Elauwit Connection, Inc S-1/A, filed Sep 15, 2025
Elauwit Connection, Inc. (ELWT)
As filed with the Securities and Exchange Commission on September 15, 2025.
Registration No. 333-289964
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pre-Effective Amendment No. 1
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Elauwit Connection, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 4899 | 99-3101171 | ||
| (State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
1700 Alta Vista Drive, Suite 130
Columbia, SC 29223
(704) 558-3099
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Barry Rubens
Chief Executive Officer
1700 Alta Vista Drive, Suite 130
Columbia, SC 29223
(704) 558-3099
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Alexander R. McClean, Esq. Margaret K. Rhoda, Esq. Harter Secrest & Emery LLP 1600 Bausch & Lomb Place Rochester, NY 14604 Tel: (585) 232-6500 Fax: (585) 232-2152 |
M. Ali Panjwani, Esq. Pryor Cashman LLP 7 Times Square, 40th Floor New York, NY 10036 Tel: (212) 421-4100 Fax: (212) 326-0806 |
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. x
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 x | Smaller reporting company x | |||
| Emerging growth company x |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided 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 Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
| PRELIMINARY PROSPECTUS | SUBJECT TO COMPLETION, DATED September 15, 2025 |
1,500,000 Shares of Common Stock
ELAUWIT CONNECTION, INC.
This is an initial public offering of shares of our common stock. We are offering on a firm commitment basis, shares of common stock, par value $0.0001 per share (“common stock”). The initial public offering price per share of common stock is expected to be between $9.00 and $11.00.
Prior to this offering, there has been no public market for our common stock. We have applied to list our common stock on the Nasdaq Capital Market (“Nasdaq”) under the symbol “ELWT.” No assurance can be given that our application will be approved. If our application is not approved or we otherwise determine that we will not be able to secure the listing of our common stock on Nasdaq, we will not complete this offering.
We are an “emerging growth company” and a “smaller reporting company” as defined under the federal securities laws and, as such, we have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings. See “Prospectus Summary — Implications of Being an Emerging Growth Company and Smaller Reporting Company.”
Investing in our securities is speculative and involves a high degree of risk. You should carefully consider the risk factors beginning on page 7 of this prospectus before purchasing our securities.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
| Price Per Share | Total | |||||||
| Public offering price | $ | $ | ||||||
| Underwriting discounts and commissions (1) | $ | $ | ||||||
| Proceeds to us, before expenses | $ | $ | ||||||
| (1) | Craig-Hallum will be due no less than 80% of the underwriting discount and Maxim Group LLC will be due no less than 20% of the underwriting discount. We have also agreed to issue warrants to purchase shares common stock to the representative of the underwriters and reimburse the underwriters for certain expenses in connection with this offering. See “Underwriting” for additional information regarding total underwriting compensation, including information on underwriting discounts and offering expenses. |
Upon the closing of this offering, we will issue to Craig-Hallum Capital Group LLC (“Craig-Hallum”) or its designee, as the representative of the underwriters in this offering, warrants entitling it to purchase a number of shares of common stock equal to 7.0% of the shares of common stock sold in this offering at an exercise price equal to 115% of the public offering price in this offering (the “Representative’s Warrants”). The Representative’s Warrants shall be exercisable six months after the effective date of the registration statement of which this prospectus forms a part and will expire five years after such effective date. This prospectus also relates to the offering of the shares of common stock issuable upon exercise of the Representative’s Warrants.
We have granted the representative of underwriters an option to purchase from us, at the public offering price, up to an additional 225,000 shares of common stock, less the underwriting discounts and commissions, within 45 days from the closing of this offering to cover over-allotments, if any. If the representative of the underwriters exercises the option in full, the total underwriting discounts and commissions payable will be $ , and the total proceeds to us, before expenses, will be $ .
The underwriters expect to deliver the shares of common stock to purchasers on or about , 2025, subject to the satisfaction of customary closing conditions.
Sole Bookrunner
Craig-Hallum
The date of this prospectus is , 2025
TABLE OF CONTENTS
You should rely only on the information contained in this prospectus and in any free writing prospectus. We and the underwriters have not authorized anyone to provide you with information different from that contained in this prospectus. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We and the underwriters are offering to sell, and seeking offers to buy, our securities only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our securities.
The information contained in this prospectus is current only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our securities. Our business, financial condition, results of operations and prospects may have changed since that date.
Neither we nor any of the underwriters have 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 our securities and the distribution of this prospectus outside of the United States.
This prospectus includes estimates regarding market and industry data. Unless otherwise indicated, information concerning our industry and the markets in which we operate, including our general expectations, market position, market opportunity and market size, are based on our management’s knowledge and experience in the markets in which we operate, together with currently available information obtained from various sources, including publicly available information, industry reports and publications, surveys, our customers, trade and business organizations and other contacts in the markets in which we operate. Certain information is based on management estimates, which have been derived from third-party sources, as well as data from our internal research, and are based on certain assumptions that we believe to be reasonable.
In presenting this information, we have made certain assumptions that we believe to be reasonable based on such data and other similar sources and on our knowledge of, and our experience to date in, the markets in which we operate. Market and industry data, which is derived in part from management’s estimates and beliefs, are subject to change and may be limited by the availability of raw data, the voluntary nature of the data gathering process and other limitations inherent in any statistical survey of such data. In addition, projections, assumptions and estimates of the future performance of the markets in which we operate and our future performance are necessarily subject to uncertainty and risk due to a variety of factors, including those described in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” These and other factors could cause results to differ materially from those expressed in the estimates made by third parties and by us.
We own or have rights to trademarks or trade names that we use in connection with the operation of our business, including our corporate names, logos and website names. In addition, we own or have the rights to copyrights, trade secrets and other proprietary rights that protect the content of our products. This prospectus may also contain trademarks, service marks and trade names of other companies, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names or products in this prospectus is not intended to, and should not be read to, imply a relationship with or endorsement or sponsorship of us. Solely for convenience, some of the copyrights, trade names and trademarks referred to in this prospectus are listed without their ©, ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our copyrights, trade names and trademarks. All other trademarks are the property of their respective owners.
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The following summary highlights information contained elsewhere in this prospectus and is qualified in its entirety by the more detailed information and financial statements included elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our securities. Before you decide to invest in our securities, you should read and carefully consider the following summary together with the entire prospectus, including our financial statements and the related notes thereto and the matters discussed in the sections in this prospectus entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business.” Some of the statements in this prospectus constitute forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors, including those discussed in the “Risk Factors” and other sections of this prospectus. In this prospectus, unless otherwise stated or the context otherwise requires, references to “Elauwit,” the “Company,” “we,” “us,” “our,” or similar references mean Elauwit Connection, Inc. on a consolidated basis.
Our Company
We are a provider of broadband Internet networks for the multifamily and student housing property sector. We provide Managed Services and Network-as-a-Service solutions designed to modernize and enhance the Internet connectivity experience for residents while driving significant financial benefits for property owners.
We strive to be a leading player in a booming multifamily property conversion trend through service commitment, operational experience and flexibility. Key highlights of our business and market opportunity include:
| · | There is an untapped market to fulfill major demand for network services in multifamily housing units: |
| o | According to market estimates from the National Multifamily Housing Council (NMHC), there are approximately 23 million apartment units in the U.S, and we estimate 55% of those units are well-suited for our network services. |
| o | Through our own market research using data provided by CoStar, a platform that provides comprehensive commercial real estate information, we estimate there are 12 million units in our addressable market of properties with 100 properties or more for overbuilds, or installing our network in a multifamily building with an existing network. |
| o | According to the National Apartment Association, the United States needs to build more than 4.6 million new apartment homes at a minimum, with as many as 11.7 million needed by 2030. |
| · | The number of opportunities that we estimate can begin generating revenue for us within the next 24 months (our “pipeline”) is rapidly growing due to our longstanding relationships and expanding customer base. From both existing and new customer relationships, we are currently tracking over 400 opportunities in our Managed Service pipeline representing an estimated $110 million of potential network construction revenue and an estimated $23 million in annual recurring revenue, if we were able to successfully complete all of these opportunities. We have also identified approximately 265,000 units in our near-term Network-as-a-Service pipeline, based on ongoing, active discussions with approximately 10 property ownership groups, which we estimate could represent approximately $150 million in annual recurring revenue, based on an estimated monthly fee of approximately $45 per unit. We do not have any contracts with customers for opportunities in our pipeline. See “— Pipeline” below for more detail about our pipeline. |
| · | We have a strong reputation for execution, customer satisfaction and top-notch support from our current business and our management team’s association with Elauwit Networks, LLC, which was acquired by Boingo Wireless, Inc. (“Boingo”) for total consideration of approximately $28.6 million in August 2018. |
| · | Our resident experience focused service offering helps our property owner customers differentiate their communities through our high-speed, instant-on, internet access approach paired with customer support developed to deliver timely, wholistic support. |
| · | We have a highly repeatable and efficient network installation process, where we install fiber or switched ethernet to each unit in a multifamily property. Once our network is installed, we achieve 100% penetration of our network to the units. |
| · | Once our network is installed, we have the opportunity to collect high margin, recurring revenue streams with ongoing service packages. If we are able to appropriately scale our business, we believe we could achieve up to 70% and 75% gross margin in our Managed Services and Network-as-a-Service lines of business, respectively. |
| · | We view the fragmented competitive landscape as ripe for consolidation. We have identified over 40 competitors as potential acquisition opportunities we plan to explore. |
We design, install, operate, and maintain new fiber optic and WiFi networks throughout each contracted property. Once installed, property owners begin selling Internet connectivity over our network directly to their residents at monthly prices and terms of their choosing. We, in turn, provide all resident activation, onboarding, customer support, and all network monitoring and maintenance services in exchange for a fixed monthly fee based on the number of units in the property times a monthly per-unit wholesale price. Our contracts with property owners generally have five to eight-year terms.
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By implementing Elauwit’s network and services, multifamily property owners:
| · | Bring the latest fiber-based Internet connectivity and WiFi services to their entire property, which has become an important factor in a property’s appeal to current and potential residents, |
| · | Provide residents with directly connected upload and download speeds of 1 gigabit per second (“Gbps”) as generally measured by the industry, plus both in-unit and all-property WiFi connectivity averaging between 200 and 500 Mbps as generally measured by the industry, plus 24/7 customer service and support provided by Elauwit, |
| · | Increase their per-unit contribution to net operating income by the difference between the monthly retail rate they charge to residents and our monthly wholesale fee to them, and |
| · | Reduce duplicative operating expenses by moving over technology assets and services to Elauwit. |
Our mission is to be the leading experience provider of Internet access solutions. For our property ownership clients, this means clear communication and timely execution. For the end users of our service, residents and their guests, this means dedication to the objective of providing an excellent resident experience. We differentiate ourselves in the area of resident experience by building reliable networks, responding to service requests quickly, establishing support protocols that lead to industry-leading first touch resolution metrics, and communicating effectively with key stakeholders throughout.
We closely monitor the challenges and needs of development and ownership groups in the real estate sectors in focus. A continued theme has been the fragmented market of service providers in the space in which we operate and issues stemming out of such. We view these issues to be a large opportunity for our business and an indication that consolidation is likely in the near future. We aim to be a driver of consolidation.
Pipeline
Managed Service
As of September 4, 2025, our Managed Service pipeline consists of 400 opportunities to provide service to about 110,000 units, representing in total an estimated $110 million of potential network construction revenue and an estimated $23 million in annual recurring revenue. The majority of our Managed Service pipeline consists of requests for proposal (“RFPs”) with existing and new customers, with the remaining smaller portion consisting of direct sales outside of an RFP process.
An opportunity is first added to our Managed Service pipeline when one of our representatives has an introductory call about the opportunity with a third party. Currently, about 30,000 units are in this early stage of the pipeline, representing the potential for approximately $30 million in network construction revenue and about $7 million in annual recurring revenue. The second stage of the pipeline is what we consider “near-term” opportunities, when (i) a design has been requested for a project; (ii) a design proposal has been delivered for a project; (iii) the project is being negotiated between the project ownership group or its subcontractors and us; or (iv) when the project has been verbally awarded to us and we are finalizing a written contract for the project. Currently, about 80,000 units are in the second stage of the pipeline, representing the potential for approximately $80 million in network construction revenue and about $16 million in annual recurring revenue. We do not have any contracts with customers for opportunities in the first or second stage of our Managed Service pipeline. After a contract for a project is signed, the project is no longer in the pipeline and is instead considered part of our backlog. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contracted Units and Backlog” for more information about our backlog.
We are a relatively new business with limited long-term win-loss data on project submissions and do not have a reasonable estimated win rate for Managed Service projects in the early, first stage of our pipeline. However, based on our historical experience and management’s estimates and experience in this industry, we estimate our win rate on Managed Service second stage pipeline projects in which we respond to an RFP for a new customer or new property ownership group is approximately 25%. We estimate our win rate on RFPs with existing customers or direct sales to property ownership groups with whom we have an existing relationship is higher than 25%. Because Managed Service projects are subject to the timeline of a new construction project, which is outside of our control, we cannot predict an exact timeline for generating revenue for each opportunity in our pipeline; however, based on our historical experience we would expect to begin to generate revenue for most opportunities in the second stage of our Managed Service pipeline in the next 18 months. Managed Service pipeline opportunities could be prevented from converting into sales if we are not able to remain competitive in developing our proposals or executing on our backlog, or if there is a slowdown in new construction for multifamily projects.
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Network-as-a-Service
As of September 4, 2025, our Network-as-a-Service pipeline consists of approximately 265,000 identified units, based on ongoing, active discussions with approximately 10 property ownership groups with whom we have an existing relationship. If all of these units were converted into contracted units, we estimate we could recognize approximately $150 million in annual recurring revenue, based on an estimated monthly fee of approximately $45 per unit. Currently, all of our Network-as-a-Service pipeline is in the earliest stage of our pipeline, which we expect to follow the stages of the Managed Service pipeline described above. These opportunities entered our Network-as-a-Service pipeline when our management team began negotiating with the property ownership groups and the ownership group expressed interest in Network-as-a-Service. We will need additional capital to begin Network-as-a-Service buildouts, and until we are able to access additional capital, the opportunities in the first stage of our Network-as-a-Service pipeline will not advance in the pipeline. We do not have any contracts with customers for projects in our Network-as-a-Service pipeline that require payment if the customer cancels the contract before the network is installed. The potential revenue under any contract that would require payment would appear in our backlog.
Because Network-as-a-Service is a new business model, we have only limited data on our ability to convert opportunities from our pipeline into revenue. Our Network-as-a-Service pipeline is based on our management’s estimate of our opportunities in our total addressable market. Our total addressable market, of multi-family properties with at least 100 units, consists of about 12 million units nationwide. Our current Network-as-a-Service pipeline is roughly 2.2% of that total addressable market. Assuming we are able to access additional capital, we believe we could begin generating revenue from Network-as-a-Service sales to the identified property ownership groups within 12 months. Our ability to convert these pipeline opportunities into sales is based on management’s estimates and experience in this industry. Network-as-a-Service pipeline opportunities could be prevented from converting into sales if we are unable to access adequate capital to deploy for Network-as-a-Service buildouts or to develop our direct sales and marketing team for Network-as-a-Service sales, if our potential customers prefer a business model other than Network-as-a-Service, or if our proposed service is viewed unfavorably compared to our competitors.
Corporate History and Structure
Our company was incorporated on May 15, 2024, in the State of Delaware as DeltaMax, Inc. Effective September 13, 2024, Elauwit Connection, Inc., a company incorporated on December 4, 2019 in the State of Delaware, merged with and into us with us as the surviving entity, where we will continue the business of Elauwit Connection, Inc. Also on September 13, 2024, we changed our name to Elauwit Connection, Inc. to reflect the nature of the business of the merged corporation.
Our principal address is 1700 Alta Vista Drive, Suite 130, Columbia, SC 29223. Our telephone number is (704) 558-3099. We maintain a website at www.elauwit.com. The information contained on our website is not, and should not be interpreted to be, incorporated into this prospectus, and you should not rely on any such information in making the decision of whether to purchase our securities.
Listing on the Nasdaq Capital Market
There is currently no public trading market for our shares of common stock. In connection with this offering, we have applied to list our common stock on the Nasdaq Capital Market (“Nasdaq”) under the symbol “ELWT.” If our listing application is approved, we expect to list our common stock on Nasdaq upon consummation of the offering. No assurance can be given that our listing application will be approved or that our common stock will be listed on Nasdaq. This offering will occur only if Nasdaq approves the listing of our common stock.
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Implications of Being an Emerging Growth Company and Smaller Reporting Company
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements that are applicable to other companies that are not emerging growth companies. Accordingly, we have included detailed compensation information for only our three most highly compensated executive officers and have not included a compensation discussion and analysis of our executive compensation programs in this prospectus. In addition, for so long as we are an “emerging growth company,” we will not be required to:
| · | engage an auditor to report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”); |
| · | comply with any requirement that may be adopted by the Public Company Accounting Oversight Board (“PCAOB”) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements; |
| · | comply with new or revised accounting standards applicable to public companies as quickly as other public companies; |
| · | submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay,” “say-on-frequency,” and “say-on-golden parachutes;” or |
| · | disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparison of the chief executive officer’s compensation to median employee compensation. |
We will remain an “emerging growth company” until the earliest to occur of:
| · | our reporting $1.235 billion or more in annual gross revenues; |
| · | our issuance, in a three-year period, of more than $1 billion in non-convertible debt; |
| · | the end of the fiscal year in which the market value of our common stock held by non-affiliates exceeds $700 million on the last business day of our second fiscal quarter; and |
| · | December 31, 2030. |
We cannot predict if investors will find our securities less attractive because we may rely on these exemptions, which could result in a less active trading market for our securities and increased volatility in the price of our securities.
Finally, we are a “smaller reporting company” (and may continue to qualify as such even after we no longer qualify as an emerging growth company) and accordingly may provide less public disclosure than larger public companies, including the inclusion of only two years of audited financial statements and only two years of management’s discussion and analysis of financial condition and results of operations disclosure. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.
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THE OFFERING
| Issuer: | Elauwit Connection, Inc. | |
| Securities being offered by us: | 1,500,000 shares of common stock (or 1,725,000 shares of common stock if the underwriters exercise their over-allotment option in full). | |
| Assumed public offering price: | $10.00 per share, which is the mid-point of the price range indicated on the cover page of this prospectus. | |
| Common stock outstanding immediately prior to this offering: | 5,000,000 shares | |
| Common stock to be outstanding immediately after this offering: | 6,500,000 shares(1) (or 6,725,000 shares if the underwriters exercise their over-allotment option in full). | |
| Over-allotment option: | We have granted the underwriters an option, exercisable for 45 days after the closing of the offering, to purchase up to an additional 225,000 shares of common stock at the public offering price less the underwriting discounts payable by us, solely to cover over-allotments, if any. | |
| Use of proceeds: | We intend to use the net proceeds from this offering for debt repayment, Network-as-a-Service project deployments, sales and marketing organizational development, payment of deferred compensation, working capital and general corporate purposes. See “Use of Proceeds.” | |
| Underwriter compensation: | The underwriters will receive an underwriting discount equal to 7.0% of the gross proceeds from the sale of securities in the offering. We will also reimburse Craig-Hallum Capital Group LLC (“Craig-Hallum”) for certain out-of-pocket actual expenses related to the offering. See “Underwriting.” | |
| Representative’s Warrants: | Upon the closing of this offering, we will issue to Craig-Hallum or its designee, as the representative of the underwriters in this offering, warrants entitling it to purchase a number of shares of common stock equal to 7.0% of the shares of common stock sold in this offering at an exercise price equal to 115% of the public offering price in this offering (the “Representative’s Warrants”). The Representative’s Warrants shall be exercisable six months after the effective date of the registration statement of which this prospectus forms a part and will expire five years after such effective date. This prospectus also relates to the offering of the shares of common stock issuable upon exercise of the Representative’s Warrants. | |
| Proposed Nasdaq trading symbol: | We have applied to have our common stock listed on Nasdaq under the symbol “ELWT.” No assurance can be given that the listing will be approved or that a trading market will develop for the common stock. We will not complete this offering unless we receive approval for listing on Nasdaq. |
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| Lock-up agreements: | We and our directors, officers and the holders of 10% or more of the outstanding shares of our common stock have agreed with the representative not to offer for sale, issue, sell, contract to sell, pledge or otherwise dispose of any of our securities for a period of six months after the closing of this offering. See “Underwriting—Lock-Up Agreements.” | |
| Dividend policy: | Holders of our common stock are entitled to ratably receive dividends as may be declared and paid from time to time by the Board of Directors (the “Board”). We have never paid cash dividends on any of our capital stock, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. See “Dividend Policy.” | |
| Transfer agent and registrar: | The transfer agent and registrar for our common stock is Colonial Stock Transfer Company, Inc. | |
| Risk factors: | The securities offered by this prospectus are speculative and involve a high degree of risk. Investors purchasing securities should not purchase the securities unless they can afford the loss of their entire investment. See “Risk Factors” beginning on page 7. |
| (1) | The number of shares of our common stock to be outstanding following this offering is based on 5,000,000 outstanding shares of common stock as of September 15, 2025 and excludes: |
| · | shares of our common stock issuable upon the conversion the simple agreement for future equity (“SAFE”); and |
| · | shares of our common stock issuable upon the exercise of the Representative’s Warrants to be issued in this offering. |
Unless otherwise indicated, this prospectus reflects and assumes that the following are not converted into or exercised for shares of our common stock:
| · | shares of our common stock issuable upon the conversion of the SAFE; |
| · | shares of our common stock issuable upon the exercise of the Representative’s Warrants to be issued in this offering; and |
| · | no exercise by the underwriters of their option to purchase up to 225,000 additional shares of our common stock from us to cover over-allotments, if any. |
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Investing in our securities is highly speculative and involves a significant degree of risk. You should carefully consider the risks described below and elsewhere in this prospectus, which could materially and adversely affect our business, results of operations or financial condition. Our business faces significant risks and the risks described below may not be the only risks we face. Additional risks not presently known to us or that we currently believe are immaterial may materially affect our business, results of operations, or financial condition. If any of these risks occur, the trading price of our common stock could decline and you may lose all or part of your investment.
Risks Related to Our Business
We have a history of losses, expect to continue to incur losses in the near term and may not achieve or sustain profitability in the future, and as a result, our management has identified and our auditors agreed that there is a substantial doubt about our ability to continue as a going concern.
We have incurred significant losses since our inception. We experienced net losses of approximately $0.4 million during the six months ended June 30, 2025 and $3.5 million and $2.7 million for the years ended December 31, 2024 and 2023, respectively. We expect our capital expenses and operational expenses to increase in the future due to investing in network construction activities and, therefore, our operating losses will continue or even increase at least through the near term. Our sales cycle is long, and a substantial amount of time could pass between when we begin the process of deploying our network for a project and when we are able recognize revenue or realize gross margin contributions from the project. Furthermore, to the extent that we are successful in increasing our customer base, we will also incur increased expenses to meet the demand of our customers. You should not rely upon our past results as indicative of future performance. We may not reach profitability in the near future or at any specific time in the future. If and when our operations do become profitable, we may not sustain profitability.
The report of our independent registered public accounting firm that accompanies our audited consolidated financial statements in this prospectus contains a going concern qualification in which such firm expressed substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result if we are unable to continue as a going concern. If we are unable to continue as a going concern, holders of our securities might lose their entire investment.
We may need to raise additional capital, which may not be available on favorable terms, if at all, and which may cause dilution to holders of our common stock, restrict our operations or adversely affect our ability to operate our business.
If we need to raise additional funds due to unforeseen circumstances or material expenditures or if our operating results are worse than expected, we cannot be certain that we will be able to obtain additional financing on favorable terms, if at all, and any additional financings could result in additional dilution to holders of our common stock. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring additional debt, expending capital, or declaring dividends, or which impose financial covenants on us that limit our ability to achieve our business objectives. If we need additional capital and cannot raise it on acceptable terms, we may not be able to meet our business objectives, our stock price may fall and you may lose some or all of your investment.
Our secured indebtedness could have important consequences to you.
Our secured indebtedness could have important consequences to you. For example, it could:
| · | limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions and other general corporate requirements; |
| · | require us to dedicate a portion of our cash flow from operations to payments on our debt, thereby reducing the availability of our cash flow for operations and other purposes; |
| · | limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and |
| · | place us at a competitive disadvantage compared to competitors that may have proportionately less debt and greater financial resources. |
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Our secured indebtedness is secured by a security interest in a portion of our accounts receivable. If we were to default on our obligations under these loans and arrangements, the counterparties would have the right to our assets. We could be required to dispose of material assets or operations to meet our debt service and other obligations, and the value realized on such assets or operations will depend on market conditions and the availability of buyers. Accordingly, any such sale may not, among other things, be for a sufficient dollar amount. If we were to otherwise attempt to sell material assets or operations, the foregoing encumbrances may limit our ability to dispose of material assets or operations. In the event that the counterparties enforced their rights to our assets, we may have to discontinue our business, and our investors could lose all or a part of their investment in us.
We have a relatively short operating history, which makes it difficult to evaluate our business and future prospects.
We have a relatively short operating history, which makes it difficult to evaluate our business and future prospects. Our business has been in existence only since December 2019. We have encountered, and will continue to encounter, risks and difficulties frequently experienced by growing companies in rapidly changing industries, including those related to:
| · | market acceptance of our current and future services; |
| · | our ability to compete with other companies offering similar products and services; |
| · | our ability to effectively market our services and attract new customers; |
| · | the amount and timing of expenses, particularly expenses related to the installation of our Network-as-a-Service solutions, and expenses related to the maintenance and expansion of our business, operations and infrastructure; |
| · | our ability to control costs, including our expenses; |
| · | our ability to manage organic growth; |
| · | changing regulatory environments and costs associated with compliance; and |
| · | general economic conditions and events. |
If we do not manage these risks successfully, our business and financial performance will be adversely affected.
Given our relatively limited operating history, we have historically earned most of our revenue from a limited number of ownership groups, and if we lose any of these ownership groups as customers or if we are unable to replace the revenue, our financial condition and results from operations would be materially and adversely affected.
Given our relatively limited operating history, we have historically earned most of our revenue from a limited number of ownership groups. During the six months ended June 30, 2025, two ownership groups accounted for approximately 48% of our total revenue. During the year ended December 31, 2024, three ownership groups accounted for approximately 36% of our total revenue. As of June 30, 2025, three ownership groups accounted for approximately 58% of our accounts receivable balance. As of December 31, 2024, two ownership groups accounted for approximately 65% of our accounts receivable balance. Revenue from a single ownership group may comprise a material portion of our revenue at a certain point in time, primarily due to the timing of recognizing network construction revenue for a project, which comprises a significant portion of the Company’s expected revenue on a given project. This concentration of revenue from ownership groups leaves us exposed to the risks associated with the loss of one or more of these significant ownership groups as customers, which would materially and adversely affect our revenue and results of operations. If these ownership groups were to significantly reduce their relationship with us, or in the event that we are unable to replace the revenue through the provision of our services to additional ownership groups, our financial condition and results from operations could be negatively impacted, and such impact could be significant.
We could be directly or indirectly affected by potential regulatory changes to our industry and our financial condition, results of operations and business may be adversely affected.
The current regulatory environment for our Managed Services and Network-as-a-Service solutions is uncertain. We may be directly impacted by any federal or state regulation of our industry or indirectly impacted through any federal or state regulation that affects property owners. We are aware of state legislation in areas where we do not yet operate that could impact our revenue if we were to enter those markets. The legislation limits the markup or fee property owners can charge tenants for the services we provide and bill to property owners. In addition, any federal regulation related to bulk billing could limit our ability to effectively grow our business. If an ‘anti-bulk’ proposal were approved, property owners of multifamily housing properties would not be able to enter into bulk billing agreements with network service providers for a property, which would significantly adversely affect our business, financial condition or results of operations.
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If we are unable to adapt to the speed of changes in wireless network infrastructure and anticipate market adoption of new technologies our financial condition, results of operations and business may be adversely impacted.
Our future success depends upon growing demand for wireless connected services. The demand for wireless connectivity may decrease or may grow more slowly than expected. Any such decrease in the demand or slowing rate of growth could have a material adverse effect on our business. The continued demand for wireless connectivity services depends on the continued proliferation of smartphones, tablets and other wireless connection enabled devices. Our revenue is derived from the demand from consumers for internet connectivity and from property owners attempting to provide consumers with greater connectivity. We may face challenges as we seek to increase the revenue generated from our Managed Services and Network-as-a-Service solutions.
A portion of our business depends on the continued integration of WiFi as a standard feature in internet connected devices. If WiFi ceases to be a standard feature in internet connected devices, or if the rate of integration of WiFi on devices decreases or is slower than expected, the market for our services may be substantially diminished.
We deliver value to our users by providing simple access to WiFi networks, regardless of whether we manage and operate the network, or the network is operated by a property owner. As a result, our business depends on our ability to anticipate and quickly adapt to changing technological standards and advances. If technological standards change and we fail to adapt accordingly, our business and revenue may be adversely affected.
A significant portion of our revenue is dependent on our relationships with our property owners and network partners, and if these relationships are impaired or terminated, or if our partners do not perform as expected, our business and results of operations could be materially and adversely affected.
We depend on our relationships with property owners in order to manage and operate our Managed Services and Network-as-a-Service solutions. These relationships allow us to generate revenue and new property owner relationships. Our agreements with our property owners and telecom operators are for defined periods and of varying durations. In order to maintain our relationships with property owners, we may need to upgrade our networks or make other changes to our products and services we provide, which would, in most cases, require significantly higher initial capital expenditures than we have historically incurred, and if we are unsuccessful, our relationships could be impaired. If property owners terminate or fail to renew these agreements, our ability to generate and retain property owner relationships would be diminished, which might result in a significant disruption of our business and adversely affect our operating results. Further, any delays in our ability to complete the upgrade of our networks or build out new networks could adversely affect our operating results.
A significant portion of our revenue depends on maintaining these relationships with network partners. Some network partners may compete with us for relationships with property owners and may decide to terminate our partnerships and instead develop competing retail products and services. Our network partner agreements are for defined periods and of varying durations. If our network partners terminate these agreements, or fail to renew these agreements, our ability to maintain property owner relationships could be diminished and our network reach could be reduced, which could result in a significant disruption of our business and adversely affect our operating results.
We depend on our relationships with our manufacturers for certain materials necessary to provide our services.
We depend on close relationships with our manufacturers for hardware and other materials necessary to provide our services to customers. Our ability to purchase at competitive prices and terms results from the volume of our purchases from these manufacturers. We purchase a substantial amount of the hardware necessary to provide our services from one hardware manufacturer. If this manufacturer were to experience shortages or financial difficulties or charge increased prices due to inflationary pressures or tariff uncertainty, and we are unable to purchase our desired volume of hardware on the same or better terms, or at all, our revenue and ability to service our customers could suffer considerably.
We believe that alternative sources exist for most of the materials we need to provide our services, and we would not expect the loss of any one manufacturer to have a material adverse effect on our business, financial condition, or results of operations. If any of our manufacturers do not perform adequately or otherwise fail to supply the materials we need to provide our services, our inability to replace the manufacturers in a timely manner and on acceptable terms could increase our costs and could cause shortages or interruptions that could have a material adverse effect on our business, financial condition, and results of operations.
Because we purchase hardware and other materials, which are subject to cost variations related to commodity costs, inflationary pressures or tariffs, if we cannot pass along cost increases, our profitability would be negatively impacted.
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If we are unable to consistently win competitive RFP processes, become a preferred or sole supplier for new-build projects, execute on our backlog, begin to increase our gross margins with newer customer relationships, access capital to deploy for Network-as-a-Service buildouts or to develop our sales and marketing teams, or capitalize on the opportunities in our pipeline, our financial condition, results of operations and business may be adversely impacted.
Many property development projects in the U.S. with 100 units or more now mandate a Managed Services approach for their residential Internet services. These projects increasingly source Managed Services providers through a competitive RFP process or directly from a trusted provider who the property owner has previously worked with. We selectively enter RFP processes where we believe our experience, quality, service reputation and standard pricing and terms will make us competitive, and the property owner is an existing customer or a potential long-term multi-property customer. We may submit RFPs or other offers for our services at rates that would result in relatively lower gross margin in order to remain competitive and/or initiate a relationship with a potential long-term multi-property customer. Our goal is to become a preferred or sole provider for property owners’ new-build projects, where we win Managed Services projects “automatically” instead of through a RFP processes. We cannot provide any assurance that we will consistently win every RFP process we enter, become a preferred or sole supplier for new-build projects, execute on our backlog, begin to increase our gross margins with newer customer relationships, access capital to deploy for Network-as-a-Service buildouts or develop our sales and marketing teams, or capitalize on the opportunities in our pipeline. If we are unable to do so, we may not be able to effectively grow our business, and our financial condition, results of operation and business may be adversely impacted.
Our performance may be impacted by general and regional economic volatility or an economic downturn.
An overall decline in economic activity could adversely impact our business and financial results. Economic uncertainty may reduce property owner spending as they make decisions on how to provide access to WiFi networks to consumers. Economic uncertainty could also result in changing preferences. Shifts in consumer spending and preferences could result in increased pressure from competitors or customers that may require us to increase promotional spending or reduce the prices of some of our services, which could then lower revenue and profitability. Accordingly, any change in property owner spending or consumer preferences related to access to WiFi networks could adversely affect the Company’s operating results.
Uncertain global economic conditions could adversely affect our business. Negative global and national economic trends, such as decreased consumer and business spending, high inflation, relatively higher interest rates for a prolonged period of time, tariffs, or the threat thereof, high unemployment levels and declining consumer and business confidence, pose challenges to our business and could result in declining revenue, profitability and cash flow. Additionally, we are subject to regional economic volatilities in the areas where we provide services. Unfavorable economic conditions may negatively affect demand for our services.
If we lose key personnel, including members of our management team, or are unable to attract and retain personnel on a cost-effective basis, our business could be harmed.
Our performance is substantially dependent on the continued services and performance of our senior management and our highly qualified team of engineers, many of whom have numerous years of experience and specialized expertise in our business and technology. If we are not successful in hiring and retaining highly qualified engineers, we may not be able to extend or maintain our engineering and technological expertise and our future product and service development efforts could be adversely affected. Additionally, the process of attracting and retaining suitable replacements for any executive officers or any of our highly qualified engineers we lose in the future would result in transition costs and would divert the attention of other members of our senior management from our existing operations. Additionally, such a loss could be negatively perceived in the capital markets.
Our success depends, in large part, on the continued contributions of Dan McDonough, Jr., Barry Rubens, Taylor Jones and Sean Arnette. Although we will be a party to employment agreements with Messrs. Rubens, Jones and Arnette and a consulting agreement with Baron Hunter Group, LLC, pursuant to which services will be provided to us through Mr. McDonough, upon the closing date of this offering, we cannot assure you that each will remain with us for a specified period. In addition, our consulting agreement with Baron Hunter Group, LLC does not include a contractual restriction on Mr. McDonough’s ability to compete with us after the completion of the term of the consulting agreement. Although we have additional personnel that contribute to our business, the loss of any of these executives could harm our ability to implement our business strategy and respond to the rapidly changing market conditions in which we operate. Competitors who have lost key personnel have experienced reductions in service execution, network deployment and service quality. If we lose members of our senior management, this may significantly delay or prevent the achievement of our strategic objectives and adversely affect our operating results.
Our future success also depends on our ability to identify, attract, hire, train, retain and motivate highly skilled managerial, operations, business development and marketing personnel, especially personnel that has experience in our business and industry. We do not know whether we will be able to hire sufficient personnel to support our business strategy. The loss of the services of one or more of our key employees, or our inability to attract, retain and motivate qualified personnel could have a material adverse effect on our business, financial condition and operating results.
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We may not successfully integrate assets from future acquisitions.
If we fail to accurately assess and successfully integrate any future acquisitions, we may not achieve the anticipated benefits, which could result in lower revenue, unanticipated operating expenses, and increased losses. Successful integration involves many challenges, including:
| · | the difficulty of integrating acquired operations and personnel with our existing operations; |
| · | the diversion of our management’s attention as a result of evaluating, negotiating and integrating acquisitions; |
| · | in some cases, our exposure to unforeseen liabilities of acquired companies; |
| · | the loss of key employees of an acquired business operation; and |
| · | the difficulty of developing, manufacturing, and marketing new products and services. |
In addition, an acquisition could adversely impact cash flows, operating results, and stockholder interests, for many reasons, including:
| · | contingent consideration payments; |
| · | the issuance of securities in connection with an acquisition or new business venture that dilutes or lessens the rights of our current stockholders; |
| · | charges to our income to reflect the impairment of acquired intangible assets, including goodwill; and |
| · | interest costs and debt service requirements for any debt incurred in connection with an acquisition or new business venture. |
If we are not able to successfully integrate our acquisitions into our business, we could significantly increase our costs without realizing expected benefits, which would adversely affect our business, financial condition, and results of operations.
If the integration of any or all of our future acquisitions is not successful, it could have a material adverse impact on our operating results and stock price.
Our future business acquisition efforts may not be successful, which may limit our growth or adversely affect our results of operations, and financing of any future acquisitions could result in stockholder dilution and increase our outstanding indebtedness. If we identify an appropriate acquisition candidate, we may not be able to successfully negotiate terms or finance the acquisition. If economic downturns or other matters of national or global concern continue for an extensive period of time or recur, our ability to pursue and consummate potential acquisitions could be materially adversely affected. In addition, to successfully complete targeted acquisitions, we may issue additional equity securities that could dilute our stockholders’ ownership, or we may incur additional debt, which could increase our existing indebtedness. If we fail to successfully acquire businesses, our growth and results of operations could be adversely affected.
The costs of our operations may exceed our estimates due to factors outside of our control, such as labor shortages, tariffs or increasing commodity prices for components used in our networks, and we may be unable to pass those costs to our customers, which would negatively impact our financial results.
We depend on our employees and engineers to design, install and manage our solutions. We rely on access to competitive, local labor supply, including skilled and unskilled positions, to operate our business consistently and reliably. Increased immigration enforcement may reduce the number of available workers for projects, increase costs or lead to delays in projects. Any labor shortage, and any disruption in our ability to hire workers would negatively affect our operations and financial condition. If we experience a sustained labor shortage, we may need to increase wages to attract workers, which would increase our costs. Furthermore, if commodity prices for components that are used in our networks were to increase, including due to inflationary pressures or the impact of tariffs on prices, the availability of hardware used in our solutions and our ability to obtain supplies through our existing supply chain could be restricted and we may be unable to pass those increased costs on to our customers. If we are unable to do so, our gross margin would decline, and our financial results would be negatively impacted. To the extent our real estate developer customers are impacted by the same external and market factors as we are, their ability to commence new development projects will be similarly negatively impacted. If our customers are unable to continue developing new properties because of a slowdown in the new construction market or other external factors, our ability to grow our operating results and financial condition may be negatively impacted.
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We may implement new lines of business or offer new services within existing lines of business, which may not meet the changing needs of property owners.
As an early-stage company, we may implement new lines of business at any time. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed and the needs of property owners are unknown. In developing and marketing new lines of business and/or new services, we may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved, and price and profitability targets may not prove feasible. We may not be successful in introducing new services or adapting to changing needs of property owners, industry trends or developments in technology, or those new products may not achieve market acceptance. As a result, we could lose business, be forced to price services on less advantageous terms to retain or attract customers, or be subject to cost increases. As a result, our business, financial condition or results of operations may be adversely affected.
Damage to our reputation could negatively impact our business, financial condition and results of operations.
Our reputation and the quality of our brand are critical to our business and success with existing and future customers, and will be critical to our success as we seek to develop new relationships with property owners. Any incident that erodes customer loyalty for our brand could significantly reduce its value and damage our business. We may be adversely affected by any negative publicity, regardless of its accuracy. Also, there has been a marked increase in the use of social media platforms and similar devices, including blogs, social media websites and other forms of internet-based communications that provide individuals with access to a broad audience of consumers and other interested persons. The availability of information on social media platforms is virtually immediate as is its impact. Information posted may be adverse to our interests or may be inaccurate, each of which may harm our performance, prospects or business. The harm may be immediate and may disseminate rapidly and broadly, without affording us an opportunity for redress or correction.
If we are unable to protect our intellectual property rights, our business could suffer.
Our success depends, in part, on our ability to maintain as trade secrets our proprietary products, technologies and inventions and to maintain the confidentiality of our trade secrets and know-how, operate without infringing upon the proprietary rights of others and prevent others from infringing upon our business proprietary rights. Despite our efforts to protect our proprietary rights, it is possible that competitors or other unauthorized third parties may obtain, copy, use or disclose our technologies, inventions, processes or improvements. We cannot assure you that any of our intellectual property rights will be enforceable, will not be challenged, invalidated or circumvented, or will otherwise provide us with meaningful protection or any competitive advantage. Our competitors may also be able to develop similar technology independently, or through the disclosure of trade secrets, and we may not be able to detect the unauthorized use of our proprietary technology or take appropriate steps to prevent such use. We may need to enter into intellectual property license agreements in the future, and if we are unable to obtain these licenses, our business could be harmed. Any of the foregoing events would lead to increased competition and lower revenues or gross margins, which could adversely affect our operating results.
We rely on a license to use the tradename “Elauwit” and if our license is terminated, our business, financial condition and results of operations may be adversely impacted.
We depend on the tradename “Elauwit” and the goodwill associated therewith to operate our business. On August 20, 2024, we entered into a tradename license agreement (the “License Agreement”) with Mr. McDonough, pursuant to which Mr. McDonough granted us an exclusive license to use the tradename “Elauwit” and the service marks, domain names and goodwill associated therewith as long as we operate our business. If we are found to be in material breach of any of the terms of the License Agreement and do not cure the breach, Mr. McDonough may terminate the License Agreement and we would not be able to use the tradename “Elauwit” or the related service marks and domain names, and we would lose all goodwill associated with the Elauwit brand. If our license is terminated, our business, financial condition and results of operations may be adversely impacted.
Our business could be negatively impacted by cyber security threats, attacks and other disruptions.
We face advanced and persistent attacks on our information infrastructure where we manage and store various proprietary information and sensitive/confidential data relating to our operations. These attacks may include sophisticated malware (viruses, worms, and other malicious software programs) and phishing emails that attack our products or otherwise exploit any security vulnerabilities. These intrusions sometimes may be zero-day malware that are difficult to identify because they are not included in the signature set of commercially available antivirus scanning programs. Experienced computer programmers and hackers may be able to penetrate our network security and misappropriate or compromise our confidential information or that of our customers or other third-parties, create system disruptions, or cause shutdowns. Additionally, sophisticated software and applications that we produce or procure from third-parties may contain defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the operation of the information infrastructure. A disruption, infiltration or failure of our information infrastructure systems or any of our data centers as a result of software or hardware malfunctions, computer viruses, cyber-attacks, employee theft or misuse, power disruptions, natural disasters or accidents could cause breaches of data security, loss of critical data and performance delays, which in turn could adversely affect our business.
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Risks Related to Our Industry
Our industry is competitive and if we do not compete successfully, we could lose market share, experience reduced revenue or suffer losses.
The market for commercial wireless infrastructure solutions is competitive and impacted by technological change, and we expect competition with our current and potential competitors to intensify in the future. Some of our competitors have taken steps or may decide to more aggressively compete against us, particularly in the market for Managed Services and Network-as-a-Service solutions.
Our competitors, many of whom are also our partners, include a variety of telecom operators, network operators, and tower companies, including AT&T, Spectrum, Comcast, Pavlov Media, Single Digits, WhiteSky and Aerwave, and local operators. These and other competitors may compete directly with us to provide internet, Managed Services or Network-as-a-Service to our target customers. Many of our competitors are substantially larger than we are and have substantially longer operating histories. Competitors who do not currently offer Managed Services of Network-as-a-Service solutions may have a competitive advantage if they enter our market due to their expanded capabilities. We may not be able to fund or invest in certain areas of our business to the same degree as our competitors. Many have substantially greater marketing budgets and other financial and personnel resources necessary to build networks for customers. Some also have greater name and brand recognition and a larger base of customers than we have. In addition, our competitors may provide services that we generally do not. Users that desire these services may choose to obtain them from a competitor rather than from us.
Competition could increase our selling and marketing expenses and related customer acquisition costs. We may not have the financial resources, technical expertise or marketing and support capabilities to continue to compete successfully. A failure to respond to established and new competitors may adversely impact our business and operating results.
Construction risks to our customers’ development projects could affect our profitability.
We intend to continue to pursue opportunities to provide our Managed Services and Network-as-a-Service solutions to multifamily properties as part of our business strategy. Property development often includes long planning and development timelines, subjecting the projects to changes in market conditions. It can involve complex and costly activities, including significant environmental remediation or construction work. We may experience an increase in costs due to general disruptions that affect our customers’ cost of labor and/or materials, such as supply chain disruptions, trade disputes, tariffs, immigration issues, labor unrest, geopolitical conflicts or other factors that create inflationary pressures. Our customers may abandon property development opportunities that they have already begun to explore for a number of reasons, and as a result, we may fail to recover costs already incurred in exploring the opportunity to provide our solutions. Our customers may also be unable to obtain, or experience delays in obtaining, necessary zoning, occupancy, or other required governmental or third-party permits and authorizations, which could cause delays in our ability to monetize our solutions in a given market. These and other risks inherent in development projects could result in increased costs to our customers or the delay or abandonment of opportunities by our customers, which may affect our profitability.
Risks Related to this Offering and Ownership of our Securities
The price of the shares of our common stock and other terms of this offering have been determined by us along with our underwriter.
If you purchase our shares of common stock in this offering, you will pay a price that was not established in a competitive market because our common stock has not been listed on any stock exchange or other public trading market. Rather, you will pay a price that was determined by us along with our underwriters. The offering price for our shares of common stock may bear no relationship to our assets, book value, historical results of operations or any other established criterion of value. The trading price, if any, of our common stock that may prevail in any market that may develop in the future, for which there can be no assurance, may be higher or lower than the price you paid for our shares of common stock.
Investors in this offering will experience immediate and substantial dilution in the book value of their investment.
The public offering price will be substantially higher than the net tangible book value per share of our outstanding shares of common stock. As a result, investors in this offering will incur immediate dilution of $8.77 per share based on the assumed public offering price of $10.00 per share. Investors in this offering will pay a price per share that substantially exceeds the book value of our assets after subtracting our liabilities. See “Dilution” for a more complete description of how the value of your investment will be diluted upon the completion of this offering.
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Our management will have broad discretion over the use of the proceeds we receive in this offering and might not apply the proceeds in ways that increase the value of your investment.
Our management will have broad discretion over the use of our net proceeds from this offering, and you will be relying on the judgment of our management regarding the application of these proceeds. Our management might not apply our net proceeds in ways that ultimately increase the value of your investment. We expect to use the net proceeds from this offering for debt repayment, Network-as-a-Service project deployments, sales and marketing organizational development, payment of deferred compensation, working capital and general corporate purposes, including investments in, or acquisitions of, complementary businesses, services or technologies. Our management might not be able to yield a significant return, if any, on any investment of these net proceeds. You will not have the opportunity to influence our decisions on how to use our net proceeds from this offering.
A majority of the voting power of our common stock is consolidated among our executive officers and directors, which may prevent you or any new investors from influencing significant corporate decisions.
Our executive officers and directors own shares representing approximately 69.5% of the voting power of our common stock. After this offering, assuming 1,500,000 shares of common stock are sold in this offering, our executive officers and directors will own shares representing approximately 53.5% of the voting power of our common stock. As a result, our executive officers and directors may have the ability to control the outcome of matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger, other sale of our Company or our assets or significant acquisitions. This concentration of voting control will limit the ability of other stockholders to influence corporate matters and may cause us to make strategic decisions that could involve risks to you or that may not be aligned with your interests. Our directors and executive officers owe a fiduciary duty to our stockholders and are legally obligated to act in good faith and in a manner they reasonably believe to be in the best interests of our stockholders. As stockholders, these individuals are entitled to vote their shares in their own interests, which may not always be in the interests of our stockholders generally. The concentration of voting power held by our executive officers and directors may adversely affect the market price of our common stock.
We have material weaknesses in our internal control over financial reporting, which if left unremediated could materially and adversely affect the market price of our common stock.
At the time of the audit for our fiscal years ended December 31, 2024 and 2023, we did not maintain effective controls over our internal control over financial reporting. Because we are a small company with few employees in our finance department, we had not documented our risk assessment or entity level controls, or formalized our review level controls. Further, at the time of the audit for fiscal 2024 and 2023, because this was the first time our financial statements were prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”), we had not yet identified a consistent and repeatable approach to evaluate percentage of completion revenue that could be easily audited and evaluated. If we are unable to remediate these material weaknesses as a newly public company, our financial reporting may not be reliable and the market price of our common stock may be adversely affected.
We are an “emerging growth company,” as defined in the JOBS Act, and a “smaller reporting company” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”), and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies or smaller reporting companies will make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we are permitted to, and intend to, take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including (1) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, (2) reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxy statements, (3) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved, and (4) an extended transition period for complying with new or revised accounting standards applicable to public companies. Additionally, we may take advantage of certain reduced disclosure obligations as a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.
After we are no longer an “emerging growth company,” we expect to incur additional management time and cost to comply with the more stringent reporting requirements applicable to companies that are deemed accelerated filers or large accelerated filers, including complying with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
We have not and do not expect to declare any dividends to our stockholders in the foreseeable future.
We have not and do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future. Consequently, investors may need to rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends should not purchase our common stock.
We may seek to raise additional funds, finance acquisitions or develop strategic relationships by issuing securities that would dilute your ownership and may negatively impact the trading price of our shares.
Any additional financing that we secure may require the granting of rights, preferences or privileges senior to, or pari passu with, those of our common stock. Any issuances by us of equity securities may be at or below the prevailing market price of our common stock and may have a dilutive impact on your ownership interest, which could cause the market price of our common stock to decline. We may also raise additional funds through the incurrence of debt or the issuance or sale of other securities or instruments senior to our shares of common stock, which may be highly dilutive. The holders of any securities or instruments we may issue may have rights superior to the rights of our stockholders. If we experience dilution from the issuance of additional securities and we grant superior rights to new securities over holders of our common stock, it may negatively impact the trading price of our shares and you may lose all or part of your investment.
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Shares eligible for future sale may adversely affect the market price of our common stock if the shares are successfully listed on Nasdaq or other stock markets, as the future sale of a substantial number of outstanding shares in the public marketplace could reduce the price of our common stock.
The market price of our shares could decline as a result of sales of substantial amounts of our shares in the public market, or the perception that these sales could occur. In addition, these factors could make it more difficult for us to raise funds through future offerings of our common stock. An aggregate of 5,000,000 shares of common stock are outstanding before the consummation of this offering all of which, except those held by management and holders subject to lock-up agreements, may be freely tradable immediately upon effectiveness of this registration statement if the holders use available exemptions under the Securities Act for the sale of those shares. All of the shares sold in the offering will be freely transferable without restriction or further registration under the Securities Act. The remaining shares will be “restricted securities” as defined in Rule 144. These shares may be sold without registration under the Securities Act to the extent permitted by Rule 144, including the eligibility requirements of Rule 144(i), or other exemptions under the Securities Act. See “Shares Available for Future Sale.”
A possible “short squeeze” due to a sudden increase in demand of our shares that largely exceeds supply may lead to price volatility in our shares of common stock.
Following this offering, investors may purchase our common stock to hedge existing exposure in our common stock or to speculate on the price of our common stock. Speculation on the price of our shares may involve long and short exposures. To the extent aggregate short exposure exceeds the number of shares of our common stock available for purchase in the open market, investors with short exposure may have to pay a premium to repurchase our common stock for delivery to lenders of our shares. Those repurchases may in turn, dramatically increase the price of our shares of common stock until investors with short exposure are able to purchase additional common shares to cover their short position. This is often referred to as a “short squeeze.” A short squeeze could lead to volatile price movements in our common stock that are not directly correlated to the performance or prospects of our company and once investors purchase the common stock necessary to cover their short position the price of our common stock may decline.
Provisions in our amended and restated certificate of incorporation (“certificate of incorporation”) and amended and restated bylaws (“bylaws”) could discourage a change in control, or an acquisition of us by a third party, even if the acquisition would be favorable to you, thereby adversely affecting existing stockholders.
Our certificate of incorporation and bylaws contain provisions that may have the effect of making more difficult or delaying attempts by others to obtain control of our Company, even when these attempts may be in the best interests of our stockholders. For example, our certificate of incorporation (i) authorizes our Board, without stockholder approval, to issue one or more series of preferred stock, which could have voting and conversion rights that adversely affect or dilute the voting power of the holders of our common stock; (ii) provides for a classified board structure in which only one-third of our directors will be elected at any annual meeting of stockholders and directors may only be removed for cause; (iii) does not provide for cumulative voting; (iv) designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders; (v) authorizes the Board to issue authorized but unissued shares of common stock without stockholder approval; and (vi) provides for limitations on the liability of, and the provisions of indemnification to, our officers and directors. Our bylaws also limit the ability of stockholders to call special meetings of the Board and require stockholders to provide us advance notice of any nominations of candidates for election to our Board or for proposing matters that can be acted upon by stockholders at meetings of stockholders. These provisions and others that could be adopted in the future could deter unsolicited takeovers or delay or prevent changes in our control or management, including transactions in which stockholders might otherwise receive a premium for their shares over then-current market prices. These provisions may also limit the ability of stockholders to approve transactions that they may deem to be in their best interests.
Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or increase the stockholder’s costs in bringing such a claim.
Our certificate of incorporation specifies that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers, or other employee to us or to our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law, the certificate of incorporation or the bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in our securities shall be deemed to have notice of and to have consented to the provisions of our certificate of incorporation described above. However, this provision does not apply to suits brought to enforce a duty or liability created by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or any other claim for which the federal courts have exclusive jurisdiction. In addition, the Court of Chancery of the State of Delaware and the federal district courts will have concurrent jurisdiction for the resolution of any suit brought to enforce any duty or liability created by the Securities Act.
This provision may have the effect of discouraging lawsuits against our directors, officers, employees and agents as it may limit any stockholder’s ability to bring a claim in a judicial forum that the stockholder finds favorable for disputes with us or our directors, officers, employees or agents or increase the stockholder’s costs in bringing such a claim. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our certificate of incorporation to be inapplicable or unenforceable in such action. If a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition or results of operations.
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General Risk Factors
Litigation may adversely affect our business, financial condition and results of operations.
From time to time in the normal course of our business operations, we may become subject to litigation involving intellectual property, data privacy and security, consumer protection, service disruption or failure, and commercial disputes and other matters that may negatively affect our operating results if changes to our business operations are required. The cost to defend such litigation may be significant and may require a diversion of our resources. There also may be adverse publicity associated with litigation that could negatively affect customer perception of our business, regardless of whether the allegations are valid or whether we are ultimately found liable. As a result, litigation may adversely affect our business, financial condition and results of operations. In addition, insurance may not cover existing or future claims, be sufficient to fully compensate us for one or more of such claims, or continue to be available on terms acceptable to us. A claim brought against us that is uninsured or underinsured could result in unanticipated costs, thereby adversely affecting our results of operations and resulting in a reduction in the trading price of our stock.
An active, liquid and orderly trading market for our common stock may not develop, the price of our stock may be volatile, and you could lose all or part of your investment.
The trading price of our common stock may be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. Our stock price could be subject to wide fluctuations in response to a variety of factors, which include:
| · | whether we achieve our anticipated corporate objectives; |
| · | actual or anticipated fluctuations in our quarterly or annual operating results; |
| · | changes in our financial or operational estimates; |
| · | our ability to implement our operational plans; |
| · | termination of the lock-up agreement or other restrictions on the ability of our stockholders to sell shares after this offering; |
| · | changes in the economic performance or market valuations of companies similar to ours; and |
| · | general economic or political conditions in the United States or elsewhere. |
In addition, the stock market has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may seriously affect the market price of companies’ stock, including ours, regardless of actual operating performance. These fluctuations may be even more pronounced in the trading market for our stock shortly following this offering. In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.
Our failure to meet the continuing listing requirements of Nasdaq could result in a delisting of our securities.
If we fail to satisfy the continuing listing requirements of Nasdaq, such as the corporate governance, stockholders’ equity or minimum closing bid price requirements, Nasdaq may take steps to delist our common stock. Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In the event of a delisting, we would likely take actions to restore our compliance with Nasdaq’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our securities, prevent our common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements.
We incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could adversely affect our operating results.
As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting and corporate governance requirements. These requirements include compliance with Section 404 and other provisions of the Sarbanes-Oxley Act, as well as rules implemented by the SEC and Nasdaq. In addition, our management team also has to adapt to the requirements of being a public company. We expect complying with these rules and regulations will substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly.
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The increased costs associated with operating as a public company will decrease our net income or increase our net loss, and may require us to reduce costs in other areas of our business or increase the prices of our services. Additionally, if these requirements divert our management’s attention from other business concerns, they could have a material adverse effect on our business, financial condition and operating results.
As a public company, we also expect that it may be more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as our executive officers.
As a public company, we are obligated to develop and maintain proper and effective internal control over financial reporting. We may not complete our analysis of our internal control over financial reporting in a timely manner, or these internal controls may not be determined to be effective, which may adversely affect investor confidence in our company and, as a result, the value of our common stock.
We will be required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the first fiscal year beginning after the effective date of the initial public offering (“IPO”). This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting.
We are in the early stages of the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404. We may not be able to remediate our previously identified material weaknesses or any future material weaknesses, or to complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal controls are effective. If we are unable to assert that our internal control over financial reporting is effective, we could lose investor confidence in the accuracy and completeness of our financial reports, which would have a material adverse effect on the price of our common stock.
If our shares of common stock become subject to the penny stock rules, it would become more difficult to trade our shares.
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If we do not retain a listing on Nasdaq and if the price of our common stock is less than $5.00, our common stock will be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares.
If we were to dissolve, the holders of our securities may lose all or substantial amounts of their investments.
If we were to dissolve as a corporation, as part of ceasing to do business or otherwise, we may be required to pay all amounts owed to any creditors before distributing any assets to the investors. There is a risk that in the event of such a dissolution, there will be insufficient funds to repay amounts owed to holders of any of our indebtedness and insufficient assets to distribute to our other investors, in which case investors could lose their entire investment.
If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. If any of the analysts who may cover us change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, our stock price would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
In making your investment decision, you should understand that we and the underwriters have not authorized any other party to provide you with information concerning us or this offering.
You should carefully evaluate all of the information in this prospectus before investing in our company. We may receive media coverage regarding our company, including coverage that is not directly attributable to statements made by our officers, that incorrectly reports on statements made by our officers or employees, or that is misleading as a result of omitting information provided by us, our officers or employees. We and the underwriters have not authorized any other party to provide you with information concerning us or this offering, and you should not rely on this information in making an investment decision.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business” contains forward-looking statements. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations, are forward-looking statements. The words “aim,” “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “might,” “outlook,” “seek,” “strive,” “will,” “would” and similar expressions are intended to identify forward-looking statements. These forward-looking statements include statements relating to:
| · | our history of losses and our ability to continue as a going concern; |
| · | our ability to obtain additional financing and fund our operations; |
| · | our market opportunity; |
| · | the effects of increased competition and innovations by new and existing competitors in our market and our ability to adapt to and anticipate changes in technology; |
| · | our ability to maintain and grow relationships with property owners and network partners and increase our customer base; |
| · | our ability to consistently win competitive RFP processes, become a preferred or sole supplier for new-build projects, increase our gross margins with newer customer relationships, and capitalize on the opportunities in our pipeline; | |
| · | our reliance on manufacturers to obtain the materials necessary to provide our services; |
| · | the potential effects of delays or disruptions in property development; |
| · | the future growth of the network services industry and demands of our customers; |
| · | our ability to pay our debts as they come due; |
| · | our ability to grow the business and effectively manage or sustain our growth; |
| · | our expected use of proceeds from this offering; |
| · | future revenue, hiring plans, expenses and capital expenditures; |
| · | our ability to comply with new or modified laws and regulations that currently apply or become applicable to our business or the business of our customers; |
| · | our ability to recruit and retain key employees and management personnel; |
| · | our financial performance and capital requirements following this offering; |
| · | our ability to maintain, protect, and enhance our intellectual property; |
| · | the material weaknesses in our internal control over financial reporting and the potential insufficiency of our disclosure controls and procedures to detect errors or acts of fraud; |
| · | the potential lack of liquidity and trading of our securities; and |
| · | the lack of an established market for our securities. |
We caution you that the foregoing list may not contain all of the forward-looking statements made in this prospectus. We have based these forward-looking statements largely on our current expectations about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
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You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus to conform these statements to actual results or to changes in our expectations, except as required by law.
You should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.
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We estimate that the net proceeds from this offering will be approximately $13,050,000 after deducting estimated underwriting discounts and estimated offering expenses payable by us. If the over-allotment option is exercised in full, we estimate that our net proceeds will be approximately $15,142,500. We intend to use the net proceeds from this offering for the following purposes:
| Proceeds: | ||||
| Gross Proceeds | $ | 15,000,000 | ||
| Discounts | 1,050,000 | |||
| Estimated Fees and Expenses | 900,000 | |||
| Net Proceeds | $ | 13,050,000 | ||
| Uses: | ||||
| Debt Repayment(1) | $ | 2,046,297 | ||
| Network-as-a Service Project Deployments(2) | 8,086,987 | |||
| Sales and Marketing Organizational Development(3) | 2,000,000 | |||
| Payment of Deferred Compensation(4) | 416,716 | |||
| Working Capital and General Corporate Purposes(5) | 500,000 | |||
| Total Uses | $ | 13,050,000 |
| (1) | Includes repayment of all or a portion of the outstanding balance under a fixed rate loan agreement (the “Fixed Rate Loan Agreement”) with Endurance Opportunities I LLC (“Endurance Opportunities”) and may include repayment of all or a portion of the balances of our outstanding promissory notes. See “Certain Relationships and Related Party Transactions” for additional information. | |
| (2) | Includes funding for infrastructure and technology initiatives to support service expansion. | |
| (3) | Includes investments in team growth, customer acquisition and brand awareness. | |
| (4) | If we complete this offering, includes the repayment of all arrearages owed pursuant to a deferred compensation agreement, by and between the Company, Daniel McDonough, Jr., Barry Rubens, Taylor Jones and Sean Arnette, dated August 20, 2024 (the “Deferred Compensation Agreement”). | |
| (5) | May include a payment of up to $2,000,000 under a put-call agreement with Baron Hunter Group, LLC and Steele Creek Partners, LLC if either entity exercises its right to sell shares to the Company. See “Certain Relationships and Related Party Transactions” for additional information. |
A $1.00 increase (decrease) in the assumed public offering price of $10.00 per share, would increase (decrease) the net proceeds to us from this offering by approximately $1.4 million, assuming the number of shares 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.
The actual allocation of proceeds realized from this offering will depend upon our operating revenue, cash position, and working capital requirements. We cannot currently allocate specific percentages of the net proceeds to us from this offering that we may use for these purposes. Therefore, as of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering. Accordingly, we will have broad discretion in the application of the net proceeds, and investors will be relying on our judgment regarding the application of the proceeds of this offering. Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities.
We have never paid cash dividends on any of our capital stock, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. We intend to retain all available funds and any future earnings to fund the development and expansion of our business. Any future determination to pay dividends will be at the discretion of our Board and will depend upon a number of factors, including our results of operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors our Board deems relevant. Therefore, we cannot assure you that we will pay any cash dividends or other distributions to holders of our common stock, or as to the amount of any such cash dividends or other distributions.
