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As filed with the Securities and Exchange
Commission on July 24, 2024
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
EXPION360 INC.
(Exact name of registrant as specified in its charter)
Nevada |
|
3691 |
|
81-2701049 |
(State or Other Jurisdiction |
|
(Primary Standard Industrial |
|
(I.R.S. Employer |
of Incorporation or Organization) |
|
Classification Code Number) |
|
Identification No.) |
2025 SW Deerhound Ave.
Redmond, OR 97756
(541) 797-6714
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant’s Principal Executive Offices)
Corporation Service Company
112 North Curry Street
Carson City, NV 89703
(775) 684-5708
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Ryan C. Wilkins
Amanda McFall |
Anthony W. Basch
J. Britton Williston |
Stradling Yocca Carlson & Rauth LLP |
Shannon M. McDonough |
660 Newport Center Drive, Suite 1600 |
Kaufman & Canoles, P.C. |
Newport Beach, CA 92660 |
1021 E. Cary Street, Suite 1400 |
(949) 725-4000 |
Richmond, VA 23219 |
|
(804) 771-5700 |
Approximate date of commencement of proposed sale
to the public: As soon as practicable after this registration statement becomes effective.
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 of 1933
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, please 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 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(d) 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. ☐
Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or
an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer |
☐ |
Accelerated filer |
☐ |
|
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Non-accelerated
filer |
☒ |
Smaller reporting company |
☒ |
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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 or until the Registration Statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The
information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not
soliciting offers to buy these securities in any state where the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED JULY 24, 2024
PRELIMINARY PROSPECTUS
EXPION360 INC.
Units
Each Consisting
of One Share of Common Stock or One Pre-Funded Warrant to Purchase One Share of Common Stock, Two Series A Warrants
to Each Purchase One Share of Common Stock, and One Series B Warrant to Purchase Such Number of Share of Common Stock
as Determined in the Series B Warrant
Up to Shares
of Common Stock underlying the Pre-Funded Warrants
Up to Shares
of Common Stock Underlying the Series A Warrants
Up to Shares
of Common Stock Underlying the Series B Warrants
We are offering,
on a firm commitment, underwritten basis, units (the “Units”), each Unit consisting of one share of common stock,
par value $0.001 per share (our “Common Stock”), two Series A warrants to each purchase one share
of Common Stock (each, a “Series A Warrant”), and one Series B warrant to purchase such number of shares of Common
Stock as determined in the Series B warrant (each, a “Series B Warrant” and together with the Series A Warrants, the
“Common Warrants”). The assumed public offering price for each Unit is $ ,
which was the last reported sale price of our Common Stock on The Nasdaq Capital Market (“Nasdaq”) on July ,
2024.
The Units have no
stand-alone rights and will not be certificated or issued as stand-alone securities.
Each Series A Warrant offered hereby is exercisable
at any time or times beginning on the first trading day following our notice to the Series A Warrant holders of Stockholder Approval (defined
below), and will expire five years from such date. Each Series A Warrant is exercisable at an exercise price of $ (assuming an offering
price of $ per Unit) per share of Common Stock. On the 11th trading day after Stockholder Approval, the Series A Warrants’ exercise
price will be reset to a price equal to the lower of (i) the exercise price then in effect and (ii) the greater of (a) the lowest daily
weighted average price during the period commencing on the first trading day after the date of Stockholder Approval and ending following
the close of trading on the tenth trading day thereafter and (b) a floor price determined in accordance with the terms of the Series A
Warrants, and the number of shares issuable upon exercise will be adjusted to the number of shares determined by multiplying the exercise
price then in effect at issuance by the number of shares acquirable upon exercise immediately prior to such reset and dividing the product
thereof by the exercise price resulting from such reset. Also after Stockholder Approval, the exercise price of the Series A Warrants
will be reduced (such reduced price, the “Adjusted Exercise Price”) to a price equal to the lesser of (i) the exercise price
then in effect and (ii) the lowest daily volume weighted average price (“VWAP”) during the period commencing five consecutive
trading days immediately preceding through the five consecutive trading days commencing on the date we effect any share split, share dividend,
share combination recapitalization or other similar transaction (which would include reverse stock splits) in the future (subject to a
floor price determined in accordance with the terms of the Series A Warrants and the Nasdaq Listing Rules (the “Floor Price”)),
with a proportionate adjustment to the number of shares underlying the Series A Warrants. Furthermore, if the Adjusted Exercise Price
would have been below the Floor Price but for the Floor Price limitation, then we will make a payment to the Series A Warrant holder for
the economic difference between the Adjusted Exercise Price and the Floor Price, subject to the exceptions and conditions set forth in
the Series A Warrants. Finally, beginning on the date of Stockholder Approval, with certain exceptions, the Series A Warrants will provide
for an adjustment to the exercise price and number of shares underlying the Series A Warrants upon our issuance of Common Stock or Common
Stock equivalents at a price per share that is less than the exercise price of the Series A Warrants. See “Securities we are
Offering – Series A Warrants” in this prospectus for more information on the Series A Warrants’ exercise price adjustments.
Each Series B Warrant
offered hereby will be exercisable immediately and exercisable at an exercise price per share of $0.001 per share. The exercise price
and number of shares of Common Stock issuable under the Series B Warrants are subject to adjustment based on the weighted average price
of Common Stock over a rolling five-trading-day period, subject to certain floor prices in accordance with the terms of the Series B
Warrants.
The adjustment provisions
described in the above paragraphs included in the Common Warrants will be available, in some cases, only upon receipt of such stockholder
approval as may be required by the applicable rules and regulations of Nasdaq to permit the adjustment provisions described in the above
paragraph included in the Common Warrants (“Stockholder Approval”). If we are unable to obtain Stockholder Approval, the
Series A Warrants will not be exercisable and certain adjustment provisions described in the above paragraph included in the Series B
Warrants will not be effective, and therefore the Common Warrants may have substantially less value. See “Risk Factors - Certain
beneficial provisions in the Common Warrants will not be effective until we are able to receive stockholder approval of such provisions,
and if we are unable to obtain such approval the Common Warrants will have significantly less value” and “Securities
We Are Offering – Stockholder Approval” in this prospectus for more information.
We are also
offering to each purchaser of Units that would otherwise result in the purchaser’s beneficial ownership exceeding 4.99%
of our outstanding Common Stock immediately following the consummation of this offering, the opportunity to purchase Units consisting
of one pre-funded warrant (in lieu of one share of Common Stock, each a “Pre-Funded Warrant” and, collectively with
the Common Warrants, the “Warrants”), two Series A Warrants, and one Series B Warrant. Subject to limited
exceptions, a holder of Pre-Funded Warrants will not have the right to exercise any portion of its Pre-Funded Warrants if the
holder, together with its affiliates, would beneficially own in excess of 4.99% (or, at the election of the holder, such limit
may be increased to up to 9.99%) of the number of shares of Common Stock outstanding immediately after giving effect to such exercise.
Each Pre-Funded Warrant will be exercisable for one share of Common Stock. The purchase price of each Unit including a Pre-Funded
Warrant will be equal to the price per Unit including one share of Common Stock, minus $0.001, and the remaining exercise price
of each Pre-Funded Warrant will equal $0.001 per share. The Pre-Funded Warrants will be immediately exercisable (subject to the
beneficial ownership cap) and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. For each
Unit including a Pre-Funded Warrant we sell (without regard to any limitation on exercise set forth therein), the number of Units
including a share of Common Stock we are offering will be decreased on a one-for-one basis.
This prospectus also
includes the shares of Common Stock issuable upon exercise of the Series A Warrants, Series B Warrants, and Pre-Funded Warrants.
The Common Stock
and Pre-Funded Warrants can each be purchased in this offering only with the accompanying Common Warrants that are part of a Unit, but
the components of the Units will be immediately separable and will be issued separately in this offering. See “Description of
Securities We Are Offering” in this prospectus for more information.
Our Common
Stock is listed on Nasdaq under the symbol “XPON.” On July , 2024, the last reported
sale price of our Common Stock on Nasdaq was $ per share.
There is no established public trading market for the Warrants, and we do not intend to list the Series A Warrants, Series B Warrants,
or the Pre-Funded Warrants on any national securities exchange or trading system. Without an active trading market, the liquidity
of the Warrants will be limited.
The final public
offering price of the Units will be determined through negotiation between us and Aegis Capital Corp., as underwriter, based upon a number
of factors, including our history and our prospects, the industry in which we operate, our past and present operating results, the previous
experience of our executive officers and the general condition of the securities markets at the time of this offering.
We have granted the underwriter an option, exercisable
for 45 days from the closing date of this offering, to purchase up to additional shares of Common Stock and Pre-Funded Warrants,
if any, representing 15% of the shares of Common Stock and Pre-Funded Warrants sold in this offering, and up to Series A Warrants,
representing 15% of the Series A Warrants sold in this offering, and up to Series B Warrants, representing 15% of the Series B Warrants
sold in this offering. The underwriter may exercise the over-allotment option with respect to shares of Common Stock only, Pre-Funded
Warrants only, Series A Warrants only, Series B Warrants only, or any combination thereof.
You should read this
prospectus, together with additional information described under the headings “Information Incorporated by Reference”
and “Where You Can Find More Information,” carefully before you invest in any of our securities.
We are an “emerging
growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012 and, as such, have elected to comply with
certain reduced public company reporting requirements for this prospectus and future filings.
Investing
in our securities is speculative and involves a high degree of risk. See the section of this prospectus titled “Risk
Factors” beginning on page 8 for a discussion of information that should be considered in connection with an
investment in our securities.
Neither the 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.
|
|
Per
Unit |
|
|
Total |
|
Public offering price |
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$ |
|
|
|
$ |
|
|
Underwriting discounts
and commissions (7.0%)(1) |
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$ |
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$ |
|
|
Proceeds to us, before
expenses |
|
$ |
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$ |
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|
|
(1) |
Does not include a non-accountable
expense allowance equal to 1.0% of the gross proceeds of the offering. See “Underwriting” for a description of
compensation payable to the underwriter. |
The
underwriter expects to deliver our securities to purchasers in the offering on
or about , 2024.
Aegis
Capital Corp.
The date of this
prospectus is , 2024.
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
This prospectus is
part of a Registration Statement on Form S-1 (as amended from time to time, the “Registration Statement”). You should read
this prospectus and the related exhibits filed with the Securities and Exchange Commission (the “SEC”), together with the
additional information described under the headings “Where You Can Find More Information” and “Information
Incorporated by Reference” before making your investment decision. All summaries in this prospectus are qualified in their
entirety by the actual documents. You should rely only on the information provided in or incorporated by reference in this prospectus,
in any prospectus supplement or in a related free writing prospectus, or documents to which we otherwise refer you. In addition, this
prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the
actual documents for complete information.
This prospectus includes
important information about us, the securities being offered and other information you should know before investing in our securities.
You should not assume that the information contained in this prospectus is accurate on any date subsequent to the date set forth on the
front cover of this prospectus, even though this prospectus is delivered or securities are sold or otherwise disposed of on a later date.
It is important for you to read and consider all information contained in this prospectus in making your investment decision. We may
file a prospectus supplement or post-effective amendment to the Registration Statement of which this prospectus forms a part that may
contain material information relating to this offering. The prospectus supplement or post-effective amendment may also add, update or
change information contained in this prospectus. If there is any inconsistency between the information in this prospectus and the applicable
prospectus supplement or post-effective amendment, you should rely on the prospectus supplement or post-effective amendment, as applicable.
Before purchasing any securities, you should carefully read this prospectus, any post-effective amendment, and any applicable prospectus
supplement, together with the additional information described in the “Where You Can Find More Information” section
of this prospectus.
We have not, and
the underwriter has not, authorized anyone to provide any information or to make any representations other than those contained or incorporated
by reference in this prospectus or in any free writing prospectuses prepared by or on behalf of us or to which we have referred you.
We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you.
The information contained in this prospectus or incorporated by reference in this prospectus or contained in any applicable free writing
prospectus is current only as of its date, regardless of its time of delivery or any sale of our securities. Our business, financial
condition, results of operations and prospects may have changed since that date.
For investors outside
the United States: We have not, and the underwriter has 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 the
United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the
offering of the securities and the distribution of this prospectus outside the United States.
Unless otherwise
indicated, information contained in this prospectus or incorporated by reference in this prospectus concerning our industry, including
our general expectations and market opportunity, is based on information from our own management estimates and research, as well
as from industry and general publications and research, surveys and studies conducted by third parties. Management estimates are
derived from publicly available information, our knowledge of our industry and assumptions based on such information and knowledge,
which we believe to be reasonable. In addition, assumptions and estimates of our and our industry’s future performance are
necessarily uncertain due to a variety of factors, including those described in “Risk Factors” beginning on
page 8 of this prospectus. These and other factors could cause our future performance to differ materially from our assumptions
and estimates.
Unless the context
otherwise requires, references in this prospectus to “Expion360,” “the Company,” “we,” “us”
and “our” refer to Expion360 Inc.
This prospectus
is an offer to sell only the securities offered hereby, and only under circumstances and in jurisdictions where it is lawful to do so.
We are not, and the underwriter is not, making an offer to sell these securities in any state or jurisdiction where the offer or sale
is not permitted.
PROSPECTUS SUMMARY
This summary provides
a brief overview of the key aspects of our business and our securities. The reader should read the entire prospectus carefully, especially
the risks of investing in our securities discussed under the section of this prospectus titled “Risk Factors.”
Some of the statements contained in this prospectus, including statements under this section and “Risk Factors,”
are forward-looking statements and may involve a number of risks and uncertainties. Our actual results and future events may differ
significantly based upon a number of factors. The reader should not put undue reliance on the forward-looking statements in this document,
which speak only as of the date on the cover of this prospectus. See the section of this prospectus titled “Cautionary Note
Regarding Forward-Looking Statements.”
Overview
Expion360 focuses
on the design, assembly, manufacturing, and sales of lithium iron phosphate (“LiFePO4”) batteries and supporting accessories
for recreational vehicles (“RVs”), marine applications and home energy storage products with plans to expand into industrial
applications. We design, assemble, and distribute high-powered, lithium battery solutions using ground-breaking concepts with a creative
sales and marketing approach. We believe that our product offerings include some of the most dense and minimal-footprint batteries in
the RV and marine industries. We are developing the e360 Home Energy Storage System, that we expect to change the industry in barrier
price, flexibility, and integration. We are deploying multiple intellectual property strategies with research and products to sustain
and scale the business. We currently have customers consisting of dealers, wholesalers, private label customers and original equipment
manufacturers who are driving revenue and brand awareness nationally.
Our corporate headquarters
are based in Redmond, Oregon, and our suppliers are based in the United States, Asia, and Europe. We are currently in the process of
building out manufacturing capacity at our corporate headquarters. Our long-term target is to onshore the manufacturing of most of our
components and assemblies, including cell manufacturing, to the United States.
Our primary target
markets are currently the RV and marine industries. We believe that we are well-positioned to capitalize on the rapid market conversion
from lead-acid to lithium batteries as the primary method of power sourcing in these industries. We are also focused on expanding into
the home energy storage market with the introduction of our two LiFePO4 battery storage systems, where we aim to provide a cost-effective,
low barrier of entry, flexible system for those looking to power their homes via solar energy, wind, or grid back-up. Along with RV,
marine and home energy storage markets, we aim to provide additional capacities to the ever-expanding electric forklift and industrial
material handling markets.
Expion360’s
e360 product line, which is manufactured for the RV and marine industries, was launched in December 2020. The e360 product line, through
its sales growth, has shown to be a preferred conversion solution for lead-acid batteries. In December 2023, we announced our entrance
into the home energy storge market with our introduction of two LiFePO4 battery storage solutions that enable residential and small business
customers to create their own stable micro-energy grid and lessen the impact of increasing power fluctuations and outages. We believe
that our e360 Home Energy Storage System has strong revenue potential with recurring income opportunities for us and our associated sales
partners.
Our products provide
numerous advantages for various industries that are looking to migrate to lithium-based energy storage. They incorporate detailed-oriented
design and engineering and strong case materials and internal and structural layouts, and are backed by responsive customer service.
Recent Developments
Certain Preliminary Financial Results for the
Three Months Ended and as of June 30, 2024
Although we have not finalized our full financial
results for the three and six months ended June 30, 2024, we expect to report preliminary financial information as follows:
| |
For the Three Months Ended June 30, 2024 |
Net sales | |
$ | 1,278,109 | |
Cost of sales | |
| 952,646 | |
Gross profit | |
| 325,463 | |
Selling, general and administrative | |
| 2,004,260 | |
Loss from operations | |
| (1,678,797 | ) |
| |
| | |
Net loss | |
| (2,220,232 | ) |
| |
As of June 30, 2024 |
Total current assets | |
$ | 5,553,107 | |
Total current liabilities | |
| 4,049,379 | |
The information above is based on preliminary unaudited
information and estimates for the three and six months ended June 30, 2024, is not a comprehensive statement of our financial results
for this period, and is subject to change pending completion of our financial closing procedures, final adjustments, completion of the
review of our financial statements and other developments that may arise between now and the time the review of our financial statements
is completed. This preliminary estimate may change and the change may be material. Our expectation with respect to the preliminary financial
information as of June 30, 2024 presented above is based upon management’s estimates and is the responsibility of management. Our
independent registered public accounting firm has not conducted an audit or review of, and does not express an opinion or any other form
of assurance with respect to, these preliminary estimates. Our actual results for the three and six months ended June 30, 2024 will not
be available until after this offering is completed.
Settlement
On May 2, 2024, we
entered into a Settlement and Mutual Release with Alexander Capital L.P. pursuant to which the parties resolved certain disputes while
not admitting any liability or wrongdoing (the “Settlement Agreement”). We agreed to (a) make a single cash payment of $100,000,
(b) issue 100,000 shares of Common Stock, and (c) amend certain outstanding warrants to reduce the per share exercise price from $9.10
to $4.50. The shares were issued pursuant to an effective Registration Statement on Form S-3 (File No. 333-272956). The Settlement Agreement
also contains other customary provisions, including a mutual release of claims and mutual non-disparagement provision.
New Products
In May 2024, we announced
the launch of our Edge™ battery, which is designed for off-grid enthusiasts, bringing a new Expion360 option designed with performance,
reliability, and versatility in mind. We began taking pre-orders of the Edge in the second quarter of 2024, with anticipated deliveries
beginning in the third quarter of 2024.
Risk Factor Summary
Before you invest
in our Common Stock, you should carefully consider all of the information in this prospectus, including matters set forth under the section
of this prospectus titled “Risk Factors.” These risks include, but are not limited to, the following:
|
● |
We operate in an extremely
competitive industry and are subject to pricing pressures. |
|
● |
We have a history of losses.
As our costs increase, we may not be able to generate sufficient revenue to achieve and sustain profitability. |
|
● |
Our audited financial statements
include a statement that there is a substantial doubt about our ability to continue as a going concern and a continuation of negative
financial trends could result in our inability to continue as a going concern. |
|
● |
We have substantial customer
concentration, with a limited number of customers accounting for a substantial portion of our sales in 2023 and 2022. |
|
● |
Nearly all of our raw materials
enter the United States through a limited number of ports, and we rely on third parties to store and ship some of our inventory;
labor unrest at these ports or other product delivery difficulties could interfere with our distribution plans and reduce our revenue. |
|
● |
Increases in costs, disruption
of supply or shortage of any of our battery components, such as electronic and mechanical parts, or raw materials used in the production
of such parts could harm our business. |
|
● |
We are currently, and will
likely continue to be, dependent on our three warehouses. If our facilities become inoperable for any reason, our ability to produce
our products could be negatively impacted. |
|
● |
Our failure to introduce
new products and product enhancements and broad market acceptance of new technologies introduced by our competitors could adversely
affect our business. |
|
● |
We may not be able to adequately
protect our proprietary intellectual property and technology and we may need to defend ourselves against intellectual property infringement
claims. |
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● |
If our electronic data
is compromised or if we fail to keep pace with developments in technology, our business could be significantly harmed. |
|
● |
Our ability to raise capital
in the future may be limited, which could make us unable to fund our capital requirements and sustain our operations. |
|
● |
We depend on our senior
management team and other key employees, and significant attrition within our management team or unsuccessful succession planning
could adversely affect our business. |
|
● |
Sales of substantial amounts
of our securities in the public markets, or the perception that such sales might occur, could reduce the price of our securities
and may dilute your voting power and your ownership interest in us. |
|
● |
The offering price of the Units may not be indicative of the value of our assets or the price at which shares can be resold. The offering price of the Units may not be an indication of our actual value. |
|
● |
This offering may cause the trading price of our shares of Common Stock to decrease. |
|
● |
Certain beneficial provisions in the Common Warrants will not be effective until we are able to receive stockholder approval of such provisions, and if we are unable to obtain such approval the Common Warrants will have significantly less value. |
Implications
of Being an Emerging Growth Company and a Smaller Reporting Company
We are an “emerging
growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible
for exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including,
but not limited to, presenting only two years of audited financial statements in addition to any required unaudited interim financial
statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
disclosure in this prospectus, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation and an exemption
from the requirements to obtain a non-binding advisory vote on executive compensation or golden parachute arrangements.
In addition, an emerging
growth company can 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 certain accounting standards until those standards would otherwise apply to
private companies. We have elected to avail ourselves of this provision of the JOBS Act. As a result, we will not be subject to new or
revised accounting standards at the same time as other public companies that are not emerging growth companies. Therefore, our consolidated
financial statements may not be comparable to those of companies that comply with new or revised accounting pronouncements as of their
public company effective dates.
We will remain an
emerging growth company until the earliest of: (i) the last day of the fiscal year following the fifth anniversary of the consummation
of our initial public offering; (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion
(as adjusted for inflation from time to time pursuant to SEC rules); (iii) the last day of the fiscal year in which we are deemed to
be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), which would occur if the market value of our Common Stock held by non-affiliates were at least $700.0 million as of the
last business day of the second fiscal quarter of such year; or (iv) the date on which we have issued more than $1.0 billion in non-convertible
debt securities during the prior three-year period.
We are also a “smaller
reporting company” as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer
an emerging growth company. 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 our public float is less than $250.0 million measured on the last
business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal
year and our public float is less than $700.0 million measured on the last business day of our second fiscal quarter. Even after we no
longer qualify as an emerging growth company, we may still qualify as a smaller reporting company, which would allow us to take advantage
of many of the same exemptions from disclosure requirements, such as reduced disclosure regarding executive compensation, among others.
For certain risks
related to our status as an emerging growth company, see “Risk Factors—Risks Related to Ownership of our Common Stock—We
are an “emerging growth company” and elect to comply with certain reduced reporting requirements applicable to emerging growth
companies, which could make our securities less attractive to investors.”
Channels
For Disclosure of Information
We announce material
information to the public through filings with the SEC, the “Investor Relations” page on our website (expion360.com),
press releases, public conference calls, and public webcasts. We encourage investors, the media and others to follow the channels listed
above and to review the information disclosed through such channels. Any updates to the list of disclosure channels through which we
will announce information will be posted on the investor relations page on our website. The inclusion of our website address in this
prospectus is an inactive textual reference only.
Corporate Information
Expion360
was initially organized as a limited liability company under the name “Yozamp Products Company, LLC” in the State of Oregon
on June 16, 2016, and converted to a Nevada corporation under its current name pursuant to articles of conversion dated as of November
16, 2021. Our principal executive offices are located at 2025 SW Deerhound Ave., Redmond, Oregon 97756 and our phone number is (541)
797-6714. Our principal website is expion360.com. The information contained on, or that can be accessed through, our website is
not a part of this prospectus or the Registration Statement of which it forms a part. The inclusion of our website address in this prospectus
is an inactive textual reference only. Investors should not rely on any such information in deciding whether to purchase our Common Stock.
THE OFFERING
Units to
be offered |
Units
based on assumed public offering price of $
per Unit, which is the last reported sales price of our Common Stock on Nasdaq on July ,
2024, on a firm commitment basis. Each Unit will consist of one share of Common Stock (or Pre-Funded Warrant to purchase one
share of Common Stock in lieu thereof), two Series A Warrants each to purchase one share of Common Stock and
one Series B Warrant to purchase such number of shares of Common Stock as determined in accordance with the terms set forth
in the Series B Warrant. The Units have no stand-alone rights and will not be certificated or issued as stand-alone securities.
The shares of Common Stock and Pre-Funded Warrants, if any, can each be purchased in this offering only with the accompanying
Common Warrants as part of Units (other than pursuant to the underwriter’s option to purchase additional shares of Common
Stock, Pre-Funded Warrants, Series A Warrants, and Series B Warrants), but the components of the Units will be immediately
separable and will be issued separately in this offering. |
Pre-Funded
Units to be offered
|
We are also
offering to certain purchasers whose purchase of Units in this offering would otherwise result in the purchaser, together with
its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%)
of outstanding Common Stock immediately following the consummation of this offering, the opportunity to purchase, if such purchasers
so choose, Units including Pre-Funded Warrants to purchase shares of Common Stock in lieu of Units including shares of Common
Stock that would otherwise result in such purchaser’s beneficial ownership exceeding 4.99% (or, at the election of the
purchaser, 9.99%) of outstanding Common Stock. The purchase price of each Unit including a Pre-Funded Warrant will be equal to
the price at which a Unit is sold to the public in this offering, minus $0.001, and the exercise price of each Pre-Funded Warrant
will be $0.001 per share.
Each Pre-Funded
Warrant will be exercisable for one share of Common Stock any time after its original issuance until exercised in full, provided
the purchaser will be prohibited from exercising Pre-Funded Warrants for shares of Common Stock if, as a result of such exercise,
the purchaser, together with its affiliates and certain related parties, would own more than 4.99% of the total number of shares
of Common Stock then issued and outstanding. However, any holder may increase such percentage to any other percentage not in excess
of 9.99%, provided that any increase in such percentage shall not be effective until 61 days after such notice to us.
This prospectus
also relates to the offering of our Common Stock issuable upon exercise of the Pre-Funded Warrants. See “Description of
Securities We Are Offering—Pre-Funded Warrants.”
|
Common
Warrants to be offered |
Series
A Warrants and Series B Warrants. Each Unit includes one share of Common Stock (or Pre-Funded Warrant to purchase
one share of Common Stock in lieu thereof), two Series A Warrants and one Series B Warrant. Each Series A Warrant
is exercisable at a price of $ per share (assuming an offering price of $ per Unit)). The Series A Warrants will be
exercisable at any time or times beginning on the first trading day following our notice to the Series A Warrant holders of
Stockholder Approval and will expire five years from such date. The Series B Warrants will be exercisable immediately. The
exercise price and number of shares of Common Stock issuable under the Series B Warrants are subject to adjustment as described
in the Series B Warrants. See “Description of Securities We Are Offering—Series A Warrants and Series B Warrants.”
|
Over-allotment
option |
The
offering is being underwritten on a firm commitment basis. We have granted the underwriter a 45-day
option to purchase up to additional shares of Common Stock, representing 15% of the Units sold
in this offering (at an assumed public offering price of $
per Unit, which is the last reported sales price of our Common Stock on Nasdaq on July ,
2024), up to additional Pre-Funded Warrants, representing 15% of the Pre-Funded Warrants sold
in the offering, if any, up to additional Series A Warrants, representing 15% of the Series
A Warrants sold in the offering, and up to additional Series B Warrants, representing 15%
of the Series B Warrants sold in the offering, on the same terms and conditions set forth above solely
to cover over-allotments. The underwriter may exercise the over-allotment option with respect to shares
of Common Stock only, Pre-Funded Warrants only, Series A Warrants only, Series B Warrants only, or
any combination thereof.
|
Common
Stock outstanding after this offering(1)
|
shares
(or shares of Common Stock if the underwriter exercises its option in full) (assuming we sell only shares of Common Stock
and no Pre-Funded Warrants and assuming no exercise of the Common Warrants).
|
Use
of proceeds
|
We
estimate that the net proceeds from this offering will be approximately $
million, based on an assumed public offering price of $
per Unit, which was the closing price of our Common Stock on Nasdaq on July ,
2024, after deducting the underwriting discount and estimated offering expenses payable by us, and excluding the proceeds,
if any, from the exercise of Common Warrants in this offering.
We currently
intend to use the net proceeds from the offering to repay an aggregate of approximately $700,000 due to stockholders under
certain unsecured promissory notes agreements (collectively, the “Stockholder Notes”), as well as approximately
$2.5 million due under the senior convertible note issued to 3i, LP (the “3i Note) as of the date of filing of this
prospectus, and for working capital and general corporate. See “Use of Proceeds” beginning on page 27
of this prospectus. |
Risk
factors
|
See
“Risk Factors” beginning on page 8 of this prospectus and other information included and incorporated
by reference in this prospectus for a discussion of the risk factors you should consider carefully when making an investment
decision.
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Nasdaq
symbol |
Our Common Stock is listed
on Nasdaq under the symbol “XPON.” There is no established trading market for the Warrants, and we do not expect a trading
market to develop. We do not intend to list the Series A Warrants, Series B Warrants or Pre-Funded Warrants on any securities exchange
or other trading market. |
|
The number of shares of
our Common Stock to be outstanding after this offering is based on 7,046,853 shares of our Common Stock outstanding as of March 31,
2024, and, unless otherwise indicated, excludes: |
|
|
|
● |
78,000 shares of Common
Stock issuable upon the exercise of warrants to purchase Common Stock outstanding as of March 31, 2024, at an exercise price of $2.90
per share; |
|
● |
514,290 shares of Common
Stock issuable upon the exercise of warrants to purchase Common Stock outstanding as of March 31, 2024, at an exercise price of $3.32
per share; |
|
● |
148,005 shares of Common
Stock issuable upon the exercise of warrants to purchase Common Stock outstanding as of March 31, 2024, at an exercise price of $9.10
per share; |
|
● |
25,000 shares of Common
Stock issuable upon the exercise of warrants to purchase Common Stock outstanding as of March 31, 2024, at an exercise price of $5.00
per share; |
|
● |
30,000 shares of Common
Stock issuable upon the exercise of options outstanding as of March 31, 2024, which were not issued under a specified plan; |
|
● |
1,244,145 shares of Common
Stock issuable upon the exercise of equity incentive awards outstanding under our 2021 Incentive Award Plan as of March 31, 2024; |
|
● |
551,623 shares of Common
Stock available for future issuance under our 2021 Incentive Award Plan as of March 31, 2024; |
|
● |
any shares of Common Stock
available for future issuance under our 2021 Incentive Award Plan, which will continue to increase in future years pursuant to the
plan’s evergreen provision; |
|
● |
2,500,000 shares of Common
Stock available for future issuance under our 2021 Employee Stock Purchase Plan as of March 31, 2024; |
|
● |
an aggregate of up to 768,971
shares of Common Stock that may be issuable under the 3i Note, which consists of 727,387 shares issuable upon conversion of the 3i
Note and up to 41,584 shares that we may issue to satisfy interest payments due under the 3i Note, subject to the terms of the Note
Purchase Agreement, as of March 31, 2024; |
|
● |
up to 1,743,754 shares
of Common Stock issuable pursuant to the common stock purchase agreement (the “Common Stock Purchase Agreement”) with
Tumim Stone Capital, LLC (“Tumim”), pursuant to which we may, at our sole discretion, direct Tumim to purchase up to
$20.0 million of our Common Stock from time to time over a 24-month period (the “Equity Line of Credit”), as of March
31, 2024; and |
|
● |
any additional shares of
Common Stock we have issued or may issue from time to time after January 12, 2024. |
At closing, we intend
to use a portion of the net proceeds from this offering to pay off in full the 3i Note and plan to terminate the Equity Line of Credit.
In light of the foregoing, we expect we will not issue any of the 768,971 shares of Common Stock under the 3i Note or the 1,743,754 shares
of Common Stock issuable pursuant to the Equity Line of Credit. See the section of this prospectus titled “Use of Proceeds”
for more information.
Except as otherwise
indicated, the information in this prospectus assumes: (a) no sale of the Pre-Funded Warrants in this offering, which, if sold, would
reduce the number of shares of Common Stock that we are offering on an one-for-one basis; (b) no exercise of any Series A Warrants or
Series B Warrants to be issued in this offering; and (c) no exercise of the options or warrants described above.
RISK FACTORS
Investing
in our securities involves risks. Before you make a decision to buy our securities, in addition to the risks and uncertainties discussed
below under “Cautionary Note Regarding Forward-Looking Statements,” you should carefully consider the specific
risks set forth herein. We have also identified a number of these factors under the heading “Risk Factors” in
our periodic reports we file with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2023 and our Quarterly
Report on Form 10-Q for the quarters ended March 31, 2023, June 30, 2023, and September 30, 2023, and will do so in our future filings.
If any of these risks actually occur, it may materially harm our business, financial condition, liquidity, results of operations, and
prospects. As a result, the market price of our securities could decline, and you could lose all or part of your investment. Additionally,
the risks and uncertainties described in this prospectus or any prospectus supplement are not the only risks and uncertainties that we
face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may become material
and adversely affect our business. If any of the following risks or other risks not specified below materialize, our business, financial
condition and results of operations could be materially and adversely affected. In that case, the trading price of our shares of Common
Stock could decline.
Risks Related
to Our Business
We operate in an extremely competitive
industry and are subject to pricing pressures.
We compete with a
number of major international and domestic manufacturers, assemblers and distributors, as well as a large number of smaller, regional
competitors. In addition, our customers have many choices for energy storage solutions in the markets that we serve including both traditional
lead-acid products as well as lithium-ion products. We anticipate continued competitive pricing pressure, including due to foreign producers
who are able to employ labor at significantly lower costs than producers in the U.S., expand their export capacity and increase their
marketing presence in our major Americas markets. Several of our competitors have strong technical, marketing, sales, manufacturing,
distribution and other resources, as well as significant name recognition, established positions in the market and long-standing relationships
with original equipment manufacturers (“OEMs”) and other customers. Our ability to maintain and improve our operating margins
has depended, and continues to depend, on our ability to control and reduce our costs. We cannot assure you that we will be able to continue
to control our operating, assembly and manufacturing expenses, to raise or maintain our prices or increase our unit volume or unit mix,
in order to maintain or improve our operating results.
We have a history
of losses. As our costs increase, we may not be able to generate sufficient revenue to achieve and sustain profitability.
We have experienced
net losses in each period since inception. We generated net losses of $7.5 million for each of the years ended December 31, 2023 and
2022.
Part of our business
strategy is to focus on our long-term growth. As a result, our profitability may be lower in the near-term than it would be if our strategy
were to maximize short-term profitability. Significant expenditures on sales and marketing efforts, expanding our platform, products,
features, and functionality, and expanding our research and development, each of which we intend to continue to invest in, may not ultimately
grow our business or cause long-term profitability. If we are ultimately unable to achieve profitability at the level anticipated by
industry or financial analysts and our stockholders, our stock price may decline.
Our efforts to grow
our business may be costlier than we expect, or our revenue growth rate may be slower than we expect, and we may not be able to increase
our revenue enough to offset the increase in operating expenses resulting from these investments. If we are unable to continue to grow
our revenue, the value of our business and Common Stock may significantly decrease, which may in turn have a material adverse effect
on our ability to raise capital to grow our business.
Our audited
financial statements include a statement that there is a substantial doubt about our ability to continue as a going concern and a continuation
of negative financial trends could result in our inability to continue as a going concern.
Our audited financial
statements as of and for the years ended December 31, 2023 and 2022 were prepared on the assumption that we would continue as a going
concern. For the years ended December 31, 2023 and 2022, the company has sustained recurring losses and negative cash flows from operations.
These factors raise substantial doubt about our ability to continue as a going concern over the next 12 months and our independent auditors
have included a “going concern” explanatory paragraph in their report on our financial statements as of and for the years
ended December 31, 2023 and 2022. If our operating results fail to improve and/or if we fail to raise additional debt or equity financing,
then our financial condition could render us unable to continue as a going concern.
Our business and future growth depends
on the needs and success of our customers.
Our customers include
dealers, wholesalers, private-label customers and OEMs. The demand for our products ultimately depends on consumers in our current end
markets (primarily owners of RVs and marine vessels), and will depend on demand on consumers in the home energy storage market as we
establish our presence in the market with the introduction of our two LiFePO4 battery storage systems. These markets can be impacted
by numerous factors, including, consumer spending, travel restrictions, fuel costs and energy demands (including an increasing trend
towards the use of green energy) and overall economic conditions. Increases or decreases in these variables may significantly impact
the demand for our products. If we fail to accurately predict demand, we may be unable to meet our customers’ needs, resulting
in the loss of potential sales, or we may produce excess products, resulting in increased inventory and overcapacity in our production
facilities, increasing our unit production cost and decreasing our operating margins.
We have substantial
customer concentration, with a limited number of customers accounting for a substantial portion of our sales in 2023 and 2022.
We currently derive
a significant portion of our revenues from a limited number of customers. During the year ended December 31, 2023, sales to two customers
totaled approximately 21% of our total sales and these customers did not have any outstanding accounts receivable at December 31, 2023.
