10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

■  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended June 30, 2017

OR

□TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from                              to                         

Commission file number:     000-53662

IRONCLAD ENCRYPTION CORPORATION

(Exact name of registrant as specified in its charter)

Nevada	81-0409475
(State or other jurisdiction of incorporation  or organization)	(I.R.S. Employer Identification No.)
One Riverway, 777 South Post Oak Lane, Suite 1700, Houston, Texas	77056
(Address of principal executive offices)	(Zip Code)

(888) 362-7972

(Issuer's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filings for the past 90 days.    Yes ■  No  □

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ■  No  □

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.

Large accelerated filer     □		Accelerated filer	□
Non-accelerated filer       □	Do not check if a smaller reporting company)	Smaller reporting company	■
		Emerging Growth Company	□

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes □ No ■

APPLICABLE ONLY TO CORPORATE ISSUERS:

State the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:  As of the close of business on August 10, 2017, there were 66,008,195 shares of Class A Common Stock and 1,538,872shares of Class B Common Stock issued and outstanding.

1

IRONCLAD ENCRYPTION CORPORATION AND SUBSIDIARY

Table of Contents

SIGNATURES

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

IRONCLAD ENCRYPTION CORPORATION AND SUBSIDIARY (Previously named Butte Highlands Mining Company) CONDENSED CONSOLIDATED BALANCE SHEETS
	June 30,		December 31,
	2017		2016
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	250,000	$	50,682
Prepaid expenses and deposits		25,000		-
Total current assets		275,000		50,682
Other assets
Patents, net		79,786		68
Total assets	$	354,786	$	50,750
Liabilities and Stockholders' Equity (Deficit)
Current liabilities
Accounts payable	$	60,284	$	-
Accrued interest		103		4,142
Accrued liabilities		177,367		12,539
Advances payable to related party		-		10,662
Total current liabilities		237,754		27,343
Other liabilities
Convertible debt		-		210,000
Total  liabilities		237,754		237,343
Commitments and contingencies		-		-
Stockholders' equity (deficit)
Preferred stock, $0.001 par value, 20,000,000 shares authorized;       none issued and outstanding		-		-
Common stock, Class A, $0.001 par value, 500,000,000 shares       authorized; 66,008,195 and 56,655,891shares issued and          outstanding, respectively		66,008		56,656
Common stock, Class B, $0.001 par value, 1,707,093 shares       authorized; 1,538,872 and 0 shares issued and outstanding,          respectively		1,539		-
Additional paid-in capital		4,604,676		31,900
Subscriptions receivable		-		(81,481)
Accumulated deficit		(4,555,191)		(193,668)
Total stockholders' equity (deficit)		117,032		(186,593)
Total liabilities and stockholders' equity (deficit)	$	354,786	$	50,750

The accompanying notes are an integral part of these financial statements.

3

IRONCLAD ENCRYPTION CORPORATION AND SUBSIDIARY (Previously named Butte Highlands Mining Company) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2017		2016		2017		2016
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Revenues	$	-	$	-	$	-	$		-
Operating expenses
Product development costs		327,749		-		332,842			-
General and administrative		294,856		6,690		1,579,661			9,234
Officer and director fees		901,684		-		1,569,730			-
Investor relations		519,409		-		759,050			-
Professional fees		79,573		-		118,261			-
Amortization		7		8		15			15
Total operating expenses		2,123,278		6,698		4,359,559		9,249
Loss from operations		(2,123,278)		(6,698)		(4,359,559)			(9,249)
Other income (expense)
Interest income		232		-		112			-
Interest expense		-		-		(2,076)			-
Total other income (expense)		232		-		(1,964)			-
Loss before taxes		(2,123,046)		(6,698)		(4,361,523)			(9,249)
Income taxes
Income tax benefit		-		-		-			-
Income tax expense		-		-		-			-
Total income tax		-		-		-			-
Net loss	$	(2,123,046)	$	(6,698)	$	(4,361,523)	$		(9,249)
Net loss per commons     share, basic and diluted	$	(0.03)	$	(6.70)	$	(0.07)	$		(9.25)
Weighted average number of     common stock shares (in     2017) or member units (in     2016) outstanding, basic and    diluted		67,488,739		1,000		65,682,253			1,000

The accompanying notes are an integral part of these financial statements.

