SUBSCRIPTION AGREEMENT FOR
____________________________________
____________________________________
____________________________________

June 15, 2007

Element 21 Golf Company
200 Queens Quay East, Unit 1
Toronto, Ontario, Canada, M5J2L4

Pursuant to a Subscription Agreement dated July 14, 2006 (the “Original
Subscription Agreement”) between Element 21 Golf Company, a Delaware corporation
(the “Company”) and the undersigned (“Investor”), the Company issued to the
Investor 117,647 shares of Series B Convertible Preferred Stock, $.10 par value
per share (the “Series B Preferred Stock”), and (ii) a warrant to purchase
17,647,059 shares of the Company’s Common Stock, $.01 par value per share (the
“Common Stock”). The Investor has now agreed to make an additional investment in
the Company, and the Company and the Investor have agreed as follows:

1. Investment. The Investor hereby agrees to invest an additional $1,000,000
(the “Investment Amount”) in the Company in exchange for (i) 58,824 shares of
Series B Preferred Stock, and (ii) warrants to purchase 5,882,400 shares of the
Company’s Common Stock, a form of which is attached hereto as Exhibit A (the
“Warrant”), on the terms and conditions described therein. The Series B
Preferred Stock shall have the rights preferences and privileges set forth in
the Series B Certificate of Designations as heretofore filed with the Secretary
of State of Delaware (the “Certificate of Designations”), provided that the same
shall be amended as set forth in Exhibit B hereto on or before June 11, 2007.
The Series B Preferred Stock, the Warrants, the shares of Common Stock issuable
upon conversion of the Series B Preferred Stock and the shares of Common Stock
issuable upon exercise of the Warrants (the “Warrant Shares”) are collectively
referred to herein as the “Securities”.

2. Payment and Issuance of Securities. On June 15, 2007, the Investor will
tender to the Company $1,000,000 and in exchange therefor, the Company will
deliver to the Investor the Securities.

The Investor fully understands that the Company has a limited operating history
and that his or its investment in the Company involves a high degree of risk of
loss of his or its entire investment. The Investor fully understands the nature
of the risks of an investment in the Company and is qualified by its knowledge
and experience to evaluate investments of this type. The Investor has carefully
considered the potential risks relating to the Company and an investment in the
Company and has, in particular, reviewed each of the risks set forth in Annex B
attached hereto and the Securities and Exchange Commission (“SEC”) filings
described in Annex C attached hereto (collectively, the “SEC Filings”) which may
be obtained at

 
 

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www.sec.gov. Both the Investor and its advisors have had the opportunity to ask
questions of and receive answers from representatives of the Company or persons
acting on its behalf concerning the Company and the terms and conditions of a
proposed investment in the Company and have also have had the opportunity to
obtain additional information necessary to verify the accuracy of information
furnished about the Company. Accordingly, the Investor has independently
evaluated the risks of making an investment in the Company.

3. Investor Representations and Warranties. The Investor hereby confirms and
agrees that what he or it acknowledged, represented and warranted to, and agreed
with, the Company in Section 3 of the Original Subscription Agreement shall be
deemed remade herein and incorporated herein mutatis mutandis.

4. Company Representations, Warranties and Covenants. The Company hereby
confirms and agrees that what it represented and warranted to, and covenanted
with, the Investor in Section 3 of the Original Subscription Agreement shall be
deemed remade herein and incorporated herein mutatis mutandis; except that the
authorized capital stock of the Company consists of 300,000,000 shares of Common
Stock, $.01 par value per share, 113,390,062 of which are issued and outstanding
as of the date hereof, and 5,000,000 shares of Preferred Stock, 2,200,000 shares
of which have been designated as Series A Convertible Preferred Stock, $.10 par
value per share, 2,113,556 of which are issued and outstanding as of the date
hereof, and 353,000 shares of which have been designated as Series B Convertible
Preferred Stock, $.10 par value per share, 235,296 of which are issued and
outstanding as of the date hereof.
5. Registration; Compliance with the Securities Act. This Section 5 shall be
applicable to the Warrant issued hereunder as well as the to warrants issued
pursuant to the Original Subscription Agreement, Section 5 of which is hereby
amended to read as set forth below. As used in this Section 5, the term
“Warrant” shall mean both the Warrants issued pursuant to this Agreement and the
warrants issued pursuant to the Original Subscription Agreement and “Warrant
Shares” shall mean the shares of Common Stock issuable upon the exercise of all
such Warrants.
 