While these customers did not have accounts receivable balances as of December 31, 2023, four other customers had accounts receivable
balances totaling $140 thousand, representing 90% of total accounts receivable as of December 31, 2023. Sales to each of our other customers
did not exceed 10% during this period. During the year ended December 31, 2022, sales to our top three customers totaled approximately
41% of our total sales. Amounts due from these customers totaled approximately 43% of our total accounts receivable at December 31, 2022.
There are inherent risks whenever a large percentage of total revenues are concentrated with a limited number of customers. In addition,
our sales are completed on a purchase order basis and most are without firm, long-term revenue commitments or sales arrangements. It
is not possible for us to predict the future level of demand for our products and services that will be generated by our customers or
the future demand for the products and services of our other customers. If any of our customers experience declining or delayed sales
due to market, economic or competitive conditions, we could be pressured to reduce the prices we charge for our products which could
have an adverse effect on our margins and financial position and could negatively affect our revenues and results of operations and/or
trading price of our Common Stock. Furthermore, there is inherent risk associated with accounts receivable concentration as a deterioration
in the financial condition of a limited number of account debtors, or any other factor which affects their ability or willingness to
pay could in turn have a material adverse effect on our financial condition.
We may not be able to successfully
manage our growth.
We have been
continuously expanding our operations since our founding in 2016. As we continue to grow, we must continue to improve our
managerial, technical and operational knowledge and allocation of resources, and to implement an effective management information
system. To effectively manage our expanded operations, we need to continue to recruit and train managerial, accounting, internal
audit, engineering, assembly and manufacturing, technical, sales and other staff to satisfy our development requirements and there
are currently significant labor shortages in the market. In order to fund our ongoing operations and our future growth, we need to
have sufficient internal sources of liquidity or access to additional financing from external sources. Furthermore, we will be
required to manage relationships with a greater number of customers, suppliers, contractors, service providers, lenders and other
third parties. We will need to further strengthen our internal control and compliance functions to ensure that we are able to comply
with our legal and contractual obligations and to reduce our operational and compliance risks. We cannot assure you that we will not
experience issues such as capital constraints, construction delays, operational difficulties at new
locations, or difficulties in expanding our existing business and operations and in recruiting and training an increasing number of personnel
to manage and operate the expanded business. Our expansion plans may also adversely affect our existing operations and thereby have a
material adverse effect on our business, prospects, financial condition and results of operations.
Our results of operations may be
negatively impacted by public health epidemics or outbreaks.
We are exposed to
risks associated with public health crises and epidemics or pandemics. A widespread health crisis could adversely affect the global economy,
resulting in an economic downturn that could impact our operations and demand for our products and therefore have a material adverse
effect on our business and results of operations. For example, the COVID-19 global pandemic adversely impacted our operations, supply
chains, and distribution systems as well as those of our third-party suppliers and manufacturers, which are located in the United States,
Asia and Europe. A future public health epidemic or outbreak may make it more difficult for us and our third-party manufacturers to find
sufficient components or raw materials and component parts on a timely basis or at a cost-effective price. Any performance failure on
the part of any of our significant suppliers or third-party manufacturers could interrupt production of our products, which would have
a material adverse effect on our business, financial condition and results of operations. In addition, during the pandemic we experienced
shortages and workforce slowdowns due to stay-at-home mandates, illness among our workforce, delays in shipping finished products to
customers, and delays in our receiving batteries and certain components. The highly competitive labor market made it difficult to recruit
and maintain a workforce properly sized and suited for our operational and strategic needs, which further adversely impacted our business,
and any future incidence of disease could similarly impact our business. In addition, while the pandemic positively impacted our battery
sales due to more consumers adopting the RV lifestyle, there is no guarantee that any such increase would be sustained, which could cause
our results of operations to fluctuate.
If we fail to expand our sales and
distribution channels, our business could suffer.
Our success, and
our ability to increase sales and operate profitably, depends on our ability to identify target customers and convert these customers
into meaningful orders, as well as our continued development of existing customer relationships. If we are unable to expand our sales
and distribution channels, we may not be able to increase revenue or achieve market acceptance of our products. We have recently expanded
our direct sales force and plan to recruit additional sales personnel. New sales personnel will require training and take time to achieve
full productivity, and there is strong competition for qualified sales personnel in our business. In addition, we believe that our future
success is dependent upon establishing successful relationships with a variety of distribution partners. To date, we have entered into
agreements with only a small number of these distribution partners. We cannot be certain that we will be able to reach agreement with
additional distribution partners on a timely basis or at all, or that these distribution partners will devote adequate resources to selling
our products. Furthermore, if our distribution partners fail to adequately market or support our products, the reputation of our products
in the market may suffer. In addition, we will need to manage potential conflicts between our direct sales force and any third-party
reselling efforts. There can be no assurances that any of our efforts to expand our sales and distribution channels will be successful.
Our ability to expand into international
markets is uncertain.
Our strategy is to
expand our operations into international markets. In addition to general risks associated with international expansion, such as foreign
currency fluctuations and political and economic instability, we face the following risks and uncertainties any of which could prevent
us from selling our products in a particular country or harm our business operations once we have established operations in that country:
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difficulties and costs of localizing products for foreign markets; |
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need to modify our products to comply with local requirements in each country; and |
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lack of a direct sales presence in other countries, our need to establish relationships with
distribution partners to sell our products in these markets and our reliance on the capabilities
and performance of these distribution partners. |
If we are unable
to expand into international markets in the manner expected, our business, financial condition, results of operations and prospects may
be materially and adversely affected.
Nearly all
of our raw materials enter the United States through a limited number of ports and we rely on third parties to store and ship some of
our inventory; labor unrest at these ports or other product deliver difficulties could interfere with our distribution plans and reduce
our revenue.
We currently rely
exclusively on foreign manufacturers to manufacture the lithium-ion batteries used as raw materials in our products, as well as certain
other of our raw materials. We may suffer delays in receiving raw materials due to work stoppages, strikes or lockouts or other bottlenecks
at the ports through which our raw materials are shipped. Likewise, we rely on trucking carriers to deliver products from the port of
arrival to our distribution facilities and from our distribution facilities to our customers. Additionally, in some cases, third parties
sort, store and direct-ship products to our customers. Labor unrest or other disruptions could result in product shortages and delays
in distributing our products to retailers, which could materially and adversely affect our business, financial condition, results of
operations and prospects.
The uncertainty in global economic
conditions could negatively affect our operating results.
Our operating results
are directly affected by the general global economic conditions of the industries in which our major customer groups operate. Our business
is also highly dependent on the economic and market conditions in each of the geographic areas in which we operate. Our products are
heavily dependent on the end markets that we serve and our operating results will vary by location, depending on the economic environment
in these markets. Sales of our RV and marine power products, for example, depend significantly on demand for new electric products for
RVs and marine applications, which, in turn, depends on end-user demand for RVs and boats. The uncertainty in global economic conditions
varies by geographic location and can result in substantial volatility in global credit markets, particularly in the United States. These
conditions, including levels of consumer spending, economic recessions, slow economic growth, economic and pricing instability, inflation
levels, increase of interest rates, credit market volatility and adverse developments affecting financial institutions, could
affect our business by reducing prices that our customers may be able or willing to pay for our products or by reducing the demand for
our products. In addition, the Russia-Ukraine war and the Israel-Palestine conflict has and may continue to further exacerbate disruptions
in the global supply chain. As a result of sanctions imposed in relation to the Russia-Ukraine conflict, gas prices in the United States
have risen to historic levels, and geopolitical tensions in the Middle East has impacted global shipping routes. Any rise in the cost
of fuel may cause a decrease in RV travel, which could ultimately negatively impact sales of our batteries for RVs. In 2022, we also
experienced increased shipping costs as a result of increased fuel costs and shutdowns at the ports through which our lithium-ion batteries
and other raw materials are shipped due to COVID-19 restrictions. We did not experience any major residual impacts in 2023. Any of the
above factors could, in turn, negatively impact our sales and earnings generation and result in a material adverse effect on our business,
cash flow, results of operations and financial position.
Government reviews, inquiries, investigations,
and actions could harm our business or reputation.
As we operate in
various locations around the world, our operations in certain countries are subject to significant governmental scrutiny and may be adversely
impacted by the results of such scrutiny. The regulatory environment with regard to our business is evolving, and officials often exercise
broad discretion in deciding how to interpret and apply applicable regulations. From time to time, we receive formal and informal inquiries
from various government regulatory authorities, as well as self-regulatory organizations, about our business and compliance with local
laws, regulations or standards. Any determination that our operations or activities, or the activities of our employees, are not in compliance
with existing laws, regulations or standards could result in the imposition of substantial fines, interruptions of business, loss of
supplier, vendor, customer or other third-party relationships, termination of necessary licenses and permits, or similar results, all
of which could potentially harm our business and/or reputation. Even if an inquiry does not result in these types of determinations,
regulatory authorities could cause us to incur substantial costs or require us to change our business practices in a manner materially
adverse to our business, and it potentially could create negative publicity which could harm our business and/or reputation.
Our operating
results could be adversely affected by changes in the cost and availability of raw materials and we are dependent on third-party manufacturers
and suppliers.
We currently rely
on multiple third-party manufacturers and suppliers located in Asia and Europe who also produce our battery cells and we intend to continue
to rely on these suppliers going forward. Lithium-ion batteries are our most significant raw material and are used along with significant
amounts of plastics, steel, copper and other materials in our assembly and manufacturing processes. Our third-party manufacturers source
the raw materials and battery components required for the production of our batteries directly from third-party suppliers and thus we
may have limited control over the agreed pricing for these raw materials and battery components. We estimate that raw material costs
account for over half of our cost of goods sold. The costs of these raw materials, particularly lithium-ion batteries, are volatile and
beyond our control. Additionally, availability of the raw materials used to manufacture our products may be limited at times resulting
in higher prices and/or the need to find alternative suppliers. Furthermore, the cost of raw materials may also be influenced by transportation
costs. Volatile raw material costs can significantly affect our operating results and make period-to-period comparisons extremely difficult.
We cannot assure you that we will be able to either hedge the costs or that we or our third-party manufacturers will be able to secure
the availability of our raw material requirements at a reasonable level or that we will be able to pass on to our customers the increased
costs of our raw materials without affecting demand, or that limited availability of materials will not impact our production capabilities.
Our inability to raise the price of our products in response to increases in prices of raw materials or to maintain a proper supply of
raw materials could have an adverse effect on our revenue, operating profit, and net income.
In addition, during
the years ended December 31, 2023 and 2022, approximately 70% and 85%, respectively, of inventory purchases were made from foreign suppliers
in Asia. Our dependence on a limited number of key third-party manufacturers and suppliers exposes us to challenges and risks in ensuring
that we maintain adequate supplies required to produce our batteries. We do not have long-term purchase arrangements with our third-party
manufacturers and our purchases are completed on a purchase order basis. Thus, although we carefully manage our inventory and lead-times,
we may experience a delay or disruption in our supply chain and/or our current suppliers may not continue to provide us with lithium-ion
batteries in our required quantities or to our required specifications and quality levels or at attractive prices. Our close working
relationships with our foreign suppliers to date, reflected in our ability to increase our purchase order volumes (qualifying us for
related volume-based discounts) and to order and receive delivery of components in advance of required demand, has helped us moderate
or offset increased supply-related costs associated with inflation, currency fluctuations and tariffs imposed on our battery imports
by the U.S. government and avoid potential shipment delays. If we are unable to enter into or maintain commercial arrangements with these
suppliers on favorable terms, or if any of these suppliers experience unanticipated delays, disruptions or shutdowns or other difficulties
ramping up their supply of products or materials to meet our requirements, our assembly operations and customer deliveries would be seriously
impacted, potentially resulting in liquidated damages and harm to our customer relationships. Although we believe we could locate alternative
suppliers to fulfill our needs, we may be unable to find a sufficient alternative supply in a reasonable time or on commercially reasonable
terms.
Further, our dependence
on these third-party suppliers entails additional risks, including:
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inability, failure or unwillingness
of third-party suppliers to comply with regulatory requirements; |
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breach of supply agreements
by the third-party suppliers; |
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misappropriation or disclosure
of our proprietary information, including our trade secrets and know-how; |
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relationships
that third-party suppliers may have with others, which may include our competitors, and failure of
third-party suppliers to adequately fulfill contractual duties, resulting in the need to enter into
alternative arrangements, which may not be available, desirable or cost-effective; and
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termination or nonrenewal
of agreements by third-party suppliers at times that are costly or inconvenient for us. |
Several of our key
manufacturers and suppliers are located in China, and we are exposed to the possibility of product supply disruption and increased costs
in the event of changes in the policies, laws, rules and regulations of the United States or Chinese governments, as well as political
unrest or unstable economic conditions in China. For example, trade tensions between the United States and China have been escalating
in recent years. Most notably, several rounds of U.S. tariffs have been placed on Chinese goods being exported to the United States.
Each of these U.S. tariff impositions against Chinese exports was followed by a round of retaliatory Chinese tariffs on U.S. exports
to China. Our batteries and other components we purchase from China have been, and may in the future be, subject to these tariffs, which
could increase our manufacturing costs and could make our products, if successfully developed and approved, less competitive than those
of our competitors whose inputs are not subject to these tariffs. We may otherwise experience
supply disruptions or delays, and although we carefully manage our inventory and lead-times, our suppliers may not continue to provide
us with battery components in our required quantities, to our required specifications and quality levels or at attractive prices.
Further, we may be
unable to control price fluctuations for these components or negotiate supply arrangements on favorable terms to us. We may also be exposed
to fluctuations in the value of the U.S. dollar relative to the Renminbi with any appreciation in the value of the Renminbi increasing
our costs for lithium-ion batteries and other raw materials sourced from China. Substantial increases in the prices for our lithium-ion
batteries and other raw materials would increase our operating costs and negatively impact our results of operations. In addition, foreign
currency fluctuations relative to the value of the U.S. dollar could affect the price of components and materials used in our batteries
and sourced from countries other than the United States.
Increases in
costs, disruption of supply or shortage of any of our battery components, such as electronic and mechanical parts, or raw materials used
in the production of such parts could harm our business.
From time to time,
we may experience increases in the cost or a sustained interruption in the supply or shortage of battery components. For example, a global
shortage and component supply disruptions of electronic battery components are currently being reported, and the full impact to us is
yet unknown. Other examples of shortages and component supply disruptions could include the supply of electronic components and raw materials
(such as resins and other raw metal materials) that go into the production of our battery components. Any such cost increase or supply
interruption could materially and negatively impact our business, prospects, financial condition and operating results.
The prices for our
battery components fluctuate depending on market conditions and global demand, and could adversely affect our business, prospects, financial
condition and operating results. For instance, we are exposed to multiple risks relating to price fluctuations for battery cells. These
risks include, but are not limited to:
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supply shortages caused
by the inability or unwillingness of suppliers and their competitors to build or operate component production facilities to supply
the numbers of battery components required to support the rapid growth of the electric RV and marine component vehicle industry and
other industries in which we operate as demand for such components increases; |
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disruption in the supply
of electronic circuits due to quality issues or insufficient raw materials; |
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a decrease in the number
of manufacturers of battery components; and |
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an increase in the cost
of raw materials. |
We are dependent
on the continued supply of battery components for our products. Any disruption in the supply of battery components could temporarily
disrupt production of our products by our third-party manufacturers until a different supplier is fully qualified. The cost of our battery
products depends in part upon the prices and availability of raw materials such as lithium, nickel, cobalt, and/or other metals which
are used to produce battery components. Our third-party manufacturers source the raw materials and battery components required for the
production of our batteries directly from third-party suppliers and thus we may have limited control over the agreed pricing for these
raw materials and battery components. The prices for these materials fluctuate and their available supply may be unstable, depending
on market conditions and global demand for these materials, including as a result of increased global production of electric vehicles
and energy storage products. Furthermore, fluctuations or shortages in petroleum and other economic conditions may cause us to experience
significant increases in freight charges. Any reduced availability of these raw materials or substantial increases in the prices for
such materials may increase the cost of our components and consequently, the cost of our products. There can be no assurance that we
will be able to recoup increasing costs of our components by increasing prices, which in turn could damage our brand, business, prospects,
financial condition and operating results.
We are currently,
and will likely continue to be, dependent on our three warehouse facilities. If our facilities become inoperable for any reason, our
ability to produce our products could be negatively impacted.
We have two warehouse
locations in Redmond, Oregon and a third warehouse in Elkhart, Indiana.
Our facilities may
be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, flooding, fire and power outages, utility and
transportation infrastructure disruptions, acts of war or terrorism, or by public health crises,
which may render it difficult or impossible for us to assemble our products for an extended period of time. The inability to produce
our products or the backlog that could develop if any of our facilities is inoperable for even a short period of time may result in increased
costs, harm to our reputation, a loss of customers or a material adverse effect on our business, financial condition or results of operations.
Although we maintain property damage and business interruption insurance, this insurance may not be sufficient to cover all of our potential
losses and may not continue to be available to us on acceptable terms, if at all.
Our long-term target
is to onshore the manufacturing of most of our components and assemblies, including cell manufacturing, to the United States. As part
of this agenda, we leased a second facility in Redmond, Oregon for assembly line development and additional warehouse space. Our plans
for expansion may experience delays, incur additional costs, or cause disruption to our existing production lines. The costs to successfully
achieve our expansion goals may be greater than we expect, and we may fail to achieve our anticipated cost efficiencies, which could
have a material adverse effect on our business, financial condition and results of operations. Furthermore, while we are generally responsible
for delivering products to the customer, we do not maintain our own fleet of delivery vehicles and outsource this function to third parties.
Any shortages in trucking capacity, any increase in the cost thereof or any other disruption to the highway systems could limit our ability
to deliver our products in a timely manner or at all.
Lithium-ion
battery cells have been observed to catch fire or release smoke and flame, which may have a negative impact on our reputation and business.
Our lithium-ion batteries
use LiFePO4 as the cathode material for lithium-ion cells. On rare occasions, lithium-ion cells can rapidly release the energy they contain
by releasing smoke and flames in a manner that can ignite nearby materials and other lithium-ion cells. This faulty result could subject
us to lawsuits, product recalls, or redesign efforts, all of which would be time consuming and expensive. Further, negative public perceptions
regarding the suitability or safety of lithium-ion cells or any future incident involving lithium-ion cells, such as a vehicle or other
fire, even if such incident does not involve our products, could seriously harm our business and reputation.
To facilitate an
uninterrupted supply of lithium-ion batteries, we store a significant number of lithium-ion batteries at our facilities. Any mishandling,
other safety issue or fire related to the cells or batteries could disrupt our operations. In addition, any accident, whether occurring
at our facilities or from the use of our batteries, may result in significant production interruption, delays or claims for substantial
damages caused by personal injuries or property damage. Such damage or injury could lead to adverse publicity and potentially a product
recall, which could have a material adverse effect on our brand, business, financial condition and results of operations.
We could face
potential product liability claims relating to our products, which could result in significant costs and liabilities, which would reduce
our profitability.
We face an inherent
business risk of exposure to product liability claims in the event that the use of any of our products results in personal injury or
property damage. We are also exposed to potential liability and product performance warranty risks that are inherent in the design, assemble,
manufacture and sale of our products. In the event that any of our products prove to be defective, we may be required to recall or redesign
such products, which would result in significant unexpected costs. Any insurance we maintain may not be available on terms acceptable
to us or such coverage may not be adequate for liabilities actually incurred. Further, any claim or product recall could result in adverse
publicity against us, which could adversely affect our sales or increase our costs.
Our operations expose us to litigation,
tax, environmental and other legal compliance risks.
We are subject to
a variety of litigation, tax, environmental, health and safety and other legal compliance risks. These risks include, among other things,
possible liability relating to product liability matters, personal injuries, intellectual property rights, contract-related claims, government
contracts, taxes, health and safety liabilities, environmental matters and compliance with competition laws and laws governing improper
business practices. We could be charged with wrongdoing as a result of such matters. If convicted or found liable, we could be subject
to significant fines, penalties, repayments or other damages (in certain cases, treble damages). In the area of taxes, changes in tax
laws and regulations, as well as changes in related interpretations and other tax guidance could materially impact our tax receivables
and liabilities and our deferred tax assets and tax liabilities. We plan to manufacture lithium-ion batteries in the future which involves
processing, storing, disposing of and otherwise moving large amounts of hazardous materials. As a result,
we will be subject to extensive and changing environmental, health and safety laws, and regulations governing, among other things: the
generation, handling, storage, use, transportation and disposal of hazardous materials; remediation of polluted ground or water; emissions
or discharges of hazardous materials into the ground, air or water; and the health and safety of our employees. Our ongoing compliance
with environmental, health and safety laws, regulations and permits could require us to incur significant expenses, limit our ability
to modify or expand our facilities or continue production and require us to install additional pollution control equipment and make other
capital improvements. In addition, private parties, including employees, could bring personal injury or other claims against us due to
the presence of, or exposure to, hazardous substances used, stored or disposed of by us or contained in our products.
Certain environmental
laws assess liability on owners or operators of real property for the cost of investigation, removal or remediation of hazardous substances
at their current or former properties or at properties at which they have disposed of hazardous substances. These laws may also assess
costs to repair damage to natural resources. We may be responsible for remediating damage to our properties caused by former owners by
our existing operations or by our future operations.
Changes in environmental
and climate laws or regulations could lead to new or additional investment in production designs and could increase environmental compliance
expenditures. For example, the United States Environmental Protection Agency has promulgated regulations applicable to projects involving
greenhouse gas emissions above a certain threshold, and the United States and certain states within the United States have enacted, or
are considering, limitations on greenhouse gas emissions.
Changes in climate
change concerns, or in the regulation of such concerns, including greenhouse gas emissions, could subject us to additional costs and
restrictions, including increased energy and raw materials costs. Additionally, we cannot assure you that we have been or at all times
will be in compliance with environmental laws and regulations or that we will not be required to expend significant funds to comply with,
or discharge liabilities arising under, environmental laws, regulations and permits, or that we will not be exposed to material environmental,
health or safety litigation.
We are subject to
anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and regulations in the jurisdictions
in which we conduct or in the future may conduct activities, including, the U.S. Foreign Corrupt Practices Act (“FCPA”).
The FCPA generally prohibits companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of
obtaining or retaining business. The FCPA applies to companies, individual directors, officers, employees and agents. Under the FCPA,
U.S. companies may be held liable for actions taken by strategic or local partners or representatives. The FCPA also imposes accounting
standards and requirements on publicly traded U.S. corporations and their foreign affiliates, which are intended to prevent the diversion
of corporate funds to the payment of bribes and other improper payments. Our policies mandate compliance with these antibribery laws.
Despite meaningful measures that we undertake to facilitate lawful conduct, which include training and internal control policies, these
measures may not always prevent reckless or criminal acts by our employees or agents as we expand our operations from the United States
domestically to abroad. As a result, we could be subject to criminal and civil penalties, disgorgement, further changes or enhancements
to our procedures, policies and controls, personnel changes or other remedial actions. Violations of these laws, or allegations of such
violations, could disrupt our operations, involve significant management distraction and result in a material adverse effect on our competitive
position, results of operations, cash flows or financial condition.
Our failure
to introduce new products and product enhancements and broad market acceptance of new technologies introduced by our competitors could
adversely affect our business.
Many new energy storage
technologies have been introduced over the past several years. For certain important and growing markets, such as aerospace and defense,
lithium-based battery technologies have a large and growing market share. Our ability to achieve significant and sustained penetration
of key developing markets, including the RV and marine markets, will depend upon our success in developing or acquiring these and other
technologies, either independently, through joint ventures, or through acquisitions, which in each case may require significant capital.
If we fail to develop or acquire, assemble and manufacture and sell, products that satisfy our customers’ demands, or we fail to
respond effectively to new product announcements by our competitors by quickly introducing competitive products, then market acceptance
of our products could be reduced and our business could be adversely affected. We cannot assure you
that our portfolio of primarily lithium-ion products will remain competitive with products based on new technologies.
We may not
be able to adequately protect our proprietary intellectual property and technology and we may need to defend ourselves against intellectual
property infringement claims.
We rely on a combination
of copyright, trademark, patent and trade secret laws, non-disclosure agreements and other confidentiality procedures and contractual
provisions to establish, protect and maintain our proprietary intellectual property and technology and other confidential information.
Certain of these technologies, especially battery case construction, are important to our business and are not protected by patents.
Despite our efforts to protect our proprietary intellectual property and technology and other confidential information, unauthorized
parties may attempt to copy or otherwise obtain and use our intellectual property and proprietary technologies. If we are unable to protect
our intellectual property and technology, we may lose any technological advantage we currently enjoy and may be required to take an impairment
charge with respect to the carrying value of such intellectual property or goodwill established in connection with the acquisition thereof.
In either case, our operating results and net income may be adversely affected. In addition, entities holding intellectual property rights
relating to our technology may bring suits alleging infringement of such rights or otherwise asserting their rights and seeking licenses.
Any such litigation or claims, whether or not valid or successful, could result in substantial costs and diversion of resources and our
management’s attention. If we are determined to have infringed upon a third-party’s intellectual property rights, we may
have to pay substantial damages, obtain a license or cease making certain products, which in turn could have a material adverse effect
on our business, operating results and financial condition.
Quality problems with our products
could harm our reputation and erode our competitive position.
The success of our
business will depend upon the quality of our products and our relationships with customers. In the event that our products fail to meet
our customers’ standards, our reputation could be harmed, which would adversely affect our marketing and sales efforts. We cannot
assure you that our customers will not experience quality problems with our products.
Any acquisitions
that we complete may dilute stockholder ownership interests in the Company, may have adverse effects on our financial condition and results
of operations and may cause unanticipated liabilities.
As part of our growth
strategy, we may make future investments in businesses, new technologies, services and other assets that complement our business. Future
acquisitions may involve the issuance of our equity securities as payment, in part or in full, for the businesses or assets acquired.
Any future issuances of equity securities would dilute stockholder ownership interests. In addition, future acquisitions might not increase,
and may even decrease, our earnings or earnings per share and the benefits derived by us from an acquisition might not outweigh or might
not exceed the dilutive effect of the acquisition. We also may incur additional debt or suffer adverse tax and accounting consequences
in connection with any future acquisitions.
If our electronic
data is compromised, or we experience a failure in our information technology or storage systems, our business could be significantly
harmed.
We and our business
partners maintain significant amounts of data electronically in locations around the world. This data relates to all aspects of our business,
including current and future products and services under development, and also contains certain customer, supplier, partner and employee
data. Our ability to execute our business strategy depends, in part, on the continued and uninterrupted performance of our information
technology systems, which support our operations. We maintain systems and processes designed to protect this data, but notwithstanding
such protective measures, there is a risk of intrusion, cyberattacks, tampering, theft, misplaced or lost data, programming and/or human
errors that could compromise the integrity and privacy of this data, improper use of our systems, software solutions or networks, unauthorized
access, use, disclosure, modification or destruction of information, defective products, production downtimes and operational disruptions,
which in turn could adversely affect our reputation, competitiveness, and results of operations. High-profile security breaches at other
companies and in government agencies have increased in recent years, and cyber-attacks are becoming more sophisticated and frequent,
and in some cases have caused significant harm. Computer hackers and others routinely attempt to breach the security of technology products,
services and systems, and to fraudulently induce employees, customers, or others to disclose information or unwittingly
provide access to systems or data. While we devote significant resources to security measures to protect our systems and data, these
measures cannot provide absolute security.
In addition, we provide
confidential and proprietary information to our third-party business partners in certain cases where doing so is necessary to conduct
our business. While we obtain assurances from those parties that they have systems and processes in place to protect such data, and where
applicable, that they will take steps to assure the protections of such data by third parties, nonetheless those partners may also be
subject to data intrusion or otherwise compromise the protection of such data. Any compromise of the confidential data of our customers,
suppliers, partners, employees or ourselves, or failure to prevent or mitigate the loss of or damage to this data through breach of our
information technology systems or other means could substantially disrupt our operations, harm our customers, employees and other business
partners, damage our reputation, violate applicable laws and regulations, subject us to potentially significant costs and liabilities
and result in a loss of business that could be material. We operate a number of critical computer systems throughout our business that
can fail for a variety of reasons. If such a failure were to occur, we may not be able to sufficiently recover from the failure in time
to avoid the loss of data or any adverse impact on certain of our operations that are dependent on such systems. This could result in
lost sales and the inefficient operation of our facilities for the duration of such a failure.
Our ability
to raise capital in the future may be limited, which could make us unable to fund our capital requirements and our stockholders may be
diluted by future securities offerings.
Our business and
operations may consume resources faster than we anticipate. In the future, we may need to raise additional funds through the issuance
of new equity securities, debt or a combination of both or by entering into credit facilities or securing other types of financing. Additional
financing may not be available on favorable terms or at all. If adequate funds are not available on acceptable terms, or at all, we may
be unable to fund our capital requirements. Further, we may be restricted in our ability to access existing sources of liquidity. For
example, pursuant to the Common Stock Purchase Agreement with Tumim, we may, at our sole discretion, direct Tumim to purchase up to $20.0
million of our Common Stock from time to time over a 24-month period. The purchase price per share that we may elect to sell to Tumim
under the Common Stock Purchase Agreement will fluctuate based on the market prices of our Common Stock during a valuation period. Accordingly,
it is not currently possible to predict the number of shares that will be sold to Tumim, the actual purchase price per share to be paid
by Tumim for such Shares, or the actual gross proceeds to be raised in connection with those sales, which may be substantially less than
the $20.0 million available to us under the Common Stock Purchase Agreement.
In addition, actual
events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional
counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors
about any events of these kinds or other similar risks, such as the closure of Silicon Valley Bank and the placement into receivership
of Signature Bank in March 2023, have in the past and may in the future lead to market-wide liquidity problems. Although we did not have
any cash or cash equivalent balances on deposit at Silicon Valley Bank, if other banks and financial institutions enter receivership
or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability
to raise additional financing or to access our existing cash, cash equivalents and investments may be threatened.
If we incur new debt,
the debt holders would have rights senior to common stockholders to make claims on our assets, and the terms of any debt could restrict
our operations, including our ability to pay dividends on our Common Stock. For example, the 3i Note contains restrictions on our ability
to pay dividends or make distributions. If we issue additional equity securities, existing stockholders may experience dilution, and
the new equity securities could have rights senior to those of our Common Stock. Because our decision to issue securities in any future
offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature
of our future offerings. Thus, our stockholders bear the risk of our future securities offerings reducing the market price of our Common
Stock and diluting their interest.
We depend on
our senior management team and other key employees, and significant attrition within our management team or unsuccessful succession planning
could adversely affect our business.
Our success depends
in part on our ability to attract, retain and motivate senior management and other key employees. Achieving this objective may be difficult
due to many factors, including fluctuations in global economic and industry conditions, competitors’ hiring practices, cost reduction
activities, and the effectiveness of our compensation programs. Competition for qualified personnel can be very intense. We must continue
to recruit, retain and motivate senior management and other key employees sufficient to maintain our current business and support our
future projects. We are vulnerable to attrition among our current senior management team and other key employees. A loss of any such
personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business, financial
condition and results of operations. For example, John Yozamp, our co-founder, former Chief Business Development Officer, and former
Chief Executive Officer, pioneered multiple new recreational concepts in the RV industry and leveraged extensive relationships in the
RV OEM business to establish our company. Mr. Yozamp retired as Chief Business Development Officer as of December 31, 2023. While we
believe we have successfully transitioned from his departure and have sufficient experience among our management team, any additional
attrition in the future could adversely impact us. In addition, if we are unsuccessful in our succession planning efforts, the continuity
of our business and results of operations could be adversely affected.
Changes in
tax laws or tax rulings could materially affect our financial position, results of operations, and cash flows.
The income and non-income
tax regimes we are subject to or operate under are unsettled and may be subject to significant change. Changes in tax laws or tax rulings,
or changes in interpretations of existing laws, could materially affect our financial position, results of operations, and cash flows.
For example, changes to U.S. tax laws enacted in December 2017 had a significant impact on our tax obligations and effective tax rate
beginning 2018. These enactments and future possible guidance from the applicable taxing authorities may have a material impact on the
Company’s operating results. The Company closely monitors these proposals as they arise in the countries where it operates. Changes
to the statutory tax rate may occur at any time, and any related expense or benefit recorded may be material to the fiscal quarter and
year in which the law change is enacted. The Company regularly assesses the likely outcomes of its tax audits and disputes to determine
the appropriateness of its tax reserves. However, any tax authority could take a position on tax treatment that is contrary to the Company’s
expectations, which could result in tax liabilities in excess of reserves.
A failure to
keep pace with developments in technology could impair our operations or competitive position.
Our business continues
to demand the use of sophisticated systems and technology. These systems and technologies must be refined, updated and replaced with
more advanced systems on a regular basis in order for us to meet our customers’ demands and expectations. If we are unable to do
so on a timely basis or within reasonable cost parameters, or if we are unable to appropriately and timely train our employees to operate
any of these new systems, our business could suffer. We also may not achieve the benefits that we anticipate from any new system or technology,
such as fuel abatement technologies, and a failure to do so could result in higher than anticipated costs or could impair our operating
results.
Risks Related
to Ownership of Our Common Stock
Our stock price may fluctuate significantly,
and you may lose all or a part of your investment.
The trading price
of our securities may be volatile and subject to wide price fluctuations in response to various factors, including:
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market conditions in the
broader stock market; |
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actual or anticipated fluctuations
in our quarterly financial condition and results of operations, or those of other companies in our industry; |
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actual or anticipated strategic,
technological, or regulatory threats, whether or not warranted by actual events; |
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whether any securities
analysts cover our stock; |
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issuance of new or changed
securities analysts’ reports or recommendations, if any; |
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investor perceptions of
our Company, the lithium battery and accessory industry; |
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the volume of trading in
our stock; |
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changes in accounting standards,
policies, guidance, interpretations, or principles; |
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sales, or anticipated sales,
of large blocks of our stock; |
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additions or departures
of key management personnel, creative, or other talent; |
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regulatory or political
developments, including changes in laws or regulations that are applicable to our business; |
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litigation and governmental
investigations; |
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sales or distributions
of our Common Stock by significant stockholders, the entity through which our controlling stockholder holds its investment, or other
insiders; |
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natural disasters and other
calamities; and |
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Furthermore, the
stock market has experienced extreme volatility that in some cases has been unrelated or disproportionate to the operating performance
of particular companies. These and other factors may cause the market price and demand for our securities to fluctuate substantially,
which may limit or prevent investors from readily selling their securities and it may otherwise negatively affect the liquidity of our
securities. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted
securities class action litigation against the Company that issued the stock. If any of our stockholders were to bring a lawsuit against
us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management
from our business.
We do not anticipate
paying dividends on our Common Stock in the foreseeable future, you may not receive any return on investment unless you sell your Common
Stock for a price greater than that which you paid for it.
We do not anticipate
paying any dividends in the foreseeable future on our Common Stock. We intend to retain all future earnings for the operation and expansion
of our business and the repayment of outstanding debt. Our credit documents contain, and any future indebtedness likely will contain,
restrictive covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to pay
dividends and make other restricted payments. As a result, capital appreciation, if any, of our Common Stock may be your major source
of gain for the foreseeable future. While we may change this policy at some point in the future, we cannot assure you that we will make
such a change.
If securities
or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding
our stock, or if our results of operations do not meet their expectations, our stock price and trading volume could decline.
The trading market
for our securities may be influenced by the research and reports that securities or industry analysts publish about us or our business
(or the absence of such research or reports). If one or more of these analysts cease coverage of our Company or fail to publish reports
on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock prices or trading volume to decline.
Moreover, if one or more of the analysts who cover us downgrade recommendations regarding our stock, or if our results of operations
do not meet their expectations, our stock prices could decline and such decline could be material.
You may be
diluted by the future issuance of additional Common Stock in connection with our incentive plans, acquisitions or otherwise.
You will experience
additional dilution upon the exercise of options and warrants to purchase our Common Stock, including those options currently outstanding
and possibly those granted in the future, and the issuance of restricted stock or other equity awards under our stock incentive plans.
As of March 31, 2024, we had 200,000,000 shares of Common Stock authorized, of which 7,046,853 were issued. Our Articles of Incorporation
authorizes us to issue shares of Common Stock and options, rights, warrants and appreciation rights relating to Common Stock for the
consideration and on the terms and conditions established by our Board of Directors (“Board”) in its sole discretion, whether
in connection with our incentive plans, acquisitions or otherwise. We have reserved 1,000,000 shares of Common Stock for issuance upon
the exercise of outstanding stock options under the 2021 Incentive Award Plan and 2,500,000 shares of Common Stock for issuance pursuant
to our 2021 Employee Stock Purchase Plan. In addition, as of March 31, 2024, there were 765,295 outstanding warrants, 30,000 options
not issued under a specific plan, and 1,179,500 outstanding options. In addition, as of March 31, 2024 there were 40,551 RSUs outstanding.
