UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM S-1

 

REGISTRATION STATEMENT UNDER

THE SECURITIES ACT OF 1933

 

Force Protection Video Equipment Corp.

 (Exact name of registrant as specified in its charter)

 

                   Florida                                                         7382                                                         45-1443512

(State of incorporation or organization)          (Primary Standard Industrial Classification Code)       (I.R.S. Employer Identification Number)

 

Force Protection Video Equipment Corp.


140 Iowa Lane

Suite 102

Cary, NC 27511

(919) 780-7897

(Address, including zip code, and telephone number including area code, of registrant’s principal executive offices)

 

Eric P. Littman, Esq.

Eric P. Littman, P.A.

7695 S.W. 104 th Street

Miami, FL 33156

Tel: (305) 663-3333 ) 668-0003

Email: littmanlaw@gmail.com


 (Name, address, including zip code, and telephone number,

Including area code, of agent for service)

 

Copies to:

Eric P. Littman, Esq.

Eric P. Littman, P.A.

7695 S.W. 104 th Street

Miami, FL 33156

Tel: (305) 663-3333

Fax: (305) 668-0003

Email: littmanlaw@gmail.com


Approximate date of commencement of proposed sale to 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: [X]


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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer

[  ]

Accelerated filer

[  ]

Non-accelerated filer

[  ]

Smaller reporting company

[X]

(Do not check if a smaller reporting company)

 

 









Calculation of Registration Fee



Title of Each Class of Securities to be Registered



Amount to be Registered (1)

Proposed

Maximum Offering

Price per Share (2)

Proposed

Aggregate Maximum Offering Price


Amount of Registration Fee

Common stock,

$0.0001 par value per share, underlying 8% Convertible Promissory Notes

38,281,250 (3)

$0.022

$842,188

$84.81


(1)

Represents shares of our common stock being registered for resale that have been issued or will be issued to the sole selling stockholder named in this registration statement.  Pursuant to Rule 416 under the Securities Act of 1933, as amended (the “Securities Act”), this registration statement also covers such indeterminate number of additional shares of the registrant’s common stock, $0.0001 par value per share, issued to prevent dilution resulting from stock splits, stock dividends or similar events.

(2)

Estimated solely for the purposes of computing the registration fee in accordance with Rule 457(c) of the Securities Act.  Price per share shown is the average of the high and low sales prices of the registrant’s common stock as reported in the consolidated reporting system as reported on the OTC Markets OTCQB on October 4, 2016, which date is within five (5) business days of the filing of this registration statement.

(3)

Represents shares of common stock issuable upon conversion of 8% Convertible Promissory Notes by the selling stockholder named in this registration statement.



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. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted .


PRELIMINARY PROSPECTUS

SUBJECT TO COMPLETION       DATED OCTOBER 11, 2016


 

38,281,250 Shares of Common Stock



Force Protection Video Equipment Corp.



This prospectus relates to the registration and resale of up to 38,281,250 shares of our common stock, par value

$0.0001 per share, by the selling stockholder identified herein, RDW Capital, LLC (“RDW” or the “Selling Stockholder”). The shares of common stock offered under this prospectus by the Selling Stockholder are issuable, or may in the future become issuable, in connection with the conversion of 8% Convertible Promissory Notes sold to the Selling Stockholder pursuant to a Securities Purchase Agreement between the Selling Stockholder and us, dated September 1, 2016 (the “RDW Financing”).   See “Private Placement of Securities” for additional information on the RDW Financing.


We will pay all expenses of registering the shares of common stock. We will not receive any proceeds from the sale of the common stock by the Selling Stockholder.


Our common stock is currently listed on the OTC Markets OTCQB under the symbol “FPVD.” On October 4, 2016, the last reported sale price of our common stock as reported on the OTCQB was $0.022 per share.


The Selling Stockholder may sell the shares of common stock described in this prospectus in a number of different ways and at varying prices. We provide more information about how the Selling Stockholder may sell its respective shares of common stock in the section of this prospectus entitled “Plan of Distribution.”


The Selling Stockholder is an “underwriter” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”), in connection with the resale of the common stock offered pursuant to this prospectus.


This investment involves a high degree of risk. You should purchase shares of common stock only if you can afford a complete loss. See “Risk Factors” beginning on page 5 to read about factors you should consider before investing in shares of our common stock.


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.


The date of this prospectus is   2016.









TABLE OF CONTENTS

PAGE NO

PROSPECTUS SUMMARY

1

THE OFFERING

4

RISK FACTORS

5

FORWARD LOOKING STATEMENTS

15

USE OF PROCEEDS

16

PRIVATE PLACEMENT OF SECURITIES

17

SELLING SECURITY HOLDERS

18

PLAN OF DISTRIBUTION

19

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

21

DESCRIPTION OF SECURITIES

23

OUR BUSINESS

25

MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS

29

MANAGEMENT

32

EXECUTIVE COMPENSATION

34

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

37

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

38

LEGAL PROCEEDINGS

39

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

39

INTEREST OF NAMED EXPERTS

39

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES LIABILITIES

39

ADDITIONAL INFORMATION

40

FINANCIAL STATEMENTS

41

SIGNATURES

50


Neither we nor the Selling Stockholder have authorized any person to give you any supplemental information or to make any representations for us. You should not rely upon any information about our company that is not contained in this prospectus. Information contained in this prospectus may become stale. You should not assume that the information contained in this prospectus or any prospectus supplement is accurate as of any date other than their respective dates, regardless of the time of delivery of this prospectus, any prospectus supplement or of any sale of the shares. Our business, financial condition, results of operations and prospects may have changed since those dates. The Selling Stockholder is offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted.








PROSPECTUS SUMMARY

 

This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our securities, you should carefully read this entire prospectus, including our financial statements and the related notes and the information set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in each case included elsewhere in this prospectus.


In this prospectus, “Force Protection,” the “Company,” “we,” “us,” and “our” refer to Force Protection Video Equipment Corp., a Florida corporation.


Company Information


Our principal executive office is located at 130 Iowa Lane, Suite 102, Cary, North Carolina 27511. Our telephone number is 919-780-7897. Our website is www.forceprovideo.com, and the information contained therein is not part of this prospectus.


We were incorporated in the state of Florida on March 11, 2011. The Company is in the business of selling video and audio capture devices initially targeted to law enforcement agencies and has established a web site at www.forceprovideo.com whereby customers can view our products and place orders. Our principal product which we sell is the LE10 camera system (the “LE10”), which is a small bodied, high definition (HD) camera which is half the size and half the price of most law enforcement cameras currently available. The LE10 does not require special software or expensive storage contracts. The video files can quickly be downloaded into a standard law enforcement case file and the micro SD cards are sealed in the provided static evidence bags and then securely stored in the department's evidence locker. Our video and audio capture devices are compact, ergonomic, tamperproof and designed to capture HD video and/or audio on demand enabling our customers to capture content while engaged in a wide range of activity. We also sell accessories that enhance the functionality and versatility of our products, including mounts, such as the helmet, handlebar, roll bar and tripod mounts, as well as mounts that enable users to wear the camera on their bodies, such as the wrist housing, chest harness and head strap. Other accessories include spare batteries, charging accessories and memory drives. Our products are marketed primarily to law enforcement due to their unique need to capture important events in the course of their duties.


As of the date of this prospectus, Paul Feldman is our sole officer and director. Mr. Feldman spends fulltime on our business. We sold our first on body video camera in May 2015. To date, our products have been sold to twenty- nine (29) state and local law enforcement agencies.


Risk Factors


Our ability to successfully operate our business and achieve our goals and strategies is subject to numerous risks including:


·

We are obligated to issue common stock upon conversion of the RDW Notes which will cause substantial dilution to investors and reduce the trading price of our common stock.

·

RDW will pay less than the then-prevailing market price for our common stock if they convert the RDW Notes.

·

Our stock price is volatile and you may not be able to resell your common stocks at or above the current trading price of our common stock.

·

Our stock price will likely materially decline because RDW has the ability to convert the RDW Notes into a large number of common stock which will result in significant  dilution.

·

There is a limited market for our common stock.

·

There is not now, and there may never be, an active, liquid and orderly trading market for our common stock, which may make it difficult for you to sell your shares of our common stock.

·

We only commenced our present business plan to sell on-body cameras in May of 2015 and as such, there is little or no historical performance for you to base an investment decision upon, and we may never become profitable.




1




·

We are dependent on sales of our securities to fund our operations.

·

Third parties can purchase the same products we sell which may negatively affect our revenues.

·

Our failure to compete effectively could adversely affect our market share, financial condition and future growth.

·

We are dependent on our manufacturer in China and any disruption or extended delay in product supply from our manufacturer could have a significant adverse impact on our operations.

·

We do not have a written agreement with our manufacturer that obligates it to provide products to us.

·

Expenses required to operate as a public company will reduce funds available to develop our business.

·

We may be subject to product liability claims and we do not have insurance coverage for such claims.

·

Should we lose the service of Paul Feldman, our sole officer and director, our operations and financial condition will be adversely affected.


Financial Summary


The tables and information below are derived from our unaudited financial statements for the three month period ended July 31, 2016 and audited financial information for the year ended April 30, 2016 and 2015.


As of the date of this prospectus, we had cash on hand of approximately $250,000 for our operational needs. Currently, our operating expenses are approximately $16,000 per month. If we fail to generate sufficient revenues or raise additional funds to meet our monthly operating costs, we would have available cash for our operating needs for approximately 17 months. Because this is only a financial summary, it does not contain all the financial information that may be important to you. Therefore, you should carefully read all the information in this prospectus, including the consolidated financial statements and their explanatory notes before making an investment decision.



 


For the Three Months Ended July 31, 2016 (Unaudited)


For the Year

Ended

April 30, 2016


For the Year

Ended April 30, 2015

Financial Summary

 

 

 

 

 

Cash & Cash Equivalents

$110,051

$  227,273

227,273

$ 35,226

 

 

 

 

Total Assets

 $305,645

$

369,357

$  60,576

 

 

 

 

Total Current Liabilities

$258,913

$

121,133

$  17,017

 

 

 

 

Total Liabilities and Stockholders’ Equity (Deficit)

$ 305,645

$

369,357

$  60,576

 

For the Three Months Ended July 31, 2016 (Unaudited)

For The Year

Ended

April 30, 2016

For The Year

Ended April 30, 2015

Statement of Operations

 

 

 

Revenue

$ 15,712

$

67,954

$ 5,000

 

 

 

 

Total Expenses

$493,520

$1,290,400

1,290,400

$ 67,999

 

 

 

 

Net Loss for the Period

($489,112)

$(1,262,001)

$   (62,999)





2




Private Placement of Securities


The shares of common stock offered by the Selling Stockholder pursuant to this prospectus were issued, or will be issuable, in connection with the following private placement transaction.  See “Private Placement of Securities” for additional information.


RDW Financing


On September 1, 2016, we entered into a securities purchase agreement (the “RDW Purchase Agreement”) with RDW pursuant to which RDW agreed to  purchase 8% Convertible Promissory Notes in the aggregate principal amount of  $367,500 for a purchase price of $350,000 (a 5% original issue discount (“OID”) totaling $17,500) in two tranches.  RDW purchased the first tranche in the aggregate principal amount of $157,500 (the “First RDW Note”) for a purchase price of $150,000 which it funded on September 6, 2016.  RDW is irrevocably bound to purchase the second tranche in the aggregate principal amount of $210,000 (the “Second RDW Note,” and together with the First RDW Note, the “RDW Notes”) for a purchase price of $200,000 on the second (2nd) trading day following the date this registration statement is declared effective by the Securities and Exchange Commission.  The RDW Notes accrue interest at a rate of 8% per annum, which interest amount is guaranteed.  The RDW Notes are convertible at any time at a conversion price equal to 60% of the lowest traded price of our common stock in the twenty (20) trading days prior to the conversion date.  The RDW Notes mature six (6) months after the issuance date.  





3



THE OFFERING


Shares of Common Stock Offered by the Selling Stockholder (1)

Up to 38,281,250 shares of Common Stock.

Offering Expenses

We will pay all expenses of registering the securities, estimated at approximately $37,153.

Shares of Common Stock Outstanding Before the Offering

177,117,321

Shares of Common Stock Outstanding After the Offering (assuming conversion of all of the RDW Notes)

215,398,571

Terms of the Offering

Upon conversion of the RDW Notes, RDW will determine when and how it will sell the securities offered in this prospectus as described in “Plan of Distribution.”

Trading Market

Our common stock is traded on the OTC Markets OTCQB under the symbol “FPVD.”

Use of the Proceeds

We will not receive proceeds from the sale of the shares of common stock by RDW.  See “Use of Proceeds.”

Risk Factors

The common stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See “Risk Factors” below.


(1) The common stock offered by the Selling Stockholder is based on a conversion price equal to 60% of %0.022, the trading price of our common stock on October 4, 2016.




4




RISK FACTORS


You should carefully consider the risks described below together with all of the other information included in this prospectus before making an investment decision with regard to our securities. The statements contained in or incorporated herein that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward- looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, you may lose all or part of your investment.


Risks Related to Our Financial Condition


We only commenced our present business plan to sell on-body cameras in May of 2015 and as such, there is little historical performance for you to base an investment decision upon, and we may never become profitable.


In February of 2015, we changed our business to the commercialization of on-body cameras. Our first sale of on-body cameras was in May 2015. For the three months ended July 31, 2016, we had revenues of only $15,712 and a net loss of $489,212. For the year ended April 30, 2016, we had revenues of only 67,964 and a net loss of 1,262,001. Accordingly, because we have had only limited sales since implementing our present business plan, there is limited historical performance for you to evaluate our prospects for achieving our business objectives and becoming profitable in light of the risks, difficulties and uncertainties frequently encountered by early stage companies such as us. Accordingly, before investing in our common stock, you should consider the challenges, expenses and difficulties that we will face as an early stage company, and whether we will ever become profitable.


We are dependent on the sale of our securities to fund our operations.


Between March 24, 2015 and May 14, 2015, we sold 100,000 and 50,000 shares of our common stock at the price of $0.50 and $0.10 per share respectively, or an aggregate of $50,000 and $5,000. From August 25, 2015 through May 13, 2016, we issued multiple convertible promissory notes (the “Private Placement Notes”) with a cumulative face amount of $442,000 to six accredited investors. All principal and interest due under the Private Placement Notes was converted between March 2, 2016 and July 8, 2016 into an aggregate of 31,176,207 shares of our common stock at prices between $0.168 and $0.00108 per share. On November 12, 2015, December 31, 2015 and March 10, 2016, we issued three notes to RDW with an aggregate principal amount of $472,500. Between March 14, 2016 and August 29, 2016, RDW converted $471,708 into an aggregate of 118,354,107 shares of our common stock at prices between $0.192 and $0.0014 per share. All principal under the November 12, 2015 and December 31, 2015 notes has been paid with a principal balance of $792 remaining under the March 10, 2016. The combined accrued and unpaid interest under these notes is $13,281 as of September 20, 2016. On May 13, 2016 and May 20, 2016, we issued two convertible notes with RDW with an aggregate principal amount of $157,500. As of July 31, 2016 we had generated revenues of only $83,676 from our current business of selling on-body cameras. We are dependent on the sale of our securities to fund our operations, and will remain so until we generate sufficient revenues to pay for our operating costs. Our officers and directors have made no written commitments with respect to providing a source of liquidity in the form of cash advances, loans and/or financial guarantees.


If we are unable to generate sufficient revenues for our operating expenses we will need financing, which we may be unable to obtain; should we fail to obtain sufficient financing, our business, operating results and financial condition will be negatively impacted.


For the three months ending July 31, 2016, we had revenues of $15,712 from the sale of our on-body camera and related accessories. For the year ended April 30, 2016, and three months ended July 31, 2016, we had a net loss of $1,262,001 and $489,212 respectively. Because we have limited revenues and lack historical financial data, including revenue data, our future revenues are unpredictable.


As of the date of this prospectus, we had cash on hand of approximately $250,000 for our operational needs. Currently, our operating expenses are approximately $16,000 per month. If we fail to generate sufficient revenues or raise additional funds to meet our monthly operating costs, we would have available cash for our operating needs for approximately 17 months.




5




Until we generate material operating revenues, we require additional debt or equity funding to continue our operations and implement our plan of operations. If we fail to generate sufficient revenues or raise additional funds to meet our monthly operating costs, our business, operating results and financial condition will be negatively impacted.


Risks Related to Our Business


Our business depends on the development of markets for detection and surveillance products and solutions.


Our products are designed to address the markets for detection, surveillance and integrated solutions. Our products are targeted to both state and local governmental agencies and the private sector. These markets and the types of products and services sold in these markets are emerging. Our ability to grow will depend in part on the rate at which markets for our products develop and on our ability to adapt to emerging demands in these markets. Geopolitical developments, terrorist attacks and government mandates may cause sharp fluctuations in the demand for our products.


Third parties can purchase the same products we sell which may negatively affect our revenues.


We purchase our products from a third party manufacturer in China which sells products to other companies. As such, third parties can purchase the same products as us which puts us at a competitive disadvantage and may have a negative impact on our revenues.


Our industry is highly competitive, and our failure to compete effectively could adversely affect our market share, financial condition and future growth.


We operate in a highly competitive environment. In addition to facing competition generally from businesses seeking to attract discretionary spending dollars, the on-body camera industry itself is highly fragmented, resulting in intense competition. We compete with single location dealers and, to a lesser degree, with national specialty stores. Dealer competition is based on the quality of available products, the price and value of the products and attention to customer service. There is significant competition in the markets which we plan to enter.


Our competitors are large national or regional chains that have substantially greater financial, marketing and other resources than us. There can be no assurance that we will be able to compete successfully against current or future competitors or that competitive pressure will not have a material adverse effect on our business, operating results and financial condition.


The success of our business depends on our ability to market our on-body camera and accessories effectively.


Our ability to establish effective marketing and advertising campaigns is the key to our success. Our advertisements must effectively promote our corporate image and the pricing of such products. If we are unable to create awareness of our products, we may not be able to attract customers. Our marketing activities may not be successful in promoting the products we sell or pricing strategies or in retaining and increasing our customer base. We cannot assure you that our marketing programs will be adequate to create a demand for our products or support our future growth, which may result in a material adverse effect on our results of operations.


We may be subject to warranty claims that could result in significant direct or indirect costs, or we could experience greater returns from retailers than expected, which could harm our business and operating results.


We accept returns of defective products for two weeks after purchase. Additionally, our manufacturer provides a one year two warranty on all of our products. The occurrence of any material defects in our products could make us liable for warranty claims in excess of our current reserves. In addition, we could incur significant costs to correct any defects, warranty claims or other problems, including costs related to product recalls. A significant product defect could materially harm our brand image and could force us to conduct a product recall. This could damage our relationships with our customers and reduce end-user loyalty .




6




A product recall would be particularly harmful to us because we have limited financial and administrative resources to effectively manage a product recall and it would detract management’s attention from implementing our core business strategies. As a result, a significant product defect or product recall could cause a decline in our sales and profitability, and could reduce or deplete our financial resources. Any negative publicity related to the perceived quality of our products could affect our brand image, decrease retailer, distributor and customer demand, and adversely affect our operating results and financial condition. Warranty claims may result in litigation, the occurrence of which could adversely affect our business and operating results.


Purchasers of our products may be injured while engaging in activities that they self-capture with our on-body camera, and we may be exposed to claims, or regulations could be imposed, which could adversely affect our brand, operating results and financial condition.


Our law enforcement and other customers use our on-body camera and accessories to self-capture their participation in a wide variety of activities which may carry the risk of significant personal injury or result in death. We may be subject to claims if our customers are injured while using our products. We have no insurance coverage for such claims. Additionally, some businesses may ban the use of our products in their facilities to limit their own liability.  If lawmakers or governmental agencies were to determine that the use of our products increased the risk of injury to all or a subset of our customers, they may pass laws or adopt regulations that limit the use of our products or increase our liability associated with the use of our products. Any of these events could adversely affect our brand, operating results or financial condition.


We may be subject to intellectual property rights claims, which are costly to defend, could require us to pay damages and could limit our ability to sell some of our products.


We have not secured intellectual property protection of the Force Protection name. Our industry is characterized by vigorous pursuit and protection of intellectual property rights, which has resulted in protracted and expensive litigation for several companies. Third parties may assert claims of misappropriation of trade secrets or infringement of intellectual property rights against us for which we may be liable.


If our business expands, the number of products and competitors in our markets increases and product overlaps occur, infringement claims may increase in number and significance. Intellectual property lawsuits are subject to inherent uncertainties due to the complexity of the technical issues involved, and we cannot be certain that we would be successful in defending ourselves against intellectual property claims. Further, many potential litigants have the capability to dedicate substantially greater resources than we can to enforce their intellectual property rights and to defend claims that may be brought against them. Furthermore, a successful claimant could secure a judgment that requires us to pay substantial damages or prevents us from distributing our products.


If we fail to develop our brand cost-effectively, our business may be adversely affected.


The success of our products marketed under the Force Protection brand will depend upon the effectiveness of our marketing efforts. Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses incurred in building the brands. If we fail to successfully promote and maintain our brand, or incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract enough new customers or retain our existing customers to the extent necessary to realize a sufficient return on our brand-building efforts, and our business and results of operations could suffer.


We must be able to adapt to rapidly changing technology trends and evolving industry standards or we risk our products becoming obsolete.


The market in which we compete is characterized by intensive development efforts and rapidly advancing technology. Our future success will depend, in large part, upon our ability to anticipate and keep pace with advancing technology and competing innovations. We may not be successful in identifying, developing and marketing new products or enhancing our existing products. We believe that a number of large companies, with significantly greater financial, manufacturing, marketing, distribution and technical resources and experience than ours, are focusing on the development of products in the security and law enforcement industry.




7




We are dependent on our manufacturer in China. Any disruption or extended delay in product supply from any of our distributors could have a significant adverse impact on our operations.


We are dependent on one manufacturer in China. We do not have guaranteed supply or pricing arrangements with our manufacturer, but submit purchase orders and pay for products as needed. As a result, we risk increased cost of our products.


Our ability to sustain satisfactory levels of sales will be dependent in part upon the ability of third party suppliers of raw materials to our manufacturer as well as our manufacturer to properly perform its functions and to comply with local regulations and market our products. While outsourcing manufacturing and distribution to third parties may reduce the cost of operations, it also reduces direct control by us over the services rendered. Although we attempt to select a reputable manufacturer, it is possible it could fail to perform as we expect.


The failure of our manufacturer to supply products as required by us could have a material adverse effect on our business, results of operations and financial condition. If we do not timely and effectively develop and implement our outsourcing strategy or if third party providers do not perform as anticipated, we may experience operational difficulties, increased costs, or even manufacturing delays, which could materially and adversely affect our business, financial condition and results of operations.


Although a number of alternative manufacturers exist that we believe could replace our manufacturer with alternative sources at comparable prices and terms, any disruption or extended delay in our manufacturing obtaining raw material products from any of our third party suppliers could have a significant adverse impact on our operations. In addition, the time needed to replace our manufacturer could adversely affect our operations by delaying shipments and potentially losing customers to our competition.


Our manufacturer purchases some components, subassemblies and products from third party suppliers. The loss of any of these suppliers may substantially disrupt our ability to obtain orders and fulfill sales as we design and qualify new components.


We rely on third party components and technology to build our products, and we rely on our manufacturer to obtain the components, subassemblies and products necessary for the manufacture of our products. Shortages in components that we use in our products are possible, and our ability to predict the availability of such components is limited. While components and supplies are generally available from a variety of sources, we and our manufacturer currently depend on a single or limited number of suppliers for several components for our products. If our suppliers of these components or technology were to enter into exclusive relationships with other providers, or were to discontinue providing such components and technology to us and we were unable to replace them cost effectively, or at all, our ability to provide our products would be impaired. Our manufacturer generally relies on purchase orders rather than long-term contracts with these suppliers. As a result, even if available, we and our manufacturer may not be able to secure sufficient components at reasonable prices or of acceptable quality to build our products in a timely manner. Therefore, we may be unable to meet customer demand for our products, which would have a material adverse effect on our business, operating results and financial condition.


Risks Related To Our Management


Should we lose the services of Paul Feldman, our sole officer and director, our operations and financial condition may be negatively impacted.


Our future depends on the continued contributions of Paul Feldman, our sole officer and director, who would be difficult to replace. Mr. Feldman’s services are critical to the management of our business and operations. We do not maintain key man life insurance on Mr. Feldman. Should we lose the services of Mr. Feldman, we may be unable to replace his services with equally competent and experienced personnel and our operational goals and strategies may be adversely affected, which will negatively affect our potential revenues.




8




We incur costs and management time related expenses pertaining to SEC reporting obligations and SEC compliance matters and our management has no experience in such matters.


Paul Feldman, our sole officer and director, is responsible for managing us, including compliance with SEC reporting obligations and maintaining disclosure controls and procedures and internal control over financial reporting. These public reporting requirements and controls are relatively new to Mr. Feldman and at times will require us to obtain outside assistance from legal, accounting or other professionals that will increase our costs of doing business. Should we fail to comply with SEC reporting and internal controls and procedures, we may be subject to securities law violations that may result in additional compliance costs or costs associated with SEC judgments or fines, each of which would increase our costs and negatively affect our potential profitability and our ability to conduct our business.


Because we do not have an audit or compensation committee, shareholders must rely on our sole director Paul Feldman, who is not independent, to perform these functions.


We have only one officer and director. We do not have an audit or compensation committee or Board of Directors as a whole that is composed of independent directors. Because Paul Feldman, our sole director, is also our sole officer and controlling shareholder, he is not independent. There is a potential conflict between his interests, our interests and our shareholders’ interests, since our sole director is also our sole officer and will make decisions concerning his own compensation and audit issues. Until we have an audit or compensation committee or independent directors, there may be less oversight of Mr. Feldman’s decisions and activities and little or no ability for our minority shareholders to challenge or reverse his activities and decisions, even if they are not in the best interests of minority shareholders.


Risks Related to the RDW Financing and our Common Stock


Common Shares that we issue upon conversion of promissory notes will dilute our existing stockholders and depress the market price of our common stock.


As of the date of this prospectus, we are obligated to issue approximately 38,281,250 common shares upon conversion of the RDW Notes based upon 60% of the trading price of $0.016 of our common shares on September 14, 2016. The issuance of these shares upon conversion of the RDW Notes will dilute our existing shareholders. The number of common shares issuable by us upon conversion of the RDW Notes is dependent on the trading price of our common shares during the twenty days prior to conversion. If the price of our stock declines in value, we will be obligated to issue more shares to the note holders which would have a further dilutive effect on our stock which could depress the market price of our common stock.


We may be required to issue significant amount of common shares upon conversion of notes that could result in a change of control.


The conversion price of the RDW Notes is based upon the trading price of our common shares. There is no way to determine with certainty the number of common shares we will be required to issue should note holders convert their notes into our common shares. As the RDW Notes are converted our stock price will decline requiring us to issue an increased number of common shares. We are currently authorized to issue 750,000,000 common shares. We presently have 177,117,321 shares outstanding. We could be required to increase our authorized shares to provide sufficient authorized common stock for conversion of the RDW Notes. Paul Feldman, our Chief Executive Officer, President and Director presently holds 1,000,010,000 votes on matters submitted to our common stockholders.




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Holders of the RDW Notes convertible into our common stock will pay less than the then- prevailing market price for our common stock.


The RDW Notes are convertible at 60% of the lowest traded price in the twenty days prior to the date of conversion. As such, the note holders have a financial incentive to sell our common stock immediately upon receiving the shares to realize the profit equal to the difference between the discounted price and the market price. If the noteholders sell shares, the price of our common stock will likely decrease. If our stock price decreases, the noteholders may have a further incentive to sell the shares of our common stock that they hold. These sales may put further downward pressure on our stock price and reduce the value of your common shares.


If our stock price materially declines, the convertible note holders will have the right to a large number of shares of common stock upon exchange of amounts due under the RDW Notes, which may result in significant dilution.


The RDW Notes have a conversion feature which is based upon 60% of our lowest trading price over a twenty trading day period. If our common stock price materially declines, we will be obligated to issue a large number of shares to the holders of these notes upon conversion. This will likely materially dilute existing shareholders. The potential for such dilutive issuances upon conversion of outstanding notes may depress the price of common stock regardless of our business performance, and could encourage short selling by market participants, especially if the trading price of our common stock begins to decrease.


The market for shares quoted on the OTC Markets OTCQB has experienced numerous frauds and abuses, which could adversely affect investors in our stock.


We believe that the market for shares of companies quoted on the OTC Markets OTCQB has suffered from patterns of fraud and abuse. Such patterns include:


·

control of the market for the security by one or a few broker-dealers;

·

manipulation of prices through prearranged matching of purchases and sales and false and misleading statements made by parties unrelated to the issuer;

·

“boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;

·

excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and

·

wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.


We believe that many of these abuses have occurred with respect to the promotion of OTC Pink companies that lacked experienced management, adequate financial resources, an adequate business plan and/or marketable and successful business or product. Should this occur in our common stock, investors will likely be adversely affected.


Our common shares are thinly traded, so you may be unable to sell at or near asking prices, or at all.


Our common stock is quoted on the OTC Markets OTCQB. Shares of our common stock are thinly- traded, meaning that the number of persons interested in purchasing our common shares at or near asking prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including :


·

we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume; and

·

stock analysts, stock brokers and institutional investors may be risk-averse and be reluctant to follow an unproven, early stage company such as ours or purchase or recommend the purchase of our shares until such time as we become more seasoned and viable




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As a result, our stock price may not reflect an actual or perceived value. Also, there may be periods of several days or more when trading activity in our shares is minimal, as compared to a seasoned issuer that has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. A broader or more active public trading market for our common shares may not develop or if developed, may not be sustained. Due to these conditions, you may not be able to sell your shares at or near asking prices or at all should you attempt to sell your shares.


Our stock price may be volatile and you may not be able to resell your shares at or above the current trading price.


Our common stock is quoted on the OTC Markets Group’s OTC Pink. Trading in stock quoted on the OTC Pink is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. The market price of our common stock may be highly volatile. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the OTC Pink and other over the counter trading systems do not benefit from the same type of Market- Maker trading systems utilized by stock exchanges such as the NYSE and AMEX and quotation systems such as the NASDAQ in which trading of a security is enhanced by to the presence of Market-Maker(s) who are dedicated to the trading of a particular listed company’s shares. Rather, on the OTC Pink and other over the counter markets, there is no assurance that a bid/ask will be posted to facilitate trading of an over the counter listed issue at any particular point in time. As a result, trading of securities on the OTC Pink and other over the counter systems is often more sporadic than the trading of securities listed on the NYSE, AMEX, NASDAQ or similar large stock exchanges or stock markets. Accordingly, shareholders may have difficulty selling their shares at any particular point in time. Additionally, the market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:


·

our ability to fully execute our business plan;

·

changes in our industry;

·

our ability to obtain working capital financing;

·

additions or departures of key personnel;

·

a “public float” in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our common stock;

·

sales of our common stock (particularly following effectiveness of this resale registration statement) upon conversion of outstanding promissory notes;

·

operating results that fall below expectations;

·

regulatory developments;

·

economic and other external factors;

·

period-to-period fluctuations in our financial results;

·

the public’s response to press releases or other public announcements by us or third parties;

·

the development and sustainability of an active trading market for our common stock; and

·

future sales of common stock by our officers, directors and significant stockholders.


In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.




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Our officers and directors have voting control over all matters submitted to a vote of our common stockholders, which will prevent our minority shareholders from having the ability to control any of our corporate actions.


As of the date of this prospectus, we had 177,117,321 shares of common stock outstanding, each entitled to one vote per common share and 5,000,000 shares of Series A Preferred Stock which entitled the holder to two hundred votes per share. Our sole officer and director, Paul Feldman, controls 10,000,000 common shares and 5,000,000 Series A Preferred Shares which represent an aggregate of 1,010,000,000 out of 1,177,117,321 total votes outstanding or 85.8% of the votes on all matters submitted to a vote of our stockholders. As such, Mr. Feldman has the ability to determine the outcome of all matters submitted to our stockholders for approval, including the election of directors. Mr. Feldman’s control of our voting securities may make it impossible to complete some corporate transactions without his support and may prevent a change in our control. In addition, this ownership could discourage the acquisition of our common stock by potential investors and could have an anti-takeover effect, possibly depressing the trading price of our common stock.


If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us  to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our  reported financial information and have a negative effect on the market price for shares of our common  stock.


Effective internal controls are necessary for us to provide reliable financial reports and to effectively prevent fraud. We maintain a system of internal control over financial reporting, which is defined as a process designed by, or under the supervision of, our principal executive officer and principal financial officer, or persons performing  similar functions, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.


As a public company, we have significant additional requirements for enhanced financial reporting and internal controls. We are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent registered public accounting firm addressing these assessments. The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. This annual report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.


We cannot assure you that we will, in the future, identify areas requiring improvement in our internal control over financial reporting. We cannot assure you that the measures we will take to remediate any areas in need of improvement will be successful or that we will implement and maintain adequate controls over our financial processes and reporting in the future as we continue our growth. If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial information and have a negative effect on the market price for shares of our Common Stock.


Because our sole officer and director is our controlling stockholder, he can exert significant control over our business and affairs, and have actual or potential interests that may depart from those of investors.