(a) If, at any time prior to the one year anniversary of the date hereof, the
Company proposes to register any shares of its Common Stock under the Securities
Act of 1933 in connection with the public offering of such securities for its
own account or for the accounts of other shareholders of the Company, solely for
cash on a form that would also permit the registration of the shares of Common
Stock issuable upon exercise of the Warrant (the “Registrable Securities”), the
Company shall, each such time, promptly give the Investor written notice of such
determination. Upon the written request of the Investor given within twenty (20)
days after mailing of any such notice by the Company, the Company shall use its
best efforts to cause to be registered under the Securities Act of 1933 all of
the Registrable Securities that the Investor has requested be registered. The
foregoing notwithstanding, the Company may, in its discretion, withdraw any
registration statement referred to in this Section 5(a) prior to the
effectiveness thereof. In connection with any offering to which this Section
5(a) applies and involving an underwriting of shares being issued by the
Company, the Company shall not be required under this Section 5(a) to include
any of the Investor’s Registrable Securities in such

 
 

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underwriting unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it. If the total amount of
securities that all holders of Registrable Securities request to be included in
an underwritten offering exceeds the amount of securities that the underwriters
reasonably believe compatible with the success of the offering, the Company
shall only be required to include in the offering so many of the securities of
the Investor as the underwriters reasonably believe will not jeopardize the
success of the offering (the securities so included to be apportioned pro rata
among each of the holders of Registrable Securities, or in such other
proportions as shall mutually be agreed to by such selling holders); provided,
however, that no such reduction shall be made with respect to any securities
offered by the Company for its own account.
 
(b) The Company shall (i) no later than December 15, 2007 (the “Filing Date”),
prepare and file with the SEC a Registration Statement on Form SB-2 (the
“Registration Statement”) relating to all of the Warrant Shares then held by, or
issuable to, the Investor; and (ii) use its commercially reasonable efforts,
subject to receipt of necessary information from the Investor, to cause the SEC
to declare the Registration Statement effective within 60 days after the date
the Registration Statement is filed with the SEC (such date, the “Required
Effective Date”). However, so long as the Company filed the Registration
Statement by the Filing Date, if the Registration Statement receives SEC review,
then the Required Effective Date will be the one hundred and twentieth (120)
calendar day after the date the Registration Statement is filed with the SEC.

(c) The Company shall use its commercially reasonable efforts to (i) promptly
prepare and file with the SEC such amendments and supplements to the
Registration Statement and the prospectus used in connection therewith as may be
necessary to keep the Registration Statement effective until the earliest of (i)
two years after the effective date of the Registration Statement, or (ii) such
time as all of the Warrant Shares become eligible for resale by non-affiliates
pursuant to Rule 144(k) under the Securities Act of 1933; and (ii) furnish to
the Investor with respect to the Registrable Securities registered under the
Registration Statement (and to each underwriter, if any, of such Registrable
Securities) such number of copies of prospectuses and such other documents as
the Investor may reasonably request, in order to facilitate the public sale or
other disposition of all or any of the Registrable Securities by the Investor.

(d)  In connection with the filing of any registration statement pursuant to
this Section 5, the Company shall use its commercially reasonable efforts to
file documents required of the Company for normal “Blue Sky” clearance in states
specified in writing by the Investor; provided, however, that the Company shall
not be required to qualify to do business or consent to service of process in
any jurisdiction in which it is not now so qualified or has not so consented.