4

IRONCLAD ENCRYPTION CORPORATION AND SUBSIDIARY (Previously named Butte Highlands Mining Company) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	Six Months Ended
	June 30,
	2017		2016
	(Unaudited)		(Unaudited)
Cash flows from operating activities
Net loss	$	(4,361,523)	$	(9,249)
Adjustments to reconcile net income (loss) to net cash provided             (used) by operating activities:
Amortization expense		15		15
Common stock issued for services, investor relations		236,250		-
Stock options issued for services, development		65,092		-
Stock options issued for services, general and administrative		1,258,648		-
Stock options issued for officers and directors		1,458,730		-
Stock options issued for services, investor relations		390,170		-
Changes in assets and liabilities:
Increase in prepaid expenses and deposits		(25,000)		-
Increase in accounts payable		60,284		8,592
Increase in accrued liabilities		164,828		-
Decrease in accrued interest		(4,039)		-
Net cash used by operating activities		(756,545)		(642)
Cash flows from investing activities
Patent applications		(79,733)		-
Net cash used by investing activities		(79,733)		-
Cash flows from financing activities
Advances payable to related party		(227)		700
Proceeds from issuances of common stock		983,693		-
Conversion of options		3,750		-
Cash received from merger		48,380		-
Net cash provided by financing activities		1,035,596		700
Increase in cash and cash equivalents		199,318		58
Cash, beginning of period		50,682		-
Cash, end of period	$	250,000	$	58
Supplemental Cash Flow Information
Interest paid	$	6,115	$	-
Income taxes paid	$	-	$	-
Common stock issued to retire convertible debt	$	210,000	$	-

The accompanying notes are an integral part of these financial statements.

5

IRONCLAD ENCRYPTION CORPORATION AND SUBSIDIARY

(Previously named Butte Highlands Mining Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Organization, Recent History, and Description of Businesses-Past and Present

History and Recent Transaction

The “Company” is the term used in these statements and notes to refer to the entity originally incorporated in the State of Delaware back in 1929 and recently reincorporated to the State of Nevada.  The registered name of the Company until early in 2017 was Butte Highlands Mining Company (“Butte”).  The name of the Company has been changed to IronClad Encryption Corporation (“IronClad”).

Butte was formed to explore and mine primarily for gold in the Butte Highlands’ “Only Chance” mine, south of Butte, Montana.  The Company was reorganized in October 1996 for the purpose of acquiring and developing additional mineral properties.  At the time of the 1996 reorganization, stockholders representing approximately 76% of the outstanding capital stock could not be located.  In order to obtain the quorum necessary for the special meetings of shareholders to authorize the reorganization, Butte obtained an order from the Superior Court of Spokane County, Washington appointing a trustee for the benefit of those stockholders who could not be located.

By May 17, 2007, eleven years after the reorganization and very limited results from its mining activities, the Company had disposed of all of its historical mineral properties or claims and eventually became a “shell company” under the rules of the Securities and Exchange Commission (“SEC”).

Now, following ten years of being a shell company with only nominal activity and limited cash or other assets, the business focus of Butte changed early in 2017.  Most notably the Company raised significant capital to implement its new business and financial plans to further develop the licensing and commercial use of its patented encryption software.  The change caused Butte to lose its previous shell company status.

The Company also changed its legal name of registration and state of incorporation to more appropriately reflect the fundamental change of its business to developing cyber encryption technology and away from its historical mining activities.  The terms “Company”, “IronClad” and “Butte” all refer to the same individual corporate entity, but the uses of the IronClad and Butte names are used to refer to different eras of the Company’s long history.  The historical eras generally coincide with the changes in business focus before and after the first weeks of 2017.