Any Common Stock that we issue, including
stock issued under our 2021 Incentive Award Plan or other equity incentive plans that we may adopt in the future, as well as under outstanding
options or warrants would dilute the percentage ownership held by our common stockholders. To the extent we raise additional capital
by issuing equity securities, our stockholders may also experience substantial additional dilution.
Sales of substantial
amounts of our securities in the public markets, or the perception that such sales might occur, could reduce the price of our securities
and may dilute your voting power and your ownership interest in us.
If our existing stockholders
sell substantial amounts of our securities in the public market, the market price of our securities could decrease significantly. The
perception in the public market that our stockholders might sell securities could also depress our market price. As of March 31, 2024,
we had 7,046,853 shares of Common Stock outstanding. Pursuant to the terms of the warrants issued to the underwriters (or their designees)
in connection with our initial public offering (the “IPO Warrants”), the holders of the IPO Warrants have the right, subject
to certain conditions, to require us to register the sale of the shares of our Common Stock underlying their warrants under the Securities
Act.
If the holders of
the IPO Warrants exercise their registration rights, the market price of shares of our securities may drop significantly. In addition,
all of the shares of Common Stock issuable upon exercise of outstanding stock options under the 2021 Incentive Award Plan and all of
the shares of Common Stock issuable pursuant to the 2021 Employee Stock Purchase Plan have been registered for public resale under the
Securities Act. A decline in the price of shares of our securities might impede our ability to raise capital through the issuance of
additional shares of our Common Stock or other equity securities.
We will continue
to incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time
to comply with public company regulations.
As a public company,
and particularly after we cease to be an “emerging growth company,” as defined in the JOBS Act, we will continue to incur
significant legal, accounting and other expenses. In addition, the Sarbanes-Oxley, as well as rules promulgated by the SEC and Nasdaq,
require us to adopt corporate governance practices applicable to U.S. public companies. Compliance with these rules and regulations will
continue to increase our legal and financial compliance costs.
The Sarbanes-Oxley
of 2002 (“Sarbanes-Oxley”), as well as rules and regulations subsequently implemented by the SEC and Nasdaq, have imposed
increased disclosure and enhanced corporate governance practices for public companies. Our efforts to continue to comply with evolving
laws, regulations and standards are likely to result in increased expenses and a diversion of management’s time and attention from
revenue-generating activities to compliance activities. We may not be successful in continuing to implement these requirements and implementing
them could adversely affect our business, results of operations and financial condition. In addition, if we fail to implement the requirements
with respect to our internal accounting and audit functions, our ability to report our financial results on a timely and accurate basis
could be impaired.
Our management team has limited
experience managing a public company.
Most members of our
management team have limited experience managing a publicly traded company, interacting with public company investors, and complying
with the increasingly complex laws pertaining to public companies. These obligations and constituents require significant attention from
our senior management and can divert their attention away from the day-to-day management of our business, which can harm our business,
operating results and financial condition.
We are an “emerging
growth company” and elect to comply with certain reduced reporting requirements applicable to emerging growth companies, which
could make our securities less attractive to investors.
As an “emerging
growth company,” we take advantage of certain exemptions from various reporting requirements that are applicable to other public
companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation
requirements of Section 404 of Sarbanes-Oxley, 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 stockholder
approval of any golden parachute
payments not previously approved. We cannot predict if investors will find our securities less attractive because we chose to rely on
these exemptions. If some investors find our securities less attractive as a result, there may be a less active trading market for our
securities and the prices of our securities may be more volatile.
Section 107 of the
JOBS Act also provides that an “emerging growth company” can 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 choose to avail ourselves of this
extended transition period and defer adoption of certain changes in accounting standards.
As described in Section
101 of the JOBS Act, the “emerging growth company” classification can be retained for up to five years following our initial
public offering or until the earlier occurrence of the following: the last day of the fiscal year (a) following the fifth anniversary
of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we deemed
to be a large accelerated filer, which means the market value of our Common Stock that is held by non-affiliates exceeded $700.0 million
as of the prior June 30; or the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior
three-year period.
If some investors
find our securities less attractive as a result of any choices to reduce future disclosure, there may be a less active market for our
securities and our stock price may be more volatile.
Failure to
maintain effective internal control over financial reporting in accordance with Section 404 of Sarbanes-Oxley could have a material adverse
effect on our business and stock price.
We are required to
comply with certain SEC rules that implement Sections 302 and 404 of Sarbanes-Oxley, which require management to certify financial and
other information in our quarterly and annual reports and beginning with this Annual Report, provide an annual management report on the
effectiveness of our internal control over financial reporting. Though we are required to disclose changes made in our internal control
procedures on a quarterly basis, we take advantage of certain exceptions from reporting requirements that are available to “emerging
growth companies” under the JOBS Act. For example, each independent registered public accounting firm that performs an audit for
us has not been required to attest to and report on our annual assessment of our internal controls over financial reporting pursuant
to Section 404 and will not be required to do so until we are no longer an “emerging growth company” as defined in the JOBS
Act and a non-accelerated filer in accordance with Rule 12b-2 under the Exchange Act. While we expect to be ready to comply with Section
404 of Sarbanes-Oxley by the applicable deadline, we cannot assure you that this will be the case. Furthermore, we may identify material
weaknesses that we may be unable to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements
of Section 404 of Sarbanes-Oxley. In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such standards
are modified, supplemented or amended from time to time, we may be unable to conclude that we have effective internal controls over financial
reporting in accordance with Section 404 of Sarbanes-Oxley. If we are unable to implement the requirements of Section 404 of Sarbanes-Oxley
in a timely manner or with adequate compliance, our independent registered public accounting firm may issue an adverse opinion due to
ineffective internal controls over financial reporting and we may be subject to sanctions or investigation by regulatory authorities,
such as the SEC. As a result, there could be a negative reaction in the financial markets due to a loss of confidence in the reliability
of our financial statements. In addition, we may be required to incur costs in improving our internal control system and the hiring of
additional personnel. Any such action could have a material adverse effect on our business, prospects, results of operations, and financial
condition.
Our management
has broad discretion as to the use of the net proceeds from our initial public offering and equity and debt financings.
While there have
been no changes to our planned use of proceeds from our initial public offering, as disclosed in the final prospectus for our initial
public offering, our management continues to have broad discretion in the application of the net proceeds. In addition, management has
broad discretion in the application of the net proceeds from the 3i Note and Equity Line of Credit, and could spend the proceeds in ways
that do not improve our results of operations or enhance the value of our Common Stock. Accordingly, you will have to rely upon the judgment
of our management with respect to the use of these proceeds. Our management may spend a portion or all of the net proceeds from our initial
public offering in ways that holders of the shares may not desire or that may not yield a significant return or any return at all.
The failure by our management to apply these funds effectively could result in financial losses, and these financial losses could have
a material adverse effect on our business, cause the price of our Common Stock to decline and delay the development of our products.
Pending their use, we may also invest the net proceeds from our offerings in a manner that does not produce income or that loses value.
If our shares
become subject to the penny stock rules, it would become more difficult to trade our shares.
The SEC has adopted
rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities
with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation
on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities
is provided by the exchange or system. If we do not retain a listing on Nasdaq or another national securities exchange and if the price
of our Common Stock is less than $5.00, our Common Stock could be deemed a penny stock. The penny stock rules require a broker-dealer,
before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing
specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise
exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for
the purchaser and receive: (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written
agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure
requirements may have the effect of reducing the trading activity in the secondary market for our Common Stock, and therefore stockholders
may have difficulty selling their shares.
Risks Related
to Our Capital Structure
Our long-term
lease and debt obligations could adversely affect our ability to raise additional capital to fund operations and limit our ability to
enter into certain transactions.
As of December 31,
2023, we had total liabilities of $6.6 million, of which $2.8 million was related to operating lease liabilities and $3.2 million was
related to debt obligations.
If we cannot generate
sufficient cash flow from operations to service our lease and debt obligations, we may need to further refinance our debt, dispose of
assets or issue equity to obtain necessary funds. We do not know whether we will be able to do any of this on a timely basis or on terms
satisfactory to us, or at all. Our substantial lease and debt obligations could have important consequences, including:
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our ability to obtain additional
debt or equity financing for working capital, capital expenditures, debt service requirements, acquisitions, and general corporate
or other purposes may be limited; |
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a portion of our cash flows
from operations will be dedicated to payments on our lease and debt obligations and will not be available for other purposes, including
operations, capital expenditures and future business opportunities; |
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we may be vulnerable in
a downturn in general economic conditions or in business or may be unable to carry on capital spending that is important to our growth; |
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restrictive covenants in
our debt documents may impose significant operating and financial restrictions on us, including our ability to pay dividends and
make other restricted payments or sell our collateral (other than inventory in the ordinary course of business); |
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our ability to introduce
new products or new technologies or exploit business opportunities may be restricted; and |
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we may be placed at a disadvantage
compared with competitors that have proportionately less lease and debt obligations |
Our principal stockholder continues
to have substantial control over us.
As of March 31, 2024, John Yozamp, our Co-Founder
and former Chief Executive Officer and Chief Business Development Officer, beneficially owns approximately 23.7% of our outstanding Common
Stock, and, his brother, James Yozamp, Jr., owns approximately 7.8%. As a consequence, Mr. Yozamp and his affiliates, including his brother,
are able to substantially influence matters requiring stockholder approval, including the election of directors, a merger, consolidation
or sale of all or substantially all of our assets, and any other significant transaction. The interests of Mr. Yozamp and/or his affiliates
may not always align with our interests or the interests of our other stockholders. For instance, this concentration of ownership may
have the effect of delaying or preventing a change of control otherwise favored by our other stockholders and could depress our stock
price.
Our Articles
of Incorporation provides that the Nevada Eighth Judicial District Court of Clark County, Nevada shall be the exclusive forum for certain
litigation that may be initiated by our stockholders, including claims under the Securities Act, which could limit our stockholders’
ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our Articles of Incorporation
provides that, subject to limited exceptions, the Nevada Eighth Judicial District Court of Clark County, Nevada shall be, to the fullest
extent permitted by law, be the sole and exclusive forum for: (i) any derivative action or proceeding brought in the name or right of
the Corporation or on its behalf, (ii) any action asserting a claim for breach of a fiduciary duty owed by any of our directors, officers,
employees or agents to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of Nevada Revised
Statutes Chapters 78 or 92A, our Articles of incorporation or our Bylaws, (iv) any action to interpret, apply, enforce or determine the
validity of our Articles of Incorporation or Bylaws, or (v) any action asserting a claim governed by the internal affairs doctrine.
Although these choice
of forum provisions would not apply to suits brought to enforce any duty or liability created by the Exchange Act or rules and regulations
thereunder, and suits brought to enforce the Securities Act or rules and regulations thereunder are granted concurrent jurisdiction in
federal and state courts pursuant to preemptive federal law, these choice of forum provisions may otherwise limit a stockholder’s
ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, employees or agents,
which may discourage such lawsuits against us and our directors, officers, employees and agents. Stockholders who do bring a claim in
the Nevada Eighth Judicial District Court of Clark County, Nevada could face additional litigation costs in pursuing any such claim,
particularly if they do not reside in or near the State of Nevada. The Nevada Eighth Judicial District Court of Clark County, Nevada
may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may
be located or would otherwise choose to bring the action, and such judgments or results may be more favorable to us than to our stockholders.
Alternatively, if a court were to find the choice of forum provision contained in our Articles of Incorporation to be inapplicable or
unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely
affect our business and financial condition.
Risks Related
to This Offering
We have broad
discretion in how we use the net proceeds of this offering, and we may not use these proceeds effectively or in ways with which you agree.
Our management will
have broad discretion as to the application of the net proceeds of this offering and could use them for purposes other than those contemplated
at the time of the offering. We currently intend to use the net proceeds from the offering to repay an aggregate of approximately $700,000
due under the Stockholder Notes and approximately $2.5 million due under the 3i Note as of the date of filing of this prospectus, and
for working capital and general corporate purposes. Our stockholders may not agree with the manner in which our management chooses to
allocate and spend the net proceeds. Moreover, our management may use the net proceeds for corporate purposes that may not increase the
market price of our Common Stock.
If you purchase
our securities in this offering, you may experience future dilution as a result of future equity offerings or other equity issuances.
In order to raise
additional capital, we may in the future offer additional shares of our Common Stock or other securities convertible into or exchangeable
for our Common Stock at prices that may not be the same as the price per share as prior issuances of Common Stock. We may not be able
to sell shares of our Common Stock or other securities in any other offering at a price per share that is equal to or greater than the
price per share previously paid by investors, and investors purchasing shares or other securities in the future could have rights superior
to existing stockholders. The price per share at which we sell additional shares of our Common Stock or securities convertible into Common
Stock in future transactions may be higher or lower than the prices per share previously paid. You will incur dilution upon exercise
of any outstanding stock options, warrants or upon the issuance of shares of Common Stock under our stock incentive programs.
In addition, the issuance of the securities in this offering, and any future sales of a substantial number of shares of our Common Stock
in the public market, or the perception that such sales may occur, could adversely affect the price of our Common Stock. We cannot predict
the effect, if any, that market sales of such shares of Common Stock or the availability of such shares for sale will have on the market
price of our Common Stock.
The offering
price of the Units may not be indicative of the value of our assets or the price at which shares can be resold. The offering price of
the Units may not be an indication of our actual value.
The public offering
price per share of the Units is being determined based upon negotiations between the Company and the underwriter. Factors taken into
consideration include the trading volume of our Common Stock prior to this offering, the historical prices at which our shares of our
Common Stock have recently traded, the history and prospects of our business, the stage of development of our business, our business
plans for the future and the extent to which they have been implemented, an assessment of our management, general conditions of the securities
markets at the time of the offering, and such other factors as we and the underwriter deem relevant. No assurance can be given that our
Common Stock can be resold at the public offering price for the Units.
For these reasons,
comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on past results as an indication
of future performance. In the past, following periods of volatility in the market price of a public company’s securities, securities
class action litigation has often been instituted against the public company. Regardless of its outcome, this type of litigation could
result in substantial costs to us and a likely diversion of our management’s attention. You may not receive a positive return on
your investment when you sell your shares of Common Stock (including following the exercise of any Warrants) and you may lose the entire
amount of your investment in the Units.
The Warrants
will not be listed or quoted on any exchange.
There is no established
public trading market for the Warrants being offered in this offering, and we do not expect a market to develop. In addition, we do not
intend to apply to list the Series A Warrants, Series B Warrants, or Pre-Funded Warrants on any national securities exchange or other
nationally recognized trading system, including Nasdaq. Without an active market, the liquidity of the Warrants will be limited.
Except as otherwise
provided in the Warrants, holders of Warrants purchased in this offering will have no rights as stockholders until such holders exercise
their Series A Warrants, Series B Warrants, or Pre-Funded Warrants and acquire our Common Stock.
Except as otherwise
provided in the Warrants, until holders of such Warrants acquire our Common Stock upon exercise of the Series A Warrants, Series B Warrants
or Pre-Funded Warrants, such holders will have no rights with respect to our Common Stock underlying such Warrants. Upon exercise of
any such Series A Warrants, Series B Warrants, or Pre-Funded Warrants, the holders will be entitled to exercise the rights of a holder
of our Common Stock only as to matters for which the record date occurs after the exercise date.
This offering
may cause the trading price of our shares of Common Stock to decrease.
The price per Unit,
together with the number of shares of Common Stock and Warrants we propose to issue and ultimately will issue if this offering is completed,
may result in an immediate decrease in the market price of our shares. This decrease may continue after the completion of this offering.
Resales of
our shares of Common Stock in the public market by our stockholders as a result of this offering may cause the market price of our shares
of Common Stock to fall.
We are registering
shares of Common Stock and shares of Common Stock, in the aggregate, issuable upon the exercise of the Warrants, as well as the Series
A Warrants and the Series B Warrants offered under this prospectus. Sales of substantial amounts of our Common Stock in the public market,
or the perception that such sales might occur, could adversely affect the market price of our shares of Common Stock. The issuance of
new shares of Common Stock could result in resales of our shares of Common Stock by our current stockholders concerned about the potential
ownership dilution of their holdings. Furthermore, in the future, we may issue additional shares of Common Stock or other
equity or debt securities exercisable or convertible into shares of Common Stock. Any such issuance could result in substantial dilution
to our existing stockholders and could cause our stock price to decline.
Provisions
of the Common Warrants offered pursuant to this prospectus, as well as the 3i Note and the Equity Line of Credit, could discourage an
acquisition of us by a third-party.
Certain provisions
of the Common Warrants offered pursuant to this prospectus, as well as the 3i Note and Equity Line of Credit, could make it more
difficult or expensive for a third-party to acquire us. The Common Warrants and the 3i Note and Equity Line of Credit each prohibit
us from engaging in certain transactions constituting “fundamental transactions” subject to certain exceptions.
These and other provisions of the Common Warrants and the 3i Note and Equity Line of Credit could prevent or deter a third-party
from acquiring us even where the acquisition could be beneficial to you.
The Common
Warrants may have an adverse effect on the market price of our Common Stock and make it more difficult to effect a business combination.
To the extent we
issue shares of Common Stock to effect a future business combination, the potential for the issuance of a substantial number of additional
shares of Common Stock upon exercise of the Common Warrants could make us a less attractive acquisition vehicle in the eyes of a target
business. Such Common Warrants, when exercised, will increase the number of issued and outstanding shares of Common Stock and reduce
the value of the shares issued to complete the business combination. Accordingly, the Common Warrants may make it more difficult to effectuate
a business combination or increase the cost of acquiring a target business. Additionally, the sale, or even the possibility of a sale,
of the shares of Common Stock underlying the Common Warrants could have an adverse effect on the market price for our securities or on
our ability to obtain future financing. If and to the extent the Common Warrants are exercised, you may experience dilution to your holdings.
Certain beneficial
provisions in the Common Warrants will not be effective until we are able to receive stockholder approval of such provisions, and if
we are unable to obtain such approval the Common Warrants will have significantly less value.
Under Nasdaq listing
rules, certain provisions in the Common Warrants will not be effective until, and unless, we obtain the approval of our stockholders.
While we intend to promptly seek stockholder approval, there is no guarantee that Stockholder Approval will ever be obtained. If we are
unable to obtain Stockholder Approval, the foregoing provisions will not become effective and the Common Warrants may have substantially
less value. In addition, we expect to incur substantial cost, and management may devote substantial time and attention, in attempting
to obtain Stockholder Approval.
The Common
Warrants are speculative in nature.
The Common Warrants
offered hereby as part of the Units do not confer any rights of share of Common Stock ownership on their holders, such as voting rights
or the right to receive dividends, but rather merely represent the right to acquire shares of Common Stock at a fixed price. Following
this offering, the market value of each of the Series A Warrants and Series B Warrants will be uncertain and there can be no assurance
that such market value will equal or exceed the warrants’ exercise prices, and consequently, whether it will ever be profitable
for holders of Common Warrants to exercise their warrants.
CAUTIONARY NOTE
REGARDING FORWARD-LOOKING STATEMENTS
This prospectus,
together with any accompanying prospectus supplement, may include “forward-looking statements” within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act. All statements in this prospectus, together with any accompanying prospectus
supplement, other than statements of historical fact, are “forward-looking statements” for purposes of these provisions,
including, without limitation, any projections regarding the markets where we operate, any statements of the plans and objectives of
our management for future operations, any statements concerning proposed new products or services, any statements regarding expected
capital expenditures, any statements regarding future economic conditions or performance, and any statements of assumptions underlying
any of the foregoing. All forward-looking statements are made as of the date on which they were made and are based on information available
to us as of such dates. We assume no obligation to update any forward-looking statement. In some cases, forward-looking statements can
be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “should,”
“anticipates,” “intends,” “seeks,” “believes,” “estimates,” “potential,”
“forecasts,” “continue,” or other forms of these words or similar words or expressions, or the negative thereof
or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein
are reasonable, there can be no assurance that such expectations or any of the forward-looking statements will prove to be correct. Actual
results will likely differ, and could differ materially, from those projected or assumed in the forward-looking statements. Prospective
investors are cautioned not to unduly rely on any such forward-looking statements.
Forward-looking statements
are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations,
and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy,
and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks,
and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial
condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these
forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those
indicated in the forward-looking statements include, among others, the following:
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We operate in an extremely
competitive industry and are subject to pricing pressures; |
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We have a history of losses
and our audited financial statements include a statement that there is a substantial doubt about our ability to continue as a going
concern. As our costs increase, we may not be able to generate sufficient revenue to achieve and sustain profitability; |
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Our business and future
growth depends on the needs and success of our customers, and we have substantial customer concentration; |
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We may not be able to successfully
manage our growth; |
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We may be negatively impacted
by public health epidemics or outbreaks, including the COVID-19 global pandemic, as well as uncertainty in global economic conditions; |
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We may fail to expand our
sales and distribution channels and our ability to expend into international markets is uncertain; |
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Nearly all of our raw materials
enter the United States through a limited number of ports, and we rely on third parties to store and ship some of our inventory;
labor unrest at these ports or other product delivery difficulties could interfere with our distribution plans and reduce our revenue; |
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Government reviews, inquiries,
investigations, and actions could harm our business or reputation; |
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We are dependent on third-party
manufacturers and suppliers, including suppliers located outside the United States, and our operating results could be adversely
affected by changes in the cost and availability of raw materials as well as increases in costs, disruption of supply, or shortage
of any of our battery components, such as electronic and mechanical parts, or raw materials used in the production of such parts; |
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We rely on three warehouse
facilities and if any of our facilities becomes inoperable for any reason or if our expansion plans fail, our ability to produce
our products could be negatively impacted; |
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Lithium-ion battery cells
have been observed to catch fire or release smoke and flame, which may have a negative impact on our reputation and business; |
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We could face potential
product liability claims relating to our products, which could result in significant costs and liabilities, which would reduce our
profitability; |
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Our operations expose us
to litigation, tax, environmental, and other legal compliance risks; |
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Our failure to introduce
new products and product enhancements and broad market acceptance of new technologies introduced by our competitors could adversely
affect our business; |
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We may not be able to adequately
protect our proprietary intellectual property and technology and we may need to defend ourselves against intellectual property infringement
claims; |
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Quality problems with our
products could harm our reputation and erode our competitive position; |
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Our ability to raise capital
in the future may be limited and our stockholders may be diluted by future securities offerings; |
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We depend on our senior
management team and other key employees, and significant attrition within our management team or unsuccessful succession planning
could adversely affect our business; and |
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We are an “emerging
growth company” and elect to comply with certain reduced reporting requirements applicable to emerging growth companies, which
could make our securities less attractive to investors. |
All forward-looking
statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements.
Our actual results will likely differ, and may differ materially, from anticipated results. Financial estimates are subject to change
and are not intended to be relied upon as predictions of future operating results, and we assume no obligation to update or disclose
revisions to those estimates. If we do update or correct one or more forward-looking statements, investors and others should not conclude
that we will make additional updates or corrections.
USE OF PROCEEDS
We estimate
that the net proceeds from this offering, after deducting underwriting discounts and commissions and estimated offering expenses
payable by us, will be approximately $ million
(based on an assumed public offering price of $ per Unit, which was the last reported sales price of our Common
Stock on Nasdaq on July , 2024). We intend to use the net proceeds from the offering to repay an aggregate of
approximately $700,000 due under the Stockholder Notes and approximately $2.5 million due under the 3i Note as of the date of
filing of this prospectus, and for working capital and general corporate purposes.
This expected use
of net proceeds from this offering represents our intentions based upon our current plans and business conditions, which could change
in the future as our plans and business conditions evolve. We cannot currently allocate specific percentages of the net proceeds to us
from this offering that we may use for the purposes specified above. Our management will have broad discretion in the application of
the net proceeds from this offering and could use them for purposes other than those contemplated at the time of this offering. Our stockholders
may not agree with the manner in which our management chooses to allocate and spend the net proceeds. Moreover, our management may use
the net proceeds for corporate purposes that may not result in our being profitable or that increases our market value.
Pending
our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments,
including short-term, investment-grade, interest-bearing instruments and U.S. government securities.
MARKET INFORMATION
AND DIVIDEND POLICY
Market
Information
Our
Common Stock began trading on Nasdaq on April 1, 2022 under the symbol “XPON.” As of March 31, 2024, there were approximately
13 registered holders of our Common Stock.
Dividend
Policy
We have never declared
or paid cash dividends on our Common Stock. We do not anticipate declaring or paying any cash dividends on our Common Stock in the foreseeable
future. See “Description of Capital Stock.” We currently intend to retain all available funds and any future earnings
to support our operations and finance the growth and development of our business. Any future determination related to our dividend policy
will be made at the discretion of our Board and will depend upon, among other factors, our results of operations, financial condition,
capital requirements, contractual restrictions, business prospects, and other factors our Board may deem relevant. Further, the 3i Note
and any future debt facilities we may enter into may contain restrictions on our ability to pay dividends or make distributions, and
any new credit facilities we may enter into may contain similar restrictions.
DILUTION
If you invest in
our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the public
offering price per share of our common stock and the “as adjusted” net tangible book value per share of our Common Stock
upon the closing of this offering.
Net tangible book
value per share of our common stock is determined by subtracting our total liabilities from the amount of our total tangible assets (total
assets less intangible assets) and then dividing the difference by the number of shares of our Common Stock deemed to be outstanding
at that date. As of March 31, 2024, we had a net tangible book value of approximately $3.7 million, or $0.52 per share of Common Stock.
After giving effect
to the sale of shares of our common stock in this offering at an offering price of $
per share, and after deducting estimated offering commissions and estimated offering expenses payable by us, our pro forma as adjusted
net tangible book value as of March 31, 2024 would have been approximately $ ,
or $ per share. This represents an immediate
increase in pro forma as adjusted net tangible book value of $
per share to existing stockholders and an immediate dilution of $
per share to new investors purchasing securities in this offering.
The following table
illustrates this dilution on a per share basis:
Public offering price per
share |
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$ |
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Net
tangible book value per share as of March 31, 2024 |
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$ |
0.52 |
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Increase
in net tangible book value per share attributable to this offering |
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Pro forma as adjusted net
tangible book value per share after this offering |
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Dilution per share to new
investors purchasing in this offering |
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$ |
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If the underwriters
fully exercise their option to purchase additional shares of our common stock, the as adjusted net tangible book value after giving
effect to this offering would be $ per share, which amount represents an immediate increase in as adjusted
net tangible book value of $ per share to existing stockholders, and an immediate dilution
to new investors purchasing shares of common stock in this offering of $ per share.
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The number of shares of
our Common Stock to be outstanding after this offering is based on 7,046,853 shares of our Common Stock outstanding as of March 31,
2024, and, unless otherwise indicated, excludes, as of that date: |
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78,000 shares of Common
Stock issuable upon the exercise of warrants to purchase Common Stock outstanding as of March 31, 2024, at an exercise price of $2.90
per share; |
|
|
|
|
● |
514,290 shares of Common
Stock issuable upon the exercise of warrants to purchase Common Stock outstanding as of March 31, 2024, at an exercise price of $3.32
per share; |
|
|
|
|
● |
148,005 shares of Common
Stock issuable upon the exercise of warrants to purchase Common Stock outstanding as of March 31, 2024, at an exercise price of $9.10
per share; |
|
|
|
|
● |
25,000 shares of Common
Stock issuable upon the exercise of warrants to purchase Common Stock outstanding as of March 31, 2024, at an exercise price of $5.00
per share; |
|
|
|
|
● |
30,000 shares of Common
Stock issuable upon the exercise of options outstanding as of March 31, 2024, which were not issued under a specified plan; |
|
|
|
|
● |
1,244,145 shares of Common
Stock issuable upon the exercise of equity incentive awards outstanding under our 2021 Incentive Award Plan as of March 31, 2024; |
|
|
|
|
● |
551,623 shares of Common
Stock available for future issuance under our 2021 Incentive Award Plan as of March 31, 2024; |
|
|
|
|
● |
any shares of Common Stock
available for future issuance under our 2021 Incentive Award Plan, which will continue to increase in future years pursuant to the
plan’s evergreen provision; |
|
|
|
|
● |
2,500,000 shares of Common
Stock available for future issuance under our 2021 Employee Stock Purchase Plan as of March 31, 2024; |
|
|
|
|
● |
an aggregate of up to 768,971
shares of Common Stock that may be issuable under the 3i Note, which consists of 727,387 shares issuable upon conversion of the 3i
Note and up to 41,584 shares that we may issue to satisfy interest payments due under the 3i Note, subject to the terms of the Note
Purchase Agreement as of March 31, 2024; |
|
|
|
|
● |
up to 1,743,754 shares
of Common Stock issuable pursuant to the Equity Line of Credit as of March 31, 2024; and |
|
|
|
|
● |
any additional shares of
Common Stock we have issued or may issue from time to time after January 12, 2024. |
At closing, we intend
to use a portion of the net proceeds from this offering to pay off in full the 3i Note and plan to terminate the Equity Line of Credit.
In light of the foregoing, we expect we will not issue any of the 768,971 shares of Common Stock under the 3i Note or the 1,743,754 shares
of Common Stock issuable pursuant to the Equity Line of Credit. See the section of this prospectus titled “Use of Proceeds”
for more information.
To the extent that
outstanding options or warrants are exercised, or restricted stock awards are settled, you may experience further dilution. In addition,
we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient
funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible
debt securities, the issuance of these securities could result in further dilution to our stockholders.
DESCRIPTION OF
SECURITIES WE ARE OFFERING
We are offering
Units based on an assumed public offering
price of $ per Unit on a firm commitment
basis. Each Unit will consist of one share of Common Stock (or Pre-Funded Warrant to purchase one share of our Common Stock in
lieu thereof), two Series A Warrants each to purchase one share of Common Stock and one Series B Warrant to purchase
such number of shares of Common Stock as determined in the Series B Warrant. The Units have no stand-alone rights and will not
be certificated or issued as stand-alone securities. The shares of Common Stock and Pre-Funded Warrants, if any, can each be purchased
in this offering only with the accompanying Series A Warrants and Series B Warrants as part of Units (other than pursuant to the
underwriter’s option to purchase additional shares of Common Stock and/or Pre-Funded Warrants and/or Series A Warrants and/or
Series B Warrants), but the components of the Units will be immediately separable and will be issued separately in this offering.
Common Stock
The material terms
and provisions of our Common Stock are described in Exhibit 4.4 filed with our Annual Report on Form 10-K for the year ended December
31, 2023.
Pre-Funded Warrants
The following summary
of certain terms and provisions of the Pre-Funded Warrants that are being offered hereby is not complete and is subject to, and qualified
in its entirety by the provisions of, the Pre-Funded Warrants. Prospective investors should carefully review the terms and provisions
of the form of Pre-Funded Warrant for a complete description of the terms and conditions of the Pre-Funded Warrants.
The term “Pre-Funded”
refers to the fact that the purchase price of our Common Stock in this offering includes almost the entire exercise price that will be
paid under the Pre-Funded Warrants, except for a nominal remaining exercise price of $0.001. The purpose of the Pre-Funded Warrants is
to enable investors that may have restrictions on their ability to beneficially own more than 4.99% (or, upon election of the holder,
9.99%) of our outstanding shares of Common Stock following the consummation of this offering the opportunity to make an investment in
the Company without triggering their ownership restrictions, by receiving Pre-Funded Warrants in lieu of our Common Stock which would
result in such ownership of more than 4.99% (or 9.99%), and receive the ability to exercise their option to purchase the shares underlying
the Pre-Funded Warrants at such nominal price at a later date.
Duration.
The Pre-Funded Warrants offered hereby will entitle the holders thereof to purchase our shares of Common Stock at a nominal exercise
price of $0.001 per share, commencing immediately on the date of issuance. There is no expiration date for the Pre-Funded Warrants.
Exercise Limitation.
A holder will not have the right to exercise any portion of the Pre-Funded Warrants if the holder (together with its affiliates) would
beneficially own in excess of 4.99% of the number of our shares of Common Stock outstanding immediately after giving effect to the exercise,
as such percentage ownership is determined in accordance with the terms of the Pre-Funded Warrants. However, any holder may increase
or decrease such percentage to any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be
effective until 61 days following notice from the holder to us. It is the responsibility of the holder to determine whether any exercise
would exceed the exercise limitation.
Exercise Price.
The Pre-Funded Warrants will have an exercise price of $0.001 per share. The exercise price is subject to appropriate adjustment in the
event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our
Common Stock and also upon any distributions of assets, including cash, stock or other property to our stockholders. The holder may elect
to exercise the Pre-Funded Warrants through a cashless exercise, in which case the holder would receive upon such exercise the net number
of shares of Common Stock determined according to the formula set forth in the Pre-Funded Warrants.
Transferability.
Subject to applicable laws, the Pre-Funded Warrants may be offered for sale, sold, transferred or assigned without our consent.
Absence of Trading
Market. There is no established trading market for the Pre-Funded Warrants and we do not expect a market to develop. In addition,
we do not intend to apply for the listing of the Pre-Funded Warrants on any national securities exchange or other trading market. Without
an active trading market, the liquidity of the Pre-Funded Warrants will be limited.
Fundamental Transactions.
In the event of a fundamental transaction, generally including any reorganization, recapitalization or reclassification of our Common
Stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation, merger, amalgamation
or arrangement with or into another person, the acquisition of more than 50% of our outstanding Common Stock, or any person or group
becoming the beneficial owner of 50% of the voting power represented by our outstanding Common Stock, the holder will have the right
to receive, for each share of Common Stock that would have been issuable upon such exercise immediately prior to the occurrence of such
fundamental transaction, the number of shares of the successor or acquiring corporation or of us if we are the surviving corporation,
and any additional consideration receivable as a result of such fundamental transaction by a holder of the number of shares for which
the Pre-Funded Warrant was exercisable immediately prior to such fundamental transaction. The holders of the Pre-Funded Warrants may
also require us to purchase the Pre-Funded Warrants from the holders by paying to each holder an amount equal to the Black Scholes value
of the remaining unexercised portion of the Pre-Funded Warrants on the date of the fundamental transaction.
No Rights as a
Stockholder. Except as otherwise provided in the Pre-Funded Warrants or by virtue of such holder’s ownership of our shares
of Common Stock, the holder of Pre-Funded Warrants does not have the rights or privileges of a holder of our Common Stock, including
any voting rights, until the holder exercises the Pre-Funded Warrant.
Stockholder Approval
Under Nasdaq listing
rules, certain anti-dilution provisions and the exercise price reset and share combination event adjustment provisions in the Series
A Warrants (described below) will not be effective until, and unless, we obtain Stockholder Approval. While we intend to promptly seek
Stockholder Approval, there is no guarantee that Stockholder Approval will ever be obtained. If we are unable to obtain Stockholder Approval,
the foregoing provisions will not become effective and the Series A Warrants and Series B Warrants will have substantially less value.
In addition, we expect to incur substantial costs, and management may devote substantial time and attention, in attempting to obtain
Stockholder Approval.
Series A Warrants
The following summary
of certain terms and provisions of the Series A Warrants included in the Units and offered hereby is not complete and is subject to,
and qualified in its entirety by the provisions of the form of Series A Warrant, which is filed as an exhibit to the registration statement
of which this prospectus forms a part. Prospective investors should carefully review the terms and provisions set forth in the form of
Series A Warrant.
Exercisability.
The Series A Warrants are exercisable at any time or times beginning on the first trading day following our notice to the Series A Warrant
holders of Stockholder Approval, which notice will be provided within two trading days of our receipt of Stockholder Approval (such notice
date, the “Series A Warrant Initial Exercise Date”), and will expire five years from such Series A Warrant Initial Exercise
Date. The Series A Warrants will be exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed
exercise notice and, at any time a registration statement registering the issuance of the shares of Common Stock underlying the Series
A Warrants under the Securities Act is effective and available for the issuance of such shares, by payment in full in immediately available
funds for the number of shares of Common Stock purchased upon such exercise. If a registration statement registering the issuance of
the shares of Common Stock underlying the Series A Warrants under the Securities Act is not effective, the holder may elect to exercise
the Series A Warrants through a cashless exercise, in which case the holder would receive upon such exercise the net number of shares
of Common Stock determined according to the formula set forth in the Series A Warrants. No fractional shares of Common Stock will be
issued in connection with the exercise of Series A Warrants. In lieu of fractional shares, we will pay the holder an amount in cash equal
to the fractional amount multiplied by the exercise price.
Exercise Limitation.
A holder will not have the right to exercise any portion of the Series A Warrants if the holder (together with its affiliates) would
beneficially own in excess of 4.99% of the number of shares of our Common Stock
outstanding immediately
after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Series A Warrants.
However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99%, provided that any increase
in such percentage shall not be effective until 61 days following notice from the holder to us. It is the responsibility of the holder
to determine whether any exercise would exceed the exercise limitation.
Exercise
Price. The exercise price per whole share of Common Stock purchasable upon exercise of the Series A Warrants is $ .
