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Table of Contents
As filed with the U.S. Securities and Exchange
Commission on September 18, 2023
Registration No. 333-273930
UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
Pre-Effective
Amendment No. 2
to
Form S-1/A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
INTRUSION INC.
(Exact name of registrant as specified in its charter)
Delaware |
|
3576 |
|
75-1911917 |
(State or other jurisdiction
of incorporation or organization) |
|
(Primary Standard Industrial
Classification Code Number) |
|
(I.R.S. Employer
Identification Number) |
101 East Park Blvd, Suite 1200
Plano, Texas 75074
Telephone: (972) 234-6400
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Anthony Scott
Chief Executive Officer
Intrusion Inc.
101 East Park Blvd, Suite 1200
Plano, Texas 75074
Telephone: (972) 234-6400
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
Laura Anthony, Esq.
Craig D. Linder, Esq.
Anthony L.G., PLLC
625 N. Flagler Drive, Suite 600
West Palm Beach, Florida 33401
Telephone: (561) 514-0936 |
|
Robert F. Charron, Esq.
Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas
New York, New York 10105
Telephone: (212) 370-1300
|
Approximate date of commencement of proposed sale
to the public: As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this
Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.
☒
If this Form is filed to register additional securities
for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed
pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed
pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ |
Accelerated filer ☐ |
Non-accelerated filer ☒ |
Smaller reporting company ☒ |
|
Emerging growth company ☐ |
If an emerging growth company, indicate by check
market if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
The registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which
specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to Section 8(a)
may determine.
The information in this preliminary
prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the U.S. Securities
and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer
to buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION
DATED SEPTEMBER 18, 2023
Preliminary Prospectus
![](https://www.sec.gov/Archives/edgar/data/736012/000168316823006524/image_001.jpg)
Intrusion Inc.
Up to 23,750,000 Units, each consisting
of
One Share of Common Stock or One Pre-Funded
Warrant to Purchase One Share of Common Stock
and
One Warrant to Purchase One Share of Common
Stock
Placement Agent Warrants to Purchase up to
2,375,000 Shares of Common Stock
Up to 49,875,000 Shares of Common Stock
Underlying the Warrants,
Pre-Funded Warrants, and Placement Agent Warrants
We are offering up to 23,750,000
units (“Units”), each Unit consisting of (i) one share of common stock, par value $0.01 per share, and (ii) one warrant
with a five-year term to purchase one share of common stock at an exercise price of $0.44 per share (110% of the offering price
per Unit) (“Warrant”) on a best-efforts basis. We are offering each Unit at an assumed public offering price of $0.40 per
Unit, equal to the closing price of our common stock on the Nasdaq Capital Market on September 15, 2023. Each Warrant will be
immediately exercisable for one share of common stock at an assumed exercise price of $0.44 per share (not less than 110% of the
public offering price of each Unit sold in this offering). The actual public offering price per Unit will be determined between us, Joseph
Gunnar & Co., LLC (“Joseph Gunnar” or the “Placement Agent”) and the investors in the offering, and may be
at a discount to the current market price of our common stock. Therefore, the assumed public offering price used throughout this prospectus
may not be indicative of the final offering price.
We are also offering to each
purchaser of Units that would otherwise result in the purchaser’s beneficial ownership exceeding 4.99% of our outstanding common
stock immediately following the consummation of this offering, the opportunity to purchase Units consisting of one pre-funded warrant
to purchase one share of common stock (“Pre-Funded Warrant”) (in lieu of one share of common stock) and one Warrant. Subject
to limited exceptions, a holder of Pre-Funded Warrants will not have the right to exercise any portion of its Pre-Funded Warrants if the
holder, together with its affiliates, would beneficially own in excess of 4.99% (or, at the election of the holder, such limit may be
increased to up to 9.99%) of the number of common stock outstanding immediately after giving effect to such exercise. Each Pre-Funded
Warrant will be exercisable for one share of common stock. The purchase price of each Unit including a Pre-Funded Warrant will be equal
to the price per Unit including one share of common stock, minus $0.001, and the remaining exercise price of each Pre-Funded Warrant will
equal $0.001 per share. The Pre-Funded Warrants will be immediately exercisable (subject to the beneficial ownership cap) and may be exercised
at any time until all of the Pre-Funded Warrants are exercised in full. For each Unit including a Pre-Funded Warrant we sell (without
regard to any limitation on exercise set forth therein), the number of Units including a share of common stock we are offering will be
decreased on a one-for-one basis. The common stock and Pre-Funded Warrants, if any, can each be purchased in this offering only with the
accompanying Warrant as part of a Unit, but the components of the Units will immediately separate upon issuance. We are also registering
the common stock issuable from time to time upon exercise of the Pre-Funded Warrants and the Warrants included in the Units offered hereby.
See “Description of Securities — Description of Securities We Are Offering” in this prospectus for more
information.
This offering will terminate
on ____________, 2023, unless we decide to terminate the offering (which we may do at any time in our discretion) prior to that date.
We will have one closing for all the securities purchased in this offering. The public offering price per Unit will be fixed for the duration
of this offering.
Our common stock is listed
on the Nasdaq Capital Market (“Nasdaq”) under the symbol “INTZ”. On September 15, 2023, the closing sale
price of our common stock was $0.40 per share, as reported by Nasdaq.
There is no established
trading market for the Units, Pre-Funded Warrants, or the Warrants. We have applied to list the Warrants (forming part of the
Units offered hereby) on the Nasdaq under the symbol “INTZW.” We do not intend to list the Units or Pre-Funded Warrants on
any securities exchange or other trading market. We do not expect an active trading market to develop for the Units or Pre-Funded Warrants.
Without an active trading market, the liquidity of these securities will be limited.
We are also seeking to register
the issuance of Warrants to purchase 2,375,000 shares of common stock (the “Placement Agent Warrants”) to the Placement
Agent (including the common stock forming part of the Units and the common stock underlying the Warrants and Pre-Funded Warrants forming
part of the Units) (assuming the Units are only sold to investors introduced by the Placement Agent), as well as 2,375,000 shares
of common stock issuable upon exercise by the Placement Agent of the Placement Agent Warrants at an exercise price of $0.50 per
share (125% of public offering price).
There is no minimum number
of Units or minimum aggregate amount of proceeds for this offering to close. We expect this offering to be completed not later than two
business days following the commencement of this offering and we will deliver all securities to be issued in connection with this offering
delivery versus payment (“DVP”)/receipt versus payment (“RVP”)/DWAC upon receipt of investor funds received by
the Company. Accordingly, neither we nor the Placement Agent have made any arrangements to place investor funds in an escrow account or
trust account since the placement agent will not receive investor funds in connection with the sale of the securities offered hereunder.
We are a “smaller
reporting company,” as defined under the U.S. federal securities laws and, as such, we have elected to comply with certain reduced
public company reporting requirements for this prospectus and future filings.
Investing in our securities
is speculative and involves a high degree of risk. You should carefully consider the risk factors beginning on page 12 of this prospectus
before investing in our securities.
|
|
Per
Unit
consisting
of common
stock and
Warrant |
|
|
Per
Unit
consisting
of pre-funded
warrant and
Warrant |
|
|
Total |
|
Assumed Public Offering Price
(1) (2) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Placement Agent fees (3) (4) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Proceeds, before expenses, to us |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
Calculated
based on an assumed offering price of $0.40, which represents the closing sales price on the Nasdaq Capital Market of the registrant’s
common stock on September 15, 2023 and assuming no Units with Pre-Funded Warrants are sold in this offering. This amount will decrease
by $0.001 for each Unit including a Pre-Funded Warrant sold in this offering. |
|
(2) |
The
public offering price corresponds to (x)(i) a public offering price per share of $ and
(ii) a public offering price per Warrant of $0.01, and (y)(i) a public offering price per Pre-Funded Warrant of $ and
(ii) a public offering price per Warrant of $0.01. |
|
(3) |
The
placement agent fees shall equal (i) eight percent (8%) of the gross proceeds of the securities sold by us in this offering to investors
introduced by the Placement Agent or (ii) a fee equal to four percent (4%) of the gross proceeds of the securities sold by us in
this offering to investors (friends and family) introduced by us. The calculation above is based on the assumption that all shares
sold in this offering were to investors introduced by the Placement Agent. Proceeds to the Company will be higher if any shares sold
in this offering were to investors introduced by us. |
|
(4) |
The Placement Agent will receive compensation in addition to the placement agent fees described above. See “Plan of Distribution” for a description of compensation payable to the Placement Agent. |
We have engaged the Placement
Agent as our exclusive placement agent to use its reasonable best efforts to solicit offers to purchase our securities in this offering.
The Placement Agent has no obligation to purchase any of the securities from us or to arrange for the purchase or sale of any specific
number or dollar amount of the securities. Because there is no minimum offering amount required as a condition to closing in this offering
the actual public amount, placement agent’s fee, and proceeds to us, if any, are not presently determinable and may be substantially
less than the total maximum offering amounts set forth above and throughout this prospectus. We have agreed to pay the Placement Agent
the placement agent fees set forth in the table above and to provide certain other compensation to the Placement Agent. See “Plan of Distribution” beginning on page 43 of this prospectus for more information regarding these arrangements.
We expect to deliver the
shares of common stock and Warrants, or Pre-Funded Warrants and Warrants, constituting the Units against payment in New York, New York
on or about , 2023.
Neither the Securities
and Exchange Commission (“SEC”) nor any state securities commission has approved or disapproved of these securities or determined
if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Sole Placement
Agent
JOSEPH
GUNNAR & CO., LLC
The date of this prospectus is _______________,
2023
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
The registration statement of which this prospectus
forms a part that we have filed with the Securities and Exchange Commission, or SEC, includes exhibits that provide more detail of the
matters discussed in this prospectus. You should read this prospectus and the related exhibits filed with the SEC before making your investment
decision.
You should rely only on the
information provided in this prospectus or in a prospectus supplement or any free writing prospectuses or amendments thereto. Neither
we nor the placement agent have authorized anyone else to provide you with different information. We do not, and the placement agent and
its affiliates do not, take any responsibility for, and can provide no assurance as to the reliability of, any information that others
may provide to you. If anyone provides you with different or inconsistent information, you should not rely on it. You should assume that
the information in this prospectus is accurate only as of the date hereof, regardless of the time of delivery of this prospectus or any
sale of securities. Our business, financial condition, results of operations and prospects may have changed since that date.
We are not, and the placement
agent is not, offering to sell or seeking offers to purchase these securities in any jurisdiction where the offer or sale is not permitted.
We and the placement agent have not done anything that would permit this offering or possession or distribution of this prospectus in
any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come
into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the securities
as to distribution of the prospectus outside of the United States.
Unless the context otherwise
requires, references in this prospectus to “Intrusion,” “the Company,” “we,” “us” and
“our” refer to Intrusion, Inc. and our subsidiaries. Solely for convenience, trademarks and tradenames referred to in this
prospectus may appear without the ® or ™ symbols, but such references are not intended to indicate in any way that we will not
assert, to the fullest extent under applicable law, our rights, or that the applicable owner will not assert its rights, to these trademarks
and tradenames.
PROSPECTUS SUMMARY
This prospectus summary
highlights certain information about our company and other information contained elsewhere in this prospectus or in documents incorporated
by reference. This summary does not contain all of the information that you should consider before investing in our securities. You should
carefully read this entire prospectus, and our other filings with the SEC, including the following sections, which are either included
herein and/or incorporated by reference herein, “Risk Factors,” “Special Note Regarding Forward-Looking Statements,”
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial
statements incorporated by reference herein, before making a decision about whether to invest in our securities.
Company Overview
Our Business
Intrusion,
Inc. is a cybersecurity company based in Plano, Texas. We offer our customers access to our exclusive threat intelligence database containing
the historical data, known associations, and reputational behavior of over 8.5 billion Internet Protocol (“IP”) addresses.
After years of gathering global internet intelligence and working exclusively with government entities, we released INTRUSION Shield,
our first commercial product, in 2021.
For the fiscal years ended
December 31, 2022 and 2021, we generated revenues of approximately $7,529,000 and $7,277,000, respectively, and reported net loss of
approximately $16,229,000 and $18,802,000, respectively, and cash flow used in operating activities of approximately $13,190,000 and
$16,557,000, respectively. For the six months ended June 30, 2023 and 2022, we generated revenues of approximately $2,777,000 and $3,893,000,
respectively, and reported net loss of approximately $7,863,000 and $8,119,000, respectively, and cash flow used in operating activities
of approximately $3,275,000 and $7,125,000, respectively. As noted in our unaudited financial statements, as of June 30, 2023, we had
an accumulated deficit of $104,189,000 and working capital deficit of $13,889,000. There
is substantial doubt regarding our ability to continue as a going concern as a result of our historical recurring
losses from operations, negative cash flows from operations, net working capital deficiency as well as our dependence on equity
and debt financings. See “Risk Factors—We have a history of operating losses, our management has concluded
that there is substantial doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph
relating to our ability to continue as a going concern in its audit report for the fiscal years ended December 31, 2022 and 2021.”
Our Solutions
INTRUSION Shield™
INTRUSION Shield, our
newest cybersecurity solution is a Zero Trust reputation-based Security-as-a-Service (“SaaS”) solution that inspects and kills
dangerous network (in and outbound) connections. What makes our approach unique is that INTRUSION Shield evaluates
every packet and analyzes the IP addresses (source and destination), as well as domain information and the ports utilized and, when combined
with other threat intelligence data reports, blocks malicious connections. Many breaches today are caused by Zero-Day and malware free
compromises that may not trigger alarms in a traditional firewall or endpoint solution. INTRUSION Shield’s capabilities
are designed to continuously evolve as the threats and landscape change over time. Unlike traditional industry approaches that rely heavily
on signatures, complex rules, and human factors mitigation, which malicious actors and nation states have learned to bypass, INTRUSION Shield’s proprietary
architecture isolates and neutralizes malicious traffic and network flows that existing solutions are ill equipped to handle.
In
September 2022, we expanded the INTRUSION Shield product line to include the Shield Cloud and Shield End-Point
solutions. The initial INTRUSION Shield offering released in early 2021, the Shield On-Premise solution,
utilizes hardware and is placed behind a firewall in a data center. Shield Cloud extends the effectiveness of the Shield On-Premise solution
to Infrastructure as a Service (IaaS), Platform as a Service (PaaS), SaaS and serverless resources in the public cloud. This product serves
as a protective gateway to the cloud, providing both Zero Trust access to, and protecting outbound connections from, virtual hosts and
serverless functions within the cloud. Shield Endpoint helps protect the network outside of the corporate enclave and data center to include
protection for remote workers, mobile, and cloud devices. This product brings the network protection of the Shield On-Premise to these
remote user devices establishing a Zero Trust network, both for intra-organization connectivity and external internet connectivity.
INTRUSION TraceCop®
INTRUSION TraceCop is
a big data tool with extensive IP intelligence canvassing the entire internet. It contains what we believe to be the largest existing
repository of reputation information on known good and known bad active IP addresses (both IPv4 and IPv6). TraceCop contains
an inventory of network selectors and enrichments useful to support forensic investigations. The data contains a history
of IPv4 and IPv6 block allocations and transfers, historical mappings of IP addresses to Autonomous Systems (ASNs) as observed through
BGP, and approximately one billion historically registered domain names and registration context. TraceCop contains
tens of billions of historic DNS resolutions of Fully Qualified Domain Names (FQDNs or hostnames) on each of these domains. Together,
the resulting data shows relationships, hosting, and attribution for internet resources. TraceCop also
contains web server surveys of content, such as natural language and topic of the content on hundreds of millions of websites and servers
and OS fingerprints of services showing applications running on a given IP address. TraceCop also contains a history
of threat and reputation for each hostname and IP address over time. All these features combine to create a very effective network forensics
and cybersecurity analysis tool.
INTRUSION Savant®
INTRUSION Savant is
a network monitoring solution that leverages the rich data available in TraceCop to identify suspicious traffic
in real-time. Savant uses several original patents to uniquely characterize and record all network flows. Savant is
a network reconnaissance and attack analysis tool used by forensic analysts in the DoD, Federal Government, and corporations with in-house
threat research teams. For example, Savant users can create various automated rules to inspect packets matching
(or not) certain criteria such as creating a rule to ensure the Source MAC address field in the Ethernet header and Source IP address
from the IP header are always the same, failing which could indicate MAC or IP Spoofing in progress. Similarly, threat investigators can
create rules using regular expressions to analyze multiple fields in the packet headers.
Our Intellectual Property
and Licenses
Our
success and our ability to compete are primarily dependent upon our proprietary technology. We principally rely on a combination of contractual
rights, trade secrets and copyright laws to establish and protect our proprietary rights in our solutions. In addition, we have received
two patents. We have also entered into non-disclosure agreements with our suppliers, resellers, and certain customers to limit access
to and disclosure of our proprietary information. There can be no assurance that the steps taken by us to protect our intellectual property
will be adequate to prevent misappropriation of our technology or that our competitors will not independently develop technologies that
are substantially equivalent or superior to our technology, although it would be extremely difficult to replicate the proprietary and
comprehensive internet databases we have developed over the past 26 years.
We
have entered into software and solution license agreements with various suppliers. These license agreements provide us with additional
software and hardware components that add value to our cybersecurity solutions. These license agreements do not provide proprietary rights
that are unique or exclusive to us and are generally available to other parties on the same or similar terms and conditions, subject to
payment of applicable license fees and royalties. We do not consider any of the solution license, software, or supplier agreements to
be material to our business, instead, they are complementary to our business and offerings.
Our Competition
The
market for network and data protection security solutions is intensely competitive and subject to frequent introductions of new technologies,
and potentially improved price and performance characteristics. Industry suppliers compete in areas such as conformity to existing and
emerging industry standards, interoperability with networking and other cybersecurity solutions, management and security capabilities,
performance, price, ease of use, scalability, reliability, flexibility, features and technical support. Our principal competitors in the
data mining and advanced persistent threat market include Niksun, NetScout, and Darktrace.
There
are numerous companies competing in various segments of the data security market. At this time, we have little or no competitors for TraceCop;
however, we believe competitors could emerge in the future. These competitors currently perform only a portion of the functions that we
can perform with TraceCop. We have been continuously collecting the TraceCop data for more
than twenty years, and we believe that none of our current or future competitors will have the ability to provide and reference this historical
data. In our newest market segment, data mining and advanced persistent threat detection, we compete directly and indirectly with companies
and open-source technologies in the firewall, intrusion detection and prevention, anti-virus, network analysis, endpoint protection, and
insider threat prevention areas of cybersecurity technology.
We
believe the INTRUSION Shield product line is novel and unique in our industry because of our proprietary
threat-enriched big data. We believe that our INTRUSION Shield family of solutions complement our customer’s
existing cybersecurity processes and third-party solutions. If the INTRUSION Shield receives widespread acceptance
in the market, we anticipate that other businesses will seek to compete with INTRUSION Shield; however, we believe
our existing, mature, and proprietary database which is integral to the operation of INTRUSION Shield will
be difficult, if not impossible, for other companies in our industry to replicate and will be a significant barrier to entry of competitors
in the near- and long-term future of cyber security solutions.
Our Customers: Government
Sales
Sales
to U.S. government customers accounted for 65.8% of our revenues for the year ended December 31, 2022, compared to 71.4% of our revenue
in 2021. We expect to continue to derive a substantial portion of our revenues from sales to governmental entities in the future as we
continue to market our products and data mining products to the government, and we intend to market INTRUSION Shield not
only to our long-standing governmental customer base but to expand our efforts to include more traditionally administrative and civilian
governmental entities. Sales to government clients present risks in addition to those involved in sales to commercial customers that could
adversely affect our revenues, including potential disruption due to irregularities in or interruptions to appropriation and spending
patterns, delays in approving a federal budget and the government’s reservation of the right to cancel contracts and purchase orders
for its convenience.
We
make our sales under purchase orders and contracts. Our customers, including government customers, may cancel their orders or contracts
with little or no prior notice and without penalty. Although we transact business with various government entities, we believe that the
cancellation of any order in itself could have a material adverse effect on our financial results. Because we derive and expect to continue
to derive a substantial portion of our revenue from sales to government entities, a large number of cancelled or renegotiated government
orders or contracts could have a material adverse effect on our financial results.
Third-Party Products
We
currently utilize commercially available computers and servers from various vendors which we integrate with our software products for
implementation into our customer networks. We do not consider any of these third party relationships to be material to the Company’s
business or results of operations.
Customer Services
Our
solution sales may include installation, operation of our technology and threat data interpretation and reporting.
Sales, Marketing and
Customers
Field
Sales Force. Our sales organization focuses on major account sales, channel partners including distributors, value added
resellers (VARs) and integrators; promotes our solutions to current and potential customers; and monitors evolving customer requirements.
The field sales and technical support force provides training and technical support to our resellers and end users and assists our customers
in designing cyber secure data networking solutions. We currently conduct sales and marketing efforts from our principal office in Plano,
Texas.
Resellers. Resellers
such as domestic and international system integrators and VARs sell our solutions as stand-alone solutions to end users and integrate
our solutions with products sold by other vendors into network security systems that are sold to end users. Our field sales force and
technical support organization provide support to these resellers. Our agreements with resellers are non-exclusive, and our resellers
generally sell other products and solutions that may compete with our solutions. Resellers may place higher priority on products or solutions
of other suppliers who are larger and have more name recognition, and there can be no assurance that resellers will continue to sell and
support our solutions.
Foreign
Sales. Export sales did not account for any revenue in 2022 and 2021.
Marketing. We
have implemented several methods to market our solutions, including participation in trade shows and seminars, distribution of sales literature
and solution specifications and ongoing communication with our resellers and installed base of end-user customers.
Customers. Our
end-user customers include United States (“U.S”) federal government, state and local government entities, large and diversified
conglomerates, and manufacturing entities. Sales to certain customers and groups of customers can be impacted by seasonal capital expenditure
approval cycles, and sales to customers within certain geographic regions can be subject to seasonal fluctuations in demand.
In
2022, 65.8% of our revenue was derived from a variety of U.S. government entities through direct sales and indirectly through system integrators
and resellers. These sales are attributable to seven U.S. Government customers through direct and indirect channels; three U.S government
customers individually exceeded 10% of total revenue in 2022. A reduction in our sales to U.S. government entities could have a material
adverse effect on our business and operating results if not replaced.
Backlog. We
believe that only a small portion of our order backlog is non-cancelable, and that the dollar amount associated with the non-cancelable
portion is immaterial. Commercial orders are generally fulfilled within two days to two weeks following receipt of an order. Certain orders
may be scheduled over several months, generally not exceeding one year.
Customer
Support, Service and Warranty. We service, repair, and provide technical support for our solutions. Our field sales and technical
support force works closely with resellers and end-user customers on-site and by telephone to assist with pre- and post- sales support
services such as network security design, system installation and technical consulting. By working closely with our customers, our employees
increase their understanding of end-user requirements and are then able to provide specific input in our solution development process.
We
warrant all our solutions against defects in materials and workmanship for periods ranging from 90 days to 36 months. Before and after
expiration of the solution warranty period, we offer both on-site and factory-based support, parts replacement, and repair services. Extended
warranty services are separately invoiced on a time and materials basis or under an annual maintenance contract.
Recent Developments
Amendment
to Promissory Notes Issued to Streeterville Capital, LLC
On
January 11, 2023, the Company entered into an amendment (the “Amendment”) of certain promissory notes pursuant to the Securities
Purchase Agreement dated March 10, 2022 (the Purchase Agreement”), between the Company and Streeterville Capital, LLC, a Utah limited
liability company (the “Streeterville”). The Company had previously sold and issued to Streeterville certain promissory notes,
dated March 10, 2022 (“Note #1”), and June 29, 2022 (“Note #2”) (collectively, the “Notes”) pursuant
to the Purchase Agreement (the Notes and Purchase Agreement collectively referred to as the “Transaction Documents”). The
principal purpose of the Amendment was to temporarily defer Streeterville from making redemptions under the Transaction Documents for
the period beginning on January 11, 2023, and ending on March 31, 2023, in exchange for a fee equal to 3.75% of the outstanding balance
of each of the Notes, and the Amendment made certain other amendments to the Transaction Documents. The fee was added to the outstanding
principal balance of each Note as of January 11, 2023.
Issuance
of Secured Promissory Note to Streeterville Capital, LLC
On
February 23, 2023, the Company entered into a note purchase agreement with Streeterville Capital, LLC (“Streeterville”), pursuant
to which, among other things, Streeterville purchased from the Company a secured promissory note (the “Secured Promissory Note”)
in the aggregate principal amount of $1.4 million plus certain reimbursed expenses in exchange for $1.3 million to the Company. Under
the Secured Promissory Note, the Company shall make principal payments to Streeterville in
the amount $50,000 per week each week prior to its maturity on March 31, 2023. No interest accrues on the balance of the Secured
Promissory Note prior to maturity. In connection with the issuance of the Secured Promissory
Note, the Company and Streeterville also entered into a security agreement, which provides, according
to its terms, a security interest in all employee retention credits or other funds, earned, owed or otherwise payable to the Company under
the Cares Act
Repayment
of Secured Promissory Note of Streeterville Capital, LLC
On
March 14, 2023, the Company repaid in full and in advance of the maturity date the Secured Promissory Note with
Streeterville Capital, LLC, dated February 23, 2023. The aggregate principal amount of the note was $1.4 million. The Secured Promissory
Note was subject to a security agreement which provided a security interest in all employee retention
credits (“ERC”) or other funds, earned, owed or otherwise payable to Intrusion under the Cares Act. The Company received payment
for the ERC owed to the Company on March 13, 2023.
Amendment
to Executive Employment Agreement of Anthony Scott
On
March 27, 2023, the Company and Anthony Scott, the President and Chief Executive Officer of the Company, entered into an Amendment to
the Executive Employment Agreement, dated December 1, 2021, between the Company and Mr. Scott providing for a temporary reduction of Mr.
Scott’s annualized base salary in the amount of $106,250 during the period beginning March 24, 2023, to September 22, 2023, and
granted an award of options to purchase 131,715 shares of Common Stock. The options vest one-year from the date of the award and state
an exercise price of $1.21 per share.
Deficiency Notice
from Nasdaq
On
April 28, 2023, the Company received written notice (the “Notice”) from the Listing Qualifications Department (the “Staff”)
of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, for the last 30 consecutive business days, the Company’s
Market Value of Listed Securities (“MVLS”) was below the minimum of $35 million required for continued listing on the Nasdaq
Capital Market pursuant to Nasdaq Listing Rule 5550(b)(2) (the “Market Value Standard”). The Staff also noted that the Company
does not meet the requirements under Nasdaq Listing Rules 5550(b)(1) (Equity Standard) and 5550(b)(3) (Net Income Standard).
The
Notice provided that, in accordance with Nasdaq Listing Rule 5810(c)(3)(C) (the “Compliance Period Rule”), the Company has
a period of 180 calendar days from the date of the Notice, or until October 25, 2023 (the “Compliance Date”), to regain compliance
with the Market Value Standard. During this period, the Company’s common stock will continue to trade on the Nasdaq Capital Market.
If at any time before the Compliance Date the Company’s MVLS closes at or above $35 million for a minimum of 10 consecutive business
days as required under the Compliance Period Rule, the Staff will provide written confirmation of compliance and will close the matter.
In
the event the Company does not regain compliance with the Market Value Standard by the Compliance Date, the Staff will provide a written
notification to the Company that its common stock will be subject to delisting. At that time, the Company may appeal the Staff’s
delisting determination to a Hearings Panel (the “Panel”). However, there can be no assurance that, if the Company receives
a delisting notice and appeals the delisting determination by the Staff to the Panel, such appeal would be successful.
The
Company intends to monitor its MLVS between now and the Compliance Date, and may, if appropriate, evaluate available options to resolve
the deficiency under the Market Value Standard and regain compliance with the Market Value Standard. The Company may also try to comply
with another Nasdaq listing criteria, such as the one under Nasdaq Listing Rule 5550(b)(1) (Equity Standard). However, there can be no
assurance that the Company will be able to regain or maintain compliance with the Nasdaq listing criteria.
Approval of 2023
Employee Stock Purchase Plan
On
April 12, 2023, the board of directors of the Company approved the 2023 Employee Stock Purchase Plan (2023 ESPP) to enable its employees
to purchase shares of its common stock through voluntary payroll deductions. As of May 16, 2023, a majority of the stockholders of the
Company approved the 2023 ESPP.
Approval of Amendment
to 2021 Omnibus Stock Incentive Plan
On
March 27, 2023, the board of directors of the Company approved an amendment (the “Amendment”) to the 2021 Omnibus Incentive
Plan (the “Plan”), which made the following material changes to the Plan (as amended by the Amendment, the “Amended
Plan”): (1) permits the Compensation Committee to recognize the existence of special circumstances with the approval of the Board
of Directors; and, (2) under such special circumstances, issue awards not otherwise subject to the attainment of a performance criteria
to vest during a period less than one (1) year. As of May 16, 2023, a majority of the stockholders of the Company approved the Amended
Plan.
Employment Separations
– Chief Operating Officer and Chief Strategy Officer
On
May 19, 2023, the Company and its Chief Operating Officer, Christopher Duzich, mutually agreed to a separation of employment. Mr. Duzich’s
separation of employment was not due to a dispute or disagreement with the Company or its management. Mr. Duzich’s employment as
Chief Operating Officer ceased as of the close of business on May 19, 2023. The Company does not intend to fill the Chief Operating Officer
role at this time, and Mr. Duzich’s responsibilities will be overseen by other members of the Company’s management team.
On
May 19, 2023, the Company and its Chief Strategy Officer, Ross Mandel, mutually agreed to a separation of employment. Mr. Mandel’s
separation of employment was not due to a dispute or disagreement with the Company or its management. Mr. Mandel’s employment as
Chief Strategy Officer ceased as of the close of business on May 19, 2023. The Company does not intend to fill the Chief Strategy Officer
role at this time, and Mr. Mandel’s responsibilities will be overseen by other members of the Company’s management team.
Forbearance and Standstill
– Streeterville Notes
On August
2, 2023, the Company and Streeterville entered into a Forbearance and Standstill Agreement (the “Forbearance Agreement”) under
which both parties agreed to extend the maturity date of each Note by 12 months. The maturity date of Note #1 is now September 10, 2024,
and the maturity date of Note #2 is now December 29, 2024.
On August
7, 2023, the Company and Streeterville entered into an amendment to the Forbearance Agreement (“Forbearance Amendment”) under
which Streeterville will not seek to redeem any portion of either Note for 180 days from the date on which the Company closes on the sale
of common stock in a best-efforts public offering (“Qualified Public Offering”) registered under the Securities Act of 1933
for aggregate proceeds of not less than $5,000,000, so long as the Qualified Public Offering occurs on or before October 1, 2023 (the
“Standstill”). If a Qualified Public Offering does not occur by October 1, 2023, the Standstill shall not take effect. Upon
the expiration of the Standstill, redemption obligations under the Notes would resume, in addition to weekly cash payments to Streeterville
in the amount of $50,000.00 due in the aggregate under the Notes via ACH withdrawal.
In consideration
of the extension of the maturity dates and the Standstill, the Company entered into a Security Agreement (Exhibit A to the Forbearance
Agreement which is an Exhibit to the registration statement of which this prospectus forms a part) with Streeterville, dated August 2,
2023 (the “Security Agreement”), under which Streeterville was granted a first-position security interest in the property
described in Schedule A to the Security Agreement (the “Collateral”), subject to dispositions in the ordinary course of such
Collateral. The Collateral would include, among other properties and interests, all customer accounts, goods and equipment, inventory,
accounts receivable, trademarks, inventions, contract rights, royalties, license rights, cash, deposit accounts, and all other assets,
goods and personal property of the Company.
Copies of the Forbearance
Agreement and Forbearance Amendment are attached hereto as Exhibits 10.24 and 10.25, respectively, and incorporated herein by reference.
The foregoing description of the terms of the Forbearance Agreement and Forbearance Amendment are qualified in their entirety by reference
to the full text of the Forbearance Agreement, the Forbearance Amendment, and the Exhibits thereto.
Corporate Information
Intrusion, Inc. was organized
in Texas in September 1983 and reincorporated in Delaware in October 1995. On October 9, 2020, our shares of common stock began trading
on the Nasdaq Capital Market under the symbol “INTZ.” Our principal executive offices are located at 101 East Park Blvd, Suite
1200, Plano, Texas 75074, and our telephone number is (972) 234-6400. Our corporate website address is www.intrusion.com. The information
contained on, or accessible through, our website is not incorporated in, and shall not be part of, this prospectus. TraceCop
(“TraceCop™”) and Intrusion Savant (“Intrusion Savant™”) are registered
trademarks of Intrusion.
THE OFFERING
Issuer |
Intrusion, Inc. |
|
|
Securities offered by us |
Up to 23,750,000 Units on a best-efforts
basis. Each Unit consists of (i) one share of common stock and (ii) one Warrant to purchase one share of common stock (together with
the common stock underlying the Warrants).
We are also offering to each purchaser, with respect
to the purchase of Units that would otherwise result in the purchaser’s beneficial ownership exceeding 4.99% of our outstanding
common stock immediately following the consummation of this offering, the opportunity to purchase one Pre-Funded Warrant in lieu of one
share of common stock. Subject to limited exceptions, a holder of Pre-Funded Warrants will not have the right to exercise any portion
of its Pre-Funded Warrant if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or, at the election
of the holder, such limit may be increased to up to 9.99%) of the number of common stock outstanding immediately after giving effect to
such exercise. Each Pre-Funded Warrant will be exercisable for one share of common stock. The purchase price per Pre-Funded Warrant will
be equal to the price per share of common stock, minus $0.001, and the exercise price of each Pre-Funded Warrant will equal $0.001 per
share. The Pre-Funded Warrants will be immediately exercisable (subject to the beneficial ownership cap) and may be exercised at any time
in perpetuity until all of the Pre-Funded Warrants are exercised in full.
The Units will not be certificated or issued in
stand-alone form. The common stock and/or Pre-Funded Warrants and the Warrants comprising the Units are immediately separable upon issuance
and will be issued separately in this offering. |
|
|
Description of the Warrants and Pre-Funded Warrants |
Each Warrant will have an assumed exercise price of $0.44 per
share (not less than 110% of the public offering price of each unit sold in this offering), will be exercisable upon issuance and
will expire five years from issuance. Each Pre-Funded Warrant will have an exercise price of $0.001 per share, will be immediately
exercisable (subject to the beneficial ownership cap) and may be exercised at any time in perpetuity. Each Warrant and
Pre-Funded Warrant is exercisable for one share of common stock, subject to adjustment in the event of stock dividends, stock splits,
stock combinations, reclassifications, reorganizations or similar events affecting our common stock as described herein. The terms
of the Warrants will be governed by a Warrant Agency Agreement, dated as of the closing date of this offering, that we expect to
be entered into between us and Computershare Trust Company N.A., or its affiliate (the “Warrant Agent”). This prospectus
also relates to the offering of the common stock issuable upon exercise of the Warrants and Pre-Funded Warrants. For more information
regarding the Warrants and Pre-Funded Warrants, you should carefully read the section titled “Description of Securities –
Description of Securities We are Offering” in this prospectus. |
|
|
Placement Agent Warrant |
The registration statement of which this prospectus is a part also
registers for sale warrants to purchase up to 2,375,000 shares of our common stock (5% of the shares of common stock forming
part of the Units sold to investors introduced by the Placement Agent in this offering and 5% of the shares of common stock underlying
the Pre-Funded Warrants and Warrants forming part of the Units sold in this offering) to be issued to the Placement Agent or its
designee, as a portion of the placement agent compensation payable in connection with this offering. Notwithstanding the foregoing,
to the extent the Units sold in the offering were sold to investors (friends and family) introduced by us (as listed in Exhibit A
to the engagement letter, dated June 19, 2023, between the Placement Agent and us), as amended, we shall only issue to Placement
Agent 2.5% of the shares of common stock forming part of the Units sold to investors introduced by the Placement Agent in this offering
and 2.5% of the shares of common stock underlying the Pre-Funded Warrants and Warrants forming part of the Units sold in this offering.