The business changes are a result of a common stock exchange transaction, accounted for as a “reverse merger”, between Butte and the owners of InterLok Key Management, Inc. (“InterLok”; at the time an independent and privately-held Texas corporation) whereby InterLok became a wholly-owned subsidiary of Butte.  Butte issued shares of its common stock in exchange for acquiring all of the common stock of InterLok.  At present, InterLok is the one and only subsidiary of the Company and InterLok’s patents and line of business now become the main basis of the business of the Company on a consolidated basis.

Along with the Company’s change of business came the Company’s adoption of IronClad Encryption Corporation (and the discontinuance of using the Butte name) as the name of what is now the parent corporation and the change of the state of incorporation to Nevada from Delaware.  The Company also has changed its stock market ticker symbol to “IRNC” from “BTHI” on one of the OTC Markets Group over-the-counter markets, OTC QB, where the Company’s shares have been and continue to be traded.

6

IRONCLAD ENCRYPTION CORPORATION AND SUBSIDIARY

(Previously named Butte Highlands Mining Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Description of Businesses—Present and Past

InterLok Key Management, Inc. (formerly InterLok Key Management, LLC) is a company in the business of developing and licensing the use of cyber software technology that encrypts data files and electronic communications.   Electronic file information and data transmissions are safeguarded from unauthorized access and their use is securely protected by perpetual authentication through the use of a single-key, dynamic synchronization of authentications keys.  InterLok was formed in Texas on June 12, 2006 and incorporated ten years later on June 16, 2016.

On January 6, 2017 InterLok entered into a Share Exchange Agreement ("Share Exchange") with Butte Highlands Mining Company.  Under the terms of the agreement, the shareholders of InterLok Key Management, Inc. exchanged all 56,655,891 outstanding shares of InterLok’s common stock for 56,655,891 shares of Class “A” common stock of Butte Highlands Mining Company.

The Share Exchange was treated as a “reverse merger” with InterLok Key Management, Inc. which is deemed--for accounting recognition purposes—as the accounting acquirer and Butte Highlands Mining Company deemed the accounting acquiree under the acquisition method of accounting. The reverse merger is deemed a recapitalization and the consolidated financial statements represent the substantive continuation of the operations and thus the financial statements of its subsidiary InterLok Key Management, Inc., while the capital structure (in terms of authorized preferred and common stock) of Butte Highlands Mining Company remains intact.

Principles of consolidation

The accompanying unaudited consolidated financial statements include the accounts of IronClad and its one subsidiary which is wholly-owned.  All intercompany accounts and transactions have been eliminated in consolidation.  The above unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information.

Accordingly, these unaudited interim consolidated financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements and the rules of the SEC.  These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2016.

In the opinion of management, the unaudited interim consolidated financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim periods presented.  Operating results for the six month period ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

Note 2 – Summary of Significant Accounting Policies

This summary of significant accounting policies is presented to assist in understanding the Company’s interim consolidated financial statements. The financial statements and notes are representations of the Company’s management which is responsible for their integrity and objectivity.  These accounting policies conform to accounting principles generally accepted in the United States and have been consistently applied in the preparation of the financial statements.

7

IRONCLAD ENCRYPTION CORPORATION AND SUBSIDIARY

(Previously named Butte Highlands Mining Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Going Concern

As shown in the accompanying financial statements, the Company has incurred cumulative operating losses since inception. As of June 30, 2017, the Company has limited financial resources with which to achieve its objectives and attain profitability and positive cash flows from operations. As shown in the accompanying balance sheets and statements of operations, the Company has an accumulated deficit of $4,555,191.  The Company's working capital (current assets minus current liabilities) is $37,246.