The exercise price and Floor Price are subject to appropriate adjustment in the event of certain stock dividends and distributions,
stock splits, stock combinations, reclassifications or similar events affecting our Common Stock and also upon any distributions
of assets, including cash, stock or other property to our stockholders.
Reset. On the 11th trading day after Stockholder
Approval (the “Reset Date”), the Series A Warrants’ exercise price will be adjusted to equal the lower of (i) the exercise
price then in effect and (ii) the greater of (a) the lowest daily weighted average price of the shares of Common Stock during the period
commencing on the first trading day after the date of Stockholder Approval and ending following the close of trading on the tenth trading
day thereafter (the “Reset Period”), and (b) if prior to Stockholder Approval, a price equal to 50% of the Nasdaq Minimum
Price, or if following Stockholder Approval, a price equal to 20% of the Nasdaq Minimum Price (the “Floor Price”), and the
number of shares issuable upon exercise will be adjusted to the number of shares determined by multiplying the exercise price then in
effect at issuance by the number of shares acquirable upon exercise immediately prior to such reset and dividing the product thereof by
the exercise price resulting from such reset. If the offering had priced on July , 2024, the Nasdaq Minimum
Price as of such date would have been $ per share, and the foregoing floor prices would have been $
and $ , respectively.
Subsequent Financing. In addition, conditioned
upon the receipt of Stockholder Approval, and subject to certain exemptions, if we issue, sell, enter into an agreement to sell, or grant
any option to purchase, or sell, enter into an agreement to sell, or grant any right to reprice, or otherwise dispose of or issue (or
announce any offer, sale, grant or any option to purchase or other disposition) any shares of Common Stock or Common Stock equivalents
(including stock options and convertible securities), at an effective price per share less than the exercise price of the Series A Warrants
then in effect, the exercise price of the Series A Warrants will be reduced to the lower of (i) such price or (ii) the lowest VWAP during
the five consecutive trading days immediately following such dilutive issuance or announcement thereof (but in no event lower than the
Floor Price and with certain adjustments made if such event occurs prior to Stockholder Approval), and the number of shares issuable upon
exercise will be proportionately adjusted such that the aggregate exercise price will remain unchanged.
Share Combination Event Adjustment. If at any
time there occurs any share split, share dividend, share combination recapitalization or other similar transaction (which would include
reverse stock splits) involving our Common Stock and the lowest daily VWAP during the period commencing five consecutive trading days
immediately preceding through the five consecutive trading days commencing on the date of such event is less than the exercise price of
the Series A Warrants then in effect, then the exercise price of the Series A Warrants will be reduced to the lowest daily VWAP during
such period (but in no event lower than the Floor Price and with certain adjustments made if such event occurs prior to Stockholder Approval),
and the number of shares issuable upon exercise will be proportionately adjusted such that the aggregate price will remain unchanged. Furthermore,
if the Adjusted Exercise Price would have been below the Floor Price but for the Floor Price limitation, then we will make a payment to
the Series A Warrant holder for the economic difference between the Adjusted Exercise Price and the Floor Price, subject to the exceptions
and conditions set forth in the Series A Warrants.
Fundamental Transactions. In the event of a
fundamental transaction, as described in the Series A Warrants and generally including any reorganization, recapitalization or reclassification
of our Common Stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation
or merger with or into another person, the acquisition of more than 50% of our outstanding Common Stock, or any person or group becoming
the beneficial owner of 50% of the voting power represented by our outstanding Common Stock, the holders of the Series A Warrants will
be entitled to receive upon exercise of the Series A Warrants the kind and amount of securities, cash or other property that the holders
would have received had they exercised the Series A Warrants immediately prior to such fundamental transaction. The holders of the Series
A Warrants may also require us to purchase the Series A Warrants from the holders by paying to each holder an amount equal to the Black
Scholes value of the remaining unexercised portion of the Series A Warrants on the date of the fundamental transaction, provided that
if the fundamental transaction is not within our control, the holders of the Series A Warrants will only be entitled to receive from us
or any successor entity the same type or form of consideration (and in the same proportion), at the Black Scholes value of the unexercised
portion of the Series A Warrant, that is being offered and paid to the holders of our Common Stock in connection with the fundamental
transaction.
Transferability.
Subject to applicable laws, the Series A Warrants may be offered for sale, sold, transferred or assigned without our consent.
Absence of Trading
Market. There is no established trading market for the Series A Warrants and we do not expect a market to develop. In addition, we
do not intend to apply for the listing of the Series A Warrants on any national securities exchange or other trading market. Without
an active trading market, the liquidity of the Series A Warrants will be limited.
Rights as a Stockholder.
Except as otherwise provided in the Series A Warrants or by virtue of such holder’s ownership of shares of our Common Stock, the
holder of a Series A Warrant does not have the rights or privileges of a holder of our Common Stock, including any voting rights, until
the holder exercises the Series A Warrant.
Governing Law.
The Series A Warrants are governed by New York law.
Series B Warrants
The following summary
of certain terms and provisions of the Series B Warrants included in the Units and offered hereby is not complete and is subject to,
and qualified in its entirety by the provisions of the form of Series B Warrant, which is filed as an exhibit to the registration statement
of which this prospectus forms a part. Prospective investors should carefully review the terms and provisions set forth in the form of
Series B Warrant.
Exercisability.
The Series B Warrants will be exercisable immediately. The Series B Warrants will be exercisable, at the option of each holder, in whole
or in part by delivering to us a duly executed exercise notice and, at any time a registration statement registering the issuance of
the shares of Common Stock underlying the Series B Warrants under the Securities Act is effective and available for the issuance of such
shares, by payment in full in immediately available funds for the number of shares of Common Stock purchased upon such exercise.
Exercise Limitation.
A holder will not have the right to exercise any portion of the Series B Warrants if the holder (together with its affiliates) would
beneficially own in excess of 4.99% of the number of shares of our Common Stock outstanding immediately after giving effect to the exercise,
as such percentage ownership is determined in accordance with the terms of the Series B Warrants. However, any holder may increase or
decrease such percentage to any other percentage not in excess of 9.99%.
Exercise Price.
The exercise price and number of shares of Common Stock issuable under the Series B Warrants are subject to adjustment based upon
the weighted average price of our Common Stock over a rolling five (5)-trading day period between the issuance date of the Series B Warrants
and the close of trading on the tenth trading day following Stockholder Approval (but in no event lower than the Floor Price and with
certain adjustments made if such event occurs prior to Stockholder Approval). The exercise price and Floor Price are also subject to
appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications
or similar events affecting our Common Stock and also upon any distributions of assets, including cash, stock or other property to our
stockholders.
Fundamental Transactions.
We shall not enter into a fundamental transaction, as described in the Series B Warrants and generally including any reorganization,
recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of our
properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding common
stock or 50% or more of the voting power of our common equity, unless the successor entity in such transaction assumes in writing all
of our obligations under the Series B Warrants. Such security of the successor entity shall be evidenced by a written instrument substantially
similar in form and substance to the Series B Warrants, including, without limitation, an adjusted exercise price equal to the value
for the shares reflected by the terms of such fundamental transaction, and exercisable for a corresponding number of shares of capital
stock equivalent to the shares acquirable and receivable upon exercise of the Series B Warrants (without regard to any limitations on
the exercise of the Series B Warrants) prior to such fundamental transaction, and with an exercise price which applies the exercise price
described in the Series B Warrants to such shares of capital stock (but taking into account the relative value of the shares pursuant
to such fundamental transaction and the value of such shares of capital stock, such adjustments to the number of shares of capital stock
and such exercise price being for the purpose of protecting the economic value of the Series B Warrants immediately prior to the occurrence
or consummation of such fundamental transaction).
Transferability.
Subject to applicable laws, the Series B Warrants may be offered for sale, sold, transferred or assigned without our consent.
Absence of Trading
Market. There is no established trading market for the Series B Warrants and we do not expect a market to develop. In addition, we
do not intend to apply for the listing of the Series B Warrants on any national securities exchange or other trading market. Without
an active trading market, the liquidity of the Series B Warrants will be limited.
Rights as a Stockholder.
Except as otherwise provided in the Series B Warrants or by virtue of such holder’s ownership of shares of our Common Stock, the
holder of a Series B Warrant does not have the rights or privileges of a holder of our Common Stock, including any voting rights, until
the holder exercises the Series B Warrant.
Governing Law.
The Series B Warrants are governed by New York law.
UNDERWRITING
Aegis Capital Corp.
(“Aegis” or the “underwriter”) is the underwriter and book-running manager of this offering. Under the terms
of an underwriting agreement, which is filed as an exhibit to the Registration Statement, we have agreed to sell to the underwriter and
the underwriter has agreed to purchase, at the public offering price less the underwriting discounts and commissions set forth on the
cover page of this prospectus, the following number of Units:
Underwriter |
|
Number
of
Units Including Common Stock |
|
|
Number
of Units Including Pre-Funded Warrants |
|
Aegis Capital Corp. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The underwriting
agreement provides that the underwriter’s obligation to purchase Units depends on the satisfaction of the conditions contained
in the underwriting agreement including:
|
● |
the representations and
warranties made by us to the underwriter are true; |
|
|
|
|
● |
there is no material change
in our business or the financial markets; and |
|
|
|
|
● |
we deliver customary closing
documents to the underwriter. |
The underwriter has
agreed to purchase all of the Units offered by this prospectus (other than those covered by the over-allotment option described below),
if any are purchased under the underwriting agreement.
The underwriter is
offering the Units subject to various conditions and may reject all or part of any order. The underwriter has advised us that it proposes
to offer the Units directly to the public at the public offering price per Unit that appears on the cover page of this prospectus. In
addition, the underwriter may offer some of the Units to other securities dealers at such price less a concession of $ per Unit.
After the Units are released for sale to the public, the underwriter may change the offering price and other selling terms at various
times.
Over-Allotment
Option
We have granted to the underwriter an option to purchase
up to additional shares of Common Stock (representing 15% of the Units sold in the offering), up to an additional Series A Warrants
to purchase an aggregate of an additional shares of Common Stock, representing 15% of the Units sold at the closing of the offering
from the Company; and Series B Warrants to purchase additional shares of Common Stock, representing 15% of the Units sold at the closing
of the offering by the Company) at the public offering price less underwriting discounts and commissions. The underwriter may exercise
this option in whole or in part at any time within 45 days after the date of the offering. The underwriter may exercise the over-allotment
option with respect to shares of Common Stock only, warrants only, or any combination thereof. The purchase price to be paid per additional
share of Common Stock will be equal to the public offering price of one Unit (less $0.001 allocated to each full warrant), as applicable,
less the underwriting discount, and the purchase price to be paid per over-allotment warrant will be $0.001. We will be obligated, pursuant
to the option, to sell these additional shares of Common Stock or warrants to the underwriter to the extent the option is exercised. If
any additional shares of Common Stock or warrants are purchased, the underwriter will offer the additional shares of Common Stock or warrants
on the same terms as those on which the other shares of Common Stock or warrants are being offered hereunder. No underwriting discounts
or commissions will be paid on any warrants purchased pursuant to the underwriter’s over-allotment option. If this over-allotment
option is exercised in full, the total offering price to the public will be approximately $ million,
and the total net proceeds, before expenses and after deducting the underwriting discounts described above, to us will be approximately
$ million (based upon a public offering price of $
per share of Common Stock).
Underwriting Discounts
and Expenses
The following table
shows the per Unit and total underwriting discounts we will pay to Aegis. These amounts are shown assuming both no exercise and full
exercise of the underwriter’s option to purchase additional securities.
|
|
Total |
|
|
|
Per
Unit |
|
|
No
Exercise |
|
|
Full
Exercise(2) |
|
Public offering price |
|
$ |
|
|
|
|
|
|
|
|
|
|
Underwriting discounts
to be paid by us (7.0%) |
|
$ |
|
|
|
|
|
|
|
|
|
|
Non-accountable expense
allowance ($1.0)(1) |
|
$ |
|
|
|
|
|
|
|
|
|
|
Proceeds, before expenses,
to us |
|
$ |
|
|
|
|
|
|
|
|
|
|
(1) |
We have agreed to pay a
non-accountable expense allowance to Aegis equal to 1.0% of the gross proceeds of the offering. |
(2) |
Assumes exercise for Units
only. The underwriter will not receive any discounts or commissions upon exercise of the underwriter’s option to purchase warrants. |
We have also agreed
to reimburse the underwriter for certain of its expenses, including $100,000 for reasonable and documented legal fees and disbursements
for Aegis’ counsel.
Stabilization
In accordance with
Regulation M under the Exchange Act, the underwriter may engage in activities that stabilize, maintain or otherwise affect the price
of our Common Stock, including short sales and purchases to cover positions created by short positions, stabilizing transactions, syndicate
covering transactions, penalty bids and passive market making.
|
● |
Short positions involve
sales by the underwriter of shares of Common Stock in excess of the number of shares the underwriter is obligated to purchase, which
creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered
short position, the number of shares involved in the sales made by the underwriter in excess of the number of shares they are obligated
to purchase is not greater than the number of shares that they may purchase by exercising their option to purchase additional shares.
In a naked short position, the number of shares involved is greater than the number of shares in their option to purchase additional
shares. The underwriter may close out any short position by either exercising their option to purchase additional shares or purchasing
shares in the open market. |
|
|
|
|
● |
Stabilizing transactions
permit bids to purchase the underlying security as long as the stabilizing bids do not exceed a specific maximum price. |
|
|
|
|
● |
Syndicate covering transactions
involve purchases of our shares of Common Stock in the open market after the distribution has been completed to cover syndicate short
positions. In determining the source of shares to close out the short position, the underwriter will 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 underwriter’s option to purchase additional shares. If the underwriter sells more shares than could be covered by the underwriter’s
option to purchase additional shares, thereby creating a naked short position, the position can only be closed out by buying shares
in the open market. A naked short position is more likely to be created if the underwriter is concerned that there could be downward
pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering. |
|
|
|
|
● |
Penalty bids permit the
underwriter to reclaim a selling concession from a syndicate member when the shares of Common Stock originally sold by the syndicate
member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions. |
|
|
|
|
● |
In passive market making,
market makers in our Common Stock who are underwriters or prospective underwriters may, subject to limitations, make bids for or
purchase our Common Stock until the time, if any, at which a stabilizing bid is made. |
These activities
may have the effect of raising or maintaining the market price of our Common Stock or preventing or retarding a decline in the market
price of our Common Stock. As a result of these activities, the price of our Common Stock may be higher than the price that might otherwise
exist in the open market. These transactions may be effected on or otherwise and, if commenced, may be discontinued at any time.
Neither we nor the
underwriter makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above
may have on the price of our Common Stock. In addition, neither we nor the underwriter makes any representation that Aegis will engage
in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.
Discretionary
Accounts
The underwriter has
informed us that they do not expect to make sales to accounts over which they exercise discretionary authority in excess of 5% of the
securities being offered in this offering.
Indemnification
We have agreed to
indemnify Aegis, its affiliates, and each person controlling Aegis against any losses, claims, damages, judgments, assessments, costs,
and other liabilities, as the same are incurred (including the reasonable fees and expenses of counsel), relating to or arising out of
the offering, undertaken in good faith.
Lock-Up Agreements
Pursuant to certain
“lock-up” agreements, our executive officers, directors and holders of at least 5% of our Common Stock and securities exercisable
for or convertible into Common Stock outstanding immediately upon the closing of this offering, have agreed, subject to certain exceptions,
not to offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of or announce the intention to otherwise dispose
of, or enter into any swap, hedge or similar agreement or arrangement that transfers, in whole or in part, the economic risk of ownership
of, directly or indirectly, engage in any short selling of any shares of Common Stock or securities convertible into or exchangeable
or exercisable for any shares of Common Stock, whether currently owned or subsequently acquired, without the prior written consent of
the underwriter, for a period of 90 days after the closing date of the offering.
The underwriter,
in its sole discretion, may release our Common Stock and other securities subject to the lock-up agreements described above in whole
or in part at any time. When determining whether or not to release Common Stock and other securities from lock-up agreements, the underwriter
will consider, among other factors, the holder’s reasons for requesting the release, the number of shares of Common Stock and other
securities for which the release is being requested and market conditions at the time.
Company Standstill
We have agreed, for
a period of 90 days after the closing date of the offering (the “Standstill Period”), that without the prior written consent
of Aegis, we will not (a) offer, sell, issue, or otherwise transfer or dispose of, directly or indirectly, any equity of our Company
or any securities convertible into or exercisable or exchangeable for equity of our Company; (b) file or caused to be filed any registration
statement with the SEC relating to the offering of any equity of our Company or any securities convertible into or exercisable or exchangeable
for equity of our Company; or (c) enter into any agreement or announce the intention to effect any of the actions described in subsections
(a) or (b) hereof (all of such matters, the “Standstill Restrictions”), provided that the Company will not be prevented from
using net proceeds from the offering to repay or redeem the Company’s outstanding convertible notes in accordance with the terms
thereof. So long as none of such equity securities shall be saleable in the public market until the expiration of the Standstill Period,
the following matters shall not be prohibited by the Standstill Restrictions: (i) the adoption of an equity incentive plan and the grant
of awards or equity pursuant to any equity incentive plan, and the filing of a registration statement on Form S-8; (ii) securities issued
pursuant to agreements, options, restricted share units or convertible securities existing as of the date hereof provided the terms are
not modified; and (iii) securities issued pursuant to acquisitions or strategic transactions (whether by merger, consolidation, purchase
of equity, purchase of assets, reorganization or otherwise) approved by a majority of the disinterested directors of our Company, provided
that such securities are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights that
require or permit the filing of any registration statement in connection therewith during the Standstill Period, and provided that any
such issuance shall only be to a person or entity (or to the equityholders of an entity) which is, itself or through
its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of our Company and shall provide
to our Company additional benefits in addition to the investment of funds, but shall not include a transaction in which our Company is
issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities. In
no event should any equity transaction during the Standstill Period result in the sale of equity at an offering price to the public less
than that of this offering.
Right of First
Refusal
If, between the period
beginning on the closing of this offering and ending twelve months after the commencement of sales in this offering, we or any of our
subsidiaries (a) decides to finance or refinance any indebtedness, Aegis (or any affiliate designated by Aegis) shall have the right
to act as sole book-runner, sole manager, sole placement agent or sole agent with respect to such financing or refinancing; or (b) decides
to raise funds by means of a public offering (including at-the-market facility) or a private placement or any other capital raising financing
of equity, equity-linked or debt securities, Aegis (or any affiliate designated by Aegis) shall have the right to act as sole book-running
manager, sole underwriter or sole placement agent for such financing. If Aegis or one of its affiliates decides to accept any such engagement,
the agreement governing such engagement will contain, among other things, provisions for customary fees and terms for transactions of
similar size and nature, including indemnification, which are appropriate to such a transaction. The foregoing rights of Aegis and its
affiliates are subject to any pre-existing obligations that we have and that have been previously identified to Aegis.
Notwithstanding the
foregoing, the decision to accept our engagement shall be made by Aegis or one of its affiliates, by a written notice to us, within ten
days of the receipt of our notification of financing needs, including a detailed term sheet. Aegis’s determination of whether in
any case to exercise its right of first refusal will be strictly limited to the terms on such term sheet, and any waiver of such right
of first refusal shall apply only to such specific terms. If Aegis waives its right of first refusal, any deviation from such terms shall
void the waiver and require us to seek a new waiver from the right of first refusal.
Other Relationships
The underwriter is
a full service financial institution engaged in various activities, which may include sales and trading, commercial and investment banking,
advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and
non-financial activities and services. The underwriter may in the future provide various investment banking, commercial banking and other
financial services for us and our affiliates for which they may in the future receive customary fees.
In the ordinary course
of its business activities, the underwriter and its affiliates, officers, directors and employees may purchase, sell or hold a broad
array of investments and actively traded securities, derivatives, loans, commodities, currencies, credit default swaps and other financial
instruments for their own account and for the accounts of their customers, and such investment and trading activities may involve or
relate to assets, securities and/or instruments of the issuer (directly, as collateral securing other obligation or otherwise) publish
or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to
clients that they should acquire, long and/or short positions in such assets, securities and instruments.
Electronic Offer,
Sale and Distribution of Securities
A prospectus in electronic
format may be made available on the websites maintained by the underwriter, if any, participating in this offering and the underwriter
participating in this offering may distribute prospectuses electronically. The underwriter may agree to allocate a number of Units for
sale to its online brokerage account holders. Internet distributions will be allocated by the underwriter that will make internet distributions
on the same basis as other allocations. Other than the prospectus in electronic format, the information on these websites is not part
of, nor incorporated by reference into, this prospectus or the registration statement of which this prospectus forms a part, has not
been approved or endorsed by us or the underwriter in its capacity as underwriter, and should not be relied upon by investors.
Offer Restrictions
Outside the United States
Other than in the
United States, no action has been taken by us or the underwriter that would permit a public offering of the securities offered by this
prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered
or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer
and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance
with the applicable rules and regulations of that jurisdiction. Persons who come into possession of this prospectus are advised to inform
themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in
which such an offer or a solicitation is unlawful.
Transfer Agent
and Registrar
The transfer agent
and registrar for our Common Stock is Pacific Stock Transfer Company. Pacific Stock Transfer Company’s address and phone number
is: 6725 Via Austi Pkwy, Suite 300, Las Vegas, Nevada 89119; telephone number (800) 785-7782.
Trading Market
Our Common Stock
is listed on Nasdaq under the symbol “XPON.” We do not intend to apply for listing of the Warrants on any securities exchange
or other nationally recognized trading system.
LEGAL MATTERS
The validity of the
securities will be passed upon for us by Stradling Yocca Carlson & Rauth LLP, Newport Beach, California. Certain legal matters in
connection with this offering have been passed upon for the underwriter by Kaufman & Canoles, P.C., Richmond, Virginia.
EXPERTS
The consolidated
financial statements of the Company as of December 31, 2023 and 2022, and for each of the two years in the period ended December 31,
2023 included in this prospectus, have been audited by M&K CPAS, PLLC, an independent registered public accounting firm. Such financial
statements are included in reliance upon the report of such firm given their authority as experts in accounting and auditing.
INFORMATION INCORPORATED
BY REFERENCE
The SEC allows us
to “incorporate by reference” information into this prospectus, which means that we can disclose important information to
you by referring you to another document filed separately with the SEC. The documents incorporated by reference into this prospectus
contain important information that you should read about us.
The following documents
are incorporated by reference into this document:
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our Annual Report on Form
10-K for the year ended December 31, 2023, filed with the SEC on March 28, 2024, as amended on our Annual Report on Form 10-K/A,
filed with the SEC on April 29, 2024; |
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our Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 2024 filed with the SEC on May 14, 2024; |
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our Current Reports on Form 8-K (other than portions thereof furnished
under Item 2.02 or Item 7.01 of Form 8-K and exhibits accompanying such reports that relate to such items) filed with the SEC on
May 7, 2024 and May 28, 2024; and |
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The description of our Common Stock contained in Exhibit 4.4 to our
Annual Report on Form 10-K for the year ended December 31, 2023, including all amendments and reports updating that description. |
We also incorporate
by reference into this prospectus all documents (other than current reports furnished under Item 2.02 or Item 7.01 of Form 8-K and exhibits
filed on such form that are related to such items) that are filed by us with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of the initial registration statement of which this prospectus is a part and prior to the effectiveness
of such registration statement and all documents that are filed by us with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this prospectus but prior to the termination of the offering. These documents include periodic reports,
such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy statements.
Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference into this prospectus will be deemed to be modified or
superseded for purposes of the document to the extent that a statement contained in this prospectus or any other subsequently filed document
that is deemed to be incorporated by reference into this document modifies or supersedes the statement.
We will provide without
charge to each person, including any beneficial owner, to whom this prospectus is delivered, upon written or oral request, a copy of
any or all documents that are incorporated by reference into this prospectus, but not delivered with the prospectus, other than exhibits
to such documents unless such exhibits are specifically incorporated by reference into the documents that this prospectus incorporates.
You should direct oral or written requests by one of the following methods. Attention: Chief Financial Officer, Expion360 Inc., 2025
SW Deerhound Ave, Redmond, Oregon 97756, (541) 797-6714. You may also access these documents, free of charge on the SEC’s website
at www.sec.gov or on the “Financial Information” page of our investor relations website at investors.expion360.com.
The information found on our website, or that may be accessed by links on our website, is not part of this prospectus. We have included
our website address solely as an inactive textual reference. Investors should not rely on any such information in deciding whether to
purchase our Common Stock.
WHERE YOU CAN FIND
MORE INFORMATION
We have filed with
the SEC a Registration Statement on Form S-1 under the Securities Act with respect to the securities being offered by this prospectus.
This prospectus, which constitutes part of the Registration Statement, does not include all of the information contained in the Registration
Statement or the exhibits, schedules and amendments to the Registration Statement. For further information with respect to us and our
Common Stock, we refer you to the Registration Statement and to the exhibits and schedules to the Registration Statement. Statements
contained in this prospectus as to the contents of any contract or any other document referred to are not necessarily complete. If a
contract or other document has been filed as an exhibit to the Registration Statement, please see the copy of the contract or other document
that has been filed. Each statement in this prospectus relating to a contract or other document filed as an exhibit is qualified in all
respects by the filed exhibit.
We file annual, quarterly
and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public at the SEC’s
website at www.sec.gov and on our website at expion360.com. Information contained on or accessible through our website
or linked therein or otherwise connected thereto does not constitute part of nor is it incorporated by reference into this prospectus
or the registration statement of which this prospectus forms a part, and the inclusion of our website address in this prospectus is an
inactive textual reference only. You may inspect a copy of the Registration Statement through the SEC’s website, as provided herein.
Expion360 Inc.
Units
Each Consisting
of One Share of Common Stock or One Pre-Funded Warrant to Purchase One Share of Common Stock, Two Series A Warrants
to Each Purchase One Share of Common Stock, and One Series B Warrant to Purchase Such Number of Share of Common
Stock as Determined in the Series B Warrant
Up to Shares
of Common Stock underlying the Pre-Funded Warrants
Up to Shares
of Common Stock Underlying the Series A Warrants
Up to Shares
of Common Stock Underlying the Series B Warrants
PROSPECTUS
The date
of this prospectus is July 24, 2024
Aegis
Capital Corp.
PART II
INFORMATION NOT
REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE
AND DISTRIBUTION
The following table
sets forth the estimated costs and expenses payable by the registrant expected to be incurred in connection with the sale and distribution
of the securities being registered hereby (other than the underwriting discount and up to $110,000 in fees). All of such costs and expenses
are estimates, except for the SEC registration fee and the Financial Industry Regulatory Authority (“FINRA”) filing fee.
| |
Amount |
SEC registration fee | |
$ | 5,094 | |
FINRA filing fee | |
$ | 5,677 | |
Accountants fees and expenses | |
$ | 4,500 | |
Legal fees and expenses | |
$ | 460,000 | |
Transfer agents fees and expenses | |
$ | 5,000 | |
Printing fees and expenses | |
$ | 5,000 | |
Miscellaneous | |
$ | 14,729 | |
Total expenses | |
$ | 500,000 | |
ITEM 14. INDEMNIFICATION
OF DIRECTORS AND OFFICERS
Nevada Revised Statutes
(“NRS”) 78.138(7) provides that, subject to limited statutory exceptions and unless the articles of incorporation or an amendment
thereto (in each case filed on or after October 1, 2003) provide for greater individual liability, a director or officer is not individually
liable to a corporation or its stockholders or creditors for any damages as a result of any act or failure to act in his or her capacity
as a director or officer unless it is proven that: (i) the act or failure to act constituted a breach of his or her fiduciary duties
as a director or officer and (ii) the breach of those duties involved intentional misconduct, fraud or a knowing violation of law.
NRS 78.7502(1) provides
that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the
corporation), by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually
and reasonably incurred by the person in connection with the action, suit or proceeding if the person (i) is not liable pursuant to NRS
78.138 or (ii) acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the conduct was unlawful.
NRS 78.7502(2) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of
the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise
against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by the person in connection
with the defense or settlement of the action or suit if the person (a) is not liable pursuant to NRS 78.138 or (ii) acted in good faith
and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation. To the extent that
a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any such action,
suit or proceeding, or in defense of any claim, issue or matter therein, the corporation shall indemnify him or her against expenses,
including attorneys’ fees, actually and reasonably incurred by him or her in connection with the defense. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, does not,
of itself, create a presumption that the person is liable pursuant to NRS 78.138 or did not act in good faith and in a manner which he
or she reasonably believed to be in or not opposed to the best interests of the corporation, or that, with respect to any criminal action
or proceeding, he or she had reasonable cause to believe that the conduct was unlawful. Indemnification may not be made for any claim,
issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom,
to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in
which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances
of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
NRS 78.751(1) provides
that any discretionary indemnification pursuant to NRS 78.7502 (unless ordered by a court or advanced pursuant to NRS 78.751(2)), may
be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances. The determination must be made (i) by the stockholders; (ii) by the board of directors
by majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding; (iii) if a majority vote
of a quorum consisting of directors who were not parties to the action, suit or proceeding so orders, by independent legal counsel in
a written opinion; or (iv) if a quorum consisting of directors who were not parties to the action, suit or proceeding cannot be obtained,
by independent legal counsel in a written opinion. NRS 78.751(2) provides that the corporation’s articles of incorporation or bylaws,
or an agreement made by the corporation, may provide that the expenses of officers and directors incurred in defending a civil or criminal
action, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of the action,
suit or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately
determined by a court of competent jurisdiction that the director or officer is not entitled to be indemnified by the corporation.
Under the NRS, the
indemnification pursuant to NRS 78.7502 and advancement of expenses authorized in or ordered by a court pursuant to NRS 78.751:
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1. |
Does not exclude any other
rights to which a person seeking indemnification or advancement of expenses may be entitled under the articles of incorporation or
any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in the person’s official
capacity or an action in another capacity while holding office, except that indemnification, unless ordered by a court pursuant to
NRS 78.7502 or for the advancement of expenses made pursuant to NRS 78.751(2), may not be made to or on behalf of any director or
officer if a final adjudication establishes that the director’s or officer’s acts or omissions involved intentional misconduct,
fraud or a knowing violation of the law and was material to the cause of action; and |
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2. |
Continues for a person
who has ceased to be a director, officer, employee or agent and inures to the benefit of the heirs, executors and administrators
of such a person. |
A right to indemnification
or to advancement of expenses arising under a provision of the articles of incorporation or any bylaw is not eliminated or impaired by
an amendment to such provision after the occurrence of the act or omission that is the subject of the civil, criminal, administrative
or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought, unless the provision in effect
at the time of such act or omission explicitly authorizes such elimination or impairment after such action or omission has occurred.
The Articles of Incorporation
of the Company provide that to the fullest extent permitted under the NRS (including, without limitation, to the fullest extent permitted
under NRS 78.7502 and 78.751(3)) and other applicable law, we shall indemnify our directors and officers in their respective capacities
as such and in any and all other capacities in which any of them serves at our request. The Articles of Incorporation further provide
that the liability of its directors and officers shall be eliminated or limited to the fullest extent permitted by the NRS, and that
if the NRS are amended to further eliminate or limit or authorize corporate action to further eliminate or limit the liability of directors
or officers, the liability of our directors and officers shall be eliminated or limited to the fullest extent permitted by the NRS, as
so amended from time to time; and in addition to any other rights of indemnification permitted by the laws of the State of Nevada or
as may be provided for by in our Bylaws or by agreement, the expenses of directors and officers incurred in defending a civil or criminal
action, suit or proceeding, involving alleged acts or omissions of such director or officer in his or her capacity as a director or officer
of the Company, must be paid, by us or through insurance purchased and maintained by the Company or through other financial arrangements
made by us, as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking
by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that
he or she is not entitled to be indemnified by the Company.
Further, we have
entered into indemnification arrangements with each of its directors and executive officers that may be broader than the specific indemnification
provisions contained in the NRS. Such arrangements may require us,
among other things,
to advance expenses and otherwise indemnify its executive officers and directors against certain liabilities that may arise by reason
of their status or service as executive officers or directors, to the fullest extent permitted by law. We intend to enter into indemnification
arrangements with any new directors and executive officers in the future.
We also have director
and officer insurance providing for indemnification for our directors and officers for certain liabilities, and such insurance provides
for indemnification of our directors and officers for liabilities under the Securities Act.
ITEM 15. RECENT
SALES OF UNREGISTERED SECURITIES
The following sets
forth information regarding all unregistered securities sold by the Registrant in the past three years. Each of the issuances was exclusively
to “accredited investors” as defined in Regulation D under the Securities Act and in reliance on the exemptions available
pursuant to Regulation D under, and Section 4(a)(2) of, the Securities Act).
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(1) |
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On October 29, 2021, in
anticipation of conversion from LLC to a C corporation, the Notes and Warrants were modified under Convertible Debenture Exercise
and Waiver and Release Agreements with the individual creditors. The Note holders agreed to settle the debt for an aggregate 1,527,647
shares of Common Stock with a fair value of $5,545,359 ($3.63 per share). Since this transaction involved contemporaneous issuance
of shares of Common Stock by the Company to the Note holders, we evaluated the transaction for modification and extinguishment accounting
and determined that the debt was extinguished as a result of the issuance of shares that do not represent the exercise of a conversion
right contained in the original terms of the Notes at issuance. |
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(2) |
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In November 2021, we issued
30,000 shares of Common Stock in exchange for legal services. |
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(3) |
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In November 2021, we issued
482,268 detachable warrants with secured promissory notes for the purchase of Common Stock. The relative fair value of the warrants
of $809,806 at the time of issuance was recorded as additional paid-in capital with a corresponding debt discount reducing the carrying
value of the notes. Additionally, we issued 77,163 warrants to purchase shares of Common Stock to underwriters in connection with
obtaining the notes. The fair value of the warrants of $262,354 was recorded as additional paid-in capital and reduced the carrying
value of the notes. The warrants are exercisable at $3.32 per share for a period of ten years from date of grant. The fair value
of the warrants was determined at date of issuance using the Black-Scholes option-pricing model and the following assumptions: per
share price of Common Stock on date of grant of $3.63, expected dividend yield of 0%, expected volatility of 110.8%, risk-free interest
rate of 1.63% and expected life based on contractual life of 10 years. |
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(4) |
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Also in November 2021, we issued warrants to purchase 151,000 shares
of Common Stock in exchange for prior services related to extinguished 2021 convertible notes and 30,000 options for the purchase
of Common Stock in exchange for legal services. The warrants are exercisable at $2.90 per share for a period of three years from
the date of grant. The options are exercisable at $3.32 per share for a period of three years from the date of grant. The options
issued were not issued under the Company’s stock option plans. The fair value of the warrants of $407,700 was recorded as additional
paid-in-capital and expensed to extinguishment loss on debt settlement. The fair value of the options of $79,200 was recorded as
additional paid-in capital with a corresponding charge to legal expense. The fair value of the warrants and options was determined
at date of issuance using the Black-Scholes option-pricing model and the following assumptions: per share price of Common Stock on
date of grant of $3.63, expected dividend yield of 0%, expected volatility of 122.7%, risk-free interest rate of 0.71% and expected
life based on contractual life of three years. |
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(5) |
On November 22, 2021, we
completed a private placement (the “Secured Note Financing”). In connection therewith, we issued an aggregate of $1,600,000
of 15% senior secured notes (the “Senior Secured Notes”) and warrants to purchase an aggregate of 559,431 shares of Common
Stock at an exercise price of $3.32 per share (the “Warrants Senior Secured Notes”). After deducting offering related
expenses, including legal fees of $15,000 and certain diligence and advisory fees of $200,000 paid to an entity owned by the spouse
of an employee of the underwriter, the net proceeds to us were approximately $1,385,000. Out of the total warrants, warrants to purchase
28,935 shares of our Common Stock were issued to the same entity owned by the spouse of an employee of the underwriter that received
the advisory fee. The maturity date of the Senior Secured Notes is the earlier of (i) May 15, 2023, (ii) the closing a Qualified
Subsequent Equity Financing and (iii) the closing of a Change of Control. The Senior Secured Notes bear interest at a rate of 15%
per annum of which (i) 10% accrues from the Closing Date and is paid to holder within 10 days after the first day of each month and
(ii) 5% accrues and compound annually and payable in arrears on the Maturity Date. The Senior Secured Notes are general secured obligations
as set forth in a security agreement between us and the noteholders. The Warrants are exercisable for a period of 10-years from the
date of issuance and may be exercised via cashless exercise/net exercise provisions contained in the Warrants. |
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(6) |
During the year ended December
31, 2021, we received gross proceeds of $2,929,000 from the issuance of unsecured convertible notes, of which $44,000 was received
from existing members/shareholders. Additionally, a member/shareholder converted a promissory note to a convertible note identical
in terms discussed below. |
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(7) |
On April 1, 2022, we issued
warrants to IPO underwriters to purchase 148,005 shares of Common Stock at an exercise price of $9.10 per share. The warrants are
exercisable 180 days after grant (September 27, 2022) and expire five years from date of grant (March 31, 2027). The fair value of
the warrants was determined at date of issuance using the Black-Scholes option-pricing model and the following assumptions: per share
price of Common Stock on date of grant of $7, expected dividend yield of 0%, expected volatility of 110.03%, risk-free interest rate
of 2.55% and expected life based on contractual life of 5 years. The fair value of $916,238 was recorded as an increase in additional-paid-in
capital and a reduction to additional paid-in capital since the warrants were issued as IPO fees to underwriters, resulting in a
zero impact to additional paid-in capital. |
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(8) |
In March 2023, holders
of 73,000 warrants we previously issued on November 9, 2021 in reliance on the exemption from registration pursuant to Section 4(a)(2)
of the Securities Act with an exercise price of $2.90 exercised their warrants on a cashless basis, which resulted in the issuance
of an additional 31,102 shares of Common Stock. During the same period, holders of 15,000 warrants previously issued by the Company
on November 22, 2021 in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act with an exercise
price of $3.32 exercised their warrants by paying the exercise price, which resulted in the issuance of an additional 15,000 shares
of Common Stock and the receipt by the Company of $49,800. |
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(9) |
On March 31, 2023, at the
closing price of $4.84 per share, the Company issued 52,000 shares of Common Stock in reliance on the exemption from registration
pursuant to Section 4(a)(2) of the Securities Act as part of the settlement agreement with Ravi Sinha dated March 21, 2023. |
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(10) |
In April 2023, holders
of 22,606 warrants previously issued by the Company on November 22, 2021 in reliance on the exemption from registration pursuant
to Section 4(a)(2) of the Securities Act with an exercise price of $3.32 exercised their warrants on a cashless basis, which resulted
in the issuance of an additional 10,151 shares of Common Stock. |
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(11) |
On August 10, 2023,
we issued 25,000 warrants to our investor relations firm in accordance with a letter of engagement signed July 22,
2022, as partial compensation for services provided by the investor relations firm. The warrants were issued in reliance on
the exemption from registration pursuant to Section 4(a)(2) of the Securities Act. The warrants are fully vested and exercisable
with an expiration date two years from date of issue (August 9, 2025) and are exercisable at a price of $5.00 per share. |
ITEM 16. EXHIBIT
(a)
Exhibits.