The warrants will be exercisable at any time, and from time to time, in whole or in part, commencing from the closing of the offering
and expiring five (5) years from the commencement of sales of the offering, at an exercise price of $0.50 (125% of the assumed
public offering price of the Units). Please see “Plan of Distribution—Placement Agent Warrants”
for a description of these warrants. |
Size of Offering |
$9,500,000 |
|
|
Assumed Price Per Unit |
$0.40 per Unit including
one share of common stock (or $0.399 per Unit including one Pre-Funded Warrant in lieu of one share of common stock) |
|
|
Common stock outstanding prior to this offering (1) |
24,060,199 shares |
|
|
Common stock to be outstanding after this offering (1) |
Up to approximately 47,810,199 shares (assuming no issuance
of Pre-Funded Warrants and no exercise of Common Warrants offered in this offering). |
|
|
Use of proceeds |
Assuming the maximum number of Units are sold in this offering at an
assumed public offering price of $0.40 per Unit, which represents the closing price of our common stock on Nasdaq on September 15, 2023,
and assuming no issuance of Units including Pre-Funded Warrants in connection with this offering or exercise of the Warrants offered in
this offering, we estimate the net proceeds of the offering will be approximately $8,418,999, after deducting cash expenses relating to
this offering payable by us estimated at approximately $1,081,001, including Placement Agent fees (assuming all investors were introduced
by the Placement Agent) of approximately $950,000 and offering expenses of $131,001. However, this is a best-efforts offering with no
minimum number of securities or amount of proceeds as a condition to closing, and we may not sell all or any of these securities offered
pursuant to this prospectus; as a result, we may receive significantly less in net proceeds. We expect to use the net proceeds from this
offering for working capital and general corporate purposes; provided, however, to the extent we receive gross proceeds greater than or
equal to $8,000,000, we may use net proceeds to repay up to $3,000,000 of outstanding indebtedness to Streeterville Capital, LLC. It is
possible that, pending their use, we may invest the net proceeds in a way that does not yield a favorable, or any, return for us. See “Use of Proceeds.”
Our management will have broad discretion in the application of the net proceeds, and investors will be relying on our judgment regarding
the application of the net proceeds from this offering. See “Risk Factors” for a discussion of certain risks that may
affect our intended use of the net proceeds from this offering. |
|
|
Listing |
Our common stock currently trades on the Nasdaq Capital Market under
the symbol “INTZ”. We have applied to list our Warrants on the Nasdaq Capital Market under the symbol “INTZW”.
We do not intend to list the Units or Pre-Funded Warrants offered hereunder on any stock exchange. |
|
|
Risk factors |
An investment in our securities is highly speculative and involves a significant degree of risk. See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our securities. |
|
|
Best Efforts Offering |
We have agreed to offer and sell the securities offered hereby to the purchasers through the Placement Agent. The Placement Agent is not required to buy or sell any specific number or dollar amount of the securities offered hereby, but it will use its reasonable best efforts to solicit offers to purchase the securities offered by this prospectus. See “Plan of Distribution” on page 43 of this prospectus. |
|
(1) |
The number of shares of common stock to be
outstanding after this offering is based on 24,060,199 shares of common stock outstanding as of September 15, 2023,
but excludes the following as of such date: |
|
· |
1,212,593 shares of common stock issuable
upon the exercise of outstanding warrants at weighted average exercise price of $5.22 per share; |
|
· | 1,013,094 shares of common stock issuable upon the exercise of outstanding stock options at weighted average exercise price of $3.12
per share; |
|
| |
|
· | 1,638,496 shares of common stock in aggregate reserved for issuance under our 2015 Stock Incentive Plan and 2021 Omnibus Incentive
Plan; |
|
| |
|
· | 239,757 shares of common stock underlying restricted stock awards outstanding; and |
|
| |
|
· | 2,375,000 shares of common stock underlying
the warrants to be issued to the Placement Agent in connection with this offering. |
Unless otherwise indicated, this prospectus reflects
and assumes the following:
| · | no sale of Pre-Funded Warrants in this offering, which, if sold, would reduce the number of common stock
that we are offering on a one-for-one basis; and |
| · | no exercise of the Warrants issued in this offering. |
RISK FACTORS
Investing in our securities involves a
high degree of risk. Prior to making a decision about investing in our securities, you should carefully consider the specific risk
factors discussed in the sections entitled “Risk Factors” contained in our annual report on Form 10-K for the
fiscal year ended December 31, 2022 under the heading “Item 1A. Risk Factors,” and as described or may be
described in any subsequent quarterly report on Form 10-Q under the heading “Item 1A. Risk Factors,” as well as in
any applicable prospectus supplement and contained or to be contained in our filings with the SEC and incorporated by reference in
this prospectus, together with all of the other information contained in this prospectus, or any applicable prospectus supplement.
For a description of these reports and documents, and information about where you can find them, see “Where You Can Find More Information” and “Incorporation of Certain Documents by Reference.” If any of the risks or uncertainties described
in our SEC filings or any prospectus supplement or any additional risks and uncertainties actually occur, our business, financial
condition and results of operations could be materially and adversely affected. In that case, the trading price of our securities
could decline and you might lose all or part of the value of your investment.
Risk Related to our Business
We have a history of operating losses, our
management has concluded that there is substantial doubt about our ability to continue as a going
concern and our auditor has included an explanatory paragraph relating to our ability to continue as a going concern in its
audit report for the fiscal years ended December 31, 2022 and 2021.
To date, we have not been profitable and have
incurred significant losses and cash flow deficits. For the fiscal years ended December 31, 2022 and 2021, we have reported net loss
of approximately $16,229,000 and $18,802,000, respectively, and cash flow used in operating activities of approximately $13,190,000 and
$16,557,000, respectively. For the six months ended June 30, 2023 and 2022, we have reported net loss of approximately $7,863,000 and
$8,119,000, respectively, and cash flow used in operating activities of approximately $3,275,000 and $7,125,000, respectively. As noted
in our unaudited financial statements, as of June 30, 2023, we had an accumulated deficit of $104,189,000 and
working capital deficit of $13,889,000. Our management has concluded that our
historical recurring losses from operations, negative cash flows from operations, working capital deficiency as well as our dependence
on equity and debt financings raise substantial doubt about our ability to continue as a going
concern and our auditor has included an explanatory paragraph relating to our ability to continue as a going concern in its
audit report for the fiscal years ended December 31, 2022 and 2021.
Our financial statements do not include any adjustments
that might result from the outcome of this uncertainty. These adjustments would likely include substantial impairment of the carrying
amount of our assets and potential contingent liabilities that may arise if we are unable to fulfill various operational commitments.
In addition, the value of our securities, including common stock issued in this offering, would be greatly impaired. Our ability to continue
as a going concern is dependent upon generating sufficient cash flow from operations and obtaining additional capital and financing, including
funds to be raised in this offering. If our ability to generate cash flow from operations is delayed or reduced and we are unable to raise
additional funding from other sources, we may be unable to continue in business even if this offering is successful.
We may require additional funding for our
growth plans, and such funding may result in a dilution of your investment.
We attempted to estimate our funding requirements
in order to implement our growth plans. If the costs of implementing such plans should exceed these estimates significantly or if we come
across opportunities to grow through expansion plans which cannot be predicted at this time, and our funds generated from our operations
prove insufficient for such purposes, we may need to raise additional funds to meet these funding requirements.
These additional funds may be raised by issuing
equity or debt securities or by borrowing from banks or other resources. We cannot assure you that we will be able to obtain any additional
financing on terms that are acceptable to us, or at all. If we fail to obtain additional financing on terms that are acceptable to us,
we will not be able to implement such plans fully if at all. Such financing even if obtained, may be accompanied by conditions that limit
our ability to pay dividends or require us to seek lenders’ consent for payment of dividends, or restrict our freedom to operate
our business by requiring lender’s consent for certain corporate actions.
Further, if we raise additional funds by way of
a rights offering or through the issuance of new shares, any shareholders who are unable or unwilling to participate in such an additional
round of fund raising may suffer dilution in their investment.
Risks Related to This Offering and Ownership of Our Securities
Our common stock
may be delisted from The Nasdaq Capital Market if we cannot maintain compliance with Nasdaq’s continued listing requirements.
Our common stock is listed
on the Nasdaq Capital Market. There are a number of continued listing requirements that we must satisfy in order to maintain our
listing on the Nasdaq Capital Market.
On April 28, 2023, the
Company received written notice (the “Notice”) from the Listing Qualifications Department (the “Staff”) of The
Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, for the last 30 consecutive business days, the Company’s
Market Value of Listed Securities (“MVLS”) was below the minimum of $35 million required for continued listing on the Nasdaq
Capital Market pursuant to Nasdaq Listing Rule 5550(b)(2) (the “Market Value Standard”). The Staff also noted that the Company
does not meet the requirements under Nasdaq Listing Rules 5550(b)(1) (Equity Standard) and 5550(b)(3) (Net Income Standard).
The Notice provided that,
in accordance with Nasdaq Listing Rule 5810(c)(3)(C) (the “Compliance Period Rule”), the Company has a period of 180 calendar
days from the date of the Notice, or until October 25, 2023 (the “Compliance Date”), to regain compliance with the Market
Value Standard. During this period, the Company’s common stock will continue to trade on the Nasdaq Capital Market. If at any time
before the Compliance Date the Company’s MVLS closes at or above $35 million for a minimum of 10 consecutive business days as required
under the Compliance Period Rule, the Staff will provide written confirmation of compliance and will close the matter.
In the event the Company
does not regain compliance with the Market Value Standard by the Compliance Date, the Staff will provide a written notification to the
Company that its common stock will be subject to delisting. At that time, the Company may appeal the Staff’s delisting determination
to a Hearings Panel (the “Panel”). However, there can be no assurance that, if the Company receives a delisting notice and
appeals the delisting determination by the Staff to the Panel, such appeal would be successful.
The Company intends to
monitor its MLVS between now and the Compliance Date, and may, if appropriate, evaluate available options to resolve the deficiency under
the Market Value Standard and regain compliance with the Market Value Standard. The Company may also try to comply with another Nasdaq
listing criteria, such as the one under Nasdaq Listing Rule 5550(b)(1) (Equity Standard). However, there can be no assurance that the
Company will be able to regain or maintain compliance with the Nasdaq listing criteria.
In addition, we cannot
assure you our securities will meet the continued listing requirements to be listed on Nasdaq in the future. If Nasdaq delists our common
stock from trading on its exchange, we could face significant material adverse consequences including:
| · | a limited availability of market quotations for our securities; |
| · | a determination that our common stock is a “penny stock” which will require brokers trading
in our common stock to adhere to more stringent rules and possibly resulting in a reduced level of trading activity in the secondary trading
market for our common stock; |
| · | a limited amount of news and analyst coverage for our company; and |
| · | a decreased ability to issue additional securities or obtain additional financing in the future. |
If we fail to maintain
compliance with all applicable continued listing requirements for the Nasdaq Capital Market and Nasdaq determines to delist our common
stock, the delisting could adversely affect the market liquidity of our common stock, our ability to obtain financing to repay debt and
fund our operations.
We could fail to maintain compliance with
any Nasdaq listing requirements, which could negatively affect the market price of our common stock, our liquidity and our ability to
raise capital.
Currently, our common stock trades on the Nasdaq
Capital Market. We have applied to list our Warrants on the Nasdaq under the symbol “INTZW”. If we fail to maintain
compliance with any Nasdaq listing requirements, our common stock and/or Warrants could be delisted from the Nasdaq Capital Market. This
could severely limit the liquidity of our common stock and/or Warrants and your ability to sell the common stock and/or Warrants on the
secondary market.
The best-efforts structure of this offering
may have an adverse effect on our business plan.
The Placement Agent is offering the securities
in this offering on a “best-efforts” basis. The Placement Agent is not required to purchase any securities, but will use its
best efforts to sell the securities offered. As a “best-efforts” offering, there can be no assurance that the offering contemplated
hereby will ultimately be consummated or will result in any proceeds being made available to us. The success of this offering will impact
our ability to use the proceeds to execute our business plan. We may have insufficient capital to implement our business plan, potentially
resulting in greater operating losses unless we are able to raise the required capital from alternative sources. There is no assurance
that alternative capital, if needed, would be available on terms acceptable to us, or at all.
Purchasers who purchase our securities in this offering pursuant
to a securities purchase agreement may have rights not available to purchasers that purchase without the benefit of a securities purchase
agreement.
In addition to rights and remedies available
to all purchasers in this offering under federal securities and state law, the purchasers that enter into a securities purchase agreement
in this offering will also be able to bring claims of breach of contract against us. The ability to pursue a claim for breach of contract
provides those investors with the means to enforce the covenants uniquely available to them under the securities purchase agreement including:
(i) timely delivery of shares; (ii) agreement to not enter into variable rate financings for one year from closing, subject certain exceptions;
(iii) agreement to not enter into any financings for 90 days from closing, subject to certain exceptions; and (iv) indemnification for
breach of contract.
Future sales of our common stock may depress
our share price.
As of September 15, 2023, we had 24,060,199
shares of our common stock outstanding. Sales of a number of shares of common stock in the public market or issuances of additional
shares pursuant to the exercise of our outstanding warrants, or the expectation of such sales or exercises, could cause the market price
of our common stock to decline. We may also sell additional shares of common stock or securities convertible into or exercisable or exchangeable
for common stock in subsequent public or private offerings or other transactions, which may adversely affect the market price of our
common stock.
Our stockholders may experience substantial
dilution in the value of their investment if we issue additional shares of our capital stock.
Our charter allows us to issue up to 80,000,000
shares of our common stock and up to 5,000,000 shares of preferred stock. To raise additional capital, we may in the future sell additional
shares of our common stock or other securities convertible into or exchangeable for our common stock at prices that are lower than the
prices paid by existing stockholders, and investors purchasing shares or other securities in the future could have rights superior to
existing stockholders, which could result in substantial dilution to the interests of existing stockholders.
Our management will have broad discretion
over the use of the net proceeds from this offering, you may not agree with how we use the proceeds and the proceeds may not be invested
successfully.
Other than amounts required to be paid to certain
lenders, our management will have broad discretion as to the use of the net proceeds from this offering and could use them for purposes
other than those contemplated at the time of commencement of this offering. Accordingly, you will be relying on the judgment of our management
with regard to the use of these net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether
the proceeds are being used appropriately. It is possible that, pending their use, we may invest the net proceeds in a way that does not
yield a favorable, or any, return for us.
The failure of our management to use such funds
effectively could have a material adverse effect on our business, financial condition, operating results and cash flows.
If you purchase our Units (of which common
stock forms a part) in this Offering, you will experience immediate and substantial dilution in the net tangible book
value of your shares of common stock (if you exercise the Warrants or the Pre-Funded Warrants). In
addition, we may issue additional equity or convertible debt securities in the future, which may result in additional dilution to investors.
Because the price per share of our common stock
in the Unit being offered hereunder is higher than the pro forma as-adjusted net tangible book value per share of our common stock, you
will suffer substantial dilution in the net tangible book value of the common stock you purchase in this Offering.
Based on an assumed offering price of $0.40
per Unit, and the net tangible book value per share of our common stock of ($0.47) as of June 30, 2023, if you purchase Units in
this offering you will suffer dilution of $0.44 per share with respect to the net tangible book value per share of the common
stock, which will be ($0.04) per share following the offering on a pro forma as adjusted basis (attributing no value to the Warrants).
See the section of this prospectus entitled “Dilution” below for a more detailed discussion of
the dilution you will incur if you purchase our Units in this offering.
This offering may cause the trading price
of our common stock to decrease.
The number of shares of common stock underlying
the securities we propose to issue and ultimately will issue if this offering is completed, may result in an immediate decrease in the
market price of our common stock. This decrease may continue after the completion of this offering. We cannot predict the effect, if any,
that the availability of shares for future sale represented by the Warrants and Pre-Funded Warrants issued in connection with the offering
will have on the market price of our common stock from time to time.
Holders of Pre-Funded Warrants and Warrants
will have no rights as a common stockholder until such holders exercise their Warrants and Pre-Funded Warrants, respectively, and acquire
our common stock, except as set forth in the Pre-Funded Warrants and Warrants.
Until holders of Warrants and Pre-Funded Warrants
acquire shares of our common stock upon exercise of the Warrants and Pre-Funded Warrants, as the case may be, holders of Warrants and
Pre-Funded Warrants will have no rights with respect to the shares of our common stock underlying such Warrants and Pre-Funded Warrants,
except as set forth in the Pre-Funded Warrants and Warrants. Upon exercise of the Warrants and Pre-Funded Warrants, the holders thereof
will be entitled to exercise the rights of a common stockholder only as to matters for which the record date occurs after the exercise
date.
Absence of a public trading market for
the Warrants and Pre-Funded Warrants may limit your ability to resell the Warrants and Pre-Funded Warrants.
There is no established trading market for
the Warrants and Pre-Funded Warrants to be issued pursuant to this offering. Although we have applied to list the Warrants on
The Nasdaq Capital Market, we cannot guarantee that our application will be approved. If the Warrants are not approved for listing on
The Nasdaq Capital Market, an active market may never develop and the liquidity of the warrants will be limited. The Pre-Funded Warrants
will not be listed for trading on Nasdaq or any other securities exchange or market, and the Pre-Funded Warrants may not be widely distributed.
Purchasers of the Pre-Funded Warrants may be unable to resell the Pre-Funded Warrants or sell them only at an unfavorable price for an
extended period of time, if at all.
The market price of our common stock may
never exceed the exercise price of the Warrants issued in connection with this offering.
The Warrants being issued in connection with this
offering become exercisable upon issuance and will expire in five years, from the date of issuance. The market price of our common stock
may never exceed the exercise price of the Warrants prior to their date of expiration. Any Warrants not exercised by their date of expiration
will expire worthless and we will be under no further obligation to the Warrant holder.
The Warrants and Pre-Funded Warrants contain
features that may reduce your economic benefit from owning them.
For so long as you continue to hold Warrants and
Pre-Funded Warrants, you will not be permitted to enter into any short sale or similar transaction with respect to our common stock. This
could prevent you from pursuing investment strategies that could provide you greater financial benefits from owning the Warrants and Pre-Funded
Warrants.
Since the Warrants and Pre-Funded Warrants
are executory contracts, they may have no value in a bankruptcy or reorganization proceeding.
In the event a bankruptcy or reorganization proceeding
is commenced by or against us, a bankruptcy court may hold that any unexercised Pre-Funded Warrants are executory contracts that are subject
to rejection by us with the approval of the bankruptcy court. As a result, holders of the Pre-Funded Warrants may, even if we have sufficient
funds, not be entitled to receive any consideration for their Warrants or may receive an amount less than they would be entitled to if
they had exercised their Pre-Funded Warrants prior to the commencement of any such bankruptcy or reorganization proceeding.
Proposed legislation in the U.S. Congress,
including changes in U.S. tax law, and the Inflation Reduction Act of 2022 may adversely impact us and the value of the Common Stock,
the Warrants, and the Pre-Funded Warrants forming a part of the Units being offered, and the Common Stock underlying such Warrants and
Pre-Funded Warrants.
Changes to U.S. tax laws (which changes may have
retroactive application) could adversely affect us or holders of the Common Stock, the Warrants, and the Pre-Funded Warrants forming a
part of the Units being offered, or the Common Stock underlying such Warrants and Pre-Funded Warrants. In recent years, many changes to
U.S. federal income tax laws have been proposed and made, and additional changes to U.S. federal income tax laws are likely to continue
to occur in the future.
The U.S. Congress is currently considering numerous
items of legislation which may be enacted prospectively or with retroactive effect, which legislation could adversely impact our financial
performance and the value of the Common Stock, the Warrants, and the Pre-Funded Warrants forming a part of the Units being offered, or
the Common Stock underlying such Warrants and Pre-Funded Warrants. Additionally, states in which we operate or own assets may impose new
or increased taxes. If enacted, most of the proposals would be effective for the current or later years. The proposed legislation remains
subject to change, and its impact on us and holders of the Common Stock, the Warrants, and the Pre-Funded Warrants forming a part of the
Units being offered, or the Common Stock underlying such Warrants and Pre-Funded Warrants is uncertain.
In addition, the Inflation Reduction Act of 2022
includes provisions that will impact the U.S. federal income taxation of corporations. Among other items, this legislation includes provisions
that will impose a minimum tax on the book income of certain large corporations and an excise tax on certain corporate stock repurchases
that would be imposed on the corporation repurchasing such stock. It is unclear how this legislation will be implemented by the U.S. Department
of the Treasury and we cannot predict how this legislation or any future changes in tax laws might affect us or holders of the Common
Stock, the Warrants, and the Pre-Funded Warrants forming a part of the Units being offered, or the Common Stock underlying such Warrants
and Pre-Funded Warrants.
Purchasers who purchase our securities in
this offering pursuant to a securities purchase agreement may have rights not available to purchasers that purchase without the benefit
of a securities purchase agreement.
In addition to rights and remedies available to
all purchasers in this offering under federal securities and state law, the purchasers that enter into a securities purchase agreement
will also be able to bring claims of breach of contract against us. The ability to pursue a claim for breach of contract provides those
investors with the means to enforce the covenants uniquely available to them under the securities purchase agreement. Additionally, in
connection with this offering, we may agree to amend the terms of certain of our outstanding warrants held by certain significant purchasers
in this offering who will enter into the securities purchase agreement. Any such amendments may, among other things, decrease the exercise
prices to be the same as the exercise prices of the Warrants offered in this offering, or increase the term of exercise of those warrants.
General Risk Factors
The Warrant and Pre-Funded Warrant (forming
part of a Unit) provides that state or federal court located within the state of Delaware will be the sole and exclusive forum for substantially
all disputes between us and our shareholders, which could limit its stockholders’ ability to obtain a favorable judicial forum for
disputes with us or our directors, officers or other employees.
Section 5 of the Warrant and Pre-Funded Warrant
(forming part of a Unit) provides that “[e]ach party agrees that all legal proceedings concerning the interpretations, enforcement,
and defense of the transactions contemplated by this Warrant (whether brought against a party hereto or their respective affiliates, directors,
officers, shareholders, partners, members, employees, or agents) shall be commenced exclusively in the state and federal courts sitting
in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action, or proceeding, any
claim that it is not personally subject to the jurisdiction of any such court, that such suit, action, or proceeding is improper or is
an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being
served in any such suit, action, or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by law.”
However, Section 27 of the Exchange Act creates
exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations
thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the
Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. In addition, Section 22 of the Securities Act
creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities
Act or the rules and regulations thereunder. As a result, the exclusive forum provisions will not apply to suits brought to enforce any
duty or liability created by the Securities Act or any other claim for which the federal and state courts have concurrent jurisdiction,
and you will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
Therefore, this provision would not apply
to suits brought to enforce a duty or liability created by the Securities Act, Exchange Act or any other claim for which the U.S. federal
courts have exclusive jurisdiction.
The exclusive forum provision in the Warrant and
Pre-Funded Warrant will not relieve us of our duty to comply with the federal securities laws and the rules and regulations thereunder,
and shareholders will not be deemed to have waived our compliance with these laws, rules and regulations.
This exclusive forum provision may limit a shareholder’s
ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees, which
may discourage lawsuits against us or our directors, officers or other employees. In addition, shareholders who do bring a claim in the
state or federal court in the State of Delaware could face additional litigation costs in pursuing any such claim, particularly if they
do not reside in or near Delaware. The state or federal court of the State of Delaware may also reach different judgments or results than
would other courts, including courts where a shareholder would otherwise choose to bring the action, and such judgments or results may
be more favorable to us than to our shareholders. However, the enforceability of similar exclusive forum provisions in other companies’
Warrants have been challenged in legal proceedings, and it is possible that a court could find this type of provision to be inapplicable
to, or unenforceable in respect of, one or more of the specified types of actions or proceedings. If a court were to find the exclusive
forum provision contained in the Warrant and Pre-Funded Warrant to be inapplicable or unenforceable in an action, we might incur additional
costs associated with resolving such action in other jurisdictions.
By purchasing Units in this offering, you
are bound by the fee-shifting provision contained in the Warrants and Pre-Funded Warrants forming part of the Units, which may discourage
you to pursue actions against us and could discourage shareholder lawsuits that might otherwise benefit the Company and its shareholders.
Section
5 of the Warrants and Pre-Funded Warrants provides that “[i]f either party shall commence an action, suit or proceeding to
enforce any provisions of this Warrant, the prevailing party in such action, suit, or proceeding shall be reimbursed by the other party
for their reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation, and prosecution
of such action or proceeding.”
NOTWITHSTANDING, THE FEE SHIFTING PROVISION CONTAINED
IN THE RESTATED CERTIFICATE OF INCORPORATION, WARRANTS AND PRE-FUNDED WARRANTS WOULD NOT APPLY TO “INTERNAL CORPORATE CLAIMS”
AS DEFINED IN SECTION 109(B) OF THE DELAWARE GENERAL CORPORATION LAW.
The phrase “attorneys fees and other costs
and expenses incurred with the investigation, preparation and prosecution of such action or proceeding” means the fees and expenses
of counsel to the Company and any other parties asserting a claim subject to Section 5 of Warrants
and Pre-Funded Warrants, which may include printing, photocopying, duplicating and other expenses, air freight charges, and fees
billed for law clerks, paralegals and other persons not admitted to the bar but performing services under the supervision of an attorney,
and the costs and fees incurred in connection with the enforcement or collection of any judgment obtained in any such proceeding.
We adopted the fee-shifting provision to eliminate
or decrease nuisance and frivolous litigation. We intend to apply the fee-shifting provision broadly
to all actions except for claims brought under the Exchange Act and Securities Act.
There is
no set level of recovery required to be met by a plaintiff to avoid payment under this provision. Instead, whoever is the prevailing party
is entitled to recover the reasonable attorneys’ fees, costs and expenses incurred in connection with the prosecution or defense
of such action. Any party who brings an action, and the party against whom such action is brought under Section 5 of Warrants and Pre-Funded
Warrants, which could include, but is not limited to former and current shareholders, Company directors, officers, affiliates, legal counsel,
expert witnesses and other parties, are subject to this provision. Additionally, any party who brings an action, and the party against
whom such action is brought under Section 5 of Warrants and Pre-Funded Warrants, which could include, but is not limited to former and
current shareholders, Company directors, officers, affiliates, legal counsel, expert witnesses and other parties, would be able to recover
fees under this provision.
In the event
you initiate or assert a claim against us, in accordance with the dispute resolution provisions contained in Section 5 of Warrants and
Pre-Funded Warrants, and you do not, in a judgment prevail, you will be obligated to reimburse us for all reasonable costs and expenses
incurred in connection with such claim, including, but not limited to, reasonable attorney’s fees and expenses and costs of appeal,
if any. Additionally, this provision in Section 5 of Warrants and Pre-Funded Warrants could discourage shareholder lawsuits that might
otherwise benefit the Company and its shareholders.
THE FEE SHIFTING PROVISION CONTAINED IN SECTION
5 OF WARRANTS AND PRE-FUNDED WARRANTS IS NOT INTENDED TO BE DEEMED A WAIVER BY ANY HOLDER OF COMMON STOCK OF THE COMPANY’S
COMPLIANCE WITH THE U.S. FEDERAL SECURITIES LAWS AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER. THE FEE SHIFTING PROVISION CONTAINED
IN THE RESTATED CERTIFICATE OF INCORPORATION, WARRANTS AND PRE-FUNDED WARRANTS DO NOT APPLY TO CLAIMS BROUGHT UNDER THE EXCHANGE ACT AND
SECURITIES ACT.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the information incorporated
by reference in this prospectus contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), which statements involve substantial risks and uncertainties. In some cases, you can identify
forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,”
“continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,”
“potential,” “predict,” “project,” “should,” “target,” “will,”
or “would” or the negative of these words or other similar terms or expressions. Forward-looking statements contained in this
prospectus include, but are not limited to, such statements. Factors that may cause actual results to differ materially from
current expectations, which we describe in more detail in our Annual Report on Form 10-K for the year ended December 31, 2022 and our
subsequently filed Quarterly Reports on Form 10-Q, include, but are not limited to:
|
· |
that to improve our financial performance, we must increase our revenue levels; |
|
· |
our ability to continue our business as a going concern; |
|
· |
our business, sales, and marketing strategies and plans; |
|
· |
our ability to successfully market, sell, and deliver our INTRUSION Shield commercial product and solutions to an expanding customer base; |
|
· |
our INTRUSION Shield solution failing to perform as expected or us being unable to meet our customers’ needs or to achieve market acceptance; |
|
· |
our ability to consummate future financings; |
|
· |
scarcity of products and materials in the supply chain; |
|
· |
our ability to attract new employees and to retain key management and technical personnel; |
|
· |
effects of the coronavirus on the U.S. and global economies; |
|
· |
customer concentration including many U.S. government entities; |
|
· |
technological changes in the network security industry; |
|
· |
intense competition from both start-up and established companies; |
|
· |
potential conflict of your interests with the interests of our larger stockholders; |
|
· |
technical or other errors with our products; |
|
· |
actual or threatened litigation and governmental investigations and the costs and efforts spent to defend against such litigation and investigations; |
|
· |
a breach of network security; |
|
· |
our ability to protect our intellectual property and the cost associated with defending claims of infringement; and |
|
· |
our intended use of the net proceeds from this offering. |
You should not rely on
forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this prospectus
primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial
condition, and operating results.
In addition, statements
that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based
on information available to us as of the date of this prospectus. While we believe that such information provides a reasonable basis for
these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted
an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned
not to unduly rely on these statements.
The forward-looking statements
made in this prospectus only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking
statements made in this prospectus to reflect events or circumstances after the date of this prospectus or to reflect new information
or the occurrence of unanticipated events, except as required by law.
USE OF PROCEEDS
We estimate that the net proceeds from this offering
will be approximately $8,418,999 (assuming the sale of all the Units offered hereby at the assumed public offering price of $0.40
per Unit, which represents the closing sale price of our Common Stock on Nasdaq on September 15, 2023, and assuming no issuance
of Pre-Funded Warrants and no exercise of the Warrants issued in connection with this offering), after deducting cash expenses relating
to this offering payable by us estimated at approximately $1,081,001, including Placement Agent fees (assuming all investors were
introduced by the Placement Agent) of approximately $950,000 and offering expenses of $131,001. The following presents
our use of proceeds if 100%, 75%, 50% or 25% of the Units are sold.
|
|
100%
of
Units
Sold |
|
|
% of
Total |
|
|
75%
of
Units
Sold |
|
|
% of
Total |
|
|
50%
of
Units
Sold |
|
|
% of
Total |
|
|
25%
of
Units
Sold |
|
|
% of
Total |
|
Gross Proceeds
from Offering |
|
$ |
9,500,000 |
|
|
|
100.0% |
|
|
$ |
7,125,000 |
|
|
|
100.0% |
|
|
$ |
4,750,000 |
|
|
|
100.0% |
|
|
$ |
2,375,000 |
|
|
|
100.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Use of Proceeds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Placement Agent Fees and Expenses |
|
$ |
950,000 |
|
|
|
10.0% |
|
|
$ |
736,250 |
|
|
|
10.3% |
|
|
$ |
522,500 |
|
|
|
11.0%. |
|
|
$ |
308,750 |
|
|
|
13.0% |
|
Offering Expenses |
|
$ |
131,001 |
|
|
|
1.4% |
|
|
$ |
131,001 |
|
|
|
1.9% |
|
|
$ |
131,001 |
|
|
|
2.8% |
|
|
$ |
131,001 |
|
|
|
5.5% |
|
General Corporate |
|
$ |
5,418,999 |
|
|
|
57.0% |
|
|
$ |
6,257,749 |
|
|
|
87.8% |
|
|
$ |
4,096,499 |
|
|
|
86.2% |
|
|
$ |
1,935,249 |
|
|
|
81.5% |
|
Repayment of Promissory Notes |
|
$ |
3,000,000 |
|
|
|
31.6% |
|
|
$ |
– |
|
|
|
–% |
|
|
$ |
– |
|
|
|
–% |
|
|
$ |
– |
|
|
|
–% |
|
Total Use of Proceeds |
|
$ |
9,500,000 |
|
|
|
100.0% |
|
|
$ |
7,125,000 |
|
|
|
100.0% |
|
|
$ |
4,750,000 |
|
|
|
100.0% |
|
|
$ |
2,375,000 |
|
|
|
100.0% |
|
We intend to use the
net proceeds from the offering for working capital and general corporate purposes, which may include research and development expenses,
capital expenditures, working capital and general and administrative expenses, and potential acquisitions of or investments in businesses,
products and technologies that complement our business, although we have no present commitments or agreements to make any such acquisitions
or investments as of the date of this prospectus.
We expect to use the
net proceeds from this offering for working capital and general corporate purposes; provided, however, to the extent we receive gross
proceeds greater than or equal to $8,000,000, we may use net proceeds to repay up to $3,000,000 of principal and interest on certain
notes (Notes #1 and #2) of Streeterville Capital, LLC. As of September 15, 2023, the outstanding principal and accrued interest
on Notes #1 and #2 in the amount of $4.5 million and $6.0 million, respectively. Each of Notes #1 and 2 have a 7% interest rate and the
maturity date of Note #1 has been extended to September 10, 2024, while the maturity date of Note #2 has been extended to December 29,
2024.
Our management will have
broad discretion as to the allocation of the net proceeds from this offering and could use them for purposes other than those contemplated
at the time of commencement of this offering.
Each $0.10
increase (decrease) in the assumed public offering price of $0.40 per unit would increase (decrease) the net proceeds to us from
this offering by $2.16 million, assuming the number of units offered by us, as set forth on the cover page of this prospectus,
remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by
us. Similarly, each increase (decrease) of 1.0 million in the number of units offered by us would increase (decrease) the net proceeds
to us from this offering by approximately $0.36 million, assuming the assumed public offering price remains the same, and after
deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We do not expect that a
change in the public offering price or the number of units by these amounts would have a material effect on our uses of the proceeds
from this offering, although it may accelerate the time at which we will need to seek additional capital.
We will not receive
any proceeds from the sale of common stock issuable upon exercise of the Warrants unless and until such Warrants are exercised for cash.
If all of the Warrants sold in this offering were to be exercised in cash at the exercise price of $0.44 per share of common stock,
we would receive additional net proceeds of approximately $10.5 million. We cannot predict when or if these Warrants will be exercised.
It is possible that these Warrants may expire and may never be exercised. We expect to use any proceeds we receive from the exercise
of Warrants for substantially the same purposes and in substantially the same manner. Pending these uses, we intend to invest the funds
in short-term, investment grade, interest-bearing securities. It is possible that, pending their use, we may invest the net proceeds
in a way that does not yield a favorable, or any, return for us.
CAPITALIZATION
The following table sets forth our cash and cash
equivalents and capitalization as of June 30, 2023 on an actual basis.
You should read this table in conjunction
with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our condensed
consolidated financial statements and related notes appearing in our Quarterly Report on Form 10-Q for the quarter ended June
30, 2023; and our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which are incorporated by reference
in this prospectus.
|
|
As of
June 30, 2023 |
|
(in thousands, except par value amounts) |
|
Actual |
|
|
|
(Unaudited) |
|
Cash and cash equivalents |
|
$ |
300 |
|
|
|
|
|
|
Long term debt |
|
$ |
171 |
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
Preferred stock, $0.01 par value; 5,000 shares authorized |
|
|
– |
|
Common stock, $0.01 par value; 80,000 shares authorized and 22,442 shares outstanding, actual |
|
|
224 |
|
Common stock held in treasury, at cost – 10 shares |
|
|
(362 |
) |
Additional paid-in capital |
|
|
94,049 |
|
Accumulated deficit |
|
|
(104,189 |
) |
Accumulated other comprehensive loss |
|
|
(43 |
) |
Total stockholders’ deficit |
|
|
(10,321 |
) |
Total capitalization |
|
$ |
(10,150 |
) |
DETERMINATION OF OFFERING PRICE
The final
offering price of the securities we are offering, and the exercise price of the Warrants included in the units that we are offering, will
be negotiated among us, the placement agent and the investors in the offering based
on the trading of our shares of common stock prior to the offering, among other things. Other factors considered in determining the public
offering price of the securities we are offering, as well as the exercise price of the Warrants included in the units that we are offering
include:
|
● |
the information in this prospectus and otherwise available to us, including our financial information; |
|
|
|
|
● |
the history and the prospects for the industry in which we compete; |
|
● |
the ability of our management; |
|
|
|
|
● |
the prospects for our future earnings; |
|
|
|
|
● |
the present state of our development and our current financial condition; |
|
|
|
|
● |
the general condition of the economy and the securities markets in the United States at the time of this offering; |
|
|
|
|
● |
the market price of our common stock listed on the Nasdaq Capital Market; |
|
|
|
|
● |
the recent market prices of, and the demand for, publicly-traded securities of generally comparable companies; and |
|
|
|
|
● |
other factors as were deemed relevant. |
Therefore, the assumed public offering price used
throughout this prospectus may not be indicative of the final offering price.