Achievement of the Company's objectives will depend on its ability to obtain additional financing, to generate revenue from current and planned business operations, and to effectively manage product and software development, operating and capital costs. The Company is in a development stage and has generated no operating revenue, profits or positive cash flows from operations.

The Company plans to fund its future operations by potential sales of its common stock or by issuing debt securities.  However, there is no assurance that IronClad will be able to achieve these objectives, therefore substantial doubt about its ability to continue as a going concern exists. The financial statements do not include adjustments relating to the recoverability of recorded assets nor the implication of associated bankruptcy costs should IronClad be unable to continue as a going concern.

Fair Value Measures

The Company's financial instruments, as defined by the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 825-10-50 Financial Instruments—Overall (and subtopics), include cash, receivables, accounts payable and accrued expenses.  All instruments are accounted for on an historical cost basis, which, due to the short maturity of these financial instruments, approximates their fair values at June 30, 2017 and at December 31, 2016.

The standards under ASC 820 Fair Value Measurementdefine fair value, establish a framework for measuring fair value in accordance with generally accepted accounting principles, and expand disclosures about fair value measurements.  ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

·

Level 1.  Observable inputs such as quoted prices in active markets;

·

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

·

Level 3.  Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The Company did not have any assets measured at fair value other than cash and deposits at June 30, 2017 and at December 31, 2016.

Provision for Income Taxes

Income taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25 Income Taxes – Recognition.  Under the approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis amounts of assets and liabilities and their financial reporting amounts at each period-end.  A valuation allowance is recorded against deferred tax asset amounts if management does not believe the Company has met the “more likely than not” standard imposed by ASC 740-10-25-5 to allow recognition of such an asset.  See Note 8.

8

IRONCLAD ENCRYPTION CORPORATION AND SUBSIDIARY

(Previously named Butte Highlands Mining Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Capitalization of Patent and Trademark Costs

The Company capitalizes its legal, patent agent and related filing fees and costs associated with the patents it holds and is developing.  The amounts are carried as an intangible asset in the financial statements.  The costs of the patents or trademarks are written off ratably (expensed) over the expected useful technological or economic life of the individual assets.  The legal life of a patent is typically about 17 years.  See Note 3.

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified to provide greater line item detail for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations.  This change in classification has no effect on previously reported cash flows in the Condensed Consolidated Statement of Cash Flows, and had no effect on the previously reported Condensed Consolidated Statement of Operation for any period.

New Accounting Requirements and Disclosures

Accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

Note 3 – Patents

Patents and trademarks are as follows:

	June 30, 2017		June 30, 2016
Patents and trademarks under development	$                   79,733	$                        -
Patents issued	398	398
Less accumulated amortization	(345)	(315)
	53	83
Patents, net	$                   79,786	$                     83

Amortization expense for intangible assets during the six month periods ended June 30, 2017 and 2016 was $7 and $8, respectively.  Three patents expire in 2017, 2018 and 2021, respectively. Costs totaling $79,733 for new patents and trademarks under development (but as yet not awarded) are capitalized at June 30, 2017.  The patents and trademarks under development will not be amortized until formally issued.

Note 4 – Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At June 30, 2017 and 2016, the Company had no amounts on deposit in excess of the FDIC insured limit.

9

IRONCLAD ENCRYPTION CORPORATION AND SUBSIDIARY

(Previously named Butte Highlands Mining Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 5 – Related Party Transactions

The Company paid $15,249 in consulting fees during 2016 to Eagle Mountain 21, LLC, an entity owned by an officer of the Company.  At December 31, 2016 the Company owed an additional $10,662 amount to that same officer for operating costs incurred and submitted for reimbursement during 2016.  Reimbursement to the officer was made at the start of the quarter ended June 30, 2017.