As of the date of this prospectus, our sole officer and director, Paul Feldman, holds approximately 86% of our outstanding voting stock and has the ability to control all matters submitted to a vote of our stockholders. The interests of Mr. Feldman may differ from the interests of our other stockholders, including investors. As a result, in addition to board seats and offices, Mr. Feldman controls all corporate actions requiring stockholder approval, irrespective of how our other stockholders, including investors, may vote, including the following actions:




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·

to elect or defeat the election of our directors;

·

to amend or prevent amendment of our Certificate of Incorporation or By-laws;

·

to effect or prevent a merger, sale of assets or other corporate transaction; and

·

to control the outcome of any other matter submitted to our stockholders for vote.


A decline in the price of our common stock could affect our ability to raise further working capital, it may adversely impact our ability to continue operations and we may go out of business.


A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Because we may attempt to acquire a significant portion of the funds we need in order to conduct our planned operations through the sale of equity securities, a decline in the price of our common stock could be detrimental to our liquidity and our operations because the decline may cause investors not to choose to invest in our stock. If we are unable to raise the funds we require for all our planned operations, we may be forced to reallocate funds from other planned uses and may suffer a significant negative effect on our business plan and operations, including our ability to develop new products and continue our current operations. As a result, our business may suffer, and not be successful and we may go out of business. We also might not be able to meet our financial obligations if we cannot raise enough funds through the sale of our common stock and we may be forced to go out of business.


Because we do not intend to pay any cash dividends on our shares of common stock in the near future, our stockholders will not be able to receive a return on their shares unless they sell them.


We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the near future. The declaration, payment and amount of any future dividends will be made at the discretion of the Board of Directors, and will depend upon, among other things, the results of operations, cash flows and financial condition, operating and capital requirements, and other factors as the Board of Directors considers relevant. There is no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend. For the foreseeable future, earnings generated from our operations will be retained for use in our business and not to pay dividends. In addition, the terms of our existing credit facilities preclude, and the terms of any future debt agreements is likely to similarly preclude, us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole resource of gain for the foreseeable future. Investors seeking cash dividends should not purchase our common stock.


Our stock is a penny stock. Trading of our stock may be restricted by the Securities and Exchange Commission’s (“SEC”) penny stock regulations which may limit a stockholder’s ability to buy and sell our stock.


Our stock is a penny stock. The Securities and Exchange Commission (“SEC”) has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a




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suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.


Financial Industry Regulatory Authority (“FINRA”) sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.


FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock.


We may, in the future, issue additional securities, which would reduce investors’ percent of ownership and may dilute our share value.


Our Articles of Incorporation authorize us to issue 750,000,000 shares of common stock, $0.0001 par value per share and 5,000,000 shares of Series A Preferred Stock. As of the date of this prospectus, we had 177,117,321 shares of common stock and 5,000,000 shares of Series A Preferred Stock outstanding. Accordingly, we may issue up to an additional 534,601,429 shares in addition to the 38,281,250 shares being registered hereunder which are issuable upon conversion of prior RDW Notes. The future issuance of common stock may result in substantial dilution in the percentage of our common stock held by our then existing shareholders. We may value any common stock issued in the future on an arbitrary basis including for services or acquisitions or other corporate actions that may have the effect of diluting the value of the shares held by our stockholders, and might have an adverse effect on any trading market for our common stock.


As an issuer of “penny stock” the protection provided by the federal securities laws relating to forward looking statements does not apply to us.


Although the federal securities law provides a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, if we are a penny stock we will not have the benefit of this safe harbor protection in the event of any claim that the material provided by us contained a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary to make the statements not misleading.




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FORWARD LOOKING STATEMENTS


Some of the statements in this prospectus are “forward-looking statements.” These forward-looking statements involve certain known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, among others, the factors set forth above under “Risk Factors”. The words “believe,” “expect,” “anticipate,” “intend,” “plan,” and similar expressions identify forward-looking statements. We caution you not to place undue reliance on these forward-looking statements. We undertake no obligation to update and revise any forward-looking statements or to publicly announce the result of any revisions to any of the forward-looking statements in this document to reflect any future developments.





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USE OF PROCEEDS


The Selling Stockholder will receive all of the proceeds from the sale of shares of common stock under this prospectus.  We will not receive any proceeds from these sales.


The Selling Stockholder will pay any agent’s commissions and expenses it incurs for brokerage, accounting, tax or legal services or any other expenses it incurs in disposing of the shares of common stock. We will bear all other costs, fees and expenses incurred in effecting the registration of the shares of common stock covered by this prospectus. These may include, without limitation, all registration and filing fees, SEC filing fees and expenses of compliance with state securities or “blue sky” laws.




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PRIVATE PLACEMENT OF SECURITIES


The shares of common stock offered by the Selling Stockholder pursuant to this prospectus were issued, or will be issuable, in connection with the private placement transaction described below. 


Securities Purchase Agreement


On September 1, 2016, we entered into a securities purchase agreement (the “RDW Purchase Agreement”) with RDW Capital, LLC, (“RDW”) a Florida limited liability company. Pursuant to the  RDW Purchase Agreement, we agreed to sell to RDW an aggregate of $367,500 in principal amount of 8% Convertible Promissory Notes (the “RDW Notes”) for a purchase price of $350,000, which included a 5% original issue discount (“OID”) totaling $17,500.  The purchase of RDW Notes will occur in two tranches: (i) $157,500 in aggregate principal amount for a purchase price of $150,000, which RDW purchased on September 1, 2016 and funded on September 6, 2016,  (the “First RDW Note”) and (ii) $210,000 in aggregate principal amount for a purchase price of $200,000 which RDW is irrevocably bound to purchase on the second (2nd) trading day after this Registration Statement is declared effective by the SEC.


8% Convertible Promissory Notes


The RDW Notes have the following terms and conditions:


·

The principal amount outstanding accrues interest at a rate of 8% per annum, which interest is guaranteed.

·

Interest is due and payable on each conversion date and on the maturity date.

·

The RDW Notes mature six months after issuance. The maturity date of the First RDW Note is March 1, 2017.

·

At any time, at the option of the holder, the RDW Notes are convertible, into shares of our common stock at a conversion price equal to 60% of the lowest traded price of our common stock in the twenty trading days prior to the conversion date.

·

We may prepay the RDW Notes in whole or in part at any time with ten days written notice to the holder for the sum of the outstanding principal and interest multiplied by 130%.  

·

Upon an event of default under the RDW Notes, RDW may accelerate the outstanding principal, plus accrued and unpaid interest, and other amounts owing through the date of acceleration (“Acceleration”).

·

Upon Acceleration, the amount due in cash will be 130% of the outstanding principal amount of the Note and accrued and unpaid interest, together with payment of all other amounts, costs, expenses and liquidated damages due under the RDW Notes.

·

Conversions of the RDW Notes shall not be permitted if such conversion will result in the holder owning more than 4.99% of our common shares outstanding after giving effect to such conversion.


Registration Rights Agreement


In connection with the RDW Financing, on September 1, 2016, we entered into a Registration Rights Agreement (the “RDW Registration Rights Agreement”) pursuant to which we agreed to register for resale on Form S-1 the shares of common stock issuable upon conversion of the RDW Notes. Pursuant to the RDW Registration Rights Agreement, we agreed to file the registration statement within 30 days after execution of the RDW Registration Rights Agreement. We are obligated to pay financial penalties of 1% of the subscription amount if this registration statement is not declared effective by the SEC within ninety days after filing.  This registration statement covers the resale of shares issuable upon conversion of the First RDW Note and Second RDW Note.


Placement Agent


Pursuant to our agreement with Carter, Terry & Company (“CTC”), we are required to pay CTC a 10% cash fee of any funding up to $1,000,000, and a stock fee equal to 4% of any financing we receive divided by the closing price of our common stock on the date of closing of the financing transaction. CTC acted as placement agent in connection with the RDW Financing.  CTC is an underwriter within the meaning of the Securities Act.




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SELLING SECURITY HOLDERS


The following table details the name of the sole Selling Stockholder, RDW Capital, LLC (“RDW”), the number of shares beneficially owned by such Selling Stockholder and the number of shares that may be offered by such Selling Stockholder for resale under this prospectus.


In accordance with Rule 13d-3 of the Exchange Act, “beneficial ownership” includes any shares of common stock as to which the Selling Stockholder has sole or shared voting power or investment power and any shares of common stock the Selling Stockholder has the right to acquire within sixty (60) days (including shares of common stock issuable pursuant to securities currently convertible or exercisable, or convertible or exercisable within sixty (60) days).


RDW may sell any number of shares of our common stock which are issuable upon conversion of amounts due under the RDW Notes. Because RDW may offer all, some or none of the shares it holds, and because, based upon information provided to us, there are currently no agreements, arrangements or understandings with respect to the resale of any of the shares, no definitive estimate as to the number of shares that will be held by RDW after the offering can be provided. Therefore, the following table has been prepared on the assumption that the entire 38,281,250 common shares being registered under this prospectus will be sold by RDW to parties unaffiliated with RDW. Because the conversion price of the RDW Notes is variable based on 60% of the lowest traded price of our common stock in the twenty (20) trading days prior to the conversion date, the number of shares of common stock that will actually be issued upon conversion of the RDW Notes may be more or less than the number of shares of common stock being offered by this prospectus.


The following table is based on 177,117,321 shares outstanding as of the date of this registration statement.





Name of selling security holder



Number of shares owned before this offering



Number of shares to be offered for sale


Number of shares to be owned after the offering is complete (2)

Percent of

Common Stock owned after the offering is complete (3)(4)

RDW Capital, LLC (1)

38,281,250

38,281,250

 --

--

(1)

RDW Capital LLC is a Florida limited liability company controlled by Gary Rogers and John DeNobile.

(2)

We have assumed that all shares registered for sale under this prospectus will be sold, but there is no obligation on the part of the sole Selling Stockholder to sell all of our shares offered by this prospectus as detailed below in the section entitled “Plan of Distribution”.

(3)

After the offering is complete, assuming all of the RDW Notes are issued and converted into the 38,281,250 shares being registered we would have 215,398,571 common shares outstanding. The 38,281,250 shares being registered upon issuance will represent 17.77% of our common shares.

(4)

Under the terms of the RDW Notes, conversions of the RDW Notes shall not be permitted if such conversion will result in RDW owning more than 4.99% of our common shares outstanding after giving effect to such conversion.


To our knowledge, neither the Selling Stockholder nor its beneficial owners:


has ever been one of our officers or directors or an officer or director of our predecessors or affiliates; or

are broker-dealers or affiliated with broker-dealers.


In addition to the transaction described above in “Private Placement of Securities,” we have had the following material relationships with the Selling Stockholder:




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On November 12, 2015, December 31, 2015, March 10, 2016, May 13, 2015, May 20, 2016 and August 22, 2016, we issued six notes to RDW with an aggregate principal amount of $787,500.  Between March 14, 2016 and August 29, 2016, RDW converted $471,708 into an aggregate of 118,354,107 shares of our common stock at prices between $0.192 and $0.0014 per share. All principal under the November 12, 2015 and December 31, 2015 notes has been paid. There remains a principal balance due of $792, $105,000, $52,500 and $157,500 under the notes dated March 10, 2016, May 13, 2016, May 20, 2016 and August 22, 2016, respectively. The combined accrued and unpaid principal and interest under the notes above is $315,792 and $18,786 as of September 20, 2016.


PLAN OF DISTRIBUTION


We are registering 38,281,250 shares of our common stock offered by the Selling Stockholder. As discussed above in the subsection entitled “Risk Factors - Risks Related to the Financing and our Common Stock ”, we are registering 38,281,250 shares issuable upon conversion of the First RDW Note and Second RDW Note in the aggregate principal amount of $367,500 as of the date of this registration statement at the conversion price of 60% of the lowest trading price in the twenty trading days prior to the filing of this registration statement ($0.016) on September 14, 2016.


The Selling Stockholder and any of its pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of common stock on the OTC Markets or any other stock exchange, market or trading facility on which our shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The Selling Stockholder may use any one or more of the following methods when selling  shares:


·

ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

·

block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

·

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

·

an exchange distribution in accordance with the rules of the applicable exchange;

·

privately negotiated transactions;

·

settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part;

·

broker-dealers may agree with the Selling Stockholder to sell a specified number of such shares at a stipulated price per share;

·

through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

·

a combination of any such methods of sale; or

·

any other method permitted pursuant to applicable law.


The Selling Stockholder or its pledgees, donees, transferees or other successors in interest, may also sell the shares directly to market makers acting as principals and/or broker-dealers acting as agents for themselves or their customers. Such broker-dealers may receive compensation in the form of discounts, concessions or commissions from the Selling Stockholder and/or the purchasers of shares for whom such broker-dealers may act as agents or to whom they sell as principal or both, which compensation as to a particular broker-dealer might be in excess of customary commissions. Market makers and block purchasers purchasing the shares will do so for their own account and at their own risk. It is possible that the Selling Stockholder will attempt to sell shares of common stock in block transactions to market makers or other purchasers at a price per share which may be below the then market price. The Selling Stockholder cannot assure that all or any of the shares offered in this prospectus will be issued to, or sold by, such Selling Stockholder.


RDW and Carter, Terry & Company, a registered broker-dealer who served as the placement agent for the RDW Financing are each underwriters within the meaning of the Securities Act. In addition to RDW and Carter, Terry & Company being underwriters under the Securities Act, any other brokers, dealers or agents affecting the sale of any of the shares offered in this prospectus, may be “underwriters” as that term is defined under the Securities Act or the Exchange Act, or the rules and regulations under such acts. Any commissions received by underwriters and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.




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We are paying all fees and expenses incident to the registration of the shares, but excluding brokerage commissions or underwriter discounts. The Selling Stockholder, alternatively, may sell all or any part of the shares offered in this prospectus through an underwriter. The Selling Stockholder has not entered into any agreement with a prospective underwriter and there is no assurance that any such agreement will be entered into.


The Selling Stockholder may pledge its shares to its brokers under the margin provisions of customer agreements. If the Selling Stockholder defaults on a margin loan, the broker may, from time to time, offer and sell the pledged shares. The Selling Stockholder and any other persons participating in the sale or distribution of the shares will be subject to applicable provisions of the Exchange Act, and the rules and regulations under such act, including, without limitation, Regulation M. These provisions may restrict certain activities of, and limit the timing of purchases and sales of any of the shares by, the Selling Stockholder or any other such person. In the event that the Selling Stockholder is deemed affiliated with purchasers or distribution participants within the meaning of Regulation M, then the Selling Stockholder will not be permitted to engage in short sales of common stock. Furthermore, under Regulation M, persons engaged in a distribution of securities are prohibited from simultaneously engaging in market making and certain other activities with respect to such securities for a specified period of time prior to the commencement of such distributions, subject to specified exceptions or exemptions. In regards to short sales, RDW may engage in the purchase or sale, long and/or short, of our securities or engage in trading of “derivative” securities based on securities issued by the Company.


We have agreed to indemnify RDW, or its transferees or assignees, against certain liabilities, including liabilities under the Securities Act, or to contribute to payments RDW or its pledgees, donees, transferees or other successors in interest, may be required to make in respect of such liabilities.


We agreed to use our commercially reasonable efforts to keep this prospectus effective until the earlier of the date on which (i) RDW has sold all of the shares of our common stock issued or issuable pursuant to the RDW Notes and/or the conversion of the Notes; or (ii) RDW has no right to acquire any additional shares of our common stock pursuant to the RDW Notes and/or the conversion of the Notes.




20



MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES


Market Information


Our common stock, par value $0.0001 per share, has been quoted with the symbol “FVPD” on the OTC Markets OTCQB since February 18, 2016. From March 15, 2015 through February 9, 2016, we were quoted on the OTC Pinks with the symbol “FVPD”. Prior to March 15, 2015, our stock was quoted on the OTC Pinks with the symbol “MREY”.


On October 4, 2016, the last reported sale price of our common stock as reported on the OTCQB was $0.022per share.


Trading in stocks quoted on the OTC Markets OTCQB and OTC Pink are often thin and is characterized by wide fluctuations in trading prices due to many factors that may have little to do with a company’s operations or business prospects.


OTC Markets OTCQB securities are not listed or traded on the floor of an organized national or regional stock exchange. Instead, OTC Markets OTCQB securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTC Markets OTCQB issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.


Set forth below are the range of high and low prices for our common stock from the OTC Markets OTC Pinks for the periods indicated. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions:


Year 2016

 

High

 

Low

First Quarter

Second Quarter (through October 4, 2016)                                                 

 

$   1.25

$   0.05

 

$0.10

$0.0022




Year 2015

 

High

 

Low

 

 

 

 

 

First Quarter

 

$   0.01

 

$ 0.01

Second Quarter

 

$   0.01

 

$ 0.01

Third Quarter

 

$ 23.96

 

$ 0.50

Fourth Quarter

 

$   1.69

 

$ 0.92

 

 

 

 

 

Year 2014

 

High

 

Low

Second Quarter

 

$ 0.01

 

$ 0.01

Third Quarter

 

$ 0.01

 

$ 0.01

Fourth Quarter

 

$ 0.01

 

$ 0.01


Transfer Agent


Our Transfer Agent is Interwest Transfer Co., Inc. located at 1981 Murray Holladay Road, Suite 100, Salt Lake City, Utah. Their telephone number is 801-272-9294 and their website is www.interwesttc.com.


Holders


As of the date of this prospectus, we had 177,117,321 shares of common stock outstanding and thirty-seven record holders of our common stock.




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Dividends


We have not paid any dividends to the holders of our common stock and we do not expect to pay any such dividends in the foreseeable future as we expect to retain our future earnings for use in the operation and expansion of our business.

Securities Authorized for Issuance Under Equity Compensation Plans


We presently do not have any equity based or other long-term incentive programs. In the future, we may adopt and establish an equity-based or other long-term incentive plan if it is in our best interest and our shareholders to do so.


Penny Stock Considerations


Our shares will be "penny stocks", as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00. Thus, our shares will be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.


Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer must make a special suitability determination regarding the purchaser and must receive the purchaser's written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt.


In addition, under the penny stock regulations, the broker-dealer is required to:


·

Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt;

·

Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities;

·

Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer's account, the account's value, and information regarding the limited market in penny stocks; and

·

Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction, prior to conducting any penny stock  transaction in the customer's account


Because of these regulations, broker-dealers may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of the Selling Stockholder or other holders to sell their shares in the secondary market, and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities, if our securities become publicly traded. In addition, the liquidity for our securities may be decreased, with a corresponding decrease in the price of our securities.


Our shares in all probability will be subject to such penny stock rules and our shareholders will, in all likelihood, find it difficult to sell their securities.


Sales of Our Common Stock Under Rule 144


We presently have 177,117,321 common shares outstanding. Of these shares 177,107,321 common shares are held by non-affiliates and 10,000,000 common shares are held by affiliates, which Rule 144 of the Securities Act of 1933 defines as restricted securities.




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We are registering 38,281,250 common shares that are issuable to the Selling Stockholder upon conversion of the First and Second RDW Notes. We are not registering shares held by affiliates in this offering. The remaining non-affiliate shares as well as all of the affiliates’ shares will be subject to the resale restrictions of Rule 144. In general, persons holding restricted securities, including affiliates, must hold their shares for a period of at least six months, may not sell more than 1% of the total issued and outstanding shares in any ninety day period, and must resell the shares in an unsolicited brokerage transaction at the market price. The availability for sale of substantial amounts of common stock under Rule 144 could reduce prevailing market prices for our securities.


DESCRIPTION OF SECURITIES


The following description is a summary of the material terms of the provisions of our Articles of Incorporation and Bylaws. Our Articles of Incorporation and Bylaws have been filed as exhibits to the registration statement of which this prospectus is a part.


We are authorized to issue 750,000,000 shares of common stock, $0.0001 par value per share and 5,000,000 shares of Series A Preferred Stock. As of the date of this prospectus there are 177,117,321   shares of our common stock issued and outstanding held by thirty-seven stockholders of record and 5,000,000 shares of our Series A Preferred Stock outstanding held by one person, Paul Feldman, our sole officer and director.


Common Stock


Each share of our common stock entitles the holder to one vote, either in person or by proxy, at meetings of shareholders. The shareholders are not permitted to vote their shares cumulatively. Accordingly, the holders of more than 50% of the total voting rights on matters presented to our common stockholders can elect all of our directors and, in such event, the holders of the remaining minority shares will not be able to elect any such directors. The vote of the majority of the holders entitled to vote on matters submitted to our common stockholders is sufficient to authorize, affirm, ratify, or consent to such act or action, except as otherwise provided by law.


To date, we have paid no cash dividends on our shares of common stock. Any future payment of dividends will be at the discretion of our Board of Directors and will depend upon, among other things, our future earnings, operating and financial condition, capital requirements, and other factors. We have no present plans for future cash or stock dividends. We intend to retain future earnings, if any, to provide funds for operation of our business.


Holders of our common stock have no preemptive rights.


Upon our liquidation or dissolution, the assets legally available for distribution to holders of shares of the common stock, after payment of all of our obligations, are distributable ratably among the holders of the then outstanding common stock.


Preferred Stock


We are authorized to issue 5,000,000 preferred shares $0.0001 par value which we have designated as Series A Preferred Stock. The Series A Preferred Stock have the rights designations and preferences set forth below:


·

No dividends shall be paid on the Series A Preferred Stock.

·

The Series A Preferred Stock shall not be convertible into shares of Common Stock.

·

Each share of Series A Stock shall be entitled to 200 votes per share on all matters submitted to a vote of our stockholders.

·

We shall redeem the Series A Preferred Stock upon request by the holder for the price of

$0.0001 per share.


On December 1, 2015, we approved the issuance of 1,000,000 shares of our non-convertible Series A Preferred Stock to Mr. Feldman and on September 12, 2016 we approved the issuance of an additional 4,000,000 shares of our non-convertible Series A Preferred Stock which entitle him to 200,000 votes per share or an aggregate of 1,000,000,000 on all matters submitted to our common stockholders.



23




Options and Warrants


We have no warrants or options to purchase our shares outstanding.


Florida Anti-Takeover Laws


As a Florida corporation, we are subject to certain anti-takeover provisions that apply to public corporations under Florida law.


Pursuant to Section 607.0901 of the Florida Business Corporation Act, or the Florida Act, a publicly held Florida corporation may not engage in a broad range of business combinations or other extraordinary corporate transactions with an interested shareholder without the approval of the holders of two-thirds of the voting shares of the corporation (excluding shares held by the interested shareholder), unless:


·

The transaction is approved by a majority of disinterested directors before the shareholder becomes an interested shareholder;

·

The interested shareholder has owned at least 80% of the corporation’s outstanding voting shares for at least five years preceding the announcement date of any such business combination;

·

The interested shareholder is the beneficial owner of at least 90% of the outstanding voting shares of the corporation, exclusive of shares acquired directly from the corporation in a transaction not approved by a majority of the disinterested directors; or

·

The consideration paid to the holders of the corporation’s voting stock is at least equal to certain fair price criteria.


An interested shareholder is defined as a person who, together with affiliates and associates, beneficially owns more than 10% of a corporation’s outstanding voting shares. We have not made an election in our amended Articles of Incorporation to opt out of Section 607.0901.


In addition, we are subject to Section 607.0902 of the Florida Act which prohibits the voting of shares in a publicly held Florida corporation that are acquired in a control share acquisition unless (i) our Board of Directors approved such acquisition prior to its consummation or (ii) after such acquisition, in lieu of prior approval by our Board of Directors, the holders of a majority of the corporation’s voting shares, exclusive of shares owned by officers of the corporation, employee directors or the acquiring party, approve the granting of voting rights as to the shares  acquired in the control share acquisition. A control share acquisition is defined as an acquisition that immediately thereafter entitles the acquiring party to 20% or more of the total voting power in an election of directors.




24



OUR BUSINESS


Overview


Our principal executive office is located at 130 Iowa Lane, Suite 102, Cary, North Carolina 27511. Our telephone number is 919-780-7897. Our website is www.forceprovideo.com and is not part of this prospectus.


We were incorporated in the state of Florida on March 11, 2011. Our business is the distribution of mini on body video cameras to state and local law enforcement.


As of the date of this prospectus, Paul Feldman is our sole officer and director. Mr. Feldman spends fulltime on our business. We sold our first on body video camera in May of 2015. To date, our products have been sold to ninety-nine state and local law enforcement agencies.


For the year ended April 30, 2016 and three months ending July 31, 2016, we had revenues of $67,964 and $15,712 from the sale of our products and services. For the year ended April 30, 2016 and three months ended July 31, 2016, we have a net loss of $1,262,001 and $489,212 respectively.


As of the date of this prospectus, we had cash on hand of approximately $250,000 for our operational needs. Currently, our operating expenses are approximately $16,000 per month. If we fail to generate sufficient revenues or raise additional funds to meet our monthly operating costs, we would have available cash for our operating needs for approximately 17 months.


Product Development and Sales


Our on-body mini-camera was developed by Paul Feldman, our Chief Executive Officer, President and Director who has significant experience in the development and commercialization of security and surveillance related products. From 2001 through August 2009, Mr. Feldman served as President and a Director of Law Enforcement Associates, Inc., a manufacturer of surveillance products and audio intelligent devices which were sold to the U.S. military and law enforcement. Patent technologies previously developed by Mr. Feldman include U.S. Patent Number 7,631,601 Surveillance Projectile and U.S. Patent Number 2006/0283,345 Surveillance Projectile.


The LE10 on-body camera is designed for use by law enforcement and can be mounted on helmets, tactical vest and riot shields. The LE10 has built-in Wi-Fi, providing connectivity with a smartphone or tablet to enable remote control and content viewing functionality. Video taken by the LE10 is stored by on a HD micro HD SD card which can be transferred to a computer for use as evidence. Downloading the video into evidence requires no special software or expensive cloud storage contracts. The LE10 is equipped with a high definition microphone to capture and record audio. The LE10 can also be used only as a standalone audio recorder to record witness statements or conduct interviews.


The LE10 allows the use of smartphones as a remote control of the camera and has 100 meter WiFi range allowing its user to manage the device with their IPhone or Android device. The LE10 provides high quality video and a sensor that allows the device to shoot in full HD at 30 fps, and 8 MP photos with shutter speed of 8fps in burst mode. In photo mode, the user can take pictures with a delayed timer. The device has three resolutions and slow motion capability allowing its user to create highly quality video while engaged in a variety of physical activity.


The LE10 has a retail price of $195.


We also sell accessories that enhance the functionality and versatility of the LE10. Our products include that enable our customers to capture content while engaged in a wide range of activity. We offer equipment-based mounts, such as the helmet, handlebar, roll bar and tripod mounts, as well as mounts that enable users to wear the mount on their bodies, such as the wrist housing, chest harness and head strap. Other accessories include spare batteries, charging accessories.




25




Our products are summarized below:


Item

Price

LE10 on-body mini camera

$ 195.00 USD

Remote Control

$ 45.00 USD

SD Card - 64GB

$ 40.00 USD

SD Card - 32GB

$ 25.00 USD

SD Card - 16GB

$ 15.00 USD

Ballistic Helmet Mount

$ 19.95 USD

Evidence Bags - 100 Count

$ 39.00 USD

Suction Mount

$ 29.95 USD

High Rated Suction Mount

$ 39.95 USD

Flotation Block - 1"

$ 6.95 USD

Flotation Block - 1 1/4"

$ 6.95 USD

Handheld Extension

$ 49.95 USD

Forcepro Charger

$ 12.95 USD

Small Helmet Mount

$ 19.95 USD

Side Helmet Mount - Pack of 5

$ 24.95 USD

Small Clamp Mount

$ 26.95 USD

Static Dash Mount

$ 17.95 USD

Vented Helmet Strap

$ 14.95 USD

Helmet Friction Mount

$ 14.95 USD

Handheld Monopod

$ 26.95 USD

HDMI Cable

$ 14.95 USD

12V USB Adapter

$ 10.00 USD

Surf Mount

$ 19.95 USD


Our manufacturer provides a one year warranty for our products.


Our customers include more than twenty-nine state and local law enforcement agencies.


Distribution


Customers purchase products from our website and by telephone order. All products are shipped from our manufacturer to our facility in North Carolina where we process and ship product to our customers using Federal Express or United Parcel Services. Customers pay all shipping charges.


Manufacturing


We purchase our finished products on an as needed basis from our manufacturer Shenzhen AEE Technology Co Ltd (“AEE”), in Shenzen China who provides production, labeling and packaging of our finished product according to our specifications. We agree with AEE as to the particular specifications for manufacturing, labeling and packaging of our products at the time each order is placed.


All material used to manufacture our products is located, purchased and paid for by AEE who invoices us only for our finished product.


We order our products on an as needed basis and we are not obligated to purchase any minimum amount of product from AEE. Additionally, AEE is not obligated to manufacture our products in the future. We pay AEE for all product we order at the time the order is placed. Upon placing an order, AEE creates a purchase order reflecting: (i) the product ordered, (ii) price per item (iii) total cost for the order, (iv) total cost to ship product ordered from our manufacturer to our facility, (iv) that immediate payment in required at the time of the order, and (v) the delivery date and delivery address.




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AEE’s purchase order also reflects the twelve month warranty of all products manufactured.


Marketing


Primarily, our sales and marketing efforts include print marketing brochures featuring our products to state and local law enforcement agencies. We create and deliver brochures to state and local law enforcement, every four weeks, using U.S. Mail.


We believe that a marketing strategy focused on print marketing to law enforcement will provide our target customers with the opportunity to view our specific information about our products and their features, which is an optimal strategy to increase sales.


Property


We occupy approximately 900 square feet at 130 Iowa Lane, Suite 102, Cary, NC 27511 pursuant to a lease agreement which expires on December 31, 2018. Our calendar year annual rent for this location is $14,340 for 2016, $14,772 for 2017 and $15,216 for 2018.


We believe this location is suitable for our current needs.


Research and Development


We have not spent any amounts on research and development in the prior two years. All research and development has been completed by Paul Feldman, our Director, President and Chief Executive Officer.


Employees


As of the date of this prospectus, we have four full time employees including Paul Feldman who is our Director, President and Chief Executive Officer. Our other two full time employees are sales persons. Mr. Feldman spends approximately forty hours per week on our business. We have one part time employee who provides clerical and administrative services.


None of our employees are represented by a collective bargaining agreement, nor have we experienced any work stoppages. We maintain good relationships with our employees.

Dependence On a Few Customers


We are not dependent on one or a few customers and we do not expect to be so in the future.


Product Warranty


We accept returns of products two weeks after purchase. Additionally, our manufacturer provides a twelve month warranty on all products manufactured. The occurrence of any material defects in our products could make us liable for damages and warranty claims in excess of our current reserves. In addition, we could incur significant costs to correct any defects, warranty claims or other problems, including costs related to product recalls. Any negative publicity related to the perceived quality of our products could affect our brand image, decrease retailer, distributor and customer demand, and adversely affect our operating results and financial condition. Warranty claims may result in litigation, the occurrence of which could adversely affect our business and operating results.




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Competition


The market for on-body cameras is highly competitive. Further, we expect competition to increase in the future as existing competitors introduce new and more competitive offerings alongside their existing products, and as new market entrants introduce new products into our markets. We compete against established, well-known camera manufacturers such as Go Pro, Canon Inc., Nikon Corporation, Olympus Corporation, Polaroid Holding Corporation and Vivitar Corporation, large, diversified electronics companies such as JVC Kenwood Corporation, Panasonic Corporation, Samsung Electronics Co., Sony Corporation and Toshiba Corporation, and specialty companies such as Garmin Ltd. Many of our current competitors have substantial market share, diversified product lines, well- established supply and distribution systems, strong worldwide brand recognition and greater financial, marketing, research and development and other resources than we do.


In addition, many of our existing and potential competitors have substantial competitive advantages, such as:


·

longer operating histories;

·

the capacity to leverage their sales efforts and marketing expenditures across a broader portfolio of products;

·

broader distribution and established relationships with channel partners;

·

access to larger established customer bases;

·

greater financial resources;

·

large intellectual property portfolios; and

·

the ability to bundle competitive offerings with other products and services.


Moreover, smartphones and tablets with photo and video functionality have significantly displaced traditional camera sales. It is possible that, in the future, the manufacturers of these devices, such as Apple Inc. and Samsung, may design them for use in a range of conditions, including challenging physical environments, or develop products similar to ours. In addition to competition or potential competition from large, established companies, new companies may emerge and offer competitive products. Further, we are aware that certain companies have developed cameras designed and labeled to appear similar to our products, which may confuse consumers or distract consumers from purchasing our products.


Increased competition may result in pricing pressures and reduced profit margins and may impede our ability to continue to increase the sales of our products or cause us to lose market share, any of which could substantially harm our business and results of operations.


Seasonality


Our business, as well as the industry in which we operate, is not seasonal.

Intellectual Property


We have no registered or patented intellectual property. Trademarks and trade names distinguish the various companies from each other. If customers are unable to distinguish our products from those of other companies, we could lose sales to our competitors. We do not have any registered trademarks and trade names, so we only have common law rights with respect to infractions or infringements on its products. Many subtleties exist in product descriptions, offering and names that can easily confuse customers. The name of our principal products may be found in numerous variations of the name and descriptions in various media and product labels. This presents a risk of losing potential customers looking for our products and buying someone else’s because they cannot differentiate between them.


Legal Proceedings


We are not a party to any legal proceedings.




28




MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS


Forward Looking Statements


The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this registration statement.  Some of the statements contained in this registration statement that are not historical facts are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which can be identified by the use of terminology such as "estimates," "projects," "plans," "believes," "expects," "anticipates," "intends," or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. However, as the Company intends to issue “penny stock,” as such term is defined in Rule 3a51-1 promulgated under the Exchange Act, the Company is ineligible to rely on these safe harbor provisions. We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this registration statement, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting our operations, market growth, services, products and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:


· Our ability to attract and retain management, and to integrate and maintain technical information and management information systems;

· Our ability to raise capital when needed and on acceptable terms and conditions;

· The intensity of competition;

· General economic conditions; and

· Changes in government regulations.


Comparison of Operating Results for the Three Months Ended July 31, 2016 to the Three Months Ended July 31, 2015


Revenues


For the three months ended July 31, 2016 we had 15,712 in revenues as compared to $15,935 for the three months ended July 31, 2015.  Our revenues for the three months ended July 31, 2016 and July 31, 2105 were attributable to the sale of our cameras to several law enforcement agencies.  


Cost of Goods Sold


For the three months ended July 31, 2016 we had cost of goods sold of $11,404 as compared to $9,689 for the three months ended July 31, 2015. Our cost of goods were attributable to the cost of our cameras, shipping and merchant costs.



Operating Expenses


For the three months ended July 31, 2016, we had operating expenses of $225,976 as compared to operating expenses of $59,288 for the three months ended July 31, 2015. The increase of $166,688 in operating expenses for the three months ended July 31, 2016 as compared to the three months ended July 31, 2015 was primarily attributable to an increase in salary, an increase in research and development, along with additional legal and professional fees.


Other Expenses


For the three months ended July 31, 2016 we had other expenses of $267,544 as compared to other expenses of $0 for the three months ended July 31, 2015.  All the elements of other expense are related to our convertible promissory notes, including $6,481 of interest expense, and $261.063 accretion of debt discount related to deferred financing costs for finder’s fees paid in connection with our convertible promissory notes.



29




Net Loss


Our Net Loss for the three months ended July 31, 2016 was $489,212, consisting of the operating expenses referred to in the preceding paragraph. Our Net Loss for the three months ended July 31, 2015 was $53,042, consisting of the operating expenses referred to in the preceding paragraph. The $43,170 increase in the Net Loss was attributable to the net increase in operating expenses referred to in the preceding paragraph.  


Liquidity and Working Capital


At July 31, 2016 our current assets were $281,044 as compared to current assets of $360,300 at April 30, 2016. The assets consisted of cash, cash equivalents, accounts receivable, inventory, fixed assets and prepayments. The decrease of current assets as of July 31, 2016 is primarily attributable to a decrease in cash from the payment of administrative expenses.


At July 31, 2016, our current liabilities were $268,913 as compared to current liabilities of $121,133 as of April 30, 2016.  The liabilities consisted of accounts payable, accrued expense, and convertible debts.  The increase is primarily attributable to the acquisition of short term debt agreements.     


Our net working capital at July 31, 2016 was $22,131 as compared to a net working capital of $239,167 at April 30, 2016. The decrease in net working capital is primarily attributable to the increase in current liabilities obtaining the convertible debt as explained in the preceding paragraphs.


Comparison of Operating Results for the Twelve Months Ended April 30, 2016 to the Twelve Months Ended April 30, 2015:


Revenue


Revenue is generated from the sale of our video and audio capture devices and related accessories. For the year ended April 30, 2016, the Company recognized $67,964 of revenue compared to $5,000 during the year ended April 30, 2015. The increase is due to the establishment of our video and audio capturing product sales during the year ended April 30, 2016 compared to no such operations in the prior year.


Gross profit


Gross profit was $28,399 and $5,000 during the years ended April 30, 2016 and 2015, respectively. Our gross margin for the year ended April 30, 2016 was 41.8% with no meaningful comparison for the year ended April 30, 2015. The Company anticipates fluctuations in the mix of product sales and cannot meaningfully determine at this early stage if our gross margin will increase or decrease with any degree of accuracy.


Operating Expenses


Operating expenses include costs related to personnel, professional fees, travel and entertainment, public company costs, insurance and other office related costs and costs to promote and sell our products. Operating costs increased $501,502 to $569,501 during the year ended April 30, 2016 compared to $67,999 during the year ended April 30, 2015. Operating costs increased due to the Company beginning meaningful operations to promote and sell our products and administer the Company.

 

Other Income (Expense)


All the elements of other income (expense) relate to our convertible promissory notes. During the year ended April 30, 2016, the Company incurred $26,711 of interest expense related to the stated interest and $694,188 for the accretion of the debt discount resulting from note issuance fees and the beneficial conversion feature contained on our convertible promissory notes.




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Liquidity and Working Capital


Our principal source of liquidity is cash in the bank and salable inventory. As of April 30, 2016 our current assets totaled $360,300 and were comprised primarily of $227,273 in cash and $129,870 of inventory and prepaid inventory. Due to the “start-up” nature of our business, we expect to incur losses as we develop and introduce our products and services. These conditions raise doubt about our ability to continue as a going concern. Management recognizes that in order for us to meet our capital requirements, and continue to operate, additional financing will be necessary. We expect to raise additional funds through private or public equity investment in order to expand the range and scope of business operations. We will try to raise additional funds through private or public equity but there is no assurance that such additional funds will be available for us to finance our operations on acceptable terms, if at all. If we are unable to raise additional capital or generate positive cash flow, it is unlikely that we will be able to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.


For the year ended April 30, 2016, net cash flows used in operating activities was $634,369, compared to $73,524 for the year ended April 30, 2015.


For the year ended April 30, 2016, net cash flows used in investing activities was $7,588, compared to $0 for the year ended April 30, 2015.


For the year ended April 30, 2016, we generated cash flows from financing activities of $834,004 from the issuance of common and preferred stock and convertible promissory notes compared to $54,999 for the year ended April 30, 2015. To date, we have financed our operations primarily through the issuance of debt and equity.



Off-Balance Sheet Arrangements


We are not currently a party to, or otherwise involved with, any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial position, operating results, liquidity, capital expenditures of capital resources.




31




MANAGEMENT


Directors and Executive Officers


The following table sets forth the name, age, and position of our sole executive officer and director. Our executive officers are elected annually by our Board of Directors. Our directors are elected annually by our shareholders at the annual meeting. Each director holds his office until his successor is elected and qualified or his earlier resignation or removal.


Name

Paul Feldman

Age

60

Position

Chief Executive Officer, President

Appointment Date

February 2, 2015

 

 

and Director

 


Paul Feldman, Director Chief Executive Officer and President


Paul Feldman has served as our sole Director, President and Chief Executive Officer since February 2, 2015. From October 2011 to January 29, 2015, Mr. Feldman served as President of Cobra Xtreme Video, Inc., a reseller of video cameras. From November 1, 2009 through September 30, 2011, Mr. Feldman was not employed.


Mr. Feldman received a Bachelor of Science from Duke University in 1978.


Term of Office


Our directors serve for a one-year term to hold office until the next annual meeting of stockholders and until their successors are elected and qualified, or until their earlier death, retirement, resignation or removal. Executive officers serve at the discretion of the Board of Directors, and are elected or appointed to serve until the next Board of Directors meeting following the annual meeting of stockholders. Our executive officers are appointed by our Board of Directors and hold office until removed by the Board.


Family Relationships


There are no family relationships among our directors and executive officers.


Legal Proceedings


No officer, director, or persons nominated for such positions, promoter or significant employee has been involved in the last ten years in any of the following:


·

Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time,

·

Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses),

·

Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities,

·

Being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

·

Having any government agency, administrative agency, or administrative court impose an administrative finding, order, decree, or sanction against them as a result of their involvement in any type of business, securities, or banking activity.

·

Being the subject of a pending administrative proceeding related to their involvement in any type of business, securities, or banking activity.

·

Having any administrative proceeding been threatened against you related to their involvement in any type of business, securities, or banking activity.



32




Director Independence


Paul Feldman is our sole officer and director. Mr. Feldman is also our majority shareholder. Mr. Feldman is not “independent” as the term is used in Item 7(d)(3)(iv)(B) of Schedule 14A under the Securities Exchange Act of 1934, as amended, and as defined by Rule 4200(a)(15) of the NASDAQ Marketplace Rules.


Board Committees


We do not have any standing audit, nominating, and compensation committees of the Board of Directors, or committees performing similar functions.


Code of Business Conduct and Ethics


We do not currently have a Code of Ethics applicable to our principal executive, financial, or accounting officer. All Board actions have been taken by written action rather than formal meetings.





33




EXECUTIVE COMPENSATION


The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the officer and directors for services rendered in all capacities for the years ending April 30, 2016 and 2015. No other officers and directors were compensated during the years ended 2016 and 2015.





Names and Principal Position



Year Ended April 30




Salary ($)




Bonus ($)



Stock Awards ($)



Option Awards ($)


Non-Equity Incentive Plan Compensation Earnings ($)

Non-Qualified

Deferred Compensatio n Earnings ($)



All Other Compensation ($)




Total ($)

Paul Feldman, Chief Executive Officer, President and Director

2016

2015

$81,461

$  9,000

0

0

0

0

0

0

0

0

0

0

0

0

$81,461

$  9,000


(1)

On February 2, 2015, Paul Feldman purchased 10,000,000 shares of our common stock for $0.0001 per share or an aggregate of $1,000 from our former president. On December 1, 2015, and September 12, 2016, we approved the issuance of 1,000,000 and 4,000,000 shares of our non-convertible Series A Preferred Stock to Mr. Feldman which entitle him to 200,000 votes per share or an aggregate of 1,000,000,000 on all matters submitted to our common stockholders. We valued the 1,000 Series A shares at $0.0001 per share or an aggregate of $5,000. As a result of Mr. Feldman’s ownership of 10,000,000 common shares and 1,000,000 Series A Preferred Stock he holds an aggregate of 86% of the votes on all matters submitted to a vote of our stockholders. As such, he controls all matters submitted to a vote of our stockholders.




34




OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END APRIL 30, 2016 AND APRIL 30, 2015
















 









Number of Securities Underlying Unexercised Options

(#)

Exercisable









Number of Securities Underlying Unexercised Options

(#)

Unexercisable






Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options

(#)












Option Exercise Price

($)













Option Expiration Date

 








Number of Shares or Units of Stock That Have Not Vested

(#)






Market Value of Shares or Units of Stock That Have Not Vested ($)

 



Equity Incentive Plan Awards: Number Of Unearned Shares, Units or Other Rights That Have Not Vested (#)

 

Equity

Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)

 

Paul Feldman 2016



0



0



0



0



0



0



0



0



0

2015

0

0

0

0

0

0

0

0

0


We paid our sole officer and director, Paul Feldman $81,461 and $9,000 during the year ended April 30, 2016 and April 30, 2015, respectively. Mr. Feldman receives an annual salary of $100,000 beginning in November of 2015. We based his salary and stock bonuses upon the hours committed, his experience and the level of skill required to perform services rendered.

Our board of directors determines the compensation paid to our executive officers based upon the years of service to us, whether services are provided on a full time basis and the experience and level of skill required.

We may award our officers and directors shares of common stock as non-cash compensation as determined by the board of directors from time to time. The board will base its decision to grant common stock as compensation on the level of skill required to perform the services rendered and time committed to providing services to us.

At no time during the last fiscal year with respect to any person listed in the table above was there:


·

any outstanding option or other equity-based award re-priced or otherwise materially modified (such as by extension of exercise periods, the change of vesting or forfeiture conditions, the change or elimination of applicable performance criteria, or the change of the bases upon which returns are determined);

·

any waiver or modification of any specified performance target, goal or condition to payout with respect to any amount included in non-stock incentive plan compensation or payouts;

·

any option or equity grant;

·

any non-equity incentive plan award made to a named executive officer;

·

any nonqualified deferred compensation plans including nonqualified defined contribution plans; or

·

any payment for any item to be included under the heading “All Other Compensation” in the Summary Compensation Table.




35




Employment Agreements with Management


On November 24, 2015, we entered into an agreement with Paul Feldman, our Chief Executive Officer, President, Treasurer and Director, to provide services to us. The agreement has a term of two years and requires us to pay $100,000 per year to Mr. Feldman for his services as our Chief Executive Officer, President, Treasurer and Director.


Our Board of Directors determines the compensation paid to our executive officers, based upon the years of service to us, whether services are provided on a full time basis and the experience and level of skill required.


We may award our officers and directors shares of common stock as non-cash compensation as determined by the Board of Directors from time to time. The Board of Directors will base its decision to grant common stock as compensation on the level of skill required to perform the services rendered and time committed to providing services to us.


Outstanding Equity Awards at the End of the Fiscal Year


We do not have and have never had any equity compensation plans and therefore no equity awards are outstanding as of the date of this prospectus.


Director Compensation


Our directors do not receive any other compensation for serving on the Board of Directors.


Bonuses and Deferred Compensation


We do not have any bonus, deferred compensation or retirement plan. All decisions regarding compensation are determined by our Board of Directors.


Options and Stock Appreciation Rights


We do not currently have a stock option or other equity incentive plan. We may adopt one or more such programs in the future.


Payment of Post-Termination Compensation


We do not have change-in-control agreements with any of our directors or executive officers, and we are not obligated to pay severance or other enhanced benefits to executive officers upon termination of their employment.


Involvement in Certain Legal Proceedings


There have been no events under any bankruptcy act, no criminal proceedings, no judgments, injunctions, orders or decrees material to the evaluation of the ability and integrity of any of our directors, executive officers, promoters or control persons during the past ten years.


Board of Directors


All directors hold office until the next annual meeting of shareholders and until their successors have been duly elected and qualified. Officers are elected by and serve at the discretion of the Board of Directors.


Our directors are not reimbursed for expenses incurred by them in connection with attending board meetings and they do not receive any other compensation for serving on the Board of Directors.




36



CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


In May 2013, we received $1,700 from our former president, at no cost to us, which we accounted for as a contribution of capital.


During the three month period ended October 31, 2013, our former President paid an aggregate of $22,284 of our obligations which consisted primarily of auditor, legal, and transfer agent fees. These transactions were accounted for as capital contributions.


During the three month period ended January 31, 2014, our former president personally paid $1,750 of our obligations to our auditor.  The transaction was accounted for as a capital contribution.


On September 27, 2013, we sold 7,500,000 shares of our common stock to Douglas Ward, our former Chief Executive Officer and President at the price of $0.001 per share for an aggregate of $7,500.


On November 24, 2015, we entered into an agreement with Paul Feldman, our Director, Chief Executive Officer and President, to provide services to us. The agreement has a term of two years and requires us to pay $100,000 per year to Mr. Feldman for his services as our Director, Chief Executive Officer and President.


On December 1, 2015 and September 12, 2016, we approved the issuance of 1,000,000 and 4,000,000 shares of our non-convertible Series A Preferred Stock to Mr. Feldman which entitle him to 200,000 votes per share or an aggregate of 200,000,000 on all matters submitted to our common stockholders. We valued the 1,000 Series A shares at $0.0001 per share or an aggregate of $5,000. As a result of Mr. Feldman’s ownership of 10,000,000 common shares and 1,000,000 Series A Preferred Stock he holds approximately 85.8% of the votes on all matters submitted to a vote of our stockholders. Both before and after the issuance of the 5,000,000 Series A Preferred Stock to Mr. Feldman he had the ability to control all matters submitted to a vote of our stockholders.


During the three month period ended January 31, 2014, our former president personally paid $1,750 of our obligations to our auditor.  The transaction was accounted for as a capital contribution.


Except as set forth above, none of the following persons has any direct or indirect material interest in any transaction to which we are a party in the prior two years or in any proposed transaction to which we are proposed to be a party:


·

Any of our directors or officers;

·

Any proposed nominee for election as our director;

·

Any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our shares; or

·

Any relative or spouse of any of the foregoing persons, or any relative of such spouse, who has the same house as such person or who is a director or officer of any parent or subsidiary of our company.





37



SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


The following table sets forth certain information regarding our shares of common stock beneficially owned as of the date of this prospectus, for (i) each stockholder known to be the beneficial owner of 5% or more of our outstanding shares of common stock, (ii) each named executive officer and director, and (iii) all executive officers and directors as a group. A person is considered to beneficially own any shares: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person has the right to acquire beneficial ownership at any time within sixty days through an exercise of stock options or warrants or otherwise. Unless otherwise indicated, voting and investment power relating to the shares shown in the table for our directors and executive officers is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children.


For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within sixty days of the date of this prospectus. For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within sixty days of the Closing Date is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership.


Unless otherwise specified, the address of each of the persons set forth below is in care of the Company at 130  Iowa Lane, Suite 102, Cary, North Carolina 27511.



Name of Beneficial Owner

Amount and Nature of Beneficial Ownership


Percentage Held (1)


  COMMON STOCK

Paul Feldman, Director, Chief

Executive Officer & President (2)

10,000,000

5.65%

All Officers & Directors (1 Person)

10,000,000

5.65%


  PREFERRED STOCK

Paul

Feldman

Director,

Chief

Executive Officer & President (2)

5,000,000

100%

All Officers and Directors (1 Person)

5,000,000

100%


(1)

Based on 177,117,321 shares of common stock issued and outstanding as of the date of this prospectus. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable.

(2)

On February 2, 2105, Paul Feldman purchased 10,000,000 shares of our common stock for $0.0001 per share or an aggregate of $1,000 from our former president. On December 1, 2015 and September 12, 2106, we approved the issuance of a total of 5,000,000 shares of our non-convertible Series A Preferred Stock to Mr. Feldman which entitle him to 200,000 votes per share or an aggregate of 1,000,000,000 on all matters submitted to our common stockholders. We valued the 5,000 Series A shares at $0.0001 per share or an aggregate of $5,000. As a result of Mr. Feldman’s ownership of 10,000,000 common shares and 5,000,000 Series A Preferred Stock he holds an aggregate of 1,010,000,000 of 1,177,117,321 total votes representing approximately 86% of the votes on all matters submitted to a vote of our stockholders. Both before and after the issuance of the 5,000,000 Series A Preferred Stock to Mr. Feldman he had the ability to control all matters submitted to a vote of our common stockholders.


This table above is based upon information derived from our stock records. Unless otherwise indicated in the footnotes to this table are subject to community property laws where applicable, each of the shareholders named in this table has sole or shared voting and investment power with respect to the shares indicated as beneficially owned.




38




LEGAL PROCEEDINGS


We are not aware of any pending or threatened legal proceedings in which we are involved.


CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE


None.


INTEREST OF NAMED EXPERTS


The financial statements for the years ended April 30, 2016 and 2015, included in this prospectus have been audited by Baum & Company P.A., an independent registered public accounting firm, to the extent and for the periods set forth in our report and are incorporated herein in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.


Eric P. Littman, P.A. has provided an opinion on the validity of the shares of our common stock being offered pursuant to this prospectus.


No expert named in the registration statement of which this prospectus forms a part as having prepared or certified any part thereof (or is named as having prepared or certified a report or valuation for use in connection with such registration statement) or counsel named in this prospectus as having given an opinion upon the validity of the securities being offered pursuant to this prospectus or upon other legal matters in connection with the registration or offering such securities was employed for such purpose on a contingency basis. Also at the time of such preparation, certification or opinion or at any time thereafter, through the date of effectiveness of such registration statement or that part of such registration statement to which such preparation, certification or opinion relates, no such person had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in our company or any of its parents or subsidiaries. Nor was any such person connected with our company or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer or employee.


DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES LIABILITIES


Our Bylaws, subject to the provisions of Florida Law, contain provisions which allow the corporation to indemnify any person against liabilities and other expenses incurred as the result of defending or administering any pending or anticipated legal issue in connection with service to us if it is determined that person acted in good faith and in a manner which he reasonably believed was in the best interest of the corporation. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.




39



ADDITIONAL INFORMATION


We filed with the Securities and Exchange Commission a registration statement under the Securities Act for the securities in this offering. This prospectus does not contain all of the information in the registration statement and the exhibits and schedule that were filed with the registration statement. For further information with respect to us and our securities, we refer you to the registration statement and the exhibits and schedule that were filed with the registration statement. Statements contained in this prospectus about the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and we refer you to the full text of the contract or other document filed as an exhibit to the registration statement. A copy of the registration statement and the exhibits and schedules that were filed with the registration statement may be inspected without charge at the Public Reference Room maintained by the Securities and Exchange Commission at 100 F Street, N.E. Washington, DC 20549, and copies of all or any part of the registration statement may be obtained from the Securities and Exchange Commission upon payment of the prescribed fee. Information regarding the operation of the Public Reference Room may be obtained by calling the Securities and Exchange Commission at 1-800-SEC- 0330. The Securities and Exchange Commission maintains a website that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC. The address of the website is www.sec.gov.


We file periodic reports under the Exchange Act, including annual, quarterly and special reports, and other information with the Securities and Exchange Commission. These periodic reports and other information are available for inspection and copying at the regional offices, public reference facilities and website of the Securities and Exchange Commission referred to above.




40




INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

PAGE #

 

Balance Sheets as of July 31, 2016 (Unaudited) and April 30, 2016

 

 

F-1

 

Statements of Operations (Unaudited) for the Three Months Ended July 31, 2016 and 2015

 

 

F-2

 

Statements of Stockholders' Equity (Deficit) for the three months ended July 31, 2016 (Unaudited) and year ended April 30, 2016

 

 

F-3

 

Statements of Cash Flows (Unaudited) for the Three Months Ended July 31, 2016 and 2015

 

 

 F-4

 

Notes to Financial Statements

 

 

 F-5

 

Report of Baum & Company, P.A.

 

 

 F-16

 

Balance Sheets as of April 30, 2016 and 2015

 

 

 F-17

 

Statements of Operations for the Years Ended April 30, 2016 and 2015

 

 

F-18

 

Statements of Stockholders' Equity (Deficit) for the years ended April 30, 2016 and 2015

 

 

F-19

 

Statements of Cash Flows for the Years Ended April 30, 2016 and 2015

 

 

F-20

 

Notes to Financial Statements

 

 

 F-21

 





41




Force Protection Video Equipment Corporation

 

 

 

 

Balance Sheets

 

 

 

 

 

 

 

 

July 31,

 

April 30,

 

 

 

 

2016

 

2016

ASSETS

 

 (Unaudited)

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

$

110,051 

 

$

227,273 

 

Inventory

 

142,457 

 

70,361 

 

Prepaid inventory

 

24,000 

 

59,509 

 

Accounts receivable

 

4,536 

 

3,157 

 

 

Total current assets

 

281,044 

 

360,300 

 

Property and equipment, net of accumulated depreciation of $1,412 and $476, respectively

 

22,656 

 

7,112 

 

Deposits

 

1,945 

 

1,945 

 

 

Total assets

 

$

305,645 

 

$

369,357 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable and accrued expenses

 

$

63,983 

 

$

30,059 

 

Convertible promissory notes net of discount of $78,655 and $204,718, respectively

 

194,930 

 

91,074 

 

 

Total current liabilities

 

258,913 

 

121,133 

Long-term liabilities

 

963 

 

983 

 

 

Total liabilities

 

259,876 

 

122,116 

Commitments and contingencies (Note 5)

 

 

 

 

Stockholders' equity

 

 

 

 

 

Preferred stock, $0.0001 par value 5,000,000 shares authorized; issued and outstanding 1,000,000 at July 31, 2016 and April 30, 2016.

 

100 

 

100 

 

Common stock, $0.0001 par value 750,000,000 shares authorized; issued and outstanding 88,035,499 and 40,525,595 at July 31, 2016 and April 30, 2016, respectively.

 

8,803 

 

4,052 

 

Additional paid-in capital

 

2,001,203 

 

1,718,214 

 

Accumulated deficit

 

(1,964,337)

 

(1,475,125)

 

 

Total stockholders' equity

 

45,769 

 

247,241 

 

 

Total liabilities and stockholders' equity

 

$

305,645 

 

$

369,357 

 

 

 

 

 

 

 

(The accompanying notes are an integral part of these financial statements)





F-1




Force Protection Video Equipment Corporation

 

 

 

Statements of Operations (Unaudited)

 

 

 

For the Three Months Ended July 31, 2016 and 2015

 

 

 

 

 

 

Three Months Ended July 31,

 

 

 

2016

 

2015

Income

 

 

 

 

Net revenue

$

15,712 

 

$

15,935 

 

Cost of goods sold

11,404 

 

9,689 

 

 

Gross profit

4,308 

 

6,246 

 

 

 

 

 

 

Operating expenses

 

 

 

 

General and administrative

167,349 

 

59,288 

 

Sales and marketing

58,627 

 

 

 

Total operating expenses

225,976 

 

59,288 

 

 

Loss from operations

(221,668)

 

(53,042)

 

 

 

 

 

 

Other income (expense)

 

 

 

 

Interest expense

(6,481)

 

 

Accretion of debt discount

(261,063)

 

 

 

Total other income (expense)

(267,544)

 

Loss before taxes

(489,212)

 

(53,042)

Provision for income taxes

 

Net loss

$

(489,212)

 

$

(53,042)

 

 

 

 

 

 

Net (loss) per common share basic and diluted

$

(0.01)

 

$

(0.00)

 

 

 

 

 

 

Weighted average common shares outstanding basic and diluted

58,994,673 

 

18,680,714 

 

 

 

 

 

 

(The accompanying notes are an integral part of these financial statements)





F-2





Force Protection Video Equipment Corporation

 

 

 

 

 

 

 

 

 

 

 

 

 

Statement of Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended July 31, 2016 and Year Ended April 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

Total

 

 

Preferred Stock

 

Common Stock

 

paid-in

 

Accumulated

 

Stockholders'

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Deficit

 

Equity

Balance, April 30, 2015

-

 

$

-

 

18,295,000

 

$

1,829

 

$

254,854

 

$

(213,124)

 

$

43,559 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock issued for cash

1,000,000

 

100

 

-

 

-

 

900

 

 

1,000 

 

Common stock issued for cash

-

 

-

 

450,000

 

45

 

44,955

 

 

45,000 

 

Common stock issued in exchange for services

-

 

-

 

10,095

 

1

 

14,499

 

 

14,500 

 

Discount on convertible promissory note due to common stock issued

-

 

-

 

31,912

 

3

 

17,997

 

 

18,000 

 

Common stock issued upon conversion of convertible promissory notes

-

 

-

 

21,738,588

 

2,174

 

630,599

 

 

632,773 

 

Discount on convertible promissory note due to beneficial conversion feature

-

 

-

 

-

 

-

 

754,410

 

 

754,410 

 

Net loss

-

 

-

 

-

 

-

 

-

 

(1,262,001)

 

(1,262,001)

Balance, April 30, 2016

1,000,000

 

100

 

40,525,595

 

4,052

 

1,718,214

 

(1,475,125)

 

247,241 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued upon conversion of convertible promissory notes

-

 

-

 

47,509,904

 

4,751

 

177,989

 

 

182,740 

 

Discount on convertible promissory note due to beneficial conversion feature

-

 

-

 

-

 

-

 

105,000

 

 

105,000 

 

Net loss

-

 

-

 

-

 

-

 

-

 

(489,212)

 

(489,212)

Balance, July 31, 2016 (Unaudited)

1,000,000

 

$

100

 

88,035,499

 

$

8,803

 

$

2,001,203

 

$

(1,964,337)

 

$

45,769 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(The accompanying notes are an integral part of these financial statements)





F-3




Force Protection Video Equipment Corporation

 

 

 

Statements of Cash Flows (Unaudited)

 

 

 

For the Three Months Ended July 31, 2016 and 2015

 

 

 

 

 

 

Three Months Ended July 31,

 

 

 

2016

 

2015

Cash flows from operating activities:

 

 

 

 

Net (Loss)

 $    (489,212)

 

 $      (53,042)

 

Adjustments to reconcile net loss to net cash provided (used in) operating activities:

 

 

 Depreciation and Amortization

                 936

 

                    -   

 

 

Accretion of debt discount

         261,063

 

                    -   

 

Changes in assets and liabilities:

   

 

 

 

 

(Increase) decrease in accounts receivable

            (1,379)

 

            (6,303)

 

 

(Increase) decrease in inventory

(72,096)

 

            (2,052)

 

 

(Increase) decrease in other assets

35,509

 

         (20,500)

 

 

Increase (decrease) in accounts payable and accrued expenses

36,957

 

5,507

 

 

Increase (decrease) in other liabilities

(20)

 

                    -   

 

 

Net cash (used) by operating activities

       (228,242)

 

         (76,390)

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchase of equipment and vehicles

         (16,480)

 

               (671)

 

Net cash (used) by investing activities

         (16,480)

 

               (671)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Proceeds from sale of common stock

                    -   

 

           45,000

 

Proceeds from sale of preferred stock

                    -   

 

                    -   

 

Proceeds from convertible promissory notes

         127,500

 

                    -   

 

Net cash provided by financing activities

         127,500

 

           45,000

 

 

 

 

 

 

Increase (decrease) in cash

       (117,222)

 

         (32,061)

Cash and cash equivalents at beginning of period

         227,273

 

           35,226

Cash and cash equivalents at end of period

 $      110,051

 

 $          3,165

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

Cash paid for interest

 $                 -   

 

 $                 -   

 

Cash paid for income taxes

 $                 -   

 

 $                 -   

 

 

 

 

 

 

 Non-cash operating activities:

 

 

 

 

Common stock issued for conversion of notes payable

 $      182,740

 

 $                 -   

 

 

 

 

 

 

(The accompanying notes are an integral part of these financial statements)




F-4



FORCE PROTECTION VIDEO EQUIPMENT CORP.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED JULY 31, 2016 AND 2015


NOTE 1 – ORGANIZATION AND GOING CONCERN


Organization


Force Protection Video Equipment Corp., (the Company), was incorporated on March 11, 2011, under the laws of the State of Florida as M Street Gallery, Inc.  On September 25, 2013, we changed our name to Enhance-Your-Reputation.com, Inc. and changed our business to providing reputation management and enhancement services. On February 2, 2015 the Company changed its name to Force Protection Video Corp.  to focus on the sale of mini body video cameras and accessories to consumers and law enforcement.  


Going Concern


The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America and applicable to a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.


During the three months ended July 31, 2016, the Company recognized revenue of $15,712 and a net operating loss of $221,668. As of July 31, 2016, the Company had working capital of $22,131 and an accumulated deficit of $1,964,337.


In view of these conditions, the ability of the Company to continue as a going concern is in doubt and dependent upon achieving a profitable level of operations and on the ability of the Company to obtain necessary financing to fund ongoing operations. Historically, the Company has relied upon funds from the sale of shares of stock, issuance of promissory notes and loans from its shareholders and private investors to finance its operations and growth. Management is planning to raise necessary additional funds for working capital through loans and/or additional sales of its common stock. However, there is no assurance that the Company will be successful in raising additional capital or that such additional funds will be available on acceptable terms, if at all. Should the Company be unable to raise this amount of capital its operating plans will be limited to the amount of capital that it can access. These financial statements do not give effect to any adjustments which will be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying financial statements.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES    


Basis of Presentation


The unaudited financial statements of Force Protection Video Equipment Corp. (the “Company”) as of July 31, 2016, and for the three months ended July 31, 2016 and 2015, have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting. Accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended April 30, 2016, as filed with the Securities and Exchange Commission as part of the Company’s Form 10-K. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the interim financial information have been included. The Company did not record an income tax provision during the periods presented due to net taxable losses. The results of operations for any interim period are not necessarily indicative of the results of operations for the entire year.




F-5




Estimates


The preparation of the Company’s financial statements requires management to make estimates and use assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. On an on-going basis, the Company evaluates its estimates. Actual results and outcomes may differ materially from these estimates and assumptions.


Cash and Cash Equivalents


The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents.


Inventory


Our inventory is comprised of finished goods, cameras and recording equipment. The Company’s inventory is stated at the lower of cost or market. The Company also makes prepayments against the future delivery of inventory classified as prepaid inventory.


Accounts Receivable


Accounts receivable are reported at the customers' outstanding balances.  The Company does not have a history of significant bad debt and has not recorded any allowance for doubtful accounts.  Interest is not accrued on overdue accounts receivable.  The Company evaluates receivables on a regular basis for potential reserve.


Property and Equipment


Fixed assets are carried at cost, less accumulated depreciation and amortization. Major improvements are capitalized, while repair and maintenance are expensed when incurred. Renewals and betterments that materially extend the life of the assets are capitalized. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in income for the period.


For federal income tax purposes, depreciation is computed under the modified accelerated cost recovery system. Depreciation for financial statement purposes is computed on a straight-line basis over estimated useful lives of the related assets. The estimated useful lives of depreciable assets are:


   

  

Estimated

  

  

Useful Lives

 Vehicles

 

     5 years

Office Equipment

  

3 - 5 years

Furniture & equipment

  

5 - 7 years


Income Taxes


The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credits and loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carry-forwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized. The Company reports a liability for unrecognized tax benefits resulting from uncertain income tax positions, if any, taken or expected to be taken in an income tax return. Estimated interest and penalties are recorded as a component of interest expense or other expense, respectively.




F-6




Revenue Recognition


The Company recognizes revenue when (a) pervasive evidence of an arrangement exists (b) products are delivered or services have been rendered (c) the sales price is fixed or determinable, and (d) collection is reasonably assured.


Advertising costs


Advertising costs are anticipated to be expensed as incurred. The Company recognized $2,120 and $0 in advertising costs during the three months ended July 31, 2016 and 2015, respectively.


Stock Based Compensation


The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 718-10 and the conclusions reached by FASB ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50.


Fair Value Measurements


Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company utilizes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:


Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;


Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and


Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.


As of July 31, 2016 and April 30, 2016, the Company did not have any assets or liabilities that were required to be measured at fair value on a recurring basis or on a non-recurring basis.  


Fair Value of Financial Instruments


The Company’s financial instruments consist of cash and cash equivalents and accounts payable and accrued expenses. The carrying amounts of the Company’s financial instruments approximate fair value because of the short term maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect those estimates. We do not hold or issue financial instruments for trading purposes, nor do we utilize derivative instruments.




F-7




Net Income (Loss) Per Share


The computation of basic earnings per share (“EPS”) is based on the weighted average number of shares that were outstanding during the period, including shares of common stock that are issuable at the end of the reporting period. The computation of diluted EPS is based on the number of basic weighted-average shares outstanding plus the number of common shares that would be issued assuming the exercise of all potentially dilutive common shares outstanding using the treasury stock method. The computation of diluted net income per share does not assume conversion, exercise or contingent issuance of securities that would have an antidilutive effect on earnings per share. Therefore, when calculating EPS, if the Company experienced a loss, there is no inclusion of dilutive securities as their inclusion in the EPS calculation is antidilutive. Furthermore, options and warrants will have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options or warrants (they are in the money).


Following is the computation of basic and diluted net loss per share for the three months ended July 31, 2016 and 2015:


 

 

 

Three Months Ended

 

 

 

July 31,

 

 

 

 

2016

2015

Basic and Diluted EPS Computation

 

 

 

Numerator:

 

 

 

 

Loss available to common stockholders'

 

$

(489,212)

$

(53,042)

 

 

 

 

 

Denominator:

 

 

 

 

Weighted average number of common shares outstanding

 

58,994,673 

18,148,846 

 

 

 

 

 

Basic and diluted EPS

 

$

(0.01)

$

(0.00)

 

 

 

 

 

Potentially dilutive securities not included in the calculation of diluted net loss per share attributable to common stockholders because to do so would be anti-dilutive are as follows (in common stock equivalent shares):

 

 

 

 

 

 

Convertible promissory notes

 

160,932,678

-


Concentrations of risk


During the three months ended July 31, 2016, one customer accounted for 10.2% of sales. During the three months ended July 31, 2015, one customer accounted for 16.2% of sales.


The Company relies on third parties for   the supply and manufacture of its capture devices, some of which are sole-source suppliers.  The Company believes that outsourcing manufacturing enables greater scale and flexibility. As demand and product lines change, the Company periodically evaluates the need and advisability of adding manufacturers to support its operations.  In instances where a supply and manufacture agreement does not exist or suppliers fail to perform their obligations, the Company may be unable to find alternative suppliers or satisfactorily deliver its products to its customers on time, if at all.  During the three months ended July 31, 2016, one supplier accounted for 91.7% of our inventory purchases.




F-8




Recent Accounting Pronouncements


In September 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-16, Business Combinations (Topic 805). This ASU eliminates the requirement for retrospective application of measurement period adjustments relating to provisional amounts recorded in a business combination as of the acquisition date. The amendments in this update require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. For public business entities, the amendments will be effective for fiscal years beginning after December 15, 2015. Early adoption is permitted. The Company does not expect this accounting update to have a material effect on its consolidated financial statements in future periods, although that could change.


In April 2015, the FASB issued ASU 2015-05, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40). This ASU provides guidance about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the software license element of the arrangement should be accounted for consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the arrangement should be accounted for as a service contract. For public business entities, the amendments will be effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted.


In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This ASU requires retrospective adoption and will be effective for fiscal years beginning after December 15, 2015 and for interim periods within those fiscal years. We expect the adoption of this guidance will not have a material impact on our financial statements.


In February 2015, the FASB issued ASU 2015-02, “Amendments to the Consolidation Analysis”, which amends the consolidation requirements in ASC 810 and significantly changes the consolidation analysis required under U.S. GAAP relating to whether or not to consolidate certain legal entities. Early adoption is permitted. The Company’s effective date for adoption is January 1, 2016. The Company does not expect this accounting update to have a material effect on its consolidated financial statements in future periods, although that could change.


In January 2015, the FASB issued ASU 2015-01, “Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items”, which eliminates the concept from U.S. GAAP the concept of an extraordinary item. Under the ASU, an entity will no longer (1) segregate an extraordinary item from the results of ordinary operations; (2) separately present an extraordinary item on its income statement, net of tax, after income from continuing operations; or (3) disclose income taxes and earnings-per-share data applicable to an extraordinary item. Early adoption is permitted. The Company’s effective date for adoption is May 1, 2016. The Company does not expect this accounting update to have a material effect on its consolidated financial statements in future periods, although that could change.


We review new accounting standards as issued. Although some of these accounting standards issued or effective after the end of our previous fiscal year may be applicable to us, we have not identified any standards that we believe merit further discussion. We believe that none of the new standards will have a significant impact on our financial statements.




F-9




NOTE 3 - FIXED ASSETS


Fixed assets consisted of the following:


 

July 31,

 

April 30,

 

2016

 

2016

 Vehicles

15,376 

 

Furniture and fixtures

6,212 

 

6,212 

Computers and office equipment

 

 

1,376 

   Total fixed assets

24,068 

 

7,588 

Accumulated depreciation

(1,412)

 

(476)

Total fixed assets

$

22,656 

 

$

7,112 


During the three months ended July 31, 2016 and 2015, the Company recognized $936 and $0, respectively, in depreciation expense.


NOTE 4 – CONVERTIBLE PROMISSORY NOTES


Following is a summary of our outstanding convertible promissory notes as of July 31, 2016:


 

 

 

 

 

Current Balances

 

 

Lender

 

Issue Date

Maturity

 

Interest

 

Total

RDW Capital, LLC Note 1

11/10/2015

 

5/10/16

 $       10,293

 

 $      7,664

 

 $    17,957

RDW Capital, LLC Note 2

12/31/2015

 

6/30/16

        105,000

 

          5,089

 

     110,089

RDW Capital, LLC Note 3

3/10/2016

 

9/10/16

               792

 

             614

 

          1,406

RDW Capital, LLC Note 4

5/13/2016

 

11/13/16

        105,000

 

          1,818

 

     106,818

RDW Capital, LLC Note 5

5/20/2016

 

11/20/16

          52,500

 

             909

 

        53,409

   Totals

 

 

 

 

 $    273,585

 

 $    16,094

 

 $  289,679

Debt discount balance

 

 

        (78,655)

 

 

 

 

   Balance sheet balances

 

 

 $    194,930

 

 

 

 


Following is a summary of our outstanding convertible promissory notes as of April 30, 2016:


 

 

 

 

 

 

Current Balances

 

 

Lender

 

Issue Date

Maturity

Principle

 

Interest

 

Total

LG Capital Funding, LLC

4/20/2016

 

9/11/2016

 

 $       13,000

 

 $            34

 

 $    13,034

Black Forest Capital, LLC

10/8/2015

 

10/8/2016

 

          19,500

 

          3,001

 

        22,501

RDW Capital, LLC Note 1

11/10/2015

 

5/10/16

 

        157,500

 

          6,136

 

     163,636

RDW Capital, LLC Note 2

1/0/1900

 

6/30/16

 

        105,000

 

          2,861

 

     107,861

RDW Capital, LLC Note 3

3/10/2016

 

9/10/16

 

               792

 

             614

 

          1,406

   Totals

 

 

 

 

 

 $    295,792

 

 $    12,646

 

 $  308,438

Debt discount balance

 

 

 

      (204,718)

 

 

 

 

   Balance sheet balances

 

 

 

 $       91,074

 

 

 

 





F-10




The company determined that each convertible promissory notes conversion feature is indexed to the Company’s stock, which is an input to a fair value measurement of a fixed-for-fixed option on equity shares. Thus, the conversion feature of the notes meets the scope exception under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification ("ASC") 815-40-15-7 and treatment under ASC 470-20 – Debt with Conversion and Other Options is appropriate.


LG Capital Funding, LLC


On September 11, 2015 the Company entered into a Securities Purchase Agreement with LG Capital Funding, LLC ("LG") for the sale of an 8% convertible note in the principal amount of $81,000 and proceeds of $75,000 net of legal expenses (the “LG Note”).


The LG Note was convertible into common stock at a price equal to 60% of the lowest trading price during the 20 trading days immediately preceding the applicable conversion.  


The LG Note principle was discounted for the value of the legal fees of $6,000 and the intrinsic value of the beneficial conversion feature of $68,000. The resulting $74,000 discount was fully accreted through July 31, 2016 due to full repayment of the LG Note on May 2, 2016.


During the three months ended July 31, 2016, the Company recognized no interest expense and debt discount accretion of $7,741. On May 2, 2016, LG converted the remaining $13,034 of principal and interest into 775,844 shares of common.


Black Forest Capital, LLC


On October 8, 2015 the Company sold and Black Forest Capital, LLC (“Black Forest”) purchased a 10% convertible note in the principal amount of $53,000 (the “Black Forest Note”) of which the Company received $50,000 after payment of legal fees. The Black Forest Note matured in 12 months on October 8, 2016. The Black Forest Note was convertible into common stock, at Black Forest’s option anytime following the issuance date, at a price for each share of common stock equal to 40% of the lowest trading price during the 20 trading days immediately preceding the applicable conversion.


The Black Forrest Note principle was discounted for the value of legal fees of $3,000 and the intrinsic value of the beneficial conversion feature of $50,000. The calculated intrinsic value was $127,199. As this amount resulted in a total debt discount that exceeded the Black Forest Note principal, the discount recorded for the beneficial conversion feature was limited to the principal amount of the Black Forest Note. The resulting $53,000 discount was accreted through July 31, 2016 due to repayment of the Black Forest Note.


During the three months ended July 31, 2016, the Company recognized no interest expense and debt discount accretion of $9,992. During the three months ended July 31, 2016, Black Forrest converted the remaining $22,499 of principal and interest into 11,076,775 shares of common stock.


RDW Capital, LLC


On November 12, 2015, the Company entered into a Securities Purchase Agreement (“RDW SPA 1”) with RDW Capital, LLC (“RDW”), a Florida limited liability company. On November 12, 2015, the Company and RDW entered into the First Amended Securities Purchase Agreement. On November 12, 2015, the Company and RDW entered into the Second Amended Securities Purchase Agreement. On February 17, 2016, the Company and RDW entered into the Third Amended Securities Purchase Agreement. On February 17, 2016, the Company and RDW entered into the Fourth Amended Securities Purchase Agreement. On May 9, 2016, the Company and RDW entered into a Securities Purchase Agreement (“RDW SPA 2”). RDW SPA 1, amendments thereto and RDW SPA 2 may hereinafter be referred to collectively as, the “ RDW SPAs ”.




F-11




RDW Note 1 - In connection with RDW SPA 1 and amendments thereto, on November 12, 2016, the Company issued to RDW a convertible note (“RWD Note 1”) due on April 10, 2016 in the principal amount of $157,500 of which the Company received proceeds of $130,000 after payment of a $7,500 original issue discount (“ OID ”) and legal and due diligence fees totaling $20,000.


RDW Note 1 principle was discounted for the value of the OID, due diligence fees and the intrinsic value of the beneficial conversion feature. The calculated intrinsic value was $121,406. As this amount resulted in a total debt discount that was less than RDW Note 1 principal, the full $121,406 discount was recognized. The resulting $148,906 discount was accreted over the 5 month term of RDW Note 1 through April 10, 2016.


RDW Note 2 - In connection with RDW SPA 1 and amendments thereto, on December 31, 2015, the Company issued to RDW a convertible note (“RDW Note 2”) due on June 30, 2016 in the principal amount of $105,000 of which the Company received proceeds of $90,000 after payment of a $5,000 OID and due diligence fees totaling $10,000.


RDW Note 2 principle was discounted for the value of the OID, due diligence fees and the intrinsic value of the beneficial conversion feature. The calculated intrinsic value was $98,086. As this amount resulted in a total debt discount that exceeds RDW Note 2 principal, the discount recorded for the beneficial conversion feature was limited to the principal amount of RDW Note 2. The resulting $105,000 discount was accreted over the 5 month term of RDW Note 2 through June 30, 2016.


RDW Note 3 - In connection with RDW SPA 1 and amendments thereto, on March 10, 2016, the Company issued to RDW a convertible note (“RDW Note 3”) due on September 10, 2016 in the principal amount of $210,000 of which the Company received proceeds of $180,000 after payment of a $10,000 OID and due diligence fees totaling $20,000.


RDW Note 3 principal was discounted for the OID, due diligence fees, stock issued to an advisor in connection with RDW Note 3 totaling $18,000, and the intrinsic value of the beneficial conversion feature. The calculated intrinsic value was $227,391. As this amount resulted in a total debt discount that exceeded RDW Note 3 principal, the discount recorded for the beneficial conversion feature was limited to the principal amount of RDW Note 3. The resulting $210,000 discount was accreted through April 30, 2016, the date RDW Note 3 was paid down to a principal and interest balance of $1,405.


RDW Note 4 - In connection with RDW SPA 2, on May 13, 2016, the Company issued to RDW a convertible note (“RDW Note 4”) due on November 13, 2016 in the principal amount of $105,000 of which the Company received proceeds of $82,500 after payment of a $5,000 OID, $7,500 of legal fees and $10,000 of due diligence fees.


RDW Note 4 principle was discounted for the value of the OID, legal fees due diligence fees and intrinsic value of the beneficial conversion feature. The calculated intrinsic value was $70,000. As this amount resulted in a total debt discount that was less than RDW Note 4 principal, the full $70,000 discount was recognized. The resulting $92,500 discount is being accreted over the 6 month term of RDW Note 4 through November 13, 2016.


RDW Note 5 - In connection with RDW SPA 2, on May 20, 2016, the Company issued to RDW a convertible note (“RDW Note 5”) due on November 20, 2016 in the principal amount of $52,500 of which the Company received proceeds of $45,000 after payment of a $2,500 OID and $5,000 of due diligence fees.


RDW Note 5 principle was discounted for the value of the OID, due diligence fees and intrinsic value of the beneficial conversion feature. The calculated intrinsic value was $35,000. As this amount resulted in a total debt discount that was less than RDW Note 5 principal, the full $35,000 discount was recognized. The resulting $42,500 discount is being accreted over the 6 month term of RDW Note 5 through November 20, 2016.




F-12




RDW Note 1, RDW Note 2, RDW Note 3, RDW Note 4 and RDW Note 5 may hereinafter be referred to collectively as, the “ RDW Notes ”.


The RDW Notes have the following terms and conditions:


· The principal amount outstanding accrues interest at a rate of eight percent (8%) per annum.

· Interest is due and payable on each conversion date and on the Maturity Date.

· At any time, at the option of the holder, the RDW notes are convertible, into shares of our common stock at a conversion price equal to sixty percent (60%) of the lowest traded price of our common stock in the twenty (20) days prior to the conversion date, at any time, at the option of the holder (the Conversion Price ).

· T he RDW Notes are unsecured obligations.

· We may prepay the RDW Notes in whole or in part at any time with ten (10) days written notice to the holder for the sum of the outstanding principal and interest multiplied by one hundred and thirty percent (130%).  RDW may continue to convert the notes from the date of the notice of prepayment until the date of prepayment.

· Default interest of twenty-four percent (24%) per annum.

· Interest on overdue accrued and unpaid interest will incur a late fee of the lower of eighteen percent (18%) per annum or the maximum rate permitted by law.

· Upon an event of default, RDW may accelerate the outstanding principal, plus accrued and unpaid interest, and other amounts owing through the date of acceleration ( Acceleration ).

· Upon Acceleration, the amount due will be one hundred thirty percent (130%) of the outstanding principal amount of the Note and accrued and unpaid interest, together with payment of all other amounts, costs, expenses and liquidated damages.

· In the event of our default, at the request of the holder, we must pay one hundred fifty percent (150%) of the outstanding balance plus accrued interest and default interest.

· We must reserve three (3) times the amount of shares necessary for the issuance of common stock upon conversion. 

· Conversions of the RDW Notes shall not be permitted if such conversion will result in the holder owning more than four point ninety-nine percent (4.99%) of our common shares outstanding after giving effect to such conversion.


During the three months ended July 31, 2016, the Company recognized $6,483 of interest expense and $243,330 of debt discount accretion related to the RDW Notes.


During the three months ended July 31, 2016, RDW converted $147,207 of RDW Note 1 principal into 35,657,285 shares of common stock.


NOTE 5 – COMMITMENTS AND CONTINGENCIES


Product Warranties


Our products are sold with a one (1) year manufacturer’s warranty. The Company has no obligation to provide warranty service or replacement. The Company does offer an extended warranty for a fee. The extended warranty expires one year from the day the manufacturer warranty expires. Warranty costs during the second year of an extended warranty are born by the manufacturer. As a result, the Company has no, or limited warranty liability exposure.




F-13




Operating Lease


On March 21, 2015, the Company entered into a lease of office space at 130 Iowa Lane, Suite 102, Carry, North Carolina 27511. The lease expires on March 31, 2018. The Company has no other noncancelable operating leases. Future minimum lease payments under this operating lease with an initial term in excess of one year as of July 31, 2016 are as follows:


Fiscal Year

2017

$10,899

2018

$14,920

2019

$10,144

Thereafter

$0


During the three months ended July 31, 2016 and 2015, rent expense for office space totaled $3,694 and $2,250, respectively.


Supplier Purchase Commitments


The Company periodically makes contractual, advance inventory purchases in the ordinary course of business. As of July 31, 2016, the Company was obligated to purchase $11,000 of inventory under a non-exclusive distribution agreement.


NOTE 6 – STOCKHOLDER'S EQUITY


As of July 31, 2016 and April 30, 2015, there were 88,035,499 and 40,525,595 shares of common stock outstanding, respectively. As of July 31, 2016 and 2015 there were 1,000,000 and 0 shares of Series A Preferred Stock outstanding, respectively.


On January 19, 2016, we amended our Articles of Incorporation to increase our authorized common stock from 50,000,000 shares to 250,000,000 shares and authorized the creation of 1,000,000 shares of Series A preferred stock with each share being entitled to 200,000 (i.e., 200:1) votes per share and with no right of conversion into shares of common stock.


On August 4, 2016, we approved an amendment to our Articles of Incorporation to increase our authorized common stock from 250,000,000 shares to 750,000,000 shares and authorized Series A preferred stock from 1,000,000 shares to 5,000,000 shares. The amendment became effective September 8, 2016.


During the three months ended July 31, 2016, the company issued 47,509,904 shares of common stock upon the conversion of convertible promissory note principal and interest totaling $182,740.


During the year ended April 30, 2016 , the Company issued preferred stock and common stock as follows:


·

10,095 shares of common stock were issued in exchange for services valued at the close price of our stock resulting in stock compensation expense of $14,500.

·

31,912 shares of common stock were issued in connection with RDW Note 3 and valued at $18,000 as stated in the related agreements.

·

450,000 shares of common stock were issued for cash of $0.10 per share resulting in the Company receiving $45,000.  

·

1,000,000 shares of non-convertible Series A Preferred Stock to Paul Feldman, CEO, which entitle him to 200,000 votes per share or an aggregate of 200,000,000 votes on all matters submitted to our common stockholders. We valued the 1,000 Series A shares at $.0001 per share or an aggregate of $1,000.

·

21,738,588 shares of common stock were issued upon the conversion of $618,708 of convertible note principal and interest. 



F-14




NOTE 7 – SUBSEQUENT EVENTS


Management has reviewed material events subsequent of the quarterly period ended July 31, 2016 and prior to the filing of financial statements in accordance with FASB ASC 855 “Subsequent Events”.  


On August 4, 2016, we approved an amendment to our Articles of Incorporation to increase our authorized common stock from 250,000,000 shares to 750,000,000 shares and authorized Series A preferred stock from 1,000,000 shares to 5,000,000 shares. The amendment became effective September 8, 2016.


RDW converted $115,293 of convertible note principal into 80,281,822 shares of common stock.


On August 22, 2016, the Company entered into a Securities Purchase Agreement (“RDW SPA 3”) with RDW. In connection with RDW SPA 3, on August 22, 2016, the Company issued to RDW a convertible note (“RWD Note 6”) due on February 22, 2017 in the principal amount of $157,500 of which the Company received proceeds of $130,000 after payment of a $7,500 OID, $5,000 of legal fees and 15,000 of due diligence fees.


On September 6, 2016, we entered into a Registration Rights Agreement and a Securities Purchase Agreement (“RDW SPA 4”) with RDW. Pursuant to their terms, RDW agreed to purchase an aggregate of up to $350,000 in Subscription Amount of Notes, corresponding to an aggregate of $367,500 in Principal Amount of Notes. The purchase will occur in two (2) tranches (each a “Tranche”), with the first Tranche of $150,000 being closed upon execution of this Agreement (the “First Closing”). The second Tranche will be for $200,000 and will occur on the date that is two (2) Trading Days from the date the Registration Statement is declared effective by the Commission. In connection with the RDW SPA 4, on September 6, 2016, we issued to RDW a convertible note (“RDW Note 7”) due March 5, 2016, in the principal amount of $157,500, of which the Company received proceeds of $130,000 after payment of a $7,500 OID, $5,000 of legal fees and 15,000 of due diligence fees which constituted the First Closing.




F-15




Baum & Company, P.A.

Certified Public Accountants

1688 Meridian Avenue, Suite 504

Miami Beach, Florida 33139


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders

Force Protection Video Equipment Corp.


We have audited the accompanying balance sheet of Force Protection Video Equipment Corp. ("the Company") as of April 30, 2016 and 2015, and the related statements of operations, stockholders' deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.


We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.  Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Force Protection Video Equipment Corp. as of April 30,  and 2015, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.


The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has not generated positive net income since inception, has an accumulated deficit, and does not have positive cash flows from operating activities. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



Miami Beach, Florida

June 16, 2016

/s/ Baum & Company, P.A.




F-16




Force Protection Video Equipment Corporation

 

 

 

Balance Sheets

 

 

 

 

 

 

 

April 30,

 

 

 

 

2016

2015

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

227,273 

$

35,226 

 

Inventory

 

70,361 

 

Prepaid inventory

 

59,509 

25,350 

 

Accounts receivable

 

3,157 

 

 

Total current assets

 

360,300 

60,576 

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $476

7,112 

 

 

 

 

 

 

 

Deposits

 

1,945 

 

 

Total assets

 

$

369,357 

$

60,576 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

Accounts payable and accrued expenses

 

$

30,059 

$

17,017 

 

Convertible promissory notes net of discount of $204,718

91,074 

 

 

Total current liabilities

 

121,133 

17,017 

 

 

 

 

 

 

Long-term liabilities

 

983 

 

 

Total liabilities

 

122,116 

 

 

 

 

 

 

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

 

 

 

Stockholders' equity (deficit)

 

 

 

 

Preferred stock, $0.0001 par value 1,000,000 shares authorized; issued and outstanding 1,000,000 and 0 at April 30, 2016 and 2015, respectively.

100 

 

Common stock, $0.0001 par value 250,000,000 shares authorized; issued and outstanding 40,525,595 and 18,295,000 at April 30, 2016 and 2015, respectively.

4,052 

1,829 

 

Additional paid-in capital

 

1,718,214 

254,854 

 

Accumulated deficit

 

(1,475,125)

(213,124)

 

 

Total stockholders' equity (deficit)

 

247,241 

43,559 

 

 

Total liabilities and stockholders' equity (deficit)

$

369,357 

$

60,576 

 

 

 

 

 

 

(The accompanying notes are an integral part of these financial statements)



F-17




Force Protection Video Equipment Corporation

 

 

 

Statements of Operations

 

 

 

For the Years Ended April 30, 2016 and 2015

 

 

 

 

 

 

Years Ended April 30,

 

 

 

2016

 

2015

Income

 

 

 

 

Net revenue

$

67,964 

 

$

5,000 

 

Cost of goods sold

39,565 

 

 

 

Gross profit

28,399 

 

5,000 

Operating expenses

 

 

 

 

General and administrative

485,186 

 

67,136 

 

Sales and marketing

58,326 

 

863 

 

Product development

25,989 

 

 

 

Total operating expenses

569,501 

 

67,999 

 

 

Loss from operations

(541,102)

 

(62,999)

 

 

 

 

 

 

Other income (expense)

 

 

 

 

Interest expense

(26,711)

 

 

Accretion of debt discount

(694,188)

 

 

 

Total other income (expense)

(720,899)

 

Loss before taxes

(1,262,001)

 

(62,999)

Provision for income taxes

 

Net loss

$

(1,262,001)

 

$

(62,999)

 

 

 

 

 

 

Net (loss) per common share basic and diluted

$

(0.06)

 

$

(0.00)

 

 

 

 

 

 

Weighted average common shares outstanding basic and diluted

20,631,092 

 

18,148,846 

 

 

 

 

 

 

 

 

 

 

 

 

(The accompanying notes are an integral part of these financial statements)






F-18





Force Protection Video Equipment Corporation

 

 

 

 

 

 

 

 

 

 

 

Statement of Stockholders' Deficit

 

 

 

 

 

 

 

 

 

 

 

 

For the Years Ended April 30, 2016 and 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Total

 

 

Preferred Stock

 

Common Stock

 

paid-in

Accumulated

Stockholders'

 

 

Shares

 

Amount

Shares

 

Amount

Capital

Deficit

 

Equity

Balance, April 30, 2014

-

 

$

-

 

18,145,000

 

$

1,814

 

$

199,870

$

(150,125)

 

$

51,559 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for cash

-

 

-

 

150,000

 

15

 

54,984

 

54,999 

 

Net loss

-

 

-

 

-

 

-

 

-

(62,999)

 

(62,999)

Balance, April 30, 2015

-

 

-

 

18,295,000

 

1,829

 

254,854

(213,124)

 

43,559 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock issued for cash

1,000,000

 

100

 

-

 

-

 

900

 

1,000 

 

Common stock issued for cash

-

 

-

 

450,000

 

45

 

44,955

 

45,000 

 

Common stock issued in exchange for services

-

 

-

 

10,095

 

1

 

14,499

 

14,500 

 

Discount on convertible promissory note due to common stock issued

-

 

-

 

31,912

 

3

 

17,997

 

18,000 

 

Common stock issued upon conversion of convertible promissory notes

-

 

-

 

21,738,588

 

2,174

 

630,599

 

632,773 

 

Discount on convertible promissory note due to beneficial conversion feature

-

 

-

 

-

 

-

 

754,410

 

754,410 

 

Net loss

-

 

-

 

-

 

-

 

-

(694,188)

 

(694,188)

Balance, April 30, 2016

1,000,000

 

$

100

 

40,525,595

 

$

4,052

 

$

1,718,214

$

(907,312)

 

$

815,054 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(The accompanying notes are an integral part of these financial statements)

 

 

 

 

 





F-19




Force Protection Video Equipment Corporation

 

 

 

Statements of Cash Flows

 

 

 

For the Years Ended April 30, 2016 and 2015

 

 

 

 

 

 

Years Ended April 30,

 

 

 

2016

 

2015

Cash flows from operating activities:

 

 

 

 

Net (Loss)

 $(1,262,001)

 

 $(62,999)

 

Adjustments to reconcile net loss to net cash provided (used in) operating activities:

 

 

 Depreciation and Amortization

                476

 

              -   

 

 

Accretion of debt discount

         694,188

 

              -   

 

 

Share based compensation expense

           14,500

 

              -   

 

Changes in assets and liabilities:

   

 

 

 

 

(Increase) decrease in accounts receivable

           (3,157)

 

              -   

 

 

(Increase) decrease in inventory

(70,361)

 

              -   

 

 

(Increase) decrease in other assets

(36,104)

 

   (25,350)

 

 

Increase (decrease) in accounts payable and accrued expenses

27,107

 

14,825

 

 

Increase (decrease) in other liabilities

983

 

              -   

 

 

Net cash (used) by operating activities

       (634,369)

 

   (73,524)

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchase of equipment

           (7,588)

 

              -   

 

Net cash (used) by investing activities

           (7,588)

 

              -   

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Proceeds from sale of common stock

           45,000

 

     54,999

 

Proceeds from sale of preferred stock

             1,000

 

              -   

 

Proceeds from convertible promissory notes

         788,004

 

              -   

 

Net cash provided by financing activities

         834,004

 

     54,999

 

 

 

 

 

 

Increase (decrease) in cash

         192,047

 

   (18,525)

Cash and cash equivalents at beginning of period

           35,226

 

     53,751

Cash and cash equivalents at end of period

 $     227,273

 

 $  35,226

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

Cash paid for interest

 $                -   

 

 $           -   

 

Cash paid for income taxes

 $                -   

 

 $           -   

 

 

 

 

 

 

 Non-cash operating activities:

 

 

 

 

Value of common stock issued in exchange for services

 $        14,500

 

 $           -   

 

 

 

 

 

 

(The accompanying notes are an integral part of these financial statements)

 

 



F-20



FORCE PROTECTION VIDEO EQUIPMENT CORP.

NOTES TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED APRIL 30, 2016 AND 2015


NOTE 1 – ORGANIZATION AND GOING CONCERN


Organization


Force Protection Video Equipment Corp., (the Company), was incorporated on March 11, 2011, under the laws of the State of Florida as M Street Gallery, Inc.  On September 25, 2013, we changed our name to Enhance-Your-Reputation.com, Inc. and changed our business to providing reputation management and enhancement services. On February 2, 2015 the Company changed its name to Force Protection Video Corp.  to focus on the sale of mini body video cameras and accessories to consumers and law enforcement.  


Going Concern


The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America and applicable to a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.


During the year ended April 30, 2016, the Company recognized revenue of $67,964 and a net operating loss of $541,102. As of April 30, 2016, the Company had working capital of $239,167 and an accumulated deficit of $1,475,125.


In view of these conditions, the ability of the Company to continue as a going concern is in doubt and dependent upon achieving a profitable level of operations and on the ability of the Company to obtain necessary financing to fund ongoing operations. Historically, the Company has relied upon funds from the sale of shares of stock, issuance of promissory notes and loans from its shareholders and private investors to finance its operations and growth. Management is planning to raise necessary additional funds for working capital through loans and/or additional sales of its common stock. However, there is no assurance that the Company will be successful in raising additional capital or that such additional funds will be available on acceptable terms, if at all. Should the Company be unable to raise this amount of capital its operating plans will be limited to the amount of capital that it can access. These financial statements do not give effect to any adjustments which will be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying financial statements.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES    


Estimates


The preparation of the Company’s financial statements requires management to make estimates and use assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. On an on-going basis, the Company evaluates its estimates. Actual results and outcomes may differ materially from these estimates and assumptions.


Cash and Cash Equivalents


The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents.




F-21




Inventory


Our inventory is comprised of finished goods, cameras and recording equipment. The Company’s inventory is stated at the lower of cost or market. The Company also makes prepayments against the future delivery of inventory classified as prepaid inventory.


Accounts Receivable


Accounts receivable are reported at the customers' outstanding balances.  The Company does not have a history of significant bad debt and has not recorded any allowance for doubtful accounts.  Interest is not accrued on overdue accounts receivable.  The Company evaluates receivables on a regular basis for potential reserve.


Property and Equipment


Fixed assets are carried at cost, less accumulated depreciation and amortization. Major improvements are capitalized, while repair and maintenance are expensed when incurred. Renewals and betterments that materially extend the life of the assets are capitalized. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in income for the period.


For federal income tax purposes, depreciation is computed under the modified accelerated cost recovery system. Depreciation for financial statement purposes is computed on a straight-line basis over estimated useful lives of the related assets. The estimated useful lives of depreciable assets are:


   

  

Estimated

  

  

Useful Lives

 

 

 

Office Equipment

  

3 - 5 years

Furniture & equipment

  

5 - 7 years


Income Taxes


The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credits and loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carry-forwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized. The Company reports a liability for unrecognized tax benefits resulting from uncertain income tax positions, if any, taken or expected to be taken in an income tax return. Estimated interest and penalties are recorded as a component of interest expense or other expense, respectively.


Revenue Recognition


The Company recognizes revenue when (a) pervasive evidence of an arrangement exists (b) products are delivered or services have been rendered (c) the sales price is fixed or determinable, and (d) collection is reasonably assured.


Advertising costs


Advertising costs are anticipated to be expensed as incurred. The Company recognized $21,683 and $0 in advertising costs during the years ended April 30, 2016 and 2015, respectively.




F-22




Stock Based Compensation


The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 718-10 and the conclusions reached by FASB ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50.


Fair Value Measurements


Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company utilizes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:


Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;


Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and


Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.


As of April 30, 2016 and 2015 the Company did not have any assets or liabilities that were required to be measured at fair value on a recurring basis or on a non-recurring basis.  


Fair Value of Financial Instruments


The Company’s financial instruments consist of cash and cash equivalents and accounts payable and accrued expenses. The carrying amounts of the Company’s financial instruments approximate fair value because of the short term maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect those estimates. We do not hold or issue financial instruments for trading purposes, nor do we utilize derivative instruments.


Net Income (Loss) Per Share


The computation of basic earnings per share (“EPS”) is based on the weighted average number of shares that were outstanding during the period, including shares of common stock that are issuable at the end of the reporting period. The computation of diluted EPS is based on the number of basic weighted-average shares outstanding plus the number of common shares that would be issued assuming the exercise of all potentially dilutive common shares outstanding using the treasury stock method. The computation of diluted net income per share does not assume conversion, exercise or contingent issuance of securities that would have an antidilutive effect on earnings per share. Therefore, when calculating EPS, if the Company experienced a loss, there is no inclusion of dilutive securities as their inclusion in the EPS calculation is antidilutive. Furthermore, options and warrants will have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options or warrants (they are in the money).




F-23




Following is the computation of basic and diluted net loss per share for the years ended April 30, 2016 and 2015:


 

 

 

Years Ended

April 30,

 

 

 

 

 

 

2016

2015

Basic and Diluted EPS Computation

 

 

 

Numerator:

 

 

 

 

Loss available to common stockholders'

 

$

(1,262,001)

$

(62,999)

 

 

 

 

 

Denominator:

 

 

 

 

Weighted average number of common shares outstanding

 

20,631,092 

18,148,846 

 

 

 

 

 

Basic and diluted EPS

 

$

(0.06)

$

(0.00)

 

 

 

 

 

Potentially dilutive securities not included in the calculation of diluted net loss per share attributable to common stockholders because to do so would be anti-dilutive are as follows (in common stock equivalent shares):

 

 

 

 

 

 

Convertible promissory notes

 

17,760,424

-


Concentrations of risk


During the year ended April 30, 2016, no customer accounted for more than 5% of sales. During the year ended April 30, 2015, one customer accounted for 100% of sales.


The Company relies on third parties for   the supply and manufacture of its capture devices, some of which are sole-source suppliers.  The Company believes that outsourcing manufacturing enables greater scale and flexibility. As demand and product lines change, the Company periodically evaluates the need and advisability of adding manufacturers to support its operations.  In instances where a supply and manufacture agreement does not exist or suppliers fail to perform their obligations, the Company may be unable to find alternative suppliers or satisfactorily deliver its products to its customers on time, if at all.  During the year ended April 30 2016, two suppliers accounted for 97% (84% and 13%) of our inventory purchases.


Recent Accounting Pronouncements


In September 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-16, Business Combinations (Topic 805). This ASU eliminates the requirement for retrospective application of measurement period adjustments relating to provisional amounts recorded in a business combination as of the acquisition date. The amendments in this update require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. For public business entities, the amendments will be effective for fiscal years beginning after December 15, 2015. Early adoption is permitted. The Company does not expect this accounting update to have a material effect on its consolidated financial statements in future periods, although that could change.


In April 2015, the FASB issued ASU 2015-05, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40). This ASU provides guidance about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the software license element of the arrangement should be accounted for consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the arrangement should be accounted for as a service contract. For public business entities, the amendments will be effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted.




F-24




In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This ASU requires retrospective adoption and will be effective for fiscal years beginning after December 15, 2015 and for interim periods within those fiscal years. We expect the adoption of this guidance will not have a material impact on our financial statements.


In February 2015, the FASB issued ASU 2015-02, “Amendments to the Consolidation Analysis”, which amends the consolidation requirements in ASC 810 and significantly changes the consolidation analysis required under U.S. GAAP relating to whether or not to consolidate certain legal entities. Early adoption is permitted. The Company’s effective date for adoption is January 1, 2016. The Company does not expect this accounting update to have a material effect on its consolidated financial statements in future periods, although that could change.


In January 2015, the FASB issued ASU 2015-01, “Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items”, which eliminates the concept from U.S. GAAP the concept of an extraordinary item. Under the ASU, an entity will no longer (1) segregate an extraordinary item from the results of ordinary operations; (2) separately present an extraordinary item on its income statement, net of tax, after income from continuing operations; or (3) disclose income taxes and earnings-per-share data applicable to an extraordinary item. Early adoption is permitted. The Company’s effective date for adoption is May 1, 2016. The Company does not expect this accounting update to have a material effect on its consolidated financial statements in future periods, although that could change.


In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205 40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which is intended to define management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Specifically, ASU 2014-15 provides a definition of the term substantial doubt and requires an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). It also requires certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans and requires an express statement and other disclosures when substantial doubt is not alleviated. The new standard will be effective for reporting periods beginning after December 15, 2016, with early adoption permitted. Management does not expect the adoption of ASU 2014-15 to have a material impact on our financial statements and disclosures.


In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes most existing revenue recognition guidance under US GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). On July 9, 2015, the FASB voted to defer the effective date of the new revenue recognition standard by one year. Based on the Board's decision, public organizations would apply the new revenue standard to annual reporting periods beginning after December 15, 2017. We are currently evaluating the impact of the pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard.


We review new accounting standards as issued. Although some of these accounting standards issued or effective after the end of our previous fiscal year may be applicable to us, we have not identified any standards that we believe merit further discussion. We believe that none of the new standards will have a significant impact on our financial statements.




F-25




NOTE 3 - FIXED ASSETS


Fixed assets consisted of the following:


 

 

April 30,

 

 

2016

 

2015

Furniture and fixtures

 

6,212 

 

-

Computers and office equipment

1,376 

 

-

   Total fixed assets

 

7,588 

 

-

Accumulated depreciation

 

(476)

 

-

Total fixed assets

 

$

7,112 

 

$

-


During the years ended April 30, 2016 and 2015, the Company recognized $476 and $0, respectively, in depreciation expense.


NOTE 4 – CONVERTIBLE PROMISSORY NOTES


Following is a summary of our outstanding convertible promissory notes as of April 30, 2016:


 

 

 

 

 

 

Current Balances

Lender

 

Issue Date

 

Maturity

Principle

Interest

 

Total

LG Capital Funding, LLC

4/20/2016

 

9/11/2016

 

 $       13,000

 $            34

 

 $    13,034

Black Forest Capital, LLC

10/8/2015

 

10/8/2016

 

          19,500

          3,001

 

        22,501

RDW Capital, LLC Note 1

11/10/2015

 

5/10/16

 

        157,500

          6,136

 

     163,636

RDW Capital, LLC Note 2

1/0/1900

 

6/30/16

 

        105,000

          2,861

 

     107,861

RDW Capital, LLC Note 3

3/10/2016

 

9/10/16

 

               792

             614

 

          1,406

   Totals

 

 

 

 

 

 $    295,792

 $    12,646

 

 $  308,438

Debt discount balance

 

 

 

      (204,718)

 

 

 

   Balance sheet balances

 

 

 

 $       91,074

 

 

 


The company determined that each convertible promissory notes conversion feature is indexed to the Company’s stock, which is an input to a fair value measurement of a fixed-for-fixed option on equity shares. Thus, the conversion feature of the notes meets the scope exception under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification ("ASC") 815-40-15-7 and treatment under ASC 470-20 – Debt with Conversion and Other Options is appropriate.


EMA Financial, LLC


On August 25, 2015 the Company entered into a Securities Purchase Agreement with EMA Financial, LLC (“EMA”), for the sale of an 8% convertible note in the principal amount of $105,000 (the “EMA Note”) of which the Company received $80,504 after payment of legal and due diligence fees of $5,000, finder's fee of $9,500 and original issue discount (“OID”) of $9,996. The EMA Note matured in twelve (12) months on August 25, 2016. The EMA Note was convertible into common stock, at EMA’s option anytime following the issuance date, at a price for each share of common stock equal to 60% of the lowest trading price during the twenty (20) trading days immediately preceding the applicable conversion. In no event was EMA effect a conversion if such conversion results in EMA beneficially owning in excess of 4.9% of the outstanding common stock of the Company.




F-26




The EMA Note principle was discounted for the value of the OID, legal fees and finder’s fee totaling $24,496, and the intrinsic value of the beneficial conversion feature of $80,504 which was computed as the difference between the fair value of the common stock issuable upon conversion of the EMA Note and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $145,000. As this amount resulted in a total debt discount that exceeds the EMA Note proceeds, the discount recorded for the beneficial conversion feature was limited to the principal amount of the EMA Note. The resulting $105,000 discount was accreted through April 18, 2016, the date the note balance was paid in full.


During the year ended April 30, 2016, the Company recognized interest expense of $5,444 and debt discount accretion of $105,000. During the year ended April 30, 2016, EMA converted $110,444 of principal and interest into 3,857,115 shares of common stock. The EMA Note has been paid in full as of April 30, 2016


Adar Bays, LLC


On September 11, 2015 the Company entered into a Securities Purchase Agreement with Adar Bays, LLC ("Adar") for the sale of an 8% convertible note in the principal amount of $81,000 (which includes Adar legal expenses in the amount of $6,000) (the “Adar Note”) of which Adar funded $27,000 upon closing, $27,000 on March 30, 2016 and $27,000 on April 13, 2016.


The Adar Note bore interest at 8% with all interest and principal due on September 11, 2016. The Adar Note was convertible into common stock anytime after 6 months, at Adar’s option, at a price for each share of common stock equal to 60% (the “Conversion Factor”) of the lowest trading price during the twenty (20) trading days immediately preceding the applicable conversion.


Adar agreed to restrict its ability to convert the Adar Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 9.9% of the then issued and outstanding shares of common stock.


The Adar Note principle was discounted for the value of the legal fees of $6,000 and the intrinsic value of the beneficial conversion feature of $75,000 computed as the difference between the fair value of the common stock issuable upon conversion of the Adar Note and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $109,000. As this amount resulted in a total debt discount that exceeds the Adar Note principal, the discount recorded for the beneficial conversion feature was limited to the principal amount of the Adar Note. The resulting $81,000 discount was accreted through April 18, 2016, the date the note balance was paid in full.


During the year ended April 30, 2016, the Company recognized interest expense of $1,144 and debt discount accretion of $75,000 During the year ended April 30, 2016, Adar converted $82,144 of principal and interest into 3,194,887 shares of common stock. The Adar Note has been paid in full as of April 30, 2016.


Auctus Fund, LLC


On September 30, 2015 the Company entered into a Securities Purchase Agreement with Auctus Fund, LLC (“Auctus”), for the sale of an 8% convertible note in the principal amount of $66,000 (the “Auctus Note”) of which the Company received $57,500 after payment of legal and due diligence fees. The Auctus Note matured in 9 months on June 30, 2016. The Auctus Note was convertible into common stock, at Auctus’s option anytime following the issuance date, at a price for each share of common stock equal to 60% of the lowest trading price during the 20 trading days immediately preceding the applicable conversion. In no event was Auctus to effect a conversion if such conversion resulted in Auctus beneficially owning in excess of 4.99% of the outstanding common stock of the Company.




F-27




The Actus Note principle was discounted for the value of the legal and due diligence fees of $8,500 and the intrinsic value of the beneficial conversion feature of $57,500 computed as the difference between the fair value of the common stock issuable upon conversion of the Auctus Note and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $62,625. As this amount resulted in a total debt discount that exceeded the Auctus Note principal, the discount recorded for the beneficial conversion feature was limited to the principal amount of the Auctus Note. The resulting $66,000 discount was accreted through April 18, 2016, the date the note balance was paid in full.


During the year ended April 30, 2016, the Company recognized interest expense of $2,749 and debt discount accretion of $66,000. During the year ended April 30, 2016, Actus converted $68,749 of principal and interest into 2,716,689 shares of common stock. The Actus Note has been paid in full as of April 30, 2016.


JSJ Investments, Inc.


On October 6, 2015 the Company sold and JSJ Investments, Inc. (“JSJ”) purchased a 12% convertible note in the principal amount of $56,000 (the “JSJ Note”) of which the Company received $51,000 after payment of a $5,000 original issue discount. The JSJ Note matured in 6 months on April 6, 2016. The JSJ Note was convertible into common stock, at JSJ ’s option anytime following the issuance date, at a price for each share of common stock equal to 60% of the lowest trading price during the 20 trading days immediately preceding the applicable conversion. In no event was JSJ to effect a conversion if such conversion resulted in JSJ beneficially owning in excess of 4.99% of the outstanding common stock of the Company.


The JSJ Note principle was discounted for the value of the OID of $5,000 and the intrinsic value of the beneficial conversion feature of $51,000 computed as the difference between the fair value of the common stock issuable upon conversion of the JSJ Note and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $57,866. As this amount resulted in a total debt discount that exceeds the JSJ Note principal, the discount recorded for the beneficial conversion feature was limited to the principal amount of the JSJ Note. The resulting $56,000 discount was accreted through April 26, 2016, the date the note balance was paid in full.


During the year ended April 30, 2016, the Company recognized interest expense of $3,536 and debt discount accretion of $56,000. During the year ended April 30, 2016, JSJ converted $59,536 of principal and interest into 3,543,799 shares of common stock. The JSJ Note has been paid in full as of April 30, 2016.


LG Capital Funding, LLC


On September 11, 2015 the Company entered into a Securities Purchase Agreement with LG Capital Funding, LLC ("LG") for the sale of an 8% convertible note in the principal amount of $81,000 (which includes LG legal expenses in the amount of $6,000) (the “LG Note”) of which LG funded $27,000 upon closing, $27,000 on March 30, 2016 and $27,000 on April 20, 2016.


The LG Note bears interest of 8%. All interest and principal must be repaid on September 11, 2016. The LG Note is convertible into common stock anytime after 6 months, at LG’s option, at a price for each share of common stock equal to 60% of the lowest trading price during the 20 trading days immediately preceding the applicable conversion. In the event the Company elects to prepay all or any portion of the LG Note during the first 180 days, the Company is required to pay to LG an amount in cash equal to 150% multiplied by the sum of all principal and interest. The note may not be prepaid after the 180th day.


LG agreed to restrict its ability to convert the LG Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 9.9% of the then issued and outstanding shares of common stock. The LG Note also provides for penalties and rescission rights if we do not deliver shares of our common stock upon conversion within the required timeframes.




F-28




The LG Note principle was discounted for the value of the legal fees of $6,000 and the intrinsic value of the beneficial conversion feature of $68,000 computed as the difference between the fair value of the common stock issuable upon conversion of the LG Note and the total price to convert based on the effective conversion price on the date of issuance. The resulting $74,000 discount is being accreted over the 12 month term of the LG Note.


During the year ended April 30, 2016, the Company recognized interest expense of $1,227  and debt discount accretion of $66,259. During the year LG converted $69,193 of principal and interest into 3,035,913 shares of common stock leaving a principal balance due of $13,000 as of April 30, 2016.


Black Forest Capital, LLC


On October 8, 2015 the Company sold and Black Forest Capital, LLC (“Black Forest”) purchased a 10% convertible note in the principal amount of $53,000 (the “Black Forest Note”) of which the Company received $50,000 after payment of legal fees. The Black Forest Note matures in 12 months on October 8, 2016. The Black Forest Note is convertible into common stock, at Black Forest’s option anytime following the issuance date, at a price for each share of common stock equal to 40% of the lowest trading price during the 20 trading days immediately preceding the applicable conversion. In no event shall Black Forest effect a conversion if such conversion results in Black Forest beneficially owning in excess of 4.99% of the outstanding common stock of the Company. The Black Forest Note and accrued interest may be prepaid within the 180 day period following the issuance date at an amount equal to 135% of the outstanding principle and unpaid interest. After expiration of the 180 days, the Black Forest Note may not be prepaid. Upon the occurrence of an event of default the balance of principle and interest shall increase to 140%.


The Black Forrest Note principle was discounted for the value of legal fees of $3,000 and the intrinsic value of the beneficial conversion feature of $50,000 computed as the difference between the fair value of the common stock issuable upon conversion of the Black Forest Note and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $127,199. As this amount resulted in a total debt discount that exceeds the Black Forest Note principal, the discount recorded for the beneficial conversion feature was limited to the principal amount of the Black Forest Note. The resulting $53,000 discount is being accreted over the 12 month term of the Black Forest Note.


During the year ended April 30, 2016, the Company recognized interest expense of $3,001 and debt discount accretion of $43,008. During the year Black Forrest converted $33,500 of principal and interest into 2,991,074 shares of common stock leaving a principal balance due of $19,500 as of April 30, 2016.


RDW Capital, LLC


RDW Securities Purchase Agreement #1


On November 10, 2015, we entered into a Securities Purchase Agreement (“RDW SPA 1”) with RDW Capital, LLC (“RDW”), a Florida limited liability company wherein RDW committed to lend us up to $1,150,000 in convertible notes. On closing, we issued to RDW, an eight percent (8%) convertible note (“RWD Note 1”) in the principal amount of $157,500 of which the Company received $130,000 after payment of legal and due diligence fees totaling $27,500.


On December 31, 2015, in connection with the RDW SPA 1, we issued to RDW a second convertible note in the principal amount of $105,000 (“RDW Note 2”) of which the Company received $90,000 after payment of legal and due diligence fees totaling $15,000.




F-29




On February 17, 2016, we entered into Amendment No. 3 to the RDW SPA 1 which increased the amount RDW will invest to an aggregate of $2,362,500 of convertible notes payable in six (6) tranches with the first tranche of $157,500 (RDW Note 1); second tranche of $105,000 (RDW Note 2); and third tranche of $525,000 ($210,000 (RDW Note 3) as described below was funded) (collectively the “RDW Notes”), having already been paid; the fourth tranche of $525,000 due within five (5) days after the effective date of a registration statement covering the fourth tranche; the fifth tranche of $525,000 within five (5) business days after the effective date of a registration statement covering the fifth tranche; and the sixth tranche of 525,000 within five (5) business days after the effective date of a registration statement covering the sixth tranche


On March 10, 2016, in connection with the RDW SPA 1, we issued to RDW a third convertible note in the principal amount of $210,000 (“RDW Note 3”) of which the Company received $180,000 after payment of legal and due diligence fees totaling $30,000


The RDW Notes have the following terms and conditions:


· The principal amount outstanding accrues interest at a rate of eight percent (8%) per annum.

· Interest is due and payable on each conversion date and on the Maturity Date.

· Mature 5-6 months, after issuance.

· At any time, at the option of the holder, the RDW notes are convertible, into shares of our common stock at a conversion price equal to sixty percent (60%) of the lowest traded price of our common stock in the twenty (20) days prior to the conversion date, at any time, at the option of the holder (the “Conversion Price”).

· T he RDW Notes are unsecured obligations.

· We may prepay the RDW Notes in whole or in part at any time with ten (10) days written notice to the holder for the sum of the outstanding principal and interest multiplied by one hundred and thirty percent (130%).  RDW may continue to convert the notes from the date of the notice of prepayment until the date of prepayment.

· Default interest of twenty-four percent (24%) per annum.

· Interest on overdue accrued and unpaid interest will incur a late fee of the lower of eighteen percent (18%) per annum or the maximum rate permitted by law.

· Upon an event of default, RDW may accelerate the outstanding principal, plus accrued and unpaid interest, and other amounts owing through the date of acceleration ( Acceleration ).

· Upon Acceleration, the amount due will be one hundred thirty percent (130%) of the outstanding principal amount of the Note and accrued and unpaid interest, together with payment of all other amounts, costs, expenses and liquidated damages.

· In the event of our default, at the request of the holder, we must pay one hundred fifty percent (150%) of the outstanding balance plus accrued interest and default interest.

· We must reserve three (3) times the amount of shares necessary for the issuance of common stock upon conversion. 

· Conversions of the RDW Notes shall not be permitted if such conversion will result in the holder owning more than four point ninety-nine percent (4.99%) of our common shares outstanding after giving effect to such conversion.




F-30




RDW Note 1 principle was discounted for the value of the legal and finder’s fees totaling $27,500 and the intrinsic value of the beneficial conversion feature of $121,406 which was computed as the difference between the fair value of the common stock issuable upon conversion of RDW Note 1 and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $121,406. As this amount resulted in a total debt discount that was less than RDW Note 1 principal, the full $121,406 discount was recognized. The resulting $148,906 discount was accreted over the 5 month term of RDW Note 1 through April 10, 2016.


RDW Note 2 principle was discounted for the value of the legal fees totaling $15,000 and the intrinsic value of the beneficial conversion feature which was computed as the difference between the fair value of the common stock issuable upon conversion of RDW Note 2 and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $98,086. As this amount resulted in a total debt discount that exceeds RDW Note 2 principal, the discount recorded for the beneficial conversion feature was limited to the principal amount of RDW Note 2. The resulting $105,000 discount is being accreted over the 5 month term of RDW Note 2 through June 30, 2016.


RDW Note 3 principle was discounted for the value of fees totaling $30,000, stock issued to an advisor in connection with RDW Note 3 totaling $18,000, and the intrinsic value of the beneficial conversion feature which was computed as the difference between the fair value of the common stock issuable upon conversion of RDW Note 3 and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $227,391. As this amount resulted in a total debt discount that exceeded RDW Note 3 principal, the discount recorded for the beneficial conversion feature was limited to the principal amount of RDW Note 3. The resulting $210,000 discount was accreted through April 30, 2016, the date RDW Note 3 was paid in full.


Related to the RDW Notes, during the year ended April 30, 2016, the Company recognized interest expense of $9,611 and debt discount accretion of $276,921.


During the year RDW converted $209,208 of RDW Note 3 principal and interest into 2,415,000 shares of common stock leaving a principal balance due on RDW Note 3 of $792 as of April 30, 2016.


RDW Securities Purchase Agreement #2


On May 9, 2016, we entered into a Securities Purchase Agreement (“RDW SPA 2”) with RDW wherein RDW committed to lend us up to $367,500 in convertible notes in four tranches with proceeds totaling $350,000 as follows: (i) $100,000 which it invested on May 13, 2016, (ii) $50,000 which it invested on May 20, 2016, (iii) $100,000 on June 13, 2016, and (iv) $100,000 on July 13, 2016.


In connection with the RDW SPA 2, on May 13, 2016, we issued to RDW, an eight percent (8%) convertible note in the principal amount of $105,000, in exchange for RDW’s investment of $100,000 (“RDW Note 4”). Out of the proceeds from RDW Note 4, we paid the sum of $7,500 to RDW’s legal counsel, $10,000 to our placement agent, Carter, Terry & Company (“CTC”), a broker-dealer registered with the Securities & Exchange Commission (“SEC”) and Financial Industry Regulatory Authority (“FINRA”) and $5,000 towards an original issue discount. Pursuant to the terms of the RDW Purchase Agreement and our agreement with CTC, we received net proceeds of $82,500 from RDW Note 4.


In connection with the RDW SPA 2, on May 20, 2016, we issued a second convertible note to RDW with  the  principal  amount  of  $52,500  (“RDW  Note 5”)  in  exchange  for  RDW’s  investment of $50,000. Out of the proceeds from RDW Note 5, we paid the sum of $5,000 to CTC, as the placement agent pursuant to the terms of our agreement with CTC and $2,500 towards an original issue discount. After payment of this amount, we received net proceeds of $45,000 from RDW Note 5.




F-31




NOTE 5 – COMMITMENTS AND CONTINGENCIES


Product Warranties


Our products are sold with a one (1) year manufacturer’s warranty. The Company has no obligation to provide warranty service or replacement. The Company does offer an extended warranty for a fee. The extended warranty expires one year from the day the manufacturer warranty expires. Warranty costs during the second year of an extended warranty are born by the manufacturer. As a result, the Company has no, or limited warranty liability exposure.


Operating Lease


On March 21, 2015, the Company entered into a lease of office space at 130 Iowa Lane, Suite 102, Carry, North Carolina 27511. The lease expires on March 31, 2018. The Company has no other noncancelable operating leases. Future minimum lease payments under this operating lease with an initial term in excess of one year as of April 30, 2016 are as follows:


Fiscal Year

2017

$14,776

2018

$14,776

2019

$9,851

Thereafter

$0


Rent expense for office space totaled $10,295 and $0 during the years ended April 30, 2016 and 2015, respectively.


Supplier Purchase Commitments


The Company periodically makes contractual, advance inventory purchases in the ordinary course of business. As of April 30, 2016, the Company was obligated to purchase $35,000 of inventory under a non-exclusive distribution agreement.


NOTE 6 – STOCKHOLDER'S EQUITY


As of April 30, 2016 and 2015, there were 40,525,595 and 18,295,000 shares of common stock outstanding, respectively. As of April 30, 2016 and 2015 there were 1,000,000 and 0 shares of Series A Preferred Stock outstanding, respectively.


On January 19, 2016, we amended our Articles of Incorporation to increase our authorized common stock from 50,000,000 shares to 250,000,000 shares and authorized the creation of 1,000,000 shares of Series A preferred stock with each share being entitled to 200,000 (i.e., 200:1) votes per share and with no right of conversion into shares of common stock.


During the year ended April 30, 2016 , the Company issued preferred stock and common stock as follows:


·

10,095 shares of common stock were issued in exchange for services valued at the close price of our stock resulting in stock compensation expense of $14,500.

·

31,912 shares of common stock were issued in connection with RDW Note 3 and valued at $18,000 as stated in the related agreements.

·

450,000 shares of common stock were issued for cash of $0.10 per share resulting in the Company receiving $45,000.  

·

1,000,000 shares of non-convertible Series A Preferred Stock to Paul Feldman, CEO, which entitle him to 200,000 votes per share or an aggregate of 200,000,000 votes on all matters submitted to our common stockholders. We valued the 1,000 Series A shares at $.0001 per share or an aggregate of $1,000.

·

21,738,588 shares of common stock were issued upon the conversion of $618,708 of convertible note principal and interest. 




F-32




During the year ended April 30, 2015 , the Company issued common stock as follows:


·

100,000 shares were issued for cash of $0.50 per share resulting in the Company receiving $50,000.

·

50,000 shares for cash of $0.10 per share and received $5,000.  

·

On February 2, 2015, Paul Feldman, CEO, purchased 10,000,000 shares of our common stock for $.0001 per share or an aggregate of $1,000 from our former president.


NOTE 7 – INCOME TAXES


No provision for income taxes was recorded in the periods presented due to tax losses incurred in each period.  As of April 30, 2016 and 2015, the Company had net operating loss carry forwards of approximately $668,383 and $116,874, respectively, for income tax reporting purposes.


 

 

April 30,

 

 

2016

2015

Deferred tax assets:

 

 

 

Net operating loss carryforwards

$

668,383  

$

116,874  

 

Statutory tax rate

34%

34%

Gross deferred tax assets

227,250  

39,737  

Valuation allowance

(227,250) 

(39,737) 

Net deferred tax asset

$

-  

$

-  

 

 

 

 

Net Loss

1,125,659  

1,318,629  

 

Stock comp

9,075  

635,000  

 

Accretion

273,403  

24,759  

 

meals and ent

6,358  

3,157  


A reconciliation between the amount of income tax benefit determined by applying the applicable U.S. statutory income tax rate to pre-tax loss for the years ended April 30, 2016 and 2015 is as follows:


 

April 30,

 

2016

 

2015

 Federal Statutory Rate

$

(429,080)

 

$

(21,420)

 Nondeductible expenses

241,567 

 

 Change in allowance on deferred tax assets

(187,513)

 

(21,420)

 

$

 

$


The valuation allowance for deferred tax assets as of April 30, 2016 and 2015 was $227,250 and $39,737, respectively. The net change in the total valuation allowance for the year ended January 31, 2016 was an increase of $187,513. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Due to the uncertainty of realizing the deferred tax asset, management has recorded a valuation allowance against the entire deferred tax asset.




F-33




The Company's U.S. federal net operating loss carry forward ("NOL") will expire in years 2033 through 2035; $15,616 of which will expire April 30, 2032, $38,259 on April 30, 2033, $62,999 on April 30, 2034 and $551,509 on April 30, 2035. Utilization of the NOL is subject to annual limitations under Internal Revenue Code Sections 382 and 383, respectively, as a result of significant changes in ownership, private placements and debt conversions. Subsequent significant equity changes, could further limit the utilization of the NOL. The annual limitations have not yet been determined; however, when the annual limitations are determined, the gross deferred tax assets for the NOL will be reduced with a reduction in the valuation allowance of a like amount.


The Company has adopted the accounting guidance related to uncertain tax positions, and has evaluated its tax positions and believes that all of the positions taken by the Company in its federal and state tax returns are more likely than not to be sustained upon examination.  The Company returns are subject to examination by federal and state taxing authorities generally for three years after they are filed.


As of January 31, 2016 and 2015, there were no unrecognized tax benefits.  Accordingly, a tabular reconciliation from beginning to ending periods is not provided.  The Company will classify any future interest and penalties as a component of income tax expense if incurred.  To date, there have been no interest or penalties charged or accrued in relation to unrecognized tax benefits.


The Company does not anticipate that the total amount of unrecognized tax benefits will change significantly in the next twelve months.


In September 2013, the Company’s sole shareholder and former President sold all of his common stock, which represented 94.5% of the Company’s issued and outstanding stock, to the Company’s new president. Pursuant to Internal Revenue Service (IRS) Code Section 382, an ownership change of greater than 50% triggers certain limits to the corporation’s right to use its net operating loss (NOL) carryovers each year thereafter to an annual percentage of the fair market value of the corporation at the time of the ownership change. The Company determined that the ownership change will limit the Company to utilize $15,616 of the $41,828 of NOL’s it incurred prior to the ownership change.  


The Company’s tax returns are subject to examination by the federal and state tax authorities for years ended April 30, 2013 through 2016.  


NOTE 9 – SUBSEQUENT EVENTS


Management has reviewed material events subsequent of the quarterly period ended April 30, 2016 and prior to the filing of financial statements in accordance with FASB ASC 855 “Subsequent Events”.  


On May 9, 2016, we entered into RDW SPA 2 with RDW wherein RDW committed to lend us up to $367,500 in convertible notes in four tranches with proceeds totaling $350,000 (net of $27,500 of OID) as follows: (i) $100,000 (net of $5,000 of OID) which it invested on May 13, 2016, (ii) $50,000 (net of $2,500 of OID) which it invested on May 20, 2016, (iii) $100,000 on June 13, 2016, which has yet to be received, and (iv) $100,000 on July 13, 2016.


In connection with the RDW Purchase Agreement, on May 13, 2016, we issued to RDW, an eight percent (8%) convertible note in the principal amount of $105,000, in exchange for RDW’s investment of $100,000 (“RDW Note 4”) (net of $5,000 of OID). Out of the proceeds from RDW Note 4, we paid the sum of $7,500 to RDW’s legal counsel, and paid $10,000 to CTC. Pursuant to the terms of the RDW SPA 2and our agreement with CTC, we received net proceeds of $82,500 from RDW Note 4.


In connection with the RDW SPA 2, on May 20, 2016, we issued a second convertible note to RDW with  the  principal  amount  of  $52,500  (“RDW  Note 5”) in  exchange  for  RDW’s  investment of $50,000 (net of $2,500 of OID). Out of the proceeds from RDW Note 5, we paid the sum of $5,000 to CTC, as the placement agent pursuant to the terms of our agreement with CTC. After payment of this amount, we received net proceeds of $45,000 from RDW Note 5.




F-34




RDW converted $10,624 of convertible note principal into 13,863,185 shares of common stock. With this conversion, RDW Note 1 and RDW Note 2 principal were reduced to $151,876.


LG converted $13,034 of convertible note principal and interest into 775,844 shares of common stock. With this conversion, the LG Note has been paid in full.


Black Forrest converted $14,200 of convertible note principal into 3,392,858 shares of common stock. With this conversion, the Black Forrest Note principle balance was reduced to $5,300.


On May 17, 2016, the Company received a refund of $26,530 against a previous payment classified as prepaid inventory.




F-35





38,281,250 Shares of Common Stock



FORCE PROTECTION VIDEO EQUIPMENT CORP.


PROSPECTUS


YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS IS NOT AN OFFER TO SELL COMMON STOCK AND IS NOT SOLICITING AN OFFER TO BUY COMMON STOCK IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.


Until

, all dealers that effect transactions in these securities whether or not participating in this offering may be required to deliver a prospectus. This is in addition to the dealer’s obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.



The Date of This Prospectus is   2016





42



PART II


INFORMATION NOT REQUIRED IN THE PROSPECTUS Item 13. OTHER EXPENSES AND ISSUANCE AND DISTRIBUTION

The following table is an itemization of all expenses incurred or expected to be incurred by us in connection with the issuance and distribution of the common shares being offered by this Prospectus. Items marked with an asterisk (*) represent offering expenses that we previously paid. We have agreed to pay all the costs and expenses of this offering. Selling security holders will pay no offering expenses.


SEC Registration Fee

$

84.81

Accounting fees and expenses

$

8,000.00

Legal fees and expense

$

10,000.00

Edgar Fees

$

2,500.00

Miscellaneous

$

1,500.00

Total

$

21,584.81


All amounts are estimates other than the Commission’s registration fee. We are paying all expenses of the offering listed above. No portion of these expenses will be borne by the Selling Stockholder. The Selling Stockholder, however, will pay any other expenses incurred in selling their common stock, including any brokerage commissions or costs of sale.


Item 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS


Florida law permits, under certain circumstances, the indemnification of any person with respect to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, to which such person was or is a party or is threatened to be made a party, by reason of his or her being an officer, director, employee or agent of the corporation or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against liability incurred in connection with such proceeding, including appeals thereof; provided, however, that the officer, director, employee or agent acted in good faith and in a manner that 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 his or her conduct was unlawful. The termination of any such third-party action by judgment, order, settlement, or conviction or upon a plea of nolo contendere or its equivalent does not, of itself, create a presumption that the person (i) 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 (ii) with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. In the case of proceedings by or in the right of the corporation, Florida law permits indemnification of any person by reason of the fact that such person is or was a director, officer, employee or agent of the corporation or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against liability incurred in connection with such proceeding, including appeals thereof; provided, however, that the officer, director, employee or agent acted in good faith and in a manner that he or she reasonably believed to be in,  or not opposed to, the best interests of the corporation, except that no indemnification is made where such person is adjudged liable, unless a court of competent jurisdiction determines that, despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.


To the extent that such person is successful on the merits or otherwise in defending against any such proceeding, Florida law provides that he or she shall be indemnified against expenses actually and reasonably incurred by him or her in connection therewith.




43




Also, under Florida law, expenses incurred by an officer or director in defending a civil or criminal proceeding may be paid by the corporation in advance of the final disposition of such proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if he or she is ultimately found not to be entitled to indemnification by the corporation pursuant to this section. Expenses incurred by other employees and agents may be paid in advance upon such terms or conditions that the Board of Directors deems appropriate.


Our Bylaws provides that we shall indemnify our officers, directors, and employees, and agents unless specifically approved in writing by the Board of Directors, to the fullest extent authorized by Section 607.0850 of the Florida Business Corporation Act, or the FBCA, as it existed when the Bylaws were adopted or as it may hereafter be amended, but, in the case of any such amendment, only to the extent that such amendment permits us to provide broader indemnification rights than were permitted prior to such amendment. Such indemnification shall continue as to a person who has ceased to be a director, officer, employee, or agent; provided, however, that we shall indemnify any such person seeking indemnity in connection with an action, suit, or proceeding (or part thereof) initiated by such person only if such action, suit, or proceeding (or part thereof) was authorized by the our Board of Directors.


The Bylaws also provide that such rights of indemnification shall be a contract right and shall include the right to be paid by us for all reasonable expenses incurred in defending any such proceeding in advance of final disposition; provided, however, that the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer in advance of the final disposition of such proceeding shall be made only upon delivery to us of an undertaking, by or on behalf of such director or officer, to repay amounts so advanced if it should be determined ultimately that such director or officer is not entitled to be indemnified under the Bylaws or otherwise.


In addition to the authority granted to us by Florida law to indemnify our directors, certain other provisions of the Florida Act have the effect of further limiting the personal liability of our directors. Pursuant to Florida law, a director of a Florida corporation cannot be held personally liable for monetary damages to the corporation or any other person for any act or failure to act regarding corporate management or policy except in the case of certain qualifying breaches of the director’s duties.


Insofar as indemnification for liabilities arising under the Securities Act, as amended, may be permitted to our directors and officers, or to persons controlling us, pursuant to our charter documents and Florida law, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933, as amended and is therefore unenforceable.


Item 15. RECENT SALES OF UNREGISTERED SECURITIES


In the prior two years, we offered and sold securities below. None of the issuances involved underwriters, underwriting discounts or commissions. We relied upon Sections 4(2) of the Securities Act, as amended for the offer and sale of the securities. We believed these exemptions were available because sales were made to persons with a pre-existing relationship to our management.


Between March 24, 2015 and May 14, 2015, we sold 100,000 and 50,000 shares of our common stock at the price of $0.50 and $.10 per share respectively, or an aggregate of $50,000 and $5,000.

 

From August 25, 2015 through May 13, 2016, we issued multiple convertible promissory notes (the “Private Placement Notes”) with a cumulative face amount of $442,000 to six accredited investors. All principal and interest due under the Private Placement Notes was converted between March 2, 2016 and July 8, 2016 into an aggregate of 31,176,207 shares of our common stock at prices between $0.168 and $0.00108 per share.


On November 12, 2015, December 31, 2015, March 10, 2016, May 13, 2015, May 20, 2016 and August 22, 2016, we issued six notes to RDW with an aggregate principal amount of $787,500.  Between March 14, 2016 and August 29, 2016, RDW converted $471,708 into an aggregate of 118,354,107 shares of our common stock at prices between $0.192 and $0.0014 per share. All principal under the November 12, 2015 and December 31, 2015 notes has been paid. There remains a principal balance due of $792, $105,000, $52,500 and $157,500 under the notes dated March 10, 2016, May 13, 2016, May 20, 2016 and August 22, 2016, respectively. The combined accrued and unpaid principal and interest under the notes above is $315,792 and $18,786 as of September 20, 2016.




44




On April 8, 2015, we sold 50,000 shares of our common stock to David Feldman at the per share price of $.10 or an aggregate of $5,000.


On May 1, 2015, we sold 50,000 shares of our common stock to David Feldman at the price of $.10 per share or an aggregate of $5,000.


On May 3, 2015 we sold 100,000 shares of our common stock to Rose Faye Parrish at the price of $.10 per share or an aggregate of $10,000.


On May 1, 2015, we sold 200,000 shares of our common stock to James Sally at the price of $.10 per share or an aggregate of $20,000.


On May 13, 2015 we sold 100,000 shares of our common stock to Rose Faye Parrish at the price of $0.10 per share or an aggregate of $10,000.


On September 1, 2016, we sold to RDW an 8% Convertible Promissory Note (the “RDW Note”) in the aggregate principal amount of $157,500 for a purchase price of $150,000.  The RDW Note is convertible into shares of our common stock at a conversion price equal to 60% of the lowest traded price of the common stock in the twenty (20) trading days prior to the conversion date.


Shares Issued for Services


On September 1, 2015, we issued 2,165 shares of restricted stock for services rendered to us. We valued these shares at $1.85 per share or an aggregate of $4,000.


On September 11, 2015, we issued 1,320 shares of restricted stock for services rendered to us. We valued these shares at $1.90 per share or an aggregate of $2,000.


On October 1, 2015, we issued 2,805 shares of restricted stock for services rendered to us. We valued these shares at

$1.07 per share or an aggregate of $2,000.


On October 9, 2015, we issued 1,955 shares of restricted stock for services rendered to us. We valued these shares at

$1.28 per share or an aggregate of $2,000.


On October 12, 2015, we issued 1,850 shares of restricted stock for services rendered to us. We valued these shares at $1.38 per share or an aggregate of $2,000.


On December 17, 2015 and September 12, 2106, we approved the issuance of 5,000,000 shares of our non-convertible Series A Preferred Stock to Mr. Feldman which entitle him to 200,000 votes per share or an aggregate of 1,000,000,000 on all matters submitted to our common stockholders. We valued the 5,000 Series A shares at $.0001 per share or an aggregate of $5,000.


Shares Issued Upon Conversion of Promissory Notes


During the year ended April 30, 2016, the Company issued 21,738,588 shares of common stock in repayment of $632,773 of principal and interest on our convertible promissory notes. From January 1, 2016 through August 29, 2016, the company issued 127,791,726 shares of common stock in repayment of $298,032 of principal and interest on our convertible promissory notes.




45




Item 16.


(a) The following exhibits are filed as part of this registration statement.


Exhibit No.         Description

3.1

Articles of Incorporation dated March 11, 2011 (i)

3.2

Amendment to Articles of Incorporation dated March 28, 2011 (i)

3.3

Amendment to Articles of Incorporation dated September 25, 2013 (i)

3.4

Amendment to Articles of Incorporation dated January 30, 2015 (i)

3.5

Amendment to Articles of Incorporation dated December 1, 2015(i)

3.6

Amendment to Articles of Incorporation Effective September 8, 2016*

3.7

Bylaws (i)

4.1

Form of Common Stock Certificate(iv)

5.1

Opinion Regarding Legality *

10.1

Securities Purchase Agreement with RDW Capital, LLC dated September 1, 2016*

10.2

RDW Capital, LLC Registration Rights Agreement, dated September 1, 2016*

10.3

Convertible Promissory Note Held by RDW Capital, LLC dated September 1, 2016 *

10.4

Promissory Note dated May 13, 1016 (ii)

10.5

Promissory Note dated May 20, 2016 (iii)

23.1

Consent of Baum & Company P.A. *

23.2

Consent of Eric P.Littman, P.A. (Included in Exhibit 5.1) *


* Filed herewith.

(i) Incorporated by reference to Form S-1 Filed February 22, 2016

(ii) Incorporated by reference to Form 8-K Filed May 18, 2016

(iii) Incorporated by reference to Form 10-K filed  June 27, 2016

(iv) Incorporated by reference to Form S-1 filed  May 23, 2011


(b) No financial statement schedules have been provided because the information is not required or is shown either in the financial statements or the notes thereto.





46




Item 17. UNDERTAKINGS


The undersigned registrant hereby undertakes:


(b)          Rule 415 Offering:


(i)

To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:


(ii)

To include any prospectus required by section 10(a)(3) of the Securities Act;


(iii)

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 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and


(iv)

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:


(A)

Paragraphs (a)(1)(i) and (a)(1)(ii) of this section do not apply if the registration statement is on Form S-8 (§ 239.16b of this chapter), and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Securities and Exchange Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) that are incorporated by reference in the registration statement; and


(B)

Paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if the registration statement is on Form S-3 (§ 239.13 of this chapter) or Form F-3 (§ 239.33 of this chapter) and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Securities and Exchange Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) (§ 230.424(b) of this chapter) that is part of the registration statement.


(C)

Provided further, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is for an offering of asset-backed securities on Form S-1 (§ 239.11 of this chapter) or Form S-3 (§ 239.13 of this chapter), and the information required to be included in a post-effective amendment is provided pursuant to Item 1100(c) of Regulation AB (§ 229.1100(c)).


(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 the offering.




47




(4)

If the registrant is a foreign private issuer, to file a post-effective amendment to the registration statement to include any financial statements required by “Item 8.A. of Form 20-F (17 CFR 249.220f)” at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Act need not be furnished, provided that the registrant includes in the prospectus, by means of a post- effective amendment, financial statements required pursuant to this paragraph (a)(4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements. Notwithstanding the foregoing, with respect to registration statements on Form F-3 (§239.33 of this chapter), a post- effective amendment need not be filed to include financial statements and information required by Section 10(a)(3) of the Act or §210.3-19 of this chapter if such financial statements and information are contained in periodic reports filed with or furnished to the Securities and Exchange Commission by the registrant pursuant to section 13 or  section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Form F-3.


(5)

That, for the purpose of determining liability under the Securities Act to any purchaser:


(i)

If the registrant is relying on Rule 430B:


(A)

Each prospectus filed by the registrant pursuant to Rule 424(b)(3) (§230.424(b)(3) of this chapter) 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

(B)

Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) (§230.424(b)(2), (b)(5), or (b)(7) of this chapter) 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) (§230.415(a)(1)(i), (vii), or (x) of this chapter) 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 the 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 the 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; or


(ii)

If the registrant is subject to Rule 430C (§230.430C of this chapter), each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (§230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. 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 first use, 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 date of first use.


(iii)

If the registrant is relying on §230.430D of this chapter:


(A)

Each prospectus filed by the registrant pursuant to §230.424(b)(3) and (h) of this chapter 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




48



(B)

Each prospectus required to be filed pursuant to §230.424(b)(2), (b)(5), or (b)(7) of this chapter as part of a registration  statement  in  reliance  on  §230.430D  of  this  chapter  relating  to  an  offering  made  pursuant  to §230.415(a)(1)(vii) or (a)(1)(xii) of this chapter for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 (15 U.S.C. 77j(a)) 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 the offering described in the prospectus. As provided in §230.430D of this chapter, 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 the 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; or


(6)

That, for the purpose of determining liability of the registrant under the Securities Act of 1933 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 (§230.424 of this chapter);

(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.


(7)

If the registrant is relying on §230.430D of this chapter, with respect to any offering of securities registered on Form SF-3 (§239.45 of this chapter), to file the information previously omitted from the prospectus filed as part of  an effective registration statement in accordance with §§230.424(h) and 230.430D of this chapter.


(8) Insofar as indemnification for liabilities arising under the Securities Act of 1933 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 of 1933 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 of 1933 and will be governed by the final adjudication of such issue.




49




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 City of Cary North Carolina on October 11, 2016.


Force Protection Video Equipment Corp.


Date: October 11, 2016

By:   /s/ Paul Feldman

Paul Feldman

Chief Executive Officer, President and Director (Principal Executive Officer)


Date: October 11, 2016

By:   /s/ Paul Feldman

Paul Feldman

Acting Chief Financial Officer (Principal Accounting Officer)


In accordance with the requirements of the Securities Act of 1933, this Registration Statement on Form S-1 was signed by the following persons in the capacities and on the dates stated.


Date

October 11, 2016

Name

/s/ Paul Feldman

Paul Feldman

Title

Chief Executive Officer, President and Director

October 11, 2016

/s/ Paul Feldman

Paul Feldman

Acting Chief Financial Officer (Principal Accounting Officer)




50




EXHIBIT INDEX


Exhibit No.         Description

3.1

Articles of Incorporation dated March 11, 2011 (i)

3.2

Amendment to Articles of Incorporation dated March 28, 2011 (i)

3.3

Amendment to Articles of Incorporation dated September 25, 2013 (i)

3.4

Amendment to Articles of Incorporation dated January 30, 2015 (i)

3.5

Amendment to Articles of Incorporation dated December 1, 2015(i)

3.6

Amendment to Articles of Incorporation Effective September 8, 2016*

3.7

Bylaws (i)

4.1

Form of Common Stock Certificate (iv)

5.1

Opinion Regarding Legality *

10.1

Securities Purchase Agreement with RDW Capital, LLC dated September 1, 2016*

10.2

RDW Capital, LLC Registration Rights Agreement, dated September 1, 2016*

10.3

Convertible Promissory Note Held by RDW Capital, LLC dated September 1, 2016 *

10.4

Promissory Note dated May 13, 1016 (ii)

10.5

Promissory Note dated May 20, 2016 (iii)

23.1

Consent of Baum & Company P.A. *

23.2

Consent of Eric P. Littman, P.A. (Included in Exhibit 5.1) *


* Filed herewith.

(i) Incorporated by reference to Form S-1 Filed February 22, 2016

(ii) Incorporated by reference to Form 8-K Filed May 18, 2016

(iii) Incorporated by reference to Form 10-K filed  June 27, 2016

(iv) Incorporated by reference to Form S-1 filed  May 23, 2011




51



Force Protection Video Equipment Corp.

October 11, 2016

Page 1


EXHIBIT 5.1


LAW OFFICES OF

ERIC P. LITTMAN, P.A.

7695 SW 104 TH STREET

OFFICES AT PINECREST

SUITE 210

MIAMI, FL 33156


TELEPHONE :                  (305) 663-3333

FACSIMILE   :                  (305) 668-0003

 EMAIL   :   littmanlaw@gmail.com

SKYPE:                      ericplittman


October 11, 2016


Force Protection Video Equipment Corp.

140 Iowa Lane

Suite 101

Cary, NC 27511



Re:

Registration Statement on Form S-1


Ladies and Gentlemen:


We have acted as counsel to Force Protection Video Equipment Corp., a Florida corporation (the “Company”) in the preparation of a Registration Statement on Form S-1 (the “Registration Statement”) filed with the Securities and Exchange Commission (the “Commission”) on October 7, 2016, as amended, in connection with the registration for resale from time to time, on a continuous or delayed basis, by certain of the Company’s security holder, of up to 38,281,250 shares (the “Shares”) of the Company’s common stock, par value $0.0001 per share, issued or issuable pursuant to the Securities Purchase Agreement, dated September 1, 2016, (the “Purchase Agreement”) between the Company and RDW Capital, LLC,  the selling security holder identified in the Registration Statement or its assigns.


For purposes of rendering this opinion, we have made such legal and factual examinations as we have deemed necessary under the circumstances and, as part of such examination, we have examined, among other things, originals and copies, certified or otherwise, identified to our satisfaction, of such documents, corporate records and other instruments as we have deemed necessary or appropriate. For the purposes of such examination, we have assumed the genuineness of all signatures on original documents and the conformity to original documents of all copies submitted to us. We have relied, without independent investigation, on certificates of public officials and, as to matters of fact material to the opinion set forth below, on certificates of officers of the Company.


On the basis of and in reliance upon the foregoing examination and assumptions, we are of the opinion that assuming the Registration Statement shall have become effective pursuant






Force Protection Video Equipment Corp.

October 11, 2016

Page 2


to the provisions of the Securities Act of 1933, as amended (the "Act"), the Shares, when issued by the Company against payment therefore (not less than par value) and in accordance with the Registration Statement and the provisions of the Purchase Agreement, and when duly registered on the books of the Company's transfer agent and registrar therefore in the name or on behalf of RDW Capital, LLC, or its assigns, will be validly issued, fully paid and nonassessable.


We express no opinion as to the laws of any state or jurisdiction other than the General Corporation Law of the State of Florida, as currently in effect.


We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and to the reference to us under the caption "Legal Matters" in the prospectus constituting a part of the Registration Statement. This opinion is for your benefit in connection with the Registration Statement and may be relied upon by you and by persons entitled to rely upon it pursuant to the applicable provisions of the Act. In giving this consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission.


Very truly yours,



/s/ Eric P. Littman

Eric P. Littman

EPL/ica








EXHIBIT 10.3


NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.


Original Issue Date: September 1 , 2016


Principal Amount: $157,500

Subscription Amount: $150,000



8% CONVERTIBLE PROMISSORY NOTE

DUE MARCH 1, 2017


THIS 8% CONVERTIBLE PROMISSORY NOTE is one of a series of duly authorized and validly issued 8% Convertible Promissory Notes of Force Protection Video Equipment Corp., a Florida corporation (the “ Company ”), having its principal place of business at 140 Iowa Lane, Suite 101, Cary, NC 27511 , designated as its 8% Convertible Promissory Notes due March 1, 2017 (this Note, the “ Note ” and, collectively with the other Notes of such series, the “ Notes ”).


FOR VALUE RECEIVED, the Company promises to pay, in cash, to RDW Capital, LLC or its registered assigns (the “ Holder ”), or shall have paid pursuant to the terms hereunder, the principal sum of $157,500 on March [__], 2017 (the “ Maturity Date ”) or such earlier date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Note in accordance with the provisions hereof. This Note is subject to the following additional provisions:


Section 1 .

Definitions .  For the purposes hereof, in addition to the terms defined elsewhere in this Note, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement (as defined below) and (b) the following terms shall have the following meanings:


Alternate Consideration ” shall have the meaning set forth in Section 5(d).


Alternative Conversion Price ” means 50% of the lowest traded price of the Common Stock in the twenty (20) Trading Days prior to the Conversion Date.


 “ Bankruptcy Event ” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within sixty (60) days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within sixty (60) calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.


Base Conversion Price ” shall have the meaning set forth in Section 5(b).


Beneficial Ownership Limitation ” shall have the meaning set forth in Section 4(d).


Buy-In ” shall have the meaning set forth in Section 4(c)(v).


Change of Control Transaction ” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 50% of the voting securities of the Company (other than by means of conversion or exercise of the Notes and the Securities issued together with the Notes), (b) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the Company or the successor entity of such transaction, (c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the acquiring entity immediately after the transaction, or (d) the execution by the Company of an agreement to which the Company  is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (c) above.


Conversion ” shall have the meaning ascribed to such term in Section 4.


Conversion Date ” shall have the meaning set forth in Section 4(a).


Conversion Price ” shall have the meaning set forth in Section 4(b).


Conversion Schedule ” means the Conversion Schedule in the form of Schedule 1 attached hereto.


Conversion Shares ” means, collectively, the shares of Common Stock issuable upon conversion of this Note in accordance with the terms hereof.


Dilutive Issuance ” shall have the meaning set forth in Section 5(b).


Dilutive Issuance Notice ” shall have the meaning set forth in Section 5(b).


DTC ” means the Depository Trust Company.

 

DTC/FAST Program ” means the DTC’s Fast Automated Securities Transfer Program.


DWAC Eligible ” means that (a) the Common Stock is eligible at DTC for full services pursuant to DTC’s Operational Arrangements, (b) the Company has been approved (without revocation) by the DTC’s underwriting department, (c) the Transfer Agent is approved as an agent in the DTC/FAST Program, and (d) the Transfer Agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.


Event of Default ” shall have the meaning set forth in Section 6(a).


Fundamental Transaction ” shall have the meaning set forth in Section 5(d).


Late Fees ” shall have the meaning set forth in Section 2(c).


Mandatory Default Amount ” means the payment of 130% of the outstanding principal amount of this Note and accrued and unpaid interest hereon, in addition to the payment of all other amounts, costs, expenses and liquidated damages due in respect of this Note.


New York Courts ” shall have the meaning set forth in Section 7(d).


Note Register ” shall have the meaning set forth in Section 2(b).


Notice of Conversion ” shall have the meaning set forth in Section 4(a).


Original Issue Date ” means the date of the first issuance of this Note, regardless of any transfers of any Note and regardless of the number of instruments which may be issued to evidence such Notes.


Purchase Agreement ” means the Securities Purchase Agreement, dated as of September [__] , 2016 between the Company and the original Holder, as amended, modified or supplemented from time to time in accordance with its terms.


Registration Rights Agreement ” means the Registration Rights Agreement, dated as of the date of the Purchase Agreement, among the Company and the original Holders, in the form of Exhibit B attached to the Purchase Agreement.


Registration Statement ” means a registration statement covering the resale of the Underlying Shares by each Holder.


Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.


Share Delivery Date ” shall have the meaning set forth in Section 4(c)(ii).


Successor Entity ” shall have the meaning set forth in Section 5(d).


Section 2 .

Interest .


a)

Payment of Interest in Cash or Kind . The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Note at the rate of 8% per annum, which interest amount shall be guaranteed. All interest payments hereunder will be payable in cash or Common Stock in the Holder’s discretion. Accrued and unpaid interest shall be due and payable on each Conversion Date and on the Maturity Date, or as otherwise set forth herein.  


b)

Interest Calculations . Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made.  Interest hereunder will be paid to the Person in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note (the “ Note Register ”).


c)

Late Fee .  All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law (the “ Late Fees ”) which shall accrue daily from the date such interest is due hereunder through and including the date of actual payment in full.


d)

Prepayment .  At any time upon ten (10) days written notice to the Holder, the Company may prepay any portion of the principal amount of this Note and any accrued and unpaid interest. If the Company exercises its right to prepay the Note, the Company shall make payment to the Holder of an amount in cash equal to the sum of the then outstanding principal amount of this Note and interest multiplied by 130%.  The Holder may continue to convert the Note from the date notice of the prepayment is given until the date of the prepayment.


Section 3.

Registration of Transfers and Exchanges .

 

a)

Different Denominations . This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same.  No service charge will be payable for such registration of transfer or exchange.

 

b)

Investment Representations . This Note has been issued subject to certain investment representations of the original Holder set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations.  


c)

Reliance on Note Register . Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.


Section 4.

Conversion .

 

a)

Voluntary Conversion . This Note shall be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time (subject to the conversion limitations set forth in Section 4(d) hereof).  The Holder shall effect conversions by delivering to the Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “ Notice of Conversion ”), specifying therein the principal amount of this Note to be converted and the date on which such conversion shall be effected (such date, the “ Conversion Date ”).  If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder.  No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required.   To effect conversions hereunder, the Holder shall not be required to physically surrender this Note to the Company unless the entire principal amount of this Note, plus all accrued and unpaid interest thereon, has been so converted. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Note in an amount equal to the applicable conversion.  The Holder and the Company shall maintain a Conversion Schedule showing the principal amount(s) converted and the date of such conversion(s).  The Company may deliver an objection to any Notice of Conversion within one (1) Business Day of delivery of such Notice of Conversion.  In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. The Holder, and any assignee by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note may be less than the amount stated on the face hereof.

 

b)

Conversion Price .  The conversion price (the “ Conversion Price ”) in effect on any Conversion Date shall be equal to 60% of the lowest traded price of the Common Stock in the twenty (20) Trading Days prior to the Conversion Date.  Notwithstanding anything herein to the contrary, at any time after the occurrence of any Event of Default the Holder may require the Company to, at such Holder’s option and otherwise in accordance with the provisions for conversion herein, convert all or any part of this Note into Common Stock at the Alternative Conversion Price.  All such foregoing determinations will be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock during such measuring period.  Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 6 hereof and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.  The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.  


c)

Mechanics of Conversion .

 

i.

Conversion Shares Issuable Upon Conversion of Principal Amount .  The number of Conversion Shares issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note to be converted and any accrued and unpaid interest to be converted by (y) the Conversion Price.


ii.

Delivery of Certificate Upon Conversion . Not later than three (3) Trading Days after each Conversion Date (the “ Share Delivery Date ”), the Company shall deliver, or cause to be delivered, to the Holder (A) a certificate or certificates representing the Conversion Shares which, on or after the date on which such Conversion Shares are eligible to be sold under Rule 144 without the need for current public information and the Company has received an opinion of counsel to such effect reasonably acceptable to the Company (which opinion the Company will be responsible for obtaining at its own cost) shall be free of restrictive legends and trading restrictions (other than those which may then be required by the Purchase Agreement) representing the number of Conversion Shares being acquired upon the conversion of this Note, and (B) payment in the amount of accrued and unpaid interest (if the Company has elected or is required to pay accrued interest in cash). All certificate or certificates required to be delivered by the Company under this Section 4(d) shall be delivered electronically through the Depository Trust Company or another established clearing corporation performing similar functions. If the Conversion Date is prior to the date on which such Conversion Shares are eligible to be sold under Rule 144 without the need for current public information the Conversion Shares shall bear a restrictive legend in substantially the following form, as appropriate:


“THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”


Notwithstanding the foregoing, commencing on such date that the Conversion Shares are eligible for sale under Rule 144 subject to current public information requirements, the Company, upon request of the Holder and at the expense of the Company, shall obtain a legal opinion to allow for such sales under Rule 144.

 

iii.

Failure to Deliver Certificates .  If, in the case of any Notice of Conversion, such certificate or certificates are not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the Company at any time on or before its receipt of such certificate or certificates, to rescind such Conversion, in which event the Company shall promptly return to the Holder any original Note delivered to the Company and the Holder shall promptly return to the Company the Common Stock certificates issued to such Holder pursuant to the rescinded Conversion Notice.

 

iv.

Obligation Absolute; Partial Liquidated Damages .  The Company’s obligations to issue and deliver the Conversion Shares upon conversion of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares; provided , however , that such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder.  In the event the Holder of this Note shall elect to convert any or all of the outstanding principal amount or interest hereof, the Company may not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining conversion of all or part of this Note shall have been sought and obtained, and the Company posts a surety bond for the benefit of the Holder in the amount of 150% of the outstanding principal amount of this Note, which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to the Holder to the extent it obtains judgment.  In the absence of such injunction, the Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion.  If the Company fails for any reason to deliver to the Holder such certificate or certificates pursuant to Section 4(c)(ii) by the Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, $1,000 per Trading Day for each Trading Day after such Share Delivery Date until such certificates are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 6 hereof for the Company’s failure to deliver Conversion Shares within the period specified herein and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.  The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

 

v.

Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion . In addition to any other rights available to the Holder, if the Company fails for any reason to deliver to the Holder such certificate or certificates by the Share Delivery Date pursuant to Section 4(c)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm 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 Conversion Shares which the Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “ Buy-In ”), then the Company shall (A) pay in cash to the Holder (in addition to any other remedies available to or elected by the Holder) the amount, if any, by which (x) the Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that the Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of the Holder, either reissue (if surrendered) this Note in a principal amount equal to the principal amount of the attempted conversion (in which case such conversion shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued if the Company had timely complied with its delivery requirements under Section 4(c)(ii).  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 conversion of this Note with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a total 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 certificates representing shares of Common Stock upon conversion of this Note as required pursuant to the terms hereof.

 

vi.

Reservation of Shares Issuable Upon Conversion . The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock a number of shares of Common Stock at least equal to 300% of the Required Minimum for the sole purpose of issuance upon conversion of this Note and payment of interest on this Note, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Notes), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5) upon the conversion of the then outstanding principal amount of this Note and payment of interest hereunder.  The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.


vii.

Fractional Shares . No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Note.  As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, 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 Conversion Price or round up to the next whole share.


viii.

Transfer Taxes and Expenses .  The issuance of certificates for shares of the Common Stock on conversion of this Note shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that, the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Note so converted and the Company shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.  The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Conversion.


d)

Holder’s Conversion Limitations .  The Company shall not effect any conversion of principal and/or interest of this Note, and a Holder shall not have the right to convert any principal and/or interest of this Note, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any Persons acting as a group together with the Holder or any of the Holder’s Affiliates) 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 shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted principal amount of this Note beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other Notes) beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 4(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  To the extent that the limitation contained in this Section 4(d) applies, the determination of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates) and of which principal amount of this Note is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determination of whether this Note may be converted (in relation to other securities owned by the Holder together with any Affiliates) and which principal amount of this Note is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph 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 4(d), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Company, or (iii) a more recent written notice by the Company or the Company’s 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 two (2) Trading Days 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 Note, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “ Beneficial Ownership Limitation ” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note held by the Holder.  The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 4(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Note held by the Holder and the Beneficial Ownership Limitation provisions of this Section 4(e) shall continue to apply.  Any such increase or decrease will not be effective until the 61 st day after such notice is delivered to the Company.   The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein 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 Note .

 

Section 5 .

Certain Adjustments .

 

a)

Stock Dividends and Stock Splits .  If the Company, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents (which, for the avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of, or payment of interest on, the Notes), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to this Section 5(a) 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.

 

b)

Subsequent Equity Sales .  If, at any time while this Note is outstanding,  the Company or any Subsidiary, as applicable, sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such lower price, the “ Base Conversion Price ” and such issuances, collectively, a “ Dilutive Issuance ”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced to equal the Base Conversion Price.  Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued.  Notwithstanding the foregoing, no adjustment will be made under this Section 5(b) in respect of an Exempt Issuance.  The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 5(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “ Dilutive Issuance Notice ”).  For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, the Holder will be entitled to receive a number of Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether the Holder accurately refers to the Base Conversion Price in the Notice of Conversion.

c)

Subsequent Rights Offerings .  In addition to any adjustments pursuant to Section 5(a) 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 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 conversion of this Note (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, 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).

 

d)

Fundamental Transaction . If, at any time while this Note 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, 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, (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, (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 or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “ Fundamental Transaction ”), then, upon any subsequent conversion of this Note, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 4(e) on the conversion of this Note), 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 Note is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 4(d) on the conversion of this Note).  For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion 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 conversion of this Note following such 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 Note and the other Transaction Documents (as defined in the Purchase Agreement) in accordance with the provisions of this Section 5(d) 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 of this Note, deliver to the Holder in exchange for this Note a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Note which is convertible 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 conversion of this Note (without regard to any limitations on the conversion of this Note) prior to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Note 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 succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

 

e)

Calculations .  All calculations under this Section 5 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 5, 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 any treasury shares of the Company) issued and outstanding.


f)

Notice to the Holder .


i.

Adjustment to Conversion Price .  Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.  

 

ii.

Notice to Allow Conversion 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 of 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 is a party, any sale or transfer of all or substantially all of the assets of the Company, 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 filed at each office or agency maintained for the purpose of conversion of this Note, and shall cause to be delivered to the Holder at its last address as it shall appear upon the Note Register, at least twenty (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 the 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 hereunder 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 convert this Note during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

Section 6 .

Events of Default .  


a)

Event of Default ” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):


i.

any default in the payment of (A) the principal amount of any Note or (B) interest, liquidated damages and other amounts owing to a Holder on any Note, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within three  (3) Trading Days;

 

ii.

the Company shall materially fail to observe or perform any other material covenant or material agreement contained in the Notes (other than a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed in clause (xi) below) which failure is not cured, if possible to cure, within the earlier to occur of (A) five (5) Trading Days after notice of such failure sent by the Holder or by any other Holde r to the Company and (B) ten (10) Trading Days after the Company has become or should have become aware of such failure;


iii.

a default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument) shall occur under (A) any of the Transaction Documents or (B) any other material agreement, lease, document or instrument to which the Company or any Subsidiary is obligated (and not covered by clause (vi) below);


iv.

any repres entation or warranty made in this Note, any other Transaction Documents, any written statement pursuant hereto or thereto or any other report, financial statement or certificate made or delivered to the Holder or any other Holder shall be untrue or incorrect in any material respect as of the date when made or deemed made;


v.

the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X)  shall be subject to a Bankruptcy Event;

 

vi.

the Company or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation greater than $100,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;


vii.

the Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible to resume listing or quotation for trading thereon within five (5) Trading Days or the transfer of shares of Common Stock through the Depository Trust Company System is no longer available or “chilled”;


viii.

the Company shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or dispose of all or in excess of 50% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute a Change of Control Transaction);


ix.

the Company does not meet the current public information requirements under Rule 144 in respect of the Registrable Securities (as defined in the Registration Rights Agreement);


x.

if, during the Effectiveness Period (as defined in the Registration Rights Agreement), either (a) the effectiveness of the Registration Statement lapses for any reason or (b) the Holder shall not be permitted to resell Registrable Securities (as defined in the Registration Rights Agreement) under the Registration Statement for a period of more than twenty (20) consecutive Trading Days or thirty (30) non-consecutive Trading Days during any 12-month period; provided , however , that if the Company is negotiating a merger, consolidation, acquisition or sale of all or substantially all of its assets or a similar transaction and, in the written opinion of counsel to the Company, the Registration Statement would be required to be amended to include information concerning such pending transaction(s) or the parties thereto which information is not available or may not be publicly disclosed at the time, the Company shall be permitted an additional ten (10) consecutive Trading Days during any 12-month period pursuant to this Section 6(a)(x);


xi.

the Company shall fail for any reason to deliver certificates to a Holder on or prior to the third Trading Day after a Conversion Date pursuant to Section 4(c) or the Company shall provide at any time notice to the Holder, including by way of public announcement, of the Company’s intention to not honor requests for conversions of any Notes in accordance with the terms hereof;


xii.

the Company fails to file with the Commission any required reports under Section 13 or 15(d) of the Exchange Act such that it is not in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable);


xiii.

if the Company or any Significant Subsidiary shall: (a) apply for or consent to the appointment of a receiver, trustee, custodian or liquidator of it or any of its properties, (b) admit in writing its inability to pay its debts as they mature, (c) make a general assignment for the benefit of creditors, (d) be adjudicated bankrupt or insolvent or be the subject of an order for relief under Title 11 of the United States Code or any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute of any other jurisdiction or foreign country, or (e) file a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization or an arrangement with creditors or to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law, or (f) take or permit to be taken any action in furtherance of or for the purpose of effecting any of the foregoing;


xiv.

if any order, judgment or decree shall be entered, without the application, approval or consent of the Company or any Significant Subsidiary, by any court of competent jurisdiction, approving a petition seeking liquidation or reorganization of the Company or any Subsidiary, or appointing a receiver, trustee, custodian or liquidator of the Company or any Subsidiary, or of all or any substantial part of its assets, and such order, judgment or decree shall continue unstayed and in effect for any period of sixty (60) days;


xv.

the occurrence of any levy upon or seizure or attachment of, or any uninsured loss of or damage to, any property of the Company or any Subsidiary having an aggregate fair value or repair cost (as the case may be) in excess of $100,000 individually or in the aggregate, and any such levy, seizure or attachment shall not be set aside, bonded or discharged within thirty (30) days after the date thereof;


xvi.

the Company shall fail to maintain sufficient reserved shares pursuant to Section 4(c)(vi); or


xvii.

any monetary judgment, writ or similar final process shall be entered or filed against the Company, any subsidiary or any of their respective property or other assets for more than $100,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of forty-five (45) calendar days.




{00810013.DOCX;2 }

1







a)

Remedies Upon Event of Default . Subject to the Beneficial Ownership Limitation as set forth in Section 4(d), if any Event of Default occurs, then the outstanding principal amount of this Note, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount.  After the occurrence of any Event of Default that results in the eventual acceleration of this Note, the interest rate on this Note shall accrue at an additional interest rate equal to the lesser of 2% per month (24% per annum) or the maximum rate permitted under applicable law.  Upon the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender this Note to or as directed by the Company.  In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law.  Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full payment pursuant to this Section 6(b).  No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.


Section 7 .

Miscellaneous .   


a)

Notices .  Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, or such other facsimile number or address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section 7(a).  Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of the Holder as set forth in the Purchase Agreement or as  appearing on the books of the Company, or such other facsimile number or address as the Holder may specify for such purposes by notice to the Company delivered in accordance with this Section 7(a). Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 12:00 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 12:00 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.

 

b)

Absolute Obligation . Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed.  This Note is a direct debt obligation of the Company.  This Note ranks pari passu with all other Notes now or hereafter issued under the terms set forth herein.   

 

c)

Lost or Mutilated Note .  If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.


d)

Governing Law .  All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof.  Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “ New York Courts ”).  Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

e)

Amendments; Waiver .  Unless otherwise provided for hereunder, no provision of this Note may be amended, modified, supplemented or waived without the written consent of the Company and the Holder.  Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note.  The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion.  

 

f)

Severability .  If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.  


g)

Usury .  If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such power as though no such law has been enacted.

 

h)

Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief.   The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note.  The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Note.


i)

Next Business Day .  Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.


j)

Headings .  The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.


*********************


(Signature Pages Follow)



{00810013.DOCX;2 } 2






IN WITNESS WHEREOF , the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.



FORCE PROTECTION VIDEO EQUIPMENT CORP.


By: /s/ Paul Feldman

     Name: Paul Feldman

     Title: President


Facsimile No. for delivery of Notices: _______________

 

 



{00810013.DOCX;2 }






ANNEX A


NOTICE OF CONVERSION



The undersigned hereby elects to convert principal under the 8% Convertible Promissory Note due March [__], 2017 of Force Protection Video Equipment Corp. (the “ Company ”), into shares of common stock of the Company (the “ Common Stock ”), according to the conditions hereof, as of the date written below.  If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith.  No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.


By the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not exceed the amounts specified under Section 4 of this Note, as determined in accordance with Section 13(d) of the Exchange Act.


The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.  


Conversion calculations:

Date to Effect Conversion:


Principal Amount of Note to be Converted:


Payment of Interest in Common Stock __ yes  __ no

If yes, $_____ of Interest Accrued on Account of Conversion at Issue.


Number of Shares of Common Stock to be Issued:



Signature:


Name:


Delivery Instructions:




{00810013.DOCX;2 }






Schedule 1


CONVERSION SCHEDULE


This 8% Convertible Promissory Note due on March [__], 2017 in the original principal amount of $157,500 is issued by Force Protection Video Equipment Corp.  This Conversion Schedule reflects conversions made under Section 4 of the above referenced Note.


Dated:



Date of Conversion

(or for first entry, Original Issue Date)


Amount of Conversion


Aggregate Principal Amount Remaining Subsequent to Conversion

(or original Principal Amount)


Company Attest













 






































{00810013.DOCX;2 }



EXHIBIT 3.6


AMENDMENT TO

ARTICLES OF INCORPORATION OF

FORCE PROTECTION VIDEO EQUIPMENT CORP .


THE UNDERSIGNED, being the president of Force Protection Video Equipment Corp. does hereby amend the Articles of Incorporation effective September 8, 2016, as follows:


ARTICLE IV

SHARES


The authorized common stock of this corporation shall be increased to 750,000,000 shares of common stock, $0.0001 par value. And the authorized Series A Preferred Stock shall be increased to 5,000,0000 shares, $0.0001 par value.



I hereby certify that the following was adopted by a majority vote of the shareholders and directors of the corporation on August 4, 2016 and that the number of votes cast was sufficient for approval.


IN WITNESS WHEREOF, I have hereunto subscribed to and executed this Amendment to Articles of Incorporation on August 4, 2016





/s/Paul Feldman

Paul Feldman, President





EXHIBIT 10.1


SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of September 1, 2016, between Force Protection Video Equipment Corp., a Florida corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively, the “Purchasers”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

 

ARTICLE I.

DEFINITIONS

 

1.1   Definitions.  In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Notes (as defined herein), and (b) the following terms have the meanings set forth in this Section 1.1:

 

Acquiring Person ” shall have the meaning ascribed to such term in Section 4.6.

 

Action ” shall have the meaning ascribed to such term in Section 3.1(j).

 

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.

 

Board of Directors ” means the board of directors of the Company.

 

Business Day ” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

Closing Dates ” means the Trading Day(s) on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto in connection with a Closing, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount as to such Closing and (ii) the Company’s obligations to deliver the Securities as to such Closing, in each case, have been satisfied or waived.

 

Closing(s) ” means the one or more closings of the purchase and sale of the Securities pursuant to Section 2.2.


Closing Statement ” means the Closing Statement in the form of Annex A attached hereto.

 

Commission ” means the United States Securities and Exchange Commission.

 

Common Stock ” means the common stock of the Company, par value $0. 0001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

 

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.

 

Company Counsel ” means Eric P. Littman, P.A.

Conversion Price ” shall have the meaning ascribed to such term in the Notes.

 

Conversion Shares ” shall have the meaning ascribed to such term in the Notes.

  

Disclosure Schedules ” shall have the meaning ascribed to such term in Section 3.1.

  

Evaluation Date ” shall have the meaning ascribed to such term in Section 3.1(q).

 

Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

Exempt Issuance ” means the issuance of ( i) securities issued under the Company’s equity incentive plan existing on the date of this Agreement and any amendments thereto approved by the Board of Directors, including securities issuable upon conversion or exercise of such securities, (ii) securities issued for consideration other than cash pursuant to a strategic arrangement, joint venture, merger, consolidation, acquisition, or similar business combination approved by the Board of Directors and (iii) securities issued hereunder or upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities, (iv) securities issued for consideration other than cash pursuant to a merger, consolidation, acquisition, or similar business combination approved by the Board of Directors, or (v) securities issued pursuant to an equipment loan or leasing arrangement, real property leasing arrangement or debt financing from a bank or similar financial institution approved by the Board of Directors.  

 

FCPA ” means the Foreign Corrupt Practices Act of 1977, as amended.

 

First Closing ” shall have the meaning ascribed to such term in Section 2.1.


GAAP ” shall have the meaning ascribed to such term in Section 3.1(h).

 

Indebtedness means (x) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (y) 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 (z) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with GAAP.

 

Intellectual Property Rights ” shall have the meaning ascribed to such term in Section 3.1(o).

 

Legend Removal Date ” shall have the meaning ascribed to such term in Section 4.1(c).

 

Liens ” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

Material Adverse Effect ” shall have the meaning assigned to such term in Section 3.1(b).

 

Material Permits ” shall have the meaning ascribed to such term in Section 3.1(m).

 

Maturity Date ” means the maturity date of the Notes as set forth therein.


Maximum Rate ” shall have the meaning ascribed to such term in Section 5.17.

 

Notes ” means the 8% Convertible Promissory Notes due, subject to the terms therein, six (6) months from the date of issuance, issued by the Company to the Purchasers hereunder, in the form of Exhibit A attached hereto.


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.

 

Pre-Notice ” shall have the meaning ascribed to such term in Section 4.13(b).

 

Principal Amount ” means, as to each Purchaser, the amounts set forth below such Purchaser’s signature block on the signature pages hereto next to the heading “Principal Amount,” in United States Dollars, which shall equal such Purchaser’s Subscription Amount as to the applicable Closing multiplied by 1.05.

 

Proceeding ” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

Public Information Failure ” shall have the meaning ascribed to such term in Section 4.3(b).

 

Public Information Failure Payments ” shall have the meaning ascribed to such term in Section 4.3(b).

 

Purchaser Party ” shall have the meaning ascribed to such term in Section 4.9.


Registration Rights Agreement ” means the Registration Rights Agreement, dated the date hereof, among the Company and the Purchasers, in the form of Exhibit B attached hereto.


Registration Statement ” means the registration statement that the Company is required to file pursuant to this Agreement to register the Underlying Shares. The Registration Statement shall register all Underlying Shares in connection with each Tranche.


Required Approvals ” shall have the meaning ascribed to such term in Section 3.1(e).

 

Required Minimum ” means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the Transaction Documents, including any Underlying Shares issuable upon conversion in full of all Notes (including Underlying Shares issuable as payment of interest on the Notes), ignoring any conversion or exercise limits set forth therein.

 

Rule 144 ” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

 “ SEC Reports ” shall have the meaning ascribed to such term in Section 3.1(h).

 

Securities ” means the Notes and the Underlying Shares.

 

Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

Short Sales ” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act.

 

Subscription Amount ” means, as to each Purchaser, the aggregate amount to be paid for Notes purchased hereunder as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.

 

Subsidiary ” means any subsidiary of the Company as set forth on Schedule 3.1(a) and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.


Trading Day ” means a day on which the principal Trading Market is open for trading.

 

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 MKT; the Nasdaq Capital Market; the Nasdaq Global Market; the Nasdaq Global Select Market; the New York Stock Exchange; OTCQX, OTCQB, OTCBB or OTC Pink Sheets (or any successors to any of the foregoing).

 

Transaction Documents ” means this Agreement, the Registration Rights Agreement, the Notes, the Transfer Agent Instruction Letter, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.

 

Transfer Agent ” means Interwest Transfer Co., Inc. the current transfer agent of the Company, with a mailing address of 1981 East 4800 South #100, Salt Lake City, UT 84117 , and any successor transfer agent of the Company.


Transfer Agent Instruction Letter ” means the letter from the Company to the Transfer Agent which instructs the Transfer Agent to issue Underlying Shares pursuant to the Transaction Documents, in the form of Exhibit C attached hereto.

 

Underlying Shares ” means the shares of Common Stock issued and issuable upon conversion or redemption of the Notes and issued and issuable in lieu of the cash payment of interest on the Notes in accordance with the terms of the Notes.

 

ARTICLE II.

PURCHASE AND SALE

 

2.1    Purchase .   The Purchaser will purchase an aggregate of up to $350,000 in Subscription Amount of Notes, corresponding to an aggregate of $367,500 in Principal Amount of Notes . The purchase will occur in two (2) tranches (each a “ Tranche ”), with the first Tranche of $150,000 being closed upon execution of this Agreement (the “ First Closing ”). The second Tranche will be for $200,000 and will occur on the date that is two (2) Trading Days from the date the Registration Statement is declared effective by the Commission.  

 

2.2    Closing .  On each Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement by the parties hereto with respect to the First Closing, the Company shall sell, and each Purchaser, severally and not jointly, shall purchase, a Note in the Principal Amount and in consideration for such Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such Purchaser.  At each Closing, each Purchaser shall deliver to the Company, via wire transfer or a certified check, immediately available funds equal to such Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such Purchaser, and the Company shall deliver to each Purchaser its respective Note, as determined pursuant to Section 2.3(a), and the Company and each Purchaser shall deliver the other items set forth in Section 2.3 deliverable at the respective Closing.  Upon satisfaction of the covenants and conditions set forth in Sections 2.3 and 2.4 for each Closing, each Closing shall occur at the offices of the Purchaser’s counsel or such other location as the parties shall mutually agree.

 

2.3    Deliveries .

 

(a)   On or prior to each Closing Date (except as noted), the Company shall deliver or cause to be delivered to each Purchaser the following:

 

(i) as to the First Closing, this Agreement duly executed by the Company;

 

(ii) a Note with a principal amount equal to such Purchaser’s Principal Amount as to the applicable Closing, registered in the name of such Purchaser;


(iii) as to the First Closing, the Registration Rights Agreement, duly executed by the Company; and

 

(iv) as to the First Closing, the Transfer Agent Instruction Letter duly executed by the Company and the Transfer Agent.

 

(b)   On or prior to the applicable Closing Date, each Purchaser shall deliver or cause to be delivered to the Company, as applicable, the following:

 

(i)  as to the First Closing, this Agreement duly executed by such Purchaser;


(ii) as to the First Closing, the Registration Rights Agreement, duly executed by such Purchaser; and

 

(iii) such Purchaser’s Subscription Amount as to the applicable Closing by wire transfer to the account specified in writing by the Company.


2.4    Closing Conditions .

 

(a)   The obligations of the Company hereunder in connection with each Closing are subject to the following conditions being met:

 

(i)  the accuracy in all material respects on the applicable Closing Date of the representations and warranties of the Purchasers contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);

 

(ii)  all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the applicable Closing Date shall have been performed; and

 

(iii)  the delivery by each Purchaser of the items set forth in Section 2.3(b) of this Agreement.

 

(b)   The respective obligations of the Purchasers hereunder in connection with each Closing are subject to the following conditions being met:

 

(i)   the accuracy in all material respects when made and on the applicable Closing Date of the representations and warranties of the Company contained herein (unless as of a specific date therein);

 

(ii)  all obligations, covenants and agreements of the Company required to be performed at or prior to the applicable Closing Date shall have been performed;

 

(iii)  the delivery by the Company of the items set forth in Section 2.3(a) of this Agreement;

 

(iv)   there is no existing Event of Default (as defined in the Notes);

 

(v)   there shall have been no Material Adverse Effect with respect to the Company since the date hereof; and

  

(vi)   from the date hereof to the applicable Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Company’s principal Trading Market and, at any time prior to the applicable Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

3.1    Representations and Warranties of the Company .  Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Purchaser:

 

(a)    Subsidiaries .  All Subsidiaries of the Company are set forth on Schedule 3.1(a) .  The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.  If the Company has no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.

 

(b)    Organization and Qualification .  The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.  Neither the Company nor any Subsidiary is in violation or default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents.  Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document; (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole; or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “ Material Adverse Effect ”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

  

(c)    Authorization; Enforcement .  The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.  The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection herewith or therewith other than in connection with the Required Approvals.  This Agreement and each other Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally; (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

(d)    No Conflicts .  The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not: (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents; (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected; or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

   

(e)    Filings, Consents and Approvals .  The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filings required pursuant to Section 4.14 of this Agreement, (ii) the notice and/or application(s) to each applicable Trading Market for the issuance and sale of the Securities and the listing of the Conversion Shares for trading thereon in the time and manner required thereby and (iii) the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws (collectively, the “ Required Approvals ”).

 

(f)    Issuance of the Securities .  The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents and applicable securities laws.  The Underlying Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents and applicable securities laws.

 

(g)    Capitalization .  The capitalization of the Company is as set forth on Schedule 3.1(g) , which Schedule 3.1(g) shall also include the number of shares of Common Stock owned beneficially, and of record, by Affiliates of the Company as of the date hereof. The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act.    No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents.  Except as a result of the purchase and sale of the Securities, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents.  The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities.  No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities.  There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

 

(h)    SEC Reports; Financial Statements .  Except as set forth on Schedule 3.1(g), the Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”).  As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  The Company is not now or has not in the last year been an issuer subject to Rule 144(i) under the Securities Act. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable or accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing.  Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“ GAAP ”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

 

 (i)    Material Changes; Undisclosed Events, Liabilities or Developments .  Since the date of the latest financial statements included within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof: (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect; (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission; (iii) the Company has not altered its method of accounting; (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock. The Company does not have pending before the Commission any request for confidential treatment of information; and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans.   Except for the issuance of the Securities contemplated by this Agreement or as set forth on Schedule 3.1(i) , no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, properties, operations, assets or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least one (1) Trading Day prior to the date that this representation is made.

 

(j)    Litigation .  Except as disclosed in Schedule 3.1(j) , there is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “ Action ”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect.  Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty.  There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company.  The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.

 

 (k)    Labor Relations .  No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company, which could reasonably be expected to result in a Material Adverse Effect.  None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good.  To the knowledge of the Company, no executive officer of the Company or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters.  The Company and its Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(l)    Compliance .  Except as disclosed in Schedule 3.1(l) , neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.

   

(m)    Regulatory Permits .  The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“ Material Permits ”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.

 

(n)    Title to Assets .  The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and (ii) Liens for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP and, the payment of which is neither delinquent nor subject to penalties.  Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.

 

(o)    Intellectual Property .  The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights as described in the SEC Reports as necessary or required for use in connection with their respective businesses and which the failure to so have could have a Material Adverse Effect (collectively, the “ Intellectual Property Rights ”).  None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from the date of this Agreement.  Neither the Company nor any Subsidiary has received, since the date of the latest audited financial statements included within the SEC Reports, a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as could not have or reasonably be expected to not have a Material Adverse Effect.  To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights.  The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(p)    Transactions with Affiliates and Employees .  Except as set forth in the SEC Reports, none of the officers or directors of the Company or any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, providing for the borrowing of money from or lending of money to, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case in excess of $100,000 other than for: (i) payment of salary or consulting fees for services rendered; (ii) reimbursement for expenses incurred on behalf of the Company; and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company.

 

(q)    Sarbanes-Oxley; Internal Accounting Controls .  The Company and the Subsidiaries are in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are applicable to the Company and are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof and as of the applicable Closing Date.  The Company and the Subsidiaries maintain a system of 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. The Company and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.  The Company’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of the period covered by the most recently filed periodic report under the Exchange Act (such date, the “ Evaluation Date ”).  The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange Act) that have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting of the Company and its Subsidiaries.

 

(r)    Certain Fees .  Other than as set forth on Schedule 3.1(r) , no brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiaries to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents.  The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section 3.1(r) that may be due in connection with the transactions contemplated by the Transaction Documents.

  

(s)    Private Placement .  Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated hereby. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market.

 

(t)    Investment Company . The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.  The Company shall, while the Notes are outstanding, conduct its business in a manner so that it will not become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.

 

(u)    Registration Rights .  Except as set forth in the SEC Reports, no Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company or any Subsidiaries.

 

(v)   Listing and Maintenance Requirements .  The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is 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.  The Company has not, in the twelve (12) months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.

 

(w)   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 to the Purchasers as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Securities and the Purchasers’ ownership of the Securities.

 

(x)    Disclosure .  Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might constitute material, non-public information.  The Company understands and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company.  All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.   The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.


(y)    No Integrated Offering . Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, 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 Securities to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require the registration of any such securities under the Securities Act, except as set forth in the SEC Reports, or (ii) any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.

 

(z)    No General Solicitation . Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Securities by any form of general solicitation or general advertising.  The Company has offered the Securities for sale only to the Purchasers and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.

 

(aa)    Foreign Corrupt Practices .  Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent or other person acting on behalf of the Company or any Subsidiary, has: (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity; (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds; (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person acting on its behalf of which the Company is aware) which is  in violation of law; or (iv) violated in any material respect any provision of FCPA.

 

(bb)    Accountants .  The Company’s accounting firm is set forth on Schedule 3.1(bb) .  To the knowledge and belief of the Company, such accounting firm is a registered public accounting firm as required by the Exchange Act.

 

(cc)    No Disagreements with Accountants and Lawyers .  Except as set forth in Schedule 3.1(cc) , there are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company which could affect the Company’s ability to perform any of its obligations under any of the Transaction Documents, and the Company is current with respect to any fees owed to its accountants and lawyers.

 

 (dd)    Acknowledgment Regarding Purchasers’ Purchase of Securities .  The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby.  The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities.  The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

  

(ee)    Regulation M Compliance .  The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Company’s placement agent in connection with the placement of the Securities.

 

(ff)    Stock Option Plans . Each stock option granted by the Company under the Company’s stock option plan was granted (i) in accordance with the terms of the Company’s stock option plan and (ii) with an exercise price at least equal to the fair market value of the Common Stock on the date such stock option would be considered granted under GAAP and applicable law. No stock option granted under the Company’s stock option plan has been backdated.  The Company has not knowingly granted, and there is no and has been no Company policy or practice to knowingly grant, stock options prior to, or otherwise knowingly coordinate the grant of stock options with, the release or other public announcement of material information regarding the Company or its Subsidiaries or their financial results or prospects.

 

(gg)    Office of Foreign Assets Control .  Neither the Company nor any Subsidiary nor, to the Company's knowledge, any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“ OFAC ”).

 

(hh)    U.S. Real Property Holding Corporation .  The Company is not and has never been a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Purchaser’s request.

 

 (ii)    Bank Holding Company Act .  Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the “ BHCA ”) and to regulation by the Board of Governors of the Federal Reserve System (the “ Federal Reserve ”).  Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.  Neither the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.


(jj) Solvency .  The Company, at this time, 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 applicable Closing Date.


(kk) Tax Status . Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company (i) has made or filed all United States federal, state and local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply.  There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.


(ll) Seniority .  As of each Closing Date, no Indebtedness or other claim against the Company is senior to the Notes in right of payment, whether with respect to interest or upon liquidation or dissolution, or otherwise, other than indebtedness secured by purchase money security interests (which is senior only as to underlying assets covered thereby) and capital lease obligations (which is senior only as to the property covered thereby).


(mm) Money Laundering .  The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “ Money Laundering Laws ”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of the Company or any Subsidiary, threatened.

 

3.2    Representations and Warranties of the Purchasers .    Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein):

 

(a)    Organization; Authority .  Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser.  Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally; (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

(b)    Own Account .  Such Purchaser understands that the Securities are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting such Purchaser’s right to sell the Securities in compliance with applicable federal and state securities laws).  Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.

 

(c)    Purchaser Status .  At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on which it converts any Notes it will be an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act.

 

(d)    Experience of Such Purchaser .  Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment.  Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

 

(e)    General Solicitation .  Such Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

 

(f)    Certain Transactions and Confidentiality .  Other than consummating the transactions contemplated hereunder, such Purchaser has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof.  Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.  Other than to other Persons party to this Agreement, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). Notwithstanding the foregoing, but subject to Section 4.12 of this Agreement, for avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to the identification of the availability of, or securing of, available shares to borrow in order to effect Short Sales or similar transactions in the future.

 

The Company acknowledges and agrees that the representations contained in Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transaction contemplated hereby.

  

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1    Transfer Restrictions .

 

(a)   The Securities may only be disposed of in compliance with state and federal securities laws.  In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act.  As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights and obligations of a Purchaser under this Agreement.

 

(b)   The Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in substantially the following form:

 

[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [CONVERTIBLE] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

The Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees or secured parties.  Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith.  Further, no notice shall be required of such pledge.  At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities.

 

(c)   Certificates evidencing the Underlying Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof):  (i) following any sale of such Underlying Shares pursuant to Rule 144, or (ii) if such Underlying Shares are eligible for sale under Rule 144 without the need for current public information or (iii) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). If all or any portion of a Note is converted at a time when there is an effective registration statement to cover the resale of the Underlying Shares, or if such Underlying Shares may be sold under Rule 144 without the need for current public information or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission) then such Underlying Shares shall be, subject to the terms hereof, issued free of all legends.  The Company agrees that at such time as such legend is no longer required under this Section 4.1(c), it will, no later than three (3) Trading Days following the delivery by a Purchaser to the Company or the Transfer Agent of a certificate representing Underlying Shares together with such seller and broker representation letter and an opinion of counsel to Purchaser, reasonably acceptable to the Company, and other documents and instruments as the Company may reasonably request, as applicable, issued with a restrictive legend (such third Trading Day, the “ Legend Removal Date ”), deliver or cause to be delivered to such Purchaser a certificate representing such shares that is free from all restrictive and other legends.  The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4.  Certificates for Underlying Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System as directed by such Purchaser.


(d)   In addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, $1,000 per Trading Day for each Trading Day after the Legend Removal Date until such certificate is delivered without a legend.  Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Company’s failure to deliver certificates representing any Securities as required by the Transaction Documents, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.

 

4.2    Acknowledgment of Dilution .  The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions.  The Company further acknowledges that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Underlying Shares pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company.

 

4.3    Furnishing of Information; Public Information .

 

(a)   Until the earliest of the time that no Purchaser owns Securities, the Company covenants to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act.

 

(b)    At any time during the period commencing from the six (6) month anniversary of the date hereof and ending at such time that all of the Securities may be sold without the requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, if the Company shall fail for any reason to satisfy the current public information requirement under Rule 144(c) (a “ Public Information Failure ”) then, in addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, by reason of any such delay in or reduction of its ability to sell the Securities, an amount in cash equal to two percent (2.0%) of the aggregate Subscription Amount of such Purchaser’s Securities on the day of a Public Information Failure and on every thirtieth (30th) day (pro rated for periods totaling less than thirty (30) days) thereafter until the earlier of (a) the date such Public Information Failure is cured and (b) such time that such public information is no longer required  for the Purchasers to transfer the Underlying Shares pursuant to Rule 144.  The payments to which a Purchaser shall be entitled pursuant to this Section 4.3(b) are referred to herein as “ Public Information Failure Payments .”  Public Information Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which such Public Information Failure Payments are incurred and (ii) the third (3rd) Business Day after the event or failure giving rise to the Public Information Failure Payments is cured.  In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 1.5% per month (prorated for partial months) until paid in full. Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Public Information Failure, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.

 

4.4    Integration .  The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.

 

4.5    Conversion and Exercise Procedures .  The form of Notice of Conversion included in the Notes sets forth the totality of the procedures required of the Purchasers in order to convert the Notes.  Without limiting the preceding sentences, no ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required in order to convert the Note.  No additional legal opinion, other information or instructions shall be required of the Purchasers to convert their Notes.  The Company shall honor conversions of the Notes and shall deliver Underlying Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.

 

4.6    Shareholder Rights Plan .  No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company and the Purchasers.

 

4.7    Non-Public Information.   Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company covenants and agrees that neither it, nor any other Person acting on its behalf, will provide any Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto such Purchaser shall have entered into a written agreement with the Company regarding the confidentiality and use of such information.  The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.

 

4.8    Use of Proceeds .  The Company shall use the net proceeds hereunder at its sole discretion.

 

4.9    Indemnification of Purchasers .   Subject to the provisions of this Section 4.9, the Company will indemnify and hold each Purchaser and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “ Purchaser Party ”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach by the Company of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against the Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of such Purchaser Party’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such  Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence, willful misconduct or malfeasance).  If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party.  Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel.  The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents.  The indemnification required by this Section 4.9 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or are incurred.  The indemnity agreements contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject to pursuant to law.

  

4.10    Reservation and Listing of Securities .

 

(a)   The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may then be required to fulfill its obligations in full under the Transaction Documents.

 

(b)   If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than 300% of the Required Minimum on such date, then the Board of Directors shall use commercially reasonable efforts to amend the Company’s certificate or articles of incorporation to increase the number of authorized but unissued shares of Common Stock to at least 300% of the Required Minimum at such time, as soon as possible and in any event not later than the 90th day after such date.

 

(c)   The Company shall, if applicable: (i) in the time and manner required by the principal Trading Market, prepare and file with such Trading Market an additional shares listing application covering a number of shares of Common Stock at least equal to the Required Minimum on the date of such application; (ii) take all steps necessary to cause such shares of Common Stock to be approved for listing or quotation on such Trading Market as soon as possible thereafter; (iii) provide to the Purchasers evidence of such listing or quotation; and (iv) maintain the listing or quotation of such Common Stock on any date at least equal to the Required Minimum on such date on such Trading Market or another Trading Market.

 

4.11    Equal Treatment of Purchasers .  No consideration (including any modification of any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration is also offered to all of the parties to this Agreement. Further, the Company shall not make any payment of principal or interest on the Notes in amounts which are disproportionate to the respective principal amounts outstanding on the Notes at any applicable time.  For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.

 

4.12    Certain Transactions and Confidentiality . Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither it, nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any Short Sales, of any of the Company’s securities during the period commencing with the execution of this Agreement and ending on the later of (i) the Maturity Date or (ii) the date that the Notes are no longer outstanding (provided that this provision shall not prohibit any sales made where a corresponding Notice of Conversion is tendered to the Company and the shares received upon such conversion or exercise are used to close out such sale). 


4.13 Right of First Refusal .

(a)    From the date hereof until the date that is the 6-month anniversary of the Closing, upon any issuance by the Company of Common Stock, Common Stock Equivalents or debt for cash consideration, Indebtedness or a combination of units thereof (a “ Subsequent Financing ”), the Purchasers on a pro rata basis shall have the right to participate in up to an amount of the Subsequent Financing equal to 100% of the Subsequent Financing on the same terms, conditions and price provided for in the Subsequent Financing.  


(b)   At least three (3) Trading Days prior to the closing of the Subsequent Financing, the Company shall deliver to the Purchasers a written notice of its intention to effect a Subsequent Financing (“ Pre-Notice ”), which Pre-Notice shall ask the Purchasers if they want to review the details of such financing (such additional notice, a “ Subsequent Financing Notice ”).  Upon the request of a Purchaser, and only upon a request by such Purchaser, for a Subsequent Financing Notice, the Company shall promptly, but no later than one (1) Trading Day after such request, deliver a Subsequent Financing Notice to such Purchaser.  The Subsequent Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Financing, the amount of proceeds intended to be raised thereunder and the Person or Persons through or with whom such Subsequent Financing is proposed to be effected and shall include a term sheet or similar document relating thereto as an attachment.    


(c)   If such Purchaser desires to participate in such Subsequent Financing, such Purchaser must provide written notice to the Company by not later than the third (3rd) Trading Day after all of the Purchasers have received the Pre-Notice that such Purchaser is willing to participate in the Subsequent Financing, the amount of such Purchaser’s participation, and representing and warranting that the Purchaser has such funds ready, willing, and available for investment on the terms set forth in the Subsequent Financing Notice.  


(d)    If notifications by the Purchasers of their willingness to participate in the Subsequent Financing (or to cause their designees to participate) are, in the aggregate, less than the total amount of the Subsequent Financing, then the Company may effect the remaining portion of such Subsequent Financing on the terms and with the Persons set forth in the Subsequent Financing Notice.  


(e)    The Company must provide the Purchasers with a second Subsequent Financing Notice, and the Purchasers will again have the right of participation set forth above in this Section 4.13, if the Subsequent Financing subject to the initial Subsequent Financing Notice is not consummated for any reason on the terms set forth in such Subsequent Financing Notice within thirty (30) Trading Days after the date of the initial Subsequent Financing Notice.


(f)    The Company and the Purchasers agree that if a Purchaser elects to participate in the Subsequent Financing, the transaction documents related to the Subsequent Financing shall not include any term or provision whereby such Purchaser shall be required to agree to any restrictions on trading as to any of the Securities purchased hereunder or be required to consent to any amendment to or termination of, or grant any waiver, release or the like under or in connection with, this Agreement, without the prior written consent of such Purchaser.


(g)    Notwithstanding anything to the contrary in this Section 4.13 and unless otherwise agreed to by the Purchasers, the Company shall either confirm in writing to the Purchasers that the transaction with respect to the Subsequent Financing has been abandoned or shall publicly disclose its intention to issue the securities in the Subsequent Financing, in either case in such a manner such that such Purchaser will not be in possession of any material, non-public information, by the tenth (10th) Trading Day following delivery of the Subsequent Financing Notice.  If by such tenth (10th) Trading Day, no public disclosure regarding a transaction with respect to the Subsequent Financing has been made, and no notice regarding the abandonment of such transaction has been received by the Purchasers, such transaction shall be deemed to have been abandoned and the Purchasers shall not be deemed to be in possession of any material, non-public information with respect to the Company or any of its Subsidiaries.  


(h)    Notwithstanding the foregoing, this Section 4.13 shall not apply in respect of an Exempt Issuance.


4.14 Securities Laws Disclosure; Publicity .  The Company shall (a) by 9:30 a.m. (New York City time) on the Trading Day immediately following the date hereof, issue a press release disclosing the material terms of the transactions contemplated hereby, and (b) file a Current Report on Form 8-K, including the Transaction Documents as exhibits thereto, with the Commission within the time required by the Exchange Act.  From and after the issuance of such press release, the Company represents to the Purchasers that it shall have publicly disclosed all material, non-public information delivered to any of the Purchasers by the Company or any of its Subsidiaries, or any of their respective officers, directors, employees or agents in connection with the transactions contemplated by the Transaction Documents. The Company and the Purchasers shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor the Purchasers shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of the Purchasers, or without the prior consent of the  Purchasers, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication.  Notwithstanding the foregoing, the Company shall not publicly disclose the name of the Purchaser, or include the name of the Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of the Purchaser, except: (a) as required by federal securities law in connection with any registration statement contemplated by this Agreement and (b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchaser with prior notice of such disclosure permitted under this clause (b).


4.15 Form D; Blue Sky Filings .  The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof, promptly upon request of any Purchaser. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers at the applicable Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such actions promptly upon request of the Purchaser.


4.16   Additional Indebtedness .  From the date hereof until the date that is ninety (90) days after the date of the Closing , without the prior written consent of the Purchaser, the Company shall not issue any indebtedness that is convertible for or exchangeable into Common Stock .


4.17   Further Financing Restrictions .  During the period commencing on the date hereof and for so long as any Principal Amount of the Notes remain outstanding, neither the Company nor any of its affiliates or Subsidiaries, nor any of its or their respective officers, employees, directors, agents or other representatives, will, without the prior written consent of the Purchasers holding a majority of the then-outstanding principal amount of the Notes (which consent may be withheld, delayed or conditioned in the Purchasers’ sole discretion), directly or indirectly: (a) solicit, initiate, encourage or accept any other inquiries, proposals or offers from any Person (other than the Purchaser) relating to any exchange (i) of any security of the Company or any of its Subsidiaries for any other security of the Company or any of its Subsidiaries, except to the extent (x) consummated pursuant to an exchange registered under a registration statement of the Company filed pursuant to the Securities Act and declared effective by the Commission or (y) such exchange is exempt from registration pursuant to an exemption provided under the Securities Act (other than Section 3(a)(10) of the Securities Act) or (ii) of any indebtedness or other securities of, or claim against, the Company or any of its Subsidiaries relying on the exemption provided by Section 3(a)(10) of the Securities Act (any such transaction described in clauses (i) or (ii), an “ Exchange Transaction ”); (b) enter into, effect, alter, amend, announce or recommend to its stockholders any Exchange Transaction with any Person (other than the Purchaser); or (c) participate in any discussions, conversations, negotiations or other communications with any Person (other than the Purchaser) regarding any Exchange Transaction, or furnish to any Person (other than the Purchaser) any information with respect to any Exchange Transaction, or otherwise cooperate in any way, assist or participate in, facilitate or encourage any effort or attempt by any Person (other than the Purchaser) to seek an Exchange Transaction involving the Company or any of its Subsidiaries. Notwithstanding the foregoing or anything contained herein to the contrary, for so long as any principal on the Notes remains outstanding, neither the Company nor any of its affiliates or Subsidiaries, nor any of its or their respective officers, employees, directors, agents or other representatives, will, without the prior written consent of the Purchasers holding a majority of the then-outstanding principal amount of the Notes (which consent may be withheld, delayed or conditioned in the Purchasers’ sole discretion), directly or indirectly, cooperate in any way, assist or participate in, facilitate or encourage any effort or attempt by any Person (other than the Purchaser) to effect any acquisition of securities or indebtedness of, or claim against, the Company by such Person from an existing holder of such securities, indebtedness or claim in connection with a proposed exchange of such securities or indebtedness of, or claim against, the Company (whether pursuant to Section 3(a)(9) or 3(a)(10) of the Securities Act or otherwise) (a “ Third Party Exchange Transfer ”). The Company, its affiliates and Subsidiaries, and each of its and their respective officers, employees, directors, agents or other representatives shall immediately cease and cause to be terminated all existing discussions, conversations, negotiations and other communications with any Persons (other than the Purchasers) with respect to any of the foregoing. The Company shall promptly (and in no event later than 24 hours after receipt) notify (which notice shall be provided orally and in writing and shall identify the Person making the inquiry, request, proposal or offer and set forth the material terms thereof) the Purchasers after receipt of any inquiry, request, proposal or offer relating to any Exchange Transaction or Third Party Exchange Transfer, and shall promptly (and in no event later than 24 hours after receipt) provide copies to the Purchasers of any written inquiries, requests, proposals or offers relating thereto.  The Company agrees that it and its affiliates and Subsidiaries, and each of its and their respective officers, employees, directors, agents or other representatives Subsidiaries will not enter into any agreement with any Person subsequent to the date hereof which prohibits the Company from providing any information to the Purchasers in accordance with this provision.   For all purposes of this Agreement, violations of the restrictions set forth in this Section 4.17 by any Subsidiary or affiliate of the Company, or any officer, employee, director, agent or other representative of the Company or any of its Subsidiaries or affiliates shall be deemed a direct breach of this Section 4.17 by the Company.


ARTICLE V.

MISCELLANEOUS

 

5.1    Termination .  This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing has not been consummated on or before September 30, 2016; provided, however, that such termination will not affect the right of any party to sue for any breach by any other party (or parties).

 

5.2    Fees and Expenses .  The Company shall deliver to each Purchaser, prior to each Closing, a completed and executed copy of the Closing Statement, attached hereto as Annex A .  Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.  At the Closing, the Company shall pay the Purchasers an aggregate of $5,000 for their legal fees.  The Company shall pay all Transfer Agent fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company and any conversion or exercise notice delivered by a Purchaser), stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers.

 

5.3    Entire Agreement .  The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

 

5.4    Notices .  Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto at or prior to 12:00 p.m. (New York City time) on a Trading Day; (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 12:00 p.m. (New York City time) on any Trading Day; (iii) the second (2nd) 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.  The address for such notices and communications shall be as set forth on the signature pages attached hereto.

 

5.5    Amendments; Waivers .  No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchasers holding at least 67% in interest of the Securities then outstanding or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought.  No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

 

5.6    Headings .  The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

 

5.7    Successors and Assigns .  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.  The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser (other than by merger or by similar reorganization or change in control transaction).  Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”

 

5.8    No Third-Party Beneficiaries .  This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.9.

 

5.9    Governing Law .  All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its 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 (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, 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 Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.   If either party shall commence an action, suit or proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under Section 4.9, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

 

5.10    Survival .  The representations and warranties contained herein shall survive the Closings and the delivery of the Securities.

 

5.11    Execution .  This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

5.12    Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

5.13    Rescission and Withdrawal Right .  Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights; provided, however, that in the case of a rescission of a conversion of a Note, the applicable Purchaser shall be required to return any shares of Common Stock subject to any such rescinded conversion notice concurrently with the return to such Purchaser of the aggregate exercise price paid to the Company for such shares.

 

5.14    Replacement of Securities .  If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction.  The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.

 

5.15    Remedies .  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents.  The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 

5.16    Payment Set Aside . To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

 

5.17    Usury .  To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any claim, action or proceeding that may be brought by any Purchaser in order to enforce any right or remedy under any Transaction Document.  Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “ Maximum Rate ”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate.  It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the effective date thereof forward, unless such application is precluded by applicable law.  If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Purchaser with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by such Purchaser to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at such Purchaser’s election.

 

5.18    Independent Nature of Purchasers’ Obligations and Rights .  The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document.  Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents.  Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.  Each Purchaser has been represented by its own separate legal counsel in its review and negotiation of the Transaction Documents.

 

5.19    Liquidated Damages .  The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.

 

5.20    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.

 

5.21    Construction . The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

 

5.22    WAIVER OF JURY TRIAL .  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

 

(Signature Pages Follow)

 

 



{00809913.DOCX;2 }

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IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

FORCE PROTECTION VIDEO EQUIPMENT CORP.  



Address for Notice:

By:__________________________________________

    Name:

    Title:


With a copy to (which shall not constitute notice):


Fax:


 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

  



{00809913.DOCX;2 }

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[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]


IN WITNESS WHEREOF , the undersigned have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

Name of Purchaser:

                                                                                                                              

Signature of Authorized Signatory of Purchaser: ____________________________________                                                                                

  

Name of Authorized Signatory: ____________________________________                                                                                                                                 

Title of Authorized Signatory: ____________________________________                                                                                                                                 

Email Address of Authorized Signatory: ____________________________________                                                                                                              

Facsimile Number of Authorized Signatory: ____________________________________                                                                                                        

Address for Notice to Purchaser:

 

 


Address for Delivery of Securities to Purchaser (if not same as address for notice):

 

 

 

First Closing Principal Amount:

   

First Closing Subscription Amount:



Second Closing Principal Amount:

   

Second Closing Subscription Amount:




EIN Number: _______________________

  



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Annex A


CLOSING STATEMENT


Pursuant to the attached Securities Purchase Agreement, dated as of the date hereof, the Purchaser shall purchase Notes from the Company.  All funds will be disbursed in accordance with this Closing Statement.

 

Disbursement Date:

September 1 , 2016



I.    PURCHASE PRICE

 

 

Gross Proceeds to be Received

$150,000

 

 

II.

DISBURSEMENTS

 

 

Company

$130,000

 

Purchaser’s financial advisor (Carter Terry

$15,000

 

Purchaser’s legal advisor (Robinson Brog)

$5,000

 

 

Total Amount Disbursed:

$150,000

 

 

WIRE INSTRUCTIONS :


 

 

 

Duly executed this 1 st day of September , 2016:


Force Protection Video Equipment Corp.


By: /s/ Paul Feldman

Name: Paul Feldman

Title: President

 




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Exhibit A


Form of 8% Convertible Promissory Note




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Exhibit B


Form of Registration Rights Agreement





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Exhibit C


Form of Transfer Agent Instruction Letter




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EXHIBIT 10.2


REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “ Agreement ”) is made and entered into as of September 1 , 2016, between Force Protection Video Equipment Corp . , a Florida corporation (the “ Company ”), and the purchaser signatory hereto (the “ Purchaser ”).

 

This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date hereof, between the Company and each Purchaser (the “ Purchase Agreement ”).


The Company and each Purchaser hereby agrees as follows:


1. Definitions .


Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase Agreement.


As used in this Agreement, the following terms shall have the following meanings:


Advice ” shall have the meaning set forth in Section 6(d).


Effectiveness Date ” means, with respect to the Initial Registration Statement required to be filed hereunder, the 90th calendar day following the initial Closing Date, and with respect to any additional Registration Statements which may be required pursuant to Section 2(c) or Section 3(c), the 90th calendar day following the date on which an additional Registration Statement is required to be filed hereunder; provided , however , that in the event the Company is notified by the Commission that one or more of the above Registration Statements will not be reviewed or is no longer subject to further review and comments, the Effectiveness Date as to such Registration Statement shall be the fifth (5th) Trading Day following the date on which the Company is so notified if such date precedes the dates otherwise required above, provided, further, if such Effectiveness Date falls on a day that is not a Trading Day, then the Effectiveness Date shall be the next succeeding Trading Day.


Effectiveness Period ” shall have the meaning set forth in Section 2(a).


Event ” shall have the meaning set forth in Section 2(d).


Event Date ” shall have the meaning set forth in Section 2(d).

 

Filing Date ” means, with respect to the Initial Registration Statement required hereunder, the 21st calendar day after the initial Closing Date, and, with respect to any additional Registration Statements which may be required pursuant to Section 2(c) or Section 3(c), the earliest practical date on which the Company is permitted by SEC Guidance to file such additional Registration Statement related to the Registrable Securities.


Holder ” or “ Holders ” means the holder or holders, as the case may be, from time to time of Registrable Securities.


Indemnified Party ” shall have the meaning set forth in Section 5(c).


Indemnifying Party ” shall have the meaning set forth in Section 5(c).


Initial Registration Statement ” means the initial Registration Statement filed pursuant to this Agreement.


Losses ” shall have the meaning set forth in Section 5(a).


Prospectus ” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated by the Commission pursuant to the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.


Registrable Securities ” means, as of any date of determination, (a) all of the shares of Common Stock then issued and issuable upon conversion in full of the Notes (assuming on such date the Notes are converted in full without regard to any conversion limitations therein), (b) all shares of Common Stock issued and issuable as interest or principal on the Notes assuming all permissible interest and principal payments are made in shares of Common Stock and the Notes are held until maturity, (c) any additional shares of Common Stock issued and issuable in connection with any anti-dilution provisions in the Notes (without giving effect to any limitations on conversion set forth in the Notes) and (d) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing; provided, however , that any such Registrable Securities shall cease to be Registrable Securities (and the Company shall not be required to maintain the effectiveness of any, or file another, Registration Statement hereunder with respect thereto) for so long as (a) a Registration Statement with respect to the sale of such Registrable Securities is declared effective by the Commission under the Securities Act and such Registrable Securities have been disposed of by the Holder in accordance with such effective Registration Statement, (b) such Registrable Securities have been previously sold in accordance with Rule 144, or (c) such securities become eligible for resale without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 as set forth in a written opinion letter to such effect, addressed, delivered and acceptable to the Transfer Agent and the affected Holders (assuming that such securities and any securities issuable upon exercise, conversion or exchange of which, or as a dividend upon which, such securities were issued or are issuable, were at no time held by any Affiliate of the Company), as reasonably determined by the Company, upon the advice of counsel to the Company.

 

  

  


Registration Statement ” means any registration statement required to be filed hereunder pursuant to Section 2(a) and any additional registration statements contemplated by Section 2(c) or Section 3(c), including (in each case) the Prospectus, amendments and supplements to any such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in any such registration statement.


Rule 415 ” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.


Rule 424 ” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.


Selling Stockholder Questionnaire ” shall have the meaning set forth in Section 3(a).


SEC Guidance ” means (i) any publicly-available written or oral guidance of the Commission staff, or any comments, requirements or requests of the Commission staff and (ii) the Securities Act.


2. Registration .


(a)  Not later than the Filing Date, the Company shall file with the Commission a Registration Statement on Form S-1 relating to the resale by the Holders of all (or such other number as the Commission will permit) of the Registrable Securities.  Subject to the terms of this Agreement, the Company shall use its best efforts to cause a Registration Statement filed under this Agreement (including, without limitation, under Section 3(c)) to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event no later than the applicable Effectiveness Date, and shall use its best efforts to keep such Registration Statement continuously effective under the Securities Act until all Registrable Securities covered by such Registration Statement (i) have been sold, thereunder or pursuant to Rule 144, or (ii) may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144, as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the affected Holders (the “ Effectiveness Period ”).  


(b)  Notwithstanding the registration obligations set forth in Section 2(a), if the Commission informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly inform each of the Holders thereof and use its commercially reasonable efforts to file amendments to the Initial Registration Statement as required by the Commission, covering the maximum number of Registrable Securities permitted to be registered by the Commission, on Form S-1 or such other form available to register for resale the Registrable Securities as a secondary offering, subject to the provisions of Section 2(e), with respect to filing on Form S-1 or other appropriate form, and subject to the provisions of Section 2(d) with respect to the payment of liquidated damages; provided , however , that prior to filing such amendment, the Company shall be obligated to use diligent efforts to advocate with the Commission for the registration of all of the Registrable Securities in accordance with the SEC Guidance, including without limitation, Compliance and Disclosure Interpretation 612.09.

 

(c) Notwithstanding any other provision of this Agreement and subject to the payment of liquidated damages pursuant to Section 2(d), if the Commission or any SEC Guidance sets forth a limitation on the number of Registrable Securities permitted to be registered on a particular Registration Statement as a secondary offering (and notwithstanding that the Company used diligent efforts to advocate with the Commission for the registration of all or a greater portion of Registrable Securities), unless otherwise directed in writing by a Holder as to its Registrable Securities, the number of Registrable Securities to be registered on such Registration Statement will be reduced as follows:

 

i.  First, the Company shall reduce or eliminate any securities to be included by any Person other than a Holder;


ii.  Second, the Company shall reduce Registrable Securities represented by Conversion Shares (applied, in the case that some Conversion Shares may be registered, to the Holders on a pro rata basis based on the total number of unregistered Conversion Shares held by such Holders).

 

In the event of a cutback hereunder, the Company shall give the Holder at least five (5) Trading Days prior written notice along with the calculations as to such Holder’s allotment. In the event the Company amends the Initial Registration Statement in accordance with the foregoing, the Company will use its best efforts to file with the Commission, as promptly as allowed by Commission or SEC Guidance provided to the Company or to registrants of securities in general, one or more registration statements on Form S-1 or such other form available to register for resale those Registrable Securities that were not registered for resale on the Initial Registration Statement, as amended.


 (d) If: (i) the Initial Registration Statement is not filed on or prior to the Filing Date (if the Company files the Initial Registration Statement without affording the Holders the opportunity to review and comment on the same as required by Section 3(a) herein, the Company shall be deemed to have not satisfied this clause (i)), or (ii) the Company fails to file with the Commission a request for acceleration of a Registration Statement in accordance with Rule 461 promulgated by the Commission pursuant to the Securities Act, within five (5) Trading Days of the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that such Registration Statement will not be “reviewed” or will not be subject to further review, or (iii) prior to the effective date of a Registration Statement, the Company fails to file a pre-effective amendment and otherwise respond in writing to comments made by the Commission in respect of such Registration Statement within ten (10) calendar days after the receipt of comments by or notice from the Commission that such amendment is required in order for such Registration Statement to be declared effective, or (iv) a Registration Statement registering for resale all of the Registrable Securities is not declared effective by the Commission by the Effectiveness Date of the Initial Registration Statement, or (v) after the effective date of a Registration Statement, such Registration Statement ceases for any reason to remain continuously effective as to all Registrable Securities included in such Registration Statement, or the Holders are otherwise not permitted to utilize the Prospectus therein to resell such Registrable Securities, for more than ten (10) consecutive calendar days or more than an aggregate of fifteen (15) calendar days (which need not be consecutive calendar days) during any 12-month period (any such failure or breach being referred to as an “ Event ”, and for purposes of clauses (i) and (iv), the date on which such Event occurs, and for purpose of clause (ii) the date on which such five (5) Trading Day period is exceeded, and for purpose of clause (iii) the date which such ten (10) calendar day period is exceeded, and for purpose of clause (v) the date on which such ten (10) or fifteen (15) calendar day period, as applicable, is exceeded being referred to as “ Event Date ”), then, in addition to any other rights the Holders may have hereunder or under applicable law, on each such Event Date and on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the applicable Event is cured, the Company shall pay to each Holder an amount in cash, as partial liquidated damages and not as a penalty, equal to the product of 1% multiplied by the aggregate Subscription Amount paid by such Holder pursuant to the Purchase Agreement. If the Company fails to pay any partial liquidated damages pursuant to this Section 2(d) in full within seven (7) days after the date payable, the Company will pay interest thereon at a rate of 18% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the Holder, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full. The partial liquidated damages pursuant to the terms hereof shall apply on a daily pro rata basis for any portion of a month prior to the cure of an Event.

 

(e) If Form S-1 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable Securities on another appropriate form and (ii) undertake to register the Registrable Securities on Form S-1 as soon as such form is available, provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as a Registration Statement on Form S-1 covering the Registrable Securities has been declared effective by the Commission.

   

3. Registration Procedures .

 

In connection with the Company’s registration obligations hereunder, the Company shall:


(a) Not less than five (5) Trading Days prior to the filing of each Registration Statement and not less than one (1) Trading Day prior to the filing of any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated or deemed to be incorporated therein by reference), the Company shall (i) furnish to each Holder copies of all such documents proposed to be filed, which documents (other than those incorporated or deemed to be incorporated by reference) will be subject to the review of such Holders, and (ii) cause its officers and directors, counsel and independent registered public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel to each Holder, to conduct a reasonable investigation within the meaning of the Securities Act. Notwithstanding the above, the Company shall not be obligated to provide the Holders advance copies of any universal registration statement registering securities in addition to those required hereunder, or any Prospectus prepared thereto. The Company shall not file a Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Holders of a majority of the Registrable Securities shall reasonably object in good faith, provided that, the Company is notified of such objection in writing no later than five (5) Trading Days after the Holders have been so furnished copies of a Registration Statement or one (1) Trading Day after the Holders have been so furnished copies of any related Prospectus or amendments or supplements thereto. Each Holder agrees to furnish to the Company a completed questionnaire in the form attached to this Agreement as Annex B (a “ Selling Stockholder Questionnaire ”) on a date that is not less than two (2) Trading Days prior to the Filing Date or by the end of the fourth (4th) Trading Day following the date on which such Holder receives draft materials in accordance with this Section 3(a).


(b) (i) Prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities, (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424, (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement or any amendment thereto and provide as promptly as reasonably possible to the Holders true and complete copies of all correspondence from and to the Commission relating to a Registration Statement (provided that, the Company shall excise any information contained therein which would constitute material non-public information regarding the Company or any of its Subsidiaries), and (iv) comply in all material respects with the applicable provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by a Registration Statement during the applicable period in accordance (subject to the terms of this Agreement) with the intended methods of disposition by the Holders thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented.

  

(c) If during the Effectiveness Period, the number of Registrable Securities at any time exceeds 100% of the number of shares of Common Stock then registered in a Registration Statement, then the Company shall file as soon as reasonably practicable, but in any case prior to the applicable Filing Date, an additional Registration Statement covering the resale by the Holders of not less than the number of such Registrable Securities.


(d) Notify the Holders of Registrable Securities to be sold (which notice shall, pursuant to clauses (iii) through (vi) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible (and, in the case of (i)(A) below, not less than one (1) Trading Day prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one (1) Trading Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement is proposed to be filed, (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement, and (C) with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information, (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose, (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in a Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a Registration Statement, Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (vi) of the occurrence or existence of any pending corporate development with respect to the Company that the Company believes may be material and that, in the determination of the Company, makes it not in the best interest of the Company to allow continued availability of a Registration Statement or Prospectus, provided , however , in no event shall any such notice contain any information which would constitute material, non-public information regarding the Company or any of its Subsidiaries.


(e) Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order stopping or suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.

 

(f) Furnish to each Holder, without charge, at least one conformed copy of each such Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference to the extent requested by such Person, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission; provided, that any such item which is available on the EDGAR system (or successor thereto) need not be furnished in physical form.


(g) Subject to the terms of this Agreement, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except after the giving of any notice pursuant to Section 3(d).


(h)  The Company shall cooperate with any broker-dealer through which a Holder proposes to resell its Registrable Securities in effecting a filing with the FINRA Corporate Financing Department pursuant to FINRA Rule 5110, as requested by any such Holder, and the Company shall pay the filing fee required by such filing within two (2) Business Days of request therefor.


(i) Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the Registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement; provided, that, the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.


(j) If requested by a Holder, cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by the Purchase Agreement, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holder may request.


(k) Upon the occurrence of any event contemplated by Section 3(d), as promptly as reasonably possible under the circumstances taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event, prepare a supplement or amendment, including a post-effective amendment, to a Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither a Registration Statement nor such Prospectus will contain an 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, in light of the circumstances under which they were made, not misleading. If the Company notifies the Holders in accordance with clauses (iii) through (vi) of Section 3(d) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holders shall suspend use of such Prospectus. The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. The Company shall be entitled to exercise its right under this Section 3(k) to suspend the availability of a Registration Statement and Prospectus, subject to the payment of partial liquidated damages otherwise required pursuant to Section 2(d), for a period not to exceed sixty (60) calendar days (which need not be consecutive days) in any 12-month period.


(l) Comply with all applicable rules and regulations of the Commission.


(m) The Company shall use its best efforts to maintain eligibility for use of Form S-1 (or any successor form thereto) for the registration of the resale of Registrable Securities.


(n) The Company may require each selling Holder to furnish to the Company a certified statement as to the number of shares of Common Stock beneficially owned by such Holder and, if required by the Commission, the natural persons thereof that have voting and dispositive control over the shares. During any periods that the Company is unable to meet its obligations hereunder with respect to the registration of the Registrable Securities solely because any Holder fails to furnish such information within three (3) Trading Days of the Company’s request, any liquidated damages that are accruing at such time as to such Holder only shall be tolled and any Event that may otherwise occur solely because of such delay shall be suspended as to such Holder only, until such information is delivered to the Company.

 

4. Registration Expenses . All fees and expenses incident to the performance of or compliance with, this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of the Company’s counsel and independent registered public accountants) (A) with respect to filings made with the Commission, (B) with respect to filings required to be made with any Trading Market on which the Common Stock is then listed for trading, (C) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities) and (D) if not previously paid by the Company in connection with an Issuer Filing, with respect to any filing that may be required to be made by any broker through which a Holder intends to make sales of Registrable Securities with FINRA pursuant to FINRA Rule 5110, so long as the broker is receiving no more than a customary brokerage commission in connection with such sale, (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. In no event shall the Company be responsible for any broker or similar commissions of any Holder or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holders.

 

5. Indemnification .


(a)  Indemnification by the Company . The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, members, partners, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Common Stock), investment advisors and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, stockholders, partners, agents and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “ Losses ”), as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (2) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement, such Prospectus or in any amendment or supplement thereto (it being understood that the Holder has approved Annex A hereto for this purpose) or (ii) in the case of an occurrence of an event of the type specified in Section 3(d)(iii)-(vi), the use by such Holder of an outdated, defective or otherwise unavailable Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated, defective or otherwise unavailable for use by such Holder and prior to the receipt by such Holder of the Advice contemplated in Section 6(d), but only if and to the extent that following the receipt of the Advice the misstatement or omission giving rise to such Loss would have been corrected. The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified person and shall survive the transfer of any Registrable Securities by any of the Holders in accordance with Section 6(h).

  

(b)  Indemnification by Holders . Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon: (x) such Holder’s failure to comply with any applicable prospectus delivery requirements of the Securities Act through no fault of the Company or (y) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company expressly for inclusion in such Registration Statement or such Prospectus or (ii) to the extent, but only to the extent, that such information relates to such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement (it being understood that the Holder has approved Annex A hereto for this purpose), such Prospectus or in any amendment or supplement thereto or (iii) in the case of an occurrence of an event of the type specified in Section 3(d)(iii)-(vi), to the extent, but only to the extent, related to the use by such Holder of an outdated, defective or otherwise unavailable Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated, defective or otherwise unavailable for use by such Holder and prior to the receipt by such Holder of the Advice contemplated in Section 6(d), but only if and to the extent that following the receipt of the Advice the misstatement or omission giving rise to such Loss would have been corrected. In no event shall the liability of any selling Holder under this Section 5(b) be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.


(c)  Conduct of Indemnification Proceedings . If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “ Indemnified Party ”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “ Indemnifying Party ”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that, the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have materially and adversely prejudiced the Indemnifying Party.


 An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses, (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding, or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and counsel to the Indemnified Party shall reasonably believe that a material conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of no more than one separate counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.


 Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten (10) Trading Days of written notice thereof to the Indemnifying Party; provided, that, the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) not to be entitled to indemnification hereunder.


(d)  Contribution . If the indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms.

  

 The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall be required to contribute pursuant to this Section 5(d), in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Holder from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.


The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.


6. Miscellaneous .


(a)  Remedies . In the event of a breach by the Company or by a Holder of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. Each of the Company and each Holder agrees that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy at law would be adequate.


(b)  No Piggyback on Registration Statement . Neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in the Registration Statement filed hereunder other than the Registrable Securities; provided that the Company and its security holders may include up to $200,000 of Common Stock held by parties other than the Holders in the Registration Statement filed hereunder.


(c)  Compliance . Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it (unless an exemption therefrom is available) in connection with sales of Registrable Securities pursuant to a Registration Statement.


(d)  Discontinued Disposition . By its acquisition of Registrable Securities, each Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(d)(iii) through (vi), such Holder will forthwith discontinue disposition of such Registrable Securities under a Registration Statement until it is advised in writing (the “ Advice ”) by the Company that the use of the applicable Prospectus (as it may have been supplemented or amended) may be resumed. The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. The Company agrees and acknowledges that any periods during which the Holder is required to discontinue the disposition of the Registrable Securities hereunder shall be subject to the provisions of Section 2(d).


(e)  Piggy-Back Registrations . If, at any time during the Effectiveness Period, there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the Company’s stock option or other employee benefit plans, then the Company shall deliver to each Holder a written notice of such determination and, if within fifteen (15) days after the date of the delivery of such notice, any such Holder shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such Holder requests to be registered; provided , however , that the Company shall not be required to register any Registrable Securities pursuant to this Section 6(e) that are eligible for resale pursuant to Rule 144 (without volume restrictions or current public information requirements) promulgated by the Commission pursuant to the Securities Act or that are the subject of a then effective Registration Statement.


(f)  Amendments and Waivers . The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of 67% or more of the then outstanding Registrable Securities (for purposes of clarification, this includes any Registrable Securities issuable upon exercise or conversion of any Security). If a Registration Statement does not register all of the Registrable Securities pursuant to a waiver or amendment done in compliance with the previous sentence, then the number of Registrable Securities to be registered for each Holder shall be reduced pro rata among all Holders and each Holder shall have the right to designate which of its Registrable Securities shall be omitted from such Registration Statement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of a Holder or some Holders and that does not directly or indirectly affect the rights of other Holders may be given only by such Holder or Holders of all of the Registrable Securities to which such waiver or consent relates; provided , however , that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the first sentence of this Section 6(f). No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration also is offered to all of the parties to this Agreement.

 

(g)  Notices . Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth in the Purchase Agreement.


(h)  Successors and Assigns . This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign (except by merger) its rights or obligations hereunder without the prior written consent of all of the Holders of the then outstanding Registrable Securities. Each Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under Section 5.7 of the Purchase Agreement.


(i)  No Inconsistent Agreements . Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Except as set forth on Schedule 6(i) , neither the Company nor any of its Subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any Person that have not been satisfied in full.


(j)  Execution and Counterparts . This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.


(k)  Governing Law . All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be determined in accordance with the provisions of the Purchase Agreement.


(l)  Cumulative Remedies . The remedies provided herein are cumulative and not exclusive of any other remedies provided by law.


(m)  Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

(n)  Headings . The headings in this Agreement are for convenience only, do not constitute a part of the Agreement and shall not be deemed to limit or affect any of the provisions hereof.


(o)  Independent Nature of Holders’ Obligations and Rights . The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Holders are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by this Agreement or any other matters, and the Company acknowledges that the Holders are not acting in concert or as a group, and the Company shall not accept any such claim, with respect to such obligations or transactions. Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose. The use of a single agreement with respect to the obligations of the Company contained was solely in the control of the Company, not the action or decision of any Holder, and was done solely for the convenience of the Company and not because it was required or requested to do so by any Holder. It is expressly understood and agreed that each provision contained in this Agreement is between the Company and a Holder, solely, and not between the Company and the Holders collectively and not between and among the Holders.


********************

 

(Signature Pages Follow)

 



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IN WITNESS WHEREOF , the parties have executed this Registration Rights Agreement as of the date first written above.

 

FORCE PROTECTION VIDEO
EQUIPMENT CORP .



By: /s/ Paul Feldman

        Name: Paul Feldman

 

        Title: President












 

[SIGNATURE PAGE OF HOLDERS FOLLOWS]

  



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2







[SIGNATURE PAGE OF HOLDERS TO RRA]

 

Name of Holder:

RDW Capital, LLC

  

  

Signature of Authorized Signatory of Holder :

/s/ John DeNoble

  

  

Name of Authorized Signatory:

John DeNoble

  

  

Title of Authorized Signatory:


Manager

 



{00810066.DOCX;3 }{00810066.DOCX;3 }

3







ANNEX A


[See attached]



{00810066.DOCX;3 }{00810066.DOCX;3 }

4







ANNEX B


Selling Stockholder Questionnaire





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5



EXHIBIT 23.1


Force Protection Video Equipment Corp.

140 Iowa Lane

Suite 101

Cary, NC 27511


Dear Sir/Madam:



We hereby consent to the Prospectus constituting a part of this Registration Statement on Form S-1 of our report dated June 16, 2016, relating to the financial statements of Force Protection Video Equipment Corp which are contained in this prospectus.


We also consent to the reference to us under the caption “Experts” in the Prospectus.



/s/Baum & Company

Miami Beach, FL 33139

October 6, 2016