See
the Exhibit Index immediately preceding the signature page hereto for a list of exhibits filed as part of this Registration Statement
on Form S-1, which Exhibit Index is incorporated herein by reference.
(b)
Financial Statement Schedules.
All
other schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the consolidated
financial statements or related notes.
ITEM 17. UNDERTAKINGS
The
undersigned registrant hereby undertakes:
(1)
To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:
(i) |
|
To include any prospectus required by Section 10(a)(3)
of the Securities Act; |
|
|
|
(ii) |
|
To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in
the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Filing Fee” table
in the effective Registration Statement; and |
|
|
|
(iii) |
|
To include any material information with respect to
the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the
Registration Statement; provided, however, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) above do not apply if the
information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished
to the SEC by the registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in the
Registration Statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the Registration Statement. |
(2)
That, for the purpose of determining any liability under the Securities Act, each such post- effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3)
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the
termination of this Offering.
(4)
That, for the purpose of determining liability under the Securities Act to any purchaser:
(i) |
|
Each prospectus filed pursuant
to Rule 424(b)(3) shall be deemed to be part of the Registration Statement as of the date the filed prospectus was deemed part of
and included in the Registration Statement; and |
(ii) |
|
Each prospectus required
to be filed pursuant to Rule 424(b)(2), (b)(5) or (b)(7) as part of a registration statement in reliance on Rule 430B relating to
an offering made pursuant to Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the information required by Section 10(a)
of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the date such
form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in this Offering described
in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter,
such date shall be deemed to be a new effective date of the Registration Statement relating to the securities in the Registration
Statement to which that prospectus relates, and this Offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of
the Registration Statement or made in a document incorporated or deemed incorporated by reference into the Registration Statement
or prospectus that is part of the Registration Statement will, as to a purchaser with a time of contract of sale prior to such effective
date, supersede or modify any statement that was made in the Registration Statement or prospectus that was part of the Registration
Statement or made in any such document immediately prior to such effective date. |
(5)
That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution
of the securities:
The undersigned registrant
undertakes that in a primary offering of securities of the undersigned registrant pursuant to this Registration Statement, regardless
of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means
of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer
or sell such securities to such purchaser:
(i) |
|
Any preliminary prospectus
or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; |
(ii) |
|
Any free writing prospectus
relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
(iii) |
|
The portion of any other
free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities
provided by or on behalf of the undersigned registrant; and |
(iv) |
|
Any other communication
that is an offer in the offering made by the undersigned registrant to the purchaser. |
(6)
The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing
of the registrant’s annual report pursuant to section 13(a) or section 15(d) of the Exchange Act (and, where applicable, each filing
of an employee benefit plan’s annual report pursuant to section 15(d) of the Exchange Act) that is incorporated by reference in
the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(7)
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC
such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
EXHIBIT
INDEX
Exhibit
Number |
|
Description |
|
Form |
|
Exhibit |
|
Filing
Date |
1.1*+ |
|
Form
of Underwriting Agreement |
|
|
|
|
|
|
3.1 |
|
Articles
of Incorporation of the Company, effective as of November 4, 2021 |
|
S-1 |
|
3.1 |
|
3/31/2022 |
3.2 |
|
Bylaws
of the Company currently in effect |
|
S-1 |
|
3.2 |
|
3/31/2022 |
4.1 |
|
Form
of the Company’s Common Stock Certificate |
|
S-1 |
|
4.1 |
|
3/31/2022 |
4.2 |
|
Form
of Representative’s Warrant Agreement |
|
S-1 |
|
4.4 |
|
3/31/2022 |
4.3 |
|
Form
of Senior Secured Promissory Note issued to bridge loan investors |
|
S-1 |
|
4.5 |
|
3/31/2022 |
4.4 |
|
Form
of Warrant with an Exercise Price of $2.90 |
|
10-K |
|
10.12 |
|
3/30/2023 |
4.5 |
|
Form
of Warrant with an Exercise Price of $3.32 |
|
10-K |
|
10.13 |
|
3/30/2023 |
4.6* |
|
Form
of Pre-Funded Warrant |
|
|
|
|
|
|
4.7* |
|
Form
of Series A Warrant |
|
|
|
|
|
|
4.8* |
|
Form
of Series B Warrant |
|
|
|
|
|
|
5.1** |
|
Opinion
of Stradling Yocca Carlson & Rauth LLP |
|
|
|
|
|
|
10.1 |
|
Form
of Common Stock Warrant issued to Selling Stockholders |
|
S-1 |
|
10.1 |
|
3/31/2022 |
10.2†
|
|
Expion360
Inc. 2021 Incentive Award Plan |
|
S-1 |
|
10.2 |
|
3/31/2022 |
10.3†
|
|
Expion360
Inc. 2021 Employee Stock Purchase Plan |
|
S-1 |
|
10.3 |
|
3/31/2022 |
10.4 |
|
Form
of Security Agreement issued to bridge loan investors |
|
S-1 |
|
10.7 |
|
3/31/2022 |
10.5 |
|
Commercial
Lease of premises at 2045 SW Deerhound Avenue Redmond, OR |
|
S-1 |
|
10.8 |
|
3/31/2022 |
10.6 |
|
Commercial
Lease of premises at 1266 SW Lake Blvd., Redmond, OR |
|
S-1 |
|
10.11 |
|
3/31/2022 |
10.7 |
|
Underwriting
Agreement dated March 31, 2022, between the Company and Alexander Capital, LP as Representative of the Underwriters |
|
8-K |
|
1.1 |
|
4/05/2022 |
10.8† |
|
Amended
and Restated Employment Agreement, between John Yozamp and Expion360 Inc., dated January 26, 2023 |
|
8-K |
|
10.1 |
|
2/01/2023 |
10.9† |
|
Amended
and Restated Employment Agreement, between Brian Schaffner and Expion360 Inc., dated January 26, 2023 |
|
8-K |
|
10.1 |
|
2/01/2023 |
10.10† |
|
Amended
and Restated Employment Agreement, between Paul Shoun and Expion360 Inc., dated January 26, 2023 |
|
8-K |
|
10.1 |
|
2/01/2023 |
10.11† |
|
Amended
and Restated Employment Agreement, between Greg Aydelott and Expion360 Inc., dated January 26, 2023 |
|
8-K |
|
10.1 |
|
2/01/2023 |
10.14+ |
|
Common
Stock Purchase Agreement, dated December 27, 2023, between Expion360 Inc. and Tumim Stone Capital, LLC |
|
8-K |
|
10.2 |
|
12/29/2023 |
10.15+ |
|
Registration
Rights Agreement, dated December 27, 2023, between Expion360 Inc. and Tumim Stone Capital, LLC |
|
8-K |
|
10.3 |
|
12/29/2023 |
10.16* |
|
Form
of Lock-Up Agreement |
|
|
|
|
|
|
21.1 |
|
Subsidiaries
of the Company |
|
S-1 |
|
21.1 |
|
3/31/2022 |
23.1* |
|
Consent
of M&K CPAS PLLC |
|
|
|
|
|
|
23.2* |
|
Consent
of Stradling Yocca Carlson & Rauth LLP (included in Exhibit 5.1) |
|
|
|
|
|
|
24.1* |
|
Power
of Attorney (reference is made to the signature page hereto) |
|
|
|
|
|
|
101.INS |
|
Inline
XBRL Instance Document |
|
|
|
|
|
|
101.SCH |
|
Inline
XBRL Taxonomy Extension Schema Document |
|
|
|
|
|
|
101.CAL |
|
Inline
XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
|
|
|
101.DEF |
|
Inline
XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
|
|
|
101.LAB |
|
Inline
XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
|
|
|
101.PRE |
|
Inline
XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
|
|
|
104 |
|
Cover
Page Interactive Data File (formatted as Inline XBRL and included in Exhibit 101) |
|
|
|
|
|
|
107* |
|
Filing
Fee Table |
|
|
|
|
|
|
* |
Filed herewith. |
** |
To be filed by amendment. |
† |
Indicates a management contract or compensatory plan or arrangement. |
+ |
The schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request. |
SIGNATURES
Pursuant to the requirements of the Securities Act
of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized,
in the Redmond, Oregon, on this 24th day of July, 2024.
|
EXPION360 INC. |
|
|
|
By: /s/ Brian Schaffner |
|
Brian Schaffner |
|
Chief Executive Officer |
|
(Principal Executive Officer) |
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person
whose signature appears below constitutes and appoints Brian Schaffner and Greg Aydelott, and each of them, as their true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for them and in their name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this registration statement and sign any registration statement
for the same offering covered by the registration statement that is to be effective upon filing pursuant to Rule 462 promulgated under
the Securities Act of 1933, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the SEC,
granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act
of 1933, this registration statement on Form S-1 has been signed by the following persons in the capacities and on the dates indicated.
Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/ Brian Schaffner |
|
Chief Executive Officer and Director |
|
July 24, 2024 |
Brian Schaffner |
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
/s/ Greg Aydelott |
|
Chief Financial Officer |
|
July 24, 2024 |
Greg Aydelott |
|
(Principal Financial and Accounting Officer) |
|
|
|
|
|
|
|
/s/ George Lefevre |
|
Director |
|
July 24, 2024 |
George Lefevre |
|
|
|
|
|
|
|
|
|
/s/ Steven M. Shum |
|
Director |
|
July 24, 2024 |
Steven M. Shum |
|
|
|
|
|
|
|
|
|
/s/ Paul Shoun |
|
Chief Operating Officer and Chairman |
|
July 24, 2024 |
Paul Shoun |
|
|
|
|
|
|
|
|
|
/s/ Tien Q. Nguyen |
|
Director |
|
July 24, 2024 |
Tien Q. Nguyen |
|
|
|
|
Exhibit 1.1
Underwriting
Agreement
July [●], 2024
Aegis Capital Corp.
1345 Avenue of the Americas,
27th Floor
New York, NY 10105
Ladies and
Gentlemen:
Expion360
Inc., a Nevada corporation (the “Company”), agrees, subject to the terms and conditions in this agreement (this
“Agreement”), to issue and sell to Aegis Capital Corp. (the “Underwriter”) an aggregate
of [●] of the Company’s units (each, a “Closing Unit”), with each Closing Unit consisting of either:
(A) one (1) share of Common Stock, $0.001 par value per share of the Company (the “Common Stock”) and two (2)
Series A warrants (each, a “Series A Warrant”), each to purchase one (1) share of Common Stock at a per Share
exercise price of $[●] and one (1) Series B warrant (each, a “Series B Warrant” and, collectively with
the Series A Warrants, the “Warrants”) to purchase such number of shares of Common Stock as determined on the
Reset Date (as defined in the Series B Warrant), and in accordance with the terms therein (each, a “Closing Common Unit”);
or (B) one pre-funded warrant (each, a “Pre-funded Warrant”) to purchase one (1) share of Common Stock at an
exercise price of $0.001 and two (2) Series A Warrants and one (1) Series B Warrant (each, a “Closing Pre-funded Unit”).
The shares of Common Stock referred to in this Section are hereinafter referred to as the “Closing Shares”;
the Warrants referred to in this Section are hereinafter referred to as the “Closing Warrants”; and the Pre-funded
Warrants referred to in this Section are hereinafter referred to as the “Closing Pre-funded Warrants.” No Closing
Common Units will be certificated, and the Closing Shares and the Closing Warrants comprising the Closing Common Units will be separated
immediately upon issuance. No Closing Pre-funded Units will be certificated, and the Closing Pre-funded Warrants and the Closing Warrants
comprising the Closing Pre-funded Units will be separated immediately upon issuance. At the option of the Underwriter, the Company agrees,
subject to the terms and conditions herein, to issue and sell additional Option Securities (as defined in Section 4.2.1 hereof). The
Closing Units and the Option Securities are herein referred to collectively as the “Securities”. The number
of Closing Units and Option Securities to be purchased by the Underwriter is set forth opposite its name in Schedule 4.1.2 hereto. Aegis
Capital Corp. has agreed to act as the Underwriter in connection with the offering and sale of the Securities.
1.1.
“Affiliate” has the meaning set forth in Rule 405 under the Securities Act.
1.2.
“Applicable Time” means [4:30 p.m.] Eastern Time on the date hereof.
1.3.
“Bona Fide Electronic Road Show” means a “bona fide electronic road show” (as defined in Rule 433(h)(5)
under the Securities Act) that the Company has made available without restriction by “graphic means” (as defined in Rule
405 under the Securities Act) to any person.
1.4.
“Business Day” means a day on which the Nasdaq Capital Market is open for trading and on which banks in New
York are open for business and not permitted by law or executive order to be closed.
1.5.
“Commission” means the United States Securities and Exchange Commission.
1.6.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
1.7.
“Final Prospectus” means the prospectus in the form first filed with the Commission pursuant to and within
the time limits described in Rule 424(b) under the Securities Act.
1.8.
“Free Writing Prospectus” has the meaning set forth in Rule 405 under the Securities Act.
1.9.
“Indebtedness” means (a) any liabilities for borrowed money or amounts owed in excess of $50,000 in aggregate
(other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent
obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s consolidated
balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of any lease payments in excess of $50,000 in aggregate due
under leases required to be capitalized in accordance with GAAP (as defined in Section 2.15 hereof).
1.10.
“Investment Company Act” means the Investment Company Act of 1940, as amended, and the rules and regulations
promulgated thereunder.
1.11.
“Issuer Free Writing Prospectus” means an “issuer free writing prospectus” (as defined in Rule
433(h)(1) under the Securities Act).
1.12.
“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.
1.13.
“Preliminary Prospectus” means any preliminary prospectus included in the Registration Statement prior to the
time at which the Commission declared the Registration Statement effective.
1.14.
“Pricing Disclosure Package” means the Preliminary Prospectus collectively with this Agreement (including documents
attached hereto or incorporated by reference herein) and the documents and pricing information set forth in Schedule 1.14 hereto.
1.15.
“Prospectus Delivery Period” means such period of time after the first date of the public offering of the Closing
Units as in the opinion of counsel for the Underwriter a prospectus relating to the Closing Units is required by law to be delivered
(or required to be delivered
but for Rule 172 under the Securities Act) in connection with sales of the Closing Units by the Underwriter or dealer.
1.16.
“Registration Statement” means (a) the registration statement on Form S-1 (File No. 333-[●]), including
a prospectus, registering the offer and sale of the Closing Units under the Securities Act as amended at the time the Commission declared
it effective, including each of the exhibits, financial statements and schedules thereto, (b) any Rule 430A Information, and (c) any
Rule 462(b) Registration Statement, including in each case any documents incorporated by reference therein.
1.17.
“Rule 430A Information” means the information deemed, pursuant to Rule 430A under the Securities Act, to be
part of the Registration Statement at the time the Commission declared the Registration Statement effective.
1.18.
“Rule 462(b) Registration Statement” means an abbreviated registration statement to register the offer and
sale of additional units pursuant to Rule 462(b) under the Securities Act.
1.19.
“Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated
thereunder.
1.20.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
1.21.
“Standstill Period” has the meaning set forth in Section 5.10.1 hereof.
1.22.
“Testing-the-Waters Communication” means any oral or Written Communication with potential investors undertaken
in reliance on Section 5(d) of the Securities Act and Rule 163B thereunder.
1.23.
“U.S. Company Counsel” means Stradling Yocca Carlson & Rauth LLP, with offices at 660 Newport Center Drive,
Suite 1600, Newport Beach, CA 92660.
1.24.
“Written Communication” has the meaning set forth in Rule 405 under the Securities Act.
1.25.
“Written Testing-the-Waters Communications” means any Testing-the-Waters Communication that is a Written Communication.
| 2. | Representations
and Warranties of the Company. The Company hereby represents and warrants to, and
agrees with, the Underwriter that the following matters are true and accurate and do not
contain any untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading. Any certificate
signed by an officer of the Company and delivered to the Underwriter or to counsel for the
Underwriter shall be deemed to be a representation and warranty by the Company to the Underwriter
as to the matters set forth therein. |
2.1.
Registration Statement. The Company has prepared and filed the Registration Statement with the Commission under the Securities
Act. The Commission has declared the Registration Statement effective under the Securities Act and the Company has not as of the date
of this Agreement filed a post-effective amendment to the Registration Statement. The Commission has not issued any order suspending
the effectiveness of the Registration Statement or any order preventing or suspending the use of the Registration Statement, the Final
Prospectus, any Preliminary Prospectus, any Issuer Free Writing Prospectus or any Testing-the-Waters Communication, and no proceedings
for such purpose or pursuant to Section 8A of the Securities Act have been initiated, are pending before or, to the Company’s knowledge,
threatened by the Commission.
2.1.1.
The Registration Statement, at the time it became effective, did not contain, and any post-effective amendment thereto, as of the effective
date of such amendment, will not contain, any untrue statement of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided that the Company makes no representation or warranty
with respect to any statements or omissions made in reliance upon and in conformity with information relating to the Underwriter furnished
to the Company in writing by the Underwriter expressly for use in the Registration Statement (including any post-effective amendment
thereto), the Pricing Disclosure Package, the Final Prospectus (including any amendments or supplements thereto), any Preliminary Prospectus,
any Issuer Free Writing Prospectus or any Testing-the-Waters Communication, it being understood and agreed that the only such information
furnished by the Underwriter consists of the information described in Section 9.3 hereof (collectively, the “Underwriter
Information”).
2.1.2.
Each of the Registration Statement and any post-effective amendment thereto, at the time it became effective and at the date hereof,
complied and will comply in all material respects with the Securities Act; provided that the Company makes no representation or
warranty with respect to any statements or omissions made in reliance upon and in conformity with the Underwriter Information.
2.2.
Pricing Disclosure Package. The Pricing Disclosure Package, as of the Applicable Time, did not, and as of the Closing Date
(as defined below) and as of any Additional Closing Date (as defined below), as the case may be, will not, contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided that the Company makes no representation or warranty with respect to any
statements or omissions made in reliance upon and in conformity with the Underwriter Information.
2.3.
Final Prospectus. Each of the Final Prospectus and any amendments or supplements thereto, as of its date, as of the time
it is filed with the Commission pursuant to Rule 424(b) under the Securities Act, as of the Closing Date and as of any Additional Closing
Date, as the case may be, will not contain any untrue statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which they were made, not misleading, and will comply in all
material respects with the Securities Act; provided that the Company makes no representation
or warranty with respect to any statements or omissions made in reliance upon and in conformity with the Underwriter Information.
2.4.
Preliminary Prospectuses. Each Preliminary Prospectus, when considered together with any amendments or supplements thereto,
as of the time it was filed with the Commission pursuant to Rule 424(a) under the Securities Act, if any, did not contain any untrue
statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and complied in all material respects with the Securities Act; provided
that the Company makes no representation or warranty with respect to any statements or omissions made in reliance upon and in conformity
with the Underwriter Information.
2.5.
Issuer Free Writing Prospectuses; Road Show.
2.5.1.
Each Issuer Free Writing Prospectus, when considered together with the Preliminary Prospectus accompanying, or delivered prior to the
delivery of, such Issuer Free Writing Prospectus, did not, as of the date of such Issuer Free Writing Prospectus, and will not, as of
the Closing Date and as of any Additional Closing Date, as the case may be, contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made,
not misleading, and complied or will comply in all material respects with the Securities Act; provided that the Company makes
no representation or warranty with respect to any statements or omissions made in reliance upon and in conformity with the Underwriter
Information.
2.5.2.
The Company has filed, or will file, with the Commission, within the time period specified in Rule 433(d) under the Securities Act, any
Free Writing Prospectus it is required to file pursuant to Rule 433(d) under the Securities Act. The Company has made available any Bona
Fide Electronic Road Show used by it in compliance with Rule 433(d)(8)(ii) under the Securities Act such that no filing of any “road
show” (as defined in Rule 433(h) under the Securities Act) (“Road Show”) is required in connection with
the offering of the Closing Units.
2.5.3.
Except for the Issuer Free Writing Prospectuses, if any, set forth in Schedule 2.5.4 hereto and electronic road shows, if any, each furnished
to the Underwriter before first use, the Company has not used, authorized the use of, referred to or participated in the planning for
use of, and will not, without the prior consent of the Underwriter, use, authorize the use of, refer to or participate in the planning
for use of, any Free Writing Prospectus.
2.6.
Testing-the-Waters Communications. The Company has not (x) alone engaged in any Testing-the-Waters Communication other
than Testing-the-Waters Communications with the consent of the Underwriter or any underwriter that the Company has previously identified
to the Underwriter with entities that are qualified institutional buyers within the meaning of Rule 144A under the Act or institutions
that are accredited investors within the meaning of Rule 501 under the Act, and (y) authorized anyone other than the Underwriter to engage
in Testing-the-Waters Communications.
2.7.
No Other Disclosure Materials. Other than the Registration Statement, the Pricing Disclosure Package, the Final Prospectus
and the Road Show, the Company (including its agents and representatives, other than the Underwriter or any underwriter that the Company
has previously identified to the Underwriter, as to which no representation or warranty is given) has not, directly or indirectly, distributed,
prepared, used, authorized, approved or referred to, and will not distribute, prepare, use, authorize, approve or refer to, any offering
material in connection with the offering and sale of the Closing Units.
2.8.
Ineligible Issuer. At the time of filing of the Registration Statement and any amendment thereto and at the date hereof,
the Company was not and is not an “ineligible issuer” in connection with the offering (as defined in Rule 405 under the Securities
Act).
2.9.
Smaller Reporting Company. From the time of initial filing of the Registration Statement with the Commission (or, if earlier,
the first date on which the Company engaged directly or through any person authorized to act on its behalf in any Testing-the-Waters
Communication) through the date hereof, the Company has been and is a “smaller reporting company,” as defined in Rule 12b-2
under the Exchange Act.
2.10.
Due Authorization. The Company has full right, power and authority to execute and deliver this Agreement and to perform
its obligations hereunder; and all action required to be taken for the due and proper authorization, execution and delivery by it of
this Agreement and the consummation by it of the transactions contemplated hereby has been duly and validly taken.
2.11.
Underwriting Agreement. This Agreement has been duly authorized, executed and delivered by the Company and, assuming the
due authorization, execution and delivery by the other parties hereto, constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as (i) the enforcement may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors generally
or by general equitable principles (whether considered in a proceeding at law or in equity) relating to enforceability and (ii) rights
to indemnification and contribution hereunder may be limited by applicable law and public policy considerations.
2.12.
No Material Adverse Change. Except as otherwise disclosed in the Registration Statement, the Pricing Disclosure Package,
the Final Prospectus (in each case exclusive of any amendment or supplement thereto) and Schedule 2.12 hereto, since the date of the
most recent financial statements included or incorporated by reference in the Registration Statement, the Pricing Disclosure Package
and the Final Prospectus: (i) there has been no material adverse change, or any development that could result in a material adverse change,
in or affecting the condition (financial or otherwise), earnings, business, properties, management, financial position, stockholders’
equity, or results of operations, whether or not arising from transactions in the ordinary course of business, of the Company and its
subsidiaries, considered as a whole; (ii) there has been no change in the share capital (other than (A) the issuance of shares of Common
Stock upon the exercise or settlement (including any “net” or “cashless” exercises or settlements) of stock options,
restricted stock units or warrants described as outstanding, (B) the grant of options and awards under existing
equity incentive plans, or (C) the repurchase of shares of Common Stock by the Company, which were issued pursuant to the early exercise
of stock options by option holders and are subject to repurchase by the Company, in each case, as described in the Registration Statement,
the Pricing Disclosure Package and the Final Prospectus), or material change in the short-term debt or long-term debt of the Company
or any of its subsidiaries, considered as a whole; and (iii) the Company and its subsidiaries, considered as a whole, have not incurred
any material liability or obligation, indirect, direct or contingent (whether or not in the ordinary course of business); nor entered
into any transaction or agreement (whether or not in the ordinary course of business) that is material to the Company and its subsidiaries,
considered as a whole; and (iv) there has been no dividend or distribution of any kind declared, set aside for payment, paid or made
by the Company or, except for dividends paid to the Company or other subsidiaries of the Company, any of its subsidiaries on any class
of capital stock or repurchase or redemption by the Company or any of its subsidiaries of any class of capital stock.
2.13.
Organization and Good Standing of the Company and its Subsidiaries. The Company and each of its subsidiaries have been
duly incorporated and are validly existing and in good standing under the laws of their respective jurisdictions of organization, are
duly qualified to do business and are in good standing in each jurisdiction in which their respective ownership or lease of property
or the conduct of their respective businesses requires such qualification, and have all power and authority (corporate and other) necessary
to own, lease or hold their respective properties and to conduct the businesses in which they are engaged as described in the Registration
Statement, the Pricing Disclosure Package and the Final Prospectus, except where the failure to be in good standing, to be so qualified
or to have such power or authority could not, individually or in the aggregate, have a material adverse effect on the condition (financial
or otherwise), earnings, business, properties, management, financial position, stockholders’ equity, or results of operations of
the Company and its subsidiaries, considered as a whole, or adversely affect the performance by the Company of its obligations under
this Agreement (a “Material Adverse Effect”).
2.14.
Capitalization. The capitalization of the Company is as set forth in the Registration Statement, the Pricing Disclosure
Package and the Final Prospectus under the heading “Capitalization”. All of the outstanding capital stock of the Company
has been duly authorized and validly issued and is fully paid and non-assessable. The Securities have been duly authorized and, when
issued and paid for as contemplated herein, will be validly issued, fully paid and non-assessable; the holders thereof are not and will
not be subject to personal liability by reason of being such holders; the Securities are not and will not be subject to the preemptive
rights of any holders of any security of the Company or similar contractual rights granted by the Company; and all corporate action required
to be taken for the authorization, issuance and sale of the Securities has been duly and validly taken. None of the outstanding shares
of Common Stock of the Company were issued in violation of any preemptive rights, rights of first refusal or other similar rights to
subscribe for or purchase securities of the Company. Except as disclosed in the Registration Statement, the Pricing Disclosure Package,
the Final Prospectus, and Schedule 2.14 hereto, there are no authorized or outstanding options, warrants, preemptive rights, rights of
first refusal or other rights to acquire, or instruments convertible into or exchangeable or exercisable for, any
shares of Common Stock of, or other equity interest in, the Company or any of its subsidiaries. All of the outstanding shares of, or
other equity interest in, each of the Company’s subsidiaries (i) have been duly authorized and validly issued, (ii) are fully paid
and non-assessable and (iii) are owned by the Company, directly or through the Company’s subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, charge, claim or restriction on voting or transfer (collectively, “Liens”).
2.15.
Common Stock Incentive Plans. With respect to the Common Stock options (the “Stock Options”)
granted pursuant to the Common Stock-based compensation plans of the Company and its subsidiaries (the “Company Common Stock
Incentive Plans”), (i) each Stock Option intended to qualify as an “incentive stock option” under Section 422
of the Internal Revenue Code of 1986, as amended (the “Code”), so qualifies, (ii) each grant of a Stock Option
was duly authorized by all necessary corporate action, including, as applicable, approval by the board of directors of the Company (or
a duly constituted and authorized committee thereof) and any required stockholders approval by the necessary number of votes or written
consents, and the award agreement governing such grant (if any), to the Company’s knowledge, was duly executed and delivered by
each party thereto, (iii) each such grant was made in all material respects in accordance with the terms of the Company Common Stock
Incentive Plans, and (iv) each such grant was properly accounted for in accordance with United States generally accepted accounting principles
applied on a consistent basis during the periods involved (“GAAP”) in the financial statements (including the
related notes) of the Company.
2.16.
No Violation or Default. Neither the Company nor any of its subsidiaries is: (i) in violation of its charter, by-laws or
similar organizational documents; (ii) in default, and no event has occurred that, with notice or lapse of time or both, would constitute
such a default, in the due performance or observance of any term, covenant, condition or other obligation contained in any indenture,
mortgage, deed of trust, loan agreement, contract, undertaking or other agreement or instrument to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries is bound or to which any property, right or asset of the Company or any
of its subsidiaries is subject; or (iii) in violation of any law or statute applicable to the Company or any of its subsidiaries or any
judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority having jurisdiction over the Company
or any of its subsidiaries, or any of their respective properties or assets, except, in the case of clauses (ii) and (iii) above, for
any such default or violation that would not, individually or in the aggregate, have a Material Adverse Effect.
2.17.
No Conflicts. None of (i) the execution, delivery and performance of this Agreement by the Company, (ii) the issuance,
sale and delivery of the Closing Units or the Option Securities, (iii) the application of the proceeds of the offering as described under
“Use of Proceeds” in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus, or (iv) the consummation
of the transactions contemplated herein will: (x) result in any violation of the terms or provisions of the charter, by-laws or similar
organizational documents of the Company or any of its subsidiaries; (y) conflict with, result in a breach or violation of, or require
the approval of stockholders, members or partners or any approval or consent of any persons under, any of the terms or provisions of,
constitute a default under, result in the termination, modification, or acceleration of, or result in the creation
or imposition of any lien, charge or encumbrance upon any property, right or asset of the Company or any of its subsidiaries pursuant
to, any indenture, mortgage, deed of trust, loan agreement, note agreement, contract, undertaking or other agreement, obligation, condition,
covenant or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries
is bound or to which any property, right or asset of the Company or any of its subsidiaries is subject; or (z) subject to the Required
Approvals (as defined below), result in the violation of any law, statute, judgment, order, rule, decree or regulation applicable to
the Company or any of its subsidiaries of any court, arbitrator, governmental or regulatory authority, agency or body having jurisdiction
over the Company or any of its subsidiaries or any of their respective properties or assets.
2.18.
No Consents Required. No consent, approval, authorization, order, filing, registration, license or qualification of or
with any court, arbitrator, or governmental or regulatory authority, agency, or body is required for (i) the execution, delivery and
performance by the Company of this Agreement; (ii) the issuance, sale and delivery of the Securities; or (iii) the consummation of the
transactions contemplated herein, except for such consents, approvals, authorizations, orders, filings, registrations or qualifications
as (x) have already been obtained or made and are still in full force and effect, (y) may be required by FINRA and the Nasdaq Capital
Market, and (z) may be required under applicable state or federal securities laws in connection with the purchase, distribution and resale
of the Securities by the Underwriter (collectively, the “Required Approvals”).
2.19.
Independent Accountants. M&K CPAS, PLLC, with offices at 24955 Interstate Highway 45 Suite 400, The Woodlands, TX 77380,
which expressed its opinion with respect to the financial statements (which term as used in this Agreement includes the related notes
thereto) and supporting schedules included in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus, is
an independent registered public accounting firm with respect to the Company and its subsidiaries within the meaning of the rules and
regulations of the Commission and the Public Company Accounting Oversight Board and as required by the Securities Act.
2.20.
Financial Statements and Other Financial Data. The financial statements (including the related notes thereto), together
with the supporting schedules, included in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus comply
in all material respects with the applicable requirements of the Securities Act and present fairly the consolidated financial position
of the entities to which they relate as of and at the dates indicated and the results of their operations and cash flows for the periods
specified. Such financial statements, notes and schedules have been prepared in conformity with GAAP applied on a consistent basis throughout
the periods involved, except as may be expressly stated in the notes thereto and except, in the case of unaudited interim financial statements,
subject to normal year end audit adjustments and the exclusion of certain footnotes as permitted by the applicable rules of the Commission.
The financial data set forth in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus under the captions
“Capitalization” present fairly the information set forth therein on a basis consistent with that of the audited financial
statements included in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus.
2.21.
Statistical and Market-Related Data. The statistical and market-related data included in the Registration Statement, the
Pricing Disclosure Package and the Final Prospectus are based on or derived from sources that the Company reasonably and in good faith
believes to be accurate and reliable in all material respects.
2.22.
Forward-Looking Statements. No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act) included in the Registration Statement, the Pricing Disclosure Package or the Final Prospectus has been made
or reaffirmed without a reasonable basis or has been disclosed other than in good faith.
2.23.
Legal Proceedings. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus,
(i) there are no legal, governmental or regulatory investigations, actions, demands, claims, suits, arbitrations, inquiries or proceedings
(collectively, “Actions”) pending to which the Company or any of its subsidiaries is or may be a party or to
which any property, right or asset of the Company or any of its subsidiaries is or may be the subject that, individually or in the aggregate,
if determined adversely to the Company or any of its subsidiaries, could have a Material Adverse Effect; and (ii) to the knowledge of
the Company, no such Actions are threatened or contemplated by any governmental or regulatory authority or by others.
2.24.
Labor Disputes. No labor disturbance by or dispute with the employees of the Company or any of its subsidiaries exists
or, to the knowledge of the Company, is threatened or contemplated that could, individually or in the aggregate, have a Material Adverse
Effect.
2.25.
Intellectual Property Rights. (i) The Company and its subsidiaries own or have the right to use all patents, patent applications,
trademarks, service marks, trade names, and other source indicators and registrations and applications for registration thereof, domain
name registrations, copyrights and registrations and applications for registration thereof, technology and know-how, trade secrets, and
all other intellectual property and related proprietary rights (collectively, “Intellectual Property Rights”)
necessary to conduct their respective businesses; (ii) other than as disclosed in the Prospectus, neither the Company nor any of its
subsidiaries has received any notice of infringement, misappropriation or other conflict with (and neither the Company nor any of its
subsidiaries is otherwise aware of any infringement, misappropriation or other conflict with) the Intellectual Property Rights of any
other person, except for such infringement, misappropriation or other conflict as could not have a Material Adverse Effect; and (iii)
to the knowledge of the Company, the Intellectual Property Rights of the Company and its subsidiaries are not being infringed, misappropriated
or otherwise violated by any person.
2.26.
Licenses and Permits. (i) The Company and its subsidiaries possess such valid and current certificates, authorizations,
approvals, licenses and permits (collectively, “Authorizations”) issued by, and have made all declarations,
amendments, supplements and filings with, the appropriate state, federal or foreign regulatory agencies or bodies necessary to own, lease
and operate their respective properties and to conduct their respective businesses as set forth in the Registration Statement, the Pricing
Disclosure Package
and the Final Prospectus; (ii) all such Authorizations are valid and in full force and effect and the Company and its subsidiaries are
in compliance with the terms and conditions of all such Authorizations; and (iii) neither the Company nor any of its subsidiaries has
received notice of any revocation, termination or modification of, or non-compliance with, any such Authorization or has any reason to
believe that any such Authorization will not be renewed in the ordinary course, except where, in the case of clauses (i), (ii) and (iii),
the failure to possess, make or obtain such Authorizations (by possession, declaration or filing) could not, individually or in the aggregate,
have a Material Adverse Effect.
2.27.