Note 6 – Convertible Notes Payable

On June 26, 2017 IronClad entered into a Securities Purchase Agreement to issue a 12% convertible note payable for an aggregate principal amount of $78,500 with the intent of meeting certain conditions precedent to closing and funding on or before July 7, 2017.  The closing conditions were met prior to that date and the convertible note payable was closed and funded on July 6, 2017.  The Company received cash proceeds of $75,000 net of transaction costs of $3,500.  See also Note 11.

On August 8, 2016, InterLok issued two 5% convertible senior promissory notes for a principal amount of $30,000 each and, on August 16, 2016, issued one 5% convertible senior promissory note for $150,000 for an aggregate principal amount of $210,000.  Interest costs accrued on the unpaid principal balances at five percent (5%) annually until the principal amount and all interest accrued thereon was paid at the earlier of 1) the maturity date two years later on August 8, 2018 or August 16, 2018, respectively, or 2) on the conversion of the notes into shares of common stock at a price equal to a conversion price of $0.15 per share.

The notes automatically converted into shares of common stock at a conversion price of $0.15 per share, subject to adjustment under certain circumstances in the event of an acquisition transaction or a public offering event.  The Company could not enter into an acquisition or public offering event without the prior written approval of any of the note holders.  If any holder declined to provide approval for an acquisition transaction or public offering, the Company could have immediately prepaid the entire outstanding principal amounts and accrued interest amounts on the notes.  Two of the notes contained the option to purchase additional shares of common stock.

During the period ended March 31, 2017, the principal balances of all three 5% convertible senior promissory notes were converted into 1,400,000 shares of IronClad Class A common stock.  Accrued interest of $6,115 on the notes was paid in cash during the quarter ended June 30, 2017.

Note 7 – Common Stock

During the three month period ended March 31, 2017, i) the Company issued 5,843,954 shares of its Class A common stock at $0.15 per share for cash in the amount of $876,597 ($35,343 of which was only subscribed and still receivable at December 31, 2016), and ii) 75,000 shares at $0.15 per share for investment banking services in the amount of $11,250.

Additionally, i) the three convertible note holders converted $210,000 into 1,400,000 shares of Class A common stock, and ii) 250,000 shares were issued pursuant to the Share Exchange Agreement at $0.03 per share.  Also, iii) subscriptions receivable that were outstanding at December 31, 2016 in the amount of $81,481 were collected.

10

IRONCLAD ENCRYPTION CORPORATION AND SUBSIDIARY

(Previously named Butte Highlands Mining Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

During the three month period ended June 30, 2017, the Company issued i) 240,333 shares of Class A common stock at $0.15 per share for cash in the amount of $36,050 pursuant to a Section 4(a)2 private placement offering, ii) 25,000 shares at $0.15 per share for the conversion of stock options (see Note 10), and iii) 75,000 shares at $2.90 per share for investment banking services valued at $217,500.

Note 8 – Income Taxes

Income taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25 Income Taxes – Recognition.  Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end.  A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard required by ASC 740-10-25-5.

Deferred income tax amounts reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes.

Significant components of the deferred tax asset amounts at an anticipated tax rate of 35% for the periods ended June 30, 2017 and December 31, 2016 are as follows:

	June 30, 2017	December 31, 2016
Net operating loss carryforwards	$  1,397,919	$    193,668
Deferred tax asset	$     489,271	$      67,780
Valuation allowance for deferred asset	(489,271)	(67,780)
Net deferred tax asset	$                -	$               -

At June 30, 2017, the Company has net operating loss carryforwards of approximately $1,397,919 which will begin to expire in the year 2033.  The increase in the allowance account amount (and also in the deferred tax asset amount) from December 31, 2016 to June 30, 2017 was $421,491.

IronClad is subject to federal level income taxes under the jurisdiction of the US, but is not subject to income taxes at any state level.  Tax periods that may still be subject to review by the Internal Revenue Service are the years 2014, 2015, and 2016.  The Company has not identified any aggressive tax positions.