MARKET PRICE AND DIVIDEND POLICY
Our shares of common stock are currently quoted
on The Nasdaq Capital Market under the symbol “INTZ”. We have applied to list the Warrants on the Nasdaq under the
symbol “INTZW.” On September 15, 2023, the last reported sales price of our common stock on Nasdaq was $0.40.
Holders of Record
As of September 15, 2023, we had approximately
86 holders of record of our common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf
of stockholders, this number is not indicative of the total number of stockholders represented by these stockholders of record.
Dividends
We have not declared or paid dividends to stockholders
since inception and do not plan to pay cash dividends in the foreseeable future. We currently intend to retain earnings, if any, to finance
our growth.
Recent Sales of Unregistered Securities
During the three fiscal years and interim period
preceding the filing of this registration statement, we have issued the following securities that were not registered under the Securities
Act. No underwriters were involved in the sales and the certificates representing the securities sold and issued contain legends restricting
transfer of the securities without registration under the Securities Act or an applicable exemption from registration.
On May 24,
2022, the Company issued 75,188 shares of its common stock pursuant to a transaction that qualified under section 4(2) as a transaction
exempt from the registration requirements of the Securities Act of 1933, as amended. These shares were issued to Purple Plaza, LLC, as
partial consideration for a confidential settlement agreement between the Company and Purple Plaza.
On November 21, 2022, the Company issued 31,746
shares of its common stock to Anthony Scott, our Chief Executive Officer and President, in exchange for $100,000, pursuant to the terms
of a Stock Purchase Agreement, dated November 21, 2022, between the Company and Anthony Scott, that
qualified under section 4(2) as a transaction exempt from the registration requirements of the Securities Act of 1933, as amended.
DILUTION
If you invest in our Units
(comprised of our common stock or Pre-Funded Warrants and Warrants) in this offering, your interest will be diluted to the extent of
the difference between the assumed public offering price per share of common stock (which forms a part of a Unit) and the pro forma net
tangible book value per share of our common stock immediately after this offering. As of June 30, 2023, our net tangible book value was
approximately ($10,451,034), or ($0.47) per share. Net tangible book value per share represents our total tangible assets less our total
liabilities, divided by the number of shares of common stock.
Net tangible book value
dilution per share of common stock in each Unit to new investors represents the difference between the amount per share of common stock
in each Unit paid by purchasers in this offering and the pro forma net tangible book value per share of our common stock immediately
after the completion of this offering.
Based on the initial offering
price of $0.40 per one share of common stock in a Unit, on an as adjusted basis as of June 30, 2023, after giving effect to the offering
of shares of common stock and the application of the related net proceeds, our net tangible book value would be:
(i)
($2,032,035), or ($0.04) per share of common stock, assuming the sale of 100% of the shares offered (23,750,000 shares of common stock
underlying units) with net proceeds in the amount of $8,418,999 after deducting estimated broker commissions and expenses of $950,000
and estimated offering expenses of $131,001;
(ii)
($4,193,285), or ($0.10) per share of common stock, assuming the sale of 75% of the units offered (17,812,500 shares of common stock
underlying units) with net proceeds in the amount of $6,257,749 after deducting estimated broker commissions and expenses of $736,250
and estimated offering expenses of $131,001;
(iii)
($6,354,535), or ($0.19) per share per share of common stock, assuming the sale of 50% of the shares offered (11,875,000 shares of common
stock underlying units) with net proceeds in the amount of $4,096,499 after deducting estimated broker commissions and expenses of $522,500
and estimated offering expenses of $131,001; and
(iv)
($8,515,785), or ($0.30) per share of common stock, assuming the sale of 25% of the shares offered (5,937,500 shares of common stock
underlying units) with net proceeds in the amount of $1,935,249 after deducting estimated broker commissions and expenses of $308,750
and estimated offering expenses of $131,001.
Purchasers of units (comprised
of our common stock or Pre-Funded Warrants and Warrants) will experience immediate and substantial dilution in net tangible book value
per share for financial accounting purposes, as illustrated in the following table on an approximate dollar per share basis, depending
upon whether we sell 100%, 75%, 50%, or 25% of the units being offered in this offering:
Percentage of offering units sold |
|
|
100% |
|
|
|
75% |
|
|
|
50% |
|
|
|
25% |
|
Assumed offering price per unit |
|
$ |
0.40 |
|
|
$ |
0.40 |
|
|
$ |
0.40 |
|
|
$ |
0.40 |
|
Net tangible book value per share of common stock before this offering |
|
|
(0.47 |
) |
|
|
(0.47 |
) |
|
|
(0.47 |
) |
|
|
(0.47 |
) |
Increase in net tangible book value per share attributable to new investors |
|
|
0.43 |
|
|
|
0.37 |
|
|
|
0.28 |
|
|
|
0.17 |
|
Pro forma net tangible book value per share after this offering |
|
|
(0.04 |
) |
|
|
(0.10 |
) |
|
|
(0.19 |
) |
|
|
(0.30 |
) |
Immediate dilution in net tangible book value per share to new investors |
|
$ |
0.44 |
|
|
$ |
0.50 |
|
|
$ |
0.59 |
|
|
$ |
0.70 |
|
The foregoing illustration
also does not reflect the dilution that would result from the exercise of any of the Pre-Funded Warrants or Warrants sold in the offering.
The following tables sets
forth depending upon whether we sell 100%, 75%, 50%, or 25% of the shares being offered in this offering, as of June 30, 2023, the number
of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid by existing stockholders
and to be paid by new investors purchasing units (of which shares of common stock form a part) in this offering at the offering price
of $0.40 per unit, together with the total consideration paid an average price per share paid by each of these groups, before
deducting placement agent’s commission and estimated offering expenses.
|
|
100%
of the Units Sold |
|
|
|
Shares
Purchased |
|
|
Total
Consideration |
|
|
Average
Price |
|
|
|
Number |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
|
per
Share |
|
Existing stockholders as of June
30, 2023 |
|
|
22,442,000 |
|
|
|
48.58% |
|
|
$ |
94,273,000 |
|
|
|
90.85% |
|
|
$ |
4.20 |
|
New investors |
|
|
23,750,000 |
|
|
|
51.42% |
|
|
|
9,500,000 |
|
|
|
9.15% |
|
|
$ |
0.40 |
|
Total |
|
|
46,192,000 |
|
|
|
100.00% |
|
|
$ |
103,773,000 |
|
|
|
100.00% |
|
|
$ |
2.25 |
|
|
|
75%
of the Units Sold |
|
|
|
Shares
Purchased |
|
|
Total
Consideration |
|
|
Average
Price |
|
|
|
Number |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
|
per
Share |
|
Existing stockholders as of June
30, 2023 |
|
|
22,442,000 |
|
|
|
55.75% |
|
|
$ |
94,273,000 |
|
|
|
92.97% |
|
|
$ |
4.20 |
|
New investors |
|
|
17,812,500 |
|
|
|
44.25% |
|
|
|
7,125,000 |
|
|
|
7.03% |
|
|
$ |
0.40 |
|
Total |
|
|
40,254,500 |
|
|
|
100.00% |
|
|
$ |
101,398,000 |
|
|
|
100.00% |
|
|
$ |
2.52 |
|
|
|
50%
of the Units Sold |
|
|
|
Shares
Purchased |
|
|
Total
Consideration |
|
|
Average
Price |
|
|
|
Number |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
|
per
Share |
|
Existing stockholders as of June
30, 2023 |
|
|
22,442,000 |
|
|
|
65.40% |
|
|
$ |
94,273,000 |
|
|
|
95.20% |
|
|
$ |
4.20 |
|
New investors |
|
|
11,875,000 |
|
|
|
34.60% |
|
|
|
4,750,000 |
|
|
|
4.80% |
|
|
$ |
0.40 |
|
Total |
|
|
34,317,000 |
|
|
|
100.00% |
|
|
$ |
99,023,000 |
|
|
|
100.00% |
|
|
$ |
2.89 |
|
|
|
25%
of the Units Sold |
|
|
|
Shares
Purchased |
|
|
Total
Consideration |
|
|
Average
Price |
|
|
|
Number |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
|
per
Share |
|
Existing stockholders as of June
30, 2023 |
|
|
22,442,000 |
|
|
|
79.08% |
|
|
$ |
94,273,000 |
|
|
|
97.54% |
|
|
$ |
4.20 |
|
New investors |
|
|
5,937,500 |
|
|
|
20.92% |
|
|
|
2,375,000 |
|
|
|
2.46% |
|
|
$ |
0.40 |
|
Total |
|
|
28,379,500 |
|
|
|
100.00% |
|
|
$ |
96,648,000 |
|
|
|
100.00% |
|
|
$ |
3.41 |
|
A $0.10 increase in
the assumed public offering price of $0.40 per Unit (the closing sale price of our common stock on the Nasdaq Capital Market on
September 15, 2023), would increase our as adjusted net tangible book value after giving effect to this offering by approximately
$2.16 million and increase the dilution per share to new investors in this offering by $0.05 per share, after deducting
placement agent fees and estimated offering expenses payable by us, and assuming the sale of 23,750,000 Units set forth on the
cover page of this prospectus remains the same and no sale of any Pre-Funded Warrants in this offering.
The foregoing discussion and
tables above (i) reflect and assume no sale of Pre-Funded Warrants in this offering, which, if sold, would reduce the number of common
stock that we are offering on a one-one basis, (ii) no exercise of Warrants in this offering, and (iii) do not give effect to the dilution
that would result from (a) 1,212,593 shares of common stock issuable upon the exercise of outstanding warrants at weighted average exercise
price of $5.22 per share, (b) 1,108,225 shares of common stock issuable upon the exercise of outstanding stock options at weighted average
exercise price of $3.24 per share, (c) 1,762,105 shares of common stock in aggregate reserved for issuance under our 2015 Stock Incentive
Plan and 2021 Omnibus Incentive Plan, (d) 157,597 shares of common stock underlying restricted stock awards outstanding, and (e) 2,375,000
shares of common stock underlying the warrants to be issued to the Placement Agent in connection with this offering.
DESCRIPTION
OF SECURITIES
The following summary description sets forth
some of the general terms and provisions of our capital stock. Because this is a summary description, it does not contain all of the information
that may be important to you. For a more detailed description of our capital stock, you should refer to the applicable provisions of the
General Corporation Law of the State of Delaware (the “DGCL”), our charter and our bylaws as currently in effect. Copies of
our amended and restated certificate of incorporation, as amended (the “charter”), and our bylaws are included as exhibits
to the registration statement of which this prospectus forms a part.
General
Our charter authorizes 80,000,000 shares of common
stock, $0.01 par value per share, and 5,000,000 shares of preferred stock, $0.01 per value per share. As of September 15, 2023,
there were 24,060,199 shares of our common stock outstanding and approximately 86 stockholders of record. No shares of our preferred
stock are designated, issued or outstanding.
Common stock
Voting rights
Each holder of our common stock is entitled to one vote for each share
on all matters submitted to a vote of the stockholders, including the election of directors. Our stockholders do not have cumulative voting
rights in the election of directors. Accordingly, holders of a majority of the voting shares are able to elect all of the directors.
Dividends
Subject to preferences that may be applicable to any then-outstanding
preferred stock which may be issued in the future, holders of our common stock are entitled to receive dividends, if any, as
may be declared from time to time by our board of directors out of legally available funds. We intend to retain future earnings, if any,
to finance the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future.
Liquidation
In the event of our liquidation, dissolution or winding up, holders
of our common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment
of all of our debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any then-outstanding
shares of preferred stock.
Rights and preferences
Holders of our common stock have no preemptive, conversion, subscription
or other rights, and there are no redemption or sinking fund provisions applicable to our common stock.
Fully paid and nonassessable
All of our outstanding shares of common stock are, and the shares of
common stock to be issued in this offering will be, fully paid and nonassessable.
Listing
Our common stock is currently listed on the Nasdaq
Capital Market under the symbol “INTZ”.
Issuance of Preferred Stock by our Board
While we currently have no shares of preferred stock issued and outstanding.
Our amended and restated certificate of incorporation provides that up to 5,000,000 shares of preferred stock may be issued from time
to time in one or more series, at the discretion of the Board of Directors without stockholder approval, with each such series to consist
of such number of shares and to have such voting powers (whether full or limited, or no voting powers) and such designations, powers,
preferences and relative, participating, optional, redemption, conversion, exchange or other special rights, and such qualifications,
limitations or restrictions thereof, as shall be stated in the resolution or resolutions providing for the issuance of such series adopted
by the Board of Directors prior to the issuance thereof. This means that our Board has the discretion to issue shares of preferred stock
that had provisions that could be superior in rights and preferences to shares of our common stock and which could be dilutive to holders
of our common stock. Further, such rights and preferences could have the effect of preventing or hindering certain fundamental transactions,
such as a merger or sale of all or substantially all of our assets or another change of control that would otherwise be beneficial to
the holders of our common stock.
Description of Securities We are Offering
Units
We are offering up to 23,750,000 units
(“Units”), each Unit consisting of (i) one share of common stock and (ii) one Warrant. We are also offering Pre-Funded
Warrants to those purchasers whose purchase of shares of common stock in this offering would result in the purchaser, together with its
affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding
shares of common stock following the consummation of this offering in lieu of the shares of common stock that would result in such excess
ownership. Each Pre-Funded Warrant will be exercisable for one share of common stock. For each Pre-Funded Warrant we sell, the number
of shares of common stock we are offering in the Units will be decreased on a one-for-one basis. No warrant for fractional shares
of common stock will be issued, rather warrants will be issued only for whole shares of common stock. We are also registering the shares
of common stock issuable from time to time upon exercise of the Pre-Funded Warrants and Warrants offered hereby.
Common Stock
The material terms and provisions of our common
stock forming part of the Units that are being offered are described under this section “Description of Securities – Common
Stock” in this prospectus.
Warrants
The following is a summary of certain terms and
provisions of the Warrants forming part of the Units that are being offered and is not complete and is subject to, and qualified in its
entirety by, the provisions of the Warrants, the form of which is filed as an exhibit to the registration statement of which this
prospectus forms a part. Prospective investors should carefully review the terms and provisions of the form of Warrants for a complete
description of the terms and conditions of the Warrants.
Duration and Exercise Price
Each Warrant offered hereby will have an assumed
exercise price equal to $0.44 (not less than 110% of the public offering price of each Unit sold in this offering). The Warrants
will be immediately exercisable and may be exercised until the five-year anniversary of the issuance date. The exercise price and number
of shares of common stock issuable upon exercise of the Warrants are subject to appropriate adjustment in the event of stock dividends,
stock splits, reorganizations or similar events affecting our common stock and the exercise price. The Warrants will be issued separately
from the common stock or Pre-Funded Warrants, respectively, and may be transferred separately immediately thereafter.
Exercisability
The Warrants will be exercisable, at the option
of each holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the number
of shares of our common stock purchased upon such exercise (except in the case of a cashless exercise as discussed below). A holder (together
with its affiliates) may not exercise any portion of such holder’s Warrants to the extent that the holder would own more than 4.99%
(or, at the election of the holder, 9.99%) of the outstanding common stock immediately after exercise. However, upon notice from the holder
to us, the holder may decrease or increase the holder’s beneficial ownership limitation, which may not exceed 9.99% of the number
of outstanding shares of common stock immediately after giving effect to the exercise, as such percentage ownership is determined in accordance
with the terms of the warrants, provided that any increase in the beneficial ownership limitation will not take effect until 61 days following
notice to us.
Cashless Exercise
If, at the time a holder exercises its Warrants,
a registration statement registering the issuance or resale of the shares of common stock underlying the Warrants under the Securities
Act is not then effective or available for the issuance of such shares, then in lieu of making the cash payment otherwise contemplated
to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise
(either in whole or in part) the net number of shares of common stock determined according to a formula set forth in the Warrants.
Fundamental Transactions
In the event of any fundamental transaction, as
described in the Warrants and generally including (i) any merger or consolidation with or into another entity if, after giving effect
to such transaction, any shareholder (or group of shareholders acting in concert) own more than fifty percent (50%) of the aggregate voting
power of the Company or the successor entity of such transaction, (ii) sale of all or substantially all of our assets, (iii) tender offer
or exchange offer and has been accepted by the holders of 50% or more of the outstanding common stock or 50% or more of the voting power
of the common equity of the Company, (iv) reclassification of our common stock if, after giving effect to such transaction, any shareholder
(or group of shareholders acting in concert) own more than fifty percent (50%) of the aggregate voting power of the Company or the successor
entity of such transaction, or (v) one or more related transactions consummates a stock or share purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another
Person or group of Persons whereby such other Person or group acquires more than fifty percent (50%) of the outstanding shares of common
stock or more than fifty percent (50%) of the voting power of the common equity of the Company, then upon any subsequent exercise of the
Warrants, the holder will have the right to receive as alternative consideration, for each share of our common stock that would have been
issuable upon such exercise immediately prior to the occurrence of such fundamental transaction, the number of shares of common stock
of the successor or acquiring corporation or of our Company, if it is the surviving corporation, and any additional consideration receivable
upon or as a result of such transaction by a holder of the number of shares of our common stock for which the Warrants are exercisable
immediately prior to such event. Notwithstanding the foregoing, in the event of a fundamental transaction, the holders of the Warrants
have the right to require us or a successor entity to redeem the Warrants for cash in the amount of the Black-Scholes Value (as defined
in the Warrants) of the remaining unexercised portion of the Warrants on the date of the consummation of such fundamental transaction,
concurrently with or within 30 days following the consummation of a fundamental transaction.
However, in the event of a fundamental transaction
which is not in our control, including a fundamental transaction not approved by our Board, the holders of the Warrants will only be entitled
to receive from us or our successor entity, as of the date of consummation of such fundamental transaction the same type or form of consideration
(and in the same proportion), at the Black Scholes Value of the unexercised portion of the Warrants that are being offered and paid to
the holders of our common stock in connection with the fundamental transaction, whether that consideration is in the form of cash, stock
or any combination of cash and stock, or whether the holders of our common stock are given the choice to receive alternative forms of
consideration in connection with the fundamental transaction.
Warrant Agent; Global Certificate
Pursuant to warrant agent agreement between us
and Computershare Trust Company, N.A., as warrant agent, the Warrants will be issued in book-entry form and shall initially be represented
only by one or more global warrants deposited with the warrant agent, as custodian on behalf of The Depository Trust Company, or DTC,
and registered in the name of Cede & Co., a nominee of DTC, or as otherwise directed by DTC.
Transferability
Subject to applicable laws, the Warrants may be
offered for sale, sold, transferred or assigned without our consent.
Fractional Shares
No fractional shares of common stock will be issued
upon the exercise of the Warrants. Rather, the number of shares of common stock to be issued will, at our election, either be rounded
up to the nearest whole number or we will pay a cash adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the exercise price.
Exchange Listing
We have applied to list the Warrants on
The Nasdaq Capital Market under the symbol “INTZW”. Such listing is a condition to the closing of this public offering.
Right as a Stockholder
Except as otherwise provided in the Warrants or
by virtue of the holder’s ownership of shares of our common stock, such holder of Warrants does not have the rights or privileges
of a holder of our common stock, including any voting rights, until such holder exercises such holder’s Warrants.
Waivers and Amendments
No term of the Warrants may be amended or waived
without the written consent of the holder.
Pre-Funded Warrants
The following summary of certain terms and provisions
of the Pre-Funded Warrants forming part of the Units being offered hereby is not complete and is subject to, and qualified in its entirety
by, the provisions of the Pre-Funded Warrant, the form of which is filed as an exhibit to the registration statement of which this
prospectus forms a part. Prospective investors should carefully review the terms and provisions of the form of Pre-Funded Warrant for
a complete description of the terms and conditions of the Pre-Funded Warrants.
Duration and Exercise Price
Each Pre-Funded Warrant forming part of the Units
offered hereby will have an initial exercise price per share of common stock equal to $0.001. The Pre-Funded Warrants will be immediately
exercisable and will expire when exercised in full. The exercise price and number of shares of common stock issuable upon exercise is
subject to appropriate adjustment in the event of share dividends, share splits, reorganizations or similar events affecting our shares
of common stock and the exercise price. The Pre-Funded Warrants will be issued in certificated form.
Exercisability
The Pre-Funded Warrants will be exercisable, at
the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for
the number of shares of common stock purchased upon such exercise (except in the case of a cashless exercise as discussed below). A holder
(together with its affiliates) may not exercise any portion of the Pre-Funded Warrant to the extent that the holder would own more than
4.99% (or, at the election of the holder, 9.99%) of the outstanding shares of common stock immediately after exercise, except that upon
at least 61 days’ prior notice from the holder to us, the holder may increase the amount of beneficial ownership of outstanding
shares after exercising the holder’s Pre-Funded Warrants up to 9.99% of the number of our shares of common stock outstanding immediately
after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Pre-Funded Warrants.
Cashless Exercise
In lieu of making the cash payment otherwise contemplated
to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise
(either in whole or in part) the number of shares of common stock determined according to a formula set forth in the Pre-Funded Warrants.
Fundamental Transactions
In the event of any fundamental transaction, as
described in the Pre-Funded Warrants and generally including (i) any merger or consolidation with or into another entity if, after giving
effect to such transaction, any shareholder (or group of shareholders acting in concert) own more than fifty percent (50%) of the aggregate
voting power of the Company or the successor entity of such transaction, (ii) sale of all or substantially all of our assets, (iii) tender
offer or exchange offer and has been accepted by the holders of 50% or more of the outstanding common stock or 50% or more of the voting
power of the common equity of the Company, (iv) reclassification of our common stock if, after giving effect to such transaction, any
shareholder (or group of shareholders acting in concert) own more than fifty percent (50%) of the aggregate voting power of the Company
or the successor entity of such transaction, or (v) one or more related transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement)
with another Person or group of Persons whereby such other Person or group acquires more than fifty percent (50%) of the outstanding shares
of common stock or more than fifty percent (50%) of the voting power of the common equity of the Company, then upon any subsequent exercise
of the Pre-Funded Warrants, the holder will have the right to receive as alternative consideration, for each share of our common stock
that would have been issuable upon such exercise immediately prior to the occurrence of such fundamental transaction, the number of shares
of common stock of the successor or acquiring corporation or of our Company, if it is the surviving corporation, and any additional consideration
receivable upon or as a result of such transaction by a holder of the number of shares of our common stock for which the Pre-Funded Warrants
are exercisable immediately prior to such event.
Fractional Shares
No fractional shares of common stock will be issued
upon the exercise of the Pre-Funded Warrants.
Rather, at our election, the number of shares
of common stock to be issued will be rounded up to the nearest whole number or we will pay a cash adjustment in an amount equal to such
fraction multiplied by the exercise price.
Trading Market
There is no trading market available for the Pre-Funded
Warrants on any securities exchange or nationally recognized trading system, and we do not expect a trading market to develop. We do not
intend to list the Pre-Funded Warrants on any securities exchange or nationally recognized trading market. Without a trading market, the
liquidity of the Pre-Funded Warrants will be extremely limited. The shares of common stock issuable upon exercise of the Pre-Funded Warrants
are currently traded on Nasdaq.
Right as a Shareholder
Except as otherwise provided in the Pre-Funded
Warrants or by virtue of such holder’s ownership of shares of common stock, the holders of the Pre-Funded Warrants do not have the
rights or privileges of holders of our shares of common stock, including any voting rights, until they exercise their Pre-Funded Warrants.
The Pre-Funded Warrants will provide that holders have the right to participate in distributions or dividends paid on our shares of common
stock.
Placement Agent Warrants
The registration statement of which this prospectus
is a part also registers for sale warrants to purchase up to 2,375,000 shares of our common stock (5.0% of the shares of common
stock forming part of the Units sold to investors introduced by the Placement Agent in this offering and 5.0% of the shares of common
stock underlying the Pre-Funded Warrants and Warrants forming part of the Units sold to investors introduced by the Placement Agent in
this offering) to be issued to the Placement Agent or its designee, as a portion of the placement agent compensation payable in connection
with this offering. Notwithstanding the foregoing, to the extent the Units sold in the offering were sold to investors (friends and family)
introduced by us (as listed in Exhibit A to the engagement letter, dated June 19, 2023, between the Placement Agent and us), as amended,
we shall only issue to Placement Agent 2.5% of the shares of common stock forming part of the Units sold to investors introduced by the
Placement Agent in this offering and 2.5% of the shares of common stock underlying the Pre-Funded Warrants and Warrants forming part
of the Units sold in this offering. The warrants will be exercisable at any time, and from time to time, in whole or in part, commencing
from the closing of the offering and expiring five (5) years from the commencement of sales of the offering, at an exercise price of
$0.50 (125% of the assumed public offering price of the Units). The Placement Agent Warrants issued in this offering will otherwise
have substantially the same terms as the Warrants, except the Placement Agent Warrants will provide for cashless exercise at all times.
The Placement Agent Warrants are registered on the registration statement of which this prospectus is a part. The form of the Placement
Agent Warrant has been included as an exhibit to this registration statement of which this prospectus forms a part.
Exclusive Forum Provision
Section 5 of the Warrant and Pre-Funded Warrant
(forming part of a Unit) provides that “[e]ach party agrees that all legal proceedings concerning the interpretations, enforcement,
and defense of the transactions contemplated by this Warrant (whether brought against a party hereto or their respective affiliates, directors,
officers, shareholders, partners, members, employees, or agents) shall be commenced exclusively in the state and federal courts sitting
in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action, or proceeding, any
claim that it is not personally subject to the jurisdiction of any such court, that such suit, action, or proceeding is improper or is
an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being
served in any such suit, action, or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by law.”
However, Section 27 of the Exchange Act creates
exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations
thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the
Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. In addition, Section 22 of the Securities Act
creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities
Act or the rules and regulations thereunder. As a result, the exclusive forum provisions will not apply to suits brought to enforce any
duty or liability created by the Securities Act or any other claim for which the federal and state courts have concurrent jurisdiction,
and you will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
Therefore, this provision would not apply
to suits brought to enforce a duty or liability created by the Securities Act, Exchange Act or any other claim for which the U.S. federal
courts have exclusive jurisdiction.
The exclusive forum provision in the Warrant and
Pre-Funded Warrant will not relieve us of our duty to comply with the federal securities laws and the rules and regulations thereunder,
and shareholders will not be deemed to have waived our compliance with these laws, rules and regulations.
This exclusive forum provision may limit a shareholder’s
ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees, which
may discourage lawsuits against us or our directors, officers or other employees. In addition, shareholders who do bring a claim in the
state or federal court in the State of Delaware could face additional litigation costs in pursuing any such claim, particularly if they
do not reside in or near Delaware. The state or federal court of the State of Delaware may also reach different judgments or results than
would other courts, including courts where a shareholder would otherwise choose to bring the action, and such judgments or results may
be more favorable to us than to our shareholders. However, the enforceability of similar exclusive forum provisions in other companies’
Warrants have been challenged in legal proceedings, and it is possible that a court could find this type of provision to be inapplicable
to, or unenforceable in respect of, one or more of the specified types of actions or proceedings. If a court were to find the exclusive
forum provision contained in the Warrant and Pre-Funded Warrant to be inapplicable or unenforceable in an action, we might incur additional
costs associated with resolving such action in other jurisdictions.
Fee Shifting Provision
Section
5 of the Warrants and Pre-Funded Warrants provides that “[i]f either party shall commence an action, suit or proceeding to
enforce any provisions of this Warrant, the prevailing party in such action, suit, or proceeding shall be reimbursed by the other party
for their reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation, and prosecution
of such action or proceeding.”
NOTWITHSTANDING, THE FEE SHIFTING PROVISION CONTAINED
IN THE RESTATED CERTIFICATE OF INCORPORATION, WARRANTS AND PRE-FUNDED WARRANTS WOULD NOT APPLY TO “INTERNAL CORPORATE CLAIMS”
AS DEFINED IN SECTION 109(B) OF THE DELAWARE GENERAL CORPORATION LAW.
The phrase “attorneys fees and other costs
and expenses incurred with the investigation, preparation and prosecution of such action or proceeding” means the fees and expenses
of counsel to the Company and any other parties asserting a claim subject to Section 5 of Warrants
and Pre-Funded Warrants, which may include printing, photocopying, duplicating and other expenses, air freight charges, and fees
billed for law clerks, paralegals and other persons not admitted to the bar but performing services under the supervision of an attorney,
and the costs and fees incurred in connection with the enforcement or collection of any judgment obtained in any such proceeding.
We adopted the fee-shifting provision to
eliminate or decrease nuisance and frivolous litigation. We intend to apply the fee-shifting
provision broadly to all actions except for claims brought under the Exchange Act and Securities Act.
There is
no set level of recovery required to be met by a plaintiff to avoid payment under this provision. Instead, whoever is the prevailing party
is entitled to recover the reasonable attorneys’ fees, costs and expenses incurred in connection with the prosecution or defense
of such action. Any party who brings an action, and the party against whom such action is brought under Section 5 of Warrants and Pre-Funded
Warrants, which could include, but is not limited to former and current shareholders, Company directors, officers, affiliates, legal counsel,
expert witnesses and other parties, are subject to this provision. Additionally, any party who brings an action, and the party against
whom such action is brought under Section 5 of Warrants and Pre-Funded Warrants, which could include, but is not limited to former and
current shareholders, Company directors, officers, affiliates, legal counsel, expert witnesses and other parties, would be able to recover
fees under this provision.
In the event
you initiate or assert a claim against us, in accordance with the dispute resolution provisions contained in Section 5 of Warrants and
Pre-Funded Warrants, and you do not, in a judgment prevail, you will be obligated to reimburse us for all reasonable costs and expenses
incurred in connection with such claim, including, but not limited to, reasonable attorney’s fees and expenses and costs of appeal,
if any. Additionally, this provision in Section 5 of Warrants and Pre-Funded Warrants could discourage shareholder lawsuits that might
otherwise benefit the Company and its shareholders.
THE FEE SHIFTING PROVISION CONTAINED IN SECTION
5 OF WARRANTS AND PRE-FUNDED WARRANTS IS NOT INTENDED TO BE DEEMED A WAIVER BY ANY HOLDER OF COMMON STOCK OF THE COMPANY’S
COMPLIANCE WITH THE U.S. FEDERAL SECURITIES LAWS AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER. THE FEE SHIFTING PROVISION CONTAINED
IN THE RESTATED CERTIFICATE OF INCORPORATION, WARRANTS AND PRE-FUNDED WARRANTS DO NOT APPLY
TO CLAIMS BROUGHT UNDER THE EXCHANGE ACT AND SECURITIES ACT.
Anti-Takeover Effects of Certain Provisions
of Our Bylaws
Charter and bylaws provisions
Our charter and our bylaws, include a number of
provisions that could deter hostile takeovers or delay or prevent changes in control of our company, including the following:
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Board of Directors Vacancies: Our charter and bylaws authorize only our board of directors to fill vacant directorships, including newly created seats. In addition, the number of directors constituting our board of directors may only be set by a resolution adopted by a majority vote of our entire board of directors. These provisions would prevent a stockholder from increasing the size of our board of directors and then gaining control of our board of directors by filling the resulting vacancies with its own nominees. This makes it more difficult to change the composition of our board of directors but promotes continuity of management. |
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Stockholder Action; Special Meetings of Stockholders: Our charter provides that our stockholders may not take action by written consent, but may only take action at annual or special meetings of our stockholders. As a result, a holder controlling a majority of our capital stock would not be able to amend our bylaws or remove directors without holding a meeting of our stockholders called in accordance with our bylaws. Further, our bylaws and charter will provide that special meetings of our stockholders may be called only by a majority of our board of directors, the Chairman of our board of directors or our Chief Executive Officer, thus prohibiting a stockholder from calling a special meeting. These provisions might delay the ability of our stockholders to force consideration of a proposal or for stockholders controlling a majority of our capital stock to take any action, including the removal of directors. |
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Advance Notice Requirements for Stockholder Proposals and Director Nominations: Our bylaws provide advance notice procedures for stockholders seeking to bring matters before our annual meeting of stockholders or to nominate candidates for election as directors at our annual meeting of stockholders. Our bylaws also specify certain requirements regarding the form and content of a stockholder’s notice. These provisions might preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders if the proper procedures are not followed. We expect that these provisions might also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company. |
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No Cumulative Voting: The DGCL provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless a corporation’s certificate of incorporation provides otherwise. Our charter does not provide for cumulative voting. |
Delaware law
We are subject to the provisions of Section 203 of the DGCL, regulating
corporate takeovers. In general, DGCL Section 203 prohibits a publicly held Delaware corporation from engaging in a business combination
with an interested stockholder for a period of three years following the date on which the person became an interested stockholder unless:
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prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; |
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upon 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, but not the outstanding voting stock owned by the interested stockholder, (i) shares owned by persons who are directors and also officers and (ii) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or |
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at or subsequent to the date of the transaction, the business combination is approved by the board of directors of the corporation and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder. |
Generally, a business combination includes a merger, asset or stock
sale, or other transaction or series of transactions together resulting in a financial benefit to the interested stockholder. An interested
stockholder is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested
stockholder status, did own 15% or more of a corporation’s outstanding voting stock. We expect the existence of this provision to
have an anti-takeover effect with respect to transactions our board of directors does not approve in advance. We also anticipate that
DGCL Section 203 may also discourage attempts that might result in a premium over the market price for the shares of common stock
held by stockholders.
Limitations on liability, indemnification of
officers and directors and insurance
Pursuant to Section 102(b)(7) of the Delaware
General Corporation Law (“DGCL”), a Director of the Corporation shall not be personally liable to the Corporation or its Stockholders
for monetary damages for breach of fiduciary duty as a Director, except for liability: (1) for any breach of the Director's duty of loyalty
to the Corporation or its Stockholders; (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (3) under Section 174 of the DGCL; or (4) for any transaction from which the Director derived an improper personal benefit.
If the DGCL or other applicable provision of Delaware law hereafter is amended to authorize further elimination or limitation of the liability
of Directors, then the liability of a Director of this Corporation, in addition to the limitation on personal liability provided herein,
shall be limited to the fullest extent permitted by the DGCL or other applicable provision of Delaware law as amended. Any repeal or modification
of this Section 2 by the Stockholders of this Corporation shall be prospective only and shall not adversely affect any limitation on the
personal liability of a Director of the Corporation existing at the time of such repeal or modification. Our restated certificate of incorporation,
as amended (our “Certificate of Incorporation”) and corporate bylaws (our “Bylaws”) contain provisions that limit
the liability of our directors for monetary damages to the fullest extent permitted by Delaware law.
Section 145 of the Delaware General Corporation
Law authorizes a corporation to indemnify its directors and officers against liabilities arising out of actions, suits and proceedings
to which they are made or threatened to be made a party by reason of the fact of their prior or current service to the corporation as
a director or officer, in accordance with the provisions of Section 145, which are sufficiently broad to permit indemnification under
certain circumstances for liabilities arising under the Securities Act of 1933, as amended (the “Securities Act”). The indemnity
may cover expenses (including attorneys’ fees) judgments, fines and amounts paid in settlement actually and reasonably incurred
by the director or officer in connection with any such action, suit or proceeding. Section 145 permits corporations to pay expenses
(including attorneys’ fees) incurred by directors and officers in advance of the final disposition of such action, suit or proceeding.