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The following table sets forth our capitalization as of June 30, 2025 as follows:
| · | on an actual basis; |
| · | on a pro forma basis to reflect (i) the conversion of Class B common stock into Class A common stock, and the reclassification of Class A common stock to common stock; and (ii) the conversion of the SAFE into shares of our common stock upon the consummation of this offering; and |
| · | on a pro forma, as adjusted, basis to reflect the issuance and sale by us of $ in shares of common stock in this offering at the assumed public offering price of $ per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us and the receipt by us of the proceeds of such sale. |
The pro forma and pro forma as adjusted information below is illustrative only, and our capitalization following the closing of this offering will change based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and related notes included elsewhere in this prospectus.
| As of June 30, 2025 | ||||||||||||
| (In thousands) | Unaudited, Actual | Unaudited, Pro Forma(1) | Unaudited, Pro Forma As Adjusted(1) | |||||||||
| Cash | $ | 525 | $ | 525 | $ | 13,575 | ||||||
| Related party debt, current | 1,451 | 1,451 | 1,451 | |||||||||
| Related party debt, net of current | 2,627 | 2,627 | 2,627 | |||||||||
| SAFE liability | 1,000 | - | - | |||||||||
| Stockholders’ Equity: | ||||||||||||
| Class A common stock, $0.0001 par value; 7,000,000 shares authorized; 2,522,950 shares outstanding as of June 30, 2025; 0 shares outstanding on a pro forma basis; and 0 shares outstanding on a pro forma as adjusted basis | - | - | - | |||||||||
| Class B common stock, $0.0001 par value; 3,000,000 shares authorized; 2,477,050 shares issued and outstanding as of June 30, 2025; 0 shares outstanding on a pro forma basis; and 0 shares outstanding on a pro forma as adjusted basis | - | - | - | |||||||||
| Common stock, $0.0001 par value; 0 shares authorized; 0 shares outstanding as of June 30, 2025; 5,117,647 shares outstanding on a pro forma basis; and 6,617,647 shares outstanding on a pro forma as adjusted basis | - | - | - | |||||||||
| Additional paid-in capital | 5,859 | 6,859 | 19,909 | |||||||||
| Accumulated deficit | (10,744 | ) | (10,744 | ) | (10,744 | ) | ||||||
| Total stockholders’ equity | (4,885 | ) | (3,885 | ) | 9,165 | |||||||
| Total capitalization | $ | 193 | 193 | $ | 13,243 | |||||||
| (1) | The pro forma and pro forma as adjusted information is illustrative only and following the completion of this offering will be adjusted based on the actual public offering price and other terms of this offering determined at pricing. |
The number of shares of our common stock to be outstanding following this offering is based on 5,000,000 outstanding shares of capital stock as of June 30, 2025 and excludes:
| · | shares of our common stock issuable upon the exercise of the Representative’s Warrants to be issued in this offering. |
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If you invest in this offering, your ownership interest will be immediately diluted to the extent of the difference between the public offering price per share of common stock and the pro forma as adjusted net tangible book value per share after giving effect to this offering. The information below is illustrative only. Our dilution following this offering will depend upon the number of shares of our common stock sold and the market price at which they are sold. You should read this section in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and related notes included elsewhere in this prospectus.
Our net tangible book value (deficit) as of June 30, 2025 was $(4.9) million, or approximately $(0.98) per share of common stock. Net tangible book value per share represents our total tangible assets less total liabilities, divided by the number of shares of common stock outstanding.
Our pro forma net tangible book value (deficit) as of June 30, 2025 which reflects the pro forma adjustments described in “Capitalization” was $(4.9) million, or approximately $(0.95) per share of common stock.
The pro forma as adjusted net tangible book value dilution per share of common stock to new investors represents the difference between the amount per share of common stock paid by purchasers in the offering and the pro forma net tangible book value per share of common stock immediately after completion of the offering.
After giving effect to the pro forma adjustments described in the “Capitalization” section and the offering and sale of our common stock at an assumed public offering price of $10.00 per share, and after deduction of underwriting discounts and commissions from gross proceeds raised in the offering and estimated offering expenses payable by us, on a pro forma as adjusted basis, our net tangible book value as of June 30, 2025 would have been approximately $8.2 million, or $1.23 per share of common stock. This represents an immediate increase in the pro forma as adjusted net tangible book value of approximately $2.19 per share to our existing stockholders and an immediate decrease in net tangible book value of $8.77 per share of common stock to new investors.
| Assumed offering price per share of common stock | $ | 10.00 | ||||||
| Actual net tangible book value per share of common stock before this offering(1) | $ | (0.98 | ) | |||||
| Pro forma adjustments(2) | 0.02 | |||||||
| Pro forma net tangible book value per share | (0.95 | ) | ||||||
| Increase (decrease) in net tangible book value per share of common stock attributable to new investors(3) | $ | 2.19 | ||||||
| Pro forma net tangible book value per share of common stock after this offering(4) | $ | 1.23 | ||||||
| Immediate dilution in net tangible book value per share of common stock to new investors | $ | 8.77 |
| (1) | Determined by dividing (i) net tangible book value (total assets less intangible assets) less total liabilities by (ii) the total number of shares of common stock issued and outstanding prior to the offering. |
| (2) | Represents the expected conversion of the SAFE into shares of common stock. |
| (3) | Represents the difference between (i) pro forma as adjusted net tangible book value per share of common stock after this offering and (ii) net tangible book value per share as of June 30, 2025. |
| (4) | Determined by dividing (i) pro forma as adjusted net tangible book value, which is our pro forma net tangible book value plus the cash proceeds of this offering, after deducting the estimated offering expenses payable by us, by (ii) the total number of shares of common stock to be outstanding following this offering. |
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Each $1.00 increase (decrease) in the assumed initial public offering price of $10.00 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted net tangible book value per share after this offering by $0.21 per share and the dilution to new investors purchasing common stock in this offering by $0.79 per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
If the underwriters exercise their option in full to purchase an additional 225,000 shares of common stock in this offering, the pro forma as adjusted net tangible book value per share after the offering would be $1.50 per share, the increase in the net tangible book value per share to existing stockholders would be $2.45 per share and the dilution to new investors purchasing our common stock in this offering would be $8.50 per share.
The number of shares of our common stock to be outstanding following this offering is based on 5,000,000 outstanding shares of capital stock as of June 30, 2025 and excludes:
| · | shares of our common stock issuable upon the exercise of the Representative’s Warrants to be issued in this offering. |
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of our operations together with our consolidated financial statements and the notes thereto appearing elsewhere in this prospectus. This discussion contains forward-looking statements reflecting our current expectations, whose actual outcomes involve risks and uncertainties. Actual results and the timing of events may differ materially from those stated in or implied by these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements,” and elsewhere in this prospectus.
Business Overview
We are a customer-centric service provider of broadband Internet networks for the multifamily and student housing property sectors across the United States. Our managed WiFi networks provide property-wide Internet access for residents, guests, property management staff, and third-party technology vendors at each property we serve. We provide our service offering wholesale to REITs, property ownership groups, and property management companies, engaged in our target real estate sectors, who then offer the service to their residents.
In building out a managed WiFi network, we provide network design, project management, network engineering, network installation, and quality control. As part of our service delivery model, we provide dedicated bandwidth, 24/7 network monitoring, network maintenance, and resident support.
Our mission is to be the leading experience provider of Internet access solutions. For our property ownership clients, this means clear communication and timely execution. For the end users of our service, residents and their guests, this means dedication to the objective of providing an excellent resident experience. We differentiate ourselves in the area of resident experience by building reliable networks, responding to service requests quickly, establishing support protocols that lead to industry-leading first touch resolution metrics, and communicating effectively with key stakeholders throughout.
While anyone can claim top tier operational capabilities, we have grown quickly through word-of-mouth, as a trusted partner for real estate development and ownership groups. We have an excellent track record of repeat business from parties we contract with. Internet access has become a utility, but unlike electricity and water, reliability is not something property owners can take for granted. Our performance has created the opportunity to expand within ownership portfolios and is a key aspect of our growth strategy moving forward.
We closely monitor the challenges and needs of development and ownership groups in the real estate sectors in focus. A continued theme has been the fragmented market of service providers in the space in which we operate and issues stemming out of such. We view these issues to be a large opportunity for our business and an indication that consolidation is likely in the near future. We aim to be a driver of consolidation.
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Results of Operations
Comparison of Results of Operations for the six months ended June 30, 2025 (the “six months”) compared to the six months ended June 30, 2024 (the “prior six-month period”).
Key results for the six months include:
| · | Topline revenue growth of 254% for the six months. The robust pace of network construction activities and activations ramping throughout 2024 continued into the six months, driving strong topline growth. |
| · | Gross margin of 25.5% primarily from network construction activities in line with expectations. Over time, management expects our gross margin to increase dramatically, as higher margin recurring service fees constitute a growing share of revenues. |
| · | Operating expenses for the six months increased by 61.1% over the prior six-month period, primarily driven by continued growth in our project management and network engineering functions, as well as expenses associated with the preparation for being a publicly traded company. |
| · | Backlog as of June 30, 2025 was $35.9 million, compared to $23.3 million as of June 30, 2024. |
| · | Contracted units as of June 30, 2025 were 32,094, compared to 17,436 as of June 30, 2024. |
Revenue
Revenue for the six months increased $8.4 million, or 254%, to $11.7 million compared to $3.3 million for the prior six-month period. This increase was primarily due to increased network construction activities and the activation of networks, driving the ramp in our recurring service revenues.
Cost of Revenue
Cost of revenue increased to $8.7 million for the six months, compared to $2.6 million for the prior six-month period. The increase in cost of revenue was due to increased network construction activities.
Gross Profit
Gross profit increased 345% to $3.0 million for the six months compared to $0.7 million for the prior six-month period. Our gross margin for the six months increased to 25.5% compared to 20.3% for the prior six-month period, primarily due to increased network activations and greater recurring services revenues in which we realize higher gross margin levels than with our network construction activities. The increase in gross profit was driven by higher revenue levels and gross margin expansion.
Operating Expenses
Operating expenses were $3.2 million for the six months compared to $2.0 million for the prior six-month period. The increase was driven by continued growth in our project management and network engineering functions, as well as expenses associated with the preparation for being a publicly traded company.
Operating Loss
Higher gross profit from revenue increases paired with gross margin expansion resulted in a decrease in operating loss of $1.1 million to $0.2 million for the six months compared to $1.3 million for the prior six-month period.
Interest Expense
Interest expense was $0.2 million for the six months compared to $0.1 million for the prior six-month period. The increase was primarily driven by increased network financing activities and borrowings for working capital. See Note 6, “Related Party Debt,” of the unaudited consolidated financial statements for the six months included in this prospectus (the “six months financials”) for additional information.
Net Loss
Net loss decreased $1.0 million to $0.4 million for six months compared to $1.4 million for the prior six-month period. The reasons for the decrease in net loss are discussed above.
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Comparison of Results of Operations for the year ended December 31, 2024 (“fiscal 2024”) compared to the year ended December 31, 2023 (“fiscal 2023”).
Key results for fiscal 2024 include:
| · | Topline revenue growth of 117% for fiscal 2024. Last year was a breakout year for our business, based upon execution of robust contracting activity during fiscal 2023. |
| · | Gross margin of 13.7% from primarily network construction activities in line with expectations. Over time, management expects our gross margin to increase dramatically, as higher margin recurring service fees constitute a growing share of revenues. |
| · | Operating expenses for fiscal 2024 increased by 57.2% over fiscal 2023, primarily driven by continued scaling of our network construction and operations teams. |
| · | Backlog as of December 31, 2024 was $34.8 million, compared to $13.1 million as of December 31, 2023. |
| · | Contracted units as of December 31, 2024 were 25,375, compared to 9,730 as of December 31, 2023. |
Revenue
Revenue for fiscal 2024 increased $4.6 million, or 117%, to $8.5 million compared to $3.9 million for fiscal 2023. This increase was primarily due to an increase in revenue from our network design and installation services of $3.9 million compared to fiscal 2023, driven by accelerated sales activities.
Cost of Revenue
Cost of revenue increased to $7.3 million for fiscal 2024, compared to $3.7 million for fiscal 2023. The increase in cost of revenue was due to increased levels of network design and installation service activities.
Gross Profit
Gross profit increased 497% to $1.2 million for fiscal 2024 compared to $0.2 million for fiscal 2023. Our gross margin for fiscal 2024 was 13.7% compared to 5.0% for fiscal 2023. The increase in gross profit and gross margin was due to increased levels of network design and installation service activities and economies of scale in these efforts.
Operating Expenses
Operating expenses were $4.4 million for fiscal 2024 compared to $2.8 million for fiscal 2023. The increase was driven by continued scaling of our network construction and operations teams, which contributed approximately $0.9 million and $0.5 million, respectively.
Operating Loss
Higher gross profit offset by higher operating expenses resulted in an increase in operating loss of $0.6 million to $3.2 million for fiscal 2024 compared to $2.6 million for fiscal 2023.
Interest Expense
Interest expense was $0.3 million for fiscal 2024 compared to $0.1 million for fiscal 2023. The increase was primarily driven by the increase in related party indebtedness during fiscal 2024. See Note 6, “Related Party Debt,” of the audited consolidated financial statements for fiscal 2024 included in this prospectus (the “fiscal 2024 financials”) for additional information.
Net Loss
Net loss increased $0.8 million to $3.5 million for fiscal 2024 compared to $2.7 million for fiscal 2023. The reasons for the increase in net loss are discussed above.
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Contracted Units and Backlog
Management uses contracted units and backlog as key performance metrics to assess our financial performance and results of operations. We define contracted units as the total number of individual units served across the properties using our networks. We believe this metric is useful to investors because it illustrates the total number of units we serve and can be tracked over time to show the reach of our networks. We believe it is more useful to compare total contracted units as opposed to total customers or total subscribers because our revenue is more closely tied to the number of units we serve than the total number of customers or subscribers. The measure of contracted units may vary across the internet services or real estate industries. Therefore, our contracted units measure is not necessarily comparable to similarity titled measures reported by other companies.
Backlog is defined as the aggregate amount of a contract price allocated to remaining performance obligations. Total backlog can include network design and installation performance obligations and internet network services and hardware and internet services performance obligations. We believe tracking backlog is useful to investors because it illustrates the remaining performance obligations under our contracts and the revenue we expect to recognize in the future. The measure of backlog may vary across the internet services or real estate industries. Therefore, our backlog measure is not necessarily comparable to similarity titled measures reported by other companies.
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Liquidity and Capital Resources
Going Concern Considerations
We have incurred significant losses since our inception. The financial statements included in this prospectus have been prepared assuming we will continue as a going concern. As of June 30, 2025 and December 31, 2024, we have an accumulated deficit of $10.7 million and $10.4 million, respectively. We experienced net losses of approximately $0.4 million for the six months and $3.5 million and $2.7 million for fiscal 2024 and fiscal 2023, respectively, and used net cash in operating activities of $1.5 million and $3.9 million during the first quarter and fiscal 2024, respectively. We expect our capital expenses and operational expenses to increase in the future due to investing in network construction activities and, therefore, our operating losses will continue or even increase at least through the near term. Furthermore, to the extent that we are successful in increasing our customer base, we will also incur increased expenses to meet the demand of our customers. We may not reach profitability in the near future or at any specific time in the future. If our operations do become profitable, we may not sustain profitability.
The report of our independent registered public accounting firm that accompanies our audited consolidated financial statements in this prospectus contains a going concern qualification in which such firm expressed substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result if we are unable to continue as a going concern. If we are unable to continue as a going concern, holders of our securities might lose their entire investment.
Liquidity
Our primary liquidity requirements are for working capital, debt repayment, Network-as-a-Service project deployment and the payment of deferred compensation. Although income taxes are not currently a significant use of funds, after the benefits of our net operating loss carryforwards are fully recognized, they could become a material use of funds, depending on our future profitability and future tax rates. Our liquidity needs have been met primarily through equity offerings and related party loans.
As of June 30, 2025, we had approximately $0.5 million in cash. As of both December 31, 2024 and December 31, 2023, we had approximately $0.3 million in cash. We continue to manage our cash position in line with forecast network construction activities. During the six months and fiscal 2024, we used net cash in operating activities of $1.5 million and $3.9 million, respectively. As of June 30, 2025, December 31, 2024 and December 31, 2023, we had working capital deficit of $2.5 million, $2.5 million and $1.6 million, respectively. Key drivers of our working capital position have been, and continue to be, network construction receivables and deferred revenue.
Capital Resources
As of June 30, 2025 and December 31, 2024, we had long-term debt of $4.1 million and $3.4 million, respectively, compared to $1.2 million as of December 31, 2023.
We have financing arrangements with Endurance Financial LLC (“Endurance”), the manager of Endurance Opportunities, and Endurance Opportunities. On March 1, 2025 and March 25, 2025, we issued commercial promissory notes to Endurance in exchange for $1.0 million in total, that have a term of 18 months and 180 days, respectively, and on November 12, 2024, we issued a commercial promissory note to Endurance Opportunities in exchange for $0.25 million, that has a term 18 months, using certain account receivables as collateral for each of the commercial promissory notes. The purpose of these facilities was to support our working capital position. On April 1, 2024 we entered into the Fixed Rate Loan Agreement with Endurance Opportunities for $1.0 million to refinance previously held long-term debt. See Note 6, “Related Party Debt,” of the six month financials and “Certain Relationships and Related Party Transactions” for additional information.
On April 12, 2024, we issued a promissory note to Motherlode, LLC (“Motherlode”) for $1.0 million as part of an agreement to repurchase and retire Series Seed Preferred Shares previously issued to Motherlode. See Note 6, “Related Party Debt,” of the fiscal 2024 financials and “Certain Relationships and Related Party Transactions” for additional information.
During fiscal 2024, we entered into various participation and agency agreements with Endurance Opportunities pursuant to which Endurance provided us with the financing necessary to support our Network-as-a-Service product offerings under certain network service agreements (the “NSAs”). During fiscal 2024, we financed $1.2 million from Endurance Opportunities, and as of December 31, 2024, the NSAs had a balance of $1.3 million. See Note 6, “Related Party Debt,” of the fiscal 2024 financials for additional information.
During fiscal 2024, we received approximately $2.4 million in net proceeds through issuances of Series B Preferred Stock. See Note 8, “Equity Offerings” of the fiscal 2024 financials for additional information.
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On January 6, 2025, we entered into a SAFE agreement with an investor, pursuant to which we received an aggregate amount of $1.0 million. See Note 9, “SAFES,” of the six months financials for additional information.
Cash Flow Analysis
Operating Activities
Net cash used in operating activities was $1.5 million for the six months, compared to $1.6 million for the prior six-month period, primarily driven by higher gross income leading to a reduction in net loss.
Net cash used in operating activities was $3.9 million for fiscal 2024, compared to $2.0 million for fiscal 2023, primarily driven by the scaling of our network construction and network operations platform.
Investing Activities
Net cash provided by investing activities was $0.25 million for fiscal 2024, compared to none for fiscal 2023, driven by cash acquired from the reverse recapitalization with DeltaMax.
Financing Activities
Net cash provided by financing activities was $1.7 million for the six months, compared to $2.3 million for the prior six-month period, primarily driven by a reduction in the issuance of Series B Preferred Stock.
Net cash provided by financing activities was $3.6 million for fiscal 2024, compared to $2.2 million for fiscal 2023, primarily driven by increased equity fundraising through the issuance of Series B Preferred Stock and proceeds from related party debt.
Off Balance Sheet Arrangements
There were no material off-balance sheet arrangements as of June 30, 2025, December 31, 2024 or December 31, 2023.
Critical Accounting Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. The following accounting policies are based on, among other things, judgments and assumptions made by management that include inherent risks and uncertainties. Management’s estimates are based on historical experience, the relevant information available at the end of each period, and their judgment. Although management believes the judgment applied in preparing estimates is reasonable based on circumstances and information known at the time, actual results could differ materially from these estimates under different assumptions or market conditions. See Note 2, “Summary of Significant Accounting Policies,” of the six months financials for information about our significant accounting policies.
Accounts Receivable, Unbilled Receivables, Network Financing Receivables and Allowance for Credit Losses
Trade accounts receivable are recorded at invoiced amounts, net of allowance for expected credit losses (CECL), if applicable, and are unsecured and do not bear interest. Unbilled and network financing receivables are presented net of allowances for credit losses. Under the CECL impairment model, the Company develops and documents its allowance for credit losses on trade accounts receivable based on historical losses. The determination of portfolio segments is based primarily on the qualitative consideration of the credit risks driven by the customer type and macroeconomic factors, if any are deemed to drive credit loss. The Company also considers reasonable and supportable current information in determining its estimated loss rates, such as external forecasts, macroeconomic trends or other factors including customers’ credit risk and historical loss experience.
Revenue Recognition
We generate revenue from the following sources: (1) network design and installation and (2) internet network services. In accordance with Accounting Standards Codification 606 “Revenue Recognition,” there is significant judgment required in determining when to recognize revenue as performance obligations are satisfied. Recognition of network design and installation revenue occurs in line with incurred costs along set project milestones, with the most meaningful being delivery of provisioned network hardware to a client’s property, installation of the fiber backbone, and installation of endpoint electronics. Recognition of internet network services revenue occurs monthly as services are delivered.
Income Taxes
We utilize an asset and liability approach for financial accounting and reporting for income taxes. The provision for income taxes is based upon income or loss after adjustment for those permanent items that are not considered in the determination of taxable income.
Recent Accounting Pronouncements
See Note 2, “Summary of Significant Accounting Policies,” of the six months financials for information about recent accounting pronouncements.
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Internal Controls and Procedures
We are not currently required to comply with the SEC’s rules implementing Section 404 of the Sarbanes-Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a public company, we will be required to comply with the SEC’s rules implementing Section 302 of the Sarbanes Oxley Act, which will require our management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting. Though we will be required to disclose material changes made to our internal controls and procedures on a quarterly basis, we will not be required to make our first annual assessment of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until the year following our first annual report required to be filed with the SEC. We will not be required to have our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting until our first annual report subsequent to our ceasing to be an “emerging growth company.”
Change in Auditor
On August 26, 2025, Freed Maxick P.C. (“FM”), following the acquisition of certain assets of FM by Withum Smith+Brown, PC (“Withum”), notified us of its resignation as our independent registered public accounting firm, effective immediately (the “Replacement”).
The reports of FM on our financial statements for the fiscal years ended December 31, 2023 and 2024 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except for an explanatory paragraph in its report related to our financial statements for the fiscal year ended December 31, 2024 regarding the substantial doubt about our ability to continue as a going concern.
During the fiscal years ended December 31, 2023 and 2024, and the subsequent interim period through August 26, 2025, (i) there were no “disagreements,” as defined in Item 304(a)(1)(iv) of Regulation S-K, with FM on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of FM, would have caused FM to make reference to the subject matter of the disagreements in connection with its reports on our consolidated financial statements for such period, and (ii) there were no “reportable events,” as defined in Item 304(a)(1)(v) of Regulation S-K, except for material weakness in our internal control over financial reporting as reported to those charged with governance for the fiscal year ended December 31, 2024.
We provided FM with a copy of the disclosures in this registration statement and requested that FM furnish us with a letter addressed to the SEC stating whether or not it agrees with the statements herein. A copy of such letter, which is dated August 29, 2025, is included as an exhibit to this registration statement.
In connection with the Replacement, on August 26, 2025, the Audit Committee approved the engagement of Withum as our independent registered public accounting firm for the fiscal year ending December 31, 2025, effective immediately.
During the fiscal years ended December 31, 2023 and 2024, and the subsequent interim period through August 26, 2025, neither the Company nor anyone acting on its behalf consulted with Withum regarding (i) the application of accounting principles to any specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, and neither a written report nor oral advice was provided to us that Withum concluded was an important factor considered by us in reaching a decision as to any accounting, auditing, or financial reporting issue, or (ii) any matter that was either the subject of a “disagreement,” as defined in Item 304(a)(1)(iv) of Regulation S-K, or a “reportable event,” as defined in Item 304(a)(1)(v) of Regulation S-K.
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Executive Summary
We are a provider of broadband Internet networks for the multifamily and student housing property sector. We provide Managed Services and Network-as-a-Service solutions designed to modernize and enhance the Internet connectivity experience for residents while driving significant financial benefits for property owners.
We strive to be a leading player in a booming multifamily property conversion trend through service commitment, operational experience and flexibility. Key highlights of our business and market opportunity include:
| · | There is an untapped market to fulfill major demand for network services in multifamily housing units: |
| o | According to market estimates from the NMHC, there are approximately 23 million apartment units in the U.S., and we estimate 55% of those units are well-suited for our network services. |
| o | Through our own market research using the CoStar data, we estimate there are 12 million units in our addressable market of properties with 100 units or more for overbuilds, or installing our network in a multifamily building with an existing network. |
| o | According to the National Apartment Association, the United States needs to build more than 4.6 million new apartment homes at a minimum, with as many as 11.7 million needed by 2030. |
| · | Our pipeline is rapidly growing due to our longstanding relationships and expanding customer base. From both existing and new customer relationships, we are currently tracking over 400 opportunities in our Managed Service pipeline representing an estimated $110 million of potential network construction revenue and an estimated $23 million in annual recurring revenue, if we were able to successfully complete all of these opportunities. We have also identified approximately 265,000 units in our near-term Network-as-a-Service pipeline, based on ongoing, active discussions with approximately 10 property ownership groups, which we estimate could represent approximately $150 million in annual recurring revenue, based on an estimated monthly fee of approximately $45 per unit. We do not have any contracts with customers for opportunities in our pipeline. See “Pipeline” below for more detail about our pipeline. |
| · | We have a strong reputation for execution, customer satisfaction and top-notch support from our current business and our management team’s association with Elauwit Networks, LLC, which was acquired by Boingo for total consideration of approximately $28.6 million in August 2018. |
| · | Our resident experience focused service offering helps our property owner customers differentiate their communities through our high-speed, instant-on, internet access approach paired with customer support developed to deliver timely, wholistic support. |
| · | We have a highly repeatable and efficient network installation process, where we install fiber or switched ethernet to each unit in a multifamily property. Once our network is installed, we achieve 100% penetration of our network to the units. |
| · | Once our network is installed, we have the opportunity to collect high margin, recurring revenue streams with ongoing service packages. If we are able to appropriately scale our business, we believe we could achieve up to 70% and 75% of gross margin in our Managed Services and Network-as-a-Service lines of business, respectively. |
| · | We view the fragmented competitive landscape as ripe for consolidation. We have identified over 40 competitors as potential acquisition opportunities we plan to explore. |
Company Overview
We design, install, operate, and maintain new fiber optic and WiFi networks throughout each contracted property. Once installed, property owners begin selling Internet connectivity over Elauwit’s network directly to their residents at monthly prices and terms of their choosing. Elauwit, in turn, provides all resident activation, onboarding, customer support, and all network monitoring and maintenance services in exchange for a fixed monthly fee based on the number of units in the property times a monthly per-unit wholesale price. Our contracts with property owners generally have five to eight-year terms.
By implementing Elauwit’s network and services, multifamily property owners:
| · | Bring the latest fiber-based Internet connectivity and WiFi services to their entire property, which has become an important factor in a property’s appeal to current and potential residents, |
| · | Provide residents with directly connected upload and download speeds of 1 gigabit per second (“Gbps”) as generally measured by the industry, plus both in-unit and all-property WiFi connectivity averaging between 200 and 500 Mbps as generally measured by the industry, plus 24/7 customer service and support provided by Elauwit, |
| · | Increase their per-unit contribution to net operating income by the difference between the monthly retail rate they charge to residents and Elauwit’s monthly wholesale fee to them, and |
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| · | Reduce duplicative operating expenses by moving over technology assets and services to Elauwit. |
According to the NMHC there are approximately 23 million apartment units in the U.S. Elauwit’s target market is properties with over 100 units, which the NMHC has estimated consists of approximately 12.1 million units.
We believe that virtually all of these larger properties are prospects for our services given the importance of high-speed Internet access to renters nationwide. This importance is highlighted by the NMHC’s recent resident survey, which found that at least 85% of respondents - in every income bracket from less than $25,000 per year to more than $200,000 per year - were either interested in, or would not rent without, high-speed Internet services.
As of January 31, 2025, we have over 26,500 combined units in service and contracted (pending installation) across 92 multifamily properties in 20 states. We have grown rapidly, with nearly 20,000 of these units coming online or contracting over the past year, resulting in 117% topline revenue growth in 2024.
Company History
Our senior management team previously founded Elauwit Networks, LLC (“Elauwit 1.0”) in 2008, offering Managed Services principally to owners and developers of student housing complexes.
Between 2008 and 2018, Elauwit 1.0 achieved the following:
| · | Managed over 250 properties across 43 states, |
| · | Provided support to over 150,000 users, and |
| · | Achieved 93% positive customer satisfaction scores, with calls answered by humans and 84% one-call resolution. |
In August of 2018, Elauwit 1.0 was acquired by Boingo for total consideration of approximately $28.6 million in connection with Boingo’s entrance into the multifamily property type and contributed approximately $28.0 million to Boingo’s total revenue for the year ended December 31, 2018, with approximately 50% being high-margin recurring revenue. Elauwit 1.0’s gross margin on recurring revenue was in excess of 80%.
Elauwit Connection, Inc. (“Elauwit 2.0”) was founded in December 2019 as a result of the entrepreneurial spirit of the company’s founders, paired with their intense focus on the resident experience. Elauwit 2.0 grew due to its reputation as a committed partner for real estate owners and its dedication to execution and top-notch support.
In September 2024, Elauwit 2.0 entered into an Agreement and Plan of Merger with DeltaMax, Inc. (“DeltaMax”), an entity created to support and effectuate Elauwit 2.0’s go public strategy. Upon Elauwit 2.0 merging into DeltaMax, the latter changed its name to Elauwit Connection, Inc. Prior to the merger, DeltaMax had no operations or personnel. No changes to Elauwit 2.0’s pre-merger operations or personnel occurred as a result of the merger. Throughout this registration statement, “Elauwit,” the “Company,” “we,” “us,” “our,” or similar references refers to the entity resulting from the merger with DeltaMax.
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Business Model
Our business model consists of providing high-speed, instant-on, internet access services wholesale to commercial real estate property owners, predominately focused on conventional multifamily developments of 100 units and more. We strive to provide our property owner customers with an additional revenue stream, a superior technical solution, and an excellent resident experience. We offer both Managed Services and Network-as-a-Service solutions to customers.
Through our Managed Services solution, we enter into network service agreements, pursuant to which customers fund all network design and installation costs, with which we receive a gross margin on design and network installation costs. We then operate the network on our customers’ behalf under a long-term service agreement for a monthly fee, which includes 24/7 network monitoring, network maintenance, resident support, and bandwidth to each property. Under our network services agreements, if a customer terminates the contract without cause, the customer will pay a termination fee equal to (i) any one-time termination fees we incur through termination of service provider contracts (without markup) at the property, provided that the customer may, in its sole discretion, elect to take assignment of such service provider contracts rather than paying the one-time non-terminable fees, in which case we will immediately assign the contracts to the customer, plus (ii) 25% of remaining service fees owed to us during the initial term.
Through our Network-as-a-Service solution, we enter into internet services agreements, pursuant to which we fund and maintain ownership of the installed network, operating for a monthly fee under a long-term service agreement that incorporates our investment in the property. Similar to our Managed Services solution, we also provide 24/7 network monitoring, network maintenance, resident support, and bandwidth to each property. Our goal is to build high margin, recurring revenue. The chart below illustrates the economics we estimate will be recognized through our Network-as-a-Service solution, based on a 450-unit community located in Fort Wayne, Indiana:
| (1) | Reflects project IRR before impact of third-party financing. |
| (2) | Reflects assumed 6.5% capitalization rate. |
| (3) | Reflects gross profit to the Company – does not include the impact of third-party financing. |
From a property owner’s perspective, our Managed Services and Network-as-a-Service solutions first provide an additional revenue stream through the difference in the fee it pays to Elauwit for the services provided and the price charged to tenants, which can result in increased net operating income generated by the property owner. Second, our networks serve as the technology backbone for the entire property, critical for property technology (“PropTech”) deployment success. Third, our intense focus on the resident experience helps property owners differentiate their properties. Unlike traditional internet service providers that may be known for poor customer support, we aggressively manage support call wait times, first touch resolution metrics, and timeliness of dispatched technicians when in-person support is needed. Altogether, this contributes to the high-end amenity feel of the critical utility that is internet access.
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The table below illustrates the economics to us and our customers for each of our solutions based on a hypothetical 250-unit property:
| Managed Service | Elauwit Financial Benefit | Network-as-a-Service | ||
| $250,000 | Design & Network Install Revenue | $18,750 | ||
| One-Time(1) | One-Time | |||
| $67,500 | Elauwit Managed Service Fee | $135,000 | ||
| Per-Year | Per-Year | |||
| $42,500 | Estimated Elauwit Incremental Gross Profit | $105,000 | ||
| Per-Year | Per-Year | |||
| N/A | Capital Expenditure Outlay | $250,000 | ||
| One-Time | ||||
| N/A | Est. Average Internal Rate of Return (IRR) %(4) | ~35.0% | ||
| Per-Year | ||||
| 60.0% | Estimated Elauwit Incremental Gross Margin | 75.0% | ||
| Per-Year | Per-Year |
| Managed Service | Property Owner Financial Benefit | Network-as-a-Service | ||
| $255,000 | Retail Revenue to Property Owner | $255,000 | ||
| Per-Year | Per-Year | |||
| $187,500 | Estimated Property Owner NOI Increase(2) | $120,000 | ||
| Per-Year | Per-Year | |||
| 45.0% | Estimated Internal Rate of Return (IRR) %(4) | N/A | ||
| Per-Year | ||||
| $3,125,000 | Estimated Property Value Increase(3) | $2,000,000 | ||
| Per-Property | Per-Property |
| (1) | We expect to recognize one-time gross margin contribution of $62,500 on design and network installation for our Managed Services solution. | |
| (2) | Represents an estimate of the increase in net operating income (total revenue minus operating expenses other than interest and tax expense) a property owner would realize based on management’s experience with past customers. We estimate the NOI improvement for property owners could be up to 200 to 300 basis points. | |
| (3) | Represents the estimated property value increase for customers resulting from the applicable service provided assuming a capitalization rate of 6%. | |
| (4) | Internal rate of return (IRR) % is unlevered. |
Market Trends
We believe the multifamily property sector in the United States is increasingly transitioning from a long reliance on legacy common carriers offering direct Internet subscriptions to their residents to property owners deploying new fiber and WiFi networks in their properties and selling Internet services directly to their residents via Managed Services providers like Elauwit.
We believe this is especially true in the new construction market. We believe a very large majority of the larger multifamily developments are now routinely constructed using the services of a Managed Services provider like Elauwit to design, install, and manage a built-in private fiber and WiFi network from which property owners sell residential Internet access services from day one. In addition, our own experience suggests that conversions of existing properties to privately managed networks can be accelerated via the type of conversion-focused solutions we bring to the market.
The sustained rise of remote work, online education, and smart home technologies are the fundamental drivers of these accelerating trends, and lead inexorably to the fact that high-speed, high-quality Internet access is now seen as being an absolute requirement for virtually every apartment resident in the U.S.
Our Market Opportunity
Through our own market research using the CoStar data base and others, we have identified, by company and contact details, approximately 2,950 property companies owning approximately 11.5 million units across approximately 40,800 US properties that we believe represent our target market. All of these companies have multifamily and/or student housing portfolios of 500 units or more according to the CoStar data.
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We further estimate that these 11.5 million units are likely spending over $8 billion annually on Internet access service, using the US nationwide average of approximately $70 per month per household spent on Internet access.
Based on our industry knowledge, customer discovery, and marketing efforts with multifamily property companies over the last several years, we believe virtually all of these owners, properties, and units are addressable by us and available to take our services over the next five to seven years.
We believe we have a well-balanced mix of internal and strategic vendor resources and key proprietary network design and installation processes that can scale across multiple, simultaneous projects. We plan to continue to leverage our longstanding relationships with property owners to expand our business.
Pipeline
Since relaunching in 2022, we have seen the pipeline for our services develop rapidly. The market for our services is large and growing as property owners seek technology enhancements to entice tenants and increase net operating income. As a result, we have consistently grown our opportunity count, now topping 400 individual properties we have identified as potentially interested in our approach to Managed Service. These opportunities represent over 110,000 units, $110 million of potential network construction revenue, and an estimated $23 million annual recurring revenue, if we were able to successfully complete all of these opportunities. These figures are limited to identified properties quotes or properties in the process of quoting, and do not include portfolio properties of existing property owner customers not yet in focus for our service offering. We have also identified approximately 265,000 units in our near-term Network-as-a-Service pipeline, based on ongoing, active discussions with approximately 10 property ownership groups, which we estimate could represent approximately $150 million in annual recurring revenue, based on an estimated monthly fee of approximately $45 per unit. We do not have any contracts with customers for opportunities in our pipeline, and there can be no assurance that we could achieve any or all of these opportunities. During the preceding twelve months ended June 30, 2025, we recognized:
| · | Revenue of approximately $16.9 million, representing year-over-year growth of approximately 99%; |
| · | Gross profit of approximately $3.5 million, representing year-over-year growth of approximately 199%, and gross margin of 20.6%; |
| · | Recurring service revenue of approximately $1.9 million; and |
| · | Installation revenue of approximately $15.0 million. |
Managed Service
As of September 4, 2025, our Managed Service pipeline consists of 400 opportunities to provide service to about 110,000 units, representing in total an estimated $110 million of potential network construction revenue and an estimated $23 million in annual recurring revenue. The majority of our Managed Service pipeline consists of RFPs with existing and new customers, with the remaining smaller portion consisting of direct sales outside of an RFP process.
An opportunity is first added to our Managed Service pipeline when one of our representatives has an introductory call about the opportunity with a third party. Currently, about 30,000 units are in this early stage of the pipeline, representing the potential for approximately $30 million in network construction revenue and about $7 million in annual recurring revenue. The second stage of the pipeline is what we consider “near-term” opportunities, when (i) a design has been requested for a project; (ii) a design proposal has been delivered for a project; (iii) the project is being negotiated between the project ownership group or its subcontractors and us; or (iv) when the project has been verbally awarded to us and we are finalizing a written contract for the project. Currently, about 80,000 units are in the second stage of the pipeline, representing the potential for approximately $80 million in network construction revenue and about $16 million in annual recurring revenue. We do not have any contracts with customers for opportunities in the first or second stage of our Managed Service pipeline. After a contract for a project is signed, the project is no longer in the pipeline and is instead considered part of our backlog. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contracted Units and Backlog” for more information about our backlog.
We are a relatively new business with limited long-term win-loss data on project submissions and do not have a reasonable estimated win rate for Managed Service projects in the early, first stage of our pipeline. However, based on our historical experience and management’s estimates and experience in this industry, we estimate our win rate on Managed Service second stage pipeline projects in which we respond to an RFP for a new customer or new property ownership group is approximately 25%. We estimate our win rate on RFPs with existing customers or direct sales to property ownership groups with whom we have an existing relationship is higher than 25%. Because Managed Service projects are subject to the timeline of a new construction project, which is outside of our control, we cannot predict an exact timeline for generating revenue for each opportunity in our pipeline; however, based on our historical experience we would expect to begin to generate revenue for most opportunities in the second stage of our Managed Service pipeline in the next 18 months. Managed Service pipeline opportunities could be prevented from converting into sales if we are not able to remain competitive in developing our proposals or executing on our backlog, or if there is a slowdown in new construction for multifamily projects.
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Network-as-a-Service
As of September 4, 2025, our Network-as-a-Service pipeline consists of approximately 265,000 identified units, based on ongoing, active discussions with approximately 10 property ownership groups with whom we have an existing relationship. If all of these units were converted into contracted units, we estimate we could recognize approximately $150 million in annual recurring revenue, based on an estimated monthly fee of approximately $45 per unit. Currently, all of our Network-as-a-Service pipeline is in the earliest stage of our pipeline, which we expect to follow the stages of the Managed Service pipeline described above. These opportunities entered our Network-as-a-Service pipeline when our management team began negotiating with the property ownership groups and the ownership group expressed interest in Network-as-a-Service. We will need additional capital to begin Network-as-a-Service buildouts, and until we are able to access additional capital, the opportunities in the first stage of our Network-as-a-Service pipeline will not advance in the pipeline. We do not have any contracts with customers for projects in our Network-as-a-Service pipeline that require payment if the customer cancels the contract before the network is installed. The potential revenue under any contract that would require payment would appear in our backlog.
Because Network-as-a-Service is a new business model, we have only limited data on our ability to convert opportunities from our pipeline into revenue. Our Network-as-a-Service pipeline is based on our management’s estimate of our opportunities in our total addressable market. Our total addressable market, of multi-family properties with at least 100 units, consists of about 12 million units nationwide. Our current Network-as-a-Service pipeline is roughly 2.2% of that total addressable market. Assuming we are able to access additional capital, we believe we could begin generating revenue from Network-as-a-Service sales to the identified property ownership groups within 12 months. Our ability to convert these pipeline opportunities into sales is based on management’s estimates and experience in this industry. Network-as-a-Service pipeline opportunities could be prevented from converting into sales if we are unable to access adequate capital to deploy for Network-as-a-Service buildouts or to develop our direct sales and marketing team for Network-as-a-Service sales, if our potential customers prefer a business model other than Network-as-a-Service, or if our proposed service is viewed unfavorably compared to our competitors.
Strong Fundamental Demand from Residents
New data from the 2024 NMHC and Grace Hill Renter Preferences Survey Report shows that Internet connectivity shapes renters’ leasing decisions and living experience.
Since 2013, the NMHC and Grace Hill Renter Preferences Survey Report has offered a comprehensive exploration of contemporary renter sentiments and the priorities shaping the rental housing landscape. Over time, the biennial report has provided the multifamily industry with some important benchmarks about the features, amenities and services that renters not only value but view as critical to their experience at a property. The ranking of these features and amenities can serve as a guidepost for housing providers when designing new communities and renovating existing communities, both in terms of what they must include and what they could perhaps do without.
One of the most apparent takeaways when we look back at the historical data is how important features and amenities related to Internet connectivity continue to be to renters. Amongst the many criteria prospective residents consider when choosing their apartment homes, connectivity remains a major consideration. Residents expect ease of access and consistency when it comes to Internet access, and as the majority will not rent without this ease and consistency, these features and amenities fall in the “must-include” category for most housing providers.
Presented here is the connectivity data from the 2024 version of the survey, which includes responses from more than 172,000 renters nationwide. Beyond looking at topline figures, we also conducted additional analysis including historical survey responses to uncover demographic trends related to the battery of questions asked surrounding connectivity.
High-Speed Internet and Reliable Cell Reception Top Renters’ Overall Wish Lists
Out of more than 80 features and amenities covered in the survey, high-speed internet and reliable cell reception have consistently ranked as top apartment features and community amenities for renters across the numerous iterations of the survey.
For 2024, 90% of respondents were either interested or would not rent without high-speed internet—making that the third highest ranking apartment feature this year after air conditioning and in-unit washer/dryer.
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While residents rely on internet connectivity for a variety of communication and entertainment purposes, the rise of remote work has also underscored the importance of connectivity. Of all respondents in the survey, 52% said they work remotely some or all of the time, and of those who do, 70% either work remotely every day or several days a week.
While many work from their apartments, shared workspaces in community common spaces are also becoming a prominent amenity for today’s renter. And unsurprisingly, always-on and secure WiFi in those shared workspaces is critical. Of those respondents who said they would be interested in using a shared workspace on a remote workday, 92% said free WiFi was very important or absolutely essential.
Residents Expect High Quality Connectivity from Move-In
Convenience and ease of access are also important to residents. The share of respondents either interested in or would not rent without community-wide WiFi increased from 54% in 2022 to 59% of respondents in 2024. Interest increased for every income bracket, with the largest increases coming from the lowest and the higher income brackets—from 58% to 65% for those with household incomes over $200,000 per year and from 56% to 62% for those making less than $25,000 per year.
Roughly two-thirds (67%) of respondents reported interest in pre-installed WiFi, up from 62% two years prior. The greatest interest came from those over 65 years of age, 77% of whom reported being interested or not willing to rent without pre-installed WiFi.
Forty-six percent of respondents said they had checked their mobile connection while touring rental homes. Separately, 47% considered it somewhat or very important to connect to a property’s WiFi while touring rental homes or community spaces.
Forty-eight percent of all respondents say a connectivity certification like a WiredScore or ROVR Score would positively influence their decision to lease a rental home, offering them some independent assurance of the quality of connectivity.
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Eighty-seven percent of respondents think it either very important or absolutely essential to have internet service available immediately on move-in. For those who worked remotely at least some of the time, 61% thought it absolutely essential to have immediate access. Age was another key determinant, with 56% of those between 25 and 34, 58% of those between 35 and 44, and 57% of those between 45 and 54 reporting it was absolutely essential to have immediate access to Internet service.
Renters Show Increasing Interest in Managed WiFi Amid Growing Demand for Seamless Connectivity
When taken together, results from the survey indicate that renters increasingly expect a seamless connectivity experience both within their individual unit as well as throughout their apartment community.
This expectation can be effectively met by managed WiFi—a system where residents are connected to the same secure internet system both in their unit and throughout the community—as well as providing immediate access to internet upon move-in, a feature renters overwhelmingly expressed was important to them.
Our Service Offerings
Elauwit’s business model centers on installing and managing carrier-grade fiber networks under long-term contracts with property owners. Through these arrangements, property owners transition from traditional providers to Elauwit’s advanced systems at lease-end dates. Elauwit’s infrastructure delivers superior internet services, which property owners monetize by billing tenants at retail rates, earning a spread over Elauwit’s wholesale fees. This arrangement drives recurring revenue for Elauwit while enhancing the value of the properties it serves.
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We have two primary business models, Managed Services and Network-as-a-Service. Key revenue streams for each model include:
| · | For our Managed Services model, where the property owner purchases the network and engages Elauwit to onboard, operate, and maintain the network: |
| o | One time Design, Engineering, Equipment, and Installation Revenue, |
| o | Monthly Service Fees based on the total number of units in the property, generally for a contract term of five years, which are routinely renewed, and |
| o | Change-Order Revenue for landlord-directed network moves, adds, and changes. |
| · | For our Network-as-a-Service model, where we fund and own the installed network on the property: |
| o | Design Fees: One-time fees for designing and engineering the network. |
| o | Monthly Service Fees based on the total number of units in the property, which is higher than our Managed Services model given that we have funded the network, and generally for a contract term of seven to eight years which we believe will have the same routine renewal aspect that our Managed Services contracts have exhibited. |
Service Delivery
Elauwit contracts for the installation and delivery of a 10 Gbps carrier-grade, symmetric fiber circuit to each property, generally selecting from among several alternative carriers in the property’s area. Additionally, Elauwit offers the option to add a back-up fiber circuit on a unique path for redundancy. We are increasingly finding property owners valuing this option out of focus on the resident experience.
We then deploy WiFi-6 access points throughout the premises, including all individual units and common areas. This network architecture provides both wired and WiFi access in each unit and property offices, and seamless internet access for residents, property staff, and smart building systems via the property-wide WiFi network. Key features include:
| · | Generally, 1 Gbps symmetrical wired connectivity in each unit, and generally up to 500 Mbps WiFi connectivity in each unit. | |
| · | The WiFi network is partitioned such that each resident gets their own bandwidth, password, and security as if it was a physically dedicated network for each resident, with their own passwords and security. | |
| · | We provide 24/7 Tier 1 customer support for both residents and property staff via our multi-year relationship with a well-known international BPO that prides itself on creativity and flexibility. Their work in this regard has allowed us to enable this frontline support team with more tools than a typical ISP, increasing our one-call resolution capabilities. | |
| · | We have in-house Tier 2 and 3 engineering personnel which handles advanced troubleshooting and issue resolution responsibilities. | |
| · | Finally, we balance onsite maintenance and support via in-house technicians in markets where we have density of deployed service and third-party field service resources everywhere else. |
Customers
Elauwit has built robust relationships with a variety of property ownership and development groups. Relationships span from merchant builders, such as Hanover Company, to long-term holders, such as Elme Communities. In between are a number of ownership groups active in new construction with a long-term hold investment approach, such as JBG Smith and Thompson Thrift. The benefit of such diverse relationships is a steady stream of both new construction and retrofit network build projects.
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Each property Elauwit serves represents a unique customer, as each property is held in a distinct legal entity. As of June 30, 2025, Elauwit had 112 customers, compared to 62 customers as of June 30, 2024. However, some customers are controlled by common ownership groups. As of June 30, 2025, no single ownership group controlled more than 15% of customers served by Elauwit. Furthermore, six ownership groups controlled five or more customers served by Elauwit, representing 58 total customers. As of June 30, 2024, four ownership groups controlled five or more customers served by Elauwit, representing 28 total customers. Our revenue and customer concentration are driven by network construction activities. At a given time, our revenue could be concentrated among one or multiple ownership groups, primarily due to the recognition of network construction revenue, which comprises a significant portion of our expected revenue on a project. Following the construction of a network, the recurring revenue we recognize over the remaining term of a contract does not comprise a material portion of our revenue. As a result, our revenue and customer concentration may fluctuate from time to time based on the frequency of our network construction activities. The following table illustrates our quarterly revenue growth and cumulative units activated through June 30, 2025:
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Geographically, these relationships have taken Elauwit across the continental U.S. Certain markets have been more active for Elauwit’s business, primarily the Southeast, Florida, Texas, and greater DC metro markets as these markets have experienced population growth in recent years. As of June 30, 2025, we have provided services in 25 states, as shown in the orange-shaded areas of the map below:
Employees
As of December 31, 2024, we had 21 total employees, of which 20 were full-time employees.
Properties
We lease approximately 5,950 square feet of office and warehouse space in Columbia, South Carolina, pursuant to a lease agreement that expires June 30, 2026. We believe this facility is adequate for the needs of our business.
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Strategy and Target Market
Elauwit’s growth strategy is two-fold:
| 1. | Organic Growth: Increasing our Managed Services and Network-as-a-Service units under management by accelerating both our new-build contract wins and our portfolio-level contract wins in our target market, and |
| 2. | Opportunistically Executing Accretive Acquisitions: There have been several mergers and acquisitions among Managed Services providers in the last two years. The supply of acquisition candidates has to date come primarily from smaller companies seeking to scale up by joining together under the umbrella of a Private Equity firm. We believe this trend will continue because there are significant synergies to be gained at scale, and there is a corresponding lack of investment capital to allow smaller companies to compete on their own. We maintain an active dialog with potential acquisition companies and their PE firm sponsors, where applicable, operating in our sector. |
Our organic growth target market is the 2,950 US companies we have identified with existing property and in-development portfolios of 500 units or more which, taken together, represent over 50% of the total apartment units in the US, over 90% of the new-build market, and over 95% of the units in complexes of 100 units or more overall. Our target customer base is relatively fragmented as well: no single company owns more than 1% of the total units, while the middle 1/3rd (approximately 1,000 companies) owns approximately 40% of all units. Companies in that middle 1/3rd have property portfolios ranging between 2,500 and 10,000 units.
New-Build Property Market
Our target customers for our Managed Services business – which is generally the most popular business model for new-build properties - are the developers and owners building 350,000 units’ worth of new multifamily properties per year in the US. Virtually all larger new property developments in the U.S. provide publicly available information very early in their development cycle and are tracked in CoStar and other data bases with a very high level of detail.
Based on our experience, we believe a large majority of new development projects in the U.S. with 100 units or more now mandate a Managed Services approach for their residential Internet services. We also believe that a majority of these projects source Managed Services providers via a competitive RFP process to start, and– increasingly, directly from a trusted provider they have worked with previously.
We selectively enter RFP processes where we believe:
| · | our experience, quality, and service reputation will make us competitive, | |
| · | we believe our standard pricing and terms will be competitive, and where | |
| · | the developer is an existing client or a potential long-term, multi-property client. |
We believe our win rate in these competitive processes is in the top three of all Managed Services providers we compete against regularly.
Based on our experience in Elauwit 1.0 and now with our additional cumulative successes winning RFP processes and building quality systems, we are increasing the number of new-build clients in our portfolio for whom we have become a preferred or sole supplier for all their new-build projects, thus winning Managed Services projects “automatically” versus via RFPs.
Existing Property Market
We created our Network-as-a-Service business model specifically for the existing property market where we believe its features are especially appealing.
Large multifamily and student housing properties in the US have historically been very precisely financed with a variety of restrictive debt and equity layers, incentives, and management structures, which taken together do not easily permit the allocation of the new capital required to install a new Internet access and WiFi network.
Our Network-as-a-Service offering, where we provide all of the capital to engineer, purchase, and install the property’s new network, overcomes this barrier.
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Our primary sales strategy to date for the existing property market has been executive-level networking, outreach, and hands-on selling directly to owners and C-level decision makers of our target property companies. We believe this strategy has and will continue to be successful because:
| 1. | Based on our experience, the buying decision for our type of service is made by owners and/or a small group of C-level executives in the company. |
| 2. | Favorable word-of-mouth and positive referrals from existing customers have been shown to be key decision-making factors both in our sector as well as in many other categories of products and services catering to the multifamily property market. |
| 3. | We believe building confidence and trust in our abilities is a critical factor in our customers’ purchase decision, and we further believe this is best done via our own executive leadership. |
| 4. | Our long and successful track record in the industry has given our executive leadership positive relationships with many influential owners and C-level executives in the sector, and thus favorable referrals and networking opportunities into their peers at our other prospect companies. |
| 5. | Concentrating our sales efforts on portfolio companies rather than the property-by-property approach taken by many of our competitors allows us to grow our business at much lower cost and in much larger increments for each successful sale. |
Competitive Landscape
| 1. | Direct Competitors Elauwit faces competition from both incumbent ISPs which are generally the legacy common carriers in each local and other Managed Services ISPs similar to Elauwit. |
| o | Incumbent ISPs such as Comcast, AT&T, and Spectrum typically provide services directly to the residents of multifamily properties with little or no involvement of the property owner. Their service offerings are generally dependent upon the type, age, and condition of their connecting network adjacent to the property and thus can vary widely. In addition, carriers such as these have historically negative customer service performance and reputations. |
| o | Managed Services ISPs, including companies similar in size and scope to Elauwit (Pavlov Media, Single Digits, WhiteSky, and Aerwave for example) offer similar value propositions as ours but may lack Elauwit’s portfolio-level services offerings, nationwide execution capability, our customer satisfaction record, or our extensive experience in the industry. We most often see these types of competitors when pursuing new-build opportunities as virtually all of these projects now mandate a Managed Services approach, and a majority of new construction developers initially source their Managed Services partner via a competitive RFP process. |
| 2. | Substitutes While Elauwit’s solutions are specialized, property owners and tenants may consider substitutes such as: |
| o | Direct-to-Tenant ISP Contracts: Tenants individually contract with ISPs, but this model often results in inconsistent service quality for residents, a lost potential income stream for the property owner, and limited property owner control over infrastructure. |
| o | Mobile Internet Providers: Mobile carriers offering high-speed 5G services (e.g., Verizon, T-Mobile) could serve as an alternative, particularly for residents seeking portable connectivity solutions. However, mobile services are generally less cost-effective for property-wide implementations and lack our reputation for top-notch support. |
| o | Do-It-Yourself Networks: Some property owners may attempt to design and manage their own networks. These efforts often fall short due to lack of experience and the technical complexity and high costs involved. |
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| 3. | Potential New Entrants The high-growth nature of this market is attracting interest from new players, particularly in the following categories: |
| o | Real Estate Technology Firms: Companies expanding from property management software into connectivity solutions as part of an integrated PropTech ecosystem. While these companies may be strong players in the PropTech ecosystem, they do not have Elauwit’s experience or expertise in delivering the infrastructure necessary for our target customers. |
| o | Global ISPs: International players may look to enter the U.S. market, targeting multifamily housing as a growth segment. |
Competitive Strengths
| 1. | Portfolio-Level Service Offerings: We have created a set of contractual features and service offerings that are especially tailored to multi-property ownership groups. Based on our experience to date, we believe these types of features are generally available from or promoted by our competitors. Among these features are our Network-as-a-Service offering, which is especially designed for owners of existing properties whose financial structuring makes it difficult or unattractive to for them to provide the up-front network capital. Based on our experience to date, we believe a large majority of existing properties within multi-property ownership groups fall into this category. |
| 2. | Proven Expertise: Our managements’ experience in Elauwit 1.0 which grew to over 250 properties and 150,000 users served has given us a deep understanding of the market, a high-quality reputation, and extensive contacts within the property ownership community. |
| 3. | Scalable Model and National Footprint: Although multifamily properties differ in size, shape, and geography, we have designed our services offerings such that they can be delivered and supported in the continental U.S., and for virtually any property type with 100 or more units within a typical footprint and configuration. We believe this all-U.S. capability gives us an extra advantage with metaproperty owners who operate in more than one U.S. region. |
| 4. | Design and Technology: We work with landlords to maximize the long-term value of their property by installing the optimum current technologies given their budgets, but also by using easily upgradeable technologies that will adapt gracefully to both increased demand and new applications. |
| 5. | Resident Satisfaction: Based upon our knowledge and belief, we consistently achieve higher resident satisfaction ratings than our competitors, in part because new residents do not have to schedule and wait for an installation appointment. |
| 6. | Management Team: Our Executive Chairman, Chief Executive Officer, and President are all recognized industry pioneers and leaders, with each having now served with Elauwit 1.0 and Elauwit 2.0 with a combined 70 years of experience. |
| 7. | Strong Industry Reputation: Elauwit 1.0 grew through its reputation for execution and top-notch support. While traditional ISPs are notorious for poor customer service, Elauwit has prided itself on its resident experience focus. We aim to raise the bar on what a multifamily resident should expect from their ISP – shorter hold times (our average answer time is 34 seconds), more nimble support (four support channels across talk, text, email, and chat), and faster issue resolution (on average, greater than 80% of our 2,300 monthly ticket volume is solved with the first touch). |
| 8. | Customer Relationships: Strong, long-term relationships with property owners and developers that have proven essential for securing contracts. |
Intellectual Property
Our intellectual property portfolio is limited to the exclusive right to use the tradename “Elauwit” and the service marks, domain names and goodwill associated therewith, which are owned by Mr. McDonough, our Executive Chairman.
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Legal Proceedings
From time to time, we may be party to or otherwise involved in legal proceedings arising in the ordinary course of business. We do not believe that there is any pending or threatened proceeding against us, which, if determined adversely, would have a material adverse effect on our business, results of operations or financial condition.
Regulatory Compliance
Currently, management is not aware of any direct or proposed FCC regulation of its business, however, the potential for change is always present. Proposals from the FCC in recent years, such as its ‘anti-bulk’ proposal, illustrate the potential for change, but have not come to fruition due in large part to the negative consumer impact. If an ‘anti-bulk’ proposal were approved, property owners of multifamily housing properties would not be able to enter into bulk billing agreements with network service providers for a property.
At the state and local level, management is not aware of any direct regulation of its business model, but is aware of two instances of regulatory action applicable to its customer, the property owner, in the states of Colorado and Massachusetts that would impact its standard operating model. In Colorado, for third-party services, property owners can only charge a markup or fee in an amount that does not exceed 2% of the amount that the property owner was billed by the third-party or a fee in an amount that does not exceed $10 per month, whichever is greater. If we were to expand to areas with this type of regulation, our revenue could be negatively impacted.
The following table sets forth certain information about our executive officers and directors as of June 30, 2025.
| Name | Age | Position | ||
| Executive Officers: | ||||
| Dan McDonough, Jr. | 49 | Executive Chairman | ||
| Barry Rubens | 66 | Chief Executive Officer and Director | ||
| Taylor Jones | 47 | President, Chief Technology Officer and Director | ||
| Sean Arnette | 43 | Chief Financial Officer and Treasurer | ||
| Rick Alder | 67 | Chief Operations Officer | ||
| Directors: | ||||
| Scott Barton | 59 | Director | ||
| Elbert Gene Basolis, Jr. | 63 | Director | ||
| Frederick Berk | 66 | Director | ||
| Leslie Goodman | 82 | Director | ||
| Glenn Josephs | 70 | Director | ||
| David O’Brien | 47 | Director | ||
| Roger Shannon | 60 | Director |
Executive Officers
Dan McDonough, Jr. Mr. McDonough has served as Executive Chairman since our inception in December 2019. Mr. McDonough founded the original Elauwit, LLC in 2002, and Elauwit 1.0, in 2008. He served as Elauwit 1.0’s Chief Executive Officer until 2012 when he became Executive Chairman. In 2018, Elauwit 1.0 sold the majority of its assets to Boingo and Mr. McDonough served as a strategic advisor to Boingo’s Chairman and Chief Executive Officer for one year. Prior to starting Elauwit, LLC in 2002, Mr. McDonough held news executive positions at Dow Jones & Company, Inc. and Gannett Co., Inc. He also served as a New York special correspondent and the Washington-based Bureau of National Affairs. Mr. McDonough was chosen to serve as a director because of his extensive knowledge and leadership experience with our Company, Elauwit 1.0, and Elauwit, LLC.
Barry Rubens. Mr. Rubens has served as our Chief Executive Officer and as a director since our inception in December 2019. From August 2018 to December 2019, Mr. Rubens served as Senior Vice President - Development at Boingo. Mr. Rubens joined the board of directors of Elauwit 1.0 in 2009 and served as its Chief Executive Officer from 2012 until its acquisition by Boingo in August 2018. Prior to that service, Mr. Rubens founded Davidson Telecom, LLC, to provide telecommunications services for large shopping mall developers. From 1993 to 2002, Mr. Rubens worked at CT Communications, Inc., where he served in various roles including Senior Vice President and Chief Financial Officer and was responsible for leading the company’s public offering and listing on Nasdaq. Mr. Rubens was chosen to serve as a director because of his extensive knowledge and leadership with our Company and Elauwit 1.0.
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Taylor Jones. Mr. Jones has served as President, Chief Technology Officer and a director since our inception in December 2019. Previously Mr. Jones was Vice President, Technology Solutions for Boingo from 2018 to 2019 and Chief Technology Officer of Elauwit 1.0 from 2008 until its acquisition by Boingo in August 2018. Prior to joining Elauwit 1.0, Mr. Jones served as Chief Technology Officer of a Southeastern “fiber-to-the-home” service provider from 2005 to 2008 and a Carolinas-based internet service provider from 2001 to 2005. Prior to this service, Mr. Jones served as a consultant for PricewaterhouseCoopers LLP, practicing in the areas of utilities and telecommunications, from 2000 to 2001. Mr. Jones was chosen to serve as a director because of his extensive knowledge of our Company and the telecommunications industry.
Sean Arnette. Mr. Arnette has served as our Chief Financial Officer and Treasurer since January 2020. From 2019 to 2020, Mr. Arnette served as Vice President of Corporate Development at Alabama Shipyard, LLC. Prior to this service, Mr. Arnette served as Vice President, Private Wealth Management at Citizens Bank from 2014 to 2018. From 2012 to 2014, Mr. Arnette served as Private Wealth Management Associate, Private Bank at J.P. Morgan and from 2011 to 2012 he served as an Investment Banking Associate, Global Mergers and Acquisitions at Barclays. Prior to this, Mr. Arnette was First Lieutenant in the United States Air Force from 2004 to 2007.