Note 9 – Share Exchange Agreement

On January 6, 2017, the Company entered into a Share Exchange Agreement with InterLok Key Management, Inc. wherein Butte agreed to issue 56,655,891 restricted shares of Butte’s common stock in exchange for 100% of the outstanding shares of InterLok Key Management, Inc. common stock.  InterLok Key Management, Inc. is engaged in the business of developing and licensing its patented key-based encryption methods.

On January 6, 2017, Butte completed its Share Exchange Agreement with the owners of InterLok, and issued 56,655,891 restricted shares of Butte’s common stock to 29 persons and entities in exchange for all of the outstanding shares of InterLok Key Management, Inc.’s common stock.  Immediately following completion of the share exchange agreement the Company’s new board of directors elected, through a series of board

11

IRONCLAD ENCRYPTION CORPORATION AND SUBSIDIARY

(Previously named Butte Highlands Mining Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

resolutions and regulatory filings, to change the Company’s name to IronClad Encryption Corporation from Butte, to move the Company to Nevada from Delaware, and to change its stock trading symbol to IRNC from BTHI.

The Share Exchange was treated as a reverse merger with InterLok Key Management, Inc. deemed, for accounting recognition purposes, the accounting acquirer and Butte Highlands Mining Company deemed the accounting acquiree under the acquisition method of accounting.  The reverse merger is deemed a recapitalization and the unaudited pro forma consolidated financial statements represent the substantive continuation of the operations and thus the financial statements of InterLok Key Management, Inc., while the capital structure (with respect to authorized, issued and outstanding shares of preferred and common stock) of Butte Highlands Mining Company--now using the name IronClad--remains intact.

Note 10 – Stock Options

During the three month period ended March 31, 2017, the Company awarded 1,145,000 stock options for services and conversions of convertible notes valued at $1,305,565 and 9,000,000 stock options to officers of IronClad valued at $622,045.  Of the total 10,145,000 options awarded, 1,045,000 vested immediately and received full expense recognition in the three month period ended March 31, 2017.  The remaining 9,883,470 options vest periodically over the subsequent three years and will be expensed as they periodically vest.

In addition, 25,000 stock options that were awarded during the three month period ending March 31, 2017 were exercised for cash in the amount of $3,750.

During the three month period ended June 30, 2017, the Company awarded 2,945,000 stock options for services valued at $4,657,850 (using the Black-Scholes option pricing model) and 500,000 stock options to an officer of IronClad valued at $731,659 (using the Black-Scholes option pricing model).  Of the total 3,445,000 options awarded during the period 85,000 vested immediately and received full expense recognition during the three month period ended June 30, 2017.  The remaining 3,360,000 options vest periodically over the next two to four years and will be expensed as they periodically vest.

The fair value of stock options is estimated on the date of each award using the Black-Scholes option pricing model to value the stock option based on its terms and conditions.  The table below summarizes the assumptions used to estimate the fair values of the options:

Number of Options	Date Issued	Exercise Price	Risk-free Interest Rate	Volatility	Life of Option in years
75,000	01/16/17	$0.75	1.54%	226.01%	3.00
6,000,000	01/20/17	$0.15	1.54%	220.00%	3.00
3,000,000	01/20/17	$0.15	1.54%	220.00%	4.00
350,000	01/31/17	$0.15	1.19%	132.84%	1.93
100,000	02/01/17	$0.15	1.22%	134.90%	2.00
100,000	03/13/17	$0.15	1.40%	144.84%	2.00
500,000	03/15/17	$0.15	1.02%	114.94%	1.40
20,000	03/21/17	$0.15	1.54%	233.07%	3.00
1,700,000	05/05/17	$1.47	1.71%	565.34%	4.00
1,000,000	05/05/17	$1.47	1.32%	202.99%	2.00
80,000	05/31/17	$0.75	1.44%	196.06%	3.00
660,000	06/12/17	$2.50	1.64%	589.85%	4.00
5,000	06/30/17	$3.49	1.55%	197.13%	3.00
13,590,000