(e) The Company shall bear all expenses in connection with the procedures in
paragraphs (a) through (d) of this Section 5 and the registration of the
Registrable Securities pursuant to the Registration Statement or any other
registration statement filed by the Company pursuant to Section 5(a) (the
Registration Statement and any other such registration statements filed pursuant
to Section 5(a) are each referred to herein as a “Registration” and collectively
as the “Registrations”), other than fees and expenses, if any, of counsel or
other advisers to the

 
 

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Investor, or underwriting discounts, brokerage fees and commissions incurred by
the Investor. A questionnaire related to the Registration Statement to be
completed by the Investor is attached hereto as Annex A. The Investor agrees
that it will promptly notify the Company of any changes in the information set
forth in the Registration Statement regarding the Investor or its plan of
distribution.

(f) For the purpose of this Section 5(f), the term “Investor/Affiliate” shall
mean any affiliates of the Investor and any person who controls the Investor or
any affiliate of the Investor within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act; and the term “Registrations” shall
include any preliminary prospectus, final prospectus, exhibit, supplement or
amendment included in or relating to, and any document incorporated by reference
in any such Registration.

(i) The Company agrees to indemnify and hold harmless the Investor and each
Investor/Affiliate against any losses, claims, damages, liabilities or expenses,
joint or several, to which the Investor or such Investor/Affiliates may become
subject, under the Securities Act, the Exchange Act, or any other federal or
state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the prior
written consent of the Company), insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof as contemplated below)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any Registration, including any prospectus,
financial statements and schedules, and all other documents filed as a part
thereof, as amended at the time of effectiveness of any Registration, including
any information deemed to be a part thereof as of the time of effectiveness
pursuant to paragraph (b) of Rule 430A, or pursuant to Rule 434, of the rules
and regulations of the SEC (the “Rules and Regulations”), or the prospectus, in
the form first filed with the SEC pursuant to Rule 424(b) of the Rules and
Regulations, or filed as part of any Registration at the time of effectiveness
if no Rule 424(b) filing is required (the “Prospectus”), or any subsequent
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state in any of them a material fact required to be
stated therein or necessary to make the statements in the Registration or any
amendment or supplement thereto not misleading or in the Prospectus or any
amendment or supplement thereto not misleading, in light of the circumstances
under which they were made, or arise out of or are based in whole or in part on
any inaccuracy in the representations and warranties of the Company contained in
this Subscription Agreement, or any failure of the Company to perform its
obligations hereunder or under law, and will reimburse the Investor and each
such Investor/Affiliate for any legal and other expenses as such expenses are
reasonably incurred by the Investor or such Investor/Affiliate in connection
with investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that the Company
will not be liable for amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Company, which consent shall not be unreasonably withheld, and the
Company will not be liable in any such case to the extent, but only to the
extent, that any such loss, claim, damage, liability or expense arises out of or
is based upon (i) an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration, the Prospectus or any amendment or
supplement thereto in reliance upon and in

 
 

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conformity with written information furnished to the Company by or on behalf of
the Investor expressly for use therein, or (ii) the failure of the Investor to
comply with the covenants and agreements contained herein with respect to the
sale of the Securities or (iii) the inaccuracy of any representation or warranty
made by the Investor herein or (iv) any statement or omission in any Prospectus
that is corrected in any subsequent Prospectus that was delivered to the
Investor prior to the pertinent sale or sales by the Investor.

(ii) The Investor will severally indemnify and hold harmless the Company, each
of its directors, each of its executive officers, including such officers who
signed the Registration, 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, against any losses, claims, damages, liabilities or expenses to
which the Company, each of its directors, each of its officers who signed the
Registration or controlling person may become subject, under the Securities Act,
the Exchange Act, or any other federal or state statutory law or regulation, or
at common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of the Investor) insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof
as contemplated below) arise out of or are based upon (i) any failure to comply
with the covenants and agreements contained herein with respect to the sale of
the Securities, or (ii) the inaccuracy of any representation or warranty made by
the Investor herein, or (iii) any untrue or alleged untrue statement of any
material fact contained in the Registration, the Prospectus, or any amendment 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 in the Registration or any amendment or
supplement thereto not misleading or in the Prospectus or any amendment or
supplement thereto not misleading in the light of the circumstances under which
they were made, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in the Registration, the Prospectus, or any amendment or supplement
thereto, in reliance upon and in conformity with written information furnished
to the Company by or on behalf of the Investor expressly for use therein, and
will reimburse the Company, each of its directors, each of its officers who
signed the Registration or controlling person for any legal and other expense
reasonably incurred by the Company, each of its directors, each of its officers
who signed the Registration or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action; provided, however, that the Investor’s
aggregate liability under this Section 5(f) with respect to a particular
Registration shall not exceed the amount of proceeds received by the Investor on
the sale of the Registrable Securities pursuant to such Registration.

(iii) Promptly after receipt by an indemnified party under this Section 5(f) of
notice of the threat or commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against an indemnifying party under
this Section 5(f), promptly notify the indemnifying party in writing thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party for contribution or
otherwise under the indemnity agreement contained in this Section 5(f) to the
extent it is not prejudiced as a result of such failure. In case any such action
is brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity

 
 

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from an indemnifying party, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with all other
indemnifying parties similarly notified, to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party; provided, however, if
the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party based upon the advice of such
indemnified party’s counsel shall have reasonably concluded, based on an opinion
of counsel reasonably satisfactory to the indemnifying party, that there may be
a conflict of interest between the positions of the indemnifying party and the
indemnified party in conducting the defense of any such action or that there may
be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of its election to assume
the defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 5(f) for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso to the preceding
sentence (it being understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel, reasonably
satisfactory to such indemnifying party, representing the indemnified parties
who are parties to such action, plus local counsel, if appropriate) or (ii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of action, in each of which cases the
reasonable fees and expenses of counsel shall be at the expense of the
indemnifying party. The indemnifying party shall not be liable for any
settlement of any action without its written consent.

(iv) If the indemnification provided for in this Section 5(f) is required by its
terms but is for any reason held to be unavailable to or otherwise insufficient
to hold harmless an indemnified party under this Section 5(f) in respect to any
losses, claims, damages, liabilities or expenses referred to herein, then each
applicable indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of any losses, claims, damages, liabilities
or expenses referred to herein (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Investor from the
private placement of the Securities hereunder or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but the relative fault of the Company and the Investor in connection with
the statements or omissions or inaccuracies in the representations and
warranties in this Subscription Agreement and/or the Registration Statement
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The respective relative benefits
received by the Company on the one hand and the Investor on the other shall be
deemed to be in the same proportion as the amount paid by the Investor to the
Company pursuant to this Subscription Agreement for the Securities purchased by
the Investor that were sold pursuant to the Registration Statement bears to the
difference (the “Difference”) between the amount the Investor paid for the
Securities that were sold pursuant to the

 
 

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Registration Statement and the amount received by the Investor from such sale.
The relative fault of the Company, on the one hand, and the Investor on the
other shall be determined by reference to, among other things, whether the
untrue or alleged statement of a material fact or the omission or alleged
omission to state a material fact or the inaccurate or the alleged inaccurate
representation and/or warranty relates to information supplied by the Company or
by the Investor and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in this Section 5(f), any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
paragraph (iii) of this Section 5(f) with respect to the notice of the threat or
commencement of any threat or action shall apply if a claim for contribution is
to be made under this paragraph (iv); provided, however, that no additional
notice shall be required with respect to any threat or action for which notice
has been given under paragraph (iii) for purposes of indemnification. The
Company and the Investor agree that it would not be just and equitable if
contribution pursuant to this Section 5(f) were determined solely by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in this paragraph. Notwithstanding the
provisions of this Section 5(f), the Investor shall be required to contribute
any amount in excess of the amount by which the Difference exceeds the amount of
any damages that the Investor has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. 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.

(g) So long as a Registration covering the resale of Registrable Securities
owned by the Investor is effective, the Company will furnish to the Investor
upon the reasonable request of the Investor, a reasonable number of copies of
the Prospectuses, and any supplements thereto, to supply to any other party
requiring such Prospectuses; and the Company, upon the reasonable request of the
Investor and with prior notice, will be available to the Investor or a
representative thereof at the Company’s headquarters to discuss information
relevant for disclosure in the Registration covering the Registrable Securities
and will otherwise cooperate with the Investor conducting an investigation for
the purpose of reducing or eliminating the Investor’s exposure to liability
under the Securities Act, including the reasonable production of information at
the Company’s headquarters, subject to appropriate confidentiality limitations.

6. Severability. In the event any parts of this Subscription Agreement are found
to be void, the remaining provisions of this Subscription Agreement shall
nevertheless be binding with the same effect as though the void parts were
deleted.

7. Choice of Law and Jurisdiction. This Subscription Agreement will be deemed to
have been made and delivered in the state of the Investor’s residence as set
forth on the signature page hereto and will be governed as to validity,
interpretation, construction, effect and in all other respects by the internal
laws of the State of Delaware.

 
 

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8. Counterparts. This Subscription Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Subscription Agreement may be by actual or facsimile signature.

9. Benefit. This Subscription Agreement shall be binding upon and inure to the
benefit of the parties hereto.

10. Notices and Addresses. All notices, offers, acceptance and any other acts
under this Subscription Agreement (except payment) shall be in writing, and
shall be sufficiently given if delivered to the addresses in person, by Federal
Express or similar courier delivery, or, if mailed, postage prepaid, by
certified mail, return receipt requested, as follows:

Investor:
At the address designated on the signature page of this Subscription Agreement.

the Company:
Element 21 Golf Company
200 Queens Quay East, Unit 1
Toronto, Ontario, Canada, M5J2L4
Tel: (416) 363-2121

or to such other address as any of them, by notice to the others may designate
from time to time. The transmission confirmation receipt from the sender’s
facsimile machine shall be conclusive evidence of successful facsimile delivery.

11. Oral Evidence. This Subscription Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior oral and written agreements between the parties hereto with respect to the
subject matter hereof. This Subscription Agreement may not be changed, waived,
discharged, or terminated orally but, rather, only by a statement in writing
signed by the party or parties against which enforcement or the change, waiver,
discharge or termination is sought.

12. Section Headings. Section headings herein have been inserted for reference
only and shall not be deemed to limit or otherwise affect, in any matter, or be
deemed to interpret in whole or in part, any of the terms or provisions of this
Subscription Agreement.

13. Survival of Representations, Warranties and Agreements. The representations,
warranties and agreements contained herein shall survive the delivery of, and
the payment for, the Securities.

RESIDENTS OF ALL STATES: THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SECURITIES ARE SUBJECT
TO RESTRICTIONS ON

 
 

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TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE
SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR
HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS
OFFERING OR THE ACCURACY OR ADEQUACY OF THIS SUBSCRIPTION AGREEMENT. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

INVESTOR
 
 
 
ELEMENT 21 GOLF COMPANY
 
By:  __________________________________
Name: Nataliya Hearn
Title: President & CEO

 
 
 

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ANNEX A

ELEMENT 21 GOLF COMPANY
REGISTRATION STATEMENT QUESTIONNAIRE

In connection with the preparation of the Registration Statement, please provide
the following information:

Pursuant to the “Selling Stockholder” section of the Registration Statement,
please state your or your organization’s name exactly as it should appear in the
Registration Statement:
 

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Please provide the number of shares that you or your organization will own
immediately after Closing, including those Securities purchased by you or your
organization pursuant to this Subscription Agreement and those shares purchased
by you or your organization through other transactions:
 

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Have you or your organization had any position, office or other material
relationship within the past three years with the Company or its affiliates?

________ Yes  ________ No

If yes, please indicate the nature of any such relationships below:
 

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Are you (i) an NASD Member (see definition), (ii) a Controlling (see definition)
shareholder of an NASD Member, (iii) a Person Associated with a Member of the
NASD (see definition), or (iv) an Underwriter or a Related Person (see
definition) with respect to the proposed offering; or (b) do you own any shares
or other securities of any NASD Member not purchased in the open market; or (c)
have you made any outstanding subordinated loans to any NASD Member?

________ Yes  ________ No

 
 

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If “yes,” please describe below:
 

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NASD Member. The term “NASD member” means either any broker or dealer admitted
to membership in the National Association of Securities Dealers, Inc. (“NASD”).
(NASD Manual, By-laws Article I, Definitions)

Control. The term “control” (including the terms “controlling,” “controlled by”
and “under common control with”) means the possession, direct or indirect, of
the power, either individually or with others, to direct or cause the direction
of the management and policies of a person, whether through the ownership of
voting securities, by contract, or otherwise. (Rule 405 under the Securities Act
of 1933, as amended)

Person Associated with a member of the NASD. The term “person associated with a
member of the NASD” means every sole proprietor, partner, officer, director,
branch manager or executive representative of any NASD Member, or any natural
person occupying a similar status or performing similar functions, or any
natural person engaged in the investment banking or securities business who is
directly or indirectly controlling or controlled by a NASD Member, whether or
not such person is registered or exempt from registration with the NASD pursuant
to its bylaws. (NASD Manual, By-laws Article I, Definitions)

Underwriter or a Related Person. The term “underwriter or a related person”
means, with respect to a proposed offering, underwriters, underwriters’ counsel,
financial consultants and advisors, finders, members of the selling or
distribution group, and any and all other persons associated with or related to
any of such persons. (NASD Interpretation).
 
 
 

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ANNEX B

RISK FACTORS

The Securities to be issued by the Company are speculative and involve a high
degree of risk. Each investor is urged to carefully read the “Risk Factors” set
forth below. As used herein, the terms “we”, “the Company” and “our” refer to
Element 21 Golf Company.

We Will Need To Raise Additional Funds. These Funds May Not Be Available When We
Need Them or on Terms Favorable to Us.

We will need to raise additional funds to operate the business, support more
rapid expansion, develop new or enhanced products, respond to competitive
pressures, acquire complementary businesses or technologies, or respond to
unanticipated events. There can be no assurances that additional financing will
be available when needed on favorable terms, or at all. If these funds are not
available when we need them, we may need to change our business strategy or
reduce our operations or investment activities. In addition, any issuance of
additional equity securities will dilute the ownership interest of our existing
stockholders and the issuance of additional debt securities may increase the
perceived risk of investing in us.

There Are Risks Associated With Our Stock Trading On The NASD OTC Bulletin Board
Rather Than A National Exchange.

There are significant consequences associated with our stock trading on the NASD
OTC Bulletin Board rather than a national exchange. The effects of not being
able to list our securities on a national exchange include:

- Limited release of the market prices of our securities;

- Limited news coverage of us;

- Limited interest by investors in our securities;

- Volatility of our stock price due to low trading volume;

- Increased difficulty in selling our securities in certain states due to “blue
sky” restrictions; and

- Limited ability to issue additional securities or to secure additional
financing.

 
 

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“Penny Stock” Regulations May Impose Certain Restrictions On The Marketability
of Our Securities. 

The SEC has adopted regulations which generally define “penny stock” to be any
equity security that has a market price (as defined) less than $5.00 per share,
subject to certain exceptions. The Company’s Common Stock is presently subject
to these regulations which impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally those with assets in excess of
$1,000,000 or annual income exceeding $200,000, or $300,000 together with their
spouse). For transactions covered by these rules, the broker-dealer must make a
special suitability determination for the purchase of such securities and have
received the purchaser’s written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the transaction, of a risk
disclosure document mandated by the SEC relating to the penny stock market. The
broker-dealer must also disclose the commission payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market maker, the broker-dealer
must disclose this fact and the broker-dealer’s presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. Consequently, the “penny stock” rules may
restrict the ability of broker-dealers to sell the Company’s securities and may
negatively affect the ability of purchasers of the Company’s shares of Common
Stock to sell such securities.

Limited Trading Market; Restrictions on Transferability. The Company’s shares of
Common Stock trade on the OTC Bulletin Board with limited daily trading volume.
However, the Securities have not been registered under the Act, and accordingly,
are subject to restrictions on transferability and resale and may not be
transferred or sold except as permitted under the Act and applicable state
securities laws, pursuant to registration or exemption therefrom. Investors
should be aware that they will be required to bear the financial risk of this
investment for an indefinite period of time.

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATES AND ARE BEING OFFERED
AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID
ACT AND SUCH LAWS. THE SECURITIES ARE SUBJECT TO RESTRICTION ON TRANSFERABILITY
AND RESALE AND MAY NOT BE PLEDGED, TRANSFERRED OR RESOLD EXCEPT AS PERMITTED
UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS

 
 

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OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING DOCUMENTS. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

IT IS INTENDED THAT THE SHARES OF COMMON STOCK OFFERED HEREBY AND THE WARRANTS
WILL BE MADE AVAILABLE ONLY TO ACCREDITED INVESTORS, AS DEFINED IN SECTION
2(15) OF THE SECURITIES ACT AND RULE 501 THEREUNDER. THE SECURITIES OFFERED
HEREBY ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS FOR
NON-PUBLIC OFFERINGS. SUCH EXEMPTIONS LIMIT THE NUMBER AND TYPES OF INVESTORS TO
WHICH THE OFFERING WILL BE MADE AND RESTRICT SUBSEQUENT TRANSFER OF THE
SECURITIES.

INVESTMENT IN THE SECURITIES OFFERED HEREBY SHOULD BE CONSIDERED ONLY BY PERSONS
WHO CAN AFFORD TO SUSTAIN A LOSS OF THEIR ENTIRE INVESTMENT. INVESTORS WILL BE
REQUIRED TO REPRESENT THAT THEY ARE FAMILIAR WITH AND UNDERSTAND THE TERMS OF
THIS OFFERING, AND THAT HAVE SUCH KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND
BUSINESS MATTERS THAT THEY ARE CAPABLE OF EVALUATING THE MERITS AND RISKS OF
THIS INVESTMENT.

NO SECURITIES MAY BE RESOLD OR OTHERWISE DISPOSED OF BY AN INVESTOR UNLESS, IN
THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, REGISTRATION UNDER THE
APPLICABLE FEDERAL AND STATE SECURITIES LAWS IS NOT REQUIRED OR COMPLIANCE IS
MADE WITH SUCH REGISTRATION REQUIREMENTS. THE OFFEREE, BY ACCEPTING DELIVERY OF
THESE MATERIALS, AGREES TO RETURN THE OFFERING MATERIALS AND ALL ACCOMPANYING OR
RELATED DOCUMENTS TO THE COMPANY UPON REQUEST IF THE OFFEREE DOES NOT AGREE TO
PURCHASE ANY OF THE SECURITIES OFFERED HEREBY.

THESE MATERIALS ARE SUBMITTED IN CONNECTION WITH THE PRIVATE OFFERING OF THE
SECURITIES AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED. ANY
REPRODUCTION OR DISTRIBUTION OF THE SUBSCRIPTION AGREEMENT IN WHOLE OR IN PART,
OR THE DIVULGENCE OF ANY OF ITS CONTENTS, WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMPANY, IS PROHIBITED. ANY PERSON ACTING CONTRARY TO THE FOREGOING
RESTRICTIONS MAY PLACE HIMSELF AND THE COMPANY IN VIOLATION OF FEDERAL OR STATE
SECURITIES LAWS.

EACH OFFEREE MAY, IF HE SO DESIRES, MAKE INQUIRIES OF MANAGEMENT OF THE COMPANY
WITH RESPECT TO THE COMPANY’S BUSINESS OR ANY OTHER MATTERS SET FORTH HEREIN,
AND MAY OBTAIN ANY ADDITIONAL INFORMATION WHICH SUCH PERSON DEEMS TO BE

 
 

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NECESSARY IN ORDER TO VERIFY THE ACCURACY OF THE INFORMATION CONTAINED HEREIN
AND TO MAKE AN INVESTMENT DECISION (TO THE EXTENT THAT THE COMPANY POSSESSES
SUCH INFORMATION OR CAN ACQUIRE IT WITHOUT UNREASONABLE EFFORT OR EXPENSE). IN
CONNECTION WITH SUCH INQUIRY, ANY DOCUMENTS WHICH ANY OFFEREE WISHES TO REVIEW
WILL BE MADE AVAILABLE FOR INSPECTION AND COPYING OR PROVIDED, UPON REQUEST,
SUBJECT TO THE OFFEREES AGREEMENT TO MAINTAIN SUCH INFORMATION IN CONFIDENCE AND
TO RETURN THE SAME TO THE COMPANY IF THE RECIPIENT DOES NOT PURCHASE THE
SECURITIES OFFERED HEREUNDER. ANY SUCH INQUIRIES OR REQUESTS FOR ADDITIONAL
INFORMATION OR DOCUMENTS SHOULD BE MADE IN WRITING TO THE COMPANY AT THE
COMPANY’S ADDRESS.
 
 

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ANNEX C

SEC FILINGS
 
Annual Report on Form 10-KSB for the fiscal year ended June 30, 2006.
Quarterly Report on Form 10-QSB for the quarter ended September 30, 2006.
Quarterly Report on Form 10-QSB for the quarter ended December 31, 2006.
Quarterly Report on Form 10-QSB for the quarter ended March 31, 2007.
 
 

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EXHIBIT A

NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER
THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE
APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

PURCHASE FORM

Dated: __________, 20 ___

The undersigned hereby irrevocably elects to exercise the within Warrant to the
extent of purchasing  shares of Common Stock and hereby makes payment of
$_______ in payment of the actual exercise price thereof.

_________________
 
INSTRUCTIONS FOR REGISTRATION OF STOCK

Name  ______________________________________________________
(Please typewrite or print in block letters)

Signature  ___________________________________________________

Social Security or Employer Identification No.  _______________________

ASSIGNMENT FORM

FOR VALUE RECEIVED, _________________________________
hereby sells, assigns and transfer unto
Name  ______________________________________________________
(Please typewrite or print in block letters)

Address  ____________________________________________________

Social Security or Employer Identification No.  ________________________

 
 

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The right to purchase Common Stock represented by this Warrant to the extent of
_______ shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint  attorney to transfer the same on the books of the
Company with full power of substitution.

Dated: __________, 20 __
 
Signature  ___________________________________________________

 
 

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EXHIBIT B

Amend the Certificate of Designations to designate 353,000 shares of the
authorized Preferred Stock of the Corporation as Series B Convertible Preferred
Stock.

* * * *

Amendment to Section 6(b) of the Certificate of Designations {new language in
italics}:
 
(iii) authorize the issuance of more than 300,000,000 shares of Common Stock
directly by amendment of the certificate of incorporation or indirectly by
reverse stock-split, merger or other device or create, or authorize the creation
of, or issue or obligate itself to issue shares of, any additional class or
series of capital stock unless the same ranks junior to the Series B Preferred
Stock with respect to the distribution of assets on the liquidation, dissolution
or winding up of the Corporation, the payment of dividends and redemption
rights, or increase the authorized number of shares of Series B Preferred Stock
or increase the authorized number of shares of any additional class or series of
capital stock unless the same ranks junior to the Series B Preferred Stock with
respect to the distribution of assets on the liquidation, dissolution or winding
up of the Corporation, the payment of dividends and redemption rights.
 
 

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