Title to Property. The Company and its subsidiaries have good and marketable title to, or have valid and enforceable rights
to lease or otherwise use, all items of real property and personal property (other than with respect to Intellectual Property Rights,
which is addressed exclusively in Section 2.25) that are material to the respective businesses of the Company and its subsidiaries, in
each case, free and clear of all liens, encumbrances, claims, and defects and imperfections of title, except such liens, encumbrances,
claims, defects and imperfections as (i) are disclosed in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus,
or (ii) do not materially affect the value of such property and do not materially interfere with the use made or proposed to be made
of such property by the Company and its subsidiaries. The Company and its subsidiaries have good and marketable title to, or have valid
and enforceable rights to lease or otherwise use, all items of real and personal property that are material to the respective businesses
of the Company and its subsidiaries, in each case, free and clear of all liens, encumbrances, claims and defects and imperfections of
title, except such liens, encumbrances, claims, defects and imperfections as (i) are disclosed in the Registration Statement, the Pricing
Disclosure Package and the Final Prospectus, or (ii) do not materially affect the value of such property and do not materially interfere
with the use made or proposed to be made of such property by the Company and its subsidiaries. All items of real and personal property
held under lease by the Company and its subsidiaries are held under valid, subsisting and enforceable leases, with such exceptions as
do not materially interfere with the use made or proposed to be made of such property by the Company and its subsidiaries.
2.28.
Taxes. The Company and each of its subsidiaries have filed all federal, state, local and foreign tax returns required to
be filed through the date hereof or have timely requested extensions thereof and have paid all taxes required to be paid thereon (except
as currently being contested in good faith and for which reserves required by GAAP have been created in the financial statements of the
Company). The charges, accruals and reserves in respect of any income and other tax liability in the financial statements of the Company
referred to in Section 2.20 are adequate, in accordance with GAAP principles, to meet any assessments for any taxes of the Company accruing
through the end of the last period specified in such financial statements.
2.29.
Solvency. Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the
receipt by the Company of the proceeds from the sale of the Closing Units hereunder, (i) the fair saleable value of the Company’s
assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing
debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking
into account the particular capital requirements of the business conducted by the Company, consolidated and projected capital requirements
and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive,
were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts
on or in respect of its liabilities when such amounts are required to be paid. The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt).
The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation
under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. The Registration Statement sets
forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company
or any Subsidiary has commitments. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.
2.30.
Investment Company Act. Neither the Company nor any of its subsidiaries is or, after giving effect to the offer and sale
of the Securities and the application of the proceeds therefrom as described under “Use of Proceeds” in the Registration
Statement, the Pricing Disclosure Package and the Final Prospectus, will be required to register as an “investment company”
(as defined in the Investment Company Act).
2.31.
Insurance. The Company and its subsidiaries are insured by recognized, financially sound institutions in such amounts,
with such amounts, with such deductibles and covering such losses and risks as the Company reasonably believes to be adequate for the
conduct of their respective businesses and the value of their respective properties and as is prudent and customary for companies engaged
in similar businesses in similar industries. All insurance policies and fidelity or surety bonds insuring the Company and its subsidiaries
or their respective businesses, assets, employees, officers and directors are in full force and effect; the Company and its subsidiaries
are in compliance with the terms of such policies in all material respects; neither the Company nor any of its subsidiaries has received
notice from any insurer or agent of such insurer that capital improvements or other expenditures are required to be made in order to
continue such insurance; and neither the Company nor any of its subsidiaries has been refused any insurance coverage sought or applied
for. There are no claims by the Company or any of its subsidiaries under any such policy as to which any insurer is denying liability
or defending under a reservation of rights clause; and neither the Company nor any of its subsidiaries has any reason to believe that
it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that could not have a Material Adverse Effect.
2.32.
No Stabilization or Manipulation. None of the Company, nor its Affiliates, or, to the knowledge of the Company, any person
acting on its or any of their behalf (other than the Underwriter, as to which no representation or warranty is given) has taken, directly
or indirectly, any action designed to or that has constituted or that could reasonably be expected
to cause or result in the stabilization or manipulation of the price of any securities of the Company. The Company acknowledges that
the Underwriter may engage in passive market making transactions in the Common Stock on the Nasdaq Capital Market (the “Exchange”)
in accordance with Regulation M under the Exchange Act (“Regulation M”).
2.33.
Compliance with the Sarbanes-Oxley Act. The Company and, to the knowledge of the Company, its officers and directors, in
their capacities as such, are and have been in compliance with all applicable provisions of the Sarbanes-Oxley Act.
2.34.
Accounting Controls. The Company and its subsidiaries maintain systems of “internal control over financial reporting”
(as defined in Rule 13a-15(f) of the Exchange Act) that comply with the requirements of the Exchange Act and have been designed by, or
under the supervision of, their principal executive and principal financial officers, or persons performing similar functions, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with GAAP. The Company and its subsidiaries maintain internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access
to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability
for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
Other than as disclosed in the Registration Statement, the Company maintains a system of internal control over financial reporting and
the Company is not aware of any other material weaknesses in its internal control over financial reporting (whether or not remediated).
Other than as disclosed in the Registration Statement, since the date of the most recent balance sheet included in the Registration Statement,
the Pricing Disclosure Package and the Final Prospectus, (x) the Company’s auditors and the board of directors of the Company have
not been advised of (A) any new significant deficiencies or material weaknesses in the design or operation of the internal control over
financial reporting of the Company and its subsidiaries which could adversely affect the Company’s ability to record, process,
summarize, and report financial data; or (B) any fraud, whether or not material, that involves management or other employees who have
a role in the internal control over financial reporting of the Company or its subsidiaries; and (y) there have been no significant changes
in the internal control over financial reporting of the Company or its subsidiaries or in other factors that could significantly affect,
such internal control over financial reporting, including any corrective actions with regard to significant deficiencies or material
weaknesses, since the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package
and the Final Prospectus.
2.35.
Disclosure Controls and Procedures. The Company and its subsidiaries have established and maintain disclosure controls
and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) that are designed to comply with the requirements of
the Exchange Act; such disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company
and its subsidiaries in the reports they file or submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the Commission’s rules and forms, including controls and procedures designed to ensure that
such information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding
required disclosure; and such disclosure controls and procedures are effective to perform the functions for which they were established.
2.36.
Compliance with Environmental Laws. The Company and each of its subsidiaries (i) are, and at all times prior hereto were,
in compliance with all Environmental Laws (as defined below) applicable to such entity, which compliance includes, without limitation,
obtaining, maintaining and complying with all permits and authorizations and approvals required by Environmental Laws to conduct their
respective businesses; and (ii) have not received notice or otherwise have knowledge of any actual or alleged violation of Environmental
Laws, or of any actual or potential liability for or other obligation concerning the presence, disposal or release of hazardous or toxic
substances or wastes, pollutants or contaminants, and, except as described in the Registration Statement, the Pricing Disclosure Package
and the Final Prospectus, (x) there are no proceedings that are pending, or known to be contemplated, against the Company or any of its
subsidiaries under Environmental Laws, other than such proceedings regarding which would not, individually or in the aggregate, have
a Material Adverse Effect; (y) to the knowledge of the Company, none of the Company or any of its subsidiaries is aware of any issues
regarding compliance with Environmental Laws, including any pending or proposed Environmental Laws, or liabilities or other obligations
under Environmental Laws or concerning hazardous or toxic substances or wastes, pollutants or contaminants, that could reasonably be
expected to have a material effect on the capital expenditures, earnings or competitive position of the Company and its subsidiaries;
and (z) none of the Company or any of its subsidiaries anticipates material capital expenditures relating to Environmental Laws. As used
herein, the term “Environmental Laws” means any laws, regulations, ordinances, rules, orders, judgments, decrees,
permits or other legal requirements of any governmental authority, including, without limitation, any international, foreign, national,
state, provincial, regional, or local authority, relating to pollution, the protection of human health or safety, the environment, or
natural resources, or to the use, handling, storage, manufacturing, transportation, treatment, discharge, disposal or release of hazardous
or toxic substances or wastes, pollutants or contaminants.
2.37.
ERISA. Each “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Security
Act of 1974, as amended (“ERISA”)) for which the Company or any member of its “Controlled Group”
(defined as any organization which is a member of a controlled group of corporations within the meaning of Section 414 of the Code) would
have any liability (each, a “Plan”) complies in form with the requirements of all applicable statutes, rules
and regulations including ERISA and the Code, and has been maintained and administered in substantial compliance with its terms and with
the requirements of all applicable statutes, rules and regulations including ERISA and the Code; (ii) with respect to each Plan subject
to Title IV of ERISA or Section 302 of ERISA or Section 412 and 430 of the Code (A) no “reportable event” (within the meaning
of Section 4043(c) of ERISA) has occurred or is reasonably expected to occur, (B) no failure to satisfy the minimum funding standard
(within the meaning of Section 302 of ERISA or Section 412 and 430 of the Code), whether or not waived, has occurred or is reasonably
expected to occur,
(C) the fair market value of the assets under each Plan (excluding for these purposes accrued but unpaid contributions) exceeds the present
value of all benefits accrued under such Plan (determined based on those assumptions used to fund such Plan) and (D) neither the Company
or any member of its Controlled Group has incurred, or reasonably expects to incur, any liability under Title IV of ERISA (other than
contributions to the Plan or premiums to the Pension Benefit Guaranty Corporation in the ordinary course and without default) in respect
of a Plan (including a “multiemployer plan”, within the meaning of Section 4001(a)(3) of ERISA); (iii) each Plan that is
intended to be qualified under Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or by failure to
act, which would cause the loss of such qualification; and (iv) no prohibited transaction, within the meaning of Section 406 of ERISA
or Section 4975 of the Code, has occurred with respect to any Plan excluding transactions to which a statutory or administrative prohibited
transaction exemption applies.
2.38.
Related Party Transactions. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Final
Prospectus, no relationship, direct or indirect, exists between or among the Company or any of its subsidiaries, on the one hand, and
the directors, officers, stockholders, other Affiliates, customers or suppliers of the Company or any of its subsidiaries, on the other
hand, that would be required by the Securities Act to be described in the Registration Statement, the Pricing Disclosure Package and
the Final Prospectus.
2.39.
No Unlawful Contributions or Other Payments. Neither the Company nor any of its subsidiaries, nor any director, officer
of the Company, nor, to the knowledge of the Company, any agent, employee, Affiliate or other person associated with or acting on behalf
of the Company or any of its subsidiaries has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expense relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government
or regulatory official or employee; (iii) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment; or (iv)
violated or is in violation of any provision of (y) the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations
thereunder (the “FCPA”), or (z) any non-U.S. anti-bribery or anti-corruption statute or regulation. The Company
and its subsidiaries have instituted and maintain and enforce policies and procedures designed to promote and ensure compliance with
all applicable anti-bribery and anti-corruption laws.
2.40.
Compliance with Anti-Money Laundering Laws. The operations of the Company and its subsidiaries are and have been conducted
at all times in compliance with all applicable financial recordkeeping and reporting requirements, including those of the Currency and
Foreign Transactions Reporting Act of 1970, as amended, the applicable anti-money laundering statutes of all jurisdictions where the
Company or any of its subsidiaries conduct business, the rules and regulations thereunder and any related or similar rules, regulations
or guidelines issued, administered or enforced by any governmental agency (collectively, the “Anti-Money Laundering Laws”);
and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company
or any of its subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
2.41.
Compliance with OFAC. Neither the Company nor any of its subsidiaries nor any director, officer of the Company, nor, to
the knowledge of the Company, any agent, employee or Affiliate of the Company or any of its subsidiaries is an individual or entity (an
“OFAC Person”), or is owned or controlled by an OFAC Person, that is currently the subject or target of any
sanctions administered or enforced by the U.S. government (including, without limitation, the Office of Foreign Assets Control of the
U.S. Treasury Department (“OFAC”) or the U.S. Department of State and including, without limitation, the designation
as a “specially designated national” or “blocked person”), the United Nations Security Council, the European
Union, His Majesty’s Treasury, or other relevant sanctions authority (collectively, “Sanctions”), nor
is the Company or any of its subsidiaries located, organized or resident in a country or territory that is the subject or the target
of Sanctions, including, without limitation, Crimea, Cuba, Iran, North Korea, Sudan and Syria (each, a “Sanctioned Country”);
and the Company will not directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such
proceeds to any subsidiary, joint venture partner or other OFAC Person (i) to fund or facilitate any activities of or business with any
OFAC Person that, at the time of such funding or facilitation, is the subject or the target of Sanctions, (ii) to fund or facilitate
any activities or business in any Sanctioned Country or (iii) in any other manner that will result in a violation by any OFAC Person
(including any OFAC Person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions. Since
the Company’s inception, the Company and its subsidiaries have not knowingly engaged in and are not now knowingly engaged in any
dealings or transactions with any OFAC Person that at the time of the dealing or transaction is or was the subject or the target of Sanctions
or with any Sanctioned Country.
2.42.
No Registration Rights. Except as described in the Registration Statement, the Pricing Disclosure Package and the Final
Prospectus, there are no contracts, agreements or understandings between the Company or any of its subsidiaries, on the one hand, and
any person, on the other hand, granting such person any rights to require the Company or any of its subsidiaries to file a registration
statement under the Securities Act with respect to any securities of the Company or any of its subsidiaries owned or to be owned by such
person or to require the Company or any of its subsidiaries to include such securities in any securities to be registered pursuant to
any registration statement to be filed by the Company or any of its subsidiaries under the Securities Act.
2.43.
Subsidiaries. The subsidiaries of the Company shall be referred to hereinafter each as a “Subsidiary”
and collectively as “Subsidiaries.” The description of the corporate structure of the Company and each of the
agreements among the Subsidiaries as set forth in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus
under the caption “Corporate History and Structure” filed as Exhibit 21.1 to the Registration Statement is true and accurate
in all material respects and nothing has been omitted from such description which would make it misleading. The Subsidiaries of the Company
listed in Schedule 2.43 hereto are the only “significant subsidiaries” (as defined under Rule 1.02(w) of Regulation S-X under
the Securities Act) of the Company (the “Significant Subsidiaries”).
2.44.
No Restrictions on Subsidiaries. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and
the Final Prospectus, no Subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends to the
Company, from making any other distribution on such Subsidiary’s share capital or similar ownership interest, from repaying to
the Company any loans or advances to such Subsidiary from the Company or from transferring any of such Subsidiary’s properties
or assets to the Company or any other Subsidiary of the Company.
2.45.
Exchange Listing. The Common Stock is listed on the Exchange, and the Company has taken no action designed to, or likely
to have the effect of, delisting the Common Stock from the Exchange, nor has the Company received any notification that the Exchange
is contemplating terminating such listing, except as described in the Registration Statement, the Disclosure Package and the Prospectus.
2.46.
Exchange Act Registration. The Common Stock is registered pursuant to Section 12(b) under the Exchange Act. The Company
has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange
Act, nor has the Company received any notification that the Commission is contemplating terminating such registration.
2.47.
Prior Securities Transactions. No securities of the Company have been sold by the Company or by or on behalf of, or for
the benefit of, any person or persons controlling, controlled by or under common control with the Company, except as disclosed in the
Registration Statement, the Disclosure Package and the Prospectus.
2.48.
Application of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company’s certificate of incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could become applicable as a result of the Underwriter and the Company fulfilling
their obligations or exercising their rights hereunder (including documents incorporated herein by reference or attached hereto).
2.49.
D&O Questionnaires. To the Company’s knowledge, all information contained in the questionnaires (the “Questionnaires”)
completed by each of the Company’s directors, officers and beneficial holders of 5% or more of the Company’s Common Stock
immediately prior to the Offering as supplemented by all information concerning the Company’s directors, officers and principal
stockholders as described in the Registration Statement, the Disclosure Package and the Prospectus, provided to the Underwriter is true
and correct in all material respects and the Company has not become aware of any information which would cause the information disclosed
in the Questionnaires to become inaccurate and incorrect in any material respect.
2.50.
No Integrated Offering. Neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that
would cause
this offering of the Closing Units to be integrated with prior offerings by the Company for purposes of any applicable stockholder approval
provisions of any trading market on which any of the securities of the Company are listed or designated.
2.51.
Litigation; Governmental Proceedings. There is no material action, suit, proceeding, inquiry, arbitration, investigation,
litigation or governmental proceeding pending or, to the Company’s knowledge, threatened against, or involving the Company, any
of its Subsidiaries or, to the Company’s knowledge, any executive officer or director which has not been disclosed in the Registration
Statement, the Disclosure Package and the Prospectus which is required to be disclosed.
2.52.
FINRA Matters.
2.52.1.
No Broker’s Fees. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Final
Prospectus, neither the Company nor any of its subsidiaries is a party to any contract, agreement or understanding with any person (other
than this Agreement) that would give rise to a valid claim against any of them or the Underwriter for a brokerage commission, finder’s
fee or like payment in connection with the offering and sale of the Securities.
2.52.2.
Payments Within Six (6) Months. Except as described in the Registration Statement, the Disclosure Package, the Final Prospectus,
and Schedule 2.52.2 hereto, the Company has not made any direct or indirect payments (in cash, securities or otherwise) to: (i) any person,
as a finder’s fee, consulting fee or otherwise, in consideration of such person raising capital for the Company or introducing
to the Company persons who raised or provided capital to the Company; (ii) any FINRA member; or (iii) any person or entity that has any
direct or indirect affiliation or association with any FINRA member, within the six (6) months prior to the initial filing of the Registration
Statement, other than the payment to the Underwriter as provided hereunder in connection with the Offering.
2.52.3.
Use of Proceeds. None of the net proceeds of the Offering will be paid by the Company to any participating FINRA member
or its affiliates, except as specifically authorized herein.
2.52.4.
FINRA Affiliation. There is no (i) officer or director of the Company, (ii) to the Company’s knowledge, any beneficial
owner of 10% or more of any class of the Company’s securities or (iii) to the Company’s knowledge, any beneficial owner of
the Company’s unregistered equity securities which were acquired during the 180-day period immediately preceding the filing of
the Registration Statement that is an affiliate or associated person of a FINRA member participating in the Offering (as determined in
accordance with the rules and regulations of FINRA).
2.52.5.
Information. All information provided by the Company in its FINRA questionnaire to underwriter’s counsel specifically
for use by underwriter’s counsel in connection with its Public Offering System filings (and related disclosure) with FINRA is true,
correct and complete in all material respects.
| 3. | Representations
and Warranties of the Underwriter. The Underwriter represents and warrants to, and
agrees with, the Company: |
3.1.
No Testing-the-Waters Communications. The Underwriter has not (i) alone engaged in any Testing-the-Waters Communication
and (ii) authorized anyone to engage in Testing-the-Waters Communications. The Underwriter has not distributed, or authorized anyone
else to distribute, any Written Testing-the-Waters Communications.
4.1.
Agreements to Sell and Purchase. On the basis of the representations, warranties and covenants herein and subject to the
conditions herein and any adjustments made in accordance with Section 4.3 hereof,
4.1.1.
The Company agrees to issue and sell the Closing Units to the Underwriter; and
4.1.2.
The Underwriter agrees to purchase from the Company the number of Closing Units set forth opposite the Underwriter’s name in Schedule
4.1.2 hereto, subject to such adjustments as the Underwriter in its sole discretion shall make to eliminate any sales or purchases of
fractional shares of Common Stock.
4.1.3.
The Closing Units are to be offered initially to the public at the offering price set forth on the cover page of the Final Prospectus
(the “Public Offering Price”). The purchase price per Closing Unit to be paid by the Underwriter to the Company
shall be $[●] per Unit (the “Purchase Price”), which represents the Public Offering Price less an underwriting
discount of 7.0% and a non-accountable expense allowance of 1.0%.
4.1.4.
Payment for the Closing Units (the “Closing Units Payment”) shall be made by wire transfer in immediately available
funds to the accounts specified by the Company to the Underwriter at the offices of Kaufman & Canoles, P.C. at 10:00 a.m., ET, on
[●], 2024 or at such other place on the same or such other date and time, not later than the fifth (5th) Business Day thereafter,
as the Underwriter and the Company may agree upon in writing (the “Closing Date”). The Closing Units Payment
shall be made against delivery of the Closing Units to be purchased on the Closing Date to the Underwriter with any transfer taxes, stamp
duties and other similar taxes payable in connection with the sale of the Closing Units duly paid by the Company.
4.2.
Over-Allotment Option.
4.2.1.
On the basis of the representations, warranties and covenants herein and subject to the conditions herein, the Underwriter is hereby granted
an option (the “Over-Allotment Option”) to purchase, in the aggregate, up to [●] additional shares of
Common Stock, representing 15.0% of the Closing Units and/or Pre-funded Warrants sold in the offering from the Company (the “Option
Shares”) and/or up to [●] Series A Warrants to purchase an aggregate of an additional [●] shares of Common Stock,
representing 30.0% of the Closing Units sold in the offering from the Company; and [●] Series B Warrants, representing 15.0% of
the Closing Units sold in the offering from the Company (the “Option Warrants”). The purchase price to be paid
per Option Share shall be equal to the price per Closing Unit set forth in Section 4.1 hereof (less $0.01 attributable to each whole Option
Warrant included in the Closing Unit) and the purchase price to be paid per Option Warrant shall be equal to $0.01 per Option Warrant.
The Over-allotment Option is, at the Underwriter’s sole discretion, for Option Shares and Option Warrants together, solely Option
Shares, solely Option Warrants, or any combination thereof (each, an “Option Security” and collectively, the
“Option Securities”). The Closing Units and the Option Securities are collectively referred to as the “Securities”.
The Securities and the shares of Common Stock issuable upon exercise of the Pre-funded Warrants and the Warrants (the “Underlying
Shares”), are collectively referred to as the “Public Securities.” The Public Securities shall
be issued directly by the Company and shall have the rights and privileges described in the Registration Statement, the Pricing Disclosure
Package and the Prospectus. The Closing Warrants and the Option Warrants, if any, shall be issued pursuant to, and shall have the rights
and privileges set forth in, the form of Warrant, and the Closing Pre-funded Warrants shall be issued pursuant to, and shall have the
rights and privileges set forth in, the form of Pre-funded Warrant. The offering and sale of the Public Securities is herein referred
to as the “Offering”.
4.2.2.
Upon an exercise of the Over-Allotment Option and subject to the terms and conditions herein, the Company agrees to issue and sell the
Option Securities to the Underwriter.
4.2.3.
The Underwriter may exercise the Over-Allotment Option at any time in whole, or from time to time in part, on or before the forty-fifth
(45th) day following the date of the Final Prospectus, by written notice from the Underwriter to the Company (the “Over-Allotment
Exercise Notice”). The Underwriter must give the Over-Allotment Exercise Notice to the Company at least two (2) Business
Days prior to the Closing Date or the applicable Additional Closing Date, as the case may be. The Underwriter may cancel any exercise
of the Over-Allotment Option at any time prior to the Closing Date or the applicable Additional Closing Date, as the case may be, by
giving written notice of such cancellation to the Company.
4.2.4.
The Over-Allotment Exercise Notice shall set forth each of the following:
4.2.4.1
the aggregate number of Option Securities as to which the Over-Allotment Option is being exercised.
4.2.4.2
the Over-Allotment Option Purchase Price.
4.2.4.3
the names and denominations in which the Option Securities are to be registered.
4.2.4.4
the applicable Additional Closing Date, which may be the same date and time as the Closing Date but shall not be earlier than the Closing
Date nor later than the tenth (10th) full Business Day after the date of the Over-Allotment Exercise Notice.
4.2.5.
Payment for the Option Securities (the “Option Securities Payment”) shall be made by wire transfer in immediately
available funds to the accounts specified by the Company to the Underwriter at the offices of Kaufman & Canoles, P.C. at 10:00 a.m.
ET on the date specified in the corresponding Over-Allotment Exercise Notice, or at such other place on the same or such other date and
time, not later than the fifth Business Day thereafter, as the Underwriter and the Company may agree upon in writing (an “Additional
Closing Date”). The Option Securities Payment shall be made against delivery to the Underwriter for the respective accounts
of the Underwriter of the Option Securities to be purchased on any Additional Closing Date, with any transfer taxes, stamp duties and
other similar taxes payable in connection with the sale of the Option Securities duly paid by the Company. Delivery of the Option Securities
shall be made through the facilities of DTC unless the Underwriter shall otherwise instruct.
4.3.
Public Offering. The Company understands that the Underwriter intends to make a public offering of the Closing Units as
soon after the effectiveness of this Agreement as in the judgment of the Underwriter is advisable, and initially to offer the Closing
Units on the terms set forth in the Final Prospectus. The Company acknowledges and agrees that the Underwriter may offer and sell Closing
Units to or through any Affiliate of the Underwriter.
| 5. | Covenants
of the Company. The Company hereby covenants and agrees with the Underwriter as follows: |
5.1.
Filings with the Commission. The Company will:
5.1.1.
prepare and file the Final Prospectus (in a form approved by the Underwriter and containing the Rule 430A Information) with the Commission
in accordance with and within the time periods specified by Rules 424(b) and 430A under the Securities Act.
5.1.2.
file any Issuer Free Writing Prospectus with the Commission to the extent required by Rule 433 under the Securities Act.
5.1.3.
file with the Commission such reports as may be required by Rule 463 under the Securities Act.
5.2.
Notice to the Underwriter. The Company will advise the Underwriter promptly, and confirm such advice in writing:
5.2.1.
when the Registration Statement has become effective.
5.2.2.
when the Final Prospectus has been filed with the Commission.
5.2.3.
when any amendment to the Registration Statement has been filed or becomes effective.
5.2.4.
when any Rule 462(b) Registration Statement has been filed with the Commission.
5.2.5.
when any supplement to the Final Prospectus, any Issuer Free Writing Prospectus, any Written Testing-the-Waters Communication or any
amendment to the Final Prospectus has been filed or distributed.
5.2.6.
of (x) any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Final Prospectus,
(y) the receipt of any comments from the Commission relating to the Registration Statement or (z) any other request by the Commission
for any additional information, including, but not limited to, any request for information concerning any Testing-the-Waters Communication.
5.2.7.
of (x) the issuance by the Commission of any order suspending the effectiveness of the Registration Statement or preventing or suspending
the use of the Registration Statement, the Pricing Disclosure Package, the Final Prospectus, any Preliminary Prospectus, any Issuer Free
Writing Prospectus or any Written Testing-the-Waters Communication or (y) the initiation or, to the knowledge of the Company, threatening
of any proceeding for that purpose or pursuant to Section 8A of the Securities Act.
5.2.8.
of the occurrence of any event or development within the Prospectus Delivery Period as a result of which, the Final Prospectus, the Pricing
Disclosure Package, any Issuer Free Writing Prospectus or any Written Testing-the-Waters Communication as then amended or supplemented
would include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances existing when the Final Prospectus, the Pricing Disclosure Package, any such Issuer Free Writing Prospectus
or any such Written Testing-the-Waters Communication is delivered to a purchaser, not misleading.
5.2.9.
of the issuance by any governmental or regulatory authority or any order preventing or suspending the use of any of the Registration
Statement, the Pricing Disclosure Package, the Final Prospectus, any Preliminary Prospectus, any Issuer Free Writing Prospectus or any
Testing-the-Waters Communication or the initiation or threatening for that purpose.
5.2.10.
of the receipt by the Company of any notice with respect to any suspension of the qualification of the Closing Units for offer and sale
in any jurisdiction or the initiation or, to the knowledge of the Company, threatening of any proceeding for such purpose.
5.3.
Ongoing Compliance.
5.3.1.
If during the Prospectus Delivery Period:
5.3.1.1
any event or development shall occur or condition shall exist as a result of which the Final Prospectus as then amended or supplemented
would include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein,
in the light of the circumstances existing when the Final Prospectus is delivered to a purchaser, not misleading, the Company will, as
soon as reasonably possible, notify the Underwriter thereof and forthwith prepare and, subject to Section
5.4 hereof, file with the Commission and furnish, at its own expense, to the Underwriter and to such dealers as the Underwriter may designate
such amendments or supplements to the Final Prospectus as may be necessary so that the statements in the Final Prospectus as so amended
or supplemented will not, in the light of the circumstances existing when the Final Prospectus is delivered to a purchaser, be misleading;
or 5.3.1.2
it is necessary to amend or supplement the Final Prospectus to comply with applicable law, the Company will, as soon as reasonably possible,
notify the Underwriter thereof and forthwith prepare and, subject to Section 5.4 hereof, file with the Commission and furnish, at its
own expense, to the Underwriter and to such dealers as the Underwriter may designate such amendments or supplements to the Final Prospectus
as may be necessary so that the Final Prospectus will comply with applicable law; and
5.3.2.
if at any time prior to the Closing Date or any Additional Closing Date, as the case may be:
5.3.2.1
any event or development shall occur or condition shall exist as a result of which the Pricing Disclosure Package as then amended or
supplemented would include any untrue statement of a material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances existing when the Pricing Disclosure Package is delivered to a purchaser, not misleading,
the Company will immediately notify the Underwriter thereof and forthwith prepare and, subject to Section 5.4 hereof, file with the Commission
(to the extent required) and furnish, at its own expense, to the Underwriter and to such dealers as the Underwriter may designate such
amendments or supplements to the Pricing Disclosure Package as may be necessary so that the statements in the Pricing Disclosure Package
as so amended or supplemented will not, in the light of the circumstances existing when the Pricing Disclosure Package is delivered to
a purchaser, be misleading; or
5.3.2.2
it is necessary to amend or supplement the Pricing Disclosure Package to comply with applicable law, the Company will immediately notify
the Underwriter thereof and forthwith prepare and, subject to Section 5.4 hereof, file with the Commission (to the extent required) and
furnish, at its own expense, to the Underwriter and to such dealers as the Underwriter may designate such amendments or supplements to
the Pricing Disclosure Package as may be necessary so that the Pricing Disclosure Package will comply with applicable law.
5.4.
Amendments, Supplements and Issuer Free Writing Prospectuses. Before (i) using, authorizing, approving, referring to, distributing
or filing any Issuer Free Writing Prospectus, (ii) filing (x) any Rule 462(b) Registration Statement or (y) any amendment or supplement
to the Registration Statement or the Final Prospectus, or (iii) distributing any amendment
or supplement to the Pricing Disclosure Package or the Final Prospectus, the Company will furnish to the Underwriter and counsel for
the Underwriter a copy of the proposed Issuer Free Writing Prospectus, Rule 462(b) Registration Statement or other amendment or supplement
for review and will not use, authorize, refer to, distribute or file any such Issuer Free Writing Prospectus or Rule 462(b) Registration
Statement, or file or distribute any such proposed amendment or supplement (A) to which the Underwriter objects in a timely manner and
(B) which is not in compliance with the Securities Act. The Company will, pursuant to reasonable procedures developed in good faith,
retain copies of each Issuer Free Writing Prospectus that is not filed with the Commission in accordance with Rule 433 under the Securities
Act.
5.5.
Delivery of Copies. The Company will, upon request of the Underwriter, deliver, without charge, (i) to the Underwriter,
three signed copies of the Registration Statement as originally filed and each amendment thereto, in each case, including all exhibits
and consents filed therewith; and (ii) to each Underwriter (A) a conformed copy of the Registration Statement as originally filed and
each amendment thereto (without exhibits and consents) and (B) during the Prospectus Delivery Period, as many copies of the Final Prospectus
(including all amendments and supplements thereto and each Issuer Free Writing Prospectus) as the Underwriter may reasonably request.
5.6.
Blue Sky Compliance. The Company will use its best efforts, with the Underwriter’s cooperation, if necessary, to
qualify or register (or to obtain exemptions from qualifying or registering) the Closing Units for offer and sale under the securities
or Blue Sky laws of such jurisdictions as the Underwriter shall reasonably request and will use its reasonable best efforts, with the
Underwriter’s cooperation, if necessary, to continue such qualifications, registrations and exemptions in effect so long as required
for the distribution of the Closing Units; provided that the Company shall not be required to (i) qualify as a foreign corporation
or other entity or as a dealer in securities in any such jurisdiction where it would not otherwise be required to so qualify, (ii) file
any general consent to service of process in any such jurisdiction or (iii) subject itself to taxation in any such jurisdiction if it
is not otherwise so subject.
5.7.
Earning Statement. The Company will make generally available to its security holders and the Underwriter as soon as practicable
an earning statement that satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 under the Securities Act covering
a period of at least 12 months beginning after the “effective date” (as defined in Rule 158 under the Securities Act) of
the Registration Statement; provided that the Company will be deemed to have furnished such statement to its security holders
and the Underwriter to the extent it is filed on the Commission’s Electronic Data Gathering, Analysis and Retrieval system (“EDGAR”).
5.8.
Stockholder Approval. The Company shall hold a special meeting of stockholders (which may also be at the annual meeting
of stockholders) at the earliest practicable date after the date hereof, but in no event later than seventy-five (75) days after the
Closing Date for the purpose of obtaining Stockholder Approval, with the recommendation of the Company’s Board of Directors that
such proposal be approved, and the Company shall solicit proxies from its stockholders in connection therewith in the same manner as
all other management
proposals in such proxy statement and all management-appointed proxyholders shall vote their proxies in favor of such proposal. Within
twenty (20) Business Days following the Closing Date, the Company shall file with the Commission a preliminary proxy statement for the
purpose of obtaining Stockholder Approval, and the Company shall use its best efforts to obtain such Stockholder Approval. In the event
Stockholder Approval (or board approval in lieu thereof following six (6) months after the Closing Date) does not occur, the Company
will be required to hold additional meetings at least once every sixty (60) days until the earlier of the date Stockholder Approval is
obtained or the Warrants are no longer outstanding, with printed and mailed proxy statements sent to stockholders for such meetings.
Notwithstanding the foregoing, the Company may, in lieu of holding a special meeting of stockholders as aforesaid, obtain the written
consent of a majority of its stockholders covering the Stockholder Approval so long as prior to seventy-five (75) days after the Closing
Date, such written consents are obtained and in accordance with Exchange Act Rule 14c-2 at least twenty (20) days shall have transpired
from the date on which a written information statement containing the information specified in Schedule 14C detailing such Stockholder
Approval shall have been filed with the Commission and delivered to stockholders of the Company. “Stockholder Approval”
shall mean those actions set forth in the definition of “Stockholder Approval” in the Series A Warrants and the Series B
Warrants.
5.9.
Use of Proceeds. The Company shall apply the net proceeds from the sale of the Closing Units and the Option Securities
in the manner described under the caption “Use of Proceeds” in the Registration Statement, the Pricing Disclosure Package
and the Final Prospectus.
5.10.
Clear Market.
5.10.1.
For a period from the date hereof to ninety (90) days after the Stockholder Approval (the “Standstill Period”),
the Company will not (x) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, or file with the
Commission a registration statement under the Securities Act relating to, any shares of Common Stock or any securities convertible into
or exercisable or exchangeable for shares of Common Stock, or publicly disclose the intention to make any offer, sale, pledge, disposition
or filing, or (y) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership
of the shares of Common Stock or any such other securities, whether any such transaction described in clause (x) or (y) above is to be
settled by delivery of shares of Common Stock or such other securities, in cash or otherwise, without the prior written consent of the
Underwriter.
5.10.2.
The restrictions contained in Section 5.10.1 hereof shall not apply to: (A) the Closing Units, (B) any shares of Common Stock issued
under Company Common Stock Incentive Plans or warrants issued by the Company, in each case, described as outstanding in the Registration
Statement, the Pricing Disclosure Package and the Final Prospectus, (C) any options and other awards granted under a Company Common Stock
Incentive Plan as described in the Registration Statement, the Pricing Disclosure Package and the Final Prospectus,
provided that such securities are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights
that require or permit any registration statement in connection therewith to be filed publicly or declared effective during the Standstill
Period (D) the amendment of a Company Common Stock Incentive Plan as described in the Registration Statement, the Pricing Disclosure
Package and the Final Prospectus, (E) the filing by the Company of any registration statement on Form S-8 or a successor form thereto
relating to a Company Common Stock Incentive Plan described in the Registration Statement, the Pricing Disclosure Package and the Final
Prospectus and (F) shares of Common Stock or other securities issued pursuant to acquisitions or strategic transactions (whether by merger,
consolidation, purchase of equity, purchase of assets, reorganization or otherwise) approved by a majority of the disinterested directors
of the Company, provided that such securities are issued as “restricted securities” (as defined in Rule 144) and carry no
registration rights that require or permit the filing of any registration statement in connection therewith during the Standstill Period,
and provided that any such issuance shall only be to a Person (or to the equityholders of a Person) which is, itself or through its subsidiaries,
an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company
additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities
primarily for the purpose of raising capital or to an entity whose primary business is investing in securities; provided, however,
that any such shares of Common Stock or other securities issued or granted pursuant to clauses (B), (C) and (F) during the Standstill
Period shall not be saleable in the public market until the expiration of the Standstill Period.
5.10.3.
If the Underwriter, in its sole discretion, agrees to release or waive the restrictions set forth in any Lock-Up Agreement as described
in Section 8.9 and provides the Company with notice of the impending release or waiver substantially in the form of Exhibit 5.10.3.1
hereto at least three (3) Business Days before the effective date of the release or waiver, then the Company agrees to announce
the impending release or waiver by a press release substantially in the form of Exhibit 5.10.3.2 hereto through a major
news service at least two (2) Business Days before the effective date of the release or waiver.