12

IRONCLAD ENCRYPTION CORPORATION AND SUBSIDIARY

(Previously named Butte Highlands Mining Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 11 – Subsequent Events

On July 6, 2017 IronClad closed and funded on an agreement to issue a 12% convertible note payable.  IronClad entered into the Securities Purchase Agreement on June 26, 2017 to issue the note payable for an aggregate principal amount of $78,500 with the intent of subsequently meeting certain conditions precedent to closing and funding on or before July 7, 2017.  The closing conditions precedent were met prior to that date and the convertible note payable was closed, issued and funded on July 6, 2017.  The Company received cash proceeds of $75,000 net of transaction costs of $3,500.

The note matures on March 30, 2018 and interest costs accrue on the unpaid principal balance at 12% annually until March 30, 2018, and after that interest accrues annually at 22% until the principal amount and all interest accrued and unpaid are paid.

The holder of the note, at his sole election, may convert the note into shares of common stock of the Company at any time during the period beginning on the date which is one hundred and eighty days following the date of the note (dated June 26, 2017) and ending on the later of i) the maturity date, or ii) the date of payment of a default amount, if any.

The shares to be issued are a function of a variable conversion price which is 65% of a market price defined to be the lowest one trading price for the Company’s common stock during the fifteen day trading period ending on the last trading day prior to exercising the conversion right.  The company will keep available authorized shares reserved, initially 289,846 shares, but in any event authorized shares equal to six times the number of shares that would be issuable upon full conversion of the note from time to time.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement on Forward-looking Information

This report contains “forward-looking statements” within the meaning of Section 27 A of the Securities Act of 1933, as amended, and Section 21 E of the Securities Exchange Act of 1934, as amended.  Forward-looking statements include statements concerning plans, objectives, goals, strategies, expectations, future events or performance and underlying assumptions and other statements which are other than statements of historical facts.

Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “plan,” “project,” “anticipate,” “estimate,” “believe,” or “think.” Forward-looking statements involve risks and uncertainties which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements.  We assume no duty to update or revise our forward-looking statements based on changes in plans or expectations or otherwise.

As used herein, references to “Company”, “IronClad,” “Butte”, “we,” “us,” and “our” refer to IronClad Encryption Corporation and its subsidiary (InterLok Key Management, Inc., “InterLok”) on a consolidated basis.  The terms “Company”, “IronClad” and “Butte” all refer to the same corporate entity, but the use of the IronClad and Butte names are used to refer to different eras of the Company’s long history.  The historical eras generally coincide with the changes in business focus in the first weeks of 2017 from its historical mining activities to its current encryption technology activities.

Some sections of this management’s discussion and analysis of our financial condition and results of operations may contain forward-looking statements.  This document and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance.

The forward-looking statements in this document are based upon various assumptions, and although we believe that these assumptions were reasonable when made, these statements are not guarantees of future performance and are subject to certain risks and uncertainties, some of which are beyond our control, and are difficult to predict.  Actual results could differ materially from those expressed in forward-looking statements.   Readers are cautioned not to place undue reliance on any forward-looking statements, which reflect management’s view only as of the date of this report.

Overview

History and Recent Transaction and Changes

The “Company” is the term used in this report to refer to the entity originally incorporated in the State of Delaware back in 1929 and recently reincorporated to the State of Nevada.  The registered name of the Company until early in 2017 was Butte Highlands Mining Company (“Butte”).  The name of the Company has been changed to IronClad Encryption Corporation (“IronClad”).

The business focus of the Company was changed early in 2017 and its legal name of registration and state of incorporation were changed to IronClad to reflect the fundamental change of its business to encryption technology and away from its historical mining activities.