In addition, Section 145 provides that a corporation has the power to purchase and maintain insurance on behalf of its directors
and officers against any liability asserted against them and incurred by them in their capacity as a director or officer, or arising out
of their status as such, whether or not the corporation would have the power to indemnify the director or officer against such liability
under Section 145.
Our Certificate of Incorporation provides that
(a) any of our directors or officers made a party to an action, suit or proceeding, whether civil, criminal, administrative, arbitrative
or investigative, or any appeal in such action, suit or proceeding, and any inquiry or investigation that could lead to such action, suit
or proceeding (each, a “Proceeding”), by reason of such person’s service as our director or officer or as a director,
officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another enterprise per our request, shall be
indemnified and held harmless by us to the fullest extent permitted by the Delaware General Corporation Law against all judgments, penalties
(including excise and similar taxes), fines, settlements, and reasonable expenses (including attorneys’ fees) actually incurred
by such person in connection with such Proceeding; (b) we must advance reasonable expenses incurred in defending any such Proceeding,
subject to limited exceptions; and (c) the indemnification rights conferred by it are not exclusive of any rights permitted by law.
Our Bylaws provide that (a) we must indemnify
our directors and officers to the maximum extent and in the manner permitted by the Delaware General Corporation Law against judgments,
penalties (including excise taxes), fines, amounts paid in settlement and reasonable expenses (including court and attorneys’ fees)
actually incurred in such settlement and reasonable expenses (including court and attorneys’ fees) actually incurred by such person
with a Proceeding by reason of such person’s service as our director or officer or as a director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another enterprise per our request, subject to certain limited exceptions, (b) we
shall advance expenses incurred by any director or officer who was or is a witness or was or is named as a defendant or respondent in
a Proceeding, in reasonable intervals prior to the final disposition of such Proceeding, subject to certain limited exceptions, and (c) the
indemnification rights conferred in our Bylaws are not exclusive.
Our Bylaws also empower our board of directors
to authorize us to indemnify our employees or agents, and to advance reasonable expenses of such persons to the same extent and subject
to the same conditions as the indemnification provided to our directors and officers.
We have entered into indemnification agreements
with each of our directors and executive officers to give such directors and officers additional contractual assurances regarding the
scope of the indemnification set forth in our Certificate of Incorporation and Bylaws and to provide additional procedural protections.
These agreements, among other things, provide that we will indemnify our directors and executive officers for judgments, penalties (including
excise and similar taxes), fines, settlements and reasonable expenses (including attorneys’ fees and court costs) actually and reasonably
incurred by a director or executive officer in connection with any threatened, pending or completed action, suit or proceeding, any appeal
in such action, suit or proceeding, and any inquiry or investigation that could lead to such action, suit or proceeding to which such
person was, is or is threatened to be made a party, a witness or other participant by reason of such person’s services as our director
or executive officer, or as a director or executive officer of any other company or enterprise to which the person provides services at
our request.
In addition, the indemnification agreements provide
that, upon the request of a director or executive officer, we shall advance expenses to the director or officer. We intend to enter into
indemnification agreements with any new directors and executive officers in the future.
We have also obtained an insurance policy covering
our directors and officers with respect to certain liabilities, including liabilities arising under the Securities Act.
Our Transfer Agent
and Warrant Agent
The transfer agent and registrar for our Common
Stock and warrant agent for our Warrants is Computershare Trust Company, N.A. The transfer agent and registrar’s address is 250
Royall Street, Canton, MA 02021. The transfer agent’s telephone (877) 373-6374.
We have agreed to indemnify Computershare Trust
Company, N.A in its roles as transfer agent and warrant agent, its agents and each of its stockholders, directors, officers and employees
against all liabilities, including judgments, costs and reasonable counsel fees that may arise out of acts performed or omitted for its
activities in that capacity, except for any liability due to any gross negligence, willful misconduct or bad faith of the indemnified
person or entity.
MATERIAL U.S. FEDERAL TAX CONSIDERATIONS FOR
HOLDERS OF OUR COMMON STOCK, WARRANTS,
PRE-FUNDED WARRANTS AND PLACEMENT AGENT
WARRANTS
The following discussion
describes the material U.S. federal income tax consequences of the acquisition, ownership and disposition of our Units, consisting of
our Common Stock or Pre-Funded Warrants and Warrants acquired in this offering. The Warrants, the Pre-Funded Warrants, and the Placement
Agent Warrants are collectively referred to in this section as the “Warrants.” This discussion is based on the current
provisions of the Internal Revenue Code of 1986, as amended, referred to as the Code, existing and proposed U.S. Treasury regulations
promulgated thereunder, and administrative rulings and court decisions in effect as of the date hereof, all of which are subject to change
at any time, possibly with retroactive effect. No ruling has been or will be sought from the Internal Revenue Service, or IRS, with respect
to the matters discussed below, and there can be no assurance the IRS will not take a contrary position regarding the tax consequences
of the acquisition, ownership or disposition of our Common Stock, or Warrants, or that any such contrary position would not be sustained
by a court.
We assume in this discussion
that the shares of our Common Stock or Warrants will be held as capital assets (generally, property held for investment). This discussion
does not address all aspects of U.S. federal income taxes, does not discuss the potential application of the Medicare contribution tax,
the alternative minimum tax and does not deal with state or local taxes, U.S. federal gift and estate tax laws, except as specifically
provided below with respect to non-U.S. holders, or any non-U.S. tax consequences that may be relevant to holders in light of their particular
circumstances. This discussion also does not address the special tax rules applicable to particular holders, such as:
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financial institutions; |
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brokers or dealers in securities; |
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tax-exempt organizations; |
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pension plans; |
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regulated investment companies; |
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owners that hold our Common Stock or Warrants as part of a straddle, hedge, conversion transaction, synthetic security or other integrated investment; |
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insurance companies; |
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controlled foreign corporations, passive foreign investment companies, or corporations that accumulate earnings to avoid U.S. federal income tax; and |
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certain U.S. expatriates. |
In addition, this discussion
does not address the tax treatment of partnerships or other pass-through entities or persons who hold our Common Stock or Warrants through
partnerships or other entities which are pass-through entities for U.S. federal income tax purposes. A partner in a partnership or other
pass-through entity that will hold our Common Stock or Warrants should consult his, her or its own tax advisor regarding the tax consequences
of the ownership and disposition of our Common Stock or Warrants through a partnership or other pass-through entity, as applicable.
This discussion of U.S.
federal income tax considerations is for general information purposes only and is not tax advice. Prospective investors should consult
their own tax advisors regarding the U.S. federal, state, local and non-U.S. income and other tax considerations of acquiring, holding
and disposing of our Common Stock and Warrants.
For the purposes of this discussion,
a “U.S. Holder” means a beneficial owner of our Common Stock or Warrants that is for U.S. federal income tax purposes (a)
an individual citizen or resident of the United States, (b) a corporation (or other entity taxable as a corporation for U.S. federal income
tax purposes), created or organized in or under the laws of the United States, any state thereof or the District of Columbia, (c) an estate
the income of which is subject to U.S. federal income taxation regardless of its source, or (d) a trust if it (1) is subject to the primary
supervision of a court within the United States and one or more U.S. persons (within the meaning of Section 7701(a)(30) of the Code) have
the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury regulations
to be treated as a U.S. person. A “Non-U.S. Holder” is, for U.S. federal income tax purposes, a beneficial owner of Common
Stock or Warrants that is not a U.S. Holder or a partnership for U.S. federal income tax purposes.
Tax Cuts and Jobs Act
Under tax legislation signed
into law in December 2017 commonly known as the Tax Cuts and Jobs Act of 2017, U.S. Holders that use an accrual method of accounting for
tax purposes and have certain financial statements generally will be required to include certain amounts in income no later than the time
such amounts are taken into account as revenue in such financial statements. The application of this rule thus may require the accrual
of income earlier than would be the case under the general tax rules described below, although the precise application of this rule is
unclear at this time. This rule is effective for taxable years beginning after December 31, 2017. U.S. Holders that use an accrual method
of accounting should consult with their tax advisors regarding the potential applicability of this legislation to their particular situation.
Allocation of Purchase Price of the Unit
For U.S. federal income tax
purposes, each unit will be treated as an “investment unit” consisting of one share of Common Stock and a warrant to acquire
one share of our Common Stock. The purchase price for each investment unit will be allocated between these two components in proportion
to their relative fair market values at the time the unit is purchased by the holder. This allocation of the purchase price for each Unit
will establish the holder’s initial tax basis for U.S. federal income tax purposes in the share of Common Stock and the Warrant
included in each Unit. The separation of the share of Common Stock and the Warrant included in each Unit should not be a taxable event
for U.S. federal income tax purposes. Each holder should consult his, her or its own tax advisor regarding the allocation of the purchase
price for a Unit.
Tax Considerations Applicable to U.S. Holders
Exercise and Expiration of Warrants
In general, a U.S. Holder
will not recognize gain or loss for U.S. federal income tax purposes upon exercise of a Warrant. The U.S. Holder will take a tax basis
in the shares acquired on the exercise of a Warrant equal to the exercise price of the Warrant, increased by the U.S. Holder’s adjusted
tax basis in the Warrant exercised (as determined pursuant to the rules discussed above). The U.S. Holder’s holding period in the
shares of our Common Stock acquired on exercise of the Warrant will begin on the date of exercise of the Warrant, and will not include
any period for which the U.S. Holder held the Warrant.
In certain limited circumstances,
a U.S. Holder may be permitted to undertake a cashless exercise of Warrants into our Common Stock. The U.S. federal income tax treatment
of a cashless exercise of Warrants into our Common Stock is unclear, and the tax consequences of a cashless exercise could differ from
the consequences upon the exercise of a Warrant described in the preceding paragraph. U.S. Holders should consult their own tax advisors
regarding the U.S. federal income tax consequences of a cashless exercise of Warrants.
The lapse or expiration of
a Warrant will be treated as if the U.S. Holder sold or exchanged the Warrant and recognized a capital loss equal to the U.S. Holder’s
tax basis in the Warrant. The deductibility of capital losses is subject to limitations.
Certain Adjustments to and Distributions on
Warrants
Under Section 305 of the Code,
an adjustment to the number of shares of Common Stock issued on the exercise of the Warrants, or an adjustment to the exercise price of
the Warrants, may be treated as a constructive distribution to a U.S. Holder of the Warrants if, and to the extent that, such adjustment
has the effect of increasing such U.S. Holder’s proportionate interest in our “earnings and profits” or assets, depending
on the circumstances of such adjustment (for example, if such adjustment is to compensate for a distribution of cash or other property
to our shareholders). An adjustment made pursuant to a bona fide reasonable adjustment formula that has the effect of preventing dilution
should generally not be considered to result in a constructive distribution. Any such constructive distribution would be taxable whether
or not there is an actual distribution of cash or other property to the holders of Warrants. In certain circumstances, if we were to make
a distribution in cash or other property with respect to our Common Stock after the issuance of the Warrants, then we may make a corresponding
distribution to a Warrant holder. The taxation of a distribution received with respect to a Warrant is unclear. It is possible such a
distribution would be treated as a distribution (or constructive distribution), although other treatments are possible. For more information
regarding the tax considerations related to distributions, see the discussion below regarding “Distributions.” U.S. Holders
should consult their tax advisors regarding the proper treatment of any adjustments to the Warrants and any distributions with respect
to the Warrants.
Distributions
As discussed above, we currently
anticipate that we will retain future earnings, if any, to finance the growth and development of our business and do not intend to pay
cash dividends in respect of our Common Stock in the foreseeable future. In the event that we do make distributions on our Common Stock
to a U.S. Holder, those distributions generally will constitute dividends for U.S. tax purposes to the extent paid out of our current
or accumulated earnings and profits (as determined under U.S. federal income tax principles). Distributions in excess of our current and
accumulated earnings and profits will constitute a return of capital that is applied against and reduces, but not below zero, a U.S. Holder’s
adjusted tax basis in our Common Stock. Any remaining excess will be treated as gain realized on the sale or exchange of our Common Stock
as described below under the section titled “ – Disposition of Our Common Stock or Warrants.”
Disposition of Our Common Stock or Warrants
Upon a sale or other taxable
disposition of our Common Stock or Warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference
between the amount realized and the U.S. Holder’s adjusted tax basis in the Common Stock or Warrants. Capital gain or loss will
constitute long-term capital gain or loss if the U.S. Holder’s holding period for the Common Stock or Warrants exceeds one year.
The deductibility of capital losses is subject to certain limitations. U.S. Holders who recognize losses with respect to a disposition
of our Common Stock or Warrants should consult their own tax advisors regarding the tax treatment of such losses.
Information Reporting and Backup Reporting
Information reporting requirements
generally will apply to payments of dividends (including constructive dividends) on the Common Stock and Warrants and to the proceeds
of a sale or other disposition of Common Stock and Warrants paid by us to a U.S. Holder unless such U.S. Holder is an exempt recipient,
such as a corporation. Backup withholding will apply to those payments if the U.S. Holder fails to provide the holder’s taxpayer
identification number, or certification of exempt status, or if the holder otherwise fails to comply with applicable requirements to establish
an exemption.
Backup withholding is not
an additional tax. Rather, any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against the
U.S. Holder’s U.S. federal income tax liability provided the required information is timely furnished to the IRS. U.S. Holders should
consult their own tax advisors regarding their qualification for exemption from information reporting and backup withholding and the procedure
for obtaining such exemption.
Tax Considerations Applicable To Non-U.S. Holders
Exercise and Expiration of Warrants
In general, a Non-U.S. Holder
will not recognize gain or loss for U.S. federal income tax purposes upon the exercise of Warrants into shares of Common Stock. The U.S.
federal income tax treatment of a cashless exercise of Warrants into our Common Stock is unclear. A Non-U.S. Holder should consult his,
her, or its own tax advisor regarding the U.S. federal income tax consequences of a cashless exercise of Warrants. The expiration of a
Warrant will be treated as if the Non-U.S. Holder sold or exchanged the Warrant and recognized a capital loss equal to the Non-U.S. Holder’s
tax basis in the Warrant. However, a Non-U.S. Holder will not be able to utilize a loss recognized upon expiration of a Warrant against
the Non-U.S. Holder’s U.S. federal income tax liability unless the loss is effectively connected with the Non-U.S. Holder’s
conduct of a trade or business within the United States (and, if an income tax treaty applies, is attributable to a permanent establishment
or fixed base in the United States) or is treated as a U.S.-source loss and the Non-U.S. Holder is present 183 days or more in the taxable
year of disposition and certain other conditions are met.
Certain Adjustments to and Distributions on
Warrants
As described under “
– U.S. Holders – Certain Adjustments to and Distributions on Warrants,” an adjustment to the Warrants could result in
a constructive distribution to a Non-U.S. Holder, which would be treated as described under “Distributions” below, and the
tax treatment of distributions on the Warrants is unclear. Any resulting withholding tax attributable to deemed dividends would be collected
from other amounts payable or distributable to the Non-U.S. Holder. Non-U.S. Holders should consult their tax advisors regarding the proper
treatment of any adjustments to and distributions on the Warrants.
Distributions
As discussed above, we currently
anticipate that we will retain future earnings, if any, to finance the growth and development of our business and do not intend to pay
cash dividends in respect of our Common Stock in the foreseeable future. In the event that we do make distributions on our Common Stock
to a Non-U.S. Holder, those distributions generally will constitute dividends for U.S. federal income tax purposes as described in “
– U.S. Holders – Distributions”.
Any distribution (including
constructive distributions) on our Common Stock that is treated as a dividend paid to a Non-U.S. Holder that is not effectively connected
with the holder’s conduct of a trade or business in the United States will generally be subject to withholding tax at a 30% rate
or such lower rate as may be specified by an applicable income tax treaty between the United States and the Non-U.S. Holder’s country
of residence. To obtain a reduced rate of withholding under a treaty, a Non-U.S. Holder generally will be required to provide the applicable
withholding agent with a properly executed IRS Form W-8BEN, IRS Form W-8BEN-E or other appropriate form, certifying the Non-U.S. Holder’s
entitlement to benefits under that treaty. Such form must be provided prior to the payment of dividends and must be updated periodically.
If a Non-U.S. Holder holds stock through a financial institution or other agent acting on the holder’s behalf, the holder will be
required to provide appropriate documentation to such agent. The holder’s agent may then be required to provide certification to
the applicable withholding agent, either directly or through other intermediaries. If you are eligible for a reduced rate of U.S. withholding
tax under an income tax treaty, you should consult with your own tax advisor to determine if you are able to obtain a refund or credit
of any excess amounts withheld by timely filing an appropriate claim for a refund with the IRS.
We generally are not required
to withhold tax on dividends paid (or constructive dividends deemed paid) to a Non-U.S. Holder that are effectively connected with the
holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, are attributable
to a permanent establishment or fixed base that the holder maintains in the United States) if a properly executed IRS Form W-8ECI, stating
that the dividends are so connected, is furnished to us (or, if stock is held through a financial institution or other agent, to the applicable
withholding agent). In general, such effectively connected dividends will be subject to U.S. federal income tax on a net income basis
at the regular graduated rates applicable to U.S. persons. A corporate Non-U.S. Holder receiving effectively connected dividends may also
be subject to an additional “branch profits tax,” which is imposed, under certain circumstances, at a rate of 30% (or such
lower rate as may be specified by an applicable treaty) on the corporate Non-U.S. Holder’s effectively connected earnings and profits,
subject to certain adjustments.
See also the sections below
titled “ – Backup Withholding and Information Reporting” and “ – Foreign Accounts” for additional
withholding rules that may apply to dividends paid to certain foreign financial institutions or non-financial foreign entities.
Disposition of Our Common Stock or Warrants
Subject to the discussions
below under the sections titled “ – Backup Withholding and Information Reporting” and “ – Foreign Accounts,”
a Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax with respect to gain realized on a sale or other
disposition of our Common Stock or Warrants unless:
|
● |
the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States, and if an applicable income tax treaty so provides, the gain is attributable to a permanent establishment or fixed base maintained by the Non-U.S. Holder in the United States; in these cases, the Non-U.S. Holder will be taxed on a net income basis at the regular graduated rates and in the manner applicable to U.S. persons, and if the Non-U.S. Holder is a corporation, an additional branch profits tax at a rate of 30%, or a lower rate as may be specified by an applicable income tax treaty, may also apply; |
|
● |
the Non-U.S. Holder is a nonresident alien present in the United States for 183 days or more in the taxable year of the disposition and certain other requirements are met, in which case the Non-U.S. Holder will be subject to a 30% tax (or such lower rate as may be specified by an applicable income tax treaty between the United States and such holder’s country of residence) on the net gain derived from the disposition, which may be offset by certain U.S.-source capital losses of the Non-U.S. Holder, if any; or |
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our Common Stock constitutes a U.S. real property interest because we are, or have been at any time during the five-year period preceding such disposition (or the Non-U.S. Holder’s holding period of the Common Stock or Warrants, if shorter), a “U.S. real property holding corporation,” unless our Common Stock is regularly traded on an established securities market and the Non-U.S. Holder held no more than 5% of our outstanding Common Stock, directly or indirectly, during the shorter of the five-year period ending on the date of the disposition or the period that the Non-U.S. Holder held our Common Stock. Special rules may apply to the determination of the 5% threshold in the case of a holder of a Warrant. Non-U.S. Holders are urged to consult their own tax advisors regarding the effect of holding our Warrants on the calculation of such 5% threshold. Generally, a corporation is a “U.S. real property holding corporation” if the fair market value of its “U.S. real property interests” (as defined in the Code and applicable regulations) equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. Although there can be no assurance, we believe that we are not currently, and we do not anticipate becoming, a “U.S. real property holding corporation” for U.S. federal income tax purposes. No assurance can be provided that our Common Stock will be regularly traded on an established securities market for purposes of the rules described above. Non-U.S. Holders are urged to consult their own tax advisors regarding the U.S. federal income tax considerations that could result if we are, or become, a “U.S. real property holding corporation”. |
See the sections titled “
– Backup Withholding and Information Reporting” and “ – Foreign Accounts” for additional information regarding
withholding rules that may apply to proceeds of a disposition of our Common Stock or Warrants paid to foreign financial institutions or
non-financial foreign entities.
Federal Estate Tax
Common Stock owned or treated
as owned by an individual who is not a citizen or resident of the United States (as specially defined for U.S. federal estate tax purposes)
at the time of death will be included in the individual’s gross estate for U.S. federal estate tax purposes and, therefore, may
be subject to U.S. federal estate tax, unless an applicable estate tax or other treaty provides otherwise. The foregoing may also apply
to Warrants. A Non-U.S. Holder should consult his, her, or its own tax advisor regarding the U.S. federal estate tax consequences of the
ownership or disposition of shares of our Common Stock and Warrants.
Backup Withholding and Information Reporting
We must report annually to
the IRS and to each Non-U.S. Holder the gross amount of the distributions (including constructive distributions) on our Common Stock or
Warrants paid to such holder and the tax withheld, if any, with respect to such distributions. Non-U.S. Holders may have to comply with
specific certification procedures to establish that the holder is not a U.S. person (as defined in the Code) in order to avoid backup
withholding at the applicable rate, currently 24%, with respect to dividends (or constructive dividends) on our Common Stock or Warrants.
Generally, a holder will comply with such procedures if it provides a properly executed IRS Form W-8BEN (or other applicable Form W-8)
or otherwise meets documentary evidence requirements for establishing that it is a Non-U.S. Holder, or otherwise establishes an exemption.
Dividends paid to Non-U.S. Holders subject to withholding of U.S. federal income tax, as described above under the heading “Dividends,”
will generally be exempt from U.S. backup withholding.
Information reporting and
backup withholding generally will apply to the proceeds of a disposition of our Common Stock or Warrants by a Non-U.S. Holder effected
by or through the U.S. office of any broker, U.S. or foreign, unless the holder certifies its status as a Non-U.S. Holder and satisfies
certain other requirements, or otherwise establishes an exemption. Generally, information reporting and backup withholding will not apply
to a payment of disposition proceeds to a Non-U.S. Holder where the transaction is effected outside the United States through a non-U.S.
office of a broker. However, for information reporting purposes, dispositions effected through a non-U.S. office of a broker with substantial
U.S. ownership or operations generally will be treated in a manner similar to dispositions effected through a U.S. office of a broker.
Non-U.S. Holders should consult their own tax advisors regarding the application of the information reporting and backup withholding rules
to them.
Copies of information returns
may be made available to the tax authorities of the country in which the Non-U.S. Holder resides or is incorporated under the provisions
of a specific treaty or agreement.
Backup withholding is not
an additional tax. Any amounts withheld under the backup withholding rules from a payment to a Non-U.S. Holder can be refunded or credited
against the Non-U.S. Holder’s U.S. federal income tax liability, if any, provided that an appropriate claim is timely filed with
the IRS.
Foreign Accounts
The Foreign Account Tax Compliance
Act, or FATCA, generally imposes a 30% withholding tax on dividends (including constructive dividends) on, and gross proceeds from the
sale or other disposition of, our Common Stock and Warrants if paid to a non-U.S. entity unless (i) if the non-U.S. entity is a “foreign
financial institution,” the non-U.S. entity undertakes certain due diligence, reporting, withholding, and certification obligations,
(ii) if the non-U.S. entity is not a “foreign financial institution,” the non-U.S. entity identifies certain of its U.S. investors,
if any, or (iii) the non-U.S. entity is otherwise exempt under FATCA.
Withholding under FATCA generally
applies to payments of dividends (including constructive dividends) on our Common Stock. An intergovernmental agreement between the United
States and an applicable foreign country may modify the requirements described in this section. Under certain circumstances, a holder
may be eligible for refunds or credits of the tax. Holders should consult their own tax advisors regarding the possible implications of
FATCA on their investment in our Common Stock or Warrants.
The preceding discussion
of material U.S. federal tax considerations is for information only. It is not tax advice. Prospective investors should consult their
own tax advisors regarding the particular U.S. federal, state, local and non-U.S. tax consequences of purchasing, holding and disposing
of our Common Stock or Warrants, including the consequences of any proposed changes in applicable laws.
PLAN OF DISTRIBUTION
Pursuant
to a placement agency agreement, dated as of , 2023, we have engaged Joseph Gunnar &
Co., LLC (“Placement Agent”) to act as our exclusive placement agent to solicit offers to purchase the securities offered
by this prospectus on a reasonable best efforts basis. The Placement Agent is not purchasing or selling any securities, nor are they required
to arrange for the purchase and sale of any specific number or dollar amount of securities, other than to use their “reasonable
best efforts” to arrange for the sale of the securities by us. Therefore, we may not sell the entire amount of securities being
offered.
The terms of this offering are subject to market
conditions and negotiations between us, the placement agent and prospective investors. The placement agent will have no authority to
bind us by virtue of the engagement letter. This is a best-efforts offering and there is no minimum amount of proceeds that is a condition
to closing of this offering. Investors purchasing securities offered hereby will have the option to execute a securities purchase agreement
with us. In addition to rights and remedies available to all purchasers in this offering under federal securities and state law, the
purchasers which enter into a securities purchase agreement will also be able to bring claims of breach of contract against us. The ability
to pursue a claim for breach of contract is material to larger purchasers in this offering as a means to enforce the following covenants
uniquely available to them under the securities purchase agreement: (i) a covenant to not enter into variable rate financings for a period
of one year following the closing of the offering, subject to certain exceptions; and (ii) a covenant to not enter into any equity
financings for 90 days from closing of the offering, subject to certain exceptions. The Placement Agent may engage one or
more sub-agents or selected dealers in connection with the offering.
The nature of the representations, warranties
and covenants in the securities purchase agreements shall include:
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standard issuer representations and warranties on matters such as organization, qualification, authorization, no conflict, no governmental
filings required, current in SEC filings, no litigation, labor or other compliance issues, environmental, intellectual property and title
matters and compliance with various laws such as the Foreign Corrupt Practices Act; and |
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covenants regarding matters such as registration of warrant shares, no integration with other offerings,
filing of an 8-K to disclose entering into these securities purchase agreements, no shareholder rights plans, no material nonpublic
information, use of proceeds, indemnification of purchasers, reservation and listing of common stock, and no subsequent equity sales
for 90 days. |
The placement agency agreement provides that the
Placement Agent’s obligations are subject to conditions contained in the placement agency agreement.
Delivery of the securities offered hereby is expected
to occur on or about _________, 2023, subject to satisfaction of certain customary closing conditions.
Fees and Expenses
The following table shows the public offering
price per Unit consisting of common stock and Warrant, and per Unit consisting of Pre-Funded Warrant and Warrant, placement agent fees
payable by us, and proceeds before expenses to us:
|
|
Per Unit
consisting
of common
stock and
Warrant |
|
|
Per Unit
consisting
of pre-funded
warrant and
Warrant |
|
|
Total |
|
Offering price |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Placement agent fees |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Proceeds before expenses to us |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
We have agreed to pay the placement agent a total
cash fee equal to 8.0% of the aggregate gross proceeds raised in the offering, provided that the placement agent shall receive a reduced
cash fee equal to 4.0% in connection with sales to certain specified investors. We have also agreed to pay the placement agent a non-accountable
expense allowance equal to 1.0% of the aggregate gross proceeds raised in the offering.
We have also agreed to reimburse the Placement
Agent for reasonable accountable out-of-pocket expenses incurred relating to the offering, the aggregate amount of out-of-pocket expenses
being limited as follows: (i) payment up to $75,000 for Placement Agent’s legal counsel fees; (ii) payment up to $15,000 for background
checks; and (iii) payment of up to $5,000 for market making and trading and clearing firm settlement expenses for the offering. Any out-of-pocket
expenses above $5,000 are to be pre-approved by the Company. We have agreed to pay $10,000 to the Placement Agent as a refundable advance,
which if paid shall be applied against actual out-of-pocket accountable expenses and such advance shall be reimbursed to us to the extent
any portion of the advance is not actually incurred, in compliance with FINRA Rule 5110(g)(4)(A) in the event of the termination of the
offering. We estimate the total offering expenses of this offering that will be payable by us, excluding the placement agent fees and
expenses, will be approximately $131,001. After deducting the placement agent fees and our estimated offering expenses, we expect
the net proceeds from this offering to be approximately $8,418,999.
Placement Agent Warrants
In addition, we have agreed to issue the placement
agent warrants to the Placement Agent or its designees to purchase up to 2,375,000 shares of our common stock (5% of the shares
of common stock forming part of the Units sold to investors introduced by the Placement Agent in this offering and 5% of the shares of
common stock underlying the Pre-Funded Warrants and Warrants forming part of the Units sold in this offering) to be issued to the Placement
Agent or its designees. Notwithstanding the foregoing, to the extent the Units sold in the offering were sold to investors (friends and
family) introduced by us (as listed in Exhibit A to the engagement letter, dated June 19, 2023, between the Placement Agent and us),
as amended, we shall only issue to Placement Agent 2.5% of the shares of common stock forming part of the Units sold to investors introduced
by the Placement Agent in this offering and 2.5% of the shares of common stock underlying the Pre-Funded Warrants and Warrants forming
part of the Units sold in this offering. The warrants will be exercisable at any time, and from time to time, in whole or in part, commencing
from the closing of the offering and expiring five (5) years from the commencement of sales of the offering, at an exercise price of
$0.50 (125% of the assumed public offering price of the Units). The Placement Agent Warrants are registered on the registration
statement of which this prospectus is a part. The form of the Placement Agent Warrant has been included as an exhibit to this registration
statement of which this prospectus forms a part.
Tail
In the event that any investors that were contacted
by the placement agent or were introduced to us by the placement agent during the term of our engagement agreement with the placement
agent provide any capital to us in a public or private offering or other financing or capital-raising transaction of any kind (each, a
“Tail Financing”) within twelve (12) months following the termination or expiration of our engagement agreement with the placement
agent, we shall pay the placement agent the cash and warrant compensation provided above on the gross proceeds raised in such Tail Financing
from such investors.
Determination of Offering Price
The public offering price per Unit that we are
offering and the exercise prices and other terms of the Pre-Funded Warrants and Warrants were negotiated between us and the investors,
in consultation with the placement agent based on the trading of our common stock prior to this offering, among other things. Other factors
considered in determining the public offering prices of the securities we are offering and the exercise prices and other terms of the
Pre-Funded Warrants and Warrants include the history and prospects of our Company, the stage of development of our business, our business
plans for the future and the extent to which they have been implemented, an assessment of our management, general conditions of the securities
markets at the time of the offering and such other factors as were deemed relevant.
Lock-up Agreements
We and each of our officers, directors and certain
5% or greater stockholders have agreed with the placement agent to be subject to a lock-up period of ninety (90) days following the date
of this prospectus. This means that, during the applicable lock-up period, we and such persons may not offer for sale, contract to sell,
or sell any shares of our common stock or any securities convertible into, or exercisable or exchangeable for, shares of our common stock
subject to certain customary exceptions. The placement agent may, in its sole discretion and without notice, waive the terms of any of
these lock-up agreements. In addition, we have agreed to not issue any securities that are subject to a price reset based on the trading
prices of our common stock or upon a specified or contingent event in the future or enter into any agreement to issue securities at a
future determined price for a period of one year following the closing date of this offering, subject to certain exceptions. The
placement agent may waive this prohibition in its sole discretion and without notice.
Transfer Agent and Registrar and Warrant Agent
The transfer agent for our common stock and warrant
agent is Computershare Trust Company N.A.
Nasdaq Listing
Our common stock is currently listed on Nasdaq
under the symbols “INTZ”. On September 15, 2023, the closing price per share of our common stock was $0.40.
We have applied to list the Warrants on the Nasdaq under the symbol “INTZW”.
Indemnification
We have agreed to indemnify the placement agent
against certain liabilities, including certain liabilities arising under the Securities Act and liabilities arising from breaches of representations
and warranties contained in our engagement letter with the placement agent. We have also agreed to contribute to payments that the placement
agent may be required to make for these liabilities.
In addition, we will indemnify the purchasers
of securities in this offering against liabilities arising out of or relating to (i) any breach of any of the representations, warranties,
covenants or agreements made by us in the securities purchase agreement or related documents or (ii) any action instituted against a purchaser
by a third party (other than a third party who is affiliated with such purchaser) with respect to the securities purchase agreement or
related documents and the transactions contemplated thereby, subject to certain exceptions.
Regulation M
The placement agent may be deemed to be an underwriter
within the meaning of Section 2(a)(11) of the Securities Act, and any commissions received by it and any profit realized on the sale of
our securities offered hereby by it while acting as principal might be deemed to be underwriting discounts or commissions under the Securities
Act. The placement agent will be required to comply with the requirements of the Securities Act and the Exchange Act, including, without
limitation, Rule 10b-5 and Regulation M under the Exchange Act. These rules and regulations may limit the timing of purchases and sales
of our securities by the placement agent. Under these rules and regulations, the placement agent may not (i) engage in any stabilization
activity in connection with our securities; and (ii) bid for or purchase any of our securities or attempt to induce any person to purchase
any of our securities, other than as permitted under the Exchange Act, until they have completed their participation in the distribution.
Other Relationships
The placement agent and its affiliates may in
the future engage in investment banking transactions and other commercial dealings in the ordinary course of business with us or our affiliates.
The placement agent may in the future receive customary fees and commissions for these transactions. However, except as disclosed in this
prospectus, we have no present arrangements with the placement agent for any further services.
Electronic Distribution
A prospectus in electronic format may be made
available on a website maintained by the placement agent and the placement agent may distribute prospectuses electronically. Other than
the prospectus in electronic format, the information on these websites is not part of this prospectus or the registration statement of
which this prospectus forms a part, has not been approved and/or endorsed by us or the placement agent and should not be relied upon by
investors.
LEGAL MATTERS
The validity of the issuance of the Units, common
stock, Warrants and Pre-Funded Warrants offered in this prospectus will be passed upon for us by Anthony L.G., PLLC, West Palm Beach,
Florida. The placement agent is being represented by Ellenoff Grossman & Schole LLP, New
York, New York.
EXPERTS
The consolidated financial statements as of December
31, 2022 and 2021 and for each of the two years in the period ended December 31, 2022 are incorporated by reference in this prospectus
to our Annual Report on Form 10-K for the year ended December 31, 2022 and have been so incorporated in reliance upon such report (which
contains an explanatory paragraph relating to the Company’s ability to continue as a going concern as described in Note 2 to such
financial statements) of Whitley Penn LLP, an independent registered public accounting firm, incorporated herein by reference, given on
the authority of such firm as experts in accounting and auditing.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
This
prospectus omits some information contained in the registration statement in accordance with SEC rules and regulations. You should review
the information and exhibits included in the registration statement of which this prospectus is a part for further information about us
and the securities we are offering. Statements in this prospectus concerning any document we filed as an exhibit to the registration statement
or that we otherwise filed with the SEC are not intended to be comprehensive and are qualified by reference to these filings. You should
review the complete document to evaluate these statements.
The SEC allows us to “incorporate
by reference” information we file with it, which means that we can disclose important information to you by referring you to other
documents. The information incorporated by reference is considered to be a part of this prospectus. Information contained in this prospectus
supersedes information incorporated by reference that we have filed with the SEC prior to the date of this prospectus.
We incorporate by reference
the following documents listed below (excluding any document or portion thereof to the extent such disclosure is furnished and not filed):
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Our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 31, 2023 including the information that will be incorporated by reference therein upon the filing of our Definitive Proxy Statement on Schedule 14A to be filed with the SEC; |
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Our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023
and June 30, 2023 filed with the SEC on May 15, 2023 and August 14, 2023, respectively; |
|
|
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Our Current Reports on Form 8-K filed with the SEC on January 17, 2023, March 1, 2023, March 6, 2023, March 16, 2023, March 31, 2023, April 11, 2023, May 2, 2023, May 22, 2023, May 22, 2023, May 25, 2023, and August 7, 2023; |
|
|
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●
|
Our Definitive Proxy Statement on Schedule 14A filed with the SEC on April 14, 2023 (other than the portions thereof which are furnished and not filed); and |
|
|
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The description of our common stock set forth in Exhibit 4.2 to our Annual Report on Form 10-K for the year ended December 31, 2022, filed by us on March 31, 2023, including any amendment or report filed for the purpose of updating such description. |
This prospectus forms part
of a registration statement on Form S-1 that we filed with the SEC. This prospectus does not contain all of the information set forth
in the registration statement and the exhibits to the registration statement or the documents incorporated by reference herein and therein.