5.11.
No Stabilization or Manipulation. None of the Company, its Affiliates or any person acting on its or any of their behalf
(other than the Underwriter, as to which no covenant is given) will take, directly or indirectly, any action designed to or that constitutes
or that could reasonably be expected to cause or result in the stabilization or manipulation of the price of any securities of the Company.
The Company acknowledges that the Underwriter may engage in passive market making transactions in the Common Stock on the Exchange in
accordance with Regulation M.
5.12.
Investment Company Act. The Company shall not invest, or otherwise use the proceeds received by the Company from the sale
of the Closing Units or the Option Securities in such a manner as would require the Company or any of its subsidiaries to register as
an “investment company” (as defined in the Investment Company Act) under the Investment Company Act.
5.13.
Transfer Agent. For the period of two (2) years from the date of this Agreement, the Company shall engage and maintain,
at its expense, a registrar and transfer agent for the Common Stock.
5.14.
Reports. For the period of two (2) years from the date of this Agreement, the Company will furnish to the Underwriter,
as soon as they are available, copies of all reports or other communications (financial or other) furnished to holders of the Common
Stock, and copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange
or automatic quotation system; provided that the Company will be deemed to have furnished such reports and financial statements
to the Underwriter to the extent they are filed on EDGAR.
5.15.
Right of First Refusal. The Company agrees that, if, for the period ending twelve (12) months after the Closing Date, the
Company or any of its subsidiaries: (a) decides to finance or refinance any indebtedness, the Underwriter (or any affiliate designated
by the Underwriter) shall have the right to act as sole book-runner, sole manager, sole placement agent or sole agent with respect to
such financing or refinancing; or (b) decides to raise funds by means of a public offering (including at-the-market facility) or a private
placement or any other capital raising financing of equity, equity-linked or debt securities, the Underwriter (or any affiliate designated
by the Underwriter) shall have the right to act as sole book-running manager, sole underwriter or sole placement agent for such financing.
If the Underwriter or one of its affiliates decides to accept any such engagement, the agreement governing such engagement (each, a “Subsequent
Transaction Agreement”) will contain, among other things, provisions for customary fees for transactions of similar size
and nature (but in no event will the fees be less than those outlined herein) and shall include the provisions of this Agreement, including
indemnification, that are appropriate to such a transaction. Notwithstanding the foregoing, the decision to accept the Company’s
engagement under this Section 5.15 shall be made by the Underwriter or one of its affiliates, by a written notice to the Company, within
ten (10) days of the receipt of the Company’s notification of its financing needs, including a detailed term sheet. The Underwriter’s
determination of whether in any case to exercise its right of first refusal will be strictly limited to the terms on such term sheet,
and any waiver of such right of first refusal shall apply only to such specific terms. If the Underwriter waives its right of first refusal,
any deviation from such terms (including without limitation after the launch of a subsequent transaction) shall void the waiver and require
the Company to seek a new waiver from the right of first refusal on the terms set forth in this Section 5.15.
| 6. | Covenants
of the Underwriter. The Underwriter hereby covenants and agrees with the Company
as follows: |
6.1.
Underwriter Free Writing Prospectus. The Underwriter has not used, authorized the use of, referred to or participated in
the planning for use of, and will not use, authorize the use of, refer to or participate in the planning for use of, any Free Writing
Prospectus (which term includes use of any written information furnished to the Commission by the Company and not incorporated by reference
into the Registration Statement and any press release issued by the Company) other than (i) a Free Writing Prospectus that contains no
“issuer information” filed or required to be filed pursuant to Rule 433(d) under the Securities
Act (“Issuer Information”) that was not included in the Preliminary Prospectus or a previously filed Issuer
Free Writing Prospectus, (ii) any Issuer Free Writing Prospectus listed in Schedule 2.5.4 hereto or prepared pursuant to Section 2.5.4
or Section 5.4 hereof (including any electronic road show), or (iii) any Free Writing Prospectus prepared by the Underwriter and approved
by the Company in advance in writing.
6.2.
Section 8A Proceedings. The Underwriter is not subject to any pending proceeding under Section 8A of the Securities Act
with respect to the offering of the Closing Units and will promptly notify the Company if any such proceeding against it is initiated
during the Prospectus Delivery Period.
7.1.
Company Expenses. The Company hereby agrees to pay on the Closing Date all expenses incident to the performance of the
obligations of the Company under this Agreement including, but not limited to: (a) all filing fees and expenses relating to the registration
of the Closing Units with the Commission; (b) all filing fees and expenses associated with the review of the offering of the Closing
Units by FINRA; (c) all fees and expenses relating to the listing of the Closing Shares and the Series A tradable Warrants and the Series
B tradable Warrants on the Exchange (to the extent relevant) or on such other stock exchanges as the Company and the Underwriter together
determine; (d) all fees, expenses and disbursements relating to the registration or qualification of the Closing Units under the “blue
sky” securities laws of such states and other jurisdictions as the Underwriter may reasonably designate (including, without limitation,
all filing and registration fees, and the reasonable fees and disbursements of the Company’s “blue sky” counsel, which
will be Underwriter’s counsel) unless such filings are not required in connection with the Company’s proposed Exchange listing;
(e) all fees, expenses and disbursements relating to the registration, qualification or exemption of the Securities under the securities
laws of such foreign jurisdictions as the Underwriter may reasonably designate; (f) the costs of all mailing and printing of the underwriting
documents, the Registration Statement, Pricing Disclosure Package, the Final Prospectus, any Preliminary Prospectus, any Issuer Free
Writing Prospectus or any Testing-the-Waters Communication and all amendments, supplements and exhibits thereto as the Underwriter may
reasonably deem necessary; (g) the costs of preparing, printing and delivering certificates representing the Closing Shares; (h) fees
and expenses of the transfer agent for the Closing Shares; (i) transfer and/or stamp taxes, if any, payable upon the transfer of securities
from the Company to the Underwriter; (j) the fees and expenses of the Company’s accountants; and (k) reasonable legal fees and
disbursements for the Underwriter’s counsel. The total amount payable by the Company to the Underwriter pursuant to (k) shall not
exceed $100,000. The Underwriter may deduct from the net proceeds of the Offering payable to the Company on the Closing Date the expenses
set forth herein to be paid by the Company to the Underwriter. Except as provided for in this Agreement, the Underwriter shall bear the
costs and expenses incurred by them in connection with the sale of the Closing Units and the transactions contemplated thereby.
7.2.
Non-accountable Expenses. On the Closing Date, the Company shall pay to the Underwriter, by deduction from the net proceeds
of the Offering a non-accountable expense
allowance equal to one percent (1.0%) of the gross proceeds received by the Company from the sale of the Closing Units); provided, however,
that in the event that the Offering is terminated, the Company agrees to reimburse the Underwriter pursuant to Section 12 hereof.
7.3.
Underwriter Expenses. Except to the extent otherwise provided in this Section 7 or Section 9 hereof, the Underwriter will
pay all of its own costs and expenses, including the fees and expenses of their counsel, any stock transfer taxes on resale of any of
the shares of Common Stock held by them, and any advertising expenses connected with any offers they may make.
7.4.
Company Reimbursement. The provisions of this Section 7 shall not affect any agreement that the Company may make for the
sharing of such costs and expenses.
| 8. | Conditions
to the Obligations of the Underwriter. The obligations of the Underwriter to purchase
the Closing Units as provided herein on the Closing Date or the Option Securities as provided
herein on any Additional Closing Date, as the case may be, shall be subject to the timely
performance by the Company of its covenants and other obligations hereunder, and to each
of the following additional conditions: |
8.1.
Registration Compliance; No Stop Order.
8.1.1.
The Registration Statement and any post-effective amendment thereto shall have become effective, no stop order suspending the effectiveness
of the Registration Statement or any post-effective amendment thereto shall be in effect, and no proceeding for such purpose or pursuant
to Section 8A of the Securities Act shall be pending before or threatened by the Commission.
8.1.2.
The Company shall have filed the Final Prospectus and each Issuer Free Writing Prospectus with the Commission in accordance with and
within the time periods prescribed by Section 5.1 hereof.
8.1.3.
The Company shall have (A) disclosed to the Underwriter all requests by the Commission for additional information relating to the offer
and sale of the Closing Units and (B) complied with such requests to the reasonable satisfaction of the Underwriter.
8.2.
Representations and Warranties. The representations and warranties of the Company contained herein shall be true and correct
on the date hereof and on and as of the Closing Date or any Additional Closing Date, as the case may be, and the statements of the Company
and its officers made in any certificates delivered pursuant to this Agreement shall be true and correct on and as of the Closing Date
or any Additional Closing Date, as the case may be.
8.3.
Auditor Comfort Letters. On the date of this Agreement and on the Closing Date or any Additional Closing Date, as the case
may be, M&K CPAS, PLLC shall have furnished to the Underwriter, at the request of the Company, letters, dated the respective dates
of delivery thereof and addressed to the Underwriter, in form and substance reasonably satisfactory to the Underwriter, containing statements
and information of the type
customarily included in accountants’ “comfort letters” to underwriter with respect to the financial statements and
certain financial information contained in each of the Registration Statement, the Pricing Disclosure Package and the Final Prospectus;
provided that the letter delivered on the Closing Date or any Additional Closing Date, as the case may be, shall use a “cut-off”
date no more than two business days prior to the Closing Date or such Additional Closing Date, as the case may be.
8.4.
No Material Adverse Change. No event or condition of a type described in Section 2.12 hereof shall have occurred or shall
exist, which event or condition is not described in each of the Pricing Disclosure Package and the Final Prospectus (in each case, exclusive
of any amendment or supplement thereto), the effect of which in the judgment of the Underwriter makes it impracticable or inadvisable
to proceed with the offering, sale or delivery of the Closing Units on the Closing Date or any Additional Closing Date, as the case may
be, in the manner and on the terms contemplated by this Agreement, the Pricing Disclosure Package and the Final Prospectus (in each case,
exclusive of any amendment or supplement thereto).
8.5.
Opinion and Negative Assurance Letter of Counsel to the Company. U.S. Company Counsel shall each have furnished to the
Underwriter, at the request of the Company, its (i) written opinion, addressed to the Underwriter and dated the Closing Date or any Additional
Closing Date, as the case may be, and (ii) negative assurance letter, addressed to the Underwriter and dated the Closing Date or any
Additional Closing Date, as the case may be, in each case, in a form reasonably satisfactory to the Underwriter.
8.6.
Officer’s Certificate. The Underwriter shall have received as of the Closing Date or any Additional Closing Date
on the date of this Agreement, a certificate from the Company’s CFO in form and substance reasonably satisfactory to the Underwriter,
containing statements and information confirming that the financial statements and certain financial information contained in the Registration
Statement is consistent with the Company’s records and does not contain any material misstatements or omissions and shall have
received as of the Closing Date or any Additional Closing Date, as the case may be, a certificate of an executive officer of the Company
who has specific knowledge of the Company’s financial matters and is satisfactory to the Underwriter, (i) confirming that such
officer has carefully reviewed the Registration Statement, the Pricing Disclosure Package, the Final Prospectus, each Issuer Free Writing
Prospectus and each Written Testing-the-Waters Communication and, to the knowledge of such officer, the representations set forth in
Sections 2.1.2, 2.2, 2.3.1, 2.4.1, 2.5.1, 2.6 and 2.8, hereof are true and correct on and as of the Closing Date or any Additional Closing
Date, as the case may be; (ii) to the effect set forth in clause (i) of Section 2.10 and Section 8.1 hereof; and (iii) confirming that
all of the other representations and warranties of the Company in this Agreement are true and correct on and as of the Closing Date or
any Additional Closing Date, as the case may be, and that the Company has complied with all agreements and covenants and satisfied all
other conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date or any Additional Closing Date, as
the case may be.
8.7.
No Legal Impediment to Issuance and Sale. No action shall have been taken and no statute, rule, regulation or order shall
have been enacted, adopted or issued by any federal,
state or foreign governmental or regulatory authority that would, as of the Closing Date or any Additional Closing Date, as the case
may be, prevent the issuance, sale or delivery of the Closing Units or the Option Securities by the Company; and no injunction or order
of any federal, state or foreign court shall have been issued that would, as of the Closing Date or any Additional Closing Date, as the
case may be, prevent the issuance, sale or delivery of the Closing Units or the Option Securities.
8.8.
Good Standing. The Underwriter shall have received on and as of the Closing Date and any Additional Closing Date, as the
case may be, satisfactory evidence of the good standing of the Company in its jurisdiction of incorporation, in writing from the appropriate
governmental authorities of such jurisdiction.
8.9.
Lock-Up Agreements. The Lock-Up Agreements substantially in the form of Exhibit 8.9 hereto executed by the
officers, directors and stockholders of at least five percent (5%) of the outstanding Common Stock of the Company as of the date hereof
relating to sales and certain other dispositions of shares of Common Stock or certain other securities, delivered to the Underwriter
on or before the date hereof, shall be in full force and effect on the Closing Date or any Additional Closing Date, as the case may be.
8.10.
Exchange Listing. On the Closing Date or any Additional Closing Date, as the case may be, the Company shall have filed
a Listing of Additional Shares Notification Form with the Nasdaq Capital Market with respect to the Closing Shares and the Series A tradable
Warrants and the Series B tradable Warrants, subject to notice of issuance.
8.11.
FINRA Clearance. On or before the date of this Agreement, if required by FINRA, the Underwriter shall have received clearance
from FINRA as to the amount of compensation allowable or payable to the Underwriter as described in the Registration Statement.
8.12.
Consent to Stockholder Approval. On or before the date of this Agreement, the Company’s Chief Executive Officer,
John Yozamp and James Yozamp shall have delivered to the Underwriter executed copies of an irrevocable consent to seek and vote his shares
in favor of those corporate actions in Section 5.8.
8.13.
Additional Documents. On or prior to the Closing Date or any Additional Closing Date, as the case may be, the Underwriter
and its counsel shall have received such information, certificates and other additional documents from the Company as they may reasonably
require for the purpose of enabling them to pass upon the issuance and sale of the Closing Units as contemplated herein or in order to
evidence the accuracy of any of the representations and warranties, or the satisfaction of any of the covenants, closing conditions or
other obligations, contained in this Agreement.
All
opinions, letters, certificates and other documents delivered pursuant to this Agreement will be deemed to be in compliance with the
provisions hereof only if they are reasonably satisfactory in form and substance to counsel for the Underwriter.
If
any condition specified in this Section 8 is not satisfied when and as required to be satisfied, this Agreement and all obligations of
the Underwriter hereunder may be terminated by the Underwriter
by notice to the Company at any time on or prior to the Closing Date or any Additional Closing Date, as the case may be, which termination
shall be without liability on the part of any party to any other party, except that the Company shall continue to be liable for the payment
of expenses under Section 7 and Section 12 hereof and except that the provisions of Section 9 and Section 10 hereof shall at all times
be effective and shall survive any such termination.
9.1.
Indemnification of the Underwriter by the Company. The Company agrees to indemnify and hold harmless the Underwriter, its
Affiliates, directors, officers, employees and agents and each person, if any, who controls the Underwriter within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities (including,
without limitation, all reasonable legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim
asserted, as such fees and expenses are incurred), joint or several, that arise out of or are based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in the Registration Statement (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact required to be stated therein or necessary in order to make the statements
therein not misleading, or (ii) any untrue statement or alleged untrue statement of a material fact contained in any Pricing Disclosure
Package (including any Pricing Disclosure Package that has subsequently been amended), the Final Prospectus (or any amendment or supplement
thereto), any Preliminary Prospectus, any Issuer Information, any Issuer Free Writing Prospectus, any Written Testing-the-Waters Communication
or any Road Show, or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading, in each case, except insofar as such losses, claims, damages
or liabilities arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with the Underwriter Information. The indemnity agreement set forth in this Section 9.1 shall be in addition to
any liabilities that the Company may otherwise have.
9.2.
Indemnification of the Company by the Underwriter. The Underwriter agrees to indemnify and hold harmless the Company, its
directors, each officer who signed the Registration Statement and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities
(including, without limitation, all reasonable legal fees and other expenses incurred in connection with any suit, action or proceeding
or any claim asserted, as such fees and expenses are incurred), joint or several, to the same extent as the indemnity set forth in Section
9.1 hereof; provided, however, that the Underwriter shall be liable only to the extent that any untrue statement or omission or alleged
untrue statement or omission was made in the Registration Statement (or any amendment or supplement thereto), any Pricing Disclosure
Package (including any Pricing Disclosure Package that has subsequently been amended), the Final Prospectus (or any amendment or supplement
thereto), any Preliminary Prospectus, any Issuer Information, any Issuer Free Writing Prospectus, any Written Testing-the-Waters Communication
or any
Road Show in reliance upon, and in conformity with, the Underwriter Information relating to the Underwriter. The indemnity agreement
set forth in this Section 9 shall be in addition to any liabilities that the Underwriter may otherwise have.
9.3.
Notifications and Other Indemnification Procedures. If any suit, action, proceeding (including any governmental or regulatory
investigation), claim or demand shall be brought or asserted against any person in respect of which indemnification may be sought pursuant
to any of the preceding subsections of this Section 9, such person (the “Indemnified Person”) shall promptly
notify the person against whom such indemnification may be sought (the “Indemnifying Person”) in writing; provided
that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have under any of the preceding
subsections of this Section 9 except to the extent that it has been materially prejudiced by such failure; and provided, further,
that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have to an Indemnified Person
otherwise than under any of the preceding subsections of this Section 9. If any such proceeding shall be brought or asserted against
an Indemnified Person and it shall have notified the Indemnifying Person thereof, the Indemnifying Person shall retain counsel reasonably
satisfactory to the Indemnified Person (who shall not, without the consent of the Indemnified Person, be counsel to the Indemnifying
Person) to represent the Indemnified Person in such proceeding and shall pay the reasonable and documented fees and expenses of such
counsel related to such proceeding, as incurred. In any such proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person
and the Indemnified Person shall have mutually agreed to the contrary; (ii) the Indemnifying Person has failed within a reasonable time
to retain counsel reasonably satisfactory to the Indemnified Person; (iii) the Indemnified Person shall have reasonably concluded that
there may be legal defenses available to it that are different from or in addition to those available to the Indemnifying Person; or
(iv) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interest between
them. It is understood and agreed that the Indemnifying Person shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all
Indemnified Persons, and that all such fees and expenses shall be paid or reimbursed as they are incurred. Any such separate firm for
(i) the Underwriter, its Affiliates, directors, officers, employees and agents and each person, if any, who controls the Underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall be designated in writing by the Underwriter;
and (ii) the Company, its directors, its officers who signed the Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall be designated in writing by the Company.
9.4.
Settlements. The Indemnifying Person under this Section 9 shall not be liable for any settlement of any proceeding effected
without its written consent, which consent may not be unreasonably withheld, but if settled with such consent or if there be a final
judgment for the plaintiff, the Indemnifying Person agrees to indemnify the Indemnified Person from and
against any loss, claim, damage, liability or expense by reason of such settlement or judgment. Notwithstanding the foregoing sentence,
if at any time an Indemnified Person shall have requested an Indemnifying Person to reimburse the Indemnified Person for any reasonably
incurred and documented fees and expenses of counsel as contemplated by this Section 9, the Indemnifying Person agrees that it shall
be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than
forty-five (45) days after receipt by such Indemnifying Person of the aforesaid request, (ii) such Indemnifying Person shall not have
reimbursed the Indemnified Person in accordance with such request, or shall not have disputed in good faith the Indemnified Person’s
entitlement to such reimbursement, prior to the date of such settlement and (iii) such Indemnified Person shall have given the Indemnifying
Person at least forty-five (45) days’ prior notice of its intention to settle. No Indemnifying Person shall, without the prior
written consent of the Indemnified Person effect any settlement, compromise or consent to the entry of judgment in any pending or threatened
action, suit or proceeding in respect of which any Indemnified Person is or could have been a party and indemnity was or could have been
sought hereunder by such Indemnified Person, unless such settlement, compromise or consent (x) includes an unconditional release of such
Indemnified Person, in form and substance reasonably satisfactory to such Indemnified Person, from and against all liability on claims
that are the subject matter of such action, suit or proceeding and (y) does not include any statements as to or any findings of fault,
culpability or failure to act by or on behalf of any Indemnified Person.
10.1.
To the extent the indemnification provided for in Section 9 hereof is unavailable to or insufficient to hold harmless an Indemnified
Person in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each Indemnifying Person, in lieu
of indemnifying such Indemnified Person thereunder, shall contribute to the aggregate amount paid or payable by such Indemnified Person,
as incurred, as a result of any losses, claims, damages, liabilities or expenses referred to therein (i) in such proportion as is appropriate
to reflect the relative benefits received by the Company, on the one hand, and the Underwriter, on the other hand, from the offering
of the Closing Units pursuant to this Agreement or (ii) if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative
fault of the Company, on the one hand, and the Underwriter, on the other hand, in connection with the statements or omissions that resulted
in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits
received by the Company, on the one hand, and the Underwriter, on the other hand, in connection with the offering of the Closing Units
pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the
Closing Units pursuant to this Agreement (before deducting expenses) received by the Company, on the one hand, and the total underwriting
discounts and commissions received by the Underwriter, on the other hand, in each case as set forth in the table on the cover of the
Final Prospectus bear to the aggregate initial offering price of the Closing Units. The relative fault of the Company, on the one hand,
and the Underwriter, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or omission
or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or the Underwriter, on
the other hand, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement
or omission.
10.2.
The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in Section 9 hereof, all reasonable legal or other fees or expenses incurred
by such party in connection with investigating or defending any action or claim. The provisions set forth in Section 9 hereof with respect
to notice of commencement of any action shall apply if a claim for contribution is to be made under this Section 10; provided,
however, that no additional notice shall be required with respect to any action for which notice has been given under Section 9 hereof
for purposes of indemnification.
10.3.
The Company and the Underwriter agree that it would not be just and equitable if contribution pursuant to this Section 10 was determined
by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in
this Section 10.
10.4.
Notwithstanding the provisions of this Section 10, the Underwriter shall not be required to contribute any amount in excess of the amount
by which the total discounts and commissions received by the Underwriter in connection with the Closing Units distributed by it exceeds
the amount of any damages the Underwriter has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement
or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11 of the Securities
Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
10.5.
For purposes of this Section 10, each director, officer, employee and agent of the Underwriter and each person, if any, who controls
the Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to
contribution as the Underwriter, and each director and officer of the Company who signed the Registration Statement, and each person,
if any, who controls the Company with the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, shall have the
same rights to contribution as the Company.
10.6.
The remedies provided for in Section 9 and Section 10 hereof are not exclusive and shall not limit any rights or remedies which may otherwise
be available to any Indemnified Person at law or in equity.
11.1.
Prior to the delivery of and payment for the Closing Units on the Closing Date or any Additional Closing Date, as the case may be, this
Agreement may be terminated by the Underwriter in the absolute discretion of the Underwriter by notice given to the Company if after
the execution and delivery of this Agreement: (i) trading or quotation of any securities issued or guaranteed by the Company shall have
been suspended or materially limited
on any securities exchange, quotation system or in the over-the-counter market; (ii) trading in securities generally on any of the New
York Stock Exchange, the Nasdaq Stock Exchange or the over-the-counter market shall have been suspended or materially limited; (iii)
a general banking moratorium on commercial banking activities shall have been declared by federal or New York state authorities; (iv)
there shall have occurred a material disruption in commercial banking or securities settlement, payment or clearance services in the
United States; (v) there shall have occurred any outbreak or escalation of national or international hostilities or any crisis or calamity,
or any change in the United States or international financial markets, or any substantial change or development involving a prospective
substantial change in general economic, financial or political conditions in the United States or internationally, as in the judgment
of the Underwriter is material and adverse and makes it impracticable or inadvisable to proceed with the offering, sale or delivery of
the Closing Units on the Closing Date or any Additional Closing Date, as the case may be, in the manner and on the terms described in
the Pricing Disclosure Package or to enforce contracts for the sale of securities; or (vi) the Company or any of its subsidiaries shall
have sustained a loss by strike, fire, flood, earthquake, accident or other calamity of such character as in the judgment of the Underwriter
may interfere materially with the conduct of the business and operations of the Company and its subsidiaries, considered as one entity,
regardless of whether or not such loss shall have been insured.
11.2.
Any termination pursuant to this Section 11 shall be without liability on the part of: (x) the Company to the Underwriter, except that
the Company shall continue to be liable for the payment of expenses under Section 7; (y) the Underwriter to the Company; or (z) any party
hereto to any other party except that the provisions of Section 9, Section 10 and this Section 11 hereof shall at all times be effective
and shall survive any such termination.
| 12. | Reimbursement
of the Underwriter’s Expenses. If (a) the Company fails to deliver the Closing
Units to the Underwriter for any reason at the Closing Date or any Additional Closing Date,
as the case may be, in accordance with this Agreement or (b) the Underwriter declines to
purchase the Closing Units for any reason permitted under this Agreement, then the Company
agrees to reimburse the Underwriter for all reasonable and documented out-of-pocket costs
and expenses (including the reasonable and documented fees and expenses of counsel to the
Underwriter) incurred by the Underwriter in connection with this Agreement and the applicable
offering contemplated hereby. |
| 13. | Representations
and Indemnities to Survive Delivery. The respective indemnities, rights of contribution,
agreements, representations, warranties and other statements of the Company and the Underwriter
set forth in or made pursuant to this Agreement or made by or on behalf of the Company or
the Underwriter pursuant to this Agreement or any certificate delivered pursuant hereto shall
remain in full force and effect, regardless of any investigation made by or on behalf of
the Underwriter, the Company or any of their respective officers or directors or any controlling
person, as the case may be, and shall survive delivery of and payment for the Closing Units
sold hereunder and any termination of this Agreement. |
| 14. | Notices.
All notices, requests, consents, claims, demands, waivers and other communications under
this Agreement shall be in writing and shall be deemed to have been duly
given (i) when delivered by hand (with written confirmation of receipt), (ii) when received by the addressee if sent by a nationally
recognized overnight courier (receipt requested), (iii) on the date sent by facsimile (with confirmation of transmission) or email of
a PDF document if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours
of the recipient, or (iv) on the third day after the date mailed, by certified or registered mail (in each case, return receipt requested,
postage pre-paid). Such communications must be sent to the respective parties at the following addresses (or at such other address for
a party as shall be specified in a notice given in accordance with this Section 14): |
If to
the Underwriter: |
|
Aegis
Capital Corp.
1345 Avenue of the
Americas, 27th Floor
New York, NY 10105
Email: reide@aegiscap.com
Attention: Robert
Eide |
|
|
with
a copy to: |
|
Kaufman
& Canoles, P.C.
Two James Center,
14th Floor
1021 E. Cary St.
Richmond, VA 23219
Email: awbasch@kaufcan.com
jbwilliston@kaufcan.com
Attention: Anthony
Basch
J. Britton Williston |
|
|
If to
the Company: |
|
Expion360
Inc.
2025 SW Deerhound Ave.
Redmond, OR 97756
Email: brian.schaffner@expion360.com
Attention: Brian
Schaffner |
|
|
|
with
copy to: |
|
Stradling
Yocca Carlson & Rauth LLP
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660
Email: RWilkins@stradlinglaw.com
Attention: Ryan
C. Wilkins |
|
|
|
Any
party hereto may change the address or facsimile number for receipt of communications by giving written notice to the others in accordance
with this Section 14.
| 15. | Successors.
This Agreement shall inure solely to the benefit of and be binding upon the Underwriter,
the Company and the other indemnified parties referred to in Section 9 and Section 10 hereof,
and in each case their respective successors. Nothing in this Agreement is intended, or shall
be construed, to give any other person or entity any legal or equitable right, benefit, remedy
or claim under, or in respect of or by virtue of, this Agreement or any
provision contained herein. The term “successors,” as used herein, shall not include any purchaser of the Closing Units from
the Underwriter merely by reason of such purchase. |
| 16. | Partial
Unenforceability. The invalidity or unenforceability of any Section, paragraph or
provision of this Agreement shall not affect the validity or enforceability of any other
Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement
is for any reason determined to be invalid or unenforceable, there shall be deemed to be
made such minor changes (and only such minor changes) as are necessary to make it valid and
enforceable. |
| 17. | Governing
Law. This Agreement and any claim, controversy or dispute arising under or related
to this Agreement, whether sounding in contract, tort or statute, shall be governed by and
construed in accordance with the internal laws of the State of New York applicable to agreements
made and to be performed in such state (including its statute of limitations), without giving
effect to the conflict of laws provisions thereof to the extent such principles or rules
would require or permit the application of the laws of any jurisdiction other than those
of the State of New York. The Company has irrevocably appointed The Corporation Trust Company,
as its agent to receive service of process or other legal summons for purposes of any such
suit, action or proceeding that may be instituted in any state or federal court in the Borough
of Manhattan in the City of New York, United States of America. |
| 18. | Consent
to Jurisdiction. No legal suit, action or proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby (each, a “Related Proceeding”)
may be commenced, prosecuted or continued in any court other than the courts of the State
of New York located in the City and County of New York or in the United States District Court
for the Southern District of New York, which courts (collectively, the “Specified
Courts”) shall have jurisdiction over the adjudication of any Related Proceeding,
and the parties to this Agreement hereby irrevocably consent to the exclusive jurisdiction
the Specified Courts and personal service of process with respect thereto. The parties to
this Agreement hereby irrevocably waive any objection to the laying of venue of any Related
Proceeding in the Specified Courts and irrevocably waive and agree not to plead or claim
in any Specified Court that any Related Proceeding brought in any Specified Court has been
brought in an inconvenient forum. |
| 19. | Equitable
Remedies. Each party to this Agreement acknowledges and agrees that (a) a breach
or threatened breach by the Company of any of its obligations under Section 5.10 or Section
5.15 would give rise to irreparable harm to the Underwriter for which monetary damages would
not be an adequate remedy and (b) if a breach or a threatened breach by the Company of any
such obligations occurs, the Underwriter will, in addition to any and all other rights and
remedies that may be available to such party at law, at equity, or otherwise in respect of
such breach, be entitled to equitable relief, including a temporary restraining order, an
injunction, specific performance of the terms of Section 5.10 or Section 5.15 and any other
relief that may be available from a court of competent jurisdiction, without any requirement
to (i) post a bond or other security, or (ii) prove actual damages or that monetary damages
will not afford an adequate remedy. Each party to this Agreement agrees that such party shall
not oppose or otherwise challenge the existence of irreparable harm, the appropriateness
of equitable relief or the entry by a court of competent jurisdiction
of an order granting equitable relief, in either case, consistent with the terms of this Section 19. |
| 20. | Waiver
of Jury Trial. The parties to this Agreement hereby irrevocably waive, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any Related Proceeding. |
| 21. | No
Fiduciary Relationship. The Company acknowledges and agrees that: (i) the purchase
and sale of the Closing Units pursuant to this Agreement, including the determination of
the offering price of the Closing Units and any related discounts and commissions, is an
arm’s-length commercial transaction between the Company, on the one hand, and the Underwriter,
on the other hand; (ii) in connection with each transaction contemplated hereby and the process
leading to such transaction the Underwriter is and has been acting solely as a principal
and is not the agent or fiduciary of the Company or its Affiliates, stockholders, members,
partners, creditors or employees or any other party; (iii) the Underwriter has not assumed
and will not assume an advisory or fiduciary responsibility in favor of the Company with
respect to any of the transactions contemplated hereby or the process leading thereto (irrespective
of whether the Underwriter has advised or is currently advising the Company on other matters)
or any other obligation to the Company except the obligations expressly set forth in this
Agreement; (iv) the Underwriter and its respective Affiliates may be engaged in a broad range
of transactions that involve interests that differ from those of the Company, and the Underwriter
has no obligation to disclose any of such interests by virtue of any fiduciary or advisory
relationship; and (v) the Underwriter has not provided any legal, accounting, regulatory
or tax advice in any jurisdiction with respect to the offering contemplated hereby, and the
Company has consulted its own legal, accounting, regulatory and tax advisors to the extent
they deemed appropriate. The Company waives and releases, to the full extent permitted by
applicable law, any claims it may have against the Underwriter arising from an alleged breach
of fiduciary duty in connection with the offering of the Closing Units or any matters leading
up to the offering of the Closing Units. |
| 22. | Compliance
with the USA Patriot Act. In accordance with the requirements of the USA Patriot
Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), the Underwriter is
required to obtain, verify and record information that identifies their respective clients,
including the Company, which information may include the name and address of its clients,
as well as other information that will allow the Underwriter to properly identify their respective
clients. |
| 23. | Entire
Agreement. This Agreement, together with any contemporaneous written agreements and
any prior written agreements (to the extent not superseded by this Agreement) that relate
to the offering of the Closing Units, represents the entire agreement among the Company and
the Underwriter with respect to the preparation of the Registration Statement, the Pricing
Disclosure Package, the Final Prospectus, each Preliminary Prospectus, each Issuer Free Writing
Prospectus, each Testing-the-Waters Communication and each Road Show, the purchase and sale
of the Closing Units and the conduct of the offering contemplated hereby. |
| 24. | Amendments
or Waivers. No amendment or waiver of any provision of this Agreement, nor any consent
or approval to any departure therefrom, shall in any event be effective unless the same shall
be in writing and signed by all the parties hereto. No waiver by any party shall operate
or be construed as a waiver in respect of any failure, breach or default not expressly identified
by such written waiver, whether of a similar or different character, and whether occurring
before or after the waiver. No failure to exercise, or delay in exercising, any right, remedy,
power or privilege arising from this Agreement shall operate or be construed as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise of any other right, remedy, power or privilege. |
| 25. | Section
Headings. The headings herein are included for convenience of reference only and
are not intended to be part of, or to affect the meaning or interpretation of, this Agreement. |
| 26. | Counterparts.
This Agreement may be executed in counterparts, each of which will be deemed an original,
but all of which together will be deemed to be one and the same agreement. Counterparts may
be delivered via facsimile, email (including PDF or any electronic signature complying with
the U.S. federal ESIGN Act of 2000) or other transmission method, and any counterpart so
delivered will be deemed to have been duly and validly delivered and be valid and effective
for all purposes. |
| 27. | Recognition
of the U.S. Special Resolution Regimes. |
27.1.
In the event that the Underwriter is a Covered Entity (as defined below) becomes subject to a proceeding under a U.S. Special Resolution
Regime, the transfer from the Underwriter of this Agreement, and any interest and obligation in or under this Agreement, will be effective
to the same extent as the transfer would be effective under the U.S. Special Resolution Regime (as defined below) if this Agreement,
and any such interest and obligation, were governed by the laws of the United States or a state of the United States.
27.2.
In the event that the Underwriter is a Covered Entity or a BHC Act Affiliate (as defined below) of the Underwriter becomes subject to
a proceeding under a U.S. Special Resolution Regime, Default Rights (as defined below) under this Agreement that may be exercised against
the Underwriter is permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special
Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States.
27.3.
As used in this section:
27.3.1.
“BHC Act Affiliate” has the meaning assigned to the term “affiliate” in, and shall be interpreted
in accordance with, 12 U.S.C. § 1841(k).
27.3.2.
“Covered Entity” means any of the following:
27.3.2.1
a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b);
27.3.2.2
a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or
27.3.2.3
a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).
27.3.3.
“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R.
§§ 252.81, 47.2 or 382.1, as applicable.
27.3.4.
“U.S. Special Resolution Regime” means each of (i) the Federal Deposit Insurance Act and the regulations promulgated
thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.
[XPON Underwriting
Agreement Signature Page Follows]
[XPON Underwriting
Agreement Signature Page]
If
the foregoing is in accordance with your understanding, please indicate your acceptance of this Agreement by signing in the space provided
below.
Very
truly yours,
Expion360 Inc. |
By:
Name: Brian
Schaffner
Title: Chief
Executive Officer
Confirmed and accepted
as of the date first above written:
AEGIS CAPITAL CORP.
By:
Name: Robert Eide
Title: Chief Executive
Officer
The following
schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of
Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC
upon request.
SCHEDULE 1.14 Pricing Disclosure Package
SCHEDULE 2.5.4 Free Writing Prospectuses
SCHEDULE
2.43 Significant Subsidiaries
SCHEDULE 4.1.2 Closing Securities
EXHIBIT 5.10.3.1 Form of Lock-Up Waiver
EXHIBIT 5.10.3.2 Form of Lock-Up Waiver Press Release
EXHIBIT 8.9 Form of Lock-Up Agreement
Exhibit
4.6
PRE-FUNDED
WARRANT TO PURCHASE COMMON STOCK
EXPION360
INC.