Rick Alder. Mr. Alder has served as our Chief Operations Officer since March 2025. Prior to this service, Mr. Alder served as President of New Business Markets at Hosted America from 2021 to 2025 and as President and Chief Operating Officer at Hosted America from 2016 to 2021. Mr. Alder served as Vice President – Client Relations at Elauwit 1.0 from 2015 to 2016. Prior to this service, Mr. Alder served as President and Chief Operating Officer at RMK Corporation from 2013 to 2015. From 2006 to 2009, Mr. Alder served as Executive Vice President, Operations and Marketing at Capital Broadband, LLC and from 2009 to 2012, he served as President, Primecast (Broadstar, LLC), a subsidiary of Capital Broadband, LLC. From 2002 to 2006, Mr. Alder served in various roles at Madison River Communications.
Sebastian Shahvandi. Effective upon the closing of this offering, Mr. Shahvandi, age 47, will serve as our Chief Revenue Officer. Prior to joining the Company, Mr. Shahvandi served as Chief Executive Officer at 7SIGNAL, Inc., a cloud-based wireless network monitoring platform, from 2023 to 2024. From 2021 to 2022, Mr. Shahvandi served as Senior Vice President – Growth at IDeaS Inc. Prior to this service, Mr. Shahvandi served as Chief Revenue Officer at Hypori, Inc. from 2018 to 2021 and as Vice President and General Manager – Enterprise Solutions Division at IMPRES Technology Solutions, Inc. from 2015-2017. Before this, Mr. Shahvandi worked at Dell Technologies Inc., where he served as General Manager, Microsoft OEM Business from 2011 to 2013 and General Manager, Enterprise and Federal Software Business from 2013 to 2015. In 2000, Mr. Shahvandi founded HNM Technologies and served as its Chief Executive Officer until 2009.
Directors
Scott Barton. Mr. Barton has served as a director since August 2022. From September 2021 to September 2025, Mr. Barton served as Chief Investment Officer of Campus Advantage, Inc. Mr. Barton has more than 20 years of experience in commercial real estate with a specific focus in the student housing, hotel, land and retail sectors. Prior to joining Campus Advantage, Mr. Barton served as Senior Vice President - Investments at Fayth Hospitality Group LLC from July 2020 to August 2021 and Managing Director, Investments at Greystar Real Estate Partner from September 2018 to September 2019. From February 2012 to September 2018, Mr. Barton served as Senior Vice President at Education Realty Trust, where he was responsible for all acquisitions, dispositions, and off-campus development activities for a $4.6 billion publicly traded student housing real estate investment trust. Prior to his service at Education Realty Trust, Mr. Barton served as Senior Vice President - Retail Brokerage at Coldwell Banker Richard Ellis from December 2002 to January 2012 and Vice President - Development and Leasing at Retail Realty Group from September 1999 to December 2002. Mr. Barton was chosen to serve as a director because of his extensive experience in the real estate industry, which we believe will be important as we expand our relationships with property owners.
Elbert Gene Basolis, Jr. Mr. Basolis has served as a director since January 2023. Mr. Basolis has served as President of Garrison Enterprise, Inc. since January 2005, where he is focused on building Garrison Enterprise, Inc. to be recognized as the premier underground utility contractor on the Eastern seaboard. From 2008 to 2022, Mr. Basolis served as a director at First Bank (Nasdaq:FRBA) and as the chair of the IT committee and a member of the loan committee, the strategic planning committee, compensation and personnel committee, the nominating and governance committee. Mr. Basolis was chosen as a director because of his extensive experience as a utility contractor, which we believe will be important as we expand our relationships with property owners.
Frederick Berk. Mr. Berk has served as a director since November 2024. Mr. Berk currently serves as a member of the executive committee at DFK USA. Prior to this service, Mr. Berk served as Co-Managing Partner at Friedman LLP, a member of the firm’s executive committee and chairman of the firm’s real estate group from January 2015 until the firm’s merger with Marcum LLP in September 2022. From September 2022 to September 2024, Mr. Berk served as a Partner and member of the executive committee of Marcum LLP. Prior to this service, Mr. Berk served as a Partner at Friedman LLP from 1989 to 2015. From 1982 to 1989, Mr. Berk served in a variety of roles at Friedman LLP. Mr. Berk was chosen to serve as a director because of his extensive experience in the financial reporting and accounting industry.
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Leslie Goodman. Mr. Goodman has served as a director since November 2023. Mr. Goodman currently serves as chairman of the board of directors at First Bank (Nasdaq:FRBA). Mr. Goodman has been a principal of The Eagle Group, Inc., a commercial real estate development and management company, since 1996. Mr. Goodman is a graduate of Rutgers University with a BA in psychology in 1965, a MBA in finance in 1970 and a JD in 1980. He served as a member of the Rutgers Board of Governors from 2003 to 2009; member of the Board of Trustees from 1996 to 2023; chair from 2002 to 2003 and vice chair from 2001 to 2002; member of the Board of Overseers from 2000 to 2023. From 1966 to present, Mr. Goodman has been actively involved in the commercial banking industry in various capacities as chairman, president, chief executive officer, and a director of a number of commercial banks. Mr. Goodman was chosen to be a director because of his extensive experience in the commercial banking industry, which we believe will be important as we implement our growth strategy.
Glenn Josephs. Mr. Josephs has served as a director since January 2023. Mr. Josephs is a Certified Public Accountant and retired from the accounting firm Friedman LLP in 2022. Mr. Josephs has over 45 years of experience providing accounting and consulting services. Mr. Josephs works closely with many commercial and residential real estate developers, owners, investors, syndicators, and management companies, including those involved in affordable housing. He also has experience with nonprofit organizations, health care and medical practices. Mr. Josephs currently serves on the board of directors of First Bank, a publicly traded institution (Nasdaq:FRBA). He has served on the board since 2008 and qualifies as the bank's "audit committee financial expert" under the relevant criteria established under SEC regulation. Mr. Josephs currently serves as the chair of the audit committee and loan committee. From 2020 to 2025, Mr. Josephs served on the compensation and personnel committee and the nominating and governance committee. Mr. Josephs was a Partner at Friedman LLP from 1996 to 2022, after serving as a Partner at Bagell, Josephs, Levine & Co LLC. Mr. Josephs was chosen to be a director because of his extensive experience providing accounting and consulting services to companies.
David O’Brien. Mr. O’Brien has served as a director since January 2023. The majority of Mr. O’Brien’s experience comes in the construction and real estate industry. Mr. O’Brien founded Brightline Construction, Inc, a heavy highway and structural concrete company in the Philadelphia Metro area, in December 2004 and has served as its President for over 20 years. Later, Mr. O’Brien founded CarCon LLC, a real-estate development company, and most recently launched Cara Capital LLC, a real estate venture capital investment company that focuses on the multifamily and construction sectors and the technology that supports them. Mr. O’Brien was chosen to serve as a director because of his extensive experience in the construction and real estate industries, which we believe will be important as we expand our relationships with property owners.
Roger Shannon. Mr. Shannon has served as a director since November 2024. Mr. Shannon has served as Chief Financial Officer of Lakeland Industries Inc., since February 2023. Prior to this service, Mr. Shannon served as Chief Financial Officer and Treasurer at Charah Solutions, Inc., from June 2019 to November 2022. From November 2015 to June 2019, Mr. Shannon served as Senior Vice President of Finance and Chief Financial Officer at Adtran, Inc. He also served as Chief Financial Officer and Treasurer at Steel Technologies, LLC from July 2006 to November 2015. Prior to this, Mr. Shannon served as the Assistant Treasurer and Director of Treasury at Brown-Forman Corporation from December 1997 to July 2006. From June 1994 to November 1997, Mr. Shannon served as Senior Investment Analysis, Assistant Treasurer of Batmark, Inc. at Brown & Williamson Tobacco Corporation. From July 1992 to June 1994, Mr. Shannon served as an Accounting Analyst at Lexmark International, Inc. Prior to this, Mr. Shannon served as a MBA Graduate Assistant, Finance Department at the University of Georgia from July 1991 to June 1992, a Staff Auditor at Vulcan Materials Company from July 1990 to June 1991 and a Supervising Senior Accountant at KPMG Peat Marwick from January 1988 to July 1990. Mr. Shannon was chosen to be a director because of his significant experience serving as a chief financial officer and his knowledge of the financial reporting and accounting industry.
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Director Independence
Our current Board consists of Dan McDonough, Jr., Scott Barton, Elbert Gene Basolis, Jr., Frederick Berk, Leslie Goodman, Taylor Jones, Glenn Josephs, David O’Brien, Barry Rubens and Roger Shannon. We are not currently listed on a national securities exchange or in an inter-dealer quotation system that requires a majority of the Board be independent. Our Board has undertaken a review of the independence of each director. Based on information provided by each director concerning his or her background, employment and affiliations, our Board has determined that Messrs. Barton, Basolis, Berk, Goodman, O’Brien and Shannon are considered independent under the Nasdaq listing standards. In making these determinations, the Board considered the current and prior relationships that each non-employee director has with the Company and all other facts and circumstances the Board deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director, and any transactions involving them described in the section titled “Certain Relationships and Related Party Transactions.” As required under applicable Nasdaq rules, we anticipate that our independent directors will meet in regularly scheduled executive sessions at which only independent directors are present.
Family Relationships
There are no family relationships between any of our directors or officers.
Committees
Our Board has established three standing committees: the audit committee; the compensation committee; and the nominating and corporate governance committee. Each of these committees consist solely of independent directors. We have adopted written charters for each of these committees, which will be available on our website, www.elauwit.com, upon the effectiveness of this registration statement. Our Board may establish other committees as it deems necessary or appropriate from time to time.
Audit Committee
The audit committee will be responsible for, among other matters:
| · | appointing, compensating, retaining, evaluating, terminating, and overseeing our independent registered public accounting firm; | |
| · | discussing with our independent registered public accounting firm the independence of its members from its management; | |
| · | reviewing with our independent registered public accounting firm the scope and results of their audit; | |
| · | approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm; | |
| · | overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim and annual financial statements that we file with the SEC; | |
| · | reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls, and compliance with legal and regulatory requirements; | |
| · | coordinating the oversight by our Board of our code of ethics and our disclosure controls and procedures; | |
| · | maintaining procedures for the confidential and/or anonymous submission of concerns regarding accounting, internal controls or auditing matters; and | |
| · | reviewing and approving related-person transactions. |
Frederick Berk, Leslie Goodman and Roger Shannon serve on the audit committee and meet the definition of “independent director” for purposes of serving on an audit committee under Rule 10A-3 under the Exchange Act and Nasdaq rules. Mr. Berk serves as Chair of the Audit Committee. Our Board has determined that each of Messrs. Berk, Goodman and Shannon will qualify as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K.
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Compensation Committee
The compensation committee will be responsible for, among other matters:
| · | reviewing key employee compensation goals, policies, plans and programs; | |
| · | reviewing and approving the compensation of our directors and executive officers; | |
| · | reviewing and approving employment agreements and other similar arrangements between us and our executive officers; and | |
| · | appointing and overseeing any compensation consultants or advisors. |
Elbert Basolis, Jr., David O’Brien and Frederick Berk serve on the compensation committee and meet the definition of “independent director” for purposes of serving on a compensation committee under Nasdaq rules. Mr. Basolis serves as Chair of the compensation committee.
Nominating Committee
The nominating committee is responsible for assisting the Board in identifying qualified individuals to become directors, in determining the composition of the Board and in monitoring the process to assess Board effectiveness. Leslie Goodman, Scott Barton and Roger Shannon serve on the nominating and corporate governance committee and Mr. Goodman serves as Chair of the nominating and corporate governance committee.
Board Leadership Structure
Our Board and management believe that the choice of whether the Chair of our Board should be an executive of the Company, or a non-executive or independent director, depends upon a number of factors, taking into account the candidates for the position and the best interests of the Company and its stockholders. Mr. McDonough currently serves as our Executive Chairman. In this role, Mr. McDonough is able to focus his attention on long-term strategic initiatives and engagement with the Board. Our Chief Executive Officer, Mr. Rubens is then able to focus on strategy development and implementation of strategic initiatives. Mr. McDonough’s operating and leadership experience as the founder of Elauwit 1.0 and as an officer and director of our company since its inception make him a compelling choice for Executive Chairman.
Mr. Basolis serves as lead independent director. The lead independent director will preside over executive sessions of the independent directors and serve as a liaison between the independent directors and our chairman and management team.
Risk Oversight
Our Board will oversee a company-wide approach to risk management. Our Board will determine the appropriate risk level for us generally, assess the specific risks faced by us and review the steps taken by management to manage those risks. While our Board will have ultimate oversight responsibility for the risk management process, its committees will oversee risk in certain specified areas.
Specifically, our compensation committee will be responsible for overseeing the management of risks relating to our executive compensation plans and arrangements, and the incentives created by the compensation awards it administers. Our audit committee will oversee management of enterprise risks and financial risks, as well as potential conflicts of interest. Our Board is responsible for overseeing the management of risks associated with the independence of our board of directors.
Compensation Committee Interlocks and Insider Participation
None of our officers currently serves, or has served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more officers serving as a member of our Board.
Code of Business Conduct and Ethics
In accordance with Nasdaq’s listing requirements and SEC rules, our Board adopted a Code of Business Conduct and Ethics that will become effective upon the effectiveness of this registration statement and applies to our directors, officers and employees. A copy of this code will be available on our website. We intend to disclose on our website any amendments to the Code of Business Conduct and Ethics and any waivers of the Code of Business Conduct and Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider information contained on our website to be part of this prospectus or in deciding to purchase shares of our common stock.
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Director and Officer Indemnification Agreements
We intend to enter into separate indemnification agreements with our directors and executive officers, in addition to the indemnification provided for in our certificate of incorporation and bylaws. These agreements, among other things, require us to indemnify our directors and executive officers for certain expenses, including attorneys’ fees, judgments, penalties, fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of their services as one of our directors or executive officers or as a director or executive officer of any other company or enterprise to which the person provides services at our request. Our certificate of incorporation and bylaws require us to indemnify our directors and officers to the fullest extent permitted by Delaware law.
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EXECUTIVE AND DIRECTOR COMPENSATION
Summary Compensation Table
The following table provides information regarding the compensation paid for the years ended December 31, 2024 and 2023 to each of the executive officers named below, who are collectively referred to as “named executive officers” elsewhere in this prospectus.
| Name and Principal Position | Year | Salary ($) |
Total ($) | ||||
| Dan McDonough, Jr. | 2024 | 180,000 | 180,000 | ||||
| Executive Chairman | 2023 | 112,500 | 112,500 | ||||
| Barry Rubens | 2024 | 180,000 | 180,000 | ||||
| Chief Executive Officer | 2023 | 112,500 | 112,500 | ||||
| Taylor Jones | 2024 | 180,000 | 180,000 | ||||
| President and Chief Technology Officer | 2023 | 150,000 | 150,000 |
Deferred Compensation
In December 2020, our named executive officers agreed to defer a portion of the compensation they earned from December 2020 to November 2022. On August 20, 2024, we entered into the Deferred Compensation Agreement to provide a mechanism for repayment. As of June 30, 2024, our named executive officers were owed the following amounts, which includes interest at a rate of 3.25% on the cumulative balances from February 1, 2022:
| · | Mr. McDonough - $173,126.60 |
| · | Mr. Rubens - $173,126.60 |
| · | Mr. Jones - $193,752.79 |
Beginning on June 1, 2024, we agreed to repay a minimum of $2,500 per month to our executive officers until all outstanding deferred compensation has been paid in full. We may prepay the outstanding deferred compensation in whole or in part or increase the minimum monthly payments at our discretion, subject to the approval of our independent directors. Any prepayment or monthly increase will apply equally to each of our named executive officers.
On June 19, 2025, we amended the Deferred Compensation Agreement (the “Deferred Compensation Amendment”). Pursuant to the Deferred Compensation Amendment, if we complete this offering, we will prepay all arrearages owed under the Deferred Compensation Agreement within 30 days of the closing of this offering.
Employment Agreements
We did not have employment agreements with our named executive officers in the year ended December 31, 2024.
Consulting Agreement – Baron Hunter Group, LLC
Effective upon the closing date of this offering, we will be a party to a consulting agreement (the “Consulting Agreement”) with Baron Hunter Group, LLC (the “Consultant”), pursuant to which we retained the Consultant to provide services to us through Mr. McDonough. Pursuant to the Consulting Agreement, Mr. McDonough will serve as our Executive Chairman and provide certain other services for a term of two years. From January 1, 2025 through December 31, 2025, the Consultant will be compensated at a rate of $180,000 per annum for the services provided under the Consulting Agreement. Beginning January 1, 2026, the Consultant will be compensated at a rate of $240,000 per annum for the services provided under the Consulting Agreement. If, during the term, we prepay all amounts to be paid to the Consultant for the services provided under the Consulting Agreement, we can terminate the Consulting Agreement upon written notice to the Consultant.
Executive Employment Agreement – Barry Rubens
Effective upon the closing date of this offering, we will be a party to an executive employment agreement with Mr. Rubens (the “Rubens Agreement”). Pursuant to the Rubens Agreement, Mr. Rubens agreed to serve as Chief Executive Officer for a term of two years (the “Term”). From January 1, 2025 to December 31, 2025, Mr. Rubens is entitled to an annual base salary of $180,000 and is eligible to receive an annual cash bonus (the “Annual Performance Bonus”) based on performance and achievement of goals and objectives as defined by the compensation committee after consultation with management. Beginning January 1, 2026, Mr. Rubens is entitled to an annual base salary of $240,000 and is eligible to receive an Annual Performance Bonus based on performance and achievement of goals and objectives as defined by the compensation committee. The amount of the Annual Performance Bonus, if any, shall be determined by the compensation committee in its sole discretion. In addition, during the Term, Mr. Rubens is entitled to participate in our benefit plans and programs and is eligible to participate in any stock incentive plan.
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Executive Employment Agreement – Taylor Jones
Effective upon the closing date of this offering, we will be a party to an executive employment agreement with Mr. Jones (the “Jones Agreement”). Pursuant to the Jones Agreement, Mr. Jones agreed to serve as President and Chief Technology Officer for a term of three years. From January 1, 2025 to December 31, 2025, Mr. Jones is entitled to an annual base salary of $180,000 and is eligible to receive an Annual Performance Bonus based on performance and achievement of goals and objectives as defined by the compensation committee after consultation with management. Beginning January 1, 2026, Mr. Jones is entitled to an annual base salary of $240,000 and is eligible to receive an Annual Performance Bonus based on performance and achievement of goals and objectives as defined by the compensation committee. The amount of the Annual Performance Bonus, if any, shall be determined by the compensation committee in its sole discretion. In addition, during the Jones Agreement, Mr. Jones is entitled to participate in our benefit plans and programs and is eligible to participate in any stock incentive plan.
Potential Payments Upon Termination or Change in Control
Under the Rubens Agreement and the Jones Agreement, if the executive is terminated for cause, resigns without good reason, or his employment ends due to his death or permanent disability, he will be entitled to any earned but unpaid base salary plus accrued benefits earned through the date of termination. Under the Rubens Agreement, in the event of Mr. Ruben’s termination for a reason other than for cause or if Mr. Rubens terminates voluntarily under one or more of the specified circumstances that constitute a good reason, he will be entitled to severance payments in the amount of his base salary for a period from the effective date of termination until the end of the Term. Under the Jones Agreement, in the event of Mr. Jones’ termination for a reason other than for cause or if Mr. Jones terminates voluntarily under one or more of the specified circumstances that constitute a good reason, he will be entitled to severance payments in the amount of his base salary for a period of one year after the effective date of termination. The severance payments are expressly conditioned upon the executive delivering to us, and not revoking within the twenty-one days following the date of termination, a general release of all claims in a form to be provided by and acceptable to us.
Messrs. Rubens and Jones will be subject to non-competition and non-solicitation provisions under their employment agreements effective for the period of one year following the executive’s termination of employment.
Outstanding Equity Incentive Awards At Fiscal Year-End
There were no stock awards held by our named executive officers as of December 31, 2024.
Stock Incentive Plan
We intend to establish a stock incentive plan prior to the effectiveness of the registration statement of which this prospectus forms a part.
Policies and Practices Related to the Grant of Certain Equity Awards
We adopted a policy governing the timing of awards under any stock incentive plan in relation to the disclosure of material non-public information that will become effective upon the effectiveness of this registration statement.
Director Compensation
Since inception, none of our directors has received any compensation solely for their service as director.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following sets forth a summary of transactions since January 1, 2023, or any currently proposed transaction, in which the Company was to be a participant and the amount involved exceeded or exceeds $45,670 (1% of the average of our total assets of the Company for the two most recently completed fiscal years) and in which any related person had or will have a direct or indirect material interest.
Since inception, we have relied on debt financing from our current and former directors for some of our working capital.
Endurance Financial, LLC Transactions
We have a financing arrangement with Endurance, an entity of which Messrs. McDonough and Josephs are founders and one-third members. Endurance is the manager of Endurance Opportunities.
On April 1, 2024, we entered into the Fixed Rate Loan Agreement with Endurance Opportunities, pursuant to which Endurance Opportunities loaned us $1,000,000. The Fixed Rate Loan Agreement accrues interest at a rate of 18% per annum and has a scheduled repayment date of May 1, 2029. As of June 30, 2025, we have paid $307,211 in principal and interest and owe $851,852 under Fixed Rate Loan Agreement. We expect to pay all or a portion of the Fixed Rate Loan Agreement with the proceeds of this offering. See “Use of Proceeds.”
On November 12, 2024, we issued a promissory note in favor of Endurance Opportunities in the amount of $250,000 (the “November Note”). The November Note accrues interest at a rate of 16.5% per annum and has a term of 18 months. As of June 30, 2025, we have paid $26,241 in interest and owe $250,000 under the November Note. Our repayment of the November Note is secured by our accounts receivable.
On March 1, 2025, we issued a promissory note in favor of Endurance in the amount of $500,000 (the “March 1 Note”). The March 1 Note has a term of 18 months. On March 25, 2025, we issued a promissory note in favor of Endurance in the amount of $500,000 (the “March 25 Note,” and together with the March 1 Note, the “Endurance Notes”). The March 25 Note had an initial term of 90 days. On July 7, 2025, we entered into a note and loan extension and modification agreement (the “Extension Agreement”) with Endurance, pursuant to which the term of the March 25 Note was extended for an additional 90-day period until September 25, 2025. Except as extended by the Extension Agreement, the terms of the March 25 Note remain in full force and effect. The Endurance Notes accrue interest at a rate of 16.5% and our repayment of the Endurance Notes is secured by our accounts receivable. As of June 30, 2025, we have paid $48,125 in interest and owe $1,000,000 under the Endurance Notes.
We have also entered into the following network service participation agreements (each, a “Participation Agreement”) with Endurance Opportunities, pursuant to which we sold an undivided interest in the revenue from certain network service agreements in exchange for the amounts specified in the table below. The Participation Agreements accrue interest at a rate of 16.5% per annum with respect to any payments not made when due. If Endurance Opportunities’ interest in a network service agreement is still outstanding 24 months after the service activation date under the network service agreement, Endurance Opportunities has the option to require us to repurchase all outstanding principal and accrued and unpaid interest and fees due with respect to Endurance Opportunities’ pro rata interest in the network service agreement. The following table outlines the terms of each of the outstanding Participation Agreements as of June 30, 2025:
| Date | Original Purchase Amount |
Total
Payment Obligation |
Remaining
Principal Amount to be Paid |
Final Payment Date | |||||||||||
| 1/1/2024 | $ | 236,775 | $ | 387,496 | $ | 177,515 |
6/15/2030 | ||||||||
| 6/1/2024 | $ | 550,000 | $ | 817,821 | $ | 440,000 |
6/1/2029 | ||||||||
| 7/12/2024 | $ | 160,000 | $ | 237,405 | $ | 130,667 |
7/1/2029 | ||||||||
| 7/12/2024 | $ | 155,000 | $ | 229,986 | $ | 123,083 |
7/1/2029 | ||||||||
| 7/12/2024 | $ | 50,000 | $ | 74,189 | $ | 42,500 |
7/1/2029 | ||||||||
| 9/23/2024 | $ | 330,000 | $ | 488,236 | $ | 280,452 |
10/1/2029 | ||||||||
Subsequent to June 30, 2025, on July 7, 2025 we entered into an additional Participation Agreement with Endurance Opportunities for an original purchase amount of $278,498 and a total payment obligation of $410,805 with a final payment date of July 1, 2030.
Motherlode, LLC Transactions
On April 12, 2024, we entered into a stock repurchase agreement (the “Stock Repurchase Agreement”) with Motherlode, pursuant to which we agreed to repurchase 250,000 shares of Series Seed Preferred Shares held by Motherlode at the original purchase price of $4.00 per share, in exchange for the issuance of a promissory note in favor of Motherlode in the amount of $1.0 million (the “Promissory Note”). The Promissory Note accrues interest at a rate of 6% per annum and has a term of 60 months. As of June 30, 2025, we have paid $289,991 in principal and interest and owe $777,621 in principal and $92,658 in interest under the Promissory Note. The Promissory Note is secured by personal guarantees of Messrs. McDonough, Jones, Josephs and Rubens. Charles Brady and Mark Holt, former directors who resigned from our Board on April 12, 2024, are members of Motherlode.
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Pursuant to the Stock Repurchase Agreement, we also agreed pay to Apogee Telecom, Inc. (“Apogee”), all amounts due under (i) a promissory note dated December 6, 2019, in the amount of $800,000; (ii) an installment payment agreement date February 28, 2023, in the amount of $412,742; and (iii) a hardware invoice in the amount of $37,837.80 received on March 7, 2024 (the “Apogee Payments”). We used the loan amount received under the Fixed Rate Loan Agreement to fund the Apogee Payments. Messrs. Brady and Holt were owners of Apogee.
Put-Call Agreement
On August 20, 2024, we entered into a put-call agreement (the “Put-Call Agreement”) with Baron Hunter Group, LLC and Steele Creek Partners, LLC to grant certain put and call rights in connection with this offering. The managing member of Baron Hunter Group, LLC and Steele Creek Partners, LLC is Mr. McDonough and Mr. Rubens, respectively. On August 11, 2025, we entered into an amendment to the Put-Call Agreement (the “Put-Call Amendment”) with Baron Hunter Group, LLC and Steele Creek Partners, LLC to reduce the put and call rights granted in connection with this offering. Pursuant to the Put-Call Amendment, Baron Hunter Group, LLC and Steele Creek Partners, LLC were granted the right to sell to us, up to a $1,000,000 in common stock at a discount of 10% below the offering price, exercisable for a period of 10 business days following the closing date of this offering. We were granted the right, exercisable by a majority of our disinterested directors, to purchase up to a maximum of $1,000,000 in common stock from each of Baron Hunter Group, LLC and Steele Creek Partners, LLC at a premium of 10% in excess of the offering price for a period of 10 business days following the closing date of this offering.
License Agreement
On August 20, 2024, we entered into the License Agreement with Mr. McDonough, pursuant to which Mr. McDonough granted us an exclusive license to use the tradename “Elauwit” and the service marks, domain names and goodwill associated therewith. As consideration for the License Agreement, we paid Mr. McDonough a one-time fee of $50,000.
Policies and Procedures for Transactions With Related Persons
Prior to this offering, we have not had a formal policy regarding approval of transactions with related parties. In connection with this offering, we adopted a written policy, that will become effective upon the effectiveness of this registration statement, and provides that our executive officers, directors, beneficial owners of more than 5% of any class of our capital stock, and any members of the immediate family of any of the foregoing persons (a “related party”) are not permitted to enter into a related party transaction with us without the prior consent of our Audit Committee. Any request for us to enter into a transaction with a related party in which the related party would have a direct or indirect interest must first be presented to our Audit Committee for review, consideration, and approval. In approving or rejecting any such proposal, our Audit Committee will consider the relevant facts and circumstances of the transaction available to it, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unrelated third party or to employees under the same or similar circumstances, and the extent of the related party’s interest in the transaction. The written policy will require that, in determining whether to approve or reject a related person transaction, our Audit Committee must consider, in light of known circumstances, whether the transaction is in, or is not inconsistent with, our best interests and those of our stockholders, as our Audit Committee determines in good faith.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding the beneficial ownership of our common stock as of September 15, 2025, and as adjusted to reflect the sale of common stock being offered in this offering by:
| · | each person, or group of affiliated persons, known to us to own beneficially more than 5% of our common stock; | |
| · | each of our current directors; | |
| · | each of our named executive officers; and | |
| · | all of our current directors and executive officers as a group. |
The information in the following table has been presented in accordance with the rules of the SEC. Under such rules, beneficial ownership of a class of capital stock includes any shares of such class as to which a person, directly or indirectly, has or shares voting power or investment power and also any shares as to which a person has the right to acquire such voting or investment power within 60 days through the exercise of any stock option, warrant or other right. If two or more persons share voting power or investment power with respect to specific securities, each such person is deemed to be the beneficial owner of such securities. Except as we otherwise indicate below and under applicable community property laws, we believe that the beneficial owners of the common stock listed below, based on information they have furnished to us, have sole voting and investment power with respect to the shares shown. Except as otherwise indicated, each stockholder named in the table is assumed to have sole voting and investment power with respect to the number of shares listed opposite the stockholder’s name.
The calculations of beneficial ownership in this table are based on 5,000,000 shares of common stock outstanding prior to the offering, and 1,500,000 shares of common stock to be issued in this offering.
| Shares Beneficially
Owned Prior to this Offering |
Shares Beneficially Owned Following this Offering |
|||||||||||||||
| Name and Address of Beneficial Owner(1) | Shares | % | Shares | % | ||||||||||||
| Executive Officers and Directors: | ||||||||||||||||
| Daniel McDonough, Jr.(2) | 945,515 | 18.9 | % | 945,515 | 14.5 | % | ||||||||||
| Barry Rubens(3) | 796,852 | 15.9 | 796,852 | 12.3 | ||||||||||||
| Taylor Jones(4) | 796,852 | 15.9 | 796,852 | 12.3 | ||||||||||||
| Scott Barton(5) | 11,437 | * | 11,437 | * | ||||||||||||
| Elbert Gene Basolis Jr. | 170,471 | 3.4 | 170,471 | 2.6 | ||||||||||||
| Frederick Berk | 62,169 | 1.2 | 62,169 | 1.0 | ||||||||||||
| Leslie Goodman(6) | 103,760 | 2.1 | 103,760 | 1.6 | ||||||||||||
| Glenn Josephs | 141,388 | 2.8 | 141,388 | 2.2 | ||||||||||||
| David O’Brien(7) | 275,170 | 5.5 | 275,170 | 4.2 | ||||||||||||
| Roger Shannon | — | * | — | * | ||||||||||||
| Directors and executive officers as a group (12 individuals) | 3,477,363 | 69.5 | % | 3,477,363 | 53.5 | % | ||||||||||
| 5% or Greater Stockholders: | ||||||||||||||||
| Baron Hunter Group, LLC and Daniel McDonough, Jr. | 883,346 | 17.7 | % | 883,346 | 13.6 | % | ||||||||||
| Steele Creek Partners, LLC and Barry Rubens | 796,852 | 15.9 | 796,852 | 12.3 | ||||||||||||
| Minotaur Networks, LLC and Taylor Jones | 796,852 | 15.9 | 796,852 | 12.3 | ||||||||||||
| Maxim Cerith LLC, Lawrence C. Glassberg and Ritesh Veera(8) | 750,000 | 15.0 | 750,000 | 11.5 | ||||||||||||
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| * | Represents less than 1% |
| (1) | Unless otherwise indicated, the address of each individual is c/o Elauwit Connection, Inc., 1700 Alta Vista Drive, Suite 130, Columbia, SC 29223. |
| (2) | Includes 883,346 shares of common stock held by Baron Hunter Group, LLC and 62,169 shares of common stock held by an entity, both of which Mr. McDonough is the managing member and has sole voting and investment power. |
| (3) | Includes 796,852 shares of common stock held by Steele Creek Partners, LLC, of which Mr. Rubens is the managing member and has sole voting and investment power. |
| (4) | Includes 796,852 shares of common stock held by Minotaur Networks, LLC, of which Mr. Jones is the managing member and has sole voting and investment power. |
| (5) | Includes 11,437 shares of common stock held in the name of a trust of which Mr. Barton has sole voting and investment power. |
| (6) | Includes 103,760 shares of common stock held by an entity of which Mr. Goodman is 1% owner and has shared voting and investment power. Mr. Goodman disclaims beneficial ownership in the shares of common stock held by such entity beyond his 1% ownership. |
| (7) | Includes 62,169 shares of common stock held by an entity of which Mr. O’Brien holds sole voting and investment power and 213,001 shares of common stock held by an entity, of which Mr. O’Brien is the managing director and holds sole voting and investment power. |
| (8) | The address of Maxim Cerith LLC is 300 Park Avenue, 16th Floor, New York, NY 10022. |
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General
The following description summarizes the most important terms of our capital stock. Our certificate of incorporation authorizes the issuance of up to 14,900,000 shares of common stock and up to 100,000 shares of preferred stock. As of the date of this prospectus, there are 5,000,000 shares of common stock outstanding, which were held by approximately 27 stockholders of record, and no shares of preferred stock are outstanding. Our certificate of incorporation and bylaws are filed as exhibits to the registration statement of which this prospectus is a part. The following descriptions of our capital stock and provisions of our certificate of incorporation, our bylaws, and provisions of the Delaware General Corporation Law (“DGCL”) are summaries and are qualified by reference to our certificate of incorporation and our bylaws that will be in effect upon the completion of this offering, as well as to the relevant provisions of the DGCL.
Prior to August 14, 2025, our certificate of incorporation provided for two classes of common stock: Class A common stock and Class B common stock. Class A common stock and Class B common stock had the same rights, preferences, privileges expect for voting and conversion rights. On August 8, 2025, all of our Class B common stockholders elected to convert their shares into Class A common stock at a ratio of one share of Class B common stock for one share of Class A common stock. On August 14, 2025, we amended and restated our certificate of incorporation to remove the dual class common stock structure and rename our Class A common stock as common stock.
Common Stock
Each holder of common stock is entitled to one vote for each share of common stock held on all matters submitted to a vote of the stockholders, including the election of directors. Our certificate of incorporation and bylaws do not provide for cumulative voting rights.
The 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. In the event of our liquidation, dissolution or winding up, holders of 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.
Holders of our common stock have no preemptive, conversion or subscription rights, and there are no redemption or sinking fund provisions applicable to the common stock.
Preferred Stock
Our Board is authorized, without vote or action by our stockholders, to issue from time to time up to an aggregate of 100,000 shares of preferred stock in one or more series and to fix or alter the powers, designations, preferences, rights and any qualifications, limitations or restrictions of the shares of each of these series, including, if applicable, the dividend rights and preferences, conversion rights, voting rights, rights and terms of redemption, including without limitation sinking fund provisions, redemption price or prices, liquidation rights and preferences, and the number of shares constituting any series. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of us without further action by our stockholders and may adversely affect the dividend, liquidation and voting and other rights of the holders of common stock. The issuance of preferred stock with voting and conversion rights may adversely affect the voting power of the holders of common stock, including the loss of voting control to others. We currently have no plans to issue any additional shares of preferred stock.
We believe that the ability to issue preferred stock without the expense and delay of a special stockholders’ meeting provides us with increased flexibility in structuring possible future financings and acquisitions, and in meeting other corporate needs that might arise. This also permits the Board to issue preferred stock containing terms which could impede the completion of a takeover attempt. This could discourage an acquisition attempt or other transaction which stockholders might believe to be in their best interests or in which they might receive a premium for their stock over the then market price of the stock.
Representative’s Warrants
The registration statement of which this prospectus is a part also registers for sale the Representative’s Warrants, as a portion of the underwriting compensation in connection with this offering. The Representative’s Warrants will be exercisable six months after the effective date of this registration statement until five years after the effective date of this registration statement at an assumed exercise price of $11.50 per share (115% of the assumed public offering price in this offering). Please see “Underwriting—Representative’s Warrants” for a description of the warrants we have agreed to issue to Craig-Hallum, subject to the completion of the offering. Pursuant to FINRA Rule 5110(e)(1), such Representative’s Warrants will be non-exercisable, and will therefore not be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such Representative’s Warrants, for a period of six (6) months after the date of the closing; provided, however, that the exceptions listed under FINRA Rule 5110(e)(2) shall apply.
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SAFE (Simple Agreement for Future Equity)
In January 2025, we issued $1.0 million in a SAFE in a transaction exempt from registration under the Securities Act. The SAFE does not entitle the holder to the rights of our stockholders, such as voting or dividend rights and the investor’s right to receive its cash-out amount is on par with payments for common stock in the event of our dissolution. The SAFE does not give us the right to repurchase the SAFE at our option and will not terminate until we achieve a liquidity event. Accordingly, in connection with this offering, we will either (i) pay the holder an amount in cash equal to the amount the holder invested in the SAFE offering or (ii) issue a number of shares of common stock to the holder equal to (a) the amount of their investment divided by (b) the public offering price multiplied by the discount rate of 85%, whichever is greater. If the SAFE is converted into shares of common stock, 117,647 shares of common stock would be issuable to the SAFE holder, based on an assumed public offering price of $10.00.
Put-Call Agreement
On August 20, 2024, we entered into the Put-Call Agreement with Baron Hunter Group, LLC and Steele Creek Partners, LLC to grant certain put and call rights in connection with this offering. On August 11, 2025, we entered into the Put-Call Amendment with Baron Hunter Group, LLC and Steele Partners, LLC to reduce the put and call rights granted in connection with this offering. Pursuant to the Put-Call Amendment, Baron Hunter Group, LLC and Steele Creek Partners, LLC were granted the right to sell to us, up to a $1,000,000 value of common stock at a discount of 10% below the offering price, exercisable for a period of 10 business days following the closing date of this offering. We were granted the right, exercisable by a majority of our disinterested directors, to purchase up to a maximum of $1,000,000 in common stock from each of Baron Hunter Group, LLC and Steele Creek Partners, LLC at a premium of 10% in excess of the offering price for a period of 10 business days following the closing date of this offering.
Anti-Takeover Effects of Certain Provisions in our Certificate and Bylaws
Certain provisions of our certificate of incorporation, our bylaws and the DGCL may discourage or make more difficult a takeover attempt that a stockholder might consider to be in his, her or its best interest. These provisions may also adversely affect the prevailing market price for shares of our common stock. We believe that the benefits of increased protection give us the potential ability to negotiate with the proponent of an unsolicited proposal to acquire or restructure us, which may result in an improvement of the terms of any such proposal in favor of our stockholders, and outweigh any potential disadvantage of discouraging those proposals.
Authorized but Unissued Shares of Capital Stock
Our authorized but unissued shares of common stock will be available for future issuance without stockholder approval, subject to the applicable provisions of the DGCL and rules of Nasdaq. These additional shares may be used for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. One of the effects of the existence of authorized but unissued common stock may be to enable our Board to issue shares to persons friendly to current management, which issuance could render more difficult or discourage an attempt to obtain control of the Company by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of our management and possibly deprive our stockholders of opportunities to sell their shares of common stock at a price higher than the prevailing market price.
Exclusive Forum
The certificate of incorporation provides that, unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers, or other employee to us or to our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the DGCL, the certificate of incorporation or the bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine. However, this provision does not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. In addition, the Court of Chancery of the State of Delaware and the federal district courts will have concurrent jurisdiction for the resolution of any suit brought to enforce any duty or liability created by the Securities Act. Notwithstanding the foregoing, the inclusion of such provisions in the certificate of incorporation will not be deemed to be a waiver by us or our stockholders of the obligation to comply with federal securities laws, rules and regulations.
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Although we believe these provisions benefit the Company by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, these provisions may have the effect of discouraging lawsuits against the Company’s directors and officers. Furthermore, the enforceability of choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable.
Advance Notice of Stockholder Proposals and Nominations
Our bylaws include an advance notice procedure for stockholders to nominate candidates for election as directors or to bring other business before any meeting of our stockholders. The stockholder notice procedure provides that only persons who are nominated by, or at the direction of, the Board, or by a stockholder who has given timely written notice prior to the meeting at which directors are to be elected, will be eligible for election as directors and that, at a stockholders’ meeting, only such business may be conducted as has been brought before the meeting by, or at the direction of, the Board or by a stockholder who has given timely written notice of such stockholder’s intention to bring such business before such meeting.
Under the stockholder notice procedure, for notice of stockholder nominations or other business to be made at a stockholders’ meeting to be timely, such notice must be received by us not earlier than the close of business on the 120th calendar day and not later than the close of business on the 90th calendar day prior to the one-year anniversary of the immediately preceding year’s annual meeting or as otherwise provided in the bylaws.
A stockholder’s notice to us proposing to nominate a person for election as a director or proposing other business must contain certain information specified in the bylaws, including the identity and address of the nominating stockholder, a representation that the stockholder is a record holder of our stock entitled to vote at the meeting and information regarding each proposed nominee or each proposed matter of business that would be required under the federal securities laws to be included in a proxy statement soliciting proxies for the proposed nominee or the proposed matter of business.
The stockholder notice procedure may have the effect of precluding a contest for the election of directors or the consideration of stockholder proposals if the proper procedures are not followed, and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of directors or to approve its own proposal, without regard to whether consideration of such nominees or proposals might be harmful or beneficial to us and our stockholders.
Classified Board
Our certificate of incorporation provides that the Board shall be divided into three classes, with the intention that each class consist of approximately one-third of the total number of our directors. At each annual meeting of stockholders, each of the successors elected to replace the directors of a class whose term expires at such annual meeting shall be elected to hold office until the third annual meeting next succeeding their election and until their respective successor shall have been duly elected and qualified. Our stockholders elect only one class of directors each year. We believe that classification of our Board helps to assure the continuity of our business strategies and policies. The classified board provision could have the effect of making the replacement of incumbent directors more time consuming and difficult. At least two annual meetings of our stockholders generally are required to effect a change in a majority of our Board.
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Restrictions on Call of Special Meetings
Our bylaws provide that special meetings of stockholders can only be called by the Board, the Board Chair, the Chief Executive Officer or by the Secretary of the Company upon the written request of the holders of at least 50% of the shares of common stock issued and outstanding and entitled to vote at the meeting. These provisions may 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.
No Cumulative Voting
The certificate of incorporation does not authorize cumulative voting for the election of directors.
Transfer Agent
The transfer agent and registrar for our common stock is Colonial Stock Transfer Company, Inc.
Potential Listing
We have applied to list our shares of common stock on Nasdaq under the symbol “ELWT.” If our listing application is approved, we expect to list our common stock on Nasdaq upon consummation of the offering. No assurance can be given that our listing application will be approved or that our common stock will be listed on Nasdaq. This offering will occur only if Nasdaq approves the listing of our common stock.
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SHARES AVAILABLE FOR FUTURE SALE
Future sales of substantial amounts of our common stock in the public market could adversely affect prevailing market prices of our common stock from time to time and could impair our future ability to raise equity capital in the future. Furthermore, because only a limited number of shares will be available for sale shortly after this offering due to certain contractual and legal restrictions on resale described below, sales of substantial amounts of our common stock in the public market after such restrictions lapse, or the anticipation of such sales, could adversely affect the prevailing market price of our common stock and our ability to raise equity capital in the future.
Based upon the number of shares outstanding as of September 15, 2025, upon the closing of this offering, we will have outstanding, an aggregate of 6,617,647 shares of common stock, assuming the conversion of the SAFE but no exercise of the underwriters’ over-allotment option. All of the shares sold in this offering by us will be freely tradable without restrictions or further registration under the Securities Act, unless held by our affiliates, as that term is defined under Rule 144 under the Securities Act, or subject to lock-up agreements. The remaining shares of common stock outstanding upon the closing of this offering are restricted securities as defined in Rule 144. Restricted securities may be sold in the U.S. public market only if registered or if they qualify for an exemption from registration, including by reason of Rule 144 under the Securities Act. As a former “shell company,” as defined in Rule 12b-2 of the Exchange Act, Rule 144 will not be available for resales of our shares of common stock issued prior to this offering for a period of one-year from the date this registration statement was initially filed with the SEC, subject to satisfaction of the eligibility requirements outlined in Rule 144(i). These remaining shares will generally become available for sale in the public market as follows:
| · | no shares will be eligible for sale in the public market on the date of this prospectus; and | |
| · | 4,227,363 shares will be eligible for sale in the public market upon expiration of lock-up agreements 181 days after the closing date of this offering, provided that the shares are sold using an available exemption under the Securities Act. See “Underwriting — Lock-up Agreements” for more information. |
We may issue shares of common stock from time to time to raise additional funds or as consideration for future acquisitions, investments or other corporate purposes. In the event that any such financing, acquisition, investment or other transaction is significant, the number of shares of common stock that we may issue may in turn be significant. We may also grant registration rights covering those shares of common stock issued in connection with any such transaction.
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material U.S. federal income tax considerations relating to the purchase, ownership and disposition of our shares of common stock, but is for general information purposes only and does not purport to be a complete analysis of all the potential tax considerations. This summary is based upon the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), existing and proposed U.S. Treasury regulations promulgated thereunder, administrative rulings and judicial decisions, all as of the date hereof. These authorities may be changed, possibly retroactively, so as to result in U.S. federal income and estate tax consequences different from those set forth below. There can be no assurance that the Internal Revenue Service (the “IRS”) will not challenge one or more of the tax consequences described herein, and we have not obtained, and do not intend to obtain, an opinion of counsel or ruling from the IRS with respect to the U.S. federal income tax considerations relating to the purchase, ownership or disposition of our securities.
This summary does not address any alternative minimum tax considerations, any considerations regarding the tax on net investment income, or the tax considerations arising under the laws of any state, local or non-U.S. jurisdiction, or under any non-income tax laws, including U.S. federal gift and estate tax laws, except to the limited extent set forth below. In addition, this summary does not address tax considerations applicable to an investor's particular circumstances or to investors that may be subject to special tax rules, including, without limitation:
| · | banks, insurance companies or other financial institutions; | |
| · | tax-exempt organizations or governmental organizations; | |
| · | regulated investment companies and real estate investment trusts; | |
| · | controlled foreign corporations, passive foreign investment companies and corporations that accumulate earnings to avoid U.S. federal income tax; | |
| · | brokers or dealers in securities or currencies; | |
| · | traders in securities that elect to use a mark-to-market method of accounting for their securities holdings; | |
| · | persons that own, or are deemed to own, more than five percent of our capital stock (except to the extent specifically set forth below); | |
| · | tax-qualified retirement plans; | |
| · | certain former citizens or long-term residents of the United States; | |
| · | partnerships or entities or arrangements classified as partnerships for U.S. federal income tax purposes and other pass-through entities (and investors therein); | |
| · | persons who hold our securities as a position in a hedging transaction, “straddle,” “conversion transaction” or other risk reduction transaction or integrated investment; | |
| · | persons who do not hold our securities as a capital asset within the meaning of Section 1221 of the Code; or | |
| · | persons deemed to sell our securities under the constructive sale provisions of the Code. |
In addition, if a partnership (or entity or arrangement classified as a partnership for U.S. federal income tax purposes) holds our securities, the tax treatment of a partner generally will depend on the status of the partner and upon the activities of the partnership. Accordingly, partnerships that hold our securities, and partners in such partnerships, should consult their tax advisors.
You are urged to consult your own tax advisors with respect to the application of the U.S. federal income tax laws to your particular situation, as well as any tax consequences of the purchase, ownership and disposition of our common stock arising under the U.S. federal estate or gift tax laws or under the laws of any state, local, non-U.S., or other taxing jurisdiction or under any applicable tax treaty.
Consequences to U.S. Holders
The following is a summary of the U.S. federal income tax consequences that will apply to a U.S. holder of our securities. For purposes of this discussion, you are a U.S. holder if, for U.S. federal income tax purposes, you are a beneficial owner of our securities, other than a partnership, that is:
| · | an individual citizen or resident of the United States; | |
| · | a corporation or other entity taxable as a corporation created or organized in the United States or under the laws of the United States, any State thereof or the District of Columbia; | |
| · | an estate whose income is subject to U.S. federal income tax regardless of its source; or |
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| · | a trust (x) whose administration is subject to the primary supervision of a U.S. court and which has one or more "United States persons" (within the meaning of Section 7701(a)(30) of the Code) who have the authority to control all substantial decisions of the trust or (y) which has made a valid election to be treated as a "United States person." |
Distributions
As described in the section titled "Dividend Policy," we have never declared or paid cash dividends on our common stock and do not anticipate paying any dividends on our common stock in the foreseeable future. However, if we do make distributions on our common stock, those payments will constitute dividends for U.S. tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed both our current and our accumulated earnings and profits, the excess will constitute a return of capital and will first reduce your basis in our common stock, but not below zero, and then will be treated as gain from the sale of stock as described below under "Gain Sale, Exchange or Other Taxable Disposition of Common Stock."
Dividend income may be taxed to an individual U.S. holder at rates applicable to long-term capital gains, provided that a minimum holding period and other limitations and requirements are satisfied. Any dividends that we pay to a U.S. holder that is a corporation will qualify for a deduction allowed to U.S. corporations in respect of dividends received from other U.S. corporations equal to a portion of any dividends received, subject to generally applicable limitations on that deduction. U.S. holders should consult their own tax advisors regarding the holding period and other requirements that must be satisfied in order to qualify for the reduced tax rate on dividends or the dividends-received deduction.
Gain on Sale, Exchange or Other Taxable Disposition of Common Stock
A U.S. holder will generally recognize capital gain or loss on the sale, exchange or other taxable disposition of our common stock. The amount of gain or loss will equal the difference between the amount realized on the sale and such U.S. holder's tax basis in such common stock. The amount realized will include the amount of any cash and the fair market value of any other property received in exchange for such common stock. Gain or loss will be long-term capital gain or loss if the U.S. holder has held the common stock for more than one year. Long-term capital gains of non-corporate U.S. holders are generally taxed at preferential rates. The deductibility of capital losses is subject to certain limitations.
Consequences to Non-U.S. Holders
Gain on Sale, Exchange or Other Taxable Disposition of Common Stock
Subject to the discussion below regarding backup withholding and foreign accounts, a non-U.S. holder generally will not be required to pay U.S. federal income tax on any gain realized upon the sale, exchange or other taxable disposition of our common stock unless:
| · | the gain is effectively connected with the non-U.S. holder's conduct of a U.S. trade or business (and, if required by an applicable income tax treaty, the gain is attributable to a permanent establishment or fixed base maintained by the non-U.S. holder in the United States); | |
| · | the non-U.S. holder is a non-resident alien individual who is present in the United States for a period or periods aggregating 183 days or more during the calendar year in which the sale or disposition occurs and certain other conditions are met; or | |
| · | shares of our common stock, as applicable, constitute U.S. real property interests by reason of our status as a "United States real property holding corporation" (a USRPHC) for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding the non-U.S. holder's disposition of, or the non- U.S. holder's holding period for, our common stock, as applicable. |
We believe that we are not currently and will not become a USRPHC for U.S. federal income tax purposes, and the remainder of this discussion so assumes. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real property relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in the future. Even if we become a USRPHC, however, as long as our common stock is regularly traded on an established securities market, such common stock will be treated as U.S. real property interests only if the non-U.S. holder actually or constructively hold more than five percent of such regularly traded common stock at any time during the shorter of the five-year period preceding the non-U.S. holder's disposition of, or the non-U.S. holder's holding period for, our common stock.
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If the non-U.S. holder is described in the first bullet above, it will be required to pay tax on the net gain derived from the sale, exchange or other taxable disposition under regular graduated U.S. federal income tax rates, and a corporate non-U.S. holder described in the first bullet above also may be subject to the branch profits tax at a rate of 30%, or such lower rate as may be specified by an applicable income tax treaty. An individual non-U.S. holder described in the second bullet above will be required to pay a flat 30% tax (or such lower rate specified by an applicable income tax treaty) on the gain derived from the sale, exchange or other taxable disposition, which gain may be offset by U.S. source capital losses for the year (provided the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses). Non-U.S. holders should consult their own tax advisors regarding any applicable income tax or other treaties that may provide for different rules.
Federal Estate Tax
Shares of common stock beneficially owned by an individual who is not a citizen or resident of the United States (as defined for U.S. federal estate tax purposes) at the time of their death will generally be includable in the decedent's gross estate for U.S. federal estate tax purposes. Such shares, therefore, may be subject to U.S. federal estate tax, unless an applicable estate tax treaty provides otherwise.
Backup Withholding and Information Reporting
Generally, we must report annually to the IRS the amount of dividends paid to you, your name and address and the amount of tax withheld, if any. A similar report will be sent to you. Pursuant to applicable income tax treaties or other agreements, the IRS may make these reports available to tax authorities in your country of residence.
Payments of dividends on or of proceeds from the disposition of our common stock made to you may be subject to information reporting and backup withholding at a current rate of 28% unless you establish an exemption, for example, by properly certifying your non-U.S. status on an IRS Form W-8BEN or IRS Form W-8BEN-E or other applicable IRS Form W-8. Notwithstanding the foregoing, backup withholding and information reporting may apply if either we or our paying agent has actual knowledge, or reason to know, that you are a U.S. person.
Backup withholding is not an additional tax; rather, the U.S. federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may generally be obtained from the IRS, provided that the required information is furnished to the IRS in a timely manner.
Foreign Account Tax Compliance
The Foreign Account Tax Compliance Act ("FATCA") generally imposes withholding tax at a rate of 30% on dividends on and gross proceeds from the sale or other disposition of our common stock paid to a "foreign financial institution" (as specially defined under these rules), unless such institution enters into an agreement with the U.S. government to, among other things, withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding the U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners) or otherwise establishes an exemption. FATCA also generally imposes a U.S. federal withholding tax of 30% on dividends on and gross proceeds from the sale or other disposition of our common stock paid to a "non-financial foreign entity" (as specially defined for purposes of these rules) unless such entity provides the withholding agent with a certification identifying certain substantial direct and indirect U.S. owners of the entity, certifies that there are none or otherwise establishes an exemption. The withholding provisions under FATCA generally apply to dividends paid by us, and under current transitional rules are expected to apply with respect to the gross proceeds from a sale or other disposition of our securities on or after January 1, 2020. Under certain circumstances, a non-U.S. holder might be eligible for refunds or credits of such taxes. An intergovernmental agreement between the United States and an applicable foreign country may modify the requirements described in this paragraph. Non-U.S. holders should consult their own tax advisors regarding the possible implications of this legislation on their investment in our securities.
Each prospective investor should consult its own tax advisor regarding the particular U.S. federal, state and local and non-U.S. tax consequences of purchasing, owning and disposing of our common stock, including the consequences of any proposed changes in applicable laws.
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Craig-Hallum Capital Group LLC (“Craig-Hallum” or the “Representative”) is acting as the sole bookrunner in this offering. We intend to enter into an underwriting agreement with respect to the securities being offered. In connection with this offering and subject to certain terms and conditions, the underwriters named below will agree to purchase, and we will agree to sell, all of the securities in this offering to the underwriters.
| Underwriter | Number
of Shares |
|||
| Craig-Hallum Capital Group LLC | ||||
| Maxim Group LLC | ||||
| Total | 1,500,000 | |||
The Representative intends to agree to purchase all such securities other than those covered by the over-allotment option to purchase additional securities described below, if they purchase any such securities. The obligations of the Representative may be terminated upon the occurrence of certain events to be specified in the underwriting agreement. Furthermore, pursuant to the underwriting agreement, the underwriters’ obligations will be subject to customary conditions and representations and warranties contained in the underwriting agreement, such as receipt by the underwriters of officers' certificates and legal opinions.
The Representative will offer the securities, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by the underwriters’ counsel and other conditions specified in the underwriting agreement. The Representative will reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
Option to Purchase Additional Securities
We have granted the Representative an option to purchase from us, at the public offering price, less the underwriting discounts and commissions, up to additional shares of common stock within 45 days from the date of this prospectus.
Indemnification
We have agreed to indemnify the Representative against certain liabilities, including certain liabilities under the Securities Act and certain liabilities arising from breaches of representations and warranties contained in the underwriting agreement, or to contribute to payments that the Representative may be required to make in respect of those liabilities.
Determination of Offering Price
The public offering price of our shares of common stock will be determined by negotiations between us and the Representative; among the factors considered in determining such public offering price are our historical performance and capital structure, prevailing market conditions, the valuation multiples of publicly traded companies that the Representative believes to be comparable to us and overall assessment of our business.
Representative’s Compensation
We have agreed to sell the common stock to the Representative at the public offering price of $ per share, which represents the public offering price of the common stock set forth on the cover page of this prospectus, less a seven percent (7.0%) underwriting discount. Craig-Hallum will be due no less than 80% of the underwriting discount and Maxim Group LLC will be due no less than 20% of the underwriting discount.
We have also agreed to reimburse the Representative for accountable legal expenses incurred by them connection with this transaction in the amount of up to an aggregate of $200,000. We estimate that the total expenses of the offering payable by us, excluding the total underwriting discount, will be approximately $900,000.
Representative’s Warrants
The Representative shall also receive warrants to purchase shares of our common stock as compensation for their services (the “Representative’s Warrants”). The number of Representative’s Warrants will equal seven percent (7.0%) of the total number of shares of common stock being sold in this offering. The Representative’s Warrants will be exercisable six months after the effective date of this registration statement and will expire five years after such effective date. The Representative’s Warrants will be exercisable at a price equal to 115% of the public offering price in connection with this offering and the Representative will receive certain registration rights in connection with the shares of common stock issued upon the exercise of Representative’s Warrants. We have agreed to a one-time demand registration of the shares underlying the Representative’s Warrants at our expense and unlimited “piggyback” registration rights at our expense with respect to the shares underlying the Representative’s Warrants for a period of five years from the effective date. Pursuant to FINRA Rule 5110(e)(1), such Representative’s Warrants will be non-exercisable, and will therefore not be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such Representative’s Warrants, for a period of six (6) months after the date of the closing; provided, however, that the exceptions listed under FINRA Rule 5110(e)(2) shall apply.
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Discount, Commissions and Expenses
The Representative has advised us that it proposes to offer the common stock at the public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $ per share of common stock. After this offering, the public offering prices and concession to dealers may be changed by C-H. No such change shall change the amount of proceeds to be received by us as set forth on the cover page of this prospectus. The shares of common stock are offered by the Representative as stated herein, subject to receipt and acceptance by it and subject to its right to reject any order in whole or in part. The Representative has informed us that it does not intend to confirm sales to any accounts over which it exercises discretionary authority.
The following table summarizes the underwriting discount we will pay to the Representative. These amounts are shown assuming both no exercise and full exercise of the over-allotment option.
| Per Share | Total
without Over- Allotment Option | Total
with Over- Allotment Option(1) | ||||||||||
| Public offering price | $ | $ | $ | |||||||||
| Total underwriting discount(2) | $ | $ | $ | |||||||||
| Proceeds to us, before expenses | $ | $ | $ | |||||||||
| (1) | Assumes the over-allotment option is exercised in full for shares of common stock. |
| (2) | Represents an underwriting discount equal to seven percent (7.0%) of the gross offering proceeds. |
Right of First Refusal
We have also granted Craig-Hallum and Maxim Group LLC a right of first refusal, subject to certain conditions, to act in the same capacity and fee economics in connection with any public or private offering of securities for the eighteen-month period following the closing of the offering.
Lock-Up Agreements and Trading Restrictions
We have agreed to a six (6) month "lock-up", and our executive officers, directors and any other holders of ten percent (10.0%) or more of the outstanding shares of common stock (each, a “lock-up holder”) have agreed to a six (6) month "lock-up", from the pricing of this offering that they beneficially own, including the issuance of common stock upon the exercise of currently outstanding convertible securities and options and options which may be issued. This means that, for a period of six (6) months, as applicable, following such pricing date, subject to the following exceptions, the lock-up holders may not offer, sell, pledge or otherwise dispose of these securities without the prior written consent of Craig-Hallum:
| · | any transfers made by the lock-up holders (a) as a bona fide gift to any member of their immediate family or to a trust the beneficiaries of which are exclusively a lock-up holder or members of the lock-up holder’s immediate family, (b) by will or intestate succession upon the death of the lock-up holder or (c) as a bona fide gift to a charity or educational institution; |
| · | transactions relating to the common stock or other securities convertible into or exercisable or exchangeable for common stock acquired in open market transactions after completion of this offering; |
| · | facilitating the establishment of a trading plan on behalf of the lock-up holder pursuant to Rule 10b5-1 under the Exchange Act, for the transfer of common stock; |
| · | any transfers made by the lock-up holder to the Company to satisfy tax withholding obligations pursuant to the Company’s equity incentive plans or arrangements disclosed in this prospectus or to pay the exercise price of any options issued under any such plan or arrangement which expires during the lock-up; provided that any filing under Section 16 of the Exchange Act made in connection with such transfer shall clearly indicate in the footnotes thereto that the filing relates to the circumstances described in this clause; |
| · | any transfers in connection with a bona fide third-party tender offer, merger, consolidation or other similar transaction made to all holders of common stock involving a change of control of the Company, provided that in the event that the tender offer, merger, consolidation or other such transaction is not completed, the lock-up holder’s common stock shall remain subject to the restrictions included in the lock-up; |
| · | any distribution or other transfer by a partnership to its partners or former partners or by a limited liability company to its members or retired members or by a corporation to its stockholders or former stockholders or to any wholly-owned subsidiary of such corporation, or in each case to a controlled affiliate of the partnership, limited liability company or corporation; and |
| · | any transfers by operation of law, such as pursuant to a qualified domestic order or in connection with a divorce settlement. |
Representative has no present intention to waive or shorten the lock-up period; however, the terms of the lock-up agreements may be waived at their discretion. In determining whether to waive the terms of the lockup agreements, Representative may base its decision on its assessment of the relative strengths of the securities markets and companies similar to ours in general, and the trading pattern of, and demand for, our securities in general.
Stabilization
The rules of the SEC generally prohibit the Representative from trading in our securities on the open market during this offering. However, the Representative is allowed to engage in some open market transactions and other activities during this offering that may cause the market price of our securities to be above or below that which would otherwise prevail in the open market. These activities may include stabilization, short sales and over-allotments, syndicate covering transactions and penalty bids.
| · | Stabilizing transactions consist of bids or purchases made by the Representative for the purpose of preventing or slowing a decline in the market price of our securities while this offering is in progress. |
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| · | Short sales and over-allotments occur when the underwriters sell more of our common stock than it purchases from us in this offering. To cover the resulting short position, the Representative may exercise the over-allotment option described above or may engage in syndicate covering transactions. There is no contractual limit on the size of any syndicate covering transaction. The Representative will make available a prospectus in connection with any such short sales. Purchasers of shares sold short by the Representative are entitled to the same remedies under the federal securities laws as any other purchaser of shares covered by the registration statement. | |
| · | Syndicate covering transactions are bids for or purchases of our securities on the open market by the underwriters in order to reduce a short position. | |
| · | Penalty bids permit the Representative to reclaim a selling concession from a syndicate member when the shares of common stock originally sold by the syndicate member are purchased in a syndicate covering transaction to cover syndicate short positions. |
If the Representative commences these activities, it may discontinue them at any time without notice. The Representative will carry out any such transactions on the U.S. Exchange.
Listing
We have applied to list our shares of common stock on Nasdaq under the symbol “ELWT.” If our listing application is approved, we expect to list our common stock on Nasdaq upon consummation of the offering. No assurance can be given that our listing application will be approved or that our common stock will be listed on Nasdaq. This offering will occur only if Nasdaq approves the listing of our common stock.
Electronic Distribution
A prospectus in electronic format may be made available on websites or through other online services maintained by the underwriters of this offering, or by their affiliates. Other than the prospectus in electronic format, the information on any underwriters' website and any information contained in any other website maintained by an underwriter 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 Representative in its capacity as an underwriter.
Other Relationships
Representative and its affiliates may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us or our affiliates. They may in the future receive, customary fees and commissions for these transactions. In the course of its businesses, Representative and their affiliates may actively trade our securities or loans for its own account or for the accounts of customers, and, accordingly, Representative and their affiliates may at any time hold long or short positions in such securities or loans.
Except for services provided in connection with this offering, Representative has not provided any investment banking or other financial services during the 180-day period preceding the date of this prospectus and we do not expect to retain Representative to perform any investment banking or other financial services for at least 90 days after the date of this prospectus.
Maxim Cerith LLC (“Maxim Cerith”) is an investment holding company that is owned and controlled by certain partners of Maxim. Maxim Cerith owns 15.0% of the Company’s common stock. See “Security Ownership of Certain Beneficial Owners and Management.”
Selling Restrictions
No action has been taken in any jurisdiction (except in the United States) that would permit a public offering of our common stock, or the possession, circulation or distribution of this prospectus or any other material relating to us or our common stock in any jurisdiction where action for that purpose is required. Accordingly, our common stock (including their constituent common stock and warrants) may not be offered or sold, directly or indirectly, and this prospectus or any other offering material or advertisements in connection with our securities may be distributed or published, in or from any country or jurisdiction, except in compliance with any applicable rules and regulations of any such country or jurisdiction.
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Notice to Investors in the United Kingdom
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State") an offer to the public of any securities which are the subject of the offering contemplated by this prospectus may not be made in that Relevant Member State except that an offer to the public in that Relevant Member State of any such securities may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:
| (a) | to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; | |
| (b) | to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; | |
| (c) | by the underwriters to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive); or | |
| (d) | in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of these securities shall result in a requirement for the publication by the issuer or the underwriters of a prospectus pursuant to Article 3 of the Prospectus Directive. |
For the purposes of this provision, the expression an "offer to the public" in relation to any of the securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any such securities to be offered so as to enable an investor to decide to purchase any such securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression "Prospectus Directive" means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.
C-H has represented, warranted and agreed that:
| (a) | it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (the FSMA)) received by it in connection with the issue or sale of any of the securities in circumstances in which section 21(1) of the FSMA does not apply to the issuer; and |
| (b) | it has complied with and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the securities in, from or otherwise involving the United Kingdom. |
European Economic Area
In particular, this document does not constitute an approved prospectus in accordance with European Commission's Regulation on Prospectuses no. 809/2004 and no such prospectus is to be prepared and approved in connection with this offering. Accordingly, in relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (being the Directive of the European Parliament and of the Council 2003/71/EC and including any relevant implementing measure in each Relevant Member State) (each, a Relevant Member State), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the Relevant Implementation Date) an offer of securities to the public may not be made in that Relevant Member State prior to the publication of a prospectus in relation to such securities which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of securities to the public in that Relevant Member State at any time:
| · | to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; | |
| · | to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000; and (3) an annual net turnover of more than €50,000,000, as shown in the last annual or consolidated accounts; or | |
| · | in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3 of the Prospectus Directive. |
For the purposes of this provision, the expression an "offer of securities to the public" in relation to any of the securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe for the securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State. For these purposes the shares offered hereby are "securities."
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Israel
This document does not constitute a prospectus under the Israeli Securities Law, 5728-1968, or the Securities Law, and has not been filed with or approved by the Israel Securities Authority. In the State of Israel, this document is being distributed only to, and is directed only at, and any offer of the shares is directed only at, investors listed in the first addendum, or the Addendum, to the Israeli Securities Law, consisting primarily of joint investment in trust funds, provident funds, insurance companies, banks, portfolio managers, investment advisors, members of the Tel Aviv Stock Exchange, underwriters, venture capital funds, entities with equity in excess of NIS 50 million and "qualified individuals", each as defined in the Addendum (as it may be amended from time to time), collectively referred to as qualified investors (in each case purchasing for their own account or, where permitted under the Addendum, for the accounts of their clients who are investors listed in the Addendum). Qualified investors will be required to submit written confirmation that they fall within the scope of the Addendum, are aware of the meaning of same and agree to it.
Switzerland
The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (the SIX) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the securities or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering or marketing material relating to the offering, or the securities have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of securities has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (CISA). Accordingly, no public distribution, offering or advertising, as defined in CISA, its implementing ordinances and notices, and no distribution to any non-qualified investor, as defined in CISA, its implementing ordinances and notices, shall be undertaken in or from Switzerland, and the investor protection afforded to acquirers of interests in collective investment schemes under CISA does not extend to acquirers of securities
Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission (ASIC), in relation to the offering.
This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (the Corporations Act) and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act. Any offer in Australia of the securities may only be made to persons (the Exempt Investors) who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the securities without disclosure to investors under Chapter 6D of the Corporations Act. The securities applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring securities must observe such Australian on-sale restrictions.
This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.
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Notice to Prospective Investors in the Cayman Islands
No invitation, whether directly or indirectly, may be made to the public in the Cayman Islands to subscribe for our securities.
Taiwan
The securities have not been and will not be registered with the Financial Supervisory Commission of Taiwan pursuant to relevant securities laws and regulations and may not be sold, issued or offered within Taiwan through a public offering or in circumstances which constitutes an offer within the meaning of the Securities and Exchange Act of Taiwan that requires a registration or approval of the Financial Supervisory Commission of Taiwan. No person or entity in Taiwan has been authorized to offer, sell, give advice regarding or otherwise intermediate the offering and sale of the securities in Taiwan.
Notice to Prospective Investors in Hong Kong
The contents of this prospectus have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution in relation to the offer. If you are in any doubt about any of the contents of this prospectus, you should obtain independent professional advice. Please note that (i) our shares may not be offered or sold in Hong Kong, by means of this prospectus or any document other than to “professional investors” within the meaning of Part I of Schedule 1 of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) (SFO) and any rules made thereunder, or in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong) (CO) or which do not constitute an offer or invitation to the public for the purpose of the CO or the SFO, and (ii) no advertisement, invitation or document relating to our shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere) which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the SFO and any rules made thereunder.
Notice to Prospective Investors in the People’s Republic of China
This prospectus may not be circulated or distributed in the PRC and the shares may not be offered or sold, and will not offer or sell to any person for re-offering or resale directly or indirectly to any resident of the PRC except pursuant to applicable laws, rules and regulations of the PRC. For the purpose of this paragraph only, the PRC does not include Taiwan and the special administrative regions of Hong Kong and Macau.
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The validity of the common stock offered by this prospectus will be passed upon by Harter Secrest & Emery LLP, Rochester, NY. Certain legal matters in connection with this offering will be passed upon for the underwriter by Pryor Cashman LLP, New York, New York.
Freed Maxick P.C., an independent registered public accounting firm, has audited our consolidated financial statements as of December 31, 2024 and 2023 as set forth in its report (which includes an explanatory paragraph as to the Company’s ability to continue as a going concern). We have included our financial statements in the prospectus and elsewhere in the registration statement in reliance on Freed Maxick P.C.’s report, given on their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1, which includes amendments and exhibits, under the Securities Act and the rules and regulations under the Securities Act for the registration of common stock being offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all the information that is in the registration statement and its exhibits and schedules. Certain portions of the registration statement have been omitted as allowed by the rules and regulations of the SEC. Statements in this prospectus that summarize documents are not necessarily complete, and in each case you should refer to the copy of the document filed as an exhibit to the registration statement. All filings we make with the SEC are available on the SEC’s web site at www.sec.gov.
Upon completion of this offering, we will be subject to the information requirements of the Exchange Act and will file annual, quarterly and current event reports, proxy statements and other information with the SEC. We also maintain a website at www.elauwit.com. The information contained on, or that can be accessed through, our website is not part of, and is not incorporated into, this prospectus. We have included our website in this prospectus solely as an inactive textual reference, and you should not consider the contents of our website in making an investment decision with respect to our securities.
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ELAUWIT CONNECTION, INC.
Index to Consolidated Financial Statements
| Page | |
| Audited Financial Statements As of and For the Years Ended December 31, 2024 and 2023 | |
| Report of Independent Registered Public Accounting Firm (PCAOB ID: 317) | F-1 |
| Consolidated Balance Sheets | F-2 |
| Consolidated Statement of Operations | F-3 |
| Consolidated Statement of Mezzanine Equity and Stockholders’ Deficit | F-4 |
| Consolidated Statements of Cash Flows | F-5 |
| Notes to Consolidated Financial Statements | F-6 |
| Unaudited Interim Condensed Consolidated Financial Statements As of and For the Six Months Ended June 30, 2025 and June 30, 2024 | |
| Consolidated Balance Sheets | F-30 |
| Consolidated Statement of Operations | F-31 |
| Consolidated Statement of Mezzanine Equity and Stockholders’ Deficit | F-32 |
| Consolidated Statements of Cash Flows | F-33 |
| Notes to Unaudited Consolidated Financial Statements | F-34 |
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Elauwit Connection, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Elauwit Connection, Inc. (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, changes in mezzanine equity and stockholders’ deficit, and cash flows for each of the years then ended and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Emphasis of Matter – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and negative cash flows from operating activities since inception. This raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters also are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
| /s/ Freed Maxick P.C. | |
| We have served as the Company's auditor since 2024. | |
| Buffalo, New York | |
| April 7, 2025 |
F-1
ELAUWIT CONNECTION, INC
(in thousands, except share and par value data)
| December 31, 2024 | December 31, 2023 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 287 | $ | 329 | ||||
| Accounts receivable | 4,451 | 898 | ||||||
| Inventories | 1,606 | 156 | ||||||
| Network financing receivable, current | 67 | — | ||||||
| Prepaid expenses and other current assets | 258 | — | ||||||
| Total current assets | 6,669 | 1,383 | ||||||
| Network financing receivable | 446 | — | ||||||
| Lease right-of-use assets, net | 55 | — | ||||||
| Net investment in lease | 531 | — | ||||||
| Other non-current assets | 25 | 25 | ||||||
| TOTAL ASSETS | $ | 7,726 | $ | 1,408 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 1,914 | $ | 391 | ||||
| Accrued expenses and other current liabilities | 76 | 36 | ||||||
| Related party debt, current | 695 | 546 | ||||||
| Related party payables, current | 240 | 120 | ||||||
| Deferred revenue | 6,215 | 1,880 | ||||||
| Phantom stock liability | — | 116 | ||||||
| Operating lease liabilities, current | 36 | — | ||||||
| Total current liabilities | 9,176 | 2,973 | ||||||
| Related party debt, net of current | 2,725 | 673 | ||||||
| Related party payables, net of current | 342 | 560 | ||||||
| Operating lease liabilities, net of current | 19 | — | ||||||
| Total liabilities | 12,262 | 4,322 | ||||||
| Commitments and contingencies (see Note 11) | ||||||||
| Mezzanine Equity | ||||||||
| Series Seed Convertible Preferred Stock, $0.001 par value, 0 and 250,000 shares issued and outstanding as of December 31, 2024 and 2023 (liquidation preference of $0 and $1,000 as of December 31, 2024 and 2023) | — | 1,000 | ||||||
| Series B Convertible Preferred Stock, $0.001 par value, 0 and 176,932 shares issued and outstanding as of December 31, 2024 and 2023 (liquidation preference of $0 and $2,382 as of December 31, 2024 and 2023) | — | 2,382 | ||||||
| Stockholders' Deficit | ||||||||
| Preferred stock, $0.0001 par value, 577,067 authorized; none designated as of December 31, 2024; 250,000 designated as Series Seed Convertible Preferred Stock, 176,932 designated as Series B Convertible Preferred Stock as of December 31, 2023 | — | — | ||||||
| Common stock, $0.0001 par value, 1,032,067 authorized, 0 and 680,000 shares (2,800,206 post share exchange) issued as of December 31, 2024 and 2023 | — | — | ||||||
| Class A common stock, $0.00001 par value, 7,000,000 authorized, 2,497,950 and 0 shares issued as of December 31, 2024 and 2023 | — | — | ||||||
| Class B common stock, $0.00001 par value, 3,000,000 authorized, 2,502,050 and 0 shares issued as of December 31, 2024 and 2023 | — | — | ||||||
| Stock subscription receivable | (30 | ) | (30 | ) | ||||
| Additional Paid-in Capital | 5,859 | 625 | ||||||
| Accumulated deficit | (10,365 | ) | (6,891 | ) | ||||
| Total stockholders' deficit | (4,536 | ) | (6,296 | ) | ||||
| TOTAL LIABILITIES, MEZZANINE EQUITY, AND STOCKHOLDERS’ DEFICIT | $ | 7,726 | $ | 1,408 | ||||
F-2
ELAUWIT CONNECTION, INC
Consolidated Statements of Operations
(in thousands, except share and par value data)
| Years Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenues | ||||||||
| Revenues | $ | 8,495 | $ | 3,923 | ||||
| Cost of revenues | ||||||||
| Cost of revenue | 7,331 | 3,728 | ||||||
| Gross profit | 1,164 | 195 | ||||||
| Operating expenses | ||||||||
| Selling, general and administrative | 4,300 | 2,740 | ||||||
| Sales and marketing | 81 | 36 | ||||||
| Research and development | 1 | 11 | ||||||
| Total operating expenses | 4,382 | 2,787 | ||||||
| Operating loss | (3,218 | ) | (2,592 | ) | ||||
| Other expense, net | ||||||||
| Interest expense, net | (255 | ) | (98 | ) | ||||
| Total other expense, net | (255 | ) | (98 | ) | ||||
| Loss from operations before income taxes | (3,473 | ) | (2,690 | ) | ||||
| Income tax expense | 1 | — | ||||||
| Net loss | $ | (3,474 | ) | $ | (2,690 | ) | ||
| Net loss attributable to common stockholders | $ | (3,474 | ) | $ | (2,690 | ) | ||
| Net loss per share attributable to common stockholders, basic and diluted | $ | (0.98 | ) | $ | (0.96 | ) | ||
| Weighted average common shares used in computing net loss per share, basic and diluted | 3,545,691 | 2,800,206 | ||||||
See accompanying notes to consolidated financial statements.
F-3
ELAUWIT CONNECTION, INC
Consolidated Statements of Mezzanine Equity and Stockholders' Deficit
(in thousands, except share data)
For the Years Ended December 31, 2024 and 2023
| Mezzanine Equity | Common Stock | ||||||||||||||||||||||||||||||||||||||||||||
| Series Seed Convertible Preferred Stock |
Series B
Convertible Preferred Stock | Common Stock | Class A
Common Stock | Class B
Common Stock | |||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Additional Paid-In- Capital | Accumulated Deficit | Stock Subscription Receivable | Total Stockholders' Deficit | ||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | 250,000 | $ | 1,000 | 50,000 | $ | 500 | 2,800,206 | $ | — | — | $ | — | — | $ | — | $ | 625 | $ | (4,201 | ) | $ | — | $ | (3,576 | ) | ||||||||||||||||||||
| Issuance of Series B Convertible Preferred Stock | — | — | 126,932 | 1,882 | — | — | — | — | — | — | — | — | (30 | ) | (30 | ) | |||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | — | — | — | (2,690 | ) | — | (2,690 | ) | |||||||||||||||||||||||||||||
| Balance at December 31, 2023 | 250,000 | $ | 1,000 | 176,932 | $ | 2,382 | 2,800,206 | $ | — | — | $ | — | — | $ | — | $ | 625 | $ | (6,891 | ) | $ | (30 | ) | $ | (6,296 | ) | |||||||||||||||||||
| Repurchase and retirement of Series Seed Preferred Stock, at cost | (250,000) | (1,000 | ) | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Issuance of Series B Convertible Preferred Stock | — | — | 143,590 | 2,378 | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Issuance of Series B Convertible Preferred Stock to pay for services | 6,545 | 108 | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Conversion of preferred and phantom stock into common stock and exchange at 4.11795 in connection with the reverse recapitalization | — | — | (327,067 | ) | (4,868 | ) | (2,800,206 | ) | — | 2,497,950 | — | 2,502,050 | — | 5,234 | — | — | 5,234 | ||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | — | — | — | (3,474 | ) | — | (3,474 | ) | |||||||||||||||||||||||||||||
| Balance at December 31, 2024 | — | $ | — | — | $ | — | — | $ | — | 2,497,950 | $ | — | 2,502,050 | $ | — | $ | 5,859 | $ | (10,365 | ) | $ | (30 | ) | $ | (4,536 | ) | |||||||||||||||||||
See accompanying notes to consolidated financial statements.
F-4
ELAUWIT CONNECTION, INC
Consolidated Statements of Cash Flows
(in thousands)
| For the Years Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (3,474 | ) | $ | (2,690 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | — | 3 | ||||||
| Right of use asset amortization expense | 17 | — | ||||||
| Issuance of Series B Preferred Stock for services | 108 | — | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (3,553 | ) | 539 | |||||
| Network financing receivable | (513 | ) | — | |||||
| Inventories | (1,450 | ) | (156 | ) | ||||
| Prepaid expenses and other assets | (258 | ) | 9 | |||||
| Accounts payable | 1,523 | (531 | ) | |||||
| Accrued expenses | 40 | 33 | ||||||
| Deferred revenue | 4,335 | 704 | ||||||
| Related party payables | (98 | ) | (23 | ) | ||||
| Net investment in lease | (531 | ) | — | |||||
| Lease right-of-use lease liabilities payments | (17 | ) | — | |||||
| Net cash used in operating activities | (3,871 | ) | (1,996 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Cash acquired from reverse recapitalization with DeltaMax | 250 | — | ||||||
| Net cash provided by investing activities | 250 | — | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from related party debt | 2,495 | 630 | ||||||
| Repayment of related party debt | (1,294 | ) | (246 | ) | ||||
| Proceeds from issuance of Series B stock | 2,378 | 1,852 | ||||||
| Net cash provided by financing activities | 3,579 | 2,236 | ||||||
| NET CHANGE IN CASH | (42 | ) | 240 | |||||
| CASH, beginning of year | 329 | 89 | ||||||
| CASH, end of year | $ | 287 | $ | 329 | ||||
| SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION: | ||||||||
| Cash payments for income taxes | $ | 2 | $ | — | ||||
| Cash payments for interest | $ | 302 | $ | 98 | ||||
| NON-CASH INVESTING AND FINANCING TRANSACTIONS: | ||||||||
| Lease liabilities arising from obtaining right-of-use asset | $ | 72 | $ | — | ||||
| Conversion of Series A Convertible Preferred Stock for common stock in conjunction with reverse recapitalization | $ | 5,118 | $ | — | ||||
| Phantom stock liability conversion as part of reverse recapitalization | $ | 116 | $ | — | ||||
| Repurchase of Series seed stock for issuance of note payable | $ | 1,000 | $ | — | ||||
See accompanying notes to consolidated financial statements.
F-5
ELAUWIT CONNECTION, INC
Notes to Consolidated Financial Statements
Note 1. Organization and Nature of Operations
The Company
Elauwit Connection, Inc ("Elauwit" or the "Company") is a privately held technology services company that specializes in providing advanced connectivity solutions for buildings by enhancing internet and network infrastructure for property owners and managers. Elauwit provides these solutions by designing and implementing high-speed internet, video, and other technology solutions to ensure seamless connectivity for residents and tenants, with the goal of putting more control in the hands of property owners and allowing them to offer a superior internet experience as a key amenity.
On September 13, 2024 (the “Closing Date”), Elauwit Connection, Inc, a Delaware Corporation, incorporated in December 2019, ("Legacy Elauwit") and DeltaMax, Inc. ("DeltaMax"), a privately-held Delaware corporation, consummated a merger transaction pursuant to which Legacy Elauwit was merged with and into the DeltaMax (the “Merger”), with the DeltaMax being the legal successor or surviving corporation in the Merger (the “Closing”). As part of the Merger DeltaMax changed its name to Elauwit Connection, Inc. On the Closing Date, Legacy Elauwit and DeltaMax consummated the Merger and the transactions contemplated thereby, including the issuance of 2,497,950 Class A shares and 2,502,050 Class B shares of Common Stock (the “Merger Shares”), which included 750,000 Class B shares to DeltaMax, with the remainder to the owners of Legacy Elauwit as a result of a 4.11795 share exchange. Additionally, a previous liability associated with Phantom Stock of $116 thousand was settled and exchanged for 102,948 Class B shares. Prior to the merger, DeltaMax was a non-operating shell company.
The Merger was accounted for as a reverse recapitalization of the Company because Legacy Elauwit has been determined to be the accounting acquirer under FASB ASC Topic 805 - Business Combinations. Under this method of accounting, DeltaMax is treated as the “acquired” company for financial reporting purposes. This determination was primarily based on holders of Legacy Elauwit capital stock comprising a relative majority of the voting power of the Company upon consummation of the Merger and will comprise the majority of the governing body of the Company, Legacy Elauwit's senior management comprising the senior management of the Company, and Legacy Elauwit operations comprising the ongoing operations of the Company. Accordingly, for accounting purposes, the financial statements of the Company represent a continuation of the financial statements of Legacy Elauwit, with the exception of legal capital, with the Merger being treated as the equivalent of Legacy Elauwit issuing shares for the net assets of DeltaMax, accompanied by a recapitalization. As such, periods prior have common stock restated at the 4.11795 share exchange ratio of Legacy Elauwit shares for Merger Shares. The net assets of DeltaMax, which included only cash of $250 thousand, were recognized as of the Closing at historical cost, with no goodwill or other intangible assets recorded because the transaction did not constitute the acquisition of a business. Operations prior to the Merger are presented as those of Legacy Elauwit and the accumulated deficit of Legacy Elauwit has been carried forward after Closing. All issued and outstanding securities of DeltaMax upon Closing were treated as issuances of securities of the Company upon the consummation of the Merger.
After the Merger and looking forward, Legacy Elauwit's product lines are the primary focus of the Company's operations. Accordingly, the Company’s current activities primarily relate to Legacy Elauwit’s historical business which comprises the design and implementation of high-speed internet, video, and other technology solutions to ensure seamless connectivity for residents and tenants.
Going Concern
As of December 31, 2024, the Company had cash of approximately $0.3 million. For the year ended December 31, 2024, the Company used approximately $3.9 million in cash for operating activities. The Company has incurred recurring net losses from operations and negative cash flows from operating activities since inception. As of December 31, 2024, the Company had an accumulated deficit of approximately $10.4 million.
F-6
Management expects operating losses and negative cash flows to continue for the foreseeable future as the Company invests in its commercial capabilities. While the Company's working capital and current debt indicate a substantial doubt regarding the Company’s ability to continue as a going concern, the Company has historically, from time to time, satisfied and may continue to satisfy certain short-term liabilities through the issuance of common and preferred stock, and other related party support, thus reducing our cash requirement to meet our operating needs. Management will continue to monitor its operating costs and seek to reduce its current liabilities. Such actions may impair its ability to proceed with certain strategic activities. If expected revenues are not adequate to fund planned expenditures, or if the Company is unsuccessful at raising cash through future capital transactions, including proceeds from our current planned initial public offering ("IPO") transaction, it may be required to reduce its spending rate to align with expected revenue levels and cash reserves, although there can be no guarantee that it will be successful in doing so. Accordingly, the Company may be required to raise additional cash through debt or equity transactions. It may not be able to secure financing in a timely manner or on favorable terms, if at all.
As a result of these factors, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date the consolidated financial statements are issued. The Company’s consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. All subsidiaries were dormant with no activities and were dissolved during 2024.
Basis of Presentation
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Financial Accounting Standards Board (“FASB”) establishes these principles to ensure financial condition, results of operations, and cash flows are consistently reported. Any reference in these notes to applicable accounting guidance is meant to refer to the authoritative nongovernmental GAAP as found in the FASB Accounting Standards Codification ("ASC").
Use of Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates made by management include assumptions used in estimates of future credit loses under the current expected credit loss impairment model, valuation of Class A and Class B common stock, valuation of Series Seed and Series B Convertible Preferred Stock, valuation of Phantom Stock Awards, revenue recognition, including cost estimates and percentage complete, provisions for income taxes and related valuation allowances and tax uncertainties. On an ongoing basis, management reviews these estimates and assumptions based on currently available information. Actual results could differ from these estimates.
F-7
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of demand deposits with financial institutions and accounts receivable. The Company maintains cash balances with financial institutions, which at times, are in excess of amounts insured by the Federal Deposit Insurance Corporation. To date, the Company has not experienced any collection loss with these institutions.
Accounts receivable are subject to the risk that the Company’s customers will not pay the amounts due. The Company has established credit and collection policies to mitigate that risk. As of December 31, 2024, the Company had two customers that accounted for approximately 65% of the Company’s accounts receivable balance. As of December 31, 2023, the Company had five customers that accounted for approximately 81% of the Company's accounts receivable balance. During the year ended December 31, 2024, the Company had three customers that accounted for approximately 36% of the Company's total revenues. During the year ended December 31, 2023, the Company had one customer that accounted for approximately 66% of the Company's total revenues.
Segment Reporting
The Company determines its reportable segments in accordance with FASB ASC Topic 280, Segment Reporting (“ASC 280”). The Company evaluates a reporting segment by first identifying its operating segments under ASC 280. The Company then evaluates each operating segment to determine if it includes one or more components that constitute a business. If there are components within an operating segment that meet the definition of a business, the Company evaluates those components to determine if they must be aggregated into one or more reportable segments. If applicable, when determining if it is appropriate to aggregate different operating segments, the Company determines if the segments are economically similar and, if so, the operating segments are aggregated.
The Company adopted the provisions of FASB ASU 2023-07 as of January 1, 2024, for the fiscal years ended December 31, 2024 and 2023. The Company has one operating segment and one reportable segment. The Company identifies the Chief Operating Decision Maker ("CODM") to be a group consisting of the Chief Executive Officer ("CEO") and the Chief Financial Officer ("CFO"). The CODM reviews financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company’s principal operations are in the United States. The CODM utilized and regularly reviews consolidated gross profit and loss from operations as measures of segment profit or loss. These measure enable the CEO and CFO to access the overall level of available resources and determine how best to deploy resources.
F-8
A reconciliation of total segment revenues to total consolidated revenues and of total segment gross margin and segment operating loss which aggregates to total consolidated loss from operations is as follows:
| For the Year ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenues | $ | 8,495 | $ | 3,923 | ||||
| Less: | ||||||||
| Cost of revenues | 7,331 | 3,728 | ||||||
| Segment gross margin | 1,164 | 195 | ||||||
| Less(1): | ||||||||
| Segment compensation expenses (2) | 2,095 | 1,368 | ||||||
| Segment travel expenses (3) | 228 | 210 | ||||||
| Other segment expenses (4) | 2,059 | 1,209 | ||||||
| Segment operating loss | $ | (3,218 | ) | $ | (2,592 | ) | ||
| (1) | The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. |
| (2) | Compensation related expenses primarily include salaries and related payroll tax expenses that are directly attributed to generating revenues. |
| (3) | Travel related expenses primarily include travel expenses that are directly attributed to generating revenues. |
| (4) | Other segment expenses for each reportable segment includes all other operating expenses such as management fees, professional fees, insurance, rent and other. |
The measure of segment assets is reported in the accompanying consolidated balance sheets as “Total assets.”
Cash and Cash Equivalents
The Company considers all short-term, highly liquid investments with original maturities of 90 days or less to be cash equivalents. The Company does not maintain deposits in financial institutions in excess of federally insured limits of $250 thousand at December 31, 2024. The Company did not have any cash equivalents at December 31, 2024 or December 31, 2023.
Accounts Receivable, Unbilled Receivables, Network Financing Receivables and Allowance for Credit Losses
Trade accounts receivable are recorded at invoiced amounts, net of allowance for expected credit losses, if applicable, and are unsecured and do not bear interest. In addition, unbilled and network financing receivables are derived from the allocation of contract consideration for services, such as network design and installation, recognized over time, which payment of such consideration received over the contract term, generally between one and several years. Unbilled and network financing receivables are presented net of allowances for credit losses. Unbilled receivables are generally billed within a few months subsequent to the balance sheet date. Network financing receivables are billed monthly in accordance with contract terms, generally over a period of five to seven years, concurrent with internet network services.
F-9
Under the current expected credit losses ("CECL") impairment model, the Company develops and documents its allowance for credit losses on trade accounts receivable, unbilled receivables, and network financing receivables based on historical losses. The determination of portfolio segments is based primarily on the qualitative consideration of the credit risks driven by the customer type and macroeconomic factors, if any are deemed to drive credit loss. The Company also considers reasonable and supportable current information in determining its estimated loss rates, such as external forecasts, macroeconomic trends or other factors including customers’ credit risk and historical loss experience. At January 1, 2023, December 31, 2023 and December 31, 2024, no macroeconomic factors were noted that would impact the Company’s expected credit losses given the short term nature of trade accounts receivable.
The adequacy of the allowance is evaluated on a regular basis. Account balances are written off after all means of collection are exhausted and the balance is deemed uncollectible. Subsequent recoveries are credited to the allowance. Changes in the allowance are recorded as adjustments to bad debt expense in the period incurred. For the years ended December 31, 2024 and 2023, the Company recorded no allowance for doubtful debt for accounts receivable.
Inventories
The Company's inventory is stated at the lower of cost and net realizable value, using specific identification method. The Company's inventory consists completely of items procured but not yet assigned or shipped to a specific job site and finished goods inventory. Indirect costs relating to long-term contracts, which include expenses such as general and administrative, are charged to expense as incurred. The Company had no material write-offs of inventory during the years ended December 31, 2024 and 2023 and has not recorded an inventory reserve.
Deferred Financing Costs
The Company allocates offering costs to the different components of the capital raise on a pro rata basis. Any offering costs allocated to common stock are charged directly to additional paid-in capital.
The Company complies with the requirements of FASB ASC Topic 340, Other Assets and Deferred Costs (“ASC 340”) and SAB 5A - Expenses of Offering. Offering costs, which consist mainly of legal, accounting and consulting fees directly attributable to the issuance of an equity contract to be classified in equity are recorded as a reduction in equity. For the years ended December 31, 2024 and December 31, 2023, there were no deferred financing costs.
Distinguishing Liabilities from Equity
The Company relies on the guidance provided by FASB ASC Topic 480, Distinguishing Liabilities from Equity ("ASC 480"), to classify certain redeemable and/or convertible instruments. The Company first determines whether a financial instrument should be classified as a liability. The Company will determine the liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument, other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of its equity shares.
Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the consolidated balance sheet. The Company will determine temporary equity classification if the redemption of the financial instrument is outside the control of the Company (i.e. at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity.
Revenue Recognition
Overview
The Company generates revenue from the following sources: (1) network design and installation and 2) internet network services.
F-10
In accordance with FASB ASC 606 “Revenue Recognition” ("ASC 606"), the Company recognizes revenue from contracts with customers using a five-step model, which is described below:
| · | identify the customer contract; |
| · | identify performance obligations that are distinct; |
| · | determine the transaction price; |
| · | allocate the transaction price to the distinct performance obligations; and |
| · | recognize revenue as the performance obligations are satisfied. |
Identify the customer contract
A customer contract is generally identified when there is approval and commitment from both the Company and its customer, the rights have been identified, payment terms are identified, the contract has commercial substance and collectability is probable. Specifically, the Company obtains written/electronic signatures on contracts with customers.
Identify performance obligations that are distinct
A performance obligation is a promise by the Company to provide a distinct good or service or a series of distinct goods or services. A good or service that is promised to a customer is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and a company’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. The Company's network design and installation revenue stream requires significant services to integrate complex activities and equipment into a single deliverable, and is therefore generally accounted for as one distinct performance obligation. The Company's internet network services revenue stream is composed of two distinct performance obligations: (1) wired/wireless internet services and (2) hardware and internet services maintenance. The hardware and internet services maintenance performance obligation is a stand-ready obligation.
Determine the transaction price
The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The transaction price for the network design and installation is fixed based on the amount stated in the contract. For contracts in which the Company finances the construction of the network, any interest collected by the Company is excluded from the transaction price. The transaction price for the bulk internet services is determined by the monthly per unit price times the number of units stated in the contract.
The Company evaluates its contracts with customers for the presence of significant financing components. If a significant financing component is identified in a contract and provides a financing benefit to the customer, the transaction price for the contract is adjusted to account for the financing portion of the arrangement, which is recognized as interest income over the financing term using the effective interest method. In determining the appropriate interest rates for significant financing components, the Company evaluates the credit profile of the customer and prevailing market interest rates and selects an interest rate in which it believes would be charged to the customer in a separate financing arrangement over a similar financing term.
Allocate the transaction price to distinct performance obligations
When allocating the contract’s transaction price, we consider each distinct performance obligation. As the contracts contain multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation based on the standalone selling price, which is stipulated in the contract.
F-11
Recognize revenue as the performance obligations are satisfied
Revenue related to network design and installation revenue stream is recognized over time as the Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced date. The best measure of progress towards completion for this performance obligation is costs incurred to date, as the Company has reliable information about the costs it expects to incur in total and the costs actually incurred and because it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. For over time contracts using a cost-to-cost measure of progress, we have an estimate at completion ("EAC") process in which management reviews the progress and execution of our performance obligations. This EAC process requires management judgment relative to assessing risks, estimating contract revenue and costs, and making assumptions for schedule and technical issues. Accordingly, the Company will use an input method of costs incurred to date relative to the estimated total costs to satisfy the performance obligation to record revenue.
Revenue related to wired/wireless internet services is recognized over time as the customer simultaneously receives and consumes the benefits provided by the Company’s performance as the Company performs. The best measure of progress towards completion for this performance obligation is the passage of time as the Company’s efforts are used evenly throughout the performance of the wired and wireless internet services performance obligation. Accordingly, the Company will use an input method of time (in days) elapsed to record revenue as the performance obligation is satisfied evenly over time as the same internet services are provided daily. Revenue will be recorded ratably over the contract term.
Revenue related to hardware and internet services maintenance is recognized over time as the customer simultaneously receives and consumes the benefits provided by the Company’s performance as the Company performs. This performance obligation is a stand-ready obligation in which the Company expects the customer to receive and consume the benefits of the hardware and internet services maintenance throughout the contract period. Accordingly, the Company will use an input method of time (in days) elapsed to record revenue. Management notes that as this is a stand-ready obligation, the performance obligation is satisfied evenly over a period of time, and revenue will be recorded ratably over the contract term.
Costs to obtain contracts
The Company incurs incremental costs to obtain contracts with their customers for certain contracts, specifically sales commissions. These costs are initially capitalized and amortized over the contract term. As of December 31, 2024, the Company had approximately $148 thousand of costs to obtain contracts capitalized which are presented within 'Prepaid expenses and other current assets'. The Company did not incur any costs to obtain contracts during the year ended December 31, 2023.
Significant Judgments
The Company enters into contracts that may include various combinations of equipment, services and network installation. Contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Once the Company determines the performance obligations, it determines the transaction price, which includes estimating the amount of variable consideration to be included in the transaction price, if any. The Company then allocates the transaction price to each performance obligation in the contract based on the stand alone selling price. The corresponding revenue is recognized as the related performance obligations are satisfied. As it relates to Network design and installation revenue, each reporting period, the Company estimates the amount of costs incurred to date as a percentage of total estimated costs to determine the amount of revenue to recognize.
F-12
Deferred Revenue and Unbilled Receivables
The timing of revenue recognition, billings and collections results in receivables, unbilled receivables and contract liabilities on our consolidated balance sheets. Under typical payment terms for our contracts accounted for over time, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals. For certain contracts, billings occur subsequent to revenue recognition, resulting in unbilled receivables. Under ASC 606, unbilled receivables constitute contract assets. For certain contracts, payment terms typically require advanced payments and deposits. Under ASC 606, payments received from customers in excess of revenue recognized to-date results in a contract liability.
Shipping and Handling Costs
Shipping and handling costs charged to customers are included in revenue, while all other shipping and handling costs are included in general and administrative expenses in the accompanying consolidated statements of operations.
Advertising and Marketing
Advertising costs are expensed as incurred and included in selling, general and administrative expenses. Advertising costs were $80 thousand and $36 thousand during the year ended December 31, 2024 and 2023, respectively.
Leases
Operating lease assets are included within right-of-use operating lease asset and operating lease liabilities are included in current portion of right-of-use operating lease obligation and non-current portion of right-of-use operating lease obligation on the consolidated balance sheets as of December 31, 2024 and 2023. The Company has elected not to present short-term leases as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that the Company is reasonably certain to exercise. Lease payments for short-term leases are recognized on a straight-line basis over the term of the lease. All other lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because the Company’s lease does not provide an implicit rate of return, the Company used an incremental borrowing rate based on the information available at adoption date in determining the present value of lease payments.
The Company assesses whether an arrangement is a lease or contains a lease at inception. For arrangements considered leases or that contain a lease that is accounted for separately, the Company determines the classification and initial measurement of the right-of-use asset and lease liability at the lease commencement date, which is the date that the underlying asset becomes available for use. The Company has elected to account for non-lease components associated with its leases and lease components as a single lease component.
The Company recognizes a right-of-use asset, which represents the Company’s right to use the underlying asset for the lease term, and a lease liability, which represents the present value of the Company’s obligation to make payments arising over the lease term. The lease liability is based on the present value of its unpaid minimum lease payments over the lease term, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the incremental borrowing rate which is the rate the Company pays to borrow on a collateralized basis.
Share-Based Compensation
The Company has a share-based compensation plans for employees. The share-based compensation includes awards of phantom stock which are accounted for under FASB ASC Topic 718, Compensation - Stock Compensation ("ASC 718"). The Company recognizes compensation cost, net of estimated forfeitures, for phantom stock awards on a straight-line basis over the requisite service period of each award. Awards that are liability classified are remeasured at each reporting period.
F-13
Income Taxes
The Company utilizes an asset and liability approach for financial accounting and reporting for income taxes. The provision for income taxes is based upon income or loss after adjustment for those permanent items that are not considered in the determination of taxable income. Deferred income taxes represent the tax effects of differences between the financial reporting and tax basis of the Company’s assets and liabilities at the enacted tax rates in effect for the years in which the differences are expected to reverse.
The Company evaluates the recoverability of deferred tax assets and establishes a valuation allowance when it is more likely than not that some portion or all the deferred tax assets will not be realized. Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liabilities. In management’s opinion, adequate provisions for income taxes have been made. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.
Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. As of December 31, 2024 and 2023, no liability for unrecognized tax benefits was required to be recorded.
The Company’s policy for recording interest and penalties associated with tax audits is to record such items as a component of operating expenses. There were no amounts accrued for penalties and interest for the years ended December 31, 2024 and 2023. The Company does not expect its uncertain tax positions to change during the next twelve months. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.
The Company has identified its United States federal tax returns, and its state and provincial tax returns in North Carolina, Georgia and Michigan as its “major” tax jurisdictions. The Company is in the process of filing its United States federal and state corporate tax returns for the year ended December 31, 2024. Net operating losses for these periods will not be available to reduce future taxable income until the returns are filed.
Basic and Diluted Net Loss per Share of Common Stock
The Company calculates basic net loss per share by dividing net loss by the weighted average number of common shares outstanding during the reporting period. A net loss cannot be diluted so when the Company is in a net loss position, basic and diluted loss per common share are the same. If in the future the Company achieves profitability, the denominator of a diluted earnings per common share calculation will include both the weighted average number of shares outstanding and the number of common stock equivalents, if the inclusion of such common stock equivalents would be dilutive. Anti-dilutive common stock equivalents excluded from the computation of diluted net loss per share include the Phantom Stock, Series Seed Stock and Series Convertible B Preferred Stock.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC Topic 820, Fair Value Measurements and Disclosures” (“ASC 820”), approximates the carrying amounts in the balance sheets, primarily due to their short-term nature. Based upon current borrowing rates with similar maturities the carrying value of long-term debt, and related party loans payable approximates fair value.
F-14
Recently Adopted Accounting Pronouncements
Recently Issued Accounting Pronouncements Adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses. The amendments in this update introduce a new accounting model to measure credit losses for financial assets measured at amortized cost. The FASB has also issued additional ASUs to clarify the scope and provide additional guidance for ASU 2016-13. Credit losses for financial assets measured at amortized cost should be determined based on the total current expected credit losses over the life of the financial asset or group of financial assets. In effect, the financial asset or group of financial assets should be presented at the net amount expected to be collected. Credit losses will no longer be recorded under the incurred loss model for financial assets measured at amortized cost.
The amendments were effective on January 1, 2023 for the Company. While the standard modifies the measurement of the allowance for credit losses, it does not alter the credit risk of our trade or unbilled receivables. The impact of ASU 2016-13 did not have a material impact on the Company's consolidated financial statements.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08). This ASU states that if the entity is the acquirer in a business combination under Topic 805, then the entity must recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. For non-public entities, the ASU is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company adopted ASU 2021-08 on January 1, 2024, and the impact was not material on the Company’s consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"), which requires public entities to disclose consistent categories and greater disaggregation of information in the rate reconciliation and for income taxes paid. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is required to adopt this standard prospectively in fiscal year 2025 for the annual reporting period ending December 31, 2025. The accounting pronouncement is not expected to have a material impact on the Company's related disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement (Topic 220): Reporting Comprehensive Income - Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses ("ASU 2024-03"), that requires public companies to disclose, in interim and reporting periods, additional information about certain expenses in the financial statements. Further clarified by ASU 2025-01, Income Statement (Topic 220): Reporting Comprehensive Income - Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses, issued in December 2025. The ASU is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and is effective on either a prospective basis or retrospective basis. The Company is currently assessing the potential impacts of ASU 2024-03.
In November 2024, the FASB issued ASU 2024-04, Debt with Conversion and Other Options (Subtopic 470-20) ("ASU 2024-04"), which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. ASU 2024-04 is effective for annual periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the amendments in Update 2020-06. Adoption can be on a prospective or retrospective basis. The Company is currently evaluating the disclosure impact that ASU 2024-04 may have on its financial statement presentation and disclosures.
Management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s consolidated financial statement presentation or disclosures.
F-15
Note 3. Revenue and Deferred Revenue
The following table provides the Company’s revenue disaggregated by revenue stream (in thousands):
| For the Years Ended December 31, | ||||||||
| Revenue (in thousands): | 2024 | 2023 | ||||||
| Network design and installation | $ | 7,370 | $ | 3,430 | ||||
| Internet network services and hardware and internet service | 1,125 | 493 | ||||||
| Total | $ | 8,495 | $ | 3,923 | ||||
Remaining performance obligations represent the transaction price of Company orders for which work has not been performed as of the end of a fiscal period. As of December 31, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $34.8 million (which represents the amount of our consolidated backlog). $11.5 million of the backlog relates to the network design and installation performance obligations and $23.3 million relates to internet network services and hardware and internet services performance obligations. Additionally, $12.7 million of the $34.8 million relates to jobs that are contracted but not yet started as of December 31, 2024. We estimate that approximately $14.1 million of our remaining performance obligations at December 31, 2024 will be completed and recognized as revenue during 2025, with the remainder recognized between 2026 and 2032.
Changes in the Company’s current deferred revenue balance for the years ended December 31, 2024 and 2023 were as follows (in thousands):
| Balance as of January 1, 2023 | $ | 1,176 | ||
| Additions included in deferred revenue as of end of period | 1,665 | |||
| Revenue recognized from opening balance | (961 | ) | ||
| Balance as of December 31, 2023 | 1,880 | |||
| Additions included in deferred revenue as of end of period | 6,182 | |||
| Revenue recognized from opening balance | (1,847 | ) | ||
| Balance as of December 31, 2024 | $ | 6,215 |
Deferred revenue balances primarily consist of customer deposits and billings in excess of revenue related to the Company's network design and installation performance obligations. As of December 31, 2024 and 2023, all of the Company’s deferred revenue balances were reported as current liabilities in the accompanying consolidated balance sheets.
Changes in the Company's network financing receivable balance for the year ended December 31, 2024 was as follows (in thousands):
| Balance as of January 1, 2024 | $ | — | ||
| Additions | 550 | |||
| Amortization | (37 | ) | ||
| Balance as of December 31, 2024 | $ | 513 |
F-16
Note 4. Accounts Receivable
Receivables are recorded and carried at the original invoiced amount less an allowance for credit losses (in thousands). The opening balance for trade accounts receivable and unbilled receivables as of January 1, 2023, is $1.3 million and $0.1 million, respectively:
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Trade accounts receivable | $ | 3,663 | $ | 869 | ||||
| Unbilled receivables | 788 | 29 | ||||||
| Allowance for credit losses | — | — | ||||||
| Accounts receivable, net | $ | 4,451 | $ | 898 | ||||
Note 5. Leases
Lessee
For the year ended December 31, 2024, operating lease expense was $19 thousand. The Company did not have any operating lease expense for the year ended December 31, 2023. For the years ended December 31, 2024 and 2023 the Company had a short-term lease expense of $7 thousand and $14 thousand, respectively. For the years ended December 31, 2024 and 2023 the company had variable lease expense of $4 thousand and $0.
The lease liability is based on the present value of its unpaid minimum lease payments over the lease term, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the incremental borrowing rate which is the rate the Company pays to borrow on a collateralized basis.
The table below presents certain information related to the weighted average remaining lease term and the weighted average discount rate for the Company’s operating leases, as of December 31, 2024:
| Weighted average remaining lease term (in years) - operating leases | 1.50 | |||
| Weighted average discount rate - operating leases | 6.50 | % |
South Carolina Office Lease Agreement
On January 1, 2023, the Company initially entered into a lease for Suite 130 and 1700 Alta Vista Drive in Columbia, SC in which the initial term was January 1, 2023 through December 31, 2023. At the end of the initial lease term (December 31, 2023), the lease became a month to month lease in which either party (the Company or the lessor) could terminate the lease at any time with 30 days notice. The Company leased this space on a month to month basis for six months until June 30, 2024. On May 31, 2024, the Company entered into a new lease with the same lessor for the original Suite 130 and an additional space, Suite 140. The term of the new lease is from July 1, 2024 to June 30, 2026. Total rent is $3,150 per month from July 1, 2024 to June 30, 2025 and $3,276 per month from July 1, 2025 to June 30, 2026.
F-17
Future lease payments for all lease obligations for the following five fiscal years and thereafter are as follows (in thousands):
| Years ending December 31: | Operating Lease | |||
| 2025 | $ | 39 | ||
| 2026 | 20 | |||
| Total minimum lease payments | $ | 58 | ||
| Less effects of discounting | (3 | ) | ||
| Present value of future minimum lease payments | $ | 55 | ||
Lessor
The Company owns certain networks and places them at customer sites under sales-type lease arrangements. The Company evaluates new leases pursuant to FASB ASC 842: Leases to determine lease classification. A lease is classified by a lessor as a sales-type lease if the significant risks and rewards of ownership reside with the customer. This situation is met if, among other things, there is an automatic transfer of title during the lease, a reasonably certain option to be exercised, the non-cancelable lease term is for more than a major part of the remaining economic useful life of the asset, the present value of the minimum lease payments represents substantially all of the leased asset’s fair value at lease inception, or the asset is so specialized in nature that it provides no alternative use to the lessor (and therefore would not provide any future value to the lessor) after the lease term.
The Company's net investment in sales-type leases as of December 31, 2024 and 2023 was $0.5 million and $0, respectively.
The table below reconciles the undiscounted cash flows to be received to the net investment in sales-type leases recorded in the consolidated balance sheets (in thousands):
| Years ending December 31: | ||||
| 2025 | $ | 102 | ||
| 2026 | 102 | |||
| 2027 | 102 | |||
| 2028 | 102 | |||
| 2029 | 102 | |||
| 2030 and thereafter | 265 | |||
| Total minimum lease payments | $ | 775 | ||
| Less: unearned interest | (244 | ) | ||
| Net investment in sales-type leases | $ | 531 | ||
Interest income recognized on lease arrangements for the years ended December 31, 2024 and 2023 is included in interest expense, net, on the consolidated statements of operations, and is presented below:
| For the Years Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Lease income - sales-type leases | $ | 24 | $ | — | ||||
| Total lease income | $ | 24 | $ | — | ||||
F-18
Note 6. Related Party Debt
The Company's debt consisted of (in thousands):
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Related Party Debt, current: | ||||||||
| Apogee Telecom Promissory Note | $ | — | $ | 165 | ||||
| Apogee Telecom Installment Payment Agreement | — | 345 | ||||||
| Endurance Loan | 222 | — | ||||||
| Motherlode Promissory Note | 185 | — | ||||||
| Network Service Agreements | 288 | 36 | ||||||
| Related Party Debt, current | $ | 695 | $ | 546 | ||||
| Related Party Debt, net of current | ||||||||
| Apogee Telecom Promissory Note | $ | — | $ | 491 | ||||
| Endurance Loan | 741 | — | ||||||
| Motherlode Promissory Note | 683 | — | ||||||
| Network Service Agreements | 1,051 | 182 | ||||||
| Endurance Business Loan | 250 | — | ||||||
| Related Party Debt, net of current | $ | 2,725 | $ | 673 | ||||
Apogee Telecom Promissory Note (December 6, 2019)
On December 6, 2019 the Company entered into a promissory note (the “Apogee Promissory Note") with Apogee Telecom, Inc., a Texas Corporation ("Apogee"), a related company connected from a board member and shareholder of the Company, where Apogee loaned $800 thousand, to the Company in exchange for the Apogee Promissory Note. The Apogee Promissory Note had a maturity date of November 30, 2026 and bears interest at 10.0%, compounded annually. No principal or interest payments were due until December 31, 2021, at which point principal and interest were paid in equal monthly installments of $19 thousand. During the years ended December 31, 2024 and 2023, the Company incurred $18 thousand and $68 thousand of interest expense, which is recognized in interest expense in the consolidated statements of operations. As part of the Series Seed Repurchase Agreement this was paid off in its entirety on April 12, 2024 (see Note 8). As of December 31, 2024 and 2023, the Apogee Promissory Note had a balance of $0 and $0.7 million, respectively. Subsequent to April 12, 2024, Apogee is no longer a related party of the Company.
Apogee Telecom Installment Payment Agreement (February 28, 2023)
On February 28, 2023, the Company entered into an installment payment agreement (the “Apogee Installment Payment Agreement") with Apogee, whereas Apogee provided hardware and peripheral equipment related to the Company's primary services. Per the Apogee Installment Payment Agreement the Company owed a principal balance of $0.4 million, which is to be paid in installments over a term of twenty three months. The Apogee Installment Payment Agreement had a maturity date of December 31, 2024, and bore interest at 12.0%, compounded annually. During the years ended December 31, 2024 and 2023, the Company incurred $15 thousand and $42 thousand, respectively, of interest expense, which is recognized in interest expense in the consolidated statements of operations. As of December 31, 2024 and 2023, the Apogee Promissory Note had a balance of $0 and $0.3 million, respectively. As part of the Series Seed Repurchase Agreement this was paid off in its entirety on April 12, 2024 (see Note 8). As noted above, subsequent to April 12, 2024, Apogee is no longer a related party of the Company.
F-19
Endurance Loan (April 1, 2024)
On April 1, 2024 the Company entered into a fixed rate loan agreement (the “Endurance Loan") with Endurance Opportunities I, LLC ("Endurance"), a related party owned by a member of management and certain shareholders, where Endurance loaned $1.0 million, to the Company in exchange for the Endurance Loan. The Endurance Loan has a maturity date of May 1, 2029 and bears interest at 18.0%, compounded annually. Monthly payments are required under the Endurance Loan of $15 thousand through October 2024 and $19 thousand, thereafter through maturity. During the year ended December 31, 2024, the Company incurred $0.1 million of interest expense, which is recognized in interest expense in the consolidated statements of operations. As of December 31, 2024, the Endurance Loan had a balance of approximately $1.0 million.
Motherlode Promissory Note (April 12, 2024)
On April 12, 2024 the Company entered into a promissory note (the “Motherlode Promissory Note") with Motherlode LLC.("Motherlode"), a related party shareholder, where Motherlode loaned $1.0 million, to the Company in exchange for the Motherlode Promissory Note. The Motherlode Promissory Note has a maturity date of April 30, 2029 and bears interest at 6.0%, compounded annually. During the term of the Motherlode Promissory Note, the Company is to pay monthly installments of $19 thousand. During the year ended December 31, 2024 the Company incurred $42 thousand of interest expense, which is recognized in interest expense in the consolidated statements of operations. As of December 31, 2024, the Motherlode Promissory Note had a balance of $0.9 million.
Network Service Agreements (Various dates in 2024)
The Company has entered into a certain network service agreement (the “Network Service Agreements" or the “NSAs”) with various customers, pursuant to which the Company will perform or has performed the design, installation, and management of a telecommunications network for the customer in financed project amounts ranging from $50 thousand to $550 thousand (the "Project Financing"). During the years ended December 31, 2024 and December 31, 2023, Endurance financed $1.2 million and $0.2 million, respectively. The Company notes $0.5 million of the amount financed during the year ended December 31, 2024, relates to the sales-type lease (see Note 5). As of December 31, 2024 and December 31, 2023, the NSAs had a balance of $1.3 million and $0.2 million, respectively. As of December 31, 2024, repayments on these agreements are made monthly and range from $1 thousand to $9 thousand.
As part of each Project Financing, the Company sold an undivided interest in the NSA, to Endurance, and interest shall accrue at a rate of 16.5% per annum, with respect to any payments owed to Endurance by the Company, or advances owed to Endurance by the Company, not made when due. In exchange, for the financing, the Company and Endurance have entered into various participation and agency agreements (the "Participation and Agency Agreements), whereby Endurance is granted an undivided participation interest entitling Endurance to receive payments in relation to each respective NSA. At any time the Participation and Agency Agreement is outstanding, the Company shall have the right to repurchase Endurance' interest at par value, with par meaning all outstanding principal, unpaid interest, and fees. If Endurance' interest under these Participation and Agency Agreements remains outstanding twenty four (24) months after the service activation date under each respective NSA, Endurance shall have the option to require repurchase by the Company of Endurance' interest, at par value. Interest expense related to these network service agreements are presented net of interest income received from network financing receivables, which accrues interest income at the same rate as the NSAs.
Endurance Business Loan
On November 12, 2024 the Company entered into a fixed rate loan agreement (the “Endurance Business Loan") with Endurance, a related party, where Endurance loaned $0.3 million to the Company. The Endurance Business Loan has a maturity date of May 2026 and bears interest at 16.5% per year. During the year ended December 31, 2024, the Company incurred $6 thousand of interest expense, which is recognized in interest expense in the consolidated statements of operations. As of December 31, 2024, the Endurance Business Loan had a balance of $0.3 million.
F-20
As of December 31, 2024, future minimum principal payments on all related party debt, excluding accrued interest amounts, were as follows (in thousands):
| Years ending December 31: | ||||
| 2025 | $ | 695 | ||
| 2026 | 956 | |||
| 2027 | 718 | |||
| 2028 | 731 | |||
| 2029 | 306 | |||
| Thereafter | 14 | |||
| Total future payments | $ | 3,420 | ||
Note 7. Related Party Payables
Management Agreement (December 6, 2019, was not renewed post 2022)
On December 6, 2019 the Company entered into a management agreement (the “Management Agreement") with Elauwit Connection, LLC, a Wyoming limited liability company ("Elauwit LLC"), a related party, that was dissolved in October 2024, whereby certain key persons of Elauwit LLC, shall provide management services to manage all aspects of the Company, subject to supervision and oversight by the Company's board of directors (the "Board"). The key persons ("Key Persons") who will supervise all services include the Executive Chairman and the Chief Executive Officer of the Company. In consideration of the services provided by the Key Persons, the Company paid Elauwit LLC a sum of $45 thousand per month during the initial year of the Management Agreement, subject to potential annual increases and other compensation, as determined by the Board. The term of the agreement was three (3) years commencing on December 1, 2019 and terminated on November 30, 2022. Beginning in December 2020, the Key Persons elected to defer portions of their consideration. On August 20, 2024, as part of the Deferred Compensation Agreement, defined below, the Company is to pay the Key Persons $0.5 million, at an interest rate of 3.25%, on cumulative balances owed. During the years ended December 31, 2024 and 2023, the Company incurred $17 thousand and $18 thousand of interest expense, respectively, which is recognized in interest expense in the consolidated statements of operations. As of December 31, 2024 and 2023, the Deferred Compensation Agreement had a balance of $0.5 million and $0.5 million, respectively.
Post November 30, 2022, the Company continued making payments under an informal agreement to same Key Persons. During the years ended December 31, 2024 and 2023, the Company incurred expenses of $335 thousand and $225 thousand, included in selling, general, and administrative expenses on the consolidated statements of operations.
Deferred Compensation Agreement (August 20, 2024)
On August 20, 2024 the Company entered into a deferred compensation agreement (the “Deferred Compensation Agreement") with certain executives of the Company, whereby the executives, deferred a certain portion of their salaries. The deferred salaries bear interest of 3.25%, on all cumulative balances outstanding as of February 1, 2022. The Company pays each of the executives $2.5 thousand per month and there is no fixed maturity date. During the years ended December 31, 2024 and 2023, the Company incurred $4 thousand and $5 thousand of interest expense, respectively, which is recognized in interest expense in the consolidated statements of operations. As of December 31, 2024 and 2023, the Deferred Compensation Agreement had a balance of $0.1 and $0.1 million, respectively.
F-21
Note 8. Equity Offerings
Class A and Class B Common Stock
Voting
The holders of the common stock, are entitled to one vote for each share of common stock.
Effective if and when the Securities and Exchange Commission grants final approval of the Corporation’s Form S-1 Filing immediately and without any further action by the Corporation, (i) the holders of the Class A Common Stock shall be entitled to one vote for each share of Class A Common Stock held at all meetings of stockholders and (ii) the holders of Class B Common Stock are entitled to ten (10) votes for each share of common stock held at all meetings of stockholders (and written actions in lieu of meetings). The enhanced voting rights of the Class B Common Stock will terminate upon the occurrence of certain conditions, as defined in the Company's Certificate of Incorporation. Once the enhanced voting rights of the Class B Common Stock terminate, and the holder of Class B Common Stock will be entitled to only one vote for each share of Class B Common Stock.
Dividend and Distribution Rights.
Shares of Class A Common Stock and Class B Common Stock shall be treated equally, identically and ratably, on a per share basis, with respect to any dividends or distributions as may be declared and paid from time to time by the Board of Directors out of any assets of the Corporation legally available therefor; provided, however, that in the event a dividend is paid in the form of shares of Class A Common Stock or Class B Common Stock (or rights to acquire such shares), then holders of Class A Common Stock shall receive shares of Class A Common Stock (or rights to acquire such shares, as the case may be) and holders of Class B Common Stock shall receive shares of Class B Common Stock (or rights to acquire such shares, as the case may be).
Merger or Consolidation.
In the case of any distribution or payment in respect of the shares of Class A Common Stock or Class B Common Stock upon the consolidation or merger of the Corporation with or into any other entity, or in the case of any other transaction having an effect on stockholders substantially similar to that resulting from a consolidation or merger, such distribution or payment shall be made ratably on a per share basis among the holders of the Class A Common Stock and Class B Common Stock as a single class.
Voluntary Conversion of Class B Common Stock.
Each share of Class B Common Stock shall be convertible into one (1) fully paid and nonassessable share of Class A Common Stock at the option of the holder thereof at any time upon written notice to the Company.
Automatic Conversion of Class B Common Stock
Each share of Class B Common Stock shall be automatically converted into one share of Class A Common Stock, upon the occurrence of any transfer of such share of Class B Common Stock and (b) all shares of Class B Common Stock shall be automatically converted into an identical number of shares of Class A Common Stock upon a conversion event.
Put and Call Option Agreements
Baron Hunter Group, LLC and Steele Creek Partners, LLC, related parties through common management, have entered into separate agreements with the Company whereby each was granted the right to sell to the Company ("Put Option") up to a $2.0 million value of common shares of the Company at a discount of 10% below the IPO issue price, limited to the lesser of $2.0 million or 10% of the IPO gross offering proceeds, exercisable for a period of ten (10) business days following the effective date of the IPO. The Company was granted the right to purchase (Call Option) up to a maximum of $2.0 million of common shares from each of Baron Hunter Group, LLC and Steele Creek Partners, LLC, at a premium of 10% in excess of the IPO issue price, limited to the lesser of $2.0 million or 10% of the IPO gross offering proceeds, exercisable for a period of ten (10) business days following the effective date of the IPO.
F-22
Common Stock
Founder Stock Purchase Agreement
On December 6, 2019, the Company and Elauwit LLC (the "Purchaser") entered into a stock purchase agreement (the "Elauwit Stock Purchase Agreement") whereby the Company sold 600,000 shares of Common Stock, $0.0001 par value per share, at a purchase price of $0.50 per share for a total gross purchase price of $0.3 million. The total gross purchase price consisted of a cash payment to the Company of $0.2 million together with the payment by the Purchaser of $0.1 million for formation of the Company and business startup expenses.
Stock Purchase Agreement
On January 31, 2022, the Company and Elauwit LLC entered into a Stock Purchase Agreement whereby the Company sold 80,000 shares of Common Stock, $0.0001 par value per share, at a purchase price of $5.00 per share for a total purchase price of $0.4 million.
Preferred Stock
Series Seed Convertible Preferred Stock
On December 6, 2019, the Company and Motherlode, a related party at the time, entered into a Stockholders Agreement (the "Series Seed Agreement"), whereby the Company sold 250,000 shares of Series Seed Preferred Stock, $0.0001 par value per share (the “Series Seed Preferred Stock”), at a purchase price of $4.00 per share.
The holders of the Series Seed Preferred Stock have the following rights and preferences.
Voting
The Series Seed Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Holders of Preferred Stock shall vote together with the holders of Common Stock as a single class and on an as-converted to Common Stock basis.
Conversion
Each share of Series Seed Preferred Stock is convertible, at the option of the holder thereof, at any time into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Issue Price for the series of Preferred Stock by the Conversion Price for that series of Preferred Stock in effect at the time of conversion. The "Conversion Price" for each series of Preferred Stock means the Original Issue Price for such series of Preferred Stock, which initial Conversion Price, and the rate at which shares of Preferred Stock may be converted into shares of Common Stock, is subject to adjustment.
Redemption
The Series Seed Preferred Stock is only redeemable under a Deemed Liquidation Event (as defined below).
F-23
Dividends
From and after the date of the issuance of any shares of Preferred Stock, dividends at the rate per annum of 10% of the Original Issue Price, shall accrue on such shares of Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Preferred Stock) (the “Accruing Dividends”). Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative; provided. However, Accruing Dividends shall be payable only when, as, and if declared by the Board of Directors and the Corporation shall be under no obligation to pay such Accruing Dividends.
As of December 31, 2024 and 2023, the Company has cumulative dividends of $0 and $0.4 million on the Series Seed Preferred Stock. Upon conversion of preferred stock into common stock, cumulative and undeclared dividends are forfeited.
Liquidation
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of shares of Series Seed Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders, and in the event of a Deemed Liquidation Event (as defined below), the holders of shares of Preferred Stock then outstanding shall be entitled to be paid out of the consideration payable to stockholders in such Deemed Liquidation Event or out of the Available Proceeds (as defined below), as applicable, before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the greater of (i) the Original Issue Price, plus any dividends declared but unpaid thereon or (ii) such amount per share as would have been payable had all shares of Preferred Stock been converted into Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event (the amount payable pursuant to this sentence is hereinafter referred to as the “Liquidation Amount”).
A Deemed Liquidation Event includes a merger or consolidation in which the Company is a constituent party or a subsidiary of the Company is a constituent party and the Company issues shares of its capital stock pursuant to such merger or consolidation, as well as a (1) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Company or any subsidiary of the Company of all or substantially all the assets of the Company and its subsidiaries taken as a whole, or (2) the sale or disposition (whether by merger, consolidation or otherwise, and whether in a single transaction or a series of related transactions) of one or more subsidiaries of the Company if substantially all of the assets of the Company and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Company.
The Series Seed Preferred Stock is classified as mezzanine equity on the consolidated balance sheets as it is contingently redeemable in the event of a change of control that is not solely within the Company’s control.
Prior to the repurchase of the Series Seed Preferred Stock on April 12, 2024, as further discussed below, the Company’s Series Seed Preferred Stock consisted of the following:
| Shares Authorized | Shares Issued and Outstanding | Carrying Value | Original Issue Price | Conversion Price | Common Shares Upon Conversion | |||||||||||||||||
| 250,000 | 250,000 | $ | 1,000,000 | $ | 4.00 | $ | 4.00 | 250,000 | ||||||||||||||
The Series Seed Preferred Stock is recorded on the accompanying consolidated balance sheets at its redemption value which is the carrying value of the redeemable preferred stock.
F-24
Series Seed Stock Repurchase Agreement
On April 12, 2024, the Company and Motherlode entered into a Stock Repurchase Agreement (the "Series Seed Stock Repurchase Agreement"), whereby the Company repurchased from Motherlode, 250,000 shares of Series Seed Preferred Stock, $0.0001 par value per share, at a purchase price of $4.00 per share, or $1 million in aggregate (the "Purchase Price"). The Purchase Price consists of the Motherlode Promissory Note (see Note 6), and is secured by personal guarantees of the Company's personnel. Additionally, as part of the closing, the Company shall pay to Apogee, all amounts due under the Apogee Promissory Note, in the amount of approximately $619 thousand. Additionally, the Company, shall pay all amounts remaining due under the Apogee Installment Payment Agreement, in the amount of approximately $330,000, together with a remaining hardware invoice in the amount of approximately $38,000. As part of the closing, certain principals of Motherlode resigned from the Board of Directors of the Company, as such Motherlode is no longer considered an ongoing related party.
Series B Convertible Preferred Stock
On various dates from January of 2022 through June of 2024 the Company entered into the Stock Purchase Agreements with certain investors, relating to the issuance and sale by the Company to the investors of up to 327,067 shares of Series B Preferred Stock (the “Series B Preferred Stock”) for an aggregate purchase price ranging from $10.00 to $16.56 per share of Series B Preferred Stock .
On various dates from January of 2022 through June of 2024, the Company and the investors completed the issuance and sale of 320,522 shares of Series B Preferred Stock for an aggregate purchase price of $4.8 million. In addition, in lieu of cash, the Company issued on various dates 6,545 Series B Preferred Stock to vendors and shareholders as compensation for services rendered. The Company determined the fair value of the 6,545 shares issued for services based on the Series B Preferred Stock price from recent sales.
In connection with the issuance of the Series B Preferred Stock, the Company incurred direct and incremental expenses of $0.1 million, comprised of legal fees and shares paid-in-kind for finders’ fees, which were expensed as incurred as they were de minimis.
Prior to the conversion of the Series B Preferred Stock on August 20, 2024, as further discussed below, the Company’s Series B Preferred Stock consisted of the following:
| Shares Authorized | Shares Issued and Outstanding | Carrying Value | Original Issue Price | Conversion Price | Common Shares Upon Conversion | |||||||||||||||||
| 327,067 | 327,067 | $ | 5,298,006 | $ | 10.00 - $16.56 | $ | 10.00 - $16.56 | 327,067 | ||||||||||||||
At December 31, 2023, the Series B Preferred Stock is recorded on the accompanying consolidated balance sheets at its redemption value which is the carrying value of the redeemable preferred stock.
The holders of the Series B Preferred Stock have the same rights and preferences as holders of Series Seed Preferred Stock above.
As of December 31, 2024 and 2023, the Company has cumulative dividends of $0 and $0.2 million on the Series B Preferred Stock. Upon conversion of preferred stock into common stock, cumulative and undeclared dividends are forfeited.
The Series B Preferred Stock is classified as mezzanine equity on the accompanying consolidated balance sheets as it is contingently redeemable in the event of a change of control that is not solely within the Company’s control.
Conversion of Series B Preferred Stock
On August 20, 2024, the Series B Preferred Stock Holders agreed to convert the Series B Preferred Shares into Common Stock of the Company, on a one-for-one basis, into an aggregate 327,067 common shares of the Company in accordance with the original conversion terms and conditions. In connection with the reverse recapitalization, the 327,067 common shares were exchanged in accordance with the exchange ratio of 4.11795:1, therefore, 1,346,846 shares of Class A and Class B common shares were issued.
F-25
Note 9. Employee Benefit Plan
In April 2024, the Company established a Safe Harbor 401(k) contribution plan under Section 401(k) of the Internal Revenue Code (“401(k) Plan”). Under the terms of the 401(k) Plan, all full-time employees were eligible to make voluntary contributions as a percentage or defined amount of compensation. The Company made matching contributions based on 100% of each employee’s contribution up to the first 3% of pay and then on 50% of employee contributions on the next 2% of pay of the employee's eligible compensation. The Company had expenses related to the matching contribution for the year ended December 31, 2024 and December 31, 2023 of approximately $51 thousand and $61 thousand, respectively.
Note 10. Income Taxes
The Company has no foreign operations and the Company's federal and state income tax provision is summarized as follows (in thousands):
| For the Years Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Current | ||||||||
| Federal | $ | — | $ | — | ||||
| State | 1 | — | ||||||
| 1 | — | |||||||
| Deferred | ||||||||
| Federal | — | — | ||||||
| State | — | — | ||||||
| — | — | |||||||
| Income tax expense | $ | 1 | $ | — | ||||
A reconciliation of the differences between the U.S. statutory federal income tax rate and the effective tax rate as provided in the consolidated statements of operations is as follows:
| For the Years Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Tax computed at the federal statutory rate | 21 | % | 21 | % | ||||
| Nondeductible expenses | — | % | — | % | ||||
| State income taxes, net of federal benefits | 1 | % | 1 | % | ||||
| Change in valuation allowance | (22 | )% | (22 | )% | ||||
| — | % | — | % | |||||
Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes, and (b) operating losses and tax credit carryforwards.
F-26
The tax effects of significant components of the Company’s deferred tax assets (liabilities) are as follows (in thousands):
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Deferred tax assets: | ||||||||
| Net operating loss carryforwards | $ | 2,361 | $ | 1,145 | ||||
| Deferred salaries | 20 | 26 | ||||||
| Accrued incentives | 6 | — | ||||||
| Percentage-completion-method to completed contract method | — | 315 | ||||||
| Accrued incentive compensation | — | 31 | ||||||
| Operating lease liabilities | 12 | — | ||||||
| Total gross deferred tax assets | 2,399 | 1,517 | ||||||
| Deferred tax liabilities: | ||||||||
| Percentage-completion-method to completed contract method | (103 | ) | — | |||||
| Operating lease right-of-use assets | (12 | ) | — | |||||
| Total gross deferred tax liabilities | (115 | ) | — | |||||
| Valuation allowance | (2,284 | ) | (1,517 | ) | ||||
| Total deferred taxes | $ | — | $ | — | ||||
At December 31, 2024, and December 31, 2023 the Company had available Federal Net Operating Loss (NOL) carryforwards of $10.5 million and $5.0 million, respectively. For State purposes, such NOL carryforwards were $6.0 million and $4.3 million, respectively. The net operating losses do not expire. Use of these NOL carryforwards may be significantly limited under the tax rules regarding the use of losses following an ownership change under Internal Revenue Code (“IRC”) Section 382.
The valuation allowance relates to deferred tax assets for certain items that will be deductible for income tax purposes under very limited circumstances and for which the Company believes it is not more likely than not that it will realize the associated tax benefit. However, in the event that the Company determines that it would be able to realize more or less than the recorded amount of net deferred tax assets, an adjustment to the deferred tax asset valuation allowance would be recorded in the period such a determination is made. In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax planning strategies in making this assessment. Based upon the levels of historical taxable income, projections of future taxable income and the reversal of deferred tax liabilities over the periods in which the deferred tax assets are deductible, management believes it is more-likely-than-not that the Company will not realize the benefits of these deductible differences, net of the existing valuation allowance. The amount of deferred tax asset considered realizable, however, could change in the near term if estimates which require significant judgment of future taxable income during the carryforward period are increased or decreased. Based upon the level of historical pre-tax loss, as well as projections of future taxable income over the periods which deferred tax assets are deductible, management determined that it is more likely than not that the Company may not realize the net deferred tax assets recorded as of December 31, 2024. Accordingly, a valuation allowance of $2.3 million, an increase of approximately $0.8 million from the valuation allowance of $1.5 million as of December 31, 2023, was recorded against net deferred tax assets as of December 31, 2024.
F-27
The Company files income tax returns as prescribed by tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal, state and local jurisdictions where applicable based on the statute of limitations that apply in each jurisdiction. The Company has no open income tax audits with any taxing authority as of December 31, 2024. The Company is still subject to income tax examinations by U.S. federal and state tax authorities for the years 2021 through 2023. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses were generated and carried forward, and make adjustments up to the amount of the net operating loss carryforward amount.
Note 11. Commitments and Contingencies
In the normal course of business, the Company is at times subject to pending and threatened legal actions. In management’s opinion, any potential loss resulting from the resolution of these matters will not have a material effect on the results of operations, financial position or cash flows of the Company.
As of December 31, 2024, the Company had no outstanding litigation.
Phantom Stock Awards
The Company has an authorized Phantom Equity Plan to grant phantom stock units to key employees of the Company as a means to provide deferred compensation. The Phantom Equity Payments (“Rights”) are cash settled and calculated by reference to the value of the Company as of the date of the award of such Rights as determined in accordance with the Plan. The maximum amount of all Rights authorized by the Plan shall be 10% of the Company's total appreciation above the market value of the Company as determined in accordance the Plan. Upon a payment event in accordance with the Plan, a participants right to any unvested Rights would terminate and be cancelled without any further payment. Rights will also terminate and be forfeited if the participant is terminated for cause. If a participant breaches any noncompetition, confidentially, nonsolicitation, noninterference or nondisclosure agreement, all unvested and vested Rights will terminate and be forfeited and the participant would be required to repay immediately any payments previously made.
During the years ended December 31, 2024 and 2023, the Company did not grant any phantom stock awards. Prior to December 31, 2023, the Company granted 55,000 phantom stock awards. As of December 31, 2023, 30,000 phantom stock awards did not vest and were forfeited. The phantom stock awards are accounted for as a liability under ASC 718 and as of December 31, 2023 the Company had a liability of $116 thousand on the consolidated balance sheets. In September 2024, the 25,000 vested phantom stock awards were exchanged for Class B common stock, at an exchange of 4.11785:1, for 102,949 shares, as a result of the merger and recapitalization transaction with DeltaMax as described in Note 1. At December 31, 2024, there are no phantom stock awards outstanding.
Information related to phantom stock awards was as follows, dollars in thousands:
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Accrued compensation cost liability | $ | — | $ | 116 | ||||
| Equivalent common shares | — | 25,000 | ||||||
Note 12. Net Loss per Share
Participating securities have the effect of diluting both basic and diluted earnings per share during periods of income. During periods of loss, no loss is allocated to the participating securities since the holders have no contractual obligation to share in the losses of the Company.
At December 31, 2024 there were no common share equivalents outstanding.
F-28
Anti-dilutive common share equivalents excluded from the computation of diluted net loss per share at December 31, 2023 consisted of Series B convertible preferred stock of 176,932, Series Seed convertible preferred stock of 250,000 and phantom stock awards of 25,000.
Note 13. Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
Lease
On January 2, 2025, the Company entered into its first amendment to the South Carolina Office Lease ("Amended SC Lease") to expand into an additional suite with approximately 1,950 additional square feet for a total of approximately 5,950 square feet of office space. The Amended SC Lease commencement date is February 1, 2025 and runs concurrently with the existing terms and conditions of the lease, through June 30, 2026. On the Amended SC Lease commencement date, the Company will reevaluate and record an adjusted operating lease liability and corresponding right-of-use asset.
Strategic Investment
On January 6, 2025, the Company entered into a Simple Agreement for Future Equity (the “SAFE Agreement”) with an investor (the “Investor”). Pursuant to the terms of the SAFE Agreement, the Company will receive an aggregate amount of $1.0 million (the “SAFE Amount”). In the event of an equity financing, as defined in the SAFE Agreement, the investment made pursuant to the SAFE Agreement will be automatically converted into the number of shares of the Company based on the lowest price per share of the Class A Common Stock sold in the future equity financing multiplied by a discount price of 85%.
Endurance Loans
On March 1, 2025, the Company entered into a fixed rate loan agreement with Endurance, where Endurance loaned $0.5 million to the Company. The Endurance Loan has a maturity date of eighteen months and bears interest at 16.5%. Quarterly payments of interest are required with outstanding principal amount of the loan due on the maturity date.
On March 25, 2025, the Company entered into a fixed rate loan agreement with Endurance, where Endurance loaned $0.5 million. The Endurance Loan has a maturity date of ninety days and bears interest at 16.5%. Monthly payments of interest are required with outstanding principal amount of the loan due on the maturity date.
F-29
ELAUWIT CONNECTION, INC
Condensed Consolidated Balance Sheets
(in thousands, except share and par value data)
| June 30, 2025 | December 31, 2024 | |||||||
| Unaudited | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 525 | $ | 287 | ||||
| Accounts receivable | 6,953 | 4,451 | ||||||
| Inventories | 1,244 | 1,606 | ||||||
| Network financing receivable, current | 77 | 67 | ||||||
| Prepaid expenses and other current assets | 252 | 258 | ||||||
| Total current assets | 9,051 | 6,669 | ||||||
| Network financing receivable | 906 | 446 | ||||||
| Lease right-of-use assets, net | 54 | 55 | ||||||
| Net investment in lease | 508 | 531 | ||||||
| Other non-current assets | 26 | 25 | ||||||
| TOTAL ASSETS | $ | 10,545 | $ | 7,726 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 2,886 | $ | 1,914 | ||||
| Accrued expenses and other current liabilities | 44 | 76 | ||||||
| Related party debt, current | 1,451 | 695 | ||||||
| Related party payables, current | 240 | 240 | ||||||
| Deferred revenue | 6,895 | 6,215 | ||||||
| Operating lease liabilities, current | 56 | 36 | ||||||
| Total current liabilities | 11,572 | 9,176 | ||||||
| Related party debt, net of current | 2,627 | 2,725 | ||||||
| Related party payables, net of current | 231 | 342 | ||||||
| SAFE liability | 1,000 | — | ||||||
| Operating lease liabilities, net of current | — | 19 | ||||||
| Total liabilities | 15,430 | 12,262 | ||||||
| Commitments and contingencies (see Note 11) | ||||||||
| Stockholders' Deficit | ||||||||
| Preferred stock, $0.0001 par value, 100,000 and 577,067 authorized as of June 30, 2025 and December 31, 2024; none designated as of June 30, 2025 and December 31, 2024 | — | — | ||||||
| Class A common stock, $0.00001 par value, 12,000,000 and 7,000,000 authorized as of June 30, 2025 and December 31, 2024, 2,522,950 and 2,497,950 shares issued as of June 30, 2025 and December 31, 2024 | — | — | ||||||
| Class B common stock, $0.00001 par value, 2,900,000 and 3,000,000 authorized as of June 30, 2025 and December 31, 2024, 2,477,050 and 2,502,050 shares issued as of June 30, 2025 and December 31, 2024 | — | — | ||||||
| Stock subscription receivable | — | (30 | ) | |||||
| Additional Paid-in Capital | 5,859 | 5,859 | ||||||
| Accumulated deficit | (10,744 | ) | (10,365 | ) | ||||
| Total stockholders' deficit | (4,885 | ) | (4,536 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 10,545 | $ | 7,726 | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
| F-30 |
ELAUWIT CONNECTION, INC
Condensed Consolidated Statements of Operations
(in thousands, except share and per value data)
(UNAUDITED)
| Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Revenues | ||||||||
| Revenues | $ | 11,691 | $ | 3,298 | ||||
| Cost of revenues | ||||||||
| Cost of revenue | 8,707 | 2,628 | ||||||
| Gross profit | 2,984 | 670 | ||||||
| Operating expenses | ||||||||
| General and administrative | 3,109 | 1,941 | ||||||
| Sales and marketing | 64 | 28 | ||||||
| Research and development | — | 1 | ||||||
| Total operating expenses | 3,173 | 1,970 | ||||||
| Operating loss | (189 | ) | (1,300 | ) | ||||
| Other expense, net | ||||||||
| Interest expense, net | (186 | ) | (112 | ) | ||||
| Total other expense, net | (186 | ) | (112 | ) | ||||
| Loss from operations before income taxes | (375 | ) | (1,412 | ) | ||||
| Income tax expense | 4 | 1 | ||||||
| Net loss | $ | (379 | ) | $ | (1,413 | ) | ||
| Net loss per share attributable to common stockholders, basic and diluted | $ | (0.08 | ) | $ | (0.50 | ) | ||
| Weighted average common shares used in computing net loss per share, basic and diluted | 5,000,000 | 2,800,206 | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| F-31 |
ELAUWIT CONNECTION, INC
Condensed Consolidated Statements of Mezzanine Equity and Stockholders' Deficit
(in thousands, except share data)
(UNAUDITED)
For the Six Months Ended June 30, 2025 and 2024
| Mezzanine Equity | Common Stock | ||||||||||||||||||||||||||||||||||||||||||||
| Series Seed
Convertible Preferred Stock | Series B
Convertible Preferred Stock | Common Stock | Class A
Common Stock | Class B
Common Stock | |||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Additional Paid-In- Capital | Accumulated Deficit | Stock Subscription Receivable | Total Stockholders' Deficit | ||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | — | $ | — | — | $ | — | — | $ | — | 2,497,950 | $ | — | 2,502,050 | $ | — | $ | 5,859 | $ | (10,365 | ) | $ | (30 | ) | $ | (4,536 | ) | |||||||||||||||||||
| Repayment of stock subscription receivable | — | — | — | — | — | — | — | — | — | — | — | — | 30 | 30 | |||||||||||||||||||||||||||||||
| Transfer and conversion of Class B Common Stock to Class A Common Stock | — | — | — | — | — | — | 25,000 | — | (25,000 | ) | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | — | — | — | (379 | ) | — | (379 | ) | |||||||||||||||||||||||||||||
| Balance at June 30, 2025 | — | $ | — | — | $ | — | — | $ | — | 2,522,950 | $ | — | 2,477,050 | $ | — | $ | 5,859 | $ | (10,744 | ) | $ | — | $ | (4,885 | ) | ||||||||||||||||||||
| Mezzanine Equity | Common Stock | ||||||||||||||||||||||||||||||||||||||||||||
| Series Seed Convertible Preferred Stock | Series B
Convertible Preferred Stock | Common Stock | Class A
Common Stock | Class B
Common Stock | |||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Additional Paid-In- Capital | Accumulated Deficit | Stock Subscription Receivable | Total Stockholders' Deficit | ||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | 250,000 | $ | 1,000 | 176,932 | $ | 2,382 | 2,800,206 | $ | — | — | $ | — | — | $ | — | $ | 625 | $ | (6,891 | ) | $ | (30 | ) | $ | (6,296 | ) | |||||||||||||||||||
| Repurchase and retirement of Series Seed Preferred Stock, at cost | (250,000 | ) | (1,000 | ) | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Issuance of Series B Convertible Preferred Stock | — | — | 143,590 | 2,378 | — | — | — | — | — | — | — | — | (598 | ) | (598 | ) | |||||||||||||||||||||||||||||
| Issuance of Series B Convertible Preferred Stock to pay for services | — | — | 4,745 | 79 | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | — | — | — | (1,413 | ) | — | (1,413 | ) | |||||||||||||||||||||||||||||
| Balance at June 30, 2024 | — | $ | — | 325,267 | $ | 4,839 | 2,800,206 | $ | — | — | $ | — | — | $ | — | $ | 625 | $ | (8,304 | ) | $ | (628 | ) | $ | (8,307 | ) | |||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| F-32 |
ELAUWIT CONNECTION, INC
Condensed Consolidated Statements of Cash Flows
(in thousands)
(UNAUDITED)
| For the Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (379 | ) | $ | (1,413 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Right of use asset amortization expense | 26 | — | ||||||
| Issuance of Series B Preferred Stock for services | — | 79 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (2,502 | ) | (923 | ) | ||||
| Network financing receivable | (470 | ) | (230 | ) | ||||
| Inventories | 362 | (524 | ) | |||||
| Prepaid expenses and other assets | 5 | (95 | ) | |||||
| Accounts payable | 972 | 392 | ||||||
| Accrued expenses | (32 | ) | (9 | ) | ||||
| Deferred revenue | 680 | 1,535 | ||||||
| Related party payables | (111 | ) | 9 | |||||
| Net investment in lease | 23 | (399 | ) | |||||
| Lease right-of-use lease liabilities payments | (24 | ) | — | |||||
| Net cash used in operating activities | (1,450 | ) | (1,578 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from issuance of SAFE liability | 1,000 | — | ||||||
| Proceeds from related party debt | 1,000 | 1,550 | ||||||
| Repayment of related party debt | (342 | ) | (1,044 | ) | ||||
| Proceeds from payment of stock subscription receivable | 30 | — | ||||||
| Proceeds from issuance of Series B stock | — | 1,780 | ||||||
| Net cash provided by financing activities | 1,688 | 2,286 | ||||||
| NET CHANGE IN CASH | 238 | 708 | ||||||
| CASH, beginning of period | 287 | 329 | ||||||
| CASH, end of period | $ | 525 | $ | 1,037 | ||||
| SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION: | ||||||||
| Cash payments for interest | $ | 166 | $ | 116 | ||||
| NON-CASH INVESTING AND FINANCING TRANSACTIONS: | ||||||||
| Lease liabilities arising from obtaining right-of-use asset | $ | 25 | $ | — | ||||
| Series B Convertible Preferred Stock Subscription Receivable | $ | — | $ | 598 | ||||
| Repurchase of Series seed stock for issuance of note payable | $ | — | $ | 1,000 | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
| F-33 |
ELAUWIT CONNECTION, INC
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1. Organization and Nature of Operations
The Company
Elauwit Connection, Inc ("Elauwit" or the "Company") is a privately held technology services company that specializes in providing advanced connectivity solutions for buildings by enhancing internet and network infrastructure for property owners and managers. Elauwit provides these solutions by designing and implementing high-speed internet, video, and other technology solutions to ensure seamless connectivity for residents and tenants, with the goal of putting more control in the hands of property owners and allowing them to offer a superior internet experience as a key amenity.
On September 13, 2024 (the “Closing Date”), Elauwit Connection, Inc, a Delaware Corporation, incorporated in December 2019, ("Legacy Elauwit") and DeltaMax, Inc. ("DeltaMax"), a privately-held Delaware corporation, consummated a merger transaction pursuant to which Legacy Elauwit was merged with and into the DeltaMax (the “Merger”), with the DeltaMax being the legal successor or surviving corporation in the Merger (the “Closing”). As part of the Merger DeltaMax changed its name to Elauwit Connection, Inc. On the Closing Date, Legacy Elauwit and DeltaMax consummated the Merger and the transactions contemplated thereby, including the issuance of 2,497,950 Class A shares and 2,502,050 Class B shares of Common Stock (the “Merger Shares”), which included 750,000 Class B shares to DeltaMax, with the remainder to the owners of Legacy Elauwit as a result of a 4.11795 share exchange. Additionally, a previous liability associated with Phantom Stock of $116 thousand was settled and exchanged for 102,948 Class B shares as a result of this transaction. Prior to the merger, DeltaMax was a non-operating shell company.
The Merger was accounted for as a reverse recapitalization of the Company because Legacy Elauwit has been determined to be the accounting acquirer under FASB ASC Topic 805 - Business Combinations. Under this method of accounting, DeltaMax is treated as the “acquired” company for financial reporting purposes. This determination was primarily based on holders of Legacy Elauwit capital stock comprising a relative majority of the voting power of the Company upon consummation of the Merger and will comprise the majority of the governing body of the Company, Legacy Elauwit's senior management comprising the senior management of the Company, and Legacy Elauwit operations comprising the ongoing operations of the Company. Accordingly, for accounting purposes, the financial statements of the Company represent a continuation of the financial statements of Legacy Elauwit, with the exception of legal capital, with the Merger being treated as the equivalent of Legacy Elauwit issuing shares for the net assets of DeltaMax, accompanied by a recapitalization. As such, periods prior have common stock restated at the 4.11795 share exchange ratio of Legacy Elauwit shares for Merger Shares. The net assets of DeltaMax, which included only cash of $250 thousand, were recognized as of the Closing at historical cost, with no goodwill or other intangible assets recorded because the transaction did not constitute the acquisition of a business. Operations prior to the Merger are presented as those of Legacy Elauwit and the accumulated deficit of Legacy Elauwit has been carried forward after Closing. All issued and outstanding securities of DeltaMax upon Closing were treated as issuances of securities of the Company upon the consummation of the Merger.
After the Merger and looking forward, Legacy Elauwit's product lines are the primary focus of the Company's operations. Accordingly, the Company’s current activities primarily relate to Legacy Elauwit’s historical business which comprises the design and implementation of high-speed internet, video, and other technology solutions to ensure seamless connectivity for residents and tenants.
Going Concern
As of June 30, 2025, the Company had cash of approximately $0.5 million. For the six months ended June 30, 2025, the Company used approximately $1.5 million in cash for operating activities. The Company has incurred recurring net losses from operations and negative cash flows from operating activities since inception. As of June 30, 2025, the Company had an accumulated deficit of approximately $10.7 million.
| F-34 |
Management expects operating losses and negative cash flows to continue for the foreseeable future as the Company invests in its commercial capabilities. While the Company's working capital and current debt indicate a substantial doubt regarding the Company’s ability to continue as a going concern, the Company has historically, from time to time, satisfied and may continue to satisfy certain short-term liabilities through the issuance of common and preferred stock, other related party support, and other financing vehicles, thus reducing our cash requirement to meet our operating needs. Management will continue to monitor its operating costs and seek to reduce its current liabilities. Such actions may impair its ability to proceed with certain strategic activities. If expected revenues are not adequate to fund planned expenditures, or if the Company is unsuccessful at raising cash through future capital transactions, including proceeds from our current planned initial public offering ("IPO") transaction, it may be required to reduce its spending rate to align with expected revenue levels and cash reserves, although there can be no guarantee that it will be successful in doing so. Accordingly, the Company may be required to raise additional cash through debt or equity transactions. It may not be able to secure financing in a timely manner or on favorable terms, if at all.
As a result of these factors, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date the unaudited condensed consolidated financial statements are issued. The Company’s unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 2. Summary of Significant Accounting Policies
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. All subsidiaries were dormant with no activities and were dissolved during 2024.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain footnotes and other financial information normally required by U.S. GAAP have been condensed or omitted in accordance with instructions for interim financial information and Article 8 of Regulation S-X. In the opinion of management, such statements include all adjustments which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of June 30, 2025. The operating results presented herein are not necessarily an indication of the results that may be expected for the year. The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the years ended December 31, 2024 and 2023, as included within its Registration Statement on Form S-1, as filed confidentially with the Securities and Exchange Commission ("SEC").
Use of Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates made by management include assumptions used in estimates of future credit losses under the current expected credit loss impairment model, valuation of Class A and Class B common stock, valuation of Phantom Stock Awards, valuation of SAFE liabilities, revenue recognition, including cost estimates and percentage complete, provisions for income taxes and related valuation allowances and tax uncertainties. On an ongoing basis, management reviews these estimates and assumptions based on currently available information. Actual results could differ from these estimates.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of demand deposits with financial institutions and accounts receivable. The Company maintains cash balances with financial institutions, which at times, are in excess of amounts insured by the Federal Deposit Insurance Corporation. To date, the Company has not experienced any collection loss with these institutions.
| F-35 |
Accounts receivable are subject to the risk that the Company’s customers will not pay the amounts due. The Company has established credit and collection policies to mitigate that risk. As of June 30, 2025, the Company had three customers that accounted for approximately 58% of the Company’s accounts receivable balance. These three customers accounted for approximately 25%, 18% and 15% of the balance each, respectively. As of December 31, 2024, the Company had two customers that accounted for approximately 66% of the Company's accounts receivable balance. These two customers that accounted for approximately 49% and 17% of the Company's accounts receivable balance. During the six months ended June 30, 2025, the Company had two customers that accounted for approximately 48% of the Company's total revenues.These two customers accounted for approximately 34% and 14% of revenues each, respectively. During the six months ended June 30, 2024, the Company had three customers that accounted for approximately 49% of the Company's total revenues. These three customers accounted for approximately 17%, 14% and 18% of revenues each, respectively.
Segment Reporting
The Company determines its reportable segments in accordance with FASB ASC Topic 280, Segment Reporting (“ASC 280”). The Company evaluates a reporting segment by first identifying its operating segments under ASC 280. The Company then evaluates each operating segment to determine if it includes one or more components that constitute a business. If there are components within an operating segment that meet the definition of a business, the Company evaluates those components to determine if they must be aggregated into one or more reportable segments. If applicable, when determining if it is appropriate to aggregate different operating segments, the Company determines if the segments are economically similar and, if so, the operating segments are aggregated.
The Company has one operating segment and one reportable segment. The Company identifies the Chief Operating Decision Maker ("CODM") to be a group consisting of the Chief Executive Officer ("CEO") and the Chief Financial Officer ("CFO"). The CODM reviews financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company’s principal operations are in the United States. The CODM utilized and regularly reviews consolidated gross profit and loss from operations as measures of segment profit or loss. These measure enable the CEO and CFO to access the overall level of available resources and determine how best to deploy resources.
A reconciliation of total segment revenues to total consolidated revenues and of total segment gross profit and segment operating loss which aggregates to total consolidated loss from operations is as follows (in thousands):
| Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Revenues | $ | 11,691 | $ | 3,298 | ||||
| Less: | ||||||||
| Cost of revenues | 8,707 | 2,628 | ||||||
| Segment gross profit | 2,984 | 670 | ||||||
| Less(1): | ||||||||
| Segment compensation expenses (2) | 1,568 | 872 | ||||||
| Segment travel expenses (3) | 131 | 135 | ||||||
| Other segment expenses (4) | 1,473 | 963 | ||||||
| Segment operating loss | $ | (189 | ) | $ | (1,300 | ) | ||
| (1) | The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. |
| (2) | Compensation related expenses primarily include salaries and related payroll tax expenses. |
| (3) | Travel related expenses primarily include travel expenses. |
| (4) | Other segment expenses for each reportable segment includes all other operating expenses such as management fees, professional fees, insurance, rent and other. |
| F-36 |
The measure of segment assets is reported in the accompanying unaudited condensed consolidated balance sheets as “Total assets.”
Cash and Cash Equivalents
The Company considers all short-term, highly liquid investments with original maturities of 90 days or less to be cash equivalents. The Company maintains $259 thousand of deposits in financial institutions in excess of federally insured limits of $250 thousand at June 30, 2025. The Company did not have any cash equivalents at June 30, 2025 or December 31, 2024.
Accounts Receivable, Unbilled Receivables, Network Financing Receivables and Allowance for Credit Losses
Trade accounts receivable are recorded at invoiced amounts, net of allowance for expected credit losses, if applicable, and are unsecured and do not bear interest. In addition, unbilled and network financing receivables are derived from the allocation of contract consideration for services, such as network design and installation, recognized over time, which payment of such consideration received over the contract term, generally between one and several years. Unbilled and network financing receivables are presented net of allowances for credit losses. Unbilled receivables are generally billed within a few months subsequent to the balance sheet date. Network financing receivables are billed monthly in accordance with contract terms, generally over a period of five to seven years, concurrent with internet network services.
Under the current expected credit losses ("CECL") impairment model, the Company develops and documents its allowance for credit losses on trade accounts receivable, unbilled receivables, and network financing receivables based on historical losses. The determination of portfolio segments is based primarily on the qualitative consideration of the credit risks driven by the customer type and macroeconomic factors, if any are deemed to drive credit loss. The Company also considers reasonable and supportable current information in determining its estimated loss rates, such as external forecasts, macroeconomic trends or other factors including customers’ credit risk and historical loss experience. At June 30, 2025 and December 31, 2024, no macroeconomic factors were noted that would impact the Company’s expected credit losses.
The adequacy of the allowance is evaluated on a regular basis. Account balances are written off after all means of collection are exhausted and the balance is deemed uncollectible. Subsequent recoveries are credited to the allowance. Changes in the allowance are recorded as adjustments to provision for credit losses in the period incurred. At June 30, 2025 and December 31, 2024, the Company recorded no allowance for expected credit losses.
Inventories
The Company's inventory is stated at the lower of cost or net realizable value, using specific identification method. The Company's inventory consists completely of items procured but not yet assigned or shipped to a specific job site and finished goods inventory. Indirect costs relating to long-term contracts, which include expenses such as general and administrative, are charged to expense as incurred. The Company had no material write-offs of inventory during the six months ended June 30, 2025 and 2024 and has not recorded an inventory reserve at June 30, 2025 or December 31, 2024.
Deferred Financing Costs
The Company allocates offering costs to the different components of the capital raise on a pro rata basis. Any offering costs allocated to common stock are charged directly to additional paid-in capital.
The Company complies with the requirements of FASB ASC Topic 340, Other Assets and Deferred Costs (“ASC 340”) and SAB 5A - Expenses of Offering. Offering costs, which consist mainly of legal, accounting and consulting fees directly attributable to the issuance of an equity contract to be classified in equity are recorded as a reduction in equity. At June 30, 2025 and December 31, 2024, there were no material deferred financing costs.
| F-37 |
Distinguishing Liabilities from Equity
The Company relies on the guidance provided by FASB ASC Topic 480, Distinguishing Liabilities from Equity ("ASC 480"), to classify certain redeemable and/or convertible instruments. The Company first determines whether a financial instrument should be classified as a liability. The Company will determine the liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument, other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of its equity shares.
Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the unaudited condensed consolidated balance sheet. The Company will determine temporary equity classification if the redemption of the financial instrument is outside the control of the Company (i.e. at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity.
Revenue Recognition
Overview
The Company generates revenue from the following sources: (1) network design and installation and 2) internet network services.
In accordance with FASB ASC 606 “Revenue Recognition” ("ASC 606"), the Company recognizes revenue from contracts with customers using a five-step model, which is described below:
| · | identify the customer contract; |
| · | identify performance obligations that are distinct; |
| · | determine the transaction price; |
| · | allocate the transaction price to the distinct performance obligations; and |
| · | recognize revenue as the performance obligations are satisfied. |
Identify the customer contract
A customer contract is generally identified when there is approval and commitment from both the Company and its customer, the rights have been identified, payment terms are identified, the contract has commercial substance and collectability is probable. Specifically, the Company obtains written/electronic signatures on contracts with customers.
Identify performance obligations that are distinct
A performance obligation is a promise by the Company to provide a distinct good or service or a series of distinct goods or services. A good or service that is promised to a customer is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and a company’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. The Company's network design and installation revenue stream requires significant services to integrate complex activities and equipment into a single deliverable, and is therefore generally accounted for as one distinct performance obligation. The Company's internet network services revenue stream is composed of two distinct and separately identifiable performance obligations: (1) wired/wireless internet services and (2) hardware and internet services maintenance. The hardware and internet services maintenance performance obligation is a stand-ready obligation.
Determine the transaction price
The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The transaction price for the network design and installation is fixed based on the amount stated in the contract. For contracts in which the Company finances the construction of the network, any interest collected by the Company is excluded from the transaction price. The transaction price for the bulk internet services is determined by the monthly per unit price times the number of units stated in the contract.
| F-38 |
The Company evaluates its contracts with customers for the presence of significant financing components. If a significant financing component is identified in a contract and provides a financing benefit to the customer, the transaction price for the contract is adjusted to account for the financing portion of the arrangement, which is recognized as interest income over the financing term using the effective interest method. In determining the appropriate interest rates for significant financing components, the Company evaluates the credit profile of the customer and prevailing market interest rates and selects an interest rate in which it believes would be charged to the customer in a separate financing arrangement over a similar financing term.
Allocate the transaction price to distinct performance obligations
When allocating the contract’s transaction price, the Company considers each distinct performance obligation. As the contracts contain multiple performance obligations, and the Company does not have stand alone observable prices, the Company notes the contract’s transaction price of each performance obligation based on the standalone selling price, which is determined using an expected cost plus a margin approach.
Recognize revenue as the performance obligations are satisfied
Revenue related to network design and installation revenue stream is recognized over time as the Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced date. The best measure of progress towards completion for this performance obligation is costs incurred to date, as the Company has reliable information about the costs it expects to incur in total and the costs actually incurred and because it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. For over time contracts using a cost-to-cost measure of progress, we have an estimate at completion ("EAC") process in which management reviews the progress and execution of our performance obligations. This EAC process requires management judgment relative to assessing risks, estimating contract revenue and costs, and making assumptions for schedule and technical issues. Accordingly, the Company will use an input method of costs incurred to date relative to the estimated total costs to satisfy the performance obligation to record revenue.
Revenue related to wired/wireless internet services is recognized over time as the customer simultaneously receives and consumes the benefits provided by the Company’s performance as the Company performs. The best measure of progress towards completion for this performance obligation is the passage of time as the Company’s efforts are used evenly throughout the performance of the wired and wireless internet services performance obligation. Accordingly, the Company will use an input method of time (in days) elapsed to record revenue as the performance obligation is satisfied evenly over time as the same internet services are provided daily. Revenue will be recorded ratably over the contract term.
Revenue related to hardware and internet services maintenance is recognized over time as the customer simultaneously receives and consumes the benefits provided by the Company’s performance as the Company performs. This performance obligation is a stand-ready obligation in which the Company expects the customer to receive and consume the benefits of the hardware and internet services maintenance throughout the contract period. Accordingly, the Company will use an input method of time (in days) elapsed to record revenue. Management notes that as this is a stand-ready obligation, the performance obligation is satisfied evenly over a period of time, and revenue will be recorded ratably over the contract term.
Costs to obtain contracts
The Company incurs incremental costs to obtain contracts with their customers for certain contracts, specifically sales commissions. These costs are initially capitalized and amortized over the contract term. As of June 30, 2025 and December 31, 2024, the Company had approximately $169 thousand and $148 thousand, respectively, of costs to obtain contracts capitalized which are presented within 'Prepaid expenses and other current assets.
| F-39 |
Significant Judgments
The Company enters into contracts that may include various combinations of equipment, services and network installation. Contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Once the Company determines the performance obligations, it determines the transaction price, which includes estimating the amount of variable consideration to be included in the transaction price, if any. The Company then allocates the transaction price to each performance obligation in the contract based on the stand alone selling price. The corresponding revenue is recognized as the related performance obligations are satisfied. As it relates to Network design and installation revenue, each reporting period, the Company estimates the amount of costs incurred to date as a percentage of total estimated costs to determine the amount of revenue to recognize.
Deferred Revenue and Unbilled Receivables
The timing of revenue recognition, billings and collections results in receivables, unbilled receivables and contract liabilities on our unaudited condensed consolidated balance sheets. Under typical payment terms for our contracts accounted for over time, amounts are billed as work progresses in accordance with agreed-upon contractual terms. For certain contracts, billings occur subsequent to revenue recognition, resulting in unbilled receivables. Under ASC 606, unbilled receivables constitute contract assets. For certain contracts, payment terms typically require advanced payments and deposits. Under ASC 606, payments received from customers in excess of revenue recognized to-date results in a contract liability.
Shipping and Handling Costs
Shipping and handling costs charged to customers are included in revenue, while all other shipping and handling costs are included in cost of revenues in the accompanying unaudited condensed consolidated statements of operations. Shipping and handling costs were not material during the six months ended June 30, 2025 and 2024.
Advertising and Marketing
Advertising costs are expensed as incurred and included in sales and marketing expense. Advertising costs were $64 thousand and $28 thousand during the six months ended June 30, 2025 and 2024, respectively.
Leases
Operating lease assets are included within lease right-of-use assets, net and operating lease liabilities are included in operating lease liabilities, current and operating lease liabilities, net of current on the unaudited condensed consolidated balance sheets as of June 30, 2025 and December 31, 2024. The Company has elected not to present short-term leases as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that the Company is reasonably certain to exercise. Lease payments for short-term leases are recognized on a straight-line basis over the term of the lease. All other lease right-of-use assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because the Company’s lease does not provide an implicit rate of return, the Company used an incremental borrowing rate based on the information available at adoption date in determining the present value of lease payments.
The Company assesses whether an arrangement is a lease or contains a lease at inception. For arrangements considered leases or that contain a lease that is accounted for separately, the Company determines the classification and initial measurement of the lease right-of-use assets and operating lease liabilities at the lease commencement date, which is the date that the underlying asset becomes available for use. The Company has elected to account for non-lease components associated with its leases and lease components as a single lease component.
The Company recognizes a lease right-of-use asset, which represents the Company’s right to use the underlying asset for the lease term, and a operating lease liability, which represents the present value of the Company’s obligation to make payments arising over the lease term. The operating lease liability is based on the present value of its unpaid minimum lease payments over the lease term, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the incremental borrowing rate which is the rate the Company pays to borrow on a collateralized basis.
| F-40 |
If a lease is modified, the modified contract is evaluated to determine whether it is or contains a lease. If a lease continues to exist, the lease modification is determined to be a separate contract when the modification grants the lessee an additional right-of-use that is not included in the original lease and the lease payments increase commensurate with the standalone price for the additional right-of-use. A lease modification that results in a separate contract will be accounted for in the same manner as a new lease. For a modification that is not a separate contract, the Company reassess the lease classification using the modified terms and conditions and the facts and circumstances as of the effective date of the modification and recognize the amount of the remeasurement of the operating lease liability for the modified lease as an adjustment to the corresponding lease right-of-use asset.
Share-Based Compensation
The Company has a share-based compensation plans for employees. The share-based compensation includes awards of phantom stock which are accounted for under FASB ASC Topic 718, Compensation - Stock Compensation ("ASC 718"). The Company recognizes compensation cost, net of estimated forfeitures, for phantom stock awards on a straight-line basis over the requisite service period of each award. Awards that are liability classified are remeasured at each reporting period.
Income Taxes
The Company utilizes an asset and liability approach for financial accounting and reporting for income taxes. The provision for income taxes is based upon income or loss after adjustment for those permanent items that are not considered in the determination of taxable income. Deferred income taxes represent the tax effects of differences between the financial reporting and tax basis of the Company’s assets and liabilities at the enacted tax rates in effect for the years in which the differences are expected to reverse.
The Company evaluates the recoverability of deferred tax assets and establishes a valuation allowance when it is more likely than not that some portion or all the deferred tax assets will not be realized. Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liabilities. In management’s opinion, adequate provisions for income taxes have been made. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.
Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. As of June 30, 2025 and December 31, 2024, no liability for unrecognized tax benefits was required to be recorded.
The Company’s policy for recording interest and penalties associated with tax audits is to record such items as a component of operating expenses. There were no amounts accrued for penalties and interest as of June 30, 2025 and December 31, 2024. The Company does not expect its uncertain tax positions to change during the next twelve months. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.
The Company has identified its United States federal tax returns, and its state and provincial tax returns in North Carolina, Georgia and Michigan as its “major” tax jurisdictions. The Company is in the process of filing its United States federal and state corporate tax returns for the year ended December 31, 2024. Net operating losses for these periods will not be available to reduce future taxable income until the returns are filed.
On July 4, 2025, the One Big Beautiful Bill (the "OBBB") Act, which includes a broad range of tax reform provisions, was signed into law in the United States and we continue to assess its impact. We currently do not expect the OBBB Act to have a material impact on our estimated annual effective tax rate in 2025.
Basic and Diluted Net Loss per Share of Common Stock
The Company calculates basic net loss per share by dividing net loss by the weighted average number of common shares outstanding during the reporting period. A net loss cannot be diluted so when the Company is in a net loss position, basic and diluted loss per common share are the same. If in the future the Company achieves profitability, the denominator of a diluted earnings per common share calculation will include both the weighted average number of shares outstanding and the number of common stock equivalents, if the inclusion of such common stock equivalents would be dilutive.
| F-41 |
Fair Value of Financial Instruments
The Company measures the fair value of financial assets and liabilities based on the guidance of FASB Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.
Fair Value Measurements
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an ordinary transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 — quoted prices in active markets for identical assets or liabilities;
Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable; and
Level 3 — inputs that are unobservable.
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, approximates the carrying amounts in the balance sheets, primarily due to their short-term nature. Based upon current borrowing rates with similar maturities the carrying value of long-term debt, and related party loans payable approximates fair value. The estimated fair value of the Company’s SAFE liabilities as of June 30, 2025 and December 31, 2024 was $1.0 million and $0, respectively, based on Level 3 inputs. Refer to Note 9.
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"), which requires public entities to disclose consistent categories and greater disaggregation of information in the rate reconciliation and for income taxes paid. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is required to adopt this standard prospectively in fiscal year 2025 for the annual reporting period ending December 31, 2025 and is currently evaluating the impact on the Company's related disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement (Topic 220): Reporting Comprehensive Income - Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses ("ASU 2024-03"), that requires public companies to disclose, in interim and reporting periods, additional information about certain expenses in the financial statements. Further clarified by ASU 2025-01, Income Statement (Topic 220): Reporting Comprehensive Income - Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses, issued in December 2025. The ASU is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and is effective on either a prospective basis or retrospective basis. The Company is currently assessing the potential impacts of ASU 2024-03.
In November 2024, the FASB issued ASU 2024-04, Debt with Conversion and Other Options (Subtopic 470-20) ("ASU 2024-04"), which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. ASU 2024-04 is effective for annual periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the amendments in Update 2020-06. Adoption can be on a prospective or retrospective basis. The Company is currently evaluating the disclosure impact that ASU 2024-04 may have on its financial statement presentation and disclosures.
| F-42 |
In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810) ("ASU 2025-03"), which clarifies the requirements for determining the accounting acquirer in the acquisition of a variable interest entity. ASU 2025-03 beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. The amendments in this update require that an entity apply the new guidance prospectively to any acquisition transaction that occurs after the initial application date. Early adoption is permitted as of the beginning of an interim or annual reporting period. The Company is currently evaluating the disclosure impact that ASU 2025-03 may have on its financial statement presentation and disclosures.
In May 2025, the FASB issued ASU 2025-04, Compensation - Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606) ("ASU 2025-04"), which clarifies the requirements for share-based consideration payable to a customer. The amendments in this update are effective for all entities for annual reporting periods (including interim reporting periods within annual reporting periods) beginning after December 15, 2026. Early adoption is permitted for all entities. The Company is currently evaluating the disclosure impact that ASU 2025-04 may have on its financial statement presentation and disclosures.
In July 2025, the FASB issued ASU 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets ("ASU 2025-05"). This standard introduces a practical expedient that companies can choose to apply when determining allowances for credit losses. Specifically, it permits companies to assume that the current conditions as of the balance sheet date remain unchanged throughout the remaining life of the assets. This standard is effective for the Company for annual reporting periods beginning after December 15, 2025, and requires prospective application. The Company is currently evaluating the impact of ASU 2025-05, however, does not expect it to have a material impact on its financial statements.
Management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s unaudited condensed consolidated financial statement presentation or disclosures.
Note 3. Revenue and Deferred Revenue
The following table provides the Company’s revenue disaggregated by revenue stream (in thousands):
| For the Six Months Ended June 30, | ||||||||
| Revenue: | 2025 | 2024 | ||||||
| Network design and installation | $ | 10,536 | $ | 2,911 | ||||
| Internet network services and hardware and internet service | 1,155 | 387 | ||||||
| Total | $ | 11,691 | $ | 3,298 | ||||
Remaining performance obligations represent the transaction price of Company orders for which work has not been performed as of the end of a fiscal period and for contracts with substantive termination penalties. As of June 30, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations was $35.9 million (which represents the amount of the Company's backlog). $7.6 million of the backlog relates to the network design and installation performance obligations and $28.3 million relates to internet network services and hardware and internet services performance obligations. Additionally, $11.1 million of the $35.9 million relates to jobs that are contracted but not yet started as of June 30, 2025. The Company estimates that approximately $9.2 million of the remaining performance obligations at June 30, 2025 will be completed and recognized as revenue during 2025, with the remainder recognized between 2026 and 2032.
| F-43 |
Changes in the Company’s current deferred revenue balance for six months ended June 30, 2025 and 2024, respectively, were as follows (in thousands):
| Balance as of January 1, 2024 | $ | 1,880 | ||
| Additions included in deferred revenue as of end of period | 2,395 | |||
| Revenue recognized from opening balance | (860 | ) | ||
| Balance as of June 30, 2024 | $ | 3,415 | ||
| Balance as of January 1, 2025 | $ | 6,215 | ||
| Additions included in deferred revenue as of end of period | 4,891 | |||
| Revenue recognized from opening balance | (4,211 | ) | ||
| Balance as of June 30, 2025 | $ | 6,895 |
Deferred revenue balances primarily consist of customer deposits and billings in excess of revenue related to the Company's network design and installation performance obligations. As of June 30, 2025 and December 31, 2024, all of the Company’s deferred revenue balances were reported as current liabilities in the accompanying unaudited condensed consolidated balance sheets.
Changes in the Company's network financing receivable balance for the six months ended June 30, 2025 and 2024, respectively, were as follows (in thousands):
| Balance as of January 1, 2024 | $ | — | ||
| Additional unbilled revenue recognized | 234 | |||
| Amounts billed during the period | (4 | ) | ||
| Balance as of June 30, 2024 | $ | 230 | ||
| Balance as of January 1, 2025 | $ | 513 | ||
| Additional unbilled revenue recognized | 506 | |||
| Amounts billed during the period | (36 | ) | ||
| Balance as of June 30, 2025 | $ | 983 |
Note 4. Accounts Receivable
Receivables are recorded and carried at the original invoiced amount less an allowance for credit losses (in thousands).
| June 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Trade accounts receivable | $ | 5,187 | $ | 3,663 | ||||
| Unbilled receivables | 1,766 | 788 | ||||||
| Allowance for credit losses | — | — | ||||||
| Accounts receivable | $ | 6,953 | $ | 4,451 | ||||
Note 5. Leases
Lessee
For the six months ended June 30, 2025, operating lease expense was $28 thousand. The Company did not have any operating lease expense for the six months ended June 30, 2024. For the six months ended June 30, 2025 and 2024 the Company had a short-term lease expense of $23 thousand and $7 thousand, respectively. For the six months ended June 30, 2025 and 2024 the company had variable lease expense of $10 thousand and $0, respectively.
| F-44 |
The lease liability is based on the present value of its unpaid minimum lease payments over the lease term, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the incremental borrowing rate which is the rate the Company pays to borrow on a collateralized basis.
The table below presents certain information related to the weighted average remaining lease term and the weighted average discount rate for the Company’s operating leases, as of June 30, 2025:
| Weighted average remaining lease term (in years) - operating leases | 1.00 | |||
| Weighted average discount rate - operating leases | 6.46 | % |
South Carolina Office Lease Agreement
On January 1, 2023, the Company initially entered into a lease for Suite 130 and 1700 Alta Vista Drive in Columbia, SC in which the initial term was January 1, 2023 through December 31, 2023. At the end of the initial lease term (December 31, 2023), the lease became a month to month lease in which either party (the Company or the lessor) could terminate the lease at any time with 30 days notice. The Company leased this space on a month to month basis for six months until June 30, 2024. On May 31, 2024, the Company entered into a new lease with the same lessor for the original Suite 130 and an additional space, Suite 140. The term of the new lease is from July 1, 2024 to June 30, 2026. Total rent is $3,150 per month from July 1, 2024 to June 30, 2025 and $3,276 per month from July 1, 2025 to June 30, 2026.
Lease Modification
On January 2, 2025, the Company entered into its first amendment to the South Carolina Office Lease ("Amended SC Lease") to expand into an additional suite with approximately 1,950 additional square feet for a total of approximately 5,950 square feet of office space. The Amended SC Lease commencement date is January 2, 2025 and runs concurrently with the existing terms and conditions of the lease, through June 30, 2026. The Company determined that the lease payments increased commensurate with the standalone price for the additional right of use and as such, the it is accounted for as a new lease, commencing on January 2, 2025. As such, the Company recorded an additional right-of-use asset and lease liability upon lease commencement of the new lease. Total rent is $1,536 per month from February 1, 2025 to June 30, 2025 and $1,598 per month from July 1, 2025 to June 30, 2026.
Future lease payments for all lease obligations for the following five fiscal years and thereafter are as follows (in thousands):
| Years ending December 31: | Operating Lease | |||
| 2025 (remainder) | $ | 29 | ||
| 2026 | 29 | |||
| Total minimum lease payments | $ | 58 | ||
| Less effects of discounting | (2 | ) | ||
| Present value of future minimum lease payments | $ | 56 | ||
Lessor
The Company owns certain networks and places them at customer sites under sales-type lease arrangements. The Company evaluates new leases pursuant to FASB ASC 842: Leases to determine lease classification. A lease is classified by a lessor as a sales-type lease if the significant risks and rewards of ownership reside with the customer. This situation is met if, among other things, there is an automatic transfer of title during the lease, a reasonably certain option to be exercised, the non-cancelable lease term is for more than a major part of the remaining economic useful life of the asset, the present value of the minimum lease payments represents substantially all of the leased asset’s fair value at lease inception, or the asset is so specialized in nature that it provides no alternative use to the lessor (and therefore would not provide any future value to the lessor) after the lease term.
The Company had no net investment in sales-type lease transactions for the six months ended June 30, 2025 and 2024.
| F-45 |
The table below reconciles the undiscounted cash flows to be received to the net investment in sales-type leases recorded in the unaudited condensed consolidated balance sheets (in thousands):
| Years ending December 31: | ||||
| 2025 (remainder) | $ | 51 | ||
| 2026 | 102 | |||
| 2027 | 102 | |||
| 2028 | 102 | |||
| 2029 | 102 | |||
| 2030 and thereafter | 265 | |||
| Total minimum lease payments | $ | 724 | ||
| Less: unearned interest | (216 | ) | ||
| Net investment in sales-type leases | $ | 508 | ||
Interest income recognized on lease arrangements for the six months ended June 30, 2025 and 2024 is included in interest expense, net, on the unaudited condensed consolidated statements of operations, and is presented below (in thousands):
| For the Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Lease income - sales-type leases | $ | 28 | $ | — | ||||
| Total lease income | $ | 28 | $ | — | ||||
Note 6. Related Party Debt
The Company's related party debt consisted of (in thousands):
| June 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Related Party Debt, current: | ||||||||
| Endurance Loan | $ | 222 | $ | 222 | ||||
| Motherlode Promissory Note | 191 | 185 | ||||||
| Network Service Agreements | 288 | 288 | ||||||
| Endurance Business Loan | 250 | — | ||||||
| Second Endurance Promissory Note | 500 | — | ||||||
| Related Party Debt, current | $ | 1,451 | $ | 695 | ||||
| Related Party Debt, net of current | ||||||||
| Endurance Loan | $ | 630 | $ | 741 | ||||
| Motherlode Promissory Note | 587 | 683 | ||||||
| Network Service Agreements | 910 | 1,051 | ||||||
| Endurance Business Loan | — | 250 | ||||||
| Endurance Promissory Note | 500 | — | ||||||
| Related Party Debt, net of current | $ | 2,627 | $ | 2,725 | ||||
| F-46 |
Apogee Telecom Promissory Note (December 6, 2019)
On December 6, 2019 the Company entered into a promissory note (the “Apogee Promissory Note") with Apogee Telecom, Inc., a Texas Corporation ("Apogee"), a related company connected from a board member and shareholder of the Company, where Apogee loaned $800 thousand, to the Company in exchange for the Apogee Promissory Note. The Apogee Promissory Note had a maturity date of November 30, 2026 and bears interest at 10.0%, compounded annually. No principal or interest payments were due until December 31, 2021, at which point principal and interest were paid in equal monthly installments of $19 thousand. As part of the Series Seed Repurchase Agreement this was paid off in its entirety on April 12, 2024 (see Note 8). As of June 30, 2025 and December 31, 2024, the Apogee Promissory Note had no remaining balance. During the six months ended June 30, 2025 and 2024, the Company incurred $0 and $18 thousand of interest expense, which is recognized in interest expense in the unaudited condensed consolidated statements of operations. Subsequent to April 12, 2024, Apogee is no longer a related party of the Company.
Apogee Telecom Installment Payment Agreement (February 28, 2023)
On February 28, 2023, the Company entered into an installment payment agreement (the “Apogee Installment Payment Agreement") with Apogee, whereas Apogee provided hardware and peripheral equipment related to the Company's primary services. Per the Apogee Installment Payment Agreement the Company owed a principal balance of $0.4 million, which is to be paid in installments over a term of twenty three months. The Apogee Installment Payment Agreement had a maturity date of December 31, 2024, and bore interest at 12.0%, compounded annually. As of June 30, 2025 and December 31, 2024, the Apogee Promissory Note had no remaining balance. As part of the Series Seed Repurchase Agreement this was paid off in its entirety on April 12, 2024 (see Note 8). During the six months ended June 30, 2025 and 2024, the Company incurred $0 and $15 thousand of interest expense, which is recognized in interest expense in the unaudited condensed consolidated statements of operations. As noted above, subsequent to April 12, 2024, Apogee is no longer a related party of the Company.
Endurance Loan (April 1, 2024)
On April 1, 2024 the Company entered into a fixed rate loan agreement (the “Endurance Loan") with Endurance Opportunities I, LLC ("Endurance"), a related party owned by a member of management and certain shareholders, where Endurance loaned $1.0 million, to the Company in exchange for the Endurance Loan. The Endurance Loan has a maturity date of May 1, 2029 and bears interest at 18.0%, compounded annually. Monthly payments are required under the Endurance Loan of $15 thousand through October 2024 and $19 thousand, thereafter through maturity. During the six months ended June 30, 2025 and the six months ended June 30, 2024 the Company incurred $52 thousand and $30 thousand of interest expense, respectively, which is recognized in interest expense in the unaudited condensed consolidated statements of operations. As of June 30, 2025 and December 31, 2024, the Endurance Loan had a balance of approximately $0.9 million and $1.0 million, respectively.
Motherlode Promissory Note (April 12, 2024)
On April 12, 2024 the Company entered into a promissory note (the “Motherlode Promissory Note") with Motherlode LLC.("Motherlode"), a related party shareholder, where Motherlode loaned $1.0 million, to the Company in exchange for the Motherlode Promissory Note. The Motherlode Promissory Note has a maturity date of April 30, 2029 and bears interest at 6.0%, compounded annually. During the term of the Motherlode Promissory Note, the Company is to pay monthly installments of $19 thousand. During the six months ended June 30, 2025 and the six months ended June 30, 2024 the Company incurred $25 thousand and $15 thousand of interest expense, respectively, which is recognized in interest expense in the unaudited condensed consolidated statements of operations. As of June 30, 2025 and December 31, 2024, the Motherlode Promissory Note had a balance of $0.8 million and $0.9 million, respectively.
Network Service Agreements (Various dates in 2024)
The Company has entered into a certain network service agreement (the “Network Service Agreements" or the “NSAs”) with various customers, pursuant to which the Company will perform or has performed the design, installation, and management of a telecommunications network for the customer in financed project amounts ranging from $50 thousand to $550 thousand (the "Project Financing"). Through December 31, 2024, Endurance financed $1.4 million. The Company notes $0.5 million of the amount financed during the year ended December 31, 2024, relates to the sales-type lease (see Note 5). During the six months ended June 30, 2025 and 2024, Endurance financed $0 and $0.8 million, respectively. As of June 30, 2025 and December 31, 2024, the NSAs had a balance of $1.2 million and $1.3 million, respectively. As of June 30, 2025, repayments on these agreements are made monthly and range from $1 thousand to $9 thousand.
| F-47 |
As part of each Project Financing, the Company sold an undivided interest in the NSA, to Endurance, and interest shall accrue at a rate of 16.5% per annum, with respect to any payments owed to Endurance by the Company, or advances owed to Endurance by the Company, not made when due. In exchange, for the financing, the Company and Endurance have entered into various participation and agency agreements (the "Participation and Agency Agreements), whereby Endurance is granted an undivided participation interest entitling Endurance to receive payments in relation to each respective NSA. At any time the Participation and Agency Agreement is outstanding, the Company shall have the right to repurchase Endurance' interest at par value, with par meaning all outstanding principal, unpaid interest, and fees. If Endurance' interest under these Participation and Agency Agreements remains outstanding twenty four (24) months after the service activation date under each respective NSA, Endurance shall have the option to require repurchase by the Company of Endurance' interest, at par value. Interest expense related to these network service agreements are presented net of interest income received from network financing receivables, which accrues interest income at the same rate as the NSAs.
Endurance Business Loan (November 12, 2024)
On November 12, 2024 the Company entered into a fixed rate loan agreement (the “Endurance Business Loan") with Endurance, a related party, where Endurance loaned $0.3 million to the Company. The Endurance Business Loan has a maturity date of May 2026 and bears interest at 16.5% per year. During the six months ended June 30, 2025, the Company incurred $21 thousand of interest expense, which is recognized in interest expense in the unaudited condensed consolidated statements of operations. As of June 30, 2025 and December 31, 2024, the Endurance Business Loan had a balance of $0.3 million and $0.3 million, respectively.
Endurance Promissory Note (March 1, 2025)
On March 1, 2025, the Company entered into a fixed rate loan agreement (the "Endurance Promissory Note") with Endurance, where Endurance loaned $0.5 million to the Company. The Endurance Loan has a maturity date of eighteen months and bears interest at 16.5%. Quarterly payments of interest are required with outstanding principal amount of the loan due on the maturity date. During the six months ended June 30, 2025, the Company incurred $28 thousand of interest expense, which is recognized in interest expense in the unaudited condensed consolidated statements of operations. As of June 30, 2025, the Endurance Promissory Note had a balance of $0.5 million.
Second Endurance Promissory Note (March 25, 2025)
On March 25, 2025, the Company entered into a fixed rate loan agreement (the “Second Endurance Promissory Note") with Endurance, where Endurance loaned $0.5 million to the Company. The Second Endurance Promissory Note has a maturity date of ninety days and bears interest at 16.5%. Monthly payments of interest are required with outstanding principal amount of the loan due on the maturity date. During the six months ended June 30, 2025, the Company incurred $22 thousand of interest expense, which is recognized in interest expense in the unaudited condensed consolidated statements of operations. As of June 30, 2025, the Second Endurance Promissory Note had a balance of $0.5 million. On July 7, 2025, the Second Endurance Promissory Note was modified to extend the term of the note an additional 90 days, to September 30, 2025. Refer to Note 13.
| F-48 |
As of June 30, 2025, future minimum principal payments on all related party debt, excluding accrued interest amounts, were as follows (in thousands):
| Years ending December 31: | ||||
| 2025 (remainder of year) | $ | 851 | ||
| 2026 | 1,456 | |||
| 2027 | 718 | |||
| 2028 | 731 | |||
| 2029 | 310 | |||
| Thereafter | 12 | |||
| Total future payments | $ | 4,078 | ||
Note 7. Related Party Payables
Management Agreement (December 6, 2019, was not renewed post 2022)
On December 6, 2019 the Company entered into a management agreement (the “Management Agreement") with Elauwit Connection, LLC, a Wyoming limited liability company ("Elauwit LLC"), a related party, that was dissolved in October 2024, whereby certain key persons of Elauwit LLC, shall provide management services to manage all aspects of the Company, subject to supervision and oversight by the Company's board of directors (the "Board"). The key persons ("Key Persons") who will supervise all services include the Executive Chairman and the Chief Executive Officer of the Company. In consideration of the services provided by the Key Persons, the Company paid Elauwit LLC a sum of $45 thousand per month during the initial year of the Management Agreement, subject to potential annual increases and other compensation, as determined by the Board. The term of the agreement was three (3) years commencing on December 1, 2019 and terminated on November 30, 2022. Beginning in December 2020, the Key Persons elected to defer portions of their consideration. On August 20, 2024, as part of the Deferred Compensation Agreement, defined below, the Company is to pay the Key Persons $0.5 million, at an interest rate of 3.25%, on cumulative balances owed. During the six months ended June 30, 2025 and 2024, the Company incurred $7 thousand and $9 thousand of interest expense, respectively, which is recognized in interest expense in the unaudited condensed consolidated statements of operations. As of June 30, 2025 and December 31, 2024, the Deferred Compensation Agreement had a balance of $0.4 million and $0.5 million, respectively.
Post November 30, 2022, the Company continued making payments under an informal agreement to same Key Persons. During the six months ended June 30, 2025 and 2024, the Company incurred expenses of $180 thousand and $0, respectively, included in general and administrative expenses on the unaudited condensed consolidated statements of operations.
Deferred Compensation Agreement (August 20, 2024)
On August 20, 2024 the Company entered into a deferred compensation agreement (the “Deferred Compensation Agreement") with certain executives of the Company, whereby the executives, deferred a certain portion of their salaries. The deferred salaries bear interest of 3.25%, on all cumulative balances outstanding as of February 1, 2022. The Company pays each of the executives $2.5 thousand per month and there is no fixed maturity date. During the six months ended June 30, 2025 and 2024, the Company incurred $2 thousand and $2 thousand of interest expense, respectively, which is recognized in interest expense in the unaudited condensed consolidated statements of operations. As of June 30, 2025 and December 31, 2024, the Deferred Compensation Agreement had a balance of $0.1 million and $0.1 million, respectively.
| F-49 |
Note 8. Equity Offerings
Class A and Class B Common Stock
Put and Call Option Agreements
Baron Hunter Group, LLC and Steele Creek Partners, LLC, related parties through common management, have entered into separate agreements with the Company whereby each was granted the right to sell to the Company ("Put Option") up to a $2.0 million value of common shares of the Company at a discount of 10% below the IPO issue price, limited to the lesser of $2.0 million or 10% of the IPO gross offering proceeds, exercisable for a period of ten (10) business days following the effective date of the IPO. The Company was granted the right to purchase (Call Option) up to a maximum of $2.0 million of common shares from each of Baron Hunter Group, LLC and Steele Creek Partners, LLC, at a premium of 10% in excess of the IPO issue price, limited to the lesser of $2.0 million or 10% of the IPO gross offering proceeds, exercisable for a period of ten (10) business days following the effective date of the IPO. This agreement was subsequently amended. See Note 13, Subsequent Events, for additional details.
On June 13, 2025, the Company adopted resolutions to amend and restate its certificate of incorporation to, among other things, (i) provide for a classified structure for the election of directors; (ii) increase the number of shares of common stock, par value $0.0001 per share, authorized for issuance to 14,900,000, consisting of 12,000,000 shares of Class A common stock and 2,900,000 shares of Class B common stock; (iii) authorize the Board of Directors to issue up to 100,000 shares of preferred stock, par value $0.0001 per share.
Baron Hunter Group, LLC
On May 16, 2025, Baron Hunter Group, LLC transferred 25,000 shares of the Company's Class B Common Stock (the "Shares") with a par value of $0.00001 per share to Glenn Josephs. Upon the occurrence of the transfer, the Shares automatically converted into 25,000 shares of Class A Common Stock with a par value of $0.00001 per share.
Series Seed Convertible Preferred Stock
Prior to the repurchase of the Series Seed Preferred Stock on April 12, 2024, as further discussed below, the Company’s Series Seed Preferred Stock consisted of the following:
| Shares Authorized | Shares Issued
and Outstanding | Carrying Value | Original Issue
Price | Conversion Price | Common Shares Upon Conversion | |||||||||||||||||
| 250,000 | 250,000 | $ | 1,000,000 | $ | 4.00 | $ | 4.00 | 250,000 | ||||||||||||||
Prior to the repurchase, the Series Seed Preferred Stock was recorded on the December 31, 2023 audited consolidated balance sheets at its redemption value which was the carrying value of the redeemable preferred stock.
Series Seed Stock Repurchase Agreement
On April 12, 2024, the Company and Motherlode entered into a Stock Repurchase Agreement (the "Series Seed Stock Repurchase Agreement"), whereby the Company repurchased from Motherlode, 250,000 shares of Series Seed Preferred Stock, $0.0001 par value per share, at a purchase price of $4.00 per share, or $1 million in aggregate (the "Purchase Price"). The Purchase Price consists of the Motherlode Promissory Note (see Note 6), and is secured by personal guarantees of the Company's personnel. Additionally, as part of the closing, the Company shall pay to Apogee, all amounts due under the Apogee Promissory Note, in the amount of approximately $619 thousand. Additionally, the Company, shall pay all amounts remaining due under the Apogee Installment Payment Agreement, in the amount of approximately $330 thousand, together with a remaining hardware invoice in the amount of approximately $38 thousand. As part of the closing, certain principals of Motherlode resigned from the Board of Directors of the Company, as such Motherlode is no longer considered an ongoing related party.
Series B Convertible Preferred Stock
On various dates from January of 2022 through June of 2024 the Company entered into the Stock Purchase Agreements with certain investors, relating to the issuance and sale by the Company to the investors of up to 327,067 shares of Series B Preferred Stock (the “Series B Preferred Stock”) for an aggregate purchase price ranging from $10.00 to $16.56 per share of Series B Preferred Stock.
On various dates from January of 2022 through June of 2024, the Company and the investors completed the issuance and sale of 320,522 shares of Series B Preferred Stock for an aggregate purchase price of $4.8 million. In addition, in lieu of cash, the Company issued on various dates 6,545 Series B Preferred Stock to vendors and shareholders as compensation for services rendered. The Company determined the fair value of the 6,545 shares issued for services based on the Series B Preferred Stock price from recent sales.
| F-50 |
In connection with the issuance of the Series B Preferred Stock, the Company incurred direct and incremental expenses of $0.1 million, comprised of legal fees and shares paid-in-kind for finders’ fees, which were expensed as incurred as they were de minimis.
Prior to the conversion of the Series B Preferred Stock on August 20, 2024, as further discussed below, the Company’s Series B Preferred Stock consisted of the following:
| Shares Authorized | Shares Issued
and Outstanding | Carrying Value | Original Issue
Price | Conversion Price | Common Shares Upon Conversion | |||||||||||||||||
| 327,067 | 327,067 | $ | 5,298,006 | $10.00 - $16.56 | $10.00 - $16.56 | 327,067 | ||||||||||||||||
Conversion of Series B Preferred Stock
On August 20, 2024, the Series B Preferred Stock Holders agreed to convert the Series B Preferred Shares into Common Stock of the Company, on a one-for-one basis, into an aggregate 327,067 common shares of the Company in accordance with the original conversion terms and conditions. In connection with the reverse recapitalization, the 327,067 common shares were exchanged in accordance with the exchange ratio of 4.11795:1, therefore, in aggregate, 1,346,846 shares of Class A and Class B common shares were issued.
Note 9. SAFEs
Strategic Investment
On January 6, 2025, the Company entered into a Simple Agreement for Future Equity (the “SAFE Agreement” or "SAFE") with an investor (the “Investor”). Pursuant to the terms of the SAFE Agreement, the Company received an aggregate amount of $1.0 million (the “SAFE Amount”). In the event of an equity financing, as defined in the SAFE Agreement, the investment made pursuant to the SAFE Agreement will be automatically converted into the number of shares of the Company based on the lowest price per share of the Class A Common Stock sold in the future equity financing multiplied by a discount price of 85%.
The SAFEs were recorded as a liability in accordance with the applicable accounting guidance due to the potential for the Company to settle the fixed outstanding balance of the SAFE liability in a variable number of shares. The initial fair value of the SAFE liability was $1.0 million. Subsequent changes in fair value at each reporting period are recognized in the unaudited condensed consolidated statement of operations as changes in fair value of SAFE liability. There was no change in fair value of the SAFE between issuance and June 30, 2025, and as such no gain or loss was recorded on the unaudited condensed consolidated statements of operations.
Note 10. Employee Benefit Plan
In April 2024, the Company established a Safe Harbor 401(k) contribution plan under Section 401(k) of the Internal Revenue Code (“401(k) Plan”). Under the terms of the 401(k) Plan, all full-time employees were eligible to make voluntary contributions as a percentage or defined amount of compensation. The Company made matching contributions based on 100% of each employee’s contribution up to the first 3% of pay and then on 50% of employee contributions on the next 2% of pay of the employee's eligible compensation. The Company had expenses related to the matching contribution for the six months ended June 30, 2025 and 2024 of approximately $32 thousand and $30 thousand, respectively.
Note 11. Commitments and Contingencies
In the normal course of business, the Company is at times subject to pending and threatened legal actions. In management’s opinion, any potential loss resulting from the resolution of these matters will not have a material effect on the results of operations, financial position or cash flows of the Company.
As of June 30, 2025, the Company had no outstanding litigation.
| F-51 |
Phantom Stock Awards
The Company has an authorized Phantom Equity Plan to grant phantom stock units to key employees of the Company as a means to provide deferred compensation. The Phantom Equity Payments (“Rights”) are cash settled and calculated by reference to the value of the Company as of the date of the award of such Rights as determined in accordance with the Plan. The maximum amount of all Rights authorized by the Plan shall be 10% of the Company's total appreciation above the market value of the Company as determined in accordance the Plan. Upon a payment event in accordance with the Plan, a participants right to any unvested Rights would terminate and be cancelled without any further payment. Rights will also terminate and be forfeited if the participant is terminated for cause. If a participant breaches any noncompetition, confidentially, nonsolicitation, noninterference or nondisclosure agreement, all unvested and vested Rights will terminate and be forfeited and the participant would be required to repay immediately any payments previously made.
During the six months ended June 30, 2025 and 2024, the Company did not grant any phantom stock awards. The phantom stock awards are accounted for as a liability under ASC 718 and as of December 31, 2023 the Company had a liability of $116 thousand on the audited consolidated balance sheets. There were 55 thousand phantom stock awards granted, of which 25 thousand did not vest and were forfeited prior to January 1, 2024. In September 2024, the 25 thousand vested phantom stock awards were exchanged for Class B common stock, at an exchange of 4.11785:1, for 102,949 shares, as a result of the merger and recapitalization transaction with DeltaMax as described in Note 1. At June 30, 2025 and December 31, 2024 there are no phantom stock awards outstanding.
Note 12. Net Loss per Share
Participating securities have the effect of diluting both basic and diluted earnings per share during periods of income. During periods of loss, no loss is allocated to the participating securities since the holders have no contractual obligation to share in the losses of the Company.
At June 30, 2025 there were no common share equivalents outstanding.
Anti-dilutive common share equivalents excluded from the computation of diluted net loss per share at June 30, 2024 consisted of Series B convertible preferred stock of 325,267 and phantom stock awards of 25,000.
| F-52 |
Note 13. Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, the Company did not identify any subsequent events, other than noted below, that would have required adjustment or disclosure in the financial statements.
Extension Second Endurance Promissory Note
On July 7, 2025, the Second Endurance Promissory Note was modified to extend the term of the note an additional 90 days, to September 25, 2025. No other terms of the agreement were amended.
Conversion of Class B Common Stock
On August 8, 2025, all Class B Common Stockholders converted all 2,477,050 shares of Class B Common Stock with a par value of $0.00001 per share into Class A Common Stock with a par value of $0.00001 per share.
Amendment to the Put and Call Option Agreements
Baron Hunter Group, LLC and Steele Creek Partners, LLC, related parties through common management, previously entered into separate Put and Call Option Agreements with the Company. On August 11, 2025 the Put and Call Option Agreements were amended whereby Baron Hunter and Steele Creek are each granted the right to sell to Elauwit (Put Option) up to a $1.0 million of common shares of Elauwit at a discount of 10% below the IPO issue price. Elauwit is granted the right to purchase (Call Option) up to a maximum of $1 million of common shares from each of Baron Hunter and Steele Creek at a premium of 10% in excess of the IPO issue price.
Amendment to the Certificate of Incorporation
On August 11, 2025, the Company adopted resolutions to amend and restate its certificate of incorporation to, among other things, (i) authorize 15,000,000 of capital stock which is divided into two classes, with 14,900,000 shares designated as Common Stock, $0.0001 par value per share (the “Common Stock”), and 100,000 shares designated as Preferred Stock, par value $0.0001 per share (the “Preferred Stock”) and (ii) the holders of Common Stock hold all voting power.
| F-53 |
Through and including , 2025 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This requirement is in addition to a dealers’ obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or membership.
Shares of common stock
ELAUWIT CONNECTION, INC.
PROSPECTUS
Sole Bookrunner
Craig-Hallum
, 2025
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses, all of which will be borne by the registrant, in connection with the sale and distribution of the securities being registered, other than the underwriting discounts and commissions. All amounts shown are estimates except for the SEC registration fee and the FINRA filing fee.
| SEC registration fee | $ | 3,108 | ||
| FINRA fees | $ | 3,500 | ||
| Printing and engraving expenses | $ | 35,000 | ||
| Accounting fees and expenses | $ | 425,000 | ||
| Legal fees and expenses | $ | 400,000 | ||
| Miscellaneous | $ | 33,392 | ||
| Total | $ | 900,000 |
Item 14. Indemnification of Directors and Officers.
Section 102(b)(7) of the Delaware General Corporation Law (“DGCL”) provides that a Delaware corporation, in its certificate of incorporation, may limit the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duties as a director, except for liability for any:
| · | transaction from which the director derived an improper personal benefit; | |
| · | act or omission not in good faith or that involved intentional misconduct or a knowing violation of law; | |
| · | unlawful payment of dividends or redemption of shares; or | |
| · | breach of the director’s duty of loyalty to the corporation or its stockholders. |
Under Section 145 of the DGCL, we can indemnify our directors and officers against liabilities they may incur in such capacities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Our certificate of incorporation (Exhibit 3.1 to this registration statement) provides that we must indemnify our directors and officers to the fullest extent permitted by law and requires us to pay expenses incurred in defending or other participating in any proceeding in advance of its final disposition upon our receipt of an undertaking by the director or officer to repay such advances if it is ultimately determined that the director or officer is not entitled to indemnification. Our certificate of incorporation further provides that rights conferred under such certificate of incorporation do not exclude any other right such persons may have or acquire under the certificate of incorporation, the bylaws, any statute, agreement, vote of stockholders or disinterested directors or otherwise.
The certificate of incorporation also provides that, pursuant to Delaware law, our directors shall not be liable for monetary damages for breach of the directors’ fiduciary duty of care to us and our stockholders. This provision in the certificate of incorporation does not eliminate the duty of care, and in appropriate circumstances equitable remedies such as injunctive or other forms of non-monetary relief will remain available under Delaware law. In addition, each director will continue to be subject to liability for breach of the director’s duty of loyalty to us for acts or omissions not in good faith or involving intentional misconduct, or knowing violations of law, for actions leading to improper personal benefit to the director, and for payment of dividends or approval of stock repurchases or redemptions that are unlawful under Delaware law. The provision also does not affect a director’s responsibilities under any other law, such as the federal securities laws or state or federal environmental laws. We also intend to obtain directors’ and officers’ liability insurance pursuant to which our directors and officers are insured against liability for actions taken in their capacities as directors and officers.
In addition, we intend to enter into agreements to indemnify our directors and certain of our officers in addition to the indemnification provided for in the certificate of incorporation. These agreements, among other things, indemnify our directors and some of our officers for certain expenses (including attorney’s fees), judgments, fines and settlement amounts incurred by such person in any action or proceeding, including any action by or in our right, on account of services by that person as a director or officer of our company or as a director or officer of our subsidiary, or as a director or officer of any other company or enterprise that the person provides services to at our request.
The underwriting agreement(s) that we may enter into may provide for indemnification by any underwriters, its directors, or its officers who sign the registration statement and our controlling persons for some liabilities, including liabilities arising under the Securities Act.
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Item 15. Recent Sales of Unregistered Securities.
The information below lists all of the securities sold by us during the past three years that were not registered under the Securities Act:
| · | On January 6, 2025, we issued approximately $1.0 million in a SAFE for cash pursuant to an exemption from registration under the Securities Act available under Section 4(a)(2) as a transaction not involving a public offering. In connection with this offering, we will either (i) pay the holder an amount in cash equal to the amount the holder invested in the SAFE or (ii) issue a number of shares of common stock to the holder equal to (a) the amount of their investment divided by (b) the public offering price multiplied by the discount rate of 85%, whichever is greater. If the SAFE is converted into shares of common stock, 117,647 shares of common stock would be issuable to the SAFE holder, based on an assumed offering price of $10.00. |
Item 16. Exhibits and Financial Statement Schedules.
The following exhibits to this registration statement included in the Index to Exhibits are incorporated by reference.
INDEX TO EXHIBITS
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| ____________ |
| * | Filed herewith. |
| + | Management contract or compensatory arrangement. |
| ^ | Schedules and similar attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company will furnish a copy of any omitted schedule or similar attachment to the Securities and Exchange Commission upon request. |
Item 17. Undertakings.
The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes:
| (a)(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; | |
| (ii) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% 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 the undertakings set forth in paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the SEC by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this registration statement or are contained in a form of prospectus filed pursuant to Rule 424(b) that is part of this registration statement. | ||
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| (2) | That, for the purposes of determining any liability under the Securities Act of 1933, 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. | |
| (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 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. |
| (b) | Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. |
| (c) | That, |
| (1) | For purposes of determining any liability under the Securities Act of 1933, 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 of 1933 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 of 1933, 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. |
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Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Columbia, State of South Carolina, on September 15, 2025.
| ELAUWIT CONNECTION, INC. | ||
| By: | /s/ Barry Rubens | |
| Name: | Barry Rubens | |
| Title: | Chief Executive Officer | |
| (principal executive officer) | ||
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Barry Rubens | Chief Executive Officer and Director | September 15, 2025 | ||
| Barry Rubens | (principal executive officer) | |||
| * | Chief Financial Officer and Treasurer | September 15, 2025 | ||
| Sean Arnette | (principal financial and accounting officer) | |||
| * | Executive Chairman | September 15, 2025 | ||
| Dan McDonough, Jr. | ||||
| * | President, Chief Technology Officer and Director | September 15, 2025 | ||
| Taylor Jones | ||||
| * | Director | September 15, 2025 | ||
| Scott Barton | ||||
| * | Director | September 15, 2025 | ||
| Elbert Gene Basolis, Jr. | ||||
| * | Director | September 15, 2025 | ||
| Frederick Berk | ||||
| * | Director | September 15, 2025 | ||
| Leslie Goodman | ||||
| * | Director | September 15, 2025 | ||
| Glenn Josephs | ||||
| * | Director | September 15, 2025 | ||
| David O’Brien | ||||
| * | Director | September 15, 2025 | ||
| Roger Shannon |
| * By: | /s/ Barry Rubens | |
| Barry Rubens, as attorney-in-fact | ||
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Exhibit 1.1
Elauwit Connection, Inc.
UNDERWRITING AGREEMENT
, 2025
CRAIG-HALLUM CAPITAL GROUP LLC
323 North Washington Ave.
Minneapolis, MN 55401
As Representative of the Purchasers
named on Schedule I hereto
Ladies and Gentlemen:
The undersigned, Elauwit Connection, Inc., a Delaware Corporation (the “Company”), hereby confirms its agreement (this “Agreement”) to issue and sell to the underwriter or underwriters, as the case may be, named in Schedule I hereto (each, an “Underwriter” and, collectively, the “Underwriters”), for whom Craig-Hallum Capital Group LLC is acting as representative (in such capacity, the “Representative”), (A) an aggregate of __________ shares of common stock, par value $0.0001 per share, of the Company (the “Firm Shares”) and (B) at the election of the Representative, up to an additional _______ shares of common stock (the “Option Shares”, and together with the Firm Shares, the “Shares”). The offering and sale of the Shares contemplated by this Agreement is referred to herein as the “Offering”.
1. Securities; Over-Allotment Option.
(a) Purchase of Firm Shares. On the basis of the representations and warranties herein contained, but subject to the terms and conditions herein set forth, the Company agrees to issue and sell, severally and not jointly, to the several Underwriters, an aggregate of __________ Firm Shares at a purchase price of $_____ per Firm Share which represents a 7% discount to the initial public offering price per Firm Share (the “Firm Share Purchase Price”). The Representative shall be due 80% of the Firm Share Purchase Price and Maxim Group LLC (“Maxim”), as the syndicate, shall be due 20% of the Firm Share Purchase Price.
(b) The Underwriters, severally and not jointly, agree to purchase from the Company the number of Firm Shares set forth opposite their respective names on Schedule I attached hereto and made a part hereof.
(c) Payment and Delivery. Delivery and payment for the Firm Shares shall be made at 10:00 a.m., New York time, on the first Business Day following the effective date (the “Effective Date”) of the Registration Statement (as hereinafter defined) (or the second Business Day following the Effective Date, if the Registration Statement is declared effective after 4:30 p.m. New York time) or at such earlier time as shall be agreed upon by the Representative and the Company at the offices of the Representative or at such other place as shall be agreed upon by the Representative and the Company. The hour and date of delivery and payment for the Firm Shares is called the “Closing Date.” The closing of the payment of the purchase price for, and delivery of certificates representing, the Firm Shares is referred to herein as the “Closing.” Payment for the Firm Shares shall be made on the Closing Date by wire transfer in Federal (same day) funds upon delivery to you of certificates (in form and substance satisfactory to the Underwriters) representing the Firm Shares (or through the full fast transfer facilities of the Depository Trust Company (the “DTC”)) for the account of the Underwriters. The Firm Shares shall be registered in such name or names and in such authorized denominations as the Representative may request in writing as soon as practicable prior to the Closing Date. The Company will permit the Representative to examine and package the Firm Shares for delivery, as soon as practicable prior to the Closing Date. The Company shall not be obligated to sell or deliver the Firm Shares except upon tender of payment by the Representative for all the Firm Shares.
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(d) Over-allotment Option. For the purposes of covering any over-allotments in connection with the distribution and sale of the Firm Shares, the Representative on behalf of the Underwriters are hereby granted an option (the “Over-Allotment Option”) for a period of forty-five (45) days after the closing of this Offering to purchase up to an additional _______ Option Shares, which equal to 15% of the Firm Shares. The purchase price to be paid for the Option Shares subject to the Over-Allotment Option will be equal to the Firm Share Purchase Price.
(e) Exercise of Option. The Over-allotment Option granted pursuant to Section 1(d) hereof may be exercised by the Representative as to all (at any time) or any part (from time to time) of the Option Shares within 45 days after the Closing Date. The Underwriters will not be under any obligation to purchase any of such Option Shares prior to the exercise of the Over-allotment Option. The Over-allotment Option granted hereby may be exercised by the giving of written notice to the Company from the Representative, setting forth the number of Option Shares to be purchased and the date and time for delivery of and payment for such Option Shares, which will not be later than three Business Days after the date of the notice or such other time as shall be agreed upon by the Company and the Representative, at the offices of the Representative or at such other place as shall be agreed upon by the Company and the Representative. If such delivery and payment for all of the Option Shares does not occur on the Closing Date, the date and time of the closing for such Option Shares will be as set forth in the notice (hereinafter the “Option Closing Date”). Upon exercise of the Over-allotment Option, the Company will become obligated to convey to the Underwriters, and, subject to the terms and conditions set forth herein, the Underwriters will become obligated to purchase, the number of Option Shares specified in such notice. If any Option Shares are to be purchased, each Underwriter agrees, severally and not jointly, to purchase the number of Option Shares (subject to such adjustments to eliminate fractional securities as the Representative may determine) that bears the same proportion to the number of Firm Shares to be purchased as set forth on Schedule I opposite the name of such Underwriter bears to the total number of Firm Shares.
(f) Payment and Delivery of Option Shares. Payment for Option Shares shall be made on the Option Closing Date by wire transfer in Federal (same day) funds by deposit of the price for the Option Shares being purchased to the Company upon delivery to the Underwriters of certificates (in form and substance satisfactory to the Underwriters) representing such Option Shares (or through the full fast transfer facilities of DTC) for the account of the Underwriters. The certificates representing the Option Shares to be delivered will be in such denominations and registered in such names as the Representative requests not less than one Business Day prior to the Closing Date or the Option Closing Date, as the case may be, and will be made available to the Representative for inspection, checking and packaging at the aforesaid office of the Company’s transfer agent or correspondent as soon as practicable prior to the Closing Date or the Option Closing Date, as the case may be.
(g) Representative’s Warrants. The Company hereby agrees to issue to the Representative (and/or its designees) on the Closing Date, for the price of $50, warrants to purchase ______ shares of the Company’s common stock (the “Closing Representative’s Warrants”), which equal to seven percent 7% of the Firm Shares, and, on each Option Closing Date, Warrants to purchase a number of the Company’s shares of common stock up to an aggregate of seven percent (7%) of the number of Shares issued at such Option Closing Date (the “Option Representative’s Warrants” and, together with the Closing Representative’s Warrants, the “Representative’s Warrants”). The Representative’s Warrants shall be exercisable, in whole or in part, commencing six (6) months from the Effective Date of the Registration Statement and expiring on the five-year anniversary of the Effective Date at an initial exercise price of $____ per Firm Share, which is equal to one hundred and fifteen percent (115%) of the Offering price of a Share. The Representative’s Warrants shall not be redeemable. The Company shall register the shares underlying the Representative’s Warrants under the Securities Act and will file all necessary undertakings in connection therewith. The Representative’s Warrants may not be transferred, assigned or hypothecated for a period of six (6) months following the Closing, except that they may be assigned, in whole or in part, to any successor, officer, manager or member of the Representative (or to officers, managers or members of any such successor or member), and to members of the underwriting syndicate or selling group. The Representative’s Warrants may be exercised as to all or a lesser number of the Company’s shares of common stock, will provide for cashless exercise at all times and will contain provisions for registration of the sale of the underlying Firm Shares at the Company’s expense, an additional demand registration at the warrant holders’ expense, and unlimited “piggyback” registration rights for a period of five years after the Closing at the Company’s expense. The Representative’s Warrants shall further provide for anti-dilution protection (adjustment in the number and price of such warrants and the shares underlying such warrants) resulting from corporate events (which would include dividends, reorganizations, mergers, etc.). The Representative’s Warrants and the Firm Shares issuable upon exercise of the Representative’s Warrants are hereinafter referred to collectively as the “Representative’s Securities.” The Representative’s Securities and the Shares shall be collectively referred to as the “Securities.”
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2. Representations and Warranties of the Company. The Company represents, warrants and covenants to, and agrees with, each of the Underwriters that, as of the date hereof and as of the Closing Date:
(a) The Company has prepared and filed with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-1 (Registration No. 333-289964), and amendments thereto, and related preliminary prospectuses for the registration under the Securities Act of 1933, as amended (the “Securities Act”), of the Securities which registration statement, as so amended (including post-effective amendments, if any), has been declared effective by the Commission and copies of which have heretofore been delivered to the Underwriters. The registration statement, as amended at the time it became effective, including the prospectus, financial statements, schedules, exhibits and other information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A under the Securities Act, is hereinafter referred to as the “Registration Statement.” If the Company has filed or is required pursuant to the terms hereof to file a registration statement pursuant to Rule 462(b) under the Securities Act registering additional Securities (a “Rule 462(b) Registration Statement”), then, unless otherwise specified, any reference herein to the term “Registration Statement” shall be deemed to include such Rule 462(b) Registration Statement. Other than a Rule 462(b) Registration Statement, which, if filed, becomes effective upon filing, no other document with respect to the Registration Statement has heretofore been filed with the Commission. All of the Securities have been registered under the Securities Act pursuant to the Registration Statement or, if any Rule 462(b) Registration Statement is filed, will be duly registered under the Securities Act with the filing of such Rule 462(b) Registration Statement. The Company has responded to all requests of the Commission for additional or supplemental information. Based on communications from the Commission, no stop order suspending the effectiveness of either the Registration Statement or the Rule 462(b) Registration Statement, if any, has been issued and no proceeding for that purpose has been initiated or, to the Company’s knowledge, threatened by the Commission. The Company, if required by the Securities Act and the rules and regulations of the Commission (the “Rules and Regulations”), proposes to file the Prospectus with the Commission pursuant to Rule 424(b) under the Securities Act (“Rule 424(b)”). The prospectus, in the form in which it is to be filed with the Commission pursuant to Rule 424(b), or, if the prospectus is not to be filed with the Commission pursuant to Rule 424(b), the prospectus in the form included as part of the Registration Statement at the time the Registration Statement became effective, is hereinafter referred to as the “Prospectus,” except that if any revised prospectus or prospectus supplement shall be provided to the Underwriters by the Company for use in connection with the Offering which differs from the Prospectus (whether or not such revised prospectus or prospectus supplement is required to be filed by the Company pursuant to Rule 424(b)), the term “Prospectus” shall also refer to such revised prospectus or prospectus supplement, as the case may be, from and after the time it is first provided to the Underwriters for such use. Any preliminary prospectus or prospectus subject to completion included in the Registration Statement or filed with the Commission pursuant to Rule 424 under the Securities Act is hereafter called a “Preliminary Prospectus.” Any reference herein to the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the exhibits incorporated by reference therein pursuant to the Rules and Regulations on or before the Effective Date of the Registration Statement, the date of such Preliminary Prospectus or the date of the Prospectus, as the case may be. Any reference herein to the terms “amend”, “amendment” or “supplement” with respect to the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include: (i) the filing of any document under the Securities Exchange Act of 1934, as amended, and together with the Rules and Regulations promulgated thereunder (the “Exchange Act”) after the Effective Date, the date of such Preliminary Prospectus or the date of the Prospectus, as the case may be, which is incorporated therein by reference, and (ii) any such document so filed. All references in this Agreement to the Registration Statement, the Rule 462(b) Registration Statement, a Preliminary Prospectus and the Prospectus, or any amendments or supplements to any of the foregoing, shall be deemed to include any copy thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”). The Prospectus delivered to the Underwriters for use in connection with the Offering was or will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T promulgated by the Commission.
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(b) At the time of the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement or the effectiveness of any post-effective amendment to the Registration Statement, when the Prospectus is first filed with the Commission pursuant to Rule 424(b), when any supplement to or amendment of the Prospectus is filed with the Commission, when any document filed under the Exchange Act was or is filed, at all other subsequent times until the completion of the public offer and sale of the Securities, and at the Closing Date, if any, the Registration Statement and the Prospectus and any amendments thereof and supplements or exhibits thereto complied or will comply in all material respects with the applicable provisions of the Securities Act, the Exchange Act and the Rules and Regulations, and did not and will not, as of the date of such amendment or supplement, contain an untrue statement of a material fact and did not and will not, as of the date of such amendment or supplement, omit to state any material fact required to be stated therein or necessary in order to make the statements therein: (i) in the case of the Registration Statement, not misleading, and (ii) in the case of the Prospectus, in light of the circumstances under which they were made as of its date, not misleading. When any Preliminary Prospectus was first filed with the Commission (whether filed as part of the registration statement for the registration of the Securities or any amendment thereto or pursuant to Rule 424(a) under the Securities Act) and when any amendment thereof or supplement thereto was first filed with the Commission, such Preliminary Prospectus and any amendments thereof and supplements thereto complied in all material respects with the applicable provisions of the Securities Act, the Exchange Act and the Rules and Regulations and did not contain an untrue statement of a material fact and did not omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. No representation and warranty is made in this subsection (b), however, with respect to any information contained in or omitted from the Registration Statement or the Prospectus or any related Preliminary Prospectus or any amendment thereof or supplement thereto in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of any Underwriter through the Representative specifically for use therein. The parties acknowledge and agree that such information provided by or on behalf of any Underwriter consists solely of: the statements set forth in the “Underwriting” section of the Prospectus only insofar as such statements relate to the names and corresponding share amounts set forth in the table of Underwriters, the amount of selling concession and re-allowance or to over-allotment and related activities that may be undertaken by the Underwriters and the paragraph relating to stabilization by the Underwriters (the “Underwriters’ Information”).
(c) Neither: (i) any Issuer-Represented General Free Writing Prospectus(es) (as defined below) issued at or prior to the Applicable Time (as defined below) and the Statutory Prospectus (as defined below), all considered together (collectively, the “General Disclosure Package”), nor (ii) any individual Issuer-Represented Limited-Use Free Writing Prospectus(es) (as defined below) when considered together with the General Disclosure Package, includes or included as of the Applicable Time any untrue statement of a material fact or omits or omitted as of the Applicable Time to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from any Statutory Prospectus included in the Registration Statement, the General Disclosure Package or any Issuer-Represented Limited-Use Free Writing Prospectus (as defined below) in conformity with the Underwriters’ Information. Each of (i) any electronic road show or investor presentation (including without limitation any “bona fide electronic road show” as defined in Rule 433(h)(5) under the Securities Act) delivered to and approved by the Underwriters for use in connection with the marketing of the Offering as of the time of their use and at the Closing Date and on each Option Closing Date, if any and (ii) any individual Written Testing-the-Waters Communication (as defined herein), when considered together with the General Disclosure Package at the Closing Date and on each Option Closing Date, if any, did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(d) Each Issuer-Represented Free Writing Prospectus, as of its issue date and at all subsequent times until the Closing Date or until any earlier date that the Company notified or notifies the Representative as described in the next sentence, did not, does not and will not include any information that conflicted, conflicts or will conflict with the information contained in the then-current Registration Statement, Statutory Prospectus or Prospectus. If at any time following issuance of an Issuer-Represented Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer-Represented Free Writing Prospectus conflicted or would conflict with the information contained in the then-current Registration Statement, Statutory Prospectus or Prospectus relating to the Securities or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at that subsequent time, not misleading, the Company has notified or will notify promptly the Representative so that any use of such Issuer-Represented Free Writing Prospectus may cease until it is promptly amended or supplemented by the Company, at its own expense, to eliminate or correct such conflict, untrue statement or omission. The preceding two sentences do not apply to statements in or omissions from any Issuer-Represented Free Writing Prospectus in conformity with the Underwriters’ Information.
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(e) The Company has not distributed and will not distribute any prospectus or other offering material in connection with the offering and sale of the Securities other than the General Disclosure Package, any Issuer-Represented Limited-Use Free Writing Prospectus or the Prospectus or other materials permitted by the Securities Act to be distributed by the Company. Unless the Company obtains the prior consent of the Representative, the Company has not made and will not make any offer relating to the Securities that would constitute an “issuer free writing prospectus,” as defined in Rule 433 under the Securities Act, or that would otherwise constitute a “free writing prospectus,” as defined in Rule 405 under the Securities Act, required to be filed with the Commission; provided that the prior written consent of the Representative shall be deemed to have been given in respect of any free writing prospectus referenced on Schedule III attached hereto. The Company has complied and will comply with the requirements of Rules 164 and 433 under the Securities Act applicable to any Issuer-Represented Free Writing Prospectus as of its issue date and at all subsequent times through the Closing Date, including timely filing with the Commission where required, legending and record keeping. To the extent an electronic road show is used, the Company has satisfied and will satisfy the conditions in Rule 433 under the Securities Act to avoid a requirement to file with the Commission any electronic road show.
(f) The Representative agrees that, unless it obtains the prior written consent of the Company, it will not make any offer relating to the Securities that would constitute an Issuer-Represented Free Writing Prospectus or that would otherwise (without taking into account any approval, authorization, use or reference thereto by the Company) constitute a “free writing prospectus” required to be filed by the Company with the Commission or retained by the Company under Rule 433 of the Securities Act; provided that the prior written consent of the Company hereto shall be deemed to have been given in respect of any Issuer-Represented General Free Writing Prospectuses referenced on Schedule III attached hereto.
(g) As used in this Agreement, the terms set forth below shall have the following meanings:
(i) “Applicable Time” means __________, 2025, ____a.m./p.m. (Eastern time).
(ii) “Statutory Prospectus” as of any time means the prospectus that is included in the Registration Statement immediately prior to that time. For purposes of this definition, information contained in a form of prospectus that is deemed retroactively to be a part of the Registration Statement pursuant to Rule 430A or 430B shall be considered to be included in the Statutory Prospectus as of the actual time that form of prospectus is filed with the Commission pursuant to Rule 424(b) under the Securities Act.
(iii) “Issuer-Represented Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 under the Securities Act, relating to the Securities that (A) is required to be filed with the Commission by the Company, or (B) is exempt from filing pursuant to Rule 433(d)(5)(i) under the Securities Act because it contains a description of the Securities or of the Offering that does not reflect the final terms or pursuant to Rule 433(d)(8)(ii) because it is a “bona fide electronic road show,” as defined in Rule 433 under the Securities Act, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g) under the Securities Act.
(iv) “Issuer-Represented General Free Writing Prospectus” means any Issuer-Represented Free Writing Prospectus that is intended for general distribution to prospective investors, as evidenced by its being specified in Schedule III to this Agreement.
(v) “Issuer-Represented Limited-Use Free Writing Prospectus” means any Issuer-Represented Free Writing Prospectus that is not an Issuer-Represented General Free Writing Prospectus. The term Issuer-Represented Limited-Use Free Writing Prospectus also includes any “bona fide electronic road show,” as defined in Rule 433 under the Securities Act, that is made available without restriction pursuant to Rule 433(d)(8)(ii), even though not required to be filed with the Commission.
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(vi) Freed Maxick P.C. (the “Auditor”), whose reports relating to the Company are included in the Registration Statement, the General Disclosure Package and the Prospectus is an independent registered public accounting firm as required by the Securities Act, the Exchange Act and the Rules and Regulations and the Public Company Accounting Oversight Board (the “PCAOB”). To the Company’s knowledge, the Auditor is not in violation of the auditor independence requirements of the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”). The Auditor has not, during the periods covered by the financial statements included in the Registration Statement, the General Disclosure Package and the Prospectus, provided to the Company any non-audit services, as such term is used in Section 10A(g) of the Exchange Act.
(h) Subsequent to the respective dates as of which information is presented in the Registration Statement, the General Disclosure Package and the Prospectus, and except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus: (i) the Company has not declared, paid or made any dividends or other distributions of any kind on or in respect of its capital stock, and (ii) there has been no material adverse change (or, to the knowledge of the Company, any development which would reasonably be expected to result in a material adverse change in the future), whether or not arising from transactions in the ordinary course of business, in or affecting: (A) the business, condition (financial or otherwise), results of operations, shareholders’ equity, properties or prospects of the Company; (B) the long-term debt or capital stock of the Company; or (C) the Offering or consummation of any of the other transactions contemplated by this Agreement, the Representative Warrants, the Registration Statement, the General Disclosure Package and the Prospectus (a “Material Adverse Change”). Since the date of the latest balance sheet presented in the Registration Statement, the General Disclosure Package and the Prospectus, the Company has not incurred or undertaken any liabilities or obligations, whether direct or indirect, liquidated or contingent, matured or unmatured, or entered into any transactions, including any acquisition or disposition of any business or asset, which are material to the Company, except for liabilities, obligations and transactions which are disclosed in the Registration Statement, the General Disclosure Package and the Prospectus.
(i) As of the dates indicated in the Registration Statement, the General Disclosure Package and the Prospectus, the authorized, issued and outstanding shares of capital stock of the Company were as set forth in the Registration Statement, the General Disclosure Package and the Prospectus in the column headed “Actual” under the section thereof captioned “Capitalization” and, after giving effect to the Offering and the other transactions (excluding the offer and sale of the Option Shares) contemplated by this Agreement, the Registration Statement, the General Disclosure Package and the Prospectus, will be as set forth in the column headed “As Adjusted” in such section. All of the issued shares of capital stock of the Company, including the outstanding Firm Shares of the Company, have been duly authorized and validly issued and are fully paid and nonassessable and have been issued in compliance with all applicable state, federal and securities laws and none of those shares was issued in violation of any preemptive rights, rights of first refusal or other similar rights to the extent any such rights were not waived; the Shares have been duly authorized and, when issued and delivered against payment therefore as provided in this Agreement, will be validly issued, fully paid and non-assessable, and the issuance of the Securities is not subject to any preemptive rights, rights of first refusal or other similar rights that have not heretofore been waived (with copies of such waivers provided to the Underwriters); and no holder of any Shares or any Firm Shares is or will be subject to personal liability by reason of being such a holder. The Securities conform to the descriptions thereof contained in the Registration Statement, the General Disclosure Package and the Prospectus.
(j) Except as described in the Registration Statement, the General Disclosure Package and the Prospectus, (A) there are no outstanding rights (contractual or otherwise), warrants or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings with respect to the sale or issuance of, any shares of capital stock of or other equity interest in the Company or any of its Subsidiaries and (B) there are no contracts, agreements or understandings between the Company and/or any of its Subsidiaries and any person granting such person the right to require the Company to file a registration statement under the Securities Act or otherwise register any securities of the Company owned or to be owned by such person and any such rights so disclosed have been waived by the holders thereof in connection with this Agreement and the transactions contemplated hereby including the Offering.
(k) [Reserved].
(l) The Firm Shares underlying the Representative’s Warrants have been duly authorized and reserved for issuance, conform to the description thereof in the Registration Statement, the General Disclosure Package and the Prospectus and have been validly reserved for issuance and will, upon exercise of the Representative’s Warrants and payment of the exercise price thereof, be duly and validly issued, fully paid and non-assessable and will not have been issued in violation of or be subject to preemptive or similar rights to subscribe for or purchase securities of the Company and the holders thereof will not be subject to personal liability by reason of being such holders.
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(m) The subsidiaries of the Company (the “Subsidiaries”), together with their respective jurisdictions of incorporation are listed on Schedule IV hereto. Each of the Subsidiaries is directly or indirectly wholly-owned by the Company and no person or entity has any right to acquire any equity interest in any of the Subsidiaries. Except as otherwise disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, the Company holds no ownership or other interest, nominal or beneficial, direct or indirect, in any corporation, partnership, joint venture or other business.
(n) The Company and each of its Subsidiaries has been duly incorporated and validly exists as a corporation, in good standing under the laws of the jurisdiction of its incorporation or has been duly formed and validly exists as a limited liability company under the laws of the jurisdiction of its formation. The Company and each of its Subsidiaries has all requisite power and authority to carry on its business as it is currently being conducted and as described in the Registration Statement, the General Disclosure Package and the Prospectus, and to own, lease and operate its properties. The Company and each of its Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation, partnership or limited liability company in each jurisdiction in which the character or location of its properties (owned, leased or licensed) or the nature or conduct of its business makes such qualification necessary, except, in each case, for those failures to be so qualified or in good standing which (individually and in the aggregate) would not reasonably be expected to have a material adverse effect on: (i) the business, condition (financial or otherwise), results of operations, shareholders’ equity, properties or prospects of the Company and its Subsidiaries, considered as a whole; (ii) the long-term debt or capital stock of the Company; or (iii) the Offering or consummation of any of the other transactions contemplated by this Agreement, the Registration Statement, the General Disclosure Package and the Prospectus (any such effect being a “Material Adverse Effect”).
(o) To the knowledge of the Company, neither the Company nor any of its Subsidiaries is: (i) in violation of its amended and restated memorandum and articles of incorporation or bylaws or other organizational documents (ii) in default under any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject; and no event has occurred which, with notice or lapse of time or both, would constitute a default under or result in the creation or imposition of any lien, security interest, charge or other encumbrance (a “Lien”) upon any of its property or assets pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject, or (iii) in violation in any respect of any law, rule, regulation, ordinance, directive, judgment, decree or order of any judicial, regulatory or other legal or governmental agency or body, foreign or domestic, except, in the case of subsections (ii) and (iii) above, for such violations or defaults which (individually or in the aggregate) would not reasonably be expected to have a Material Adverse Effect.
(p) The Company has full right, power and authority to execute and deliver this Agreement, the Representative’s Warrants and all other agreements, documents, certificates and instruments required to be delivered pursuant to this Agreement and the Representative’s Warrants. The Company has duly and validly authorized this Agreement, the Representative’s Warrants and each of the transactions contemplated thereby. This Agreement has been duly and validly executed and delivered by the Company and constitutes the legal, valid and binding obligations of the Company and are enforceable against the Company in accordance with their terms, except (i) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally; (ii) as enforceability of any indemnification or contribution provision may be limited under federal and state securities laws; and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
(q) When issued, the Representative’s Warrants will constitute valid and binding obligations of the Company to issue and sell, upon exercise thereof and payment of the respective exercise prices therefor, the number and type of securities of the Company called for thereby in accordance with the terms thereof and the Representative’s Warrants are enforceable against the Company in accordance with their respective terms, except: (i) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally; (ii) as enforceability of any indemnification or contribution provision may be limited under federal and state securities laws; and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
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(r) The execution, delivery, and performance by the Company of this Agreement, the Representative’s Warrants and all other agreements, documents, certificates and instruments required to be delivered pursuant to this Agreement, and the Representative’s Warrants and consummation of the transactions contemplated hereby and thereby do not and will not: (i) conflict with, require consent under or result in a breach of any of the terms and provisions of, or constitute a default (or an event which with notice or lapse of time, or both, would constitute a default) under, or result in the creation or imposition of any Lien upon any property or assets of the Company of any of its Subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement, instrument, franchise, license or permit to which the Company or any of its Subsidiaries is a party or by which the Company, any of its Subsidiaries or any of their respective properties, operations or assets may be bound or (ii) violate or conflict with any provision of the certificate of incorporation, by-laws, or other organizational documents of the Company or any of its Subsidiaries, or (iii) violate or conflict with any law, rule, regulation, ordinance, directive, judgment, decree or order of any judicial, regulatory or other legal or governmental agency or body, domestic or foreign applicable to the Company or any of its Subsidiaries, or (iv) except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, trigger a reset or repricing of any outstanding securities of the Company or any of its Subsidiaries.
(s) Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, the Company and each of its Subsidiaries have all material consents, approvals, authorizations, orders, registrations, qualifications, licenses, filings and permits of, with and from all judicial, regulatory and other legal or governmental agencies and bodies and all third parties, foreign and domestic (collectively, the “Consents”), to own, lease and operate their respective properties and conduct their respective businesses as they are now being conducted and as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, and each such Consent is valid and in full force and effect, except which (individually or in the aggregate), in each such case, would not reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries has received notice of any investigation or proceedings which results in or, if decided adversely to the Company or any of its Subsidiaries could reasonably be expected to result in, the revocation of, or imposition of a materially burdensome restriction on, any Consent. No Consent contains a materially burdensome restriction not adequately disclosed in the Registration Statement, the General Disclosure Package and the Prospectus.
(t) The Company and each of its Subsidiaries is in compliance with all material applicable laws, rules, regulations, ordinances, directives, judgments, decrees and orders, foreign and domestic, except for any non-compliance the consequences of which would not have or reasonably be expected to have a Material Adverse Effect).
(u) The Company has filed with the Commission a Form 8-A (File Number 001-________) providing for the registration of the Firm Shares (the “Form 8-A Registration Statement”). The Firm Shares are registered pursuant to Section 12(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Form 8-A Registration Statement was declared effective by the Commission on or prior to the date hereof. The Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Firm Shares under the Exchange Act, nor has the Company received any notification that the Commission is contemplating terminating such registration.
(v) The Firm Shares have been approved for listing on the NASDAQ Capital Market, subject to official notice of issuance (the “Exchange,” or “Nasdaq Capital Market”), and the Company has taken no action designed to, or likely to have the effect of, delisting the Firm Shares from the Exchange, nor has the Company received any notification that the Exchange is contemplating terminating such listing.
(w) No consent of, with or from any judicial, regulatory or other legal or governmental agency or body or any third party, foreign or domestic is required for the execution, delivery and performance of this Agreement or the Representative’s Warrants or the consummation of each of the transactions contemplated hereby and thereby, including the issuance, sale and delivery of the Securities to be issued, sold and delivered hereunder, except (i) such as may have previously been obtained (with copies of such consents provided to the Underwriters), (ii) the registration under the Securities Act of the Securities, which has become effective, (iii) such consents as may be required under state securities or blue sky laws or the by-laws and rules of the Nasdaq Capital Market, and (iii) the FINRA’s approval in connection with the purchase and distribution of the Securities by the Underwriters, each of which has been obtained and is in full force and effect.
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(x) Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, there is no judicial, regulatory, arbitral or other legal or governmental proceeding or other litigation or arbitration, domestic or foreign, pending to which the Company or any of its Subsidiaries is a party or of which any property, operations or assets of the Company or any of its Subsidiaries is the subject which, individually or in the aggregate, if determined adversely to the Company or any of its Subsidiaries would reasonably be expected to have a Material Adverse Effect. To the Company’s knowledge, except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, no such proceeding, litigation or arbitration is threatened or contemplated and the defense of any such proceedings, litigation and arbitration against or involving the Company or any of its Subsidiaries would not reasonably be expected to have a Material Adverse Effect.
(y) The financial statements, including the notes thereto, and the supporting schedules included in the Registration Statement, the General Disclosure Package and the Prospectus comply in all material respects with the requirements of the Securities Act and the Exchange Act, and present fairly in all material respects the financial position as of the dates indicated and the cash flows and results of operations for the periods specified of the Company. Except as otherwise stated in the Registration Statement, the General Disclosure Package and the Prospectus, said financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) applied on a consistent basis throughout the periods involved, except in the case of unaudited financials which are subject to normal year end adjustments and do not contain certain footnotes. The supporting schedules included in the Registration Statement, the General Disclosure Package and the Prospectus present fairly in all material respects the information required to be stated therein. No other financial statements or supporting schedules are required to be included or incorporated by reference in the Registration Statement, the General Disclosure Package or the Prospectus. The other financial information included in the Registration Statement, the General Disclosure Package and the Prospectus present fairly in all material respects the information included therein and have been prepared on a basis consistent with that of the financial statements that are included in the Registration Statement, the General Disclosure Package and the Prospectus and the books and records of the respective entities presented therein.
(z) There are no pro forma or as adjusted financial statements which are required to be included in the Registration Statement, the General Disclosure Package and the Prospectus in accordance with Regulation S-X which have not been included as so required. The pro forma and pro forma as adjusted financial information included in the Registration Statement, the General Disclosure Package and the Prospectus has been properly compiled and prepared in accordance with the applicable requirements of the Securities Act and the Rules and Regulations and include all adjustments necessary to present fairly in accordance with GAAP the pro forma and as adjusted financial position of the respective entity or entities presented therein at the respective dates indicated and their cash flows and the results of operations for the respective periods specified. The assumptions used in preparing the pro forma and pro forma as adjusted financial information included in the Registration Statement, the General Disclosure Package and the Prospectus provide a reasonable basis for presenting the significant effects directly attributable to the transactions or events described therein. The related pro forma and pro forma as adjusted adjustments give appropriate effect to those assumptions; and the pro forma and pro forma as adjusted financial information reflect the proper application of those adjustments to the corresponding historical financial statement amounts.
(aa) The statistical, industry-related and market-related data included in the Registration Statement, the General Disclosure Package and the Prospectus are based on or derived from sources which the Company reasonably and in good faith believes are reliable and accurate, and such data agree with the sources from which they are derived.
(bb) The Company has established and maintains disclosure controls and procedures over financial reporting (as defined in Rules 13a-15 and 15d-15 under the Exchange Act) and such controls and procedures are designed to ensure that information relating to the Company required to be disclosed in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company has utilized such controls and procedures in preparing and evaluating the disclosures in the Registration Statement, in the General Disclosure Package and in the Prospectus.
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(cc) Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, the Company’s board of directors has validly appointed an audit committee whose composition satisfies the requirements of the rules and regulations of the Nasdaq Stock Market and the board of directors and/or audit committee has adopted a charter that satisfies the requirements of the rules and regulations of the Nasdaq Stock Market. Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, neither the board of directors nor the audit committee has been informed, nor is the Company aware, of: (i) any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; or (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
(dd) Neither the Company nor any of its Subsidiaries nor any of their respective Affiliates (as defined in the Securities Act) has taken, directly or indirectly, any action which constitutes or is designed to cause or result in, or which could reasonably be expected to constitute, cause or result in, the stabilization or manipulation of the price of any security to facilitate the sale or resale of the Securities.
(ee) Neither the Company nor any of its Subsidiaries nor any of their respective Affiliates has, prior to the date hereof, made any offer or sale of any securities which are required to be “integrated” pursuant to the Securities Act or the Rules and Regulations with the offer and sale of the Securities pursuant to the Registration Statement. Except as disclosed in the Registration Statement, the General Disclosure Package, and the Prospectus, neither the Company nor any of its Affiliates has sold or issued any securities during the six-month period preceding the date of the Prospectus, including but not limited to any sales pursuant to Rule 144A or Regulation D or Regulation S under the Securities Act.
(ff) To the knowledge of the Company, all information contained in the questionnaires completed by each of the Company’s officers and directors immediately prior to the Offering and provided to the Representative as well as the biographies of such officers and directors in the Registration Statement are true and correct in all material respects and the Company has not become aware of any information which would cause the information disclosed in the questionnaires completed by the directors and officers to become inaccurate and incorrect.
(gg) To the knowledge of the Company, no director or officer of the Company is subject to any non-competition agreement or non-solicitation agreement with any current employer or prior employer which could materially affect his or her ability to be and act in his or her respective capacity of the Company.
(hh) The Company is not and, at all times up to and including consummation of the transactions contemplated by this Agreement, and after giving effect to application of the net proceeds of the Offering, will not be, subject to registration as an “investment company” under the Investment Company Act of 1940, as amended, and is not and will not be an entity “controlled” by an “investment company” within the meaning of such act.
(ii) To the knowledge of the Company, no relationship, direct or indirect, exists between or among any of the Company or, to the knowledge of the Company, any Affiliate of the Company, on the one hand, and any director, officer, shareholder, customer or supplier of the Company or, to the knowledge of the Company, any Affiliate of the Company, on the other hand, which is required by the Securities Act, the Exchange Act or the Rules and Regulations to be described in the Registration Statement or the Prospectus which is not so described as required. There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees of indebtedness by the Company to or for the benefit of any of the officers or directors of the Company or any of their respective family members. The Company has not, in violation of Sarbanes-Oxley, directly or indirectly extended or maintained credit, arranged for the extension of credit, or renewed an extension of credit, in the form of a personal loan to or for any director or executive officer of the Company, except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus.
(jj) The Company is in material compliance with the rules and regulations promulgated by the Nasdaq Stock Market (to the extent applicable to the Company prior to the listing of the Firm Shares on the Nasdaq Capital Market following the Closing) or any other governmental or self regulatory entity or agency, except for such violations which, singly or in the aggregate, would not have a Material Adverse Effect. Without limiting the generality of the foregoing: (i) all members of the Company’s board of directors who are required to be “independent” (as that term is defined under applicable laws, rules and regulations), including, without limitation, all members of the audit committee of the Company’s board of directors, meet the qualifications of independence as set forth under applicable laws, rules and regulations and (ii) the audit committee of the Company’s board of directors has at least one member who is an “audit committee financial expert” (as that term is defined under applicable laws, rules and regulations).
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(kk) Intentionally Omitted.
(ll) The Company and each of its Subsidiaries owns or leases all such properties (other than intellectual property, which is covered by Section 2(mm)) as are necessary to the conduct of its business as presently operated as described in the Registration Statement, the General Disclosure Package and the Prospectus. The Company and each of its Subsidiaries has good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by it, in each case free and clear of all Liens except such as are described in the Registration Statement, the General Disclosure Package and the Prospectus or such as do not (individually or in the aggregate) materially affect the business or prospects of the Company or any of its Subsidiaries. Any real property and buildings held under lease or sublease by the Company or any of its Subsidiaries are held by it under valid, subsisting and, to the Company’s knowledge, enforceable leases with such exceptions as are not material to, and do not materially interfere with, the use made and proposed to be made of such property and buildings by the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has received any notice of any claim adverse to its ownership of any real or personal property or of any claim against the continued possession of any real property, whether owned or held under lease or sublease by the Company or any of its Subsidiaries.
(mm) The Company and each of its Subsidiaries: (i) owns, possesses, or has the adequate right to use all patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, formulae, customer lists, and know-how and other intellectual property (including trade secrets and other unpatented and/or unpatentable material proprietary or confidential information, systems or procedures, “Intellectual Property”) necessary for the conduct of its businesses as being conducted and as described in the Registration Statement, the General Disclosure and Prospectus and (ii) has no knowledge that the conduct of its business conflicts or will conflict with the intellectual property rights of others, and has not received any notice of any claim of conflict with, any right of others. Except as set forth in the Registration Statement, the General Disclosure Package or the Prospectus, neither the Company nor any of its Subsidiaries has granted or assigned to any other Person any right to sell any of the products or services of the Company or any of its Subsidiaries. To the Company’s knowledge, there is no infringement by third parties of any such Intellectual Property; there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the rights of the Company or any of its Subsidiaries in or to any such Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim; and there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others that the Company or any of its Subsidiaries infringes or otherwise violates any patent, trademark, copyright, trade secret or other proprietary rights of others, and the Company is unaware of any other fact which would form a reasonable basis for any such claim. Except as set forth in the Registration Statement, the General Disclosure Package and the Prospectus, neither the Company nor any of its Subsidiaries has received any claim for royalties or other compensation from any Person, including any employee of the Company or any of its Subsidiaries who made inventive contributions to the technology or products of the Company or any of its Subsidiaries that are pending or unsettled, and except as set forth in the Registration Statement, the General Disclosure Package and the Prospectus neither the Company nor any of its Subsidiaries has any obligation to pay material royalties to any Person on account of inventive contributions.
(nn) The agreements and documents described in the Registration Statement, the General Disclosure Package and the Prospectus conform in all material respects to the descriptions thereof contained therein. Each agreement or other instrument (however characterized or described) to which the Company or any of its Subsidiaries is a party or by which any of their respective properties or business are or may be bound or affected and (i) that is referred to in the Registration Statement, the General Disclosure Package or the Prospectus or attached as an exhibit thereto, or (ii) is material to the businesses of the Company and its Subsidiaries, has been duly and validly executed by the Company or its Subsidiary, as the case may be, is in full force and effect in all material respects and is enforceable against the Company in accordance with its terms, except (x) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (y) as enforceability of any indemnification or contribution provision may be limited under the foreign, federal and state securities laws, and (z) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought, and none of such agreements or instruments has been assigned by the Company or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries, nor, to the Company’s knowledge, any other party is in breach or default thereunder and, to the Company’s knowledge, no event has occurred that, with the lapse of time or the giving of notice, or both, would constitute a breach or default thereunder, in any such case, which would result in a Material Adverse Effect.
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(oo) The disclosures in the Registration Statement, the General Disclosure Package and the Prospectus concerning the effects of foreign, federal, state and local regulation on the respective businesses of the Company and each of its Subsidiaries as currently contemplated are correct in all material respects and do not omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they were made, not misleading.
(pp) Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and each of its Subsidiaries (i) has made or filed all United States federal, state and local income and other foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. The provisions for taxes payable, if any, shown on the financial statements filed with or as part of the Registration Statement are sufficient for all accrued and unpaid taxes, whether or not disputed, and for all periods to and including the dates of such consolidated financial statements. No deficiency assessment with respect to a proposed adjustment of the federal, state, local or foreign taxes of the Company or any of its Subsidiaries is pending or, to the Company’s knowledge, threatened. There is no tax lien, whether imposed by any federal, state, foreign or other taxing authority, outstanding against the assets, properties or business of the Company or any of its Subsidiaries, other than liens for taxes not yet delinquent, or being contested in good faith by appropriate proceedings and for which reserves in accordance with GAAP have been established in the Company’s books and records. The term “taxes” mean all federal, state, local, foreign, and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments, or charges in the nature of taxes, together with any interest and any penalties, additions to tax, or additional amounts with respect thereto. The term “returns” means all returns, declarations, reports, statements, and other documents required to be filed in respect to taxes.
(qq) No labor disturbance or dispute by or with the employees of the Company or any of its Subsidiaries which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect, currently exists or, to the Company’s knowledge, is threatened. The Company and each of its Subsidiaries is in compliance in all material respects with the labor and employment laws and collective bargaining agreements and extension orders applicable to its employees.
(rr) Intentionally Omitted.
(ss) Intentionally Omitted.
(tt) Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, and would not be reasonably expected, individually or in the aggregate, to have a Material Adverse Effect, to the knowledge of the Company the Company and each of its Subsidiaries has at all times operated its business in material compliance with all Environmental Laws (as hereinafter defined), and no material expenditures are or will be required in order to comply therewith. Neither the Company nor any of its Subsidiaries has received any notice or communication that relates to or alleges any actual or potential violation or failure to comply with any Environmental Laws that would, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect. As used herein, the term “Environmental Laws” means all applicable laws and regulations, including any licensing, permits or reporting requirements, and any action by a federal state or local government entity pertaining to the protection of the environment, protection of public health, protection of worker health and safety, or the handling of hazardous materials, including without limitation, the Clean Air Act, 42 U.S.C. § 7401, et seq., the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601, et seq., the Federal Water Pollution Control Act, 33 U.S.C. § 1321, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. § 690-1, et seq., and the Toxic Substances Control Act, 15 U.S.C. § 2601, et seq.
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(uu) Except as would not result in a Material Adverse Effect, neither the Company nor any of its Subsidiaries has failed to file with the applicable regulatory authorities any filing, declaration, listing, registration, report or submission that is required to be so filed for the business operation of the Company and its Subsidiaries as currently conducted. All such filings were in material compliance with applicable laws when filed and no deficiencies have been asserted in writing by any applicable regulatory authority with respect to any such filings, declarations, listings, registrations, reports or submissions. The Company and each of its Subsidiaries holds, and is in material compliance with, all franchises, grants, authorizations, licenses, permits, easements, consents, certificates and orders (“Permits”) of any governmental or self-regulatory agency, authority or body required for the conduct of the business of the Company and its Subsidiaries as currently conducted, and all such Permits are in full force and effect, in each case except where the failure to hold, or comply with, any of them is not reasonably likely to result in a Material Adverse Effect.
(vv) Neither the Company nor any Subsidiary of the Company nor, to the knowledge of the Company, any other person associated with or acting on behalf of the Company or any Subsidiary including, without limitation, any director, officer, agent or employee of the Company or any Subsidiary, has, directly or indirectly, while acting on behalf of the Company or such Subsidiary: (i) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; (ii) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns from corporate funds; (iii) violated any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any other unlawful payment.
(ww) Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.
(xx) The operations of the Company and each of its Subsidiaries are and have been conducted at all times in compliance in all material respects with applicable financial record keeping and reporting requirements and money laundering statutes of the United States and, to the Company’s knowledge, all other jurisdictions to which the Company is subject, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any applicable governmental agency (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its Subsidiaries with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened.
(yy) Neither the Company nor any of its Subsidiaries nor to the knowledge of the Company, any director, officer, agent, employee or Affiliate of the Company or any of its Subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”), the United Nations Security Council or other relevant authorities (collectively, “Sanctions”) nor located, organized or resident in a country or territory that is the subject of Sanctions. The Company will not directly or indirectly use the proceeds of the Offering, or lend, contribute or otherwise make available such proceeds to any joint venture partner or other person or entity, for the purpose of funding or financing the activities or business of or with any Person or in any country or territory that. At the time of such funding or facilitation is the subject of to any Sanctions, or in any other manner that will result in a violation of Sanctions by any Person (including any Person participating in the Offering). For the past five years, neither the Company nor any of its Subsidiaries has knowingly engaged in, is not now knowingly engaged in, and will not engage in, any dealings or transactions with any Person, or in any country or territory, that at the time of the dealing or transaction is or was the subject of Sanctions.
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(zz) Except as set forth in the Registration Statement, the General Disclosure Package and the Prospectus, no brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents. To the Company’s knowledge, there are no other arrangements, agreements or understandings of the Company or, to the Company’s knowledge, any of its Affiliates that may affect the Underwriters’ compensation, as determined by FINRA. Except as provided for in this Agreement, the Company has not made any direct or indirect payments (in cash, securities or otherwise) to (i) any person, as a finder’s fee, investing fee or otherwise, in consideration of such person raising capital for the Company or introducing to the Company persons who provided capital to the Company, (ii) any FINRA member, or (iii) any person or entity that has any direct or indirect affiliation or association with any FINRA member participating in the Offering within the 12-month period prior to the date on which the Registration Statement was filed with the Commission (the “Filing Date”) or thereafter. Except as disclosed in the Registration Statement, General Disclosure Package and the Prospectus, to the Company’s knowledge, no (i) officer or director of the Company or its Subsidiaries, (ii) owner of 10% or more of the Company’s unregistered securities or that of its Subsidiaries or (iii) owner of any amount of the Company’s unregistered securities acquired within the 180-day period prior to the Filing Date, has any direct or indirect affiliation or association with any FINRA member participating in the Offering. The Company will advise the Underwriters and their respective counsel if it becomes aware that any officer, director or stockholder of the Company or its Subsidiaries is or becomes an affiliate or associated person of a FINRA member participating in the Offering.
(aaa) Except for key man insurance to cover the loss of key personnel or as disclosed in the Prospectus, the Company and each of its Subsidiaries maintains insurance in such amounts and covering such risks as the Company reasonably considers adequate for the conduct of their respective businesses and the value of their respective properties and as is customary for companies engaged in similar businesses in similar industries, all of which insurance is in full force and effect, except where the failure to maintain such insurance could not reasonably be expected to have Material Adverse Effect. The Company reasonably believes that it and each of its Subsidiaries will be able to renew its existing insurance as and when such coverage expires or will be able to obtain replacement insurance adequate for the conduct of its respective business and the value of its respective properties at a cost that would not have a Material Adverse Effect.
(bbb) [Reserved].
(ccc) [Reserved].
(ddd) [Reserved].
(eee) [Reserved].
(fff) As used in this Agreement, references to matters being “material” with respect to the Company or any of its Subsidiaries shall mean a material event, change, condition, status or effect related to the condition (financial or otherwise), properties, assets (including intangible assets), liabilities, business, prospects, operations or results of operations of the Company and such Subsidiaries either individually or taken as a whole, as the context requires.
(ggg) As used in this Agreement, the term “knowledge of the Company” (or similar language) shall mean the knowledge of the executive officers of the Company who are named in the Prospectus, with the assumption that such executive officers shall have made reasonable and diligent inquiry of the matters presented (with reference to what is customary and prudent for the applicable individuals in connection with the discharge by the applicable individuals of their duties as executive officers of the Company).
(hhh) Any certificate signed by or on behalf of the Company and delivered to the Underwriters or to Pryor Cashman LLP (the “Representative’s Counsel”), as the Representative’s Counsel shall be deemed to be a representation and warranty by the Company to each Underwriter listed on Schedule I hereto as to the matters covered thereby.
3. Offering. Upon authorization of the release of the Securities by the Representative, the Underwriters propose to offer the Securities for sale to the public upon the terms and conditions set forth in the Prospectus.
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4. Covenants of the Company. The Company acknowledges, covenants and agrees with the Representative that:
(a) The Registration Statement and any amendments thereto have been declared effective, and if Rule 430A is used or the filing of the Prospectus is otherwise required under Rule 424(b), the Company will file the Prospectus (properly completed if Rule 430A has been used) pursuant to Rule 424(b) within the prescribed time period and will provide evidence satisfactory to the Representative of such timely filing. The Company will file with the Commission all Issuer Free Writing Prospectuses in the time and manner required under Rules 433(d) or 163(b)(2), as the case may be, and shall send the draft to the Representative and Representative’s Counsel for review before filings.
(b) During the period beginning on the date hereof and ending on the later of the Closing Date or such date as, the Prospectus is no longer required by law to be delivered (or in lieu thereof the notice referred to in Rule 173(a) under the Securities Act is no longer required to be provided), in connection with sales by an underwriter or dealer (the “Prospectus Delivery Period”), prior to amending or supplementing the Registration Statement or the Prospectus, the Company shall furnish to the Representatives and Representative’s Counsel for review a copy of each such proposed amendment or supplement, and the Company shall not file any such proposed amendment or supplement to which the Representative or Representative’s Counsel reasonably object.
(c) After the date of this Agreement, the Company shall promptly advise the Representative in writing (i) of the receipt of any comments of, or requests for additional or supplemental information from, the Commission, (ii) of the time and date of any filing of any post-effective amendment to the Registration Statement or any amendment or supplement to any prospectus, the General Disclosure Package or the Prospectus, (iii) of the time and date that any post-effective amendment to the Registration Statement becomes effective, and (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto or of any order preventing or suspending its use or the use of any prospectus, the General Disclosure Package, the Prospectus or any Issuer-Represented Free Writing Prospectus, or of any proceedings to remove, suspend or terminate from listing the Firm Shares from any securities exchange upon which they are listed for trading, or of the threatening or initiation of any proceedings for any of such purposes. If the Commission shall enter any such stop order at any time, the Company will use its reasonable efforts to obtain the lifting of such order at the earliest possible moment. Additionally, the Company agrees that it shall comply with the provisions of Rules 424(b), 430A and 430B, as applicable, under the Securities Act and will use its commercially reasonable efforts to confirm that any filings made by the Company under Rule 424(b) or Rule 433 were received in a timely manner by the Commission (without reliance on Rule 424(b)(8) or Rule 164(b)).
(d) During the Prospectus Delivery Period, the Company will comply in all material respects with all requirements imposed upon it by the Securities Act, as now and hereafter amended, and by the Rules and Regulations, as from time to time in force, and by the Exchange Act so far as necessary to permit the continuance of sales of or dealings in the Securities as contemplated by the provisions hereof, the General Disclosure Package, the Registration Statement and the Prospectus. If during such period any event occurs as a result of which the Prospectus (or if the Prospectus is not yet available to prospective purchasers, the General Disclosure Package ) would include any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which such statements were made, not misleading, or if during such period it is necessary or appropriate in the opinion of the Company or its counsel or the Representative or Representative’s Counsel to amend the Registration Statement or supplement the Prospectus (or if the Prospectus is not yet available to prospective purchasers, the General Disclosure Package) to comply with the Securities Act or to file under the Exchange Act any document which would be deemed to be incorporated by reference in the Prospectus in order to comply with the Securities Act or the Exchange Act, the Company will promptly notify the Representative and will amend the Registration Statement or supplement the Prospectus (or if the Prospectus is not yet available to prospective purchasers, the General Disclosure Package) or file such document (at the expense of the Company) so as to correct such statement or omission or effect such compliance.
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(e) If at any time following issuance of an Issuer-Represented Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer-Represented Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement, the Statutory Prospectus or the Prospectus included or would include any untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at that subsequent time, not misleading, the Company has promptly notified or promptly will notify the Representative and Representative’s Counsel and has promptly amended or will promptly amend or supplement, at its own expense, such Issuer-Represented Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.
(f) The Company will promptly deliver to the Underwriters, the Representative and Representative’s Counsel, a signed copy of the Registration Statement, as initially filed and all amendments thereto, including all consents and exhibits filed therewith. The Company will promptly deliver to each of the Underwriters such number of copies of any Preliminary Prospectus, the Prospectus, the Registration Statement, and all amendments of and supplements to such documents, if any, and all documents which are exhibits to the Registration Statement and Prospectus or any amendment thereof or supplement thereto, as the Underwriters may reasonably request. Prior to 10:00 a.m., New York time, on the Business Day next succeeding the date of this Agreement and from time to time thereafter, the Company will furnish the Underwriters with copies of the Prospectus in New York City in such quantities as the Underwriters may reasonably request.
(g) The Company consents to the use and delivery of the Preliminary Prospectus by the Underwriters in accordance with Rule 430 and Section 5(b) of the Securities Act.
(h) If the Company elects to rely on Rule 462(b) under the Securities Act, the Company shall both file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) and pay the applicable fees in accordance with Rule 111 of the Securities Act by the earlier of: (i) 10:00 p.m., New York City time, on the date of this Agreement, and (ii) the time that confirmations are given or sent, as specified by Rule 462(b)(2).
(i) The Company will use its commercially reasonable efforts, in cooperation with the Representative and Representative’s Counsel, at or prior to the time of effectiveness of the Registration Statement, to qualify the Securities for offering and sale under the securities laws relating to the offering or sale of the Securities of such jurisdictions, domestic or foreign, as the Representative may reasonably designate and to maintain such qualification in effect for so long as required for the distribution thereof, except that in no event shall the Company be obligated in connection therewith to qualify as a foreign corporation or other entity or as a dealer in securities in any such jurisdiction, to execute a general consent to service of process in any such jurisdiction, or to subject itself to taxation in any such jurisdiction if it is otherwise not so subject.
(j) During the six-month period after the Offering is completed, (the “Company Lock-up Period”), the Company may not, without the prior written consent of the Representative, (i) offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any securities of the Company, except for (A) the issuance of securities under any equity compensation plan of the Company, (B) the issuance of Firm Shares upon the exercise or conversion of securities that are issued and outstanding on the date of this Agreement and are described in the Registration Statement and the Prospectus, 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 or conversion price of such securities (other than in connection with stock splits, adjustments or combinations as set forth in such securities) or to extend the term of such securities, and (C) the issuance of 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 within 180 days following the Closing Date, and provided that any such issuance shall only be to a Person (or to the equity holders 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; or (ii) file any registration statement relating to the offer or sale of any of the Company’s securities.
(k) Schedule II hereto contains a complete and accurate list of the Company’s executive officers, directors and holders of 10% or more of the Company’s Firm Shares (collectively, the “Lock-Up Parties”). The Company has caused each of the Lock-Up Parties to deliver to the Representative an executed lock-up agreement, (the “Lock-Up Agreement”), prior to the execution of this Agreement.
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(l) If the Representative, in its sole discretion, agrees to release or waive the restrictions set forth in a Lock-Up Agreement described in Section 4(k) hereof for an officer or a director of the Company and provide the Company with notice of the impending release or waiver at least three business days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by (i) a press release through a major news service or (ii) any other method that satisfies the obligations described in FINRA Rule 5131(d)(2) at least two business days before the effective date of the release or waiver.
(m) [Reserved].
(n) [Reserved].
(o) For a period of at least two (2) years from the Effective Date, the Company shall retain a nationally recognized PCAOB registered independent public accounting firm reasonably acceptable to the Representative. The Representative acknowledges that the Auditor or Withum Smith+Brown, PC are acceptable to the Representative.
(p) During the period of one (1) year from the Effective Date, the Company will make available to the Representative copies of all reports or other communications (financial or other) furnished to security holders or from time to time published or publicly disseminated by the Company, and will deliver to the Representative: (i) as soon as practicable after they are available, copies of any reports, financial statements and proxy or information statements furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company is listed; and (ii) such additional information concerning the business and financial condition of the Company as the Representative may from time to time reasonably request in writing pursuant to a specific regulatory or liability issue or; provided, that any such item which is available on the EDGAR system (or successor thereto) need not be furnished in physical form.
(q) The Company will not issue press releases or engage in any other publicity, without the Representative’s prior written consent, for a period ending at 5:00 p.m. Eastern time on the first Business Day following the fortieth (40th) day following the Closing Date, other than normal and customary releases issued in the ordinary course of the Company’s business, or as required by law.
(r) The Company hereby grants the Representative and Maxim the right of first refusal for a period of eighteen (18) months after the closing of this Offering to act as underwriters and book runners, or placement agents or sales agents, for any and all future public or private equity, equity-linked or debt (excluding commercial bank debt) offerings for which the Company retains the service of an underwriter, agent, advisor, finder or other person or entity in connection with such offering during such eighteen (18) month period of the Company, or any successor to or any subsidiary of the Company (each such potential offering, a “Future Offering”). Pursuant to such Future Offering, Representative shall receive no less than 80% of the agreed upon fee and Maxim shall receive no less than 20% of the agreed upon fee. The Representative will hold the leading role and responsibilities conventionally understood to be associated with such name placement, including, without limitation, billing, delivery and stabilization, as the case may be, and to receive a percentage of the aggregate gross spread or fees from such Future Offering (such gross spread or fees in such Future Offering will be mutually determined in good faith by Company and Craig-Hallum and will be based on the prevailing market for similar services for global, full-service investment banks). The Company shall not offer to retain any entity or person in connection with any such offering on terms more favorable than terms on which it offers to retain the Representative and Maxim. Such offer shall be made in writing in order to be effective. The Representative and Maxim shall notify the Company within ten (10) business days of its receipt of the written offer contemplated above as to whether or not it agrees to accept such retention. If the Representative and Maxim should decline such retention, the Company shall have no further obligations to the Representative or Maxim with respect to the offering for which it has offered to retain the Representative and Maxim, except as otherwise provided for herein.
(s) The Company will apply the net proceeds from the sale of the Securities as set forth under the caption “Use of Proceeds” in the Prospectus.
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(t) The Company will use its commercially reasonable efforts to effect and maintain the listing of the Firm Shares on the Nasdaq Stock Market, the NYSE, or the NYSE American for at least three (3) years after the Closing Date.
(u) The Company, during the Prospectus Delivery Period, will file all documents required to be filed with the Commission pursuant to the Securities Act, the Exchange Act and the Rules and Regulations within the time periods required thereby.
(v) The Company will use its commercially reasonable efforts to do and perform all things required to be done or performed under this Agreement by the Company prior to the Closing Date, and to satisfy all conditions precedent to the delivery of the Securities.
(w) The Company will not take, and will use its commercially reasonable efforts to cause its Affiliates not to take, directly or indirectly, any action which constitutes or is designed to cause or result in, or which could reasonably be expected to constitute, cause or result in, the stabilization or manipulation of the price of any security to facilitate the sale or resale of the Securities.
(x) The Company shall cause to be prepared and delivered to the Representative, at its expense, within two (2) Business Days from the effective date of this Agreement, an Electronic Prospectus to be used by the Underwriters in connection with the Offering. As used herein, the term “Electronic Prospectus” means a form of prospectus, and any amendment or supplement thereto, that meets each of the following conditions: (i) it shall be encoded in an electronic format, satisfactory to the Representative, that may be transmitted electronically by the other Underwriters to offerees and purchasers of the Securities for at least the period during which a Prospectus relating to the Securities is required to be delivered under the Securities Act; (ii) it shall disclose the same information as the paper prospectus and prospectus filed pursuant to EDGAR, except to the extent that graphic and image material cannot be disseminated electronically, in which case such graphic and image material shall be replaced in the electronic prospectus with a fair and accurate narrative description or tabular representation of such material, as appropriate; and (iii) it shall be in or convertible into a paper format or an electronic format, satisfactory to the Representative, that will allow recipients thereof to store and have continuously ready access to the prospectus at any future time, without charge to such recipients (other than any fee charged for subscription to the Internet as a whole and for on-line time).
(y) The Company represents and agrees that, unless it obtains the prior written consent of the Representative, and the Representative represents and agrees that, unless it obtains the prior written consent of the Company, it has not made and will not make any offer relating to the Securities that would constitute an “issuer free writing prospectus,” as defined in Rule 433 under the Securities Act, or that would otherwise constitute a “free writing prospectus,” as defined in Rule 405 under the Securities Act, required to be filed with the Commission; provided that the prior written consent of the parties hereto shall be deemed to have been given in respect of the free writing prospectuses included in Schedule III. Any such free writing prospectus consented to by the Company and the Representative is hereinafter referred to as a “Permitted Free Writing Prospectus.” Each of the Company and the Representative represents that it has treated or agrees that it will treat each Permitted Free Writing Prospectus as an “issuer free writing prospectus,” as defined in Rule 433, and has complied and will comply with the requirements of Rule 433 applicable to any Permitted Free Writing Prospectus, including timely Commission filing where required, legending and record keeping.
5. Payment of Expenses.
(a) Whether or not the transactions contemplated by this Agreement, the Registration Statement and the Prospectus are consummated or this Agreement is terminated, the Company hereby agrees to pay all reasonable and documented costs and expenses incident to the performance of its obligations hereunder including the following:
(i) all filing fees and communication expenses related to the registration of the Securities to be sold in the Offering including all expenses in connection with the preparation, printing, formatting for EDGAR and filing of the Registration Statement, any Preliminary Prospectus and the Prospectus and any and all amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriters and dealers;
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(ii) all fees and expenses in connection with filings with FINRA;
(iii) all fees, disbursements and expenses of the Company’s counsel and accountants in connection with the registration of the Securities under the Securities Act and the Offering;
(iv) all fees and expenses in connection with listing the Firm Shares on the Nasdaq Capital Market;
(v) all fees, expenses and disbursements relating to the registration or qualification of such Firm Shares under the “blue sky” securities laws of such states and other jurisdictions as the Representative may reasonably designate (including, without limitation, all filing and registration fees, and the fees and disbursements of the Representative’s Counsel for such counsel’s participation in the “blue sky’ and stock exchange listing process);
(vi) the costs of all mailing and printing of the underwriting documents (including this Agreement, any blue sky surveys and, if appropriate, any Agreement Among Underwriters, Selected Dealers’ Agreement, Underwriters’ Questionnaire and Power of Attorney);
(vii) the costs and expenses of any investor relations firm;
(viii) all reasonable travel expenses of the Company’s officers and employees and any other expenses incurred in connection with attending or hosting meetings with prospective purchasers of the Securities;
(ix) any stock transfer taxes payable upon the transfer of securities by the Company to the Underwriters and any other taxes incurred by the Company in connection with this Agreement or the Offering;
(x) the cost and charges of any transfer agent or registrar for the Firm Shares;
(xi) any reasonable cost and expenses in conducting background checks of the Company’s officers and directors by a background search firm acceptable to the Representative;
(xii) fees of Representative’s Counsel;
(xiii) the cost of preparing, printing and delivering certificates representing each of the Securities;
(xiv) all other costs, fees and expenses incident to the performance of the Company obligations hereunder which are not otherwise specifically provided for in this Section 5.
The Representative’s total out-of-pocket accountable expenses (including legal fees and expenses) in connection with the Offering shall not exceed $200,000 in the event of a Closing of the Offering, and shall not exceed $100,000 in the event that there is not a Closing of the Offering, unless the Company provides their prior written consent which shall not be unreasonably withheld.
(b) Notwithstanding anything to the contrary in this Section 5, in the event that this Agreement is terminated by the Company, pursuant to Section 11(b) hereof, or subsequent to a Material Adverse Change, the Company will pay the out-of-pocket expenses actually incurred as allowed under FINRA Rule 5110 by the Underwriters through the date of such termination (including the fees and disbursements of Representative’s Counsel) with such expenses not to exceed $120,000.
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6. Conditions of Underwriters’ Obligations. The obligations of the Underwriters to purchase and pay for the Firm Shares or the Option Shares, as the case may be, as provided herein shall be subject to: (i) the accuracy of the representations and warranties of the Company herein contained, as of the date hereof and as of the Closing Date, (ii) the absence of any misstatement or omission in any certificates, opinions, written statements or letters furnished to the Representative or to Representative’s Counsel pursuant to this Section 6, (iii) the performance by the Company of its obligations hereunder, and (iv) each of the following additional conditions. For purposes of this Section 6, the terms “Closing Date” and “Closing” shall refer to the Closing Date for both Firm Shares and the Option Shares (if any), as the case may be, and each of the foregoing and following conditions must be satisfied as of each Closing.
(a) The Registration Statement shall have become effective and all necessary regulatory or listing approvals shall have been received not later than 5:30 p.m., New York time, on the date of this Agreement, or at such later time and date as shall have been consented to in writing by the Representative. If the Company shall have elected to rely upon Rule 430A under the Securities Act, the Prospectus shall have been filed with the Commission in a timely fashion in accordance with the terms hereof and a form of the Prospectus containing information relating to the description of the Securities and the method of distribution and similar matters shall have been filed with the Commission pursuant to Rule 424(b) within the applicable time period; and, at or prior to the Closing Date or the actual time of the Closing, no stop order suspending the effectiveness of the Registration Statement or any part thereof, or any amendment thereof, nor suspending or preventing the use of the General Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus shall have been issued; no proceedings for the issuance of such an order shall have been initiated or threatened; any request of the Commission for additional information (to be included in the Registration Statement, the General Disclosure Package, the Prospectus, any Issuer Free Writing Prospectus or otherwise) shall have been complied with to the Representative’s satisfaction; and FINRA shall have raised no objection to the fairness and reasonableness of the underwriting terms and arrangements.
(b) The Representative shall not have reasonably determined, and advised the Company, that the Registration Statement, the General Disclosure Package or the Prospectus, or any amendment thereof or supplement thereto, or any Issuer Free Writing Prospectus, contains an untrue statement of fact which, in the Representative’s reasonable opinion, is material, or omits to state a fact which, in the Representative’s reasonable opinion, is material and is required to be stated therein or necessary to make the statements therein not misleading; provided, however, that if in the Representative’s opinion such deficiency is curable Representative shall have given the Company reasonable notice of such deficiency and a reasonable chance to cure such deficiency.
(c) The Representative shall have received: (i) the written opinion and negative assurance letter, each reasonably satisfactory in form and substance to the Representative and Representative’s Counsel, of Harter Secrest & Emery LLP, the corporate counsel for the Company, dated as of the Closing Date and any Option Closing Date, as the case may be, and addressed to the Representative.
(d) The Representative shall have received a certificate of the Chief Executive Officer and Chief Financial Officer of the Company, dated as of each Closing Date to the effect that: (i) the condition set forth in subsection (a) of this Section 6 has been satisfied, (ii) as of the date hereof and as of the applicable Closing Date, the representations and warranties of the Company set forth in Sections 1 and 2 hereof are accurate, (iii) as of the applicable Closing Date, all agreements, conditions and obligations of the Company to be performed or complied with hereunder on or prior thereto have been duly performed or complied with, (iv) the Company has not sustained any material loss or interference with their respective businesses, whether or not covered by insurance, or from any labor dispute or any legal or governmental proceeding, (v) no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereof has been issued and no proceedings therefor have been initiated or threatened by the Commission, (vi) there are no pro forma or as adjusted financial statements that are required to be included or incorporated by reference in the Registration Statement and the Prospectus pursuant to the Rules and Regulations which are not so included or incorporated by reference, and (vii) subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus there has not been any Material Adverse Change or any development involving a prospective Material Adverse Change, whether or not arising from transactions in the ordinary course of business.
(e) On the date of this Agreement and on the Closing Date, the Representative shall have received a “cold comfort” letter from the Auditor as of the date of delivery and addressed to the Representative and in form and substance satisfactory to the Representative and Representative’s Counsel, confirming that they are independent certified public accountants with respect to the Company within the meaning of the Securities Act and the Rules and Regulations, and stating, as of the date of delivery (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Prospectus, as of a date not more than five (5) days prior to the date of such letter), the conclusions and findings of such firm with respect to the financial information and other matters relating to the Registration Statement and the Prospectus covered by such letter.
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(f) Subsequent to the execution and delivery of this Agreement and prior to the Closing Date, there shall not have been any change in the capital stock or long-term debt of the Company or any change or development involving a change, whether or not arising from transactions in the ordinary course of business, in the business, condition (financial or otherwise), results of operations, shareholders’ equity, properties or prospects of the Company including but not limited to the occurrence of any fire, flood, storm, explosion, accident, act of war or terrorism or other calamity, the effect of which, in any such case described above, is, in the sole judgment of the Representative, so material and adverse as to make it impracticable or inadvisable to proceed with the Offering on the terms and in the manner contemplated in the Prospectus (exclusive of any supplement).
(g) Prior to the execution and delivery of this Agreement, the Representative shall have received a lock-up agreement from each Lock-Up Party, duly executed by the applicable Lock-Up Party.
(h) The Firm Shares shall have been registered under the Exchange Act and, as of the Closing Date, the Firm Shares shall be listed and admitted and authorized for trading on the Nasdaq Capital Market and satisfactory evidence of such action shall have been provided to the Representative. The Company shall have taken no action designed to, or likely to have the effect of terminating the registration of the Firm Shares under the Exchange Act or delisting or suspending from trading the Firm Shares from the Nasdaq Capital Market, nor has the Company received any information suggesting that the Commission or the Nasdaq Capital Market is contemplating terminating such registration of listing. The Firm Shares and the Firm Shares underlying the Representative’s Warrants shall be DTC eligible.
(i) FINRA shall have confirmed that it has not raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements.
(j) No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any federal, state or foreign governmental or regulatory authority that would, as of the Closing Date, prevent the issuance or sale of the Securities; and no injunction or order of any federal, state or foreign court shall have been issued that would, as of the Closing Date, prevent the issuance or sale of the Securities or materially and adversely affect or potentially and adversely affect the business or operations of the Company.
(k) The Company shall have furnished the Representative with a Certificate of Good Standing for the Company certified by the Secretary of the State of Delaware.
(l) The Company shall have furnished the Representative and Representative’s Counsel with such other certificates, opinions or other documents as they may have reasonably requested.
(m) On each Closing Date, there shall have been issued to the Representative, a Representative’s Warrant.
If any of the conditions specified in this Section 6 shall not have been fulfilled when and as required by this Agreement, or if any of the certificates, opinions, written statements or letters furnished to the Representative or to Representative’s Counsel pursuant to this Section 6 shall not be reasonably satisfactory in form and substance to the Representative or to Representative’s Counsel, all obligations of the Underwriters hereunder may be cancelled by the Representative at, or at any time prior to, the consummation of the Closing. Notice of such cancellation shall be given to the Company in writing or by telephone. Any such telephone notice shall be confirmed promptly thereafter in writing.
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7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Underwriter, its officers, directors employees, and agents, its affiliates and each other person, if any, controlling Representative or any of its affiliates (Representative and each such other person being an “Indemnified Person”) within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, liabilities, claims, damages and expenses whatsoever as related to or arising out of or in connection with the Offering (including but not limited to reasonable attorneys’ fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), and will reimburse each Indemnified Person, whether or not pending or threatened and whether or not any Indemnified Person is a party, for all reasonable expenses (including reasonable fees and expenses of counsel) as they are incurred in connection with investigating, preparing, pursuing or defending any action, claim, suit, investigation, joint or several, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon the Offering, including but is not limited to (i) any untrue statement or alleged untrue statement of a material fact contained in (A) the Registration Statement, including the information deemed to be a part of the Registration Statement at the time of effectiveness and at any subsequent time pursuant to Rules 430A and 430B of the Rules and Regulations, the General Disclosure Package, the Prospectus, or any amendment or supplement thereto (including any documents filed under the Exchange Act and deemed to be incorporated by reference into the Prospectus), (B) any Issuer Free Writing Prospectus or in any other materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the offering of the Securities, including any road show or investor presentations made to investors by the Company (whether in person or electronically) (collectively “Marketing Materials”) or (C) any filings or reports filed by the Company under the Exchange Act or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse such indemnified party for any legal or other expenses reasonably incurred by it in connection with investigating or defending against such loss, claim, damage, liability or action; or (ii) in whole or in part upon any inaccuracy in the representations and warranties of the Company contained herein; or (iii) in whole or in part upon any failure of the Company to perform its obligations hereunder or under law; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, any Preliminary Prospectus, the General Disclosure Package, the Prospectus, or any such amendment or supplement, any Issuer Free Writing Prospectus or any other Marketing Materials, in reliance upon and in conformity with the Underwriters’ Information. With respect to any untrue statement or omission or alleged untrue statement or omission made in the Preliminary Prospectus, the indemnity agreement contained in this Section 7(a) shall not inure to the benefit of an Underwriter to the extent that any loss, liability, claim, damage or expense of such Underwriter results from the fact that a copy of the Prospectus was not given or sent to the Person asserting any such loss, liability, claim or damage at or prior to the written confirmation of sale of the Securities to such Person as required by the Securities Act and the rules and regulations thereunder, and if the untrue statement or omission has been corrected in the Prospectus, unless such failure to deliver the Prospectus was a result of non-compliance by the Company with its obligations under this Agreement. The Company agrees promptly to notify each Underwriter of the commencement of any litigation or proceedings against the Company or any of its officers, directors or Controlling Persons in connection with the issue and sale of the Securities or in connection with the Registration Statement or Prospectus. The Company will not, however, be responsible for any losses, claims, damages or liabilities (or expenses relating thereto) that are judicially determined in a judgment not subject to appeal to have resulted from the bad faith, gross negligence or intentional misconduct of any Indemnified Person.
(b) [Reserved].
(c) Each Underwriter, severally and not jointly, shall indemnify and hold harmless the Company, each of the directors of the Company, each of the officers of the Company who shall have signed the Registration Statement, and each other Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, liabilities, claims, damages and expenses whatsoever as incurred (including but not limited to attorneys’ fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, as originally filed or any amendment thereof, or any related Preliminary Prospectus or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with the Underwriters’ Information; provided, however, that in no case shall any Underwriter be liable or responsible for any amount in excess of the aggregate underwriting discount applicable to the Securities to be purchased by such Underwriter hereunder. The parties agree that such information provided by or on behalf of any Underwriter through the Representative consists solely of the material referred to in the last sentence of Section 2(b) hereof.
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(d) Promptly after receipt by an indemnified party under subsection (a) or (c) above of notice of any claims or the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify each party against whom indemnification is to be sought in writing of the claim or the commencement thereof (but the failure so to notify an indemnifying party shall not relieve the indemnifying party from any liability which it may have under this Section 7 to the extent that it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability that such indemnifying party may have otherwise than on account of the indemnity agreement hereunder). In case any such claim or action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate, at its own expense in the defense of such action, and to the extent it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel satisfactory to such indemnified party; provided however, that counsel to the indemnifying party shall not (except with the written consent of the indemnified party) also be counsel to the indemnified party. Notwithstanding the foregoing, the indemnified party or parties shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless (i) the employment of such counsel shall have been authorized in writing by one of the indemnifying parties in connection with the defense of such action, (ii) the indemnifying parties shall not have employed counsel to have charge of the defense of such action within a reasonable time after notice of commencement of the action, (iii) the indemnifying party does not diligently defend the action after assumption of the defense, or (iv) such indemnified party or parties shall have reasonably concluded that a conflict may arise between the positions of the indemnifying party and the indemnified party, or any of them, in conducting the defense of any such action or there may be legal defenses available to it or them which are different from or additional to those available to one or all of the indemnifying parties (in which case the indemnifying parties shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events such fees and expenses shall be borne by the indemnifying parties and shall be paid as incurred. No indemnifying party shall, without the prior written consent of the indemnified parties (which consent shall not be unreasonably delayed, withhold or denied), effect any settlement or compromise of, or consent to the entry of judgment with respect to, any pending or threatened claim, investigation, action or proceeding in respect of which indemnity or contribution may be or could have been sought by an indemnified party under this Section 7 or Section 8 hereof (whether or not the indemnified party is an actual or potential party thereto), unless (x) such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such claim, investigation, action or proceeding and (ii) does not include a statement as to or an admission of fault, culpability or any failure to act, by or on behalf of the indemnified party, and (y) the indemnifying party confirms in writing its indemnification obligations hereunder with respect to such settlement, compromise or judgment.
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8. Contribution. In order to provide for contribution in circumstances in which the indemnification provided for in Section 7 is judicially determined to be unavailable (other than in accordance with the last sentence of the first paragraph hereof) to an indemnifying party in respect of any losses, claims, damages or liabilities referred to herein, then, in lieu of indemnifying such indemnifying party hereunder the Company and the Underwriters shall contribute to the aggregate losses, claims, damages, liabilities and expenses of the nature contemplated by such indemnification provision (including any investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claims asserted, but after deducting in the case of losses, claims, damages, liabilities and expenses suffered by the Company, any contribution received by the Company from Persons, other than the Underwriters, who may also be liable for contribution, including Persons who control the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, officers of the Company who signed the Registration Statement and directors of the Company) as incurred to which the Company and one or more of the Underwriters may be subject, in such proportions as is appropriate to reflect the relative benefits received by the Company and the Underwriters from the Offering or, if such allocation is not permitted by applicable law, in such proportions as are appropriate to reflect not only the relative benefits referred to above but also the relative fault of the Company and the Underwriters in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Underwriters shall be deemed to be in the same proportion as (x) the total proceeds from the Offering (net of underwriting discounts and commissions but before deducting expenses) received by the Company bears to (y) the underwriting discount or commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of each of the Company and of the Underwriters shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 8 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any judicial, regulatory or other legal or governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 8: (i) no Underwriter shall be required to contribute any amount in excess of the aggregate discounts and commissions applicable to the Securities underwritten by it and distributed to the public and (ii) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each Person, if any, who controls an Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as such Underwriter, and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to clauses (i) and (ii) of the immediately preceding sentence. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties, notify each party or parties from whom contribution may be sought, but the omission to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have under this Section 8 or otherwise. The obligations of the Underwriters to contribute pursuant to this Section 8 are several in proportion to the respective number of Securities to be purchased by each of the Underwriters hereunder and not joint.
9. Underwriter Default.
(a) If any Underwriter or Underwriters shall default in its or their obligation to purchase Firm Shares hereunder, and if the securities with respect to which such default relates (the “Default Securities”) do not (after giving effect to arrangements, if any, made by the Representative pursuant to subsection (b) below) exceed in the aggregate 10% of the number of Firm Shares, each non-defaulting Underwriter, acting severally and not jointly, agrees to purchase from the Company that number of Default Securities that bears the same proportion of the total number of Default Securities then being purchased as the number of Firm Shares set forth opposite the name of such Underwriter on Schedule I hereto bears to the aggregate number of Firm Shares set forth opposite the names of the non-defaulting Underwriters, subject, however, to such adjustments to eliminate fractional shares as the Representative in its sole discretion shall make.
(b) In the event that the aggregate number of Default Securities exceeds 10% of the number of Firm Shares, the Representative may in its discretion arrange for itself or for another party or parties (including any non-defaulting Underwriter or Underwriters who so agree) to purchase the Default Securities on the terms contained herein. In the event that within 48 hours after such a default the Representative does not arrange for the purchase of the Default Securities as provided in this Section 9, this Agreement shall thereupon terminate, without liability on the part of the Company with respect thereto (except in each case as provided in Sections 5, 7, 8, 9 and 11(d)) or the Underwriters, but nothing in this Agreement shall relieve a defaulting Underwriter or Underwriters of its or their liability, if any, to the other Underwriters and the Company for damages occasioned by its or their default hereunder.
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(c) In the event that any Default Securities are to be purchased by the non-defaulting Underwriters, or are to be purchased by another party or parties as aforesaid, the Representative or the Company shall have the right to postpone the Closing Date for a period, not exceeding five (5) Business Days, in order to effect whatever changes may thereby be necessary in the Registration Statement or the Prospectus or in any other documents and arrangements, and the Company agrees to file promptly any amendment or supplement to the Registration Statement or the Prospectus which, in the reasonable opinion of Representative’s Counsel, may thereby be made necessary or advisable. The term “Underwriter” as used in this Agreement shall include any party substituted under this Section 9 with like effect as if it had originally been a party to this Agreement with respect to such Firm Shares.
10. Survival of Representations and Agreements. All representations and warranties, covenants and agreements of the Company and the Underwriters contained in this Agreement or in certificates of officers of the Company submitted pursuant hereto, including the agreements contained in Sections 5, 10, 14 and 15, the indemnity agreements contained in Section 7 and the contribution agreements contained in Section 8 hereof, shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any Underwriter or any controlling Person thereof or by or on behalf of the Company, any of its officers and directors or any controlling Person thereof, and shall survive delivery of and payment for the Securities to and by the Underwriters. The representations contained in Section 2 hereof and the covenants and agreements contained in Sections 5, 7, 8, this Section 10 and Sections 12, 13, 14 and 15 hereof shall survive any termination of this Agreement, including termination pursuant to Section 9 or 11 hereof. The representations and covenants contained in Sections 2, 3 and 4 hereof shall survive termination of this Agreement if any Securities are purchased pursuant to this Agreement.
11. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective upon the later of: (i) receipt by the Representative and the Company of notification of the effectiveness of the Registration Statement or (ii) the execution of this Agreement. Notwithstanding any termination of this Agreement, the provisions of this Section 11 and of Sections 5, 7, 8, 12, 13, 14 and 15, inclusive, shall remain in full force and effect at all times after the execution hereof. If this Agreement is terminated after any Securities have been purchased hereunder, the provisions of Sections 2, 3 and 4 hereof shall survive termination of this Agreement.
(b) The Representative shall have the right to terminate this Agreement at any time prior to the consummation of the Closing if: (i) any domestic or international event or act or occurrence has materially disrupted, or in the reasonable opinion of the Representative will in the immediate future materially disrupt, the market for the Company’s securities or securities in general; or (ii) trading on the New York Stock Exchange or the Nasdaq Stock Market shall have been suspended or been made subject to material limitations, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required, on the New York Stock Exchange or the Nasdaq Stock Market or by order of the Commission, FINRA or any other governmental authority having jurisdiction; or (iii) a banking moratorium has been declared by any state or federal authority or if any material disruption in commercial banking or securities settlement or clearance services shall have occurred; (iv) any downgrading shall have occurred in the Company’s corporate credit rating or the rating accorded the Company’s debt securities by any “nationally recognized statistical rating organization” (as defined for purposes of Rule 436(g) under the Securities Act) or if any such organization shall have been publicly announced that it has under surveillance or review, with material negative implications, its rating of any of the Company’s debt securities; or (v) (A) there shall have occurred any outbreak or escalation of hostilities or acts of terrorism involving the United States or there is a declaration of a national emergency or war by the United States, excluding a national emergency declared related to the COVID-19 pandemic, or (B) there shall have been any other calamity or crisis or any change in political, financial or economic conditions if the effect of any such event in (A) or (B), in the reasonable judgment of the Representative, is so material and adverse that such event makes it impracticable or inadvisable to proceed with the offering, sale and delivery of the Firm Shares on the terms and in the manner contemplated by the Prospectus.
(c) Any notice of termination pursuant to this Section 11 shall be in writing.
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(d) If this Agreement shall be terminated pursuant to any of the provisions hereof or if the sale of the Securities provided for herein is not consummated because any condition to the obligations of the Underwriters set forth herein is not satisfied or because of any refusal, inability or failure on the part of the Company to perform any agreement herein or comply with any provision hereof, the Company will, subject to demand by the Representative, reimburse the Underwriters for those out-of-pocket expenses (including the reasonable fees and expenses of Representative’s Counsel), actually incurred by the Underwriters in connection herewith, up to $100,000.
12. Notices. All communications hereunder, except as may be otherwise specifically provided herein, shall be in writing, and:
(a) if sent to the Representative or any Underwriter, shall be mailed, delivered, or faxed and confirmed in writing, to:
Craig-Hallum Capital Group LLC
323 North Washington Ave.
Minneapolis, MN 55401
Attention: Chris Jensen
Email: ###
with a copy to Representative’s Counsel at:
Pryor Cashman LLP
7 Times Square, 40th Floor
New York, NY, 10036
Attention: M. Ali Panjwani, Esq.
Email: ###
(b) if sent to the Company, shall be mailed, delivered, or faxed and confirmed in writing to the Company and its counsel at the addresses set forth in the Registration Statement.
13. Parties; Limitation of Relationship. This Agreement shall inure solely to the benefit of, and shall be binding upon, the Underwriters, the Company and the controlling Persons, directors, officers, employees and agents referred to in Sections 7 and 8 hereof, and their respective successors and assigns, and no other Person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the parties hereto and said controlling Persons and their respective successors, officers, directors, heirs and legal representative, and it is not for the benefit of any other Person. The term “successors and assigns” shall not include a purchaser, in its capacity as such, of Securities from any of the Underwriters.
14. Governing Law; This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to conflict of laws principles (other than Section 5-1401 of the General Obligations Law).
15. Submission to Jurisdiction, Etc. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. The Company irrevocably (a) submits to the jurisdiction of any court of the State of New York for the purpose of any suit, action, or other proceeding arising out of this Agreement, or any of the agreements or transactions contemplated by this Agreement, the Registration Statement and the Prospectus (each, a “Proceeding”), (b) agrees that all claims in respect of any Proceeding may be heard and determined in any such court, (c) waives, to the fullest extent permitted by law, any immunity from jurisdiction of any such court or from any legal process therein, (d) agrees not to commence any Proceeding other than in such courts, and (e) waives, to the fullest extent permitted by law, any claim that such Proceeding is brought in an inconvenient forum. EACH OF THE COMPANY, THE REPRESENTATIVE, AND ANY UNDERWRITER (ON BEHALF OF ITSELF AND, TO THE FULLEST EXTENT PERMITTED BY LAW, ON BEHALF OF ITS RESPECTIVE EQUITY HOLDERS AND CREDITORS) HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED UPON, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE REGISTRATION STATEMENT, AND THE PROSPECTUS.
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16. Entire Agreement. This Agreement, together with the exhibits and schedules attached hereto and as the same may be amended from time to time in accordance with the terms hereof, constitutes the entire agreement of the parties to this Agreement and supersedes all prior or contemporaneous written or oral agreements, understandings, promises and negotiations with respect to the subject matter hereof.
17. Severability. If any term or provision of this Agreement or the performance thereof shall be invalid or unenforceable to any extent, such invalidity or unenforceability shall not affect or render invalid or unenforceable any other provision of this Agreement and this Agreement shall be valid and enforced to the fullest extent permitted by law.
18. Amendment. This Agreement may only be amended by a written instrument executed by each of the parties hereto.
19. Waiver, etc. The failure of any of the parties hereto to at any time enforce any of the provisions of this Agreement shall not be deemed or construed to be a waiver of any such provision, nor to in any way effect the validity of this Agreement or any provision hereof or the right of any of the parties hereto to thereafter enforce each and every provision of this Agreement. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Agreement shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.
20. No Fiduciary Relationship. The Company hereby acknowledges that the Underwriters are acting solely as underwriters in connection with the offering of the Company’s Securities. The Company further acknowledge that the Underwriters are acting pursuant to a contractual relationship created solely by this Agreement entered into on an arm’s length basis and in no event do the parties intend that the Underwriters act or be responsible as a fiduciary to the Company, its management, shareholders, creditors or any other person in connection with any activity that the Underwriters may undertake or have undertaken in furtherance of the offering of the Company’s Securities, either before or after the date hereof. The Underwriters hereby expressly disclaim any fiduciary or similar obligations to the Company, either in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions, and the Company hereby confirms its understanding and agreement to that effect. The Company hereby further confirms its understanding that no Underwriter has assumed an advisory or fiduciary responsibility in favor of the Company with respect to the Offering contemplated hereby or the process leading thereto, including any negotiation related to the pricing of the Securities; and the Company has consulted its own legal and financial advisors to the extent it has deemed appropriate in connection with this Agreement and the Offering. The Company and the Underwriters agree that they are each responsible for making their own independent judgments with respect to any such transactions, and that any opinions or views expressed by the Underwriters to the Company regarding such transactions, including but not limited to any opinions or views with respect to the price or market for the Company’s securities, do not constitute advice or recommendations to the Company. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the Underwriters with respect to any breach or alleged breach of any fiduciary or similar duty to the Company in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions.
21. Judgment Currency. The obligation of the Company in respect of any sum due to any Underwriter under this Agreement shall, notwithstanding any judgment in a currency other than U.S. dollars (the “Judgment Currency”), not be discharged until the first business day, following receipt by such Underwriter of any sum adjudged to be so due in the Judgment Currency, on which (and only to the extent that) such Underwriter may in accordance with normal banking procedures purchase U.S. dollars with the Judgment Currency; if the U.S. dollars so purchased are less than the sum originally due to such Underwriter hereunder, the Company agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Underwriter against such loss. If the U.S. dollars so purchased are greater than the sum originally due to such Underwriter hereunder, such Underwriter agrees to pay to the Company an amount equal to the excess of the U.S. dollars so purchased over the sum originally due to such Underwriter hereunder.
22. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. Delivery of a signed counterpart of this Agreement by facsimile or other electronic transmission shall constitute valid and sufficient delivery thereof.
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23. Headings. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement.
24. Time is of the Essence. Time shall be of the essence of this Agreement. As used herein, the term “Business Day” shall mean any day other than a Saturday, Sunday or any day on which the major stock exchanges in New York, New York are not open for business.
[Signature Pages Follow]
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If the foregoing correctly sets forth your understanding, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement among us.
| Very truly yours, | ||
| Elauwit Connection, Inc. | ||
| By: | ||
| Name: | Barry Rubens | |
| Title: | Chief Executive Officer | |
| Accepted by the Representative, acting for themselves and as | ||
| Representative of the Underwriters named on Schedule I attached hereto, | ||
| as of the date first written above: | ||
| CRAIG-HALLUM CAPITAL GROUP LLC | ||
| By: | ||
| Name: | ||
| Title: | ||
SCHEDULE I
| Name of Purchaser | Number of Firm Shares Being Purchased |
Number of Option Shares Being Purchased | ||
| Craig-Hallum Capital Group LLC | ||||
| Maxim Group LLC | ||||
| Total |
SCHEDULE II
Lock-Up Parties
| Name | Position | |
| Daniel McDonough, Jr. | Executive Chairman and Managing Member of Baron Hunter Group, LLC | |
| Barry Rubens | Chief Executive Officer and Director and Managing Member of Steele Creek Partners, LLC | |
| Sean Arnette | Chief Financial Officer | |
| Taylor Jones | President, Chief Technology Officer and Director and Managing Member of Minotaur Networks, LLC | |
| Scott Barton | Director | |
| Elbert Gene Basolis Jr. | Director | |
| Frederick Berk | Director | |
| Leslie Goodman | Director | |
| Glenn Josephs | Director | |
| David O’Brien | Director | |
| Roger Shannon | Director | |
SCHEDULE III
Free Writing Prospectus
[None.]
SCHEDULE IV
Subsidiaries
| Name | Background | Ownership | ||
| [None.] | ||||
Exhibit 4.2
Form of Representative’s Warrant
THE REGISTERED HOLDER OF THIS PURCHASE WARRANT BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE WARRANT EXCEPT AS HEREIN PROVIDED AND THE REGISTERED HOLDER OF THIS PURCHASE WARRANT AGREES THAT IT WILL NOT SELL, TRANSFER, ASSIGN, PLEDGE OR HYPOTHECATE THIS PURCHASE WARRANT FOR A PERIOD OF ONE HUNDRED EIGHTY (180) DAYS FOLLOWING THE COMMENCEMENT OF SALES OF THE OFFERING TO ANYONE OTHER THAN (I) CRAIG-HALLUM CAPITAL GROUP LLC, OR (II) ANY SUCCESSOR, OFFICER, MANAGER OR MEMBER OF CRAIG-HALLUM CAPITAL GROUP LLC (OR TO OFFICERS, MANAGERS OR MEMBERS OF ANY SUCH SUCCESSOR OR MEMBER); OR (III) TO MEMBERS OF THE UNDERWRITING SYNDICATE OR SELLING GROUP. (SEE SECTION 4(a)).
REPRESENTATIVE’S COMMON STOCK PURCHASE WARRANT
ELAUWIT CONNECTION, INC.
| Warrant Shares: [ ] | Original Issuance Date: [ ], 2025 |
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, Craig-Hallum Capital Group LLC 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 six (6) months from the effective date of the Registration Statement (the “Initial Exercise Date”) and on or prior to 5:00 p.m. (New York City time) on [ ], 2030 (the “Termination Date”) but not thereafter, to subscribe for and purchase from Elauwit Connection, Inc., a Delaware corporation (the “Company”), up to [ ] Firm Shares (as subject to adjustment hereunder, the “Warrant Shares”). The purchase price of one Firm Share under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
Section 1. Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Underwriting Agreement (the “Agreement”), dated [ ], 2025 by and between the Company and Craig-Hallum Capital Group LLC, as representative of the several underwriters.
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 facsimile copy (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 within three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
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b) Exercise Price. The exercise price per Firm Share under this Warrant shall be $[ ] (which is 115% of the offering price per Firm Share in the offering contemplated by the Agreement) (the “Exercise Price”).
c) Cashless Exercise. If at the time of exercise hereof there is no effective registration statement registering the Warrant Shares, or the prospectus contained therein is not available for the issuance of the Warrant Shares to the Holder, then, provided that the Trading Price, as defined below, is equal to or greater than the Exercise Price, on the Termination Date, 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 (as defined below) 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)(64) 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 Firm Shares 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 (such applicable price for (a), the “Trading Price”); |
| (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 characteristics of the Warrants being exercised and the holding period of the Warrants being exercised may be tacked on to the holding period of the Warrant Shares. The Company agrees not to take any position contrary to this Section 2(c).
“Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Firm Shares are then listed or quoted on a Trading Market, the bid price of the Firm Shares for the time in question (or the nearest preceding date) on the Trading Market on which the Firm Shares 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 the Firm Shares are traded on OTCQB or OTCQX, the volume weighted average sales price of the Firm Shares for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Firm Shares are not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Firm Shares are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per Firm Share so reported, or (d) in all other cases, the fair market value of an Firm Share as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Firm Shares are then listed or quoted on a Trading Market, the daily volume weighted average price of the Firm Shares for such date (or the nearest preceding date) on the Trading Market on which the Firm Shares are 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 the Firm Shares are traded on OTCQB or OTCQX , the volume weighted average sales price of the Firm Shares for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Firm Shares are not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Firm Shares are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per Firm Share so reported, or (d) in all other cases, the fair market value of a Firm Share as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
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Provided that the Trading Price is equal to or greater than the Exercise Price, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).
d) Mechanics of Exercise.
i. Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder either by (A) 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 there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder, or (B) if there is no effective registration statement and the Warrant is exercised via cashless exercise at a time when such Warrant Shares would be eligible for resale under Rule 144 by a non-affiliate of the Company, such Warrant Shares are delivered to Holder’s broker, and the Company receives a statement from Holder’s broker that it has received instructions to sell the Warrant Shares or that it would take responsibility that the sales of the Warrant Shares will only be made if the Warrant Shares are eligible to be sold under Rule 144, 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 Firm Shares on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) 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 use commercially reasonable efforts 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 Firm Shares 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.
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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, Firm Shares 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 Firm Shares 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 Firm Shares that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Firm Shares having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of Firm Shares 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 Firm Shares upon exercise of the Warrant as required 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 transfer 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.
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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 Firm Shares beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of Firm Shares issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of Firm Shares which would be issuable upon (i) exercise of the remaining, non-exercised 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 non-converted portion of any other securities of the Company (including, without limitation, any other Firm Share 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 Firm Shares, a Holder may rely on the number of outstanding Firm Shares 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 Firm Shares 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 Firm Shares then outstanding. In any case, the number of outstanding Firm Shares 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 Firm Shares was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of Firm Shares outstanding immediately after giving effect to the issuance of Firm Shares 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 Firm Shares outstanding immediately after giving effect to the issuance of Firm Shares 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 Firm Shares or any other equity or equity equivalent securities payable in Firm Shares (which, for avoidance of doubt, shall not include any Firm Shares issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding Firm Shares into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding Firm Shares into a smaller number of shares, or (iv) issues by reclassification of Firm Shares, 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 Firm Shares (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of Firm Shares 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) [Reserved].
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c) 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 Firm Share equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Firm Shares (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 Firm Shares 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 Firm Shares are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such Firm Shares as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
d) 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 Firm Shares, by way of return of capital or otherwise, other than cash (including, without limitation, any distribution of 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 Firm Shares 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 Firm Shares are to be determined for the participation in such Distribution (provided, however, 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 Firm Shares 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).
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e) 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 (other than solely with respect to a name change of the Company), (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Firm Shares 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 Firm Shares, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Firm Shares or any compulsory share exchange pursuant to which the Firm Shares are effectively converted into or exchanged for other securities, cash or property (other than a reclassification in which the Company’s shareholders remain the same), 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 or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding Firm Shares (not including any Firm Shares held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of Firm Shares 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 Firm Shares 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 Firm Share 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 Firm Shares 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 of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction; provided, however, if the Fundamental Transaction is not within the Company’s control, including not approved by the Company’s Board of Directors or the consideration is not in all stock of the Successor Entity, Holder shall only be entitled to receive from the Company or any 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 (as defined below) of the unexercised portion of this Warrant, that is being offered and paid to the holders of Firm Shares 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 Firm Shares are given the choice to receive from among alternative forms of consideration in connection with the Fundamental Transaction. “Black Scholes Value” means the value of this Warrant based on the Black and 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 (A) a risk-free interest rate corresponding to the U.S. Treasury rate as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable 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 greater of (x) the last VWAP immediately prior to the public announcement of such Fundamental Transaction and (y) the last VWAP immediately prior to the consummation of such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date. The payment of the Black Scholes Value will be made by wire transfer of immediately available funds within five Business Days of the Holder’s election (or, if later, on the effective date 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 and the other Transaction Documents in accordance with the provisions of this Section 3(e) 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 Firm Shares 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 Firm Shares 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 succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.
f) 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 Firm Shares deemed to be issued and outstanding as of a given date shall be the sum of the number of Firm Shares (excluding treasury shares, if any) issued and outstanding.
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g) 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 facsimile or 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 Firm Shares, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Firm Shares, (C) the Company shall authorize the granting to all holders of the Firm Shares 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 Firm Shares, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Firm Shares are 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 facsimile or email to the Holder at its last facsimile number or 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 Firm Shares 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 Firm Shares of record shall be entitled to exchange their Firm Shares 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.
Section 4. Transfer of Warrant.
a) Transferability. Pursuant to FINRA Rule 5110(e) and the Agreement, neither this Warrant nor any Warrant Shares issued upon exercise of this Warrant shall be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of the securities by any person for a period of one-hundred eighty (180) day immediately following the date of effectiveness or commencement of sales of the offering pursuant to which this Warrant is being issued, except the transfer of any security:
(i) by operation of law or by reason of reorganization of the Company;
(ii) to any FINRA member firm participating in the offering and the officers and partners thereof, if all securities so transferred remain subject to the lock-up restriction in this Section 4(a) for the remainder of the time period;
(iii) if the aggregate amount of securities of the Company held by the Holder or related person do not exceed 1% of the securities being offered;
(iv) that is beneficially owned on a pro-rata basis by all equity owners of an investment fund, provided that no participating member manages or otherwise directs investments by the fund, and participating members in the aggregate do not own more than 10% of the equity in the fund; or
(v) the exercise or conversion of any security, if all securities received remain subject to the lock-up restriction in this Section 4(a) for the remainder of the time period.
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Subject to the foregoing restrictions, compliance with any applicable securities laws, and the conditions set forth in Section 4(d) hereof, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date 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. 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 Original Issuance Date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
d) Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant or Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.
Section 5. General Terms. These additional terms shall relate to the Warrants registered pursuant to the Registration Statement:
i. Indemnification.
(w) The Company shall, to the fullest extent permitted by applicable law, indemnify the Holder(s) of the Warrants to be sold pursuant to the Registration Statement and each person, if any, who controls such Holders within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against litigation, commenced or threatened, or any claim whatsoever whether arising out of any action between the underwriter and the Company or between the underwriter and any third party or otherwise) to which any of them may become subject under the Act, the Exchange Act or otherwise, arising from such registration statement; provided, however, that, with respect to any Holder of Warrants, this indemnity shall not apply to any loss, liability, claim, damage or expense to the extent arising out of an untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by such Holder expressly for use in the Registration Statement (or any amendment thereto), or any preliminary prospectus or the prospectus (or any amendment or supplement thereto).
(x) The Holder(s) of the Warrants to be sold pursuant to the Registration Statement, and their successors and assigns, shall severally, and not jointly, indemnify the Company, its officers and directors and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which they may become subject under the Act, the Exchange Act or otherwise, arising from information furnished by or on behalf of such Holders, or their successors or assigns, in writing, for specific inclusion in the Registration Statement(or any amendment thereto), or any preliminary prospectus or the prospectus (or any amendment or supplement thereto).
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(y) Each indemnified party shall give prompt notice to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve the indemnifying party from any liability it may have under this Agreement, except to the extent that the indemnifying party is prejudiced thereby. If it so elects, after receipt of such notice, an indemnifying party, jointly with any other indemnifying parties receiving such notice, may assume the defense of such action with counsel chosen by it; provided, however, that the indemnified party shall be entitled to participate in (but not control) the defense of such action with counsel chosen by it, the reasonable fees and expenses of which shall be paid by such indemnified party, unless a conflict would arise if one counsel were to represent both the indemnified party and the indemnifying party, in which case the reasonable fees and expenses of counsel to the indemnified party shall be paid by the indemnifying party or parties. In no event shall the indemnifying party or parties be liable for a settlement of an action with respect to which they have assumed the defense if such settlement is effected without the written consent of such indemnifying party, or for the reasonable fees and expenses of more than one counsel for (i) the Company, its officers, directors and controlling persons as a group, and (ii) the selling Holders and their controlling persons as a group, in each case, in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances; provided, however, that if, in the reasonable judgment of an indemnified party, a conflict of interest may exist between such indemnified party and the Company or any other of such indemnified parties with respect to such claim, the indemnifying party shall be obligated to pay the reasonable fees and expenses of such additional counsel.
(z) If the indemnification provided for in or pursuant to Section 5(b)(i) is due in accordance with the terms hereof, but held by a court of competent jurisdiction to be unavailable or unenforceable in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions which result in such losses, claims, damages, liabilities or expenses as well as any other relevant equitable considerations. The relative fault of the indemnifying party on the one hand and of the indemnified party on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party, and by such party’s relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
ii. [Intentionally Omitted]
iii. Supplemental Prospectus. Each Holder agrees, that upon receipt of any notice from the Company of the happening of any event as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, such Holder will immediately discontinue disposition of Warrants pursuant to the Registration Statement covering such Warrants until such Holder’s receipt of the copies of a supplemental or amended prospectus, and, if so desired by the Company, such Holder shall deliver to the Company (at the expense of the Company) or destroy (and deliver to the Company a certificate of such destruction) all copies, other than permanent file copies then in such Holder’s possession, of the prospectus covering such Warrants current at the time of receipt of such notice. Immediately after discovering of such an event which causes the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, the Company shall prepare and file, as soon as practicable, a supplement or amendment to the prospectus so that such Registration Statement does not include any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing and distribute such supplement or amendment to each Holder.
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Section 6. Miscellaneous.
a) No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3.
b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.
d) Authorized Shares.
The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Firm Shares 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 Firm Shares 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 non-assessable 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 non-assessable 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.
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e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Agreement.
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) Non-waiver 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 or the Agreement, 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 notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Agreement.
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 Firm Shares 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 and the Holder.
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.
********************
(Signature Page Follows)
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
| Elauwit Connection, Inc. | ||
| By: | ||
| Name: | ||
| Title: | ||
NOTICE OF EXERCISE
TO: Elauwit Connection, 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: |
EXHIBIT B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
| Name: | |
| Address: | (Please Print) |
| Phone Number: | |
| Email Address: | (Please Print) |
| Dated: ___________ __, _____ | |
| Holder’s Signature: | |
| Holder’s Address: |
Warrant Exercise Log
| Date | Number of Warrant Shares Available to be Exercised |
Number of Warrant Shares Exercised |
Number of Warrant Shares Remaining to be Exercised | |||
Elauwit Connection, Inc.
WARRANT DATED __________, 2025
WARRANT NO. [ ]
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ________________________________ the right represented by the above-captioned Warrant to purchase ____________ share of Company Firm Shares and appoints ________________ attorney to transfer said right on the books of the Company with full power of substitution in the premises.
Dated: _______________, ____
| (Signature must conform in all respects to name of holder as specified on the face of the Warrant) | ||
| Address of Transferee | ||
| In the presence of: | ||
Exhibit 5.1
September 15, 2025
Elauwit Connection, Inc.
1700 Alta Vista Drive, Suite 130
Columbia, SC 29223
| Re: | Registration Statement on Form S-1 |
Ladies and Gentlemen:
We have acted as counsel to Elauwit Connection, Inc., a Delaware corporation (the “Company”), in connection with the preparation and filing with the Securities and Exchange Commission, pursuant to the Securities Act of 1933, as amended (the “Securities Act”), of the Company’s Registration Statement on Form S-1 (File No. 333-289964) (the “Registration Statement”). The Registration Statement covers the underwritten public offering and sale of the following securities (the “Securities”):
| 1. | up to 1,725,000 shares of common stock, par value $0.0001 per share (the “Common Stock”), which includes up to 225,000 shares of Common Stock pursuant to the over-allotment option of the underwriters described in the Registration Statement (these shares of Common Stock, the “Shares”); |
| 2. | warrants to purchase a number of shares of Common Stock equal to 7.0% of the number of Shares sold in the offering, at an exercise price equal to 115% of the public offering price per Share, to be issued to the representative of the underwriters (the “Representative’s Warrant”); and |
| 3. | up to 120,750 shares of Common Stock issuable upon exercise of the Representative’s Warrant (the “Representative’s Warrant Shares”). |
We understand that the Securities are to be sold to the underwriters as described in the Registration Statement pursuant to an underwriting agreement, substantially in the form filed as an exhibit to the Registration Statement, to be entered into by and among the Company and Craig-Hallum Capital Group LLC (the “Representative”), acting for itself and as representative for any other underwriters named therein (the “Underwriting Agreement”).
In connection with the foregoing, we have examined originals or copies of such corporate records of the Company, certificates and other communications of public officials, certificates of officers of the Company and such other documents as we have deemed relevant or necessary for the purpose of rendering the opinions expressed herein. As to questions of fact material to those opinions, we have, to the extent we deemed appropriate, relied on certificates of officers of the Company and on certificates and other communications of public officials. We have assumed the genuineness of all signatures on, and the authenticity of, all documents submitted to us as originals, the conformity to authentic original documents of all documents submitted to us as copies thereof, the due authorization, execution and delivery by the parties thereto other than the Company of all documents examined by us, and the legal capacity of each individual who signed any of those documents. In addition, we have assumed that (a) each of the Underwriting Agreement and Representative’s Warrant (the “Transaction Documents”) will be duly executed and delivered by all parties thereto, (b) the Representative has the power, corporate or otherwise, to enter into and perform its obligations under the Underwriting Agreement and that the Underwriting Agreement will be a valid and binding obligation of the Representative, (c) there will not have occurred, prior to the date of the issuance of the Representative’s Warrant Shares: (i) any change in law affecting the validity or enforceability of the Representative’s Warrant or (ii) any amendments to the Transaction Documents, (d) at the time of the issuance and sale of the Securities: (i) the Company is validly existing and in good standing under the law of the State of Delaware, (ii) the Company has not amended its certificate of incorporation or bylaws, (iii) the board of directors of the Company and any committee thereof has not taken any action to amend, rescind or otherwise reduce its prior authorization of the issuance of the Securities and (iv) the Company will receive consideration in excess of par value for the issuance of the Shares, (e) the Registration Statement becomes and remains effective, and the prospectus which is a part of the Registration Statement, and the prospectus delivery requirements with respect thereto, fulfill all of the requirements of the Securities Act, throughout all periods relevant to the opinion, (f) the Securities will be offered in the manner and on the terms identified or referred to in the Registration Statement, including all amendments thereto, and (g) all offers and sales of the Securities will be made in compliance with the securities laws of the states having jurisdiction thereof.
| 1600 BAUSCH & LOMB PLACE ROCHESTER, NY 14604-2711 PHONE: 585.232.6500 FAX: 585.232.2152 |
| rochester, ny • buffalo, ny • albany, ny • corning, ny • new york, ny |
Elauwit Connection, Inc.
September 15, 2025
Page 2
Based upon the foregoing, and subject to the additional qualifications set forth below, we are of the opinion that:
| 1. | the Shares have been duly authorized for issuance and, when issued and paid for in accordance with the terms of the Underwriting Agreement, will be validly issued, fully paid and non-assessable; |
| 2. | the Representative’s Warrant has been duly authorized for issuance and, when issued, sold and delivered by the Company in accordance with the Underwriting Agreement, will be validly issued and will constitute a valid and binding obligation of the Company enforceable against the Company in accordance with its terms; and |
| 3. | the Representative’s Warrant Shares have been duly authorized for issuance and, when issued and delivered by the Company upon valid exercise of the Representative’s Warrant and against receipt of the exercise price therefor, in accordance with the Representative’s Warrant, will be validly issued, fully paid and non-assessable. |
The opinion rendered in paragraph 2 above is subject to (i) bankruptcy, insolvency, moratorium, fraudulent conveyance, fraudulent transfer and other similar laws affecting the rights and remedies of creditors generally, and (ii) constitutional and public policy limitations and general principles of equity (regardless of whether enforcement may be sought in a proceeding in equity or at law). In addition, we express no opinion as to: the right to collect any payment to the extent that such payment constitutes a penalty, premium, forfeiture or late payment charge; the enforceability of the governing law, consent to jurisdiction and forum selection provisions contained in any of the Transaction Documents; waivers of right to trial by jury or defense; or any purported right of indemnification or exculpation with respect to illegal acts, intentional torts, violation of securities laws, negligence or willful misconduct.
The opinions expressed herein are limited exclusively to the applicable provisions of the Delaware General Corporate Law and the law of the State of New York as currently in effect, and we are expressing no opinion as to the effect of the laws of any other jurisdiction.
This opinion letter has been prepared in accordance with the customary practice of lawyers who regularly give, and lawyers who regularly advise opinion recipients concerning, opinions of the type contained herein.
This opinion letter deals only with the specified legal issues expressly addressed herein, and you should not infer any opinion that is not explicitly addressed herein from any matter stated in this letter.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and the reference to this firm under the caption “Legal Matters” in the prospectus contained in the Registration Statement. In giving such consent, we do not hereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act and the rules and regulations thereunder. This opinion is rendered to you as of the date hereof and we assume no obligation to advise you or any other person hereafter with regard to any change after the date hereof in the circumstances or the law that may bear on the matters set forth herein even though the change may affect the legal analysis or legal conclusion or other matters in this letter.
| Very truly yours, | |
| /s/ Harter Secrest & Emery LLP |
Exhibit 10.6
FORM OF
ELAUWIT CONNECTION, INC.
2025 STOCK INCENTIVE PLAN
Section 1. Purpose
The purpose of the Elauwit Connection, Inc. 2025 Stock Incentive Plan (the “Plan”) is to promote stockholder value and the future success of Elauwit Connection, Inc. by providing appropriate retention and performance incentives to the employees and non-employee directors of the Company and its Affiliates (each as defined below), and any other individuals who perform services for the Company or its Affiliates.
Section 2. Definitions
2.1 “Affiliate” means any entity in which the Company has a direct or indirect equity interest of 50 percent or more, any entity included in the audited consolidated financial statements of the Company and any other entity in which the Company has a substantial ownership interest and which has been designated as an Affiliate for purposes of the Plan by the Committee in its sole discretion.
2.2 “Award” means any form of incentive or performance award granted under the Plan to a Participant by the Committee pursuant to any terms and conditions that the Committee may establish and set forth in the applicable Award Agreement. Awards granted under the Plan may consist of: (a) Options granted pursuant to Section 7; (c) Restricted Stock granted pursuant to Section 8; (d) Restricted Stock Units granted pursuant to Section 8; and (e) Other Stock-Based Awards granted pursuant to Section 9.
2.3 “Award Agreement” means the written or electronic document(s) evidencing the grant of an Award to a Participant.
2.4 “Board” means the Board of Directors of the Company.
2.5 “Change in Control” means the happening of any of the following:
(a) any Exchange Act Person becomes the owner, directly or indirectly, of securities of the Company representing more than 50 percent of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (A) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person from the Company in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities or (B) solely because the level of ownership held by any Exchange Act Person (the “Subject Person”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities owned by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur;
(b) there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not own, directly or indirectly, either (A) outstanding voting securities representing more than 50 percent of the combined outstanding voting power of the surviving entity in such merger, consolidation or similar transaction or (B) more than 50 percent of the combined outstanding voting power of the parent of the surviving entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions relative to each other as their ownership of the outstanding voting securities of the Company immediately prior to such transaction;
(c) there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Affiliates, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Affiliates to an entity, more than 50 percent of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions relative to each other as their ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition;
(d) individuals who, immediately following the Effective Date, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board within any 24-month period; provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office (other than as a result of any settlement of a proxy or consent solicitation contest or any action taken to avoid such a contest), such new member shall, for purposes of the Plan, be considered as a member of the Incumbent Board; or
(e) the complete dissolution or liquidation of the Company;
provided, however, a “Change in Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the capital stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions.
In addition, solely with respect to any Award that constitutes “deferred compensation” subject to Section 409A and that is payable on account of a Change in Control (including any installments that are accelerated on account of a Change in Control), a Change in Control shall occur only if such event also constitutes a “change in the ownership,” “change in the effective control,” or a “change in the ownership of a substantial portion of the assets” of the Company as those terms are defined by Section 1.409A-3(i)(5) of the Treasury Regulations, but only to the extent necessary to establish a time or form of payment that complies with Section 409A, without altering the definition of Change in Control for purposes of determining whether a Participant’s rights to such Award become vested or otherwise unconditional upon the Change in Control.
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2.6 “Code” means the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated and other official guidance issued thereunder.
2.7 “Committee” means the Compensation Committee of the Board, or any successor committee that the Board may designate to administer the Plan, provided such Committee consists of two or more individuals, each of whom must be (a) a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act and (b) a director meeting the independence requirements for compensation committee members under the rules and regulations of the Exchange on which the shares of Common Stock are traded. References to “Committee” shall include persons to whom the Committee has delegated authority pursuant to Section 3.5.
2.8 “Common Stock” means the common stock, par value $0.0001 per share, of the Company, and stock of any other class or company into which such shares may thereafter be changed.
2.9 “Company” means Elauwit Connection, Inc., a Delaware corporation, or any successor thereto.
2.10 “Disability” with respect to a Participant, has the meaning assigned to such term under the long-term disability plan maintained by the Company or an Affiliate in which such Participant is covered at the time the determination is made, and if there is no such plan, means the permanent inability as a result of accident or sickness to perform any and every duty pertaining to such Participant’s occupation or employment for which the Participant is suited by reason of the Participant’s previous training, education and experience; provided that, for Incentive Stock Options, Disability means a “permanent and total disability” as defined by Section 22(e) of the Code; and provided further, that to the extent an Award subject to Section 409A shall become payable upon a Participant’s Disability, a Disability shall not be deemed to have occurred for such purposes unless the circumstances would also result in a “disability” within the meaning of Section 409A, unless otherwise provided in the Award Agreement.
2.11 “Effective Date” means the date on which the Plan is approved by the stockholders of the Company.
2.12 “Exchange” means The Nasdaq Stock Market LLC, or such other national securities market on which the shares of Common Stock are listed for trading.
2.13 “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the regulations and interpretations thereunder.
2.14 “Exchange Act Person” means any natural person, entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include (a) the Company or any Affiliate, (b) any employee benefit plan of the Company or any Affiliate or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Affiliate, (c) an underwriter temporarily holding securities pursuant to an offering of such securities, (d) an entity owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company; or (e) any natural person, entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date, is the owner, directly or indirectly, of securities of the Company representing more than 50 percent of the combined voting power of the Company’s then outstanding securities.
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2.15 “Fair Market Value” of a share of Common Stock as of any specific date means the per share closing price reported by the Exchange on such date, or, if there is no such reported closing price on such date, then the per share closing price reported by the Exchange on the last previous day on which such closing price was reported, or such other value as determined by the Committee in accordance with applicable law. The Fair Market Value of any property other than shares of Common Stock means the market value of such property as determined by the Committee using such methods or procedures as it may establish from time to time.
2.16 “Incentive Stock Option” means an Option that qualifies as an incentive stock option under Section 422 of the Code.
2.17 “Nonqualified Stock Option” means an Option that does not qualify as an Incentive Stock Option or which is designated a Nonqualified Stock Option.
2.18 “Option” means a right to purchase shares of Common Stock at a specified exercise price that is granted subject to certain terms and conditions pursuant to Section 7, and includes both Incentive Stock Options and Nonqualified Stock Options.
2.19 “Other Stock-Based Award” means an Award denominated in shares of Common Stock that is granted subject to certain terms and conditions pursuant to Section 9.
2.20 “Participant” means an individual who has been granted an Award under the Plan, or in the event of the death of such individual, the individual’s beneficiary.
2.21 “Plan” has the meaning given such term in Section 1.
2.22 “Restricted Period” means the period during which Restricted Stock may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of.
2.23 “Restricted Stock” means an Award of shares of Common Stock that is granted subject to certain terms and conditions pursuant to Section 8.
2.24 “Restricted Stock Unit” means an Award of a right to receive shares of Common Stock (or an equivalent value in cash or other property, or any combination thereof) that is granted subject to certain terms and conditions pursuant to Section 8.
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2.25 “Section 409A” means Section 409A of the Code.
2.26 “Treasury Regulations” means the tax regulations promulgated under the Code.
Section 3. Administration
3.1 Administration. Except as otherwise specified herein, the Plan shall be administered solely by the Committee.
3.2 Authority.
(a) Subject only to Section 3.3, the Committee has all the powers vested in it by the terms of the Plan set forth herein, such powers to include exclusive authority to select the employees and other individuals to be granted Awards under the Plan, to determine the type, size and terms of the Award to be made to each individual selected, to modify the terms of any Award that has been granted, to determine the time when Awards will be granted, to establish performance objectives, and to prescribe the form of Award Agreement.
(b) The Committee has the power and authority to make any adjustments necessary or desirable as a result of the granting of Awards to eligible individuals located outside the United States, and to adopt, to amend or to rescind rules, procedures or subplans relating to the operation and administration of the Plan in order to accommodate local laws, policies, customs, procedures or practices, and accounting, tax or other regulatory standards, or to facilitate the administration of the Plan, including, but not limited to, the authority to adopt, to amend or to rescind rules, procedures and subplans that limit or vary: the methods available to exercise Awards, the methods available to settle Awards, the methods available for the payment of income taxes, social insurance contributions and employment taxes, the procedures for withholding on Awards and the use of stock certificates or other indicia of ownership. The Committee may also adopt rules, procedures or subplans applicable to particular Affiliates or locations.
(c) The Committee is authorized to interpret the Plan and the Awards granted under the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, and to make any other determinations that it deems necessary or desirable for the administration of the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any Award in the manner and to the extent the Committee deems necessary or desirable to carry it into effect. Any decision of the Committee in the interpretation and administration of the Plan, as described herein, shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned.
3.3 Non-Employee Director Awards. In respect of Awards granted to non-employee directors of the Company or its Affiliates, the Board has all the powers otherwise vested in the Committee by the terms of the Plan set forth herein, including the exclusive authority to select the non-employee directors to be granted Awards under the Plan, to determine the type, size and terms of the Award to be made to each non-employee director selected, to modify the terms of any Award that has been granted to a non-employee director, to determine the time when Awards will be granted to non-employee directors and to prescribe the form of the Award Agreement embodying Awards made under the Plan to non-employee directors.
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3.4 Repricing Prohibited Absent Stockholder Approval. Notwithstanding any provision of the Plan, except for adjustments pursuant to Section 10, neither the Board nor the Committee may, without the prior approval of the stockholders of the Company, (a) reduce, directly or indirectly, the per-share exercise price of an outstanding Option after it is granted; (b) cancel an Option when the exercise price of the Option exceeds the Fair Market Value of a share of Common Stock in exchange for cash or another Award (other than in connection with a Change in Control); or (c) take any other action that is treated as a repricing under United States generally accepted accounting principles or by the rules or regulations of the Exchange.
3.5 Delegation. The Committee may authorize any one or more of its members or any officer of the Company to execute and deliver documents or to take any other action on behalf of the Committee with respect to Awards made or to be made to Participants, subject to the requirements of applicable law, including without limitation, Section 16 of the Exchange Act.
3.6 Indemnification. No director, no member of the Committee and no officer of the Company shall be liable for anything done or omitted to be done by him or her, by any other director, by any other member of the Committee or by any officer of the Company in connection with the performance of duties under the Plan, except for his or her own willful misconduct or gross negligence, or as expressly provided by applicable law, and the Company shall indemnify each director, member of the Committee and officer of the Company against any such liability.
Section 4. Participation
4.1 Eligible Individuals. Consistent with the purposes of the Plan, subject to Section 3.3, the Committee shall have exclusive power to select the employees and non-employee directors of the Company and its Affiliates and other individuals performing services for the Company and its Affiliates who may participate in the Plan and be granted Awards under the Plan.
4.2 Conditions to Receipt of Awards. Unless otherwise waived by the Committee, no prospective Participant shall have any rights with respect to an Award unless and until such Participant has executed an Award Agreement evidencing the Award, delivered a fully executed copy thereof to the Company, and otherwise complied with the applicable terms and conditions of such Award.
Section 5. Shares Subject to Plan
5.1 Maximum Number of Shares that May Be Issued.
(a) Available Shares.
(i) Subject to any automatic increase in Section 5.1(a)(ii) and adjustment as provided in Section 10, the maximum number of shares of Common Stock reserved and available for grant and issuance pursuant to the Plan as of the Effective Date shall be [662,000] (the “Initial Share Maximum”).
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(ii) The number of shares of Common Stock available for issuance under the Plan will automatically increase on January 1st of each year for a period of 10 years, commencing on January 1, 2026 and ending on (and including) January 1, 2035, by the lesser of (A) five percent of the total number of shares of Common Stock outstanding on December 31st of the immediately preceding calendar year, and (B) such number of shares of Common Stock determined by the Board. None of the shares of Common Stock available for issuance pursuant to this Section 5.1(a)(ii) will be issued in respect of Incentive Stock Options.
(b) Share Counting. For purposes of counting shares against the maximum number of shares of Common Stock that may be issued under the Plan as described in Section 5.1(a), on the date of grant, Awards denominated solely in shares of Common Stock (such as Options and Restricted Stock) and other Awards that may be exercised for, settled in or convertible into shares of Common Stock will be counted against the Plan reserve on the date of grant of the Award based on the maximum number of shares that may be issued pursuant to the Award, as determined by the Committee.
(c) Shares Added Back. Shares of Common Stock related to Awards issued under the Plan that are forfeited, canceled, expired or otherwise terminated without the issuance of shares of Common Stock will be added back and again available for issuance under the Plan. In addition, shares of Common Stock that are retained or reacquired by the Company to satisfy the exercise price or purchase price of an Award or to satisfy the tax withholding obligation in connection with an Award, as well as any shares of Common Stock covered by an Award that is settled in cash, will be added back and again be available for issuance under the Plan.
(d) Source of Shares. Shares of Common Stock issued pursuant to the Plan may be authorized but unissued shares, treasury shares, reacquired shares or any combination thereof.
(e) Assumed or Substituted Awards. Awards granted through the assumption of, or substitution for, outstanding awards previously granted by a company acquired by the Company or any Affiliate, or with which the Company or any Affiliate combines, will not reduce the maximum number of shares of Common Stock that may be issued under the Plan as described in Section 5.1(a) or the maximum number shares of Common Stock authorized for grant to an individual in any calendar year described in Section 5.2.
(f) Fractional Shares. No fractional shares of Common Stock may be issued under the Plan, and unless the Committee determines otherwise, an amount in cash equal to the Fair Market Value of any fractional share of Common Stock that would otherwise be issuable shall be paid in lieu of such fractional share of Common Stock. The Committee may, in its sole discretion, cancel, terminate, otherwise eliminate or transfer or pay other securities or other property in lieu of issuing any fractional share of Common Stock.
5.2 Maximum Individual Limits. The sum of (a) the grant date fair value of the Awards granted under the Plan in any calendar year to any non-employee director in respect of services as a non-employee director, and (b) the amount that may be paid in that calendar year to any non-employee director in property other than shares of Common Stock (including cash) in respect of services as a non-employee director, shall not exceed $200,000.
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Section 6. Awards Under Plan
6.1 Types of Awards. Awards under the Plan may include one or more of the following types: Options, Restricted Stock, Restricted Stock Units and Other Stock-Based Awards. As provided by Section 3.2(b), the Committee may also grant any other Award providing similar benefits, subject to such terms, conditions and restrictions as it may determine necessary or appropriate to satisfy non-U.S. law or regulatory requirements or avoid adverse consequences under such requirements.
6.2 Dividend Equivalents. Other than with respect to Options, the Committee may choose, at the time of the grant of an Award or any time thereafter up to the time of the Award’s payment, to include or to exclude as part of such Award an entitlement to receive cash dividends or dividend equivalents, subject to such terms, conditions, restrictions or limitations, if any, as the Committee may establish. Dividends and dividend equivalents shall be paid in such form and manner (i.e., lump sum or installments), and at such times as the Committee shall determine.
6.3 Vesting Conditions. The vesting of an Award may be conditioned upon a Participant’s continued employment with or service to the Company and its Affiliates and/or the achievement of specified performance objectives.
6.4 Transferability. An Award and a Participant’s rights and interest under an Award may not be sold, assigned or transferred, hypothecated or encumbered in whole or in part either directly or by operation of law or otherwise (except in the event of the Participant’s death) including, but not by way of limitation, execution, levy, garnishment, attachment, pledge, bankruptcy or in any other manner; provided, however, that the Committee may allow a Participant to assign or transfer without consideration an Award (other than an Incentive Stock Option) to one or more members of his or her immediate family, to a partnership of which the only partners are the Participant or members of the Participant’s immediate family, or to a trust established by the Participant for the exclusive benefit of the Participant or one or more members of his or her immediate family.
6.5 Award Agreement. Unless otherwise determined by the Committee, each Award shall be evidenced by an Award Agreement in such form as the Committee shall prescribe from time to time in accordance with the Plan, including a written agreement, contract, certificate or other instrument or document containing the terms and conditions of an individual Award granted under the Plan which may, in the discretion of the Company, be transmitted electronically. Each Award and Award Agreement shall be subject to the terms and conditions of the Plan.
6.6 Method of Payment. The Committee may, in its discretion, settle any Award through the payment of cash, the delivery of shares of Common Stock or other property, or a combination thereof, as the Committee shall determine or as specified by the Plan or an Award Agreement. Any Award settlement, including payment deferrals, may be subject to conditions, restrictions and contingencies as the Committee shall determine.
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6.7 Death, Disability or Termination. The Committee may include in an Award Agreement provisions related to the death, Disability or termination of employment or service of a Participant, including without limitation the acceleration of the exercisability, vesting or settlement of, or the lapse of restrictions or deemed satisfaction of performance objectives with respect to, an Award.
6.8 Change in Control. The Committee may include in an Award Agreement provisions related to a Change in Control, including without limitation the acceleration of the exercisability, vesting or settlement of, or the lapse of restrictions or deemed satisfaction of performance objectives with respect to, an Award.
6.9 Forfeiture Provisions. The Committee may, in its discretion, provide in an Award Agreement that an Award shall be canceled if the Participant, without the consent of the Company, while employed by or providing services to the Company or any Affiliate or after termination of such employment or service, violates a non-competition (to the extent permissible under applicable law), non-solicitation or non-disclosure covenant or agreement, or otherwise engages in activity that is in conflict with or adverse to the interest of the Company or any Affiliate, including fraud or conduct contributing to any financial restatements or irregularities, as determined by the Committee in its sole discretion. Notwithstanding the foregoing, none of the non-disclosure restrictions in this Section 6.9 or in any Award Agreement shall, or shall be interpreted to, impair the Participant from exercising any legally protected whistleblower rights (including under Rule 21F under the Exchange Act).
6.10 Recoupment Provisions. Notwithstanding anything in the Plan or in any Award Agreement to the contrary, all Awards granted under the Plan shall be subject to recoupment in accordance with any clawback policy adopted by the Company and to the extent required by applicable law (including, without limitation, Section 10D of the Exchange Act and the listing rules of the national securities exchange on which the shares of Common Stock are listed). No such recoupment of compensation will be an event giving rise to a right to resign for “good reason” or “constructive termination” (or similar term) under any agreement between any Participant and the Company.
Section 7. Options
7.1 Grant of Options. The Committee may grant Awards of Options. The Committee may grant Incentive Stock Options to any employee provided the terms of such grants comply with Section 7.5 and the requirements of Section 422 of the Code, and any ambiguities in construction shall be interpreted in order to effectuate that intent. Each Option granted under the Plan shall comply with the following terms and conditions, and with such other terms and conditions, including, but not limited to, restrictions upon the Option or the shares of Common Stock issuable upon exercise thereof or the attainment of performance objectives, as the Committee may determine.
7.2 Exercise Price; Expiration Date. Except for Options granted through the assumption of, or substitution for, outstanding awards previously granted by a company acquired by the Company or any Affiliate, or with which the Company or any Affiliate combines, the exercise price shall be equal to or greater than the Fair Market Value of the shares of Common Stock subject to such Option on the date that the Option is granted. The Committee in its discretion shall establish the expiration date of an Option; provided that in no event shall the expiration date be later than 10 years from the date that the Option is granted.
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7.3 Number of Shares of Common Stock. The Committee shall determine the number of shares of Common Stock to be subject to each Option.
7.4 Exercisability. The Option shall not be exercisable unless the Option has vested, and payment in full of the exercise price for the shares of Common Stock being acquired thereunder at the time of exercise is made in such form as the Committee may determine in its discretion, including, but not limited to:
(a) cash;
(b) if permitted by the Committee, by instructing the Company to withhold a number of shares of Common Stock that would otherwise be issued having a Fair Market Value equal to the applicable portion of the exercise price being so paid;
(c) if permitted by the Committee, by tendering (actually or by attestation) to the Company a number of previously acquired shares of Common Stock that have been held by the Participant for at least six months (or such shorter period, if any, determined by the Committee in consideration of applicable accounting standards) and that have a Fair Market Value equal to the applicable portion of the exercise price being so paid;
(d) if permitted by the Committee, by authorizing a third party broker to sell, on behalf of the Participant, the appropriate number of shares of Common Stock otherwise issuable to the Participant upon the exercise of the Option and to remit to the Company a sufficient portion of the sale proceeds to pay the entire exercise price and any tax withholding resulting from such exercise; or
(e) any combination of the foregoing.
7.5 Limitations for Incentive Stock Options. The terms and conditions of any Incentive Stock Options granted hereunder shall be subject to and shall be designed to comply with the provisions of Section 422 of the Code. Incentive Stock Options may be granted only to employees of the Company or an Affiliate, provided such Affiliate is also a “parent corporation” of the Company within the meaning of Section 424(e) of the Code or a “subsidiary corporation” of the Company within the meaning of Section 424(f) of the Code, on the date of grant. To the extent that the aggregate Fair Market Value (determined as of the date of grant) of the shares of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any individual during any calendar year (under all plans of the Company and its Affiliates) exceeds $100,000 (or such other limit that applies at the time the Incentive Stock Options are granted), such Incentive Stock Options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as Nonqualified Stock Options. Incentive Stock Options may not be transferable by a Participant other than by will or the laws of descent and distribution and may only be exercisable during the Participant’s lifetime by the Participant. If, at the time an Incentive Stock Option is granted, the employee recipient owns (after application of the rules contained in Section 424(d) of the Code) shares of Common Stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or its subsidiaries, then: (a) the exercise price for such Incentive Stock Option shall be at least 110 percent of the Fair Market Value of the shares of Common Stock subject to such Incentive Stock Option on the date of grant; and (b) such Incentive Stock Option shall not be exercisable after the date five years from the date such Incentive Stock Option is granted. The maximum number of shares of Common Stock that may be issued under the Plan pursuant to Incentive Stock Options may not exceed, in the aggregate, the Initial Share Maximum specified in Section 5.1(a)(i).
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Section 8. Restricted Stock and Restricted Stock Units
8.1 Grant of Restricted Stock and Restricted Stock Units. The Committee may grant Awards of Restricted Stock or Restricted Stock Units. Each Award of Restricted Stock or Restricted Stock Units under the Plan shall comply with the following terms and conditions, and with such other terms and conditions as the Committee, in its discretion, shall establish.
8.2 Number of Shares of Common Stock. The Committee shall determine the number of shares of Common Stock to be issued to a Participant pursuant to the Award, and the extent, if any, to which they shall be issued in exchange for cash, other consideration or a combination thereof.
8.3 Restricted Stock Issuance. Shares of Common Stock issued to a Participant in accordance with the Award of Restricted Stock may be issued in certificate form or through the entry of an uncertificated book position on the records of the Company’s transfer agent and registrar. The Company may impose appropriate restrictions on the transfer of such shares of Common Stock, which shall be evidenced in the manner permitted by law as determined by the Committee in its discretion, including but not limited to (a) causing a legend or legends to be placed on any certificates evidencing such Restricted Stock, or (b) causing “stop transfer” instructions to be issued, as it deems necessary or appropriate.
8.4 Vesting Conditions. The vesting of an Award of Restricted Stock or Restricted Stock Units may be conditioned upon the attainment of specific performance objectives as the Committee may determine.
8.5 Stockholder Rights. Unless otherwise determined by the Committee in its discretion, prior to the expiration of the Restricted Period, a Participant to whom an Award of Restricted Stock has been made shall have ownership of such shares of Common Stock, including the right to vote the same and to receive dividends or other distributions made or paid with respect to such shares of Common Stock, subject, however, to the restrictions and limitations imposed thereon pursuant to the Plan or Award Agreement.
Section 9. Other Stock-Based Awards
9.1 Grant of Other Stock-Based Awards. The Committee may grant Other Stock-Based Awards. Each Other Stock-Based Award granted under the Plan shall comply with the following terms and conditions, and with such other terms and conditions as the Committee, in its discretion, shall establish.
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9.2 Vesting Conditions. The vesting of Other Stock-Based Awards may be conditioned upon the attainment of specific performance objectives as the Committee may determine.
9.3 Settlement. The Committee shall be entitled in its discretion to settle the obligation under an Other Stock-Based Award by the payment of cash, shares of Common Stock or other property, or any combination thereof.
Section 10. Dilution and Other Adjustments
10.1 Adjustment for Corporate Transaction or Change in Corporate Capitalization. In the event of any change in the outstanding shares of Common Stock of the Company by reason of any corporate transaction or change in corporate capitalization such as a stock split, reverse stock split, stock dividend, split-up, split-off, spin-off, recapitalization, merger, consolidation, rights offering, reorganization, combination, consolidation, subdivision or exchange of shares, a sale by the Company of all or part of its assets, any distribution to stockholders other than a normal cash dividend, partial or complete liquidation of the Company or other extraordinary or unusual event, the Committee or Board, as applicable, shall make such adjustment in (a) the class and maximum number of shares of Common Stock that may be delivered under the Plan as described in Section 5.1 and the limits under Section 7.5, (b) the class, number and exercise price of outstanding Options, and (c) the class and number of shares subject to any other Awards granted under the Plan (provided that the number of shares of any class subject to Awards shall always be a whole number) and the terms of such Awards (including, without limitation, any applicable performance goals), as may be determined to be appropriate by the Committee or Board, as applicable, and such adjustments shall be final, conclusive and binding for all purposes of the Plan.
10.2 Adjustment for Merger or Consolidation. In the event of any merger, consolidation or similar transaction as a result of which the holders of shares of Common Stock receive consideration consisting exclusively of securities of the surviving entity (or the parent of the surviving entity) in such transaction, the Committee or Board, as applicable, shall, to the extent deemed appropriate by the Committee or Board, as applicable, adjust each Award outstanding on the date of such merger, consolidation or similar transaction so that it pertains and applies to the securities which a holder of the number of shares of Common Stock subject to such Award would have received in such merger, consolidation or similar transaction.
10.3 Assumption or Substitution of Awards. In the event of a dissolution or liquidation of the Company; a sale of all or substantially all of the Company’s assets (on a consolidated basis); or a merger, consolidation or similar transaction involving the Company in which the holders of shares of Common Stock receive securities and/or other property, including cash, other than shares of the surviving entity in such transaction (or the parent of such surviving entity), the Committee or Board, as applicable, shall, to the extent deemed appropriate by the Committee or Board, as applicable, have the power to provide for the exchange of each Award (whether or not then exercisable or vested) for an Award with respect to: (a) some or all of the property which a holder of the number of shares of Common Stock subject to such Award would have received in such transaction; or (b) securities of the acquirer or surviving entity (or parent of such acquirer or surviving entity) and, incident thereto, make an equitable adjustment as determined by the Committee or Board, as applicable, in the exercise price of the Award, or the number of shares or amount of property subject to the Award or provide for a payment (in cash or other property) to the Participant to whom such Award was granted in partial consideration for the exchange of the Award. In addition, the Committee shall, to the extent deemed appropriate by the Committee or Board, as applicable, have the power to cancel, effective immediately prior to the occurrence of such event, each Award (whether or not then exercisable or vested), and, in full consideration of such cancellation, pay to the Participant to whom such Award was granted an amount in cash, for each share of Common Stock subject to such Award, equal to the value, as determined by the Committee or Board, as applicable, of such Award, provided that with respect to any outstanding Option such value shall be equal to the excess of (i) the value, as determined by the Committee or Board, as applicable, of the property (including cash) received by the holder of shares of Common Stock as a result of such event, over (ii) the exercise price of such Option, provided further that the value of any outstanding Option shall be zero where the exercise price of such Option is greater than the value, as determined by the Committee or Board, as applicable, of the property (including cash) received by the holder of shares of Common Stock as a result of such event; and that no change to the original timing of payment will be made to the extent it would violate Section 409A.
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Section 11. Amendment and Termination
11.1 Amendment. The Plan may be amended in whole or in part at any time and from time to time by the Board, and the terms of any outstanding Award under the Plan may be amended from time to time by the Committee or Board, as applicable, in its discretion in any manner that it deems necessary or appropriate; provided however, that no amendment may be made without stockholder approval if such amendment would:
(a) increase the number of shares available for grant specified in Section 5.1(a) (other than pursuant to Section 5.1(a)(ii) or Section 10);
(b) change the class of persons eligible to receive Incentive Stock Options;
(c) decrease the minimum Option exercise price set forth in Section 7.2 (other than changes made pursuant to Section 10);
(d) change the limits set forth in Section 7.5 (other than pursuant to Section 10);
(e) amend or repeal the prohibition against repricing or exchange set forth in Section 3.4; or
(f) require stockholder approval under applicable law, including Exchange listing conditions.
No such amendment shall adversely affect in a material manner any right of a Participant under an Award without his or her written consent. Any stockholder approval requirement under the Plan will be met if such approval is obtained in accordance with applicable law. Notwithstanding the foregoing, any amendment to the Plan or any outstanding Award under the Plan shall be made in a manner as to ensure that an Award intended to be exempt from Section 409A will continue to be exempt from Section 409A and that an Award intended to comply with Section 409A will continue to comply with Section 409A.
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11.2 Termination. The Plan may be suspended in whole or in part at any time and from time to time by the Board. The Plan shall terminate upon the adoption of a resolution of the Board terminating the Plan. No Award may be granted under the Plan after the date that is 10 years from the date the Plan was last approved and adopted by the stockholders of the Company. No termination of the Plan shall materially alter or impair any of the rights or obligations of any person, without his or her consent, under any Award theretofore granted under the Plan, except that subsequent to termination of the Plan, the Committee may make amendments permitted under Section 11.
Section 12. Miscellaneous
12.1 Loans. No loans from the Company or any Affiliate to a Participant shall be permitted in connection with the Plan.
12.2 Reservation of Rights of Company. No employee or other person shall have any claim or right to be granted an Award under the Plan. Neither the Plan nor any action taken hereunder shall be construed as giving any employee or other person any right to continue to be employed by or perform services for the Company or any Affiliate, and the right to terminate the employment of or performance of services by any Participant at any time and for any reason is specifically reserved.
12.3 Non-Uniform Treatment. Determinations made by the Committee under the Plan need not be uniform and may be made selectively among eligible individuals under the Plan, whether or not such eligible individuals are similarly situated.
12.4 General Conditions of Awards. No Participant or other person shall have any right with respect to the Plan, the shares of Common Stock reserved for issuance under the Plan or in any Award, contingent or otherwise, until written evidence of the Award shall have been delivered to the recipient and all the terms, conditions and provisions of the Plan and the Award applicable to such recipient (and each person claiming under or through him or her) have been met.
12.5 Rights as a Stockholder. Unless otherwise determined by the Committee in its discretion, a Participant holding Options, Restricted Stock Units, Other Stock-Based Awards or other Awards shall have no rights as a stockholder with respect to any shares of Common Stock (or as a holder with respect to other securities), if any, issuable pursuant to any such Award until the date of the issuance of a stock certificate to him or her or the entry on his or her behalf of an uncertificated book position on the records of the Company’s transfer agent and registrar for such shares of Common Stock or other instrument of ownership, if any. Except as provided in Section 10, no adjustment shall be made for dividends, distributions or other rights (whether ordinary or extraordinary, and whether in cash, securities, other property or other forms of consideration, or any combination thereof) for which the record date is prior to the date such book entry is made or a stock certificate or other instrument of ownership, if any, is issued.
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12.6 Compliance with Applicable Laws. No shares of Common Stock or other property shall be issued or paid hereunder with respect to any Award unless counsel for the Company shall be satisfied that such issuance will be in compliance with applicable federal, state, local and foreign legal, securities exchange and other applicable requirements. The Company shall be under no obligation to effect the registration pursuant to the Securities Act of 1933, as amended, of any shares of Common Stock to be issued hereunder or to effect similar compliance under any state or local laws.
12.7 Withholding of Taxes. The Company and its Affiliates shall have the right to deduct from any payment made under the Plan, the federal, state, local or foreign income or other taxes required by law to be withheld with respect to such payment. In accordance with rules and procedures established by the Committee, the required withholding obligations may be settled with shares of Common Stock, including shares of Common Stock that are part of the Award that gives rise to the withholding requirement (up to the Participant’s minimum required tax withholding rate or such other rate that will not trigger a negative accounting impact). It shall be a condition to the obligation of the Company to issue shares of Common Stock or other property, or any combination thereof, upon exercise, settlement or payment of any Award under the Plan, that the Participant pay to the Company, upon its demand, such amount as may be requested by the Company for the purpose of satisfying any liability to withhold federal, state, local or foreign income or other taxes. If the amount requested is not paid, the Company may refuse to issue or pay shares of Common Stock or other property, or any combination thereof. Notwithstanding anything in the Plan to the contrary, the Committee may, in its discretion, permit an eligible Participant to elect to pay a portion or all of the amount requested by the Company for such taxes with respect to such Award, at such time and in such manner as the Committee shall deem to be appropriate (including, but not limited to, by authorizing the Company to withhold, or agreeing to surrender to the Company on or about the date such tax liability is determinable, shares of Common Stock or other property, or any combination thereof that would otherwise be distributed, or have been distributed, as the case may be, pursuant to such Award to such person, having a fair market value equal to the amount of such taxes).
12.8 Unfunded Nature of Plan. The Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Award under the Plan, and the rights to the payment of Awards shall be no greater than the rights of the Company’s general creditors.
12.9 Consent. By accepting any Award or other benefit under the Plan, each Participant and each person claiming under or through him or her shall be conclusively deemed to have indicated his or her acceptance and ratification of, and consent to, any action taken under the Plan by the Company, the Board or the Committee.
12.10 No Warranty of Tax Effect. Although the Company may structure an Award to qualify for favorable federal, state, local or foreign tax treatment, or to avoid adverse tax treatment, no person connected with the Plan in any capacity, including, but not limited to, the Company and its directors, officers, agents and employees, makes any representation, commitment or guarantee that any intended tax treatment will be applicable with respect to any Award under the Plan, or that such tax treatment will apply to or be available to a Participant or his or her beneficiary. Furthermore, the existence of an Award shall not affect the right or power of the Company or its stockholders to take any corporate action, regardless of the potential effect of such action on the tax treatment of an Award under the Plan.
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12.11 Interpretation. Unless the context indicates otherwise, references to “Sections” in the Plan refer to Sections of the Plan. Headings of Sections herein are inserted only for convenience of reference and are not to be considered in the construction of the Plan. In the Plan, the use of the masculine pronoun shall include the feminine and the use of the singular shall include the plural, as appropriate.
12.12 Severability. If any provision of the Plan shall be held unlawful or otherwise invalid or unenforceable in whole or in part by a court of competent jurisdiction, such provision shall: (a) be deemed limited to the extent that such court of competent jurisdiction deems it lawful, valid or enforceable and as so limited shall remain in full force and effect, and (b) not affect any other provision of the Plan or part thereof, each of which shall remain in full force and effect.
12.13 Choice of Law. The validity, construction, interpretation, administration and effect of the Plan, and of its rules and regulations, and rights relating to the Plan and to Awards granted under the Plan, shall be governed by the substantive laws, but not the choice of law rules, of the State of Delaware.
12.14 Section 409A. Awards granted under the Plan are intended to qualify for an exception from or comply with Section 409A, and the Plan and Award Agreements shall be administered, construed and interpreted in accordance with such intent. To the extent that an Award or the payment, settlement or deferral thereof is subject to Section 409A, the Award shall be granted, paid, settled or deferred in a manner that shall comply with Section 409A and any Section 409A compliance policy of the Company and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by a Participant on account of non-compliance with Section 409A. To the extent any payment of an Award may be classified as a “short-term deferral” within the meaning of Section 409A, such payment shall be deemed a short-term deferral, even if it may also qualify for an exemption from Section 409A under another provision of Section 409A. Notwithstanding anything in the Plan or any Award Agreement to the contrary, if a Participant is a “specified employee” (within the meaning of Section 409A(2)(B)) as of the date of such Participant’s separation from service (as determined pursuant to Section 409A), then to the extent any Award payable to such Participant on account of such separation from service would be considered nonqualified deferred compensation under Section 409A, such payment or benefit shall be paid or provided in a lump sum upon the earlier of six months and one day after such separation from service, and the date of the Participant’s death. Unless the Committee determines otherwise, any provision of the Plan that would cause the grant of an Award or the payment, settlement or deferral thereof to fail exemption from or compliance with Section 409A may be amended to qualify for exemption from or comply with Section 409A, which may be made on a retroactive basis, in accordance with Section 409A.
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Exhibit 10.25
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement"), dated as of _________, 20___, is by and between Elauwit Connection, Inc., a Delaware corporation (the "Company") and the individual whose name appears below the word “Indemnitee” on the signature page hereto (the "Indemnitee").
WHEREAS, Indemnitee is a director and/or an officer of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against directors and officers of public companies;
WHEREAS, the board of directors of the Company (the "Board") has determined that enhancing the ability of the Company to retain and attract as directors and officers the most capable persons is in the best interests of the Company and that the Company therefore should seek to assure such persons that indemnification and insurance coverage is available; and
WHEREAS, in recognition of the need to provide Indemnitee with substantial protection against personal liability, in order to procure Indemnitee's continued service as a director and/or officer of the Company and to enhance Indemnitee's ability to serve the Company in an effective manner, and in order to provide such protection pursuant to express contract rights (intended to be enforceable irrespective of, among other things, any amendment to the Company's amended and restated certificate of incorporation or amended and restated bylaws (collectively, the "Constituent Documents"), any change in the composition of the Board or any change in control or business combination transaction relating to the Company), the Company wishes to provide in this Agreement for the indemnification of, and the advancement of Expenses (as defined in Section 1(f) below) to, Indemnitee as set forth in this Agreement and for the continued coverage of Indemnitee under the Company's directors' and officers' liability insurance policies.
NOW, THEREFORE, in consideration of the foregoing and the Indemnitee's agreement to continue to provide services to the Company, the parties agree as follows:
1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings:
(a) "Beneficial Owner" has the meaning given to the term "beneficial owner" in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
(b) "Change in Control" means the occurrence after the date of this Agreement of any of the following events:
(i) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 25% or more of the Company's then outstanding Voting Securities unless the change in relative Beneficial Ownership of the Company's securities by any Person results solely from a reduction in the aggregate number of outstanding shares of securities entitled to vote generally in the election of directors;
(ii) the consummation of a reorganization, merger or consolidation, unless immediately following such reorganization, merger or consolidation, all of the Beneficial Owners of the Voting Securities of the Company immediately prior to such transaction beneficially own, directly or indirectly, more than 50% of the combined voting power of the outstanding Voting Securities of the entity resulting from such transaction;
(iii) during any period of two consecutive years, not including any period prior to the execution of this Agreement, individuals who at the beginning of such period constituted the Board (including for this purpose any new directors whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved) cease for any reason to constitute at least a majority of the Board; or
(iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets.
(c) "Claim" means:
(i) any threatened, pending or completed action, suit, proceeding or alternative dispute resolution mechanism, whether civil, criminal, administrative, arbitrative, investigative or other, and whether made pursuant to federal, state or other law; or
(ii) any inquiry, hearing or investigation that the Indemnitee determines might lead to the institution of any such action, suit, proceeding or alternative dispute resolution mechanism.
(d) "Delaware Court" shall have the meaning ascribed to it in Section 9(e) below.
(e) "Disinterested Director" means a director of the Company who is not and was not a party to the Claim in respect of which indemnification is sought by Indemnitee.
(f) "Expenses" means any and all expenses, including attorneys' and experts' fees, court costs, transcript costs, travel expenses, duplicating, printing and binding costs, telephone charges, and all other costs and expenses incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness or participate in, any Claim. Expenses also shall include (i) Expenses incurred in connection with any appeal resulting from any Claim, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent, and (ii) for purposes of Section 5 only, Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee's rights under this Agreement, by litigation or otherwise. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.
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(g) "Expense Advance" means any payment of Expenses advanced to Indemnitee by the Company pursuant to Section 4 or Section 5 hereof.
(h) "Indemnifiable Event" means any event or occurrence, whether occurring before, on or after the date of this Agreement, related to the fact that Indemnitee is or was a director, officer, employee or agent of the Company or any subsidiary of the Company, or is or was serving at the request of the Company as a director, officer, employee, member, manager, trustee or agent of any other corporation, limited liability company, partnership, joint venture, trust or other entity or enterprise (collectively with the Company, "Enterprise") or by reason of an action or inaction by Indemnitee in any such capacity (whether or not serving in such capacity at the time any Loss is incurred for which indemnification can be provided under this Agreement).
(i) "Independent Counsel" means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently performs, nor in the past three years has performed, services for either: (i) the Company or Indemnitee (other than in connection with matters concerning Indemnitee under this Agreement or of other indemnitees under similar agreements) or (ii) any other party to the Claim giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee's rights under this Agreement.
(j) "Losses" means any and all Expenses, damages, losses, liabilities, judgments, fines, penalties (whether civil, criminal or other), ERISA excise taxes, amounts paid or payable in settlement, including any interest, assessments, any federal, state, local or foreign taxes imposed as a result of the actual or deemed receipt of any payments under this Agreement and all other charges paid or payable in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness or participate in, any Claim.
(k) "Person" means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity and includes the meaning set forth in Sections 13(d) and 14(d) of the Exchange Act.
(l) "Standard of Conduct Determination" shall have the meaning ascribed to it in Section 9(b) below.
(m) "Voting Securities" means any securities of the Company that vote generally in the election of directors.
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2. Services to the Company. Indemnitee agrees to continue to serve as a director or officer of the Company for so long as Indemnitee is duly elected or appointed or until Indemnitee tenders the Indemnitee’s resignation or is no longer serving in such capacity. This Agreement shall not be deemed an employment agreement between the Company (or any of its subsidiaries or Enterprise) and Indemnitee. Indemnitee specifically acknowledges that the Indemnitee’s service to the Company or any of its subsidiaries or Enterprise is at will and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment agreement between Indemnitee and the Company (or any of its subsidiaries or Enterprise), other applicable formal severance policies duly adopted by the Board or, with respect to service as a director or officer of the Company, by the Company's Constituent Documents or Delaware law.
3. Indemnification. Subject to Section 9 and Section 10 of this Agreement, the Company shall indemnify Indemnitee, to the fullest extent permitted by the laws of the State of Delaware in effect on the date hereof, or as such laws may from time to time hereafter be amended to increase the scope of such permitted indemnification, against any and all Losses if Indemnitee was or is or becomes a party to or participant in, or is threatened to be made a party to or participant in, any Claim by reason of or arising in part out of an Indemnifiable Event, including, without limitation, Claims brought by or in the right of the Company, Claims brought by third parties, and Claims in which the Indemnitee is solely a witness.
4. Advancement of Expenses. Indemnitee shall have the right to advancement by the Company, prior to the final disposition of any Claim by final adjudication to which there are no further rights of appeal, of any and all Expenses actually and reasonably paid or incurred by Indemnitee in connection with any Claim arising out of an Indemnifiable Event. Indemnitee's right to such advancement is not subject to the satisfaction of any standard of conduct. Without limiting the generality or effect of the foregoing, within 30 days after any request by Indemnitee, the Company shall, in accordance with such request, (a) pay such Expenses on behalf of Indemnitee, (b) advance to Indemnitee funds in an amount sufficient to pay such Expenses, or (c) reimburse Indemnitee for such Expenses. In connection with any request for Expense Advances, Indemnitee shall not be required to provide any documentation or information to the extent that the provision thereof would undermine or otherwise jeopardize attorney-client privilege. In connection with any request for Expense Advances, Indemnitee shall execute and deliver to the Company an undertaking (which shall be accepted without reference to Indemnitee's ability to repay the Expense Advances) to repay any amounts paid, advanced, or reimbursed by the Company for such Expenses to the extent that it is ultimately determined, following the final disposition of such Claim, that Indemnitee is not entitled to indemnification hereunder. Indemnitee's obligation to reimburse the Company for Expense Advances shall be unsecured and no interest shall be charged thereon.
5. Indemnification for Expenses in Enforcing Rights. To the fullest extent allowable under applicable law, the Company shall also indemnify against, and, if requested by Indemnitee, shall advance to Indemnitee subject to and in accordance with Section 4, any Expenses actually and reasonably paid or incurred by Indemnitee in connection with any action or proceeding by Indemnitee for (a) indemnification or reimbursement or advance payment of Expenses by the Company under any provision of this Agreement, or under any other agreement or provision of the Constituent Documents now or hereafter in effect relating to Claims relating to Indemnifiable Events, and/or (b) recovery under any directors' and officers' liability insurance policies maintained by the Company. However, in the event that Indemnitee is ultimately determined not to be entitled to such indemnification or insurance recovery, as the case may be, then all amounts advanced under this Section 5 shall be repaid. Indemnitee shall be required to reimburse the Company in the event that a final judicial determination is made that such action brought by Indemnitee was frivolous or not made in good faith.
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6. Partial Indemnity. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for a portion of any Losses in respect of a Claim related to an Indemnifiable Event but not for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.
7. Notification and Defense of Claims.
(a) Notification of Claims. Indemnitee shall notify the Company in writing as soon as practicable of any Claim which could relate to an Indemnifiable Event or for which Indemnitee could seek Expense Advances, including a brief description (based upon information then available to Indemnitee) of the nature of, and the facts underlying, such Claim. The failure by Indemnitee to timely notify the Company hereunder shall not relieve the Company from any liability hereunder unless such failure materially prejudices the Company. If at the time of the receipt of such notice, the Company has directors' and officers' liability insurance in effect under which coverage for Claims related to Indemnifiable Events is potentially available, the Company shall give prompt written notice to the applicable insurers in accordance with the procedures set forth in the applicable policies. The Company shall provide to Indemnitee a copy of such notice delivered to the applicable insurers, and copies of all subsequent correspondence between the Company and such insurers regarding the Claim, in each case substantially concurrently with the delivery or receipt thereof by the Company.
(b) Defense of Claims. The Company shall be entitled to participate in the defense of any Claim relating to an Indemnifiable Event at its own expense and, except as otherwise provided below, to the extent the Company so wishes, it may assume the defense thereof with counsel reasonably satisfactory to Indemnitee. After notice from the Company to Indemnitee of its election to assume the defense of any such Claim, the Company shall not be liable to Indemnitee under this Agreement or otherwise for any Expenses subsequently directly incurred by Indemnitee in connection with Indemnitee's defense of such Claim other than reasonable costs of investigation or as otherwise provided below. Indemnitee shall have the right to employ its own legal counsel in such Claim, but all Expenses related to such counsel incurred after notice from the Company of its assumption of the defense shall be at Indemnitee's own expense; provided, however, that if (i) Indemnitee's employment of its own legal counsel has been authorized by the Company, (ii) Indemnitee has reasonably determined that there may be a conflict of interest between Indemnitee and the Company in the defense of such Claim, (iii) after a Change in Control, Indemnitee's employment of its own counsel has been approved by the Independent Counsel or (iv) the Company shall not in fact have employed counsel to assume the defense of such Claim, then Indemnitee shall be entitled to retain its own separate counsel (but not more than one law firm plus, if applicable, local counsel in respect of any such Claim) and all Expenses related to such separate counsel shall be borne by the Company.
8. Procedure upon Application for Indemnification. In order to obtain indemnification pursuant to this Agreement, Indemnitee shall submit to the Company a written request therefor, including in such request such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of the Claim, provided that documentation and information need not be so provided to the extent that the provision thereof would undermine or otherwise jeopardize attorney-client privilege. Indemnification shall be made insofar as the Company determines Indemnitee is entitled to indemnification in accordance with Section 9 below.
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9. Determination of Right to Indemnification.
(a) Mandatory Indemnification; Indemnification as a Witness.
(i) To the extent that Indemnitee shall have been successful on the merits or otherwise in defense of any Claim relating to an Indemnifiable Event or any portion thereof or in defense of any issue or matter therein, including without limitation dismissal without prejudice, Indemnitee shall be indemnified against all Losses relating to such Claim in accordance with Section 3 to the fullest extent allowable by law, and no Standard of Conduct Determination (as defined in Section 9(b)) shall be required.
(ii) To the extent that Indemnitee's involvement in a Claim relating to an Indemnifiable Event is to prepare to serve and serve as a witness, and not as a party, the Indemnitee shall be indemnified against all Losses incurred in connection therewith to the fullest extent allowable by law and no Standard of Conduct Determination (as defined in Section 9(b)) shall be required.
(b) Standard of Conduct. To the extent that the provisions of Section 9(a) are inapplicable to a Claim related to an Indemnifiable Event that shall have been finally disposed of, any determination of whether Indemnitee has satisfied any applicable standard of conduct under Delaware law that is a legally required condition to indemnification of Indemnitee hereunder against Losses relating to such Claim and any determination that Expense Advances must be repaid to the Company (a "Standard of Conduct Determination") shall be made as follows:
(i) if no Change in Control has occurred, (A) by a majority vote of the Disinterested Directors, even if less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum or (C) if there are no such Disinterested Directors, by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to Indemnitee; and
(ii) if a Change in Control shall have occurred, (A) if the Indemnitee so requests in writing, by a majority vote of the Disinterested Directors, even if less than a quorum of the Board or (B) otherwise, by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to Indemnitee.
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The Company shall indemnify and hold harmless Indemnitee against and, if requested by Indemnitee, shall reimburse Indemnitee for, or advance to Indemnitee, within 30 days of such request, any and all Expenses incurred by Indemnitee in cooperating with the person or persons making such Standard of Conduct Determination.
(c) Making the Standard of Conduct Determination. The Company shall use its reasonable best efforts to cause any Standard of Conduct Determination required under Section 9(b) to be made as promptly as practicable. If the person or persons designated to make the Standard of Conduct Determination under Section 9(b) shall not have made a determination within 30 days after the later of (i) receipt by the Company of a written request from Indemnitee for indemnification pursuant to Section 8 (the date of such receipt being the "Notification Date") and (ii) the selection of an Independent Counsel, if such determination is to be made by Independent Counsel, then Indemnitee shall be deemed to have satisfied the applicable standard of conduct; provided that such 30-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the person or persons making such determination in good faith requires such additional time to obtain or evaluate information relating thereto. Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement of Indemnitee to indemnification under this Agreement shall be required to be made prior to the final disposition of any Claim.
(d) Payment of Indemnification. If, in regard to any Losses:
(i) Indemnitee shall be entitled to indemnification pursuant to Section 9(a);
(ii) no Standard Conduct Determination is legally required as a condition to indemnification of Indemnitee hereunder; or
(iii) Indemnitee has been determined or deemed pursuant to Section 9(b) or Section 9(c) to have satisfied the Standard of Conduct Determination,
then the Company shall pay to Indemnitee, within five days after the later of (A) the Notification Date or (B) the earliest date on which the applicable criterion specified in clause (i), (ii) or (iii) is satisfied, an amount equal to such Losses.
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(e) Selection of Independent Counsel for Standard of Conduct Determination. If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to Section 9.1(b)(i), the Independent Counsel shall be selected by the Board of Directors, and the Company shall give written notice to Indemnitee advising the Indemnitee of the identity of the Independent Counsel so selected. If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to Section 9.1(b)(ii), the Independent Counsel shall be selected by Indemnitee, and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either case, Indemnitee or the Company, as applicable, may, within five days after receiving written notice of selection from the other, deliver to the other a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not satisfy the criteria set forth in the definition of "Independent Counsel" in Section 1(i), and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person or firm so selected shall act as Independent Counsel. If such written objection is properly and timely made and substantiated, (i) the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit; and (ii) the non-objecting party may, at its option, select an alternative Independent Counsel and give written notice to the other party advising such other party of the identity of the alternative Independent Counsel so selected, in which case the provisions of the two immediately preceding sentences, the introductory clause of this sentence and numbered clause (i) of this sentence shall apply to such subsequent selection and notice. If applicable, the provisions of clause (ii) of the immediately preceding sentence shall apply to successive alternative selections. If no Independent Counsel that is permitted under the foregoing provisions of this Section 9(e) to make the Standard of Conduct Determination shall have been selected within 20 days after the Company gives its initial notice pursuant to the first sentence of this Section 9(e) or Indemnitee gives its initial notice pursuant to the second sentence of this Section 9(e), as the case may be, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware ("Delaware Court") to resolve any objection which shall have been made by the Company or Indemnitee to the other's selection of Independent Counsel and/or to appoint as Independent Counsel a person to be selected by the Court or such other person as the Court shall designate, and the person or firm with respect to whom all objections are so resolved or the person or firm so appointed will act as Independent Counsel. In all events, the Company shall pay all of the reasonable fees and expenses of the Independent Counsel incurred in connection with the Independent Counsel’s determination pursuant to Section 9(b).
(f) Presumptions and Defenses.
(i) Indemnitee's Entitlement to Indemnification. In making any Standard of Conduct Determination, the person or persons making such determination shall presume that Indemnitee has satisfied the applicable standard of conduct and is entitled to indemnification, and the Company shall have the burden of proof to overcome that presumption and establish that Indemnitee is not so entitled. Any Standard of Conduct Determination that is adverse to Indemnitee may be challenged by the Indemnitee in the Delaware Court. No determination by the Company (including by its directors or any Independent Counsel) that Indemnitee has not satisfied any applicable standard of conduct may be used as a defense to any legal proceedings brought by Indemnitee to secure indemnification or reimbursement or advance payment of Expenses by the Company hereunder or create a presumption that Indemnitee has not met any applicable standard of conduct.
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(ii) Reliance as a Safe Harbor. For purposes of this Agreement, and without creating any presumption as to a lack of good faith if the following circumstances do not exist, Indemnitee shall be deemed to have acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company if Indemnitee's actions or omissions to act are taken in good faith reliance upon the records of the Company, including its financial statements, or upon information, opinions, reports or statements furnished to Indemnitee by the officers or employees of the Company or any of its subsidiaries in the course of their duties, or by committees of the Board or by any other Person (including legal counsel, accountants and financial advisors) as to matters Indemnitee reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Company. In addition, the knowledge and/or actions, or failures to act, of any director, officer, agent or employee of the Company shall not be imputed to Indemnitee for purposes of determining the right to indemnity hereunder.
(iii) No Other Presumptions. For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, will not create a presumption that Indemnitee did not meet any applicable standard of conduct or have any particular belief, or that indemnification hereunder is otherwise not permitted.
(iv) Defense to Indemnification and Burden of Proof. It shall be a defense to any action brought by Indemnitee against the Company to enforce this Agreement (other than an action brought to enforce a claim for Losses incurred in defending against a Claim related to an Indemnifiable Event in advance of its final disposition) that it is not permissible under applicable law for the Company to indemnify Indemnitee for the amount claimed. In connection with any such action or any related Standard of Conduct Determination, the burden of proving such a defense or that the Indemnitee did not satisfy the applicable standard of conduct shall be on the Company.
10. Exclusions from Indemnification. Notwithstanding anything in this Agreement to the contrary, the Company shall not be obligated to:
(a) indemnify or advance funds to Indemnitee for Expenses or Losses with respect to proceedings initiated by Indemnitee, including any proceedings against the Company or its directors, officers, employees or other indemnitees and not by way of defense, except:
(i) proceedings referenced in Section 5 above (unless a court of competent jurisdiction determines that each of the material assertions made by Indemnitee in such proceeding was not made in good faith or was frivolous); or
(ii) where the Company has joined in or the Board has consented to the initiation of such proceedings.
(b) indemnify Indemnitee if a final decision by a court of competent jurisdiction determines that such indemnification is prohibited by applicable law.
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(c) indemnify Indemnitee for the disgorgement of profits arising from the purchase or sale by Indemnitee of securities of the Company in violation of Section 16(b) of the Exchange Act, or any similar successor statute.
(d) indemnify or advance funds to Indemnitee for Indemnitee's reimbursement to the Company of any bonus or other incentive-based or equity-based compensation previously received by Indemnitee, or payment of any profits realized by Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements under Section 304 of the Sarbanes-Oxley Act of 2002 in connection with an accounting restatement of the Company or under the Company's clawback policy under Rule 10D-1 under the Exchange Act and Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (or any other clawback policy), or the payment to the Company of profits arising from the purchase or sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act).
11. Settlement of Claims. The Company shall not be liable to Indemnitee under this Agreement for any amounts paid in settlement of any threatened or pending Claim related to an Indemnifiable Event effected without the Company's prior written consent, which shall not be unreasonably withheld. The Company shall not settle any Claim related to an Indemnifiable Event in any manner that would impose any Losses on the Indemnitee without the Indemnitee's prior written consent.
12. Duration. All agreements and obligations of the Company contained herein shall continue during the period that Indemnitee is a director or officer of the Company (or is serving at the request of the Company as a director, officer, employee, member, trustee or agent of another Enterprise) and shall continue thereafter (i) so long as Indemnitee may be subject to any possible Claim relating to an Indemnifiable Event (including any rights of appeal thereto) and (ii) throughout the pendency of any proceeding (including any rights of appeal thereto) commenced by Indemnitee to enforce or interpret his or her rights under this Agreement, even if, in either case, he or she may have ceased to serve in such capacity at the time of any such Claim or proceeding.
13. Non-Exclusivity. The rights of Indemnitee hereunder will be in addition to any other rights Indemnitee may have under the Constituent Documents, the General Corporation Law of the State of Delaware, any other contract or otherwise (collectively, "Other Indemnity Provisions"); provided, however, that (a) to the extent that Indemnitee otherwise would have any greater right to indemnification under any Other Indemnity Provision, Indemnitee will be deemed to have such greater right hereunder and (b) to the extent that any change is made to any Other Indemnity Provision which permits any greater right to indemnification than that provided under this Agreement as of the date hereof, Indemnitee will be deemed to have such greater right hereunder.
14. Liability Insurance. For the duration of Indemnitee's service as a director and/or officer of the Company, and thereafter for so long as Indemnitee shall be subject to any pending Claim relating to an Indemnifiable Event, the Company shall use commercially reasonable efforts (taking into account the scope and amount of coverage available relative to the cost thereof) to continue to maintain in effect policies of directors' and officers' liability insurance providing coverage that is at least substantially comparable in scope and amount to that provided by the Company's current policies of directors' and officers' liability insurance. In all policies of directors' and officers' liability insurance maintained by the Company, Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same rights and benefits as are provided to the most favorably insured of the Company's directors, if Indemnitee is a director, or of the Company's officers, if Indemnitee is an officer (and not a director) by such policy. Upon request, the Company will provide to Indemnitee copies of all directors' and officers' liability insurance applications, binders, policies, declarations, endorsements and other related materials.
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15. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment to Indemnitee in respect of any Losses to the extent Indemnitee has otherwise received payment under any insurance policy, the Constituent Documents, Other Indemnity Provisions or otherwise of the amounts otherwise indemnifiable by the Company hereunder.
16. Subrogation. In the event of payment to Indemnitee under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee. Indemnitee shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.
17. Amendments. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be binding unless in the form of a writing signed by the party against whom enforcement of the waiver is sought, and no such waiver shall operate as a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. Except as specifically provided herein, no failure to exercise or any delay in exercising any right or remedy hereunder shall constitute a waiver thereof.
18. Binding Effect. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), assigns, spouses, heirs and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part of the business and/or assets of the Company, by written agreement in form and substances satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
19. Severability. The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any portion thereof) are held by a court of competent jurisdiction to be invalid, illegal, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
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20. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand, against receipt, or mailed, by postage prepaid, certified or registered mail:
(a) if to Indemnitee, to the address set forth on the signature page hereto.
(b) if to the Company, to:
Elauwit Connection, Inc.
170 Alta Vista Drive, Suite 130
Columbia, SC 29223
Attention: Secretary
with a copy (which shall not constitute notice) to:
Harter Secrest & Emery LLP
1600 Bausch and Lomb Place,
Rochester, NY 14604
Attn: Margaret K. Rhoda, Esq.
Email: ###
Notice of change of address shall be effective only when given in accordance with this Section. All notices complying with this Section shall be deemed to have been received on the date of hand delivery or on the third business day after mailing.
21. Governing Law and Forum. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such state without giving effect to its principles of conflicts of laws. The Company and Indemnitee hereby irrevocably and unconditionally: (a) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court and not in any other state or federal court in the United States, (b) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement and (c) waive, and agree not to plead or make, any claim that the Delaware Court lacks venue or that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.
22. Headings. The headings of the sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction or interpretation thereof.
23. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original, but all of which together shall constitute one and the same Agreement.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
| ELAUWIT CONNECTION, INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
| INDEMNITEE | |
| Name: | |
| Signature: | |
| Email: | |
| Physical Address for Notice: | |
[Signature page to Indemnification Agreement]
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the use in this Pre-Effective Amendment No. 1 to the Registration Statement (No. 333-289964) on Form S-1 of Elauwit Connection, Inc. of our report dated April 7, 2025, which includes an explanatory paragraph as to Elauwit Connection, Inc.’s ability to continue as a going concern, relating to the consolidated financial statements of Elauwit Connection, Inc. as of and for the years ended December 31, 2024 and 2023, appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to our firm under the heading "Experts" in such Prospectus.
/s/ Freed Maxick P.C.
Buffalo, New York
September 15, 2025
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