For further information with respect to us and the securities that we are offering under this prospectus, we refer you to the registration
statement and the exhibits and schedules filed as a part of the registration statement and the documents incorporated by reference herein
and therein. You should rely only on the information incorporated by reference or provided in this prospectus and registration statement.
We have not authorized anyone else to provide you with different information. You should not assume that the information in this prospectus
and the documents incorporated by reference herein and therein is accurate as of any date other than the respective dates thereof.
All reports and other documents
we subsequently file pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of this offering, including
all such documents we may file with the SEC after the date of the initial registration statement and prior to the effectiveness of the
registration statement, but excluding any information furnished to, rather than filed with, the SEC, will also be incorporated by reference
into this prospectus and deemed to be part of this prospectus from the date of the filing of such reports and documents.
Any information in any of
the foregoing documents will automatically be deemed to be modified or superseded to the extent that information in this prospectus or
in a later filed document that is incorporated or deemed to be incorporated herein by reference modifies or replaces such information.
Upon written or oral request,
we will provide you without charge a copy of any or all of the documents that are incorporated by reference into this prospectus including
but limited to financial statement information and exhibits which are specifically incorporated by reference into such documents. Requests
should be directed to: Intrusion Inc., Attention: Investor Relations, 101 East Park Blvd, Suite 1200, Plano, Texas 75074 or call (972)
234 6400. You may access this information at ir.intrusion.com. Except for the specific incorporated documents listed above, no
information available on or through our website shall be deemed to be incorporated in this prospectus or the registration statement of
which it forms a part.
The SEC maintains an internet
website that contains reports, proxy and information statements and other information regarding the issuers that file electronically with
the SEC, including the Company, and can be accessed free of charge on the SEC’s website, http://www.sec.gov.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC
a registration statement on Form S-1 under the Securities Act with respect to the securities offered by this prospectus. This prospectus,
which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement,
some of which is contained in exhibits to the registration statement as permitted by the rules and regulations of the SEC. For further
information with respect to us and our securities, we refer you to the registration statement, including the exhibits filed as a part
of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any other document is
not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, please see the copy of
the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit
is qualified in all respects by the filed exhibit. You may obtain copies of this information by mail from the Public Reference Section
of the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549, at prescribed rates. You may obtain information on the operation of
the public reference rooms by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy
statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is located
at http://www.sec.gov.
We are subject to the information
and reporting requirements of the Exchange Act and, in accordance with this law, are required to file periodic reports, proxy statements
and other information with the SEC. These periodic reports, proxy statements and other information are available for inspection and copying
at the SEC’s public reference facilities and the website of the SEC referred to above. We also maintain a website at ir.intrusion.com.
You may access these materials 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 prospectus and the inclusion of our website address in this prospectus
is an inactive textual reference only.
Up to 23,750,000 Units, each consisting
of
One Share of Common Stock or One Pre-Funded
Warrant to Purchase One Share of Common Stock
and
One Warrant to Purchase One Share of Common
Stock
Placement Agent Warrants to Purchase up to
2,375,000 Shares of Common Stock
Up to 49,875,000 Shares of Common Stock
Underlying the Warrants,
Pre-Funded Warrants, and Placement Agent Warrants
INTRUSION INC.
PROSPECTUS
Sole Placement Agent
JOSEPH
GUNNAR & CO., LLC
__________, 2023
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. |
Other Expenses of Issuance and Distribution |
The following table sets forth
all expenses to be paid by the registrant, other than estimated underwriting discounts and commissions, in connection with our public
offering. All amounts shown are estimates except for the SEC registration fee and the FINRA filing fee:
Type |
|
Amount |
|
SEC registration fee |
|
$ |
2,330 |
|
FINRA filing fee |
|
|
3,671 |
|
Legal fees and expenses |
|
|
175,000 |
|
Accounting fees and expenses |
|
|
15,000 |
|
Placement Agent’s accountable expenses |
|
|
20,000 |
|
Non-accountable fees |
|
|
95,000 |
|
Miscellaneous expense |
|
|
10,000 |
|
Total Expenses |
|
$ |
321,001 |
|
Item 14. |
Indemnification of Directors and Officers. |
Section 145 of the Delaware
General Corporation Law authorizes a corporation to indemnify its directors and officers against liabilities arising out of actions, suits
and proceedings to which they are made or threatened to be made a party by reason of the fact of their prior or current service to the
corporation as a director or officer, in accordance with the provisions of Section 145, which are sufficiently broad to permit indemnification
under certain circumstances for liabilities arising under the Securities Act of 1933, as amended (the “Securities Act”). The
indemnity may cover expenses (including attorneys’ fees) judgments, fines and amounts paid in settlement actually and reasonably
incurred by the director or officer in connection with any such action, suit or proceeding. Section 145 permits corporations to pay
expenses (including attorneys’ fees) incurred by directors and officers in advance of the final disposition of such action, suit
or proceeding. In addition, Section 145 provides that a corporation has the power to purchase and maintain insurance on behalf of
its directors and officers against any liability asserted against them and incurred by them in their capacity as a director or officer,
or arising out of their status as such, whether or not the corporation would have the power to indemnify the director or officer against
such liability under Section 145.
Our restated certificate of
incorporation, as amended (our “Certificate of Incorporation”), provides that (a) any of our directors or officers made a
party to an action, suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative, or any appeal in such action,
suit or proceeding, and any inquiry or investigation that could lead to such action, suit or proceeding (each, a “Proceeding”),
by reason of such person’s service as our director or officer or as a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another enterprise per our request, shall be indemnified and held harmless by us to the fullest
extent permitted by the Delaware General Corporation Law against all judgments, penalties (including excise and similar taxes), fines,
settlements, and reasonable expenses (including attorneys’ fees) actually incurred by such person in connection with such Proceeding;
(b) we must advance reasonable expenses incurred in defending any such Proceeding, subject to limited exceptions; and (c) the indemnification
rights conferred by it are not exclusive of any rights permitted by law.
Our corporate bylaws (our
“Bylaws”), provide that (a) we must indemnify our directors and officers to the maximum extent and in the manner permitted
by the Delaware General Corporation Law against judgments, penalties (including excise taxes), fines, amounts paid in settlement and reasonable
expenses (including court and attorneys’ fees) actually incurred in such settlement and reasonable expenses (including court and
attorneys’ fees) actually incurred by such person with a Proceeding by reason of such person’s service as our director or
officer or as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another enterprise
per our request, subject to certain limited exceptions, (b) we shall advance expenses incurred by any director or officer who was
or is a witness or was or is named as a defendant or respondent in a Proceeding, in reasonable intervals prior to the final disposition
of such Proceeding, subject to certain limited exceptions, and (c) the indemnification rights conferred in our Bylaws are not exclusive.
Our Bylaws also empower our
board of directors to authorize us to indemnify our employees or agents, and to advance reasonable expenses of such persons to the same
extent and subject to the same conditions as the indemnification provided to our directors and officers.
We have entered into indemnification
agreements with each of our directors and executive officers to give such directors and officers additional contractual assurances regarding
the scope of the indemnification set forth in our Certificate of Incorporation and Bylaws and to provide additional procedural protections.
These agreements, among other things, provide that we will indemnify our directors and executive officers for judgments, penalties (including
excise and similar taxes), fines, settlements and reasonable expenses (including attorneys’ fees and court costs) actually and reasonably
incurred by a director or executive officer in connection with any threatened, pending or completed action, suit or proceeding, any appeal
in such action, suit or proceeding, and any inquiry or investigation that could lead to such action, suit or proceeding to which such
person was, is or is threatened to be made a party, a witness or other participant by reason of such person’s services as our director
or executive officer, or as a director or executive officer of any other company or enterprise to which the person provides services at
our request.
In addition, the indemnification
agreements provide that, upon the request of a director or executive officer, we shall advance expenses to the director or officer. We
intend to enter into indemnification agreements with any new directors and executive officers in the future.
We have also obtained an insurance
policy covering our directors and officers with respect to certain liabilities, including liabilities arising under the Securities Act.
Item 15. |
Recent Sales of Unregistered Securities. |
During the three fiscal years
and interim period preceding the filing of this registration statement, we have issued the following securities that were not registered
under the Securities Act. No underwriters were involved in the sales and the certificates representing the securities sold and issued
contain legends restricting transfer of the securities without registration under the Securities Act or an applicable exemption from registration.
On
May 24, 2022, the Company issued 75,188 shares of its common stock pursuant to a transaction that qualified under section 4(2) as a transaction
exempt from the registration requirements of the Securities Act of 1933, as amended. These shares were issued to Purple Plaza, LLC, as
partial consideration for a confidential settlement agreement between the Company and Purple Plaza.
On November 21, 2022, the
Company issued 31,746 shares of its common stock to Anthony Scott, our Chief Executive Officer and President, in exchange for $100,000,
pursuant to the terms of a Stock Purchase Agreement, dated November 21, 2022, between the Company and Anthony Scott, that
qualified under section 4(2) as a transaction exempt from the registration requirements of the Securities Act of 1933, as amended.
Item 16. |
Exhibits and Financial Statement Schedules |
|
(a) |
Exhibits. The list of exhibits preceding the signature page of this registration statement is incorporated herein by reference. |
|
(b) |
Consolidated Financial Statement Schedules. All schedules are omitted because the required information is inapplicable, or the information is presented in the financial statements and the related notes. |
The undersigned registrant hereby undertakes:
(1) To file, during any period
in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus
required by section 10(a)(3) of the Securities Act of 1933, as amended (the “Securities Act”);
(ii) To reflect in the prospectus
any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding
the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration
Fee” table in the effective registration statement; and
(iii) To include any material
information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to
such information in the registration statement; provided, however, that paragraphs (1)(i), (1)(ii) and (1)(iii) above do not apply if
the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished
to the Securities and Exchange Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule
424(b) that is part of the registration statement.
(2) That, for the purpose
of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration
by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose
of determining liability under the Securities Act to any purchaser:
(A) Each prospectus filed
by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus
was deemed part of and included in the registration statement; and
(B) Each prospectus filed
pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule
430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement
as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus
that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such
first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such date of first use.
(5) That for the purpose of
determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of securities, the undersigned
registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement,
regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser
by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to
offer or sell such securities to such purchaser:
(i) Any preliminary prospectus
or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus
relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other
free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided
by or on behalf of the undersigned registrant; and
(iv) Any other communication
that is an offer in the offering made by the undersigned registrant to the purchaser.
Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant
to any charter provision, by law or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant
hereby undertakes that:
(1) For purposes of determining
any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under
the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining
any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof
EXHIBIT INDEX
Exhibit No. | |
Exhibit Description |
1.1* | |
Form of Placement Agency Agreement, dated September __, 2023, by and between the Company and Joseph Gunnar & Co., LLC |
| |
|
3.1(3) | |
Restated Certificate of Incorporation of the Company |
| |
|
3.2(5) | |
Certificate of Amendment to Certificate of Incorporation of the Company. |
| |
|
3.3(2) | |
Bylaws of the Company |
| |
|
4.1(6) | |
Specimen Common Stock Certificate. |
| |
|
4.2(19) | |
Description of the Capital Stock of the Company |
| |
|
4.3(14) | |
Form of Convertible Promissory Note #1 Issued Under the Securities Purchase Agreement dated March 10, 2022, by and between the Registrant and Streeterville Capital, LLC. |
| |
|
4.4(14) | |
Form of Convertible Promissory Note #2 Issued Under the Securities Purchase Agreement dated March 10, 2022, by and between the Registrant and Streeterville Capital, LLC. |
| |
|
4.5(15) | |
Form of Warrant Issued under that Securities Purchase Agreement between the Registrant and the Purchaser identified on the signature pages thereto, dated September 12, 2022 |
| |
|
4.6* | |
Form of Warrant Agency Agreement between the Company and Computershare Trust Company N.A. |
| |
|
4.7* | |
Form of Common Stock Purchase Warrant |
| |
|
4.8** | |
Form of Pre-Funded Warrant |
| |
|
4.9** | |
Form of Placement Agent Warrant |
| |
|
5.1* | |
Opinion of Anthony L.G., PLLC |
| |
|
10.1(14) | |
Securities Purchase Agreement dated March 10, 2022, by and Between the Registrant and Streeterville Capital, LLC |
| |
|
10.2(16) | |
Amendment dated January 11, 2023, to the Securities Purchase Agreement dated March 10, 2022, by and between the Registrant and Streeterville Capital, LLC. |
| |
|
10.3(15) | |
Securities Purchase Agreement between the Registrant and the Purchasers identified on the signature pages thereto, dated September 12, 2022 |
10.4(17) | |
Note Purchase Agreement dated February 23, 2023, by and between the Company and Streeterville Capital, LLC |
| |
|
10.5(18) | |
Sublease Agreement between the Registrant and CliftonLarsonAllen LLP dated September 28, 2020 |
| |
|
10.6(18) | |
Lease between the Registrant and JBA Portfolio, LLC, executed as of February 3, 2021 |
| |
|
10.7(2)+ | |
Amended and Restated 401(k) Savings Plan of the Registrant |
| |
|
10.8(4)+ | |
Intrusion Inc. 401(k) Savings Plan Summary of Material Modifications |
| |
|
10.9(7)+ | |
Amended 2005 Stock Incentive Plan of the Registrant |
| |
|
10.10(8)+ | |
2015 Stock Incentive Plan of the Registrant |
| |
|
10.11(9)+ | |
Form of Notice of Grant of Stock Option |
| |
|
10.12(9)+ | |
Form of Stock Option Agreement |
| |
|
10.13(9)+ | |
Form of Notice of Grant of Non-Employee Director Automatic Stock Option (Initial Grant) |
| |
|
10.14(9)+ | |
Form of Notice of Grant of Non-Employee Director Automatic Stock Option (Annual Grant) |
| |
|
10.15(9)+ | |
Form of Automatic Stock Option Agreement |
| |
|
10.16(10)+ | |
Intrusion Inc. Amended 2021 Omnibus Incentive Plan |
| |
|
10.17(11)+ | |
Form of Incentive Stock Option Award Agreement to the Intrusion Inc. 2021 Omnibus Incentive Plan |
| |
|
10.18(1)+ | |
Form of Restricted Stock Award Agreement to the Intrusion Inc. 2021 Omnibus Incentive Plan |
| |
|
10.19(1)+ | |
Form of Non-Qualified Stock Option Agreement to the Intrusion Inc. 2021 Omnibus Incentive Plan |
| |
|
10.20(12) | |
Sales Agreement, dated August 5, 2021, between the Registrant and B. Riley Securities, Inc. |
| |
|
10.21(13)+ | |
Executive Employment Agreement between Intrusion Inc. and Anthony Scott, dated November 11, 2021 |
| |
|
10.22(20) | |
2023 Employee Stock Purchase Plan of the Registrant |
| |
|
10.23 (21) | |
First Amendment of Executive Employment Agreement between Intrusion Inc. and Anthony Scott, dated March 27, 2023 |
| |
|
10.24 (22) | |
Forbearance and Standstill Agreement, dated as of August 2, 2023, between Intrusion Inc. and Streeterville Capital, LLC |
10.25 (22) | |
Amendment to Forbearance Agreement, dated as of August 7, 2023, between Intrusion Inc. and Streeterville Capital, LLC |
| |
|
10.26 (22) | |
Security Agreement, dated as of August 2, 2023, by Intrusion Inc. in favor of Streeterville Capital, LLC (Schedule A to Forbearance and Standstill Agreement, dated as of August 2, 2023, between Intrusion Inc. and Streeterville Capital, LLC) |
| |
|
10.27** | |
Form of Securities Purchase Agreement |
| |
|
14.1(19) | |
Code Of Conduct |
| |
|
21.1** | |
List of Subsidiaries |
| |
|
23.1* | |
Consent of Whitley Penn LLP, Independent Registered Public Accounting Firm. |
| |
|
23.3* | |
Consent of Anthony L.G., PLLC (incorporated in Exhibit 5.1). |
| |
|
24.1** | |
Power of Attorney (included on the signature page). |
| |
|
107* | |
Filing Fee Table |
† |
Management contract, compensation plan or arrangement. |
* |
Filed herewith. |
** |
Filed previously. |
*** |
Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and exhibit will be furnished to the SEC upon request. |
(1) |
Filed as an Exhibit to the Registrant’s Annual
Report on Form 10-K, for the fiscal year ended December 31, 2022, which Exhibit is incorporated herein by
reference. |
(2) |
Filed as an Exhibit to the Registrant’s Annual Report on
Form 10-K, for the fiscal year ended December 31, 2000, which Exhibit is incorporated herein by
reference. |
(3) |
Filed as an Exhibit to the Registrant’s Current Report on Form 8-K dated June 15, 2010, which Exhibit is incorporated herein by reference. |
(4) |
Filed as an Exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, which Exhibit is incorporated herein by reference. |
(5) |
Filed as an Exhibit to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (as amended), which Exhibit is incorporated herein by reference. |
(6) |
Filed as an Exhibit to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (as amended), which Exhibit is incorporated herein by reference. |
(7) |
Filed as an Exhibit to the Registrant’s Current Report on Form 8-K dated June 15, 2005, which Exhibit is incorporated herein by reference. |
(8) |
Filed as an Exhibit to the Registrant’s Definitive Proxy Statement on Schedule 14A in connection with the solicitation of proxies for its Annual Meeting of Stockholders held May 14, 2015, which Exhibit is incorporated herein by reference. |
(9) |
Filed as an Exhibit to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (as amended), which Exhibit is incorporated herein by reference. |
(10) |
Filed as an Exhibit to the Registrant’s Current Report on Form 8-K filed on May 22, 2023, which Exhibit is incorporated by reference herein. |
(11) |
Filed as an Exhibit to the Registrant’s Quarterly Report on Form 10-Q filed on November 12, 2021, which Exhibit is incorporated by reference herein. |
(12) |
Filed as an Exhibit to the Registrant’s Registration Statement on Form S-3 filed on August 5, 2021, which Exhibit is incorporated by reference herein. |
(13) |
Filed as an Exhibit to the Registrant’s Current Report on Form 8-K filed on November 17, 2021, which Exhibit is incorporated by reference herein. |
(14) |
Filed as an Exhibit to the Registrant’s Current Report on Form 8-K filed on March 10, 2022, which Exhibit is incorporated by reference herein. |
(15) |
Filed as an Exhibit to the Registrant’s Current Report on Form 8-K filed on September 12, 2022, which Exhibit is incorporated by reference herein. |
(16) |
Filed as an Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 17, 2023 |
(17) |
Filed as an Exhibit 10.1 to Registrant’s Current Report on Form 8-K on March 1, 2023 |
(18) |
Filed as an Exhibit to the Registrant’s Annual Report on Form 10-K, for the fiscal year ended December 31, 2020, which Exhibit is incorporated herein by reference. |
(19) |
Filed as an Exhibit to the Registrant’s Annual Report on Form 10-K, for the fiscal year ended December 31, 2021, which Exhibit is incorporated herein by reference. |
(20) |
Filed as an Exhibit to the Registrant’s Definitive Proxy Statement on Schedule 14A in connection with the solicitation of proxies for its Annual Meeting of Stockholders held May 16, 2023, which Exhibit is incorporated herein by reference. |
(21) |
Filed as an Exhibit to the Registrant’s Current Report on Form 8-K filed on March 31, 2023, which Exhibit is incorporated by reference herein. |
(22) |
Filed as an Exhibit to the Registrant’s Current Report on Form 8-K filed on August 7, 2023, which Exhibit is incorporated by reference herein. |
SIGNATURES
Pursuant to the requirements
of the Securities Act of 1933, as amended, the registrant has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Plano, Texas on September 18, 2023.
|
Intrusion Inc. |
|
|
|
By: |
/s/ Anthony Scott |
|
|
Anthony Scott, |
|
|
Chief Executive Officer |
Pursuant to the requirements
of the Securities Act, this Registration Statement has been signed by the following persons in the capacities held on September 18,
2023.
Name |
|
Title |
|
|
|
/s/ Anthony Scott |
|
Chief Executive Officer, President and Director |
Anthony Scott |
|
(Principal Executive Officer) |
|
|
|
* |
|
Chief Financial Officer |
Kimberly Pinson |
|
(Principal Financial Officer and Principal Accounting Officer) |
|
|
|
* |
|
Chairman and Director |
Anthony J. LeVecchio |
|
|
|
|
|
* |
|
Director |
James F. Gero |
|
|
|
|
|
* |
|
Director |
Katrinka B. McCallum |
|
|
|
|
|
* |
|
Director |
Gregory K. Wilson |
|
|
By: |
/s/ Anthony Scott |
|
|
Anthony Scott |
|
|
Attorney-in-fact* |
|
Exhibit 1.1
PLACEMENT AGENCY AGREEMENT
________, 2023
Intrusion Inc.
101 E. Park Boulevard, Suite 1200
Plano, TX 75074
Ladies and Gentlemen:
Introduction. Subject
to the terms and conditions herein (this “Agreement”), Intrusion Inc., a Delaware corporation (the “Company”),
hereby agrees to sell up to an aggregate of $____ million of registered securities of the Company, including, but not limited to, _____
shares (the “Shares”) of the Company’s common stock, $0.01 par value per share (the "Common Stock”),
pre-funded common stock purchase warrants to purchase up to an aggregate of _____ shares of Common Stock (the “Pre-Funded Warrants”),
and common stock purchase warrants to purchase up to an aggregate of _____ shares of Common Stock (the “Common Warrants”
and, collectively with the Pre-Funded Warrants, the “Warrants”, and together with the Shares and the shares of common
stock issuable upon exercise of the Warrants, the “Securities”) directly to various investors (each, an “Investor”
and, collectively, the “Investors”) through Joseph Gunnar & Co., LLC (the “Placement Agent”)
as placement agent. The documents executed and delivered by the Company and the Investors in connection with the Offering (as defined
below), including, without limitation, a securities purchase agreement (the “Purchase Agreement”),
shall be collectively referred to herein as the “Transaction Documents.” The purchase price to the Investors for each
Share is $____ (the “Per Share Purchase Price”) and for each Pre-Funded Warrant
is $_____ and the exercise price to the Investors for each share of common stock issuable upon exercise of the Common Warrants
is $_____. The Placement Agent may retain other brokers or dealers to act as sub-agents or selected-dealers on its behalf in connection
with the Offering.
The Company hereby confirms
its agreement with the Placement Agent as follows:
Section 1.
Agreement to Act as Placement Agent.
(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 Placement Agent shall be the exclusive placement agent in connection with the offering and sale by the
Company of the Securities pursuant to the Company's registration statement on Form S-1 (File No. 333-273930) (the “Registration
Statement”), with the terms of such offering (the “Offering”) to be subject to market conditions and negotiations
between the Company, the Placement Agent and the prospective Investors. The Placement Agent will act on a reasonable best efforts basis
and the Company agrees and acknowledges that there is no guarantee of the successful placement of the Securities, or any portion thereof,
in the prospective Offering. Under no circumstances will the Placement Agent or any of its “Affiliates” (as defined below)
be obligated to underwrite or purchase any of the Securities for its own account or otherwise provide any financing. The Placement Agent
shall act solely as the Company’s agent and not as principal. The Placement Agent shall have no authority to bind the Company with
respect to any prospective offer to purchase Securities and the Company shall have the sole right to accept offers to purchase Securities
and may reject any such offer, in whole or in part. Subject to the terms and conditions hereof, payment of the purchase price for, and
delivery of, the Securities shall be made at one or more closings (each a “Closing” and the date on which each Closing
occurs, a “Closing Date”). As compensation for services rendered, on each Closing Date, the Company shall pay to the
Placement Agent the fees and expenses set forth below:
(i)
A cash fee (the “Cash Fee”) equal to 8.0% of the gross proceeds received by the Company from the sale of the
Securities at the closing of the Offering (the “Closing”), provided, however, that a reduced Cash Fee
of 4.0% shall be payable on any gross proceeds received from any investors listed on Annex A to this Agreement.
(ii)
Such number of Common Stock purchase warrants (the “Placement Agent Warrants”) to Placement Agent or its designees
at each Closing to purchase shares of Common Stock equal to 5.0% of the aggregate number of Shares and Warrants sold in the Offering,
provided, however, such Placement Agent Warrants shall equal 2.5% of the aggregate number of Shares and Warrants sold to
any investors listed on Annex A to this Agreement. The Placement Agent Warrants shall have the same terms as the Common Warrants
except that the Placement Agent Warrants shall have an exercise price of 125% of the public offering price per share, an expiration date
of 5 years from the commencement of sales in the Offering and will have a cashless exercise provision at all times. The Placement Agent
Warrants shall not be transferable for six months from the date of the Offering except as permitted by the Financial Industry Regulatory
Authority (“FINRA”).
(iii)
The Company agrees to pay a non-accountable expense allowance to the Placement Agent equal to 1.0% of the gross proceeds received
by the Company from the sale of the Securities at the Closing. In connection with the Offering, the Company also agrees to reimburse the
Placement Agent for (a) subject to compliance with FINRA Rule 5110(g)(4)(A), the fees and expenses of the Placement Agent’s counsel
up to $75,000, (b) all fees, expenses and disbursements relating to background checks of the Company’s officers and directors up
to $15,000, and (c) the Placement Agent’s market making and trading, and clearing firm settlement expenses for the Offering up to
$5,000.
(b)
The term of the Placement Agent's exclusive engagement will be until the completion of the Offering (the “Exclusive Term”);
provided, however, that a party hereto may terminate the engagement with respect to itself at any time upon 10 days written
notice to the other parties. Notwithstanding anything to the contrary contained herein, the provisions concerning confidentiality, indemnification
and contribution contained herein and the Company’s obligations contained in the indemnification provisions will survive any expiration
or termination of this Agreement, and the Company’s obligation to pay fees actually earned and payable and to reimburse expenses
actually incurred and reimbursable pursuant to Section 1 hereof and which are permitted to be reimbursed under FINRA Rule 5110(g), will
survive any expiration or termination of this Agreement. Nothing in this Agreement shall be construed to limit the ability of the Placement
Agent or its Affiliates to pursue, investigate, analyze, invest in, or engage in investment banking, financial advisory or any other business
relationship with Persons (as defined below) other than the Company. As used herein (i) “Persons” 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 and (ii) “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 of 1933, as amended (the “Securities Act”).
Section 2.
Representations, Warranties and Covenants of the Company. The Company hereby represents, warrants and covenants to the Placement
Agent as of the date hereof, and as of each Closing Date, as follows:
(a)
Securities Law Filings. The Company has filed with the Securities and Exchange Commission (the “Commission”)
the Registration Statement under the Securities Act, which was filed on August 11, 2023 and declared effective on ____________, 2023 for
the registration of the Securities under the Securities Act. Following the determination of pricing among the Company and the prospective
Investors introduced to the Company by Placement Agent, the Company will file with the Commission pursuant to Rules 430A and 424(b) under
the Securities Act, and the rules and regulations (the “Rules and Regulations”) of the Commission promulgated thereunder,
a final prospectus relating to the placement of the Securities, their respective pricings and the plan of distribution thereof and will
advise the Placement Agent of all further information (financial and other) with respect to the Company required to be set forth therein.
Such registration statement, at any given time, including the exhibits thereto filed at such time, as amended at such time, is hereinafter
called the “Registration Statement”; such prospectus in the form in which it appears in the Registration Statement
at the time of effectiveness is hereinafter called the “Base Prospectus”; and the final prospectus, in the form in
which it will be filed with the Commission pursuant to Rules 430A and/or 424(b) (including the Base Prospectus as it may be amended or
supplemented) is hereinafter called the “Final Prospectus.” The Registration Statement at the time it originally became
effective is hereinafter called the “Original Registration Statement.” Any reference in this Agreement to the Registration
Statement, the Original Registration Statement, the Base Prospectus or the Final Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein (the “Incorporated Documents”), if any, which were or are filed under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), at any given time, as the case may be; and any reference
in this Agreement to the terms “amend,” “amendment” or “supplement” with respect to the Registration
Statement, the Original Registration Statement, the Base Prospectus or the Final Prospectus shall be deemed to refer to and include the
filing of any document under the Exchange Act after the date of this Agreement, or the issue date of the Base Prospectus or the Final
Prospectus, as the case may be, deemed to be incorporated therein by reference. All references in this Agreement to financial statements
and schedules and other information which is “contained,” “included,” “described,” “referenced,”
“set forth” or “stated” in the Registration Statement, the Base Prospectus or the Final Prospectus (and all other
references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which
is or is deemed to be incorporated by reference in the Registration Statement, the Base Prospectus or the Final Prospectus, as the case
may be. As used in this paragraph and elsewhere in this Agreement, “Time of Sale Disclosure Package” means the Base
Prospectus, any preliminary prospectus, any subscription agreement between the Company and the Investors in connection with the Offering,
and any issuer free writing prospectus as defined in Rule 433 of the Act (each, an “Issuer Free Writing Prospectus”),
if any, that the parties hereto shall hereafter expressly agree in writing to treat as part of the Time of Sale Disclosure Package. The
term “any Prospectus” shall mean, as the context requires, the Base Prospectus, the Final Prospectus, and any supplement
to either thereof. The Company has not received any notice that the Commission has issued or intends to issue a stop order suspending
the effectiveness of the Registration Statement or the use of the Base Prospectus or the Prospectus or intends to commence a proceeding
for any such purpose.
(b) Assurances.
The Original Registration Statement, as amended, (and any further documents to be filed with the Commission) contains all exhibits and
schedules as required by the Securities Act. Each of the Registration Statement and any post-effective amendment thereto, at the time
it became effective, complied in all material respects with the Securities Act and the applicable Rules and Regulations and did not contain
any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements
therein not misleading. The Base Prospectus, and the Final Prospectus, each as of its respective date, comply or will comply in all material
respects with the Securities Act and the applicable Rules and Regulations. Each of the Base Prospectus and the Final Prospectus, as amended
or supplemented, did not and will not contain as of the date thereof any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however,
that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information
furnished in writing to the Company by the Placement Agent expressly for use therein. The Incorporated Documents, when they were filed
with the Commission, conformed in all material respects to the requirements of the Exchange Act and the applicable Rules and Regulations
promulgated thereunder, and none of such documents, when they were filed with the Commission, contained any untrue statement of a material
fact or omitted to state a material fact necessary to make the statements therein (with respect to Incorporated Documents incorporated
by reference in the Base Prospectus or Final Prospectus), in light of the circumstances under which they were made not misleading. No
post-effective amendment to the Registration Statement reflecting any facts or events arising after the date thereof which represent,
individually or in the aggregate, a fundamental change in the information set forth therein is required to be filed with the Commission.
Except for this Agreement, there are no documents required to be filed with the Commission in connection with the transaction contemplated
hereby that (x) have not been filed as required pursuant to the Securities Act or (y) will not be filed within the requisite time period.
Except for this Agreement, there are no contracts or other documents required to be described in the Base Prospectus or Final Prospectus,
or to be filed as exhibits or schedules to the Registration Statement, which have not been described or filed as required.
(c)
Offering Materials. Neither the Company nor any of its directors and officers has distributed and none of them will distribute,
prior to each Closing Date, any offering material in connection with the offering and sale of the Securities other than the Time of Sale
Disclosure Package and any other materials permitted by the Securities Act.
(d)
Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate
the transactions contemplated by this Agreement and the Time of Sale Disclosure Package and otherwise to carry out its obligations hereunder
and thereunder. The execution and delivery of each of this Agreement by the Company and the consummation by it of the transactions contemplated
hereby and thereby and under the Final Prospectus have been duly authorized by all necessary action on the part of the Company and no
further action is required by the Company, the Company’s Board of Directors (the “Board of Directors”) or the
Company’s stockholders in connection therewith other than in connection with the Required Approvals (as defined below). This Agreement
has been duly executed by the Company and, when delivered in accordance with the terms hereof, assuming due authorization, execution and
delivery by the Placement Agent, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance
with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.
(e)
No Conflicts. The execution, delivery and performance by the Company of this Agreement and the transactions contemplated
pursuant to the Time of Sale Disclosure Package, the issuance and sale of the Securities and the consummation by it of the transactions
contemplated hereby and thereby to which it is a party do not and will not (i) conflict with or violate any provision of the Company’s
or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict
with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation
of any Lien (as defined in the Purchase Agreement) upon any of the properties or assets of the Company or any Subsidiary, or give to others
any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company
or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject
to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the
case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect (as defined
in the Purchase Agreement).
(f)
Certificates. Any certificate signed by an officer of the Company and delivered to the Placement Agent or to counsel
for the Placement Agent shall be deemed to be a representation and warranty by the Company to the Placement Agent as to the
matters set forth therein.
(g)
Reliance. The Company acknowledges that the Placement Agent will rely upon the accuracy and truthfulness of the foregoing
representations and warranties and hereby consents to such reliance.
(h)
Forward-Looking Statements. No forward-looking statements (within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act) contained in the Time of Sale Disclosure Package has been made or reaffirmed without a reasonable basis or has
been disclosed other than in good faith.
(i)
Statistical or Market-Related Data. Any statistical, industry-related and market-related data included or incorporated by
reference in the Time of Sale Disclosure Package, are based on or derived from sources that the Company reasonably and in good faith believes
to be reliable and accurate, and such data agree with the sources from which they are derived.
(j)
FINRA Affiliations. There are no affiliations with any FINRA member firm that is participating in the Offering among the
Company’s officers, directors or, to the knowledge of the Company, any five percent (5%) or greater stockholder of the Company.
(k)
Representations and Warranties Incorporated by Reference. Each of the representations and warranties (together with any
related disclosure schedules thereto) made to the Investors in the Purchase Agreement is hereby incorporated herein by reference (as though
fully restated herein) and is hereby made to, and in favor of, the Placement Agent.
Section 3. Delivery
and Payment. Each Closing shall occur at the offices of Ellenoff Grossman & Schole LLP, 1345 Avenue of the Americas, New York,
New York 10105 (“Placement Agent Counsel”) (or at such other place as shall be agreed upon by the Placement Agent
and the Company). Subject to the terms and conditions hereof, at each Closing payment of the purchase price for the Securities sold on
such Closing Date shall be made by Federal Funds wire transfer, against delivery of such Securities, and such Securities shall be registered
in such name or names and shall be in such denominations, as the Placement Agent may request at least one business day before the time
of purchase .
Deliveries of the documents
with respect to the purchase of the Securities, if any, shall be made at the offices of Placement Agent Counsel. All actions taken at
a Closing shall be deemed to have occurred simultaneously.
Section 4. Covenants
and Agreements of the Company. The Company further covenants and agrees with the Placement Agent as follows:
(a)
Registration Statement Matters. The Company will advise the Placement Agent promptly after it receives notice thereof of
the time when any amendment to the Registration Statement has been filed or becomes effective or any supplement to the Base Prospectus
or the Final Prospectus has been filed and will furnish the Placement Agent with copies thereof. The Company will file promptly all reports
and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to Section 13(a),
14 or 15(d) of the Exchange Act subsequent to the date of any Prospectus and for so long as the delivery of a prospectus is required in
connection with the Offering. The Company will advise the Placement Agent, promptly after it receives notice thereof (i) of any request
by the Commission to amend the Registration Statement or to amend or supplement any Prospectus or for additional information, and (ii)
of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment
thereto or any order directed at any Incorporated Document, if any, or any amendment or supplement thereto or any order preventing or
suspending the use of the Base Prospectus or the Final Prospectus or any prospectus supplement or any amendment or supplement thereto
or any post-effective amendment to the Registration Statement, of the suspension of the qualification of the Securities for offering or
sale in any jurisdiction, of the institution or threatened institution of any proceeding for any such purpose, or of any request by the
Commission for the amending or supplementing of the Registration Statement or any Prospectus or for additional information. The Company
shall use its commercially reasonable efforts to prevent the issuance of any such stop order or prevention or suspension of such use.
If the Commission shall enter any such stop order or order or notice of prevention or suspension at any time, the Company will use its
commercially reasonable efforts to obtain the lifting of such order at the earliest possible moment, or will file a new registration statement
and use its best efforts to have such new registration statement declared effective as soon as practicable. Additionally, the Company
agrees that it shall comply with the provisions of Rules 424(b), 430A, 430B and 430C, as applicable, under the Securities Act, including
with respect to the timely filing of documents thereunder, and will use its commercially reasonable efforts to confirm that any filings
made by the Company under such Rule 424(b) are received in a timely manner by the Commission.
(b) Blue
Sky Compliance. The Company will cooperate with the Placement Agent and the Investors in endeavoring to qualify the Securities for
sale under the securities laws of such jurisdictions (United States and foreign) as the Placement Agent and the Investors may reasonably
request and will make such applications, file such documents, and furnish such information as may be reasonably required for that purpose,
provided the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in
any jurisdiction where it is not now so qualified or required to file such a consent, and provided further that the Company shall not
be required to produce any new disclosure document. The Company will, from time to time, prepare and file such statements, reports and
other documents as are or may be required to continue such qualifications in effect for so long a period as the Placement Agent may reasonably
request for distribution of the Securities. The Company will advise the Placement Agent promptly of the suspension of the qualification
or registration of (or any such exemption relating to) the Securities for offering, sale or trading in any jurisdiction or any initiation
or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration
or exemption, the Company shall use its commercially reasonable efforts to obtain the withdrawal thereof at the earliest possible moment.
(c) Amendments
and Supplements to a Prospectus and Other Matters. The Company will comply with the Securities Act and the Exchange Act, and the
rules and regulations of the Commission thereunder, so as to permit the completion of the distribution of the Securities as contemplated
in this Agreement, the Incorporated Documents and any Prospectus. If during the period in which a prospectus is required by law to be
delivered in connection with the distribution of Securities contemplated by the Incorporated Documents or any Prospectus (the “Prospectus
Delivery Period”), any event shall occur as a result of which, in the judgment of the Company or in the reasonable opinion
of the Placement Agent or counsel for the Placement Agent, it becomes necessary to amend or supplement the Incorporated Documents or
any Prospectus in order to make the statements therein, in the light of the circumstances under which they were made, as the case may
be, not misleading, or if it is necessary at any time to amend or supplement the Incorporated Documents or any Prospectus or to file
under the Exchange Act any Incorporated Document to comply with any law, the Company will promptly prepare and file with the Commission,
and furnish at its own expense to the Placement Agent and to dealers, an appropriate amendment to the Registration Statement or supplement
to the Registration Statement, the Incorporated Documents or any Prospectus that is necessary in order to make the statements in the
Incorporated Documents and any Prospectus as so amended or supplemented, in the light of the circumstances under which they were made,
as the case may be, not misleading, or so that the Registration Statement, the Incorporated Documents or any Prospectus, as so amended
or supplemented, will comply with law. Before amending the Registration Statement or supplementing the Incorporated Documents or any
Prospectus in connection with the Offering, the Company will furnish the Placement Agent with a copy of such proposed amendment or supplement
and will not file any such amendment or supplement to which the Placement Agent reasonably objects.
(d) Copies
of any Amendments and Supplements to a Prospectus. The Company will furnish the Placement Agent, without charge, during the period
beginning on the date hereof and ending on the later of the last Closing Date of the Offering, as many copies of any Prospectus or prospectus
supplement and any amendments and supplements thereto, as the Placement Agent may reasonably request.
(e) Free
Writing Prospectus. The Company covenants that it will not, unless it obtains the prior written consent of the Placement Agent, make
any offer relating to the Securities that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free
writing prospectus” (as defined in Rule 405 of the Securities Act) required to be filed by the Company with the Commission
or retained by the Company under Rule 433 of the Securities Act. In the event that the Placement Agent expressly consents in writing
to any such free writing prospectus (a “Permitted Free Writing Prospectus”), the Company covenants that it shall (i)
treat each Permitted Free Writing Prospectus as an Issuer Free Writing Prospectus, and (ii) comply with the requirements of Rule 164
and 433 of the Securities Act applicable to such Permitted Free Writing Prospectus, including in respect of timely filing with the Commission,
legending and record keeping.
(f)
Transfer Agent. The Company will maintain, at its expense, a registrar and transfer agent for the Common Stock.
(g)
Earnings Statement. As soon as practicable and in accordance with applicable requirements under the Securities Act, but
in any event not later than 18 months after the last Closing Date, the Company will make generally available to its security holders and
to the Placement Agent an earnings statement, covering a period of at least 12 consecutive months beginning after the last Closing Date,
that satisfies the provisions of Section 11(a) and Rule 158 under the Securities Act.
(h)
Periodic Reporting Obligations. During the Prospectus Delivery Period, the Company will duly file, on a timely basis, with
the Commission and the Trading Market (as defined in the Purchase Agreement) all reports and documents required to be filed under the
Exchange Act within the time periods and in the manner required by the Exchange Act.
(i)
Additional Documents. The Company will enter into any subscription, purchase or other customary agreements as the
Placement Agent or the Investors deem necessary or appropriate to consummate the Offering, all of which will be in form and substance
reasonably acceptable to the Placement Agent and the Investors. The Company agrees that the Placement Agent may rely upon, and each is
a third party beneficiary of, the representations and warranties, and applicable covenants, set forth in any such purchase, subscription
or other agreement with Investors in the Offering.
(j)
No Manipulation of Price. The Company will not take, directly or indirectly, any action designed to cause or
result in, or that has constituted or might reasonably be expected to constitute, the stabilization or manipulation of the price of any
securities of the Company.
(k)
Acknowledgment. The Company acknowledges that any advice given by the Placement Agent to the Company is solely for the benefit
and use of the Board of Directors of the Company and may not be used, reproduced, disseminated, quoted or referred to, without the Placement
Agent's prior written consent.
(l)
Announcement of Offering. The Company acknowledges and agrees that the Placement Agent may, subsequent to the Closing, make
public its involvement with the Offering.
(m)
Reliance on Others. The Company confirms that it will rely on its own counsel and accountants for legal and accounting advice.
(n)
Research Matters. By entering into this Agreement, the Placement Agent does
not provide any promise, either explicitly or implicitly, of favorable or continued research coverage of the Company and the Company hereby
acknowledges and agrees that the Placement Agent’s selection as a placement agent for the Offering was in no way conditioned, explicitly
or implicitly, on the Placement Agent providing favorable or any research coverage of the Company. In accordance with FINRA Rule 2711(e),
the parties acknowledge and agree that the Placement Agent has not directly or indirectly offered favorable research, a specific rating
or a specific price target, or threatened to change research, a rating or a price target, to the Company or inducement for the receipt
of business or compensation.
(o)
Subsequent Equity Sales.
(i)
From the date hereof until ninety (90) days after the Closing Date, neither the Company nor any Subsidiary shall (i) issue,
enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents
(as defined in the Purchase Agreement) or (ii) file any registration statement or amendment or supplement thereto, other than the Final
Prospectus or filing a registration statement on Form S-8 in connection with any employee benefit plan.
(ii)
From the date hereof until one (1) year following the Closing Date, the Company shall be prohibited from effecting or entering
into an agreement to effect any issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents (or a combination
of units thereof) involving a Variable Rate Transaction. “Variable Rate Transaction” means a transaction in which the
Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right
to receive additional shares of Common Stock either (A) at a conversion price, exercise price or exchange rate or other price that is
based upon and/or varies with the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance
of such debt or equity securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future
date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common Stock or (ii) enters into, or effects a transaction under, any agreement,
including, but not limited to, an equity line of credit or an “at-the-market offering”, whereby the Company may issue securities
at a future determined price regardless of whether shares pursuant to such agreement have actually been issued and regardless of whether
such agreement is subsequently canceled; provided, however, that, (i) after ninety (90) days following the Closing Date,
the issuance of shares of Common Stock pursuant to the Company’s existing sales agreement, dated August 5, 2021 with B. Riley Securities
Inc. (the “Sales Agreement”) at an effective price per share equal to or greater than the Per Share Purchase Price
and (ii) after 180 days following the Closing Date, the issuance of shares of Common Stock pursuant to the Sales Agreement shall not be
deemed a Variable Rate Transaction. The Placement Agent shall be entitled to obtain injunctive relief against the Company to preclude
any such issuance, which remedy shall be in addition to any right to collect damages.
(iii)
Notwithstanding the foregoing, this Section 4(o) shall not apply in respect of an Exempt Issuance, except that no Variable Rate
Transaction shall be an Exempt Issuance. As used herein, “Exempt Issuance” means the issuance of (a) shares of Common
Stock or options to employees, officers or directors of the Company pursuant to any stock or option plan duly adopted for such purpose,
by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors
established for such purpose for services rendered to the Company, (b) securities upon the exercise or exchange of or conversion of any
Securities issued hereunder, the Placement Agent Warrants and any securities upon exercise of the Placement Agent Warrants and/or other
securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement,
provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease
the exercise price, exchange price or conversion price of such securities (other than in connection with stock splits or combinations)
or to extend the term of such securities, and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority
of the disinterested directors of the Company, provided that such securities are issued as “restricted securities” (as defined
in Rule 144) and carry no registration rights that require or permit the filing of any registration statement in connection therewith
during the prohibition period in Section 4(o)(i) herein, and provided that any such issuance shall only be to a Person (or to the equityholders
of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with
the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not
include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary
business is investing in securities.
(p)
Capital Changes. From the date hereof until ninety (90) days after the Closing Date, the Company shall not undertake a reverse
or forward stock split or reclassification of the Common Stock without the prior written consent of the Placement Agent.
Section 5.
Conditions of the Obligations of the Placement Agent.
The obligations of the Placement Agent hereunder shall be subject to the accuracy of the representations and warranties on the part of
the Company set forth in Section 2 hereof, in each case as of the date hereof and as of each Closing Date as though then made, to the
timely performance by each of the Company of its covenants and other obligations hereunder on and as of such dates, and to each of the
following additional conditions:
(a)
Accountants’ Comfort Letter. On the date hereof, the Placement Agent shall have received, and the Company shall have
caused to be delivered to the Placement Agent, a letter from Whitley Penn LLP (the independent registered public accounting firm of the
Company), addressed to the Placement Agent, dated as of the date hereof, in form and substance satisfactory to the Placement Agent. The
letter shall not disclose any change in the condition (financial or other), earnings, operations, business or prospects of the Company
from that set forth in the Incorporated Documents or the applicable Prospectus or prospectus supplement, which, in the Placement Agent's
sole judgment, is material and adverse and that makes it, in the Placement Agent's sole judgment, impracticable or inadvisable to proceed
with the Offering of the Securities as contemplated by such Prospectus.
(b)
Compliance with Registration Requirements; No Stop Order; No Objection from the FINRA. Each Prospectus (in accordance with
Rule 424(b)) and “free writing prospectus” (as defined in Rule 405 of the Securities Act), if any, shall have been
duly filed with the Commission, as appropriate; no stop order suspending the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose shall have been initiated or, to the Company’s knowledge, threatened by
the Commission; no order preventing or suspending the use of any Prospectus shall have been issued and no proceeding for that purpose
shall have been initiated or, to the Company’s knowledge, threatened by the Commission; no order having the effect of ceasing or
suspending the distribution of the Securities or any other securities of the Company shall have been issued by any securities commission,
securities regulatory authority or stock exchange and no proceedings for that purpose shall have been instituted or shall be pending or,
to the knowledge of the Company, contemplated by any securities commission, securities regulatory authority or stock exchange; all requests
for additional information on the part of the Commission shall have been complied with; and the FINRA shall have raised no objection to
the fairness and reasonableness of the placement terms and arrangements.
(c)
Corporate Proceedings. All corporate proceedings and other legal matters in connection with this Agreement, the Registration
Statement and each Prospectus, and the registration, sale and delivery of the Securities, shall have been completed or resolved in a manner
reasonably satisfactory to the Placement Agent's counsel, and such counsel shall have been furnished with such papers and information
as it may reasonably have requested to enable such counsel to pass upon the matters referred to in this Section 5.
(d)
No Material Adverse Effect. Subsequent to the execution and delivery of this Agreement and prior to each Closing Date, in
the Placement Agent's sole judgment after consultation with the Company, there shall not have occurred any Material Adverse Effect or
any material adverse change or development involving a prospective material adverse change in the condition or the business activities,
financial or otherwise, of the Company from the latest dates as of which such condition is set forth in the Registration Statement and
Prospectus (“Material Adverse Effect”).
(e)
Opinion of Counsel for the Company. The Placement Agent shall have received on each Closing Date the legal opinion of US
legal counsel to the Company, dated as of such Closing Date, including, without limitation, a negative assurance letter addressed to the
Placement Agent and in form and substance reasonably satisfactory to the Placement Agent.
(f)
Officers’ Certificate. The Placement Agent shall have received on each Closing Date a certificate of the Company,
dated as of such Closing Date, signed by the Chief Executive Officer and Chief Financial Officer of the Company, to the effect that, and
the Placement Agent shall be satisfied that, the signers of such certificate have reviewed the Registration Statement, the Incorporated
Documents, the Prospectus, and this Agreement and to the further effect that:
(i)
The representations and warranties of the Company in this Agreement are true and correct, as if made on and as of such Closing
Date, and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at
or prior to such Closing Date;
(ii)
No stop order suspending the effectiveness of the Registration Statement or the use of any Prospectus has been issued and no proceedings
for that purpose have been instituted or are pending or, to the Company’s knowledge, threatened under the Securities Act; no order
having the effect of ceasing or suspending the distribution of the Securities or any other securities of the Company has been issued by
any securities commission, securities regulatory authority or stock exchange in the United States and no proceedings for that purpose
have been instituted or are pending or, to the knowledge of the Company, contemplated by any securities commission, securities regulatory
authority or stock exchange in the United States;
(iii)
When the Registration Statement became effective, at the time of sale, and at all times subsequent thereto up to the delivery of
such certificate, the Registration Statement and the Incorporated Documents, if any, when such documents became effective or were filed
with the Commission, and any Prospectus, contained all material information required to be included therein by the Securities Act and
the Exchange Act and the applicable rules and regulations of the Commission thereunder, as the case may be, and in all material respects
conformed to the requirements of the Securities Act and the Exchange Act and the applicable rules and regulations of the Commission thereunder,
as the case may be, and the Registration Statement and the Incorporated Documents, if any, and any Prospectus, did not and do not include
any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not misleading (provided, however, that the preceding representations
and warranties contained in this paragraph (iii) shall not apply to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Company by the Placement Agent expressly for use therein) and, since the effective date of
the Registration Statement, there has occurred no event required by the Securities Act and the rules and regulations of the Commission
thereunder to be set forth in the Incorporated Documents which has not been so set forth; and
(iv)
Subsequent to the respective dates as of which information is given in the Registration Statement, the Incorporated Documents and
any Prospectus, there has not been: (a) any Material Adverse Effect; (b) any transaction that is material to the Company and the Subsidiaries
taken as a whole, except transactions entered into in the ordinary course of business; (c) any obligation, direct or contingent, that
is material to the Company and the Subsidiaries taken as a whole, incurred by the Company or any Subsidiary, except obligations incurred
in the ordinary course of business; (d) any material change in the capital stock (except changes thereto resulting from the exercise of
outstanding stock options or warrants) or outstanding indebtedness of the Company or any Subsidiary; (e) any dividend or distribution
of any kind declared, paid or made on the capital stock of the Company; or (f) any loss or damage (whether or not insured) to the property
of the Company or any Subsidiary which has been sustained or will have been sustained which has a Material Adverse Effect.
(g)
Bring-down Comfort Letter. On each Closing Date, the Placement Agent shall have received from Whitley
Penn LLP, or such other independent registered public accounting firm of the Company, a letter dated as of such Closing Date, in
form and substance satisfactory to the Placement Agent, to the effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (a) of this Section 5, except that the specified date referred to therein for the carrying out of
procedures shall be no more than three business days prior to such Closing Date.
(h)
Lock-Up Agreements. On the date hereof, the Placement Agent shall have received the executed lock-up agreements, in the
form attached hereto as Exhibit A, from each of the directors and officers of the Company.
(i)
Stock Exchange Listing. The Common Stock shall be registered under the Exchange Act and shall be listed on the Trading Market,
and the Company shall not have taken any action designed to terminate, or likely to have the effect of terminating, the registration
of the Common Stock under the Exchange Act or delisting or suspending from trading the Common Stock from the Trading Market, nor shall
the Company have received any information suggesting that the Commission or the Trading Market is contemplating terminating such registration
or listing.
(j)
Additional Documents. On or before each Closing Date, the Placement Agent and counsel for the Placement Agent shall have
received such information and documents as they may reasonably require for the purposes of enabling them to pass upon the issuance and
sale of the Securities as contemplated herein, or in order to evidence the accuracy of any of the representations and warranties, or the
satisfaction of any of the conditions or agreements, herein contained.
If any condition specified
in this Section 5 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Placement Agent by notice
to the Company at any time on or prior to a Closing Date, which termination shall be without liability on the part of any party to any
other party, except that Section 6 (Payment of Expenses), Section 7 (Indemnification and Contribution) and Section 8 (Representations
and Indemnities to Survive Delivery) shall at all times be effective and shall survive such termination.
Section 6.
Payment of Expenses. The Company agrees to pay all costs, fees and expenses incurred by the Company in connection with the
performance of its obligations hereunder and in connection with the transactions contemplated hereby, including, without limitation: (i)
all expenses incident to the issuance, delivery and qualification of the Securities (including all printing and engraving costs); (ii)
all fees and expenses of the registrar and transfer agent of the Common Stock; (iii) all necessary issue, transfer and other stamp taxes
in connection with the issuance and sale of the Securities; (iv) all fees and expenses of the Company’s counsel, independent
public or certified public accountants and other advisors; (v) all costs and expenses incurred in connection with the preparation, printing,
filing, shipping and distribution of the Registration Statement (including financial statements, exhibits, schedules, consents and certificates
of experts), the Base Prospectus, the Final Prospectus, and all amendments and supplements thereto, and this Agreement; (vi) all filing
fees, reasonable attorneys’ fees and expenses incurred by the Company or the Placement Agent (with respect to the Placement Agent,
which amount shall be subject to the reimbursement limit set forth in Section 1(a)(ii)) in connection with qualifying or registering (or
obtaining exemptions from the qualification or registration of) all or any part of the Securities for offer and sale under the state securities
or blue sky laws or the securities laws of any other country, and, if requested by the Placement Agent, preparing and printing a “Blue
Sky Survey,” an “International Blue Sky Survey” or other memorandum, and any supplements thereto, advising
the Placement Agent of such qualifications, registrations and exemptions; (vii) if applicable, the filing fees incident to the review
and approval by the FINRA of the Placement Agent's participation in the offering and distribution of the Securities; (viii) the fees and
expenses associated with including the Shares and shares of Common Stock issuable upon exercise of the Warrants on the Trading Market;
(ix) all costs and expenses incident to the travel and accommodation of the Company’s and the Placement Agent's employees on the
“roadshow,” if any; and (x) all other fees, costs and expenses referred to in Part II of the Registration Statement.
Section 7.
Indemnification and Contribution.
(a) The Company
agrees to indemnify and hold harmless the Placement Agent, its affiliates and each person controlling the Placement Agent (within the
meaning of Section 15 of the Securities Act), and the directors, officers, agents and employees of the Placement Agent, its affiliates
and each such controlling person (the Placement Agent, and each such entity or person. an “Indemnified Person”) from
and against any losses, claims, damages, judgments, assessments, costs and other liabilities (collectively, the “Liabilities”),
and shall reimburse each Indemnified Person for all fees and expenses (including the reasonable fees and expenses of one counsel for all
Indemnified Persons, except as otherwise expressly provided herein) (collectively, the “Expenses”) as they are incurred
by an Indemnified Person in investigating, preparing, pursuing or defending any Actions, whether or not any Indemnified Person is a party
thereto, (i) caused by, or arising out of or in connection with, any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement, any Incorporated Document, or any Prospectus or by any omission or alleged omission to state therein a
material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (other
than untrue statements or alleged untrue statements in, or omissions or alleged omissions from, information relating to an Indemnified
Person furnished in writing by or on behalf of such Indemnified Person expressly for use in the Incorporated Documents) or (ii) otherwise
arising out of or in connection with advice or services rendered or to be rendered by any Indemnified Person pursuant to this Agreement,
the transactions contemplated thereby or any Indemnified Person's actions or inactions in connection with any such advice, services or
transactions; provided, however, that, in the case of clause (ii) only, the Company shall not be responsible for any Liabilities
or Expenses of any Indemnified Person that are finally judicially determined to have resulted primarily from such Indemnified Person's
(x) gross negligence or willful misconduct in connection with any of the advice, actions, inactions or services referred to above or (y)
use of any offering materials or information concerning the Company in connection with the offer or sale of the Securities in the Offering
which were not authorized for such use by the Company and which use constitutes gross negligence or willful misconduct. The Company also
agrees to reimburse each Indemnified Person for all Expenses as they are incurred in connection with enforcing such Indemnified Person's
rights under this Agreement.
(b) Upon
receipt by an Indemnified Person of actual notice of an Action against such Indemnified Person with respect to which indemnity may be
sought under this Agreement, such Indemnified Person shall promptly notify the Company in writing; provided that failure by any Indemnified
Person so to notify the Company shall not relieve the Company from any liability which the Company may have on account of this indemnity
or otherwise to such Indemnified Person, except to the extent the Company shall have been prejudiced by such failure. The Company shall,
if requested by the Placement Agent, assume the defense of any such Action including the employment of counsel reasonably satisfactory
to the Placement Agent, which counsel may also be counsel to the Company. Any Indemnified Person shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless: (i) the Company has failed promptly to assume the defense and employ counsel or (ii) the named parties
to any such Action (including any impeded parties) include such Indemnified Person and the Company, and such Indemnified Person shall
have been advised in the reasonable opinion of counsel that there is an actual conflict of interest that prevents the counsel selected
by the Company from representing both the Company (or another client of such counsel) and any Indemnified Person; provided that the Company
shall not in such event be responsible hereunder for the fees and expenses of more than one firm of separate counsel for all Indemnified
Persons in connection with any Action or related Actions, in addition to any local counsel. The Company shall not be liable for any settlement
of any Action effected without its written consent (which shall not be unreasonably withheld). In addition, the Company shall not, without
the prior written consent of the Placement Agent (which shall not be unreasonably withheld), settle, compromise or consent to the entry
of any judgment in or otherwise seek to terminate any pending or threatened Action in respect of which indemnification or contribution
may be sought hereunder (whether or not such Indemnified Person is a party thereto) unless such settlement, compromise, consent or termination
includes an unconditional release of each Indemnified Person from all Liabilities arising out of such Action for which indemnification
or contribution may be sought hereunder. The indemnification required hereby shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as such expense, loss, damage or liability is incurred and is due and payable.
(c) In
the event that the foregoing indemnity is unavailable to an Indemnified Person other than in accordance with this Agreement, the Company
shall contribute to the Liabilities and Expenses paid or payable by such Indemnified Person in such proportion as is appropriate to reflect
(i) the relative benefits to the Company, on the one hand, and to the Placement Agent and any other Indemnified Person, on the other hand,
of the matters contemplated by this Agreement or (ii) if the allocation provided by the immediately preceding clause is not permitted
by applicable law, not only such relative benefits but also the relative fault of the Company, on the one hand, and the Placement Agent
and any other Indemnified Person, on the other hand, in connection with the matters as to which such Liabilities or Expenses relate, as
well as any other relevant equitable considerations; provided that in no event shall the Company contribute less than the amount necessary
to ensure that all Indemnified Persons, in the aggregate, are not liable for any Liabilities and Expenses in excess of the amount of fees
actually received by the Placement Agent pursuant to this Agreement. For purposes of this paragraph, the relative benefits to the Company,
on the one hand, and to the Placement Agent on the other hand, of the matters contemplated by this Agreement shall be deemed to be in
the same proportion as (a) the total value paid or contemplated to be paid to or received or contemplated to be received by the Company
in the transaction or transactions that are within the scope of this Agreement, whether or not any such transaction is consummated, bears
to (b) the fees paid to the Placement Agent under this Agreement. Notwithstanding the above, no person guilty of fraudulent misrepresentation
within the meaning of Section 11(f) of the Securities Act, as amended, shall be entitled to contribution from a party who was not guilty
of fraudulent misrepresentation.
(d) The
Company also agrees that no Indemnified Person shall have any liability (whether direct or indirect, in contract or tort or otherwise)
to the Company for or in connection with advice or services rendered or to be rendered by any Indemnified Person pursuant to this Agreement,
the transactions contemplated thereby or any Indemnified Person's actions or inactions in connection with any such advice, services or
transactions except for Liabilities (and related Expenses) of the Company that are finally judicially determined to have resulted primarily
from such Indemnified Person's gross negligence or willful misconduct in connection with any such advice, actions, inactions or services.
(e) The
reimbursement, indemnity and contribution obligations of the Company set forth herein shall apply to any modification of this Agreement
and shall remain in full force and effect regardless of any termination of, or the completion of any Indemnified Person's services under
or in connection with, this Agreement.
Section 8.
Representations and Indemnities to Survive Delivery. The respective indemnities, agreements, representations, warranties and
other statements of the Company or any person controlling the Company, of its officers, and of the Placement Agent 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 Placement
Agent, 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 Securities sold hereunder and any termination of this Agreement. A successor to a Placement Agent, or
to the Company, its directors or officers or any person controlling the Company, shall be entitled to the benefits of the indemnity, contribution
and reimbursement agreements contained in this Agreement.
Section 9.
Notices. All communications hereunder shall be in writing and shall be mailed, hand delivered or e-mailed and confirmed to
the parties hereto as follows:
If to the Placement Agent to the address set forth
above, attention: _______, email: ________
With a copy to:
Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas, 11th Floor
New York, New York 10105
E-mail: capmkts@egsllp.com
If to the Company:
Intrusion Inc.
101 East Park Blvd, Suite
1200
Plano, Texas 75074
e-mail: Tony.Scott@intrusion.com
Attention: Anthony Scott
With a copy to:
Anthony L.G., PLLC
625 N. Flagler Drive, Suite 600
West Palm Beach, FL 33401
e-mail: LAnthony@anthonypllc.com
Attention: Laura Anthony
Any party hereto may change
the address for receipt of communications by giving written notice to the others.
Section 10.
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 7 hereof, and to their respective successors, and personal representative,
and no other person will have any right or obligation hereunder.
Section 11.
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 12.
Governing Law Provisions. This Agreement shall be deemed to have been made and delivered in New York City and both this Agreement
and the transactions contemplated hereby shall be governed as to validity, interpretation, construction, effect and in all other respects
by the internal laws of the State of New York, without regard to the conflict of laws principles thereof. Each of the Placement Agent
and the Company: (i) agrees that any legal suit, action or proceeding arising out of or relating to this Agreement and/or the transactions
contemplated hereby shall be instituted exclusively in New York Supreme Court, County of New York, or in the United States District Court
for the Southern District of New York, (ii) waives any objection which it may have or hereafter to the venue of any such suit, action
or proceeding, and (iii) irrevocably consents to the jurisdiction of the New York Supreme Court, County of New York, and the United States
District Court for the Southern District of New York in any such suit, action or proceeding. Each of the Placement Agent and the Company
further agrees to accept and acknowledge service of any and all process which may be served in any such suit, action or proceeding in
the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York and agrees
that service of process upon the Company mailed by certified mail to the Company’s address shall be deemed in every respect effective
service of process upon the Company, in any such suit, action or proceeding, and service of process upon the Placement Agent mailed by
certified mail to the Placement Agent’s address shall be deemed in every respect effective service process upon the Placement Agent,
in any such suit, action or proceeding. Notwithstanding any provision of this Agreement to the contrary, the Company agrees that neither
the Placement Agent nor its affiliates, and the respective officers, directors, employees, agents and representatives of the Placement
Agent, its affiliates and each other person, if any, controlling the Placement Agent or any of its affiliates, shall have any liability
(whether direct or indirect, in contract or tort or otherwise) to the Company for or in connection with the engagement and transaction
described herein except for any such liability for losses, claims, damages or liabilities incurred by the Placement Agent that are finally
judicially determined to have resulted from the fraud, willful misconduct or gross negligence of such individuals or entities. If either
party shall commence an action or proceeding to enforce any provision of this Agreement, then the prevailing party in such action or proceeding
shall be reimbursed by the other party for its reasonable attorney’s fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.
Section 13.
General Provisions.
(a) This
Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous
oral agreements, understandings and negotiations with respect to the subject matter hereof. Notwithstanding anything herein to the contrary,
the Engagement Agreement, dated June 19, 2023 (“Engagement Agreement”), as amended on July 19, 2023, between the Company
and Joseph Gunnar & Co., LLC shall continue to be effective and the terms therein shall continue to survive and be enforceable by
the Placement Agent in accordance with its terms, provided that, in the event of a conflict between the terms of the Engagement Agreement
and this Agreement, the terms of this Agreement shall prevail. 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. 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. Section headings herein are for the convenience of the
parties only and shall not affect the construction or interpretation of this Agreement.
(b) The
Company acknowledges that in connection with the offering of the Securities: (i) the Placement Agent has acted at arms length, are not
agents of, and owe no fiduciary duties to the Company or any other person, (ii) the Placement Agent owes the Company only those duties
and obligations set forth in this Agreement and (iii) the Placement Agent may have interests that differ from those of the Company. The
Company waives to the full extent permitted by applicable law any claims it may have against the Placement Agent arising from an alleged
breach of fiduciary duty in connection with the offering of the Securities
[The remainder of this page has been intentionally
left blank.]
If the foregoing is in accordance
with your understanding of our agreement, please sign below whereupon this instrument, along with all counterparts hereof, shall become
a binding agreement in accordance with its terms.
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Very truly yours, |
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Intrusion Inc., |
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a Delaware corporation |
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By: /s/ Anthony Scott |
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Name: Anthony
Scott |
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Title: Chief Executive Officer |
The foregoing Placement Agency
Agreement is hereby confirmed and accepted as of the date first above written.
Joseph
Gunnar & Co., LLC
By: _____________________________
Name:
Title:
Exhibit 4.6
INTRUSION
INC.
and
COMPUTERSHARE INC. and
COMPUTERSHARE TRUST COMPANY, N.A., collectively,
as
Warrant Agent
Warrant Agency Agreement
Dated as of ________, 2023
WARRANT AGENCY AGREEMENT
WARRANT AGENCY AGREEMENT,
dated as of _________, 2023 (“Agreement”), between Intrusion Inc., a Delaware corporation (the “Company”),
and Computershare Inc., a Delaware corporation (“Computershare”), and its affiliate Computershare Trust Company, N.A.,
a federally chartered trust company (collectively with Computershare, the “Warrant Agent”).
W I T N E S S E T H
WHEREAS, pursuant to an offering
by the Company of Warrants (as defined below), the Company wishes to issue Warrants in book entry form entitling the respective holders
of the Warrants (the “Holders”, which term shall include a Holder’s transferees, successors and assigns and “Holder”
shall include, if the Warrants are held in “street name”, a Participant (as defined below) or a designee appointed by such
Participant) to purchase an aggregate of up to ______ shares of the Company’s common stock, par value $0.01 per share (the “Common
Stock”), underlying the Warrants (as defined below) upon the terms and subject to the conditions hereinafter set forth (the
“Offering”);
WHEREAS, the Company wishes
the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing so to act, in connection with the issuance, registration,
transfer, exchange, exercise and replacement of the Warrants.
NOW, THEREFORE, in consideration
of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions.
For purposes of this Agreement, the following terms have the meanings indicated:
(a) “Affiliate”
has the meaning ascribed to it in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
(b) “Business Day”
means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by
law to remain closed; provided, however, for clarification, commercial banks shall not be deemed to be authorized or required
by law to remain closed due to “stay at home”, “shelter-in-place”, “non-essential employee”
or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority
so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in The City of New York generally
are open for use by customers on such day.
(c) “Close of Business”
on any given date means 5:00 p.m., New York City time, on such date; provided, however, that if such date is not a Business
Day it means 5:00 p.m., New York City time, on the next succeeding Business Day.
(d) “Person”
means an individual, corporation, association, partnership, limited liability company, joint venture, trust, unincorporated organization,
government or political subdivision thereof or governmental agency or other entity.
(e) “Trading Day”
means a day on which the Common Stock is traded on a Trading Market.
(f) “Trading Market”
means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the
NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (or
any successors to any of the foregoing).
(g) “Warrants”
means Common Stock Purchase Warrants of the Company with a term of exercise of five years following the Initial Exercise Date.
(h) “Warrant Certificate”
means a certificate in substantially the form attached as Exhibit 1-A hereto, representing such number of Warrant Shares (as defined
below) as is indicated therein, provided that any reference to the delivery of a Warrant Certificate in this Agreement shall include delivery
of notice from the Depositary or a Participant (each as defined below) of the transfer or exercise of the Warrant in the form of a Global
Warrant (as defined below).
(i) “Warrant Shares”
means the shares of Common Stock underlying the Warrants and issuable upon exercise of the Warrants.
All other capitalized terms
used but not otherwise defined herein shall have the meaning ascribed to such terms in the Warrant Certificates.
Section 2. Appointment
of Successor Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the express
terms or conditions hereof (and no implied terms and conditions), and the Warrant Agent hereby accepts such appointment. The Company may
from time to time appoint such Co-Warrant Agents as it may, in its sole discretion, deem necessary or desirable upon ten (10) calendar
days’ prior written notice to the Warrant Agent. The Warrant Agent shall have no duty to supervise, and shall in no event be liable
for, the acts or omissions of any such Co-Warrant Agent. In the event the Company appoints one or more co-Warrant Agents, the respective
duties of the Warrant Agent and any Co-Warrant Agent shall be as the Company shall reasonably determine, provided that such duties and
determination are consistent with the terms and provisions of this Agreement.
Section 3. Global Warrants.
(a) The Warrants, shall
be issuable in book entry form (the “Global Warrants” and, each, a “Global Warrant”). All of the
Warrants shall initially be represented by one or more Global Warrants, deposited with the Warrant Agent and registered in the name of
Cede & Co., a nominee of The Depository Trust Company (the “Depositary”), or as otherwise directed by the Depositary.
Ownership of beneficial interests in the Warrants, shall be shown on, and the transfer of such ownership shall be effected through, records
maintained by (i) the Depositary or its nominee for each Global Warrant or (ii) institutions that have accounts with the Depositary (such
institution, with respect to a Warrant in its account, a “Participant”). For purposes of Regulation SHO, a holder whose
interest in a Global Warrant is a beneficial interest in certificate(s) representing such Warrant held in book-entry form through the
Depositary shall be deemed to have exercised its interest in such Warrant upon instructing its broker that is a Participant to exercise
its interest in such Warrant, provided that in each such case payment of the applicable aggregate Exercise Price (other than in the case
of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the
Standard Settlement Period, in each case following such instruction. As used herein, “Standard Settlement Period” means the
standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common
Stock as in effect on the date of delivery of the Exercise Notice.
(b) If the Depositary subsequently
ceases to make its book-entry settlement system available for the Warrants, the Company may instruct the Warrant Agent regarding other
arrangements for book-entry settlement. In the event that the Warrants are not eligible for, or it is no longer necessary to have the
Warrants available in, book-entry form, the Warrant Agent shall provide written instructions to the Depositary to deliver to the Warrant
Agent for cancellation each Global Warrant, and the Company shall instruct the Warrant Agent in writing to deliver to each Holder a Warrant
Certificate.
(c) A Holder has the right
to elect at any time or from time to time a Warrant Exchange (as defined below) pursuant to a Warrant Certificate Request Notice (as defined
below). Upon written notice by a Holder to the Warrant Agent for the exchange of some or all of such Holder’s Global Warrants for
a Warrant Certificate, evidencing the same number of Warrants, which request shall be in the form attached hereto as Annex A (a
“Warrant Certificate Request Notice” and the date of delivery of such Warrant Certificate Request Notice by the Holder,
the “Warrant Certificate Request Notice Date” and the deemed surrender upon delivery by the Holder of a number of Global
Warrants for the same number of Warrants evidenced by a Warrant Certificate, a “Warrant Exchange”), the Warrant Agent
shall as soon as commercially practicable effect the Warrant Exchange and issue and deliver, at the expense of the Company, to the Holder
a Warrant Certificate, for such number of Warrants in the name set forth in the Warrant Certificate Request Notice. Such Warrant Certificate,
shall be dated the original issue date of the Warrants, shall be executed by manual signature by an authorized signatory of the Company,
shall be in the form attached hereto as Exhibit 1-A. In connection with a Warrant Exchange, the Company agrees to deliver, or to
direct the Warrant Agent to deliver, the Warrant Certificate, to the Holder within ten (10) Business Days of the Warrant Certificate Request
Notice pursuant to the delivery instructions in the Warrant Certificate Request Notice (“Warrant Certificate Delivery Date”).
If the Company fails for any reason to deliver to the Holder the Warrant Certificate subject to the Warrant Certificate Request Notice
by the Warrant Certificate Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for
each $1,000 of Warrant Shares evidenced by such Warrant Certificate (based on the VWAP (as defined in the Warrants) of the Common Stock
on the Warrant Certificate Request Notice Date), $10 per Business Day for each Business Day after such Warrant Certificate Delivery Date
until such Warrant Certificate, as applicable, is delivered or, prior to delivery of such Warrant Certificate, the Holder rescinds such
Warrant Exchange. In no event shall the Warrant Agent be liable for the Company’s failure to deliver the Warrant Certificate by
the Warrant Certificate Delivery Date. The Company covenants and agrees that, upon the date of delivery of the Warrant Certificate Request
Notice, the Holder shall be deemed to be the holder of the Warrant Certificate, and, notwithstanding anything to the contrary set forth
herein, the Warrant Certificate shall be deemed for all purposes to contain all of the terms and conditions of the Warrants, evidenced
by such Warrant Certificate, and the terms of this Agreement, other than Sections 3(c) and 9 herein, shall not apply to the Warrants evidenced
by the Warrant Certificate.
Section 4. Form of Warrant
Certificates. The Warrant Certificate, together with the form of election to purchase Common Stock (“Exercise Notice”)
and the form of assignment to be printed on the reverse thereof, shall be in the form of Exhibit 1-A hereto.
Section 5. Countersignature
and Registration. The Warrant Certificates shall be executed on behalf of the Company by its Chief Executive Officer, Chief Financial
Officer or Vice President, either manually or by facsimile signature, and have affixed thereto the Company’s seal or a facsimile
thereof which shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature.
The Warrant Certificates shall be countersigned by the Warrant Agent by either manually or by facsimile signature and shall not be valid
for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Warrant Certificates shall
cease to be such officer of the Company before countersignature by the Warrant Agent and issuance and delivery by the Company, such Warrant
Certificates, nevertheless, may be countersigned by the Warrant Agent, issued and delivered with the same force and effect as though the
person who signed such Warrant Certificate had not ceased to be such officer of the Company; and any Warrant Certificate may be signed
on behalf of the Company by any person who, at the actual date of the execution of such Warrant Certificate, shall be a proper officer
of the Company to sign such Warrant Certificate, although at the date of the execution of this Agreement any such person was not such
an officer.
The Warrant Agent will keep
or cause to be kept, at its office designated for such purposes, books for registration and transfer of the Warrant Certificates issued
hereunder. Such books shall show the names and addresses of the respective Holders of the Warrant Certificates, the number of warrants
evidenced on the face of each of such Warrant Certificate and the date of each of such Warrant Certificate.
Section 6. Transfer, Split
Up, Combination and Exchange of Warrant Certificates; Mutilated, Destroyed, Lost or Stolen Warrant Certificates; Replacement Warrant Certificates.
With respect to the Global Warrant, subject to the provisions of the Warrant Certificate, and the last sentence of this first paragraph
of Section 6 and subject to applicable law, rules or regulations, or any “stop transfer” instructions the Company may give
to the Warrant Agent, at any time after the closing date of the Offering, and at or prior to the Close of Business on the Termination
Date (as such term is defined in the Warrant Certificate), any Warrant Certificate or Warrant Certificates or Global Warrant or Global
Warrants may be transferred, split up, combined or exchanged for another Warrant Certificate or Warrant Certificates or Global Warrant
or Global Warrants, entitling the Holder to purchase a like number of shares of Common Stock as the Warrant Certificate or Warrant Certificates
or Global Warrant or Global Warrants surrendered then entitled such Holder to purchase. Any Holder desiring to transfer, split up, combine
or exchange any Warrant Certificate or Global Warrant shall make such request in writing delivered to the Warrant Agent, and shall surrender
the Warrant Certificate or Warrant Certificates, together with the required form of assignment and certificate duly executed and properly
completed and such other documentation as the Warrant Agent may reasonably request, to be transferred, split up, combined or exchanged
at the office of the Warrant Agent designated for such purpose, provided that no such surrender of a Warrant Certificate is applicable
to the Holder of a Global Warrant. Any requested transfer of Warrants, whether in book-entry form or certificate form, shall be accompanied
by evidence of authority of the party making such request that may be reasonably required by the Warrant Agent, including, but not limited
to, a signature guarantee from an eligible guarantor institution participating in a signature guarantee program approved by the Securities
Transfer Association with respect to a paper Warrant Certificate. Thereupon the Warrant Agent shall, subject to the last sentence of this
first paragraph of Section 6, countersign and deliver to the Person entitled thereto a Warrant Certificate or Warrant Certificates, as
the case may be, as so requested. The Company may require payment from the Holder of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up, combination or exchange of Warrant Certificates. The Warrant Agent
shall not have any duty or obligation to take any action under any section of this Agreement that requires the payment of taxes and/or
charges unless and until it is satisfied that all such payments have been made.
Upon receipt by the Warrant
Agent of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of a Warrant Certificate, which evidence
shall include an affidavit of loss, or in the case of mutilated certificates, the certificate or portion thereof remaining, and, in case
of loss, theft or destruction, of indemnity or security reasonably acceptable to the Company and the Warrant Agent, and satisfaction of
any other reasonable requirements established by Section 8-405 of the Uniform Commercial Code as in effect in the State of Delaware, and
reimbursement to the Company and the Warrant Agent of all reasonable expenses incidental thereto, and upon surrender to the Warrant Agent
and cancellation of the Warrant Certificate if mutilated, the Company will make and deliver a new Warrant Certificate of like tenor to
the Warrant Agent for delivery to the Holder in lieu of the Warrant Certificate so lost, stolen, destroyed or mutilated.
Warrant Agent shall issue
replacement Warrants in a form mutually agreed to by Warrant Agent and the Company for those certificates alleged to have been lost, stolen
or destroyed, upon receipt by Warrant Agent of an open penalty surety bond satisfactory to it and holding it and Company harmless, absent
notice to Warrant Agent that such certificates have been acquired by a bona fide purchaser. Warrant Agent may, at its option, issue replacement
Warrants for mutilated certificates upon presentation thereof without such indemnity.
The Company shall provide
an opinion of counsel prior to the Warrant Agent which shall state that all Warrants or Warrant Shares, as applicable, (i) were offered,
sold or issued as part of an offering that was registered in compliance with the Securities Act of 1933, as amended or pursuant to an
exemption from the registration requirements of the 1933 Act, as amended (as the case may be), (ii) were issued in compliance with all
applicable state securities or “blue sky” laws or are “covered securities” as defined in Section 18(b)(1)(A) of
the Securities Act of 1933, as amended (as the case may be), and (iii) are validly issued, fully paid and non-assessable.
Section 7. Exercise of
Warrants; Exercise Price; Termination Date.
(a) The Warrants shall be exercisable commencing
on the Initial Exercise Date. The Warrants shall cease to be exercisable and the right to exercise such Warrants shall terminate and become
void as set forth in the Warrant Certificate. Subject to the foregoing and to Section 7(b) below, the Holder of a Warrant, may exercise
the Warrant, in whole or in part pursuant to Section 2 of the Warrant Certificate. Payment of the Exercise Price (unless exercised via
a cashless exercise) may be made, at the option of the Holder, by wire transfer or by certified or official bank check in United States
dollars, to the Warrant Agent at the office of the Warrant Agent designated for such purposes. In the case of the Holder of a Global Warrant,
the Holder shall deliver the duly executed Exercise Notice and the payment of the Exercise Price as described herein. Notwithstanding
any other provision in this Agreement, a holder whose interest in a Global Warrant is a beneficial interest in a Global Warrant held in
book-entry form through the Depositary (or another established clearing corporation performing similar functions), shall effect exercises
by delivering to the Depositary (or such other clearing corporation, as applicable) the appropriate instruction form for exercise, complying
with the procedures to effect exercise that are required by the Depositary (or such other clearing corporation, as applicable). The Company
acknowledges that the bank accounts maintained by the Warrant Agent in connection with the services provided under this Agreement will
be in Computershare’s name and that the Warrant Agent may receive investment earnings in connection with the investment at Warrant
Agent risk and for its benefit of funds held in those accounts from time to time. Neither the Company nor the Holders will receive interest
on any deposits or Exercise Price. No ink-original Exercise Notice shall be required, nor shall any medallion guarantee (or other type
of guarantee or notarization) of any Exercise Notice be required.
(b) Upon receipt of an Exercise
Notice for a Cashless Exercise, the Warrant Agent shall deliver a copy of the Exercise Notice to the Company and request from the Company
and the Company shall promptly calculate and transmit to the Warrant Agent in writing the number of Warrant Shares issuable in connection
with such Cashless Exercise. The Warrant Agent shall have no obligation under this Agreement to calculate, the number of Warrant Shares
issuable in connection with a Cashless Exercise nor shall the Warrant agent have any duty or obligation to investigate or confirm whether
the Company’s determination of the number of Warrant Shares issuable upon such exercise, pursuant to this Section 7, is accurate
or correct.
(c) Upon the Warrant Agent’s
receipt of a Warrant Certificate, at or prior to the Close of Business on the Termination Date set forth in such Warrant Certificate,
with the executed Exercise Notice and payment of the Exercise Price for the shares to be purchased (other than in the case of a Cashless
Exercise) and an amount equal to any applicable tax, or governmental charge referred to in Section 6 by wire transfer, or by certified
check or bank draft payable to the order of the Company (or, in the case of the Holder of a Global Warrant, the delivery of the executed
Exercise Notice and the payment of the Exercise Price (other than in the case of a Cashless Exercise) and any other applicable amounts
as set forth herein), the Warrant Agent shall cause the Warrant Shares underlying such Warrant Certificate, or Global Warrant, to be delivered
to or upon the order of the Holder of such Warrant Certificate, or Global Warrant, registered in such name or names as may be designated
by such Holder, no later than the Warrant Share Delivery Date (as such term is defined in the Warrant Certificate. If the Company is then
a participant in the DWAC system of the Depositary and either (A) there is an effective registration statement permitting the issuance
of the Warrant Shares to or resale of the Warrant Shares by Holder or (B) the Warrant is being exercised via Cashless Exercise, then the
certificates for Warrant Shares shall be transmitted by the Warrant Agent to the Holder by crediting the account of the Holder’s
broker with the Depositary through its DWAC system. For the avoidance of doubt, if the Company becomes obligated to pay any amounts to
any Holders pursuant to Section 2(d)(i) or 2(d)(iv) of the Warrant Certificate, such obligation shall be solely that of the Company and
not that of the Warrant Agent. Notwithstanding anything else to the contrary in this Agreement, except in the case of a Cashless Exercise,
if any Holder fails to duly deliver payment to the Warrant Agent of an amount equal to the aggregate Exercise Price of the Warrant Shares
to be purchased upon exercise of such Holder’s Warrant as set forth in Section 7(a) hereof by the Warrant Share Delivery Date, the
Warrant Agent will not obligated to deliver such Warrant Shares (via DWAC or otherwise) until following receipt of such payment, and the
applicable Warrant Share Delivery Date shall be deemed extended by one day for each day (or part thereof) until such payment is delivered
to the Warrant Agent.
(d) In case the Holder of
any Warrant Certificate shall exercise fewer than all Warrants evidenced thereby, upon the request of the Holder, a new Warrant Certificate
evidencing the number of Warrants equivalent to the number of Warrants remaining unexercised may be issued by the Warrant Agent to the
Holder of such Warrant Certificate or to his duly authorized assigns in accordance with Section 2(d)(ii) of the Warrant Certificate, subject
to the provisions of Section 6 hereof.
(e) In the event of a cash
exercise, the Company hereby instructs the Warrant Agent to record cost basis for newly issued shares in a manner to be subsequently communicated
by the Company in writing to the Warrant Agent. In the event of a cashless exercise, the Company shall provide cost basis for shares issued
pursuant to a cashless exercise at the time the Company confirms the number of Warrant Shares issuable in connection with the cashless
exercise to the Warrant Aagent pursuant to Section 7(b) hereof.
Section 8. Cancellation
and Destruction of Warrant Certificates. All Warrant Certificates surrendered for the purpose of exercise, transfer, split up, combination
or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Warrant Agent for cancellation or in canceled
form, or, if surrendered to the Warrant Agent, shall be canceled by it, and no Warrant Certificates shall be issued in lieu thereof except
as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Warrant Agent for cancellation and
retirement, and the Warrant Agent shall so cancel and retire, any other Warrant Certificate purchased or acquired by the Company otherwise
than upon the exercise thereof. At the expense of the Company, the Warrant Agent shall deliver all canceled Warrant Certificates to the
Company, or shall, at the written request of the Company, destroy such canceled Warrant Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company, subject to any applicable law, rule or regulation requiring the Warrant Agent to retain
such canceled certificates.
Section 9. Certain Representations;
Reservation and Availability of Shares of Common Stock or Cash.
(a) This Agreement has been
duly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery hereof by the Warrant Agent,
constitutes a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms, and the
Warrants have been duly authorized, executed and issued by the Company and, assuming due execution thereof by the Warrant Agent pursuant
hereto and payment therefor by the Holders, constitute valid and legally binding obligations of the Company enforceable against the Company
in accordance with their terms and entitled to the benefits hereof; in each case except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally or by general
equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).
(b) As of the date hereof,
the authorized capital stock of the Company consists of (i) [___] shares of Common Stock, of which [___] shares of Common Stock are issued
and outstanding, and [___] shares of Common Stock are reserved for issuance upon exercise of the Warrants, (ii) [___] shares of preferred
stock, [___] of which are issued and outstanding, and [___] shares of Common Stock are reserved for issuance upon conversion of the Preferred
Stock; and (iii) [___] shares of Common Stock are authorized for issuance to employees, consultants and directors pursuant to the Company’s
stock plan, under which options to purchase [___] shares are issued and outstanding. There are no other outstanding obligations, warrants,
options or other rights to subscribe for or purchase from the Company any class of capital stock of the Company.
(c) The Company covenants
and agrees that it will cause to be reserved and kept available out of its authorized and unissued shares of Common Stock or its authorized
and issued shares of Common Stock held in its treasury, free from preemptive rights, the number of shares of Common Stock that will be
sufficient to permit the exercise in full of all outstanding Warrants.
(d) The Company further
covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable
in respect of the original issuance or delivery of the Warrant Certificates or certificates evidencing Common Stock upon exercise of the
Warrants. The Company shall not, however, be required to pay any tax or governmental charge which may be payable in respect of any transfer
involved in the transfer or delivery of Warrant Certificates or the issuance or delivery of certificates for Common Stock in a name other
than that of the Holder of the Warrant Certificate evidencing Warrants surrendered for exercise or to issue or deliver any certificate
for shares of Common Stock upon the exercise of any Warrants until any such tax or governmental charge shall have been paid (any such
tax or governmental charge being payable by the Holder of such Warrant Certificate at the time of surrender) or until it has been established
to the Company’s and the Warrant Agent’s reasonable satisfaction that no such tax or governmental charge is due.
Section 10. Common Stock
Record Date. Each Person in whose name any certificate for shares of Common Stock is issued (or to whose broker’s account is
credited shares of Common Stock through the DWAC system) upon the exercise of Warrants shall for all purposes be deemed to have become
the holder of record for the Common Stock represented thereby on, and such certificate shall be dated, the date on which submission of
the Exercise Notice was made, provided that the Warrant Certificate evidencing such Warrant was duly surrendered (but only if required
herein) and payment of the Exercise Price (and any applicable transfer taxes) was received on or prior to the Warrant Share Delivery Date;
provided, however, that, if the date of submission of the Exercise Notice is a date upon which the Common Stock transfer
books of the Company are closed, such Person shall be deemed to have become the record holder of such shares on, and such certificate
shall be dated, the next succeeding day on which the Common Stock transfer books of the Company are open.
Section 11. Adjustment
of Exercise Price, Number of Shares of Common Stock or Number of the Company Warrants. The Exercise Price, the number of shares covered
by each Warrant and the number of Warrants outstanding are subject to adjustment from time to time as provided in Section 3 of the Warrant
Certificate. In the event that at any time, as a result of an adjustment made pursuant to Section 3 of the Warrant Certificate, the Holder
of any Warrant thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than shares of Common
Stock, thereafter the number of such other shares so receivable upon exercise of any Warrant shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares contained in Section
3 of the Warrant Certificate, and the provisions of Sections 7, 9 and 13 of this Agreement with respect to the shares of Common Stock
shall apply on like terms to any such other shares. All Warrants originally issued by the Company subsequent to any adjustment made to
the Exercise Price pursuant to the Warrant Certificate shall evidence the right to purchase, at the adjusted Exercise Price, the number
of shares of Common Stock purchasable from time to time hereunder upon exercise of the Warrants, all subject to further adjustment as
provided herein.
Section 12. Certification
of Adjusted Exercise Price or Number of Shares of Common Stock. Whenever the Exercise Price or the number of shares of Common Stock
issuable upon the exercise of each Warrant Certificate is adjusted as provided in Section 11 or 13, the Company shall (a) promptly prepare
a certificate setting forth the Exercise Price of each Warrant Certificate, as so adjusted, and a brief, reasonably detailed statement
of the facts accounting for such adjustment, (b) promptly file with the Warrant Agent and with each transfer agent for the Common Stock
a copy of such certificate and (c) instruct the Warrant Agent, at the Company’s expense, to send a brief summary thereof to each
Holder of a Warrant Certificate. The Warrant Agent shall be fully protected in relying on such certificate and on any adjustment or statement
therein contained and shall have no duty or liability with respect to, and shall not be deemed to have knowledge of any such adjustment
or any such event unless and until it shall have received such certificate.
Section 13. Fractional
Shares of Common Stock.
(a) The Company shall not
issue fractions of Warrants or distribute Warrant Certificates which evidence fractional Warrants. Whenever any fractional Warrant would
otherwise be required to be issued or distributed, the actual issuance or distribution shall reflect a rounding of such fraction to the
nearest whole Warrant (rounded up).
(b) The Company shall not
issue fractions of shares of Common Stock upon exercise of Warrants or distribute stock certificates which evidence fractional shares
of Common Stock. Whenever any fraction of a share of Common Stock would otherwise be required to be issued or distributed, the actual
issuance or distribution in respect thereof shall be made in accordance with Section 2(d)(v) of the Warrant Certificate.
(c) Whenever a payment for
fractional Warrants or fractional shares of Common Stock is to be made by the Warrant Agent under this Agreement, the Company shall (i)
promptly prepare and deliver to the Warrant Agent a certificate setting forth in reasonable detail the facts realted to such payments
and the prices and formulas utilized in calculating such payments; and (ii) provide sufficient funds to the Warrant Agent in the form
of fully collected funds to make such payments. The Warrant Agent shall be fully protected in relying upon a certificate and has no duty
with respect to, and will not be deemed to have knowledge of, any payment for fractional Warrant or fractional shares of Common Stock
under any Section of this Agreement relating to the payment of fractional Warrants or fractional shares of Common Stock unless and until
the Warrant Agent has received such a certificate and sufficient monies.
Section 14. Concerning the Warrant Agent.
(a) The Company agrees to pay
to the Warrant Agent in accordance with Section 30 hereof, pursuant to the fee schedule mutually agreed upon by the parties hereto and
provided separately on the date hereof, for all services rendered by it hereunder and, from time to time, its reasonable expenses and
counsel fees and other disbursements incurred in the preparation, delivery, negotiation, amendment, administration and execution of this
Agreement and the exercise and performance of its duties hereunder.
(b) The Company covenants and
agrees to indemnify and to hold the Warrant Agent harmless against any losses, liability, damage, judgment, fine, penalty, claim, demand,
settlement, cost, or expense (including the reasonable fees and expenses of legal counsel), which may be paid, incurred or suffered by
or to which it may become subject, arising from or out of, directly or indirectly, any claims or liability resulting from its actions
or omissions as Warrant Agent pursuant hereto; provided, that such covenant and agreement does not extend to, and the Warrant Agent shall
not be indemnified with respect to, such costs, expenses, losses and damages incurred or suffered by the Warrant Agent as a result of,
or arising out of, its gross negligence, bad faith, or willful misconduct (each as determined by a final non-appealable court of competent
jurisdiction). Notwithstanding anything in this Agreement to the contrary, any liability of the Warrant Agent under this Agreement will
be limited to the amount of annual fees paid (not including reimbursed expenses) by the Company to the Warrant Agent during the twelve
(12) months immediately preceding the event for which recovery from the Warrant Agent is being sought. The costs and expenses incurred
by the Warrant Agent in enforcing this right of indemnification shall be paid by the Company.
(c) Upon the assertion of a
claim for which the Company may be required to indemnify the Warrant Agent, the Warrant Agent shall promptly notify the Company of such
assertion, and shall keep the other party reasonably advised with respect to material developments concerning such claim. However, failure
to give such notice shall not affect the Warrant Agent’s right to and the Company’s obligations for indemnification hereunder.
(d) Neither party to this Agreement
shall be liable to the other party for any consequential, indirect, punitive, special or incidental damages under any provisions of this
Agreement or for any consequential, indirect, punitive, special or incidental damages arising out of any act or failure to act hereunder
even if that party has been advised of or has foreseen the possibility of such damages.
(e) Notwithstanding anything
contained herein to the contrary, the rights and obligations of the parties set forth in this Section 14 shall survive termination
of this Agreement, the expiration of the Warrants or the resignation, removal or replacement of the Warrant Agent.
(f) From time to time, Company
may provide Warrant Agent with instructions concerning the services performed by the Warrant Agent hereunder. In addition, at any time
Warrant Agent may apply to any officer of Company for instruction, and may consult with legal counsel for Warrant Agent or Company with
respect to any matter arising in connection with the services to be performed by the Warrant Agent under this Agreement. Warrant Agent
and its agents and subcontractors shall not be liable and shall be indemnified by Company for any action taken or omitted by Warrant Agent
in reliance upon any Company instructions or upon the advice or opinion of such counsel. Warrant Agent shall not be held to have notice
of any change of authority of any person, until receipt of written notice thereof from Company.
Section 15. Purchase or
Consolidation or Change of Name of Warrant Agent. Any Person into which the Warrant Agent or any successor Warrant Agent may be merged
or with which it may be consolidated, or any Person resulting from any merger or consolidation to which the Warrant Agent or any successor
Warrant Agent shall be party, or any Person succeeding to the stock transfer or other shareholder services business of the Warrant Agent
or any successor Warrant Agent, shall be the successor to the Warrant Agent under this Agreement without the execution or filing of any
paper or any further act on the part of any of the parties hereto, provided that such Person would be eligible for appointment as a successor
Warrant Agent under the provisions of Section 17. In case at the time such successor Warrant Agent shall succeed to the agency created
by this Agreement any of the Warrant Certificates shall have been countersigned but not delivered, any such successor Warrant Agent may
adopt the countersignature of the predecessor Warrant Agent and deliver such Warrant Certificates so countersigned; and in case at that
time any of the Warrant Certificates shall not have been countersigned, any successor Warrant Agent may countersign such Warrant Certificates
either in the name of the predecessor Warrant Agent or in the name of the successor Warrant Agent; and in all such cases such Warrant
Certificates shall have the full force provided in the Warrant Certificates and in this Agreement.
In case at any time the name
of the Warrant Agent shall be changed and at such time any of the Warrant Certificates shall have been countersigned but not delivered,
the Warrant Agent may adopt the countersignature under its prior name and deliver Warrant Certificates so countersigned; and in case at
that time any of the Warrant Certificates shall not have been countersigned, the Warrant Agent may countersign such Warrant Certificates
either in its prior name or in its changed name; and in all such cases such Warrant Certificates shall have the full force provided in
the Warrant Certificates and in this Agreement.
Section 16. Duties of Warrant
Agent. The Warrant Agent undertakes the duties and obligations imposed by this Agreement upon the following express terms and conditions
(and no implied terms and conditions), by all of which the Company, by its acceptance hereof, shall be bound and shall not assume any
obligations or relationship of agency or trust with any of the Holders of the Warrants or any other Person:
(a) The Warrant Agent may
consult with legal counsel selected by it (who may be legal counsel for the Company), and the opinion and advice of such counsel shall
be full and complete authorization and protection to the Warrant Agent as to any action taken or omitted by it in the absence of bad faith
and in accordance with such opinion or advice.
(b) Whenever in the performance
of its duties under this Agreement the Warrant Agent shall deem it necessary or desirable that any fact or matter be proved or established
by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chief Executive Officer,
Chief Financial Officer or Vice President of the Company; and such certificate shall be full authorization and protection to the Warrant
Agent and the Warrant Agent shall incur no liability for or in respect of any action taken, suffered in the absence of bad faith or omitted
to be taken by it under the provisions of this Agreement in reliance upon such certificate. The Warrant Agent shall have no duty to act
without such a certificate as set forth in this Section 16(b).
(c) Subject to the limitation
set forth in Section 14, the Warrant Agent shall be liable hereunder only for its gross negligence, bad faith or willful misconduct (each
as determined in a final, non-appealable judgment of a court of competent jurisdiction).
(d) The Warrant Agent shall
not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Warrant Certificates
(including in the case of any notation in book entry form to reflect ownership), except its countersignature thereof, by the Company or
be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.
(e) The Warrant Agent shall
not have any liability or be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Warrant Agent) or in respect of the validity or execution of any Warrant Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement
or in any Warrant Certificate; nor shall it be responsible for the adjustment of the Exercise Price or the making of any change in the
number of shares of Common Stock required under the provisions of Section 11 or 13 or responsible for the manner, method or amount of
any such change or adjustment or the ascertaining of the existence of facts that would require any such adjustment or change (except with
respect to the exercise of Warrants evidenced by Warrant Certificates after actual notice of any adjustment of the Exercise Price); nor
shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of
Common Stock to be issued pursuant to this Agreement or any Warrant Certificate or as to whether any shares of Common Stock will, when
issued, be duly authorized, validly issued, fully paid and nonassessable.
(f) Each party hereto agrees
that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further
and other acts, instruments and assurances as may reasonably be required by the other party hereto for the carrying out or performing
by any party of the provisions of this Agreement.
(g) The Warrant Agent is
hereby authorized to accept instructions with respect to the performance of its duties hereunder from the Chief Executive Officer, Chief
Financial Officer or Vice President of the Company, and to apply to such officers for advice or instructions in connection with its duties,
and it shall not be liable and shall be indemnified and held harmless for any action taken or suffered to be taken by it in the absence
of bad faith in accordance with instructions of any such officer, provided Warrant Agent carries out such instructions without gross negligence,
bad faith or willful misconduct.
(h) The Warrant Agent and
any shareholder, director, officer or employee of the Warrant Agent may buy, sell or deal in any of the Warrants or other securities of
the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money
to the Company or otherwise act as fully and freely as though it were not Warrant Agent under this Agreement. Nothing herein shall preclude
the Warrant Agent from acting in any other capacity for the Company or for any other Person.
(i) The Warrant Agent may
execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its
attorney or agents, and the Warrant Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such
attorney or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, absent gross negligence
or bad faith in the selection and continued employment thereof (which gross negligence and bad faith must be determined by a final, non-appealable
judgment of a court of competent jurisdiction).
(j) All funds received by
Computershare under this Agreement that are to be distributed or applied by Computershare in the performance of services (the “Funds”)
shall be held by Computershare as agent for the Company and deposited in one or more bank accounts to be maintained by Computershare in
its name as agent for the Company. Until paid pursuant to the terms of this Agreement, Computershare will hold the Funds through such
accounts in: deposit accounts of commercial banks with Tier 1 capital exceeding $1 billion or with an average rating above investment
grade by S&P (LT Local Issuer Credit Rating), Moody’s (Long Term Rating) and Fitch Ratings, Inc. (LT Issuer Default Rating)
(each as reported by Bloomberg Finance L.P.). Computershare shall have no responsibility or liability for any diminution of the Funds
that may result from any deposit made by Computershare in accordance with this paragraph, including any losses resulting from a default
by any bank, financial institution or other third party. Computershare may from time to time receive interest, dividends or other earnings
in connection with such deposits. Computershare shall not be obligated to pay such interest, dividends or earnings to the Company, any
holder or any other party.
(k) The Warrant Agent shall
forward funds received for warrant exercises in a given month by the 5th business day of the following month by wire transfer
to an account designated by the Company.
(l) The Warrant Agent shall
not be obligated to expend or risk its own funds or to take any action that it believes would expose or subject it to expense or liability
or to a risk of incurring expense or liability, unless it has been furnished with assurances of repayment or indemnity satisfactory to
it.
(m) The Warrant Agent shall not be liable or
responsible for any failure of the Company to comply with any of its obligations relating to any registration statement filed with the
Securities and Exchange Commission or this Agreement, including without limitation obligations under applicable regulation or law.
(n) The Warrant Agent may rely on and be fully
authorized and protected in acting or failing to act upon (a) any guaranty of signature by an “eligible guarantor institution”
that is a member or participant in the Securities Transfer Agents Medallion Program or other comparable “signature guarantee program”
or insurance program in addition to, or in substitution for, the foregoing; or (b) any law, act, regulation or any interpretation of the
same even though such law, act, or regulation may thereafter have been altered, changed, amended or repealed.
(o) In the event the Warrant Agent believes any
ambiguity or uncertainty exists hereunder or in any notice, instruction, direction, request or other communication, paper or document
received by the Warrant Agent hereunder, the Warrant Agent, may, in its sole discretion, refrain from taking any action, and shall be
fully protected and shall not be liable in any way to Company, the holder of any Warrant or any other Person for refraining from taking
such action, unless the Warrant Agent receives written instructions signed by the Company which eliminates such ambiguity or uncertainty
to the satisfaction of Warrant Agent.
This Section 16 shall survive the expiration
of the Warrants, the termination of this Agreement and the resignation, replacement or removal of the Warrant Agent.
Section 17. Change of Warrant
Agent. The Warrant Agent may resign and be discharged from its duties under this Agreement upon 30 days’ notice in writing sent
to the Company and, in the event that the Warrant Agent or one of its affiliates is not also the transfer agent for the Company, to each
transfer agent of the Common Stock. In the event the transfer agency relationship in effect between the Company and the Warrant Agent
terminates, the Warrant Agent will be deemed to have resigned automatically and be discharged from its duties under this Agreement as
of the effective date of such termination, and the Company shall be responsible for sending any required notice thereunder. The Company
may remove the Warrant Agent or any successor Warrant Agent upon 30 days’ notice in writing, sent to the Warrant Agent or successor
Warrant Agent, as the case may be, and to each transfer agent of the Common Stock, and to the Holders of the Warrant Certificates. If
the Warrant Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the
Warrant Agent. If the Company shall fail to make such appointment within a period of 30 days after such removal or after it has been notified
in writing of such resignation or incapacity by the resigning or incapacitated Warrant Agent or by the Holder of a Warrant Certificate
(who shall, with such notice, submit his Warrant Certificate for inspection by the Company), then the Holder of any Warrant Certificate
may apply to any court of competent jurisdiction for the appointment of a new Warrant Agent, provided that, for purposes of this Agreement,
the Company shall be deemed to be the Warrant Agent until a new warrant agent is appointed. Any successor Warrant Agent, whether appointed
by the Company or by such a court, shall be a Person, other than a natural person, organized and doing business under the laws of the
United States or of a state thereof, in good standing, which is authorized under such laws to exercise stock transfer powers and is subject
to supervision or examination by federal or state authority and which has at the time of its appointment as Warrant Agent a combined capital
and surplus of at least $50,000,000. After appointment, the successor Warrant Agent shall be vested with the same powers, rights, duties
and responsibilities as if it had been originally named as Warrant Agent without further act or deed; but the predecessor Warrant Agent
shall deliver and transfer to the successor Warrant Agent any property at the time held by it hereunder, and execute and deliver any further
assurance, conveyance, act or deed necessary for the purpose but such predecessor Warrant Agent shall not be required to make any additional
expenditure (without prompt reimbursement by the Company) or assume any additional liability in connection with the foregoing. Not later
than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Warrant Agent and
each transfer agent of the Common Stock, and mail a notice thereof in writing to the Holders of the Warrant Certificates. However, failure
to give any notice provided for in this Section 17, or any defect therein, shall not affect the legality or validity of the resignation
or removal of the Warrant Agent or the appointment of the successor Warrant Agent, as the case may be.
Section 18. Issuance of
New Warrant Certificates. Notwithstanding any of the provisions of this Agreement or of the Warrants to the contrary, the Company
may, at its option, issue new Warrant Certificates evidencing Warrants in such form as may be approved by its Board of Directors to reflect
any adjustment or change in the Exercise Price per share and the number or kind or class of shares of stock or other securities or property
purchasable under the several Warrant Certificates made in accordance with the provisions of this Agreement.
Section 19. Notices.
Notices or demands authorized by this Agreement to be given or made (i) by the Warrant Agent or by the Holder of any Warrant Certificate
to or on the Company, (ii) by the Company or by the Holder of any Warrant Certificate to or on the Warrant Agent or (iii) by the Company
or the Warrant Agent to the Holder of any Warrant Certificate, shall be deemed given when in writing (a) on the date delivered, if delivered
personally, (b) on the first Business Day following the deposit thereof with Federal Express or another recognized overnight courier,
if sent by Federal Express or another recognized overnight courier, (c) on the fourth Business Day following the mailing thereof with
postage prepaid, if mailed by registered or certified mail (return receipt requested), and (d) the date of transmission, if such notice
or communication is delivered via facsimile or e-mail attachment at or prior to 5:30 p.m. (New York City time) on a Business Day and (e)
the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile or e-mail attachment
on a day that is not a Business Day or later than 5:30 p.m. (New York City time) on any Business Day, in each case to the parties at the
following addresses (or at such other address for a party as shall be specified by like notice):
| (a) | If to the Company, to: |
Intrusion
Inc.
101
East Park Blvd, Suite 1200
Plano,
Texas 75074
Attn: Anthony
Scott
Email: Tony.Scott@intrusion.com
With a copy (which shall not constitute notice) to:
Anthony L.G.,
PLLC
625 N. Flagler
Drive, Suite 600
West Palm
Beach, FL 33401
Attn: Laura
Anthony
Email: LAnthony@anthonypllc.com
| (b) | If to the Warrant Agent, to: |
Computershare
Trust Company, N.A.
Computershare Inc.
150 Royall Street
Canton, MA 02021
Attention: Client Services
For any notice delivered by email to be deemed
given or made, such notice must be followed by notice sent by overnight courier service to be delivered on the next Business Day following
such email, unless the recipient of such email has acknowledged via return email receipt of such email.
(c) If to the Holder of
any Warrant Certificate, to the address of such Holder as shown on the registry books of the Company. Any notice required to be delivered
by the Company to the Holder of any Warrant may be given by the Warrant Agent on behalf of the Company. Notwithstanding any other provision
of this Agreement, where this Agreement provides for notice of any event to a Holder of any Warrant, such notice shall be sufficiently
given if given to the Depositary (or its designee) pursuant to the procedures of the Depositary or its designee.
Section 20. Supplements
and Amendments.