Warrant Shares: [●] |
Initial Exercise
Date: [●], 2024 |
|
Issue Date: [●], 2024 |
THIS
PRE-FUNDED WARRANT TO PURCHASE COMMON STOCK (the “Warrant”) certifies that, for value received, [●]
or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time until this Warrant is exercised in full (the “Termination Date”)
but not thereafter, to subscribe for and purchase from Expion360 Inc., a Nevada corporation (the “Company”),
up to [●] shares (as subject to adjustment hereunder, the “Warrant Shares”) of Common Stock. The purchase
price of one (1) share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2.2.
| 1. | Definitions.
In addition to the terms defined elsewhere in this Warrant or in the Underwriting Agreement
dated [●], 2024, the following terms have the meanings indicated in this Section 1: |
1.1.
“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.
1.2.
“Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a)
if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the
nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based
on a Trading Day from 9:30 a.m. (New York City time) to 4:00 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market,
the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable,
(c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported
on the Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price
per share of Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined
by an independent appraiser selected in good faith by the Holders of a majority in interest of the Warrants then outstanding and reasonably
acceptable to the Company, the fees and expenses of which shall be paid by the Company.
1.3.
“Board of Directors” means the board of directors of the Company.
1.4.
“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City
of New York are authorized or required by law to remain closed; provided, however, for clarification, commercial banks
shall not be deemed to be authorized or required by law to remain closed due to “stay at home”, “shelter-in-place”,
“non-essential employee” or any other similar orders or restrictions or the closure of any physical
branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire
transfers) of commercial banks in The City of New York generally are open for use by customers on such day.
1.5.
“Commission” means the United States Securities and Exchange Commission.
1.6.
“Common Stock” means the common stock of the Company, $0.001 par value per share, and any other class of securities
into which such securities may hereafter be reclassified or changed.
1.7.
“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the
holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant
or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof
to receive, Common Stock.
1.8.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
1.9.
“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.
1.10.
“Registration Statement” means the Company’s registration statement on Form S-1 (File No. 333-[●]).
1.11.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
1.12.
“Subsidiary” means any subsidiary of the Company and shall, where applicable, also include any direct or indirect
subsidiary of the Company formed or acquired after the date hereof.
1.13.
“Trading Day” means a day on which the Common Stock is traded on a Trading Market.
1.14.
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select
Market, the New York Stock Exchange, OTCQB or OTCQX (or any successors to any of the foregoing).
1.15.
“Transfer Agent” means Pacific Stock Transfer Company, the current transfer agent of the Company, with a mailing
address of 6725 Via Austi Pkwy, Suite 300, Las Vegas, Nevada 89119 and an email address of awalker@pacificstocktransfer.com, and any
successor transfer agent of the Company.
1.16.
“Underwriting Agreement” means the underwriting agreement, dated as of [●], 2024, between the Company
and Aegis Capital Corp., as amended, modified or supplemented from time to time in accordance with its terms.
1.17.
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if
the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date
(or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P.
(based on a Trading Day from 9:30 a.m. (New York City time) to 4:00 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading
Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable,
(c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported
on the Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price
per share of Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined
by an independent appraiser selected in good faith by the holders of a majority in interest of the Warrants then outstanding and reasonably
acceptable to the Company, the fees and expenses of which shall be paid by the Company.
1.18.
“Warrants” means this Warrant and other Common Stock purchase warrants issued by the Company pursuant to the
Registration Statement.
2.1.
Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any
time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed
PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise substantially in the form attached hereto as Exhibit 2.1
(the “Notice of Exercise”). Within the earlier of (i) one (1) Trading Day and (ii) the number of Trading
Days comprising the Standard Settlement Period (as defined in Section 2.4.1 herein) following the date of exercise as aforesaid, the Holder
shall deliver the aggregate Exercise Price for the Warrant Shares specified in the applicable Notice of Exercise by wire transfer or cashier’s
check drawn on a United States bank unless the cashless exercise procedure specified in Section 2.3 below is specified in the applicable
Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee
or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required
to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the
Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three
(3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting
in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding
number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and
the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver
any objection to any Notice of Exercise within one (1) Trading Day of receipt of such notice. The Holder and any assignee, by acceptance
of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the
Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount
stated on the face hereof.
2.2.
Exercise Price. The aggregate exercise price of this Warrant, except for a nominal exercise price of $0.001 per Warrant
Share, was pre-funded to the Company on or prior to the Initial Exercise Date and, consequently, no additional consideration (other than
the nominal exercise price of $0.001 per Warrant Share) shall be required to be paid by the Holder to any Person to effect any exercise
of this Warrant. The Holder shall not be entitled to the return or refund of all, or any portion, of such pre-paid aggregate exercise
price under any circumstance or for any reason whatsoever, including in the event this Warrant shall not have been exercised prior to
the Termination Date. The remaining unpaid exercise price per share of Common Stock under this Warrant shall be $0.001, subject to adjustment
hereunder (the “Exercise Price”).
2.3.
Cashless Exercise. This Warrant may also be exercised, in whole or in part, at such time by means of a “cashless
exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing
[(A-B) (X)] by (A), where:
| (A) = | as
applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable
Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant
to Section 2.1 hereof on a day that is not a Trading Day or (2) both executed and delivered
pursuant to Section 2.1 hereof on a Trading Day prior to the opening of “regular trading
hours” (as defined in Rule 600(b) of Regulation NMS promulgated under the federal securities
laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading
Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price
of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. as of the
time of the Holder’s execution of the applicable Notice of Exercise if such Notice
of Exercise is executed during “regular trading hours” on a Trading Day and is
delivered within two (2) hours thereafter (including until two (2) hours after the close
of “regular trading hours” on a Trading Day) pursuant to Section 2.1 hereof or
(iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice
of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant
to Section 2.1 hereof after the close of “regular trading hours” on such Trading
Day; |
| (B) = | the
Exercise Price of this Warrant, as adjusted hereunder; and |
| (X) = | the
number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance
with the terms of this Warrant if such exercise were by means of a cash exercise rather than
a cashless exercise. |
If
Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the
Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised, and the holding period
of the Warrant Shares being issued may be tacked on to the holding period of this Warrant. Assuming (i) the Holder is not an Affiliate
of the Company, and (ii) all of the applicable conditions of Rule 144 promulgated under the Securities Act with respect to Holder and
the Warrant Shares are met in the case of such a cashless exercise, the Company agrees that the Company will cause the removal of the
legend from such Warrant Shares (including by delivering an opinion of the Company’s counsel to the Company’s transfer agent
at its own expense to ensure the foregoing), and the Company agrees that the Holder is under no obligation to sell the Warrant Shares
issuable upon the exercise of the Warrant prior to removing the legend. The Company agrees not to take any position contrary to this
Section 2.3.
2.4.
Mechanics of Exercise.
2.4.1.
Delivery of Warrant Shares upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted
by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository
Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant
in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale
of the Warrant Shares by Holder or (B) the Warrant Shares are eligible for resale by the Holder without volume or manner-of-sale limitations
pursuant to Rule 144 (assuming cashless exercise of the Warrants), and otherwise by physical delivery of a certificate, for the number
of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise
by the date that is the earliest of (i) one (1) Trading Day after the delivery to the Company of the Notice of Exercise, (ii) one (1)
Trading Day after delivery of the aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard
Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”).
Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of
the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares,
provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of
(i) one (1) Trading Day and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice
of Exercise. Notwithstanding anything herein to the contrary, upon delivery of the Notice of Exercise, the Holder shall be deemed for
purposes of Regulation SHO under the Exchange Act to have become the holder of the Warrant Shares irrespective of the date of delivery
of the Warrant Shares. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise
by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each
$1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise),
$10 per Trading Day (increasing to $20 per Trading Day on the third (3rd) Trading Day after the Warrant Share Delivery Date) for each
Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company
agrees to maintain a Transfer Agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable.
As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of
Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the
Notice of Exercise. Notwithstanding the foregoing, with respect to any Notice(s) of Exercise delivered on or prior to 12:00 p.m. (New
York City time) on the Initial Exercise Date, which may be delivered at any time after the time of execution of the Underwriting Agreement,
the Company agrees to deliver the Warrant Shares subject to such notice(s) by 4:00 p.m. (New York City time) on the Initial Exercise Date
and the Initial Exercise Date shall be the Warrant Share Delivery Date for purposes hereunder, provided that payment of the aggregate
Exercise Price (other than in the case of a cashless exercise) is received by such Warrant Share Delivery Date.
2.4.2.
Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request
of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new
Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant
shall in all other respects be identical with this Warrant.
2.4.3.
Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant
to Section 2.4.1 by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.
2.4.4.
Compensation for Buy-In on Failure to Timely Deliver Warrant Shares upon Exercise. In addition to any other rights available
to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions
of Section 2.4.1 above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required
by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares
of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon
such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which
(x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds
(y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection
with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B)
at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise
was not honored and return any amount received by the Company in respect of the
Exercise Price for those Warrant Shares (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of
shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder.
For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A)
of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount
of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure
to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
2.4.5.
No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise
of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company
shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied
by the Exercise Price or round up to the next whole share.
2.4.6.
Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer
tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the
Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder;
provided, however, that, in the event that Warrant Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto as Exhibit 2.4.6 duly executed
by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all
fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day
electronic delivery of the Warrant Shares.
2.4.7.
Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise
of this Warrant, pursuant to the terms hereof.
2.5.
Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not
have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to
such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates,
and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution
Parties”)), would beneficially
own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares
of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common
Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of
shares of Common Stock which would be issuable upon (i) exercise of the remaining, unexercised portion of this Warrant beneficially owned
by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or unconverted portion
of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on
conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution
Parties. Except as set forth in the preceding sentence, for purposes of this Section 2.5, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the
Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act
and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation
contained in this Section 2.5 applies, the determination of whether this Warrant is exercisable (in relation to other securities owned
by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the
sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether
this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties)
and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall
have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 2.5, in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission,
as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer
Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall
within one (1) Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any
case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities
of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number
of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% (or,
upon election by a Holder prior to the issuance of any Warrants, 9.99%) of the number of shares of Common Stock outstanding immediately
after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the
Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2.5, provided that the Beneficial Ownership
Limitation in no event exceeds 9.99% of the number of shares of Common Stock outstanding immediately after giving effect
to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2.5 shall
continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such
notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this Section 2.5 to correct this paragraph (or any portion hereof) which may be defective or inconsistent
with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly
give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
3.1.
Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or
otherwise makes a distribution or distributions on shares of Common Stock or any other equity or equity equivalent securities payable
in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise
of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way
of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares
of Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before
such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the
number of Shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this
Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3.1 shall become effective immediately after the record
date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after
the effective date in the case of a subdivision, combination or re-classification.
3.2.
[Reserved.]
3.3.
Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3.1 above, if at any time the Company grants,
issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to all (or
substantially all) of the record holders of any class of shares of Common Stock (the “Purchase Rights”), then
the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder
could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without
regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the
date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as
of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided,
however, that, to the extent that the Holder’s right to participate in any such Purchase Right would
result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase
Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such
Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result
in the Holder exceeding the Beneficial Ownership Limitation).
3.4.
Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend
or other distribution of its assets (or rights to acquire its assets) to all (or substantially all) holders of shares of Common Stock,
by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property
or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction)
(a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall
be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had
held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise
hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for
such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined
for the participation in such Distribution (provided, however, that, to the extent that the Holder’s right to participate in any
such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to
participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution
to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever,
as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation). To the extent that this Warrant has
not been partially or completely exercised at the time of such Distribution, such portion of the Distribution shall be held in abeyance
for the benefit of the Holder until the Holder has exercised this Warrant.
3.5.
Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in
one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company or
any Subsidiary, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all
or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender
offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted
to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of
the outstanding Common Stock or 50% or more of the voting power of the common equity of the Company, (iv) the Company, directly or indirectly,
in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property,
or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other
business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with
another Person or group of Persons whereby such other Person or group acquires 50% or more of the outstanding shares of Common Stock
or 50% or more of the voting power of the common equity of the Company (each a “Fundamental Transaction”),
then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have
been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without
regard to any limitation in Section 2.5 on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2.5 on the exercise of this
Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such
Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. Notwithstanding anything to the contrary,
in the event of a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at the Holder’s option,
exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction (or, if later, the
date of the public announcement of the applicable Fundamental Transaction), purchase this Warrant from the Holder by paying to the Holder
an amount of cash equal to the Black Scholes Value (as defined below) of the remaining unexercised portion of this Warrant on the date
of the consummation of such Fundamental Transaction; provided, however, that, if the Fundamental Transaction is not within the Company’s
control, including not approved by the Company’s Board of Directors, the Holder shall only be entitled to receive from the Company
or any Successor Entity the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised
portion of this Warrant, that is being offered and paid to the holders of Common Stock of the Company in connection with the Fundamental
Transaction, whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of Common Stock
are given the choice to receive from among alternative forms of consideration in connection with the Fundamental Transaction; provided,
further, that if holders of Common Stock of the Company are not offered or paid any consideration in such Fundamental Transaction, such
holders of Common Stock will be deemed to have received common stock/shares of the Successor Entity (which Entity may be the Company
following such Fundamental Transaction) in such Fundamental Transaction. “Black Scholes Value” means the value
of this Warrant based on the Black-Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”)
determined as of the day of consummation of the applicable contemplated Fundamental Transaction for pricing purposes and reflecting (A)
a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement
of the applicable contemplated Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of (1)
100% and (2) the 100 day volatility as obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization factor)
as of the Trading Day immediately following the public announcement of the applicable contemplated Fundamental Transaction, (C) the underlying
price per share used in such calculation shall be the greater of (i) the sum of the price per share being offered in cash, if any, plus
the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (ii) the highest VWAP during the period
beginning on the Trading Day immediately preceding the public announcement of the applicable contemplated Fundamental Transaction (or
the consummation of the applicable Fundamental Transaction, if earlier) and ending on the Trading Day of the Holder’s request pursuant
to this Section and (D) a remaining option time equal to the time between the date of the public announcement of the applicable contemplated
Fundamental Transaction and the Termination Date and (E) a zero cost of borrow. The payment of the Black Scholes Value will be made by
wire transfer of immediately available funds (or such other consideration) within the later of (i) five (5) Business Days after the Holder’s
election and (ii) the date of consummation of the Fundamental Transaction. The Company shall cause any successor entity in a Fundamental
Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the
obligations of the Company under this Warrant in accordance with the provisions of this Section 3.5 pursuant to written agreements in
form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental
Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity
evidenced by a written instrument substantially similar in form and substance to this Warrant that is exercisable for a corresponding
number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable
and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental
Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account
the relative value of the shares of Common Stock prior to such Fundamental Transaction and the value of such shares of capital stock,
such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant
immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to
the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall be added to the term “Company”
under this Warrant (so that from and after the occurrence or consummation of such Fundamental Transaction, each and every provision of
this Warrant referring to the “Company” shall refer instead to each of the Company and the Successor Entity or Successor
Entities, jointly and severally), and the Successor Entity or Successor Entities, jointly and severally with the Company, may exercise
every right and power of the Company prior thereto and the Successor Entity or Successor Entities shall assume all of the obligations
of the Company prior thereto under this Warrant with the same effect as if the Company and such Successor Entity or Successor Entities,
jointly and severally, had been named as the Company herein. For the avoidance of doubt, the Holder shall be entitled to the benefits
of the provisions of this Section 3.5 regardless of (i) whether the Company has sufficient authorized shares of Common Stock for the
issuance of Warrant Shares and/or (ii) whether a Fundamental Transaction occurs prior to the Initial Exercise Date.
3.6.
Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share,
as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
3.7.
Notice to Holder.
3.7.1.
Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the
Company shall promptly deliver to the Holder by email a notice setting forth the Exercise Price after such adjustment and any resulting
adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
3.7.2.
Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever
form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock,
(C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with
any reclassification of the Common Stock, any consolidation or merger to which the Company (or any of its Subsidiaries) is a party, any
sale or transfer of all or substantially all of its assets, or any compulsory share exchange whereby the Common Stock is converted into
other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding
up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by email to the Holder at its last email
address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective
date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to
be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected
that holders of the Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver
such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified
in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding
the Company or any of the Subsidiaries, the Company shall simultaneously file such
notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during
the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be
expressly set forth herein.
4.1.
Transferability. Subject to compliance with any applicable securities laws, this Warrant and all rights hereunder (including,
without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office
of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto
as Exhibit 2.4.6 duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon
the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant
or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument
of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant
shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender
this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant
to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the Company assigning this
Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant
Shares without having a new Warrant issued.
4.2.
New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office
of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed
by the Holder or its agent or attorney. Subject to compliance with Section 4.1, as to any transfer which may be involved in such division
or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of
this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
4.3.
Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose
(the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and
treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to
the Holder, and for all other purposes, absent actual notice to the contrary.
5.1.
No Rights as Stockholder until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting
rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2.4.1, except
as expressly set forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise”
pursuant to Section 2.3 or to receive cash payments pursuant to Section 2.4.1 and Section 2.4.4 herein, in no event shall the Company
be required to net cash settle an exercise of this Warrant.
5.2.
Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares,
and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant,
shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the
Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant
or stock certificate.
5.3.
Saturdays, Sundays, Holidays, etc. 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.
5.4.
Authorized Shares.
5.4.1.
Reservation of Authorized and Unissued Shares. The Company covenants that, during the period the Warrant is outstanding,
it will reserve from its authorized and unissued Common Stock a sufficient number of shares of Common Stock to provide for the issuance
of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of
this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon
the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure
that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements
of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon
the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant
and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable (which means
that no further sums are required to be paid by the holders thereof in connection with the issue thereof) and free from all taxes, liens
and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously
with such issue).
5.4.2. Noncircumvention.
Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking
of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount
payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of
this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
5.4.3.
Authorizations, Exemptions and Consents. Before taking any action that would result in an adjustment in the number of Warrant
Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
5.5.
Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Warrant 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 conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of
the transactions contemplated by this Warrant (whether brought against a party hereto or their respective affiliates, directors, officers,
shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City
of New York. Each party 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, 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, that such suit, action or proceeding is improper or is an 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 Warrant 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 law. If either party shall commence an action, suit or proceeding to enforce any provisions of this Warrant,
the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for their reasonable attorneys’
fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. Notwithstanding
the foregoing, nothing in this paragraph shall limit or restrict the federal district court in which a Holder may bring a claim under
the federal securities laws.
5.6.
Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered,
and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
5.7.
Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder
shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies, notwithstanding the fact
that the right to exercise this Warrant terminates on the Termination Date. No provision of this Warrant shall be construed as a waiver
by the Holder of any rights which the Holder may have under the federal securities laws and the rules and regulations of the Commission
thereunder. Without limiting any other provision of this Warrant, if the Company willfully and knowingly fails to comply with any provision
of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient
to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings,
incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
5.8.
Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without
limitation, any Notice of Exercise, shall be in writing and delivered personally, by e-mail, or sent by a nationally recognized overnight
courier service, addressed to the Company, at 2025 SW Deerhound Ave., Redmond, OR 97756, Attn: Brian Schaffner, Chief Executive Officer,
email address: brian.schaffner@expion360.com, or such other email address or address as the Company may specify for such purposes by
notice to the Holders. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in
writing and delivered personally, by e-mail, or sent by a nationally recognized overnight courier service addressed to each Holder at
the e-mail address or address of such Holder appearing on the books of the Company. Any notice or other communication or deliveries hereunder
shall be deemed given and effective on the earliest of (i) the time of transmission, if such notice or communication is delivered via
e-mail at the e-mail address set forth in this Section 5.8 prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading
Day after the time of transmission, if such notice or communication is delivered via e-mail at the e-mail address set forth in this Section
5.8 on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading 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. To the extent that any notice provided hereunder constitutes, or contains, material, non-public
information regarding the Company or any Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant
to a Current Report on Form 8-K.
5.9.
Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant
to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of
the Holder for the purchase price of any Common Stock or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors of the Company.
5.10.
Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to
assert the defense in any action for specific performance that a remedy at law would be adequate.
5.11.
Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby
shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted
assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant
and shall be enforceable by the Holder or holder of Warrant Shares.
5.12.
Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company,
on the one hand, and the Holder, on the other hand.
5.13.
Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining
provisions of this Warrant.
5.14.
Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be
deemed a part of this Warrant.
********************
[XPON Investor
Pre-Funded Registered Warrant Signature Page Follows]
[XPON Investor
Pre-Funded Registered Warrant Signature Page]
IN
WITNESS WHEREOF, the Company has caused this Pre-Funded Registered Warrant to be executed by its officer thereunto duly authorized as
of the date first above indicated.
EXPION360 INC.
By: ______________________________
Name: Brian Schaffner
Its: Chief Executive Officer
Exhibit
2.1
NOTICE OF
EXERCISE
To: EXPION360
INC.
(1)
The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only
if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2)
Payment shall take the form of (check applicable box):
[
] in lawful money of the United States.
[ ] if
permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2.3,
to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure
set forth in subsection 2.3.
(3)
Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
_______________________________
The Warrant
Shares shall be delivered to the following DWAC Account Number:
_______________________________
_______________________________
_______________________________
[SIGNATURE
OF HOLDER]
Name
of Investing Entity: |
|
Signature
of Authorized Signatory of Investing Entity: |
|
Name
of Authorized Signatory: |
|
Title
of Authorized Signatory: |
|
Date: |
|
Exhibit
2.4.6
ASSIGNMENT
FORM
(To
assign the foregoing Warrant, execute this form and supply required information. Do not use this form to exercise the Warrant to purchase
shares of Common Stock.)
FOR
VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
Name: |
|
Address: |
|
Phone
Number: |
|
Email
Address: |
|
Date: |
|
Holder’s
Signature: |
|
Holder’s
Address: |
|
Exhibit
4.7
SERIES A
WARRANT TO PURCHASE COMMON STOCK
EXPION360 INC.
Warrant Shares: [●] |
Issuance Date:
[●], 2024 |
|
|
THIS
SERIES A WARRANT TO PURCHASE COMMON STOCK (the “Warrant”) certifies that, for value received, [●]
or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the Initial Exercise Date and on or prior to 5:00 p.m. (New York City time)
on the five-year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe
for and purchase from Expion360 Inc., a Nevada corporation (the “Company”), up to [●] shares (as subject
to adjustment hereunder, the “Warrant Shares”) of Common Stock. The purchase price of one (1) share of Common
Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2.2.
| 1. | Definitions.
In addition to the terms defined elsewhere in this Warrant or in the Underwriting Agreement
dated July [●], 2024, the following terms have the meanings indicated in this Section
1: |
1.1.
“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.
1.2.
“Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a)
if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the
nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (“Bloomberg”)
(based on a Trading Day from 9:30 a.m. (New York City time) to 4:00 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading
Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable,
(c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported
on the Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price
per share of Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined
by an independent appraiser selected in good faith by the Holders of a majority in interest of the Warrants then outstanding and reasonably
acceptable to the Company, the fees and expenses of which shall be paid by the Company.
1.3.
“Board of Directors” means the board of directors of the Company.
1.4.
“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City
of New York are authorized or required by law to remain closed; provided, however, for clarification, commercial banks
shall not be deemed to be authorized or required by law to remain closed due to “stay at home”, “shelter-in-place”,
“non-essential employee” or any other similar orders or restrictions or the closure of any physical branch locations at the
direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of commercial
banks in The City of New York generally are open for use by customers on such day.
1.5.
“Commission” means the United States Securities and Exchange Commission.
1.6.
“Common Stock” means the common stock of the Company, $0.001 par value per share, and any other class of securities
into which such securities may hereafter be reclassified or changed.
1.7.
“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the
holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant
or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof
to receive, Common Stock.
1.8.
“Effective Date” means the date of the Underwriting Agreement.
1.9.
“Exercise Date” means the date that some or all of this Warrant is exercised pursuant to the provisions of
this Warrant.
1.10.
“Floor Price” means (i) prior to Stockholder Approval, a price equal to fifty percent (50%) of the Nasdaq Minimum
Price prior to pricing on the Pricing Date, as defined in Nasdaq Listing Rule 5635(d)(1)(A) (which price shall be appropriately adjusted
for any stock dividend, stock split, stock combination, reclassification or similar transaction), or (ii) following Stockholder Approval,
a price equal to twenty percent (20%) of the Nasdaq Minimum Price prior to pricing on the Pricing Date, as defined in Nasdaq Listing
Rule 5635(d)(1)(A) (which price shall be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification
or similar transaction).
1.11.
“Initial Exercise Date” means the first Trading Day following the Company’s notice to the Holder of Stockholder
Approval, which notice shall be provided within two Trading Days of the Company’s receipt of Stockholder Approval.
1.12.
“Issuance Date” means the date that this Warrant, among other securities, has been issued pursuant to the Underwriting
Agreement.
1.13.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
1.14.
“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.
1.15.
“Registration Statement” means the Company’s registration statement on Form S-1 (File No. 333-[●]).
1.16.
“Reset Date” means the eleventh (11th) Trading Day after Stockholder Approval.
1.17.
“Reset Period” means the period commencing on the first Trading Day after the date of Stockholder Approval
and ending following the close of trading on the tenth (10th) Trading Day thereafter.
1.18.
“Reset Price” means the greater of (i) the lowest daily Weighted Average Price of the shares of Common Stock
during the Reset Period and (ii) the Floor Price (as adjusted for stock splits, stock dividends, recapitalizations, reorganizations,
reclassification, combinations, reverse stock splits or other similar events occurring after the Effective Date).
1.19.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
1.20.
“Series B Warrant” means the Company’s Series B Warrants issued on the Issuance Date.
1.21.
“Stockholder Approval” means such approval as may be required by the applicable rules and regulations of the
Nasdaq Capital Market (or any successor entity) from the stockholders of the Company, or board of directors in lieu thereof, with respect
to issuance of all of the Warrants and the Warrant Shares upon the exercise thereof, including without limitation:
1.21.1.
to render inapplicable clause (i) of the definition of Floor Price for purposes of Section 3.2 hereof, thereby giving full effect to
the adjustment in the exercise price and/or number of shares of Common Stock underlying the Warrants following any Dilutive Issuance
(as defined below).
1.21.2.
to consent to any adjustment to the exercise price or number of shares of Common Stock underlying the Warrants in the event of a Share
Combination Event pursuant to Section 3.8.
1.21.3.
to consent to the voluntary adjustment, from time to time, of the exercise price of any and all currently outstanding warrants pursuant
to Section 3.9.
1.21.4.
[to approve an amendment to the Company’s Articles of Incorporation to increase the number of authorized shares of Common Stock
as may be needed to permit the Company to reserve for issuance all of the Warrant Shares].
1.22.
“Subsidiary” means any subsidiary of the Company and shall, where applicable, also include any direct or indirect
subsidiary of the Company formed or acquired after the Issuance Date.
1.23.
“Trading Day” means a day on which the Common Stock is traded on a Trading Market.
1.24.
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select
Market, the New York Stock Exchange, OTCQB or OTCQX (or any successors to any of the foregoing).
1.25.
“Transfer Agent” means Pacific Stock Transfer Company, the current transfer agent of the Company, with a mailing
address of 6725 Via Austi Pkwy, Suite 300, Las Vegas, Nevada 89119 and an email address of awalker@pacificstocktransfer.com, and any
successor transfer agent of the Company.
1.26.
“Underwriting Agreement” means the underwriting agreement, dated as of [●], 2024, between the Company
and Aegis Capital Corp., as amended, modified or supplemented from time to time in accordance with its terms.
1.27.
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if
the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date
(or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg (based
on a Trading Day from 9:30 a.m. (New York City time) to 4:00 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading
Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable,
(c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported
on the Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price
per share of Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined
by an independent appraiser selected in good faith by the holders of a majority in interest of the Warrants then outstanding and reasonably
acceptable to the Company, the fees and expenses of which shall be paid by the Company.
1.28.
“Warrants” means this Warrant and the Series B Warrant to be issued by the Company pursuant to the Registration
Statement.
2.1.
Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any
time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed
PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise substantially in the form attached hereto as Exhibit 2.1
(the “Notice of Exercise”). Within the earlier of (i) one (1) Trading Day and (ii) the number of Trading
Days comprising the Standard Settlement Period (as defined in Section 2.4.1 herein) following the date of exercise as aforesaid, the
Holder shall deliver the aggregate Exercise Price for the Warrant Shares specified in the applicable Notice of Exercise by wire transfer
or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2.3 below is specified
in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other
type of guarantee or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder
shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available
hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation
within three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this
Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering
the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased.
The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The
Company shall deliver any objection to any Notice of Exercise within one (1) Trading Day of receipt of such notice. The Holder and
any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the
purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time
may be less than the amount stated on the face hereof.
2.2.
Exercise Price. The exercise price per Warrant Share shall be $[●], subject to adjustment hereunder (the “Exercise
Price”).
2.3.
Cashless Exercise. If at the time of exercise hereof there is no effective registration statement registering, or the prospectus
contained therein is not available for the issuance of the Warrant Shares to the Holder or the resale of the Warrant Shares by the Holder,
then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the
Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
| (A) = | as
applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable
Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant
to Section 2.1 hereof on a day that is not
a Trading Day or (2) both executed and delivered pursuant to Section 2.1 hereof on a Trading Day prior to the opening of “regular
trading hours” (as defined in Rule 600(b) of Regulation NMS promulgated under the federal securities laws) on such Trading Day,
(ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise
or (z) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg as of the time of the Holder’s
execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a
Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of “regular trading
hours” on a Trading Day) pursuant to Section 2.1 hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the
date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2.1 hereof
after the close of “regular trading hours” on such Trading Day; |
| (B) = | the
Exercise Price of this Warrant, as adjusted hereunder; and |
| (X) = | the
number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance
with the terms of this Warrant if such exercise were by means of a cash exercise rather than
a cashless exercise. |
If
Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the
Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised. The Company agrees not
to take any position contrary to this Section 2.3.
Notwithstanding
anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant
to this Section 2.3.
2.4.
Mechanics of Exercise.
2.4.1.
Delivery of Warrant Shares upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted
by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository
Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant
in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale
of the Warrant Shares by Holder or (B) the Warrant Shares are eligible for resale by the Holder without volume or manner-of-sale limitations
pursuant to Rule 144 (assuming cashless exercise of the Warrants), and otherwise by physical delivery of a certificate or by electronic
delivery (at the election of the Holder), for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise
to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) one (1) Trading Day after the
delivery to the Company of the Notice of Exercise, (ii) one (1) Trading Day after delivery of the
aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery
to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”) (provided that if the
aggregate Exercise Price has not been delivered by such date, the Warrant Share Delivery Date shall be one (1) Trading Day after the
Aggregate Exercise Price (or notice of a Cashless Exercise) is delivered). Upon delivery of the Notice of Exercise, the Holder shall
be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has
been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other
than in the case of a cashless exercise) is received within the earlier of (i) one (1) Trading Day and (ii) the number of Trading Days
comprising the Standard Settlement Period following delivery of the Notice of Exercise. Notwithstanding anything herein to the contrary,
upon delivery of the Notice of Exercise, the Holder shall be deemed for purposes of Regulation SHO under the Exchange Act to have become
the holder of the Warrant Shares irrespective of the date of delivery of the Warrant Shares. If the Company fails for any reason to deliver
to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder,
in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of
the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the third
(3rd) Trading Day after the Warrant Share Delivery Date) for each Trading Day after such Warrant Share Delivery Date until such Warrant
Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a Transfer Agent that is a participant in the FAST
program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period”
means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect
to the Common Stock as in effect on the date of delivery of the Notice of Exercise. Notwithstanding the foregoing, with respect to any
Notice(s) of Exercise delivered on or prior to 12:00 p.m. (New York City time) on the Initial Exercise Date, which may be delivered at
any time after the time of execution of the Underwriting Agreement, the Company agrees to deliver the Warrant Shares subject to such
notice(s) by 4:00 p.m. (New York City time) on the Initial Exercise Date and the Initial Exercise Date shall be the Warrant Share Delivery
Date for purposes hereunder, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is
received by such Warrant Share Delivery Date.
2.4.2.
Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request
of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new
Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant
shall in all other respects be identical with this Warrant.
2.4.3.
Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant
to Section 2.4.1 by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.
2.4.4.
Compensation for Buy-In on Failure to Timely Deliver Warrant Shares upon Exercise. In addition to any other rights available
to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions
of Section 2.4.1 above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required
by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares
of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon
such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which
(x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds
(y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection
with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B)
at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise
was not honored and return any amount received by the Company in respect of the Exercise Price for those Warrant Shares (in which case
such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had
the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having
a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate
sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall
be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder
in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s
right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise
of the Warrant as required pursuant to the terms hereof.
2.4.5.
No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise
of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company
shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied
by the Exercise Price or round up to the next whole share.
2.4.6.
Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer
tax or other incidental expense in respect
of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be
issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that, in
the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise
shall be accompanied by the Assignment Form attached hereto as Exhibit 2.4.6 duly executed by the Holder and the Company may require,
as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay
all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another
established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
2.4.7.
Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise
of this Warrant, pursuant to the terms hereof.
2.5.
Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not
have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to
such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates,
and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution
Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of
the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties
shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is
being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, unexercised
portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion
of the unexercised or unconverted portion of any other securities of the Company (including, without limitation, any other Common Stock
Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the
Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2.5,
beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance
with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith.
To the extent that the limitation contained in this Section 2.5 applies, the determination of whether this Warrant is exercisable (in
relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant
is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s
determination of whether this Warrant is exercisable (in relation to other securities
owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each
case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such
determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2.5, in determining the
number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A)
the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement
by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common
Stock outstanding. Upon the written or oral request of a Holder, the Company shall within one (1) Trading Day confirm orally and in writing
to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or
its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The
“Beneficial Ownership Limitation” shall be 4.99% (or, upon election by a Holder prior to the issuance of any
Warrants, 9.99%) of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership
Limitation provisions of this Section 2.5, provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number
of shares of Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this
Warrant held by the Holder and the provisions of this Section 2.5 shall continue to apply. Any increase in the Beneficial Ownership Limitation
will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall
be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2.5 to correct this paragraph
(or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or
to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph
shall apply to a successor holder of this Warrant.
3.1.
Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or
otherwise makes a distribution or distributions on shares of Common Stock or any other equity or equity equivalent securities payable
in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise
of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way
of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares
of Common Stock any shares
of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall
be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of Shares issuable
upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged.
Any adjustment made pursuant to this Section 3.1 shall become effective immediately after the record date for the determination of stockholders
entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
3.2.
Subsequent Equity Sales. If, at any time while this Warrant is outstanding (such period, the “Adjustment Period”),
the Company issues, sells, enters into an agreement to sell, or grants any option to purchase, or sells, enters into an agreement to
sell, or grants any right to reprice, or otherwise disposes of or issues (or announces any offer, sale, grant or any option to purchase
or other disposition), or, in accordance with this Section 3.2, is deemed to have issued or sold, any shares of Common Stock or Common
Stock Equivalents for a consideration per share (the “New Issuance Price”) less than a price equal to the Exercise
Price in effect immediately prior to such issue or sale or deemed issuance or sale (such Exercise Price then in effect is referred to
as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then simultaneously
with the consummation (or, if earlier, the announcement) of such Dilutive Issuance, the Exercise Price then in effect shall be reduced
to an amount equal to the lower of (a) the New Issuance Price or (b) the lowest VWAP during the Five (5) consecutive Trading Days immediately
following the closing (or announcement, as the case may be) of the Dilutive Issuance (such lower price, the “Base Share Price”)
and the number of Warrant Shares issuable hereunder shall be proportionately increased such that the aggregate Exercise Price of this
Warrant on the Issuance Date for the Warrant Shares then outstanding shall remain unchanged following such event; provided that the Base
Share Price shall not be less than the Floor Price (subject to adjustment for reverse and forward stock splits, recapitalizations and
similar transactions following the date of the Underwriting Agreement). Notwithstanding the foregoing, if one or more Dilutive Issuances
occurred prior to the Stockholder Approval being obtained and the reduction of the Exercise Price was limited by clause (i) of the definition
of Floor Price, once the Stockholder Approval is obtained, the Exercise Price will automatically be reduced to equal the greater of (x)
the lowest Base Share Price with respect to any Dilutive Issuance that occurred prior to the Stockholder Approval being obtained, and
(y) the price determined by reference to clause (ii) of the definition of Floor Price. If the Company enters into a Variable Rate Transaction,
the Company shall be deemed to have issued shares of Common Stock or Common Stock Equivalents at the lowest possible price, conversion
price or exercise price at which such securities may be issued, converted or exercised. For the avoidance of doubt, in the event the
Exercise Price has been adjusted pursuant to this Section 3.2 and the Dilutive Issuance that triggered such adjustment does not occur,
is not consummated, is unwound or is cancelled after the facts for any reason whatsoever, in no event shall the Exercise Price be readjusted
to the Exercise Price that would have been in effect
if such Dilutive Issuance had not occurred or been consummated. For all purposes of the foregoing, the following shall be applicable: