Form 1-A Issuer Information UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 1-A
REGULATION A OFFERING STATEMENT
UNDER THE SECURITIES ACT OF 1933 		OMB APPROVAL

FORM 1-A

OMB Number: 3235-0286

Estimated average burden hours per response: 608.0

1-A: Filer Information

Issuer CIK
0001548187
Issuer CCC
XXXXXXXX
DOS File Number
Offering File Number
024-10854
Is this a LIVE or TEST Filing? ☒ LIVE ☐ TEST
Would you like a Return Copy? ☒
Notify via Filing Website only? ☐
Since Last Filing? ☐

Submission Contact Information

Name
Phone
E-Mail Address

1-A: Item 1. Issuer Information

Issuer Infomation

Exact name of issuer as specified in the issuer's charter
Soliton, Inc.
Jurisdiction of Incorporation / Organization
DELAWARE
Year of Incorporation
2012
CIK
0001548187
Primary Standard Industrial Classification Code
ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS
I.R.S. Employer Identification Number
36-4729076
Total number of full-time employees
6
Total number of part-time employees
2

Contact Infomation

Address of Principal Executive Offices

Address 1
5304 ASHBROOK DRIVE
Address 2
City
HOUSTON
State/Country
TEXAS
Mailing Zip/ Postal Code
77081
Phone
832-661-3453

Provide the following information for the person the Securities and Exchange Commission's staff should call in connection with any pre-qualification review of the offering statement.

Name
Cavas Pavri
Address 1
Address 2
City
State/Country
Mailing Zip/ Postal Code
Phone

Provide up to two e-mail addresses to which the Securities and Exchange Commission's staff may send any comment letters relating to the offering statement. After qualification of the offering statement, such e-mail addresses are not required to remain active.

Financial Statements

Industry Group (select one) ☐ Banking ☐ Insurance ☒ Other

Use the financial statements for the most recent period contained in this offering statement to provide the following information about the issuer. The following table does not include all of the line items from the financial statements. Long Term Debt would include notes payable, bonds, mortgages, and similar obligations. To determine "Total Revenues" for all companies selecting "Other" for their industry group, refer to Article 5-03(b)(1) of Regulation S-X. For companies selecting "Insurance", refer to Article 7-04 of Regulation S-X for calculation of "Total Revenues" and paragraphs 5 and 7 of Article 7-04 for "Costs and Expenses Applicable to Revenues".

Balance Sheet Information

Cash and Cash Equivalents
$ 10535.00
Investment Securities
$ 0.00
Total Investments
$
Accounts and Notes Receivable
$ 0.00
Loans
$
Property, Plant and Equipment (PP&E):
$ 306541.00
Property and Equipment
$
Total Assets
$ 445665.00
Accounts Payable and Accrued Liabilities
$ 1430432.00
Policy Liabilities and Accruals
$
Deposits
$
Long Term Debt
$ 0.00
Total Liabilities
$ 12472372.00
Total Stockholders' Equity
$ -12026707.00
Total Liabilities and Equity
$ 445665.00

Statement of Comprehensive Income Information

Total Revenues
$ 0.00
Total Interest Income
$
Costs and Expenses Applicable to Revenues
$ 0.00
Total Interest Expenses
$
Depreciation and Amortization
$ 30561.00
Net Income
$ -1351665.00
Earnings Per Share - Basic
$ -0.74
Earnings Per Share - Diluted
$ -0.74
Name of Auditor (if any)
GBH CPAs, PC

Outstanding Securities

Common Equity

Name of Class (if any) Common Equity
Common
Common Equity Units Outstanding
1820556
Common Equity CUSIP (if any):
000000000
Common Equity Units Name of Trading Center or Quotation Medium (if any)
NA

Preferred Equity

Preferred Equity Name of Class (if any)
Series A
Preferred Equity Units Outstanding
416666
Preferred Equity CUSIP (if any)
000000000
Preferred Equity Name of Trading Center or Quotation Medium (if any)
NA

Preferred Equity

Preferred Equity Name of Class (if any)
Series B
Preferred Equity Units Outstanding
2118100
Preferred Equity CUSIP (if any)
000000000
Preferred Equity Name of Trading Center or Quotation Medium (if any)
NA

Debt Securities

Debt Securities Name of Class (if any)
Convertible Bridge Notes
Debt Securities Units Outstanding
6900000
Debt Securities CUSIP (if any):
000000000
Debt Securities Name of Trading Center or Quotation Medium (if any)
NA

1-A: Item 2. Issuer Eligibility

Issuer Eligibility

Check this box to certify that all of the following statements are true for the issuer(s)

☒

1-A: Item 3. Application of Rule 262

Application Rule 262

Check this box to certify that, as of the time of this filing, each person described in Rule 262 of Regulation A is either not disqualified under that rule or is disqualified but has received a waiver of such disqualification.

☒

Check this box if "bad actor" disclosure under Rule 262(d) is provided in Part II of the offering statement.

☐

1-A: Item 4. Summary Information Regarding the Offering and Other Current or Proposed Offerings

Summary Infomation

Check the appropriate box to indicate whether you are conducting a Tier 1 or Tier 2 offering ☐ Tier1 ☒ Tier2
Check the appropriate box to indicate whether the financial statements have been audited ☐ Unaudited ☒ Audited
Types of Securities Offered in this Offering Statement (select all that apply)
☒Equity (common or preferred stock)
Does the issuer intend to offer the securities on a delayed or continuous basis pursuant to Rule 251(d)(3)? ☒ Yes ☐ No
Does the issuer intend this offering to last more than one year? ☐ Yes ☒ No
Does the issuer intend to price this offering after qualification pursuant to Rule 253(b)? ☐ Yes ☒ No
Will the issuer be conducting a best efforts offering? ☒ Yes ☐ No
Has the issuer used solicitation of interest communications in connection with the proposed offering? ☐ Yes ☒ No
Does the proposed offering involve the resale of securities by affiliates of the issuer? ☐ Yes ☒ No
Number of securities offered
3000000
Number of securities of that class outstanding
1898056

The information called for by this item below may be omitted if undetermined at the time of filing or submission, except that if a price range has been included in the offering statement, the midpoint of that range must be used to respond. Please refer to Rule 251(a) for the definition of "aggregate offering price" or "aggregate sales" as used in this item. Please leave the field blank if undetermined at this time and include a zero if a particular item is not applicable to the offering.

Price per security
$ 5.0000
The portion of the aggregate offering price attributable to securities being offered on behalf of the issuer
$ 15000000.00
The portion of the aggregate offering price attributable to securities being offered on behalf of selling securityholders
$ 0.00
The portion of the aggregate offering price attributable to all the securities of the issuer sold pursuant to a qualified offering statement within the 12 months before the qualification of this offering statement
$ 0.00
The estimated portion of aggregate sales attributable to securities that may be sold pursuant to any other qualified offering statement concurrently with securities being sold under this offering statement
$ 0.00
Total (the sum of the aggregate offering price and aggregate sales in the four preceding paragraphs)
$ 15000000.00

Anticipated fees in connection with this offering and names of service providers

Underwriters - Name of Service Provider
Boustead Securities, LLC
 Underwriters - Fees
$ 1200000.00
Sales Commissions - Name of Service Provider
Sales Commissions - Fee
$
Finders' Fees - Name of Service Provider
N/A
 Finders' Fees - Fees
$ 0.00
Audit - Name of Service Provider
GBH CPAs, PC
 Audit - Fees
$ 35000.00
Legal - Name of Service Provider
Schiff Hardin
 Legal - Fees
$ 90000.00
Promoters - Name of Service Provider
Promoters - Fees
$
Blue Sky Compliance - Name of Service Provider
Blue Sky Compliance - Fees
$
CRD Number of any broker or dealer listed:
Estimated net proceeds to the issuer
$ 13675000.00
Clarification of responses (if necessary)
Underwriter fees include reimbursement for certain diligence, travel and legal expenses.

1-A: Item 5. Jurisdictions in Which Securities are to be Offered

Jurisdictions in Which Securities are to be Offered

Using the list below, select the jurisdictions in which the issuer intends to offer the securities

Selected States and Jurisdictions
ALABAMA
ALASKA
ARIZONA
ARKANSAS
CALIFORNIA
COLORADO
CONNECTICUT
DELAWARE
DISTRICT OF COLUMBIA
FLORIDA
GEORGIA
HAWAII
IDAHO
ILLINOIS
INDIANA
IOWA
KANSAS
KENTUCKY
LOUISIANA
MAINE
MARYLAND
MASSACHUSETTS
MICHIGAN
MINNESOTA
MISSISSIPPI
MISSOURI
MONTANA
NEBRASKA
NEVADA
NEW HAMPSHIRE
NEW JERSEY
NEW MEXICO
NEW YORK
NORTH CAROLINA
NORTH DAKOTA
OHIO
OKLAHOMA
OREGON
PENNSYLVANIA
PUERTO RICO
RHODE ISLAND
SOUTH CAROLINA
SOUTH DAKOTA
TENNESSEE
TEXAS
UTAH
VERMONT
VIRGINIA
WASHINGTON
WEST VIRGINIA
WISCONSIN
WYOMING

Using the list below, select the jurisdictions in which the securities are to be offered by underwriters, dealers or sales persons or check the appropriate box

None ☐
Same as the jurisdictions in which the issuer intends to offer the securities ☒
Selected States and Jurisdictions

ALABAMA
ALASKA
ARIZONA
ARKANSAS
CALIFORNIA
COLORADO
CONNECTICUT
DELAWARE
DISTRICT OF COLUMBIA
FLORIDA
GEORGIA
HAWAII
IDAHO
ILLINOIS
INDIANA
IOWA
KANSAS
KENTUCKY
LOUISIANA
MAINE
MARYLAND
MASSACHUSETTS
MICHIGAN
MINNESOTA
MISSISSIPPI
MISSOURI
MONTANA
NEBRASKA
NEVADA
NEW HAMPSHIRE
NEW JERSEY
NEW MEXICO
NEW YORK
NORTH CAROLINA
NORTH DAKOTA
OHIO
OKLAHOMA
OREGON
PENNSYLVANIA
PUERTO RICO
RHODE ISLAND
SOUTH CAROLINA
SOUTH DAKOTA
TENNESSEE
TEXAS
UTAH
VERMONT
VIRGINIA
WASHINGTON
WEST VIRGINIA
WISCONSIN
WYOMING

1-A: Item 6. Unregistered Securities Issued or Sold Within One Year

Unregistered Securities Issued or Sold Within One Year

None ☐

Unregistered Securities Issued

As to any unregistered securities issued by the issuer of any of its predecessors or affiliated issuers within one year before the filing of this Form 1-A, state:

(a)Name of such issuer
Soliton, Inc.
(b)(1) Title of securities issued
Convertible 8.25 Percent Bridge Notes
(2) Total Amount of such securities issued
5000000
(3) Amount of such securities sold by or for the account of any person who at the time was a director, officer, promoter or principal securityholder of the issuer of such securities, or was an underwriter of any securities of such issuer.
0
(c)(1) Aggregate consideration for which the securities were issued and basis for computing the amount thereof.
5,000,000
(2) Aggregate consideration for which the securities listed in (b)(3) of this item (if any) were issued and the basis for computing the amount thereof (if different from the basis described in (c)(1)).

Unregistered Securities Issued

As to any unregistered securities issued by the issuer of any of its predecessors or affiliated issuers within one year before the filing of this Form 1-A, state:

(a)Name of such issuer
Soliton, Inc.
(b)(1) Title of securities issued
Convertible 8.25 Percent Bridge Notes
(2) Total Amount of such securities issued
1900000
(3) Amount of such securities sold by or for the account of any person who at the time was a director, officer, promoter or principal securityholder of the issuer of such securities, or was an underwriter of any securities of such issuer.
0
(c)(1) Aggregate consideration for which the securities were issued and basis for computing the amount thereof.
1,900,000
(2) Aggregate consideration for which the securities listed in (b)(3) of this item (if any) were issued and the basis for computing the amount thereof (if different from the basis described in (c)(1)).

Unregistered Securities Issued

As to any unregistered securities issued by the issuer of any of its predecessors or affiliated issuers within one year before the filing of this Form 1-A, state:

(a)Name of such issuer
Soliton, Inc.
(b)(1) Title of securities issued
Convertible 10.0 Percent Bridge Notes
(2) Total Amount of such securities issued
500000
(3) Amount of such securities sold by or for the account of any person who at the time was a director, officer, promoter or principal securityholder of the issuer of such securities, or was an underwriter of any securities of such issuer.
0
(c)(1) Aggregate consideration for which the securities were issued and basis for computing the amount thereof.
500,000
(2) Aggregate consideration for which the securities listed in (b)(3) of this item (if any) were issued and the basis for computing the amount thereof (if different from the basis described in (c)(1)).

Unregistered Securities Issued

As to any unregistered securities issued by the issuer of any of its predecessors or affiliated issuers within one year before the filing of this Form 1-A, state:

(a)Name of such issuer
Soliton, Inc.
(b)(1) Title of securities issued
Convertible 10.0 Percent Bridge Notes
(2) Total Amount of such securities issued
3000000
(3) Amount of such securities sold by or for the account of any person who at the time was a director, officer, promoter or principal securityholder of the issuer of such securities, or was an underwriter of any securities of such issuer.
300000
(c)(1) Aggregate consideration for which the securities were issued and basis for computing the amount thereof.
3,000,000
(2) Aggregate consideration for which the securities listed in (b)(3) of this item (if any) were issued and the basis for computing the amount thereof (if different from the basis described in (c)(1)).
$21,000 (7% of proceeds)

Unregistered Securities Act

(e) Indicate the section of the Securities Act or Commission rule or regulation relied upon for exemption from the registration requirements of such Act and state briefly the facts relied upon for such exemption
4(a)(2) and Regulation D of the Securities Act of 1933; sold only to accredited investors

An Offering statement pursuant to Regulation A relating to these securities has been filed with the Securities and Exchange Commission ("SEC"). Information contained in this Preliminary Offering Circular is subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted before the Offering statement filed with the SEC is qualified. This Preliminary Offering Circular shall not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sales of these securities in any state in which such offer, solicitation or sale would be unlawful before registration or qualification under the laws of any such state. We may elect to satisfy our obligation to deliver a Final Offering Circular by sending you a notice within two business days after the completion of our sale to you that contains the URL where the Offering Circular was filed may be obtained.

Preliminary Offering Circular
Subject to Completion. Dated August 10, 2018

Soliton, Inc.
Minimum Offering of 1,500,000 shares of common stock / Maximum Offering of 3,000,000 shares of common stock

This is an initial public offering of our shares of common stock. We are offering up to a maximum of 3,000,000 shares of common stock at an offering price of $5.00 per share with a minimum offering amount of $7,500,000 (the “Minimum Offering Amount”) and a maximum offering amount of $15,000,000 (the “Maximum Offering Amount”) (collectively, the “Offering”). The Offering will terminate on the earliest of: (1) the date on which the Maximum Offering Amount has been sold, (2) the date which is one year after this Offering being qualified by the U.S. Securities and Exchange Commission (the “SEC”), or (3) the date on which this Offering is earlier terminated by us in our sole discretion and for any reason (the “Termination Date”).
Until we achieve the Minimum Offering Amount, the proceeds for the Offering will be kept in two non-interest bearing accounts (each an “Offering Account,” collectively, the "Offering Accounts"). The Bryn Mawr Trust Company of Delaware ("BMTC DE") will serve as the escrow agent for the Offering Account maintained for all funds tendered by investors placed by SI Securities, LLC, a selected dealer in this Offering, as described below. FinTech Clearing, LLC will serve as the deposit agent for the other Offering Account maintained for all other funds tendered by investors in this Offering. The Underwriter shall determine the achievement of at least the minimum offering and the closing on such amounts. The Underwriter shall then instruct BMTC DE to release their funds to FinTech Clearing, LLC who will distribute all the proceeds to us less any fees to the Underwriter and selected dealers and the associated offered shares will be issued to the investors. If the Offering does not achieve the Minimum Offering Amount, and therefore does not close, the proceeds for the Offering will be promptly returned to investors, without deduction and without interest.
This Offering is being conducted on a “best efforts” basis pursuant to Regulation A of Section 3(6) of the Securities Act of 1933, as amended (the “Securities Act”), for Tier 2 Offerings. We intend to complete one closing. Until we complete the closing, the proceeds for this Offering will be kept in Offering Accounts maintained by BMTC DE and FinTech Clearing, LLC. At a closing, the proceeds will be distributed to us and the associated shares will be issued to the investors. If there are no closings or if funds remain in the deposit account upon termination of this Offering without any corresponding closing, the investments for this Offering will be promptly returned to investors, without deduction and without interest. Fintech Clearing, LLC and BMTC DE will serve as the deposit account agents on behalf of investors in the Offering. The minimum purchase requirement per investor is 100 shares of Common Stock $500; however, we can waive the minimum purchase requirement on a case-by-case basis in our sole discretion. See “Underwriting”.
We expect to commence the offer and sale of the shares as of the date on which the Offering Statement of which this Offering Circular is a part is qualified by the SEC. Prior to this Offering, there has been no public market for our common stock. We have applied to list our common stock on The NASDAQ Stock Market under the symbol “SOLY”. We expect our common stock to begin trading on NASDAQ within three business days of the final closing of the Offering; provided that we have met the minimum listing criteria of NASDAQ. We will not complete a closing of this Offering without a listing approval letter from NASDAQ. Our common stock will not commence trading on NASDAQ unless and until (i) not less than the Minimum Amount of this Offering is closed; (ii) this Offering is terminated and (iii) we have filed a post-qualification amendment to the Offering Statement, and a registration statement on Form 8-A under the Exchange Act, and such post-qualification amendment is qualified by the SEC and the Form 8-A has become effective.
Boustead Securities, LLC, or the Underwriter, has agreed to act as our exclusive, lead managing underwriter to offer the shares to prospective investors on a “best efforts” basis. In addition, the Underwriter may engage such other broker dealers or agents as it determines to assist in this Offering. The Underwriter is not purchasing the offered shares, and is not required to sell any specific number or dollar amount of the offered shares by us.
If we only complete the minimum offering, under NASDAQ Marketplace Rules 5615(c), we may be deemed a “controlled company.” However, we do not intend to avail ourselves of the corporate governance exemptions afforded to a “controlled company” under the NASDAQ Marketplace Rules.
 
Price to public
Underwriting Commissions (1)(2)
Proceeds to issuer (3)
To public in this Offering:
 
 
 
Per share:
$
5.00

$
0.35

$
4.65

Total Minimum:
$
7,500,000

$
525,000

$
6,700,000

Total Maximum:
$
15,000,000

$
1,050,000

$
13,675,000

(1)
This table depicts underwriter commissions of 7% of the gross Offering proceeds. Please refer to the section entitled “Underwriting,” beginning on page 92, for additional information regarding total underwriter compensation.
(2)
In addition to the underwriter discounts and commissions included in the above table, our Underwriter will receive warrants to purchase shares of our common stock equal to 7% of the aggregate shares sold in this Offering, which will have an exercise price of $5.00 (100% of the Offering price).
(3)
After deducting expenses of the Offering, which are estimated to be approximately $275,000. Does not include any marketing expenses for this Offering as described in “Use of Proceeds”. See the “Underwriting” for details regarding the compensation payable in connection with this Offering. This amount represents the proceeds of the Offering to the Company, which will be used as set out in “Use of Proceeds.”

We expect to commence the sale of the shares as of the date on which the Offering Statement of which this Offering Circular is a part is declared qualified by the SEC.
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, and, as such, may elect to comply with certain reduced reporting requirements for this Offering Circular and future filings after this Offering.
Investing in our common stock involves a high degree of risk. Please see “Risk Factors,” beginning on page 12, for a discussion of certain risks that you should consider before investment in our common stock.
Generally, no sale may be made to you in this Offering if the aggregate purchase price you pay is more than ten percent (10%) of the greater of your annual income or your net worth. Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(c) of Regulation a+. For general information on investing, we encourage you to refer to www.investor.gov.
The SEC does not pass upon the merits of or give its approval to any securities offered or the terms of the Offering, nor does it pass upon the accuracy or completeness of any Offering Circular or other solicitation materials. These securities are offered pursuant to an exemption from registration with the SEC; however, the SEC has not made an independent determination that the securities offered are exempt from registration.
This Offering Circular follows the disclosure format of Part I of Form S-1 pursuant to the general instructions of Part II(a)(1)(ii) of Form 1-A.
Offering Circular dated ______________, 2018



3
12
32
34
35
36
38
40
48
73
78
85
86
87
91
93
101
102
103
104
No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this Offering Circular. You must not rely on any unauthorized information or representations. This Offering Circular is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this Offering Circular is current only as of its date.



OFFERING CIRCULAR SUMMARY
This summary highlights information contained elsewhere in this Offering Circular. This summary does not contain all of the information that you should consider before deciding to invest in our common stock. Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described herein, together with all of the other information in this Offering Circular, including our financial statements and related notes, before investing in our common stock. If any of the risks materialize, our business, financial condition, operating results and prospects could be materially and adversely affected. In that event, the price of our common stock could decline, and you could lose part or all of your investment. Unless the context requires otherwise, references in this Offering Circular to the “Company,” “we,” “us” and “our” refer to Soliton, Inc.
Our Company
Overview
We are a pre-revenue stage medical device company with a novel and proprietary platform technology licensed from The University of Texas M.D. Anderson Cancer Center ("MD Anderson"). Our first commercial product uses rapid pulses of designed acoustic shockwaves to dramatically accelerate the removal of unwanted tattoos. We are based in Houston, Texas, and we have a staff of eight that are all actively engaged in bringing this device to the market. We expect to file for premarket clearance with the US Food and Drug Administration ("FDA") for our first device in the second half of 2018 and expect to receive clearance to market the device mid 2019. This initial filing is limited to our device used in conjunction with the 1064 nm Q-switched laser to enable effective multiple pass laser treatments in a single office session to accelerate removal of black tattoos on the arms, legs and torso in Fitzpatrick Skin Type I-III individuals.
While we believe our technology has many potential applications, we have initially focused on the removal of tattoos, where both animal and human studies have shown promising results. The current standard of care for tattoo removal is to use a Q-switched (pulsed) laser to ablate the tattoo ink particles into pieces small enough for the body’s natural processes to remove them. Unfortunately, this current method is highly inefficient, requiring up to 10 or more office visits to achieve acceptable results. A clinical trial has demonstrated that using our Rapid Acoustic Pulse ("RAP") device in conjunction with a Q-switched laser has the potential to produce similar results in just 2 to 3 office visits. We believe this “Soliton” method can not only dramatically accelerate tattoo removal, but also has the potential to lower removal cost for patients, while increasing profitability to practitioners, and to reduce the potential for unwanted side effects from current laser removal methods.
Market Opportunity
Currently Americans spend $3.4 billion per year on tattoos and as social acceptance of body art steadily increases, spending on tattoos will likely continue to grow. With the tremendous growth in the number of people getting tattoos, there is a corresponding increase in demand for tattoo removal. Estimates of the size of the tattoo removal market vary widely. One independent source estimates that, globally, the market for tattoo removal is expected to grow at the rate of about 15.6% from 2017 to 2023 and that the global market for tattoo removal is expected to reach several billion in revenue by 2023. Our own research and analysis suggests that regardless of its potential, the current tattoo removal market is significantly underdeveloped. Approximately 20% of all tattoos do not contain black ink. As we are initially seeking clearance for our device for the removal of black tattoos only, the market opportunity may be similarly reduced until the time that we receive clearance for the removal of other ink colors.
Approximately three out of ten Americans (29%) have at least one tattoo and independent research suggests that 23% of those regret their tattoo. Our own research has also revealed that a much larger percentage have an interest in removing a tattoo in order to change to a different tattoo. We estimate that

3


as many as 61 million Americans are interested in some form of tattoo removal, yet the current tattoo removal market remains relatively small (estimated to be less than 100,000 removals per year in the US). Our market research suggests this is because consumer confidence in current tattoo methods is low and they are considered to be too costly, painful and time-consuming.
Our Solution
Our RAP device uses designed acoustic shockwaves to accelerate the removal of tattoos when used in conjunction with existing lasers. Our technology allows a doctor to treat a patient multiple times in a single office visit and significantly reduce the overall time it takes to remove a tattoo. Clinical trial data suggests that the “Soliton” method can enable tattoo removal in just 1/3 the time of current methods. If our RAP device is cleared by the FDA, we believe the introduction of the Soliton method has the potential to increase the overall size of the tattoo removal market, and we believe we will benefit from this market growth.
Additional Indications and Technology
While we are initially targeting the tattoo removal market, our technology also shows promise in a number of other indications, including reduction of cellulite, improvement in skin laxity and assistance to existing technologies for the reduction of subcutaneous fat. Animal studies and a human proof-of-concept study have demonstrated that the RAP device affects subcutaneous fat cells and animal studies have demonstrated its ability to affect dermal and subcutaneous collagen structures that we believe could contribute to an improvement in these indications. Successful commercialization for these indications will require additional FDA clearance.
Our Strategy
Our primary goal is to become a leading medical technology company focused on developing and commercializing products utilizing our proprietary RAP technology platform. To achieve this goal, we intend to:
•
Secure FDA clearance of our first (Generation 1) RAP product. We expect to submit our request for premarket clearance from the FDA for our RAP device for tattoo removal in the second half of 2018 and expect to receive this clearance mid 2019. Depending on the FDA’s view of existing predicates, this will be either a 510(k) or de novo process, but we believe either pathway will support our planned timeline for product launch. Although we expect to make additional 510(k) filings as we make changes to our device to facilitate commercialization, we believe this initial approval is the most critical to achieve. Subsequent generations of our device will continue to rely on the same fundamental technology and therapy, thereby allowing the Generation 1 device to serve as the predicate for these future 510(k) submissions, which in turn we believe will reduce the regulatory risk and complexity of those future submissions. This initial clearance will be limited to the use of our device with the 1064 nm Q-switched laser to enable effective multiple pass laser treatments in a single office session to accelerate removal of black tattoos on the arms, legs and torso in Fitzpatrick Skin Type I-III individuals.
•
Complete commercial refinements to our RAP device in preparation for launch. We are collaborating with a large medical device manufacturer as well as engineers and industrial designers to make refinements to our current Generation 1 device in order to optimize the user experience, improve convenience and incorporate aesthetics consistent with the cosmetic dermatology marketplace. We expect this development work to result in three generations of the RAP device: Generation 1 is the device being presented to the FDA via our initial filing in the third quarter of 2018, Generation 2 will incorporate improvements in user experience and convenience and Generation 3 will finalize industrial design and aesthetic improvements. We believe

4


Generation 2 will likely necessitate additional FDA clearance while it is currently unclear whether this will be necessary for Generation 3.
•
Prepare for market launch. We intend to support our market launch by establishing service, training and support functions for clinicians in addition to marketing and sales support efforts to clinicians and/or customers. We anticipate a hybrid approach in which we will establish and utilize our own sales and marketing resources to address certain markets and foster brand recognition while also using strategic partnerships to address others. The strategy we will select will depend on the specific market being addressed, on the existing market participants, on the breadth of reach required to address the market, and on the financial alternatives available.
•
Establish a profitable and sustainable revenue model. Revenues will be driven by the sale of our RAP console to dermatologists, plastic surgeons, and other physician offices, as well as medi-spas under the supervision of a doctor. More importantly, recurring revenues will be generated by the sale of disposable cartridges that are utilized with each patient visit and treatment. Additional revenues will result from maintenance services to our customers. We intend to build an internal direct sales team to reach the U.S. market and plan to use a network of distributors when we expand outside the United States.
•
Utilize key opinion leaders and test markets to refine our approach. We intend to launch our Generation 2 product in 2019 to a limited group of dermatologists in the United States, focusing on key opinion leaders and certain test markets to gain important understandings prior to a nationwide launch of our product. This initial launch will allow us to evaluate the efficacy of market outreach programs, as well as to inform product design and service techniques prior to a broad national launch of our Generation 3 product.
•
Leverage our technology platform. In parallel with the commercialization of our RAP system for tattoo removal, we will continue to conduct research and development activities oriented toward identifying additional indications and continuously improving our products and expanding our market opportunities. Any additional indications will need to be cleared by the FDA prior to our launch to the marketplace.
Risks Associated with Our Business
Our business is subject to numerous risks, as discussed more fully in the section entitled “Risk Factors” immediately following this summary. In particular:
•
We have limited operating experience and a history of net losses, and we may never achieve or maintain profitability.
•
The RAP device is dependent upon regulatory approval and will be subject to ongoing regulatory review, and any failure to secure clearance or comply with continuing regulation by the FDA or other regulatory bodies could prevent the RAP device from entering the market or subject us to a product recall or other regulatory action, which would seriously harm our business.
•
The Generation 3 RAP device we expect to offer in our nationwide launch will have significant changes from the Generation 2 device that we intend offer in our initial market launch, which in turn will have significant changes from the Generation 1 device we intend to submit for FDA review and clearance. We expect the changes made to our device from Generation 1 to Generation 2 will necessitate the filing of an additional 510(k) before being launched. We cannot be certain that the changes we deem appropriate to make to the Generation 3 RAP device prior to the nationwide launch will not require another 510(k) filing.

5


•
We are dependent upon the success of the RAP device for removal of tattoos, and the RAP device has not been cleared by the FDA, and, even if cleared, if the market for RAP technology fails to grow significantly, our business and future prospects will be harmed.
•
Because we have limited operating experience and plan to enter into the rapidly-evolving market for aesthetic products, we may not be able to successfully predict or react to relevant industry developments and business trends.
•
We will compete against medical technology and aesthetic companies, including those offering products and technologies unrelated to tattoo removal, for physician resources and mindshare, and many of these companies have greater resources than our company and well-established sales channels, which may make it difficult for us to achieve market penetration.
•
The technologies that we have licensed from MD Anderson may not be patentable or, if they are, such patents may not be valid or enforceable and may not protect us against competitors who challenge those licensed patents, obtain their own patents that may have an adverse effect on our ability to conduct business, or are able to otherwise circumvent our patents. Additionally, our products and technologies are complex and one patent may not be sufficient to protect our products where a series of patents may be needed. Further, we may not have the necessary financial resources to enforce or defend our patents or patent applications. In addition, any patent applications we may have made or may make relating to inventions for our actual or potential products and technologies may not result in patents being issued or may result in patents that provide insufficient or incomplete coverage for our inventions.
•
Third parties may claim that the manufacture, use or sale of our technologies infringe their intellectual property rights. As with any litigation where such claims may be asserted, we may have to seek licenses, defend infringement actions or challenge the validity of those patents in the patent office or the courts. If these are not resolved favorably, we may not be able to continue to develop and commercialize our RAP device. Even if we were able to obtain rights to a third party’s intellectual property, these rights may be non-exclusive, thereby giving our competitors potential access to the same intellectual property. If we are found liable for infringement or are not able to have these patents declared invalid or unenforceable, we may be liable for significant monetary damages, encounter significant delays in bringing products to market or be precluded from participating in the manufacture, use or sale of products or technologies by patents of others. We may not have identified, or be able to identify in the future, U.S. or foreign patents that pose a risk of potential infringement claims.
•
Even if we complete the maximum offering hereunder, we will require substantial additional funding beyond the proceeds of the Offering to which this Offering Circular relates to fully complete the development and commercialization of our RAP device and to pursue the other indications discussed in this Offering Circular, and such funding may not be available on acceptable terms or at all.
Implications of Being an Emerging Growth Company
We qualify as an “emerging growth company” as the term is used in The Jumpstart Our Business Startups Act of 2012 (JOBS Act), and therefore, we may take advantage of certain exemptions from various public company reporting requirements, including:
•
a requirement to only have two years of audited financial statements and only two years of related selected financial data and management’s discussion and analysis;
•
exemption from the auditor attestation requirement on the effectiveness of our internal controls over financial reporting;

6


•
reduced disclosure obligations regarding executive compensation; and
•
exemptions from the requirements of holding a non-binding advisory stockholder vote on executive compensation and any golden parachute payments. 
We may take advantage of these provisions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.0 billion in annual revenues, have more than $700 million in market value of our capital stock held by non-affiliates or issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some, but not all, of the available benefits of the JOBS Act. We have taken advantage of some of the reduced reporting requirements in this Offering Circular. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock. In addition, the JOBS Act provides that an emerging growth company can delay adopting new or revised accounting standards until such time as those standards apply to private companies. The Company has irrevocably elected to avail itself of this exemption from new or revised accounting standards, and, therefore, will not be subject to the same new or revised accounting standards as public companies that are not emerging growth companies.
Corporate Information
We were originally incorporated in Delaware in April 2012. Our corporate offices are located at 5304 Ashbrook Dr., Houston, TX 77081. Our telephone number is 844-705-4866 and our website is located at www.soliton.com. The information contained on, or that can be accessed through, our website is not a part of this Offering Circular.

7


The Offering
Common Stock we are Offering
Minimum of 1,500,000 shares of common stock
Maximum of 3,000,000 shares of common stock
 
 
Common Stock outstanding before this Offering
2,125,556 shares of common stock (includes 227,500 shares of restricted stock that have voting rights, but are restricted from transfer or sale)
 
 
Common Stock outstanding after this Offering assuming the minimum raise
13,644,265 (includes (i) 6,689,290 shares of common stock that will issuable upon the conversion of our outstanding convertible notes (inclusive of shares issuable for accrued interest through June 30, 2018 under such notes); and (ii) 3,329,418 shares of common stock underlying outstanding convertible preferred stock and accrued dividend on the preferred stock through that will convert into shares of our common stock upon the closing of this Offering)
 
 
Common Stock outstanding after this Offering assuming the maximum raise
15,144,265 (includes (i) 6,689,290 shares of common stock that will issuable upon the conversion of our outstanding convertible notes (inclusive of shares issuable for accrued interest through June 30, 2018 under such notes); and (ii) 3,329,418 shares of common stock underlying outstanding convertible preferred stock and accrued dividend on the preferred stock through that will convert into shares of our common stock upon the closing of this Offering)
 
 
Use of proceeds
We intend to use the proceeds from this Offering primarily to develop and commercialize the RAP device, conduct clinical trials for new indications; and also for license fees, research and development, brand development, and for working capital. See “Use of Proceeds.”
 
 
Risk Factors
See “Risk Factors” and other information appearing elsewhere in this Offering Circular for a discussion of factors you should carefully consider before deciding whether to invest in our common stock.
 
 
Offering Accounts
The Offering will terminate on the earliest of: (1) the date on which the Maximum Offering Amount has been sold, (2) the date which is one year after this Offering being qualified by the SEC, or (3) the date on which this Offering is earlier terminated by the Company in its sole discretion and for any reason (the “Termination Date”). All subscription proceeds will be deposited in the Offering Accounts and will be released to FinTech Clearing, LLC to provide to the Company. If the Offering does not close, the proceeds for the Offering will be promptly returned to investors, without deduction and without interest.
 
 

8


Proposed listing
We have applied to list our common stock on The NASDAQ Stock Market under the symbol “SOLY”. There is no assurance that this application will be approved. Our common stock will not commence trading on NASDAQ unless and until (i) at least the minimum amount of this Offering is closed; (ii) this Offering is terminated; and (iii) we have filed a post-qualification amendment to the Offering statement, and a registration statement on Form 8-A under the Exchange Act, and such post-qualification amendment is qualified by the SEC and the Form 8-A has become effective. Pursuant to applicable rules under Regulation A, the Form 8-A will not become effective until the SEC qualifies the post-qualification amendment. We intend to file the post-qualification amendment and request its qualification immediately prior to the termination of the Offering in order that the Form 8-A may become effective as soon as practicable.
The number of shares of common stock to be outstanding before this Offering does not give effect to:
•
6,689,290 shares of common stock that will issuable upon the conversion of our outstanding convertible notes (inclusive of shares issuable for accrued interest through June 30, 2018 under such notes).
•
3,329,418 shares of common stock underlying outstanding convertible preferred stock and accrued dividend on the preferred stock through that will convert into shares of our common stock upon the closing of this Offering;
•
91,350 shares of common stock underlying outstanding warrants at an average exercise price of $1.75 per share;
•
Up to 291,000 shares of common stock underlying warrants to be issued in conjunction with the August Offering at an exercise price of $1.75 per share;
•
2,235,000 shares of common stock underlying outstanding options at an average exercise price of $1.74 per share; and
•
794,745 shares available for future issuance under outstanding Soliton, Inc. Stock Plans.

9


SUMMARY FINANCIAL DATA
In the following tables, we provide our summary financial data. We have derived the summary statements of operations for the years ended December 31, 2017 and 2016 from our audited financial statements and for the three-months ended March 31, 2018 and 2017 from our unaudited financial statements appearing in this prospectus. Our historical results are not necessarily indicative of the results to be expected in the future. When you read this summary financial data, it is important that you read it together with “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in conjunction with the financial statements, related notes and other financial information included in this prospectus.
 
Year Ended
 
Quarter Ended
 
December 31,
 
March 31,
 
2017
 
2016
 
2018
 
2017
 
 
 
 
 
(Unaudited)
 
(Unaudited)
Statement of Operations Data:
 
 
 
 
 
 
 
Revenue
$
—

 
$
—

 
$
—

 
$
—

Expenses:
 
 
 
 
 
 
 
Research and development expenses
3,965,276

 
4,146,777

 
692,725

 
1,151,873

Sales and marketing expenses
91,288

 
33,929

 
12,500

 
18,120

Depreciation and amortization
130,075

 
82,523

 
30,561

 
32,386

General and administrative expenses
3,001,969

 
3,054,762

 
449,029

 
742,100

Operating loss
(7,188,608
)
 
(7,317,991
)
 
(1,184,815
)
 
(1,944,479
)
Other income (expenses):
 
 
 
 
 
 
 
Interest expense, net
(295,830
)
 
—

 
(166,850
)
 
(21,645
)
Other income
4,751

 
16,732

 
—

 
—

Total other expense, net
(291,079
)
 
16,732

 
(166,850
)
 
(21,645
)
Loss before income taxes
(7,479,687
)
 
(7,301,259
)
 
(1,351,665
)
 
(1,966,124
)
Income tax expense
937

 
2,312

 
—

 
937

Net loss
$
(7,480,624
)
 
$
(7,303,571
)
 
$
(1,351,665
)
 
$
(1,967,061
)
Basic and diluted loss per common share
$
(4.40
)
 
$
(4.80
)
 
$
(0.74
)
 
$
(1.20
)
Basic and diluted weighted-average number of common shares outstanding
1,700,275

 
1,522,619

 
1,820,556

 
1,643,056


10


 
As of March 31, 2018
 
Actual (1)
 
Pro Forma as adjusted for minimum raise (2)
 
For Forma as adjusted for maximum raise (3)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
Balance Sheet Data:
 
 
 
 
 
Cash and cash equivalents
$
10,535

 
$
9,960,535

 
$
16,935,535

Working capital (deficit)
(12,426,134
)
 
8,539,813

 
15,514,813

Total assets
445,665

 
10,395,665

 
17,370,665

Total indebtedness
7,362,687

 
—

 
—

Total equity
(12,026,707
)
 
8,939,240

 
15,914,240

(1)
Actual balance sheet data presents balance sheet data on an actual basis without any adjustments to reflect subsequent or anticipated events.
(2)
As adjusted balance sheet data presents balance sheet data on a pro forma as adjusted basis, reflecting the receipt by us of the net proceeds from the sale of 1,500,000 shares of common stock in this Offering at an assumed initial public offering price of $5.00 per share, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us; the conversion of outstanding bridge notes and accrued interest as of March 31, 2018 and additional principal of notes issued subsequent to March 31, 2018, of $3,250,000 and the payment of dividends (accrued as of March 31, 2018) on our currently outstanding preferred stock through the issuance of 730,652 shares of common stock, as if each had occurred on March 31, 2018.
(3)
As adjusted balance sheet data presents balance sheet data on a pro forma as adjusted basis, reflecting the receipt by us of the net proceeds from the sale of 3,000,000 shares of common stock in this Offering at an assumed initial public offering price of $5.00 per share, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us; the conversion of outstanding bridge notes and accrued interest as of March 31, 2018 and additional principal of notes issued subsequent to March 31, 2018, of $3,250,000; and the payment of dividends (accrued as of March 31, 2018) on our currently outstanding preferred stock through the issuance of 730,652 shares of common stock, as if each had occurred on March 31, 2018.


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RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider each of the following risks, together with all other information set forth in this Offering Circular, including the financial statements and the related notes, before making a decision to buy our common stock. If any of the following risks actually occurs, our business could be harmed. In that case, the trading price of our common stock could decline, and you may lose part or all of your investment.
Risks Relating to Our Business
There is no guarantee that the FDA will grant 510(k) or de novo clearance or PMA approval of our future products and failure to obtain necessary clearances or approvals for our future products would adversely affect our ability to grow our business.
Our lead product candidate, as well as some of our future products will require FDA clearance of a 510(k) or de novo application or may require FDA approval of a PMA. The FDA may not approve or clear these products for the indications that are necessary or desirable for successful commercialization. Indeed, the FDA may refuse our requests for premarket clearance or premarket approval of new products, new intended uses or modifications to existing products. Failure to receive clearance or approval for our products would have an adverse effect on our ability to continue or expand our business.
If we fail to obtain and maintain regulatory approvals and clearances, or are unable to obtain, or experience significant delays in obtaining, FDA clearances or approvals for our RAP device, our future products or product enhancements, our ability to commercially distribute and market these products could suffer.
Our products are subject to rigorous regulation by the FDA and numerous other federal, state and foreign governmental authorities. The process of obtaining regulatory clearances or approvals to market a medical device can be costly and time consuming, and we may not be able to obtain these clearances or approvals on a timely basis, if at all. In particular, the FDA permits commercial distribution of a new medical device only after the device has received clearance under Section 510(k) of the Federal Food, Drug and Cosmetic Act, or is the subject of an approved premarket approval application, or PMA, unless the device is specifically exempt from those requirements. The FDA will clear marketing of a lower risk medical device through the 510(k) process if the manufacturer demonstrates that the new product is substantially equivalent to other 510(k)-cleared products or through a de novo process if substantial equivalence is not available. High risk devices deemed to pose the greatest risk, such as life-sustaining, life-supporting, or implantable devices, or devices not deemed substantially equivalent to a previously cleared device, require the approval of a PMA. The PMA process is more costly, lengthy and uncertain than the 510(k) or de novo clearance processes. A PMA application must be supported by extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing and labeling data, to demonstrate to the FDA’s satisfaction the safety and efficacy of the device for its intended use. We believe our current product candidate will require clearance through the 510(k) or de novo process.
We expect to submit our request for premarket clearance to the FDA in the second half of 2018. Although we believe that the RAP device is not a Class III device and that substantially equivalent devices are currently legally marketed that are not subject to PMA, we cannot be certain that the FDA will agree. Furthermore, the FDA may determine that our request for 510(k) is inadequate and require additional testing or other information. If the FDA determines that our arguments of substantial equivalence are inadequate, we may be required to submit a de novo application, which will require substantial additional time for approval. If the FDA determines that the RAP device should be considered a Class III device, we may be required to pursue a PMA, which could consume several years of additional approval time and considerable unanticipated expense. If we are required to pursue a PMA, the proceeds from this Offering will likely not be sufficient to fund our company through the PMA process, and we will require additional financing, which may not be available.

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We will require substantial additional funding, which may not be available to us on acceptable terms, or at all, and, if not so available, may require us to delay, limit, reduce or cease our operations.
We intend to use the proceeds from this Offering to advance our Generation 1 RAP device through the FDA clearance process and commercial development in preparation for an initial launch with a Generation 2 device to a limited group of dermatologists and then to a Generation 3 device for nationwide launch. The Generation 3 RAP device we expect to offer in our nationwide launch will have significant changes from the Generation 2 device that we intend offer in our initial market launch, which in turn will have significant changes from the Generation 1 device we intend to submit for FDA review and clearance. We expect the changes made to our device from Generation 1 to Generation 2 will necessitate the filing of an additional 510(k) before being launched. We cannot be certain that the changes we deem appropriate to make to the Generation 3 RAP device prior to the nationwide launch will not require another 510(k) filing. Commercializing and launching medical device products can be expensive. Even if we complete the maximum offering hereunder we will require substantial additional future capital in order to launch and market the device nationwide, build out a sales force and manufacture the device. We will continue to require substantial additional capital to continue commercialization activities.
We have a limited operating history and we expect a number of factors to cause our operating results to fluctuate on an annual basis, which may make it difficult to predict our future performance.
We formed our corporation in 2012 without a working RAP prototype. During the first 4 years of operations we have focused on research and development of a fully-integrated working prototype of the RAP device to remove tattoos. During the past 2 years we have focused our efforts on developing a commercial device that would receive FDA clearance to sell. We intend to apply for FDA clearance in the third quarter of 2018; after such application our efforts will be focused on refining our commercial device to improve ease of use features necessary for adoption in dermatological settings. Developing this commercial device for our limited market launch is anticipated to cost at least $2.6 million and take at least nine months of additional work. Further refinement to the device in advance of our national commercial launch is anticipated to cost at least an additional $2.5 million and take another eleven months of additional work. Additionally, a high percentage of our expenses will be associated with pre-launch marketing activities as well as fixed costs. We have not yet sold any products, and we may never achieve commercial success with RAP technology. We have limited historical financial data upon which we may base our projected revenue and operating expenses. Our limited operating history makes it difficult for potential investors to evaluate our technology or prospective operations and business prospects. As a pre-commercialization stage company, we are subject to all the risks inherent in business development, financing, unexpected expenditures, and complications and delays that often occur in a new business. Investors should evaluate an investment in us in light of the uncertainties encountered by developing companies in a competitive environment. There can be no assurance that our efforts will be successful or that we will ultimately be able to attain profitability.
RAP utilizes potentially dangerous energy levels and we could face liability for claims related to the RAP device that would be costly and would damage our reputation.
The acoustic shockwaves generated by our RAP device are the result of producing and directing electrical energy within the device's hand piece approaching 3,000 volts at 3,000 amps of current. Although the RAP device has been designed in accordance, and has been independently tested and found to comply, with the electrical and other safety requirements for comparable medical devices, we cannot be certain that such design and testing measures have identified every possible mode of failure. An unanticipated failure mode or misuse of the RAP device could potentially expose the operator or patient to hazardous and potentially lethal electrical shock and we could face liability for claims of injury or

13


death and our ability to commercialize the RAP device could be materially harmed. In addition, such claims would damage our reputation and hinder our ability to commercialize the RAP device.
The use of lasers to remove tattoos has inherent dangers.
Recognized and published (see "Complications of Tattoos and Tattoo Removal: Stop and Think Before you ink;" Khunger, Molpariya, & Khunger, 2015) adverse events of Q-switched laser tattoo removal include: pain; blistering; crusting; pinpoint hemorrhage; urticarial reaction; hypopigmentation; hyperpigmentation; leukotrichia; local-papule; plaques; darkening of tattoos; photoallergic reactions; systemic reactions; residual pigmentation; ghost images; scarring; and textural changes. These adverse events may be increased when multiple laser passes are used to remove a tattoo in a single session.
Modifications to our products may require new regulatory clearances or approvals or may require us to recall or cease marketing our products until clearances or approvals are obtained.
Modifications to our products may require new regulatory approvals or clearances, including 510(k) clearances or premarket approvals, or require us to recall or cease marketing the modified devices until these clearances or approvals are obtained. The FDA requires device manufacturers to initially make and document a determination of whether or not a modification requires a new approval, supplement or clearance. A manufacturer may determine that a modification could not significantly affect safety or efficacy and does not represent a major change in its intended use, so that no new 510(k) clearance is necessary. However, the FDA can review a manufacturer's decision and may disagree. The FDA may also on its own initiative determine that a new clearance or approval is required. Once we have a commercialized product, we may make modifications in the future that we believe do not or will not require additional clearances or approvals. If the FDA disagrees and requires new clearances or approvals for these modifications, we may be required to recall and to stop marketing our products as modified, which could require us to redesign our products and harm our operating results. In these circumstances, we may be subject to significant enforcement actions.
Where we determine that modifications to our products require a new 510(k) clearance or premarket approval application, we may not be able to obtain those additional clearances or approvals for the modifications or additional indications in a timely manner, or at all. Obtaining clearances and approvals can be a time-consuming process, and delays in obtaining required future clearances or approvals would adversely affect our ability to introduce new or enhanced products in a timely manner, which in turn would harm our future growth.
Our Generation 1 device is not ready for commercial launch, and even if our device is cleared by the FDA, we will need to modify this device prior to commercial launch, which modifications may be unsuccessful or costly.
We conducted our clinical trials with and will apply for premarket clearance based on a device that is not optimized for commercial launch. Modifications we expect to make to this Generation 1 device include improvements in user interface, improvements to extend the life and ease of replacement of the consumable treatment head cartridges and general aesthetics and will be made via a Generation 2 and Generation 3 device intended for initial market launch and nationwide market launch, respectively. We expect the changes made to our device from Generation 1 to Generation 2 will necessitate the filing of an additional 510(k) before being launched. We cannot be certain that the changes we deem appropriate to make to the Generation 3 RAP device prior to the nationwide launch will not require another 510(k) filing. While we believe these changes will not affect the therapy delivered by our RAP device, we may be unsuccessful or experience delays in making these changes and/or the FDA may require additional 510(k) submissions to properly document these changes.

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Because we have not yet launched the RAP device, we have been using our available capital resources for development of the commercial units and have not yet generated any revenues; therefore, we may not be able to continue as a going concern.
We are a pre-approval stage medical device company, and do not expect to generate any revenues until our commercial RAP units are cleared by the FDA and sold. Our ability to continue as a going concern is dependent upon our generating cash flow from sales that are sufficient to fund operations or finding adequate financing to support our operations. To date, we have had no revenues and have relied on equity-based financing from the sale of securities in private placements and the issuance of convertible notes. Our sales plan may not be successful in achieving a sustainable business and revenues. Although we are engaged in the Offering described in this Offering Circular, we have no arrangements in place for all the anticipated required financing to be able to fully implement our business plan. If we are unable to continue as planned currently, we may have to curtail some or all of our business plan and operations. In such case, investors may lose some or all of their investment.
Our clinical experience with the RAP device is limited to black tattoos with one type of laser, and future trials may not result in similar results.
To date, our clinical trial data is limited to the use of the RAP device in conjunction with Q-Switched lasers treating primarily black tattoos. We do not have clinical data indicating the efficacy of the RAP device in conjunction with shorter pulse “Pico-Switched” lasers or in treating tattoo ink colors other than black. Although, based on animal and theoretical models, we believe RAP has the potential to be similarly effective in such instances, we cannot be certain. If it is not as effective in such instances, our ability to successfully commercialize the RAP device could be materially harmed.
Clinical trials may be necessary to support future product submissions to FDA. These clinical trials will be expensive and will require the enrollment of large numbers of patients, and suitable patients may be difficult to identify and recruit. Delays or failures in our clinical trials will prevent us from commercializing any modified or new products and will adversely affect our business, operating results and prospects.
Initiating and completing clinical trials necessary to support any future PMA applications, and additional safety and efficacy data beyond that typically required for a 510(k) clearance, for our possible future product candidates, will be time consuming and expensive and the outcome uncertain. Moreover, the results of early clinical trials are not necessarily predictive of future results, and any product we advance into clinical trials may not have favorable results in later clinical trials.
Conducting successful clinical studies will require the enrollment of large numbers of patients, and suitable patients may be difficult to identify and recruit. Patient enrollment in clinical trials and completion of patient participation and follow-up depends on many factors, including the size of the patient population, the nature of the trial protocol, the attractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigators, support staff, and proximity of patients to clinical sites and able to comply with the eligibility and exclusion criteria for participation in the clinical trial and patient compliance. For example, patients may be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive post-treatment procedures or follow-up to assess the safety and effectiveness of our products or if they determine that the treatments received under the trial protocols are not attractive or involve unacceptable risks or discomforts.
Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy are required and we may not adequately develop such protocols to support clearance and approval. Further, the FDA may require us to submit data on a greater number of patients than we originally anticipated and/or for a longer follow-up period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure of patients to continue to participate in a clinical

15


trial may cause an increase in costs and delays in the approval and attempted commercialization of our products or result in the failure of the clinical trial. In addition, despite considerable time and expense invested in our clinical trials, FDA may not consider our data adequate to demonstrate safety and efficacy. Such increased costs and delays or failures could adversely affect our business, operating results and prospects.
If the third parties on which we rely to conduct our clinical trials and to assist us with pre-clinical development do not perform as contractually required or expected, we may not be able to obtain regulatory clearance or approval for or commercialize our products.
We do not have the ability to independently conduct our pre-clinical and clinical trials for our product candidates and future products and we must rely on third parties, such as contract research organizations, medical institutions, clinical investigators and contract laboratories to conduct such trials. If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, if these third parties need to be replaced, or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our pre-clinical development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize, our products on a timely basis, if at all, and our business, operating results and prospects may be adversely affected. Furthermore, our third-party clinical trial investigators may be delayed in conducting our clinical trials for reasons outside of their control.
The results of our clinical trials may not support our product candidate claims or may result in the discovery of adverse side effects.
Even though our first clinical trials are completed, we cannot be certain that their results will support our product candidate claims or that the FDA will agree with our conclusions regarding them. Success in pre-clinical studies and early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the later trials will replicate the results of prior trials and pre-clinical studies. The clinical trial process may fail to demonstrate that our product candidates are safe and effective for the proposed indicated uses, which could cause us to abandon a product candidate and may delay development of others. Any delay or termination of our clinical trials will delay the filing of our product submissions and, ultimately, our ability to commercialize our product candidates and generate revenues. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’s profile.
Even if our products are cleared or approved by the FDA, if we or our suppliers fail to comply with ongoing FDA requirements, or if we experience unanticipated problems with our products, these products could be subject to restrictions or withdrawal from the market.
Any product for which we obtain clearance or approval, and the manufacturing processes, reporting requirements, post-approval clinical data and promotional activities for such product, will be subject to continued regulatory review, oversight and periodic inspections by the FDA and other domestic and foreign regulatory bodies. In particular, we and our suppliers are required to comply with FDA’s Quality System Regulations, or QSR, which covers the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, storage and shipping of any product for which we obtain clearance or approval. FDA enforces the QSR and other regulations through periodic inspections. The failure by us or one of our suppliers to comply with applicable statutes and regulations administered by the FDA, or the failure to timely and adequately respond to any adverse inspectional observations or product safety issues, could result in, among other things, any of the following enforcement actions:
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untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;

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unanticipated expenditures to address or defend such actions
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customer notifications for repair, replacement, refunds;
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recall, detention or seizure of our products;
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operating restrictions or partial suspension or total shutdown of production;
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refusing or delaying our requests for premarket clearance or premarket approval of new products or modified products;
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operating restrictions;
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withdrawing premarket clearances on PMA approvals that have already been granted;
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refusal to grant export approval for our products; or
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criminal prosecution.
If any of these actions were to occur, it would harm our reputation and cause our product sales and profitability to suffer and may prevent us from generating revenue. Furthermore, our key component suppliers may not currently be or may not continue to be in compliance with all applicable regulatory requirements which could result in our failure to produce our products on a timely basis and in the required quantities, if at all.
Even if regulatory clearance or approval of a product is granted, such clearance or approval may be subject to limitations on the intended uses for which the product may be marketed and reduce our potential to successfully commercialize the product and generate revenue from the product. If the FDA determines that our promotional materials, labeling, training or other marketing or educational activities constitute promotion of an unapproved use, it could request that we cease or modify our training or promotional materials or subject us to regulatory enforcement actions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our training or other promotional materials to constitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement.
In addition, we may be required to conduct costly post-market testing and surveillance to monitor the safety or effectiveness of our products, and we must comply with medical device reporting requirements, including the reporting of adverse events and malfunctions related to our products. Later discovery of previously unknown problems with our products, including unanticipated adverse events or adverse events of unanticipated severity or frequency, manufacturing problems, or failure to comply with regulatory requirements such as QSR, may result in changes to labeling, restrictions on such products or manufacturing processes, withdrawal of the products from the market, voluntary or mandatory recalls, a requirement to repair, replace or refund the cost of any medical device we manufacture or distribute, fines, suspension of regulatory approvals, product seizures, injunctions or the imposition of civil or criminal penalties which would adversely affect our business, operating results and prospects.
We utilize a single manufacturer, Sanmina Corporation, for the manufacture of the RAP device and expect to continue to do so for commercial devices. Risks associated with the manufacturing of our products could reduce our gross margins and negatively affect our operating results.
We do not have any manufacturing facilities or direct manufacturing personnel. We currently rely, and expect to continue to rely, on Sanmina Corporation for the manufacture of the RAP device for commercial manufacture. Although Sanmina is a large contract manufacturer of medical devices, we are subject to numerous risks relating to our reliance on their manufacturing capabilities. If they encounter problems in

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manufacturing the RAP device then our business could be significantly impacted. These problems include:
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inability to secure product components in a timely manner, in sufficient quantities or on commercially reasonable terms;
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failure to increase production of the RAP device to meet demand;
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inability to modify production lines to enable us to efficiently produce future products or implement changes in current products in response to regulatory requirements;
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difficulty identifying and qualifying alternative manufacturers in a timely manner;
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inability to establish agreements with future third-party manufacturers or to do so on acceptable terms; or
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potential damage to or destruction of our manufacturers' equipment or facilities.
As demand for our products increases, our manufacturer will need to invest additional resources to purchase components, hire and train employees, and enhance their manufacturing processes. If they fail to increase production capacity efficiently, our sales may not increase in line with our expectations and our operating margins could fluctuate or decline. The RAP device has many parts that are specialized high-voltage components and many of these components are only produced by one supplier and the loss of any of these suppliers, or their inability to provide Sanmina with an adequate supply of materials, could harm our business. For our business strategy to be successful, Sanmina must be able to provide us with components in sufficient quantities, in compliance with regulatory requirements and quality control standards, in accordance with agreed upon specifications, at acceptable costs and on a timely basis. Future increases in sales of the RAP device could strain the ability of Sanmina to deliver an increasingly large supply of components and RAP systems in a manner that meets these various requirements. We do not have a long-term agreement with Sanmina and contract with Sanmina on a project-to-project basis utilizing a separate purchase order for each project. As such, there is no assurance that Sanmina will continue to provide us with manufacturing services in the future.
Our products may in the future be subject to product recalls that could harm our reputation, business and financial results.
The FDA and similar foreign governmental authorities have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture. In the case of the FDA, the authority to require a recall must be based on an FDA finding that there is a reasonable probability that the device would cause serious injury or death. Manufacturers may, under their own initiative, recall a product if any material deficiency in a device is found. A government-mandated or voluntary recall by us or one of our distributors could occur as a result of component failures, manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls of any of our products would divert managerial and financial resources and have an adverse effect on our financial condition and results of operations. The FDA requires that certain classifications of recalls be reported to FDA within 10 working days after the recall is initiated. Companies are required to maintain certain records of recalls, even if they are not reportable to the FDA. We may initiate voluntary recalls involving our products in the future that we determine do not require notification of the FDA. If the FDA disagrees with our determinations, they could require us to report those actions as recalls. A future recall announcement could harm our reputation with customers and negatively affect our sales. In addition, the FDA could take enforcement action for failing to report the recalls when they were conducted.

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If our products cause or contribute to a death or a serious injury, or malfunction in certain ways, we will be subject to medical device reporting regulations, which can result in voluntary corrective actions or agency enforcement actions.
Under the FDA medical device reporting regulations, medical device manufacturers are required to report to the FDA information that a device has or may have caused or contributed to a death or serious injury or has malfunctioned in a way that would likely cause or contribute to death or serious injury if the malfunction of the device or one of our similar devices were to recur. If we fail to report these events to the FDA within the required timeframes, or at all, FDA could take enforcement action against us. Any such adverse event involving our products also could result in future voluntary corrective actions, such as recalls or customer notifications, or agency action, such as inspection or enforcement action. Any corrective action, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, will require the dedication of our time and capital, distract management from operating our business, and may harm our reputation and financial results.
We have limited experience in assembling and testing our products and may encounter problems or delays in the assembly of our products or fail to meet certain regulatory requirements which could result in an adverse effect on our business and financial results.
We have limited experience in assembling and testing our RAP device, and no experience in doing so on a commercial scale. To become profitable, we must assemble and test the RAP device in commercial quantities in compliance with regulatory requirements and at an acceptable cost. Increasing our capacity to assemble and test our products on a commercial scale will require us to improve internal efficiencies. We may encounter a number of difficulties in increasing our assembly and testing capacity, including:
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managing production yields;
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maintaining quality control and assurance;
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providing component and service availability;
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maintaining adequate control policies and procedures;
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hiring and retaining qualified personnel; and
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complying with state, federal and foreign regulations.
If we are unable to satisfy commercial demand for our RAP device due to our inability to assemble and test our RAP device, our ability to generate revenue would be impaired, market acceptance of our products could be adversely affected and customers may instead purchase or use, our competitors’ products.
Certain parts used in the manufacturing of our equipment may experience shortages in global supply which could impact our ability to manufacture our device for customers or maintain research and development timelines.
There are a number of component parts used in the manufacture of our device that are used by many manufacturers in a variety of products. We will compete with other manufacturers for the supply of these components. Additionally, certain parts that are currently in our design may be discontinued by our supplier requiring us to find alternative parts. This issue may require us to change the design of our device or purchase significant inventories of these parts in order to protect against manufacturing delays. We may not be able to procure alternative components or adequate raw material inventories which would result in an inability to produce our device.

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U.S. legislative or FDA regulatory reforms may make it more difficult and costly for us to obtain regulatory approval of our product candidates and to manufacture, market and distribute our products after approval is obtained.
From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulatory approval, manufacture and marketing of regulated products or the reimbursement thereof. In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of future products. In addition, FDA regulations and guidance are often revised or reinterpreted by the agency in ways that may significantly affect our business and our products. It is impossible to predict whether legislative changes will be enacted or FDA regulations, guidance or interpretations changed, and what the impact of such changes, if any, may be.
For example, the policies of the new administration and their impact on the regulation of our products in the United States remain uncertain.  The outcome of the 2016 election and the forthcoming 2018 mid-term elections could result in significant legislative and regulatory reforms impacting the FDA’s regulation of our products.  Any change in the laws or regulations that govern the clearance and approval processes relating to our current and future products could make it more difficult and costly to obtain clearance or approval for new products, or to produce, market and distribute existing products. Significant delays in receiving clearance or approval, or the failure to receive clearance or approval for our new products would have an adverse effect on our ability to expand our business.
We cannot assure you that we will generate revenue or become profitable in the future.
Our products may never be cleared by the FDA or become commercially viable or accepted for use. We have incurred significant losses since our inception and expect to experience operating losses and negative cash flow for the foreseeable future. We expect to expend significant resources on hiring of personnel, continued scientific and product research and development, product testing and preclinical and clinical investigation, intellectual property development and prosecution, marketing and promotion, capital expenditures, working capital, general and administrative expenses, and fees and expenses associated with our capital raising efforts. We expect to incur costs and expenses related to consulting costs, hiring of scientists, engineers, science and other operational personnel, and the continued development of relationships with strategic partners.
We anticipate needing additional financing over the longer term to execute our business plan and fund operations, which additional financing may not be available on reasonable terms or at all.
As of March 31, 2018, we had total assets of $446,000, including cash of $11,000. We have an accumulated deficit as of March 31, 2018, of $33.2 million. The proceeds from this Offering are expected to provide capital for the next 16 months, if we complete the minimum offering, or 13 months, if we complete the maximum offering, that will fund a limited market launch of the RAP device and associated sales and marketing activities. However, we believe that we will require additional capital to mount a major sales and marketing effort and execute our business plan. We cannot give any assurance that we will be able to obtain all the necessary funding that we may need. We may pursue additional funding through various financing sources, including additional public offerings, the issuance of debt securities, fees associated with licensing some or all of our technology, joint ventures with capital partners and project type financing. There can be no assurance that funds will be available on commercially reasonable terms, if at all. If financing is not available on satisfactory terms, we may be unable to further pursue our business plan and we may be unable to continue operations, in which case you may lose some or all of your investment. Alternatively, we may consider changes in our business plan that might enable us to achieve aspects of our business objectives and lead to some commercial success with a smaller amount of capital, but we cannot assure that changes in our business plan will result in revenues or maintain any value in your investment.

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We do not have any sales, marketing, and distribution capabilities or arrangements, and will need to create these as we move towards commercialization of our products.
We do not yet have sales, marketing, and distribution capabilities or arrangements. To be able to commercialize our potential products, we will need to develop all of the foregoing. We have limited experience in establishing these capabilities, and therefore, we may be unsuccessful in achieving commercialization and earning revenues. We believe that setting up the commercialization parts of the company will take substantial capital and commitment of time and effort. We may seek development and marketing partners for RAP technology and license technology that is complementary, but not directly associated with RAP technology to others in order to avoid our having to provide the marketing, manufacturing and distribution capabilities within our organization. There can be no assurance that we will find any development and marketing partners or companies that are interested in licensing our technology. If we are unable to establish and maintain adequate sales, marketing, manufacturing and distribution capabilities, independently or with others, we will not be able to generate product revenue, and may not become profitable.
Even if the RAP device is cleared by the FDA, achieving and maintaining market acceptance of the RAP device for tattoo removal could be negatively impacted by many factors, which may prevent us from successfully commercializing the RAP device.
Even if the RAP device is cleared by the FDA, we may not be successful achieving market acceptance of the RAP device for tattoo removal. Many factors could negatively impact our ability to achieve or maintain market acceptance, including:
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the failure of the RAP device to achieve wide acceptance among people who regret having one or more tattoos or have a tattoo they would like to modify (prospective clients), dermatologists, and key opinion leaders in the tattoo removal community;
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possible reluctance by dermatologists to change their current practices because of perceived liability risks arising from the use of new products
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perceived risks associated with the use of the RAP device or similar products or technologies generally;
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the introduction of competitive products and the rate of acceptance of those products as compared to the RAP device;
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adverse results of future clinical trials relating to the RAP device or similar competitive products; and
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adverse publicity or other adverse events including any product liability lawsuits.
If we are not successful in convincing prospective clients and dermatologists of the benefits of the RAP device then our sales potential, strategic objectives and profitability could be negatively impacted, which would adversely affect our business, financial condition and operating results.
If important assumptions we have made about what prospective clients want and are willing to purchase are inaccurate, our business and operating results may be adversely affected.
Our business strategy was developed based on a number of important assumptions about prospective clients, including their desire to have one or more tattoos removed, their reasons for not taking action to remove those tattoos to date and their willingness to pay for an improved method of removing their tattoos. These assumptions were based on published secondary research, as well as primary research commissioned by us. This research may be flawed and/or any of the resulting

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assumptions may prove to be inaccurate. If so, our efforts to commercialize the RAP device, even if cleared by the FDA, may fall short of expectations and you could lose some or all of your investment.
The tattoo removal process is an elective procedure that is not reimbursable and to the extent there is a general reduction in discretionary spending that could result in a reduction in the demand for tattoo removal services.
The decision to undergo a procedure from our systems will be driven by consumer demand. Procedures performed using our systems will be elective procedures, the cost of which must be borne by the patient and are not reimbursable through government or private health insurance. In times of economic uncertainty or recession, individuals often reduce the amount of money that they spend on discretionary items, including aesthetic procedures. The general economic difficulties being experienced and the lack of availability of consumer credit for some of our customers' patients could adversely affect the markets in which we will operate.
We expect to operate in a highly competitive market, we may face competition from large, well-established medical device and product manufacturers with significant resources, and we may not be able to compete effectively.
A method for facilitating multiple laser passes in a single office visit by applying a chemically infused patch (PFD Patch) to the skin was introduced to the market within the last several years. Although we believe, based on currently available published clinical data for the PFD Patch, that the Soliton method is more effective than the PFD Patch, the company that owns the PFD Patch, Merz Pharma, has substantially more resources than Soliton. Furthermore, we have made this assessment based on separate clinical trials with differing protocols, not on a direct head-to-head comparison between the PFD Patch and the Soliton method, so we cannot be certain that the Soliton method is more effective. Also, there are currently a number of laser companies such as Lumenis, Cynosure (Hologic) and Cutera that market their lasers for tattoo removal and all of these companies have substantially more resources than Soliton. Furthermore, our clinical trials have demonstrated clinically significant improvement in tattoo fading over laser alone. Since we are pursuing FDA clearance for the RAP device to treat tattoos in conjunction with lasers, some of these companies may view our product as a competitive threat.
Also, there may be numerous companies of which we are not aware that may be working on separate technology for tattoo fading or removal. As well, the broader market for energy-based devices in the aesthetic market is becoming more competitive. Over time, we believe this field will become subject to more rapid change and new devices and products will emerge. We may find ourselves in competition with companies that have competitive advantages over us, such as:
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greater name recognition;
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established relations with dermatologists;
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established distribution networks;
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additional lines of products, and the ability to offer rebates, higher discounts or incentives to gain a competitive advantage; and
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greater financial and human resources for product development, sales and marketing, and patent litigation.
As a result, we may not be able to compete effectively against these companies or their devices and products.

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Rapidly changing technology in life sciences could make the products we are developing obsolete.
The medical device and life-science industry in general is characterized by rapid and significant technological changes, frequent new product introductions and enhancements and evolving industry standards. Our future success will depend on our ability to continually develop and then improve the products that we design and to develop and introduce new products that address the evolving needs of our customers on a timely and cost-effective basis.
If we do not enhance our product offerings through our research and development efforts on a timely basis, we may fail to effectively compete or become profitable.
In order to capture and grow market share in the tattoo removal market, we will need to enhance and broaden our product offerings to meet the evolving demands of patients and dermatologists, as well as compete against new technologies. The success of the RAP device or future versions of the RAP device will depend on numerous factors, including our ability to:
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identify product enhancements that improve performance of tattoo removal and clinicians’ ability to use the device and successfully incorporate those features into our products;
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develop and introduce future generations of the RAP device in a timely manner;
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offer products at a price that is competitive with other products then available; and
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adequately protect our intellectual property and avoid infringing upon the intellectual property rights of third-parties.
We have in the past experienced, and we may in the future experience, delays in various phases of product development and commercial launch, including engineering, manufacturing, and marketing. Any delays in our anticipated product launches may significantly impede our ability to successfully compete in our markets. In particular, such delays could cause customers to delay or forego purchases of our products. Even if we are able to successfully develop the RAP device or future versions of the RAP device when anticipated, these products may not produce sales in excess of the costs of development, and they may be quickly rendered obsolete by the changing preferences of dermatologists and patients, or the introduction by our competitors of products embodying new technologies or features.
Potential complications from the RAP device or future versions of the RAP device may not be revealed by our clinical experience or other testing. Undetected errors or defects in the RAP device or future versions of the RAP device could harm our reputation, decrease the market acceptance of the RAP device or expose us to product liability claims.
Our RAP device is a highly complex device with many potential areas for undetected errors, defects or other complications. We cannot be certain that our clinical and other safety and efficacy testing has revealed all such complications. If such complications emerge in the future, we may not have sufficient resources to address them and our commercialization plans could be materially adversely affected.
If we lose key management personnel, or if we fail to recruit additional highly skilled personnel, our ability to expand our operations and increase the size of our company will be impaired, and we may experience loss of markets or market share and we may become less competitive.
As of May 31, 2018, we had six full-time employees and two part-time employees. Because of our small size, growth in accordance with our business plan, will place a significant strain on our financial, technical, operational and management resources. As we advance our product candidates through

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commercial development, launch and post-launch activities, we will need to increase our product development, scientific and administrative headcount to manage these programs.
We are highly dependent upon the principal members of our management team, scientific advisory board and consultants. These persons have significant experience not only in development, regulatory, commercialization and business development activities, but also with the RAP system, acoustic energy and the biology of tattoos. If we lose one or more of our executive officers or key employees or consultants, our ability to implement our business strategy successfully could be seriously harmed. Any of our executive officers or key employees or consultants may terminate their employment at any time. Replacing executive officers, key employees and consultants may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to develop, gain regulatory approval of and commercialize products successfully. Competition to hire and retain employees and consultants from this limited pool is intense, and we may be unable to hire, train, retain or motivate these additional key personnel and consultants. Our failure to retain key personnel or consultants could materially harm our business.
In addition, we have scientific and clinical advisors and consultants who assist us in formulating our regulatory and clinical strategies. These advisors are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us and typically they will not enter into non-compete agreements with us. If a conflict of interest arises between their work for us and their work for another entity, we may lose their services. In addition, our advisors may have arrangements with other companies to assist those companies in developing products or technologies that may compete with ours.
In addition, to meet our obligations as a public company, we may need to increase our general and administrative capabilities. Our management, personnel and systems currently in place may not be adequate to support this future growth. If we are unable to successfully manage this growth and increased complexity of operations, our business may be adversely affected.
If we are unable to establish good relationships with physicians, our business could be negatively affected.
Our business model will depend on the distribution of our RAP device into the offices of practicing dermatologists and other physicians. This will require us to build and maintain good relationships with physicians who will have a significant source of patients that will generate treatment revenues for both the physician and the Company. If we are unable to establish good relationships with physicians and maintain them, it will jeopardize both device and replaceable component revenues.
Risks Related to our License Agreement and Intellectual Property
We have licensed the intellectual property rights for our technology from MD Anderson, and if our license agreement with MD Anderson is terminated our business will be materially harmed.
We obtained a royalty-bearing, worldwide, exclusive license to intellectual property rights, including patent rights related to RAP technology from the University of Texas on behalf of the MD Anderson Cancer Center. If we become insolvent, cannot meet commercial diligence requirements contained in the licensing agreement, or fail to make annual maintenance fee payments without curing the default, then the technology will revert back to MD Anderson. Furthermore, if we are successful in commercializing and selling the RAP device, we will owe milestone and royalty payments pursuant to this license. If we fail to make those payments in accordance with the license, our license could be terminated.

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We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights.
We may from time to time seek to enforce our intellectual property rights against infringers when we determine that a successful outcome is probable and may lead to an increase in the value of the intellectual property. If we choose to enforce our patent rights against a party, then that individual or company has the right to ask the court to rule that such patents are invalid or should not be enforced. Additionally, the validity of our patents and the patents we have licensed may be challenged if a petition for post grant proceedings such as inter-parties review and post grant review is filed within the statutorily applicable time with the U.S. Patent and Trademark Office (USPTO). These lawsuits and proceedings are expensive and would consume time and resources and divert the attention of managerial and scientific personnel even if we were successful in stopping the infringement of such patents. In addition, there is a risk that the court will decide that such patents are not valid and that we do not have the right to stop the other party from using the inventions. There is also the risk that, even if the validity of such patents is upheld, the court will refuse to stop the other party on the ground that such other party's activities do not infringe our intellectual property rights. In addition, in recent years the U.S. Supreme Court modified some tests used by the USPTO in granting patents over the past 20 years, which may decrease the likelihood that we will be able to obtain patents and increase the likelihood of a challenge of any patents we obtain or license.
If we are unable to protect the intellectual property used in our products, others may be able to copy our innovations which may impair our ability to compete effectively in our markets.
The strength of our patents involves complex legal and scientific questions and can be uncertain. We have 8 families of patents. As of March 31, 2018, our patent portfolio is comprised of 5 pending U.S. patent applications, 10 granted and 28 pending foreign counterpart patent applications, and 4 pending PCT patent applications, each of which we either own directly or we are the exclusive licensee. These patent applications may be challenged or fail to result in issued patents, or if issued, these patents and our existing patents may be too narrow to prevent third-parties from developing or designing around our intellectual property and in that event, we may lose competitive advantage, which could result in harm to our business.
We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
As is common in the medical device industry, we employ individuals who were previously employed at other medical device companies, including our competitors or potential competitors. We may be subject to claims that these employees, or we, have used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.
If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and products could be adversely affected.
In addition to patented technology, we rely upon, among other things, unpatented proprietary technology, processes, trade secrets and know-how. Any involuntary disclosure to or misappropriation by third-parties of our confidential or proprietary information could enable competitors to duplicate or surpass our technological achievements, potentially eroding our competitive position in our market. We seek to protect confidential or proprietary information in part by confidentiality agreements with our employees, consultants and third-parties. While we require all of our employees, consultants, advisors and any third-parties who have access to our proprietary know-how, information and technology to enter into confidentiality agreements, we cannot be certain that this know-how, information and technology will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently

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develop substantially equivalent information and techniques. These agreements may be terminated or breached, and we may not have adequate remedies for any such termination or breach. Furthermore, these agreements may not provide meaningful protection for our trade secrets and know-how in the event of unauthorized use or disclosure. To the extent that any of our staff were previously employed by other pharmaceutical, medical technology or biotechnology companies, those employers may allege violations of trade secrets and other similar claims in relation to their medical device development activities for us.
Risks Relating to this Offering of Our Common Stock
There has been no public market for our common stock and an active market may not develop or be sustained, which could limit your ability to sell shares of our common stock.
There currently is no public market for our common stock, and our common stock will not be traded in the open market prior to this Offering. Although we intend to list the common stock on the NASDAQ Capital Market in connection with this Offering, an adequate trading market for the common stock may not develop or be sustained after this Offering. The initial public offering price will be determined by negotiations between the underwriter and our board of directors and may not be representative of the market price at which our shares of common stock will trade after this offering. In particular, we cannot assure you that you will be able to resell your shares at or above the initial public offering price.
The best efforts structure of this Offering may yield insufficient gross proceeds to fully execute on our business plan.
The underwriter is offering shares of our common stock in this Offering on a best efforts basis. The underwriter is not required to sell any specific number or dollar amount of common stock but will use their best efforts to sell the shares offered by us. It is a condition to this Offering that, upon the closing of the Offering, our common stock would qualify for listing on the NASDAQ Capital Market. In order to list, the NASDAQ Capital Market requires that, among other criteria, at least 1,000,000 publicly-held shares of our common stock be outstanding, the shares be held in the aggregate by at least 300 round lot holders, the market value of the publicly-held shares of our common stock be at least $15.0 million, our stockholders’ equity after giving effect to the sale of our shares in this Offering be at least $4.0 million, the bid price per share of our common stock be $4.00 or more. As a “best efforts” offering, there can be no assurance that we will successfully raise this minimum amount, that the Offering will satisfy the listing conditions required to trade our common stock on the NASDAQ Capital Market or that the Offering contemplated by this Offering Circular will ultimately be completed or will result in any proceeds being made available to us.
The success of this Offering will impact, in large part, our ability to cover expenses and finance operations over the next 12-15 months. We believe the net proceeds of this Offering, together with our cash and cash equivalents, including the remaining proceeds from our recent private placement of our unsecured promissory notes, will be sufficient to meet our cash, operational and liquidity requirements for at least 15 months if we sell a minimum of 1,500,000 shares and for at least 12 months if we sell all 3,000,000 shares of our common stock in this Offering. Should we raise the maximum, we will commercialize the device at a faster pace and therefore spend at a faster pace. The operating plan that we would enact should we raise the minimum includes a significant reduction in planned staffing, travel, research and development spending, and other overhead to mirror the reduced pace of development. If no shares are sold in this Offering, or if we sell only the minimum number of shares yielding insufficient gross proceeds, we may be unable to cover our expenses, sufficiently fund operations or fully execute on our business plan. This could potentially result in a material adverse effect on our business, Offering Circular, financial condition and results of operations.

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If securities or industry analysts do not publish research or reports about us, or if they adversely change their recommendations regarding our common stock, then our stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us, our industry and our market. If no analyst elects to cover us and publish research or reports about us, the market for our common stock could be severely limited and our stock price could be adversely affected. In addition, if one or more analysts ceases coverage of us or fails to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. If one or more analysts who elect to cover us issue negative reports or adversely change their recommendations regarding our common stock, our stock price could decline.
Purchasers in this Offering will experience immediate and substantial dilution in net tangible book value.
The initial public offering price is substantially higher than the net tangible book value of each outstanding share of our common stock. Purchasers of common stock in this Offering will experience immediate and substantial dilution on a book value basis. The dilution per share in the net tangible book value per share of common stock will be $4.58 per share if the minimum number of shares are sold and $4.15 per share if the maximum number of shares are sold, based on a $5.00 initial public offering price, and assuming, for purposes of the dilution calculations contained in this Offering Circular, the conversion of all of our outstanding preferred stock including accrued dividends into an aggregate of 3,329,418 shares of our common stock contemporaneously with the closing of this Offering and the conversion of all of our outstanding unsecured promissory notes into an aggregate of 6,689,290 shares of our common stock contemporaneously with the closing of this Offering (inclusive of shares issuable for accrued interest through June 30, 2018 under such notes). See “Dilution.”
Your ownership may be diluted if additional capital stock is issued to raise capital, to finance acquisitions or in connection with strategic transactions.
We intend to seek to raise additional funds, finance acquisitions or develop strategic relationships by issuing equity or convertible debt securities in addition to the shares issued in this Offering, which would reduce the percentage ownership of our existing stockholders. Our board of directors has the authority, without action or vote of the stockholders, to issue all or any part of our authorized but unissued shares of common or preferred stock. Prior to this Offering, our certificate of incorporation will be amended to authorize us to issue up to 100,000,000 shares of common stock . Future issuances of common stock would reduce your influence over matters on which stockholders vote and would be dilutive to earnings per share.
The concentration of our common stock ownership by a single shareholder will limit your ability to influence corporate matters.
Upon completion of this Offering, and assuming the conversion of all our outstanding unsecured promissory notes with interest accrued through June 30, 2018 and convertible preferred stock with accrued dividends contemporaneously with the closing of this Offering, a single shareholder, Remeditex Ventures, LLC (Remeditex) will beneficially own and will be able to vote in the aggregate 60.3% of our outstanding common stock if the minimum number of shares are sold and 54.4% of our outstanding common stock if the maximum number of shares offered are sold. As such, Remeditex, will continue to have the ability to exert significant influence over all corporate activities, including the election or removal of directors and the outcome of tender offers, mergers, proxy contests or other purchases of common stock that could give our stockholders the opportunity to realize a premium over the then-prevailing market price for their shares of common stock. This concentrated control will limit your ability to influence corporate matters and, as a result, we may take actions that purchasers in this Offering do not view as

27


beneficial. In addition, such concentrated control could discourage others from initiating changes of control. In such cases, the perception of our prospects in the market may be adversely affected and the market price of our common stock may decline.
Certain provisions in our organizational documents could enable our board of directors to prevent or delay a change of control.
Our organizational documents at the time of the Offering will contain provisions that may have the effect of discouraging, delaying or preventing a change of control of, or unsolicited acquisition proposals, that a stockholder might consider favorable. These include provisions:
•
prohibiting the stockholders from acting by written consent;
•
requiring advance notice of director nominations and of business to be brought before a meeting of stockholders;
•
requiring a majority vote of the outstanding shares of common stock to amend the bylaws; and
•
limiting the persons who may call special stockholders’ meetings.
In addition, Delaware law makes it difficult for stockholders that recently have acquired a large interest in a corporation to cause the merger or acquisition of the corporation against the directors’ wishes. Under Section 203 of the Delaware General Corporation Law, a Delaware corporation may not engage in any merger or other business combination with an interested stockholder for a period of three years following the date that the stockholder became an interested stockholder except in limited circumstances, including by approval of the corporation’s board of directors.
We have no intention of declaring dividends in the foreseeable future.
The decision to pay cash dividends on our common stock rests with our board of directors and will depend on our earnings, unencumbered cash, capital requirements and financial condition. We do not anticipate declaring any dividends in the foreseeable future, as we intend to use any excess cash to fund our operations. Investors in our common stock should not expect to receive dividend income on their investment, and investors will be dependent on the appreciation of our common stock to earn a return on their investment.
If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired, which would adversely affect our business and our stock price.
Ensuring that we have adequate internal financial and accounting controls and procedures in place to produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently.  Our management has concluded that our internal controls over financial reporting are ineffective and has identified a material weakness in our internal controls due to the lack of segregation of duties. While management is working to remediate the material weakness, there is no assurance that such changes, when economically feasible and sustainable, will remediate the identified material weaknesses or that the controls will prevent or detect future material weaknesses. If we are not able to maintain effective internal control over financial reporting, our financial statements, including related disclosures, may be inaccurate, which could have a material adverse effect on our business. We may discover additional material weaknesses in our internal financial and accounting controls and procedures that need improvement from time to time.
Management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the

28


preparation of financial statements for external purposes in accordance with United States generally accepted accounting principles. Management does not expect that our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our company will have been detected.
Assuming the completion of this Offering, we will be required to comply with Section 404 of the Sarbanes-Oxley Act in connection with our future annual and quarterly reports on Form 10-K and Form 10-Q, commencing with the second Form 10-K we are required to file. We expect to expend significant resources in developing the necessary documentation and testing procedures required by Section 404. We cannot be certain that the actions we will be taking to improve our internal controls over financial reporting will be sufficient, or that we will be able to implement our planned processes and procedures in a timely manner. In addition, if we are unable to produce accurate financial statements on a timely basis, investors could lose confidence in the reliability of our financial statements, which could cause the market price of our common stock to decline and make it more difficult for us to finance our operations and growth.
The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.
Once we are a public company, we will incur additional accounting, legal and other expenses that we did not incur as a private company. We will incur costs associated with our public company reporting requirements. We also anticipate that we will incur costs associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002, as well as rules and regulations implemented by the SEC and The NASDAQ Stock Market. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. Furthermore, these rules and regulations could make it more difficult or costlier for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
The protection provided by the federal securities laws relating to forward-looking statements does not apply to us.
The lack of this protection could harm us in the event of an adverse outcome in a legal proceeding relating to forward-looking statements made by us. Although federal securities laws provide 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 certain issuers, including issuers that do not have their equity traded on a recognized national securities exchange at the time the statement is made. Our common stock does not currently trade on any recognized national securities exchange. As a result, we will not have the benefit of this safe harbor protection in the event of any legal action based upon a 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. The lack of this protection in a contested proceeding could harm our financial condition.

29


As an “emerging growth company” under the Jumpstart Our Business Startups Act, or JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements.
As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. We are an emerging growth company until the earliest of:
•
the last day of the fiscal year during which we have total annual gross revenues of $1 billion or more;
•
the last day of the fiscal year following the fifth anniversary of this Offering;
•
the date on which we have, during the previous 3-year period, issued more than $1 billion in non-convertible debt; or
•
the date on which we are deemed a “large accelerated issuer” as defined under the federal securities laws.
For so long as we remain an emerging growth company, we will not be required to:
•
have an auditor report on our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002;
•
comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis);
•
submit certain executive compensation matters to shareholders advisory votes pursuant to the “say on frequency” and “say on pay” provisions (requiring a non-binding shareholder vote to approve compensation of certain executive officers) and the “say on golden parachute” provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010;
•
include detailed compensation discussion and analysis in our filings under the Securities Exchange Act of 1934, as amended, and instead may provide a reduced level of disclosure concerning executive compensation;
•
present more than two years of audited financial statements or two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A; and
•
immediately adopt new or revised financial accounting standards under §107 of the JOBS Act; instead we are eligible to claim longer phase-in periods.
We intend to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act. The Company has elected to avail itself of this exemption from new or revised accounting standards, and, therefore, will not be subject to the same new or revised accounting standards as public companies that are not emerging growth companies.
Certain of these reduced reporting requirements and exemptions were already available to us due to the fact that we also qualify as a “smaller reporting company” under SEC rules. For instance, smaller

30


reporting companies are not required to obtain an auditor attestation and report regarding management’s assessment of internal control over financial reporting; are not required to provide a compensation discussion and analysis; are not required to provide a pay-for-performance graph or CEO pay ratio disclosure; and may present only two years of audited financial statements and related MD&A disclosure.
Under the JOBS Act, we may take advantage of the above-described reduced reporting requirements and exemptions for up to five years after our initial sale of common equity pursuant to a registration statement declared effective under the Securities Act of 1933, or such earlier time that we no longer meet the definition of an emerging growth company. Further, under current SEC rules, we will continue to qualify as a “smaller reporting company” for so long as we have a public float (i.e., the market value of common equity held by non-affiliates) of less than $75 million as of the last business day of our most recently completed second fiscal quarter.
We cannot predict if investors will find our securities less attractive due to our reliance on these exemptions. If investors were to find our common stock less attractive as a result of our election, we may have difficulty raising all of the proceeds we seek in this Offering.
After the completion of this Offering, we may be at an increased risk of securities class action litigation.
Historically, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biotechnology companies have experienced significant stock price volatility in recent years. If we were to be sued, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

31


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
We make forward-looking statements under the “Summary,” “Risk Factors,” “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in other sections of this Offering Circular. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “should,” “would,” “could,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential” or “continue,” and the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. In particular, you should consider the numerous risks and uncertainties described under “Risk Factors.”
While we believe we have identified material risks, these risks and uncertainties are not exhaustive. Other sections of this Offering Circular describe additional factors that could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements after the date of this Offering Circular to conform our prior statements to actual results or revised expectations, and we do not intend to do so.
Forward-looking statements include, but are not limited to, statements about:
•
our ability to obtain additional funding to commercialize RAP for tattoo removal, develop the RAP device for other indications and develop our dermatological technologies;
•
the need to obtain regulatory approval for our Generation 1 RAP device, and the potential to obtain an additional approval when we modify the Generation 1 RAP device to become our Generation 2 device before our initial market launch and to become our Generation 3 device before our nationwide launch;
•
the success of our future clinical trials;
•
compliance with obligations under our intellectual property license with MD Anderson;
•
market acceptance of the RAP device;
•
competition from existing products or new products that may emerge;
•
potential product liability claims;
•
our dependency on third-party manufacturers to supply or manufacture our products;

32


•
our ability to establish or maintain collaborations, licensing or other arrangements;
•
our ability and third parties’ abilities to protect intellectual property rights;
•
our ability to adequately support future growth; and
•
our ability to attract and retain key personnel to manage our business effectively.
We caution you not to place undue reliance on the forward-looking statements, which speak only as of the date of this Offering Circular in the case of forward-looking statements contained in this Offering Circular.
This Offering Circular also incorporates estimates and other statistical data made by independent parties and by us relating to market size and growth and other data about our industry. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. In addition, projections, assumptions and estimates of our future performance and the future performance of the markets in which we operate are necessarily subject to a high degree of uncertainty and risk.

33


USE OF PROCEEDS
Based on an initial public offering price of $5.00 per share, we estimate that the net proceeds from this Offering, after deducting underwriting commissions and expenses payable by us and other offering expenses payable by us, will be approximately $6.7 million if we sell a minimum of 1,500,000 shares and approximately $13.7 million if we sell all 3,000,000 shares of our common stock in this Offering. However, this is a best efforts offering and there is no assurance that we will sell any shares or receive any proceeds.
We intend to use the proceeds from this Offering as follows:
 
Assuming Minimum Offering
 
Assuming Maximum Offering
Offering costs
$
800,000

 
$
1,325,000

Cost to conduct cellulite trials
300,000

 
460,000

Payment of deferred salaries to officers (2)
50,000

 
465,000

Commercialization of the RAP device
1,275,000

 
3,500,000

Research, IP and license fees
600,000

 
850,000

Tattoo Trials for additional claims
—

 
300,000

Brand development
—

 
1,500,000

Repayment of August 2018 notes (3)
360,000

 
360,000

Working Capital
4,115,000

 
6,240,000

Total Proceeds (1)
$
7,500,000

 
$
15,000,000

(1)
If we complete the maximum offering, we estimate that we will have sufficient funds to complete the commercialization of our device to be sold in the initial limited market launch as well as the proof-of-concept and FDA Cellulite studies. If we complete the minimum offering, we estimate that we will require additional financing of at least $3.6 million to complete the commercialization plus such additional working capital to fund our operations during the pendency of the development work. The timing and costs of clinical trials are difficult to predict and as such the foregoing estimates may prove to be inaccurate.
(2)
The payment of the deferred salaries includes a $50,000 payment to our Chief Marketing Officer in the minimum offering and payments of $131,000 to our Executive Chairman, $131,000 to our President and Chief Science Officer, $98,000 to our Chief Operating Officer, the same $50,000 to our Chief Marketing Officer and $55,000 to our Chief Financial Officer in the maximum offering.
(3)
Represents $360,000 in 10% non-convertible promissory notes we plan to issue in August 2018, which is due upon the closing of this Offering. In addition to these notes, if this Offering is not completed prior to October 1, 2018 and if we require additional working capital, Mr. Klemp, Dr. Capelli, Ms. Bisson and other members of management have collectively agreed to purchase up to an additional $125,000 of such notes, which, if issued, will be due and payable upon closing of this offering.

We believe the net proceeds of this Offering, together with our cash and cash equivalents, including the remaining proceeds from our recent private placement of our unsecured promissory notes, will be sufficient to meet our cash, operational and liquidity requirements for at least 15 months if we sell a minimum of 1,500,000 shares and for at least 12 months if we sell all 3,000,000 shares of our common stock in this Offering. Should we raise the maximum, we will commercialize the device at a faster pace and therefore spend at a faster pace. The operating plan that we would enact should we raise the minimum includes a significant reduction in planned staffing, travel, research and development spending, and other overhead to mirror the reduced pace of development.
As of the date of this Offering circular, we cannot specify with certainty all of the particular uses for the net proceeds to us from this Offering. Accordingly, our management will have broad discretion in the application of these proceeds. Net offering proceeds not immediately applied to the uses summarized above will be invested in short-term investments such as money market funds, commercial paper, U.S. treasury bills and similar securities investments pending their use.

34


SELECTED FINANCIAL DATA
The following tables set forth our selected financial data for the periods indicated. The following selected financial data for the years ended December 31, 2016 and 2017 and the quarters ended March 31, 2018 and 2017 are derived from our financial statements appearing elsewhere in this Offering Circular. The data should be read together with “Management’s Discussion and Analysis Discussion of Analysis of Financial Condition and Results of Operations” and in conjunction with the financial statements, related notes, and other financial information included elsewhere in this Offering Circular.
Our historical results are not necessarily indicative of the results to be expected in the future.
 
Year Ended
 
Quarter Ended
 
December 31,
 
March 31,
 
2017
 
2016
 
2018
 
2017
 
 
 
 
 
(Unaudited)
 
(Unaudited)
Statement of Operations Data:
 
 
 
 
 
 
 
Revenue
$
—

 
$
—

 
$
—

 
$
—

Expenses:
 
 
 
 
 
 
 
Research and development expenses
3,965,276

 
4,146,777

 
692,725

 
1,151,873

Sales and marketing expenses
91,288

 
33,929

 
12,500

 
18,120

Administrative expenses
3,001,969

 
3,054,762

 
449,029

 
742,100

Depreciation and amortization
130,075

 
82,523

 
30,561

 
32,386

Operating loss
(7,188,608
)
 
(7,317,991
)
 
(1,184,815
)
 
(1,944,479
)
 
 
 
 
 
 
 
 
Other income (expenses):
 
 
 
 
 
 
 
Interest expense, net
(295,830
)
 
—

 
(166,850
)
 
(21,645
)
Other income
4,751

 
16,732

 
—

 
—

Total other income (expenses)
(291,079
)
 
16,732

 
(166,850
)
 
(21,645
)
 
 
 
 
 
 
 
 
Loss before income taxes
(7,479,687
)
 
(7,301,259
)
 
(1,351,665
)
 
(1,966,124
)
Income tax expense
937

 
2,312

 
 
 
937

Net loss
(7,480,624
)
 
(7,303,571
)
 
(1,351,665
)
 
(1,967,061
)
Net loss available to common shareholders
$
(7,480,624
)
 
$
(7,303,571
)
 
$
(1,351,665
)
 
$
(1,967,061
)
 
 
 
 
 
 
 
 
Basic and diluted loss per common share
$
(4.40
)
 
$
(4.80
)
 
$
(0.74
)
 
$
(1.20
)
 
 
 
 
 
 
 
 
Basic and diluted weighted-average shares outstanding
1,700,275

 
1,522,619

 
1,820,556

 
1,643,056



35


CAPITALIZATION
The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2018 on:
•
an actual basis; and
•
a pro forma as adjusted basis after giving effect to: (1) (a) the sale of a minimum of 1,500,000 shares of our common stock in this Offering at an estimated initial public offering price of $5.00 per share and our receipt of the estimated $6.7 million in net proceeds from this Offering, after deducting underwriting commissions and estimated offering expenses payable by us, and (b) the sale of all 3,000,000 shares of our common stock in this Offering at an estimated initial public offering price of $5.00 per share and our receipt of the estimated $13.7 million in net proceeds from this Offering, after deducting underwriting commissions and estimated offering expenses payable by us; (2) the conversion of all of our outstanding unsecured promissory notes in principal amount of $10,862,687 into 6,534,812 shares of our common stock contemporaneously with the closing of this Offering (inclusive of shares issuable for accrued interest through March 31, 2018 under such notes); (3) the conversion of our convertible preferred stock with accrued dividends as of March 31, 2018 into 3,265,418 shares of common stock contemporaneously with this Offering.
You should read this capitalization table together with “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes appearing elsewhere in this prospectus.
 
At March 31, 2018
 
Actual
 
Pro Forma - As adjusted Minimum
 
Pro Forma - As adjusted Maximum
 
 
 
Unaudited
 
Unaudited
Cash and cash equivalents
$
10,535

 
$
10,210,535

 
$
17,185,535

Notes payable and accrued interest
$
7,362,687

 
$
—

 
$
—

Stockholders’ equity (deficit):
 
 
 
 
 
Preferred stock, $0.001 par value: 2,534,766, 0, and 0 shares authorized, respectively, 2,534,766, 0 and 0 shares issued and outstanding, respectively.
2,535

 
—

 
—

Common stock, $0.001 par value: 5,250,000, 100,000,000 and 100,000,000 shares authorized, respectively; 1,820,556, 13,120,786 and 14,620,786 shares issued and outstanding, respectively (1)
1,821

 
13,121

 
14,621

Additional paid-in capital
21,176,941

 
64,195,495

 
71,168,996

Accumulated deficit
(33,208,004
)
 
(55,019,377
)
 
(55,019,377
)
Total stockholders’ equity (deficit)
(12,026,707
)
 
9,189,239

 
16,164,240

Total capitalization
$
(4,664,020
)
 
$
9,189,239

 
$
16,164,240

(1)
The number of shares of common stock to be outstanding after this Offering includes (i) the conversion of our convertible preferred stock with accrued dividends into 3,265,418 shares of common stock, (ii) the conversion of all of our outstanding unsecured promissory notes in principal amount of $10,862,687 (inclusive of accrued interest through March 31, 2018) into 6,534,812 shares of our common stock.

The number of shares does not give effect to:
•
780,000 shares of common stock available for issuance under the Soliton, Inc. 2018 Stock Plan

36


and 14,745 available for issuance under the Soliton, Inc. 2012 Stock Plan.
•
91,350 shares of common stock underlying outstanding warrants at an average exercise price of $1.75 per share.
•
Up to 291,000 shares of common stock underlying warrants to be issued in conjunction with the August Offering at an exercise price of $1.75 per share.
•
between 105,000 shares (assuming the minimum offering is completed) and 210,000 shares (assuming the maximum offering is completed) of common stock issuable upon the exercise of the warrants issued to the representatives of the underwriters and other brokers.

37


DILUTION
Purchasers of our common stock in this Offering will experience an immediate dilution of net tangible book value per share from the public offering price of $5.00. Dilution in net tangible book value per share represents the difference between the amount per share paid by the purchasers of shares of common stock and the net tangible book value per share immediately after this Offering.
As of March 31, 2018, our net tangible book value was ($12,122,313), or ($6.66) per share of common stock. Net tangible book value per share represents our total tangible assets, less our total liabilities, divided by the number of outstanding shares of our common stock.
After (i) giving effect to the sale of 1,500,000 shares of common stock (minimum) and 3,000,000 shares of common stock (maximum) in this Offering at an offering price of $5.00 per share, (ii) after deducting estimated offering expenses payable by us of $800,000 under the minimum raise and $1.3 million under the maximum raise, (iii) assuming the conversion of all of our outstanding unsecured convertible promissory notes into 6,689,290 shares of our common stock contemporaneously with the closing of this Offering (inclusive of shares issuable for accrued interest through June 30, 2018 under such notes), and (iv) assuming the conversion of our outstanding convertible preferred stock with accrued dividends through June 30, 2018, 3,329,418 shares of common stock contemporaneously with the closing of this Offering, our pro forma net tangible book value would have been $0.42 (minimum) and $0.85 (maximum) per share. This represents an immediate increase in pro forma net tangible book value of $7.08 (minimum) and $7.51 (maximum) per share to our existing stockholders and immediate dilution of $4.58 (minimum) and $4.15 (maximum) per share to new investors purchasing shares at the public offering price of $5.00 per share. The following table illustrates the dilution in pro forma net tangible book value per share to new investors as of March 31, 2018:
 
Minimum
 
Maximum
Assumed public offering price per share
$
5.00

 
$
5.00

Net tangible book value per share at March 31, 2018
(6.66
)
 
(6.66
)
Increase in net tangible book value per share to the existing stockholders attributable to this Offering
7.08

 
7.51

Adjusted net tangible book value per share after this Offering
0.42

 
0.85

Dilution in net tangible book value per share to new investors
4.58

 
4.15

The following tables set forth, as of March 31, 2018, the number of shares of common stock purchased from us, the total cash consideration paid to us and the average price per share paid by the existing holders of our common stock and the price to be paid by new investors at the public offering price of $5.00 per share.
Minimum Offering
 
Shares Purchased
 
Total Consideration
 
Average Price
Per Share
 
Number
 
Percent
 
Amount
 
Percent
 
Existing investors before this Offering
11,034,265

 
88.0
%
 
$
28,650,318

 
79.3
%
 
$
2.60

Investors purchasing shares in this Offering
1,500,000

 
12.0
%
 
7,500,000

 
20.7
%
 
5.00

Total
12,534,265

 
100
%
 
$
36,150,318

 
100.0
%
 
$
2.88


38


Maximum Offering
 
Shares Purchased
 
Total Consideration
 
Average Price
Per Share
 
Number
 
Percent
 
Amount
 
Percent
 
Existing investors before this Offering
11,034,265

 
78.6
%
 
$
28,650,318

 
65.6
%
 
$
2.60

Investors purchasing shares in this Offering
3,000,000

 
21.4
%
 
15,000,000

 
34.4
%
 
5.00

Total
14,034,265

 
100
%
 
$
43,650,318

 
100.0
%
 
$
3.11


39


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the financial statements and the related notes appearing elsewhere in this Offering Circular. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. See “Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under “Risk Factors” and elsewhere in this Offering Circular.
Overview
Soliton, Inc. was incorporated in the state of Delaware on March 27, 2012. We are a medical technology company focused on developing and commercializing products utilizing our proprietary designed acoustic shockwave technology platform referred to as RAP (Rapid Acoustic Pulse). We are a pre-revenue stage company with our first product currently being developed for the removal of tattoos. Our product will need to receive clearance from the Food and Drug Administration, or FDA, in order to be marketed in the United States. We expect to submit our filing for premarket clearance approval with the FDA in the second half of 2018. We also intend to secure regulatory approval in numerous international markets and are currently developing a regulatory strategy for these markets.
Our business model anticipates generating revenue from the sale of our RAP console to dermatologists, plastic surgeons, and other physician offices, as well as medi-spas under the supervision of a doctor. More importantly, recurring revenues will be generated by the sale of disposable cartridges that are utilized with each patient visit and treatment. Additional revenues will result from maintenance services to our customers. Our system comprises a control unit with a hand piece and our consumable treatment cartridges, which are designed to allow a physician to perform a single office visit involving multiple laser passes on an average-sized tattoo. In simple terms, we expect this to translate into approximately one treatment cartridge per patient, per visit.
Our ongoing research and development activities are primarily focused on obtaining FDA clearance for our system and then developing our system and treatment head for tattoo removal procedures. In addition to these development activities related to tattoo removal, we are exploring additional uses of RAP technology for the dermatology, plastic surgery, and aesthetic markets, as well as new methods for improving the safety and efficacy of laser-based devices.
Market in which we will operate. The medical technology and aesthetic product markets are highly competitive and dynamic and are characterized by rapid and substantial technological development and product innovations. We will compete with many other technologies for consumer demand. Further, the aesthetic industry in which we will operate is particularly vulnerable to economic trends. The decision to undergo a procedure from our systems will be driven by consumer demand. Procedures performed using our systems are elective procedures, the cost of which must be borne by the patient and are not reimbursable through government or private health insurance. In times of economic uncertainty or recession, individuals often reduce the amount of money that they spend on discretionary items, including aesthetic procedures. The general economic difficulties being experienced and the lack of availability of consumer credit for some of our customers' patients could adversely affect the markets in which we will operate.
Recent Developments
On April 2, 2018, we completed a private placement for an aggregate of $500,000 of convertible bridge notes. On the closing date of this Offering, the outstanding principal and accrued, but unpaid interest on the notes will be converted into common stock at the conversion price of $0.175 per share.

40


The notes bear interest at 10.0% per annum and mature on April 2, 2020.
On April 2, 2018, we engaged our outside engineering firm to develop the first device capable of delivering high enough therapeutic output to treat cellulite and to produce a prototype device to be used in our first proof-of-concept trials for this indication. In early April 2018, we began protocol drafting discussions with our Clinical Director of the intended study site to be used for the planned proof-of-concept trial targeting cellulite reduction.
After successfully treating the first patient on April 2, 2018, we enrolled and treated the second patient in a cooperative fat reduction trial.
During the first half of April, we successfully completed all major safety testing on the RAP Device. This testing has been ongoing for months and represented the last significant hurdle to our submission of a request for a premarket clearance to the FDA.
On April 17, 2018, we commenced a private placement for up to an aggregate of $3,000,000 of convertible bridge notes. On the closing date of this Offering, the outstanding principal and accrued, but unpaid interest on the notes will be converted into common stock at the conversion price of $1.75 per share. The notes bear interest at 10.0% per annum and mature two years from the issuance date of the notes. As of June 30, 2018, $3,000,000 in proceeds had been received by the Company.In August 2018, we expect to issue $360,000 in principal amount of 10% non-convertible promissory notes. The principal and interest will be due on the earlier of one-year from the date of issuance or upon the closing of this Offering. For each dollar in principal amount of notes purchased by investors, we will issue the investors a five-year warrant to purchase 0.6 of a share of common stock at an exercise price of $1.75 per share.
In addition to the notes described above, if this Offering is not completed prior to October 1, 2018 and if we require additional working capital pending completion of the Offering, Mr. Klemp, Dr. Capelli, Ms. Bisson and other members of management have collectively agreed to purchase up to an additional $125,000 of notes and warrants on the same terms as described above.
Critical Accounting Policies and Estimates
Our critical accounting policies have not materially changed during the year ended December 31, 2017 or the quarter ended March 31, 2018, except for the accounting for revenue recognition, which doesn’t have significant impact on our financial statements. Furthermore, the preparation of our financial statements is in conformity with generally accepted accounting principles in the United States of America, or GAAP. The preparation of our financial statements requires management to make judgments and estimates that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting period. Our management believes that we consistently apply these judgments and estimates, and the financial statements fairly represent all periods presented. However, any differences between these judgments and estimates and actual results could have a material impact on our statements of income and financial position.
Property and Equipment
Property and equipment are stated at historical cost and depreciated on a straight-line basis over the estimated useful lives, generally three to five years. Leasehold improvements are depreciated over the shorter of the remaining lease term or useful lives of the assets. Upon disposition of the assets, the costs and related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations. Repairs and maintenance costs are included as expense in the accompanying statement of operations.

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Intangible Assets
Intangible assets include patents and trademarks. Patent related costs in connection with filing and prosecuting patent applications and patents filed by the Company are expensed as incurred, and are classified as general and administrative expenses, until a patent is granted; at which time additional costs related to applications in different countries are capitalized to intangible assets and amortized to general and administrative expenses over the shorter of the remaining licensed term or a twenty-year patent life. The Company does not amortize trademarks with indefinite useful lives; rather, such assets are required to be tested for impairment at least annually or sooner if events or changes in circumstances indicate that the asset may be impaired.
Long-Lived Assets
The Company evaluates its long-lived assets, including equipment, for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. Recoverability of these assets is measured by comparison of the carrying amount of each asset to the future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the asset is considered impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired assets. The Company has not recorded impairment of any long-lived assets in the periods presented.
Convertible Debt
When conversion terms related to convertible debt would be triggered by future events not controlled by the Company, the Company accounts for the conversion feature as contingent conversion options. Recognition of the intrinsic value of the conversion option is recognized only upon the occurrence of a triggering event.
Research and Development Expenses
Research and development expenses are recognized as incurred and include the costs related to the Company's various contract research service providers, suppliers, engineering studies, supplies, and outsourced testing and consulting, as well as clinical costs.
Stock-Based Compensation
Stock-based compensation expense includes the estimated fair value of equity awards vested during the reporting period. The expense for equity awards vested during the reporting period is determined based upon the grant date fair value of the award and is recognized as expense over the applicable vesting period of the stock award using the straight-line method.
JOBS Act Accounting Election
The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to avail itself of this exemption from new or revised accounting standards, and, therefore, will not be subject to the same new or revised accounting standards as public companies that are not emerging growth companies.

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Results of Operations
Below is a summary of the results of operations for the years ended December 31, 2017 and 2016.
 
Year ended
 
December 31,
 
2017
 
2016
 
$ Change
 
% Change
Operating expenses
 
 
 
 
 
 
 
Research and development
$
3,965,276

 
$
4,146,777

 
$
(181,501
)
 
(4.38
)%
Sales and marketing
91,288

 
33,929

 
57,359

 
169.06
 %
Depreciation and amortization
130,075

 
82,523

 
47,552

 
57.62
 %
General and administrative
3,001,969

 
3,054,762

 
(52,793
)
 
(1.73
)%
Total operating expenses
$
7,188,608

 
$
7,317,991

 
$
(129,383
)
 
(1.77
)%
Below is a summary of the results of operations for the quarters ended March 31, 2018 and 2017.
 
Three months ended
 
March 31,
 
2018
 
2017
 
$ Change
 
% Change
Operating expenses
 
 
 
 
 
 
 
Research and development
$
692,725

 
$
1,151,873

 
$
(459,148
)
 
(39.86
)%
Sales and marketing
12,500

 
18,120

 
(5,620
)
 
(31.02
)%
Depreciation and amortization
30,561

 
32,386

 
(1,825
)
 
(5.64
)%
General and administrative
449,029

 
742,100

 
(293,071
)
 
(39.49
)%
Total operating expenses
$
1,184,815

 
$
1,944,479

 
$
(759,664
)
 
(39.07
)%
Results of Operations for the Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016
Research and development. Research and development expenses decreased by $182,000 for the year ended December 31, 2017, compared to the same period in 2016, primarily due to a decrease in clinical trial costs of $164,000. Additionally, we incurred a $63,000 decrease in lab supplies and parts. We had further decreases in our intellectual property costs of $7,000 and our contract engineering costs of $15,000. These decreases were slightly offset by increased regulatory consulting costs of $44,000 incurred as we worked on our premarket clearance filing in 2017, the annual increase in our license maintenance fee of $10,000, and an increase in animal study costs of $13,000. The overall decrease in research and development costs reflects our transition from pure research to more development related activities.
Sales and marketing. Sales and marketing expenses increased by $57,000 for the year ended December 31, 2017, compared to the year ended December 31, 2016, primarily due to the onboarding of our new Scientific Advisory Board (SAB) and the related cost of meetings with this group during 2017 and the service agreement with our SAB chairman. We include our Scientific Advisory Board fees in sales and marketing because they primarily advise on our product launch and marketing decisions related to dermatologists and prospective patients.
General and administrative. General and administrative expenses decreased by $53,000 for the year ended December 31, 2017, compared to 2016. This decrease was primarily due to a decrease in compensation expenses of $75,000 driven primarily by the decrease in expense related to the vesting of

43


restricted stock and options, as well as a decrease in office expenses of $14,000. This decrease was offset by a $38,000 increase in professional fees driven by the audit that was incurred for the first time in 2017 and the R&D tax study which was undertaken in 2017.
Results of Operations for the Quarter Ended March 31, 2018 Compared to the Quarter Ended March 31, 2017
Research and development. Research and development expenses decreased significantly by $459,000 for the quarter ended March 31, 2018 as compared to the quarter ended March 31, 2017. The decrease is due primarily to reductions in fees to our contract research firm, animal study costs and clinical trial costs of $178,000, $108,000 and $189,000, respectively. These decreases were slightly offset by an increase of $14,000 in our intellectual property costs.
Sales and marketing. Sales and marketing expenses decreased by $6,000 in quarter ended March 31, 2018 as compared to the same period in 2017. This decrease is due primarily to the conference meeting that we hosted for our SAB in the first quarter of 2017 that was not held in the first quarter of 2018.
General and administrative. General and administrative expenses decreased by $293,000 for the quarter ended March 31, 2018 as compared to the quarter ended March 31, 2017. There were decreases in compensation costs and travel costs of $229,000 and $59,000, respectively. The decrease in compensation expense is due primarily to the accrual of bonuses in the first quarter of 2017 that was reversed in 2018. Travel costs were higher in the prior year due to the clinical trials that were being conducted in that period which required significant travel to the trial site.
Liquidity and Capital Resources
Since our inception, we have financed our operations through private placements of common stock, convertible preferred stock, and convertible bridge notes. The following table summarizes our cash and cash equivalents as of March 31, 2018:
 
March 31, 2018
Cash and cash equivalents
$
10,535

We expect to continue to invest in our research and development efforts to support our current initiatives. From April 1, 2018 until June 30, 2018, we raised $3.5 million in financing from the issuance of convertible notes. Based on our current plans, we believe that our existing cash and cash equivalents will be sufficient to satisfy our anticipated cash requirements through September 30, 2018. In August 2018, we expect to issue $360,000 in principal amount of 10% non-convertible promissory notes. We expect that these proceeds will satisfy our anticipated cash requirements through October 2018. I f this Offering is not completed prior to October 1, 2018 and if we require additional working capital, Mr. Klemp, Dr. Capelli, Ms. Bisson and other members of management have collectively agreed to purchase up to an additional $125,000 of notes. Should this Offering not be completed by the end of November 2018, we will be required to raise additional financing, which will occur through the issuance of additional convertible notes. We believe the net proceeds from the minimum offering, together with our cash and cash equivalents, will be sufficient to meet our cash, operational and liquidity requirements for at least 15 months. If we raise the maximum offering and commercialize at a faster pace, we believe the net proceeds from the Offering, together with our cash and cash equivalents, will be sufficient to meet our cash, operational and liquidity requirements for at least 12 months. However, we cannot be certain that our planned levels of expenses will be achieved. If our operating results fail to meet our expectation, we could be required to seek additional funding through private financings or other arrangements. In such event, adequate funds may not be available when needed or may not be available on favorable or commercially acceptable terms, which could have a negative effect on our business and results of operations.

44


Summary of Cash Flows
The following table summarizes our cash flows for the years ended December 31, 2017 and 2016:
 
For the year ended December 31,
 
2017
 
2016
Net cash used in operating activities
$
(6,095,548
)
 
$
(6,004,932
)
Net cash used in investing activities
(66,932
)
 
(299,509
)
Net cash provided by financing activities
6,025,000

 
5,000,000

Net decrease in cash and cash equivalents
$
(137,480
)
 
$
(1,304,441
)
The following table summarizes our cash flows for the quarters ended March 31, 2018 and 2017:
 
For the three months ended March 31,
 
2018
 
2017
Net cash used in operating activities
$
(878,997
)
 
$
(1,162,969
)
Net cash used in investing activities
(3,880
)
 
(3,642
)
Net cash provided by financing activities
875,000

 
2,000,000

Net increase/(decrease) in cash and cash equivalents
$
(7,877
)
 
$
833,389

Cash Flows for the years ended December 31, 2017 and 2016
Operating activities. Net cash used in operating activities was $6.1 million during the year ended December 31, 2017, and consisted of a net loss of $7.5 million, which was offset by a net change in operating assets and liabilities of $669,000 and by non-cash items of $716,000. Non-cash items for the year ended December 31, 2017, consisted of depreciation expense of $130,000 and stock-based compensation of $586,000. The significant items in the change in operating assets and liabilities include an increase in accrued liabilities of $335,000 and an increase in accrued interest-related party of $296,000. The increase in accrued liabilities was driven primarily by the work performed but not yet billed by our animal research firm and salaries which have been deferred with certain members of executive management. The increase in accrued interest-related party is due to the issuance of the related part convertible notes and the calculation of interest thereon.
Net cash used in operating activities was $6.0 million during the year ended December 31, 2016, and consisted of a net loss of $7.3 million, which was offset by a net change in operating assets and liabilities of $500,000 and by non-cash items of $798,000. Non-cash items for the year ended December 31, 2016, consisted of depreciation expense of $83,000 and stock-based compensation expense of $716,000. The cash provided by the change in operating assets and liabilities resulted primarily from an increase of $195,000 in accrued liabilities and an increase in accounts payable of $223,000. The increase in accrued liabilities was driven primarily by the work performed but not yet billed by our contract clinical trial partners, while the increase in accounts payable was driven by the significant invoices received from our contract engineering partners for increased work at the end of 2016.
Investing activities. Net cash used in investing activities was approximately $67,000 for the year ended December 31, 2017, as compared to net cash used in investing activities of $300,000 during the same period in 2016. In 2017, $49,000 was utilized towards the purchase of property and equipment as a result of the investment in our research equipment and office and research facilities, as compared to $252,000 spent similarly in 2016. We invested $18,000 towards the acquisition of intangibles in 2017 while spending $48,000 in 2016.

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Financing activities. Net cash provided by financing activities during the year ended December 31, 2017, of $6.0 million consisted entirely of the proceeds from the issuance of convertible notes with a related party; while net cash provided by financing activities during the year ended December 31, 2016, of $5.0 million consisted of proceeds received from the issuance of convertible preferred stock.
Cash Flows for the quarters ended March 31, 2018 and 2017
Operating activities. Net cash used in operating activities was $897,000 during the quarter ended March 31, 2018, and consisted of a net loss of $1.4 million, which was offset by a net change in operating assets and liabilities of $297,000 and by non-cash items of $176,000. Non-cash items for the quarter ended March 31, 2018, consisted of depreciation expense of $31,000 and stock-based compensation of $145,000. The significant items in the change in operating assets and liabilities include a decrease in accrued liabilities of $346,000 and an increase in accounts payable of $477,000 and accrued interest-related party of $167,000. The decrease in accrued liabilities was driven primarily by the agreed upon forfeiture of accrued management bonuses which had been accrued until first quarter. The increase in accounts payable is due primarily to a significant invoice received from our animal research partner that had not been paid at quarter end. The increase in accrued interest-related party is due to the issuance of the related party convertible notes and the calculation of interest thereon.
Net cash used in operating activities was $1.2 million during the quarter ended March 31, 2017, and consisted of a net loss of $2.0 million, which was offset by a net change in operating assets and liabilities of $629,000 and by non-cash items of $175,000. Non-cash items for the quarter ended March 31, 2017, consisted of depreciation expense of $32,000 and stock-based compensation of $143,000. The significant items in the change in operating assets and liabilities include a decrease in accrued liabilities of $101,000 and an increase in accrued interest-related party of $22,000 and in accounts payable of $712,000. The decrease in accrued liabilities was driven primarily by payment made during the quarter for significant work performed by our contract engineering firms that had been accrued at year end. The increase in accounts payable is due to the increase in work being performed for commercialization, delayed billing that was received from our animal study partner, and significant IP spending during the quarter. The increase in accrued interest-related party is due to the issuance of the related part convertible notes and the calculation of interest thereon.
Investing activities. Net cash used in investing activities was approximately $3,800 for the quarter ended March 31, 2018, as compared to net cash used in investing activities of $3,600 during the same period in 2017. In 2017, $1,200 was utilized towards the purchase of property and equipment as a result of the investment in our research equipment and office and research facilities. We invested $3,900 towards the acquisition of intangibles in 2018 while spending $2,400 in 2017.
Financing activities. Net cash provided by financing activities during the quarter ended March 31, 2018 of $875,000 consisted entirely of the proceeds from the issuance of convertible notes with a related party. Net cash provided by financing activities during the quarter ended March 31, 2017 of $2.0 million, also consisted of proceeds from the issuance of convertible notes with a related party.
Contractual Obligations and Commitments
On April 5, 2012, the Company entered into a Patent and Technology License Agreement with The University of Texas M.D. Anderson Cancer Center (“MD Anderson”). Pursuant to the agreement, the Company obtained a royalty-bearing, worldwide, exclusive license to intellectual property including patent rights related to the patents and technology the Company uses. Under the agreement, Soliton agreed to pay a nonrefundable license documentation fee 30 days after the effective date of the agreement. Additionally, Soliton agreed to pay a nonrefundable annual maintenance fee starting on the third anniversary of the effective date of the agreement, which escalates each anniversary. Additionally, the Company agreed to a running royalty percentage of net sales. The Company also agreed to make certain milestone and sublicensing payments.

46


MD Anderson has the right to terminate the agreement upon advanced notice in the event of a default by Soliton. The agreement will expire upon the expiration of the licensed intellectual property. The rights obtained by the Company pursuant to the agreement are made subject to the rights of the U.S. government to the extent that the technology covered by the licensed intellectual property was developed under a funding agreement between MD Anderson and the U.S. government. All out-of-pocket expenses incurred by MD Anderson in filing, prosecuting and maintaining the licensed patents have been and shall continue to be assumed by the Company.
Lease Commitments
Rent expense was $97,000 for the year ended December 31, 2017, compared to $96,000 for the year ended December 31, 2016. Total rent expense for the three months ended March 31, 2018 and 2017 was $16,793 and $24,158, respectively. On July 15, 2015 we entered into a new lease for permanent office and lab space. The lease has a five-year term but is cancellable after the first three years. Rent expense for non-cancellable operating leases with scheduled rent increases will be recognized on a straight-line basis over the lease term.
Future minimum lease payments under the operating leases as of March 31, 2018, are as follows:
Year Ending December, 31
 
Amount
2018
 
$
75,115

2019
 
103,737

2020
 
108,429

Thereafter
 
36,668

Total future minimum lease payments
 
$
323,949

This table assumes that the lease is not terminated after three years. If the lease were terminated, the amounts in 2019 and thereafter would not be due.
Purchase Commitments
We had no non-cancellable purchase obligations to contract manufacturers and suppliers at March 31, 2018.
Unrecognized Tax Benefits
We have not recorded a provision for income taxes in our financial statements as we have been in a loss position since inception and we cannot be more certain than not that we will be able to recognize the income tax benefit from our NOL carry forward within the next three years.
Off-balance Sheet Arrangements
As of March 31, 2018, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

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BUSINESS
Overview
Soliton, Inc. is a pre-revenue stage medical device company with a novel and proprietary platform technology licensed from The University of Texas M.D. Anderson Cancer Center. Our RAP device uses rapid pulses of designed acoustic shockwaves to dramatically accelerate the removal of tattoos when used in conjunction with existing lasers. Our technology allows a doctor to treat a patient multiple times in a single office visit and significantly reduce the overall time it takes to remove a tattoo. We are based in Houston, Texas, and have a staff of eight that are all actively engaged in bringing this device to the market. We expect to submit a request for premarket clearance to the FDA in the second half of 2018 for our first device and expect to receive clearance to market the device in mid 2019. We are collaborating with a large medical device manufacturer as well as engineers and industrial designers to make refinements to our current working prototype in order to optimize the user experience, improve convenience and incorporate aesthetics consistent with the cosmetic dermatology marketplace. We expect this development work to result in three generations of the RAP device: Generation 1 is the device being presented to the FDA for our premarket clearance in the third quarter of 2018, Generation 2 will incorporate improvements in user experience and convenience and Generation 3 will finalize industrial design and aesthetic improvements. We believe Generation 2 will likely necessitate additional FDA clearance while it is currently unclear whether this will be necessary for Generation 3.
While we believe our technology has many potential applications, we have initially focused on the removal of tattoos, where both animal and human studies have shown promising results. The current standard of care for tattoo removal is to use a Q-switched (pulsed) laser to ablate the tattoo ink particles into pieces small enough for the body’s natural processes to remove them. Unfortunately, this current method is highly inefficient, requiring up to 10 or more office visits to achieve acceptable results. An independent clinical trial has demonstrated that using our RAP device in conjunction with a Q-switched laser has the potential to produce similar results in just 2 to 3 office visits. We believe this “Soliton” method can not only dramatically accelerate tattoo removal, but also has the potential to lower removal cost for patients, while increasing profitability to practitioners, and to reduce the potential for unwanted scarring and ghosting (a lingering silhouette image of the tattoo).
We have conducted animal research that indicates our technology also shows promise in a number of other indications, including reduction of cellulite, improvement in skin laxity and assistance to existing technologies for the reduction of subcutaneous fat. We have recently begun working with a large aesthetics company in trials targeting fat reduction. The initial testing has proved promising resulting in continuing discussions regarding a larger collaborative fat reduction clinical trial. In addition, we are in the early stages of research on new methods for improving the safety and efficacy of laser-based devices. Our initial submission for premarket clearance currently planned for the second half of 2018 is limited solely to the treatment of tattoos and capitalization upon either of these two additional indications would require additional FDA clearances.
We are beginning the commercialization phase of our RAP device and are working with our contract manufacturer, Sanmina Corporation, to complete the design of the device that will be launched to a narrow group of key dermatologists in our initial limited market launch in the second half of 2019. During the initial market launch, we will be further refining our RAP device and investing in building the marketing support for the full national commercial launch which is planned for the second half of 2020.
As the commercialization of the device is underway, we will be conducting both a proof-of-concept and a full FDA trial targeting the cellulite indication. Should we have favorable results and receive FDA clearance for this additional indication, our national launch may be broadened to include cellulite reduction.

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Corporate History
Soliton, Inc. was founded in 2012 by Walter V. Klemp, Executive Chairman, and Christopher Capelli, President and Chief Science Officer.
We licensed the technology that formed the basis for the RAP technology from The University of Texas M.D. Anderson Cancer Center, where Dr. Capelli was the head of the Office of Technology Commercialization and had conceived his invention of the technology. From 2012 through 2015, we engaged in extensive animal studies to understand the nature of tattoo ink inside the body and the impact of the acoustic wave and laser energy on tattoo particles. During this research period, Dr. Capelli resigned from his position at MD Anderson in order to fully devote his time to Soliton.
In parallel to the basic research supporting the ability to accelerate tattoo removal with RAP technology, significant engineering and industrial design work was focused on improving the capability of the RAP technology, developing a product capable of delivering rapidly repeating, high pressure acoustic shockwaves to the skin with the highest efficacy and least potential for pain or collateral tissue damage.
In 2015, we leased 6,597 square feet of combined office, laboratory and warehouse space in Houston, Texas, where we maintain our headquarters and limited research and development activities. The bulk of Soliton’s research and development work is outsourced to specialty research, engineering and fabrication firms.
In 2017, an independent clinical trial involving 32 tattoos demonstrated the ability of the RAP device to significantly accelerate tattoo fading as compared with the current standard of care. Throughout 2017, we worked with our contract design and manufacturing firm, Sanmina Corporation, to develop the design history, risk analysis and independent safety testing, which, combined with our clinical trial results, will form the basis for our submitting a request for premarket clearance to the FDA, which we expect will occur in the third quarter of 2018.
Manufacturing
We currently partner with outsourced engineering and manufacturing companies for the development and commercialization of the RAP device. Our manufacturing partner, Sanmina, is one of the world’s largest medical device manufacturers. We have worked with Sanmina on the development of the device and will partner with their engineering team and other outside contractors as we make changes to the device to insure ease of manufacturing before our initial test launch. Once we have launched the device, our intent is that Sanmina will continue to function as our contract manufacturer.
Our Technologies
Understanding Tattoos
Tattooing involves the placement of pigment into the skin's dermis, the layer of dermal tissue underlying the epidermis. As illustrated in Figure 1, ink particles are typically injected by being placed on the tips of needles that puncture the skin with the ink particles being left behind as the needles are withdrawn. After initial injection, pigment is present throughout and down through the epidermis and upper dermis, in both of which the presence of foreign material activates the immune system's phagocytes to engulf the pigment particles, which by this point are beginning to agglomerate. As healing proceeds, the damaged epidermis flakes away (eliminating surface pigment) while deeper in the skin granulation tissue forms, which is later converted to connective tissue by collagen growth. This mends the upper dermis, where the agglomerated pigment is consumed by and remains trapped within macrophages, ultimately concentrating in a layer just below the dermis/epidermis boundary as the macrophage becomes pigment laden and immobile. Its presence there is stable, but in the long term (decades) the pigment tends to migrate deeper into the dermis, accounting for the degraded detail of old tattoos.

49


Figure 1
UNDERSTANDINGTATTOOES.JPG
As macrophages collect individual ink particles, many are carried away by the circulatory and lymphatic systems and it has been estimated that more than half of the injected ink particles are carried away within the first several months after a tattoo is applied. However, many macrophages over consume ink particles to the point where they can no longer be absorbed into the circulatory and lymphatic systems. These “pigment laden macrophages” thereby form the relatively permanent tattoo that remains.
Current Standard of Care for Tattoo Removal
Tattoo removal has been performed with various tools during the history of tattooing. While tattoos were once considered permanent, it is now possible to remove them, fully or partially, with treatments. Pre-laser tattoo removal methods include dermabrasion, TCA (Trichloroacetic acid, an acid that removes the top layers of skin, reaching as deep as the layer in which the tattoo ink resides), salabrasion (scrubbing the skin with salt), cryosurgery and excision that is sometimes still used along with skin grafts for larger tattoos. Tattoo removal by laser was performed with continuous-wave lasers initially, later with Q-switched (short-pulse) lasers, which became commercially available in the early 1990s, and more recently with Pico-switched lasers that deliver shorter pulse bursts of energy than Q-switched lasers. Today, "laser tattoo removal" usually refers to the non-invasive removal of tattoo pigments using (primarily or most commonly) Q-switched lasers with some increasing use of the Pico-switched lasers.
This “laser tattoo removal” is further described as using lasers to fragment pigment particles, as well as break-apart pigment laden macrophages resulting in the dispersion of the ink particles they contain. The fragmented ink particles are then absorbed by the body, repeating the same natural immune response by macrophages that accounted for the loss of 50% or more of the ink originally injected when the tattoo was applied.
All tattoo pigments have specific light absorption spectra. A tattoo laser must be capable of emitting adequate energy within the given absorption spectrum of the pigment to provide an effective treatment. To specifically target tattoos, laser wavelength and pulse duration must be chosen appropriately. Certain tattoo pigments, such as yellows, greens and fluorescent inks, are more challenging to treat with a Q-switched laser than darker blacks and blues because they have absorption spectra that fall outside or on the edge of the emission spectra available in the device.
There are several types of short-pulse lasers appropriate for tattoo removal, with one differentiating factor being the color spectrum for which it is optimized. Q-switched lasers can provide multiple wavelengths and are used to treat a much broader range of tattoo pigments than previous lasers. The

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more recently developed Pico-switched lasers claim to be more effective on those colors that present the greatest challenge for Q-switched lasers and are used either in conjunction with or replacement of Q-switched lasers. The amount of energy to be delivered is determined prior to each treatment, as well as the spot size and treatment speed. Light is optically scattered in the skin, like automobile headlights in fog. Larger spot sizes slightly increase the effective penetration depth of the laser light, thus enabling more effective targeting of deeper tattoo pigments, and can also help make treatments faster by covering a larger area with each pulse.
Laser tattoo removal can be described as ranging from uncomfortable to quite painful. The pain is often described to be similar to that of hot oil on the skin, or a "slap" from an elastic band. To mitigate pain one common method is to cool the area during treatment with a medical-grade chiller/cooler and to use a topical anesthetic. Pre-treatment options include the application of an anesthetic cream under occlusion for 45 to 90 minutes prior to the laser treatment session. In other cases, anesthesia is administered locally by injections of 1% to 2% lidocaine, sometimes including epinephrine. The addition of epinephrine to the injection must be done with careful consideration as the drug restricts blood flow, and reduced blood flow makes it more difficult for the body to remove the residual heat from the laser.
A common risk for patients treated with lasers for tattoo removal is the appearance of darkening of the normal skin pigmentation (hyperpigmentation). These changes may resolve in 6 to 12 months but may also be permanent. Hyperpigmentation is more commonly related to patients with darker skin tone. Another common risk is scarring as a result of collateral tissue damage caused by the residual heat caused by lasers. The potential for more extreme keloid scarring also increases with darker skin tone. The standard measure for skin tone is called the Fitzpatrick Scale, a scale from I to VI, with I being extremely fair and VI being extremely dark. Generally speaking, great care must be used when treating patients who are Fitzpatrick IV and above to avoid hyperpigmentation and keloid scarring, and as a result, clinicians generally use lower energy settings, which in turn means each treatment is likely to be less effective and more treatments are likely to be needed for satisfactory tattoo removal.
As illustrated in Figure 2, “complete” laser tattoo removal usually involves numerous treatment sessions typically spaced at least six to eight weeks apart. Treating more quickly than six weeks increases the risk of adverse effects and does not necessarily increase the rate of ink absorption. At each session, some, but not all, of the tattoo pigment particles are fragmented, and the body removes the smallest fragments over the course of several weeks. The result is that the tattoo is lightened over time. Remaining large agglomerations of tattoo pigment are then targeted at subsequent treatment sessions, causing further lightening. The number of sessions and spacing between treatments depends on various parameters, including the area of the body treated and skin color. Tattoos located on the extremities, such as the ankle, require even more treatments. As tattoos fade, clinicians may recommend that patients wait many months between treatments to facilitate fragmented ink particle absorption and minimize unwanted side effects.

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Figure 2
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We believe the amount of time or the number of treatments required to “completely” remove a tattoo is a critical hurdle to tattoo owner adoption of the current laser tattoo removal procedure. The Wall Street Journal reported a research study conducted at a laser surgery center in Milan, Italy, from 1995 through 2010. There were 352 people in the study, of which 201 were men, with a median age of 30 years old. Overall, the study found about 47% of people had their tattoos successfully removed after 10 laser treatments and it took 15 treatments to remove tattoos from 75% of patients. Black and red pigments in tattoos were most easily removed. The researchers also found that the amount of time between Q-switched laser treatment sessions was important to the technique's success. Treatment intervals of eight weeks or less were found to be less effective for tattoo removal. Patient frustration and dissatisfaction with removal success and with the time to achieve success results in a significant number of patients discontinuing treatments, or “dropping out.”
A more recent study of 237 patients treated with Q-switched lasers showed very similar results, which are plotted below. As can be seen on the graph in Figure 3, only about half of the patients with black or red tattoos achieved complete removal after 10 treatments, which if spaced only six weeks apart will still require over a year’s worth of time-consuming and uncomfortable office visits.
Many studies accepted by the FDA deem 75% or greater removal to be a "successful removal," while others simply do not define what a successful removal is, using the word “complete” without clarification. Many successful removals do not remove all trace of the original tattoo, but instead reduce the visible tattoo to the point where it is difficult to see with the naked eye. Generally speaking, we consider a removal procedure to be complete when 75% or more of the visible ink is gone and the patient and the physician are satisfied that whatever residual ink particles remain are likely to be absorbed by the body through natural immune, healing and skin remodeling processes.

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Figure 3
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How the RAP Device Makes Laser Tattoo Removal More Effective
Our marketing research has shown that, for most patients interested in tattoo removal, the poor efficacy of the standard of care presents too much of a barrier for them to move forward with tattoo removal. Our laboratory research into the problem of tattoo removal has led us to the conclusion that laser shielding is a major cause of this poor efficacy. This laser shielding can be broken down into two subtypes: Particle Shielding and Vacuole Shielding, as depicted below in Figure 4.
Figure 4
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Particle Shielding
Lasers are essentially “line of sight” dependent, meaning the laser light pulses can only ablate particles that are directly in their path. Because tattoo ink particles tend to aggregate into clusters within the skin, the particles at the top of the clusters (closest to the surface of the skin) effectively shield the rest of the particles from the laser energy (particle shielding). This leads to two conclusions: each laser pass only affects a small percentage of ink particles, explaining why multiple passes are important, and, if we can spread these particles out, each subsequent laser pass has an opportunity to hit more targets.
Much of our research utilized tattooed pig skin, because pig skin is considered the most like human skin when it comes to dermatology treatments. Biopsies from pigs with mature tattoos allow us to see the effect the RAP device has on pigment particle agglomerations. A microscopic histological comparison in Figure 5 shows an untreated tattoo on the left with intact tightly formed (macrophage) agglomerations of tattoo ink and a similar tattoo on the right treated with the RAP device. The result of the RAP device treatment is a noticeable destruction of the macrophages and dispersal of the pigment particles. We have effectively created more targets for the laser to hit.
Figure 5
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Vacuole Shielding
A second, and more limiting problem arises the moment that the laser light contacts ink particles within its path. Almost instantly, a plasma event occurs that quickly results in the formation of steam vacuoles. These vacuoles appear white in color and result in “optical scattering” that immediately blocks any additional laser energy from reaching ink particles below the vacuoles. Until those vacuoles are gone, subsequent laser passes will have very little effect. In the picture shown below in Figure 6, you can see the emergence of a white frost or crust that forms immediately with each pulse of the laser.

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Figure 6
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Several efforts have been made to address these vacuole formations in an attempt to facilitate multiple laser passes in a single office visit, but they have failed to gain traction for lack of sufficient improvement in results or due to their relative impracticality in practice.
A relatively new treatment protocol has been studied, referred to as the “R20 method.” The “R” stands for Repeating, while the “20” represents 20 minutes. The R20 Method suggests administering a single pass of the laser every 20 minutes, with up to 4 passes, providing effectively 4 removal treatments during one office visit. The 20-minute pause between passes of the laser allows the epidermal or surface vacuoles to dissipate, presumably increasing the ability of the laser to reach more pigment with each subsequent pass.
The R20 method has not been heavily adopted by the medical community as the “wait” time between treatments presents two hurdles: the recommended 20-minute wait between treatments in practice grows to an hour or more between treatments as the physician moves to treat other patients during the “wait,” and keeping the patient properly anesthetized for the entire treatment session becomes a challenge. While the level of improved results has not justified this cumbersome routine, data varies as to the number of R20 treatment sessions required to successfully remove a tattoo; most seem to center on 6-8 laser passes, or 2 treatment sessions (likely separated by at least 8 weeks).
A company called OnLight (recently acquired by Merz Pharma) introduced a transparent patch infused with a clear chemical called Perfluorodecalin (PFD), which they claimed was capable of reducing the formation of surface vacuoles, thereby enabling multiple laser passes in succession. And, while a study has shown that the PFD patch appears to enable 3 to 4 laser passes in a single office visit (without long interruptions between treatments), any improvement in tattoo fading only occurred in about 2 out of 3 of patients and, in most of those patients, the degree of improvement was only marginal.
Data from our research presented at the American Society for Laser Medicine & Surgery in April 2017 offers an explanation. A histology image (Figure 7) of a biopsy taken 2 hours after laser treatment reveal that, while the surface vacuoles have dissipated, deeper “dermal vacuoles” persist and continue to shield the remaining particles from subsequent laser passes. And, our studies have shown that these deep dermal vacuoles persist for up to 48 hours. The histology image in Figure 7 shows the presence of these vacuoles 2 hours after laser treatment, well beyond what the R20 method could hope to avoid, and importantly, below the reach of Perfluorodecalin in the PFD patch, which cannot penetrate below the epidermis and into the dermis where these vacuoles occur.

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Figure 7
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However, if you apply the RAP device immediately following a laser treatment (Figure 8), histology reveals that these deep dermal vacuoles are dispersed, allowing lasers to again have line of sight access to pigment particles.
Figure 8
VACOULEDISPERSIONPOSTAWD.JPG

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The Rapid Acoustic Pulse (RAP) Device
Description of Technology
With traditional laser treatment tattoo removal, efficacy is limited by particle shielding resulting from the natural clustering or agglomeration of pigment particles and the formation of laser-induced dermal vacuoles, both of which block access of laser energy to the particles being targeted (see Particle Shielding and Vacuole Shielding above). Importantly, the dermal vacuoles inhibit any additional passes of the laser from effectively reaching the remaining tattoo pigment agglomerations due to optical scattering. The shape, frequency and repetition rate of the RAP device’s acoustic shockwave pulses are designed to increase dispersion of ink particles and to diffuse and disperse both superficial and dermal vacuoles while minimizing damage to adjacent non-pigmented tissue as well as pain perceived by the patient. With RAP dermal clearing, loss of laser efficacy due to optical scattering is thereby minimized. In addition, we believe more ink is exposed to each successive laser pass due to increase particle dispersion. As a result, effective, fast, multi-pass laser treatment of tattoo sites in a single office session may be realized.
Subject to FDA Clearance, the RAP device is initially being commercialized to be used in conjunction with the 1064 nm Q-switched laser to enable effective multiple pass laser treatments in a single office session to accelerate removal of black tattoos on the arms, legs and torso in Fitzpatrick Skin Type I-III individuals. Our animal testing suggests that the RAP device is as effective on other tattoo ink colors using alternate wavelength lasers and analytical modeling supports the expectation that RAP should also work well with Pico-switched lasers. Use of the device on other colors and with a Pico-switched laser would be considered an off-label use until further FDA clearance is achieved. The RAP device uses repeated, rapidly rising acoustic waves to both disrupt pigment laden cells and provide dermal clearing of both superficial and dermal vacuoles generated during the laser process. The clearing of these vacuoles allows for multiple laser treatments within one office visit and animal testing data suggests that remaining agglomerations of ink particles will be dispersed providing greater access for subsequent laser passes.
The RAP device uses electrohydraulics to generate the designed acoustic shockwaves at a rate of up to 100 per second to effectively disperse ink particles and superficial and dermal vacuoles. The RAP device for commercial launch is composed of three parts: a console, a hand piece and a disposable cartridge. The console houses a pulse power system used to provide high voltage power to a pair of electrodes housed within the cartridge. Additionally, the console contains a fluid management system that circulates saline through the cartridge. The cartridge is snapped in and out of the hand piece for easy replacement and forms the basis for a “razor and blade” revenue model providing recurring revenue for Soliton.

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Note: Figure 9 is an artist’s depiction of the proposed commercial version, current prototypes differ in appearance.
Figure 9
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Our RAP device generates high-energy designed acoustic shockwaves when electricity is applied to the electrodes immersed in the circulating saline contained in the cartridge enclosure. An electrical arc with a very short duration of 100 to 200 nanoseconds is formed within the saline between the electrodes. When this arc is formed, a small amount of water is vaporized between the electrodes creating a nearly instantaneous expansion and collapse of a plasma bubble. This creates a shockwave that propagates outward through the saline, most of which is reflected off a curved surface surrounding the electrodes designed to form a shockwave front that passes through the cartridge’s acoustically transparent window. This window is placed against the patient’s skin above the tattoo to be removed allowing the acoustic energy to penetrate to a depth of 1 to 2 mm, which corresponds with the typical depth of tattoo pigment. These shockwaves are generated at a rate of up to 100 times per second.
The high repetition rate of Soliton shockwaves is a key component of our patent-pending technology. Specifically, a single shockwave from our RAP device is delivering 1 to 6 MPa (Megapascals) of acoustic pressure. Although this is a significant level of pressure, a single shockwave will pass through a typical skin cell with relatively little disruption. This is because the general elasticity of the cell is capable of deforming slightly to absorb that single impact and then returning to its original shape. The rate at which the cell returns to its normal shape is referred to as its “relaxation rate,” and this rate is well understood in the field of biomechanics. By increasing the repetition rate of Soliton shockwaves above approximately 25 times per second, we begin to exceed the relaxation rate of skin cells, which triggers their natural “viscoelastic” property and causes them to stiffen. In that stiffened state, the cells are quite vulnerable and shear waves created by the interaction of subsequent shockwaves with the tattoo ink particles in macrophages is now enough to rupture the cell membranes and disperse the particles.
The shockwaves generated by our RAP device are designed and proprietary, comprised of high acoustic energy delivered with a very short rise time. Very high electrical energy (approximately 3000 volts at 3000 amps) is discharged in the treatment head with nanosecond precision to minimize unwanted acoustic frequencies (which helps minimize pain and collateral tissue damage and extend electrode life). A proprietary custom-shaped reflector designed through finite element computer simulation technology directs the bulk of the acoustic energy to the patient’s skin in uniform waves that are nearly planar (perpendicular) to the surface of the skin but slightly diverging in order to deliver maximum acoustic pressure to the depth of a typical tattoo, but then rapidly dissipate beyond that distance. The pressure mapping diagram in Figure 10 provides an example of how our reflector design controls energy density at varying treatment depths. The brighter yellow colors indicate maximum pressure at tattoo ink depth (top layer) and the darker red colors indicate lower pressures deeper in the skin (lower levels).

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Figure 10
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While our RAP device designed acoustic shockwaves are measured in the ultrasound spectrum, they should not be confused with typical therapeutic ultrasound that is focused and creates significant heat through cavitation (bubble formation) within the skin. In contrast Soliton designed acoustic shockwaves are deliberately unfocused and produce little to no heat within the skin. The specific frequency and rise time of Soliton shockwaves allow them to pass harmlessly through normal skin cells but when encountering a significant mass differential like that of tattoo ink particles, they create shear waves that break apart macrophage structures containing the particles and dissipate dermal vacuoles resulting from laser treatment.
Figure 11
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Given the high level of energy involved with each electrical discharge and the high repetition rate (up to 100 times per second), the tungsten electrodes in the treatment head have a limited life, hence the need for a replaceable cartridge. The cartridge designed for tattoo removal (Figure 11) is capable of delivering as many as 120,000 shockwaves before replacement, which we believe is enough to treat an average sized tattoo throughout one office visit. This length of service life is only possible through the use of a proprietary drive mechanism for feeding electrode material into the electrical arc without changing the focal point established by the cartridge’s reflector.
In total, we have 8 patent families pending relating to the technologies that makes our RAP device and certain variations possible, as well as various applications of our RAP device, with still more potential patent applications under way. As of March 31, 2018, our patent portfolio is comprised of 5 pending U.S. patent applications, 10 granted and 28 pending foreign counterpart patent applications, and 4 pending PCT patent applications, each of which we either own directly or we are the exclusive licensee.

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Market for RAP Tattoo Removal
Over the past two decades or so, the tattoo has become an attractive, artistic expression among many people. The popularity of tattoos continues to rise as they become more accepted in popular culture. People 18-29 years old have the most tattoos, according to a 2010 study by the Pew Research Center with 38% of that age group having at least one. Nearly half of this group with tattoos have between two and five tattoos, while 18 % have six or more. Among other generations, the following indicates the percentages by age with at least one tattoo:
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30-45 year-olds: 32%
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46-64 year-olds: 15%
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> 65 years old: 6%
Currently Americans spend $3.4 billion per year on tattoos, and as social acceptance of body art steadily increases spending on tattoos will likely continue to grow. With the tremendous growth in the number of people getting tattoos, there is a corresponding increase in demand for tattoo removal. Estimates of the size of the tattoo removal market vary widely. One independent source estimates that, globally, the market for tattoo removal is expected to grow at the rate of about 15.6% from 2017 to 2023 and that the global market for tattoo removal is expected to reach several billion in revenue by 2023. Our own research and analysis suggests that regardless of its potential, the current tattoo removal market is significantly underdeveloped.
Tattoo removal is a process of removing a permanent tattoo from the skin. The removal process is undertaken by using laser, surgery, creams, and various other processes. The use of laser techniques for tattoo removal is the predominant tattoo removal process with 66% of the market. Different type of lasers such as Q-switched ruby laser, Q-Switched Nd:YAG laser, and Q-Switched Alexandrite laser are used to remove black as well as colored tattoos. The other options available for tattoo removal include surgical excision, tattoo removal creams, dermabrasion, plastic surgery, and others. Creams are less painful than laser and surgical procedures to remove tattoos, but the use is time consuming and inefficient.
Laser tattoo removal is an elective, private pay procedure performed on an outpatient basis. The procedure is primarily performed at laser centers and dermatology clinics with laser centers performing 60.9% of the procedures in 2016. Because the cost of tattoo removal is many times the cost of tattoo application, the procedure only attracts those who can pay. Laser tattoo removal practitioners charge a premium for their time. Each treatment is generally priced from $100 to $500, and most patients require 10 or more treatments, depending on the size and complexity of the tattoo, to achieve comprehensive removal. Because tattoo removal is a painful, time-consuming and expensive process, patients need to be very motivated for removal. Here are some of the most common reasons people seek tattoo removal:
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Tattoo includes the name of a former spouse or significant other
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Limited clothing options to hide tattoo
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Do not want their children to see it
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Curtails job prospects
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Poor quality tattoo
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Tattoo has faded
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The importance of getting the tattoo has lessened

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We commissioned our own survey of individuals with one or more tattoos in an effort to better understand their interest in, motivations for and concerns about tattoo removal. This survey was designed to be representative of the US population with 95% confidence (+/- 3%) and indicated that 63% of individuals with tattoos were interested in some form of removal. Importantly, a majority of these individuals didn’t regret having tattoos, they simply wanted to make a change. From this observation we conclude that the total available market in the US alone could be calculated as 63% of the estimated 70 million US adults with one or more tattoos (29% of the 2016 US population), or 44 million potential customers.
In this survey we also asked what barriers prevented these individuals from taking action to have a tattoo removed. The primary reasons were cost, pain and efficacy (time required for removal). With this in mind, we believe the dramatic reduction in the number of office visits required for tattoo removal using the Soliton method may be sufficient to motivate many individuals who have been considering tattoo removal to finally take action, which we, in turn believe may result in a material acceleration of the current rate of growth for tattoo removal.
Clinical Trial Results
Our RAP device has received institutional review board (IRB) approval as a non-significant risk device. Subsequent to receiving this status, we have conducted several human clinical trials to study the use of the RAP device to accelerate tattoo fading.
Human Correlation Trial - 1 (HCT-1)
An initial human clinical trial was conducted to demonstrate the dispersion of tattoo pigment. In the first part of the HCT-1 study, three patients with black tattoos in various locations (lower back, lower leg and shoulder) were selected. Two tattoo sites on each patient were treated with a single pass of the RAP device. One site was treated and then immediately biopsied and the other was treated with a biopsy taken 24 hours post treatment. All biopsies in all patients demonstrated pigment dispersion from macrophages. As seen in Figure 12, the images present the tattoo site untreated (left image) and 24 hours post-treatment with the RAP device (right image). Note the significant dispersion of the tattoo ink pigment at 24 hours post treatment in the right image.
Figure 12
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In the second part of the HCT-1 study, six patients were selected for a single treatment session to demonstrate tattoo fading. For each patient, a single black tattoo was selected and divided into three adjacent areas. Two of the areas were treated (i.e. test areas) and the third area remained untreated as a control for comparison to the test areas. One test area was treated with a single laser treatment (Laser Only). The other test area was treated with multiple laser passes, with each laser pass followed by a

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treatment with the RAP device (Laser+RAP). After each laser pass, the laser was adjusted to increase the laser fluence.
Dermal vacuolization was immediately identified in all tattoos treated with a laser. Minimal dermal clearing was detected 5 minutes post treatment in the Laser Only treatment areas. Significant dermal clearing was immediately identified in the Laser+RAP treatment areas. The Laser+RAP treated test area, demonstrated accelerated tattoo fading at 24 hours post treatment when compared to the non-treated tattoo test site (area to the right of the blue line) and to tattoos treated with Laser Only.
The trial also offered important conclusions to the treatment therapy. The importance of preventing thermal damage to the tattoo site resulting from multiple laser passes is critical and concluding avoiding the use of epinephrine, maintaining the hydrogel dressing throughout the procedure, and increasing the laser fluence and spot size with each laser pass (titrating the increases by listing for a treatment ‘snap’ during treatment or by watching for new vacuole formation).
Human Correlation Trial- 2 (HCT-2)
To further demonstrate accelerated tattoo fading in a single office session when the RAP device is used as an accessory to the 1064 nm Q-switched laser, the multi-pass method was again tested in humans in a pivotal clinical trial (HCT-2). The RAP device was evaluated in a single-center (Skin Care Physicians, Chestnut Hill, MA), prospective study.
A total of 32 black tattoos, from 22 participants, were divided into three zones. Two zones in each tattoo, separated by a control zone, were treated with either multiple laser passes, each separated by RAP device applications (“Laser + RAP”) or a single-pass laser treatment (“Laser Only”). The treatment sites were assessed for the number of laser passes and adverse events immediately following the treatment as well as at 6 weeks and 12 weeks following the treatment session. The treatment sites were also assessed for the degree of fading at 12 weeks post treatment using blinded review.
The HCT-2 study confirmed the feasibility of using the RAP device to enable safe, multi-pass laser treatments in a single session. The observed mean number of laser passes in the Laser + RAP treated participants was 4.16. Studies of the PFD Patch demonstrated an ability to achieve a mean of 3.7 passes with use of the patch.  The average number of deliverable passes in a single treatment session of the RAP device, as an alternative accessory device instead of the PFD Patch, was determined to be at least comparable to the average number of deliverable passes in a single treatment session of the PFD Patch.  Based on these results, the primary objective of this study was considered met.
The secondary objective was to assess the degree of tattoo fading from a single treatment session for both the Laser + RAP treatment and the Laser Only treatment.  Assessment by blinded reviewers at 12 weeks indicated that there was accelerated fading for Laser + RAP in comparison to Laser Only.  Specifically, 72% of the tattoos treated with the Laser + RAP had a good, excellent or complete response (>25% fading) compared to 40% of the tattoos treated with Laser Only. Furthermore, 41% of the tattoos treated with the Laser + RAP had an excellent or complete response (≥50% fading) compared to 12% of the tattoos treated with Laser Only. Finally, 19% of the tattoos treated with the Laser + RAP had a complete response (>75% fading) compared to 3% of the tattoos treated with Laser Only.
As an additional comparison, assessment of tattoo fading at 12 weeks was performed by the treating physicians (non-blinded reviewers). The non-blinded reviewers scored 81% of the tattoos treated with the Laser + RAP as having a good, excellent, or complete response (>25% fading) compared to 16% of the tattoos treated with Laser Only. On average, the tattoos treated with the Laser + RAP had 49% fading in a single treatment session, as compared with only 16% for the tattoos treated with Laser Only. The difference between the blinded and non-blinded reviewers in terms of fading scores is believed to be a result of the bon-blinded reviewers’ direct examination the tattoos at 12 weeks compared to the blinded

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reviewers’ use of photographs only. However, the differences were not statistically significant using chi-square analysis.
A representative cross-polarized images of one participant’s tattoo, before treatment and 12 weeks after treatment, are shown in Figure 13. In these images, the tattoo zone marked with ‘A’ was treated with Laser Only and the tattoo zone marked with ‘B’ was treated with Laser+RAP. As can be seen with these images, after 12 weeks, the tattoo zone treated with Laser+RAP demonstrated a significant degree of fading in comparison with the tattoo zone treated with Laser Only.
The conclusion of the HCT-2 study was that the RAP device, as an accessory to the 1064 nm Q-switched laser, safely enables multiple laser treatments in a single office visit. More importantly, the RAP device enables accelerated tattoo fading in a single treatment session.
Figure 13
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Human Correlation Trial - 3 (HCT-3)
HCT-3 built upon HCT-2 by bringing back 10 HCT-2 subjects (12 tattoos) for up to an additional two separate treatment sessions. The first session performed as part of the HCT-2 multi-pass laser treatment study was followed by a second session 20 weeks after the first session. The third and final session (where needed) was performed 28 weeks after the first session (8 weeks after the second session). As described for the HCT-2 study above, each test site was treated with either Laser + RAP or Laser Only. The test sites were assessed for degree of fading at 40 weeks following the first session (12 weeks following the third session).
The Laser + RAP in HCT-3 again outperformed Laser Only, with subjects showing an average of 80% fading after only two visits vs. 44% for Laser Only. After 3 “Soliton” treatments, 100% of the treated tattoos had a ‘Complete’ (76-100% faded) response; in comparison, only 16% of the tattoos treated with the Laser Only had a ‘Complete’ response.
The same representative image from Figure 13 is shown in Figure 14 before treatment and a new image taken after three treatment sessions is shown below it. Hence, the top photo in Figure 15 is taken

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before any treatments began and the bottom photo is taken at week 40--12 weeks post the third treatment. In the top photo, the section marked with an "A" was treated with Laser Only and the section marked with "B" was treated with Laser + RAP. As can be seen with these images, after 40 weeks, the tattoo zone treated with Laser + RAP demonstrated a significant degree of fading in comparison with the tattoo zone treated with Laser Only.
The conclusion from HCT-3 was that RAP, used as an accessory to the 1064 nm Q-Switched laser, enabled accelerated tattoo fading in just three office visits.
Figure 14
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Research and Development
While we are initially targeting the tattoo removal market, our technology also shows promise in a number of other indications. We have conducted animal studies and some limited human trials in some of these other indications as discussed below. In addition, we are in the early research stages with a method for improving the safety and efficacy of lasers in general.
Reduction of Cellulite and Skin Laxity
Cellulite is a condition that primarily affects women, usually occurring in the buttock and thigh area, where the skin has a dimpled or lumpy appearance. Between 80 and 90 percent of women will probably experience cellulite sometime in their lives. There is a very large global market for cellulite treatment. In the U.S. alone, women spend roughly one billion dollars a year on cellulite therapy, with approximately 85% of U.S. women reporting concerns about cellulite. There are numerous treatments available, but the effect is mostly temporary. A 2015 review of a variety of studies into the effectiveness of different techniques indicated that either the procedures did not work, or the research methodology was flawed. No non-invasive treatment appears to have yet been confirmed by scientific research. The American Academy of Dermatology (AAD) reviewed a number of surgical techniques that may be successful in reducing the appearance of cellulite by breaking up the bands of connective tissue under the skin's

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surface. As a non-invasive technique, if the RAP device is capable of reducing the appearance of cellulite, we believe this could become an important new indication for our technology.
Cellulite is characterized by relief alterations (lumpiness) of the skin surface, which give the skin an orange peel, cottage cheese, or mattress-like appearance. One cause for cellulite is believed to be inadequate collagen in the dermis leading to a weak dermal extracellular matrix (ECM).  Excess subcutaneous fat can then protrude into the weak pockets within the ECM resulting in a mottled or lumpy appearance to the skin. This same weakening of the ECM can also be associated with skin laxity whereby the skin appears loose, wrinkled and creped.
We believe it may be possible to reduce the appearance of cellulite and skin laxity by strengthening the ECM. Existing independent research suggests this can be accomplished by inducing the fibroblasts in the skin to produce more collagen.  One approach to inducing collagen production is to apply an external force to pre-stress fibroblasts by applying external pulsed acoustic shockwaves at high repetition rates. Given the viscoelastic nature of fibroblasts, we believe external acoustic waves applied at repetition rates faster than the relaxation rate of the fibroblasts will cause the cells to stiffen and become “pre-stressed.” In this pre-stressed state, fibroblasts become more susceptible to external forces and if the external forces are great enough, we believe the fibroblast will then produce collagen.
Soliton’s RAP device produces 1-6 MPA designed acoustic shockwaves at pulse rates between 50 and 100 Hz. We believe this high pulse rate enables the ‘pre-stressing’ of the fibroblasts so that they are sensitized to the external forces from the acoustic shockwaves. As an initial proof-of-concept we have demonstrated in a pig model that our RAP device is capable of consistently forming new collagen within the ECM of the dermis.  As seen in Figure 15, the histological image on the right demonstrates the stimulation of new collagen growth in pig skin after a single 2-minute application of the RAP device (i.e., increase in blue staining) in comparison to the histological image on the left from non-treated skin.
Figure 15
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Another of our animal studies shows the apparent potential of RAP device treatments to strengthen the ECM in pig skin, which independent research has suggested may lead to increased skin stiffness and uniformity in humans. As shown in Figure 16, the septa in the adipose layer demonstrate increase thickening over time with repeat RAP treatments. The histology image on the right was after a single RAP

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treatment. The histology image on the far left was after multiple RAP treatments. We believe the increase in septa thickening should lead to increased skin stiffness and uniformity.
Figure 16
BUSINESSA8.JPG
We intend to conduct our first human trial in the cellulite indication during 2018.
We also believe this same mechanism of action may play a role in reducing skin laxity, adding yet another important potential new indication for the RAP device.
Reduction of Subcutaneous Fat
The aesthetic device market for subcutaneous fat reduction is dominated by a technology branded as CoolSculpting®, which is owned by Allergan. The CoolSculpting technology centers around a process Allergan calls Cryolipolysis® and utilizes cooling plates against which a patient’s skin is held by vacuum. The objective of this method is to cause the death of subcutaneous fat cells, which are then absorbed by the body over a period of 90 days, resulting in an overall reduction in fat volume. While this method has enjoyed market success, its efficacy has been limited by the relative percentage of fat reduction it can achieve (about 20% to 25% as reported by Allergan) and the uniformity or smoothness of the resulting skin area after treatment.
Following the success of the CoolSculpting procedure, competing methods of reducing subcutaneous fat have also been introduced. One of the more successful competing technologies has been a procedure called SculpSure® from the Cynosure division of Hologic, a leading laser manufacturer. SculpSure relies on the use of heat generated from laser energy rather than Cryolipolysis.
In vitro and in vivo testing of our RAP device suggests that Soliton shockwaves may have an effect on subcutaneous fat cells that may be beneficial to the current method of subcutaneous fat reduction. In light of this, we have entered into a series of clinical trials with a large global aesthetics company to test whether or not this is the case in human subjects. These trials are early stage and intended as a proof-of-concept to determine if expanded human trials are warranted.
Improved Laser Technology
In addition, we are in the early research stages with a method for improving the safety and efficacy of lasers in general. The goal is to use these improved lasers, in combination with the RAP device, to achieve complete tattoo removal in 1-2 sessions. The underlying technology concept for improving lasers is still early in the research phase and subject to further proof-of-concept testing before we can assess its potential.

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Patents and Proprietary Technology
To establish and protect our proprietary technologies and products, we rely on a combination of patent, copyright, trademark, and trade-secret laws, as well as confidentiality provisions in our contracts. We have implemented a patent strategy designed to protect our technology and facilitate commercialization of our current and future products. In total, we have 8 patent families pending relating to the technologies that make our RAP device and certain variations possible, as well as various applications of our RAP device, with still more potential patent applications under way. As of March 31, 2018, our patent portfolio is comprised of 5 pending U.S. patent applications, 10 granted and 28 pending foreign counterpart patent applications, and 4 pending PCT patent applications, each of which we either own directly or we are the exclusive licensee. Our intellectual property portfolio for our core RAP technology was built through the combination of licensing patents from third parties and the issuance of filing of new patent applications by us as the result of our ongoing development activities. Many of our pending patents were exclusively licensed from MD Anderson and generally relate to early variations of our core technology relating to our RAP platform. In general, patents have a term of 20 years from the application filing date or earliest claimed priority date.
We also rely on trade secrets, technical know-how, contractual arrangements, and continuing innovation to protect our intellectual property and maintain our competitive position. We have a policy to enter into confidentiality agreements with third parties, employees, and consultants. We also have a policy that our employees and consultants sign agreements requiring that they assign to us their interests in intellectual property such as patents and copyrights arising from their work for us. It is our policy that all employees sign an agreement not to compete unfairly with us during their employment and upon termination of their employment through the misuse of confidential information, soliciting employees, and soliciting customers.
We have registered “Soliton” as a trademark in the United States, “soliton.com” is a URL registered in the name of Soliton, Inc. and our logo and product designs are protected by copyright. Additionally, we have also registered the “Soliton” trademark in a number of other important other foreign countries. These trademarks have been granted in the United States and four other countries and are still pending in seven countries.
MD Anderson License Agreement
On April 5, 2012, the Company entered into a Patent and Technology License Agreement with The University of Texas M.D. Anderson Cancer Center (“MD Anderson”). Pursuant to the agreement, the Company obtained a royalty-bearing, worldwide, exclusive license to intellectual property including patent rights related to the patents and technology the Company uses. Under the agreement, Soliton agreed to pay a nonrefundable license documentation fee 30 days after the effective date of the agreement. Additionally, Soliton agreed to pay a nonrefundable annual maintenance fee starting on the third anniversary of the effective date of the agreement, which escalates each anniversary. Additionally, the Company agreed to a running royalty percentage of net sales. The Company also agreed to make certain milestone and sublicensing payments.
MD Anderson has the right to terminate the agreement upon advanced notice in the event of a default by Soliton. The agreement will expire upon the expiration of the licensed intellectual property. The rights obtained by the Company pursuant to the agreement are made subject to the rights of the U.S. government to the extent that the technology covered by the licensed intellectual property was developed under a funding agreement between MD Anderson and the U.S. government. To the extent that is the case, our license agreement with, and the intellectual property rights we have licensed from, MD Anderson are subject to such a funding agreement and any superior rights that the U.S. government may have with respect to the licensed intellectual property. Therefore, there is a risk that the intellectual property rights we have licensed from MD Anderson may be non-exclusive or void if a funding agreement related to the licensed technology between MD Anderson and the U.S. government does exist and

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depending on the terms of such an agreement. Notwithstanding the foregoing, we do not believe our RAP technology received any federal funding. All out-of-pocket expenses incurred by MD Anderson in filing, prosecuting and maintaining the licensed patents have been and shall continue to be assumed by the Company.
Properties
The company’s corporate and executive offices are in located in a leased facility in Houston, Texas. The current lease terminates in 2021. The company believes that our facilities are sufficient to meet the current needs and that suitable space will be available as and when needed. Soliton does not own any real property.
Legal Proceedings
In the normal course of business, from time-to-time, we may be subject to claims in legal proceedings. However, we are currently not a party to any pending legal actions. Notwithstanding, legal proceedings are subject-to inherent uncertainties, and an unfavorable outcome in future proceedings could include monetary damages, and in such event, could result in a material adverse impact on our business, financial position, results of operations, or cash flows.
Employees
As of July 5, 2018, Soliton had six full-time employees and two part-time employees, and accordingly, a high percentage of the work performed for our development projects is outsourced to qualified independent contractors.
Government Regulation
Our product candidate and operations are subject to extensive and rigorous regulation by the U.S. Food and Drug Administration, or FDA, under the Federal Food, Drug, and Cosmetic Act, or FDCA, and it’s implementing regulations, guidance documentation, and standards. Our RAP device is regulated by the FDA as a medical device. The FDA regulates the design, development, research, testing, manufacturing, safety, labeling, storage, recordkeeping, promotion, distribution, sale and advertising of medical devices in the United States to ensure that medical products distributed domestically are safe and effective for their intended uses. The FDA also regulates the export of medical devices manufactured in the United States to international markets. Any violations of these laws and regulations could result in a material adverse effect on our business, financial condition and results of operations. In addition, if there is a change in law, regulation or judicial interpretation, we may be required to change our business practices, which could have a material adverse effect on our business, financial condition and results of operations.
Unless an exemption applies, before we can commercially distribute medical devices in the United States, we must obtain, depending on the type of device, either prior premarket clearance or premarket approval, or PMA, from the FDA. The FDA classifies medical devices into one of three classes:
•
Class I devices, which are subject to only general controls (e.g., labeling, medical devices reporting, and prohibitions against adulteration and misbranding) and, in some cases, to the premarket clearance requirements;
•
Class II devices, generally requiring premarket clearance before they may be commercially marketed in the United States; and

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•
Class III devices, consisting of devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, or devices deemed not substantially equivalent to a predicate device, generally requiring submission of a PMA supported by clinical trial data.
Our current product candidates, including the RAP device, are all class II devices and will require submission of a premarket notification.
510(k) Clearance Pathway 
When a 510(k) clearance is required, we must submit a premarket notification demonstrating that our proposed device is substantially equivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for the submission of PMAs. By regulation, the FDA is required to clear or deny a 510(k) premarket notification within 90 days of submission of the application. As a practical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantial equivalence.
Any modification to a 510(k)-cleared device that would constitute a major change in its intended use, or any change that could significantly affect the safety or effectiveness of the device, requires a new 510(k) clearance and may even, in some circumstances, require a PMA, if the change raises complex or novel scientific issues or the product has a new intended use. The FDA requires every manufacturer to make the determination regarding the need for a new 510(k) submission in the first instance, but the FDA may review any manufacturer's decision.
Premarket Approval (PMA) Pathway
A PMA must be submitted to the FDA if the device cannot be cleared through the 510(k) process. A PMA must be supported by extensive data, including but not limited to, technical, preclinical, clinical trials, manufacturing and labeling to demonstrate to the FDA's satisfaction the safety and effectiveness of the device for its intended use. During the review period, the FDA will typically request additional information or clarification of the information already provided. Also, an advisory panel of experts from outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDA may or may not accept the panel's recommendation. In addition, the FDA will generally conduct a pre-approval inspection of the manufacturing facility or facilities to ensure compliance with the QSRs.
New PMAs or PMA supplements are required for modifications that affect the safety or effectiveness of the device, including, for example, certain types of modifications to the device's indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type of information as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and may not require as extensive clinical data or the convening of an advisory panel.
de novo Classification
Medical device types that the FDA has not previously classified as Class I, II or III are automatically classified into Class III regardless of the level of risk they pose. The Food and Drug Administration Modernization Act of 1997 established a new route to market for low to moderate risk medical devices that are automatically placed into Class III due to the absence of a predicate device, called the “Request for Evaluation of Automatic Class III Designation,” or the de novo classification procedure. This procedure allows a manufacturer whose novel device is automatically classified into Class III to request down-classification of its medical device into Class I or Class II on the basis that the device presents low or moderate risk, rather than requiring the submission and approval of a PMA application. Prior to the enactment of the Food and Drug Administration Safety and Innovation Act of 2012, or the FDASIA, a medical device could only be eligible for de novo classification if the manufacturer first submitted a 510(k)

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premarket notification and received a determination from the FDA that the device was not substantially equivalent. FDASIA streamlined the de novo classification pathway by permitting manufacturers to request de novo classification directly without first submitting a 510(k) premarket notification to the FDA and receiving a not substantially equivalent determination. Under FDASIA, the FDA is required to classify the device within 120 days following receipt of the de novo application. If the manufacturer seeks reclassification into Class II, the manufacturer must include a draft proposal for special controls that are necessary to provide a reasonable assurance of the safety and effectiveness of the medical device. In addition, the FDA may reject the reclassification petition if it identifies a legally marketed predicate device that would be appropriate for a 510(k) or determines that the device is not low to moderate risk or that general controls would be inadequate to control the risks and special controls cannot be developed.
Clinical Trials
Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) or de novo clearance. Such trials generally require an investigational device exemption application, or IDE, approved in advance by the FDA for a specified number of patients and study sites, unless the product is deemed a nonsignificant risk device eligible for more abbreviated IDE requirements. Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of an institutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including but not limited to those relating to good clinical practices. To conduct a clinical trial, we also are required to obtain the patients' informed consent in form and substance that complies with both FDA requirements and state and federal privacy and human subject protection regulations. We, the FDA or the IRB could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits. Even if a trial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtain FDA approval to market the product in the U.S. Similarly, in Europe the clinical study must be approved by a local ethics committee and in some cases, including studies with high-risk devices, by the ministry of health in the applicable country.
Pervasive and Continuing Regulation
After a device is placed on the market, numerous regulatory requirements apply. These include:
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Product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;
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Quality System Regulation, or QSR, which requires manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the manufacturing process;
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labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label use or indication;
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clearance of product modifications that could significantly affect safety or efficacy or that would constitute a major change in intended use of one of our cleared devices;
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approval of product modifications that affect the safety or effectiveness of one of our approved devices;
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medical device reporting regulations, which require that manufacturers comply with FDA requirements to report if their device may have caused or contributed to a death or serious injury, or has malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction of the device or a similar device were to recur;

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•
post-approval restrictions or conditions, including post-approval study commitments;
•
post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device;
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the FDA's recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is in violation of governing laws and regulations;
•
regulations pertaining to voluntary recalls; and
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notices of corrections or removals.
Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the Federal Trade Commission and by state regulatory and enforcement authorities. Recently, promotional activities for FDA-regulated products of other companies have been the subject of enforcement action brought under healthcare reimbursement laws and consumer protection statutes. In addition, under the federal Lanham Act and similar state laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countries outside the U.S., which can change rapidly with relatively short notice. If the FDA determines that our promotional materials or training constitutes promotion of an unapproved use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions.
Furthermore, our products could be subject to voluntary recall if we or the FDA determine, for any reason, that our products pose a risk of injury or are otherwise defective. Moreover, the FDA can order a mandatory recall if there is a reasonable probability that our device would cause serious adverse health consequences or death.
The FDA has broad post-market and regulatory enforcement powers. Once we have a marketed product, we will be subject to unannounced inspections by the FDA to determine our compliance with the QSR and other regulations, and these inspections may include the manufacturing facilities of some of our subcontractors. Failure by us or by our suppliers to comply with applicable regulatory requirements can result in enforcement action by the FDA or other regulatory authorities, which may result in sanctions including, but not limited to:
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untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;
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unanticipated expenditures to address or defend such actions
•
customer notifications for repair, replacement, refunds;
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recall, detention or seizure of our products;
•
operating restrictions or partial suspension or total shutdown of production;
•
refusing or delaying our requests for premarket clearance or premarket approval of new products or modified products;
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operating restrictions;
•
withdrawing premarket clearances or PMA approvals that have already been granted;

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•
refusal to grant export approval for our products; or
•
criminal prosecution.
Competition
The medical device industry is subject to intense competition. Our products will compete against stand-alone laser treatments offered by offered by Hologic (Cynosure), Cutera, Lumenis, Candela and Laserscope, as well as several smaller highly-specialized companies. If the RAP device is cleared by the FDA we intend to compete primarily on the basis of improved time to remove, reduced pain, reduced chance of scarring and, reduced trips to the doctor. In addition, competition among providers of devices for the aesthetic market is characterized by extensive research efforts and rapid technological progress. To compete effectively, we must demonstrate that our products are attractive alternatives to other laser-only methods for tattoo removal. Additionally, there are many companies, both public and private, that are developing devices that use both laser-based and alternative technologies for the conditions treated by our products that may prove to be more effective, safer or less costly than our products. Many of these competitors have significantly greater financial and human resources than we do and have established reputations as well as worldwide distribution channels that are more effective than ours. Additional competitors may enter the market, and we are likely to compete with new companies in the future. We expect to encounter potential customers that, due to existing relationships with our competitors, are committed to or prefer the products offered by these competitors. We expect that competitive pressures may result in price reductions, reduced margins and loss of market share. There can be no assurance that competitors, many of which have made substantial investments in competing technologies, will not prevent, limit or interfere with our ability to make, use or sell our products either in the United States or in international markets.
A company called OnLight (recently acquired by Merz Pharma) introduced a transparent patch infused with a clear chemical called Perfluorodecalin (PFD). The DESCRIBE® PFD Patch is a single-use, optical clearing device accessory for use in laser-assisted tattoo removal procedures and is now marketed by Merz Aesthetics. Side effects, including pain, erythema and edema were reported during laser tattoo removal. The DESCRIBE® PFD Patch is available only through licensed physicians. They claim to speed the time to clearance of a tattoo by absorbing laser-induced whitening and allowing for immediate re-treatment.
Some patients may choose to have their tattoo surgically excised by a plastic surgeon or dermatologist.
As of March 31, 2018, the FDA has not approved or cleared any do-it-yourself tattoo removal ointments or creams.
The cellulite removal market is highly competitive and has numerous device companies in the space. The technologies currently being used vary significantly in approach, efficacy and invasiveness to the patient.

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MANAGEMENT
The following table sets forth certain information regarding our executive officers and directors as of June 30, 2018.
Name
 
Age
 
Position
Walter V. Klemp
 
59
 
Executive Chairman
Christopher Capelli
 
58
 
President and Chief Science Officer
Lori Bisson
 
47
 
Chief Financial Officer
Joe Tanner
 
70
 
Chief Operating Officer
Jonathan P. Foster
 
54
 
Director
Bradley Hauser
 
41
 
Director
Danika Harrison
 
42
 
Director
Set forth below is biographical information about each of the individuals named in the tables above:
Walter V. Klemp - Founder and Executive Chairman. Mr. Klemp is a co-founder of our company and has served as our executive chairman since July 2015. From 2006 until 2016, Mr. Klemp has served as the chairman, co-founder and part-time chief executive officer of Moleculin, LLC, and since 2016 Mr. Klemp has served as chairman and chief executive officer of Moleculin Biotech, Inc., a clinical stage pharmaceutical company focused on the development of oncology drug candidates. Mr. Klemp served as president and chief executive officer of Zeno Corporation from 2004 to April 2011, where he developed and marketed dermatology devices and drugs from concept through FDA approval and market launch. From 1987 to 2000, Mr. Klemp served as chief executive officer and chairman of Drypers Corporation, a publicly traded multinational consumer products company that was listed as #1 on the INC 500 List of America’s Fastest Growing Companies. We believe that Mr. Klemp’s history with our company and background, coupled with his extensive experience in the medical field, provide him with the qualifications to serve as a director. Mr. Klemp earned a B.A. degree from Lewis & Clark. Mr. Klemp currently provides services as needed by us, which we estimate does not exceed 10 hours per week.
Christopher Capelli, M.D. - Founder, President and Chief Science Officer. Dr. Capelli is a co-founder of our company and has served as our president since March 2018 and chief science officer since September 2015. From September 2014 through August 2015. Dr. Capelli was a consultant to the company. Dr. Capelli is the lead inventor of Soliton’s RAP technology. From March 2005 through August 2014, Dr. Capelli served as the vice president in the office of Technology Based Ventures at The University of Texas M. D. Anderson Cancer Center. From March 2001 through February 2005, Dr. Capelli served the director of the Office of Technology Management at the University of Pittsburgh. From 1987 through 1998, Dr. Capelli served the president and was the founder of BioInterface Technologies, Inc. which developed new a silver-based antimicrobial technology for use in wound care. Dr. Capelli is a graduate of Massachusetts Institute of Technology with a Bachelor of Science degree in Mechanical Engineering. Dr. Capelli earned his MD from the University of Wisconsin Medical School and maintains a medical license in the State of Wisconsin. We believe that Dr. Capelli's history with our company as a founder and as the creator of our technology provide him with the qualifications to serve as a director.
Lori Bisson. - Executive Vice President and Chief Financial Officer . Ms. Bisson has served as our chief financial officer since January 2015. Prior to joining Soliton, Ms. Bisson worked as a financial and business development consultant as a Shareholder in Condon & Company, PC, from 2009 through December 2014, where she advised a number of life science companies. From 2005 to 2009, Ms. Bisson served as the CFO of Zeno Corporation, a medical device company focused on new technology in the aesthetics area. Ms. Bisson previously served as the CFO of Gulfstream Trading, Ltd., an international oil trading organization from 2001 to 2005. From 1995 to 2001, Ms. Bisson held various positions with

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Drypers Corporation, a publicly traded multinational consumer products company, where she ultimately held the title of Vice President of Integrated Solutions and oversaw accounting, information technology, and logistics for the US operation. Ms. Bisson began her career at Arthur Andersen, LLP as an auditor focused on consumer products companies. Ms. Bisson also serves as an advisor to Moleculin Biotech, Inc., a drug development company traded on NASDAQ developing novel cancer therapies. Ms. Bisson earned her CPA in 1995 after earning her BBA from Baylor University.
Joe Tanner - Chief Operating Officer. Mr. Tanner has served as Soliton’s Chief Operating Officer since October 2014. Since 2000, Mr. Tanner has served as co-owner and part time co-manager of a chain of convenience stores in Washington State. Mr. Tanner served as Chief Operating Officer of Zeno Corporation from 2005 to 2011, a company that developed and marketed dermatology devices and drugs from concept through FDA approval and market launch. From 1993 to 2000, Mr. Tanner served as Chief Operating Officer of Drypers Corporation’s International Division, comprised of manufacturing facilities in 6 countries and sales teams in many other counties. Mr. Tanner has an undergraduate degree from Harvard University and a law degree from the University of Texas.
Jonathan P. Foster - Director. Mr. Jonathan P. Foster joined our Board of Directors effective as of June 15, 2018. Mr. Foster currently serves as the Chief Financial Officer for Moleculin Biotech, Inc. (MBI), a drug development company traded on Nasdaq developing novel cancer therapies. Prior to his tenure at MBI, Mr. Foster served as the CFO of InfuSystem Holdings, Inc., a medical technology company providing pumps for hospital use, from 2012 to 2016. Prior to InfuSystem, Mr. Foster served as a consultant to the Chief Financial Officer of LSG Sky Chefs, USA, Inc., a subsidiary of Deutsche Lufthansa AG and the world's largest provider of airline catering and in-flight services. Prior to that, from 2000-2012, he was President, CFO and majority owner of United Credit, Inc. & Advance Today, Inc., a privately-owned consumer finance company with multiple locations. From 1996-2000, Mr. Foster served as Executive Vice President and Chief Financial Officer of Drypers Corporation, a publicly traded global consumer products company with more than 2,000 employees internationally and $460 million in revenue. He previously served as Chief Financial Officer of Dickson Weatherproof Nail Company, Controller & Treasurer of divisions of Schlumberger Industries, and as a Manager in the Middle Market Group of Deloitte & Touche. He has also served on the State of South Carolina Board of Financial Institutions and the Board of Directors for the Easley Baptist Hospital Foundation. Mr. Foster has a BS in Accounting from Clemson University, is a Certified Public Accountant and AICPA Chartered Global Management Accountant. We believe that Mr. Foster's experience as a chief financial officer in the biotechnology industry and his extensive accounting experience provide him with the qualifications to serve as a director.
Brad Hauser - Director. Mr. Bradley Hauser, also known as Brad, joined our Board of Directors effective as of June 15, 2018. Mr. Hauser has served as the Vice President, R&D and General Manager for CoolSculpting at Allergan Pharmaceuticals since ZELTIQ Aesthetics, Inc. was acquired by Allergan in April 2017. Previously, he served as the Senior Vice President of Research and Development at ZELTIQ Aesthetics, Inc. from January 2017 to April 2017 and as its Vice President of Research and Development from July 2015 to January 2017. Mr. Hauser joined ZELTIQ in December 2013 as Vice President of Product and Clinical Strategy. Prior to joining ZELTIQ, he held multiple roles in the aesthetic industry, including Executive Vice President of Commercial Operations for Cutera, Director of Research and Development at Medicis and Managing Director of Product and Clinical Marketing at Solta Medical. Mr. Hauser received his Bachelor of Arts in Human Biology from Stanford University.
Danika Harrison - Director. Ms. Danika R. Harrison joined our Board of Directors effective as of June 15, 2018. Ms. Harrison has been the President and CEO of Elira Therapeutics, Inc. since September 2017. Prior to that she served as Senior Vice President of Global Marketing at ZELTIQ Aesthetics, Inc. from January 2017, serving as its Vice President of Global Marketing from February 2016 and as VP of Consumer and Brand Marketing from November 2014 until the acquisition of Zeltiq by Allergan in April 2017. Ms. Harrison served as Senior Vice President of Direct Marketing & Innovation at TRIA Beauty, Inc. from December 2013 to June 2014, serving previously as Senior Vice President of

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Global Marketing from December 2011, and as VP/GM of North America from March 2011. From April 2006 to March 2011, Ms. Harrison worked at Rosetta, a consulting-centered interactive agency, where she was most recently a Partner leading the relationship marketing group consulting for leading brands like Dannon, Johnson’s Baby and Rogers to develop direct and digital marketing programs throughout the United States and Canada. Ms. Harrison holds a B.S. from Georgetown University and an M.B.A. from the Kellogg School of Management at Northwestern University. 
Director Independence
The rules of the NASDAQ Stock Market, or the NASDAQ Rules, require a majority of a listed company’s board of directors to be composed of independent directors within one year of listing. In addition, the NASDAQ Rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and governance committees be independent. Under the NASDAQ Rules, a director will only qualify as an independent director if, in the opinion of our board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ Rules also require that audit committee members satisfy independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee, accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries or otherwise be an affiliated person of the listed company or any of its subsidiaries. In considering the independence of compensation committee members, the NASDAQ Rules require that our board of directors must consider additional factors relevant to the duties of a compensation committee member, including the source of any compensation we pay to the director and any affiliations with the company. 
Our current board of directors undertook a review of the composition of our current board of directors and the independence of each director. Our board of directors has determined that Messrs. Foster and Hauser, and Ms. Harrison are independent as defined under the NASDAQ rules. Messrs. Klemp and Capelli are not independent.
Committees of the Board of Directors
Our board of directors has established an audit committee, a compensation committee and a nominating and governance committee. Each of these committees will operate under a charter that will be approved by our board of directors prior to this Offering.
Audit Committee. Our audit committee consists of three independent directors. The members of the audit committee are Mr. Foster, who chairs the committee, Mr. Hauser, and Ms. Harrison. The audit committee consists exclusively of directors who are financially literate. In addition, Mr. Foster is considered an “audit committee financial expert” as defined by the SEC’s rules and regulations.
The audit committee responsibilities include:
•
overseeing the compensation and work of and performance by our independent auditor and any other registered public accounting firm performing audit, review or attestation services for us;
•
engaging, retaining and terminating our independent auditor and determining the terms thereof;
•
assessing the qualifications, performance and independence of the independent auditor;
•
evaluating whether the provision of permitted non-audit services is compatible with maintaining the auditor’s independence;

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•
reviewing and discussing the audit results, including any comments and recommendations of the independent auditor and the responses of management to such recommendations;
•
reviewing and discussing the annual and quarterly financial statements with management and the independent auditor;
•
producing a committee report for inclusion in applicable SEC filings;
•
reviewing the adequacy and effectiveness of internal controls and procedures;
•
establishing procedures regarding the receipt, retention and treatment of complaints received regarding the accounting, internal accounting controls, or auditing matters and conducting or authorizing investigations into any matters within the scope of the responsibility of the audit committee; and
•
reviewing transactions with related persons for potential conflict of interest situations.
Compensation Committee. Our compensation committee consists of three independent directors. The members of the Compensation Committee are Mr. Hauser, who chairs the committee, Ms. Harrison and Mr. Foster. The committee has primary responsibility for:
•
reviewing and recommending all elements and amounts of compensation for each executive officer, including any performance goals applicable to those executive officers;
•
reviewing and recommending for approval the adoption, any amendment and termination of all cash and equity-based incentive compensation plans;
•
once required by applicable law, causing to be prepared a committee report for inclusion in applicable SEC filings;
•
approving any employment agreements, severance agreements or change of control agreements that are entered into with the CEO and certain executive officers; and
•
reviewing and recommending the level and form of non-employee director compensation and benefits.
Nominating and Governance Committee. The Nominating and Governance Committee consists of three independent directors. The members of the Nominating and Governance Committee are Mr. Foster, who chairs the committee, Ms. Harrison, and Mr. Hauser. The Nominating and Governance Committee’s responsibilities include:
•
recommending persons for election as directors by the stockholders;
•
recommending persons for appointment as directors to the extent necessary to fill any vacancies or newly created directorships;
•
reviewing annually the skills and characteristics required of directors and each incumbent director’s continued service on the board;
•
reviewing any stockholder proposals and nominations for directors;
•
advising the board of directors on the appropriate structure and operations of the board and its committees;

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•
reviewing and recommending standing board committee assignments;
•
developing and recommending to the board Corporate Governance Guidelines, a Code of Business Conduct and Ethics and other corporate governance policies and programs and reviewing such guidelines, code and any other policies and programs at least annually;
•
making recommendations to the board as to determinations of director independence; and
•
making recommendations to the board regarding corporate governance based upon developments, trends, and best practices.
The Nominating and Governance Committee will consider stockholder recommendations for candidates for the board of directors.
Our bylaws provide that, in order for a stockholder’s nomination of a candidate for the board to be properly brought before an annual meeting of the stockholders, the stockholder’s nomination must be delivered to the Secretary of the company no later than 120 days prior to the one-year anniversary date of the prior year’s annual meeting.
Code of Business Conduct and Ethics
We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Following this Offering, a copy of the code will be made available on the Corporate Governance section of our website, which is located at www.soliton.com. If we make any substantive amendments to, or grant any waivers from, the code of business conduct and ethics for any officer or director, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8-K filed with the SEC.

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COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table and the related notes set forth information relating to the compensation earned by each of the named executive officers during the last two fiscal years.
Name and Principal Position
 
Year
 
Salary ($) (2)
 
Bonus (2)
 
Stock
Awards
($) (1)
 
Total ($)
Walter V. Klemp, Executive Chairman
 
2017
 
$
300,000

 
$
15,625

 
$
—

 
$
315,625

 
2016
 
300,000

 
—

 
—

 
300,000

Chris Capelli, President & Chief Science Officer
 
2017
 
300,000

 
15,625

 
—

 
315,625

 
2016
 
300,000

 
—

 
—

 
300,000

Lori Bisson, Chief Financial Officer 
 
2017
 
160,000

 
—

 
—

 
160,000

 
2016
 
160,000

 
—

 
192,857

 
352,857

Joe Tanner, Chief Operating Officer
 
2017
 
225,000

 
11,719

 
—

 
236,719

 
2016
 
225,000

 
—

 
257,143

 
482,143

(1)
Represents the full grant date fair value of the restricted stock grant calculated in accordance with FASB ASC Topic 718. For a summary of the assumptions made in the valuation of these awards, please see Note 8 to our consolidated financial statements included elsewhere in this Offering Circular.
(2)
In 2017, Walter V. Klemp, Chris Capelli, and Joe Tanner agreed to defer $31,250, $31,250, and $23,438, respectively, of their compensation until the Company has additional funding. Additionally, the Company agreed to pay a 50% premium on the amount deferred, which amounts will be paid contingent upon available funding at the close of this Offering.

Employment Agreements
Upon the closing of the Offering, we intend to enter into employment agreements with our named executive officers on the following terms: (i) Mr. Klemp - base salary: $200,000; cash bonus target for 2019: 50%; option grant value target for 2019: $750,000; (ii) Dr. Capelli - base salary: $425,000; cash bonus target for 2019: 35%; option grant value target for 2019: $750,000; (iii) Ms. Bisson - base salary: $265,000; cash bonus target for 2019: 38%; option grant value target for 2019: $450,000; and (iv) Mr. Tanner - base salary: $250,000; cash bonus target for 2019: 36%; option grant value target for 2019: $350,000.
Equity Awards
The following table sets forth certain information concerning our outstanding restricted stock agreements for our named executive officers at December 31, 2017.
Outstanding Equity Awards At Fiscal Year-End-2017
Name
 
Number of
Securities
Underlying
Shares
(#)
Unrestricted Stock
 
Number of
Securities
Underlying
Shares
(#)
Restricted Stock
Walter V. Klemp
 
150,000

 
50,000 (2)
Christopher Capelli
 
150,000

 
100,000 (1)
Lori Bisson
 
30,000

 
30,000 (3)
Joe Tanner
 
40,000

 
40,000 (4)

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(1)
50,000 shares will become unrestricted on the earlier of November 19, 2018 or upon the closing of this Offering. Of the remaining 50,000 shares, 33,333 shares become unrestricted upon the closing of this Offering and the remaining 16,667 shares will become unrestricted over the 12 months after this Offering on a monthly basis.
(2)
The 50,000 shares will become unrestricted on the earlier of November 19, 2018 or upon the closing of this Offering.
(3)
15,000 of the 30,000 shares became unrestricted on June 1, 2018, and 15,000 will become unrestricted on the earlier of June 1, 2019 or upon the closing of this Offering.
(4)
20,000 of the 40,000 shares became unrestricted on June 1, 2018, and 20,000 will become unrestricted on the earlier of June 1, 2019 or upon the closing of this Offering.

The table does not include options granted after December 31, 2017. In June 2018, we granted the following options to our named executive officers, subject to shareholder approval of our 2018 Stock Plan: Mr. Klemp - option to purchase 725,000 shares; Dr. Capelli - option to purchase 725,000 shares; Ms. Bisson - option to purchase 180,000 shares; and Mr. Tanner - option to purchase 160,000 shares. These options will have a term of ten years, have an exercise price of $1.75 per share and vest over four years in four equal installments.
Director Compensation
Mr. Klemp and Dr. Capelli, our non-independent board members, do not receive any additional compensation for serving as directors. Upon joining the board of directors, in June 2018 our independent directors each received a ten-year option to purchase 30,000 shares of common stock with an exercise price of $1.75 per share vesting annually over a four-year period.
Upon the completion of our Offering, our board of directors will establish a compensation policy for non-employee directors.
Scientific Advisory Board
Our executive team is supported by our scientific advisory board, the members of which include dermatologists experienced in the fields in which we pursue. The members of our Scientific Advisory Board are compensated based on our utilization of their time. The chairman of our Scientific Advisory Board is on retainer.
Michael S. Kaminer, MD, chair of Soliton’s Scientific Advisory Board, is known as a leader, innovator and talented skin cancer and cosmetic surgeon in the Boston area. Dr. Kaminer is one of the pre-eminent educators in cosmetic surgery in the nation, having lectured at many national meetings, including national meetings of the American Academy of Dermatology and the American Society for Dermatologic Surgery, the Hawaii Dermatology Conference, and the American Society for Laser Medicine and Surgery. He has also lectured at numerous international meetings and symposia, recently serving as Co-Chairman of the Anti-Aging World Congress in Paris, France.
E. Victor Ross, MD, is a dermatologist specializing in laser surgery of the skin. Presently, he is the director of the Scripps Clinic Laser and Cosmetic Dermatology Center and a frequent lecturer at national and international meetings on cutaneous laser medicine. He also serves on the editorial board of two major dermatologic journals.
Roy G. Geronemus, M.D., Director of the Laser & Skin Surgery Center of New York®, graduated from Harvard University and pursued his medical education at the University of Miami School of Medicine. He is a Clinical Professor of Dermatology at New York University Medical Center where he founded its laser program and served nine years as chief of dermatologic and laser surgery. He is past president of the American Society for Dermatologic Surgery and the American Society for Laser Medicine & Surgery.
Mathew M. Avram, M.D., J.D. is the director of the MGH Dermatology Laser & Cosmetic Center. He is the Faculty Director for Procedural Training in the Department of Dermatology, Harvard Medical School.

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Dr. Avram attended college at Princeton and completed his residency training at Harvard, where he served as chief resident.
Dr. Elizabeth Tanzi is a board-certified dermatologist proudly serving men and women in the Washington D.C. area. After 15 years of practicing cosmetic dermatology in Washington D.C., she founded Capital Laser & Skin Care.
Dr. Jeffrey Dover graduated as the silver medalist, Magna cum Laude with an M.D. degree from the University of Ottawa. He now co-directs SkinCare Physicians of Chestnut Hill, a comprehensive facility specializing in dermatology, laser and cosmetic surgery, and he is Associate Professor of Clinical Dermatology at Yale University School of Medicine, and Associate Professor of Dermatology at Brown Medical School. Dr. Dover is Past President of both the American Society of Dermatologic Surgery and the American Society for Lasers in Medicine and Surgery.
Dr. Eric F. Bernstein is Director of Laser Surgery and Cosmetic Dermatology Centers and one of the world’s leading experts on laser medicine and surgery. As a result of Dr. Bernstein’s research and development work, he often is among the very first in the world to utilize new laser applications for patient treatment.
Dr. Christopher Zachary, Professor and Chair of the Department of Dermatology at the University of California, Irvine, heads up one of the world’s premier laser and skin surgery facilities. He has been the program director for the Mohs College and the American Society for Laser Surgery and Medicine annual meetings. He is a Past President of the Association of Academic Dermatologic Surgeons.
2012 Stock Plan
In March 2012, the Company’s board of directors and stockholders adopted the 2012 Long Term Incentive Plan (the “2012 Stock Plan”). The 2012 Stock Plan is designed to enable the Company to offer employees, officers, directors and consultants, as defined, an opportunity to acquire a proprietary interest in the Company. The types of awards that may be granted under the 2012 Stock Plan include stock options, stock appreciation rights, restricted stock, and other stock-based awards subject to limitations under applicable law. All awards are subject to approval by the Company’s board of directors. The 2012 Stock Plan reserves shares of common stock for issuance in accordance with the 2012 Stock Plan’s terms. We do not intend to utilize the 2012 Stock Plan after the completion of this Offering, and intend to utilize our newly established 2018 Stock Plan discussed below. The following is a summary of the materials terms of the 2012 Stock Plan. 
Administration.  The 2012 Stock Plan is administered by our board of directors, and, once constituted, will be administered by the Compensation Committee of the board of directors (we refer to body administering the 2012 Stock Plan as the “Committee”). The Committee will have full authority to select the individuals who will receive awards under the 2012 Stock Plan, determine the form and amount of each of the awards to be granted and establish the terms and conditions of awards.
Number of shares of common stock. The number of shares of the common stock that may be issued under the 2012 Stock Plan is 789,745. As of March 31, 2018, we had issued an option to purchase 15,000 shares of common stock under the 2012 Stock Plan and had granted 760,000 shares of restricted stock under the 2012 Stock Plan. Shares issuable under the 2012 Stock Plan may be authorized but unissued shares or treasury shares. If there is a lapse, forfeiture, expiration, termination or cancellation of any award made under the 2012 Stock Plan for any reason, the shares subject to the award will again be available for issuance. Any shares subject to an award that are delivered to us by a participant, or withheld by us on behalf of a participant, as payment for an award or payment of withholding taxes due in connection with an award will not again be available for issuance, and all such shares will count toward the number of shares issued under the 2012 Stock Plan. The number of shares of common stock issuable under the 2012 Stock Plan is subject to adjustment, in the event of any reorganization, recapitalization,

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stock split, stock distribution, merger, consolidation, split-up, spin-off, combination, subdivision, consolidation or exchange of shares, any change in the capital structure of the company or any similar corporate transaction. In each case, the Committee has the discretion to make adjustments it deems necessary to preserve the intended benefits under the 2012 Stock Plan. No award granted under the 2012 Stock Plan may be transferred, except by will, the laws of descent and distribution.
Eligibility.  All officers and employees, and other persons who provide services to us, including directors are eligible to receive awards under the 2012 Stock Plan. On March 31, eight employees and all non-employee directors were eligible to participate in the 2012 Stock Plan.
Awards to participants.  The 2012 Stock Plan provides for discretionary awards of stock options, stock awards and stock unit awards to participants. Each award made under the 2012 Stock Plan will be evidenced by a written award agreement specifying the terms and conditions of the award as determined by the Committee in its sole discretion, consistent with the terms of the 2012 Stock Plan.
Stock options.  The Committee has the discretion to grant non-qualified stock options or incentive stock options to participants and to set the terms and conditions applicable to the options, including the type of option, the number of shares subject to the option and the vesting schedule; provided that the exercise price of each stock option will be the fair market value of the common stock on the date on which the option is granted, each option will expire not later than ten years from the date of grant .
Stock awards.  The Committee has the discretion to grant stock awards to participants. Stock awards will consist of shares of common stock granted without any consideration from the participant or shares sold to the participant for appropriate consideration as determined by the Board. The number of shares awarded to each participant, and the restrictions, terms and conditions of the award, will be at the discretion of the Committee. Subject to the restrictions, a participant will be a shareholder with respect to the shares awarded to him or her and will have the rights of a shareholder with respect to the shares, including the right to vote the shares and receive dividends on the shares.
Payment for stock options and withholding taxes.  The Committee may make one or more of the following methods available for payment of any award, including the exercise price of a stock option, and for payment of the minimum required tax obligation associated with an award: (i) cash; (ii) cash received from a broker-dealer to whom the holder has submitted an exercise notice together with irrevocable instructions to deliver promptly to us the amount of sales proceeds from the sale of the shares subject to the award to pay the exercise price or withholding tax; (iii) by directing us to withhold shares of common stock otherwise issuable in connection with the award having a fair market value equal to the amount required to be withheld; and (iv) by delivery of previously acquired shares of common stock that are acceptable to the Committee and that have an aggregate fair market value on the date of exercise equal to the exercise price or withholding tax, or certification of ownership by attestation of such previously acquired shares.
Provisions relating to a “change in control” of the company.  Notwithstanding any other provision of the Plan or any award agreement, in the event of a “Change in Control” of the company, the Committee has the discretion to provide that all outstanding awards will become fully exercisable, all restrictions applicable to all awards will terminate or lapse, and performance goals applicable to any stock awards will be deemed satisfied at the highest target level. In addition, upon such Change in Control, the Committee has sole discretion to provide for the purchase of any outstanding stock option for cash equal to the difference between the exercise price and the then fair market value of the common stock subject to the option had the option been currently exercisable, make such adjustment to any award then outstanding as the Committee deems appropriate to reflect such Change in Control and cause any such award then outstanding to be assumed by the acquiring or surviving corporation after such Change in Control.

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Amendment of award agreements; Amendment and termination of the plan; Term of the plan. The Committee may amend any award agreement at any time, provided that no amendment may adversely affect the right of any participant under any agreement in any material way without the written consent of the participant, unless such amendment is required by applicable law, regulation or stock exchange rule. The Board may terminate, suspend or amend the Plan, in whole or in part, from time to time, without the approval of the shareholders, unless such approval is required by applicable law, regulation or stock exchange rule, and provided that no amendment may adversely affect the right of any participant under any outstanding award in any material way without the written consent of the participant, unless such amendment is required by applicable law, regulation or rule of any stock exchange on which the shares are listed.
No awards may be granted under the Plan on or after the tenth anniversary of the effective date of the Plan.
2018 Stock Plan
In June 2018, the Company’s board of directors adopted the Soliton, Inc. 2018 Stock Plan (the “2018 Plan”) for issuances to the Company’s employees, officers, directors and consultants, subject to shareholder approval of plan. The 2018 Plan is a stock-based compensation plan that provides for discretionary grants of stock options, stock awards, stock unit awards and stock appreciation rights to key employees, non-employee directors and consultants. The material features of the 2018 Plan, as amended, are outlined below. The following description of the 2018 Plan is a summary only and is qualified in its entirety by reference to the complete text of the 2018 Plan.
Administration. The 2018 Plan will be administered by our board of directors or, once established, the compensation committee of the board of directors (we refer to the body administering the 2018 Plan as the “Committee”). The Committee has full authority to select the individuals who will receive awards under the 2018 Plan, determine the form and amount of each of the awards to be granted and establish the terms and conditions of awards.
Limit on Non-Employee Director Compensation. Under the 2018 Plan, the following limits will apply to non-employee directors. The aggregate value of all compensation granted or paid, as applicable, to any individual for service as a non-employee director with respect to any calendar year, including awards granted under the 2018 Plan and cash fees paid to such non-employee director, will not exceed $300,000 in total value. For purposes of these limitations, the value of awards is calculated based on the grant date fair value of such awards for financial reporting purposes.
Number of Shares of Common Stock. The number of shares of the common stock that may be issued under the 2018 Plan will be 3,000,000. As of June 18, 2018, we had issued options to purchase 2,130,000 shares of common stock under the 2018 Plan, subject to receipt of shareholder approval of the 2018 Plan. Shares issuable under the 2018 Plan may be authorized but unissued shares or treasury shares. If there is a lapse, forfeiture, expiration, termination or cancellation of any award made under the 2018 Plan for any reason, the shares subject to the award will again be available for issuance. Any shares subject to an award that are delivered to us by a participant, or withheld by us on behalf of a participant, as payment for an award or payment of withholding taxes due in connection with an award will not again be available for issuance, and all such shares will count toward the number of shares issued under the 2018 Plan. The number of shares of common stock issuable under the 2018 Plan is subject to adjustment, in the event of any reorganization, recapitalization, stock split, stock distribution, merger, consolidation, split-up, spin-off, combination, subdivision, consolidation or exchange of shares, any change in the capital structure of the company or any similar corporate transaction. In each case, the Committee has the discretion to make adjustments it deems necessary to preserve the intended benefits under the 2018 Plan. No award granted under the 2018 Plan may be transferred, except by will, the laws of descent and distribution.

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Eligibility. All employees designated as key employees for purposes of the 2018 Plan, all non-employee directors and consultants are eligible to receive awards under the 2018 Plan. As of June 12, 2018, eight employees and all non-employee directors were eligible to participate in the 2018 Plan.
Awards to Participants. The 2018 Plan provides for discretionary awards of stock options, stock awards, stock unit awards and stock appreciation rights to participants. Each award made under the 2018 Plan will be evidenced by a written award agreement specifying the terms and conditions of the award as determined by the Committee in its sole discretion, consistent with the terms of the 2018 Plan.
Stock Options. The Committee has the discretion to grant non-qualified stock options or incentive stock options to participants and to set the terms and conditions applicable to the options, including the type of option, the number of shares subject to the option and the vesting schedule; provided that the exercise price of each stock option will be the closing price of the common stock on the date on which the option is granted (“fair market value”), each option will expire ten years from the date of grant and no dividend equivalents may be paid with respect to stock options.
In addition, an incentive stock option granted to a key employee is subject to the following rules: (i) the aggregate fair market value (determined at the time the option is granted) of the shares of common stock with respect to which incentive stock options are exercisable for the first time by a key employee during any calendar year (under all incentive stock option plans of the company and its subsidiaries) cannot exceed $100,000, and if this limitation is exceeded, that portion of the incentive stock option that does not exceed the applicable dollar limit will be an incentive stock option and the remainder will be a non-qualified stock option; (ii) if an incentive stock option is granted to a key employee who owns stock possessing more than 10% of the total combined voting power of all class of stock of the company, the exercise price of the incentive stock option will be 110% of the closing price of the common stock on the date of grant and the incentive stock option will expire no later than five years from the date of grant; and (iii) no incentive stock option can be granted after ten years from the date the 2018 Plan was adopted.
Stock Appreciation Rights. The Committee has the discretion to grant stock appreciation rights to participants. The Committee determines the exercise price for a stock appreciation right, which cannot be less than 100% of the fair market value of our common stock on the date of grant. Upon the exercise of a stock appreciation right, we will pay the participant in common stock or in cash, at our discretion, an amount equal to the product of (1) the excess of the per share fair market value of our common stock on the date of exercise over the exercise price, multiplied by (2) the number of shares of common stock with respect to which the stock appreciation right is exercised. The Committee has the discretion to set the terms and conditions applicable to the award, including the number of shares subject to the stock appreciation right and the vesting schedule, provided that each stock appreciation right will expire not more than ten years from the date of grant and no dividends or dividend equivalents shall be paid with respect to any stock appreciation right prior to the exercise of the stock appreciation right.
Stock Awards. The Committee has the discretion to grant stock awards to participants. Stock awards will consist of shares of common stock granted without any consideration from the participant or shares sold to the participant for appropriate consideration as determined by the Board. The number of shares awarded to each participant, and the restrictions, terms and conditions of the award, will be at the discretion of the Committee. Subject to the restrictions, a participant will be a shareholder with respect to the shares awarded to him or her and will have the rights of a shareholder with respect to the shares, including the right to vote the shares and receive dividends on the shares; provided that dividends otherwise payable on any stock award subject to restrictions will be held by us and will be paid to the holder of the stock award only to the extent the restrictions on such stock award lapse.
Stock Units. The Committee has the discretion to grant stock unit awards to participants. Each stock unit entitles the participant to receive, on a specified date or event set forth in the award agreement, one share of common stock or cash equal to the fair market value of one share on such date or event, as provided in the award agreement. The number of stock units awarded to each participant, and the terms

83


and conditions of the award, will be at the discretion of the Committee. Unless otherwise specified in the award agreement, a participant will not be a shareholder with respect to the stock units awarded to him prior to the date they are settled in shares of common stock. The award agreement may provide that until the restrictions on the stock units lapse, the participant will be paid an amount equal to the dividends that would have been paid had the stock units been actual shares; provided that such dividend equivalents will be held by us and paid only to the extent the restrictions lapse.
Payment for Stock Options and Withholding Taxes. The Committee may make one or more of the following methods available for payment of any award, including the exercise price of a stock option, and for payment of the tax obligation associated with an award: (i) cash; (ii) cash received from a broker-dealer to whom the holder has submitted an exercise notice together with irrevocable instructions to deliver promptly to us the amount of sales proceeds from the sale of the shares subject to the award to pay the exercise price or withholding tax; (iii) by directing us to withhold shares of common stock otherwise issuable in connection with the award having a fair market value equal to the amount required to be withheld; and (iv) by delivery of previously acquired shares of common stock that are acceptable to the Committee and that have an aggregate fair market value on the date of exercise equal to the exercise price or withholding tax, or certification of ownership by attestation of such previously acquired shares.
Provisions Relating to a “Change in Control” of the Company. Notwithstanding any other provision of the 2018 Plan or any award agreement, in the event of a “Change in Control” of the company, the Committee has the discretion to provide that all outstanding awards will become fully exercisable, all restrictions applicable to all awards will terminate or lapse, and performance goals applicable to any stock awards will be deemed satisfied at the target level. In addition, upon such Change in Control, the Committee has sole discretion to provide for the purchase of any outstanding stock option for cash equal to the difference between the exercise price and the then fair market value of the common stock subject to the option had the option been currently exercisable, make such adjustment to any award then outstanding as the Committee deems appropriate to reflect such Change in Control and cause any such award then outstanding to be assumed by the acquiring or surviving corporation after such Change in Control.
Amendment of Award Agreements; Amendment and Termination of the 2018 Plan; Term of the 2018 Plan. The Committee may amend any award agreement at any time, provided that no amendment may adversely affect the right of any participant under any agreement in any material way without the written consent of the participant, unless such amendment is required by applicable law, regulation or stock exchange rule.
The Board may terminate, suspend or amend the 2018 Plan, in whole or in part, from time to time, without the approval of the stockholders, unless such approval is required by applicable law, regulation or stock exchange rule, and provided that no amendment may adversely affect the right of any participant under any outstanding award in any material way without the written consent of the participant, unless such amendment is required by applicable law, regulation or rule of any stock exchange on which the shares are listed.
Notwithstanding the foregoing, neither the 2018 Plan nor any outstanding award agreement can be amended in a way that results in the repricing of a stock option. Repricing is broadly defined to include reducing the exercise price of a stock option or stock appreciation right or cancelling a stock option or stock appreciation right in exchange for cash, other stock options or stock appreciation rights with a lower exercise price or other stock awards. (This prohibition on repricing without stockholder approval does not apply in case of an equitable adjustment to the awards to reflect changes in the capital structure of the company or similar events.)
No awards may be granted under the 2018 Plan on or after the tenth anniversary of the initial effective date of the 2018 Plan.

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RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
We have a license agreement with The University of Texas M. D. Anderson Cancer Center (MD Anderson) for certain of the patents, patent applications and related intellectual property on which we base our research and product development. M D Anderson is a stockholder of our company as a result of the shares issued to acquire the license agreement. The license agreement is described in the section of this Offering Circular entitled “Business - Our License Agreement.” 
As the inventor of the intellectual property we license from MD Anderson, Dr. Capelli is entitled to 50% of the license income (which is determined after MD Anderson recoups any costs associated therewith) that we are required to pay to MD Anderson pursuant to our license agreement with MD Anderson. In addition, Dr. Capelli is entitled to 50% of the proceeds (after the recoupment of any costs associated therewith) from the sale by MD Anderson of the 212,500 shares issued to MD Anderson in connection with the license agreement.
As of June 30, 2018, we had convertible bridge notes outstanding with Remeditex Ventures LLC, our largest stockholder, in the amount of $8,400,000. Upon the closing of this Offering, these notes including the accrued interest (calculated through an assumed date of June 30, 2018 of $678,440) will convert into 4,204,171 shares of common stock.
As of June 30, 2018, we had a convertible bridge note outstanding with Christopher Capelli, our president and chief science officer, in the amount of $22,000. Upon the closing of this Offering, these notes including the accrued interest (calculated through an assumed date of June 30, 2018 of $458) will convert into 12,833 shares of common stock.
In August 2018, we expect to issue $360,000 in principal amount of 10% non-convertible promissory notes. The principal and interest will be due on the earlier of one-year from the date of issuance or upon the closing of this Offering. For each dollar in principal amount of notes purchase by investors, we will issue the investors a five-year warrant to purchase .6 of a share of common stock at an exercise price of $1.75 per share. In addition to the notes described above, if this Offering is not completed prior to October   1, 2018 and if we require additional working capital, Mr. Klemp, Dr. Capelli, Ms. Bisson and other members of management have collectively agreed to purchase up to an additional $125,000 of notes and warrants on the same terms as described above.
Policies and Procedures for Related Party Transactions
Our audit committee charter will provide that our audit committee will be responsible for reviewing and approving in advance any related party transaction. This will cover, with certain exceptions set forth in Item 404 of Regulation S-K under the Securities Act, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships in which we were or are to be a participant, where the amount involved exceeds $120,000 and a related person had or will have a direct or indirect material interest, including, without limitation, purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person. All of the transactions described in this section occurred prior to the creation of our audit committee and the adoption of this policy.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of June 30, 2018, regarding beneficial ownership of our common stock by:
•
each of our directors and director nominees;
•
each of our executive officers;
•
all directors and executive officers as a group; and
•
each person, or group of affiliated persons, known by us to beneficially own more than five percent of our shares of common stock.
Beneficial ownership is determined according to the rules of the SEC, and generally means that person has beneficial ownership of a security if he or she possesses sole or shared voting or investment power of that security, and includes options that are currently exercisable or exercisable within 60 days. Each director or officer, as the case may be, has furnished us with information with respect to beneficial ownership. Except as otherwise indicated, we believe that the beneficial owners of common stock listed below, based on the information each of them has given to us, have sole investment and voting power with respect to their shares, except where community property laws may apply. Except as otherwise noted below, the address for each person or entity listed in the table is c/o Soliton, Inc., 5304 Ashbrook Drive, Houston, Texas, 77081.
 
Shares beneficially owned prior to Offering
 
Percentage owned prior to Offering
 
Percentage beneficially owned after Offering
 
 
 
Minimum
 
Maximum
Name and Address of Beneficial Owner
 
 
 
 
 
 
 
Directors and Executive Officers
 
 
 
 
 
 
 
Walter V. Klemp
425,000

 
3.5
%
 
3.1
%
 
2.8
%
Christopher Capelli, M.D. (1)
475,333

 
4.0
%
 
3.5
%
 
3.1
%
Lori Bisson
60,000

 
*

 
*

 
*

Joe Tanner
80,000

 
*

 
*

 
*

Jonathan P. Foster
—

 
*

 
*

 
*

Danika Harrison
—

 
*

 
*

 
*

Brad Hauser
—

 
*

 
*

 
*

Directors and Executive Officers as a Group (4 persons)
1,040,333

 
8.7
%
 
7.6
%
 
6.9
%
5% or greater shareholders
 
 
 
 

 

Remeditex Ventures (2)
8,233,589

 
68.6
%
 
60.3
%
 
54.4
%
*
Less than 1%.
(1)
Includes 212,500 currently held by M.D. Anderson Cancer Center that were issued pursuant to our license agreement with MD Anderson. As the inventor of the intellectual property we license from MD Anderson, Dr. Capelli is entitled to 50% of the proceeds (after the recoupment of any costs associated therewith) from the sale by MD Anderson of the shares issued to the MD Anderson in connection with the license agreement. Notwithstanding Dr. Capelli pecuniary interest in the shares held by MD Anderson, Dr. Capelli has no right to vote or sell the shares held by MD Anderson. Assumes the conversion of bridge note outstanding with accrued interest through June 30, 2018 of 12,833 shares.
(2)
Assumes the conversion of preferred shares outstanding with accrued dividends of 3,329,418 shares and conversion of bridge notes outstanding with accrued interest through June 30, 2018 of 4,204,171 shares. Lyda Hill is the sole trustee in the trust that owns a controlling interest in Remeditex Ventures and should be considered the beneficial owner of these shares.

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DESCRIPTION OF CAPITAL STOCK
The following summary is a description of the material terms of our capital stock and is not complete. You should also refer to the Soliton, Inc. certificate of incorporation and bylaws, which are included as exhibits to the Offering statement of which this Offering Circular forms a part, and the applicable provisions of the Delaware General Corporation Law.
Our amended and restated certificate of incorporation to be in effect prior to the completion of this Offering will authorize us to issue up to 100,000,000 shares of common stock . Our convertible preferred stock with accrued dividends will be automatically converted into 3,329,418 shares of common stock contemporaneously with the closing of this Offering. Our unsecured promissory notes will be automatically converted into 6,689,290 shares of common stock contemporaneously with the closing of this Offering (inclusive of shares issuable for accrued interest through June 30, 2018 under such notes) After giving effect to the conversion of our preferred stock and our unsecured convertible notes contemporaneously with the closing of this Offering, we will have 13,644,265 shares of common stock outstanding (if the minimum number of shares are sold) or 15,144,265 shares of common stock outstanding (if the maximum number of shares are sold) immediately after the closing of this Offering.
Common Stock
Shares of our common stock have the following rights, preferences and privileges:
Voting
Each holder of common stock is entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders. Any action at a meeting at which a quorum is present will be decided by a majority of the voting power present in person or represented by proxy, except in the case of any election of directors, which will be decided by a plurality of votes cast. There is no cumulative voting.
Dividends
Holders of our common stock are entitled to receive dividends when, as and if declared by our board of directors out of funds legally available for payment, subject to the rights of holders, if any, of any class of stock having preference over the common stock. Any decision to pay dividends on our common stock will be at the discretion of our board of directors. Our board of directors may or may not determine to declare dividends in the future. The board’s determination to issue dividends will depend upon our profitability and financial condition any contractual restrictions, restrictions imposed by applicable law and the SEC, and other factors that our board of directors deems relevant.
Liquidation Rights
In the event of a voluntary or involuntary liquidation, dissolution or winding up of the company, the holders of our common stock will be entitled to share ratably on the basis of the number of shares held in any of the assets available for distribution after we have paid in full, or provided for payment of, all of our debts and after the holders of all outstanding series of any class of stock have preference over the common stock, if any, have received their liquidation preferences in full.
Other
Our issued and outstanding shares of common stock are fully paid and non-assessable. Holders of shares of our common stock are not entitled to preemptive rights. Shares of our common stock are not convertible into shares of any other class of capital stock, nor are they subject to any redemption or sinking fund provisions.

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Convertible Notes
Between January 2017 and February 2018, we issued 8.25% convertible notes in an aggregate of $6,900,000 in principal amount of convertible notes, which principal and accrued interest will automatically convert into shares of common stock upon the closing of this Offering at a conversion rate of $3.75 per share.
On April 2, 2018, we issued 10% convertible notes in an aggregate of $500,000 in principal amount of convertible notes, which principal and accrued interest will automatically convert into shares of common stock upon the closing of this Offering at a conversion rate of $0.175 per share.
On April 17, 2018, we commenced a private offering of 10% convertible notes, which principal and accrued interest will automatically convert into shares of common stock upon the closing of this Offering at a conversion rate of $1.75 per share. As of June 30, 2018, we had issued $3,000,000 in principal amount of such notes.
August Offering
In August 2018, we expect to issue $360,000 in principal amount of 10% non-convertible promissory notes. The principal and interest will be due on the earlier of one-year from the date of issuance or upon the closing of this Offering. For each dollar in principal amount of notes purchase by investors, we will issue the investors a five-year warrant to purchase .6 of a share of common stock at an exercise price of $1.75 per share. Subject to limited exceptions, a holder of warrants will not have the right to exercise any portion of its warrants if the holder, together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of our common stock outstanding immediately after giving effect to such exercise. A holder may increase or decrease the beneficial ownership limitation up to 9.99%, provided, however, that any increase in the beneficial ownership limitation shall not be effective until 61 days following notice of such change to us.
In addition to the notes described above, if this Offering is not completed prior to October 1, 2018 and if we require additional working capital, Mr. Klemp, Dr. Capelli, Ms. Bisson and other members of management have collectively agreed to purchase up to an additional $125,000 of notes and warrants on the same terms as described above.
Certificate of Incorporation and Bylaw Provisions
Our amended and restated certificate of incorporation and bylaws to be in effect prior to this Offering will include a number of anti-takeover provisions that may have the effect of encouraging persons considering unsolicited tender offers or other unilateral takeover proposals to negotiate with our board of directors rather than pursue non-negotiated takeover attempts. These provisions include:
Advance Notice Requirements. Our amended and restated bylaws establish advance notice procedures with regard to stockholder proposals relating to the nomination of candidates for election as directors or new business to be brought before meetings of stockholders. These procedures provide that notice of stockholder proposals must be timely and given in writing to our corporate Secretary. Generally, to be timely, notice must be received at our principal executive offices not fewer than 120 calendar days prior to the first anniversary date on which our notice of meeting and related proxy statement were mailed to stockholders in connection with the previous year’s annual meeting of stockholders. The notice must contain the information required by the bylaws, including information regarding the proposal and the proponent.
Special Meetings of Stockholders. Our bylaws provide that special meetings of stockholders may be called at any time by only the Chairman of the Board, the Chief Executive Officer, the President or the board of directors, or in their absence or disability, by any vice president.

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No Written Consent of Stockholders. Our certificate of incorporation and bylaws provide that any action required or permitted to be taken by stockholders must be effected at a duly called annual or special meeting of stockholders and may not be effected by any consent in writing by such stockholders.
Amendment of Certificate of Incorporation. Our certificate of incorporation requires the affirmative vote of at least two-thirds of our shares to amend, alter or repeal certain provisions in the certificate of incorporation, including, how we elect directors, our obligation to indemnify our officers and directors, our agreement to limit the liability of our directors to the extent permitted by Delaware law, the prohibition on written consents discussed in the above paragraph, and that we have elected to be governed by Section 203 of the Delaware General Corporation Law (as described below). The requirement to obtain a vote of two-thirds of our shares will make it more difficult for stockholders to change our certificate of incorporation.
Exclusive Forum Provision .  Our certificate of incorporation provides that the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors or officers to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law, or our certificate of incorporation or the bylaws, and (iv) any action asserting a claim against us governed by the internal affairs doctrine. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, a court could find these provisions of our certificate of incorporation to be inapplicable or unenforceable in respect of one or more of the specified types of actions or proceedings, which may require us to incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.
Amendment of Bylaws. Our stockholders may amend any provisions of our bylaws by obtaining the affirmative vote of the holders of a majority of each class of issued and outstanding shares of our voting securities, at a meeting called for the purpose of amending and/or restating our bylaws.
Delaware Takeover Statute
We are subject to Section 203 of the Delaware General Corporation Law ("DGCL") which, subject to certain exceptions, prohibits a Delaware corporation from engaging in any “business combination” (as defined below) with any interested stockholder for a period of three years following the date that such stockholder became an interested stockholder, unless: (1) prior to such date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; (2) on consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding those shares owned (x) by persons who are directors and also officers and (y) by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to this plan will be tendered in a tender or exchange offer; or (3) on or subsequent to such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2⁄3% of the outstanding voting stock that is not owned by the interested stockholder.
Section 203 of the DGCL defines generally “business combination” to include: (1) any merger or consolidation involving the corporation and the interested stockholder; (2) any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder; (3) subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; (4) any transaction involving the corporation

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that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or (5) the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. In general, Section 203 defines an “interested stockholder” as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by such entity or person.
Limitations on Liability and Indemnification of Officers and Directors
Our certificate of incorporation and bylaws limit the liability of our officers and directors and provide that we will indemnify our officers and directors, in each case, to the fullest extent permitted by the Delaware General Corporation Law. We expect to obtain additional directors’ and officers’ liability insurance coverage prior to the completion of this Offering.
Listing
We have applied to list our common stock on the NASDAQ Capital Market under the symbol “SOLY”.
Transfer Agent
The transfer agent for our common stock is Computershare.

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SHARES ELIGIBLE FOR FUTURE SALE
Future sales of substantial amounts of common stock in the public market after this Offering could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our equity securities. We are unable to estimate the number of shares of common stock that may be sold in the future.
Upon the closing of this Offering, we will have:
•
13,644,265 shares of common stock outstanding (if the minimum number of shares are sold) and 15,144,265 shares of common stock outstanding (if the maximum number of shares are sold); assuming the conversion of all of our outstanding unsecured convertible promissory notes into 6,689,290 shares of our common stock (inclusive of shares issuable for accrued interest through June 30, 2018 under such notes), and the conversion of our outstanding convertible preferred stock with accrued dividends into 3,329,418 shares of common stock, in each case, contemporaneously with the closing of this Offering; and
•
91,350 shares of common stock underlying outstanding warrants at an average exercise price of $1.75 per share:
•
Up to 291,000 shares of common stock underlying warrants to be issued in conjunction with the August Offering at an exercise price of $1.75 per share; and
•
2,235,000 shares of common stock underlying outstanding options at an average exercise price of $1.74 per share.
All of the shares sold in this Offering will be freely tradable without restriction under the Securities Act unless purchased by one of our affiliates as that term is defined in Rule 144 under the Securities Act, which generally includes directors, officers or 10% stockholders. None of the holders of shares of our common stock or securities exercisable for or convertible into shares of our common stock have any registration rights.
Lock-Up
Our executive officers, directors, and major stockholders (with respect to shares of common stock, common stock issuable upon conversion of our preferred stock, and common stock underlying 8.25% convertible notes), have agreed with the underwriters not to offer, sell, dispose of or hedge any shares of our common stock, subject to specified limited exceptions and extensions described elsewhere in this prospectus, during the period continuing through the date that is twelve months (subject to extension) after the date of this prospectus. After such twelve month period and until 24 months from the closing of this Offering, such individuals and entities may sell their shares pursuant to the following criteria:
–if our common stock price is over $7.00 per share for five consecutive trading days then the holder can sell up to 3% of their holdings on a monthly basis, subject to a maximum sale on any trading day of 4% of the daily volume;
–if our common stock price is over $10.00 per share for five consecutive trading days then the holder can sell up to an additional 5% of their holdings on a monthly basis, subject to a maximum sale on any trading day of 7% of the daily volume; and
–if our common stock price is over $14.00 per share then the holder is not restricted from making any sales until such time as our common stock price falls back below $14.00 per share.

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From the end of the preceding 24 month period until the three-year anniversary of the initial closing of this Offering, the holders can sell on any trading day 10% of the daily volume; provided that if our common stock price is over $10.00 per share then the holder is not restricted from making any sales until such time as the common stock falls back below $10.00 per share.
Notwithstanding the above, if the price is below $7.00 after the twelve month period the holder is permitted to sell two tranches as follows:
–5% of their holdings up to 100,000 shares in a private transaction after which such shares will be subject to a Rule 144 6 month holding period and released from lockup thereafter.
Rule 144
Shares of common stock held by any of our affiliates, as that term is defined in Rule 144 of the Securities Act, as well as shares held by our current stockholders, may be resold only pursuant to further registration under the Securities Act or in transactions that are exempt from registration under the Securities Act. In general, under Rule 144 as currently in effect, any person who is or has been an affiliate of ours during the 90 days immediately preceding the sale and who has beneficially owned shares for at least six months is entitled to sell, within any three-month period commencing 90 days after the date of this Offering Circular, a number of shares that does not exceed the greater of: (i) 1% of the number of shares of common stock then outstanding, or (ii) the average weekly trading volume of the common stock during the four calendar weeks preceding the filing of a Form 144 with respect to the sale.
Sales under Rule 144 by our affiliates will also be subject to manner of sale provisions and notice requirements and to the availability of current public information about us.
Stock Plan
We intend to file a registration statement on Form S-8 under the Securities Act of 1933, as amended, which will register 3,789,745 shares of common stock underlying stock awards for issuance under our stock option plans. Subject to any vesting requirements, these shares registered on Form S-8 will be eligible for resale in the public markets without restriction, subject to Rule 144 limitations applicable to affiliates.

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UNDERWRITING
We have entered into an engagement agreement with Boustead Securities, LLC, who will act as the lead underwriter (the “Underwriter”) upon the qualification of this Offering Circular. We will enter into an underwriting agreement with the Underwriter, with respect to the shares of our common stock in this Offering. Under the terms and subject to the conditions contained in the engagement agreement, we have agreed to issue and sell to the public through the Underwriter, and the Underwriter has agreed to offer and sell, a minimum of 1,500,000 shares of common stock and a maximum of 3,000,000 shares of common stock on a “best efforts” basis. If $7.5 million in subscriptions for the shares (the “Minimum Offering”) is not deposited in the Offering Accounts on or before __________, 2018 (the “Minimum Offering Period”), all subscriptions will be refunded to subscribers without deduction or interest. Subscribers have no right to a return of their funds during the Minimum Offering Period. If at least the Minimum Offering amount has been deposited by __________, 2018, the Offering may continue until the date when all shares have been sold or the date which is one year from this Offering being qualified by the SEC. The Underwriter may retain other selected dealers that are qualified to offer and sell the shares and that are members of the Financial Industry Regulatory Authority, Inc.
Until we achieve the minimum offering amount, the proceeds for the Offering will be kept in two non-interest bearing accounts (each an "Offering Account," collectively, the “Offering Accounts”). The Bryn Mawr Trust Company of Delaware ("BMTC DE") will serve as the escrow agent for the Offering Account maintained for all funds tendered by investors placed by SI Securities, LLC, a selected dealer in this Offering, as described below. FinTech Clearing, LLC will serve as the deposit agent for the other Offering Account maintained for all other funds tendered by investors in this Offering. The Underwriter shall determine the achievement of at least the minimum offering amount and the closing on such amounts, the Underwriter shall then instruct BMTC DE to release their funds to FinTech Clearing, LLC who will distribute all the proceeds to us less any fees to the Underwriter and selected dealers and the associated offered shares will be issued to the investors. If the Offering does not close, the proceeds for the Offering will be promptly returned to investors, without deduction and without interest.
The Underwriter is under no obligation to purchase any shares of our common stock for its own account. As a “best efforts” offering, there can be no assurance that the Offering will ultimately be consummated. The underwriter may, but is not obligated to, retain other selected dealers that are qualified to offer and sell the shares and that are members of the Financial Industry Regulatory Authority, Inc.
We have applied to NASDAQ to list our common stock under the symbol “SOLY.” In order to list, we will have to comply with NASDAQ listing standards and approval from NASDAQ will be conditional upon meeting these listing standards. We expect trading to commence following the approval of the qualification of this Offering, assuming we have sold the necessary number of shares being offered, and our filing on Form 8-A to register our shares under Section 12(b) under the Exchange Act has become effective.
Discounts, Commissions and Expenses
The Underwriter proposes to offer the shares to investors at the public Offering price and will receive cash equal to seven percent (7%) of the gross amount to be disbursed to us. The gross proceeds of this Offering will be immediately deposited into either an Offering Account administered by Fintech Clearing, LLC, held with Pacific Mercantile Bank, until at least the minimum offering amount is received or an Offering Account with BMTC DE, until such time as we have sold at least the minimum offering amount and otherwise satisfy the listing conditions to trade our Common Stock on NASDAQ. The Underwriter shall determine the achievement of at least the minimum offering and the closing on such amounts, the Underwriter shall then instruct BMTC DE to release their funds to FinTech Clearing, LLC who will distribute all the proceeds to us less any fees to the Underwriter and selected dealers and the associated offered shares will be issued to the investors .

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The following table and the two succeeding paragraphs summarize the underwriting compensation and estimated expenses we will pay:
 
Public Offering price
 
Underwriting Commissions (1)
 
Proceeds to us, before expenses
Per share:
$
5.00

 
$
0.35

 
$
4.65

Total Minimum:
$
7,500,000

 
$
525,000

 
$
6,700,000

Total Maximum:
$
15,000,000

 
$
1,050,000

 
$
13,675,000

(1)
This table depicts underwriter commissions of 7% of the gross offering proceeds.
(2)
In addition to the underwriter discounts and commissions included in the above table, our Underwriter will receive warrants to purchase shares of our common stock equal to 7% of the aggregate shares sold in this Offering, which will have an exercise price of $5.00 (100% of the Offering price).
(3)
After deducting expenses of the Offering, which are estimated to be approximately $275,000. Does not include any marketing expenses for this Offering as described in “Use of Proceeds”. See “Underwriting” for details regarding the compensation payable in connection with this Offering. This amount represents the proceeds of the Offering to the Company, which will be used as set out in “Use of Proceeds.”

We have agreed to reimburse the Underwriter for expenses incurred relating to the Offering, including all actual fees and expenses incurred by the Underwriter in connection with, among other things, due diligence costs, which shall not exceed $35,000, $35,000 of which was paid upon the execution of the engagement agreement, and the fees and expenses of the Underwriter’s counsel, which shall not exceed $75,000. We have also agreed to pay the Underwriter for all road show, transportation and other reasonable out-of-pocket expenses which shall not exceed $25,000 ($25,000 of which was paid upon the filing of an application to list its shares on NASDAQ). All fees and expenses already paid by us shall be reimbursed to the extent not actually incurred. We estimate that the total expenses of this Offering (including the foregoing expenses set forth in this paragraph), excluding underwriting commissions described above, will be approximately $275,000. In the event this Offering does not close, or the engagement agreement is terminated for any reason, we have agreed to reimburse the underwriter for all unreimbursed, reasonable, documented, out-of-pocket fees, expenses, and disbursements.
As additional compensation to the Underwriter, upon consummation of this Offering, we will issue to the Underwriter or its designees warrants to purchase an aggregate number of shares of our Common Stock equal to 7% of the number of shares of Common Stock issued in this Offering, at an exercise price per share of $6.00 (120% of the initial public offering price). These warrants and the underlying shares of Common Stock will not be sold, transferred, assigned, or hypothecated or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of the warrants by any person for a period of 180 days from the qualification date of this Offering, in accordance with FINRA Rule 5110. These warrants will expire on the fifth anniversary of the qualification date of the Offering, in accordance with FINRA Rule 5110(f)(2)(G)(i).
The Underwriter will compensate all selected dealers for their services as a selected dealer pursuant to the terms of the Selected Dealer Agreement, a form of which is filed as an exhibit to the Offering Statement of which this Offering Circular forms a part.
We intend to market the Common Stock in this Offering, in whole or in part, through the FlashFunders™ online platform located at http://www.flashfunders.com operated by FlashFunders, Inc. (collectively, with its subsidiaries and affiliates, referred to as FlashFunders), where this Offering Circular will be posted and through the SeedInvest Technology, LLC online platform located at the domain name www.seedinvest.com (an affiliate of SI Securities, LLC) (the "SI Online Platform"). FlashFunders, through its wholly owned subsidiary, FinTech Clearing, LLC, a FINRA member, has been further engaged to provide certain technology and clearing services, including offering deposit account services, in connection with this Offering. The fee for these services equal to 0.25% of the gross Offering proceeds

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(excluding proceeds from subscribers originating from SI Securities, LLC) will be paid by the Underwriter and will be reimbursed by us to the Underwriter. Further, we will pay FlashFunders (i) a technology fee equal to 0.25% of the gross Offering proceeds, which is included in the underwriting commission described above; (ii) applicable fees for fund transfers and accounting, including: funds transfer fees - $0.50 per ACH transfer; $12.00 per incoming wire transfer; $30.00 per outgoing domestic wire transfer; $40.00 per outgoing foreign wire transfer; $10.00 per check; and other banking and vendor fees as appropriate for funds processing; (iii) $2.00 processing fee for each AML; (iv) $8.00 fee for funds transfer exception, if any; and (v) a $10,000 listing fee, which is included as underwriting compensation. The SI Online Platform has also been engaged to provide technology tools to allow for the sale of shares in this Offering. SI Securities, LLC will charge investors investing in this Offering through the SI Online Platform a non-refundable transaction fee equal to 2% of the amount they invest (up to $300) at the time they subscribe for our shares. This fee will be refunded in the event we do not reach our minimum offering. The Offering is also marketed through our own website.
The underwriting agreement provides that we will indemnify the underwriter against certain liabilities, including liabilities under the Securities Act, or contribute to payments the underwriter may be required to make in respect thereof.
Offering Period and Expiration Date
This Offering will start on the date this Offering Circular is declared qualified by the SEC and will terminate at the earlier of: (1) the date at which the maximum amount of Common Stock being offered has been sold, (2) the date which is one year after this Offering is qualified by the SEC, or (3) the date on which this Offering is earlier terminated by us in our sole discretion.
Procedures for Subscribing
For subscriptions through Boustead Securities, LLC:
Go to [*], click on the “Invest” button and follow the procedures as described.
1.
Electronically receive, review, execute and deliver to us through DocuSign, a subscription agreement; and
2.
Deliver funds only by ACH, wire transfer or check for the amount set forth in the subscription agreement directly to the specified bank account maintained by FinTech Clearing, LLC as the deposit account agent.
Our website will redirect interested investors via the “Invest Now” button to a site operated by FlashFunders, where investors can receive, review, execute and deliver subscription agreements and payments electronically.
Investors who do not wish to utilize the online subscription option available on FlashFunders will be required to:
1.
Complete the subscription agreement offline and email, mail or fax the completed subscription agreement to the Underwriter; and
2.
Mail a check or wire funds to the Offering Account at Pacific Mercantile Bank.
We shall only deliver such subscription documents upon request after a potential investor has had ample opportunity to review this Offering Circular.

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For subscriptions through SI Securities, LLC:
1.
Go to [*], click on the "Invest" button and follow the procedures as described (if it is your first time making an investment on the SI Online Platform, you will be asked to set up an investor profile).
2.
Verify your identity and accreditation status.
3.
Execute the required legal agreements.
4.
Enter the account information of your bank account (checking or savings) or choose to wire the funds.
5.
Confirm your investment.
Each investor through the SI Online Platform, by providing his or her name and subscription amount and clicking "accept" and/or checking the appropriate box on the SI Online Platform (the "SI Online Acceptance"), will confirm their investment through the SI Online Platform and will confirm such investor’s electronic signature to the subscription agreement. By executing the subscription agreement, each investor will also agree that his or her electronic signature as provided through the SI Online Acceptance is the legal equivalent of his or her manual signature on the subscription agreement and the SI Online Acceptance establishes such investor’s acceptance of the terms and conditions of the subscription agreement.
Investors through SI Securities, LLC who do not wish to utilize the online subscription option available on the SI Online Platform will be required to:
1.
Complete the subscription agreement offline and email, mail or fax the completed subscription agreement to SI Securities, LLC; and
2.
Transfer funds via ACH or wire to the Offering Account at BMTC DE.
Any potential investor will have ample time to review the subscription agreement, along with their counsel, prior to making any final investment decision. We shall only deliver such subscription documents upon request after a potential investor has had ample opportunity to review this Offering Circular. Further, we will not accept any money until the SEC declares the Offering Statement qualified.
Proceeds will be held in an Offering Account at Pacific Mercantile Bank, administered by FinTech Clearing, LLC, and BMTC DE as the escrow agent, subject to compliance with Exchange Act Rule 15c2-4 until closing occurs. Our Underwriter and/or the participating broker-dealers will submit a subscriber’s form(s) of payment in compliance with Exchange Act Rule 15c2-4, generally by noon of the next business day following receipt of the subscriber’s subscription agreement and form(s) of payment.
You will be required to represent and warrant in your subscription agreement that you are an accredited investor as defined under Rule 501 of Regulation D or that your investment in the shares of common stock does not exceed 10% of your net worth or annual income, whichever is greater, if you are a natural person, or 10% of your revenues or net assets, whichever is greater, calculated as of your most recent fiscal year if you are a non-natural person. By completing and executing your subscription agreement you will also acknowledge and represent that you have received a copy of this Offering Circular, you are purchasing the shares of common stock for your own account and that your rights and responsibilities regarding your shares of common stock will be governed by our chart and bylaws, each filed as an exhibit to the Offering Statement of which this Offering Circular is a part.

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Right to Reject Subscriptions. After we receive your complete, executed subscription agreement and the funds required under the subscription agreement have been received in the Offering Accounts, we have the right to review and accept or reject your subscription in whole or in part, for any reason or for no reason. We will return all monies from rejected subscriptions immediately to you, without interest or deduction.
Acceptance of Subscriptions. Upon our acceptance of a subscription agreement, we will countersign the subscription agreement and issue the shares subscribed at closing. Once you submit the subscription agreement and it is accepted, you may not revoke or change your subscription or request your subscription funds. All accepted subscription agreements are irrevocable.
Both the FlashFunders and SI Online Platforms contain certain “Terms of Use” that investors wishing to subscribe online are required to agree to in order to complete their proposed investment in the Company. The Terms of Use on the FlashFunders Platform and SI Online Platform will not apply to potential claims made under the federal securities laws by investors in this Offering.
On April 17, 2018, we commenced a private placement for up to an aggregate of $3,000,000 of convertible bridge notes (the “Private Placement”). On the closing date of this Offering, the outstanding principal and accrued, but unpaid interest on the notes will be converted into common stock at the conversion price of $1.75 per share. The notes bear interest at 10.0% per annum and mature two years from the issuance date of the notes. In connection with the Private Placement, the Underwriter purchased a convertible bridge note representing an aggregate of $300,000 and received a common stock purchase warrant to purchase 12,000 shares of common stock of the Company (the “Private Placement Securities”). We believe the Private Placement Securities may be deemed as compensation pursuant to FINRA Rule 5110(d)(5)(C).
Lock-Up Agreements
We have agreed that we will not (i) offer, pledge, sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise dispose of, directly or indirectly, any shares of our capital stock or securities convertible into or exercisable or exchangeable for shares of capital stock, (ii) file or cause to be filed any registration statement with the SEC (excluding a Form S-8 registration statement related to our existing equity compensation plans) relating to the offering for any shares of our capital stock or any securities convertible into or exercisable or exchangeable for shares of capital stock, or (iii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of our capital stock (collectively, the “Lock-Up Securities”) during the period commencing upon the commencement of this offering and ending on and including the 180th day following such date (the “Lock-up Period”), except with respect to (A) the shares to be sold hereunder, (B) the issuance of shares of common stock or warrants to purchase common stock at a purchase price or exercise price, as applicable, of (1) greater than $9.00 per share for the initial 90 days of the Lock-up Period, or (2) greater than $7.00 per share for the final 90 days of the Lock-up Period, (C) the issuance of shares of common stock upon the exercise of a stock option or warrant or the conversion of a security outstanding on the date of the offering, issued after the date of the commencement of the offering pursuant to our currently existing or hereafter adopted equity compensation plans or employment or consulting agreements or arrangements which have been filed with the SEC, or (D) the issuance of stock options or shares of our capital stock under any currently existing or hereafter adopted equity compensation plan or employment/consulting agreements or agreements.
Our executive officers, directors, and major stockholders (with respect to shares of common stock currently owned, common stock issuable upon conversion of our preferred stock, and common stock underlying 8.25% convertible notes), have agreed with the underwriters not to offer, sell, dispose of or hedge any shares of our common stock, subject to specified limited exceptions and extensions described elsewhere in this prospectus, during the period continuing through the date that is twelve months (subject

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to extension) after the date of this prospectus. After such twelve month period and until 24 months from the closing of this Offering, such individuals and entities may sell their shares pursuant to the following criteria:
–if our common stock price is over $7.00 per share for five consecutive trading days then the holder can sell up to 3% of their holdings on a monthly basis, subject to a maximum sale on any trading day of 4% of the daily volume;
–if our common stock price is over $10.00 per share for five consecutive trading days then the holder can sell up to an additional 5% of their holdings on a monthly basis, subject to a maximum sale on any trading day of 7% of the daily volume; and
–if our common stock price is over $14.00 per share then the holder is not restricted from making any sales until such time as our common stock price falls back below $14.00 per share.
From the end of the preceding 24 month period until the three-year anniversary of the initial closing of this Offering, the holders can sell on any trading day 10% of the daily volume; provided that if our common stock price is over $10.00 per share then the holder is not restricted from making any sales until such time as the common stock falls back below $10.00 per share.
Notwithstanding the above, if the price is below $7.00 after the twelve month period the holder is permitted to sell two tranches as follows:
–5% of their holdings up to 100,000 shares in a private transaction after which such shares will be subject to a Rule 144 6 month holding period and released from lockup thereafter.
Electronic Offer, Sale and Distribution of Shares
An Offering Circular in electronic format may be made available on the websites maintained by the Underwriter, or selling group members, if any, participating in the Offering. The Underwriter may agree to allocate a number of shares to selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the Underwriter and selling group members that may make Internet distributions on the same basis as other allocations.
ERISA Considerations
Special considerations apply when contemplating the purchase of shares of our common stock on behalf of employee benefit plans that are subject to Title I of the Employee Retirement Income Security Act of 1974, as amended, or ERISA, plans, individual retirement accounts and other arrangements that are subject to Section 4975 of the Internal Revenue Code of 1986, as amended, or the Code, or provisions under any federal, state, local, non-U.S. or other laws or regulations that are similar to such provisions of the Code or ERISA, and entities whose underlying assets are considered to include “plan assets” of any such plan, account or arrangement (each referred to as a Plan). A person considering the purchase of the Offered Shares on behalf of a Plan is urged to consult with tax and ERISA counsel regarding the effect of such purchase and, further, to determine that such a purchase will not result in a prohibited transaction under ERISA, the Code or a violation of some other provision of ERISA, the Code or other applicable law. We will rely on such determination made by such persons, although no shares of our Common Stock will be sold to any Plans if management believes that such sale will result in a prohibited transaction under ERISA or the Code.
Foreign Regulatory Restrictions on Purchase of the Common Stock
We have not taken any action to permit a public offering of our common stock outside the United States or to permit the possession or distribution of this Offering Circular outside the United States.

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Persons outside the United States who come into possession of this Offering Circular must inform themselves about and observe any restrictions relating to this Offering of common stock and the distribution of the Offering Circular outside the United States.
Pricing of the Offering
The public offering price of the shares in this Offering will be determined by our Board of Directors and the underwriters without the assistance of a third party. Among the factors considered in determining the public offering price of the shares, in addition to the prevailing market conditions, are estimates of our business potential and earnings prospects.
Investment Limitations
Generally, no sale may be made to you in this Offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or net worth. Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.
As a Tier 2, Regulation A offering, investors must comply with the 10% limitation to invest in the Offering. The only investor in this Offering exempt from this limitation is an accredited investor, as defined under Rule 501 of Regulation D. If you meet one of the following tests you should qualify as an accredited investor:
(1)
You are a natural person who has had individual income in excess of $200,000 in each of the two most recent years, or joint income with your spouse in excess of $300,000 in each of these years, and have a reasonable expectation of reaching the same income level in the current year;
(2)
You are a natural person and your individual net worth, or joint net worth with your spouse, exceeds $1,000,000 at the time you purchase shares in this Offering (please see below on how to calculate your net worth);
(3)
You are an executive officer or general partner of the issuer or a manager or executive officer of the general partner of the issuer;
(4)
You are an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, of the Code, a corporation, a Massachusetts or similar business trust or a partnership, not formed for the specific purpose of acquiring the shares in this Offering, with total assets in excess of $5,000,000;
(5)
You are an entity (including an Individual Retirement Account trust) in which each equity owner is an accredited investor;
(6)
You are a trust with total assets in excess of $5,000,000, your purchase of shares in this Offering is directed by a person who either alone or with his purchaser representative(s) (as defined in Regulation D promulgated under the Securities Act) has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment, and you were not formed for the specific purpose of investing in the shares in this Offering;
(7)
You are a bank or a savings and loan association or other institution as defined in the Securities Act, a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, an insurance company as defined by the Securities Act, an investment company registered under the Investment Company Act of 1940, as amended, or the

99


Investment Company Act, or a business development company as defined in that act, any Small Business Investment Company licensed by the Small Business Investment Act of 1958 or a private business development company as defined in the Investment Advisers Act of 1940; or
(8)
You are a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has assets in excess of $5,000,000.
Net Worth Calculation
Your net worth is defined as the difference between your total assets and total liabilities. This calculation must exclude the value of your primary residence and may exclude any indebtedness secured by your primary residence (up to an amount equal to the value of your primary residence). In the case of fiduciary accounts, net worth and/or income suitability requirements may be satisfied by the beneficiary of the account or by the fiduciary, if the fiduciary directly or indirectly provides funds for the purchase of the shares in the Offering.
In order to purchase shares in this Offering and prior to the acceptance of any funds from an investor, an investor will be required to represent, to the company’s satisfaction, that he or she is either an accredited investor or is in compliance with the 10% of net worth or annual income limitation on investment in this Offering.
Selling Security Holders
No securities are being sold for the account of security holders. All net proceeds of this Offering will go to our company.
Other Selling Restrictions
Other than in the United States, no action has been taken by us or the Underwriter that would permit a public Offering of our common stock in any jurisdiction where action for that purpose is required. Our common stock may not be offered or sold, directly or indirectly, nor may this Offering Circular or any other Offering material or advertisements in connection with the offer and sale of shares of our common stock be distributed or published in any authority, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this Offering Circular comes are advised to inform themselves about and to observe any restrictions relating to this Offering and the distribution of this Offering Circular. This Offering Circular does not constitute an offer to sell or a solicitation of an offer to buy our common stock in any authority in which such an offer or solicitation would be unlawful.

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LEGAL MATTERS
The validity of the shares of common stock being offered by this Offering Circular will be passed upon for us by Schiff Hardin LLP, Washington, DC. Hunter Taubman Fischer & Li LLC has acted as counsel for the Underwriter with respect to this Offering.


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EXPERTS
The financial statements as of December 31, 2017 and 2016, included in this Offering Circular, have been so included in reliance on the report by GBH CPAs, PC, an independent registered public accounting firm, given on the authority of such firm as experts in auditing and accounting.


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WHERE YOU CAN FIND MORE INFORMATION
We have filed an offering statement on Form 1-A with the SEC under the Securities Act with respect to the common stock offered by this Offering Circular. This Offering Circular, which constitutes a part of the offering statement, does not contain all of the information set forth in the offering statement or the exhibits and schedules filed therewith. For further information with respect to us and our common stock, please see the offering statement and the exhibits and schedules filed with the offering statement. Statements contained in this Offering Circular regarding the contents of any contract or any other document that is filed as an exhibit to the offering statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the offering statement. The offering statement, including its exhibits and schedules, may be inspected without charge at the public reference room maintained by the SEC, located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549, and copies of all or any part of the offering statement may be obtained from such offices upon the payment of the fees prescribed by the SEC. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room. The SEC also maintains an Internet website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the site is www.sec.gov.
Upon completion of this Offering, we will become subject to the information and periodic reporting requirements of the Exchange Act, and, in accordance therewith, will file periodic reports, proxy statements and other information with the SEC. Such periodic reports, proxy statements and other information will be available for inspection and copying at the public reference room and on the SEC website referred to above.
We also maintain a website at www.soliton.com. Upon completion of this Offering, you may access these materials at our website free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on our website is not a part of this Offering Circular and the inclusion of our website address in this Offering Circular is an inactive textual reference only.


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of
Soliton, Inc.
Houston, Texas
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Soliton, Inc. (the "Company") as of December 31, 2017 and 2016, the related statements of operations, changes in stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Other Matters
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficit that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to 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.
/s/ GBH CPAs, PC
We have served as the Company's auditor since 2017.
GBH CPAs, PC
www.gbhcpas.com
Houston, Texas
February 2, 2018

104


Soliton, Inc.
Balance Sheets
As of December 31, 2017 and 2016
 
2017
 
2016
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
18,412

 
$
155,892

Prepaid expenses and other current assets
7,746

 
26,004

Total current assets
26,158

 
181,896

Property and equipment, net of accumulated depreciation
336,726

 
416,506

Intangible assets, net of accumulated amortization
92,102

 
75,465

Other assets
23,283

 
30,842

Total assets
$
478,269

 
$
704,709

LIABILITIES AND STOCKHOLDERS’ DEFICIT
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
445,453

 
$
435,396

Accrued liabilities
853,443

 
518,230

Dividends payable
3,333,260

 
2,053,260

Accrued interest - related party
295,830

 
—

Convertible notes payable - related party
6,025,000

 
—

Total current liabilities
10,952,986

 
3,006,886

Deferred rent
25,878

 
23,900

Total liabilities
10,978,864

 
3,030,786

Commitments and contingencies
 
 
 
Stockholders’ deficit
 
 
 
Series A Preferred stock, $0.001 par value, liquidation value of $1,999,997, 416,666 shares authorized, issued and outstanding
417

 
417

Series B Preferred stock, $0.001 par value, liquidation value of $14,000,641, 2,118,100 shares authorized, issued and outstanding
2,118

 
2,118

Common stock, $0.001 par value, 5,250,000 authorized, 1,820,556 and 1,643,056 shares issued and outstanding, respectively
1,821

 
1,643

Additional paid-in capital
21,031,388

 
20,445,460

Accumulated deficit
(31,536,339
)
 
(22,775,715
)
Total stockholders’ deficit
(10,500,595
)
 
(2,326,077
)
Total liabilities and stockholders’ deficit
$
478,269

 
$
704,709

See accompanying notes to the financial statements.

105


Soliton, Inc.
Statements of Operations
For the Years Ended December 31, 2017 and 2016
 
2017
 
2016
Revenue
$
—

 
$
—

 
 
 
 
Operating expenses:
 
 
 
Research and development
3,965,276

 
4,146,777

Sales and marketing
91,288

 
33,929

Depreciation and amortization expense
130,075

 
82,523

General and administrative expenses
3,001,969

 
3,054,762

Total operating expenses
7,188,608

 
7,317,991

 
 
 
 
Loss from operations
(7,188,608
)
 
(7,317,991
)
 
 
 
 
Other income (expense):
 
 
 
Interest expense
(295,830
)
 
—

Other income (expense)
4,751

 
16,732

Total other income (expense)
(291,079
)
 
16,732

 
 
 
 
Loss before income taxes
(7,479,687
)
 
(7,301,259
)
Income tax expense
937

 
2,312

 
 
 
 
Net loss
$
(7,480,624
)
 
$
(7,303,571
)
 
 
 
 
Net loss per common share, basic and diluted
$
(4.40
)
 
$
(4.80
)
 
 
 
 
Weighted average number of common shares outstanding, basic and diluted
1,700,275

 
1,522,619

See accompanying notes to the financial statements.

106


Soliton, Inc.
Statements of Changes in Stockholders’ Equity (Deficit)
For the Years Ended December 31, 2017 and 2016
 
 
 
 
 
 
 
Additional
 
 
 
 
 
Series A Preferred Stock
 
Series B Preferred Stock
 
Common Stock
 
Paid-In
 
Accumulated
 
 
 
Shares
 
Par
 
Shares
 
Par
 
Shares
 
Par
 
Capital
 
Deficit
 
Total
Balance at December 31, 2015
416,666

 
$
417

 
1,361,636

 
$
1,362

 
1,465,556

 
$
1,466

 
$
14,730,488

 
$
(14,300,199
)
 
$
433,534

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Share-based compensation
—

 
—

 
—

 
—

 
177,500

 
177

 
715,728

 
—

 
715,905

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of Series B Preferred Stock for cash
—

 
—

 
756,464

 
756

 
—

 
—

 
4,999,244

 
—

 
5,000,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accrued preferred dividends
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(1,171,945
)
 
(1,171,945
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(7,303,571
)
 
(7,303,571
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2016
416,666

 
417

 
2,118,100

 
2,118

 
1,643,056

 
1,643

 
20,445,460

 
(22,775,715
)
 
(2,326,077
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Share-based compensation
—

 
—

 
—

 
—

 
177,500

 
178

 
585,928

 
—

 
586,106

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accrued preferred dividends
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(1,280,000
)
 
(1,280,000
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(7,480,624
)
 
(7,480,624
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
416,666

 
$
417

 
2,118,100

 
$
2,118

 
1,820,556

 
$
1,821

 
$
21,031,388

 
$
(31,536,339
)
 
$
(10,500,595
)
See accompanying notes to the financial statements.

107


Soliton, Inc.
Statements of Cash Flows
For the Years Ended December 31, 2017 and 2016
 
2017
 
2016
Cash flows from operating activities:
 
 
 
Net loss
$
(7,480,624
)
 
$
(7,303,571
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation and amortization
130,075

 
82,523

Share-based compensation
586,106

 
715,905

Changes in operating assets and liabilities:
 
 
 
Prepaid expenses and other current assets
18,258

 
42,633

Other assets
7,559

 
15,118

Accounts payable
10,057

 
223,291

Accrued liabilities
335,213

 
195,269

Accrued interest - related party
295,830

 
—

Deferred rent
1,978

 
23,900

Net cash used in operating activities
(6,095,548
)
 
(6,004,932
)
 
 
 
 
Cash flows from investing activities:
 
 
 
Payments for the purchase of property and equipment
(48,807
)
 
(251,957
)
Payments for acquisition of intangibles
(18,125
)
 
(47,552
)
Net cash used in investing activities
(66,932
)
 
(299,509
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Proceeds from issuance of convertible notes - related party
6,025,000

 
—

Proceeds from sale of preferred stock
—

 
5,000,000

Net cash provided by financing activities
6,025,000

 
5,000,000

 
 
 
 
Net decrease in cash
(137,480
)
 
(1,304,441
)
 
 
 
 
Cash and cash equivalents, beginning of year
155,892

 
1,460,333

 
 
 
 
Cash and cash equivalents, end of year
$
18,412

 
$
155,892

 
 
 
 
Supplemental cash flow disclosures:
 
 
 
Cash paid for interest
$
—

 
$
—

Cash paid for income taxes
$
—

 
$
—

 
 
 
 
Non-cash investing and financing activities:
 
 
 
Accrued preferred dividends
$
1,280,000

 
$
1,171,945

See accompanying notes to the financial statements.

108


Soliton, Inc.
Notes to Financial Statements
Note 1 - Description of the Business and Summary of Significant Accounting Policies
Description of the Business
Soliton, Inc. (“Soliton” or the “Company”) was organized under the laws of the State of Delaware on March 27, 2012. The Company operates in one segment as a medical device company organized to develop and commercialize products utilizing a proprietary Rapid Acoustic Pulse technology platform. We are a pre-revenue stage company with our first product being developed for the removal of tattoos.
Going Concern
The Company has adopted the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements - Going Concern (“ASC 205-40”). ASC 205-40 requires management to assess an entity's ability to continue as a going concern within one year of the date of the financial statements are issued. In each reporting period (including interim periods), an entity is required to assess conditions known and reasonably knowable as of the financial statement issuance date to determine whether it is probable an entity will not meet its financial obligations within one year from the financial statement issuance date. Substantial doubt about an entity's ability to continue as a going concern exists when conditions and events, considered in the aggregate, indicate it is probable the entity will be unable to meet its financial obligations as they become due within one year after the date the financial statements are issued.
The Company is an early stage and emerging growth company and has not generated any revenues to date. As such, the Company is subject to all of the risks associated with early stage and emerging growth companies. Since inception, the Company has incurred losses and negative cash flows from operating activities. The Company does not expect to generate positive cash flows from operating activities in the near future.
The Company incurred net losses of approximately $7.5 million and had net cash flows used in operating activities of approximately $6.1 million for the year ended December 31, 2017. At December 31, 2017, the Company had an accumulated deficit of approximately $31.5 million, negative working capital of $10.9 million and cash of $18,412. The Company does not expect to experience positive cash flows from operating activities in the near future, if at all. The Company anticipates incurring operating losses for the next several years as it completes the development of its products and seeks requested regulatory clearances to market such products. These factors raise substantial doubt about the Company's ability to continue as a going concern within one year after the date the consolidated financial statements are issued.
The Company estimates its current cash resources, including the approximately $500,000 of net proceeds received in the January 2018 convertible debt tranches and the committed $375,000, absent any additional sources of cash, is sufficient to fund its operations through March 2018. Accordingly, the Company does not have sufficient cash resources to fund its anticipated operating losses for the next twelve months and the Company must raise additional funds to support its operating and capital needs beyond March 2018.
The Company’s ability to fund its operations is dependent upon management's plans, which include raising additional capital, obtaining regulatory clearance for its products currently under development, commercializing and generating revenues from products currently under development, and continuing to control expenses.

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A failure to raise sufficient capital, generate sufficient product revenues, or control expenditures, among other factors, will adversely impact the Company’s ability to meet its financial obligations as they become due and payable and to achieve its intended business objectives and therefore raises substantial doubt of the Company's ability to continue as a going concern within one year after the date the financial statements are issued.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.
Use of Estimates in Financial Statement Presentation
The preparation of these financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid accounts with original maturities of three months or less to be cash equivalents. At December 31, 2017 and 2016, all of the Company’s cash was deposited in one bank. 
Property and Equipment
Property and equipment are stated at historical cost and depreciated on a straight-line basis over the estimated useful lives, generally three to five years. Leasehold improvements are depreciated over the shorter of the remaining lease term or useful lives of the assets. Upon disposition of the assets, the costs and related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations. Repairs and maintenance costs are included as expense in the accompanying statement of operations.
Intangible Assets
Intangible assets include patents and trademarks. Patent related costs in connection with filing and prosecuting patent applications and patents filed by the Company are expensed as incurred, and are classified as general and administrative expenses, until a patent is granted; at which time additional costs related to applications in different countries are capitalized to intangible assets and amortized to general and administrative expenses over the shorter of the remaining licensed term or a twenty-year patent life. The Company does not amortize trademarks with indefinite useful lives; rather, such assets are required to be tested for impairment at least annually or sooner if events or changes in circumstances indicate that the asset may be impaired.
Long-Lived Assets
The Company evaluates its long-lived assets, including equipment, for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. Recoverability of these assets is measured by comparison of the carrying amount of each asset to the future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the asset is considered impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired assets. The Company has not recorded impairment of any long-lived assets in the periods presented.

110


Deferred Rent
Deferred rent is recorded and amortized to the extent the total minimum rental payments allocated to the current period on a straight-line basis exceed or are less than the cash payments required.
Convertible Debt
When conversion terms related to convertible debt would be triggered by future events not controlled by the Company, the Company accounts for the conversion feature as contingent conversion options. Recognition of the intrinsic value of the conversion option is recognized only upon the occurrence of a triggering event.
Fair Value Measurements
Fair value is defined as the price which would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-tier fair value hierarchy which prioritizes the inputs used in the valuation methodologies, as follows:
Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.
Level 3 Inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.
At December 31, 2017 and 2016, the carrying amounts of the Company's financial instruments, including cash, accounts payable, and accrued expenses, approximate their respective fair value due to the short-term nature of these instruments.
At December 31, 2017 and 2016, the Company does not have any assets or liabilities required to be measured at fair value in accordance with FASB ASC Topic 820, Fair Value Measurement.
Revenue Recognition
Prior to January 1, 2017, revenues were recognized when the four basic criteria for recognition were met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) consideration is fixed or determinable; and (4) collectability is reasonably assured. The Company adopted new accounting guidance for revenue recognition effective January 1, 2018 which did not have a material impact on the Company’s financial statements. Beginning from January 1, 2018, revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services

111


Research and Development Expenses
Research and development expenses are recognized as incurred and include the costs related to the Company's various contract research service providers, suppliers, engineering studies, supplies, and outsourced testing and consulting, as well as clinical costs.
Stock-Based Compensation
Stock-based compensation expense includes the estimated fair value of equity awards vested during the reporting period. The expense for equity awards vested during the reporting period is determined based upon the grant date fair value of the award and is recognized as expense over the applicable vesting period of the stock award using the straight-line method.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of reported assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company must then assess the likelihood that the resulting deferred tax assets will be realized. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.
Net Loss per Common Share
Basic net loss per common share are computed by dividing net loss available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net earnings (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. As of December 31, 2017, potentially dilutive securities include options to purchase 15,000 common shares, preferred stock convertible to 2,534,766 common shares and notes convertible to common shares upon a future financing. As of December 31, 2016, potentially dilutive securities include preferred stock convertible into 2,534,766 common shares.
JOBS Act Accounting Election
The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has irrevocably elected to avail itself of this exemption from new or revised accounting standards, and, therefore, will not be subject to the same new or revised accounting standards as public companies that are not emerging growth companies.
Subsequent Events
The Company’s management reviewed all material events through February 2, 2018 (the date that the financial statements were available to be issued) for subsequent event disclosure consideration.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"), which establishes a right-of-use (“ROU”) model requiring a lessee to recognize a ROU asset and a lease liability for all leases with terms greater-than 12 months. Leases will be classified as either finance or operating,

112


with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods with those fiscal years. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact of this guidance on its consolidated financial position, results of operations, and cash flows.
The Company does not believe that any other recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.
Note 2 - Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
 
December 31, 2017
 
December 31, 2016
Prepaid insurance
$
6,300

 
$
6,299

Rent deposit
—

 
15,118

Other receivables
1,446

 
4,587

Total prepaid expenses and other current assets
$
7,746

 
$
26,004

Note 3 - Property and Equipment, Net
Property and equipment, net consisted of the following:
 
December 31, 2017
 
December 31, 2016
Computer equipment and software
$
95,130

 
$
89,449

Research and development equipment
241,377

 
198,251

Leasehold improvements
242,167

 
242,167

Furniture
19,893

 
19,893

Less: accumulated depreciation
(261,841
)
 
(133,254
)
Total property and equipment, net
$
336,726

 
$
416,506

Depreciation expense for the years ended December 31, 2017 and 2016 was $128,587 and $81,623, respectively.
Note 4 - Intangible Assets, Net
Intangible assets, net consisted of the following:
 
December 31, 2017
 
December 31, 2016
Patents
$
22,527

 
$
14,898

Trademarks
72,590

 
62,094

Less: accumulated amortization
(3,015
)
 
(1,527
)
Total intangible assets, net
$
92,102

 
$
75,465


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Amortization expense for the years ended December 31, 2017 and 2016 was $1,488 and $900, respectively.
Note 5 - Convertible Note Payable - Related Party
On January 18, 2017, the Board of Directors of the Company approved a note purchase agreement allowing the Company to sell an aggregate of $3 million of convertible bridge notes. The notes are convertible into either the Company’s preferred or common stock at 75% of the price paid per share in a subsequent equity financing where the Company receives gross proceeds of not less than $5 million or at 85% of the per share price determined by dividing the equity value of the Company that is expected to be available for distribution to the Company’s stockholders by the aggregate number of the Company’s fully-diluted common shares upon the closing of a sale, liquidation, merger, or change of control of the Company. The notes bear interest at 8.25% per annum and mature on January 31, 2018.
The Company subsequently closed the first tranche of the note on January 23, 2017 for $1 million. A follow-on round of the note was closed on March 1, 2017 for $1 million with the last tranche of the note being closed on April 27, 2017 for $1 million.
The note agreement was amended on June 19, 2017 to allow for the sale and issuance of an additional $3.25 million of notes up to an aggregated amount of $6.25 million.
The Company closed $1.3 million on June 19, 2017 under the amended note purchase agreement and subsequently closed another $700,000 on July 17, 2017.
All notes issued under the agreement initially approved on January 18, 2017 are currently in default.
On November 1, 2017, the Board of Directors of the Company approved a second note purchase agreement allowing the Company to sell an aggregate of $1.9 million of convertible bridge notes with the same terms as the first note agreement except that the note matures on June 29, 2018.
The Company subsequently closed the first tranche of the note on November 9, 2017 for $400,000. A follow-on round of the note was closed on December 1, 2017, for $375,000 with a third tranche of the note being closed on December 26, 2017 for $250,000.
All the convertible notes were issued to one investor who is also a major stockholder of the Company.
As of December 31, 2017, the outstanding balance of the convertible notes payable was $6,025,000 and accrued interest related to the convertible notes was $295,830.
Note 6 - Income Taxes
Due to the Company’s net losses, there were no provisions for income taxes for the years ended December 31, 2017 and 2016. The difference between the income tax expense of zero shown in the statement of operations and pre-tax book net loss times the federal statutory rate of 35% is due to the change in the valuation allowance.
On December 22, 2017, new federal tax reform legislation was enacted in the United States (the “2017 Tax Act”), resulting in significant changes from previous tax law.  The 2017 Tax Act reduces the federal corporate income tax rate to 21% from 35% effective January 1, 2018.  The rate change, along with certain immaterial changes in tax basis resulting from the 2017 Tax Act, resulted in a reduction of the Company’s deferred tax assets of $3,715,972 and a corresponding reduction in the valuation allowance.

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Deferred income tax assets as of December 31, 2017 and 2016 were as follows:
 
December 31, 2017
 
December 31, 2016
Deferred Tax Assets:
 

 
 
Net operating losses
$
(5,573,958
)
 
$
(6,876,848
)
Less valuation allowance
5,573,958

 
6,876,848

Total deferred tax assets
$
—

 
$
—

The Company has recorded a full allowance against its deferred tax assets as of December 31, 2017 and 2016 because management determined that it is not more-likely-than not that those assets will be realized. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of deferred assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. 
For federal income tax purposes, the Company has a net operating loss carry forward of approximately $26.5 million at December 31, 2017, which expires commencing in 2032.
Note 7 - Commitments and Contingencies
On April 5, 2012, the Company entered into a Patent and Technology License Agreement with The University of Texas M.D. Anderson Cancer Center (“MD Anderson”). Pursuant to the agreement, the Company obtained a royalty-bearing, worldwide, exclusive license to intellectual property including patent rights related to the patents and technology the Company uses. Under the agreement, Soliton agreed to pay a nonrefundable license documentation fee 30 days after the effective date of the agreement. Additionally, Soliton agreed to pay a nonrefundable annual maintenance fee starting on the third anniversary of the effective date of the agreement, which escalates each anniversary. Additionally, the Company agreed to a running royalty percentage of net sales. The Company also agreed to make certain milestone and sublicensing payments.
MD Anderson has the right to terminate the agreement upon advanced notice in the event of a default by Soliton. The agreement will expire upon the expiration of the licensed intellectual property. The rights obtained by the Company pursuant to the agreement are made subject to the rights of the U.S. government to the extent that the technology covered by the licensed intellectual property was developed under a funding agreement between MD Anderson and the U.S. government. All out-of-pocket expenses incurred by MD Anderson in filing, prosecuting and maintaining the licensed patents have been and shall continue to be assumed by the Company.
Leases
The Company leases space for its corporate office, which initially provided for a five-year term beginning on July 15, 2015, for rent payments of $8,053 per month and the option to cancel the lease agreement at the end of the initial three-year term at the election of the Company. Total rent expense under this office space lease arrangement for the years ended December 31, 2017 and 2016 was $96,631 and $95,788, respectively.

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Future minimum lease payments as of December 31, 2017 were as follows:
Year Ending December, 31
 
Amount
2018
 
$
99,147

2019
 
103,737

2020
 
108,429

Thereafter
 
36,668

Total future minimum lease payments
 
$
347,981

Legal Proceedings
In the normal course of business, from time-to-time, the Company may be subject to claims in legal proceedings. However, the Company does not believe it is currently a party to any pending legal actions. Notwithstanding, legal proceedings are subject-to inherent uncertainties, and an unfavorable outcome could include monetary damages, and in such event, could result in a material adverse impact on the Company's business, financial position, results of operations, or cash flows.
Note 8 - Stockholders’ Equity (Deficit)
Preferred Stock
The Company is authorized to issue 2,534,766 shares of preferred stock with a par value of $0.001 per share with such designation, rights, and preferences as may be determined from time-to-time by the Company's board of directors.
During 2016, the Company sold 756,464 Series B Preferred Stock for $5 million. As of December 31, 2017 and 2016, there were 416,666 Series A Preferred Stock and 2,118,100 Series B Preferred Stock issued and outstanding.
The Series A Preferred Stock has the following features:
1.
Dividends accrue at a rate of 8% per annum based on $4.80 per Series A preferred share, the dividends are cumulative but non-compounding and payable upon the Company’s voluntary or involuntary liquidation, dissolution or winding up, the exercise of conversion rights of the holder, the declaration by the Company’s board of directors, upon a closing of the sale of the Company’s common shares to the public at a price of at least $24 per share with at least $50 million of gross proceeds and the common shares listed on the New York Stock Exchange or NASDAQ Capital Market, and upon conversion of at least 50.1% of the issued and outstanding Series A Preferred Stock. The Company has the option to pay the dividend in cash or by issuing common shares.
2.
A liquidation right preferable over the right of the Company’s common stock.
3.
Each share of the Series A Preferred Stock has one voting right.
4.
Each share of the Series A Preferred Stock is convertible by the holder, at any time, into shares of common stock equal to $4.80 divided by a conversion price, initially set at $4.80. The conversion price is adjustable upon certain events.
The Series B Preferred Stock has similar rights as Series A Preferred Stock except that the dividends are based on $6.61 per Series B Preferred share and Series B Preferred Stock is convertible into common shares at a rate of $6.61 divided by a conversion price initially set at $6.61. As of December 31, 2017 and 2016, accrued dividends for preferred stock were $3,333,260 and $2,053,260, respectively. At

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December 31, 2017, the conversion price for the Series A and Series B preferred stock were $4.80 and $6.61, respectively.
Adoption of 2012 Long Term Incentive Plan
In November 2012, the Company’s board of directors and stockholders adopted the 2012 Long Term Incentive Plan (the “2012 Stock Plan”). The 2012 Stock Plan is designed to enable the Company to offer employees, officers, directors and consultants, as defined, an opportunity to acquire a proprietary interest in the Company. The types of awards that may be granted under the 2012 Stock Plan include stock options, stock appreciation rights, restricted stock, and other stock-based awards subject to limitations under applicable law. All awards are subject to approval by the Company’s board of directors. The 2012 Stock Plan reserves shares of common stock for issuance in accordance with the 2012 Stock Plan’s terms. Total number of shares reserved and available for issuance under the plan is 789,745 shares. As of December 31, 2017, 14,746 shares remained available for grant under the 2012 Stock Plan.
Restricted Stock
The Company granted 450,000 shares of restricted common stock to executives during 2013 and 2014. Of the total shares of restricted stock granted, 400,000 shares vested annually equally over 4 years and the remaining 50,000 shares have a vesting schedule of 33,332 shares vest upon change of control and remaining vested monthly equally over 12 months after a change of control.
During 2016, the Company granted 310,000 shares of restricted common stock to executives and employees with a fair value of $996,429 based on the fair value of $3.21 per share on grant date. One quarter of the shares vested on the date of grant and one quarter of the shares vest on each of the anniversary after the grant date.
During each of the years ended December 31, 2017 and 2016, the Company issued common shares totaling 177,500 for restricted shares granted.
During the years ended December 31, 2017 and 2016, the Company recorded $570,536 and $715,905, respectively, in stock-based compensation for all of the restricted shares granted. As of December 31, 2017, unamortized expense related to the restricted stock grant was $798,003.
Stock Options
The following table summarizes stock option activities for the year ended December 31, 2017:
 
Number of Shares
 
Weighted Average Exercise Price
 
Weighted Average Remaining Life (in Years)
 
Aggregate Intrinsic Value
Outstanding, December 31, 2016
—

 
$
—

 
—

 
$
—

Granted
15,000

 
0.13

 
10.00

 
—

Exercised
—

 
—

 
—

 
—

Canceled
—

 
—

 
—

 
—

Outstanding, December 31, 2017
15,000

 
$
0.13

 
9.75

 
$
—

 
 
 
 
 
 
 
 
Exercisable, December 31, 2017
3,750

 
$
0.13

 
9.75

 
$
—

On October 1, 2017, the Company granted options to purchase 15,000 common shares to a member of the scientific advisory board. The stock options have a ten-year contractual term from date of grant, an

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exercise price of $0.13 per share. Options to purchase 3,750 common shares vested on the date of grant and options to purchase 3,750 common shares vest on each of the anniversary after the grant date. The options had a fair value of $46,711 that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 1.92%, (2) expected life of 5.8 years, (3) volatility of 79%, and (4) zero expected dividends.
There were no option activities during the year ended December 31, 2016.
All options issued and outstanding are being amortized over their respective vesting periods. The unrecognized compensation expense at December 31, 2017 was $31,141. During the year ended December 31, 2017, the Company recorded option expense of $15,570.
Note 9 - Subsequent Events
On January 8, 2018, the Company executed an additional tranche of the convertible note in the amount of $250,000. On January 25, 2018, the Company executed a second additional tranche of the convertible note in the amount of $250,000. Both of these notes are governed under the same terms and conditions of the convertible note agreement approved on November 1, 2017 discussed in Note 5 above.

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Soliton, Inc.
Balance Sheet
(Unaudited)
 
March 31,
2018
 
December 31,
2017
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
10,535

 
$
18,412

Prepaid expenses and other current assets
9,700

 
7,746

Total current assets
20,235

 
26,158

Property and equipment, net of accumulated depreciation
306,541

 
336,726

Intangible assets, net of accumulated amortization
95,606

 
92,102

Other assets
23,283

 
23,283

Total assets
$
445,665

 
$
478,269

LIABILITIES AND STOCKHOLDERS' DEFICIT
 
 
 
Current liabilities
 
 
 
Accounts payable
$
922,781

 
$
445,453

Accrued liabilities
507,641

 
853,443

Dividends payable
3,653,260

 
3,333,260

Accrued interest - related party
462,687

 
295,830

Convertible notes payable - related party
6,900,000

 
6,025,000

Total current liabilities
12,446,369

 
10,952,986

Deferred rent
26,003

 
25,878

Total liabilities
12,472,372

 
10,978,864

Commitments and contingencies
 
 
 
Stockholders' deficit
 
 
 
Series A Preferred Stock, $0.001 par value, liquidation value of $1,999,997, 416,666 shares authorized, issued and outstanding
417

 
417

Series B Preferred Stock, $0.001 par value, liquidation value of $14,000,641, 2,118,100 shares authorized, issued and outstanding
2,118

 
2,118

Common stock, $0.001 par value, 5,250,000 shares authorized, 1,820,556 shares issued and outstanding
1,821

 
1,821

Additional paid-in capital
21,176,941

 
21,031,388

Accumulated deficit
(33,208,004
)
 
(31,536,339
)
Total stockholders' deficit
(12,026,707
)
 
(10,500,595
)
Total liabilities and stockholders' deficit
$
445,665

 
$
478,269

See accompanying notes to the unaudited financial statements

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Soliton, Inc.
Statement of Operations
(Unaudited)
 
2018
 
2017
Revenue
$
—

 
$
—

Operating expenses:
 
 
 
Research and development
692,725

 
1,151,873

Sales and marketing
12,500

 
18,120

Depreciation and amortization expense
30,561

 
32,386

General and administrative expenses
449,029

 
742,100

Total operating expenses
1,184,815

 
1,944,479

Loss from operations
(1,184,815
)
 
(1,944,479
)
Other income (expense):
Interest income
37

 
506

Interest expense
(166,887
)
 
(22,151
)
Total other income (expense)
(166,850
)
 
(21,645
)
Loss before income taxes
(1,351,665
)
 
(1,966,124
)
Income tax expense
-

 
937

Net loss
$
(1,351,665
)
 
$
(1,967,061
)
Net loss per common share, basic and diluted
$
(0.74
)
 
$
(1.20
)
Weighted average number of common shares outstanding, basic and diluted
1,820,556

 
1,643,056

See accompanying notes to the unaudited financial statements.

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Soliton, Inc.
Statements of Cash Flows
(Unaudited)
 
Three Months Ended March 31,
 
2018
 
2017
Cash flows from operating activities:
 
 
 
Net loss
$
(1,351,665
)
 
$
(1,967,061
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation and amortization expenses
30,561

 
32,386

Stock-based compensation
145,553

 
142,634

Changes in operating assets and liabilities
 
 
 
Prepaid expenses and other current assets
(1,954
)
 
(4,626
)
Accounts payable
477,328

 
711,752

Accrued liabilities
(345,802
)
 
(101,438
)
Accrued interest - related party
166,857

 
22,151

Deferred rent
125

 
1,233

Net cash used in operating activities
(878,997
)
 
(1,162,969
)
Cash flows from investing activities:
 
 
 
Payments for acquisition of properties and equipment
—

 
(1,197
)
Payments for acquisition of intangible assets
(3,880
)
 
(2,445
)
Net cash used in investing activities
(3,880
)
 
(3,642
)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of convertible notes - related party
875,000

 
2,000,000

Net cash provided by financing activities
875,000

 
2,000,000

Net change in cash and cash equivalents
(7,877
)
 
833,389

Cash and cash equivalents, beginning of period
18,412

 
155,892

Cash and cash equivalents, end of period
$
10,535

 
$
989,281

Supplemental cash flow disclosures:
 

 
 

Cash paid for interest
-

 
-

Cash paid for income tax
-

 
-

Non-cash investing and financing activities:
 
 
 
Accrued preferred dividends
$
320,000

 
$
320,000

See accompanying notes to the unaudited financial statements.

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Soliton, Inc.
Notes to Financial Statements
(Unaudited)
Note 1 - Description of the Business and Summary of Significant Accounting Policies Description of the Business
Soliton, Inc. (“Soliton” or the “Company”) was organized under the laws of the State of Delaware on March 27, 2012. The Company operates in one segment as a medical device company organized to develop and commercialize products utilizing a proprietary controlled ultrasound technology platform. We are a pre-revenue stage company with our first product being developed for the removal of tattoos.
Going Concern
The Company has adopted the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements - Going Concern (“ASC 205-40”). ASC 205-40 requires management to assess an entity's ability to continue as a going concern within one year of the date of the financial statements are issued. In each reporting period (including interim periods), an entity is required to assess conditions known and reasonably knowable as of the financial statement issuance date to determine whether it is probable an entity will not meet its financial obligations within one year from the financial statement issuance date. Substantial doubt about an entity's ability to continue as a going concern exists when conditions and events, considered in the aggregate, indicate it is probable the entity will be unable to meet its financial obligations as they become due within one year after the date the financial statements are issued.
The Company is an early stage and emerging growth company and has not generated any revenues to date. As such, the Company is subject to all of the risks associated with early stage and emerging growth companies. Since inception, the Company has incurred losses and negative cash flows from operating activities. The Company does not expect to generate positive cash flows from operating activities in the near future.
For the three months ended March 31, 2018, the Company incurred net losses of approximately $1.4 million, and had net cash flows used in operating activities of approximately $0.9 million. At March 31, 2018, the Company had an accumulated deficit of approximately $33.2 million, negative working capital of $12.4 million and cash of $10,535. The Company does not expect to experience positive cash flows from operating activities in the near future, if at all. The Company anticipates incurring operating losses for the next several years as it completes the development of its products and seeks requested regulatory clearances to market such products. These factors raise substantial doubt about the Company's ability to continue as a going concern within one year after the date the consolidated financial statements are issued.
The Company estimates its current cash resources, including the approximately $4.2 million of net proceeds received through June 30, 2018, through its convertible debt tranches, is sufficient to fund its operations through September 2018. Accordingly, the Company does not have sufficient cash resources to fund its anticipated operating losses for the next twelve months and the Company must raise additional funds to support its operating and capital needs beyond September 2018.
The Company’s ability to fund its operations is dependent upon management's plans, which include raising additional capital, obtaining regulatory clearance for its products currently under development, commercializing and generating revenues from products currently under development, and continuing to control expenses.

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A failure to raise sufficient capital, generate sufficient product revenues, or control expenditures, among other factors, will adversely impact the Company’s ability to meet its financial obligations as they become due and payable and to achieve its intended business objectives and therefore raises substantial doubt of the Company's ability to continue as a going concern within one year after the date the financial statements are issued.
Basis of Presentation
The accompanying interim financial statements are unaudited. These unaudited interim financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all the information and footnotes required by U.S. Generally Accepted Accounting Principles (“GAAP”) for complete financial statements. These unaudited interim financial statements should be read in conjunction with the audited financial statements and accompanying notes for the year ended December 31, 2017. In the opinion of management, the unaudited interim financial statements reflect all the adjustments (consisting of normal recurring adjustments) necessary to state fairly the Company’s financial position as of March 31, 2018 and the results of operations for the three months ended March 31, 2018 and 2017. The interim consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. The December 31, 2017 balance sheet included herein was derived from the audited financial statements, but does not include all disclosures, including notes, required by GAAP for complete financial statements.
Use of Estimates in Financial Statement Presentation
The preparation of these financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid accounts with original maturities of three months or less to be cash equivalents. At March 31, 2018, all of the Company’s cash was deposited in one bank.
Property and Equipment
Property and equipment are stated at historical cost and depreciated on a straight-line basis over the estimated useful lives, generally three to five years. Leasehold improvements are depreciated over the shorter of the remaining lease term or useful lives of the assets. Upon disposition of the assets, the costs and related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations. Repairs and maintenance costs are included as expense in the accompanying statement of operations.
Intangible Assets
Intangible assets include patents and trademark. Patent related costs in connection with filing and prosecuting patent applications and patents filed by the Company are expensed as incurred, and are classified as general and administrative expenses, until a patent is granted; at which time additional costs related to applications in different countries are capitalized to intangible assets and amortized to general and administrative expenses over the shorter of the remaining licensed term or a twenty-year patent life. The Company does not amortize trademarks with indefinite useful lives; rather, such assets are required to be tested for impairment at least annually or sooner if events or changes in circumstances indicate that the asset may be impaired.

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Long-Lived Assets
The Company evaluates its long-lived assets, including equipment, for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. Recoverability of these assets is measured by comparison of the carrying amount of each asset to the future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the asset is considered impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired assets. The Company has not recorded impairment of any long-lived assets in the periods presented.
Deferred Rent
Deferred rent is recorded and amortized to the extent the total minimum rental payments allocated to the current period on a straight-line basis exceed or are less than the cash payments required.
Convertible Debt
When conversion terms related to convertible debt would be triggered by future events not controlled by the Company, the Company accounts for the conversion feature as contingent conversion options. Recognition of the intrinsic value of the conversion option is recognized only upon the occurrence of a triggering event.
Fair Value Measurements
Fair value is defined as the price which would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-tier fair value hierarchy which prioritizes the inputs used in the valuation methodologies, as follows:
Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.
Level 3 Inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.
At March 31, 2018 and December 31, 2017, the carrying amounts of the Company's financial instruments, including cash, accounts payable, and accrued expenses, approximate their respective fair value due to the short-term nature of these instruments.
At March 31, 2018 and December 31, 2017, the Company does not have any assets or liabilities required to be measured at fair value in accordance with FASB ASC Topic 820, Fair Value Measurement.
Revenue Recognition
Prior to January 1, 2017, revenues were recognized when the four basic criteria for recognition were met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been

124


rendered; (3) consideration is fixed or determinable; and (4) collectability is reasonably assured. The Company adopted new accounting guidance for revenue recognition effective January 1, 2018 which did not have a material impact on the Company’s financial statements. Beginning from January 1, 2018, revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
Research and Development Expenses
Research and development expenses are recognized as incurred and include the costs related to the Company's various contract research service providers, suppliers, engineering studies, supplies, and outsourced testing and consulting, as well as clinical costs.
Stock-Based Compensation
Stock-based compensation expense includes the estimated fair value of equity awards vested during the reporting period. The expense for equity awards vested during the reporting period is determined based upon the grant date fair value of the award and is recognized as expense over the applicable vesting period of the stock award using the straight-line method.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of reported assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company must then assess the likelihood that the resulting deferred tax assets will be realized. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.
Net Loss per Common Share
Basic net loss per common share are computed by dividing net loss available to common shareholders by the weighted- average number of common shares outstanding during the period. Diluted net earnings (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. As of March 31, 2018 and December 31, 2017, potentially dilutive securities include options to purchase 15,000 common shares, preferred stock convertible to 2,534,766 common shares and notes convertible to common shares upon a future financing.
JOBS Act Accounting Election
The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has irrevocably elected to avail itself of this exemption from new or revised accounting standards, and, therefore, will not be subject to the same new or revised accounting standards as public companies that are not emerging growth companies.
Subsequent Events
The Company’s management reviewed all material events through April 26, 2018 (the date that the

125


financial statements were available to be issued) for subsequent event disclosure consideration.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"), which establishes a right-of-use (“ROU”) model requiring a lessee to recognize a ROU asset and a lease liability for all leases with terms greater-than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods with those fiscal years. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact of this guidance on its consolidated financial position, results of operations, and cash flows.
The Company does not believe that any other recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.
Note 2 - Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
 
March 31,
2018
 
December 31,
2017
Prepaid insurance
$
2,773

 
$
6,300

Prepaid legal
5,000

 
—

Other receivables
1,927

 
1,446

Total prepaid expenses and other current assets
$
9,700

 
$
7,746

Note 3 - Property and Equipment, Net
Property and equipment, net consisted of the following:
 
March 31,
2018
 
December 31,
2017
Computer equipment and software
$
91,181

 
$
95,130

Research and development equipment
241,377

 
241,377

Leasehold improvements
242,167

 
242,167

Furniture
19,893

 
19,893

Less: accumulated depreciation
(288,077
)
 
(261,841
)
Total property and equipment, net
$
306,541

 
$
336,726

Depreciation expense during the three months ended March 31, 2018 and 2017 was $30,185 and $32,386, respectively.

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Note 4 - Intangible Assets, Net
Intangible assets, net consisted of the following:
 
March 31,
2018
 
December 31,
2017
Patents
$
22,527

 
$
22,527

Trademarks
76,470

 
72,590

Less: accumulated amortization
(3,391
)
 
(3,015
)
Total intangible assets, net
$
95,606

 
$
92,102

Amortization expense during the three months ended March 31, 2018 and 2017 was $376 and $0, respectively.
Note 5 - Convertible Note Payable - Related Party
On January 18, 2017, the Board of Directors of the Company approved a note purchase agreement allowing the Company to sell an aggregate of $3 million of convertible bridge notes. The notes are convertible into either the Company’s preferred or common stock at 75% of the price paid per share in a subsequent equity financing where the Company receives gross proceeds of not less than $5 million or at 85% of the per share price determined by dividing the equity value of the Company that is expected to be available for distribution to the Company’s stockholders by the aggregate number of the Company’s fully-diluted common shares upon the closing of a sale, liquidation, merger, or change of control of the Company. The notes bear interest at 8.25% per annum and matured on January 31, 2018.
The Company subsequently closed the first tranche of the note on January 23, 2017 for $1 million. A follow-on round of the note was closed on March 1, 2017 for $1 million with the last tranche of the note being closed on April 27, 2017 for $1 million.
The note agreement was amended on June 19, 2017 to allow for the sale and issuance of an additional $3.25 million of notes up to an aggregated amount of $6.25 million.
The Company closed $1.3 million on June 19, 2017 under the amended note purchase agreement and subsequently closed another $700,000 on July 17, 2017.
On July 12, 2018, the note purchase agreement was amended to extend the maturity date to April 30, 2019.
On November 1, 2017, the Board of Directors of the Company approved a second note purchase agreement allowing the Company to sell an aggregate of $1.9 million of convertible bridge notes with the same terms as the first note agreement except that the note matures on June 29, 2018. On July 12, 2018, the second note purchase agreement was amended to extend the maturity date to April 30, 2019.
The Company subsequently closed the first tranche of the note on November 9, 2017 for $400,000. A follow-on round of the note was closed on December 1, 2017 for $375,000 with a third tranche of the note being closed on December 26, 2017 for $250,000.
On January 8, 2018, the Company executed an additional tranche of the convertible note in the amount of $250,000. On January 25, 2018, the Company executed a second additional tranche of the convertible note in the amount of $250,000. On February 13, 2018, the Company executed a third additional tranche of the convertible note in the amount of $375,000.

127


All the convertible notes were issued to one investor who is also a major stockholder of the Company.
As of March 31, 2018, the outstanding balance of the convertible notes payable was $6,900,000 and accrued interest related to the convertible notes was $462,687.
Note 6 - Commitments and Contingencies
On April 5, 2012, the Company entered into a Patent and Technology License Agreement with The University of Texas M.D. Anderson Cancer Center (“MD Anderson”). Pursuant to the agreement, the Company obtained a royalty-bearing, worldwide, exclusive license to intellectual property including patent rights related to the patents and technology the Company uses. Under the agreement, Soliton agreed to pay a nonrefundable license documentation fee 30 days after the effective date of the agreement. Additionally, Soliton agreed to pay a nonrefundable annual maintenance fee starting on the third anniversary of the effective date of the agreement, which escalates each anniversary. Additionally, the Company agreed to a running royalty percentage of net sales. The Company also agreed to make certain milestone and sublicensing payments.
MD Anderson has the right to terminate the agreement upon advanced notice in the event of a default by Soliton. The agreement will expire upon the expiration of the licensed intellectual property. The rights obtained by the Company pursuant to the agreement are made subject to the rights of the U.S. government to the extent that the technology covered by the licensed intellectual property was developed under a funding agreement between MD Anderson and the U.S. government. All out-of-pocket expenses incurred by MD Anderson in filing, prosecuting and maintaining the licensed patents have been and shall continue to be assumed by the Company.
Leases
The Company leases space for its corporate office, which initially provided for a five-year term beginning on July 15, 2015, for rent payments of $8,053 per month and the option to cancel the lease agreement at the end of the initial three-year term at the election of the Company. Total rent expense under this office space lease arrangement for the three months ended March 31, 2018 and 2017 was $16,793 and $24,158, respectively.
Future minimum lease payments as of March 31, 2018 were as follows:
Period Ending December, 31
 
Amount
2018
 
$
75,115

2019
 
103,737

2020
 
108,429

Thereafter
 
36,668

Total future minimum lease payments
 
$
323,949

Legal Proceedings
In the normal course of business, from time-to-time, the Company may be subject to claims in legal proceedings. However, the Company does not believe it is currently a party to any pending legal actions. Notwithstanding, legal proceedings are subject-to inherent uncertainties, and an unfavorable outcome could include monetary damages, and in such event, could result in a material adverse impact on the Company's business, financial position, results of operations, or cash flows.

128


Note 7 - Stockholders’ Equity (Deficit) Preferred Stock
The Company is authorized to issue 2,534,766 shares of preferred stock with a par value of $0.001 per share with such designation, rights, and preferences as may be determined from time-to-time by the Company's board of directors.
As of March 31, 2018 and December 31, 2017, there were 416,666 Series A Preferred Stock and 2,118,100 Series B Preferred Stock issued and outstanding.
The Series A Preferred Stock has the following features:
1)
Dividends accrue at a rate of 8% per annum based on $4.80 per Series A preferred share, the dividends are cumulative but non-compounding and payable upon the Company’s voluntary or involuntary liquidation, dissolution or winding up, the exercise of conversion rights of the holder, the declaration by the Company’s board of directors, upon a closing of the sale of the Company’s common shares to the public at a price of at least $24 per share with at least $50 million of gross proceeds and the common shares listed on the New York Stock Exchange or NASDAQ Capital Market, and upon conversion of at least 50.1% of the issued and outstanding Series A Preferred Stock. The Company has the option to pay the dividend in cash or by issuing common shares.
2)
A liquidation right preferable over the right of the Company’s common stock.
3)
Each share of the Series A Preferred Stock has one voting right.
4)
Each share of the Series A Preferred Stock is convertible by the holder, at any time, into shares of common stock equal to $4.80 divided by a conversion price, initially set at $4.80. The conversion price is adjustable upon certain events.
The Series B Preferred Stock has similar rights as Series A Preferred Stock except that the dividends are based on $6.61 per Series B Preferred share and Series B Preferred Stock is convertible into common shares at a rate of $6.61 divided by a conversion price initially set at $6.61. As of March 31, 2018 and December 31, 2017, accrued dividends for preferred stock were $3,653,260 and $3,333,260, respectively. At March 31, 2018, the conversion price for the Series A and Series B preferred stock were $4.80 and $6.61, respectively.
Adoption of 2012 Long Term Incentive Plan
In November 2012, the Company’s board of directors and stockholders adopted the 2012 Long Term Incentive Plan (the “2012 Stock Plan”). The 2012 Stock Plan is designed to enable the Company to offer employees, officers, directors and consultants, as defined, an opportunity to acquire a proprietary interest in the Company. The types of awards that may be granted under the 2012 Stock Plan include stock options, stock appreciation rights, restricted stock, and other stock-based awards subject to limitations under applicable law. All awards are subject to approval by the Company’s board of directors. The 2012 Stock Plan reserves shares of common stock for issuance in accordance with the 2012 Stock Plan’s terms. Total number of shares reserved and available for issuance under the plan is 789,746 shares. As of March 31, 2018, 14,746 shares remained available for grant under the 2012 Stock Plan.
Restricted Stock
During the three months ended March 31, 2018 and 2017, the Company recorded $142,634 and $142,634, respectively, in stock-based compensation for the restricted shares granted prior to 2017. As of March 31, 2018, unamortized expense related to the restricted stock grant was $655,369.

129


Stock Options
The following table summarizes stock option activities for the three months ended March 31, 2018:
 
Number of Shares
 
Weighted Average Exercise Price
 
Weighted Average Remaining Life (in Years)
 
Aggregate Intrinsic Value
Outstanding, December 31, 2017
15,000

 
$
0.13

 
9.75

 
—

Granted
—

 
—

 
—

 
—

Exercised
—

 
—

 
—

 
—

Canceled
—

 
—

 
—

 
—

Outstanding, March 31, 2018
15,000

 
$
0.13

 
9.51

 
—

 
 
 
 
 
 
 
 
Exercisable, March 31, 2018
3,750

 
$
0.13

 
9.51

 
—

All options issued and outstanding are being amortized over their respective vesting periods. The unrecognized compensation expense at March 31, 2018 was $28,222. During the three months ended March 31, 2018 and 2017, the Company recorded option expense of $2,919 and $0, respectively.
Note 8 - Subsequent Events
On April 2, 2018, the Board of Directors of the Company approved a note purchase agreement allowing the Company to sell an aggregate of $500,000 of convertible bridge notes. On the closing date of the Company’s initial public offering of no more than 2 million shares of common stock at a price per share of not less than $5, the outstanding principal and accrued, but unpaid, interest shall be converted into common stock at the conversion price of $0.175. The notes bear interest at 10.0% per annum and mature on April 2, 2020. The Company issued to five investors for an aggregate of $500,000 on the same date.
On April 17, 2018, the Board of Directors of the Company approved a note purchase agreement allowing the Company to sell an aggregate of $3,000,000 of convertible bridge notes. On the closing date of the Company’s initial public offering of no more than 3,000,000 shares of common stock at a price per share of not less than $5, the outstanding principal and accrued, but unpaid, interest shall be converted into common stock at the conversion price of $1.75. The notes bear interest at 10.0% per annum and mature on April 17, 2020. As of June 30, 2018, we had issued $3,000,000 in principal amount of such notes.
Subsequent to March 31, 2018, the Company issued options to purchase 2,220,000 shares of common stock to officers and non-employee directors. These options have a term of 10 years and are exercisable at $1.75 per share.
Subsequent to March 31, 2018, the Company issued warrants to purchase 91,350 shares of common stock to its underwriters. These warrants have a term of 5 years and are exercisable at $1.75

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PART III - EXHIBITS
INDEX TO EXHIBITS
Exhibit
Number
 
Description
1.1
 
1.2
 
1.3
 
2.1
 
2.2
 
4
 
6.1
 
6.2
 
6.3
 
6.4
 
6.5
 
6.6
 
6.7
 
6.8
 
6.9
 
6.10
 
8.1
 
8.2
 
10
 
11.1
 
11.2
 
12
 
13.1
 

*
Previously filed.

(1)
Confidential portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.



SIGNATURES
Pursuant to the requirements of Regulation A, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-A and has duly caused this amendment to Offering Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas on August 10, 2018.
SOLITON, INC.
 
 
By:
/s/ Christopher Capelli
 
President and Chief Science Officer 

This offering statement has been signed below by the following persons in the capacities and on the dates indicated:
SIGNATURE
 
TITLE
 
DATE
 
 
 
 
 
/s/ Christopher Capelli
 
President and Chief Science Officer (principal executive officer)
 
August 10, 2018
 Christopher Capelli
 
 
 
 
 
 
 
/s/ Lori Bisson
 
Chief Financial Officer (principal financial and accounting officer)
 
August 10, 2018
 Lori Bisson
 
 
 
 
 
 
 
*
 
Executive Chairman
 
August 10, 2018
Walter V. Klemp
 
 
 
 
 
 
 
*
 
Director
 
August 10, 2018
Jonathan P. Foster
 
 
 
 
 
 
 
*
 
Director
 
August 10, 2018
Danika Harrison
 
 
 
 
 
 
 
*
 
Director
 
August 10, 2018
Brad Hauser
 
 
*
By:
/s/ Lori Bisson
 
 
Lori Bisson
 
 
Attorney-in-fact

Exhibit 1.1

UNDERWRITING AGREEMENT
SOLITON, INC.
______, 2018
Boustead Securities, LLC
6 Venture, Suite 325
Irvine, CA 92618
As Representative of the several underwriters
listed in Schedule A hereto
Ladies and Gentlemen:
Soliton, Inc., a Delaware corporation (the “Company”), proposes to issue and sell a minimum of 1,500,000 shares and a maximum of 3,000,000 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (“Common Stock”) to investors deemed acceptable by the Company (the “Investors”) in a public offering pursuant to Regulation A and to engage the several underwriters listed in Schedule A hereto (the “Underwriters”), for whom Boustead Securities, LLC is acting as a representative (the “Representative”) on a best efforts basis. The Underwriters have agreed to act, on a best efforts basis only, as the underwriters in connection with the offering and sale of the Shares (the “Offering”). The Company confirms its agreement with the Underwriters as follows:
SECTION 1.    Agreement to Act on a Best Efforts Basis.
(a)On the basis of the representations, warranties and agreements of the Company herein contained and subject to all the terms and conditions of this Agreement, the Underwriters agree to act on a best efforts, min/max basis only, in connection with the issuance and sale by the Company of the Shares to the Investors. Under no circumstances will the Underwriters be obligated to underwrite or purchase any of the Shares for their respective accounts or otherwise provide any financing. The Company has agreed that upon the Initial Closing and at each Subsequent Closing (as defined below) of the Offering, the Company shall: (y) pay the Underwriters a success fee, payable in cash, equal to seven percent (7%) of the aggregate gross proceeds received by the Company from such Closing (the “Success Fee”); and (z) issue to the Underwriters warrants, substantially in the form of Exhibit A hereto, equal to seven percent (7%) of the number of shares of Common Stock sold and issued in the Offering (the “Underwriters Warrants”), at an exercise price per share equal to one hundred percent (100%) of the price per Share as shown on the cover page of the Final Offering Circular (as defined below). Such warrant shall expire on the fifth anniversary of the Qualification Date (as defined below).
(b)The Underwriters shall have the right to enter into selected dealer agreements with other broker-dealers participating in the Offering (each dealer being referred to herein as a “Dealer” and said dealers being collectively referred to herein as the “Dealers”). The Success Fee is allowable, in whole or in part, to the Dealers. The Company will not be liable or responsible to any Dealer for direct payment of compensation to any Dealer, it being the sole and exclusive responsibility of the Underwriters for payment of compensation to Dealers.
SECTION 2.    Delivery and Payment.
(a)In the event that the Underwriters receive any payment from an Investor in connection with the purchase of any Shares by such investor, such payments will be promptly transmitted to and deposited into one of two escrow accounts (the “Escrow Accounts”) established by the Company in


connection with the Offering, Bryn Mawr Trust Company of Delaware, as escrow agent for funds tendered by Investors placed by SI Securities, LLC and FinTech Clearing, LLC, as escrow agent for all other funds tendered by Investors (the “Escrow Agents”). Among other things, the Underwriters shall forward any checks so received by the Underwriters to the Escrow Agents by noon the next business day. The Underwriters and the Company shall instruct Investors to make wire transfers in accordance with the Company’s qualified Offering Statement.
(b)Prior to the Initial Closing date of the Offering and any Subsequent Closing date, (i) each Investor will execute and deliver a Subscription Agreement (each, an “Investor Subscription Agreement”) to the Company and the Company will make available to each Underwriter and the Escrow Agents copies of each such Investor Subscription Agreement; (ii) each Investor will transfer to the Escrow Accounts funds in an amount equal to the price per Share as shown on the cover page of the Final Offering Circular multiplied by the number of Shares subscribed by such Investor; (iii) subscription funds received from any Investor will be promptly transmitted to the Escrow Accounts in compliance with Rule 15c2-4 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and (iv) the Escrow Agents will notify the Company and the Representative in writing whether the balance of the Escrow Accounts contains collected funds in the amount equal to the proceeds for the sale of at least 1,500,000 Shares offered hereby (the “Requisite Funds”).
i.If the Escrow Agents shall have received at least the Requisite Funds on or before 9:00 a.m., New York City time, on ______, 2018, or at such other time(s) on such other date(s), not more than thirty (30) days thereafter, as may be agreed upon by the Company and the Representative (each such date, a “Closing Date”), Bryn Mawr Trust Company of Delaware will release the balance of their escrow account to FinTech Clearing, LLC who will release the balance of the Escrow Accounts for collection by the Company and the Representative as provided in the escrow agreement among the Company, the Representative and FinTech Clearing, LLC and the escrow agreement among the Company, the Representative, SI Securities, LLC and The Bryn Mawr Trust Company of Delaware (each an “Escrow Agreement”, collectively, the “Escrow Agreements”) and the Company shall deliver the Shares purchased on such Closing Date to the Investors, which delivery may be made through the facilities of the Depository Trust Company (“DTC”) or via book entry with the Company’s securities registrar and transfer agent, Computershare (the “Transfer Agent”). The initial closing (the “Initial Closing”) and any subsequent closing (each, a “Subsequent Closing”) shall take place at the office of the Representative or such other location as the Representative and the Company shall mutually agree. The Initial Closing and all Subsequent Closings shall each be referred to as a “Closing.” All actions taken at a Closing shall be deemed to have occurred simultaneously on the date of such Closing.
ii.If the Requisite Funds have not been received immediately prior to the initial Closing Date, the Offering will not proceed and the Escrow Agents will promptly return the funds to the investors without interest.
(c)On each Closing Date, the Company will issue to the Representative (and/or its designee(s)) the Underwriters Warrants. The Underwriter Warrants shall have an exercise price per share equal to one hundred twenty percent (120%) of the price per Share as shown on the cover page of the Final Offering Circular. The Underwriter Warrants will be exercisable for a term of five years beginning on the Qualification Date (as defined below). The Representative understands and agrees that there are significant restrictions pursuant to Financial Industry Regulatory Authority (“FINRA”) Rule 5110 against transferring the Underwriter Warrants and the underlying shares of Common Stock during the one hundred eighty (180) days after the Qualification Date and by its acceptance thereof shall agree that it will not sell, transfer, assign, pledge or hypothecate the Underwriter Warrants, or any portion thereof, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities for a period of one hundred eighty (180) days following the Qualification Date to anyone other


than (i) the Representative or selected dealer in connection with the Offering contemplated hereby or (ii) a bona fide officer or partner of the Representative or selected dealer; and only if any such transferee agrees to the foregoing lock-up restrictions.
SECTION 3.    Representations and Warranties of the Company. The Company represents, warrants and covenants to each Underwriter as follows:
(a)The Company has filed with the Securities and Exchange Commission (the “Commission”) an offering statement on Form 1-A (File No. 024-10854) (collectively, with the various parts of such offering statement, each as amended as of the Qualification Date for such part, including any Offering Circular and all exhibits to such offering statement, the “Offering Statement”) relating to the Shares pursuant to Regulation A as promulgated under the Securities Act of 1933, as amended (the “Securities Act”), and the other applicable rules, orders and regulations (collectively referred to as the “Rules and Regulations”) of the Commission promulgated under the Securities Act. As used in this Agreement:
i.“Applicable Time” means 12:00 p.m., Eastern time, on the date of this Agreement;
ii.“Final Offering Circular” means the final offering circular relating to the public offering of the Shares as filed with the Commission pursuant to Regulation A of the Rules and Regulations;
iii.“Preliminary Offering Circular” means any preliminary offering circular relating to the Shares included in the Offering Statement pursuant to Regulation A of the Rules and Regulations;
iv.“Pricing Disclosure Materials” means the most recent Preliminary Offering Circular and the materials identified in Schedule B hereto;
v.“Qualification Date” means the date as of which the Offering Statement was or will be qualified with the Commission pursuant to Regulation A, the Securities Act and the Rules and Regulations; and
vi.“Testing-the-Waters Communication” means any video or written communication with potential investors undertaken in reliance on Rule 255 of the Rules and Regulations.
(b)The Offering Statement has been filed with the Commission in accordance with the Securities Act and Regulation A of the Rules and Regulations; no stop order of the Commission preventing or suspending the qualification or use of the Offering Statement, or any amendment thereto, has been issued, and no proceedings for such purpose have been instituted, or, to the Company’s knowledge, are contemplated by the Commission.
(c)The Offering Statement, at the time it became qualified, as of the date hereof, and as of each Closing Date, conformed and will conform in all material respects to the requirements of Regulation A, the Securities Act and the Rules and Regulations.
(d)The Offering Statement, at the time it became qualified, as of the date hereof, and as of each Closing Date, did not and will not, 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 not misleading.
(e)The Preliminary Offering Circular did not, as of its date, 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 the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representation or warranty with respect to the statements contained in the Preliminary Offering Circular which have been provided by the Underwriter to the Company specifically for inclusion therein, as further set forth in Section 8(c) of this Agreement.
(f)The Final Offering Circular will not, as of its date and on each Closing Date, 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 the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representation or warranty with respect to the statements contained in the Final Offering Circular which have been provided by the Underwriters to the Company specifically for inclusion therein, as further set forth in Section 8(c) of this Agreement.
(g)The Pricing Disclosure Materials and each Testing-the-Waters Communication, when considered together, did not, as of the Applicable Time, 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, provided, however, that the Company makes no representation or warranty with respect to the statements contained in the Preliminary Offering Circular which have been provided by the Underwriters to the Company specifically for inclusion therein, as further set forth in Section 8(c) of this Agreement.
(h)As of the date hereof and as of each Closing Date, the Company is duly organized and validly existing as a corporation in good standing under the laws of the State of Delaware. The Company has full power and authority to conduct all the activities conducted by it, to own and lease all the assets owned and leased by it and to conduct its business as presently conducted and as described in the Offering Statement, the Pricing Disclosure Materials and the Final Offering Circular. The Company is duly licensed or qualified to do business and in good standing as a foreign organization in all jurisdictions in which the nature of the activities conducted by it or the character of the assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so qualified or in good standing or have such power or authority would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on or affecting the business, prospects, properties, management, financial position, stockholders’ equity, or results of operations of the Company and its Subsidiaries taken as a whole (a “Material Adverse Effect”). Complete and correct copies of the certificate of incorporation and of the bylaws of the Company and all amendments thereto have been made available to the Underwriters, and such certificate of incorporation shall be in effect as of the Closing Date.
(i)The Company has no subsidiaries, nor does it own a controlling interest in any entity other than those entities set forth on Schedule C to this Agreement (each a “Subsidiary” and collectively the “Subsidiaries”). Each Subsidiary has been duly organized and is validly existing and in good standing under the laws of its jurisdiction of formation. Each Subsidiary is duly qualified and in good standing as a foreign company in each jurisdiction in which the character or location of its properties (owned, leased or licensed) or the nature or conduct of its business makes such qualification necessary, except for those failures to be so qualified or in good standing which would not be reasonably expected to have a Material Adverse Effect. All of the shares of issued capital stock of each corporate subsidiary, and all of the share capital, membership interests and/or equity interests of each subsidiary that is not a corporation, have been duly authorized and validly issued, are fully paid and non-assessable and are owned directly or indirectly by the Company, free and clear of any lien, encumbrance, claim, security interest, restriction on transfer, shareholders’ agreement, proxy, voting trust or other defect of title whatsoever.
(j)The Company is organized in, and its principal place of business is in, the United States.


(k)The Company is not subject to the ongoing reporting requirements of Section 13 or 15(d) of the Exchange Act and has not been subject to an order by the Commission denying, suspending, or revoking the registration of any class of securities pursuant to Section 12(j) of the Exchange Act that was entered within five (5) years preceding the date the Offering Statement was originally filed with the Commission. The Company is not, and has not been at any time during the two-year period preceding the date the Offering Statement was originally filed with the Commission, required to file with the Commission the ongoing reports required by the Rules and Regulations under Regulation A.
(l)The Company is not, nor upon completion of the transactions contemplated herein will it be, an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”). The Company is not a development stage company or a “business development company” as defined in Section 2(a)(48) of the Investment Company Act. The Company is not a blank check company and is not an issuer of fractional undivided interests in oil or gas rights or similar interests in other mineral rights. The Company is not an issuer of asset-backed securities as defined in Item 1101(c) of Regulation AB.
(m)Neither the Company, nor any predecessor of the Company; nor any other issuer affiliated with the Company; nor any director or executive officer of the Company or other officer of the Company participating in the Offering, nor any beneficial owner of twenty percent (20%) or more of the Company’s outstanding voting equity securities, nor any promoter connected with the Company, is subject to the disqualification provisions of Rule 262 of the Rules and Regulations.
(n)The Company is not a “foreign private issuer,” as such term is defined in Rule 405 under the Securities Act.
(o)The Company has full legal right, power and authority to enter into this Agreement, and the Escrow Agreements and perform the transactions contemplated hereby and thereby. This Agreement and the Escrow Agreements have each been authorized and validly executed and delivered by the Company and are each a legal, valid and binding agreement of the Company enforceable against the Company in accordance with its terms, subject to the effect of applicable bankruptcy, insolvency or similar laws affecting creditors’ rights generally and equitable principles of general applicability.
(p)The issuance and sale of the Shares have been duly authorized by the Company, and, when issued and paid for in accordance with this Agreement, will be duly and validly issued, fully paid and nonassessable and will not be subject to preemptive or similar rights. The holders of the Shares will not be subject to personal liability by reason of being such holders. The Shares, when issued, will conform to the description thereof set forth in the Final Offering Circular in all material respects.
(q)The Company has not authorized anyone other than the management of the Company and the Representative to engage in Testing-the-Waters Communications. The Company reconfirms that the Representative has been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The Company has not distributed any Testing-the-Waters Communications other than those listed on Schedule D hereto.
(r)The financial statements and the related notes included in the Offering Statement, the Pricing Disclosure Materials and the Final Offering Circular present fairly, in all material respects, the financial condition of the Company and its Subsidiaries as of the dates thereof and the results of operations and cash flows at the dates and for the periods covered thereby in conformity with United States generally accepted accounting principles (“GAAP”), except as may be stated in the related notes thereto. No other financial statements or schedules of the Company, any Subsidiary or any other entity are required by the


Securities Act or the Rules and Regulations to be included in the Offering Statement or the Final Offering Circular. There are no off-balance sheet arrangements (as defined in Regulation S-K Item 303(a)(4)(ii)) that may have a material current or future effect on the Company’s financial condition, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources.
(s)GBH CPAs, PC (the “Accountants”), who have reported on the financial statements and schedules described in Section 3(r), are registered independent public accountants with respect to the Company as required by the Securities Act and the Rules and Regulations and by the rules of the Public Company Accounting Oversight Board. The financial statements of the Company and the related notes and schedules included in the Offering Statement, the Pricing Disclosure Materials and the Final Offering Circular comply as to form in all material respects with the requirements of the Securities Act and the Rules and Regulations and present fairly the information shown therein.
(t)Since the date of the most recent financial statements of the Company included in the Offering Statement and the most recent Preliminary Offering Circular and prior to the Initial Closing and any Subsequent Closing, other than as described in the Final Offering Circular (A) there has not been and will not have been any change in the capital stock of the Company or long-term debt of the Company or any Subsidiary or any dividend or distribution of any kind declared, set aside for payment, paid or made by the Company on any class of capital stock or equity interests, or any material adverse change, or any development that would reasonably be expected to result in a material adverse change, in or affecting the business, prospects, properties, management, financial position, stockholders’ equity, or results of operations of the Company and its Subsidiaries taken as a whole (a “Material Adverse Change”) and (B) neither the Company nor any Subsidiary has sustained or will sustain any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor disturbance or dispute or any action, order or decree of any court or arbitrator or governmental or regulatory authority, except in each case as otherwise disclosed in the Offering Statement, the Pricing Disclosure Materials and the Final Offering Circular.
(u)Since the date as of which information is given in the most recent Preliminary Offering Circular, except as disclosed in the most recent Preliminary Offering Circular, neither the Company nor any Subsidiary has entered or will before the Initial Closing or any Subsequent Closing enter into any transaction or agreement, not in the ordinary course of business, that is material to the Company and its Subsidiaries taken as a whole or incurred or will incur any liability or obligation, direct or contingent, not in the ordinary course of business, that is material to the Company and its Subsidiaries taken as a whole, and neither the Company nor any Subsidiary has any plans to do any of the foregoing.
(v)The Company and each Subsidiary has good and valid title in fee simple to all items of real property and good and valid title to all personal property described in the Offering Statement or the Final Offering Circular as being owned by them, in each case free and clear of all liens, encumbrances and claims except those that (1) do not materially interfere with the use made and proposed to be made of such property by the Company and its Subsidiaries or (2) would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. Any real property described in the Offering Statement or the Final Offering Circular as being leased by the Company or any Subsidiary that is material to the business of the Company and its Subsidiaries taken as a whole is held by them under valid, existing and enforceable leases, except those that (A) do not materially interfere with the use made or proposed to be made of such property by the Company and its Subsidiaries or (B) would not be reasonably expected, individually or in the aggregate, to have a Material Adverse Effect.
(w)There are no legal, governmental or regulatory actions, suits or proceedings pending, either domestic or foreign, to which the Company is a party or to which any property of the Company is the subject, nor are there, to the Company’s knowledge, any threatened legal, governmental or regulatory


investigations, either domestic or foreign, involving the Company or any property of the Company that, individually or in the aggregate, if determined adversely to the Company, would reasonably be expected to have a Material Adverse Effect or materially and adversely affect the ability of the Company to perform its obligations under this Agreement; to the Company’s knowledge, no such actions, suits or proceedings are threatened or contemplated by any governmental or regulatory authority or threatened by others.
(x)The Company and each Subsidiary, if any, has, and at each Closing Date will have, (1) all governmental licenses, permits, consents, orders, approvals and other authorizations necessary to carry on its business as presently conducted except where the failure to have such governmental licenses, permits, consents, orders, approvals and other authorizations would not be reasonably expected to have a Material Adverse Effect, and (2) performed all its obligations required to be performed, and is not, and at each Closing Date will not be, in default, under any indenture, mortgage, deed of trust, voting trust agreement, loan agreement, bond, debenture, note agreement, lease, contract or other agreement or instrument (collectively, a “contract or other agreement”) to which it is a party or by which its property is bound or affected and, to the Company’s knowledge, no other party under any material contract or other agreement to which it is a party is in default in any respect thereunder. The Company and its Subsidiaries are not in violation of any provision of its organizational or governing documents.
(y)The Company has obtained, or prior to the Closing will obtain, all authorization, approval, consent, license, order, registration, exemption, qualification or decree of, any court or governmental authority or agency or any sub-division thereof that is required for the performance by the Company of its obligations hereunder, in connection with the offering, issuance or sale of the Shares and the Underwriters Warrants under this Agreement or the consummation of the transactions contemplated by this Agreement as may be required under federal, state, local and foreign laws, the Securities Act or the rules and regulations of the Commission thereunder, state securities or Blue Sky laws, and the rules and regulations of the NASDAQ Capital Market (“NASDAQ”).
(z)There is no actual or, to the knowledge of the Company, threatened, enforcement action or investigation any governmental authority that has jurisdiction over the Company, and to its knowledge, the Company has received no notice of any pending or threatened claim or investigation against the Company that would provide a legal basis for any enforcement action, and the Company has no reason to believe that any governmental authority is considering such action.
(aa)Neither the execution of this Agreement, nor the issuance, offering or sale of the Shares, nor the consummation of any of the transactions contemplated herein, nor the compliance by the Company with the terms and provisions hereof or thereof will conflict with, or will result in a breach of, any of the terms and provisions of, or has constituted or will constitute a default under, or has resulted in or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any Subsidiary pursuant to the terms of any contract or other agreement to which the Company or any Subsidiary may be bound or to which any of the property or assets of the Company or any Subsidiary is subject, except such conflicts, breaches or defaults as may have been waived or would not, in the aggregate, be reasonably expected to have a Material Adverse Effect; nor will such action result in any violation, except such violations that would not be reasonably expected to have a Material Adverse Effect, of (1) the provisions of the organizational or governing documents of the Company or any Subsidiary, or (2) any statute or any order, rule or regulation applicable to the Company or any Subsidiary or of any court or of any federal, state or other regulatory authority or other government body having jurisdiction over the Company or any Subsidiary.
(ab)There is no document or contract of a character required to be described in the Offering Statement or the Final Offering Circular or to be filed as an exhibit to the Offering Statement which is not described or filed as required. All such contracts to which the Company or any Subsidiary is a party


have been authorized, executed and delivered by the Company or any Subsidiary, and constitute valid and binding agreements of the Company or any Subsidiary, and are enforceable against the Company in accordance with the terms thereof, subject to the effect of applicable bankruptcy, insolvency or similar laws affecting creditors’ rights generally and equitable principles of general applicability, except as would not, in the aggregate, be reasonably expected to have a Material Adverse Effect. None of these contracts have been suspended or terminated for convenience or default by the Company or any of the other parties thereto, and the Company has not received notice of any such pending or threatened suspension or termination.
(ac)The Company and its directors, officers or controlling persons have not taken, directly or indirectly, any action intended, or which might reasonably be expected, to cause or result, under the Securities Act or otherwise, in, or which has constituted, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Company’s Common Stock.
(ad)Other than as previously disclosed to the Underwriters in writing, the Company, or any person acting on behalf of the Company, has not and, except in consultation with the Underwriters, will not publish, advertise or otherwise make any announcements concerning the distribution of the Shares, and has not and will not conduct road shows, seminars or similar activities relating to the distribution of the Shares nor has it taken or will it take any other action for the purpose of, or that could reasonably be expected to have the effect of, preparing the market, or creating demand, for the Shares.
(ae)No holder of securities of the Company has rights to the registration of any securities of the Company as a result of the filing of the Offering Statement or the transactions contemplated by this Agreement, except for such rights as have been waived or as are described in the Offering Statement.
(af)No labor dispute with the employees of the Company or any Subsidiary exists or, to the knowledge of the Company, is threatened, and the Company is not aware of any existing or threatened labor disturbance by the employees of any of its or any Subsidiary’s principal suppliers, manufacturers, customers or contractors.
(ag)The Company and each of its subsidiaries: (i) are and have been in material compliance with all laws, to the extent applicable, and the regulations promulgated pursuant to such laws, and comparable state laws, and all other local, state, federal, national, supranational and foreign laws, manual provisions, policies and administrative guidance relating to the regulation of the Company and its subsidiaries except for such non-compliance as would not be reasonably expected, individually or in the aggregate, to have a Material Adverse Effect; (ii) have not received notice of any ongoing claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from any Regulatory Agency or third party alleging that any product operation or activity is in material violation of any laws and has no knowledge that any such Regulatory Agency or third party is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding; and (iii) are not a party to any corporate integrity agreement, deferred prosecution agreement, monitoring agreement, consent decree, settlement order, or similar agreements, or has any reporting obligations pursuant to any such agreement, plan or correction or other remedial measure entered into with any Governmental Authority.
(ah)The business and operations of the Company, and each of its Subsidiaries, have been and are being conducted in compliance with all applicable laws, ordinances, rules, regulations, licenses, permits, approvals, plans, authorizations or requirements relating to occupational safety and health, or pollution, or protection of health or the environment (including, without limitation, those relating to emissions, discharges, releases or threatened releases of pollutants, contaminants or hazardous or toxic substances, materials or wastes into ambient air, surface water, groundwater or land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of chemical substances, pollutants, contaminants or hazardous or toxic substances, materials or wastes, whether solid,


gaseous or liquid in nature) of any governmental department, commission, board, bureau, agency or instrumentality of the United States, any state or political subdivision thereof, or any foreign jurisdiction (“Environmental Laws”), and all applicable judicial or administrative agency or regulatory decrees, awards, judgments and orders relating thereto, except where the failure to be in such compliance would not be reasonably expected, individually or in the aggregate, to have a Material Adverse Effect; and neither the Company nor any of its Subsidiaries has received any notice from any governmental instrumentality or any third party alleging any material violation thereof or liability thereunder (including, without limitation, liability for costs of investigating or remediating sites containing hazardous substances and/or damages to natural resources).
(ai)There has been no storage, generation, transportation, use, handling, treatment, Release or threat of Release of Hazardous Materials (as defined below) by or caused by the Company or any of its Subsidiaries (or, to the knowledge of the Company, any other entity (including any predecessor) for whose acts or omissions the Company or any of its Subsidiaries is or could reasonably be expected to be liable) at, on, under or from any property or facility now or previously owned, operated or leased by the Company or any of its Subsidiaries, or at, on, under or from any other property or facility, in violation of any Environmental Laws or in a manner or amount or to a location that could reasonably be expected to result in any liability under any Environmental Law, except for any violation or liability which would not, individually or in the aggregate, have a Material Adverse Effect. “Hazardous Materials” means any material, chemical, substance, waste, pollutant, contaminant, compound, mixture, or constituent thereof, in any form or amount, including petroleum (including crude oil or any fraction thereof) and petroleum products, natural gas liquids, asbestos and asbestos containing materials, naturally occurring radioactive materials, brine, and drilling mud, regulated or which can give rise to liability under any Environmental Law. “Release” means any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, or migrating in, into or through the environment, or in, into from or through any building or structure.
(aj)The Company and its Subsidiaries own, possess, license or have other adequate rights to use, on reasonable terms, all material patents, patent applications, trade and service marks, trade and service mark registrations, trade names, copyrights, licenses, inventions, trade secrets, technology, know-how and other intellectual property necessary for the conduct of the Company’s and each of its Subsidiary’s business as now conducted (collectively, the “Intellectual Property”), except to the extent such failure to own, possess or have other rights to use such Intellectual Property would not result in a Material Adverse Effect. Except as set forth in the Final Offering Circular: (a) no party has been granted an exclusive license to use any portion of such Intellectual Property owned by the Company or its Subsidiaries; (b) to the knowledge of the Company, there is no infringement by third parties of any such Intellectual Property owned by or exclusively licensed to the Company or its Subsidiaries; (c) the Company is not aware of any defects in the preparation and filing of any of patent applications, as listed in Exhibit C, within the Intellectual Property; (d) to the knowledge of the Company, the patent applications, as listed in Exhibit C, within the Intellectual Property are being prosecuted so as to avoid the abandonment thereof; (e) to the knowledge of the Company, the patents, as listed in Exhibit C, within the Intellectual Property are being maintained and the required maintenance fees (if any) are being paid; (f) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the Company’s or any of its Subsidiaries’ rights in or to any Intellectual Property, and the Company and its Subsidiaries are unaware of any facts which would form a reasonable basis for any such claim; (g) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the validity or scope or enforceability of any such Intellectual Property, and the Company and its Subsidiaries are unaware of any facts which would form a reasonable basis for any such claim; and (h) there is no pending, or to the knowledge of the Company, threatened action, suit, proceeding or claim by others that the Company’s or any of its Subsidiaries’ business as now conducted infringes or otherwise violates any patent, trademark, copyright, trade secret or other proprietary rights of others, and the Company and its Subsidiaries are unaware of any


other fact which would form a reasonable basis for any such claim. To the knowledge of the Company, no opposition filings or invalidation filings have been submitted which have not been finally resolved in connection with any of the Company’s patents and patent applications in any jurisdiction where the Company has applied for, or received, a patent.
(ak)Except as would not have, individually or in the aggregate, a Material Adverse Effect, the Company and each Subsidiary (1) has timely filed all federal, state, provincial, local and foreign tax returns that are required to be filed by such entity through the date hereof, which returns are true and correct, or has received timely extensions for the filing thereof, and (2) has paid all taxes, assessments, penalties, interest, fees and other charges due or claimed to be due from the Company, other than (A) any such amounts being contested in good faith and by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP or (B) any such amounts currently payable without penalty or interest. There are no tax audits or investigations pending, which if adversely determined could have a Material Adverse Effect; nor to the knowledge of the Company are there any proposed additional tax assessments against the Company or any Subsidiary which could have, individually or in the aggregate, a Material Adverse Effect. No transaction, stamp, capital or other issuance, registration, transaction, transfer or withholding tax or duty is payable by or on behalf of the Underwriters to any foreign government outside the United States or any political subdivision thereof or any authority or agency thereof or therein having the power to tax in connection with (i) the issuance, sale and delivery of the Shares by the Company; (ii) the purchase from the Company, and the initial sale and delivery of the Shares to purchasers thereof; or (iii) the execution and delivery of this Agreement or any other document to be furnished hereunder.
(al)On each Closing Date, all stock transfer or other taxes (other than income taxes) which are required to be paid in connection with the sale and transfer of the Shares to be issued and sold on such Closing Date will be, or will have been, fully paid or provided for by the Company and all laws imposing such taxes will be or will have been fully complied with.
(am)The Company and its Subsidiaries are insured with insurers with appropriately rated claims paying abilities against such losses and risks and in such amounts as are prudent and customary for the businesses in which they are engaged; all policies of insurance and fidelity or surety bonds insuring the Company, each Subsidiary or their respective businesses, assets, employees, officers and directors are in full force and effect; and there are no claims by the Company or its Subsidiary under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; neither the Company nor any Subsidiary has been refused any insurance coverage sought or applied for; and neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that is not materially greater than the current cost. The Company has obtained director’s and officer’s insurance in such amounts as is customary for a similarly situated company engaging in an initial public offering of securities.
(an)Neither the Company nor its Subsidiaries, if any, nor any director, officer, agent or employee of either the Company or any Subsidiary, if any, has directly or indirectly, (1) made any unlawful contribution to any federal, state, local and foreign candidate for public office, or failed to disclose fully any contribution in violation of law, (2) made any payment to any federal, state, local and foreign governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments required or permitted by the laws of the United States or any jurisdiction thereof, (3) violated or is in violation of any provisions of the U.S. Foreign Corrupt Practices Act of 1977, or (4) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment
(ao)The operations of the Company and its Subsidiaries, if any, are and have been conducted at all times in compliance in all material respects with applicable financial recordkeeping and


reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”) and no material action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its Subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
(ap)Neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any director, officer, agent or employee of the Company or any of its Subsidiaries is currently subject to any U.S. sanctions (the “Sanctions Regulations”) administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC’); and the Company will not directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC or listed on the OFAC Specially Designated Nationals and Blocked Persons List. Neither the Company nor, to the knowledge of the Company, any director, officer, agent or employee of the Company, is named on any denied party or entity list administered by the Bureau of Industry and Security of the U.S. Department of Commerce pursuant to the Export Administration Regulations (“EAR”); and the Company will not, directly or indirectly, use the proceeds of the offering of the Shares hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any Sanctions Regulations or to support activities in or with countries sanctioned by said authorities, or for engaging in transactions that violate the EAR.
(aq)The Company has not distributed and, prior to the later to occur of the last Closing Date and completion of the distribution of the Shares, will not distribute any offering material in connection with the offering and sale of the Shares other than each Preliminary Offering Circular, the Pricing Disclosure Materials and the Final Offering Circular, or such other materials as to which the Underwriters shall have consented in writing (which shall include any Testing-the-Waters Communication).
(ar)Each employee benefit plan, within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and all stock purchase, stock option, stock-based severance, employment, change-in-control, medical, disability, fringe benefit, bonus, incentive, deferred compensation, employee loan and all other employee benefit plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA, that is maintained, administered or contributed to by the Company or any of its affiliates for employees or former employees, directors or independent contractors of the Company or its Subsidiaries, or under which the Company or any of its Subsidiaries has had or has any present or future obligation or liability, has been maintained in material compliance with its terms and the requirements of any applicable federal, state, local and foreign laws, statutes, orders, rules and regulations, including but not limited to ERISA and the Code; no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred which would result in a material liability to the Company with respect to any such plan excluding transactions effected pursuant to a statutory or administrative exemption; no event has occurred (including a “reportable event” as such term is defined in Section 4043 of ERISA) and no condition exists that would subject the Company to any material tax, fine, lien, penalty, or liability imposed by ERISA, the Code or other applicable law; and for each such plan that is subject to the funding rules of Section 412 of the Code or Section 302 of ERISA, no “accumulated funding deficiency” as defined in Section 412 of the Code has been incurred, whether or not waived, and the fair market value of the assets of each such plan (excluding for these purposes accrued but unpaid contributions) exceeds the present value of all benefits accrued under such plan determined using reasonable actuarial assumptions.


(as)Prior to the Initial Closing, the Company will have filed with the Commission a registration statement on Form 8-A providing for the registration under the Exchange Act of the Shares.
(at)No relationship, direct or indirect, exists between or among the Company or any Subsidiary, on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company or any Subsidiary, on the other, which would be required to be disclosed in the Offering Statement, the Preliminary Offering Circular and the Final Offering Circular and is not so disclosed.
(au)The Company has not sold or issued any securities that would be integrated with the offering of the Shares contemplated by this Agreement pursuant to the Securities Act, the Rules and Regulations or the interpretations thereof by the Commission or that would fail to come within the safe harbor for integration under Regulation A.
(av)The Shares have been approved for listing, subject to notice of issuance on the NASDAQ, under the symbol “SOLY”.
(aw)Except as set forth in this Agreement, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company or the Underwriters for a brokerage commission, finder’s fee or other like payment in connection with the offering of the Shares.
(ax)To the knowledge of the Company, there are no affiliations with FINRA among the Company’s directors, officers or any five percent or greater stockholder of the Company or any beneficial owner of the Company’s unregistered equity securities that were acquired during the 180-day period immediately preceding the initial filing date of the Offering Statement.
(ay)There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees of indebtedness by the Company to or for the benefit of any of the officers or directors of the Company or any of their respective family members. The Company has not directly or indirectly, including through its Subsidiaries, extended or maintained credit, arranged for the extension of credit, or renewed any extension of credit, in the form of a personal loan to or for any director or executive officer of the Company or any of their respective related interests, other than any extensions of credit that ceased to be outstanding prior to the initial filing of the Offering Statement. No transaction has occurred between or among the Company and any of its officers or directors, stockholders, customers, suppliers or any affiliate or affiliates of the foregoing that is required to be described or filed as an exhibit to in the Offering Statement, the Preliminary Offering Circular, the Pricing Disclosure Materials or the Final Offering Circular and is not so described.
(az)The Underwriters Warrants have been duly authorized for issuance. The Company has reserved a sufficient number of shares of its Common Stock for issuance upon exercise of the Underwriters Warrants and, when issued and paid for in accordance with the terms thereof, such shares of Common Stock will be validly issued, fully paid and non-assessable. The issuance of the Common Stock pursuant to the Underwriters Warrants will not be subject to any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Company or any of its subsidiaries.
SECTION 4.    Covenants of the Company.
(a)The Offering Statement has become qualified, and the Company will file the Final Offering Circular, subject to the prior approval of the Underwriters, pursuant to Rule 253 and Regulation A, within the prescribed time period and will provide a copy of such filing to the Underwriters promptly following such filing.


(b)The Company will not, during such period as the Final Offering Circular would be required by law to be delivered in connection with sales of the Shares by an underwriter or dealer in connection with the offering contemplated by this Agreement (whether physically or through compliance with Rules 251 and 254 under the Securities Act or any similar rule(s)), file any amendment or supplement to the Offering Statement or the Final Offering Circular unless a copy thereof shall first have been submitted to the Underwriters within a reasonable period of time prior to the filing thereof and the Underwriters shall not have reasonably objected thereto in good faith.
(c)The Company will notify the Underwriters promptly, and will, if requested, confirm such notification in writing: (1) when any amendment to the Offering Statement is filed; (2) of any request by the Commission for any amendments to the Offering Statement or any amendment or supplements to the Final Offering Circular or for additional information; (3) of the issuance by the Commission of any stop order preventing or suspending the qualification of the Offering Statement or the Final Offering Circular, or the initiation of any proceedings for that purpose or the threat thereof; (4) of becoming aware of the occurrence of any event that in the judgment of the Company makes any statement made in the Offering Statement, the Preliminary Offering Circular, the Pricing Disclosure Materials or the Final Offering Circular untrue in any material respect or that requires the making of any changes in the Offering Statement, the Preliminary Offering Circular, the Pricing Disclosure Materials or the Final Offering Circular in order to make the statements therein, in light of the circumstances in which they are made, not misleading; and (5) of receipt by the Company of any notification with respect to any suspension of the qualification or exemption from registration of the Shares for offer and sale in any jurisdiction. If at any time the Commission shall issue any order suspending the qualification of the Offering Statement in connection with the offering contemplated hereby or in connection with sales of Common Stock pursuant to market making activities by the Underwriters, the Company will make every reasonable effort to obtain the withdrawal of any such order at the earliest possible moment. If the Company has omitted any information from the Offering Statement, it will use its best efforts to comply with the provisions of and make all requisite filings with the Commission pursuant to Regulation A, the Securities Act and the Rules and Regulations and to notify the Underwriters promptly of all such filings.
(d)If, at any time when the Final Offering Circular relating to the Shares is required to be delivered under the Securities Act, the Company becomes aware of the occurrence of any event as a result of which the Final Offering Circular, as then amended or supplemented, would, in the reasonable judgment of counsel to the Company or counsel to the Underwriters, include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or the Offering Statement, as then amended or supplemented, would, in the reasonable judgment of counsel to the Company or counsel to the Underwriters, include any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading, or if for any other reason it is necessary, in the reasonable judgment of counsel to the Company or counsel to the Underwriters, at any time to amend or supplement the Final Offering Circular or the Offering Statement to comply with the Securities Act or the Rules and Regulations, the Company will promptly notify the Underwriters and will promptly prepare and file with the Commission, at the Company’s expense, an amendment to the Offering Statement and/or an amendment or supplement to the Final Offering Circular that corrects such statement and/or omission or effects such compliance and will deliver to the Underwriters, without charge, such number of copies thereof as the Underwriters may reasonably request. The Company consents to the use of the Final Offering Circular or any amendment or supplement thereto by the Underwriters, and the Underwriters agree to provide to each Investor, prior to the Initial Closing and, as applicable, any Subsequent Closing, a copy of the Final Offering Circular and any amendments or supplements thereto.
(e)The Company will furnish to the Underwriters and their counsel, without charge (i) one conformed copy of the Offering Statement as originally filed with the Commission and each amendment


thereto, including financial statements and schedules, and all exhibits thereto, and (ii) so long as an offering circular relating to the Shares is required to be delivered under the Securities Act or the Rules and Regulations, as many copies of each Preliminary Offering Circular or the Final Offering Circular or any amendment or supplement thereto as each Underwriter may reasonably request.
(f)If at any time following the distribution of any Written Testing-the-Waters Communication there occurred or occurs an event or development as a result of which such Written Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company has or will promptly notify the Underwriters in writing and has or will promptly amend or supplement, at its own expense, such Written Testing-the-Waters Communication to eliminate or correct such untrue statement or omission.
(g)The Company will comply with any undertakings contained in the Offering Statement.
(h)Prior to the sale of the Shares to the Investors, the Company will cooperate with the Underwriters and their counsel in connection with the registration or qualification, or exemption therefrom, of the Shares for offer and sale under the state securities or Blue Sky laws of such jurisdictions as the Underwriters may reasonably request; provided, that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action which would subject it to general service of process in any jurisdiction where it is not now so subject.
(i)The Company will apply the net proceeds from the offering and sale of the Shares in the manner set forth in the Final Offering Circular under the caption “Use of Proceeds.”
(j)The Company will use its reasonable best efforts to ensure that the Shares are listed on the NASDAQ.
(k)The Company will not at any time, directly or indirectly, take any action intended, or which might reasonably be expected, to cause or result in, or which will constitute, stabilization of the price of the Shares to facilitate the sale or resale of any of the Shares.
(l)    The Company will not (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise dispose of, directly or indirectly, any shares of capital stock of the Company or securities convertible into or exercisable or exchangeable for shares of capital stock of the Company, (ii) file or cause to be filed any registration statement with the Commission (excluding a Form S-8 registration statement related to the Company’s existing equity compensation plans) relating to the offering for any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company, or (iii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of capital stock of the Company (the “Lock-Up Securities”) during the period commencing on and including the date hereof and ending on and including the 180th day following the date of this Agreement (the “Lock-up Period”), except with respect to (A) the Shares to be sold hereunder, (B) the issuance of shares of Common Stock or warrants to purchase Common Stock at a purchase price or exercise price, as applicable, of (1) greater than $9.00 per share for the initial 90 days of the Lock-up Period, or (2) greater than $7.00 per share for the final 90 days of the Lock-up Period, (C) the issuance of shares of Common Stock upon the exercise of a stock option or warrant or the conversion of a security outstanding on the date of the Offering, issued after the date of this Agreement pursuant to the Company’s currently existing or hereafter adopted equity compensation plans or employment or consulting agreements or arrangements of which each Underwriter has been advised in writing or which have been filed


with the Commission, or (D) the issuance by the Company of stock options or shares of capital stock of the Company under any currently existing or hereafter adopted equity compensation plan or employment/consulting agreements or agreements of the Company, provided, however, that the executive officers, directors and any 5% or more shareholder of the Company shall agree to be bound by the terms of the lock-up letter described in this Section 4(l) hereof. If the Representative agrees to waive or release any Lock-Up Securities from the Lock-Up Period, the Company will announce the impending release or waiver by press release through a major news service at least two (2) business days before the effective date of such release or waiver.
(l)The Company shall not grant a waiver or consent to any of the provision of the lock-up agreements referenced in Exhibit B without the prior written consent of the Representative.
SECTION 5.    Representations and Warranties of the Underwriters, Agreements of the Underwriters. Each Underwriter represents and warrants and covenants to the Company that:
(a)The Underwriter agrees that it shall not include any “issuer information” (as defined in Rule 433 under the Securities Act) in any Written Testing-the-Waters Communication used or referred to by the Underwriter without the prior consent of the Company (any such issuer information with respect to whose use the Company has given its consent, “Permitted Issuer Information”), provided that “issuer information” (as defined in Rule 433 under the Securities Act) within the meaning of this Section 5 shall not be deemed to include information prepared by the Underwriter on the basis of, or derived from, “issuer information”.
(b)Neither the Underwriter nor any Dealer, nor any managing member of the Underwriter or any Dealer, nor any director or executive officer of the Underwriter or any Dealer or other officer of the Underwriter or any Dealer participating in the offering of the Shares is subject to the disqualification provisions of Rule 262 of the Rules and Regulations. No registered representative of the Underwriter or any Dealer, or any other person being compensated by or through the Underwriter or any Dealer for the solicitation of Investors, is subject to the disqualification provisions of Rule 262 of the Rules and Regulations.
(c)The Underwriter and each Dealer is a member of FINRA and it and its respective employees and representatives have all required licenses and registrations to act under this Agreement, and the Underwriter shall remain a member or duly licensed, as the case may be, during the Offering.
(d)Except for Participating Dealer Agreements, no agreement will be made by the Underwriter with any person permitting the resale, repurchase or distribution of any Shares purchased by such person.
(e)Except as otherwise consented to by the Company, the Underwriter has not and will not use or distribute any written offering materials other than the Preliminary Offering Circular, Pricing Disclosure Materials and the Final Offering Circular. The Underwriter has not and will not use any “broker-dealer use only” materials with members of the public, or has not and will not make any unauthorized verbal representations or verbal representations which contradict or are inconsistent with the statements made in the Offering Statement in connection with offers or sales of the Shares.
SECTION 6.    Expenses.
(a)Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, the Company agrees to pay all costs, fees and expenses incurred in connection with the transactions contemplated hereby, including without limitation: (i) all actual fees and expenses incurred by the Underwriters in connection with, among other things, due diligence costs, which shall not


exceed $35,000, $35,000 of which were paid upon the execution of the Engagement Letter (as defined herein), and the fees and expenses of the Underwriters’ counsel, which shall not exceed $75,000; (ii) $35,000 for all road show and transportation expenses of the Underwriters; (iii) all expenses incident to the issuance and delivery of the Shares (including all printing and engraving costs, if any); (iv) all fees and expenses of the registrar and transfer agent of the Common Stock; (v) all necessary issue, transfer and other stamp taxes in connection with the issuance and sale of the Shares placed by the Underwriters; (vi) all fees and expenses of the Company’s counsel, independent public or certified public accountants and other advisors; (vii) all costs and expenses incurred in connection with the preparation, printing, filing, shipping and distribution of the Offering Statement (including financial statements, exhibits, schedules, consents and certificates of experts), each Preliminary Offering Circular, the Pricing Disclosure Materials, the Final Offering Circular and all amendments and supplements thereto, and this Agreement; (viii) all filing fees, incurred by the Company, or the Underwriters, in connection with qualifying or registering (or obtaining exemptions from the qualification or registration of) all or any part of the Shares for offer and sale under the state securities or blue sky laws; and (ix) the filing fees incident to the FINRA’s review and approval of the Underwriters’ participation in the offering and placement of the Shares.
(b)In connection with this Offering, we granted the Underwriters a right of first refusal, for a period of twelve (12) months following the qualification of the Offering, to act as placement agent or underwriter or to act as a joint financial advisor on at least equal economic terms on any public or private financing (debt or equity), merger, business combination, recapitalization or sale of some or all of the equity assets of the Company.
SECTION 7.    Conditions of the Obligations of the Underwriters. The obligations of each Underwriter hereunder are subject to (1) the accuracy of the representations and warranties on the part of the Company set forth in Section 3, as of the date hereof and as of the Closing Date as though then made, (2) the timely performance by the Company of its covenants and obligations hereunder, and (3) each of the following additional conditions:
(a)(i) No stop order suspending the qualification of the Offering Statement shall have been issued, and no proceedings for that purpose shall be pending or threatened by any securities or other governmental authority (including, without limitation, the Commission), (ii) no order suspending the qualification of the Offering Statement or the qualification or exemption of the Shares under the securities or Blue Sky laws of any jurisdiction shall be in effect and no proceeding for such purpose shall be pending before, or threatened or contemplated by, any securities or other governmental authority (including, without limitation, the Commission), (iii) any request for additional information on the part of the staff of any securities or other governmental authority (including, without limitation, the Commission) shall have been complied with to the satisfaction of the staff of the Commission or such authorities and (iv) after the date hereof no amendment or supplement to the Offering Statement or the Final Offering Circular shall have been filed unless a copy thereof was first submitted to the Underwriters and the Underwriters did not object thereto in good faith, and the Underwriters shall have received certificates of the Company, dated as of each Closing Date and signed by the President and Chief Executive Officer of the Company, and the Chief Financial Officer of the Company, to the effect of clauses (ii) and (iii).
(b)Since the respective dates as of which information is given in the Offering Statement, the Pricing Disclosure Materials and the Final Offering Circular, in the reasonable judgment of the Underwriters there shall not have occurred a Material Adverse Change.
(c)Since the respective dates as of which information is given in the Offering Statement, the Pricing Disclosure Materials and the Final Offering Circular, there shall have been no litigation or other proceeding instituted against the Company or any of its officers or directors in their capacities as such, before or by any federal, state or local or foreign court, commission, regulatory body, administrative agency or


other governmental body, domestic or foreign, which litigation or proceeding, in the reasonable judgment of the Underwriters, would reasonably be expected to have a Material Adverse Effect.
(d)Each of the representations and warranties of the Company contained herein shall be true and correct as of each Closing Date in all respects for those representations and warranties qualified by materiality and in all material respects for those representations and warranties that are not qualified by materiality, as if made on such date, and all covenants and agreements herein contained to be performed on the part of the Company and all conditions herein contained to be fulfilled or complied with by the Company at or prior to such Closing Date shall have been duly performed, fulfilled or complied with in all material respects.
(e)On the Closing Date, the Underwriters shall have received the opinion and 10b-5 negative assurances letter from Schiff Hardin LLP, Washington, D.C., counsel for the Company, addressed to the Underwriters, dated as of the Closing Date, substantially in the form satisfactory to the Underwriters.
(f)At the Initial Closing and at any Subsequent Closing, there shall be furnished to the Underwriters a certificate, dated the date of its delivery, signed by each of the President and the Chief Financial Officer of the Company, in their capacities as officers of the Company, in form and substance satisfactory to the Underwriters to the effect that each signer has carefully examined the Offering Statement, the Final Offering Circular and the Pricing Disclosure Materials, and that to each of such person’s knowledge:
i.As of the date of each such certificate, (x) the Offering Statement does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading and (y) neither the Final Offering Circular nor the Pricing Disclosure Materials contains any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading and no event has occurred as a result of which it is necessary to amend or supplement the Final Offering Circular in order to make the statements therein not untrue or misleading in any material respect.
ii.Each of the representations and warranties of the Company contained in this Agreement were, when originally made, and are, at the time such certificate is delivered, true and correct in all respects for those representations and warranties qualified by materiality and in all material respects for those representations and warranties that are not qualified by materiality.
iii.Each of the covenants required herein to be performed by the Company on or prior to the date of such certificate has been duly, timely and fully performed and each condition herein required to be complied with by the Company on or prior to the delivery of such certificate has been duly, timely and fully complied with.
iv.To their knowledge, no stop order suspending the qualification of the Offering Statement or of any part thereof has been issued and no proceedings for that purpose have been instituted or are contemplated by the Commission.
v.Subsequent to the date of the most recent financial statements in the Offering Statement and in the Final Offering Circular, there has been no Material Adverse Change.
(g)The Company shall have furnished or caused to be furnished to the Underwriters such certificates, in addition to those specifically mentioned herein, as the Underwriters may have reasonably requested as to the accuracy and completeness on any Closing Date and of any statement in the Offering Statement, the Preliminary Offering Circular, the Pricing Disclosure Materials or the Final Offering Circular, as to the accuracy on such Closing Date of the representations and warranties of the Company as to the


performance by the Company of its obligations hereunder, or as to the fulfillment of the conditions concurrent and precedent to the obligations hereunder of the Underwriters.
(h)On or prior to the date hereof, the Company shall have furnished to the Underwriters an agreement substantially in the form of Exhibit B hereto from each of the Company’s officers, directors, and 10% of greater security holders of the Company’s Common Stock or securities convertible into or exercisable for shares of the Company’s Common Stock, and each such agreement shall be in full force and effect on the Closing Date.
(i)The Shares have been approved for listing upon notice of issuance on the NASDAQ.
(j)The Company shall have furnished or caused to be furnished to the Underwriters on each Closing Date satisfactory evidence of the good standing of the Company and the Subsidiaries in their respective jurisdiction of organization and their good standing as foreign entities in such other jurisdictions as the Underwriters may reasonably request, in each case in writing or any standard form of telecommunication from the appropriate governmental authorities of such jurisdictions.
(k)FINRA shall not have raised any objection with respect to the fairness or reasonableness of the plan of distribution, or other arrangements of the transactions, contemplated hereby.
(l)On or after the Applicable Time there shall not have occurred any of the following: (a) a suspension or material limitation in trading in securities generally on the New York Stock Exchange, Inc., NYSE MKT or NASDAQ; (b) a general moratorium on commercial banking activities declared by either Federal or New York authorities or a material disruption in commercial banking or securities settlement or clearance services in the United States; (c) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war or (d) the occurrence of any other calamity or crisis or any change in financial, political or economic conditions in the United States or elsewhere, if the effect of any such event specified in clause (c) or (d) in the judgment of the Representative makes it impracticable or inadvisable to proceed with the offering or the delivery of the Shares being delivered on any Closing Date on the terms and in the manner contemplated in the Final Offering Circular.
(m)    At the Closing Date and at any Subsequent Closing, the Accountants shall have furnished to the Underwriters a letter, dated the date of its delivery (the “Comfort Letter”), addressed to the Underwriters and in form and substance reasonably satisfactory to the Underwriters containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained in the Offering Statement, the Pricing Disclosure Materials and the Final Offering Circular.
SECTION 8.    Indemnification.
(a)Indemnification by the Company. The Company shall indemnify and hold harmless each Underwriter, its affiliates and its directors, officers, members, employees and agents and each person, if any, who controls the Underwriters within the meaning of Section 15 of the Securities Act of or Section 20 of the Exchange Act (collectively the “Underwriters Indemnified Parties,” and each an “Underwriters Indemnified Party”) against any loss, claim, damage, expense or liability whatsoever (or any action, investigation or proceeding in respect thereof), to which such Underwriters Indemnified Party may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, expense, liability, action, investigation or proceeding arises out of or is based upon (A) any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Offering Circular, the Offering Statement or the Final Offering Circular or any amendment or supplement thereto, (B) the omission or alleged omission to state in any Preliminary Offering Circular, the Offering Statement, the Final Offering Circular, the Pricing Disclosure Materials, or any Written Testing-the-Waters Communication, any Permitted Issuer Information, or in any


amendment or supplement thereto, a material fact required to be stated therein or necessary to make the statements therein not misleading or (C) any breach of the representations and warranties of the Company contained herein or failure of the Company to perform its obligations hereunder or pursuant to any law, any act or failure to act, or any alleged act or failure to act, by the Underwriters in connection with, or relating in any manner to, this Agreement, the Securities or the Offering, and which is included as part of or referred to in any loss, claim, damage, expense, liability, action, investigation or proceeding arising out of or based upon matters covered by subclause (A), (B) or (C) above of this Section 8(a) (provided that the Company shall not be liable in the case of any matter covered by this subclause (C) to the extent that it is determined in a final judgment by a court of competent jurisdiction that such loss, claim, damage, expense or liability resulted directly from any such act or failure to act undertaken or omitted to be taken by the Underwriters through gross negligence or willful misconduct), and shall reimburse the Underwriters Indemnified Party promptly upon demand for any legal fees or other expenses reasonably incurred by that Underwriters Indemnified Party in connection with investigating, or preparing to defend, or defending against, or appearing as a third party witness in respect of, or otherwise incurred in connection with, any such loss, claim, damage, expense, liability, action, investigation or proceeding, as such fees and expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, expense or liability arises out of or is based upon an untrue statement in, or omission from any Preliminary Offering Circular, the Offering Statement or the Final Offering Circular, or any such amendment or supplement thereto, or any of the Pricing Disclosure Materials made in reliance upon and in conformity with written information furnished to the Company through the Underwriters expressly for use therein, which information the parties hereto agree is limited to the Underwriter’s Information (as defined below). This indemnity agreement is not exclusive and will be in addition to any liability, which the Company might otherwise have and shall not limit any rights or remedies which may otherwise be available at law or in equity to each Underwriters Indemnified Party.
(b)Indemnification by the Underwriters. Each Underwriter shall indemnify and hold harmless the Company and the Company’s directors, its officers who signed the Final Offering Circular and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively the “Company Indemnified Parties” and each a “Company Indemnified Party”) against any loss, claim, damage, expense or liability whatsoever (or any action, investigation or proceeding in respect thereof), to which such Company Indemnified Party may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, expense, liability, action, investigation or proceeding arises out of or is based upon (i) any untrue statement of a material fact contained in the Offering Statement, any Preliminary Offering Circular or the Final Offering Circular, or any amendment or supplement thereto, any Written Testing-the-Waters Communication, in reliance upon and in conformity with written information furnished to the Company by the Underwriter expressly for such use (the “Underwriter’s Information”), or (ii) the omission to state in the Offering Statement, any Preliminary Offering Circular or the Final Offering Circular, or any amendment or supplement thereto, any Written Testing-the-Waters Communication, a material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or omission was made in reliance upon and in conformity with written information furnished to the Company through the Underwriter expressly for use therein, which information the parties hereto agree is limited to the Underwriter’s Information and shall reimburse the Company for any legal or other expenses reasonably incurred by such party in connection with investigating or preparing to defend or defending against or appearing as third party witness in connection with any such loss, claim, damage, liability, action, investigation or proceeding, as such fees and expenses are incurred. Notwithstanding the provisions of this Section 8(c), in no event shall any indemnity by the Underwriters under this Section 8(c) exceed the total discount and commission received by the Underwriters in connection with the Offering.
(c)Procedure. Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be


made against an indemnifying party under this Section 8, notify such indemnifying party in writing of the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 8 except to the extent it has been materially adversely prejudiced by such failure; and, provided, further, that the failure to notify an indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 8. If any such action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense of such action with counsel reasonably satisfactory to the indemnified party (which counsel shall not, except with the written consent of the indemnified party, be counsel to the indemnifying party). After notice from the indemnifying party to the indemnified party of its election to assume the defense of such action, except as provided herein, the indemnifying party shall not be liable to the indemnified party under Section 10 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense of such action other than reasonable costs of investigation; provided, however, that any indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense of such action but the fees and expenses of such counsel (other than reasonable costs of investigation) shall be at the expense of such indemnified party unless (i) the employment thereof has been specifically authorized in writing by the Company in the case of a claim for indemnification under Section 8(a), (ii) such indemnified party shall have been advised by its counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party, or (iii) the indemnifying party has failed to assume the defense of such action and employ counsel reasonably satisfactory to the indemnified party within a reasonable period of time after notice of the commencement of the action or the indemnifying party does not diligently defend the action after assumption of the defense, 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 of (or, in the case of a failure to diligently defend the action after assumption of the defense, to continue to defend) such action on behalf of such indemnified party and the indemnifying party shall be responsible for legal or other expenses subsequently incurred by such indemnified party in connection with the defense of such action; provided, however, that the indemnifying party shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys at any time any such indemnified party (in addition to any local counsel), which firm shall be designated in writing by the Underwriters if the indemnified party under this Section 8 is an Underwriters Indemnified Party or by the Company if an indemnified party under this Section 8 is a Company Indemnified Party. Subject to this Section 8(c), the amount payable by an indemnifying party under Section 8 shall include, but not be limited to, (x) reasonable legal fees and expenses of counsel to the indemnified party and any other expenses in investigating, or preparing to defend or defending against, or appearing as a third party witness in respect of, or otherwise incurred in connection with, any action, investigation, proceeding or claim, and (y) all amounts paid in settlement of any of the foregoing. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of judgment with respect to any pending or threatened action or any claim whatsoever, in respect of which indemnification or contribution could be sought under this Section 8 (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party in form and substance reasonably satisfactory to such indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. Subject to the provisions of the following sentence, no indemnifying party shall be liable for settlement of any pending or threatened action or any claim whatsoever that is effected without its written consent (which consent shall not be unreasonably withheld or delayed), but if settled with its written consent, if its consent has been unreasonably withheld or delayed or if there be a judgment for the plaintiff in any such matter, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such


settlement or judgment. In addition, if at any time an indemnified party shall have requested that an indemnifying party reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated herein effected without its written consent if (i) such settlement is entered into more than forty-five (45) days after receipt by such indemnifying party of the request for reimbursement, (ii) such indemnifying party shall have received notice of the terms of such settlement at least thirty (30) days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.
(d)Contribution. If the indemnification provided for in this Section 8 is unavailable or insufficient to hold harmless an indemnified party under Section 8(a), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid, payable or otherwise incurred by such indemnified party as a result of such loss, claim, damage, expense or liability (or any action, investigation or proceeding in respect thereof), as incurred, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand from the offering of the Shares, or (ii) if the allocation provided by clause (i) of this Section 8(d) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) of this Section 8(d) but also the relative fault of the Company on the one hand and the Underwriters on the other with respect to the statements, omissions, acts or failures to act which resulted in such loss, claim, damage, expense or liability (or any action, investigation or proceeding in respect thereof) as well as any other relevant equitable considerations. The relative benefits received by the Company or on the one hand and the Underwriters on the other with respect to such offering shall be deemed to be in the same proportion as the total proceeds from the offering of the Shares purchased by investors as contemplated by this Agreement (before deducting expenses) received by the Company bear to the total underwriting commissions received by the Underwriters in connection with the Offering, in each case as set forth in the table on the cover page of the Final Offering Circular. The relative fault of the Company on the one hand and the Underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Underwriters on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement, omission, act or failure to act; provided that the parties hereto agree that the written information furnished to the Company by the Underwriters for use in the Offering Statement, any Preliminary Offering Circular or the Final Offering Circular, or any amendment or supplement thereto, and any Written Testing-the-Waters Communication, consists solely of the Underwriter’s Information. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 8(d) be determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage, expense, liability, action, investigation or proceeding referred to above in this Section 8(d) shall be deemed to include, for purposes of this Section 8(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating, preparing to defend or defending against or appearing as a third party witness in respect of, or otherwise incurred in connection with, any such loss, claim, damage, expense, liability, action, investigation or proceeding. Notwithstanding the provisions of this Section 8(d), the Underwriters shall not be required to contribute any amount in excess of the total commission received in cash by the Underwriters in connection with the Offering less the amount of any damages that the Underwriters have otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement, omission or alleged omission, act or alleged act or failure to act or alleged failure to act. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
SECTION 9.    Termination of this Agreement. Prior to the initial Closing Date, this Agreement may be terminated by the Representative by notice given to the Company if at any time (i) trading or quotation in


any of the Company’s securities shall have been suspended or limited by the Commission or by the NASDAQ; (ii) a general banking moratorium shall have been declared by any of federal, New York or Delaware authorities; or (iii) there shall have occurred any outbreak or escalation of national or international hostilities or any crisis or calamity, or any change in the United States or international financial markets, or any substantial change or development involving a prospective substantial change in United States’ or international political, financial or economic conditions that, in the reasonable judgment of the Representative, is material and adverse and makes it impracticable to market the Shares in the manner and on the terms described in the Final Offering Circular or to enforce contracts for the sale of securities. Any termination pursuant to this Section 9 shall be without liability on the part of (a) the Company to the Representative, except that the Company shall be obligated to reimburse the expenses of each Underwriter as provided for herein, (b) the Underwriters to the Company, or (c) of any party hereto to any other party except that the provisions of Section 6 (with respect to the reimbursement of out-of-pocket accountable, bona fide expenses actually incurred by the Underwriters or persons associated with the Underwriters) and Section 8 shall at all times be effective and shall survive such termination.
SECTION 10.    No Advisory or Fiduciary Responsibility. The Company agrees that the Underwriters are acting solely in the capacity of an arm’s length contractual counterparty to the Company with respect to the offering of Shares contemplated hereby. Additionally, the Underwriters are not advising the Company or any other person as to any legal, tax, investment, accounting or regulatory matters in any jurisdiction with respect to the Offering contemplated hereby or the process leading thereto (irrespective of whether the Underwriters have advised or is advising the Company on other matters). The Company has conferred with its own advisors concerning such matters and shall be responsible for making its own independent investigation and appraisal of the transactions contemplated hereby, and each Underwriter shall have no responsibility or liability to the Company or any other person with respect thereto. Each Underwriter advises that it and its affiliates are engaged in a broad range of securities and financial services and that it or its affiliates may have business relationships or enter into contractual relationships with purchasers or potential purchasers of the Company’s securities. Any review by the Underwriters of the Company, the transactions contemplated hereby or other matters relating to such transactions will be performed solely for the benefit of the Underwriters and shall not be on behalf of, or for the benefit of, the Company.
SECTION 11.    Entire Agreement. This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior agreements and understandings (whether written or oral) between the Company and the Underwriters, solely with respect to the Offering contemplated by this Agreement. For elimination of doubt, nothing in this Agreement or contemplated hereby, including without limitation the immediately previous sentence, shall supersede, curtail, limit, terminate, eliminate or invalidate any provision of the engagement letter, dated as of May 31, 2018, by and between the Representative and the Company (“Engagement Letter”) not related to the transactions contemplated by the Offering Statement and the Final Offering Circular, each of which provisions shall remain in full force and effect.
SECTION 12.    Representations and Indemnities to Survive Delivery. The respective indemnities, agreements, representations, warranties and other statements of the Company, of its officers and of the Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of the Underwriters or the Company or any of its or their partners, officers or directors or any controlling person, as the case may be, and will survive delivery of and payment for the Shares sold hereunder and any termination of this Agreement.


SECTION 13.    Notices. All communications hereunder shall be in writing and shall be mailed, hand delivered, or sent via electronic mail and confirmed to the parties hereto as follows:
If to the Underwriters:
Boustead Securities, LLC
as the Representative of the several Underwriters
6 Venture, Suite 325
Irvine, CA 92618
Email: Dan@boustead1828.com
Attn: Daniel J. McClory
With a copy (which shall not constitute notice) to:
Hunter Taubman Fischer & Li LLC
1450 Broadway, 26th Floor
New York, NY 10018
Email: ltaubman@htflawyers.com
Attn: Louis Taubman, Esq.
If to the Company:
Soliton, Inc.
5304 Ashbrook Drive
Houston. TX 77081
Email: lbisson@soliton.com
Attn: Ms. Lori Bisson, CFO
With a copy (which shall not constitute notice) to:
Schiff Hardin LLP
901 K Street NW, Suite 700
Washington, DC 20001
Email: CPavri@schiffhardin.com
Attn: Cavas Pavri, Esq.
Any party hereto may change the address for receipt of communications by giving written notice to the others.
SECTION 14.    Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and to the benefit of the employees, officers and directors and controlling persons referred to in Section 8, and in each case their respective successors, and no other person will have any right or obligation hereunder. The term “successors” shall not include any purchaser of the Shares as such merely by reason of such purchase.
SECTION 15.    Partial Unenforceability. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable.


SECTION 16.    Governing Law Provisions. This Agreement shall governed by and construed and enforced in accordance with the laws of the State of California, without giving effect to conflict of laws principles thereof.
SECTION 17.    General Provisions.
(a)Each of the parties hereto acknowledges that it is a sophisticated business person who was adequately represented by counsel during negotiations regarding the provisions hereof, including, without limitation, the indemnification and contribution provisions of Section 8, and is fully informed regarding said provisions. Each of the parties hereto further acknowledges that the provisions of Section 8 hereto fairly allocate the risks in light of the ability of the parties to investigate the Company, its affairs and its business in order to assure that adequate disclosure has been made in the Offering Statement, any Preliminary Offering Circular and the Final Offering Circular (and any amendments and supplements thereto), as required by the Securities Act and the Exchange Act.
(b)The respective indemnities, contribution agreements, representations, warranties and other statements of the Company and the Underwriters set forth in or made pursuant to this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation, or statement as to the results thereof, made by or on behalf of the Underwriters, the officers or employees of the Underwriters, any person controlling the Underwriters and the Company, the officers or employees of the Company, or any person controlling the Company (ii) acceptance of the Shares and payment for them as contemplated hereby and (iii) termination of this Agreement.
(c)Except as otherwise provided, this Agreement has been and is made solely for the benefit of and shall be binding upon the Company, the Underwriters, the Underwriters’ officers and employees, any controlling persons referred to herein, the Company’s directors and the Company’s officers who sign the Offering Statement and their respective successors and assigns, all as and to the extent provided in this Agreement, and no other person shall acquire or have any right under or by virtue of this Agreement. The term “successors and assigns” shall not include a purchaser of any of the Shares from the Underwriters merely because of such purchase.
(d)This Agreement may be executed in two or more counterparts, each one of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
(e)This Agreement may not be amended or modified unless in writing by all of the parties hereto, and no condition herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to benefit.
(f)The section headings herein are for the convenience of the parties only and shall not affect the construction or interpretation of this Agreement.
(g)For the avoidance of doubt, the terms of (i) this Agreement, (ii) the Subscription Agreement, and (iii) the Escrow Agreements shall govern the relationship of the parties and any terms of use included in the parties websites or subscription platforms will not apply.
If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to the Company the enclosed copies hereof, whereupon this instrument, along with all counterparts hereof, shall become a binding agreement in accordance with its terms.
[SIGNATURE PAGE FOLLOWS]


Very truly yours,
SOLITON, INC.
By:
 
Name:
 
Title:
 
The foregoing Underwriting Agreement is hereby confirmed and accepted by the Representative as of the date first above written.
BOUSTEAD SECURITIES, LLC
By:
 
Name:
 
Title:
 


SCHEDULE A
Initial Closing
Underwriters
 
Shares Sold through the Underwriters
Boustead Securities, LLC
 
 
[__]
 
 



SCHEDULE B
Pricing Disclosure Materials
Initial Closing:
Offering price $5.00 per Share
Number of Shares: [●]



SCHEDULE C
Subsidiaries
None.



SCHEDULE D
Testing-the-Waters Communications


EXHIBIT A
Form of Warrant
THE REGISTERED HOLDER OF THIS PURCHASE WARRANT AGREES BY HIS, HER OR ITS ACCEPTANCE HEREOF, THAT SUCH HOLDER WILL NOT FOR A PERIOD OF ONE HUNDRED EIGHTY (180) DAYS FOLLOWING THE QUALIFICATION DATE (AS DEFINED BELOW) OF THE OFFERING STATEMENT: (A) SELL, TRANSFER, ASSIGN, PLEDGE OR HYPOTHECATE THIS PURCHASE WARRANT TO ANYONE OTHER THAN OFFICERS OR PARTNERS OF BOUSTEAD SECURITIES, LLC, EACH OF WHOM SHALL HAVE AGREED TO THE RESTRICTIONS CONTAINED HEREIN, IN ACCORDANCE WITH FINRA CONDUCT RULE 5110(G)(1), OR (B) CAUSE THIS PURCHASE WARRANT OR THE SECURITIES ISSUABLE HEREUNDER TO BE THE SUBJECT OF ANY HEDGING, SHORT SALE, DERIVATIVE, PUT OR CALL TRANSACTION THAT WOULD RESULT IN THE EFFECTIVE ECONOMIC DISPOSITION OF THIS PURCHASE WARRANT OR THE SECURITIES HEREUNDER, EXCEPT AS PROVIDED FOR IN FINRA RULE 5110(G)(2).
THIS PURCHASE WARRANT IS NOT EXERCISABLE PRIOR TO [●], 2018. VOID AFTER 5:00 P.M., EASTERN TIME, [ ], 2023.
COMMON STOCK PURCHASE WARRANT
For the Purchase of [●]1 Shares of Common Stock
of
SOLITON, INC.
1.Purchase Warrant. THIS CERTIFIES THAT, pursuant to that certain Underwriting Agreement by and between Soliton, Inc., a Delaware corporation (the “Company”) and Boustead Securities, LLC (“Boustead”), as representative (the “Representative”) of the several underwriters listed in Schedule A thereto (the “Underwriters”), dated [●], 2018 (the “Underwriting Agreement”), Boustead (in such capacity with its permitted successors or assigns, the “Holder”), as registered owner of this Purchase Warrant, is entitled, at any time or from time to time from [●], 2018 (the “Exercise Date”), and at or before 5:00 p.m., Eastern time, [●], 2023 (the “Expiration Date”), but not thereafter, to subscribe for, purchase and receive, in whole or in part, up to [●] shares of common stock of the Company, par value $[●] per share (the “Shares”), subject to adjustment as provided in Section 6 hereof. If the Expiration Date is a day on which banking institutions are authorized by law or executive order to close, then this Purchase Warrant may be exercised on the next succeeding day which is not such a day in accordance with the terms herein. During the period commencing on the date hereof and ending on the Expiration Date, the Company agrees not to take any action that would terminate this Purchase Warrant. This Purchase Warrant is initially exercisable at $[●] per Share (one hundred percent (100%)) of the price of the Shares sold in the Offering); provided, however, that upon the occurrence of any of the events specified in Section 6 hereof, the rights granted by this Purchase Warrant, including the exercise price per Share and the number of Shares to be received upon such exercise, shall be adjusted as therein specified. The term “Exercise Price” shall mean the initial exercise price or the adjusted exercise price, depending on the context. Any term not defined herein shall have the meaning ascribed thereto in the Underwriting Agreement.

_______________
1    7% of shares issued in offering


2.Exercise.
2.1.    Exercise Form. In order to exercise this Purchase Warrant, the exercise form attached hereto as Exhibit A (the “Exercise Form”) must be duly executed and completed and delivered to the Company, together with this Purchase Warrant and payment of the Exercise Price for the Shares being purchased payable in cash by wire transfer of immediately available funds to an account designated by the Company or by certified check or official bank check to the order of the Company. If the subscription rights represented hereby shall not be exercised at or before 5:00 p.m., Eastern time, on the Expiration Date, this Purchase Warrant shall become and be void without further force or effect, and all rights represented hereby shall cease and expire.
2.2.    Cashless Exercise. In lieu of exercising this Purchase Warrant by payment of cash or check payable to the order of the Company pursuant to Section 2.1 above, Holder may elect to receive the number of Shares equal to the value of this Purchase Warrant (or the portion thereof being exercised), by surrender of this Purchase Warrant to the Company, together with the Exercise Form, in which event the Company shall issue to Holder, Shares in accordance with the following formula:
X=
Y (A-B)
A
Where,
 
X = The number of Shares to be issued to Holder;
Y = The number of Shares for which the Purchase Warrant is being exercised;
A = The fair market value of one Share; and
B = The Exercise Price.
For purposes of this Section 2.2, the fair market value of a Share is defined as follows:
(i)if the Company’s common stock is traded on a securities exchange, the value shall be deemed to be the weighted average price of the Shares on such exchange for the five (5) consecutive trading days ending on the day immediately prior to the Exercise Form being submitted in connection with the exercise of this Purchase Warrant; or
(ii)if the Company’s common stock is actively traded over-the-counter, the value shall be deemed to be the weighted average price of the Shares for the five (5) consecutive trading days ending on the trading day immediately prior to the Exercise Form being submitted in connection with the exercise of the Purchase Warrant; if there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Company’s Board of Directors.
2.3.    Legend. Each certificate for the securities purchased under this Purchase Warrant shall bear a legend as follows unless such securities have been registered under the Securities Act of 1933, as amended (the “Act”):
“The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the “Act”), or applicable state law. Neither the securities nor any interest therein may be offered for sale, sold or otherwise transferred except pursuant to an effective registration statement under the Act, or pursuant to an exemption from registration under the Act and applicable state law which, in the opinion of counsel to the Company, is available.”


3.Transfer.
3.1.    General Restrictions. The registered Holder of this Purchase Warrant agrees by his, her or its acceptance hereof, that such Holder will not for a period of one hundred eighty (180) days following the Qualification Date of the Offering Statement: (a) sell, transfer, assign, pledge or hypothecate this Purchase Warrant to anyone other than: (i) Boustead or an underwriter or a selected dealer participating in the offering (the “Offering”) contemplated by the Underwriting Agreement, or (ii) officers or partners of Boustead, each of whom shall have agreed to the restrictions contained herein, in accordance with FINRA Conduct Rule 5110(g)(1), or (b) cause this Purchase Warrant or the securities issuable hereunder to be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of this Purchase Warrant or the securities hereunder, except as provided for in FINRA Rule 5110(g)(2). On and after that date that is one hundred eighty (180) days after the Qualification Date of the Offering Statement, transfers to others may be made subject to compliance with or exemptions from applicable securities laws. In order to make any permitted assignment, the Holder must deliver to the Company the assignment form attached hereto as Exhibit B duly executed and completed, together with this Purchase Warrant and payment of all transfer taxes, if any, payable in connection therewith. The Company shall within five (5) Business Days transfer this Purchase Warrant on the books of the Company and shall execute and deliver a new Purchase Warrant or Purchase Warrants of like tenor to the appropriate assignee(s) expressly evidencing the right to purchase the aggregate number of Shares purchasable hereunder or such portion of such number as shall be contemplated by any such assignment.
3.2.    Restrictions Imposed by the Act. The securities evidenced by this Purchase Warrant shall not be transferred unless and until: (i) the Company has received the opinion of counsel for the Holder that the securities may be transferred pursuant to an exemption from registration under the Act and applicable state securities laws, the availability of which is established to the reasonable satisfaction of the Company, (ii) a Registration Statement relating to the offer and sale of such securities that includes a current prospectus with respect to which the Holder has exercised its registration rights pursuant to Section 4.2 herein, has been filed and declared effective by the Securities and Exchange Commission (the “Commission”) and compliance with applicable state securities law has been established.
4.Registration Rights.
4.1.    Reserved.
4.2.    “Piggy-Back” Registration.
4.2.1.    Grant of Right. Unless all of the Shares underlying the Purchase Warrants (collectively, the “Registrable Securities”) are included in an effective registration statement with a current prospectus, the Holder shall have the right, for a period of five (5) years commencing one hundred eighty (180) days after the Qualification Date, to include the remaining Registrable Securities as part of any other registration of securities filed by the Company (other than in connection with a transaction contemplated by Rule 145 promulgated under the Act or pursuant to Form S-3 or any equivalent form).
4.2.2.    Terms. The Company shall bear all fees and expenses attendant to registering the Registrable Securities pursuant to Section 4.2.1 hereof, but the Holders shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities. In the event of such a proposed registration, the Company shall furnish the then Holders of outstanding Registrable Securities with not less than thirty (30) days written notice prior to the proposed date of filing of such registration statement. Such notice to the Holders shall continue to be given for each registration statement filed by the Company until such time as all of the Registrable Securities have been sold by the Holder. The holders of the Registrable Securities shall


exercise the “piggy-back” rights provided for herein by giving written notice, within ten (10) days of the receipt of the Company’s notice of its intention to file a registration statement. Except as otherwise provided in this Purchase Warrant, there shall be no limit on the number of times the Holder may request registration under this Section 4.2.2.
4.3.    General Terms.
4.3.1.    Indemnification. The Company shall indemnify the Holder(s) of the Registrable Securities to be sold pursuant to any registration statement hereunder and each person, if any, who controls such Holders within the meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which any of them may become subject under the Act, the Exchange Act or otherwise, arising from such registration statement but only to the same extent and with the same effect as the provisions pursuant to which the Company has agreed to indemnify the Underwriters contained in Section 5.1 of the Underwriting Agreement. The Holder(s) of the Registrable Securities to be sold pursuant to such registration statement, and their successors and assigns, shall severally, and not jointly, indemnify the Company, against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which they may become subject under the Act, the Exchange Act or otherwise, arising from information furnished by or on behalf of such Holders, or their successors or assigns, in writing, for specific inclusion in such registration statement to the same extent and with the same effect as the provisions contained in Section 8.2 of the Underwriting Agreement pursuant to which the Underwriters have agreed to indemnify the Company.
4.3.2.    Exercise of Purchase Warrants. Nothing contained in this Purchase Warrant shall be construed as requiring the Holder(s) to exercise their Purchase Warrants prior to or after the initial filing of any registration statement or the effectiveness thereof.
4.3.3.    Documents Delivered to Holders. If the registration statement includes an underwritten public offering, the Company shall furnish to each underwriter of any such offering, a signed counterpart, addressed to such underwriter, of: (i) an opinion of counsel to the Company, dated as of the date on which the Registrable Securities are delivered to the underwriter for sale pursuant to such registration, and (ii) a “cold comfort” letter dated the effective date of such registration statement and the date of the closing under the underwriting agreement signed by the independent registered public accounting firm which has issued a report on the Company’s financial statements included in such registration statement, in each case covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of such accountants’ letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer’s counsel and in accountants’ letters delivered to underwriter(s) in underwritten public offerings of securities. The Company shall also deliver promptly to each Holder participating in the offering requesting the correspondence and memoranda described below and to the managing underwriter, if any, copies of all correspondence between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or its staff with respect to the registration statement and permit each Holder and underwriter(s) to do such investigation, upon reasonable advance notice, with respect to information contained in or omitted from the registration statement as it deems reasonably necessary to comply with applicable securities laws or rules of FINRA. Such investigation shall include access to books, records and properties and opportunities to discuss the business of the Company with its officers and independent auditors, all to such reasonable extent and at such reasonable times as any such Holder shall reasonably request.


4.3.4.    Underwriting Agreement. The Company shall enter into an underwriting agreement with the managing underwriter(s), if any, selected by any Holders whose Registrable Securities are being registered pursuant to this Section 4, which managing underwriter shall be reasonably satisfactory to the Company. Such agreement shall be reasonably satisfactory in form and substance to the Company, each Holder and such managing underwriter, and shall contain such representations, warranties and covenants by the Company and such other terms as are customarily contained in agreements of that type used by the managing underwriter. The Holders shall be parties to any underwriting agreement relating to an underwritten sale of their Registrable Securities and may, at their option, require that any or all the representations, warranties and covenants of the Company to or for the benefit of such underwriter(s) shall also be made to and for the benefit of such Holders. Such Holders shall not be required to make any representations or warranties to or agreements with the Company or the underwriter(s) except as they may relate to such Holders, their Shares and their intended methods of distribution.
4.3.5.    Documents to be Delivered by Holder(s). Each of the Holder(s) participating in any of the foregoing offerings shall furnish to the Company a completed and executed questionnaire provided by the Company requesting information customarily sought of selling security holders.
4.3.6.    Damages. Should the registration or the effectiveness thereof required by Section 4.3 hereof be delayed by the Company or the Company otherwise fails to comply with such provisions, the Holder(s) shall, in addition to any other legal or other relief available to the Holder(s), be entitled to obtain specific performance or other equitable (including injunctive) relief against the threatened breach of such provisions or the continuation of any such breach, without the necessity of proving actual damages and without the necessity of posting bond or other security.
4.3.7.    Rule 144 Registration. The provisions of this Section 4 shall be inapplicable to the extent the Registrable Securities become eligible for sale by the Holder assuming a cashless exercise without the need for current pubic information or other restriction pursuant to Rule 144 under the Act.
5.    New Purchase Warrants to be Issued.
5.1.    Partial Exercise or Transfer. Subject to the restrictions in Section 3 hereof, this Purchase Warrant may be exercised or assigned in whole or in part. In the event of the exercise or assignment hereof in part only, upon surrender of this Purchase Warrant for cancellation, together with the duly executed exercise or assignment form and funds sufficient to pay any Exercise Price and/or transfer tax if exercised pursuant to Section 2.1 hereof, the Company shall cause to be delivered to the Holder without charge a new Purchase Warrant of like tenor to this Purchase Warrant in the name of the Holder evidencing the right of the Holder to purchase the number of Shares purchasable hereunder as to which this Purchase Warrant has not been exercised or assigned.
5.2.    Lost Certificate. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Purchase Warrant and of reasonably satisfactory indemnification or the posting of a bond, the Company shall execute and deliver a new Purchase Warrant of like tenor and date. Any such new Purchase Warrant executed and delivered as a result of such loss, theft, mutilation or destruction shall constitute a substitute contractual obligation on the part of the Company.
6.    Adjustments.
6.1.    Adjustments to Exercise Price and Number of Shares. The Exercise Price and the number of Shares underlying this Purchase Warrant shall be subject to adjustment from time to time as hereinafter set forth:


6.1.1.    Share Dividends; Split Ups. If, after the date hereof, and subject to the provisions of Section 6.3 below, the number of outstanding Shares is increased by a stock dividend payable in Shares or by a split up of Shares or other similar event, then, on the effective day thereof, the number of Shares purchasable hereunder shall be increased in proportion to such increase in outstanding shares, and the Exercise Price shall be proportionately decreased.
6.1.2.    Aggregation of Shares. If, after the date hereof, and subject to the provisions of Section 6.3 below, the number of outstanding Shares is decreased by a consolidation, combination or reclassification of Shares or other similar event, then, on the effective date thereof, the number of Shares purchasable hereunder shall be decreased in proportion to such decrease in outstanding shares, and the Exercise Price shall be proportionately increased.
6.1.3.    Replacement of Shares upon Reorganization, etc. In case of any reclassification or reorganization of the outstanding Shares other than a change covered by Section 6.1.1 or Section 6.1.2 hereof or that solely affects the par value of such Shares, or in the case of any share reconstruction or amalgamation or consolidation of the Company with or into another corporation (other than a consolidation or share reconstruction or amalgamation in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the outstanding Shares), or in the case of any sale or conveyance to another corporation or entity of the property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the Holder of this Purchase Warrant shall have the right thereafter (until the expiration of the right of exercise of this Purchase Warrant) to receive upon the exercise hereof, for the same aggregate Exercise Price payable hereunder immediately prior to such event, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, share reconstruction or amalgamation, or consolidation, or upon a dissolution following any such sale or transfer, by a Holder of the number of Shares of the Company obtainable upon exercise of this Purchase Warrant immediately prior to such event; and if any reclassification also results in a change in Shares covered by Section 6.1.1 or Section 6.1.2, then such adjustment shall be made pursuant to Section 6.1.1, Section 6.1.2 and this Section 6.1.3. The provisions of this Section 6.1.3 shall similarly apply to successive reclassifications, reorganizations, share reconstructions or amalgamations, or consolidations, sales or other transfers.
6.1.4.    Changes in Form of Purchase Warrant. This form of Purchase Warrant need not be changed because of any change pursuant to this Section 6.1, and Purchase Warrants issued after such change may state the same Exercise Price and the same number of Shares as are stated in the Purchase Warrants initially issued pursuant to this Agreement. The acceptance by any Holder of the issuance of new Purchase Warrants reflecting a required or permissive change shall not be deemed to waive any rights to an adjustment occurring after the date hereof or the computation thereof.
6.2.    Substitute Purchase Warrant. In case of any consolidation of the Company with, or share reconstruction or amalgamation of the Company with or into, another corporation (other than a consolidation or share reconstruction or amalgamation which does not result in any reclassification or change of the outstanding Shares), the corporation formed by such consolidation or share reconstruction or amalgamation shall execute and deliver to the Holder a supplemental Purchase Warrant providing that the holder of each Purchase Warrant then outstanding or to be outstanding shall have the right thereafter (until the stated expiration of such Purchase Warrant) to receive, upon exercise of such Purchase Warrant, the kind and amount of shares of stock and other securities and property receivable upon such consolidation or share reconstruction or amalgamation, by a holder of the number of Shares of the Company for which such Purchase Warrant might have been exercised immediately prior to such consolidation, share reconstruction or amalgamation, sale or transfer. Such supplemental Purchase Warrant shall provide for adjustments which shall be identical to the adjustments provided for in this Section 6. The above provision of this Section 6 shall similarly apply to successive consolidations or share reconstructions or amalgamations.


6.3.    Elimination of Fractional Interests. The Company shall not be required to issue certificates representing fractions of Shares upon the exercise of the Purchase Warrant, nor shall it be required to issue scrip or pay cash in lieu of any fractional interests, it being the intent of the parties that all fractional interests shall be eliminated by rounding any fraction up or down, as the case may be, to the nearest whole number of Shares or other securities, properties or rights.
7.    Reservation and Listing. The Company shall at all times reserve and keep available out of its authorized Shares, solely for the purpose of issuance upon exercise of this Purchase Warrant, such number of Shares or other securities, properties or rights as shall be issuable upon the exercise thereof. The Company covenants and agrees that, upon exercise of this Purchase Warrant and payment of the Exercise Price therefor, in accordance with the terms hereby, all Shares and other securities issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights of any shareholder. The Company further covenants and agrees that upon exercise of this Purchase Warrant and payment of the exercise price therefor, all Shares and other securities issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights of any shareholder. As long as this Purchase Warrant shall be outstanding, the Company shall use its commercially reasonable efforts to cause all Shares issuable upon exercise of this Purchase Warrant to be listed (subject to official notice of issuance) on all national securities exchanges (or, if applicable, on the OTC Bulletin Board or any successor trading market) on which the Shares issued to the public in the Offering may then be listed and/or quoted.
8.    Certain Notice Requirements.
8.1.    Holder’s Right to Receive Notice. Nothing herein shall be construed as conferring upon the Holders the right to vote or consent or to receive notice as a shareholder for the election of directors or any other matter, or as having any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of the Purchase Warrants and their exercise, any of the events described in Section 8.2 shall occur, then, in one or more of said events, the Company shall give written notice of such event at least fifteen days prior to the date fixed as a record date or the date of closing the transfer books (the “Notice Date”) for the determination of the shareholders entitled to such dividend, distribution, conversion or exchange of securities or subscription rights, or entitled to vote on such proposed dissolution, liquidation, winding up or sale. Such notice shall specify such record date or the date of the closing of the transfer books, as the case may be. Notwithstanding the foregoing, the Company shall deliver to each Holder a copy of each notice given to the other shareholders of the Company at the same time and in the same manner that such notice is given to the shareholders.
8.2.    Events Requiring Notice. The Company shall be required to give the notice described in this Section 8 upon one or more of the following events: (i) if the Company shall take a record of the holders of its Shares for the purpose of entitling them to receive a dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company, (ii) the Company shall offer to all the holders of its Shares any additional shares of capital stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any option, right or warrant to subscribe therefor, or (iii) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation or share reconstruction or amalgamation) or a sale of all or substantially all of its property, assets and business shall be proposed.
8.3.    Notice of Change in Exercise Price. The Company shall, promptly after an event requiring a change in the Exercise Price pursuant to Section 6 hereof, send notice to the Holders of such event and change (“Price Notice”). The Price Notice shall describe the event causing the change and the method of calculating same and shall be certified as being true and accurate by the Company’s Chief Financial Officer.


8.4.    Transmittal of Notices. All notices, requests, consents and other communications under this Purchase Warrant shall be in writing and shall be deemed to have been duly made (1) when hand delivered, (2) when mailed by express mail or private courier service, (3) when the event requiring notice is disclosed in all material respects and filed in a current report on Form 8-K or in a definitive proxy statement on Schedule 14A prior to the Notice Date or (4) if sent by electronic mail, on the day the notice was sent if during regular business hours and, if sent outside of regular business hours, on the following business day: (i) if to the registered Holder of the Purchase Warrant, to the address of such Holder as shown on the books of the Company, or (ii) if to the Company, to following address or to such other address as the Company may designate by notice to the Holders:
If to the Holder:
Boustead Securities, LLC
6 Venture, Suite 325
Irvine, CA 92618
Email: Dan@boustead1828.com
Attn: Daniel J. McClory
With a copy (which shall not constitute notice) to:
Hunter Taubman Fischer & Li LLC
1450 Broadway, 26th Floor New York, NY 10018
Email: ltaubman@htflawyers.com
Attn: Louis Taubman, Esq.
If to the Company:
Soliton, Inc.
5304 Ashbrook Drive
Houston. TX 77081
Email: lbisson@soliton.com
Attn: Ms. Lori Bisson, CFO
With a copy (which shall not constitute notice) to:
Schiff Hardin LLP
901 K Street NW, Suite 700
Washington, DC 20001
Email: CPavri@schiffhardin.com
Attn: Cavas Pavri, Esq.
9.    Miscellaneous.
9.1.    Amendments. The Company and Boustead may from time to time supplement or amend this Purchase Warrant without the approval of any of the Holders in order to cure any ambiguity, to correct or supplement any provision contained herein that may be defective or inconsistent with any other provisions herein, or to make any other provisions in regard to matters or questions arising hereunder that the Company and Boustead may deem necessary or desirable and that the Company and Boustead deem shall not adversely affect the interest of the Holders. All other modifications or amendments shall require the written consent of and be signed by the party against whom enforcement of the modification or amendment is sought.


9.2.    Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Purchase Warrant.
9.3.    Entire Agreement. This Purchase Warrant (together with the other agreements and documents being delivered pursuant to or in connection with this Purchase Warrant) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof.
9.4.    Binding Effect. This Purchase Warrant shall inure solely to the benefit of and shall be binding upon, the Holder and the Company and their permitted assignees and respective successors and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Purchase Warrant or any provisions herein contained.
9.5.    Governing Law; Submission to Jurisdiction. This Purchase Warrant shall be governed by and construed and enforced in accordance with the laws of the State of California, without giving effect to conflict of laws principles thereof. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Purchase Warrant shall be brought and enforced in the state courts located in Orange County, or in the United States District Court for the Central District of California located in the City of Santa Ana, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 8 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim. The Company and the Holder agree that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor.
9.6.    Waiver, etc. The failure of the Company or the Holder to at any time enforce any of the provisions of this Purchase Warrant shall not be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Purchase Warrant or any provision hereof or the right of the Company or any Holder to thereafter enforce each and every provision of this Purchase Warrant. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Purchase Warrant shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.
9.7.    Exchange Agreement. As a condition of the Holder’s receipt and acceptance of this Purchase Warrant, Holder agrees that, at any time prior to the complete exercise of this Purchase Warrant by Holder, if the Company and Boustead enter into an agreement (“Exchange Agreement”) pursuant to which they agree that all outstanding Purchase Warrants will be exchanged for securities or cash or a combination of both, then Holder shall agree to such exchange and become a party to the Exchange Agreement.
9.8.    Execution in Counterparts. This Purchase Warrant may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each


of the other parties hereto. Such counterparts may be delivered by facsimile transmission or other electronic transmission.
[SIGNATURE PAGE FOLLOWS]



IN WITNESS WHEREOF, the Company has caused this Purchase Warrant to be signed by its duly authorized officer as of the ____ day of _______, 2018.
SOLITON, INC.
By:
 
Name:
 
Title:
 



EXHIBIT A
to
PURCHASE WARRANT
Form to be used to exercise Purchase Warrant:
Date: __________, 20___
The undersigned hereby elects irrevocably to exercise the Purchase Warrant for ______ Shares of Soliton, Inc., a Delaware corporation (the “Company”) and hereby makes payment of $____ (at the rate of $____ per Share) in payment of the Exercise Price pursuant thereto. Please issue the Shares as to which this Purchase Warrant is exercised in accordance with the instructions given below and, if applicable, a new Purchase Warrant representing the number of Shares for which this Purchase Warrant has not been exercised.
or
The undersigned hereby elects irrevocably to convert its right to purchase ___ Shares under the Purchase Warrant for ______ Shares, as determined in accordance with the following formula:
X=
Y (A-B)
A
Where,
 
X = The number of Shares to be issued to Holder;
Y = The number of Shares for which the Purchase Warrant is being exercised;
A = The fair market value of one Share; and
B = The Exercise Price.
The undersigned agrees and acknowledges that the calculation set forth above is subject to confirmation by the Company and any disagreement with respect to the calculation shall be resolved by the Company in its sole discretion.
Please issue the Shares as to which this Purchase Warrant is exercised in accordance with the instructions given below and, if applicable, a new Purchase Warrant representing the number of Shares for which this Purchase Warrant has not been exercised.
Signature
Signature Guaranteed
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name: (Print in Block Letters)
Address:
NOTICE: The signature to this form must correspond with the name as written upon the face of the Purchase Warrant without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership on a registered national securities exchange.


EXHIBIT B
TO
PURCHASE WARRANT
Form to be used to assign Purchase Warrant:
(To be executed by the registered Holder to effect a transfer of the within Purchase Warrant):
FOR VALUE RECEIVED, ___________________________ does hereby sell, assign and transfer unto __________________ the right to purchase shares of Soliton, Inc., a Delaware corporation (the “Company”), evidenced by the Purchase Warrant and does hereby authorize the Company to transfer such right on the books of the Company.
Dated:    ____________, 20__
Signature
NOTICE: The signature to this form must correspond with the name as written upon the face of the within Purchase Warrant without alteration or enlargement or any change whatsoever.



EXHIBIT B
Form of Lock-Up Agreement
Boustead Securities, LLC
6 Venture, Suite 325
Irvine, CA 92618
Re:    Soliton, Inc. – Lock-Up Agreement
Ladies and Gentlemen:
The undersigned, a holder of shares of common stock, $0.001 par value (“Shares”), or rights to acquire Shares, of Soliton, Inc., a Delaware corporation (the “Company”), understands that Boustead Securities, LLC, acting as a representative (the “Representative”) of the several underwriters in the Public Offering (“Underwriters”), proposes to enter into an underwriting agreement (the “Underwriting Agreement”) with the Company providing for the public offering (the “Public Offering”) of Shares of the Company.
To induce the Underwriters to continue their efforts in connection with the Public Offering, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned hereby agrees for the benefit of the Company and the Representative that, without the Representative’s prior written consent, the undersigned will not, during the period commencing on the date hereof and ending 12 months following the closing date of the Public Offering (the “Initial Lock-Up Period”), directly or indirectly (1) offer, pledge, assign, encumber, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, any Shares or any securities directly or indirectly convertible into or exercisable or exchangeable for Shares owned either of record or beneficially (as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), by the undersigned on the date hereof or hereafter acquired, or (2) enter into any swap or other agreement or arrangement that transfers, in whole or in part, any of the economic consequences of ownership of the Shares, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Shares or such other securities, in cash or otherwise, or publicly announce an intention to do any of the foregoing.
After the Initial Lock-up Period and until 24 months from the closing of the Public Offering (the “Additional Lock-up Period”), the undersigned hereby agrees for the benefit of the Company and the Underwriters that, without the Representative’s prior written consent, the undersigned will not, sell his, her or its shares other than pursuant to the following criteria:
i.
if the Company’s common stock price is over $7.00 per share for five consecutive trading days then the undersigned can sell up to 3% of his, her or its holdings on a monthly basis, subject to a maximum sale on any trading day of 4% of the daily volume;
ii.
if the Company’s common stock price is over $10.00 per share for five consecutive trading days then the undersigned can sell up to an additional 5% of his, her or its holdings on a monthly basis, subject to a maximum sale on any trading day of 7% of the daily volume; and
iii.
if the Company’s common stock price is over $14.00 per share then the undersigned is not restricted from making any sales until such time as the Company’s common stock price falls back below $14.00 per share.


From the end of the preceding 24 month period until the three-year anniversary of the initial closing of the Public Offering (the “Final Lock-up Period”, and collectively with the Initial Lock-up Period and the Additional Lock-up Period, the “Lock-up Period”), the undersigned shall be able to sell on any trading day 10% of the daily volume; provided that if the Company’s common stock price is over $10.00 per share then the undersigned is not restricted from making any sales until such time as the Company’s common stock falls back below $10.00 per share.
Notwithstanding the above, if the price of the Company’s common stock is below $7.00 after the Initial Lock-up Period, the undersigned is permitted to sell in two tranches 5% of his, her or its holdings, up to 100,000 shares, in a private transaction, after which such shares will be subject to a Rule 144 6 month holding period and released from lockup thereafter.
If the undersigned is an officer or director of the Company, the undersigned further agrees that the foregoing restrictions shall be equally applicable to any issuer-directed Shares the undersigned may purchase in the Public Offering.
The foregoing shall not apply to:
i.
the sale of Shares pursuant to the Underwriting Agreement;
ii.
transactions relating to Shares acquired in open market transactions after the completion of the Public Offering; provided that, no filing by any party under the Exchange Act or other public announcement shall be required or shall be voluntarily made in connection with such transfer;
iii.
(a) exercises of stock options or equity awards granted pursuant to an equity incentive or other plan or warrants to purchase shares of Shares or other securities (including by cashless exercise to the extent permitted by the instruments representing such stock options or warrants so long as such cashless exercise is effected solely by the surrender of outstanding stock options or warrants to the Company and the Company’s cancellation of all or a portion thereof to pay the exercise price), provided that in any such case the securities issued upon exercise shall remain subject to the provisions of this Agreement (as defined below); (b) transfers of Shares or other securities to the Company in connection with the vesting or exercise of any equity awards granted pursuant to an equity incentive or other plan and held by the undersigned to the extent, but only to the extent, as may be necessary to satisfy tax withholding obligations pursuant to the Company’s equity incentive or other plans;
iv.
transfers of Shares or any security directly or indirectly convertible into or exercisable or exchangeable for Shares as a bona fide gift or in connection with estate planning, including, but not limited to, dispositions to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned and dispositions from any grantor retained annuity trust established for the direct benefit of the undersigned or a member of the immediate family of the undersigned, or by will or intestacy;
v.
any transfer pursuant to a qualified domestic relations order or in connection with a divorce;
vi.
(a) any distributions or transfers without consideration of Shares or any security directly or indirectly convertible into or exercisable or exchangeable for Shares to limited partners, members, stockholders or affiliates of the undersigned, or to any partnership, corporation or limited liability company controlled by the undersigned or by a member of the immediate family of the undersigned; (b) any transfer made in connection with the sale or other bona fide transfer in a single transaction of all or substantially all of the undersigned’s capital stock, partnership interests, membership interests or other similar equity interests, as the


case may be, or all or substantially all of the undersigned’s assets, in any such case not undertaken for the purpose of avoiding the restrictions imposed by this Agreement;
vii.
the establishment of a trading plan pursuant to Rule 10b 5-1 under the Exchange Act for the transfer of shares of Shares, provided that such plan does not provide for the transfer of Shares during the Lock-Up Period;
viii.
by will or intestate succession upon the death of the undersigned; or
i.
transfers or distributions pursuant to a bona fide third party tender offer, merger, consolidation or other similar transaction made to all holders of the Company’s Common Stock involving a change of control of the Company (including entering into any lock-up, voting or similar agreement pursuant to which the undersigned may agree to transfer, sell, tender or otherwise dispose of the Company’s Common Stock (or any security convertible into or exercisable for the Company’s Common Stock), or voting any of the Company’s Common Stock in favor of any such transaction or taking any other action in connection with any such transaction), provided that the restrictions set forth in this Lock-Up Agreement shall continue to apply to the undersigned's Shares should such tender offer, merger, consolidation or other transaction not be completed;
provided, however, that (a) in the case of any transfer or distribution pursuant to clause (iv) or (vi), each donee or distributee shall sign and deliver a lock-up letter agreement substantially in the form of this letter agreement (the “Agreement”) and (b) in the case of any transaction pursuant to clauses (iv), (vi) or (vii), such transaction is not required to be reported during the Lock-Up Period by anyone in any public report or filing with the Securities and Exchange Commission or otherwise (other than a required filing on Form 5, Schedule 13D or Schedule 13G (or 13D/A or 13G/A) and no such filing shall be made voluntarily during the Lock-Up Period. In addition, the undersigned agrees that, without the Representative’s prior written consent, it will not, during the Lock-Up Period, make any demand for or exercise any right with respect to, the registration of any Shares or any security directly or indirectly convertible into or exercisable or exchangeable for Shares.
The undersigned hereby further agrees that, prior to engaging in any transaction or taking any other action that is subject to the terms of this Agreement during the period from the date of this Agreement to the expiration of the Lock-Up Period, it will give notice thereof to the Company and will not consummate such transaction or take such action unless it has received written confirmation from the Company that the Lock-Up Period has expired.
In furtherance of the foregoing, (1) the undersigned also agrees and consents to the entry of stop transfer instructions with any duly appointed transfer agent for the registration or transfer of the securities described herein against the transfer of any such securities except in compliance with the foregoing restrictions, and (2) the Company, and any duly appointed transfer agent for the registration or transfer of the securities described herein, are hereby authorized to decline to make any transfer of securities if such transfer would constitute a violation or breach of this Agreement.
If the undersigned is an officer or director of the Company, (i) the Representative agrees that, at least three (3) business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of Shares, the Representative will notify the Company of the impending release or waiver, and (ii) the Company has agreed in the Underwriting Agreement to announce the impending release or waiver by press release through a major news service at least two (2) business days before the effective date of the release or waiver. Any release or waiver granted by the Representative hereunder to any such officer or director shall only be effective two (2) business days after the publication date of such press release. The provisions of this paragraph will not apply if (a) the release or waiver is effected solely to permit


a transfer not for consideration and (b) the transferee has agreed in writing to be bound by the same terms described in this letter to the extent and for the duration that such terms remain in effect at the time of the transfer.
The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Agreement. The undersigned hereby waives any applicable notice requirement concerning the Company’s intention to file the registration statement and applicable exhibits (the “Offering Statement”) and sell Shares thereunder.
The undersigned understands that the Company and the Underwriters are relying upon this Agreement in proceeding toward consummation of the Public Offering. The undersigned further understands that this Agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors and assigns.
The undersigned acknowledges that whether or not the Public Offering actually occurs depends on a number of factors, including market conditions, that any Public Offering will be made only pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Representative and that there is no assurance that the Company and the Representative will enter into an Underwriting Agreement with respect to the Public Offering or that the Public Offering will be consummated.
This Agreement shall automatically terminate upon the earliest to occur, if any, of (1) either the Representative, on the one hand, or the Company, on the other hand, advising the other in writing, prior to the execution of the Underwriting Agreement, that they have determined not to proceed with the Public Offering, (2) termination of the Underwriting Agreement before the sale of any shares of Shares pursuant to the Underwriting Agreement, (3) the withdrawal of the Offering Statement filed with the Securities and Exchange Commission with respect to the Public Offering, or (4) the Underwriting Agreement having not been executed by [●] or such other date as may be agreed as the final date of the Public Offering if the Company and the Representative extend the Public Offering.
This Agreement shall be governed by and construed in accordance with the laws of the State of California, without regard to the conflict of laws principles thereof.
[SIGNATURE PAGE FOLLOWS


Sincerely,

 
Shareholder
 
 
(Name - Please Print)
 
 
(Signature)
 
 
 
(Name of Signatory, in the
case of entities - Please Print)
 
 
 
(Title of Signatory, in the case
of entities - Please Print)
 
 
 
 
Address:
 
 
 
 
 
 
 
 
 
 
 


EXHIBIT C
Patent Applications

Exhibit 1.3

SELECTED DEALER AGREEMENT
BOUSTEAD SECURITIES, LLC (the “Underwriter”), as agent for Soliton, Inc., a Delaware corporation (the “Company”), is acting, in accordance with that certain underwriting agreement dated ______________, 2018 (the “Underwriting Agreement”), as best efforts underwriter of a proposed public offering (the “Offering”) of up to a minimum of 1,500,000 shares of the Company’s common stock (the “Common Stock”) for a minimum offering amount of $7,500,000 (the “Minimum Offering Amount”) and a maximum of 3,000,000 shares of the Company’s Common Stock for an aggregate maximum offering amount of up to $15,000,000 (the “Maximum Offering Amount”), pursuant to an offering statement and Preliminary Offering Circular filed with the Securities and Exchange Commission (“SEC”) on Form 1-A, as amended from time to time, and such offering statement was qualified by the SEC on [ ], 2018 (Offering File No. 024-10854). The Preliminary Offering Statement includes the Company’s offering circular, as amended or supplemented from time to time (the “Offering Circular”). The Company is offering the Common Stock to certain subscribers (the “Subscribers”) for a purchase price of $5.00 per share of common stock. Once the closing occurs, the funds will be released to the Company and commissions will be paid directly to the Underwriter upon written request by the Company and the Underwriter to the Escrow Agent.
The Offering will be made on a “best efforts” basis whereby Common Stock yielding gross proceeds of not less than the Minimum Offering Amount will be sold or no shares will be sold. The Underwriter invites your participation as a “selected dealer” in offering the Common Stock to the public pursuant to the Offering Circular, subject to the terms of (a) the Underwriting Agreement with the Company as may be changed from time to time, (b) this Agreement and (c) the Underwriter’s instructions which may be forwarded to the selected dealers from time to time. The terms and conditions of this invitation are as follows:
1.    Acceptance of Orders. Orders received from the selected dealer will be accepted only at a price, in the amounts and on the terms set forth in the Offering Circular. After reaching the Minimum Offering Amount, the Company may continue to sell Common Stock up to the Maximum Offering Amount on a continuous basis at the offering price set forth on the cover page of the Offering Circular. Non-binding written indications of interest are being accepted from potential subscribers and may be used for allocation in the event subscriptions exceeding the Minimum Offering Amount are received. The Company, may, in its sole discretion, accept or reject any order.
2.    Selling Compensation. The selected dealer will receive, on all Common Stock sold by it to subscribers procured directly by the selected dealer, compensation of 5% (five percent) of the total sales price, or $0.25 per Share, based on a $5.00 price per share of common stock and warrants to purchase an aggregate number of shares of the Company’s Common Stock equal to 5% (five percent) of the number of shares of Common Stock directly attributable to investors introduced by the selected dealer (the “Selected Dealer’s Commission”). No commissions will be paid on subscriptions for Common Stock that the Company rejects. The Selected Dealer’s Commission to which you are entitled hereunder shall be paid to you by the Underwriter concurrently with the closing of the Offering. Prior to closing, the Underwriter shall provide the Selected Dealer with a flow of funds memorandum and shall not disburse funds without their approval of the flow of funds memorandum.


3.    Selected Dealer Offers and Sales. The selected dealer shall offer and sell the Common Stock to its customers preapproved by the Underwriter on a commission-basis only. No Common Stock may be purchased for the account of the selected dealer or its principals. In all sales of the Common Stock under this Agreement, the selected dealer shall confirm as agent for a member of the public. The Underwriter shall make up to 1,000,000 shares of Common Stock available for sale by the selected dealer, in accordance with the provisions of this Agreement and subject to selected dealers demand for such shares by its customers.
4.    Delivery of Funds. In order for any subscription to be considered, each Subscriber is required to submit a completed and executed subscription agreement and any other applicable agreement and payment by ACH or by wire transfer in the amount subscribed for to the selected dealer. The selected dealer will then be required to provide the Underwriter with a schedule, in the form of Schedule 1 of this Agreement, providing the Subscribers (i) full name, (ii) amount of funds, (iii) number of shares of Common Stock to be provided and (iv) Common Stock delivery instructions for each Subscriber. If such Subscriber’s tender of a subscription is rejected in whole or in part, then the funds forwarded by the prospective investor (or the applicable portion thereof) will be returned to the prospective investor directly.
5.    Payment for Sales. Full payment for the Common Stock shall accompany all subscription agreements and shall be by wire transfers to one of the offering escrow accounts (the “Offering Escrow Accounts”) held by the Bryn Mawr Trust Company of Delaware (“BMTC DE”) or FinTech Clearing, LLC (collectively with BMTC DE, the “Escrow Agents”). Subscription agreements and copies of documentation with respect to all such wire transfers shall be delivered to the Underwriter at the address set forth in paragraph 16 below.
6.    Deposit of Sales Proceeds. All proceeds from the sale of the Shares, without deduction, will be deposited in the Offering Escrow Account set forth in paragraph 5 of this agreement. If at least $7,500,000 has not been deposited and cleared by the termination date set forth in the Offering Circular, the full amount paid will be refunded to all subscribers within a ten (10) day period from the initial or extended deadline. No certificates evidencing the Common Stock will be issued unless and until the deposits have been cleared within the time period provided above. All amounts so deposited will be delivered to the Company, except that the Escrow Agents may be instructed to pay the underwriting commissions related to the proceeds of the Offering prior to the delivery of such proceeds to the Company. No commissions will be paid by the Underwriter unless and until the deposits have been cleared and such funds have been released and the net proceeds, after deduction for underwriting commissions, are delivered to the Company.
7.    Failure of Order. If an order is rejected or if a payment is received which proves insufficient, any compensation paid to the selected dealer shall be returned either by the selected dealer in cash or by a charge against the account of the selected dealer, as the Underwriter may elect.
8.    Conditions of Offering. All sales will be subject to delivery by the Company of certificates evidencing its Common Stock, or the electronic transfer via DRS and DTC of any Common Stock purchased, at the discretion of the purchaser.

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9.    Selected Dealer’s Undertakings.
(a)    No person is authorized to make any representations concerning the Common Stock except those contained in the Company’s then current Offering Circular filed by the Company with the Securities and Exchange Commission.
(b)    The selected dealer will not offer Common Stock pursuant to this agreement unless the Offering Circular is furnished or otherwise made available to the purchaser at least forty-eight (48) hours prior to the mailing of the confirmation of sale, or is sent to such person under such circumstances that it would be received by the purchaser or the purchaser’s representative forty-eight (48) hours prior to the purchaser’s receipt of a confirmation of the sale.
(c)    With the exception of certain pre-approved issuer information and e-mail templates, the selected dealer agrees not to use any supplemental sales literature of any kind without prior written approval of the Underwriter, unless it is furnished by the Underwriter for such purpose. In offering the Common Stock, the selected dealer will rely solely on the representations contained in the Company’s Offering Circular filed by the Company with the Securities and Exchange Commission. The Underwriter may not circulate or share any supplemental sales literature prepared solely by the selected dealer for the purpose of the Underwriter’s review with any third parties, other than with the Company, Company’s counsel, and Underwriters counsel or with selected dealer’s prior approval to circulate or share such supplemental sales literature with others (which shall not be unreasonably withheld). Additional copies of the then current Offering Circular will be supplied by the Underwriter in reasonable quantities upon request.
(d)    The selected dealer agrees that it is bound by the terms of the Offering Escrow Agreements dated [ ], 2018 executed by the Company, the Underwriter and the Escrow Agent.
(e) The selected dealer agrees that it shall comply with the applicable provisions of SEC Rules 10b-9 and 15c2-4 and the FINRA “Notice to Members” Number 84-7.
10.    FINRA Compliance. By accepting this agreement, the selected dealer represents that (a) that it is a broker or dealer (as defined by FINRA) actually engaged in the investment banking or securities business and that it is either (i) a member in good standing of FINRA or (ii) a non-U.S. bank, broker, dealer or other institution not eligible for membership in FINRA and not registered under the 1934 Act (a “non-member non-U.S. dealer”). It further agrees that, in connection with any purchase or sale of the Shares, it will comply, if it is a member of FINRA, including, without limitation, with the requirements of FINRA Rules 5110, 5121, 5130, 5131 and 5141 (to the extent any or all such rules are applicable to the Offering). If it is a non-member non-U.S. dealer, it will comply with the requirements of the following FINRA rules (including any successor rules thereto adopted by FINRA): (i) to the extent that it is acting, in respect of offers or sales of the Shares, as a “conduit” for, or are receiving in connection with such offers and sales any selling commissions, discounts, allowances or other compensation from, or is otherwise being directed with respect to allocations or disposition of the Shares by, a FINRA member, FINRA Rule 5130 and FINRA Rule 5141 as though it is a member of FINRA, and (ii) FINRA Rule 204(c), as that Rule applies to a non-member broker or dealer in a non-U.S. country, and (iii) it is, and will remain at all relevant times, an appropriately registered or licensed broker or dealer (to the extent required) in its home jurisdiction and in any non-U.S. jurisdiction in which it engages in activities in connection with the

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Offering. The selected dealer represents and warrants that it is fully familiar with the above provisions. The selected dealer further states that neither it, nor any related person has provided or will provide a loan or credit facility to the Company during the 180 day period preceding the filing date through the end of the 90 day period following the effective date of the offering. The selected dealer has not received, and has not received a commitment from the Company with respect to, any form of compensation or other items of value from the Company other than as provided herein.
The selected dealer further represents, by its participation in the Offering, that it has provided to us all documents and other information required to be filed with respect to it, any related person or any person associated with it or any such related person pursuant to the supplementary requirements of FINRA’s interpretation with respect to review of corporate financing as such requirements relate to the Offering.
11.    Selected Dealer’s Employees. By accepting this agreement, the selected dealer has assumed full responsibility for proper training and instruction of its representatives concerning the selling methods to be used in connection with the offer and sale of the Common Stock, giving special emphasis to the principles of suitability and full disclosure to prospective investors and the prohibitions against “free-riding and withholding.”
12.    Indemnification. The Company and the Underwriter have agreed to certain indemnities, as more particularly set forth in the Underwriting Agreement.
13.    Selected Dealer’s Indemnification. The selected dealer agrees to indemnify and hold harmless the Company, the Underwriter, each of the Company’s officers and directors who signed the offering statement, and each person, if any, who controls the Company and the Underwriter within the meaning of Section 12 of the Securities Act of 1933, as amended, against any and all loss, liability, claim, damage and expense (a) but only with respect to untrue statements or omissions, or alleged untrue statements or omissions made in the offering statement or the Offering Circular or any amendment or supplement to it in reliance upon and in conformity with written information furnished to the Company by such selected dealer expressly for use in the offering statement (or any amendment to it) or the Offering Circular (or any amendment or supplement to it) or (b) based upon alleged misrepresentations or omissions to state material facts in connection with statements made by the selected dealer or the selected dealer’s salesperson orally or by other means; and the selected dealer will reimburse the Company and the Underwriter for any legal or other expenses reasonably incurred in connection with the investigation of or the defending of any such action or claim.
14.    Required Notices and Claims. Each indemnified party shall give prompt notice to each indemnifying party of any action commenced against it in respect of which indemnity may be sought under this agreement, but failure to so notify an indemnifying party shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. An indemnifying party may participate at its own expense in the defense of such action. If it so elects within a reasonable time after receipt of such notice, an indemnifying party, jointly with any other indemnifying parties receiving such notice, may assume the defense of such action with counsel chosen by it and approved by the indemnified parties’ defendant in such action, unless such indemnified parties reasonably object to such assumption on the ground that there may be legal defenses available to them which are different from or in addition to those available to such

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indemnifying parties, and shall not be liable for any fees and expenses of counsel for the indemnified parties later incurred in connection with such action. In no event shall the indemnifying parties be liable for the fees and expenses of more than one counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances.
15.    Expenses. No expenses will be charged to selected dealers. A single transfer tax, if any, on the sale of the Common Stock by the selected dealer to its customers will be paid when such Common Stock are delivered to the selected dealer for delivery to its customers. However, the selected dealer will pay its proportionate share of any transfer tax or any other tax (other than the single transfer tax described above) if any such tax shall be from time to time assessed against the Underwriter and other selected dealers.
16.    Communications. All communications to the Underwriter shall be sent to:
Boustead Securities, LLC
6 Venture, Suite 265
Irvine, CA 92618
Attention: Keith Moore, CEO
Fax: +1 815 301 8099
Any notice to the selected dealer shall be properly given if mailed or telephoned to the selected dealer below. This Agreement will terminate upon the termination of the Offering, except that either party may terminate this Agreement at any time by giving written notice to the other.
17.    Compliance with Law. The selected dealer agrees that in selling the Common Stock it will comply with all applicable rules and regulations, including the applicable provisions of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, the applicable rules and regulations of the SEC thereunder, the applicable rules and regulations of FINRA, the applicable rules and regulations of any securities exchange or other regulatory or self-regulatory organization having jurisdiction over the Offering and the applicable laws, rules and regulations specified in Section 18(a) and 18(b) hereof.
18.    Offering Restrictions. The selected dealer will not make any offers or sales of the Shares in jurisdictions outside the United States except under circumstances that will result in compliance with (a) applicable laws in each such jurisdiction and (b) the restrictions on offers or sales set forth in this agreement, any wire or the Offering Circular, or preliminary offering circular or other similar offering document, as the case may be. It is understood that, except as specified in this agreement, the Offering Circular or other similar offering document, or applicable wire, no action has been taken by us, the Company or any other party to permit the selected dealer to offer the Common Stock in any jurisdiction other than the United States where action would be required for such purpose.
19.    Prohibition on Money Laundering. The operations of the selected dealer’s business and its subsidiaries are and, to the selected dealer’s knowledge, have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all

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jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (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 selected dealer or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to its knowledge, threatened.
20.    Assignment and Termination. This Agreement may not be assigned by the selected dealer without the Underwriter’s prior written consent. This Agreement will terminate upon the termination of the Offering, except that either party may terminate this Agreement at any time by giving written notice to the other, and except that Section 23 shall survive any termination of this Agreement.
21.    Governing Law. This Agreement shall be governed by the laws of the State of California, without reference to its conflict of law principles. The parties agree that the venue for any dispute hereunder, of any nature, shall be the courts of the State of California, located in the County of Los Angeles.
22.    Confidentiality. The Underwriter agrees that the information provided by a prospective purchaser will be kept confidential by them and their representatives, and will not except as hereinafter provided or as required by applicable law, disclose by them or their representatives to any person without the selected dealer’s prior written consent and will not be used by the Underwriter or their representatives other than for the purpose of the Offering.
23.    No Contact. The Underwriter agrees that they will not utilize any information provided by the selected dealer, including the information listed in Schedule 1, to contact any of the Subscribers, other than for the purpose of this Offering and with selected dealer’s prior written approval.
The parties hereto agree and accept the foregoing terms and conditions effective as of the ____ day of _________ 2018.


Boustead Securites, LLC
 
 
By:
 
 
Daniel J. McClory, Managing Director
 
 
By:
 
 
Keith C. Moore, CEO
Selected Dealer:
 
 
By:
 
 
Authorized Signatory

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Schedule 1
Subscriber Name
Amount of
Subscription
Number of shares
of Common Stock
Common Stock Delivery
Instructions
 
 
 
 

Exhibit 4

SUBSCRIPTION AGREEMENT
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. THIS INVESTMENT IS SUITABLE ONLY FOR PERSONS WHO CAN BEAR THE ECONOMIC RISK FOR AN INDEFINITE PERIOD OF TIME AND WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. FURTHERMORE, INVESTORS MUST UNDERSTAND THAT THE MARKET FOR SUCH INVESTMENT MAY BE LIMITED AND SPORADIC AND IS EXPECTED TO CONTINUE TO BE LIMITED AND SPORADIC FOR AN INDEFINITE PERIOD OF TIME. NO PUBLIC MARKET CURRENTLY EXISTS FOR THE SECURITIES.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES OR BLUE SKY LAWS AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND STATE SECURITIES OR BLUE SKY LAWS. ALTHOUGH AN OFFERING STATEMENT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”), THAT OFFERING STATEMENT DOES NOT INCLUDE THE SAME INFORMATION THAT WOULD BE INCLUDED IN A REGISTRATION STATEMENT UNDER THE ACT. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON THE MERITS OF THIS OFFERING OR THE ADEQUACY OR ACCURACY OF THE SUBSCRIPTION AGREEMENT OR ANY OTHER MATERIALS OR INFORMATION MADE AVAILABLE TO SUBSCRIBER IN CONNECTION WITH THIS OFFERING OVER THE WEB-BASED PLATFORM MAINTAINED BY FLASHFUNDERS, INC. (THE “PLATFORM”) OR THROUGH BOUSTEAD SECURITIES, LLC (THE “BROKER”). ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
INVESTORS WHO ARE NOT “ACCREDITED INVESTORS” (AS THAT TERM IS DEFINED IN SECTION 501 OF REGULATION D PROMULGATED UNDER THE ACT) ARE SUBJECT TO LIMITATIONS ON THE AMOUNT THEY MAY INVEST, AS SET OUT IN SECTION 4. THE COMPANY IS RELYING ON THE REPRESENTATIONS AND WARRANTIES SET FORTH BY EACH SUBSCRIBER IN THIS SUBSCRIPTION AGREEMENT AND THE OTHER INFORMATION PROVIDED BY SUBSCRIBER IN CONNECTION WITH THIS OFFERING TO DETERMINE THE APPLICABILITY TO THIS OFFERING OF EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT.
PROSPECTIVE INVESTORS MAY NOT TREAT THE CONTENTS OF THE SUBSCRIPTION AGREEMENT, THE OFFERING CIRCULAR OR ANY OF THE OTHER MATERIALS AVAILABLE ON THE PLATFORM OR PROVIDED BY THE BROKER (COLLECTIVELY, THE “OFFERING MATERIALS”) OR ANY PRIOR OR SUBSEQUENT COMMUNICATIONS FROM THE COMPANY OR ANY OF ITS OFFICERS, EMPLOYEES OR AGENTS (INCLUDING “TESTING THE WATERS” MATERIALS) AS INVESTMENT, LEGAL OR TAX ADVICE. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THIS OFFERING, INCLUDING THE MERITS AND THE RISKS INVOLVED. EACH PROSPECTIVE INVESTOR SHOULD CONSULT THE

    

INVESTOR’S OWN COUNSEL, ACCOUNTANT AND OTHER PROFESSIONAL ADVISOR AS TO INVESTMENT, LEGAL, TAX AND OTHER RELATED MATTERS CONCERNING THE INVESTOR’S PROPOSED INVESTMENT.
THE OFFERING MATERIALS MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY’S MANAGEMENT. WHEN USED IN THE OFFERING MATERIALS, THE WORDS “ESTIMATE,” “PROJECT,” “BELIEVE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH CONSTITUTE FORWARD LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
THE COMPANY MAY NOT BE OFFERING THE SECURITIES IN EVERY STATE. THE OFFERING MATERIALS DO NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY STATE OR JURISDICTION IN WHICH THE SECURITIES ARE NOT BEING OFFERED.
THE COMPANY RESERVES THE RIGHT IN ITS SOLE DISCRETION AND FOR ANY REASON WHATSOEVER TO MODIFY, AMEND AND/OR WITHDRAW ALL OR A PORTION OF THE OFFERING AND/OR ACCEPT OR REJECT IN WHOLE OR IN PART ANY PROSPECTIVE INVESTMENT IN THE SECURITIES OR TO ALLOT TO ANY PROSPECTIVE INVESTOR LESS THAN THE AMOUNT OF SECURITIES SUCH INVESTOR DESIRES TO PURCHASE. EXCEPT AS OTHERWISE INDICATED, THE OFFERING MATERIALS SPEAK AS OF THEIR DATE. NEITHER THE DELIVERY NOR THE PURCHASE OF THE SECURITIES SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THAT DATE.


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TO:
Soliton, Inc.
 
5304 Ashbrook Drive
 
Houston, Texas 77081

    
Ladies and Gentlemen:

1. Subscription.
(a) The undersigned (“Subscriber”) hereby irrevocably subscribes for and agrees to purchase the common stock (the “Securities” or “Common Stock”), of Soliton, Inc., a Delaware corporation (the “Company”), at a purchase price of $5.00 per share of Common Stock (the “Per Security Price”), upon the terms and conditions set forth herein. The minimum subscription is $[250]. The rights of Common Stock are as set forth in the Certificate of Incorporation and Bylaws included in the Exhibits to the Offering Statement of the Company filed with the SEC (the “Offering Statement”).
(b) Subscriber understands that the Securities are being offered pursuant to an offering circular dated [________], 2018 (the “Offering Circular”) filed with the SEC as part of the Offering Statement. By executing this Subscription Agreement, Subscriber acknowledges that Subscriber has received this Subscription Agreement, copies of the Offering Circular and Offering Statement including exhibits thereto and any other information required by the Subscriber to make an investment decision.
(c) The Subscriber’s subscription may be accepted or rejected in whole or in part, at any time prior to a Closing Date (as hereinafter defined), by the Company at its sole discretion. In addition, the Company, at its sole discretion, may allocate to Subscriber only a portion of the number of Securities Subscriber has subscribed for. The Company will notify Subscriber whether this subscription is accepted (whether in whole or in part) or rejected. If Subscriber’s subscription is rejected, Subscriber’s payment (or portion thereof if partially rejected) will be returned to Subscriber without interest and all of Subscriber’s obligations hereunder shall terminate.
(d) The aggregate number of Securities sold shall not exceed 3,000,000 (the “Maximum Offering”). The Company may accept subscriptions until [____________], 2018, unless otherwise extended by the Company in its sole discretion in accordance with applicable SEC regulations for such other period required to sell the Maximum Offering (the “Termination Date”). Providing that subscriptions for 1,500,000 Securities are received (the “Minimum Offering”), the Company may elect at any time to close all or any portion of this offering, on various dates at or prior to the Termination Date (each a “Closing Date”).
(e) In the event of rejection of this subscription in its entirety, or in the event the sale of the Securities (or any portion thereof) is not consummated for any reason, this Subscription Agreement shall have no force or effect, except for Section 5 hereof, which shall remain in force and effect.


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(f) The terms of this Subscription Agreement shall be binding upon Subscriber and its transferees, heirs, successors and assigns (collectively, “Transferees”); provided that for any such transfer to be deemed effective, the Transferee shall have executed and delivered to the Company in advance an instrument in a form acceptable to the Company in its sole discretion, pursuant to which the proposed Transferee shall be acknowledge, agree, and be bound by the representations and warranties of Subscriber, terms of this Subscription Agreement.
2. Purchase Procedure.
(a) Payment. The purchase price for the Securities shall be paid simultaneously with the execution and delivery to the Company of the signature page of this Subscription Agreement. Subscriber shall deliver a signed copy of this Subscription Agreement, along with payment for the aggregate purchase price of the Securities by a check for available funds made payable to “FinTech Clearing as agent for the investors in ‘Soliton’”, by ACH electronic transfer or wire transfer to an account designated by the Company, or by any combination of such methods.
(b) Offering Deposit Account arrangements. Payment for the Securities shall be received by FinTech Clearing, LLC (the “Offering Deposit Account Agent”) from the undersigned by transfer of immediately available funds, check or other means approved by the Company at least two days prior to the applicable Closing Date, in the amount as set forth on the signature page hereto. Upon such Closing Date, the Offering Deposit Account Agent shall release such funds to the Company. The undersigned shall receive notice and evidence of the digital entry of the number of the Securities owned by undersigned reflected on the books and records of the Company and verified by Computershare Trust Company, N.A., (the “Transfer Agent”), which books and records shall bear a notation that the Securities were sold in reliance upon Regulation A.
Offering Deposit Account Agent Name
FinTech Clearing, LLC
Address
6 Venture, Suite 265
Irvine, CA 92618
Routing Number
122242869
Account Number
To Be Provided to Investor
Account Name
FinTech Clearing as Agent for the Investors of Soliton
Reference
REF: Soliton – [Investor Name]


3. Representations and Warranties of the Company.
The Company represents and warrants to Subscriber that the following representations and warranties are true and complete in all material respects as of the date of each Closing Date, except as otherwise indicated. For purposes of this Agreement, an individual shall be deemed to have “knowledge” of a particular fact or other matter if such individual is actually aware of such fact. The Company will be deemed to have “knowledge” of a particular fact or other matter if one of the Company’s current officers has, or at any time had, actual knowledge of such fact or other matter.


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(a) Organization and Standing. The Company is a corporation duly formed, validly existing and in good standing under the laws of the State of Delaware. The Company has all requisite power and authority to own and operate its properties and assets, to execute and deliver this Subscription Agreement and any other agreements or instruments required hereunder. The Company is duly qualified and is authorized to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and leased) makes such qualification necessary, except for those jurisdictions in which failure to do so would not have a material adverse effect on the Company or its business.
(b) Issuance of the Securities. The issuance, sale and delivery of the Securities in accordance with this Subscription Agreement has been duly authorized by all necessary corporate action on the part of the Company. The Securities, when so issued, sold and delivered against payment therefor in accordance with the provisions of this Subscription Agreement, will be duly and validly issued, fully paid and non-assessable.
(c) Authority for Agreement. The execution and delivery by the Company of this Subscription Agreement and the consummation of the transactions contemplated hereby (including the issuance, sale and delivery of the Securities) are within the Company’s powers and have been duly authorized by all necessary corporate action on the part of the Company. Upon full execution hereof, this Subscription Agreement shall constitute a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except (i) as limited by 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) with respect to provisions relating to indemnification and contribution, as limited by considerations of public policy and by federal or state securities laws.
(d) No filings. Assuming the accuracy of the Subscriber’s representations and warranties set forth in Section 4 hereof, no order, license, consent, authorization or approval of, or exemption by, or action by or in respect of, or notice to, or filing or registration with, any governmental body, agency or official is required by or with respect to the Company in connection with the execution, delivery and performance by the Company of this Subscription Agreement except (i) for such filings as may be required under Regulation A or under any applicable state securities laws, (ii) for such other filings and approvals as have been made or obtained, or (iii) where the failure to obtain any such order, license, consent, authorization, approval or exemption or give any such notice or make any filing or registration would not have a material adverse effect on the ability of the Company to perform its obligations hereunder.
(e) Capitalization. The authorized and outstanding securities of the Company immediately prior to the initial investment in the Securities is as set forth “Description of Capital Stock” in the Offering Circular. Except as set forth in the Offering Circular, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal), or agreements of any kind (oral or written) for the purchase or acquisition from the Company of any of its securities.
(f) Financial statements. Complete copies of the Company’s audited financial statements consisting of the balance sheets of the Company as at December 31, 2016, December 31, 2017 and the related statements of income, stockholders’ equity and cash flows for the two-year period then ended (the “Financial Statements”) and unaudited financial statements consisting of the balance sheet of the Company as at March 31, 2018,


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and the related statements of income, and cash flows for the three month periods ended March 31, 2018 and March 31, 2017 (the “Interim Financial Statements”) appear in the Offering Circular. The Financial Statements and Interim Financial Statements are based on the books and records of the Company and fairly present in all material respects the financial condition of the Company as of the respective dates they were prepared and the results of the operations and cash flows of the Company for the periods indicated. GBH CPAs, PC, which has audited the Financial Statements, is an independent accounting firm within the rules and regulations adopted by the SEC.
(g) Proceeds. The Company shall use the proceeds from the issuance and sale of the Securities as set forth in “Use of Proceeds” in the Offering Circular.
(h) Litigation. There is no pending action, suit, proceeding, arbitration, mediation, complaint, claim, charge or investigation before any court, arbitrator, mediator or governmental body, or to the Company’s knowledge, currently threatened in writing (a) against the Company or (b) against any consultant, officer, manager, director or key employee of the Company arising out of his or her consulting, employment or board relationship with the Company or that could otherwise materially impact the Company.
4. Representations and Warranties of Subscriber. By executing this Subscription Agreement, Subscriber (and, if Subscriber is purchasing the Securities subscribed for hereby in a fiduciary capacity, the person or persons for whom Subscriber is so purchasing) represents and warrants, which representations and warranties are true and complete in all material respects as of such Subscriber’s respective Closing Date(s):
(a) Requisite Power and Authority. Such Subscriber has all necessary power and authority under all applicable provisions of law to execute and deliver this Subscription Agreement and any other agreements required hereunder and to carry out their provisions. All action on Subscriber’s part required for the lawful execution and delivery of this Subscription Agreement and other agreements required hereunder have been or will be effectively taken prior to the Closing Date. Upon their execution and delivery, this Subscription Agreement and other agreements required hereunder will be valid and binding obligations of Subscriber, enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights and (b) as limited by general principles of equity that restrict the availability of equitable remedies.
(b) Investment Representations. Subscriber understands that the Securities have not been registered under the Securities Act of 1933, as amended (the “Securities Act”). Subscriber also understands that the Securities are being offered and sold pursuant to an exemption from registration contained in the Securities Act based in part upon Subscriber’s representations contained in this Subscription Agreement.
(c) Limited Market and Continued Economic Risk. Subscriber acknowledges and agrees that the public market for the Securities may be limited and sporadic and that there is no guarantee that a liquid market for their resale will ever exist. Subscriber must bear the economic risk of this investment indefinitely and the Company has no obligation to take any steps with respect to facilitating active trading of the Securities. Subscriber acknowledges that Subscriber is able to bear the economic risk of losing Subscriber’s entire investment in the Securities. Subscriber also understands that an investment in the Company involves significant risks and has taken full cognizance of and understands all of the risk factors relating to the purchase of Securities.


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(d) Accredited Investor Status or Investment Limits. Subscriber represents that either:
(i) Subscriber is an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities Act, as defined on Appendix A of this Subscription Agreement; or
(ii) The purchase price set out in paragraph (b) of the signature page to this Subscription Agreement, together with any other amounts previously used to purchase Securities in this offering, does not exceed 10% of the greater of the Subscriber’s annual income or net worth.
Subscriber represents that to the extent it has any questions with respect to its status as an accredited investor, or the application of the investment limits, it has sought professional advice.
(e) Shareholder information. Within five days after receipt of a request from the Company, the Subscriber hereby agrees to provide such information with respect to its status as a shareholder (or potential shareholder) and to execute and deliver such documents as may reasonably be necessary to comply with any and all laws and regulations to which the Company is or may become subject. Subscriber further agrees that in the event it transfers any Securities, it will require the transferee of such Securities to agree to provide such information to the Company as a condition of such transfer.
(f) Company Information. Subscriber understands that the Company is subject to all the risks that apply to early-stage companies, whether or not those risks are explicitly set out in the Offering Circular. Subscriber has had such opportunity as it deems necessary (which opportunity may have presented through online chat or commentary functions) to discuss the Company’s business, management and financial affairs with officers and management of the Company and has had the opportunity to review the Company’s operations and facilities. Subscriber has also had the opportunity to ask questions of and receive answers from the Company and its management regarding the terms and conditions of this investment. Subscriber acknowledges that except as set forth herein, no representations or warranties have been made to Subscriber, or to Subscriber’s advisors or representative, by the Company or others with respect to the business or prospects of the Company or its financial condition.
(g) Valuation. The Subscriber acknowledges that the price of the Securities was set by the Company on the basis of the Company’s internal valuation and no warranties are made as to value. The Subscriber further acknowledges that future offerings of Securities may be made at lower valuations, with the result that the Subscriber’s investment will bear a lower valuation.
(h) Domicile. Subscriber maintains Subscriber’s domicile (and is not a transient or temporary resident) at the address shown on the signature page.
(i) No Brokerage Fees. There are no claims for brokerage commission, finders’ fees or similar compensation in connection with the transactions contemplated by this Subscription Agreement or related documents based on any arrangement or agreement binding upon Subscriber.
(j) Foreign Investors. If Subscriber is not a United States person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended), Subscriber hereby represents that it has satisfied itself as to the full observance of the laws of its home jurisdiction in connection with any invitation to subscribe for the Securities or any use of this Subscription Agreement, including (i) the legal requirements within its home


7


jurisdiction for the purchase of the Securities, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any non-US governmental or other consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale, or transfer of the Securities. Subscriber’s subscription and payment for and continued beneficial ownership of the Securities will not violate any applicable securities or other laws of the Subscriber’s home jurisdiction. For the avoidance of doubt, the term “home jurisdiction” shall not refer to the United States.
5. Survival of Representations and Indemnity. The representations, warranties and covenants made by the Subscriber herein shall survive the Termination Date of this Agreement. The Subscriber agrees to indemnify and hold harmless the Company and its respective officers, directors and affiliates, and each other person, if any, who controls the Company within the meaning of Section 15 of the Securities Act against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all reasonable attorneys’ fees, including attorneys’ fees on appeal) and expenses reasonably incurred in investigating, preparing or defending against any false representation or warranty or breach of failure by the Subscriber to comply with any covenant or agreement made by the Subscriber herein or in any other document furnished by the Subscriber to any of the foregoing in connection with this transaction.
6. Governing Law; Jurisdiction. This Subscription Agreement shall be governed and construed in accordance with the laws of the State of New York.
EACH OF THE SUBSCRIBER AND THE COMPANY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION LOCATED WITHIN TEXAS AND NO OTHER PLACE AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS SUBSCRIPTION AGREEMENT MAY BE LITIGATED IN SUCH COURTS. EACH OF SUBSCRIBER AND THE COMPANY ACCEPTS FOR ITSELF AND HIMSELF AND IN CONNECTION WITH ITS AND HIS RESPECTIVE PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS SUBSCRIPTION AGREEMENT. EACH OF SUBSCRIBER AND THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN THE MANNER AND IN THE ADDRESS SPECIFIED IN SECTION 8 AND THE SIGNATURE PAGE OF THIS SUBSCRIPTION AGREEMENT.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS SUBSCRIPTION AGREEMENT OR THE ACTIONS OF EITHER PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF, EACH OF THE PARTIES HERETO ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF SUCH PARTY. EACH OF THE PARTIES HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE,


8


MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS SUBSCRIPTION AGREEMENT. IN THE EVENT OF LITIGATION, THIS SUBSCRIPTION AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
For the avoidance of doubt, the provisions of this Section 6 shall not apply to claims brought under the federal securities laws and the rules and regulations thereunder.

7. Notices. Notice, requests, demands and other communications relating to this Subscription Agreement and the transactions contemplated herein shall be in writing and shall be deemed to have been duly given if and when (a) delivered personally, on the date of such delivery; or (b) mailed by registered or certified mail, postage prepaid, return receipt requested, in the third day after the posting thereof; or (c) emailed, telecopied or cabled, on the date of such delivery to the address of the respective parties as follows:

If to the Company, to:
Soliton, Inc.
Attention: Ms. Lori Bisson, CFO
5304 Ashbrook Drive
Houston, Texas 77081

If to a Subscriber, to Subscriber’s address as shown on the signature page hereto

or to such other address as may be specified by written notice from time to time by the party entitled to receive such notice. Any notices, requests, demands or other communications by telecopy or cable shall be confirmed by letter given in accordance with (a) or (b) above.
8. Miscellaneous.
(a) All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the person or persons or entity or entities may require.
(b) This Subscription Agreement is not transferable or assignable by Subscriber.
(c) The representations, warranties and agreements contained herein shall be deemed to be made by and be binding upon Subscriber and its heirs, executors, administrators and successors and shall inure to the benefit of the Company and its successors and assigns.
(d) None of the provisions of this Subscription Agreement may be waived, changed or terminated orally or otherwise, except as specifically set forth herein or except by a writing signed by the Company and Subscriber.


9


(e) In the event any part of this Subscription Agreement is found to be void or unenforceable, the remaining provisions are intended to be separable and binding with the same effect as if the void or unenforceable part were never the subject of agreement.
(f) The invalidity, illegality or unenforceability of one or more of the provisions of this Subscription Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Subscription Agreement in such jurisdiction or the validity, legality or enforceability of this Subscription Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.
(g) This Subscription Agreement supersedes all prior discussions and agreements between the parties with respect to the subject matter hereof and contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof.
(h) The terms and provisions of this Subscription Agreement are intended solely for the benefit of each party hereto and their respective successors and assigns, and it is not the intention of the parties to confer, and no provision hereof shall confer, third-party beneficiary rights upon any other person.
(i) The headings used in this Subscription Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof.
(j) This Subscription Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.
(k) No failure or delay by any party in exercising any right, power or privilege under this Subscription Agreement shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
[SIGNATURE PAGE FOLLOWS]



10


SOLITON, INC.
SUBSCRIPTION AGREEMENT SIGNATURE PAGE

The undersigned, desiring to purchase shares of Common Stock of Soliton, Inc., by executing this signature page, hereby executes, adopts and agrees to all terms, conditions and representations of the Subscription Agreement.

(a) The number of shares of Common Stock the undersigned hereby irrevocably subscribes for is:


 
(print number of Securities)
(b) The aggregate purchase price (based on a purchase price of $5.00 per Security) for the shares of Common Stock the undersigned hereby irrevocably subscribes for is:


 
(print number of Securities)
 
 
(c) The Securities being subscribed for will be owned by, and should be recorded on the Company’s books as held in the name of:
 
 
 
(print name of owner or joint owners)
 



11



 
 
 
 
 
If the Securities are to be purchased in joint names, both Subscribers must sign:
 
 
 
 
 
 
 
 
Signature
 
 
 
Signature
 
 
 
 
 
 
 
 
 
Name (Please Print)
 
 
 
Name (Please Print)
 
 
 
 
 
 
 
 
 
Email address
 
 
 
Email address
 
 
 
 
 
 
 
 
 
Address 1
 
 
 
Address 1
 
 
 
 
 
 
 
 
 
Address 2
 
 
 
Address 2
 
 
 
 
 
 
 
 
 
City/Municipality
State/Province
 
 
 
City/Municipality
State/Province
 
 
 
 
 
 
 
 
 
Zip/Postal
Country
 
 
 
Zip/Postal
Country
 
 
 
 
 
 
 
 
 
Telephone Number
 
 
 
Telephone Number
 
 
 
 
 
 
 
 
 
Tax ID No.
 
 
 
Tax ID No.
 
 
 
 
 
 
 
 
 
Date
 
 
 
Date
 

* * * * *
This Subscription is accepted
 
 
 
Soliton, Inc.
on
 
.
 
By:
 
 
 
 
 
Name:
 
 
 
 
 
Title:
 


12


APPENDIX A
An accredited investor includes the following categories of investor:
(1) Any bank as defined in section 3(a)(2) of the Act, or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; any insurance company as defined in section 2(a)(13) of the Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors;
(2) Any private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940;
(3) Any organization described in section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;
(4) Any director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer;
(5) Any natural person whose individual net worth, or joint net worth with that person's spouse, exceeds $1,000,000.
(i) Except as provided in paragraph (a)(5)(ii) of this section, for purposes of calculating net worth under this paragraph (a)(5):
(A) The person's primary residence shall not be included as an asset;
(B) Indebtedness that is secured by the person's primary residence, up to the estimated fair market value of the primary residence at the time of the sale of securities, shall not be included as a liability (except that if the amount of such indebtedness outstanding at the time of sale of securities exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability); and


13


(C) Indebtedness that is secured by the person's primary residence in excess of the estimated fair market value of the primary residence at the time of the sale of securities shall be included as a liability;
(ii) Paragraph (a)(5)(i) of this section will not apply to any calculation of a person's net worth made in connection with a purchase of securities in accordance with a right to purchase such securities, provided that:
(A) Such right was held by the person on July 20, 2010;
(B) The person qualified as an accredited investor on the basis of net worth at the time the person acquired such right; and
(C) The person held securities of the same issuer, other than such right, on July 20, 2010.
(6) Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;
(7) Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in §230.506(b)(2)(ii); and
(8) Any entity in which all of the equity owners are accredited investors.



14

Exhibit 6.1
Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.


PATENT AND TECHNOLOGY LICENSE AGREEMENT
This AGREEMENT (“AGREEMENT”) is made on this 5th day of April, 2012, by and between THE BOARD OF REGENTS (“BOARD”) of THE UNIVERSITY OF TEXAS SYSTEM (“SYSTEM”), an agency of the State of Texas, whose address is 201 West 7th Street, Austin, Texas 78701, on behalf of THE UNIVERSITY OF TEXAS M. D. ANDERSON CANCER CENTER (“UTMDACC”), a member institution of SYSTEM, and SOLITON, INC. a Delaware corporation having a principal place of business located at 1225 N. Loop West, Suite 725, Houston, Texas 77008 (“LICENSEE”).
RECITALS
A.
BOARD owns certain PATENT RIGHTS and TECHNOLOGY RIGHTS related to LICENSED SUBJECT MATTER developed at UTMDACC.
B.
BOARD, through UTMDACC, desires to have the LICENSED SUBJECT MATTER developed in the LICENSED FIELD and used for the benefit of LICENSEE, BOARD, SYSTEM, UTMDACC, the inventor(s), and the public as outlined in BOARD’s Intellectual Property Policy.
C.
LICENSEE wishes to obtain a license from BOARD to practice LICENSED SUBJECT MATTER.
NOW, THEREFORE, in consideration of the mutual covenants and promises herein contained, the parties agree as follows:
I.    EFFECTIVE DATE
1.1
This AGREEMENT is effective as of the date written above (“EFFECTIVE DATE”), which is the date fully executed by all parties.
II.    DEFINITIONS
As used in this AGREEMENT, the following terms have the meanings indicated:
2.1
AFFILIATE means any business entity more than fifty percent (50%) owned by LICENSEE, any business entity which owns more than fifty percent (50%) of LICENSEE, or any business entity that is more than fifty percent (50%) owned by a business entity that owns more than fifty percent (50%) of LICENSEE.
2.2
FIRST SEED MONEY INVESTMENT means the first tranche of investor financing in LICENSEE of at least $[*****].
2.3
LICENSED FIELD means all fields of use.



1
Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

2.4
LICENSED PRODUCTS means any product or service sold by LICENSEE or its AFFILIATES or their sublicensees comprising LICENSED SUBJECT MATTER pursuant to this AGREEMENT.
2.5
LICENSED SUBJECT MATTER means inventions and discoveries covered by PATENT RIGHTS or TECHNOLOGY RIGHTS within LICENSED FIELD.
2.6
LICENSED TERRITORY means worldwide.
2.7
NET SALES means the gross revenues received by LICENSEE or its AFFILIATES or their sublicensees from a SALE less sales discounts actually granted, sales and/or use taxes actually paid, import and/or export duties actually paid, outbound transportation actually prepaid or allowed, and amounts actually allowed or credited due to returns (not exceeding the original billing or invoice amount), all as recorded by LICENSEE or its AFFILIATES or their sublicensees in their official books and records in accordance with generally accepted accounting practices and consistent with their published financial statements and/or regulatory filings with the United States Securities and Exchange Commission.
2.8
PATENT RIGHTS means BOARD's rights in the information or discoveries described in invention disclosures, or claimed in any patents and/or patent applications, whether domestic or foreign, as identified in Exhibit I attached hereto, and all divisionals, continuations, continuations-in-part (to the extent the claims of such continuations-in-part are entitled to claim priority to the aforesaid patents and/or patent applications identified in Exhibit I), reissues, reexaminations or extensions of the patents and/or patent applications identified in Exhibit I, and any letters patent, domestic or foreign that issue thereon.
2.9
REGULATORY APPROVAL means the approval required by the United States Food and Drug Administration, or an equivalent regulatory agency in any national jurisdiction other than the United States, to begin selling a LICENSED PRODUCT in such jurisdiction.
2.10
SALE or SOLD means the transfer or disposition of a LICENSED PRODUCT for value to a party other than LICENSEE, an AFFILIATE or a ROYALTY-FREE PRACTITIONER. As used herein, “ROYALTY-FREE PRACTITIONER” means UTMDACC as well as Christopher C. Capelli (“PHYSICIAN INVENTOR”) and any partner or associate who practices medicine with the PHYSICIAN INVENTOR, but with respect to such partner or associate, only for such time as he/she is engaged in a bona fide medical practice with the PHYSICIAN INVENTOR.
2.11
SECOND SEED MONEY INVESTMENT means the second tranche of investor financing in LICENSEE of at least $[*****].
2.12
TECHNOLOGY RIGHTS means BOARD's rights in any technical information, know-how, processes, procedures, compositions, devices, methods, formulae, protocols, techniques, software, designs, drawings or data created by the inventor(s) listed in Exhibit I at UTMDACC before the EFFECTIVE DATE, which are not claimed in PATENT RIGHTS but that are necessary for practicing PATENT RIGHTS.



2
Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

III.    LICENSE
3.1
BOARD, through UTMDACC, hereby grants to LICENSEE a royalty-bearing, exclusive license under LICENSED SUBJECT MATTER to manufacture, have manufactured, use, import, offer to sell and/or sell LICENSED PRODUCTS within LICENSED TERRITORY for use within LICENSED FIELD. This grant is subject to Sections 14.2 and 14.3 hereinbelow, the payment by LICENSEE to UTMDACC of all consideration as provided herein, and is further subject to the following rights retained by BOARD and UTMDACC to:
(a)
Publish the general scientific findings from research related to LICENSED SUBJECT MATTER, subject to the terms of ARTICLE XI–Confidential Information and Publication; and
(b)
Use LICENSED SUBJECT MATTER for research, teaching, patient care, and other academically-related purposes.
3.2
LICENSEE may extend the license granted herein to any AFFILIATE provided that the AFFILIATE consents in writing to be bound by this AGREEMENT to the same extent as LICENSEE. LICENSEE agrees to deliver such contract to UTMDACC within thirty (30) calendar days following execution thereof. For clarification, the assignment fee specified in Section 12.1 shall not apply to extensions to an Affiliate under this Section 3.2.
3.3
LICENSEE may grant sublicenses under LICENSED SUBJECT MATTER consistent with the terms of this AGREEMENT provided that LICENSEE is responsible for its sublicensees’ compliance with any relevant terms of this AGREEMENT, and for diligently collecting all amounts due LICENSEE from sublicensees. If a sublicensee pursuant hereto becomes bankrupt, insolvent or is placed in the hands of a receiver or trustee, LICENSEE, to the extent allowed under applicable law and in a timely manner, agrees to use commercially reasonable efforts to collect all consideration owed to LICENSEE and to have the sublicense agreement confirmed or rejected by a court of proper jurisdiction.
3.4
LICENSEE must deliver to UTMDACC a true and correct copy of each sublicense granted by LICENSEE, and any modification or termination thereof, within thirty (30) calendar days after execution, modification, or termination.
3.5
If this AGREEMENT is terminated pursuant to ARTICLE XIII-Term and Termination, BOARD and UTMDACC agree to accept as successors to LICENSEE, existing sublicensees in good standing at the date of termination provided that each such sublicensee consents in writing to be bound by all of the terms and conditions of this AGREEMENT.
IV.    CONSIDERATION, PAYMENTS AND REPORTS
4.1
In consideration of rights granted by BOARD to LICENSEE under this AGREEMENT, LICENSEE agrees to pay to UTMDACC (or issue to BOARD, in the case of LICENSE



3
Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

EQUITY (as defined in Section 4.1(h) below) or INVESTMENT EQUITY (as defined in Section 4.2 below)) the following:
(a)
All actual out-of-pocket expenses incurred by UTMDACC on or after April 5, 2012, in filing, prosecuting, enforcing and maintaining PATENT RIGHTS, for so long as, and in such countries as this AGREEMENT remains in effect. UTMDACC will invoice LICENSEE for such expenses on a quarterly basis. The invoiced amounts will be due and payable by LICENSEE within thirty (30) calendar days of LICENSEE’s receipt of each such invoice; and
(b)
A nonrefundable license documentation fee in the amount of $[****], which includes $[****] for patent expenses incurred by UTMDACC prior to the date referenced in Section 4.1(a) above. This fee will not reduce the amount of any other payment provided for in this ARTICLE IV, and is due and payable within thirty (30) calendar days after the EFFECTIVE DATE. This license documentation fee is not subject to the thirty (30) day cure period set forth in Section 13.3(b); and
(c)
A nonrefundable annual maintenance fee (“ANNUAL MAINTENANCE FEE”) due and payable beginning on the third anniversary of the EFFECTIVE DATE and each anniversary of the EFFECTIVE DATE occurring thereafter until the first SALE, as follows:
(1)     a first ANNUAL MAINTENANCE FEE in the amount of $[****] shall be due and payable (without invoice) within thirty (30) calendar days after the third anniversary of the EFFECTIVE DATE; and
(2)     second and subsequent ANNUAL MAINTENANCE FEES shall be due and payable (without invoice) within thirty (30) calendar days after the fourth and each subsequent anniversary of the EFFECTIVE DATE until the first SALE. The amount of the ANNUAL MAINTENANCE FEE shall increase by $[****] each year, e.g., $[****] shall be due within thirty (30) calendar days after the fourth anniversary of the EFFECTIVE DATE; $[****] shall be due within thirty (30) calendar days after the fifth anniversary of the EFFECTIVE DATE; $[****] shall be due within thirty (30) calendar days after the sixth anniversary of the EFFECTIVE DATE; and so on. The ANNUAL MAINTENANCE FEES will not reduce the amount of any other payment provided for in this ARTICLE IV; and
(d)
A running royalty equal to [****] of NET SALES; and
(e)
A one-time milestone payment of $[****] due upon REGULATORY APPROVAL of the first LICENSED PRODUCT, regardless of whether the milestone is achieved by LICENSEE, a sublicensee or an AFFILIATE. The foregoing milestone payment shall be made by LICENSEE to UTMDACC (without invoice) within thirty (30) calendar days of achieving the milestone event and shall not reduce the amount of any other payment provided for in this ARTICLE IV; and



4
Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

(f)
The following percentages of all consideration, other than research and development money and royalties, received by LICENSEE from any sublicensee pursuant to Sections 3.3 and 3.4 hereinabove, including but not limited to, up-front payments, marketing, distribution, franchise, option, license, or documentation fees, bonus and milestone payments and equity securities (hereafter “SUBLICENSEE CONSIDERATION”):
(1)     [****] of all SUBLICENSEE CONSIDERATION if the sublicense is executed before the second anniversary of the EFFECTIVE DATE; and
(2)     [****] of all SUBLICENSEE CONSIDERATION if the sublicense is executed on or after the second anniversary of the EFFECTIVE DATE, but before the fourth anniversary of the EFFECTIVE DATE; and
(3)     [****] of all SUBLICENSEE CONSIDERATION if the sublicense is executed on or after the fourth anniversary of the EFFECTIVE DATE; and
(g)
An Assignment Fee of $[****] for each permitted assignment of this AGREEMENT (in consideration for UTMDACC allowing the assignment), due and payable prior to any assignment pursuant to Section 12.1 below; and
(h)
LICENSE EQUITY as consideration for the license as follows: LICENSEE shall issue “LICENSE EQUITY,” as defined below, to the BOARD, on behalf of UTMDACC, or to the BOARD’s designee. As used herein, “LICENSE EQUITY shall mean that number of shares of LICENSEE’s common stock equal to [****] of the TOTAL ISSUED COMMON STOCK, including equity issued, or to be issued, in connection with the FIRST and SECOND SEED MONEY INVESTMENT. “TOTAL ISSUED COMMON STOCK” shall mean the number of shares of common stock that would be outstanding assuming conversion of all preferred stock and convertible debt and the exercise of any options, but not assuming any exercise of outstanding warrants. The LICENSE EQUITY shall be issued to the BOARD or the BOARD’s designee on or before that date which is thirty (30) calendar days after the LICENSEE’s receipt of the FIRST SEED MONEY INVESTMENT. If BOARD is issued LICENSE EQUITY prior to the SECOND SEED MONEY INVESTMENT, such additional equity (as necessary) will be issued to the BOARD or the BOARD’s designee within thirty (30) calendar days of the LICENSEE’S receipt of the SECOND SEED MONEY INVESTMENT to make up the difference (if any) between the LICENSE EQUITY already issued to the BOARD and the number of shares of LICENSEE’s common stock equal to [****] of the TOTAL ISSUED COMMON STOCK, including equity issued, or to be issued, in connection with the SECOND SEED MONEY INVESTMENT.
4.2
In addition to the equity and cash consideration for the license, as set forth in Section 4.1 above, as consideration for UTMDACC’s investment in LICENSEE (including, but not limited to, indirect cash investments for licensing expenses and/or as founder’s equity),



5
Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

LICENSEE shall issue “INVESTMENT EQUITY,” as defined below, to the BOARD, on behalf of UTMDACC, or to designee of the BOARD reasonably approved by LICENSEE. As used in this Section 4.2, “INVESTMENT EQUITY” shall mean that number of shares of LICENSEE’s common stock equal to [****] of the TOTAL ISSUED COMMON STOCK, including equity issued, or to be issued, in connection with the FIRST and SECOND SEED MONEY INVESTMENT. The INVESTMENT EQUITY shall be issued to the BOARD or the BOARD’s designee on or before that date which is thirty (30) calendar days after the LICENSEE’s receipt of the FIRST SEED MONEY INVESTMENT. If BOARD is issued equity prior to the SECOND SEED MONEY INVESTMENT as a founder, such additional equity (as necessary) will be issued to the BOARD or the BOARD’s designee within thirty (30) calendar days of the LICENSEE’S receipt of the SECOND SEED MONEY INVESTMENT to make up the difference (if any) between the INVESTMENT EQUITY already issued to the BOARD and the number of shares of LICENSEE’s common stock equal to [****] of the TOTAL ISSUED COMMON STOCK, including equity issued, or to be issued, in connection with the SECOND SEED MONEY INVESTMENT.
Within ninety (90) calendar days after the LICENSEE’s receipt of the FIRST SEED MONEY INVESTMENT, LICENSEE shall ensure that a stockholder agreement is entered into by and among LICENSEE, BOARD or its designee, and the primary stockholders that is substantially in the form of the attached EXHIBIT II.
4.3
Unless otherwise provided, all such payments are payable within thirty (30) calendar days after March 31, June 30, September 30, and December 31 of each year during the term of this AGREEMENT, at which time LICENSEE will also deliver to UTMDACC a true and accurate report, giving such particulars of the business conducted by LICENSEE, its AFFILIATES and its sublicensees, if any exist, during the preceding three (3) calendar months under this AGREEMENT as necessary for UTMDACC to account for LICENSEE's payments hereunder. This report will include pertinent data, including, but not limited to:
(a)
the accounting methodologies used to account for and calculate the items included in the report and any differences in such accounting methodologies used by LICENSEE since the previous report; and
(b)
a list of LICENSED PRODUCTS produced for the three (3) preceding calendar months categorized by the technology it relates to under PATENT RIGHTS; and
(c)
the total quantities of LICENSED PRODUCTS produced by the category listed in Section 4.3(b); and
(d)
the total SALES by the category listed in Section 4.3(b); and
(e)
the calculation of NET SALES by the category listed in Section 4.3(b); and
(f)
the royalties so computed and due UTMDACC by the category listed in Section 4.3(b); and



6
Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

(g)
all consideration received from each sublicensee and payments due UTMDACC; and
(h)    all other amounts due UTMDACC herein.
Simultaneously with the delivery of each such report, LICENSEE agrees to pay UTMDACC the amount due, if any, for the period of such report. These reports are required even if no payments are due.
4.4
During the term of this AGREEMENT and for one (1) year thereafter, LICENSEE agrees to keep complete and accurate records of its, its AFFILIATES’ and its sublicensees’ SALES and NET SALES in sufficient detail to enable the royalties and other payments due hereunder to be determined. Upon its receipt of at least five (5) business days advance written notice from UTMDACC, LICENSEE agrees to permit UTMDACC or its representatives, at UTMDACC’s expense, to periodically examine LICENSEE’s books, ledgers, and records during LICENSEE’s regular business hours for the sole purpose of and to the extent necessary to verify any report required under this AGREEMENT. If any amounts due UTMDACC are determined to have been underpaid in an amount equal to or greater than [****] of the total amount due during the period so examined, then in addition to the amounts underpaid, LICENSEE will pay the cost of the examination plus accrued interest at the highest allowable rate.
4.5
Within thirty (30) calendar days following each anniversary of the EFFECTIVE DATE, LICENSEE will deliver to UTMDACC a written progress report as to LICENSEE's (and any sublicensee’s) efforts and accomplishments during the preceding year in diligently commercializing LICENSED SUBJECT MATTER in the LICENSED TERRITORY and LICENSEE’s (and sublicensees’) commercialization plans for the upcoming year.
4.6
All amounts payable hereunder by LICENSEE will be paid in United States funds without deductions for taxes, assessments, fees, or charges of any kind. Checks are to be made payable to The University of Texas M. D. Anderson Cancer Center, and sent by United States mail to Box 4390, Houston, Texas 77210-4390, or by wire transfer to:
[****]
4.7
No payments due or royalty rates owed under this AGREEMENT will be reduced as the result of co-ownership of LICENSED SUBJECT MATTER by BOARD and another party, including, but not limited to, LICENSEE.
V.    SPONSORED RESEARCH
5.1
LICENSEE is under no obligation to sponsor research at UTMDACC. However, if LICENSEE desires to sponsor research for or related to the LICENSED SUBJECT MATTER, and particularly where LICENSEE receives payments for sponsored research



7
Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

pursuant to a sublicense under this AGREEMENT, LICENSEE (a) will notify UTMDACC in writing of all opportunities to conduct this sponsored research (including clinical trials, if applicable), (b) will solicit research and/or clinical proposals from UTMDACC for this purpose, and (c) will give good faith consideration to funding the proposals at UTMDACC.
VI.    PATENTS AND INVENTIONS
6.1
If after consultation with LICENSEE both parties agree that a new patent application should be filed for LICENSED SUBJECT MATTER, UTMDACC will prepare and file appropriate patent applications, and LICENSEE will pay the actual out-of-pocket costs incurred by UTMDACC in connection with searching, preparing, filing, prosecuting and maintaining same. If LICENSEE notifies UTMDACC that it does not intend to pay the cost of filing, prosecuting or maintaining a patent application or patent, or if LICENSEE fails to promptly confirm its intent to pay the cost of filing, prosecuting or maintaining a patent application or patent upon inquiry from UTMDACC, or if LICENSEE is in arrears on any expense payments due under Section 4.1(a), then UTMDACC may elect to file, not file, continue prosecution or maintenance, or abandon such patent application or patent at its own expense without further notice to LICENSEE. In the event UTMDACC files or continues prosecution or maintenance of such patent application or patent at UTMDACC’s expense, then LICENSEE’s rights to such invention under this AGREEMENT shall terminate in their entirety. UTMDACC will provide LICENSEE with a copy of any applications for which LICENSEE has paid the cost of filing, as well as copies of any documents received or filed during prosecution thereof. The parties agree that they share a common legal interest to get valid enforceable patents and that LICENSEE will keep all privileged information received pursuant to this Section confidential.
VII.    INFRINGEMENT BY THIRD PARTIES
7.1
BOARD, on behalf of UTMDACC, shall have the first right, but shall not be required to, bring suit for patent infringement against third parties. If BOARD becomes aware of an infringer and elects not to bring suit against such infringer, it shall advise LICENSEE of its decision not to bring suit, such advice shall be given not more than thirty (30) days after the final decision has been made by the BOARD and UTMDACC not to bring suit. Thereafter, LICENSEE, at its expense, may enforce any patent exclusively licensed hereunder against infringement by third parties. Any such legal action shall be at the expense of the party bringing suit and all recoveries shall belong to such party, provided that, if the parties agree to jointly pursue an infringer and legal action is brought jointly by BOARD and LICENSEE (or initially by BOARD with later joinder or intervention by LICENSEE) and fully participated in by both BOARD and LICENSEE, then any recovery (including attorney’s fees and enhanced or punitive damages) shall be shared jointly by BOARD and LICENSEE in proportion to the share of legal expenses paid by each.
7.2
In any suit or dispute involving an infringer, the parties agree to cooperate fully with each other. At the request and expense of the party bringing suit, the other party will permit access



8
Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

during regular business hours, to all relevant personnel, records, papers, information, samples, specimens, and the like in its possession.
VIII.    PATENT MARKING
8.1
LICENSEE agrees that all packaging containing individual LICENSED PRODUCT(S), documentation therefor, and, when possible, actual LICENSED PRODUCT(S) sold by LICENSEE, AFFILIATES, and/or sublicensees of LICENSEE will be appropriately marked with the number of any applicable patent(s) licensed hereunder in accordance with each country's patent laws, including Title 35, United States Code, to the extent such marking is necessary or required to fully preserve PATENT RIGHTS in each such country.
IX.    INDEMNIFICATION AND INSURANCE
9.1
LICENSEE agrees to hold harmless and indemnify BOARD, SYSTEM, UTMDACC, their Regents, officers, employees, students and agents from and against any claims, demands, or causes of action whatsoever, costs of suit and reasonable attorney’s fees, including without limitation, those costs arising on account of any injury or death of persons or damage to property caused by, or arising out of, or resulting from, the exercise or practice of the rights granted hereunder by LICENSEE, its officers, its AFFILIATES or their officers, employees, agents or representatives.
9.2
In no event shall BOARD, SYSTEM or UTMDACC be liable for any indirect, special, consequential or punitive damages (including, without limitation, damages for loss of profits or expected savings or other economic losses, or for injury to persons or property) arising out of, or in connection with, this AGREEMENT or its subject matter, regardless of whether BOARD, SYSTEM or UTMDACC knows or should know of the possibility of such damages.
9.3
Beginning at the time when any LICENSED SUBJECT MATTER is being distributed or sold (including for the purpose of obtaining regulatory approvals) by LICENSEE, an AFFILIATE, or by a sublicensee, LICENSEE shall, at its sole cost and expense, procure and maintain commercial general liability insurance in amounts not less than $[****] per incident and $[****] annual aggregate, and LICENSEE shall use reasonable efforts to have the BOARD, SYSTEM, UTMDACC, their Regents, officers, employees, students and agents named as additional insureds. Such commercial general liability insurance shall provide: (i) product liability coverage; (ii) broad form contractual liability coverage for LICENSEE's indemnification under this AGREEMENT; and (iii) coverage for litigation costs. The minimum amounts of insurance coverage required herein shall not be construed to create a limit of LICENSEE's liability with respect to its indemnification under this AGREEMENT.
9.4
    LICENSEE shall provide UTMDACC with written evidence of such insurance within thirty (30) calendar days of its procurement. Additionally, LICENSEE shall provide



9
Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

UTMDACC with written notice of at least fifteen (15) calendar days prior to the cancellation, non-renewal or material change in such insurance.
9.5
LICENSEE shall maintain such commercial general liability insurance beyond the expiration or termination of this AGREEMENT during: (i) the period that any LICENSED SUBJECT MATTER developed pursuant to this AGREEMENT is being commercially distributed or sold by LICENSEE, an AFFILIATE or by a sublicensee or agent of LICENSEE; and (ii) the five (5) year period immediately after such period.
X.USE OF BOARD AND UTMDACC’S NAME
10.1
LICENSEE will not use the name of (or the name of any employee of) UTMDACC, SYSTEM or BOARD in any advertising, promotional or sales literature, on its Web site, or for the purpose of raising capital without the advance express written consent of BOARD secured through:
[****]
Notwithstanding the above, LICENSEE may use the name of (or name of any employee of) UTMDACC, SYSTEM or BOARD in routine business correspondence, or as needed in appropriate regulatory submissions without any requirement for the express written consent.
XI.    CONFIDENTIAL INFORMATION AND PUBLICATION
11.1
UTMDACC and LICENSEE each agree that all information contained in documents marked “confidential” and forwarded to one by the other (i) are to be received in strict confidence, (ii) are to be used only for the purposes of this AGREEMENT, and (iii) will not be disclosed by the recipient party (except as required by law or court order), its agents or employees without the prior written consent of the disclosing party, except to the extent that the recipient party can establish by competent written proof that such information:
(a)
was in the public domain at the time of disclosure; or
(b)
later became part of the public domain through no wrongful act or omission of the recipient party, its employees, agents, successors or assigns; or
(c)
was lawfully disclosed to the recipient party by a third party having the right to disclose it; or
(d)
was already known by the recipient party at the time of disclosure; or
(e)
was independently developed by the recipient party without use of the disclosing party’s confidential information; or
(f)
is required by law or regulation to be disclosed.



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Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

If either party, its directors, officers, employees or other representatives are legally compelled to disclose confidential information of the other, then to the extent reasonably possible it will provide the other party with prompt notice thereof so that the party may seek a protective order or other appropriate remedy (including an order that the information be produced under seal) and/or waive compliance with the provisions hereof. If such protective order or other remedy is not obtained, or if the disclosing party waives compliance with the provisions hereof, a party will furnish only such information as it is advised is legally required.
11.2
Each party’s obligation of confidence hereunder will be fulfilled by using at least the same degree of care with the disclosing party's confidential information as it uses to protect its own confidential information, but always at least a reasonable degree of care. This obligation will exist while this AGREEMENT is in force and for a period of three (3) years thereafter.
11.3
UTMDACC reserves the right to publish the general scientific findings from research related to LICENSED SUBJECT MATTER, with due regard to the protection of LICENSEE’s confidential information. UTMDACC will submit the manuscript of any proposed publication to LICENSEE at least thirty (30) calendar days before publication, and LICENSEE shall have the right to review and comment upon the publication in order to protect LICENSEE’s confidential information. Upon LICENSEE’s request, publication may be delayed up to sixty (60) additional calendar days to enable LICENSEE to secure adequate intellectual property protection of LICENSEE’s confidential information that would otherwise be affected by the publication.
XII.    ASSIGNMENT
12.1
Except in connection with the sale of all or substantially all of LICENSEE's assets to a third party, a merger in which LICENSEE is not the surviving entity, or LICENSEE’s assignment of all of its rights and obligations hereunder to an AFFILIATE, this AGREEMENT may not be assigned by LICENSEE without the prior written consent of UTMDACC, which will not be unreasonably withheld or delayed. For any assignment to be effective, (a) the LICENSEE must timely pay UTMDACC the Assignment Fee specified in Section 4.1; and (b) the assignee must assume in writing (a copy of which writing will be provided to UTMDACC) all of LICENSEE's interests, rights, duties, and obligations under the AGREEMENT and agree to comply with all terms and conditions of the AGREEMENT as if the assignee were the original party (i.e., the LICENSEE) to the AGREEMENT.
XIII.    TERM AND TERMINATION
13.1
Subject to Sections 13.3 and 13.4 hereinbelow, the term of this AGREEMENT is from the EFFECTIVE DATE to the full end of the term or terms for which PATENT RIGHTS have not expired, or if only TECHNOLOGY RIGHTS are licensed and no PATENT RIGHTS are applicable, for a term of fifteen (15) years.
13.2
BOARD or UTMDACC have the right to terminate this AGREEMENT if LICENSEE, within ninety (90) calendar days after receiving written notice from UTMDACC of the



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Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

intended termination, fails to provide written evidence satisfactory to UTMDACC that LICENSEE or its sublicensee(s) is using commercially reasonable efforts to commercialize a LICENSED PRODUCT for at least one indication. By way of example and not by way of limitation, the foregoing requirement shall be satisfied if LICENSEE provides written evidence satisfactory to UTMDACC that LICENSEE has made SALES of LICENSED PRODUCTS or has an effective, ongoing and active research, development, manufacturing, marketing or sales program as appropriate, directed toward obtaining regulatory approval, and/or production and/or SALES of LICENSED PRODUCTS in any jurisdiction. Notwithstanding the foregoing and in addition thereto, if LICENSEE should discontinue commercial efforts for more than two (2) years, and has not found a commercially viable entity to invest in LICENSEE or sublicense LICENSED SUBJECT MATTER and bring LICENSED PRODUCTS promptly to market, then BOARD or UTMDACC has the right to terminate this AGREEMENT upon thirty (30) days written notice to LICENSEE.
13.3
Subject to any rights herein which survive termination, this AGREEMENT will earlier terminate in its entirety:
(a)
automatically, if LICENSEE becomes bankrupt or insolvent and/or if the business of LICENSEE shall be placed in the hands of a receiver, assignee, or trustee, whether by voluntary act of LICENSEE or otherwise; or
(b)
upon thirty (30) calendar days written notice from UTMDACC, if LICENSEE breaches or defaults on the payment or reporting obligations of ARTICLE IV (excluding the license documentation fee specified in Section 4.1(b), for which no cure period applies), or the use of name obligations of ARTICLE X, unless, before the end of such thirty (30) calendar day notice period, LICENSEE has cured the default or breach to UTMDACC’s satisfaction, and so notifies UTMDACC, stating the manner of the cure; or
(c)
upon ninety (90) calendar days written notice from UTMDACC if LICENSEE breaches or defaults on any other obligation under this AGREEMENT, unless, before the end of the such ninety (90) calendar day notice period, LICENSEE has cured the default or breach to UTMDACC’s satisfaction and so notifies UTMDACC, stating the manner of the cure, or if such breach or default cannot reasonably be remedied or cured within ninety (90) calendar days, such remedy or cure is not promptly commenced by LICENSEE within the ninety (90) day period and within a total of one hundred eighty (180) calendar days of the notice of default, LICENSEE diligently prosecutes to completion the cure or remedy to UTMDACC’s satisfaction and so notifies UTMDACC, stating the manner of the cure; or
(d)
at any time by mutual written agreement between LICENSEE and UTMDACC upon one hundred eighty (180) calendar days written notice to all parties and subject to any terms herein which survive termination; or



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(e)
if Section 13.2 or 15.8 is invoked; or
(f)
immediately, upon written notice from UTMDACC, if LICENSEE has defaulted or been late on its payment obligations pursuant to the terms of this AGREEMENT on any two (2) occasions in a twelve (12) month period; or
(g)
immediately, upon written notice from UTMDACC, if (i) LICENSEE fails to timely pay the license documentation fee specified in Section 4.1(b), (ii) LICENSEE does not receive the FIRST SEED MONEY INVESTMENT within ten (10) calendar days of the EFFECTIVE DATE of this Agreement, or (iii) within ninety (90) calendar days after the LICENSEE’s receipt of the FIRST SEED MONEY INVESTMENT, the stockholder agreement required by Section 4.2 is not entered into by and among LICENSEE, BOARD or its designee, and the primary stockholders provided, however, that the BOARD or its designee is not the party that has failed to sign the stockholder agreement within the ninety (90) day period.
13.4    Upon termination of this AGREEMENT:
(a)
Nothing herein will be construed to release either party of any obligation maturing prior to the effective date of the termination; and
(b)
LICENSEE covenants and agrees to be bound by the provisions of ARTICLES IX (Indemnification and Insurance), X (Use of Board and UTMDACC’s Name) and XI (Confidential Information and Publication) of this AGREEMENT; and
(c)
LICENSEE may, for a period of one year after the effective date of the termination, sell all LICENSED PRODUCTS and parts therefor that it has on hand at the date of termination, if LICENSEE pays the earned royalty thereon and any other amounts due pursuant to ARTICLE IV of this AGREEMENT; and
(d)
Subject to Section 13.4(c), LICENSEE agrees to cease and desist from any use and all SALES of the LICENSED SUBJECT MATTER and LICENSED PRODUCTS upon termination of this AGREEMENT; and
(e)
LICENSEE grants to BOARD and UTMDACC a nonexclusive royalty bearing license with the right to sublicense to others any improvements made by LICENSEE (including, to the extent permissible, improvements licensed by LICENSEE from third parties) to the LICENSED SUBJECT MATTER. LICENSEE and UTMDACC agree to negotiate in good faith the royalty rate for the nonexclusive license. BOARD's and UTMDACC’s right to sublicense others hereunder is solely for the purpose of permitting others to develop and commercialize the entire technology package.



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Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

XIV.    WARRANTY: SUPERIOR-RIGHTS
14.1
Except for the rights, if any, of the Government of the United States of America (“GOVERNMENT”) as set forth below, BOARD represents and warrants to LICENSEE that to the knowledge of UTMDACC’s Office of Technology Commercialization (without further inquiry) (a) BOARD is the owner of the entire right, title, and interest in and to LICENSED SUBJECT MATTER, (b) BOARD has the sole right to grant licenses thereunder, and (c) BOARD has not knowingly granted licenses thereunder to any other entity that would restrict rights granted hereunder except as stated herein.
14.2
LICENSEE understands that the LICENSED SUBJECT MATTER may have been developed under a funding agreement with the GOVERNMENT and, if so, that the GOVERNMENT may have certain rights relative thereto. This AGREEMENT is explicitly made subject to the GOVERNMENT’S rights under any such agreement and any applicable law or regulation. To the extent that there is a conflict between any such agreement, applicable law or regulation and this AGREEMENT, the terms of such GOVERNMENT agreement, applicable law or regulation shall prevail. LICENSEE agrees that LICENSED PRODUCTS SOLD in the United States will be manufactured substantially in the United States, unless a written waiver is obtained in advance from the GOVERNMENT. LICENSEE will promptly advise UTMDACC if such a written waiver is requested and/or obtained.
14.3
LICENSEE understands and agrees that BOARD and UTMDACC, by this AGREEMENT, make no representation as to the operability or fitness for any use, safety, efficacy, approvability by regulatory authorities, time and cost of development, patentability, and/or breadth of the LICENSED SUBJECT MATTER. BOARD and UTMDACC, by this AGREEMENT, also make no representation as to whether any patent covered by PATENT RIGHTS is valid or as to whether there are any patents now held, or which will be held, by others or by BOARD or UTMDACC in the LICENSED FIELD, nor do BOARD and UTMDACC make any representation that the inventions contained in PATENT RIGHTS do not infringe any other patents now held or that will be held by others or by BOARD. However, BOARD represents and warrants to LICENSEE that to the knowledge of UTMDACC’s Office of Technology Commercialization (without further inquiry) the inventions contained in PATENT RIGHTS do not infringe any other patents now held by UTMDACC.
14.4
LICENSEE, by execution hereof, acknowledges, covenants and agrees that LICENSEE has not been induced in any way by BOARD, SYSTEM, UTMDACC or employees thereof to enter into this AGREEMENT, and further warrants and represents that (a) LICENSEE is entering into this AGREEMENT voluntarily; (b) LICENSEE has conducted sufficient due diligence with respect to all items and issues pertaining to this AGREEMENT; and (c) LICENSEE has adequate knowledge and expertise, or has used knowledgeable and expert consultants, to adequately conduct such due diligence, and agrees to accept all risks inherent herein.



14
Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

XV.    GENERAL
15.1
This AGREEMENT constitutes the entire and only agreement between the parties for LICENSED SUBJECT MATTER and all other prior negotiations, representations, agreements and understandings are superseded hereby. No agreements altering or supplementing the terms hereof will be made except by a written document signed by all parties.
15.2
Any notice required by this AGREEMENT must be given by prepaid, first class, certified mail, return receipt requested, and addressed in the case of UTMDACC to:
[****]
or in the case of LICENSEE to:
Soliton, Inc.
1225 N. Loop West
Suite 725
Houston, Texas 77008
ATTENTION: Walter Klemp, CEO
or other addresses as may be given from time to time under the terms of this notice provision.
15.3
LICENSEE must comply with all applicable federal, state and local laws and regulations in connection with its activities pursuant to this AGREEMENT. LICENSEE acknowledges that the LICENSED SUBJECT MATTER is subject to U. S. export control jurisdiction. LICENSEE agrees to comply with all applicable international and national laws that apply to the LICENSED SUBJECT MATTER, including U.S. Export Administration Regulations, as well as end-user, end-use, and destination restrictions applied by the United States.
15.4
This AGREEMENT will be construed and enforced in accordance with the laws of the United States of America and of the State of Texas, without regard to its conflict of law provisions. The Texas State Courts of Harris County, Texas (or, if there is exclusive federal jurisdiction, the United States District Court for the Southern District of Texas) shall have exclusive jurisdiction and venue over any dispute arising out of this AGREEMENT, and LICENSEE consents to the jurisdiction and venue of such courts and hereby explicitly waives the rights to any other venue to which it might be entitled by cause of action, domicile or otherwise. Nothing in this AGREEMENT shall be deemed as a waiver by BOARD, SYSTEM or UTMDACC of its sovereign immunity.
15.5
Failure of BOARD or UTMDACC to enforce a right under this AGREEMENT will not act as a waiver of right or the ability to later assert that right relative to the particular situation involved.
15.6
Headings included herein are for convenience only and will not be used to construe this AGREEMENT.



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Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

15.7
If any part of this AGREEMENT is for any reason found to be unenforceable, all other parts nevertheless will remain enforceable.
15.8
In the event that LICENSEE brings an action before any court, agency or tribunal seeking to invalidate or otherwise challenge the enforceability of or BOARD’s ownership of any patent included in the PATENT RIGHTS, then UTMDACC may immediately terminate this AGREEMENT upon written notice to LICENSEE. Any dispute regarding the validity, enforceability or ownership of any patent included in the PATENT RIGHTS shall be litigated in the courts located in Houston, Texas, and LICENSEE agrees not to challenge personal jurisdiction in that forum. To the extent that LICENSEE unsuccessfully challenges the validity or enforceability of any patent included in the PATENT RIGHTS, LICENSEE agrees to reimburse UTMDACC and BOARD for all costs and fees (including attorney’s fees) paid by UTMDACC and BOARD in defending against such challenge. LICENSEE understands and agrees that, in the event LICENSEE successfully challenges the validity or enforceability of any patent included in the PATENT RIGHTS, all payments or other consideration made or otherwise provided by LICENSEE to UTMDACC prior to a final, non-appealable adjudication of invalidity and/or unenforceability shall be non-refundable. The obligations of this Section shall survive the expiration or termination of this AGREEMENT.
15.9
Neither party hereto will have the right to claim damages or to terminate this agreement as a result of the other party’s failure or delay in performance hereunder due to unforeseen circumstances beyond the reasonable control of such other party, such as labor disputes, strikes, lockouts, shortages of or inability to obtain labor, fuel, raw materials or supplies, war, riot, insurrection, epidemic, Act of God and government action (a “Force Majeure Event”), provided, however, that the party suffering a Force Majeure Event must (i) immediately provide written notice to the other party of any delay or failure to perform that will result from such Force Majeure Event, (ii) use reasonable commercial efforts to avoid, limit, or reduce the impact of the Force Majeure Event upon its ability to perform its obligations under this AGREEMENT, and (iii) must use its best efforts to cure any failure, omission, or nonperformance resulting from such Force Majeure Event as soon as possible after the cessation of such Force Majeure Event.
15.10
This AGREEMENT may be executed in one or more original counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more original counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart.



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IN WITNESS WHEREOF, the parties hereto have caused their duly authorized representatives to execute this AGREEMENT.
BOARD OF REGENTS OF THE
UNIVERSITY OF TEXAS SYSTEM
 
SOLITON, INC.
 
 
 
 
 
By
/s/ Leon J. Leach
 
By
/s/ Walter Klemp
 
Leon J. Leach
Executive Vice President
The University of Texas
M.D. Anderson Cancer Center
 
 
Walter Klemp
Chief Executive Officer
 
 
 
 
 
Date:
4/4/12
 
Date:
April 3rd, 2012
 
 
 
 
 
THE UNIVERSITY OF TEXAS
M. D. ANDERSON CANCER CENTER
 
 
 
 
 
 
 
 
By:
/s/ Leon J. Leach
 
 
 
 
Leon J. Leach
Executive Vice President
The University of Texas
M.D. Anderson Cancer Center
 
 
 
 
 
 
 
 
Date:
4/4/12
 
 
 
 
 
 
 
 
Approved as to Business Terms:
 
 
 
 
 
By:
/s/ Dan Fontaine
 
 
 
 
R. Dan Fontaine
Senior Vice President for Business Affairs
The University of Texas
M. D. Anderson Cancer Center
 
 
 
 
 
 
 
 
Date:
4/4/12
 
 
 



17
Portions herein identified by [*****] have been omitted as Confidential Information and has been filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

EXHIBIT I
MDA AVP No.
Creator
AVP Title
Patent applications/patent numbers
[****]

Christopher C. Capelli, M.D.
[****]

[****]

[****]

Christopher C. Capelli, M.D.
[****]

[****]




18
Exhibit 6.4

ISSUER ACKNOWLEDGEMENT
REGULATION A OFFERING
The undersigned (the “Issuer”) has engaged FinTech Clearing, LLC (“Broker Dealer”) and FinTech Global Markets, Inc. (“Website Administrator”) to provide certain services to the Issuer pursuant to the Terms of Use located at www.flashfunders.com (as amended or supplemented from time to time, the “Terms of Use”). All capitalized terms not expressly defined in this Issuer Acknowledgement shall have the respective meanings ascribed to them in the Terms of Use. As a material inducement to Broker Dealer and Website Administrator to provide the Services, the Issuer hereby agrees as follows:
1.Defined Terms. As used herein, the following terms have the following meanings:
(a)“Affiliate” means any entity controlled by or under common control with the Issuer and any predecessor of the Issuer. For the purposes hereof, “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of voting securities, by contract or otherwise.
(b)“Closing” means the consummation of an Offering.
(c)“Commission” means the Securities and Exchange Commission.
(d)“Gross Proceeds” means the total gross process raised by an Issuer in an Offering.
(e)“Investor” means any investor or any potential investor in an Offering.
(f)“Offering” means an Offering being conducted pursuant to Rule 251(a) of the Securities Act.
(g)“Offering Statement” means an offering statement filed with the Commission pursuant to Rule 252 of the Securities Act.
(h)“Platform” means the website located at www.flashfunders.com.
(i)“Securities Act” means the Securities Act of 1933.
2.Compensation; Reimbursable Expenses; Payment Terms.
(a)Compensation. Prior to the listing of the Offering on the Platform _______________ shall pay to Broker Dealer a fee equal to ten thousand dollars ($10,000.00) (the “Listing Fee”). Broker Dealer will be compensated in connection with the Offering pursuant to and in accordance with that certain Selected Dealers Agreement by and between Broker Dealer and Boustead Securities, LLC, a copy of which is attached to this Issuer Acknowledgement as Exhibit A. Broker-Dealer may further enter into an Offering Deposit Account Agency Agreement (“Deposit Agreement”) with the Issuer in the form attached as Exhibit B to act as the Deposit Account Agent

1

for the Offering and shall be compensated and/or reimbursed pursuant to the terms and conditions therein.
(b)Reimbursable Expenses. Broker Dealer shall be entitled to reimbursement for all out-of-pocket third party expenses that it pays or incurs on behalf of the Issuer in connection with any Offering (collectively, “Reimbursable Expenses”). Reimbursable Expenses shall include, without limitation, any state filing fees and payment processing fees.
(c)Payment Terms. At each Closing, Broker Dealer shall deliver to the Issuer a summary of the unpaid Reimbursable Expenses as of such Closing. The Issuer acknowledges and agrees that Broker Dealer has the right, but not the obligation, to deduct all such Reimbursable Expenses directly from the funds held in the Escrow Accounts (the “Closing Funds”). Broker Dealer shall invoice the Issuer for all Reimbursable Expenses not deducted from the Closing Funds. The Issuer shall pay all such amounts within ten (10) calendar days after the date of such invoice.
3.Representations, Warranties and Covenants. With respect to any Offering, the Issuer hereby represents, warrants and covenants to Broker Dealer and Website Administrator that:
(a)Terms of Use. The Issuer shall at all times comply with the Terms of Use.
(b)Disclosure. None of the information filed with the Commission by or on behalf of the Issuer, or any of the information provided to Broker Dealer or Website Administrator (through the Platform or otherwise) by or on behalf of the Issuer, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make such statements not misleading in light of the circumstances under which they were made.
(c)Reliance. Broker Dealer and Website Administrator are entitled to rely on all representations and warranties of the Issuer made in any investment documents, included in any Offering materials, or otherwise provided in connection with any Offering.
(d)Securities Filings. The Issuer will timely make all securities filings required under applicable federal and applicable state securities laws, and will otherwise abide by all of the rules, regulations and other requirements applicable to issuers of securities under the Securities Act and other applicable laws.
(e)Own Advisors. The Issuer has been advised to, and has, consulted with the Issuer’s own legal, financial and tax advisors in connection with an Offering. The Issuer is not relying on any statements or representations of Broker Dealer or Website Administrator or their agents, for legal, financial or tax advice with respect to an Offering, use of the Platform or any corporate preparation, clean-up and/or structuring of the Issuer related thereto.
(f)No Assurances. The Issuer understands that Broker Dealer can make no assurance that any Offering will be successful or that the Issuer will receive any minimum or target investment in such Offering.

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(g)Termination of Offering. The Issuer acknowledges and agrees that (i) Broker Dealer has the right, without any liability to the Issuer, to deny the Issuer access to the Platform or terminate any Offering at any time and for any or no reason (including, without limitation, if Broker Dealer determines that the Issuer or such Offering presents the potential for fraud or otherwise raises concerns about Investor protection), and (ii) as between the Issuer (and its stockholders and affiliates) and Broker Dealer, to the fullest extent permitted by law, Broker Dealer has no liability or obligation to conduct any examination or investigation, or to detect, conclude or report to the Issuer any concerns, based upon any information known to or discoverable by Broker Dealer, that the Issuer or such Offering presents the potential for fraud or otherwise raises concerns about Investor protection.
(h)Notice of Termination of Offering. The Issuer shall immediately notify Broker Dealer in writing if the Issuer terminates, cancels or is otherwise unable to complete an Offering.
(i)Use of Platform. The Issuer acknowledges that the Platform has been developed and is maintained by Website Administrator. WEBSITE ADMINISTRATOR DOES NOT RECOMMEND, SOLICIT TRANSACTIONS IN, RECEIVE COMPENSATION FROM, OR OTHERWISE PARTICIPATE IN SECURITIES OFFERINGS IN ANY MANNER. The Platform serves only as an online interface utilized by the Broker Dealer to display securities offerings. All securities related activities are conducted by Broker Dealer.
(j)Compliance with Laws. THE ISSUER HAS READ, CONSULTED WITH ITS OWN LEGAL ADVISOR REGARDING, AND UNDERSTANDS RULES 251 TO 263 OF THE SECURITIES ACT AND REGULATION A. THE ISSUER HAS COMPLIED WITH THE REQUIREMENTS IN RULE 251 TO 263 OF THE SECURITIES ACT.
(k)No Disqualification Event. None of the Issuer, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Issuer participating in the Offering, any beneficial owner of 20% or more of the Issuer’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter connected with the Issuer in any capacity at the time of sale (each, an “Issuer Covered Person”) is subject to any of the “Bad Actor” disqualifications described in Rule 262(a)(1) to (8) under the Securities Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 262(b) or (c) under the Securities Act. The Issuer has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event. Prior to the commencement of an Offering, the Issuer shall cause each Issuer Covered Person to complete, execute and deliver to Broker Dealer a bad actor questionnaire provided by Broker Dealer.
(l)Eligible Issuer. The Issuer is organized under the laws of the United States or Canada, or any State, Province, Territory or possession thereof, or the District of Columbia, with its principal place of business in the United States or Canada. The Issuer is not required to file reports pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) immediately before the offering. The Issuer not an investment company registered or required to be registered under the Investment Company Act of 1940 or a business development company as defined in section 2(a)(48) of the Investment Company Act of 1940. The Issuer is not issuing fractional undivided interests in oil or gas rights, or a similar interest in other mineral rights. The

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Issuer is not, and has not been, subject to any order of the Commission entered pursuant to Section 12(j) of the Exchange Act within five years before the filing of the Offering Statement. The Issuer has filed with the Commission all reports required to be filed, if any, pursuant to Rule 257 during the two years before the filing of the offering statement (or for such shorter period that the Issuer was required to file such reports). The Issuer is not a development stage company and has a specific business plan. Such business plan does not indicate that the Issuer plans to engage in a merger or acquisition with an unidentified company or companies. A copy of such business plan is, or will be, included in the Offering Statement.
(m)Offering Statement. The Issuer has completed and filed with the Commission, or will complete and timely file with the Commission, the Offering Statement in compliance with Rule 252 of the Securities Act. The Commission has qualified the Offering Statement. The Issuer will provide Broker Dealer with a filed copy of the Offering Statement and all amendments thereto. The Issuer acknowledges that the Issuer is solely responsible for the contents of its Offering Statement and is not relying on any statements or representations of Broker Dealer or its agents, for legal or other advice with respect to its Offering Statement or any amendments thereto or other filings with any governmental agency.
(n)Indemnification. The Issuer agrees to indemnify, hold harmless and defend the Indemnified Parties at the Issuer’s expense, against any and all claims, actions, proceedings, and suits and all related liabilities, damages, settlements, penalties, fines, costs and expenses and costs and expenses of investigations (including, without limitation, reasonable attorneys’ fees and other dispute resolution expenses) incurred by any Indemnified Party arising out of or relating to (a) the Issuer’s breach of any representation, warranty or covenant, or any of its obligations, under this Issuer Acknowledgement or any of the offering documents and/or (b) any violation by the Issuer of any law, rule, order or regulation applicable to an Offering (including, without limitation, the Securities Act).
(o)Intentionally Omitted.
(p)Conflict. In the event of any conflict between this Issuer Acknowledgement and the Terms of Use, this Issuer Acknowledgement shall govern.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the Issuer has executed this Issuer Acknowledgement as of the day and year set forth below.
ISSUER NAME:
SOLITON, INC.
 
 
 
By (signature):
 
Name:
Walter Klemp
Title:
Executive Chairman
Date:
 
ACKNOWLEDGED AND ACCEPTED:
 
 
FINTECH CLEARING, LLC
 
 
By:
 
Name:
Keith Moore
Title:
Principal and Treasurer
Date:
 
 
 
FINTECH GLOBAL MARKETS, INC.
 
 
By:
 
Name:
Brian Park
Title:
President
Date:
 


EXHIBIT A
SELECTED DEALERS AGREEMENT
(See attached)








EXHIBIT B
OFFERING DEPOSIT ACCOUNT AGENCY AGREEMENT
(See attached)







Exhibit 6.7















SOLITON, INC.

NOTE PURCHASE AGREEMENT




























NOTE PURCHASE AGREEMENT

THIS NOTE PURCHASE AGREEMENT (the “Agreement”) is made as of ______________, 2018, by and between Soliton, Inc., a Delaware corporation (the “Company”), ________________ (the “Lenders”). Capitalized terms not otherwise defined in this Agreement shall have the meanings ascribed to them in Section 1 below.

The following recitals are true and constitute the basis for this Agreement:

A.
The Lenders intend to provide certain Consideration to the Company as set forth in this Agreement; and

B.
The parties intend for the Company to issue in return for the Consideration one or more Notes and, upon the occurrence of certain events, shares of Equity Securities, as further set forth herein.

NOW, THEREFORE, in consideration of the foregoing, and the representations, warranties, covenants and conditions set forth below, the Company and the Lenders, intending to be legally bound, hereby agree as follows:
1.     Definitions.
(a)    “Affiliate” means, with respect to any specified Person, (a) any other Person which directly or indirectly controls, is controlled by, or is under common control with such first Person, and (b) any Person who is a director, manager, officer, partner or principal of such first Person or of any Person which directly or indirectly controls, is controlled by, or is under common control with such first Person. For purposes of this definition, “control” of a Person shall mean the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether by ownership of voting stock, by contract or otherwise.
(b)    “Common Stock” shall mean the shares of common stock, par value $0.001 per share, of the Company.
(c)    “Consideration” shall mean the amount of money paid by the Lenders pursuant to this Agreement as shown on Schedule 1 attached hereto (the “Schedule of Lender”) for the Notes as indicated thereon.
(d)    “Conversion Price” shall mean $0.175 (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like).
(e)    “Conversion Shares” shall mean the Company’s Common Stock.
(f)    “Corporate Transaction” shall mean (i) the closing of the sale, lease, transfer, exclusive license or other disposition of all or substantially all of the Company’s assets, (ii) the consummation of a merger or consolidation of the Company with or into another entity (except a merger or consolidation in which the holders of capital stock of the Company immediately prior to such merger or consolidation continue to hold at least 50% of the voting power of the capital stock of the Company or the surviving or acquiring entity), (iii) the closing of the transfer (whether by merger, consolidation or otherwise), in one transaction or a series of related transactions, to a Person or group of Persons who are an Affiliate (other than an underwriter of the Company’s securities), of the Company’s securities if, after such closing, such Person or group of Persons who

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are an Affiliate would hold 50% or more of the outstanding capital stock of the Company or (iv) a liquidation, dissolution or winding up of the Company; provided, however, that a transaction shall not constitute a Corporate Transaction if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the Persons who held the Company’s securities immediately prior to such transaction.

(g)    “Equity Securities” shall mean the Company’s Common Stock or Preferred Stock or any securities conferring the right to purchase the Company’s Common Stock or Preferred Stock or securities convertible into, or exchangeable for (with or without additional consideration), the Company’s Common Stock or Preferred Stock.

(h)    “Maturity Date” shall mean ___________, 2020.

(i)    “Notes” shall mean the one or more convertible promissory notes issued to the Lenders pursuant to Section 2.1 below, the form of which is attached hereto.

(j)    “Person” means any individual, corporation, joint venture, partnership, trust, limited liability company, association or other business entity.

(k)    “Preferred Stock” shall mean the shares of preferred stock, par value $0.001 per share, of the Company.

(l)    “Qualified Offering” means the completion of the initial public offering of no more than 2,000,000 shares of Common Stock at a price per share of not less than $5.00 pursuant to which the Company’s Equity Securities become registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended.

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

2.    Terms of the Notes.
2.1    Issuance of Notes. In return for the Consideration paid by the Lenders, the Company shall sell and issue to each of the Lenders, and each of the Lenders shall purchase, one or more Notes as the case may be. Each Note shall have a principal balance equal to that portion of the Consideration paid by the Lender for the Note, as set forth in the Schedule of such Lender. At the option of each Lender, the Notes shall be convertible into Conversion Shares pursuant to Section 2.2 below.
2.2    Right to Convert Notes.
(a)    Qualified Offering. Subject to Section 2.2(b) below, if a Qualified Offering is completed, without further action from the Lender, on the closing date of the Qualified Offering, 100% of the outstanding principal and accrued, but unpaid interest under the terms of each Note shall be converted into Conversion Shares at the Conversion Price. Upon conversion, the Conversion Shares deliverable hereunder shall be issued within four (4) business days of the conversion date.
(b)    Limitation on Conversions. Notwithstanding anything to the contrary contained in the Notes issued to each of _______________, upon the completion of a Qualified Offering, the Note issued to such Lender shall not be convertible into Conversion Shares to the extent (but only to the extent) that such Lender or any of its Affiliates would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the

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Common Stock. To the extent the conversion provisions of Section 2.2(a) would be limited by this Section 2.2(b), the portion of the Note not converted as of the date of the Qualified Offering shall be converted into Common Stock at a later date or dates, provided that at such later date or dates the limitation in this Section 2.2(b) would no longer apply to _______________, as applicable, because such Lender would no longer own in excess of the Maximum Percentage. During any period of time after the completion of a Qualified Offering, but prior to the time any of _______________would be permitted to receive Common Stock pursuant to the conversion provisions of their Notes: (i) the Maturity Date of the Notes issued to such Lender shall be automatically extended until such date as such Note is fully converted, and during such period the Company shall not be permitted to repay such Note in cash; (ii) the Note issued to such Lender shall cease to accrue interest as set forth in such Note; and (iii) the Company shall no longer be required to comply with the covenants set forth in Section 7. below. For the purposes of this paragraph, beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. The provisions of this section shall be implemented in a manner otherwise than in strict conformity with the terms of this section to correct this section (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation. The holders of Common Stock shall be third party beneficiaries of this paragraph and the Company may not amend or waive this paragraph without the consent of holders of a majority of its Common Stock.
(c)    Corporate Transaction or Covenant Violation. If the Company breaches the covenant set forth in Section 7.5 below (an “Equity Violation”) or consummates a Corporate Transaction prior to the payment in full or conversion of the Notes pursuant to Section 2.2(a) above, then the outstanding principal and accrued but unpaid interest outstanding under the terms of the Note(s) held by each Non-Voting Holder shall, at the option of the Non-Voting Holder thereof, either be (i) due and payable in full by the Company, (ii) converted into Conversion Shares pursuant to this Section 2.2(c), or (iii) in case of an Equity Violation in which Remeditex or its Affiliates participate, converted into the offering of Equity Securities that caused the Equity Violation on the same terms and conditions as provided to Remeditex or its Affiliates; in each case which shall occur immediately prior to the consummation of the transaction that causes the Equity Violation or the consummation of the Corporate Transaction and which may be conditioned upon such consummation. If the Notes are to be converted into Conversion Shares pursuant to Section 2.2(c)(ii), the number of Conversion Shares to be issued upon the conversion of the Note shall be determined by dividing (A) the outstanding principal and accrued but unpaid interest outstanding on each Note to be converted as of the date of conversion by (B) the Conversion Price. At least ten (10) days prior to the closing of either a Corporate Transaction or the transaction that causes an Equity Violation, the Company shall notify the Non-Voting Holder of each Note in writing of the terms of the Corporate Transaction or the terms of the transaction that will cause the Equity Violation (the “Corporate Transaction Notice”), and the Non-Voting Holder shall inform the Company of its decision as set forth above within such 10-day period. The term “Non-Voting Holder” shall mean (i) Remeditex, only if the Corporate Transaction or transaction that causes the Equity Violation is approved by the Board of Directors without the approval of either director appointed by Remeditex pursuant to the Charter; and (ii) _______________. Further, with respect to any Corporate Transaction that is approved by either director appointed by Remeditex pursuant to the Charter, the Note held by Remeditex shall, at the option of Remeditex, be due and payable in full by the Company or converted into Conversion Shares on the same terms as the Convertible Promissory Notes held by Remeditex as of the date hereof pursuant to the Existing NPAs (as defined in Section 7.2 below).
(d)    No Fractional Shares. Upon the conversion of a Note into Conversion Shares, no fractional shares shall be issued upon conversion of any Note and the aggregate number of shares of stock to be issued shall, at the Company’s sole discretion, be (i) rounded up to the nearest whole share or (ii) in lieu of

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any fractional shares to which the holder of the Note would otherwise be entitled, the Company shall pay the holder thereof an amount in cash equal to such fraction multiplied by the Conversion Price in effect for such Conversion Shares.
(e)    Mechanics of Conversion. The Company shall not be required to issue or deliver the Conversion Shares until the holder of the Note has surrendered the Note to the Company at the address set forth on the signature page hereto (as may be updated pursuant to Section 8.5 below). Such conversion may be made contingent upon the closing of the Qualified Offering or any transaction described in Section 2.2(c). With respect to any conversion pursuant to Section 2.2, the Company shall, if necessary, promptly take all necessary steps to authorize the filing of all necessary amendments to its then current Certificate of Incorporation (the “Charter”) to authorize and reserve for issuance sufficient quantities of the Conversion Shares described in Section 1(e), as well as the shares of Common Stock issuable upon the conversion of any Equity Securities issued pursuant to Section 2.2(c).
3.     Purchase and Sale of the Notes.
3.1    Closing.
(a)    On or prior to the Closing (as defined below), the Board of Directors of the Company shall have authorized the sale and issuance of up to an aggregate amount of $500,000 of Notes.
(b)    Subject to the terms and conditions of this Agreement, the Lenders agree to purchase at the Closing (as defined below) and the Company agrees to sell and issue to the Lenders at the Closing, each a Note in the principal amount of $250,000 as set forth opposite each Lender’s name on the Schedule of Lender.

4.    Closing Mechanics.
4.1    Closing. The initial purchase and sale of the Notes shall take place remotely via the exchange of documents and signatures, at 1:00 p.m., CDT, on _______________, 2018, or at such other time and place as the Company and the Lenders agree upon, orally or in writing (which time and place are designated as the “Closing”). At the Closing, the Lender shall deliver the Consideration to the Company by wire transfer of immediately available funds and the Company shall deliver to the Lender one or more executed Notes in return for the respective Consideration provided to the Company.
5.    Representations and Warranties of the Company. In connection with the transactions provided for herein, and except as set forth on the schedule of exceptions (the “Schedule of Exceptions”), the Company hereby represents and warrants to the Lenders that:
5.1    Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its business or properties.
5.2    Authorization. Except for the authorization and issuance of the shares (a) issuable in connection with the Qualified Offering or (b) issuable in connection with the conversion of the Note pursuant to Section 2.2(a), if applicable, all corporate action has been taken on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement and the Notes. Except as may be limited by applicable bankruptcy, insolvency, reorganization, or similar laws relating to or affecting the enforcement of creditors’ rights, the Company has taken all corporate action required to make

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all of the obligations of the Company reflected in the provisions of this Agreement and the Notes, the valid and enforceable obligations they purport to be.
5.3    Compliance with Other Instruments. The Company is not in violation of or default under (a) any provisions of its Charter or its bylaws (“Bylaws”), (b) any instrument, judgment, order, writ or decree to which it is a party, (c) any note, indenture or mortgage to which it is a party, (d) any material lease, agreement or contract to which it is a party or by which it is bound (each such material lease, agreement, or contract being set forth in Section 5.3 of the Schedule of Exceptions), or (e) any federal or state statute, rule or regulation applicable to the Company, the violation of or default under which, in the case of clause (b), (c), (d) or (e), would constitute or result in a material default or violation of any law or regulation applicable to the Company or any material term or provision of the current Charter or Bylaws or any material agreement or instrument by which it is bound or to which its properties or assets are subject. The execution, delivery and performance of this Agreement and the Notes and the consummation of the transactions contemplated by this Agreement does not result in any such violation or conflict with or constitute, with or without the passage of time and giving of notice, either (i) a default under any such provision, instrument, judgment, order, writ, decree, contract or agreement or (ii) an event which results in the creation of any lien, charge or encumbrance upon any assets of the Company or the suspension, revocation, forfeiture, or nonrenewal of any material permit or license applicable to the Company.
5.4    Valid Issuance of Stock. The Conversion Shares, when issued and paid for as provided in this Agreement, shall be duly authorized and validly issued, fully paid, and nonassessable. The shares of Common Stock issuable upon conversion of the Conversion Shares will be duly reserved for issuance prior to conversion, and upon issuance in accordance with the terms of the Charter, will be validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under Section 2.12 of the Investor Rights Agreement, the Shareholders Agreement, applicable federal and state securities laws and liens or encumbrances created by or imposed by the Lender. Assuming the accuracy of the representations made by the Lenders in Section 6 of this Agreement and no changes in applicable law or regulations, and subject to the filings described in Section 5.8 below, the offer and sale of the Notes by the Company and the issuance of the Conversion Shares are exempt from the registration requirements of the Securities Act.
5.5    Capitalization.
(a)    The authorized capital of the Company consists, immediately prior to the Closing, of:
(i)    5,250,000 shares of Common Stock, 2,140,556 shares of which are issued and outstanding. The outstanding shares of Common Stock are duly and validly authorized and issued, fully paid and nonassessable, and were issued in accordance with the registration or qualification provisions of the Securities Act and any relevant state securities laws, or pursuant to valid exemptions therefrom. The outstanding shares of Common Stock are owned by the holders and in the numbers specified in Section 5.5(a) of the Schedule of Exceptions. The Company holds no shares of Common Stock in its treasury.
(ii)    2,534,766 shares of Preferred Stock, 416,666 shares of which are designated Series A Preferred Stock (the “Series A Preferred Stock”), all of which 416,666 shares are issued and outstanding, and 2,118,100 shares of which are designated Series B Preferred Stock, all of which 2,118,100 shares are issued and outstanding. The rights, privileges and preferences of the Series A Preferred Stock and the Series B Preferred Stock are as stated in the Charter. The outstanding shares of Preferred Stock are duly and validly authorized and issued, fully paid and nonassessable, and were issued in accordance with the registration or qualification provisions of the Securities Act and any relevant state securities laws, or pursuant to valid exemptions therefrom. Each outstanding share of Series A Preferred Stock and Series B Preferred Stock is convertible into shares of Common Stock on a one-for-one basis as of the date hereof. The consummation of the transactions contemplated hereunder will not result in any anti-dilution adjustment or

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other similar adjustment to the outstanding shares of Preferred Stock. The outstanding shares of Preferred Stock are owned by the holders and in the numbers specified in Section 5.5(a) of the Schedule of Exceptions. The Company holds no shares of Preferred Stock in its treasury.
(b)    Except for (i) the conversion privileges of the currently outstanding shares of Series A Preferred Stock and Series B Preferred Stock, and the Conversion Shares to be issued under this Agreement, (ii) with respect to Remeditex, the rights provided in Section 3.3 of the Amended and Restated Investor Rights Agreement, dated February 25, 2014, by and between the Company and Remeditex Ventures LLC (as amended on November 19, 2014, July 15, 2016, January 23, 2017, and June 19, 2017 the “Investor Rights Agreement”), (iii) with respect to Remeditex, the rights provided in Section 6.10 of the Shareholders Agreement, dated April 5, 2012, by and among the Company and the Company’s stockholders (as amended on February 25, 2014 and November 19, 2014, the “Shareholders Agreement”), (iv) the restricted stock awards pursuant to the Company’s 2012 Long Term Incentive Plan, as amended (the “Plan”), as set forth on Section 5.5(b) of the Schedule of Exceptions, and (v) as otherwise set forth in the Schedule of Exceptions, there are not outstanding any options, warrants, rights (including conversion or preemptive rights) or agreements for the purchase or acquisition from the Company of any shares of its capital stock. Except under the terms of the Shareholders Agreement and the Investor Rights Agreement, the Company is not a party or subject to any agreement or understanding, and to the Company’s knowledge, there is no agreement or understanding between any Persons, which affects or relates to the voting or giving of written consents with respect to any security of the Company or by a director of the Company. The Company has not made any representations, or made any agreement or commitment, regarding equity incentives to any officer, employee, director or consultant that are inconsistent with the share amounts and terms set forth on Section 5.5(b) of the Schedule of Exceptions. The reference in this paragraph to “directors” does not include any director of the Company designated by the Lender.
(c)    Except as contemplated by this Agreement or as set forth in the Investor Rights Agreement and the Shareholders Agreement, no shares of the Company’s outstanding capital stock, or stock issuable upon exercise or exchange of any outstanding options, warrants, or rights, or other stock issuable by the Company, are subject to any preemptive rights, rights of first refusal, or other rights to purchase such stock (whether in favor of the Company or any other Person) pursuant to any agreement or commitment of the Company that has not been waived.
(d)    No Person other than the Lenders has any right, under any agreement or instrument or applicable law, to purchase any of the Notes covered by this Agreement.
(e)    Except for the Charter and the Shareholders Agreement, the Company is not a party or subject to any agreement or understanding, and, to the Company’s knowledge, there is no agreement or understanding between any Person, which affects or relates to the voting or giving of written consents with respect to any security, or by a director, of the Company. The reference in this paragraph to “directors” does not include any director of the Company designated by Remeditex.
(f)    Except as set forth in Section 5.5(f) of the Schedule of Exceptions, none of the Company’s stock purchase agreements, stock option documents, or other agreements or understandings between the Company and any holder of any equity securities of the Company contains a provision providing for acceleration of vesting (or lapse of a repurchase right) upon the occurrence of any events. All options to acquire shares of the Company’s Common Stock vest as set forth on Section 5.5(f) of the Schedule of Exceptions.
(g)    The total outstanding shares of capital stock of the Company on a fully diluted basis immediately following the Closing will be as set forth in Section 5.5(a) of the Schedule of Exceptions.
All outstanding securities of the Company, including, without limitation, all outstanding shares of the capital stock of the Company, all shares of the capital stock of the Company issuable upon the conversion or exercise of all convertible or exercisable securities and all other securities that the Company is obligated to

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issue, are subject to a “market stand-off” restriction not to exceed one hundred eighty (180) days following an initial public offering of the Company’s securities pursuant to a registration statement filed with the Securities and Exchange Commission pursuant to the Securities Act, in a form substantially the same to Section 2.12 of the Investor Rights Agreement.

5.6    Litigation. There is no action, suit, proceeding or investigation pending or, to the Company’s knowledge, currently threatened against the Company that questions the validity of this Agreement or the Notes, or the right of the Company to enter into such agreements, or to consummate the transactions contemplated hereby or thereby, or that might result, either individually or in the aggregate, in any material adverse change in the assets, condition or affairs of the Company, financially or otherwise, or any change in the current equity ownership of the Company, nor to the Company’s knowledge is there any basis for the foregoing. The foregoing includes, without limitation, actions, suits, proceedings or investigations pending or threatened (or any basis therefor known to the Company) involving the prior employment of any of the Company’s employees, their use in connection with the Company’s business of any information or techniques allegedly proprietary to any of their former employers, or their obligations under any agreements with prior employers. The Company is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no action, suit, proceeding or investigation by the Company currently pending or that the Company intends to initiate.
5.7    Subsidiaries. The Company has no subsidiaries and does not own or control, directly or indirectly, any interest in any other Person. The Company is not a participant in any joint venture, partnership, or similar arrangement.
5.8    Governmental Consents and Filings. Assuming the accuracy of the representations made by each of the Lenders in Section 6 of this Agreement, no consent, approval, order, or authorization of or registration, qualification, designation, declaration, or filing with, any federal, state, or local governmental authority is required on the part of the Company in order to enable the Company to execute, deliver, and perform its obligations under this Agreement except for such qualifications or filings under applicable securities laws as may be required in connection with the transactions contemplated by this Agreement.
5.9    Agreements; Actions.
(a)    Section 5.9(a) of the Schedule of Exceptions lists all agreements and instruments to which the Company is a party or by which it is bound that are material to the business and operations of the Company.
(b)    The Company has not (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock, (ii) incurred any material indebtedness, material obligations, or incurred any other material liabilities except as set forth in Section 5.9(b) of the Schedule of Exceptions, (iii) made any loans or advances to any Person, other than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its assets or rights, other than in the ordinary course of business.
5.10    Certain Transactions.  
(a)    Other than (i) standard employee benefits generally made available to all employees, (ii) standard director and officer indemnification agreements approved by the Board, (iii) the issuance of shares of Common Stock pursuant to the Plan, (iv) as set forth in Section 5.10(a) of the Schedule of Exceptions or the Shareholder Agreement or the Investor Rights Agreement, and (v) pursuant to this Agreement, there are no agreements, understandings or proposed transactions between the Company and any of its officers or directors or any Affiliate thereof. The reference in this paragraph to “directors” does not include any director of the Company designated by Remeditex.

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(b)    Except as set forth in Section 5.10(b) of the Schedule of Exceptions, the Company is not indebted, directly or indirectly, to any of its directors, officers or employees or to their respective spouses or children or to any Affiliate of any of the foregoing, other than in connection with salary, expenses or advances of expenses incurred in the ordinary course of business. Except as set forth in Section 5.10(b) of the Schedule of Exceptions, none of the Company’s directors, officers or employees, or any members of their immediate families, or any Affiliate of the foregoing are, directly or indirectly, indebted to the Company or, to the Company’s knowledge, have any (i) material commercial, industrial, banking, consulting, legal, accounting, charitable or familial relationship with any of the Company’s customers, suppliers, service providers, joint venture partners, licensees and competitors, (ii) direct or indirect ownership interest in any firm or corporation with which the Company is Affiliated or with which the Company has a business relationship, or any firm or corporation which competes with the Company except that directors, officers or employees or stockholders of the Company may own stock in (but not exceeding two percent (2%) of the outstanding capital stock of) publicly traded companies that may compete with the Company or (iii) financial interest in any contract with the Company. The reference in this paragraph to “directors” does not include any director of the Company designated by Remeditex.
5.11        Rights of Registration. Except as provided in the Investor Rights Agreement, the Company is not under any obligation to register under the Securities Act any of its currently outstanding securities.
5.12        Employee Matters.
(a)    Set forth in Section 5.12(a) of the Schedule of Exceptions is a list of all of the Company’s employees and the direct compensation to be paid to them for service in 2017.
(b)    Except as set forth in Section 5.12(b) of the Schedule of Exceptions, the Company has not made any commitments regarding equity incentives to any officer, employee, director or consultant of the Company, except such shares of Common Stock as are reflected as being issued and outstanding in Section 5.2(a). The reference in this paragraph to “director” does not include any director of the Company designated by Remeditex.
(c)    The Company has not adopted any employee benefit plan subject to the Employee Retirement Income Security Act of 1974, as amended.
5.13    Proprietary Information and Inventions Assignment Agreement. Except as provided in Section 5.13 of the Schedule of Exceptions, each current and former officer, employee, and consultant of the Company has entered into and executed the Company’s standard form of Proprietary Information and Inventions Assignment Agreement, or an employment or consulting agreement containing substantially similar terms that has been provided to the Lenders.
5.14    Tax Returns and Payments. The Company has filed all tax returns that are required to have been filed with appropriate federal, state, county, local, and foreign governmental agencies or instrumentalities. All such returns and reports were true and correct in all material respects at the time made. The Company has paid or established reserves (such reserves are adequate for taxes due or accrued as of the date of this Agreement) for all income, franchise, and other taxes, assessments, governmental charges, penalties, interest, and fines due and payable by it on or before the Initial Closing. The Company has not elected pursuant to the Internal Revenue Code of 1986, as amended (the “Code”), to be treated as a Subchapter S corporation or a collapsible corporation pursuant to Section 1362(a) or Section 341(f) of the Code, nor has it made any other elections pursuant to the Code (other than elections that relate solely to methods of accounting, depreciation, or amortization) that could reasonably be expected to have a material adverse effect on the Company. The Company has never had any tax deficiency proposed or assessed against it and has not executed any waiver of any statute of limitations on the assessment or collection of any tax or governmental charge. The Company has withheld or collected from each payment made to each of its employees the amount of all taxes, including, but not limited to, federal

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income taxes, Federal Insurance Contribution Act taxes, and Federal Unemployment Tax Act taxes required to be withheld or collected from each payment made to each of its employees and has paid the same to the proper tax receiving officers or authorized depositories. No federal or state income or sales tax return of the Company has been audited, no deficiency assessment or proposed adjustment of the Company’s United States income tax, state or municipal taxes or sales taxes is pending, and the Company has no knowledge of any proposed liability for any tax to be imposed on its property or assets.
5.15    Intellectual Property.
(a)    Status. The term “Proprietary Assets” means all patents, patent applications, trademarks, service marks, trademark and service mark applications, trade names, copyright registrations, and licenses currently owned and/or used by the Company or necessary for the conduct of the Company’s business as currently conducted or proposed to be conducted, as well as any agreement under which the Company has access to any intellectual property or confidential information used by the Company in its business. Section 5.15 of the Schedule of Exceptions sets forth all Proprietary Assets necessary, to the Company’s knowledge, to conduct the Company’s business as currently conducted or as presently proposed to be conducted. The Company owns, or has the right to use under the agreements or upon the terms described in Section 5.15(a) of the Schedule of Exceptions, all of the Proprietary Assets and has taken all actions reasonable in light of its financial position to protect the Proprietary Assets. Except as set forth in Section 5.15(a) of the Schedule of Exceptions, the Company does not require any license or other agreement to use any of the Proprietary Assets, except for licenses or agreements that can be obtained in the ordinary course of business without unreasonable effort, delay, cost, or expense. Except as set forth in Section 5.15(a) of the Schedule of Exceptions, the Company is not bound by or a party to any options, licenses, or agreements of any kind with respect to the Proprietary Assets of any other Person and, to the Company’s knowledge, except as set forth in Section 5.15(a) of the Schedule of Exceptions, there are no outstanding options, licenses, or agreements of any kind relating to the Proprietary Assets. With respect to each item of the Company’s Proprietary Assets that any third party owns and that the Company uses pursuant to license, sublicense, agreement or permission: (i) the license, as it relates to the Company is legal, valid, binding, enforceable, and in full force and effect in all material respects; (ii) the Company is not, and to the Company’s knowledge, no other party to the license, sublicense, agreement or permission is in material breach or default, and no event has occurred which with notice or lapse of time or both would constitute a material breach or default or permit termination, modification or acceleration thereunder; (iii) the Company has not, and to the Company’s knowledge, no other party to the license, sublicense, agreement or permission has repudiated any material provision thereof; and (iv) the Company has not granted any sublicense or similar right with respect to the license, sublicense, agreement or permission other than as expressly permitted by such license, sublicense, agreement or permission. Except as set forth in Section 5.15(a) of the Schedule of Exceptions, to the Company’s knowledge, no director, officer, or stockholder of the Company owns any rights in any Proprietary Assets directly or indirectly competitive with those owned or to be used by the Company or derived from or in connection with the conduct of the Company’s business. Except as set forth in Section 5.15(a) of the Schedule of Exceptions, to the Company’s knowledge it is not now necessary to use any inventions or works of authorship of its employees made outside of their employment by the Company. The Company has not granted rights to manufacture, produce, assemble, license, market, or sell its products to any other person and is not bound by any agreement that affects the Company’s exclusive rights to develop, manufacture, assemble, distribute, market, or sell its products. The reference in this paragraph to “director” does not include any director of the Company designated by Remeditex.
(b)    No Infringement. The Company has not violated or infringed, and is currently not violating or infringing, and to the Company’s knowledge, neither the Company nor any managerial employee or consultant of the Company has received any communications alleging that the Company (or any of its employees or consultants) has violated or infringed or, by conducting its business as presently proposed, would violate or infringe, any of the patents, trademarks, service marks, trade names, copyrights, mask works, licenses,

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trade secrets, processes, data, know-how, or other intellectual property rights (“Intellectual Property Rights”) of any other Person. To the Company’s knowledge, no third party has materially interfered with, infringed upon, misappropriated, diluted, constituted the unauthorized use, misuse or misappropriation or violated any of the Company’s currently owned or licensed Intellectual Property Rights.
5.16    Title to Property and Assets. Except for leased property and assets (which are addressed below), the Company has good and valid title to its properties and assets, free and clear of all mortgages, deeds of trust, liens, encumbrances, and security interests, except for statutory liens for the payment of current taxes that are not yet delinquent and encumbrances and liens that arise in the ordinary course of business and do no materially impair the Company’s ownership or use of such property or assets. With respect to the property and assets it leases, the Company is in material compliance with such leases and holds a valid leasehold interest free of any liens, claims or encumbrances other than those held by the lessors of such leased property or assets, except to the extent that noncompliance could not reasonably be expected to have a material adverse effect on the Company. The Company’s tangible property and assets are in good condition, except for ordinary wear and tear, and are suitable for their intended purposes. The Company does not have any ownership interest in any real property.
5.17    Insurance. The Company maintains insurance as set forth in Section 5.17 of the Schedule of Exceptions.
5.18    Permits. The Company possesses all material franchises, permits, licenses and any similar authority necessary for the conduct of the Company’s business, the lack of which could reasonably be expected to have a material adverse effect on the Company. The Company is not in default in any material respect under any of such franchises, permits, licenses or other similar authority.
5.19    Environmental and Safety Laws. The Company is not in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, “Environmental Laws”), and does not own or operate any real property contaminated with any substance that is subject to any Environmental Laws, nor is it liable for any off-site disposal or contamination pursuant to any Environmental Laws or subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim has had or could reasonably be expected to have a material adverse effect on the Company, individually or in the aggregate.
5.20    Labor Agreements and Actions; Employees. The Company is not bound by or subject to (and none of its assets or properties is bound by or subject to) any written or oral, express or implied, contract, commitment, or arrangement with any labor union, and no labor union has requested or, to the Company’s knowledge, has sought to represent any of the employees, representatives, or agents of the Company. There is no strike or other labor dispute involving the Company pending or, to the Company’s knowledge, threatened, that could reasonably be expected to have a material adverse effect on the Company, nor, to the Company’s knowledge, is there any labor organization activity involving its employees. To the Company’s knowledge, no officer or key employee, or any group of key employees, intends to terminate his, her, or their employment with the Company, nor does the Company have a present intention to terminate the employment of any of the foregoing. The employment of each officer and employee of the Company is terminable at the will of the Company without severance or similar obligations. The Company has complied in all material respects with all applicable state and federal equal employment opportunity and other laws related to employment. Other than the Plan, the Company is not a party to or bound by any currently effective employment contract, deferred compensation agreement, bonus plan, incentive plan, profit sharing plan, retirement agreement, or other employee compensation agreement. There are no Actions pending, or to the Company’s knowledge, threatened, by any former or current employee concerning such person’s employment by the Company.

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5.21    Disclosure. The Company has made available to the Lenders all the information reasonably available to the Company that the Lenders have requested in writing for deciding whether to acquire the Notes.
5.22    Brokers. The Company has no contract, arrangement, or understanding with any broker, finder, or similar agent with respect to the transactions contemplated by this Agreement.
5.23    Investment Company. Neither the Company nor any of its subsidiaries is an “investment company” or a company “controlled” by “an investment company” within the meaning of the Investment Company Act of 1940 and the rules and regulations under the Investment Company Act of 1940 and is not deemed to be an “investment company” for purposes of Section 12(d)(1) of the Investment Company Act of 1940.
5.24    Regulatory Matters. The Company holds, and is operating in compliance in all material respects with, such permits, licenses, franchises, approvals, exemptions, authorizations and clearances of the U.S. Food and Drug Administration (the “FDA”) required for the conduct of its business as currently conducted. The Company currently is in compliance in all material respects with applicable statutes and implementing regulations administered or enforced by the FDA. The Company has not received written notice of any pending or, to the Company’s knowledge any, threatened claim, suit, proceeding, hearing, enforcement, audit, investigation, arbitration or other action from the FDA or applicable foreign governmental authority alleging that any operation or activity of the Company is in violation of any applicable law.
6.     Representations and Warranties of the Lenders. In connection with the transactions provided for herein, each Lender hereby represents and warrants to the Company, severally and not jointly, that:
6.1    Authorization. This Agreement constitutes the Lender’s valid and legally binding obligation, enforceable in accordance with its terms, except as may be limited by (a) applicable bankruptcy, insolvency, reorganization, or similar laws relating to or affecting the enforcement of creditors’ rights and (b) laws relating to the availability of specific performance, injunctive relief or other equitable remedies. The Lender represents that it has full power and authority to enter into this Agreement. Additionally, the Lender is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite power and authority to carry on its business as now conducted.
6.2    Purchase Entirely for Own Account. The Lender acknowledges that this Agreement is made with Lender in reliance upon its representation to the Company that the Note, the Conversion Shares, and any Equity Securities issuable upon conversion of the Conversion Shares (collectively, the “Securities”) will be acquired for investment for Lender’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Lender has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, the Lender further represents that the Lender does not have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third Person, with respect to the Securities.
6.3    Disclosure of Information. The Lender acknowledges that it has received all the information it considers necessary or appropriate for deciding whether to acquire the Securities. The Lender further represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Securities and the Company’s business, properties, prospects and financial condition and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable expense) necessary to verify the accuracy of any information furnished or made available to the Lender.

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6.4    Investment Experience. The Lender is an investor in securities of companies in the development stage and acknowledges that it is able to fend for itself, can bear the economic risk of its investment and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Securities. The Lender also represents it has not been organized solely for the purpose of acquiring the Securities.
6.5    Accredited Investor. The Lender is an “accredited investor” within the meaning of Rule 501 of Regulation D of the Securities and Exchange Commission (the “SEC”), as in effect on the date hereof.
6.6    No Disqualification Events. Neither (a) the Lender, (b) any of its directors, executive officers, other officers that may serve as a director or officer of any company in which it invests, general partners or managing members, nor (c) any beneficial owner of the Company’s voting equity securities (in accordance with Rule 506(d) of the Securities Act) held by the Lender, as applicable, is subject to any of the “bad actor” disqualifications described in Securities Act Rule 506(d)(1)(i) to (viii) (each, a “Disqualification Event”), except for Disqualification Events covered by Rule 506(d)(2)(ii) or (iii) or (d)(3) under the Securities Act and disclosed reasonably in advance of the purchase of this Note in writing in reasonable detail to the Company. In furtherance of the foregoing, the Lender represents and warrants that: (1) the Lender has not been subject to a criminal conviction within ten years of the issuance of this Note or to a court injunction or restraining order within five years of the issuance of this Note in connection with the purchase or sale of a security, in connection with making a false filing with the SEC, or arising out of the conduct of any financial intermediaries; (2) the Lender has not been subject to a final order from state securities, insurance, banking, savings association or credit union regulators or federal banking agencies, the Commodity Futures Trading Commission or the National Credit Union Administration (A) that would bar the Lender from associating with a regulated entity; engaging in the business of securities, insurance or banking; or engaging in savings association or credit union activities, or (B) that were based on fraudulent, manipulative or deceptive conduct and were issued within ten years of the issuance of this Note; (3) the Lender is not subject to any SEC disciplinary orders relating to brokers, dealers, municipal securities dealers, investment companies, investment advisers or their associated persons; (4) the Lender is not subject to any SEC cease-and-desist order arising out of any scienter-based anti-fraud violation or violation of Section 5 of the Securities Act; (5) the Lender has not been suspended or expelled from membership in a self-regulatory organization; and (6) the Lender has not been subject to any SEC stop orders or orders suspending a Regulation A exemption issued within five years of the issuance of this Note.
6.7    Restricted Securities. The Lender understands that the Securities are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Act only in certain limited circumstances. The Lender represents that it is familiar with SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Act.
6.8    Legends. It is understood that the Securities may bear the following legend:
“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.”

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7.     Covenants.
7.1    Use of Proceeds. The Company hereby agrees that the Consideration shall be used exclusively for working capital purposes or for other purposes so approved by the Company’s Board of Directors.
7.2     Pari Passu Notes. Remeditex acknowledges and agrees that the payment of all or any portion of the outstanding principal amount of and all interest on this Note shall be pari passu in right of payment and in all other respects to the other Notes issued pursuant to this Agreement and the Existing NPAs, or pursuant to the terms of such Notes. In the event Remeditex receives payments in excess of its pro rata share of Company’s payments to the holders of all of the Notes, then Remeditex shall hold in trust all such excess payments for the benefit of the holders of the other Notes and shall pay such amounts held in trust to such other holders upon demand by such holders. The term “Existing NPAs” means the Note Purchase Agreements between Remeditex and the Company, dated as of January 23, 2017, as amended on June 19, 2017, and the Note Purchase Agreement between Remeditex and the Company dated November 7, 2017.
7.3    Amendment to Existing NPAs. The Company and Remeditex hereby agree that the term “Next Equity Financing” in the Existing NPAs is hereby amended and restated as follows:
“Next Equity Financing” shall mean the first to occur of either (a) a Qualified Offering or (b) the next sale (or series of related sales other than in connection with a Qualified Offering) by the Company of its Equity Securities following the date of this Agreement from which the Company receives gross proceeds of not less than $5,000,000 from financial, non-strategic investors (excluding the aggregate amount of debt securities converted into Equity Securities upon conversion of the Notes pursuant to Section 2.2 below or the aggregate amount of debt securities converted into Equity Securities upon conversion of the notes pursuant to Section 2.2 of that certain Note Purchase Agreement, dated as of January 23, 2017, as amended on June 19, 2017, between Remeditex and the Company and the Note Purchase Agreement, dated November 7, 2017, between Remeditex and the Company (collectively, the “Existing NPA”).
7.4    Waiver of Price Protection. Remeditex, as the sole holder of the Company’s Series A Preferred Stock and Series B Preferred Stock, hereby agrees pursuant to subsection 4.4.2 of the Charter that neither the issuance of the Notes nor the issuance of the Conversion Shares thereunder shall require an adjustment to the Preferred Stock “Conversion Prices” (as defined in the Charter). In addition, Remeditex hereby agrees pursuant to subsection 4.4.2 of the Charter that no adjustment to the Preferred Stock “Conversion Prices” (as defined in the Charter) will be required due to any of the issuances set forth in Section 7.5(a)-(c).
7.5    Restrictions on Future Equity Issuances. The Company hereby agrees that until the completion of a Qualified Offering, it may not, without the approval of both Lenders, issue any Equity Securities, except as follows:
(a)    The Company may issue a maximum of 600,000 shares of Common Stock at minimum price per share of not less than $1.75, either directly or through the issuance of additional convertible notes exercisable into Common Stock at a conversion price of not less than $1.75 per share (with such terms no more favorable to the holders than the Notes) (the “F&F Equity Investment Round”). The F&F Equity Investment Round shall cease upon the commencement of the financing in Section 7.5(b), unless extended as provided for therein;
(b)    Within three business days of the closing of the F&F Equity Investment Round, the Company shall have the right to either: (i) extend the F&F Equity Investment Round for up to another 600,000 shares of Common Stock at minimum price per share of not less than $1.75, either directly or through the issuance of additional convertible notes exercisable into Common Stock at a conversion price of not less than $1.75 per share (with such terms no more favorable to the holders than the Notes), or (ii) the Company may

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commence an offering of Equity Securities (or contractual arrangements convertible into Equity Securities) pursuant to either Regulation D or Regulation CF of the Securities Act provided that the effective offering price per share in any Regulation CF offering must be not less than $4.55 per share and maximum number of shares that may be issued shall be 350,000. The Company agrees to provide the Lenders with notice of its choice hereunder; and
(c)    The Qualified Offering.
7.6    Qualified Offering Pursuit. The Company agrees to use its best efforts to commence an offering of Common Stock pursuant to Regulation A of the Securities Act within three months from the Closing, and to use its best efforts to complete such offering as soon as practicable. The Company will use its best efforts to file the Form 1-A for the Regulation A offering within 60 days after the Closing, and to use its best efforts to respond to all SEC comments within 15 days of the receipt of such comments.
7.7    Approval Pursuant to Shareholders Agreement. To the extent required by Section 6.5 of the Shareholders Agreement, Remeditex hereby approves the actions to be taken by the Company pursuant to this Agreement.
8.     Miscellaneous.
8.1    Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Neither this Agreement nor any rights hereunder are transferable without the prior written consent of the Company, which the Company may grant or withhold in its sole discretion. Notwithstanding the foregoing, the Lenders shall, upon advance written notice to the Company, be permitted to assign this Agreement to any Affiliate of such Lender who (a) executes and delivers an acknowledgement that such Affiliate agrees to be subject to, and bound by, all the terms and conditions of this Agreement, (b) makes the representations and warranties to the Company that are set forth in Section 6 and (c) if requested by the Company, delivers to the Company an opinion of legal counsel, reasonably satisfactory to the Company, that such transfer complies with state and federal securities laws. Notwithstanding any provision herein to the contrary, the Lenders shall not make any disposition of any of the Equity Securities to a competitor of the Company, as determined in good faith by the Company. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
8.2    Governing Law. This Agreement and the Note shall be governed by and construed under the laws of the State of Delaware as applied to agreements among Delaware residents, made and to be performed entirely within the State of Delaware without regard to conflict of laws rules.
8.3    Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. For purposes of this Agreement, a photostatic, facsimile, electronic or similar reproduction and transmission by a party hereto of the signature of that party will have the same effect as that party signing and delivering that signature page in person.
8.4    Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
8.5    Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, if not so

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confirmed, then on the next business day, (c) three (3) days after having been sent by registered or certified mail, return receipt requested, postage prepaid or (d) two (2) days after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the respective parties at respective addresses shown on the signature pages hereto (or at such other addresses as shall be specified by notice given in accordance with this Section 8.5):
8.6    Finder’s Fee. Each party represents that it neither is nor will be obligated for any finder’s fee or commission in connection with this transaction. The Lenders, severally and not jointly, agree to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder’s fee (and the costs and expenses of defending against such liability or asserted liability) for which such Lender or any of its officers, partners, employees or representatives is responsible. The Company agrees to indemnify and hold harmless the Lenders from any liability for any commission or compensation in the nature of a finder’s fee (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.
8.7    Expenses. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. Irrespective of whether the Closing is effected, each party shall pay all costs and expenses that it incurs with respect to the negotiation, execution, delivery and performance of this Agreement and the Notes.
8.8    Entire Agreement; Amendments and Waivers. This Agreement, the Notes, and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof. This Agreement and the obligations of the Company and the rights of the Lenders under this Agreement may be amended, waived, discharged or terminated (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely) only with the written consent of the Company and the Lenders. Any waiver or amendment effected in accordance with this Section shall be binding upon each party to this Agreement and the holder of the Notes purchased under this Agreement at the time outstanding and each future holder of the Notes.
8.9    Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.
8.10    Stock Purchase Agreement. The Lenders understand and agree that the conversion of the Notes into Conversion Shares may require such Lender’s, and the Lender agrees to effect such execution of certain agreements relating to the purchase and sale of such Securities, as well as registration, co-sale, rights of first refusal, rights of first offer and voting rights, if any, relating to such Securities.
8.11    Further Assurance. From time to time, the Company shall execute and deliver to the Lenders such additional documents and shall provide such additional information to the Lenders as the Lenders may reasonably require to carry out the terms of this Agreement, the Notes, and any agreements executed in connection herewith or therewith, or to be informed of the financial and business conditions and prospects of the Company.
***Remainder of this Page Intentionally Left Blank***

***Signature Pages to Follow***




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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
COMPANY:
 
 
 
SOLITON, INC.
 
 
 
 
 
 
By:
 
 
 
 
 
 
Address:
5304 Ashbrook Drive
 
 
Houston, TX 77081
 
 
 



SIGNATURE PAGE TO THE SOLITON, INC.
NOTE PURCHASE AGREEMENT


LENDERS:
 
 
 
 
 
 
 
 
 
By:
 
 
 
 
 
Address:
 


SIGNATURE PAGE TO THE SOLITON, INC.
NOTE PURCHASE AGREEMENT

SCHEDULE 1
SCHEDULE OF LENDERS


Lender
Closing
Note
 
 
 
 
 
 
 
 
 
 
 
 



B-1
Exhibit 6.8

























SOLITON, INC.

NOTE PURCHASE AGREEMENT



























1


NOTE PURCHASE AGREEMENT

THIS NOTE PURCHASE AGREEMENT (the “Agreement”) is made as of the date set forth on the signature page hereto, by and between Soliton, Inc., a Delaware corporation (the “Company”), Remeditex Ventures LLC (“Remeditex”) and each of the lenders set forth on the signature page hereto (collectively, the “Non-Remeditex Lenders” and together with Remeditex, the “Lenders”). Capitalized terms not otherwise defined in this Agreement shall have the meanings ascribed to them in Section 1 below.

The following recitals are true and constitute the basis for this Agreement:

A.
The Lenders intend to provide certain Consideration to the Company as set forth in this Agreement; and

B.
The parties intend for the Company to issue in return for the Consideration one or more Notes and, upon the occurrence of certain events, shares of Equity Securities, as further set forth herein.

NOW, THEREFORE, in consideration of the foregoing, and the representations, warranties, covenants and conditions set forth below, the Company and the Lenders, intending to be legally bound, hereby agree as follows:
1.    Definitions.
(a)    “Affiliate” means, with respect to any specified Person, (a) any other Person which directly or indirectly controls, is controlled by, or is under common control with such first Person, and (b) any Person who is a director, manager, officer, partner or principal of such first Person or of any Person which directly or indirectly controls, is controlled by, or is under common control with such first Person. For purposes of this definition, “control” of a Person shall mean the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether by ownership of voting stock, by contract or otherwise.
(b)    “Common Stock” shall mean the shares of common stock, par value $0.001 per share, of the Company.
(c)    “Consideration” shall mean the amount of money paid by the Lenders pursuant to this Agreement as shown on the signature page hereto for the Notes as indicated thereon.
(d)    “Conversion Price” shall mean $1.75 (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like).
(e)    “Conversion Shares” shall mean the Company’s Common Stock.
(f)    “Corporate Transaction” shall mean (i) the closing of the sale, lease, transfer, exclusive license or other disposition of all or substantially all of the Company’s assets, (ii) the consummation of a merger or consolidation of the Company with or into another entity (except a merger or consolidation in which the holders of capital stock of the Company immediately prior to such merger or consolidation continue to hold at least 50% of the voting power of the capital stock of the Company or the surviving or acquiring entity), (iii) the closing of the transfer (whether by merger, consolidation or otherwise), in one transaction or a series of related transactions, to a Person or group of Persons who are an Affiliate (other than an underwriter of the Company’s securities), of the Company’s securities if, after such closing, such Person or group of Persons who

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are an Affiliate would hold 50% or more of the outstanding capital stock of the Company or (iv) a liquidation, dissolution or winding up of the Company; provided, however, that a transaction shall not constitute a Corporate Transaction if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the Persons who held the Company’s securities immediately prior to such transaction.

(g)    “Equity Securities” shall mean the Company’s Common Stock or Preferred Stock or any securities conferring the right to purchase the Company’s Common Stock or Preferred Stock or securities convertible into, or exchangeable for (with or without additional consideration), the Company’s Common Stock or Preferred Stock.

(h)    “Make-Whole Amount” shall mean for any Note the amount calculated by (1) dividing the outstanding principal amount of the Note plus any accrued and unpaid interest on the date of calculation by the Conversion Price, and then (2) multiplying such amount by 2.25. By way of example, if the outstanding principal amount of a Note plus any accrued and unpaid interest was $1,500, the Make-Whole Amount would be $1,928 [or (1,500 / 1.75) x 2.25].

(i)    “Maturity Date” shall mean two years from the issuance date of the Notes.

(j)    “Notes” shall mean the one or more convertible promissory notes issued to the Lenders pursuant to Section 2.1 below, the form of which is attached hereto.

(k)    “Person” means any individual, corporation, joint venture, partnership, trust, limited liability company, association or other business entity.

(l)    “Preferred Stock” shall mean the shares of preferred stock, par value $0.001 per share, of the Company.

(m)    “Qualified Offering” means the completion of the initial public offering of no more than 3,000,000 shares of Common Stock at a price per share of not less than $5.00 pursuant to which the Company’s Equity Securities become registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended.

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

2.     Terms of the Notes.
2.1    Issuance of Notes. In return for the Consideration paid by the Lenders, the Company shall sell and issue to each of the Lenders, and each of the Lenders shall purchase, one or more Notes as the case may be. Each Note shall have a principal balance equal to that portion of the Consideration paid by the Lender for the Note, as set forth on the signature page hereto. At the option of each Lender, the Notes shall be convertible into Conversion Shares pursuant to Section 2.2 below.
2.2    Right to Convert Notes.
(a)    Qualified Offering. Subject to Section 2.2(b) below, if a Qualified Offering is completed, without further action from the Lender, on the closing date of the Qualified Offering, 100% of the outstanding principal and accrued, but unpaid interest under the terms of each Note shall be converted into

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Conversion Shares at the Conversion Price. Upon conversion, the Conversion Shares deliverable hereunder shall be issued within four (4) business days of the conversion date.
(b)    Limitation on Conversions. Notwithstanding anything to the contrary contained in the Notes issued to each of the Non-Remeditex Lenders, upon the completion of a Qualified Offering, the Note issued to such Non-Remeditex Lender shall not be convertible into Conversion Shares to the extent (but only to the extent) that such Non-Remeditex Lender or any of its Affiliates would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the Common Stock. To the extent the conversion provisions of Section 2.2(a) would be limited by this Section 2.2(b), the portion of the Note not converted as of the date of the Qualified Offering shall be converted into Common Stock at a later date or dates, provided that at such later date or dates the limitation in this Section 2.2(b) would no longer apply to a Non-Remeditex Lender because such Non-Remeditex Lender would no longer own in excess of the Maximum Percentage. During any period of time after the completion of a Qualified Offering, but prior to the time any Non-Remeditex Lender would be permitted to receive Common Stock pursuant to the conversion provisions of their Notes: (i) the Maturity Date of the Notes issued to such Non-Remeditex Lender shall be automatically extended until such date as such Note is fully converted, and during such period the Company shall not be permitted to repay such Note in cash; (ii) the Note issued to such Non-Remeditex Lender shall cease to accrue interest as set forth in such Note; and (iii) the Company shall no longer be required to comply with the covenants set forth in Section 7 below. For the purposes of this paragraph, beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. The provisions of this section shall be implemented in a manner otherwise than in strict conformity with the terms of this section to correct this section (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation. The holders of Common Stock shall be third party beneficiaries of this paragraph and the Company may not amend or waive this paragraph without the consent of holders of a majority of its Common Stock.
(c)    Corporate Transaction. If the Company consummates a Corporate Transaction prior to the payment in full or conversion of the Notes pursuant to Section 2.2(a) above, then the outstanding principal and accrued but unpaid interest outstanding under the terms of the Note(s) held by each Non-Voting Holder shall, at the option of the Non-Voting Holder thereof, either be (i) due and payable in full by the Company at the Make-Whole Amount, or (ii) converted into Conversion Shares pursuant to this Section 2.2(c); in each case which shall occur immediately prior to the consummation of the Corporate Transaction and which may be conditioned upon such consummation. If the Notes are to be converted into Conversion Shares pursuant to Section 2.2(c)(ii), the number of Conversion Shares to be issued upon the conversion of the Note shall be determined by dividing (A) the outstanding principal and accrued but unpaid interest outstanding on each Note to be converted as of the date of conversion by (B) a conversion price of $1.25 per share (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like). At least ten (10) days prior to the closing of a Corporate Transaction, the Company shall notify the Non-Voting Holder of each Note in writing of the terms of the Corporate Transaction (the “Corporate Transaction Notice”), and the Non-Voting Holder shall inform the Company of its decision as set forth above within such 10-day period. The term “Non-Voting Holder” shall mean (i) Remeditex, only if the Corporate Transaction is approved by the Board of Directors without the approval of either director appointed by Remeditex pursuant to the Charter; and (ii) each Non-Remeditex Lender. Further, with respect to any Corporate Transaction that is approved by either director appointed by Remeditex pursuant to the Charter, the Note held by Remeditex shall, at the option of Remeditex, be due and payable in full by the Company or converted into Conversion Shares on the same terms as the Convertible Promissory Notes held by Remeditex as of the date hereof pursuant to the Existing NPAs (as defined in Section 7.2 below).

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(d)    No Fractional Shares. Upon the conversion of a Note into Conversion Shares, no fractional shares shall be issued upon conversion of any Note and the aggregate number of shares of stock to be issued shall, at the Company’s sole discretion, be (i) rounded up to the nearest whole share or (ii) in lieu of any fractional shares to which the holder of the Note would otherwise be entitled, the Company shall pay the holder thereof an amount in cash equal to such fraction multiplied by the Conversion Price in effect for such Conversion Shares.
(e)    Mechanics of Conversion. The Company shall not be required to issue or deliver the Conversion Shares until the holder of the Note has surrendered the Note to the Company at the address set forth on the signature page hereto (as may be updated pursuant to Section 8.5 below). Such conversion may be made contingent upon the closing of the Qualified Offering or any transaction described in Section 2.2(c). With respect to any conversion pursuant to Section 2.2, the Company shall, if necessary, promptly take all necessary steps to authorize the filing of all necessary amendments to its then current Certificate of Incorporation (the “Charter”) to authorize and reserve for issuance sufficient quantities of the Conversion Shares described in Section 1(e), as well as the shares of Common Stock issuable upon the conversion of any Equity Securities issued pursuant to Section 2.2(c).
3.     Purchase and Sale of the Notes.
3.1    Closing.
(a)    On or prior to the final Closing (as defined below), the Board of Directors of the Company shall have authorized the sale and issuance of up to an aggregate amount of $3,000,000 of Notes (the “Aggregate Investment Amount”).
(b)    Subject to the terms and conditions of this Agreement, the Lenders agree to purchase at the Closing(s) (as defined below) and the Company agrees to sell and issue to the Lenders at such Closing, each a Note in the principal amount as set forth opposite each Lender’s name on the signature page hereto.
4.     Closing Mechanics.
4.1    Initial Closing. The initial purchase and sale of Notes shall take place remotely via the exchange of documents and signatures, at 1:00 p.m., CDT, on April __, 2018, or at such other time and place as the Company and the initial Lenders purchasing Notes to be sold as reflected on the initial signature page hereto, agree upon orally or in writing (which time and place are designated as the “Initial Closing”). In the event there is more than one closing, the term “Closing” shall apply to each such closing unless otherwise specified. At each Closing, each Lender shall deliver the Consideration to the Company by wire transfer of immediately available funds and the Company shall deliver to each Lender one or more executed Notes in return for the respective Consideration provided to the Company.
4.2    Sale of Additional Notes. After the Initial Closing and at any time before the Qualified Offering, the Company may sell, pursuant to the terms of this Agreement, up to the balance of the Aggregate Investment Amount that was not sold at the Initial Closing (the “Additional Notes”), to the Lenders or other qualified investors (the “Additional Lenders” and each such closing, an “Additional Closing”) upon the execution by such Additional Lenders of a counterpart signature page hereto. Any notes issued and sold pursuant to this Section 4.2 shall be deemed to be “Notes” for all purposes under this Agreement and any Additional Lenders thereof shall be deemed to be “Lenders” for all purposes under this Agreement. The purchase and sale of the Additional Notes shall take place remotely via the exchange of documents and signatures, at a date, time and place as the Company and the Lenders purchasing Additional Notes to be sold agree upon, orally or in writing (which time and place are designated as the “Additional Closing”).

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4.3    Terms of Additional Closing. All sales of Notes made at any Additional Closing pursuant to Section 4.2 shall, in each case, be made on the terms and conditions set forth in this Agreement, provided, that, (a) except as may otherwise be agreed by the Company, the representations and warranties of the Company set forth in Section 5 hereof (and the Schedule of Exceptions) shall be made as of the Initial Closing (and not as of the date of any such Additional Closing), and the Company shall have no obligation to update such disclosures, and (b) the representations and warranties in Section 6 of the Additional Lenders purchasing Notes at each such Additional Closing shall be made as of the date of such Additional Closing.
5.     Representations and Warranties of the Company. In connection with the transactions provided for herein, and except as set forth on the schedule of exceptions (the “Schedule of Exceptions”), the Company hereby represents and warrants to the Lenders that:
5.1    Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its business or properties.
5.2    Authorization. Except for the authorization and issuance of the shares (a) issuable in connection with the Qualified Offering or (b) issuable in connection with the conversion of the Note pursuant to Section 2.2(a), if applicable, all corporate action has been taken on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement and the Notes. Except as may be limited by applicable bankruptcy, insolvency, reorganization, or similar laws relating to or affecting the enforcement of creditors’ rights, the Company has taken all corporate action required to make all of the obligations of the Company reflected in the provisions of this Agreement and the Notes, the valid and enforceable obligations they purport to be.
5.3    Compliance with Other Instruments. The Company is not in violation of or default under (a) any provisions of its Charter or its bylaws (“Bylaws”), (b) any instrument, judgment, order, writ or decree to which it is a party, (c) any note, indenture or mortgage to which it is a party, (d) any material lease, agreement or contract to which it is a party or by which it is bound (each such material lease, agreement, or contract being set forth in Section 5.3 of the Schedule of Exceptions), or (e) any federal or state statute, rule or regulation applicable to the Company, the violation of or default under which, in the case of clause (b), (c), (d) or (e), would constitute or result in a material default or violation of any law or regulation applicable to the Company or any material term or provision of the current Charter or Bylaws or any material agreement or instrument by which it is bound or to which its properties or assets are subject. The execution, delivery and performance of this Agreement and the Notes and the consummation of the transactions contemplated by this Agreement does not result in any such violation or conflict with or constitute, with or without the passage of time and giving of notice, either (i) a default under any such provision, instrument, judgment, order, writ, decree, contract or agreement or (ii) an event which results in the creation of any lien, charge or encumbrance upon any assets of the Company or the suspension, revocation, forfeiture, or nonrenewal of any material permit or license applicable to the Company.
5.4    Valid Issuance of Stock. The Conversion Shares, when issued and paid for as provided in this Agreement, shall be duly authorized and validly issued, fully paid, and nonassessable. The shares of Common Stock issuable upon conversion of the Conversion Shares will be duly reserved for issuance prior to conversion, and upon issuance in accordance with the terms of the Charter, will be validly issued, fully paid and nonassessable and free of restrictions on transfer other than, if applicable, restrictions on transfer under Section 2.12 of the Investor Rights Agreement, the Shareholders Agreement, applicable federal and state securities laws and liens or encumbrances created by or imposed by the Lender. Assuming the accuracy of the

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representations made by the Lenders in Section 6 of this Agreement and no changes in applicable law or regulations, and subject to the filings described in Section 5.8 below, the offer and sale of the Notes by the Company and the issuance of the Conversion Shares are exempt from the registration requirements of the Securities Act.
5.5    Capitalization.
(a)    The authorized capital of the Company consists, immediately prior to the Closing, of:
(i)    5,250,000 shares of Common Stock, 2,140,556 shares of which are issued and outstanding. The outstanding shares of Common Stock are duly and validly authorized and issued, fully paid and nonassessable, and were issued in accordance with the registration or qualification provisions of the Securities Act and any relevant state securities laws, or pursuant to valid exemptions therefrom. The outstanding shares of Common Stock are owned by the holders and in the numbers specified in Section 5.5(a) of the Schedule of Exceptions. The Company holds no shares of Common Stock in its treasury.
(ii)    2,534,766 shares of Preferred Stock, 416,666 shares of which are designated Series A Preferred Stock (the “Series A Preferred Stock”), all of which 416,666 shares are issued and outstanding, and 2,118,100 shares of which are designated Series B Preferred Stock, all of which 2,118,100 shares are issued and outstanding. The rights, privileges and preferences of the Series A Preferred Stock and the Series B Preferred Stock are as stated in the Charter. The outstanding shares of Preferred Stock are duly and validly authorized and issued, fully paid and nonassessable, and were issued in accordance with the registration or qualification provisions of the Securities Act and any relevant state securities laws, or pursuant to valid exemptions therefrom. Each outstanding share of Series A Preferred Stock and Series B Preferred Stock is convertible into shares of Common Stock on a one-for-one basis as of the date hereof. The consummation of the transactions contemplated hereunder will not result in any anti-dilution adjustment or other similar adjustment to the outstanding shares of Preferred Stock. The outstanding shares of Preferred Stock are owned by the holders and in the numbers specified in Section 5.5(a) of the Schedule of Exceptions. The Company holds no shares of Preferred Stock in its treasury.
(b)    Except for (i) the conversion privileges of the currently outstanding shares of Series A Preferred Stock and Series B Preferred Stock, and the Conversion Shares to be issued under this Agreement, (ii) with respect to Remeditex, the rights provided in Section 3.3 of the Amended and Restated Investor Rights Agreement, dated February 25, 2014, by and between the Company and Remeditex Ventures LLC (as amended on November 19, 2014, July 15, 2016, January 23, 2017, and June 19, 2017 the “Investor Rights Agreement”), (iii) with respect to Remeditex, the rights provided in Section 6.10 of the Shareholders Agreement, dated April 5, 2012, by and among the Company and the Company’s stockholders (as amended on February 25, 2014 and November 19, 2014, the “Shareholders Agreement”), (iv) the restricted stock awards pursuant to the Company’s 2012 Long Term Incentive Plan, as amended (the “Plan”), as set forth on Section 5.5(b) of the Schedule of Exceptions, and (v) as otherwise set forth in the Schedule of Exceptions, there are not outstanding any options, warrants, rights (including conversion or preemptive rights) or agreements for the purchase or acquisition from the Company of any shares of its capital stock. Except under the terms of the Shareholders Agreement and the Investor Rights Agreement, the Company is not a party or subject to any agreement or understanding, and to the Company’s knowledge, there is no agreement or understanding between any Persons, which affects or relates to the voting or giving of written consents with respect to any security of the Company or by a director of the Company. The Company has not made any representations, or made any agreement or commitment, regarding equity incentives to any officer, employee, director or consultant that are inconsistent with the share amounts and terms set forth on Section 5.5(b) of the Schedule of Exceptions. The reference in this paragraph to “directors” does not include any director of the Company designated by Remeditex.
(c)    Except as contemplated by this Agreement or as set forth in the Investor Rights Agreement and the Shareholders Agreement, no shares of the Company’s outstanding capital stock, or

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stock issuable upon exercise or exchange of any outstanding options, warrants, or rights, or other stock issuable by the Company, are subject to any preemptive rights, rights of first refusal, or other rights to purchase such stock (whether in favor of the Company or any other Person) pursuant to any agreement or commitment of the Company that has not been waived.
(d)    No Person other than the Lenders has any right, under any agreement or instrument or applicable law, to purchase any of the Notes covered by this Agreement.
(e)    Except for the Charter and the Shareholders Agreement, the Company is not a party or subject to any agreement or understanding, and, to the Company’s knowledge, there is no agreement or understanding between any Person, which affects or relates to the voting or giving of written consents with respect to any security, or by a director, of the Company. The reference in this paragraph to “directors” does not include any director of the Company designated by Remeditex.
(f)    Except as set forth in Section 5.5(f) of the Schedule of Exceptions, none of the Company’s stock purchase agreements, stock option documents, or other agreements or understandings between the Company and any holder of any equity securities of the Company contains a provision providing for acceleration of vesting (or lapse of a repurchase right) upon the occurrence of any events. All options to acquire shares of the Company’s Common Stock vest as set forth on Section 5.5(f) of the Schedule of Exceptions.
(g)    The total outstanding shares of capital stock of the Company on a fully diluted basis immediately following the Closing will be as set forth in Section 5.5(a) of the Schedule of Exceptions.
5.6    Litigation. There is no action, suit, proceeding or investigation pending or, to the Company’s knowledge, currently threatened against the Company that questions the validity of this Agreement or the Notes, or the right of the Company to enter into such agreements, or to consummate the transactions contemplated hereby or thereby, or that might result, either individually or in the aggregate, in any material adverse change in the assets, condition or affairs of the Company, financially or otherwise, or any change in the current equity ownership of the Company, nor to the Company’s knowledge is there any basis for the foregoing. The foregoing includes, without limitation, actions, suits, proceedings or investigations pending or threatened (or any basis therefor known to the Company) involving the prior employment of any of the Company’s employees, their use in connection with the Company’s business of any information or techniques allegedly proprietary to any of their former employers, or their obligations under any agreements with prior employers. The Company is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no action, suit, proceeding or investigation by the Company currently pending or that the Company intends to initiate.
5.7    Subsidiaries. The Company has no subsidiaries and does not own or control, directly or indirectly, any interest in any other Person. The Company is not a participant in any joint venture, partnership, or similar arrangement.
5.8    Governmental Consents and Filings. Assuming the accuracy of the representations made by each of the Lenders in Section 6 of this Agreement, no consent, approval, order, or authorization of or registration, qualification, designation, declaration, or filing with, any federal, state, or local governmental authority is required on the part of the Company in order to enable the Company to execute, deliver, and perform its obligations under this Agreement except for such qualifications or filings under applicable securities laws as may be required in connection with the transactions contemplated by this Agreement.

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5.9    Agreements; Actions.
(a)    Section 5.9(a) of the Schedule of Exceptions lists all agreements and instruments to which the Company is a party or by which it is bound that are material to the business and operations of the Company.
(b)    The Company has not (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock, (ii) incurred any material indebtedness, material obligations, or incurred any other material liabilities except as set forth in Section 5.9(b) of the Schedule of Exceptions, (iii) made any loans or advances to any Person, other than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its assets or rights, other than in the ordinary course of business.
5.10    Certain Transactions.  
(a)    Other than (i) standard employee benefits generally made available to all employees, (ii) standard director and officer indemnification agreements approved by the Board, (iii) the issuance of shares of Common Stock pursuant to the Plan, (iv) as set forth in Section 5.10(a) of the Schedule of Exceptions or the Shareholder Agreement or the Investor Rights Agreement, and (v) pursuant to this Agreement, there are no agreements, understandings or proposed transactions between the Company and any of its officers or directors or any Affiliate thereof. The reference in this paragraph to “directors” does not include any director of the Company designated by Remeditex.
(b)    Except as set forth in Section 5.10(b) of the Schedule of Exceptions, the Company is not indebted, directly or indirectly, to any of its directors, officers or employees or to their respective spouses or children or to any Affiliate of any of the foregoing, other than in connection with salary, expenses or advances of expenses incurred in the ordinary course of business. Except as set forth in Section 5.10(b) of the Schedule of Exceptions, none of the Company’s directors, officers or employees, or any members of their immediate families, or any Affiliate of the foregoing are, directly or indirectly, indebted to the Company or, to the Company’s knowledge, have any (i) material commercial, industrial, banking, consulting, legal, accounting, charitable or familial relationship with any of the Company’s customers, suppliers, service providers, joint venture partners, licensees and competitors, (ii) direct or indirect ownership interest in any firm or corporation with which the Company is Affiliated or with which the Company has a business relationship, or any firm or corporation which competes with the Company except that directors, officers or employees or stockholders of the Company may own stock in (but not exceeding two percent (2%) of the outstanding capital stock of) publicly traded companies that may compete with the Company or (iii) financial interest in any contract with the Company. The reference in this paragraph to “directors” does not include any director of the Company designated by Remeditex.
5.11    Rights of Registration. Except as provided in the Investor Rights Agreement, the Company is not under any obligation to register under the Securities Act any of its currently outstanding securities.
5.12    Employee Matters.
(a)    Set forth in Section 5.12(a) of the Schedule of Exceptions is a list of all of the Company’s employees and the direct compensation to be paid to them for service in 2017.
(b)    Except as set forth in Section 5.12(b) of the Schedule of Exceptions, the Company has not made any commitments regarding equity incentives to any officer, employee, director or consultant of the Company, except such shares of Common Stock as are reflected as being issued and outstanding in Section 5.2(a). The reference in this paragraph to “director” does not include any director of the Company designated by Remeditex.

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(c)    The Company has not adopted any employee benefit plan subject to the Employee Retirement Income Security Act of 1974, as amended.
5.13    Proprietary Information and Inventions Assignment Agreement. Except as provided in Section 5.13 of the Schedule of Exceptions, each current and former officer, employee, and consultant of the Company has entered into and executed the Company’s standard form of Proprietary Information and Inventions Assignment Agreement, or an employment or consulting agreement containing substantially similar terms that has been provided to the Lenders.
5.14    Tax Returns and Payments. The Company has filed all tax returns that are required to have been filed with appropriate federal, state, county, local, and foreign governmental agencies or instrumentalities. All such returns and reports were true and correct in all material respects at the time made. The Company has paid or established reserves (such reserves are adequate for taxes due or accrued as of the date of this Agreement) for all income, franchise, and other taxes, assessments, governmental charges, penalties, interest, and fines due and payable by it on or before the Initial Closing. The Company has not elected pursuant to the Internal Revenue Code of 1986, as amended (the “Code”), to be treated as a Subchapter S corporation or a collapsible corporation pursuant to Section 1362(a) or Section 341(f) of the Code, nor has it made any other elections pursuant to the Code (other than elections that relate solely to methods of accounting, depreciation, or amortization) that could reasonably be expected to have a material adverse effect on the Company. The Company has never had any tax deficiency proposed or assessed against it and has not executed any waiver of any statute of limitations on the assessment or collection of any tax or governmental charge. The Company has withheld or collected from each payment made to each of its employees the amount of all taxes, including, but not limited to, federal income taxes, Federal Insurance Contribution Act taxes, and Federal Unemployment Tax Act taxes required to be withheld or collected from each payment made to each of its employees and has paid the same to the proper tax receiving officers or authorized depositories. No federal or state income or sales tax return of the Company has been audited, no deficiency assessment or proposed adjustment of the Company’s United States income tax, state or municipal taxes or sales taxes is pending, and the Company has no knowledge of any proposed liability for any tax to be imposed on its property or assets.
5.15    Intellectual Property.
(a)    Status. The term “Proprietary Assets” means all patents, patent applications, trademarks, service marks, trademark and service mark applications, trade names, copyright registrations, and licenses currently owned and/or used by the Company or necessary for the conduct of the Company’s business as currently conducted or proposed to be conducted, as well as any agreement under which the Company has access to any intellectual property or confidential information used by the Company in its business. Section 5.15 of the Schedule of Exceptions sets forth all Proprietary Assets necessary, to the Company’s knowledge, to conduct the Company’s business as currently conducted or as presently proposed to be conducted. The Company owns, or has the right to use under the agreements or upon the terms described in Section 5.15(a) of the Schedule of Exceptions, all of the Proprietary Assets and has taken all actions reasonable in light of its financial position to protect the Proprietary Assets. Except as set forth in Section 5.15(a) of the Schedule of Exceptions, the Company does not require any license or other agreement to use any of the Proprietary Assets, except for licenses or agreements that can be obtained in the ordinary course of business without unreasonable effort, delay, cost, or expense. Except as set forth in Section 5.15(a) of the Schedule of Exceptions, the Company is not bound by or a party to any options, licenses, or agreements of any kind with respect to the Proprietary Assets of any other Person and, to the Company’s knowledge, except as set forth in Section 5.15(a) of the Schedule of Exceptions, there are no outstanding options, licenses, or agreements of any kind relating to the Proprietary Assets. With respect to each item of the Company’s Proprietary Assets that any third party owns and that the Company uses pursuant to license, sublicense, agreement or permission: (i) the license, as it relates to the Company is legal, valid, binding, enforceable, and in full force and effect in all material respects; (ii) the

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Company is not, and to the Company’s knowledge, no other party to the license, sublicense, agreement or permission is in material breach or default, and no event has occurred which with notice or lapse of time or both would constitute a material breach or default or permit termination, modification or acceleration thereunder; (iii) the Company has not, and to the Company’s knowledge, no other party to the license, sublicense, agreement or permission has repudiated any material provision thereof; and (iv) the Company has not granted any sublicense or similar right with respect to the license, sublicense, agreement or permission other than as expressly permitted by such license, sublicense, agreement or permission. Except as set forth in Section 5.15(a) of the Schedule of Exceptions, to the Company’s knowledge, no director, officer, or stockholder of the Company owns any rights in any Proprietary Assets directly or indirectly competitive with those owned or to be used by the Company or derived from or in connection with the conduct of the Company’s business. Except as set forth in Section 5.15(a) of the Schedule of Exceptions, to the Company’s knowledge it is not now necessary to use any inventions or works of authorship of its employees made outside of their employment by the Company. The Company has not granted rights to manufacture, produce, assemble, license, market, or sell its products to any other person and is not bound by any agreement that affects the Company’s exclusive rights to develop, manufacture, assemble, distribute, market, or sell its products. The reference in this paragraph to “director” does not include any director of the Company designated by Remeditex.
(b)    No Infringement. The Company has not violated or infringed, and is currently not violating or infringing, and to the Company’s knowledge, neither the Company nor any managerial employee or consultant of the Company has received any communications alleging that the Company (or any of its employees or consultants) has violated or infringed or, by conducting its business as presently proposed, would violate or infringe, any of the patents, trademarks, service marks, trade names, copyrights, mask works, licenses, trade secrets, processes, data, know-how, or other intellectual property rights (“Intellectual Property Rights”) of any other Person. To the Company’s knowledge, no third party has materially interfered with, infringed upon, misappropriated, diluted, constituted the unauthorized use, misuse or misappropriation or violated any of the Company’s currently owned or licensed Intellectual Property Rights.
5.16    Title to Property and Assets. Except for leased property and assets (which are addressed below), the Company has good and valid title to its properties and assets, free and clear of all mortgages, deeds of trust, liens, encumbrances, and security interests, except for statutory liens for the payment of current taxes that are not yet delinquent and encumbrances and liens that arise in the ordinary course of business and do no materially impair the Company’s ownership or use of such property or assets. With respect to the property and assets it leases, the Company is in material compliance with such leases and holds a valid leasehold interest free of any liens, claims or encumbrances other than those held by the lessors of such leased property or assets, except to the extent that noncompliance could not reasonably be expected to have a material adverse effect on the Company. The Company’s tangible property and assets are in good condition, except for ordinary wear and tear, and are suitable for their intended purposes. The Company does not have any ownership interest in any real property.
5.17    Insurance. The Company maintains insurance as set forth in Section 5.17 of the Schedule of Exceptions.
5.18    Permits. The Company possesses all material franchises, permits, licenses and any similar authority necessary for the conduct of the Company’s business, the lack of which could reasonably be expected to have a material adverse effect on the Company. The Company is not in default in any material respect under any of such franchises, permits, licenses or other similar authority.
5.19    Environmental and Safety Laws. The Company is not in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the

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environment or human exposure to hazardous or toxic substances (collectively, “Environmental Laws”), and does not own or operate any real property contaminated with any substance that is subject to any Environmental Laws, nor is it liable for any off-site disposal or contamination pursuant to any Environmental Laws or subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim has had or could reasonably be expected to have a material adverse effect on the Company, individually or in the aggregate.
5.20    Labor Agreements and Actions; Employees. The Company is not bound by or subject to (and none of its assets or properties is bound by or subject to) any written or oral, express or implied, contract, commitment, or arrangement with any labor union, and no labor union has requested or, to the Company’s knowledge, has sought to represent any of the employees, representatives, or agents of the Company. There is no strike or other labor dispute involving the Company pending or, to the Company’s knowledge, threatened, that could reasonably be expected to have a material adverse effect on the Company, nor, to the Company’s knowledge, is there any labor organization activity involving its employees. To the Company’s knowledge, no officer or key employee, or any group of key employees, intends to terminate his, her, or their employment with the Company, nor does the Company have a present intention to terminate the employment of any of the foregoing. The employment of each officer and employee of the Company is terminable at the will of the Company without severance or similar obligations. The Company has complied in all material respects with all applicable state and federal equal employment opportunity and other laws related to employment. Other than the Plan, the Company is not a party to or bound by any currently effective employment contract, deferred compensation agreement, bonus plan, incentive plan, profit sharing plan, retirement agreement, or other employee compensation agreement. There are no Actions pending, or to the Company’s knowledge, threatened, by any former or current employee concerning such person’s employment by the Company.
5.21    Disclosure. The Company has made available to the Lenders all the information reasonably available to the Company that the Lenders have requested in writing for deciding whether to acquire the Notes.
5.22    Brokers. The Company has no contract, arrangement, or understanding with any broker, finder, or similar agent with respect to the transactions contemplated by this Agreement.
5.23    Investment Company. Neither the Company nor any of its subsidiaries is an “investment company” or a company “controlled” by “an investment company” within the meaning of the Investment Company Act of 1940 and the rules and regulations under the Investment Company Act of 1940 and is not deemed to be an “investment company” for purposes of Section 12(d)(1) of the Investment Company Act of 1940.
5.24    Regulatory Matters. The Company holds, and is operating in compliance in all material respects with, such permits, licenses, franchises, approvals, exemptions, authorizations and clearances of the U.S. Food and Drug Administration (the “FDA”) required for the conduct of its business as currently conducted. The Company currently is in compliance in all material respects with applicable statutes and implementing regulations administered or enforced by the FDA. The Company has not received written notice of any pending or, to the Company’s knowledge any, threatened claim, suit, proceeding, hearing, enforcement, audit, investigation, arbitration or other action from the FDA or applicable foreign governmental authority alleging that any operation or activity of the Company is in violation of any applicable law.
6.    Representations and Warranties of the Lenders. In connection with the transactions provided for herein, each Lender hereby represents and warrants to the Company, severally and not jointly, that:
6.1    Authorization. This Agreement constitutes the Lender’s valid and legally binding obligation, enforceable in accordance with its terms, except as may be limited by (a) applicable bankruptcy, insolvency, reorganization, or similar laws relating to or affecting the enforcement of creditors’ rights and (b) laws relating

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to the availability of specific performance, injunctive relief or other equitable remedies. The Lender represents that it has full power and authority to enter into this Agreement. Additionally, the Lender is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite power and authority to carry on its business as now conducted.
6.2    Purchase Entirely for Own Account. The Lender acknowledges that this Agreement is made with Lender in reliance upon its representation to the Company that the Note, the Conversion Shares, and any Equity Securities issuable upon conversion of the Conversion Shares (collectively, the “Securities”) will be acquired for investment for Lender’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Lender has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, the Lender further represents that the Lender does not have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third Person, with respect to the Securities.
6.3    Disclosure of Information. The Lender acknowledges that it has received all the information it considers necessary or appropriate for deciding whether to acquire the Securities. The Lender further represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Securities and the Company’s business, properties, prospects and financial condition and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable expense) necessary to verify the accuracy of any information furnished or made available to the Lender.
6.4    Investment Experience. The Lender is an investor in securities of companies in the development stage and acknowledges that it is able to fend for itself, can bear the economic risk of its investment and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Securities. The Lender also represents it has not been organized solely for the purpose of acquiring the Securities.
6.5    Accredited Investor. The Lender is an “accredited investor” within the meaning of Rule 501 of Regulation D of the Securities and Exchange Commission (the “SEC”), as in effect on the date hereof.
6.6    No Disqualification Events. Neither (a) the Lender, (b) any of its directors, executive officers, other officers that may serve as a director or officer of any company in which it invests, general partners or managing members, nor (c) any beneficial owner of the Company’s voting equity securities (in accordance with Rule 506(d) of the Securities Act) held by the Lender, as applicable, is subject to any of the “bad actor” disqualifications described in Securities Act Rule 506(d)(1)(i) to (viii) (each, a “Disqualification Event”), except for Disqualification Events covered by Rule 506(d)(2)(ii) or (iii) or (d)(3) under the Securities Act and disclosed reasonably in advance of the purchase of this Note in writing in reasonable detail to the Company. In furtherance of the foregoing, the Lender represents and warrants that: (1) the Lender has not been subject to a criminal conviction within ten years of the issuance of this Note or to a court injunction or restraining order within five years of the issuance of this Note in connection with the purchase or sale of a security, in connection with making a false filing with the SEC, or arising out of the conduct of any financial intermediaries; (2) the Lender has not been subject to a final order from state securities, insurance, banking, savings association or credit union regulators or federal banking agencies, the Commodity Futures Trading Commission or the National Credit Union Administration (A) that would bar the Lender from associating with a regulated entity; engaging in the business of securities, insurance or banking; or engaging in savings association or credit union activities, or (B) that were based on fraudulent, manipulative or deceptive conduct and were issued within ten years of the issuance of this Note; (3) the Lender is not subject to any SEC disciplinary orders relating to brokers, dealers, municipal securities dealers, investment companies, investment advisers or their associated persons; (4) the Lender is not subject to any SEC cease-and-desist order arising out of any scienter-based anti-fraud violation

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or violation of Section 5 of the Securities Act; (5) the Lender has not been suspended or expelled from membership in a self-regulatory organization; and (6) the Lender has not been subject to any SEC stop orders or orders suspending a Regulation A exemption issued within five years of the issuance of this Note.
6.7    Restricted Securities. The Lender understands that the Securities are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Act only in certain limited circumstances. The Lender represents that it is familiar with SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Act.
6.8    Acknowledgement of Bridge Offering. Each Lender acknowledges that this is a “bridge” offering to the Qualified Offering. The Company requires significant financing to fund its proposed business plan, and if the Qualified Offering is not completed for any reason, the Company will be unable to execute upon its proposed business plan and may be required to cease operations. As such, if the Qualified Offering does not occur, you will likely lose your entire investment. The completion of the Qualified Offering involves significant time and expense, and is dependent not only on the market for the Company’s securities, but also on the overall market for new offerings of securities. The Company can provide no assurance that the Qualified Offering will be completed on a timely basis, if at all. In addition, each Lender acknowledges that if the Qualified Offering is not completed prior to August 2018, the Company will likely be required to raise additional financing on terms that may be superior to the terms in this offering.
6.9    Legends. It is understood that the Securities may bear the following legend:
“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.”
7.    Covenants.
7.1    Use of Proceeds. The Company hereby agrees that the Consideration shall be used exclusively for working capital purposes or for other purposes so approved by the Company’s Board of Directors.
7.2     Pari Passu Notes; Waivers.
(a)    Remeditex acknowledges and agrees that the payment of all or any portion of the outstanding principal amount of and all interest on the Notes issuable hereunder shall be pari passu in right of payment and in all other respects to the other Notes issued pursuant to this Agreement and the Existing NPAs. In the event Remeditex receives payments in excess of its pro rata share of Company’s payments to the holders of all of the Notes, then Remeditex shall hold in trust all such excess payments for the benefit of the holders of the other Notes and shall pay such amounts held in trust to such other holders upon demand by such holders. The term “Existing NPAs” means the Note Purchase Agreements between Remeditex and the Company, dated as of January 23, 2017, as amended on June 19, 2017, and the Note Purchase Agreement between Remeditex and the Company dated November 7, 2017.
(b)    Each of _________________ (collectively, the “Prior Note Holders”) acknowledges and agrees that the payment of all or any portion of the outstanding principal amount of and all interest on the Notes issuable hereunder shall be pari passu in right of payment and in all other respects to the

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notes issued to such parties on or about April 2, 2018 (the “Prior Notes”). In the event any Prior Note Holder receives payments in excess of its pro rata share of Company’s payments to the holders of all of the Notes, then the applicable Prior Note Holder shall hold in trust all such excess payments for the benefit of the holders of the other Notes and shall pay such amounts held in trust to such other holders upon demand by such holders. Each of the Prior Note Holders hereby agrees that the issuances of the Notes or Conversion Shares pursuant to this Agreement shall not be deemed to be an “Equity Violation” as defined in the Prior Notes.
7.3    Waiver of Price Protection. Remeditex, as the sole holder of the Company’s Series A Preferred Stock and Series B Preferred Stock, hereby agrees pursuant to subsection 4.4.2 of the Charter that neither the issuance of the Notes nor the issuance of the Conversion Shares thereunder shall require an adjustment to the Preferred Stock “Conversion Prices” (as defined in the Charter).
7.4    Qualified Offering Pursuit. The Company agrees to use its best efforts to commence an offering of Common Stock pursuant to Regulation A of the Securities Act within three months from the Closing, and to use its best efforts to complete such offering as soon as practicable. The Company will use its best efforts to file the Form 1-A for the Regulation A offering within 60 days after the Closing, and to use its best efforts to respond to all SEC comments within 15 days of the receipt of such comments.
7.5    Approval Pursuant to Shareholders Agreement. To the extent required by Section 6.5 of the Shareholders Agreement, Remeditex hereby approves the actions to be taken by the Company pursuant to this Agreement.
8.     Miscellaneous.
8.1    Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Neither this Agreement nor any rights hereunder are transferable without the prior written consent of the Company, which the Company may grant or withhold in its sole discretion. Notwithstanding the foregoing, the Lenders shall, upon advance written notice to the Company, be permitted to assign this Agreement to any Affiliate of such Lender who (a) executes and delivers an acknowledgement that such Affiliate agrees to be subject to, and bound by, all the terms and conditions of this Agreement, (b) makes the representations and warranties to the Company that are set forth in Section 6 and (c) if requested by the Company, delivers to the Company an opinion of legal counsel, reasonably satisfactory to the Company, that such transfer complies with state and federal securities laws. Notwithstanding any provision herein to the contrary, the Lenders shall not make any disposition of any of the Equity Securities to a competitor of the Company, as determined in good faith by the Company. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
8.2    Governing Law. This Agreement and the Note shall be governed by and construed under the laws of the State of Delaware as applied to agreements among Delaware residents, made and to be performed entirely within the State of Delaware without regard to conflict of laws rules.
8.3    Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. For purposes of this Agreement, a photostatic, facsimile, electronic or similar reproduction and transmission by a party hereto of the signature of that party will have the same effect as that party signing and delivering that signature page in person.
8.4    Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

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8.5    Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, if not so confirmed, then on the next business day, (c) three (3) days after having been sent by registered or certified mail, return receipt requested, postage prepaid or (d) two (2) days after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the respective parties at respective addresses shown on the signature pages hereto (or at such other addresses as shall be specified by notice given in accordance with this Section 8.5):
8.6    Finder’s Fee. Each party represents that it neither is nor will be obligated for any finder’s fee or commission in connection with this transaction. The Lenders, severally and not jointly, agree to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder’s fee (and the costs and expenses of defending against such liability or asserted liability) for which such Lender or any of its officers, partners, employees or representatives is responsible. The Company agrees to indemnify and hold harmless the Lenders from any liability for any commission or compensation in the nature of a finder’s fee (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.
8.7    Expenses. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. Irrespective of whether the Closing is effected, each party shall pay all costs and expenses that it incurs with respect to the negotiation, execution, delivery and performance of this Agreement and the Notes.
8.8    Entire Agreement; Amendments and Waivers. This Agreement, the Notes, and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof. This Agreement and the obligations of the Company and the rights of the Lenders under this Agreement may be amended, waived, discharged or terminated (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely) only with the written consent of the Company and the Lenders. Any waiver or amendment effected in accordance with this Section shall be binding upon each party to this Agreement and the holder of the Notes purchased under this Agreement at the time outstanding and each future holder of the Notes.
8.9    Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.
8.10    Stock Purchase Agreement. The Lenders understand and agree that the conversion of the Notes into Conversion Shares may require such Lender’s, and the Lender agrees to effect such execution of certain agreements relating to the purchase and sale of such Securities, as well as registration, co-sale, rights of first refusal, rights of first offer and voting rights, if any, relating to such Securities.
8.11    Further Assurance. From time to time, the Company shall execute and deliver to the Lenders such additional documents and shall provide such additional information to the Lenders as the Lenders may reasonably require to carry out the terms of this Agreement, the Notes, and any agreements executed in connection herewith or therewith, or to be informed of the financial and business conditions and prospects of the Company.

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***Remainder of this Page Intentionally Left Blank***

***Signature Pages to Follow***





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IN WITNESS WHEREOF, the Company has executed this Agreement as of the date set forth below.
COMPANY:
 
 
 
 
SOLITON, INC.
 
 
 
 
 
 
 
 
By:
 
 
 
 
 
Date:
 
 
 
 
 
Address:
5304 Ashbrook Drive
Houston, TX 77081




IN WITNESS WHEREOF, Remeditex has executed this Agreement as of the date set forth below.
REMEDITEX:
 
 
 
 
REMEDITEX VENTURES LLC
 
 
 
 
 
 
 
 
By:
 
 
 
 
 
 
Date:
 
 
 
 
 
 
Principal Amount of Note:
 
 
 
 
 
Address:
5304 Ashbrook Drive
Houston, TX 77081





IN WITNESS WHEREOF, each Non-Remeditex Lender has executed this Agreement as of the date set forth below.
By:
 
 
 
 
 
Print Name:
 
 
 
 
 
Title:
 
 
 
 
 
Date:
 
 
 
 
 
Principal Amount of Note:
 
 
 
 
 
Address:
The prior note holders solely with respect to Section 7.2(b):
By:
 



Exhibit 6.9

THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (ii) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS.
Soliton, Inc.
10% UNSECURED PROMISSORY NOTE
$[____________]
[____________], 2018
FOR VALUE RECEIVED, Soliton, Inc, a Delaware corporation (the “Company”), promises to pay to the order of [____________] (the “Payee” or the “Holder”) or registered assigns, on the earlier of: (i) the one-year anniversary of the date hereof, or (ii) a completion by the Company of a Qualified Offering (as defined below), unless accelerated due to the occurrence of an Event of Default (the earlier of such dates is referred to as the “Maturity Date”), the principal amount of [____________] Dollars ($[____________]) (the “Principal Amount”) and interest on the Principal Amount (as set forth in Section 2), in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. Interest on this Note shall accrue on the Principal Amount outstanding from time to time at a rate per annum computed in accordance with Section 2 hereof.
1.Qualified Offering. A “Qualified Offering” means the completion of the initial public offering of the Company’s securities pursuant to which the Company’s securities become registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended.
2.Base Interest Rate; Payment of Interest. The outstanding Principal Amount shall bear interest at the rate of 10.0% per annum. Interest shall be based on a 365 day year. Accrued interest will be due and payable on the Maturity Date.
3.Covenants of Company
A.Affirmative Covenants. The Company covenants and agrees that, so long as this Note shall be outstanding, it will perform the obligations set forth in this Section 3.A.:
(i)Maintenance of Existence. The Company will do or cause to be done all things reasonably necessary to preserve and keep in full force and effect its corporate existence, rights and franchises and comply with all laws applicable to the Company, except where the failure to comply would not have a material adverse effect on the Company.

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4.Events of Default
A.The term “Event of Default” shall mean any of the events set forth in this Section 4.A.:
(i)Non-Payment of Obligations. The Company shall default in the payment of the Principal Amount or accrued interest of this Note as and when the same shall become due and payable, whether by acceleration or otherwise.
(ii)Non-Performance of Affirmative Covenants. The Company shall materially default in the due observance or performance of any covenant set forth in Section 3.A.
(iii)Bankruptcy, Insolvency, etc. The Company shall:
(a)apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for the Company, or make a general assignment for the benefit of creditors; or
(b)permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of the Company, and, if such case or proceeding is not commenced by the Company or converted to a voluntary case, such case or proceeding shall be consented to or acquiesced in by the Company or shall result in the entry of an order for relief.
B.Action if Bankruptcy. If any Event of Default described in clause (iii) of Section 4.A. shall occur, the outstanding Principal Amount of this Note and all other obligations hereunder shall automatically be and become immediately due and payable, without notice or demand.
C.Action if Other Event of Default. Upon the occurrence of an Event of Default that goes uncured for more than 10 days after written notice thereof by Holder to the Company (other than any Event of Default described in clause (iii) of Section 4.A.) the entire outstanding principal of the Note together with the interest accrued thereon shall be immediately due and payable. The Company hereby waives any and all notices including notice of breach, notice of default, notice of intent to accelerate, notice of acceleration or any other demand or presentment that may be required.
5.Miscellaneous.
A.Parties in Interest. All covenants, agreements and undertakings in this Note binding upon the Company or the Payee shall bind and inure to the benefit of the successors and permitted assigns of the Company and the Payee, respectively, whether so expressed or not.
B.Governing Law. This Note shall be governed by the laws of the State of Texas as applied to contracts entered into and to be performed entirely within the State of Texas. Any action arising out of this Note shall be brought exclusively in a court of competent jurisdiction in Harris County, Texas, and the Company and the Holder (by accepting this Note) hereby irrevocably waive any objections they may have to venue in Harris County, Texas.
C.Arbitration. Any dispute, claim or controversy arising out of or relating to this Note or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope or applicability of this agreement to arbitrate, shall be determined by arbitration in Houston, Texas

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before a single arbitrator. The arbitration shall be administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures (“Rules”) and in accordance with the Expedited Procedures in those Rules, including Rules 16.1 and 16.2 of those Rules. Judgment on the Award (as defined in the Rules) may be entered in any court having jurisdiction. The Company and Holder shall each select one independent arbitrator expert in the subject matter of the dispute (the arbitrators so selected shall be referred to herein as “Company’s Arbitrator” and “Holder’s Arbitrator,” respectively). In the event that either such party fails to select an independent arbitrator as set forth herein within 20 days from delivery of a notice of arbitration, then the matter shall be resolved by the arbitrator selected by the other party. Company’s Arbitrator and Holder’s Arbitrator shall select a third independent arbitrator expert in the subject matter of the dispute, and the three arbitrators so selected shall resolve the matter according to the procedures set forth in this section. If Company’s Arbitrator and Holder’s Arbitrator are unable to agree on a third arbitrator within 20 days after their selection, Company’s Arbitrator and Holder’s Arbitrator shall each prepare a list of three independent arbitrators. Company’s Arbitrator and Holder’s Arbitrator shall each have the opportunity to designate as objectionable and eliminate one arbitrator from the other arbitrator’s list within seven days after submission thereof, and the third arbitrator shall then be selected by lot from the arbitrators remaining on the lists submitted by Company’s Arbitrator and Holder’s Arbitrator. The parties shall maintain the confidential nature of the arbitration proceeding and the Award, including the hearing, except as may be necessary to prepare for or conduct the arbitration hearing on the merits, or except as may be necessary in connection with a court application for a preliminary remedy, a judicial challenge to an Award or its enforcement, or unless otherwise required by law or judicial decision. The parties acknowledge that this Note evidences a transaction involving interstate commerce. Notwithstanding the provision in the preceding section with respect to applicable substantive law, any arbitration conducted pursuant to the terms of this Note shall be governed by the Federal Arbitration Act.
D.Notice. All notices shall be in writing, and shall be deemed given when actually delivered to a party at its address set forth herein personally, by a reputable overnight messenger.
E.No Waiver. No delay in exercising any right hereunder shall be deemed a waiver thereof, and no waiver shall be deemed to have any application to any future default or exercise of rights hereunder.
IN WITNESS WHEREOF, this Note has been executed and delivered on the date specified above by the duly authorized representative of the Company.
Soliton, Inc
 
 
By:
 
 
Lori Bisson, Chief Financial Officer

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Exhibit 6.10

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE 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.

COMMON STOCK PURCHASE WARRANT

SOLITON, INC.
Warrant Shares: [_______]
Initial Exercise Date: [_______], 2018
 
 
Warrant Number: [_______]
 
    
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, [_______] or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date set forth above (the “Initial Exercise Date”) and on or prior to the close of business on the five-year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Soliton, Inc., a Delaware corporation (the “Company”), up to [_______] shares (as subject to adjustment hereunder, the “Warrant Shares”) of Common Stock. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
Section 1.             Definitions. In addition to the terms defined elsewhere in this Warrant, the following terms have the meanings indicated in this Section 1:
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“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.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock Equivalents” means any securities of the Company 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.

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“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“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.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Trading Day” means a day on which the Common Stock is traded on a Trading Market.
“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, or the New York Stock Exchange (or any successors to any of the foregoing.
“Transfer Agent” means Computershare, the current transfer agent of the Company, and any successor transfer agent of the Company.
Section 2.             Exercise.
a)Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy (or e-mail attachment) of the Notice of Exercise in the form annexed hereto, along with payment of the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank, unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
b)Exercise Price. The exercise price per share of the Common Stock under this Warrant shall be $1.75, subject to adjustment hereunder (the “Exercise Price”).

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c)Cashless Exercise. Commencing six months after the Initial Exercise Date, if at the time of exercise hereof there is no effective registration statement registering, or the prospectus contained therein is not available for the issuance of the Warrant Shares to the Holder, then, upon exercise of this Warrant by the Holder, this Warrant may only be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Exercise Notice is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. as of the time of the Holder’s execution of the applicable Exercise Notice if such Exercise Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Exercise Notice if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day;

(B) = the Exercise Price of this Warrant, as adjusted hereunder; and

(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

Notwithstanding anything herein to the contrary, the Company shall not be required to make any cash payments or net cash settlement to the Holder in lieu of delivery of the Warrant Shares.
“Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the

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Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
d)Mechanics of Exercise.
i.    Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by physical delivery of a certificate or by book-entry confirmation at the Transfer Agent, registered in the Company’s share register in the name of the Holder, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise within three (3) Trading Days after the delivery to the Company of the Notice of Exercise and payment of the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank, unless the cashless exercise procedure specified in Section 2(b) above is specified in the applicable Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise and payment of the Exercise Price (other than in the case of a cashless exercise), the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares.
ii.    No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.
iii.    Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing

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of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
iv.    Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
e)Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties.  Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company shall within two 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 Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of

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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 exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(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 exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
Section 3.             Certain Adjustments.
a)Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(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)Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, 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, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-

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off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group 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 exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume all of the obligations of the Company under this Warrant in accordance with the provisions of this Section 3(b). 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 Warrant 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 Warrant with the same effect as if such Successor Entity had been named as the Company herein.
c)Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
Section 4.             Transfer of Warrant.
a)Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

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b)New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
c)Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
d)Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, provide to the Company an opinion of counsel selected by the Holder or transferee 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.
e)Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.
Section 5.             Miscellaneous.
a)No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i).
b)Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
c)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.

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d)Authorized Shares. The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
e)Jurisdiction. This Warrant shall be governed by and construed and enforced in accordance with the laws of the State of Texas, without giving effect to conflict of laws principles thereof. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Warrant shall be brought and enforced in Harris County, Texas, or in the federal courts located in Harris County, Texas, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.
f)Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.
g)Nonwaiver. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies.
h)Notices. Any notices, consents, waivers or other document or communications required or permitted to be given or delivered under the terms of this Warrant must be in writing and will be deemed to have been delivered: (i) upon receipt, if delivered personally; and (ii) if sent by overnight courier service, one (1) Trading Day after deposit with an overnight courier service with next day delivery specified, in each case, properly addressed to the party to receive the same. If notice is given by email, a copy of such notice shall be dispatched no later than the next business day by first class mail, postage prepaid. The address for such communications shall be:
If to the Company:
Soliton, Inc.
5304 Ashbrook Dr.
Houston, TX 77081
Attention: Lori Bisson, Chief Financial Officer

If to a Holder, to its address or e-mail address set forth herein or on the books and records of the Company.

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Or, in each of the above instances, to such other address or e-mail address and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party at least five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, or (B) provided by an overnight courier service, shall be rebuttable evidence of personal service in accordance with clause (i) or (iii) above, respectively. A copy of the e-mail transmission containing the time, date and recipient e­mail address shall be rebuttable evidence of receipt by e-mail in accordance with clause (ii) above.
i)Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
j)Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
k)Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
l)Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
m)Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
********************

(Signature Page Follows)

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

SOLITON, INC.
 
 
By:
 
 
Name: Lori Bisson
Title: Chief Financial Officer

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NOTICE OF EXERCISE
TO:    SOLITON, INC.
(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[  ] in lawful money of the United States; or
[  ] if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
_______________________________
The Warrant Shares shall be delivered as follows:
[  ] Physical certificate:
_______________________________
[  ] Book-entry:
_______________________________
[SIGNATURE OF HOLDER]
 
 
 
 
Name of Investing Entity:
 
Signature of Authorized Signatory of Investing Entity:
 
Name of Authorized Signatory:
 
Title of Authorized Signatory:
 
Date:
 




EXHIBIT B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
Name:
 
 
 
 
(Please Print)
Address:
 
 
 
 
(Please Print)
 
 
 
Phone Number:
 
 
 
 
 
Email Address
 
 
 
 
 
Dated: _______________ __, ______
 
 
 
 
Holder’s Signature:
 
 
 
 
 
Holder’s Address:
 
 


Exhibit 8.1

OFFERING DEPOSIT ACCOUNT AGENCY AGREEMENT
This Offering Deposit Account Agency Agreement (this “Agreement”) is entered into as of ____________, 2018, by and between Soliton, Inc., a Delaware corporation with its principal office located at 5304 Ashbrook Drive, Houston, TX 77081(“Issuer”), FinTech Global Markets, Inc., a Delaware corporation with its principal office located at 6 Venture, Suite 265, Irvine, CA 92618 (“Intermediary”) and FinTech Clearing, LLC, a Delaware limited liability company and FINRA registered Broker/Dealer, with its principal office located at 6 Venture, Suite 265, Irvine, CA 92618 (“Deposit Account Agent”). Issuer, Intermediary and Deposit Account Agent shall collectively be referred to as “Parties”.
RECITALS
This Agreement is entered into in reference to the following facts:
(a)The Issuer is offering securities of the Issuer, as identified on Schedule A (the “Securities”) in a public offering described in an offering statement (the “Offering”) to investors (the “Subscribers”) pursuant to Regulation A, promulgated under Securities Act of 1933, as amended (the “33 Act”), and represents that such offering is compliant with all applicable securities laws, including, without limitation, the 33 Act, and any other governing acts, rules, regulations or amendments promulgated by the Securities and Exchange Commission (“SEC”).
(b)The Intermediary provides Issuers and Subscribers with an online intermediary platform (the “Platform”) where the Securities are offered for sale by the Issuer.
(c)The Issuer desires that the Deposit Account Agent act as agent for transmission or maintenance of payments received from the Subscribers (“Proceeds”) by the Intermediary until the Offering period has ended and the Offering has Closed (as defined below) or otherwise terminated.
(d)The Deposit Account Agent is willing to act in such capacity, subject to the terms hereof.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the Parties hereto hereby agree as follows.
ARTICLE 1 - PROCEEDS
1.1    Appointment; Account.
(a)The Issuer and the Intermediary hereby appoint the Deposit Account Agent to act as deposit holder for the Proceeds under the terms of this Agreement. The Deposit Account Agent hereby accepts such appointment, subject to the terms, conditions, and limitations hereof.
(b)Immediately following the Deposit Account Agent’s execution of this Agreement and prior to the date of the commencement of the Offering, the Parties shall establish an account record designated by the Deposit Account Agent (the “Offering Deposit Account”) for

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the purpose of receiving and holding Subscriber Proceeds. All Subscribers will be instructed to wire funds or make checks payable directly to Deposit Account Agent in accordance with the instructions in Schedule B. All Parties agree to maintain the Offering Deposit Account and act with respect to the Offering Deposit Account and Proceeds in a manner that is compliant with SEC Rules SEC Rules 10b-9, 15c3-3, and 15c2-4 promulgated under the Securities Exchange Act of 1934, as amended (including SEC and FINRA interpretations of such Rules), and all other applicable laws, rules, and regulations.
1.2    Deposits Held.
(a)The Intermediary and the Issuer shall direct each Subscriber purchasing securities interests to deliver the Proceeds to the Deposit Account Agent as their subscriptions for the Offering are accepted. The Deposit Account Agent shall deposit and hold all Proceeds in the Offering Deposit Account at all times until such funds are disbursed therefrom in accordance with the terms hereof. As and when such Proceeds are delivered to the Deposit Account Agent, the Intermediary will also deliver to the Deposit Account Agent a completed Report from Intermediary in the form attached hereto as Schedule B, and copies of executed Subscriber subscription agreements for each Subscriber whose funds are included in such Proceeds. Promptly after its receipt thereof, the Deposit Account Agent shall notify the Intermediary that the Deposit Account Agent has received the Proceeds. Upon request from time to time, the Deposit Account Agent shall notify the Intermediary of the amount of the Proceeds then held in the Offering Deposit Account.
(b)Proceeds in the form of ACH or wire transfer are deemed deposited into the Offering Deposit Account when delivered to the Deposit Account Agent. Any Proceeds deposited in the form of a check, draft or similar instrument are deemed deposited when the collectability thereof has been confirmed (hereinafter “Cleared Funds”). All such checks and similar instruments shall be made payable to “FinTech Clearing as Agent for the Investors in Soliton, Inc.” Any checks or other instruments that are not made so payable shall be returned by the Deposit Account Agent to the party submitting the check or other similar instrument. Any check returned unpaid to the Deposit Account Agent shall be returned to the party that submitted the check and the Deposit Account Agent shall promptly notify the Intermediary of such return.
(c)The Proceeds shall be disbursed by the Deposit Account Agent from the Offering Deposit Account by wire transfer of funds or by check payable to the appropriate distributee at the address set forth herein, except for disbursements of Proceeds payable to itself under the terms hereof.
1.3    Investment. The Offering Deposit Account shall be a demand deposit account, and no interest shall accrue on the Proceeds deposited therein. The Deposit Account Agent shall not be obligated to earn any earnings or interest on the Proceeds.

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ARTICLE 2 – DISBURSEMENT PROCEDURES
2.1    Disbursement of Proceeds. The Deposit Account Agent shall hold and disburse the Proceeds in accordance with the following procedures:
(a)Initial and Subsequent Closings when Minimum Met. If, prior to the Termination Date, the Deposit Account Agent has received Cleared Funds equal to or greater than the Minimum Amount and receives a joint written instruction from the Issuer and the Intermediary confirming a closing of the transaction contemplated in the Offering (a “Closing”), the Deposit Account Agent shall, pursuant to such written instruction, pay such Cleared Funds to the Issuer promptly (noon the following business day) upon receipt of such written instruction (“First Closing”). Thereafter, with respect to any additional Cleared Funds received after the First Closing or subsequent Closing and held by the Deposit Account Agent prior to the Termination Date, the Deposit Account Agent shall, upon receipt of written instruction confirming a Closing and identifying the Subscribers (and corresponding Proceeds) participating in such Closing, pay such Cleared Funds specified in the joint written instruction to the Issuer at one or more subsequent Closings promptly (noon the following business day) upon receipt of such written instruction. If the Deposit Account Agent does not receive a written instruction regarding the disbursement of any Cleared Funds remaining in the Deposit Account fifteen (15) business days after the Termination Date, then the Deposit Account Agent will initiate a return payment to return any Cleared Funds after the most recent Closing to each Subscriber according to the amount received and cleared from the Subscriber after the most recent Closing without deduction, penalty, or expense to Subscriber.
(b)No Closing Even though Minimum Met. If no Closing has taken place within fifteen (15) business days of the Termination Date (where the Deposit Account Agent has received Cleared Funds at least equaling the Minimum Amount prior to the Termination Date), the Deposit Account Agent shall return all Cleared Funds to Subscribers according to the amounts and return payment instructions contained in the Offering Report (defined under Schedule B) promptly (noon the following business day) upon expiration of such fifteen (15) business day time period, or if the Issuer and the Intermediary notify the Deposit Account Agent pursuant to a written instruction at any earlier time that no Closing will take place, the Deposit Account Agent shall return all Cleared Funds to Subscribers according to the amounts and return payment instructions contained in the Offering Report promptly (noon the following business day) upon such written notification without deduction, penalty, or expense to Subscriber.
(c)Terminated Listing. If, at any time, the Deposit Account Agent receives a written instruction stating that the Offering has been terminated and the Parties will not proceed with a Closing, the Deposit Account Agent shall return all Cleared Funds to Subscribers according to the amounts and return payment instructions contained in the Offering Report promptly (noon the following business day) upon such written notification without deduction, penalty, or expense to Subscriber.  
(d)Minimum Not Met. If, prior to the Termination Date, the Deposit Account Agent has not received Cleared Funds at least equaling the Minimum Amount, the Deposit Account Agent shall return all Proceeds to Subscribers according to the amounts and return payment

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instructions contained in the Offering Report promptly (noon the following business day) upon Termination Date, without deduction, penalty, or expense to Subscriber.
(e)Rejection of Subscriber. If, at any time, Deposit Account Agent receives a written notice from Intermediary that either (i) the Issuer has determined not to accept any Subscriber’s subscription for Securities or (ii) the Intermediary has determined that such Subscriber has not satisfied Intermediary’s legal, regulator or other compliance reviews for the Offering, the Deposit Account Agent shall return all Cleared Funds of such Subscriber to such Subscriber according to the amount and return payment instructions contained in the Offering Report promptly (noon the following business day) upon such written notice from Intermediary.
(f)Return of Proceeds to Subscribers. Any return payment to Subscribers initiated by the Deposit Account Agent in accordance with this Section 2.1 shall be payable to the Subscriber using the applicable instructions provided to the Deposit Account Agent in the Offering report in connection with the Subscriber’s deposit without deduction, penalty or expense to the Subscriber. If any return payment is returned to the Deposit Account Agent as undeliverable, Deposit Account Agent will immediately notify Intermediary and obtain updated return payment instructions from Intermediary, or (at the election of Intermediary) return such Subscriber’s Cleared Funds by check payable to the Subscriber and mailed to an address designated in the Offering report.
(g)Return of Funds Undeliverable. If any amount of Proceeds is returned to Deposit Account Agent as undeliverable following the operation of clauses (a)-(e) of this Section 2.1, Deposit Account Agent, in addition to its other rights herein, may maintain and manage such Proceeds for such period of time as it determines may be necessary or appropriate, including in accordance with applicable state escheatment and unclaimed property laws, as determined by Deposit Account Agent in its reasonable discretion and may take any other action permitted by this Agreement.
(h)Fees and Costs. Issuer agrees to pay all fees and costs associated with the Agreement, including monthly and transactional fees (which shall include incoming and outgoing return payment fees) as set forth on Schedule C. All disbursements of Proceeds in Section 2.1(a) after the applicable sale date (to the Issuer) other than disbursements of Proceeds received from Subscribers who are clients of ____________ shall be subject to the fees, costs, expenses and other amounts due to Deposit Account Agent owed by the Issuer and any other indemnified party (as defined below) hereunder.
ARTICLE 3 - GENERAL TRANSMISSION AND MAINTENANCE OF PAYMENTS PROCEDURES
3.1    Accounts and Records. The Deposit Account Agent shall keep accurate books and records of all transactions hereunder. The Intermediary and Deposit Account Agent shall each have reasonable access to one another's books and records concerning the Offering and the Proceeds. Upon final disbursement of the Proceeds, the Deposit Account Agent shall deliver to the Intermediary and the Issuer a complete accounting of all transactions relating to the Proceeds.     

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3.2    Duties. The Deposit Account Agent's duties hereunder shall be determined solely by the express provisions of this Agreement. The Deposit Account Agent's duties are purely contractual in nature. Nothing in this Agreement shall be construed to give rise to any fiduciary obligations of the Deposit Account Agent with respect to the Subscribers or to the other Parties to this Agreement. Except for a possible reference to the definitions of certain words or terms defined in the Offering Memorandum, but not defined herein, the Deposit Account Agent is not charged with any duties with respect to the Offering Memorandum and shall not otherwise be concerned with the terms thereof. The Deposit Account Agent shall not be required to notify or obtain the consent, approval, authorization, or order of court or governmental body to perform its obligations under this Agreement, except as expressly provided herein.
3.3    Disputes.
(a)If there is any disagreement or the presentation of any adverse claim or demand in connection with the disbursement of the Proceeds, the Deposit Account Agent may, at its option, after providing written notice to the Intermediary and Issuer of such disagreement or adverse claim or demand, refuse to comply with any such claims or demands during the continuance of such disagreement and may refrain from delivering any item affected hereby, and in so doing, the Deposit Account Agent shall not become liable to the undersigned or to any other person, due to its failure to comply with such adverse claim or demand. If the Intermediary and/or Issuer does not provide satisfactory assurances to the Deposit Account Agent that it may act in accordance with the other provisions of this Agreement, then the Deposit Account Agent shall be entitled to continue, without liability, to refrain and refuse to act until:
(i)authorized to disburse the Proceeds by an order from a court purporting to have jurisdiction of the Parties and the Proceeds, after which time the Deposit Account Agent shall be entitled to act in conformity with such order; or
(ii)the Deposit Account Agent (i) shall have been notified that all differences shall have been adjusted by agreement, and (ii) shall have been directed in writing to take certain actions with respect to the Proceeds subject to the adverse claim or demand, signed jointly or in counterpart by the Intermediary and Issuer and by all persons making adverse claims or demands, at which time the Deposit Account Agent shall be protected in acting in compliance therewith.
(b)At any time prior to the Deposit Account Agent's receipt of a court order or a notice, as provided in clauses (i) or (ii) of this Section 3.3(a), the Deposit Account Agent may, but is not required to, file a suit in interpleader and obtain an order from the court requiring the Parties to interplead and litigate in such court adverse claims or demands raised pursuant to this Section 3.3. If such interpleader suit is brought, the Deposit Account Agent shall ipso facto be fully released and discharged from all obligations to further perform any and all duties or obligations imposed upon it in relation to the disputed amount. The Intermediary agrees to reimburse the Deposit Account Agent for all costs, expenses, and reasonable attorney's fees expended or incurred by the Deposit Account Agent in connection with such adverse claim or demand, the amount thereof to be fixed and judgment thereof to be rendered by the court in such lawsuit.

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3.4    Liability Limited.
(a)Deposit Account Agent shall have no duties or responsibilities other than the ministerial duties as expressly set forth herein and no other duties and obligations shall be implied (fiduciary or otherwise). Deposit Account Agent shall have no duty to enforce any obligation of any person to make any payment or delivery, or to direct or cause any payment or delivery to be made, or to enforce any obligation of any person to perform any other act. Deposit Account Agent shall be under no liability to the other Parties hereto or to anyone else by reason of any failure on the part of any party hereto or any maker, guarantor, endorser or other signatory of any document or any other person to perform such person’s obligations under any such document. Deposit Account Agent shall have no liability with respect to the transfer or distribution of any funds effected by the Deposit Account Agent pursuant to wiring or transfer instructions provided to the Deposit Account Agent by the Intermediary or Issuer, or set forth in any subscription agreement. Except for instructions given to Deposit Account Agent pursuant to a joint written instruction, Deposit Account Agent shall not be obligated to recognize any agreement between any and all of the persons referred to herein, notwithstanding that references thereto may be made herein and whether or not it has knowledge thereof. In the event of any conflict between the terms and provisions of this Agreement and any other agreement, the terms and conditions of this Agreement shall control subject to Section 4.18 hereof.
(b)Deposit Account Agent shall not be liable to the Issuer or the Intermediary or to anyone else for any action taken or omitted by it in good faith except to the extent that a court of competent jurisdiction determines that Deposit Account Agent’s gross negligence or willful misconduct was the primary cause of any loss to the Issuer or the Intermediary. In no event shall Deposit Account Agent be liable for incidental, indirect, special, consequential or punitive damages of any kind whatsoever (including lost profits), even if Deposit Account Agent has been advised of the likelihood of such loss or damage and regardless of the form of action. The officers, directors, members, partners, trustees, employees, agents, attorneys or other representatives and Affiliates of Deposit Account Agent owe no duty or obligation to any party hereunder and shall have no liability to any person by reason of any error of judgment, for any act done or not done, for any mistake of fact or law, or otherwise. Deposit Account Agent may rely conclusively, and shall be protected in acting, upon any order, notice, instruction (including a joint written instruction (such as a wire transfer instruction)), request, demand, certificate, opinion or advice of counsel (including counsel chosen by Deposit Account Agent), statement, instrument, report or other paper or document (not only as to its due execution and the validity (including the authority of the person signing or presenting the same) and effectiveness of its provisions, but also as to the truth and acceptability of any information therein contained), which is believed by Deposit Account Agent to be genuine and to be signed or presented by the proper person or persons. Deposit Account Agent shall not be bound by any notice or demand, or any waiver, modification, termination or rescission of this Agreement or any of the terms thereof, unless evidenced by a written amendment in accordance with Section 4.11 hereto.
(c)Deposit Account Agent shall not be obligated to take any legal or other action or commence any proceeding in connection with the Proceeds, any account in which Proceeds are deposited, this Agreement or any other agreement, or to appear in, prosecute or defend any such

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legal action or proceeding (whether or not it shall have been furnished with acceptable indemnification and advancement). Deposit Account Agent may consult legal counsel selected by it in the event of any dispute or question as to the construction of any of the provisions hereof or of any other agreement or of its duties hereunder, or relating to any dispute or question involving any party hereto, and shall incur no liability and shall be fully indemnified from any liability whatsoever in acting in accordance with the opinion or instruction of such counsel. The Intermediary shall promptly pay, upon demand, the reasonable fees, costs and expenses of any such counsel.
(d)Deposit Account Agent shall not be responsible for the sufficiency or accuracy of the form of, or the execution, validity, value or genuineness of, any document or property received, held or delivered by it hereunder, or of any signature or endorsement thereon, or for any lack of endorsement thereon, or for any description therein; nor shall Deposit Account Agent be responsible or liable to the other Parties hereto or to anyone else in any respect on account of the identity, authority or rights of the persons executing or delivering or purporting to execute or deliver any document or property or this Agreement. Deposit Account Agent shall have no responsibility with respect to the use or application of any Proceeds paid by Deposit Account Agent pursuant to the provisions hereof. Deposit Account Agent shall have no duty to solicit any payment which may be due to be paid in Proceeds or to confirm or verify the accuracy or correctness of any amounts delivered in accordance with this Agreement or the calculation of the Minimum Amount or the Maximum Amount in respect to the Proceeds. Deposit Account Agent shall not be liable to the Intermediary, Issuer or to anyone else for any loss, which may be incurred by reason of any investment of any monies, which it holds hereunder.
(e)Deposit Account Agent shall have the right to assume in the absence of written notice to the contrary from the proper person or persons that a fact or an event by reason of which an action would or might be taken by Deposit Account Agent does not exist or has not occurred, without incurring liability to the other Parties hereto or to anyone else for any action taken or omitted, or any action suffered by it to be taken or omitted, in good faith, in reliance upon such assumption.
(f)Deposit Account Agent is authorized, in its sole discretion, to comply with orders issued or process entered by any court with respect to the Proceeds, without determination by Deposit Account Agent of such court’s jurisdiction in the matter. If any portion of the Proceeds is at any time attached, garnished or levied upon under any court order, or in case the payment, assignment, transfer, conveyance or delivery of any such property shall be stayed or enjoined by any court order, or in case any order, judgment or decree shall be made or entered by any court affecting such property or any part thereof, then and in any such event, Deposit Account Agent is authorized, in its sole discretion, to rely upon and comply with any such order, writ, judgment or decree which it is advised by legal counsel selected by it is binding upon it without the need for appeal or other action; and if Deposit Account Agent complies with any such order, writ, judgment or decree, it shall not be liable to any of the Parties hereto or to any other person or entity by reason of such compliance even though such order, writ, judgment or decree may be subsequently reversed, modified, annulled, set aside or vacated.
3.5    Reliance on Documents, Etc. The Deposit Account Agent may rely on and shall be protected in acting in reliance upon any instructions or directions furnished to it in writing or pursuant

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to any provisions of this Agreement and shall be entitled to treat as genuine, and as the document it purports to be, any letter, paper, or other document furnished to it and believed by it to be genuine and to have been signed and presented by the proper Party or Parties. The Intermediary and/or Issuer shall not include the Deposit Account Agent's name in any document unless such document has been approved in writing by the Deposit Account Agent, except with regard to those documents pertaining to and referring to the Deposit Account Agent's functions as Proceeds holder pursuant to this Agreement.
3.6    Indemnification. From and at all times after the date of this Agreement, the Issuer and Intermediary shall, to the fullest extent permitted by law, defend, indemnify and hold harmless Deposit Account Agent and each of its directors, officers, members, partners, trustees, employees, attorneys, agents and affiliates (collectively, the “Indemnified Parties”) against any and all actions, claims (whether or not valid), losses, damages, liabilities, costs, penalties, settlements, judgments and expenses of any kind or nature whatsoever (including costs and expenses and reasonable attorneys’ fees) incurred by or asserted against any of the Indemnified Parties from and after the date hereof, whether direct, indirect or consequential, as a result of, in connection with, or arising from or in any way relating to any claim, demand, suit, action or proceeding (including any inquiry or investigation) by any person, including the Intermediary and/or the Issuer, whether threatened or initiated, asserting a claim for any legal or equitable remedy against any person (whether it is an Indemnified Party or not) under any statute or regulation, including any federal or state securities laws, or under any common law or equitable cause or otherwise, arising from or in connection with the negotiation, preparation, execution, performance or failure of performance of this Agreement or any transactions contemplated herein or relating hereto (including tax reporting or withholding or the enforcement of any rights or remedies under or in connection with this Agreement), whether or not any such Indemnified Party is a party to any such action, proceeding, suit or the target of any such inquiry or investigation (without derogation of any other indemnity afforded to Deposit Account Agent); provided, however, that no Indemnified Party shall have the right to be indemnified hereunder for any liability finally determined by a court of competent jurisdiction, subject to no further appeal, to have resulted solely from the gross negligence or willful misconduct of such Indemnified Party. Each Indemnified Party shall, in its sole discretion, have the right to select and employ separate counsel with respect to any action or claim brought or asserted against it, and the reasonable fees, costs and expenses of such counsel shall be paid, upon demand, by the Intermediary.
3.7    Compensation. The Issuer shall compensate Deposit Account Agent for its services hereunder pursuant to Schedule C. Deposit Account Agent is expressly authorized and directed, but shall not be obligated, to, and may, charge against and disburse to itself (to the extent Rules 15c2-4 under the Securities Exchange Act of 1934, as amended, permits) from the Proceeds for which a Closing has occurred and that are payable to the Issuer pursuant hereto after the applicable Sale Date(s), from time to time, the amount of any compensation and reimbursement which are due and payable hereunder, including any amount to which Deposit Account Agent or any other Indemnified Party is entitled to seek indemnification pursuant to Section 3.6 hereof, or any other amount owing to Deposit Account Agent hereunder. Deposit Account Agent shall notify the Issuer of any disbursement from the Proceeds to itself or any other Indemnified Party in respect of any reimbursement hereunder and shall furnish to the Issuer copies of all related invoices and other statements through electronically submitting such notice on the Platform. Subject to Rule 15c2-4

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under the Securities Exchange Act of 1934, as amended, the Issuer hereby grants to Deposit Account Agent and the other Indemnified Parties a security interest in and lien upon the Proceeds for which a Closing has occurred (a) for the payment of any fees, costs, expenses and other amounts due to Deposit Account Agent or any other Indemnified Party hereunder and (b) to secure any and all obligations of the Issuer in this Agreement with the right to offset any amount due any of them under this Agreement against the Proceeds; provided, however, that such lien shall attach only after the Sale Date for the applicable Proceeds. If for any reason funds in the Proceeds are insufficient to cover such amount, the Issuer shall pay, upon demand, such amounts to Deposit Account Agent or any other Indemnified Party upon receipt of copies of related invoices and other statements.
3.8    Filings and Resolution. Concurrently with their execution and delivery of this Agreement, the Issuer shall each deliver to the Deposit Account Agent (a) a copy of its articles of incorporation, certificate of incorporation or similar formation document, (b) corporate resolutions, signed by its corporate secretary, authorizing it to enter this Agreement, and (c) a Certificate of Authority in the form acceptable to the Deposit Account Agent.
3.9    Customer Information. Concurrently with its execution and delivery of this Agreement, the Issuer shall deliver to the Deposit Account Agent such identification as required by law and such authorization documents, all as the Deposit Account Agent may require. Without limiting the generality the foregoing, the Issuer shall deliver to the Deposit Account Agent (a) a copy of its organizational documents (e.g., articles of incorporation, operating agreement, etc.), (b) corporate/partnership resolutions, signed by its an appropriate signatory, authorizing it to enter this Agreement, and (c) a completed Certificate of Authority in the form approved by the Deposit Account Agent, reflecting the names and titles of the persons authorized to sign and deliver any document specified herein on behalf of any party hereto and an original handwritten exemplar of such persons signature.
3.10    Identification Number. The Issuer represents and warrants that (a) its Federal tax identification number (“TIN”) specified on the signature page of this Agreement underneath its signature is correct and is to be used for 1099 tax reporting purposes, and (b) it is not subject to backup withholding. The Issuer agrees to provide the Deposit Account Agent with the tax identification number for any person or entity to whom interest is paid on any of the Proceeds.
3.11    Term. The term of this Agreement shall commence as of the date and the year first above written and shall end on the date (the “Termination Date”) which is either (a) the Intermediaries’ notification to the Deposit Account Agent of the termination of the Offering pursuant to Section 2.1(c) of this Agreement, or (b) the final Closing date; provided, however, that the Deposit Account Agent shall perform all necessary actions pursuant to Sections 2.1(a), (b), (c) or (d) hereof in connection with the Proceeds then being held by the Deposit Account Agent, or (c) the date upon which the Deposit Account Agent confirms that it has received in the Offering Deposit Account in an amount equal to at least the Minimum Amount specified on Schedule A and has received a written instruction confirming a Closing with respect to at least the Minimum Amount.
During the Term, the Parties agree that (a) the Proceeds will be held in an account for the exclusive benefit of Subscribers (as defined under Rule 15c3-3 of the Securities Exchange Act of 1934) until such time the applicable Securities are considered sold as defined by SEC Rules and the Offering

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documents (the “Sale Date”) and (b) until such time as a Closing has occurred, the Issuer is not entitled to any funds received and no amounts deposited in the Offering Deposit Account shall become the property of the Issuer or any other entity, or be subject to the debts of the Issuer or any other entity.
3.12    Termination of Agreement; Resignation of Agent. Upon the first to occur of (a) the disbursement of all amounts in the Proceeds in accordance with this Agreement (including Section 2.1(e) and the operation of applicable state escheatment and unclaimed property laws), (b) the resignation of Deposit Account Agent, (c) termination of the Offering either pursuant to Section 2.1(c) or pursuant to a written instruction, Deposit Account Agent shall be released from its obligations hereunder and Deposit Account Agent shall have no further obligation or liability whatsoever with respect to this Agreement or the Proceeds and the Offering Deposit Account shall be closed. In the event of the termination of the Agreement, the Deposit Account Agent shall return all Proceeds to the Subscribers promptly (noon the following business day) upon notice of such termination. The obligations of the Issuer will continue to exist notwithstanding the termination or discharge of Deposit Account Agent’s obligations or liabilities hereunder until the obligations of the Issuer have been fully performed.
Deposit Account Agent may resign at any time and be discharged from its duties as Deposit Account Agent hereunder by giving the Issuer and the Intermediary at least thirty (30) days’ notice thereof, which may be submitted via email. Upon any such notice of resignation, the Issuer and the Intermediary shall jointly issue to Deposit Account Agent a written instruction authorizing redelivery of the Proceeds to a depository that has been retained as successor to Deposit Account Agent hereunder prior to the effective date of such resignation. As soon as practicable after its resignation, Deposit Account Agent shall turn over to such successor deposit account agent or escrow agent all monies and property held hereunder upon presentation of the document appointing the new deposit account agent or escrow agent and such deposit account agent or escrow agent’s acceptance thereof, and after deduction and payment (to the extent Rule 15c2-4 under the Securities Exchange Act of 1934, as amended, permits) to the retiring Deposit Account Agent after the Sale Date with respect to such Proceeds of all fees, costs and expenses (including court costs and expenses and attorneys' fees) or any other amount payable to, incurred by, or expected to be incurred by the retiring Deposit Account Agent in connection with the performance of its duties and the exercise of its rights hereunder. In the event no successor deposit account agent or escrow agent has been appointed by the Issuer on or prior to the date Deposit Account Agent’s resignation is to become effective, Deposit Account Agent shall be entitled to tender into the custody of any court of competent jurisdiction all assets then held by it hereunder. Deposit Account Agent shall have no responsibility for the appointment of a successor deposit account agent or escrow agent hereunder.
After Deposit Account Agent’s resignation, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Deposit Account Agent under this Agreement. Any corporation or other entity into which Deposit Account Agent may be merged or converted or with which it may be merged or consolidated, or any other entity to which all or a majority of all of Deposit Account Agent’s business may be transferred by sale of assets or otherwise, shall be Deposit Account Agent under this Agreement without further act or consent of any party hereto.

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ARTICLE 4 - GENERAL PROVISIONS
4.1    Representations and Warranties. Each of the Issuer and the Intermediary severally covenants and makes the following representations and warranties to Deposit Account Agent:
(a)It is duly organized, validly existing, and in good standing under the laws of the state of its incorporation or organization, and has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder;
(b)This Agreement has been duly approved by all necessary action, including any necessary shareholder or membership approval, has been executed by its duly authorized officers, and constitutes its valid and binding agreement enforceable in accordance with its terms;
(c)The execution, delivery, and performance of this Agreement is in accordance with the agreements related to the Offering and will not violate, conflict with, or cause a default under its articles of incorporation, bylaws, management agreement or other organizational document, as applicable, any applicable law, rule or regulation, any court order or administrative ruling or decree to which it is a party or any of its property is subject, or any agreement, contract, indenture, or other binding arrangement, including the agreements related to the Offering, to which it is a party or any of its property is subject;
(d)All information herein is true and accurate and the Deposit Account Agent may rely solely on information in this Agreement and any amendments to this Agreement. The Deposit Account Agent shall have no responsibility or obligation to interpret the terms of any document related to the Offering, other than the terms of this Agreement, even if the Deposit Account Agent has received a copy of any such document.
(e)Deposit Account Agent is appointed to act as agent only for the limited purposes set forth in this Agreement; no representation, statement, communication or other suggestion shall be made that Deposit Account Agent has investigated the desirability or advisability of investment in the Securities or has approved, endorsed or passed upon the merits of purchasing the Securities; and the name of Deposit Account Agent has not and shall not be used in any manner in connection with the offering of the Securities other than to state that Deposit Account Agent has agreed to serve as deposit account agent for the limited purposes set forth in this Agreement;
(f)No party other than the Parties hereto has, or shall have, any lien, claim or security interest in the Proceeds or any part thereof. No financing statement under the Uniform Commercial Code is on file in any jurisdiction claiming a security interest in or describing (whether specifically or generally) the Proceeds or any part thereof;
(g)It possesses such valid and current licenses, certificates, authorizations or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies necessary to conduct its respective businesses, and it has not received any notice of proceedings relating to the revocation or modification of, or non-compliance with, any such license, certificate, authorization or permit;

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(h)It is in compliance with all applicable federal, state, and local laws and regulations, including, but not limited to Securities laws, including but not limited to disclosure requirements and rules, regulations and guidance related to contingency offerings; and that Intermediary is in compliance with all anti-money laundering and know-your-customer laws, including the Bank Secrecy Act, the USA PATRIOT Act, and all regulations promulgated thereunder, and economic sanctions implemented by the Office of Foreign Assets Control;
(i)It is not a target of any governmental investigation or enforcement action or order; and
(j)All of its representations and warranties contained herein are true and complete as of the date hereof and will be true and complete at the time of any disbursement of Proceeds.
4.2    Notice. Any notice, request, demand or other communication provided for hereunder to be given shall be in writing and shall be delivered personally, by certified mail, return receipt requested, postage prepaid, or by transmission by a telecommunications device, and shall be effective (a) on the day when personally served, including delivery by overnight mail and courier service, (b) on the third business day after its deposit in the United States mail, and (c) on the business day of confirmed transmission by telecommunications device. The addresses of the Parties hereto (until notice of a change thereof is served as provided in this Section 4.2 shall be as follows: To the Deposit Account Agent:
If to the Intermediary:
 
If to Issuer:
 
 
 
FinTech Clearing, LLC
Attn: Brian Park
6 Venture, Suite 265
Irvine, CA 92618
 
Soliton, Inc.
Attn: Ms. Walter Klemp, Chairman
5304 Ashbrook Drive
Houston, TX 77081
 
 
 
with a copy to:
 
with a copy to:
 
 
 
 
 
Soliton, Inc.
Attn: Ms. Lori Bisson, CFO
5304 Ashbrook Drive
Houston, TX 77081
 
 
 
If to Deposit Account Agent:
 
 
FinTech Clearing, LLC
Attn: Brian Park
6 Venture, Suite 265
Irvine, CA 92618
 
 
 
 
 
with a Copy to::
 
 

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4.3    Arbitration.
(a)All disputes between the Intermediary or Issuer, on the one hand, the Deposit Account Agent on the other hand, relating to the payment of the Proceeds and/or the Deposit Account Agent’s rights, obligations, and liabilities arising from or related to this Agreement shall be resolved by mandatory binding expedited arbitration under the JAMS Comprehensive Arbitration Rules & Procedures in effect as of the date the request for arbitration is filed (the “Rules”) before a single neutral arbitrator selected in accordance with the Rules. Each of the Parties may initiate such arbitration pursuant to the Rules. The arbitration shall be held in Los Angeles, California (such site being herein referred to as the “Forum”). The arbitrator shall issue a written opinion that includes the factual and legal basis for any decision and award, unless the Parties agree otherwise.
(b)Any court having jurisdiction of the Parties and the subject matter may enforce such a decision. Each of the Parties hereto submits to the non-exclusive personal jurisdiction of the courts of the Forum as an appropriate place for compelling arbitration or giving legal confirmation of any arbitration award, and irrevocably waives any objection which it may now or hereafter have to the venue of any such enforcement proceeding brought in any of said courts and any claim of inconvenient forum. Each of the Parties agrees that service of process for all arbitration proceedings may be made in accordance with the Rules and shall be deemed effective as provided therein.
(c)Any claim or action of any kind (including, but not limited to, any claims for breach of contract), against the Deposit Account Agent arising out of or connected with this Agreement shall be barred and waived unless asserted by the commencement of an arbitration proceeding within 180 days after the accrual of the action or claim. This limitation shall also apply to claims which might otherwise be asserted against as a “set-off,” credit, cross-complaint, or defense. This section and the forgoing limitation shall survive termination of this Agreement.
(d)For the avoidance of doubt, the provisions of this Section 4.3 shall not apply to claims brought under the federal securities laws and the rules and regulations thereunder.
4.4    Effect of Agreement. This Agreement shall inure to the benefit of, and be binding upon, the respective successors and assigns of the Parties hereto.
4.5    Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.
4.6    Counterparts and Electronic Signatures. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but which together shall constitute one and the same instrument. Delivery of an executed counterpart of this Agreement by facsimile shall be equally effective as delivery of a manually executed counterpart of this Agreement. Any party delivering an executed counterpart by facsimile shall also deliver a manually executed counterpart of this Agreement, but failure to do so shall not affect the validity, enforceability, of binding effect of this Agreement.

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The intentional action in electronically signing this Agreement shall be evidence of consent to be legally bound by this Agreement, including any schedules hereto and notices. The use of an electronic version of this Agreement and any notices fully satisfies any requirement that they be provided to the Parties in writing. Each party is solely responsible for reviewing and understanding all of the terms and conditions of this Agreement. Each party accepts as reasonable and proper notice, for the purpose of any and all laws, rules and regulations, notice by electronic means, including, the posting of modifications to this Agreement and any schedule hereto. Each party agrees to not contest the admissibility or enforceability of the electronically signed copy of this Agreement in any proceeding arising out of the terms and conditions of this Agreement.
4.7    USA Patriot Act Notice. The Deposit Account Agent notifies the Intermediary and Issuer that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56, signed into law October 26, 2001) (the “Patriot Act”) the Deposit Account Agent is required to obtain, verify and record information that identifies the other Parties to this Agreement, which information includes the name and address of those Parties and other information that will allow the Deposit Account Agent to identify them in accordance with the Patriot Act. In particular:
To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person or entity that opens an account.
WHAT THIS MEANS FOR YOU: when you open an account, we will ask the name and address of the entity and other information that will allow us to identify the business or organization. We may also ask to see identifying documents.
4.8    No Third Party Beneficiaries. None of the Intermediary, the Issuer and the Deposit Account Agent intends that any rights, duties or restrictions contained herein shall inure to the benefit of any third party.
4.9    Final Agreement. This Agreement is intended by the Deposit Account Agent, Intermediary and the Issuer to be the final, complete, and exclusive expression of the agreement between them. This Agreement supersedes any and all prior oral or written agreements relating to the subject matter hereof. No modification, rescission, waiver, release, or amendment of any provision of this Agreement shall be made, except by a written agreement signed by the Parties hereto by a duly authorized officer thereof.
4.10    Security Procedures. Deposit Account Agent may rely solely upon any account numbers or similar identifying numbers provided by the Intermediary or Issuer, as appropriate, to identify (a) a beneficiary, (b) a beneficiary's bank, or (c) an intermediary bank. Deposit Account Agent may apply any of the Proceeds for any payment order it executes using any such identifying number, even where its use may result in a person other than a beneficiary being paid, or the transfer of funds to a bank other than a beneficiary's bank or an intermediary bank designated.

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4.11    Amendment or Waiver. This Agreement may be changed, waived, discharged or terminated only by a writing executed by the Parties hereto; provided, however, that the Deposit Account Agent’s signature (agreement) is not required in respect to any change to, waiver of, discharge or termination of any section to which it is not subject. No delay or omission by any party hereto in exercising any right with respect hereto shall operate as a waiver. A waiver on any one occasion shall not be construed as a bar to, or waiver of, any right or remedy on any future occasion.
4.12    Severability. To the extent any provision of this Agreement is prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.
4.13    Entire Agreement. This Agreement constitutes the entire agreement between the Parties hereto relating to the holding, investment and disbursement of Proceeds and sets forth in their entirety the obligations and duties of Deposit Account Agent with respect to the Proceeds.
4.14    Dealings. Deposit Account Agent and any stockholder, director, officer or employee of Deposit Account Agent may buy, sell, and deal in any of the securities of the Issuer and become interested in any transaction in which the Issuer may be interested, and contract and lend money to the Issuer and otherwise act as fully and freely as though it were not Deposit Account Agent under this Agreement. Nothing herein shall preclude Deposit Account Agent from acting in any other capacity for the Issuer or for any other entity.
4.15    Currency. The currency applicable to any amount payable or receivable under this Agreement is United States dollars.
4.16    Force Majeure. Notwithstanding anything to the contrary hereunder, Deposit Account Agent shall not be liable for any delay, failure to perform, or other act or non-act resulting from acts beyond its reasonable control, including acts of God, terrorism, shortage of supply, labor difficulties (including strikes), war, civil unrest, fire, floods, electrical outages, equipment or transmission failures, internet interruption, vendor failures (including information technology providers), and other similar causes.
4.17    No Strict Construction. The Parties hereto have participated jointly in the negotiation and draft of this Agreement. In the event any ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if it were drafted jointly by the Parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party hereto by virtue of authorship of any provision of this Agreement.
4.18    Priority. In the event of any conflict between the provisions of any schedule attached hereto and the remainder of this Agreement, this Agreement shall be construed in a manner prescribed by Deposit Account Agent acting in good faith.
4.19    Headings. The headings in this Agreement are for convenience purposes and shall be ignored for purposes of enforcing this Agreement, do not constitute a part of this Agreement,

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and may not be used by any party hereto to characterize, interpret, limit or affect otherwise any provision of this Agreement.
[Signature Page to Follow]

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed delivered by and through its duly authorized representative as of the date and the year first above written.
SOLITON, INC.
 
 
 
 
By:
 
 
Name: Lori Bisson
 
Title: Chief Financial Officer
 
 
 
 
FINTECH GLOBAL MARKETS, INC.
 
 
 
 
By:
 
 
Name: Brian Park
 
Title: President
 
 
 
 
FINTECH CLEARING, LLC
 
 
 
 
By:
 
 
Name: Keith Moore
 
Title: Principal and Treasurer








[Signature Page to the Offering Deposit Account Agency Agreement]

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SCHEDULE A
Offering Details
In connection with the Offering, the Issuer is offering securities for sale as follows:
Securities Offered: [ ]
Minimum Funding Amount1: [ ]
Maximum Funding Offered: [ ]
Termination Date2: [ ]
1  “Minimum Amount” shall mean the Minimum Funding Amount specified on Schedule A, which corresponds to the minimum aggregate dollar amount of securities that must be ordered to meet the contingency for a successful Offering. For purposes of this Agreement only, the Minimum Amount may be $0 if all contingencies have already occurred (e.g., Issuer opts to terminate its relationship with a deposit account agent who has completed its services through the contingency period). In any event, Issuer and Intermediary agree to provide accurate information in Schedule A and understand and agree that Deposit Account Agent solely relies on such information and has no duty or obligation to verify its accuracy.
2  “Termination Date” shall mean the date on which the Maximum Funding Amount has been sold in one or more Closings or the Offering End Date specified on Schedule A, whichever event occurs first; provided, however, that the Issuer and Intermediary may extend the Offering End Date in this definition for up to 60 days upon delivery of a written instruction to Deposit Account Agent and its statement that it has received and accepted subscription statements (and the accompanying payments have been deposited in the Proceeds and have cleared) equal to the Minimum Amount.

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SCHEDULE B
Reporting and Funding Instructions
Report from Intermediary
Intermediary shall submit a report (“Subscriber Report”) to the Deposit Account Agent with the following information for each Subscriber before Subscriber initiates the funding wire:
•
Name
•
Tax ID
•
Address
•
Date of birth (if individual)
•
If investor is an entity:
◦
Authorized signer name
◦
Authorized signer position
◦
Authorized signer Tax ID
◦
Authorized signer address
◦
Authorized signer date of birth
•
Number of shares/units (if applicable)
•
Purchase price
•
Purchase date
•
Form of payment (e.g., wire or check)
◦
If by wire, wire originating bank
◦
if by check, instruct the Subscriber to make checks payable to FinTech Clearing as Agent for the Investors in Soliton, Inc.
•
Return Payment instructions (should a Return Payment be required pursuant to this Agreement)
** If there is a discrepancy between the Subscriber Report and the payment submitted by the Subscriber, the Deposit Account Agent may, in its sole discretion, reject a Subscriber’s payment. If there is a material discrepancy in purchase price, the Deposit Account Agent will reject the payment. If there is a non-material discrepancy in purchase price, the Deposit Account Agent may in its sole discretion accept the payment and require that either the Subscriber Report be corrected or the difference in purchase price be submitted. There will be a service fee charged for any discrepancies. **
Wire Instructions to Subscribers
Subscribers shall be instructed to wire fund to the Offering Deposit Account held at Pacific Mercantile Bank in connection with the Offering as follows:
** Federal securities rules require that the exact investment amount is received in the Deposit Account for your investment to be complete. If the amount that arrives in the Deposit Account is less than the investment amount, this could result in the cancellation of the investment and return of funds less wire fees. **

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** Each wire must include return payment instructions. The name registered on the bank account in the return payment instructions must match the name on the funding account and investment documents. If not, this could result in the cancellation of the investment and return of funds less wire fees. **
ABA Routing #:
122242869
SWIFT Code:
PMERUS66
Bank Name:
Pacific Mercantile Bank
Bank Address:
949 South Coast Dr.
Costa Mesa, CA 92626
Beneficiary Account Name:
FinTech Clearing as Agent for the Investors in Soliton, Inc.
Beneficiary Account #:
To be provided
Beneficiary Address:
6 Venture, Suite 265
Irvine, CA 92618
REF:
Soliton – [Subscriber Name]

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SCHEDULE C
Fee Schedule
Service
Fee
Cash Management Fee
25 bps (0.25 %) of Proceeds disbursed to Issuer (excluding proceeds from subscribers originating from ________)
CIP/AML check (applied to each subscriber)
$2.00
Wire Transfers – Incoming (Domestic or Foreign)
$5.00
Wire Transfers – Outgoing (Domestic)
$10.00
Wire Transfers – Outgoing (Foreign)
$25.00
NACHA Upload per file
$5.00
ACH per transaction (incoming or outgoing)
$0.50
ACH Exceptions (incoming or outgoing)
$2.00
Check Processing (incoming or outgoing)
$10.00

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Exhibit 8.2

ESCROW AGREEMENT

FOR SECURITIES OFFERING


THIS ESCROW AGREEMENT, dated as of (“Escrow Agreement”), is by and between SI Securities, LLC (“ SI Securities”), Boustead Securities, LLC (“Boustead”), Soliton, Inc., a company incorporated in Delaware (“Issuer”), and The Bryn Mawr Trust Company of Delaware (“BMTC DE”), a Delaware entity, as Escrow Agent hereunder (“Escrow Agent”). Capitalized terms used herein, but not otherwise defined, shall have the meaning set forth in that certain Selected Dealer Agreement by and between Boustead and SI Securities executed prior hereto (the “Selected Dealer Agreement”).


BACKGROUND

A.    Boustead has engaged SI Securities to participate as a selling agent for the sale of common stock of the Issuer on a “best efforts” basis pursuant to the Selected Dealer Agreement.

B.    Subscribers to the Securities (the “Subscribers” and individually, a “Subscriber”) will be required to submit full payment for their respective investments at the time they enter into subscription agreements.

C.    All payments in connection with subscriptions for Securities shall be sent directly to the Escrow Agent, and Escrow Agent has agreed to accept, hold, and disburse such funds deposited with it thereon in accordance with the terms of this Escrow Agreement.

D.    In order to establish the escrow of funds and to effect the provisions of the Offering Document, the parties hereto have entered into this Escrow Agreement.

STATEMENT OF AGREEMENT

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, for themselves, their successors and assigns, hereby agree as follows:

1.Definitions. In addition to the terms defined above, the following terms shall have the following meanings when used herein:

“Business Days” shall mean days when banks are open for business in the State of Delaware.

“Investment” shall mean the dollar amount of Securities proposed to be purchased by the Subscriber in full. Subscribers may subscribe by tendering funds via wire or ACH only to

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the account specified in Exhibit A attached herein, checks will not be accepted. Wire and/or ACH instructions are subject to change, and may differ if funds are being sent from an international account. In the event these instructions change they will be updated and provided by Escrow Agent to Boustead and SI Securities.

“Escrow Funds” shall mean the funds deposited with the Escrow Agent pursuant to this Escrow Agreement.

“Expiration Date” means the date that is one year from the qualification of the Offering by the Commission.

“Minimum Offering” shall have the definition as set forth in Exhibit A attached hereto.

“Minimum Offering Notice” shall mean a written notification, signed by Boustead and SI Securities, pursuant to which Boustead and SI Securities shall represent that, to their actual knowledge, all Closing Conditions have been met.

“Closing Conditions” shall include, but are not limited to, Boustead and SI Securities determining that at the time of a closing, the Minimum Offering has been met, the investment remains suitable for investors, investors have successfully passed ID, KYC, AML, OFAC, and suitability screening, and that Issuer has completed all actions required by it as communicated by Boustead and SI Securities at the time of a closing.

“Offering” shall have the meaning set forth in the Selected Dealer Agreement.

“Securities” shall have the meaning set forth in the Selected Dealer Agreement.

“Subscription Accounting” shall mean an accounting of all subscriptions for Securities received for the Offering as of the date of such accounting, indicating for each subscription the Subscriber’s name, social security number and address, the number and total purchase price of subscribed Securities, the date of receipt of the Investment, and notations of any nonpayment of the Investment submitted with such subscription, any withdrawal of such subscription by the Subscriber, any rejection of such subscription by Issuer, or other termination, for whatever reason, of such subscription.

2.Appointment of and Acceptance by Escrow Agent. The other parties hereto hereby appoint Escrow Agent to serve as escrow agent hereunder, and Escrow Agent hereby accepts such appointment in accordance with the terms of this Escrow Agreement. Escrow Agent hereby agrees to hold all Investments related to the Offering in escrow pursuant to the terms of this Agreement.

3.Deposits into Escrow. a. All Investments shall be delivered directly to the Escrow Agent for deposit into the Escrow Account described on Exhibit A hereto. Investments shall be transmitted promptly to the Escrow Agent in compliance with Rule 15c2-4.

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Each such deposit shall be accompanied by the following documents:

(1)
a report containing such Subscriber’s name, social security number or taxpayer identification number, address and other information required for withholding purposes;

(2)
a Subscription Accounting; and

(3)
instructions regarding the investment of such deposited funds in accordance with Section 6 hereof.

ALL FUNDS SO DEPOSITED SHALL REMAIN THE PROPERTY OF THE SUBSCRIBERS ACCORDING TO THEIR RESPECTIVE INTERESTS AND SHALL NOT BE SUBJECT TO ANY LIEN OR CHARGE BY ESCROW AGENT OR BY JUDGMENT OR CREDITORS' CLAIMS AGAINST ISSUER UNTIL RELEASED OR ELIGIBLE TO BE RELEASED TO ISSUER IN ACCORDANCE WITH SECTION 4(a) HEREOF.

b.    The parties hereto understand and agree that all Investments received by Escrow Agent hereunder are subject to collection requirements of presentment and final payment, and that the funds represented thereby cannot be drawn upon or disbursed until such time as final payment has been made and is no longer subject to dishonor. Upon receipt, Escrow Agent shall process each Investment for collection, and the proceeds thereof shall be held as part of the Escrow Funds until disbursed in accordance with Section 4 hereof. If, upon presentment for payment, any Investment is dishonored, Escrow Agent’s sole obligation shall be to notify the parties hereto of such dishonor and to promptly return such Investment to the applicable investor.

Upon receipt of any Investment that represents payment of an amount less than or greater than the Subscriber’s initial proposed Investment, Escrow Agent's sole obligation shall be to notify the parties hereto of such fact and to promptly return such Investment to the applicable investor.

4.Disbursements of Escrow Funds.

a.    Completion of Offering. Subject to the provisions of Section 10 hereof, Escrow Agent shall pay to FinTech Clearing, LLC the liquidated value of the Escrow Funds, by Automated Clearing House (“ACH”), no later than one (1) business day following receipt of the following documents:

(1)A Minimum Offering Notice;

(2)Instruction Letter (as defined below); and

(3)Such other certificates, notices or other documents as Escrow Agent shall reasonably require.

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The Escrow Agent shall disburse the Escrow Funds by ACH from the Escrow Account in accordance with written instructions signed by Boustead and SI Securities as to the disbursement of such funds (the “Instruction Letter”) in accordance with this Section 4(a). Notwithstanding the foregoing, Escrow Agent shall not be obligated to disburse the Escrow Funds to Issuer if Escrow Agent has reason to believe that (a) Investments in full payment for that number of Securities equal to or greater than the Minimum Offering have not been received, deposited with and collected by the Escrow Agent, or (b) any of the certifications and opinions set forth in the Minimum Offering Notice are incorrect or incomplete.

After the initial disbursement of Escrow Funds to FinTech Clearing, LLC pursuant to this Section 4(a), Escrow Agent shall pay to FinTech Clearing, LLC any additional funds received with respect to the Securities, by ACH, no later than one (1) business day after receipt.

It is understood that any ACH transaction must comply with U. S law. However, BMTC DE is not responsible for errors in the completion, accuracy, or timeliness of any transfer properly initiated by BMTC DE in accordance with joint written instructions occasioned by the acts or omissions of any third party financial institution or a party to the transaction, or the insufficiency or lack of availability of your funds on deposit in an external account.

b.     Rejection of Any Subscription or Termination of the Offering. Promptly after receipt by Escrow Agent of written notice (i) from Issuer that the Issuer intends to reject a Subscriber’s subscription, (ii) from Issuer or Boustead with SI Securities that there will be no closing of the sale of Securities to Subscribers, (iii) from any federal or state regulatory authority that any application by Issuer to conduct a banking business has been denied, or (iv) from the Securities and Exchange Commission or any other federal or state regulatory authority that a stop or similar order has been issued with respect to the Offering Document and has remained in effect for at least twenty (20) days, Escrow Agent shall pay to the applicable Subscriber(s), by ACH , the amount of the Investment paid by each Subscriber.

c.    Expiration of Offering Period. Notwithstanding anything to the contrary contained herein, if Escrow Agent shall not have received a Minimum Offering Notice on or before the Expiration Date, or the offering has been sooner terminated by Issuer, Escrow Agent shall, without any further instruction or direction from Boustead and SI Securities or Issuer, promptly return to each Subscriber, by ACH or Wire transfer, the Investment made by such Subscriber.

5.Suspension of Performance or Disbursement Into Court. If, at any time, (i) there shall exist any dispute between Boustead, SI Securities, Issuer, Escrow Agent, any Subscriber or any other person with respect to the holding or disposition of all or any portion of the Escrow Funds or any other obligations of Escrow Agent hereunder, or (ii) if at any time Escrow Agent is unable to determine, to Escrow Agent’s reasonable satisfaction, the proper disposition of all or any portion of the Escrow Funds or Escrow Agent’s proper actions with respect to its obligations hereunder, or (iii) if Boustead, SI Securities, and Issuer have not within 30 days of the furnishing by Escrow Agent of a notice of resignation pursuant to Section 7 hereof appointed a successor Escrow Agent

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to act hereunder, then Escrow Agent may, in its reasonable discretion, take either or both of the following actions:

a.    suspend the performance of any of its obligations (including without limitation any disbursement obligations) under this Escrow Agreement until such dispute or uncertainty shall be resolved to the sole satisfaction of Escrow Agent or until a successor Escrow Agent shall have been appointed (as the case may be).

b.    petition (by means of an interpleader action or any other appropriate method) any court of competent jurisdiction in any venue convenient to Escrow Agent, for instructions with respect to such dispute or uncertainty, and to the extent required or permitted by law, pay into such court all funds held by it in the Escrow Funds for holding and disposition in accordance with the instructions of such court.

This Escrow Agreement has been duly approved by all necessary corporate action, including any necessary shareholder or membership approval, has been executed by its duly authorized officers, and constitutes its valid and binding agreement, enforceable in accordance with its terms.

6.Investment of Funds. Escrow Agent will not commingle Escrow Funds received by it in escrow with funds of others and shall not invest such Escrow Funds. The Escrow Funds will be held in a non-interest bearing account.

7.Resignation of Escrow Agent. Escrow Agent may resign and be discharged from the performance of its duties hereunder at any time by giving ten (10) days prior written notice to the Boustead, SI Securities, and the Issuer specifying a date when such resignation shall take effect. Upon any such notice of resignation, Boustead, SI Securities, and Issuer jointly shall appoint a successor Escrow Agent hereunder prior to the effective date of such resignation. The retiring Escrow Agent shall transmit all records pertaining to the Escrow Funds and shall pay all Escrow Funds to the successor Escrow Agent, after making copies of such records as the retiring Escrow Agent deems advisable. After any retiring Escrow Agent’s resignation, the provisions of this Escrow Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Escrow Agent under this Escrow Agreement. Any corporation or association into which the Escrow Agent may be merged or converted or with which it may be consolidated, or any corporation or association to which all or substantially all of the escrow business of the Escrow Agent’s corporate trust line of business may be transferred, shall be the Escrow Agent under this Escrow Agreement without further act.

8.Liability of Escrow Agent.

a.    The Escrow Agent undertakes to perform only such duties as are expressly set forth herein and no duties shall be implied. The Escrow Agent shall have no liability under and no duty to inquire as to the provisions of any agreement other than this Escrow Agreement, including without limitation the Offering Document. The Escrow Agent shall not be liable for any action taken or omitted by it in good faith except to the extent that a court of competent jurisdiction determines that the Escrow Agent’s gross negligence or willful misconduct was the primary cause

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of any loss to the Issuer or any Subscriber. Escrow Agent’s sole responsibility shall be for the safekeeping and disbursement of the Escrow Funds in accordance with the terms of this Escrow Agreement. Escrow Agent shall have no implied duties or obligations and shall not be charged with knowledge or notice of any fact or circumstance not specifically set forth herein. Escrow Agent may rely upon any notice, instruction, request or other instrument, not only as to its due execution, validity and effectiveness, but also as to the truth and accuracy of any information contained therein, which Escrow Agent shall believe to be genuine and to have been signed or presented by the person or parties purporting to sign the same. In no event shall Escrow Agent be liable for incidental, indirect, special, consequential or punitive damages (including, but not limited to lost profits), even if the Escrow Agent has been advised of the likelihood of such loss or damage and regardless of the form of action. Escrow Agent shall not be obligated to take any legal action or commence any proceeding in connection with the Escrow Funds, any account in which Escrow Funds are deposited, this Escrow Agreement or the Offering Document, or to appear in, prosecute or defend any such legal action or proceeding. Without limiting the generality of the foregoing, Escrow Agent shall not be responsible for or required to enforce any of the terms or conditions of any subscription agreement with any Subscriber or any other agreement between Issuer and any Subscriber. Escrow Agent shall not be responsible or liable in any manner for the performance by Issuer or any Subscriber of their respective obligations under any subscription agreement nor shall Escrow Agent be responsible or liable in any manner for the failure of Issuer or any third party (including any Subscriber) to honor any of the provisions of this Escrow Agreement. Escrow Agent may consult legal counsel selected by it in the event of any dispute or question as to the construction of any of the provisions hereof or of any other agreement or of its duties hereunder, or relating to any dispute involving any party hereto, and shall incur no liability and shall be fully indemnified from any reasonable liability whatsoever in acting in accordance with the reasonable opinion or instruction of such counsel. Issuer shall promptly pay, upon demand, the reasonable fees and expenses of any such counsel.

b.    The Escrow Agent is authorized, in its sole discretion, to comply with orders issued or process entered by any court with respect to the Escrow Funds, without determination by the Escrow Agent of such court's jurisdiction in the matter. If any portion of the Escrow Funds is at any time attached, garnished or levied upon under any court order, or in case the payment, assignment, transfer, conveyance or delivery of any such property shall be stayed or enjoined by any court order, or in case any order, judgment or decree shall be made or entered by any court affecting such property or any part thereof, then and in any such event, the Escrow Agent is authorized, in its reasonable discretion, to rely upon and comply with any such order, writ, judgment or decree which it is advised by legal counsel selected by it is binding upon it without the need for appeal or other action; and if the Escrow Agent complies with any such order, writ, judgment or decree, it shall not be liable to any of the parties hereto or to any other person or entity by reason of such compliance even though such order, writ, judgment or decree may be subsequently reversed, modified, annulled, set aside or vacated. Notwithstanding the foregoing, the Escrow Agent shall provide the Issuer, Boustead, and SI Securities with immediate notice of any such court order or similar demand and the opportunity to interpose an objection or obtain a protective order.

9.Indemnification of Escrow Agent. From and at all times after the date of this Escrow Agreement, Issuer shall, to the fullest extent permitted by law, defend, indemnify and hold harmless

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the Escrow Agent and each director, officer, employee, attorney, agent and affiliate of Escrow Agent (collectively, the “Indemnified Parties”) against any and all actions, claims (whether or not valid), losses, damages, liabilities, costs and expenses of any kind or nature whatsoever (including without limitation reasonable attorneys’ fees, costs and expenses) incurred by or asserted against any of the Indemnified Parties from and after the date hereof, whether direct, indirect or consequential, as a result of or arising from or in any way relating to any claim, demand, suit, action or proceeding (including any inquiry or investigation) by any person, including without limitation Issuer, whether threatened or initiated, asserting a claim for any legal or equitable remedy against any person under any statute or regulation, including, but not limited to, any federal or state securities laws, or under any common law or equitable cause or otherwise, arising from or in connection with the negotiation, preparation, execution, performance or failure of performance of this Escrow Agreement or any transactions contemplated herein, whether or not any such Indemnified Party is a party to any such action, proceeding, suit or the target of any such inquiry or investigation; provided, however, that no Indemnified Party shall have the right to be indemnified hereunder for any liability finally determined by a court of competent jurisdiction, subject to no further appeal, to have resulted from the gross negligence or willful misconduct of such Indemnified Party. Each Indemnified Party shall, in its sole discretion, have the right to select and employ separate counsel with respect to any action or claim brought or asserted against it, and the reasonable fees of such counsel shall be paid upon demand by the Issuer. The obligations of Issuer under this Section 9 shall survive any termination of this Escrow Agreement and the resignation or removal of Escrow Agent.

10.Compensation to Escrow Agent.

a.    Fees and Expenses. SI Securities shall compensate Escrow Agent for its services hereunder in accordance with Exhibit A attached hereto and, in addition, shall reimburse Escrow Agent for all of its reasonable pre-approved out-of-pocket expenses, including attorneys’ fees, travel expenses, telephone and facsimile transmission costs, postage (including express mail and overnight delivery charges), copying charges and the like. The additional provisions and information set forth on Exhibit A are hereby incorporated by this reference, and form a part of this Escrow Agreement. All of the compensation and reimbursement obligations set forth in this Section 10 shall be payable by SI Securities upon demand by Escrow Agent. The obligations of SI Securities under this Section 10 shall survive any termination of this Escrow Agreement and the resignation or removal of Escrow Agent.

b.    Disbursements from Escrow Funds to Pay Escrow Agent. The Escrow Agent is authorized to and may disburse from time to time, to itself or to any Indemnified Party from the Escrow Funds (but only to the extent of Issuer’s rights thereto), the amount of any compensation and reimbursement of out-of-pocket expenses due and payable hereunder (including any amount to which Escrow Agent or any Indemnified Party is entitled to seek indemnification pursuant to Section 9 hereof). Escrow Agent shall notify Issuer of any disbursement from the Escrow Funds to itself or to any Indemnified Party in respect of any compensation or reimbursement hereunder and shall furnish to Issuer copies of all related invoices and other statements.

c.    Security and Offset. Issuer hereby grants to Escrow Agent and the Indemnified Parties a security interest in and lien upon the Escrow Funds (to the extent of Issuer’s

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rights thereto) to secure all obligations hereunder, and Escrow Agent and the Indemnified Parties shall have the right to offset the amount of any compensation or reimbursement due any of them hereunder (including any claim for indemnification pursuant to Section 9 hereof) against the Escrow Funds (to the extent of Issuer’s rights thereto.) If for any reason the Escrow Funds available to Escrow Agent and the Indemnified Parties pursuant to such security interest or right of offset are insufficient to cover such compensation and reimbursement, Issuer shall promptly pay such amounts to Escrow Agent and the Indemnified Parties upon receipt of an itemized invoice.

11.Representations and Warranties.    Each party hereto respectively makes the following representations and warranties to Escrow Agent:

(1)    It is a corporation or limited liability company duly organized, validly existing, and in good standing under the laws of the state of its incorporation or organization, and has full power and authority to execute and deliver this Escrow Agreement and to perform its obligations hereunder.

(2)    This Escrow Agreement has been duly approved by all necessary corporate action, including any necessary shareholder or membership approval, has been executed by its duly authorized officers, and constitutes its valid and binding agreement, enforceable in accordance with its terms.

(3)    The execution, delivery, and performance of this Escrow Agreement will not violate, conflict with, or cause a default under its articles of incorporation, articles of organization or bylaws, operating agreement or other organizational documents, as applicable, any applicable law or regulation, any court order or administrative ruling or decree to which it is a party or any of its property is subject, or any agreement, contract, indenture, or other binding arrangement to which it is a party or any of its property is subject. The execution, delivery and performance of this Escrow Agreement is consistent with and accurately described in the Offering Document.

(4)    It hereby acknowledges that the status of Escrow Agent is that of agent only for the limited purposes set forth herein, and hereby represents and covenants that no representation or implication shall be made that the Escrow Agent has investigated the desirability or advisability of investment in the Securities or has approved, endorsed or passed upon the merits of the investment therein and that the name of the Escrow Agent has not and shall not be used in any manner in connection with the offer or sale of the Securities other than to state that the Escrow Agent has agreed to serve as escrow agent for the limited purposes set forth herein.
 
(5)    All of its representations and warranties contained herein are true and complete as of the date hereof and will be true and complete at the time of any deposit to or disbursement from the Escrow Funds.

b.    Issuer further represents and warrants to Escrow Agent that no party other than the parties hereto and the prospective Subscribers have, or shall have, any lien, claim or security interest in the Escrow Funds or any part thereof. No financing statement under the Uniform Commercial Code is on file in any jurisdiction claiming a security interest in or describing (whether specifically or generally) the Escrow Funds or any part thereof.

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c.    SI Securities further represents and warrants to Escrow Agent that the deposit with Escrow Agent by SI Securities of Investments pursuant to Section 3 hereof shall be deemed a representation and warranty by SI Securities that such Investment represents a bona fide sale to the Subscriber described therein of the amount of Securities set forth therein, subject to and in accordance with the terms of the Offering Document.

12.Identifying Information. Issuer, Boustead, and SI Securities acknowledge that a portion of the identifying information set forth on Exhibit A is being requested by the Escrow Agent in connection with the USA Patriot Act, Pub.L.107-56 (the “Act”). To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. For a non-individual person such as a business entity, a charity, a Trust, or other legal entity, we ask for documentation to verify its formation and existence as a legal entity. We may also ask to see financial statements, licenses, identification and authorization documents from individuals claiming authority to represent the entity or other relevant documentation.

13.Consent to Jurisdiction and Venue. In the event that any party hereto commences a lawsuit or other proceeding relating to or arising from this Escrow Agreement, the parties hereto agree that the United States District Court for the State of Delaware shall have the sole and exclusive jurisdiction over any such proceeding. If such court lacks federal subject matter jurisdiction, the parties agree that the Circuit Court in and for State of Delaware shall have sole and exclusive jurisdiction. Any of these courts shall be proper venue for any such lawsuit or judicial proceeding and the parties hereto waive any objection to such venue. The parties hereto consent to and agree to submit to the jurisdiction of any of the courts specified herein and agree to accept service of process to vest personal jurisdiction over them in any of these courts.

14.Notice. All notices, approvals, consents, requests, and other communications hereunder shall be in writing and shall be deemed to have been given when the writing is delivered if given or delivered by hand, overnight delivery service or facsimile transmitter (with confirmed receipt) to the address or facsimile number set forth on Exhibit A hereto, or to such other address as each party may designate for itself by like notice, and shall be deemed to have been given on the date deposited in the mail, if mailed, by first-class, registered or certified mail, postage prepaid, addressed as set forth on Exhibit A hereto, or to such other address as each party may designate for itself by like notice.

15.Amendment or Waiver. This Escrow Agreement may be changed, waived, discharged or terminated only by a writing signed by Boustead, SI Securities, Issuer, and Escrow Agent. No delay or omission by any party in exercising any right with respect hereto shall operate as a waiver. A waiver on any one occasion shall not be construed as a bar to, or waiver of, any right or remedy on any future occasion.

16.Severability. To the extent any provision of this Escrow Agreement is prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining

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provisions of this Escrow Agreement.

17.Governing Law. This Escrow Agreement shall be construed and interpreted in accordance with the internal laws of the State of Delaware without giving effect to the conflict of laws principles thereof.

18.Entire Agreement. This Escrow Agreement constitutes the entire agreement between the parties relating to the acceptance, collection, holding, investment and disbursement of the Escrow Funds and sets forth in their entirety the obligations and duties of the Escrow Agent with respect to the Escrow Funds.

19.Binding Effect. All of the terms of this Escrow Agreement, as amended from time to time, shall be binding upon, inure to the benefit of and be enforceable by the respective successors and assigns of Boustead, SI Securities, Issuer and Escrow Agent.

20.Execution in Counterparts. This Escrow Agreement may be executed in two or more counterparts, which when so executed shall constitute one and the same agreement.

21.Termination. Upon the first to occur of the disbursement of all amounts in the Escrow Funds or deposit of all amounts in the Escrow Funds into court pursuant to Section 5 or Section 8 hereof, this Escrow Agreement shall terminate and Escrow Agent shall have no further obligation or liability whatsoever with respect to this Escrow Agreement or the Escrow Funds.

22.Dealings. The Escrow Agent and any stockholder, director, officer or employee of the Escrow Agent may buy, sell, and deal in any of the securities of the Issuer and become pecuniarily interested in any transaction in which the Issuer may be interested, and contract and lend money to the Issuer and otherwise act as fully and freely as though it were not Escrow Agent under this Escrow Agreement. Nothing herein shall preclude the Escrow Agent from acting in any other capacity for the Issuer or any other entity.

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IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to be executed under seal as of the date first above written.


        

By:
 
Name:
Soliton, Inc.
Title:
 
 
 
BMTC DE, as Escrow Agent
 
 
By:
 
Name:
Robert W. Eaddy
Title:
Presidednt
 
 
SI SECURITIES, LLC
 
 
By:
 
Name:
James Han
Title:
Manager
 
 
BOUSTEAD SECURITIES, LLC.
 
 
By:
 
Name:
 
Title:
 

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EXHIBIT A


1.
Definitions:
 
“Minimum Offering” means $______________ of Securities (including both offline and online investments through SI     Securities, Boustead, or otherwise).
 
 
 
 
2.
Offering Type
 
"Regulation A"
 
 
 
 
3.
ACH/Wire instructions
 
Bank Name        Bryn Mawr Trust Company
Address                      801 Lancaster Ave, Bryn Mawr PA 19010
Routing Number    031908485
Account Number    069-6964
Account Name        Trust Funds
Further Instructions    SeedInvest – Soliton
 
 
 
 
4.
Escrow Agent Fees
 
 
 
 
 
 
 
Escrow Administration Fee:
$100.00 for each break letter after the first four $750.00 escrow account fee    
 
 
 
 
 
The fees quoted in this schedule apply to services ordinarily rendered in the administration of an Escrow Account and are subject to reasonable adjustment based on final review of documents, or when the Escrow Agent is called upon to undertake unusual duties or responsibilities, or as changes in law, procedures, or the cost of doing business demand. Services in addition to and not contemplated in this Escrow Agreement, including, but not limited to, document amendments and revisions, non-standard cash and/or investment transactions, calculations, notices and reports, and legal fees, will be billed as extraordinary expenses.

Extraordinary fees are payable to the Escrow Agent for duties or responsibilities not expected to be incurred at the outset of the transaction, not routine or customary, and not incurred in the ordinary course of business. Payment of extraordinary fees is appropriate where particular inquiries, events or developments are unexpected, even if the possibility of such things could have been identified at the inception of the transaction.

Unless otherwise indicated, the above fees relate to the establishment of one escrow account. Additional sub-accounts governed by the same Escrow Agreement may incur an additional charge. Transaction costs include charges for wire transfers, internal transfers and securities transactions.




5.
Notice Addresses
 
 
 
 
If to issuer at:
 
 
ATTN:             
Telephone:             
E-mail:
 
 
 
If to the Escrow
Agent at:
 
The Bryn Mawr Trust Company
20 Montchanin Road, Suite 100
Greenville, DE 19807
ATTN: Robert W. Eaddy    
Telephone: 302-798-1792
E-mail: readdy@bmtc.com 
 
 
 
If to SI Securities, LLC at:
 
 
222 Broadway, 19th Fl.
New York, NY 10038
ATTN: Ryan M. Feit
Telephone: 646.291.2161 ext. 700
 
 
 
If to Boustead Securities, LLC at:
 
 
ATTN:             
Telephone:             
E-mail:



Exhibit 11.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the inclusion in this Offering Statement on Form 1-A (Amendment No. 3) of our report dated February 2, 2018 relating to the financial statements of Soliton, Inc. as of December 31, 2017 and 2016 and the years then ended. We also consent to the reference to our firm under the heading "Experts" appearing therein.

/s/ GBH CPAs, PC
 
GBH CPAs, PC
www.gbhcpas.com
Houston, Texas
August 9, 2018