(a) The Company and the
Warrant Agent may from time to time supplement or amend this Agreement without the approval of any Holders of Global Warrants in order
to (i) add to the covenants and agreements of the Company for the benefit of the Holders of the Global Warrants, (ii) to surrender any
rights or power reserved to or conferred upon the Company in this Agreement, (iii) to cure any ambiguity,
(iv) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein,
or (v) to make any other provisions with regard to matters or questions arising hereunder which the Company and the Warrant Agent may
deem necessary or desirable, provided that such addition, correction or surrender shall not adversely affect the interests of the
Holders of the Global Warrants or Warrant Certificates in any material respect.
(b) In addition to the foregoing,
with the consent of Holders of Warrants entitled, upon exercise thereof, to receive not less than a majority of the shares of Common Stock
issuable thereunder, the Company and the Warrant Agent may modify this Agreement for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Agreement or modifying in any manner the rights of the Holders of the Global
Warrants; provided, however, that no modification of the terms (including but not limited to the adjustments described in
Section 11) upon which the Warrants are exercisable or reducing the percentage required for consent to modification of this Agreement
may be made without the consent of the Holder of each outstanding warrant certificate affected thereby; provided further, however,
that no amendment hereunder shall affect any terms of any Warrant Certificate issued in a Warrant Exchange. As a condition precedent to
the Warrant Agent’s execution of any amendment, modification or supplement to this Agreement, the Company shall deliver to the Warrant
Agent a certificate from a duly authorized officer of the Company that states that the proposed amendment complies with the terms of this
Section 20. No supplement or amendment to this Agreement shall be effective unless duly executed by the Warrant Agent.
Section 21. Successors.
All covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit
of their respective successors and assigns hereunder.
Section 22. Benefits of
this Agreement. Nothing in this Agreement shall be construed to give any Person other than the Company, the Holders of Warrant Certificates
and the Warrant Agent any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Warrant Agent and the Holders of the Warrant Certificates.
Section 23. Governing Law;
Jurisdiction. This Agreement and each Warrant Certificate issued hereunder shall be governed by, and construed in accordance with,
the laws of the State of New York without giving effect to the conflicts of law principles thereof. The Company hereby agrees that any
action, proceeding or claim against it arising out of or relating in any way to this Agreement shall be brought and enforced in the state
and federal courts sitting in the City of New York, Borough of Manhattan, 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 inconvenience
forum.
Section 24. Counterparts.
This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and the same instrument. A signature to this Agreement transmitted electronically
shall have the same authority, effect and enforceability as an original signature.
Section 25. Captions.
The captions of the sections of this Agreement have been inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
Section 26. Confidentiality.
The Warrant Agent and the Company agree that all books, records, information and data pertaining to the business of the other party, including
inter alia, personal, non-public warrant holder information, which are exchanged or received pursuant to the negotiation or the
carrying out of this Agreement including the fees for services set forth in the attached schedule shall remain confidential, and shall
not be voluntarily disclosed to any other person, except as may be required by law, including, without limitation, pursuant to subpoenas
from state or federal government authorities (e.g., in divorce and criminal actions).
Section 27. Severability.
Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement 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 Agreement; provided, however, that if such prohibited and invalid provision shall adversely affect the rights, immunities, liabilities,
duties or obligations of the Warrant Agent, the Warrant Agent shall be entitled to resign immediately upon written notice to the Company.
Section 28. Force Majeure.
Notwithstanding anything to the contrary contained herein, the Warrant Agent will not be liable for any delays or failures in performance
resulting from acts beyond its reasonable control including, without limitation, epidemics, pandemics, acts of God, terrorist acts, shortage
of supply, breakdowns or malfunctions, interruptions or malfunction of computer facilities, or loss of data due to power failures or mechanical
difficulties with information storage or retrieval systems, labor difficulties, war, or civil unrest.
Section 29. Further Assurances.
The Company shall perform, acknowledge and deliver or cause to be performed, acknowledged and delivered all such further and other acts,
documents, instruments and assurances as may be reasonably required by the Warrant Agent for the carrying out or performing by the Warrant
Agent of the provisions of this Agreement.
Section 30. Entire Agreement.
This Agreement contains the entire agreement and understanding among parties hereto with respect to the subject matter hereof, and supersedes
all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature
whatsoever with respect to the subject matter hereof. Notwithstanding anything to the contrary contained in this Agreement, in the event
of inconsistency between any provision in this Agreement and any provision in a Warrant Certificate, as it may from time to time be amended,
the terms of such Warrant Certificate shall govern and control; provided, that, all rights, duties, obligations, liabilities and immunities
of the Warrant Agent shall be governed and controlled by this Agreement.
Section 31. Fees; Expenses. As consideration
for the services provided by the Warrant Agent (the “Services”), the Company shall pay to the Warrant Agent the fees
mutually agreed upon by the parties on or around the date hereof (the “Fees”). If the Company requests that the Warrant
Agent provide additional services not contemplated hereby, the Company shall pay to the Warrant Agent fees for such services at the Warrant
Agent’s reasonable and customary rates, such fees to be governed by the terms of a separate agreement to be mutually agreed to and
entered into by the Parties at such time (the “Additional Service Fee”; together with the Fees, the “Service
Fees”)
(a)
The Company shall reimburse the Warrant Agent for all reasonable and documented expenses incurred by the Warrant Agent (including,
without limitation, reasonable and documented fees and disbursements of counsel) in connection with the Services (the “Expenses”);
provided, however, that the Warrant Agent reserves the right to request advance payment for any out-of-pocket expenses.
The Company agrees to pay all Service Fees and Expenses within thirty (30) days following receipt of an invoice from the Warrant Agent.
(b)
[The Company agrees and acknowledges that the Warrant Agent may adjust the Service Fees annually, on or about each anniversary
date of this Agreement, by the annual percentage of change in the latest Consumer Price Index of All Urban Consumers United States City
Average, as published by the U.S. Department of Labor, Bureau of Labor Statistics.][1]
(c)
Upon termination of this Agreement for any reason, the Warrant Agent shall assist the Company with the transfer of records of the
Company held by the Warrant Agent. The Warrant Agent shall be entitled to reasonable additional compensation and reimbursement of any
Expenses for the preparation, delivery and transfer of such records to the successor agent or to the Company, and for maintaining records
and/or Stock Certificates that are received after the termination of this Agreement.
IN WITNESS WHEREOF, the parties
hereto have caused this Agreement to be duly executed as of the day and year first above written.
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Intrusion Inc. |
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Computershare
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COMPUTERSHARE INC. |
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__________________
[1] NTD: To be confirmed
Annex A: Form of Warrant Certificate Request
Notice
WARRANT CERTIFICATE REQUEST NOTICE
To: Computershare Trust Company, N.A., as
Warrant Agent for Intrusion Inc. (the “Company”)
The undersigned Holder of Intrusion Inc. Common
Stock Purchase Warrants (“Warrants”) in the form of [_______] [_______] Global Warrants issued by the Company hereby elects
to receive a Warrant Certificate evidencing the Warrants held by the Holder as specified below:
| 1. | Name of Holder of [_______] [_______] Warrants in form of Global Warrants: ___________________________ |
| | |
| 2. | Name of Holder in Warrant Certificate (if different from name of Holder of Warrants in form of Global
Warrants): ________________________________ |
| | |
| 3. | Number of Warrants in name of Holder in form of Global Warrants: ___________________ |
| | |
| 4. | Number of Warrants for which Warrant Certificate shall be issued: __________________ |
| | |
| 5. | Number of Warrants in name of Holder in form of Global Warrants after issuance of
Warrant Certificate, if any: ___________ |
| 6. | [_______] [_______] Warrant Certificate shall be delivered to the following address: |
______________________________
______________________________
______________________________
______________________________
The undersigned hereby acknowledges and agrees
that, in connection with this Warrant Exchange and the issuance of the Warrant Certificate, the Holder is deemed to have surrendered the
number of Warrants in form of Global Warrants in the name of the Holder equal to the number of Warrants evidenced by the Warrant Certificate.
[SIGNATURE OF HOLDER]
Name of Investing Entity: ____________________________________________________
Signature of Authorized Signatory of Investing Entity: ______________________________
Name of Authorized Signatory: ________________________________________________
Title of Authorized Signatory: _________________________________________________
Date: _______________________________________________________________
Exhibit 1-A: Form of Warrant Certificate
Exhibit 4.7
EXHIBIT A-2
COMMON STOCK PURCHASE WARRANT
Intrusion
Inc.
Warrant Shares: _______ |
Initial Exercise Date: _______, 2023 |
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 hereof (the “Initial Exercise Date”) and on or prior to 5:00 p.m. (New York
City time) on _____[1] (the “Termination Date”)
but not thereafter, to subscribe for and purchase from Intrusion 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). This Warrant shall initially
be issued and maintained in the form of a security held in book-entry form and the Depository Trust Company or its nominee (“DTC”)
shall initially be the sole registered holder of this Warrant, subject to a Holder’s right to elect to receive a Warrant in certificated
form pursuant to the terms of the Warrant Agency Agreement, in which case this sentence shall not apply.
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.
“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 on the Pink Open Market (or a similar
organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of 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.
“Board
of Directors” means the board of directors of the Company.
“Business
Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized
or required by law to remain closed; provided, however, for clarification, commercial banks shall not be deemed to be authorized
or required by law to remain closed due to “stay at home”, “shelter-in-place”, “non-essential employee”
or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority
so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in The City of New York generally
are open for use by customers on such day.
“Commission”
means the United States Securities and Exchange Commission.
“Common
Stock” means the common stock of the Company, par value $0.01 per share, and any other class of securities into which such securities
may hereafter be reclassified or changed.
____________________
[1]
Insert the date that is the five year anniversary of the Initial Exercise Date, provided that, if such date is not a Trading Day, insert
the immediately following Trading Day.
“Common
Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire
at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is
at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“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.
“Purchase
Agreement” means the securities purchase agreement, dated as of _________, 2023, by and between the Company and each of the
purchasers signatory thereto.
“Registration
Statement” means the Company’s registration statement on Form S-1 (File No. 333-273930).
“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Subsidiary”
means any subsidiary of the Company and shall, where applicable, also include any direct or indirect subsidiary of the Company formed
or acquired after the date hereof.
“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 American, 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 Trust Company, N.A., the current transfer agent of the Company, with a mailing address of 150
Royall Street, Canton, MA 02021, and any successor transfer agent of 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 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 on the Pink Open Market
(or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of 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.
“Warrant
Agency Agreement” means that certain warrant agency agreement, dated on or about the Initial Exercise Date, between the Company
and the Warrant Agent.
“Warrant
Agent” means the Transfer Agent, Computershare Inc. and any successor warrant agent of
the Company.
“Warrants”
means this Warrant and other Common Stock purchase warrants issued by the Company pursuant to the Registration Statement.
Section 2. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made,
in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the
Company of a duly executed PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the
“Notice of Exercise”). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising
the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver
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 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 as soon as reasonably practicable
of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases
of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant
Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall
maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection
to any Notice of Exercise within one (1) Business Day of receipt of such notice. Notwithstanding the foregoing, with respect to any Notice(s)
of Exercise delivered on or prior to 12:00 p.m. (New York City time) on the Initial Exercise Date, which may be delivered at any time
after the time of execution of the Purchase Agreement, the Company agrees to deliver the Warrant Shares subject to such notice(s) by 4:00
p.m. (New York City time) on the Initial Exercise Date and the Initial Exercise Date shall be the Warrant Share Delivery Date for purposes
hereunder, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received by such Warrant
Share Delivery Date. 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.
Notwithstanding the
foregoing in this Section 2(a), a holder whose interest in this Warrant is a beneficial interest in certificate(s) representing this Warrant
held in book-entry form through DTC (or another established clearing corporation performing similar functions), shall effect exercises
made pursuant to this Section 2(a) by delivering to DTC (or such other clearing corporation, as applicable) the appropriate instruction
form for exercise, complying with the procedures to effect exercise that are required by DTC (or such other clearing corporation, as applicable),
subject to a Holder’s right to elect to receive a Warrant in certificated form pursuant to the terms of the Warrant Agency Agreement,
in which case this sentence shall not apply.
b) Exercise Price. The exercise price per share of Common Stock under this Warrant shall be $_____,
subject to adjustment hereunder (the “Exercise Price”).
c) Cashless
Exercise. If at the time of exercise hereof there is no effective registration statement registering, or the prospectus
contained therein is not available for the issuance of the Warrant Shares to the Holder, then this Warrant may also be exercised, in
whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a
number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = as applicable:
(i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1)
both executed and delivered pursuant to Section 2(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) of Regulation
NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading
Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Stock on the principal Trading
Market as reported by Bloomberg L.P. as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice
of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter (including
until two (2) hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii)
the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise
is both executed and delivered pursuant to Section 2(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.
If Warrant Shares are
issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the
Warrant Shares shall take on the registered characteristics of the Warrants being exercised. The Company agrees not to take any position
contrary to this Section 2(c).
Notwithstanding anything
herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this
Section 2(c).
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 crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or (B) this Warrant is being exercised via cashless exercise, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) two (2) Trading Days after the delivery to the Company of the Notice of Exercise, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company, and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the third Trading Day after the Warrant Share Delivery Date) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise.
ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company
shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver
to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant,
which new Warrant shall in all other respects be identical with this Warrant.
iii. Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder
the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such
exercise.
iv. Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof. Notwithstanding the foregoing, the Warrant Agent shall not be liable for any liquidated damages or any other damages associated with the Company’s failure to timely deliver Warrant Shares pursuant to the terms hereof.
v. 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.
vi. 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 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.
vii. 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 one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock
then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion
or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date
as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall
be 4.99% (or, upon election by a Holder prior to the issuance of any Warrants, 9.99%) of the number of shares of 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) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above,
if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other
property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder
will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have
acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard
to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date
on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which
the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however,
that, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial
Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership
of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held
in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership
Limitation).
c) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall
declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock,
by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property
or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction)
(a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled
to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number
of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including
without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution,
or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation
in such Distribution (provided, however, that, to the extent that the Holder's right to participate in any such Distribution
would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent)
and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto
would not result in the Holder exceeding the Beneficial Ownership Limitation).
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, after giving effect to such transaction, the stockholders of the
Company immediately prior to such transaction own less than 50% of the aggregate voting power of the Company or the successor entity of
such transaction, (ii) the Company (all of its Subsidiaries, taken as a whole), directly or indirectly, effects any sale, lease, license,
assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions,
(iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property
and has been accepted by the holders of 50% or more of the outstanding Common Stock or 50% or more of the voting power of the common equity
of the Company, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization
or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into
or exchanged for other securities, cash or property, after giving effect to such transaction, the stockholders of the Company immediately
prior to such transaction own less than 50% of the aggregate voting power of the Company or the successor entity of such transaction,
or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other
business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with
another Person or group of Persons whereby such other Person or group acquires 50% or more of the outstanding shares of Common Stock or
50% or more of the voting power of the common equity of the Company (each a “Fundamental Transaction”), then, upon
any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable
upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to
any limitation in Section 2(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. Notwithstanding anything to the contrary, in the
event of a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable
at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction (or, if later, the date of the
public announcement of the applicable Fundamental Transaction), purchase this Warrant from the Holder by paying to the Holder an amount
of cash equal to the Black Scholes Value (as defined below) of the remaining unexercised portion of this Warrant on the date of the consummation
of such Fundamental Transaction; provided, however, that, if the Fundamental Transaction is not within the Company's control,
including not approved by the Company's Board of Directors, the Holder shall only be entitled to receive from the Company or any Successor
Entity the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of this
Warrant, that is being offered and paid to the holders of Common Stock of the Company in connection with the Fundamental Transaction,
whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of Common Stock are given
the choice to receive from among alternative forms of consideration in connection with the Fundamental Transaction; provided, further,
that if holders of Common Stock of the Company are not offered or paid any consideration in such Fundamental Transaction, such holders
of Common Stock will be deemed to have received common stock of the Successor Entity (which Entity may be the Company following such Fundamental
Transaction) in such Fundamental Transaction. “Black Scholes Value” means the value of this Warrant based on the Black-Scholes
Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of
the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting
d) (A)
a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement
of the applicable contemplated Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100%
and the 100 day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization factor) as of the
Trading Day immediately following the public announcement of the applicable contemplated Fundamental Transaction, (C) the underlying
price per share used in such calculation shall be the greater of (i) the sum of the price per share being offered in cash, if any, plus
the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (ii) the highest VWAP during the period
beginning on the Trading Day immediately preceding the public announcement of the applicable contemplated Fundamental Transaction (or
the consummation of the applicable Fundamental Transaction, if earlier) and ending on the Trading Day of the Holder’s request pursuant
to this Section 3(d), (D) a remaining option time equal to the time between the date of the public announcement of the applicable contemplated
Fundamental Transaction and the Termination Date and (E) a zero cost of borrow. The payment of the Black Scholes Value will be made by
wire transfer of immediately available funds (or such other consideration) within the later of (i) five Business Days of the Holder’s
election and (ii) the date of consummation of the Fundamental Transaction. The Company shall cause any successor entity in a Fundamental
Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations
of the Company under this Warrant in accordance with the provisions of this Section 3(d) pursuant to written agreements in form and substance
reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and
shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by
a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares
of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon
exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and
with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative
value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number
of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately
prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder.
Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall be added to the term “Company” under
this Warrant (so that from and after the occurrence or consummation of such Fundamental Transaction, each and every provision of this
Warrant and the other Transaction Documents referring to the “Company” shall refer instead to each of the Company and the
Successor Entity or Successor Entities, jointly and severally), and the Successor Entity or Successor Entities, jointly and severally
with the Company, may exercise every right and power of the Company prior thereto and the Successor Entity or Successor Entities shall
assume all of the obligations of the Company prior thereto under this Warrant and the other Transaction Documents with the same effect
as if the Company and such Successor Entity or Successor Entities, jointly and severally, had been named as the Company herein. For the
avoidance of doubt, the Holder shall be entitled to the benefits of the provisions of this Section 3(d) regardless of (i) whether the
Company has sufficient authorized shares of Common Stock for the issuance of Warrant Shares and/or (ii) whether a Fundamental Transaction
occurs prior to the Initial Exercise Date.
e) 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.
f) Notice to Holder.
i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly deliver to the Holder by email a notice setting forth the Exercise Price after such adjustment
and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other
distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption
of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for
or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required
in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company (or any of its Subsidiaries)
is a party, any sale or transfer of all or substantially all of its assets, or any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by email to the Holder at its
last email address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record
or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock
of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date
as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided
that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate
action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material,
non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission
pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the
date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
g) Voluntary Adjustment By Company. Subject to the rules and regulations of the Trading Market,
the Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of
time deemed appropriate by the board of directors of the Company.
Section 4. Transfer
of Warrant.
a) Transferability. This Warrant and all rights hereunder (including, without limitation, any
registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or the
designated office of its designated agent, together with a written assignment of this Warrant substantially
in the form attached hereto properly completed and 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. All transfers with respect to physical/definitive
warrant certificates shall be accompanied by a guaranty of signature by an "eligible guarantor institution" that is a member
or participant in the Securities Transfer Agent Medallion Program, the Stock Exchanges Medallion Program or the New York Stock Exchange,
Inc. Medallion Signature Program. Upon such surrender and, if required, such payment, the Company shall
execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations
specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required
to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the
Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for
the purchase of Warrant Shares without having a new Warrant issued.
b) New Warrants. If this Warrant is not held in global form through DTC (or any successor depositary),
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 Exercise Date and shall be identical with this Warrant
except as to the number of Warrant Shares issuable pursuant thereto.
c) Warrant Register. The Warrant Agent shall register this Warrant, upon records to be maintained
by the Warrant Agent for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to
time. The Company and the Warrant Agent 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.
Section 5. Miscellaneous.
a) No Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not entitle
the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in
Section 2(d)(i), except as expressly set forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless
exercise” pursuant to Section 2(c) or to receive cash payments pursuant to Section 2(d)(i) and Section 2(d)(iv) herein, in no event
shall the Company be required to net cash settle an exercise of this Warrant.
b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt
by the Company and the Warrant Agent 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 the Warrant Agent and the Company (which, in the case of the Warrant issued
in physical/definitive form, shall include the posting of any bond satisfactory to the Company and the Warrant Agent and, in the case
of a Warrant held in book entry form through DTC, 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.
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).
Except and to the extent
as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate
of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate
to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the
Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior
to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts
to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary
to enable the Company to perform its obligations under this Warrant.
Before taking any action
which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.
e) Governing Law. All questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without
regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Warrant (whether brought against a party hereto or their respective affiliates, directors,
officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting
in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is
an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence
of delivery) to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by law. If either party shall commence an action, suit or proceeding to enforce any provisions of
this Warrant, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for their reasonable attorneys’
fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of
this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state
and federal securities laws.
g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies.
Without limiting any other provision of this Warrant, if the Company willfully and knowingly fails to comply with any provision of this
Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient
to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings,
incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
h) Notices. Any and all notices or other communications or deliveries to be provided by the Holders
hereunder including, without limitation, any Notice of Exercise, shall be in writing and delivered personally, by e-mail, or sent by a
nationally recognized overnight courier service, addressed to the Company, at 101 East Park Blvd, Suite
1200, Plano, Texas 75074, Attention: Anthony Scott, email address:
Tony.Scott@intrusion.com, or such other email address or address as the Company may specify for such
purposes by notice to the Holders. Except as provided in the Warrant Agency Agreement with respect to the Warrant Agent, any and
all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally,
by e-mail, or sent by a nationally recognized overnight courier service addressed to each Holder at the e-mail address or address of such
Holder appearing on the books of the Company. Any notice or other communication or deliveries hereunder shall be deemed given and effective
on the earliest of (i) the time of transmission, if such notice or communication is delivered via e-mail at the e-mail address set forth
in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the time of transmission, if such
notice or communication is delivered via e-mail at the e-mail address set forth in this Section on a day that is not a Trading Day or
later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.
To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any
Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.
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) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby
agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
k) 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.
l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company, on the one hand, and the Holder or the beneficial owner of this Warrant, on the other hand.
m) 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.
n) 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.
o) Warrant Agency Agreement. The terms of this Warrant are
to be read in conjunction with the applicable terms of the Warrant
Agency Agreement. In the event of an inconsistency between the terms of this Warrant and the Warrant Agency Agreement,
the terms of this Warrant shall prevail. Without limiting the generality of the foregoing,
all provisions with respect to the rights, duties, obligations, liabilities and immunities of the Warrant Agent shall be determined and
interpreted solely by the provisions of the Warrant Agency Agreement.
********************
(Signature Page Follows)
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.
|
Intrusion Inc.
|
|
By:__________________________________________
Name: Anthony Scott
Title: Chief Executive Officer |
NOTICE OF EXERCISE
To: Intrusion
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 to the following
DWAC Account Number:
_______________________________
_______________________________
_______________________________
[SIGNATURE
OF HOLDER]
Name of Investing Entity: ________________________________________________________________________
Signature of Authorized Signatory of Investing
Entity: _________________________________________________
Name of Authorized Signatory: ___________________________________________________________________
Title of Authorized Signatory: ____________________________________________________________________
Date: ________________________________________________________________________________________
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 5.1
ANTHONY
L.G., PLLC
laura aNTHONy, esq
JOHN CACOMANOLIS, ESQ*
CHAD FRIEND, ESQ, LLM
SVETLANA ROVENSKAYA,
ESQ**
__________________________
OF COUNSEL:
Jessica Haggard, esq.
***
MICHAEL R. GEROE, ESQ, CIPP/US****
CRAIG D. LINDER, ESQ*****
PETER P. LINDLEY, ESQ,
CPA, MBA
john lowy, esq.******
STUART REED, ESQ.
LAZ ROTHSTEIN, ESQ.
Harris Tulchin, Esq.
*******
|
www.ANTHONYPLLC.com
WWW.SECURITIESLAWBLOG.COM
WWW.LAWCAST.COM
DIRECT E-MAIL:
LANTHONY@ANTHONYPLLC.COM
|
*licensed in FL and NY
**licensed in NY and NJ
***licensed in Missouri
****licensed in CA, DC, MO and NY
*****licensed in CA, FL and NY
******licensed in NY and NJ
*******licensed in CA and HI (inactive in HI)
September 18, 2023
Intrusion Inc.
101 East Park Blvd, Suite 1200
Plano, Texas 75074
Re: Intrusion Inc. –
Registration Statement on Form S-1
Gentlemen:
We have acted as counsel to
Intrusion Inc., a Delaware corporation (the “Company”), in connection with the Company’s Registration Statement on Form
S-1, as publicly filed with the Securities and Exchange Commission (the “Commission”) on August 11, 2023, and as thereafter
amended, (the “Registration Statement”), with respect to the Company’s offering (the “Offering”) of up to
23,750,000 of the Company’s units (the “Units”), each Unit consisting of (i) one share of common stock of the Company,
par value $0.01 per share (“Common Stock”) or one Pre-Funded Warrant to purchase one share of Common Stock (the “Pre-Funded
Warrants”) and (ii) one Warrant to purchase one share of Common Stock (the “Common Warrants”). The Units are to be sold
by the Company pursuant to a placement agency agreement (the “Placement Agency Agreement”) by and between the Company
and Joseph Gunnar & Co., LLC (the “Placement Agent”), the form of which is filed as Exhibit 1.1 to the Registration
Statement. The Company is also registering (i) warrants to purchase up to 2,375,000 shares of Common Stock of the Company to be
issued to the Placement Agent as additional compensation pursuant to the Placement Agency Agreement (the “Placement Agent Warrants”
and together with the Common Warrants and Pre-Funded Warrants, the “Warrants”), and (ii) up to an aggregate of 2,375,000
shares of Common Stock issuable upon exercise of the Placement Agent Warrants (the “Placement Agent Warrant Shares”).
As used herein, (i) the Common Stock included in each Unit are referred to as the “Unit Shares,” (ii) the Common Stock issuable
upon exercise of the Pre-Funded Warrants are referred to as the “Pre-Funded Warrant Shares,” (iii) the Common Stock issuable
upon exercise of the Common Warrants are referred to as the “Warrant Shares,” and (iv) the Units, Unit Shares, Pre-Funded
Warrant Shares, the Warrant Shares, Placement Agent Warrant Shares, and Warrants are collectively referred to as the “Securities”).
In our capacity as counsel
to the Company, we have examined originals or copies, certified or otherwise identified to our satisfaction, of: (i) the Registration
Statement; (ii) the prospectus of the Company (the “Prospectus”) included in the Registration Statement; (iii) the form of
Warrant Agency Agreement, to be entered by and between the Company and Computershare Trust Company N.A. that is filed as an exhibit to
the Registration Statement (the “Warrant Agreement”) and (iv) such corporate documents and records of the Company and such
other instruments, certificates and documents as we have deemed necessary or appropriate as a basis for the opinions hereinafter expressed.
In such examinations, we have assumed the authenticity of all documents submitted to us as originals, the conformity to original documents
of all documents submitted to us as copies or drafts of documents to be executed, the genuineness of all signatures and the legal competence
or capacity of persons or entities to complete the execution of documents. As to various questions of fact which are material to the opinions
hereinafter expressed, we have relied upon statements or certificates of public officials, directors of the Company and others.
We have further assumed for
the purposes of this opinion, without investigation, that (i) all documents contemplated by the Prospectus to be executed in connection
with the Offering have been duly authorized, executed and delivered by each of the parties thereto other than the Company, (ii) the terms
of the Offering comply in all respects with the terms, conditions and restrictions set forth in the Prospectus and all of the instruments,
agreements and other documents relating thereto or executed in connection therewith, and (iii) all Unit Shares, Pre-Funded Warrant Shares,
Warrant Shares and Placement Agent Warrant Shares will be issued in compliance with applicable U.S. federal and state securities and other
laws (other than the laws of the State of New York and the State of Delaware in respect of which we are opining).
Based upon and subject to
the foregoing, and having regard for such other legal considerations which we deem relevant, we are of the opinion that under the laws
of the State of Delaware:
1. The Securities have been
duly authorized by the Company.
2. The Units, when issued,
sold and paid for as contemplated in the Prospectus, will be validly issued, fully paid, and non-assessable.
3. The Unit Shares, when issued,
sold and paid for as contemplated in the Prospectus, will be validly issued, fully paid, and non-assessable.
4. Assuming the Pre-Funded
Warrants are issued and delivered as contemplated in the Prospectus, the Pre-Funded Warrant Shares, when issued and delivered upon the
exercise of the Pre-Funded Warrants in accordance with their terms, will be validly issued, fully paid and non-assessable.
5. Assuming the Common Warrants
are issued and delivered as contemplated in the Prospectus, the Warrant Shares, when issued and delivered against payment therefor upon
the exercise of the Common Warrants in accordance with their terms, will be validly issued, fully paid and non-assessable.
6. Assuming the Placement
Agent Warrants are issued and delivered as contemplated in the Prospectus, the Placement Agent Warrant Shares, when issued and delivered
upon the exercise of the Placement Agent Warrants in accordance with their terms, will be validly issued, fully paid and non-assessable.
Based upon and subject to
the foregoing, and having regard for such other legal considerations which we deem relevant, we are of the opinion that under the laws
of the State of New York:
The Warrants, when issued,
sold and paid for as contemplated in the Prospectus and in accordance with the terms of the Common Warrant Agreement, Pre-Funded Warrant
Agreement, or Placement Agent Warrant Agreement, as applicable, the Warrants will constitute valid and legally binding obligations of
the Company in accordance with their terms, except as the enforcement thereof (i) may be limited by any applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, fraudulent transfer, fraudulent obligation, moratorium or other similar laws affecting generally
the enforceability of creditors’ rights and remedies or the collection of debtor’s obligations from time to time in effect,
and (ii) is subject to general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity
or at law, including the application of principles of good faith, fair dealing, course of dealing, course of performance, commercial reasonableness,
materiality, unconscionability and conflict with public policy and other similar principles; or other law relating to or affecting creditors’
rights generally and general principles of equity.
This opinion is limited to
the laws of the State of New York and the State of Delaware as in effect on the date hereof.
We hereby consent to the filing
of this opinion as an exhibit to the Registration Statement, and to each reference to us and the discussions of advice provided by us
under the headings “Material U.S. Federal Tax Considerations for Holders of Our Common Stock, Warrants, Pre-Funded Warrants and
Placement Agent Warrants” and “Legal Matters” in the Prospectus, without admitting we are “experts” within
the meaning of the U.S. Securities Act of 1933, as amended, or the rules and regulations of the Commission promulgated thereunder with
respect to any part of the Registration Statement or Prospectus.
Sincerely yours,
/s/ Laura E. Anthony |
|
Laura E. Anthony, |
|
For the Firm |
|
625 N.
FLAGLER DRIVE, SUITE 600 ● WEST PALM BEACH, FLORIDA ● 33401
● PHONE: 561-514-0936 ● FAX 561-514-0832
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
We consent to the incorporation by
reference in this Registration Statement on Form S-1 of Intrusion Inc. and subsidiaries (the “Company”) of our report dated
March 31, 2023 (which contains an explanatory paragraph relating to the Company’s ability to continue as a going concern as described
in Note 2 to such financial statements), related to our audit of the consolidated balance sheets of the Company as of December 31, 2022
and 2021, and the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for the
years then ended, which report appears in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. We also
consent to the reference to our firm under the heading “Experts” in this Registration Statement on Form S-1.
/s/ Whitley Penn LLP
Dallas, Texas
September 18, 2023
Exhibit 107
CALCULATION OF FILING FEE TABLES
Form S-1
(Form Type)
Intrusion Inc.
(Exact Name of Registrant as Specified in its Charter)
Table 1: Newly Registered Securities
Security
Type |
|
Security
Class
Title |
|
Fee
Calculation
Rule |
|
Amount
Registered |
|
|
Proposed
Maximum
Offering
Price Per
Unit |
|
|
Maximum
Aggregate
Offering
Price (1) |
|
|
Fee
Rate |
|
|
Amount of
Registration
Fee |
|
|
|
Units (2), consisting of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
(i) Common stock, par value $0.01
per share or Pre-Funded Warrants to purchase common stock, included in the units (3)(4)(5) |
|
Rule 457(o) |
|
|
— |
|
|
|
— |
|
|
$ |
9,500,000 |
|
|
|
0.0001102 |
|
|
$ |
1,046.90 |
|
Equity |
|
(ii) Warrants to purchase common stock, par value $0.01
per share, included in the units (3) |
|
Rule 457(g) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Equity |
|
Common stock, par value $0.01 per share, underlying
the warrants included in the units (6) |
|
Other |
|
|
— |
|
|
|
— |
|
|
$ |
10,450,000 |
|
|
|
0.0001102 |
|
|
$ |
1,151.60 |
|
Equity |
|
Common stock, par value $0.01 per share, underlying
Pre-Funded Warrants to purchase common stock (4)(5)(7) |
|
Other |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Equity |
|
Placement Agent’s
Warrant to purchase common stock (8) |
|
Rule
457(g) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Equity |
|
Common stock issuable upon
exercise of Placement Agent’s Warrant to purchase common stock (9) |
|
Rule
457(g) |
|
|
— |
|
|
|
— |
|
|
$ |
1,187,500 |
|
|
|
0.0001102 |
|
|
|
130.86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Offering
Amounts/Net Fee Due |
|
|
$ |
21,137,500 |
|
|
|
|
|
|
$ |
2,329.36 |
|
|
|
|
Total
Fees Previously Paid |
|
|
|
|
|
|
|
|
|
|
$ |
2,084.16 |
|
|
|
|
Total
Fee Offsets |
|
|
|
|
|
|
|
|
|
|
$ |
— |
|
|
|
|
Net
Fee Due |
|
|
|
|
|
|
|
|
|
|
$ |
245.20 |
|
(1) |
Estimated solely for the
purpose of calculating the amount of the registration fee pursuant to Rule 457(o) of the Securities Act of 1933, as amended (the
“Securities Act”). |
|
|
(2) |
Each unit consists of one
share of common stock, par value $0.01 per share, and one warrant to purchase one share of common stock, par value $0.01 per share.
|
|
|
(3) |
Included in the price of
the units. No fee required pursuant to Rule 457(g) under the Securities Act. |
|
|
(4) |
The proposed maximum aggregate
offering price of the common stock proposed to be sold in the offering will be reduced on a dollar-for-dollar basis based on the
offering price of any Pre-Funded Warrants offered and sold in the offering, and the proposed maximum offering price of the Pre-Funded
Warrants to be sold in the offering will be reduced on a dollar-for-dollar basis based on the offering price of any common stock
sold in the offering. |
|
|
(5) |
The registrant may issue
Pre-Funded Warrants to purchase common stock in the offering. The purchase price of each Pre-Funded Warrant will equal the price
per share at which shares of common stock are being sold to the public in this offering, minus $0.001, which constitutes the pre-funded
portion of the exercise price, and the remaining unpaid exercise price of the Pre-Funded Warrant will equal $0.001 per share (subject
to adjustment as provided for therein). |
|
|
(6) |
The warrants are exercisable
at a per share exercise price equal to 110% of the public offering price per unit. The proposed maximum aggregate public offering
price of the shares of common stock issuable upon exercise of the warrants was calculated to be $10,450,000 (which is 110% of $9,500,000
since each investor will receive a warrant to purchase one share of common stock for each share of common stock purchased in this
offering). |
|
|
(7) |
Pursuant to Rule 416 under
the Securities Act, the shares registered hereby also include an indeterminate number of additional shares as may from time to time
become issuable by reason of stock splits, distributions, recapitalizations or other similar transactions. |
(8) |
In accordance with Rule
457(g) under the Securities Act, because the common stock of the registrant underlying the Placement Agent’s Warrant is registered
hereby, no separate registration fee is required with respect to the Placement Agent’s Warrant registered hereby. |
|
|
(9) |
The Placement Agent’s
Warrants are exercisable at a per share exercise price equal to 125% of the public offering price per common stock. As estimated
solely for the purpose of calculating the registration fee pursuant to Rule 457(g) under the Securities Act, the proposed maximum
aggregate offering price of the Placement Agent’s warrants is $1,187,500 which is equal to 125% of $950,000 (5% of $9,500,000
of common stock sold in this offering and 5% of the common stock underlying the Pre-Funded Warrants and the Warrants). |
|
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