The business changes are a result of a common stock exchange transaction, accounted for as a “reverse merger”, between Butte and the owners of InterLok Key Management, Inc. (“InterLok”; a privately-held Texas corporation) whereby InterLok became a wholly-owned subsidiary of Butte.  Butte issued shares of its common stock in exchange for acquiring all of the common stock of InterLok.  At present, InterLok is the one and only subsidiary of the Company and InterLok’s line of business now becomes the main business of the Company on a

14

consolidated basis.  The former directors and officers of InterLok have become the principal directors and officers of IronClad.

Along with the Company’s change of business came the Company’s adoption of IronClad Encryption Corporation (and the discontinuance of using the Butte name) as the name of what is now the parent corporation and the change of the state of incorporation to Nevada from Delaware.  The Company also has changed its stock market ticker symbol to “IRNC” from “BTHI” on one of the over-the-counter markets, OTCQB, where the Company’s shares have been and continue to be traded.

Typical of a reverse merger transaction that IronClad completed on January 6, 2017 is the loss of its status as a shell company.  At that time IronClad filed on a “super” Form 8-K (and Form 8-K/A) the appropriate information including the financial statements of InterLok as the accounting acquirer.

As of June 30, 2017, IronClad continues to qualify as a smaller reporting company as it has in the past and up to the present.  IronClad is now a development stage company as it commits more and more of its resources to financial planning, capital raising, research and development, establishing US manufacturing supply sources for its planned products, applying for additional encryption-related patents, recruiting and training staff, identifying and developing potential markets, and commissioning production and testing of prototype communication equipment and cyber software.

Description of the Company’s Businesses—Past (as Butte) and Present (as IronClad)

The original business purpose of the Company, Butte, was to explore and mine the Butte Highlands’ “Only Chance” mine located south of Butte, Montana.

Butte was reorganized in October 1996 for the purpose of acquiring and developing additional mineral properties.  As of the date of the 1996 reorganization, stockholders representing approximately 76% of the outstanding common stock could not be located.  In order to obtain the quorum necessary for the special shareholder meetings to approve the reorganization, the Company obtained an order from the Superior Court of Spokane County, Washington which appointed a trustee for the benefit of those stockholders who could not be located.

By May 17, 2007 the Company had disposed of all of its historical mineral properties and claims, and became a shell company.

On January 6, 2017, ten years after being inactive, the Company changed the focus of its business away from mining to encryption and information technology when Butte acquired all of the ownership interests of InterLok Key Management, Inc., a Texas corporation.  InterLok Key Management, Inc. had been engaged in the business of developing and licensing its patented key-based encryption methods.

On January 6, 2017, Butte entered into and completed a Share Exchange Agreement with the owners of InterLok Key Management, Inc., wherein Butte agreed to issue 56,655,891 restricted shares of its common stock to 29 individuals or entities in exchange for 100% of the outstanding shares of InterLok Key Management, Inc.’s common stock.  As a result of the share exchange InterLok Key Management, Inc. became a wholly-owned subsidiary of IronClad Encryption Corporation.

Immediately following completion of the share exchange agreement, Butte’s new board of directors changed Butte’s name to IronClad Encryption Corporation, reincorporated Butte from the state of Delaware to the state of Nevada and changed Butte’s stock trading symbol as listed on the over-the-counter market, OTCQB, to “IRNC” from “BTHI”.

15

Review of First Quarter and Comparative Results and Liquidity

Results of Operations

Three months ended June 30, 2017 compared to Three months ended June 30, 2016

During the three month period ended June 30, 2017, the Company had a net loss of $2,123,046 compared to a net loss of $6,698 during the three month period ended June 30, 2016.  This represents an increased net loss of $2,116,580 during the three month period ended June 30, 2017. The increase in net loss is attributable to an increase in costs for software and new patent development costs, general and administrative expenses, officer and director fees, and professional fees during the three month period ended June 30, 2017.  Many of the costs incurred were non-cash and were recognized as compensation expenses in connection with the issuance of IronClad common stock or stock options.

The $327,749 of product development costs incurred during the quarter (and which also represents most of the year to date development costs incurred of $332,842) are primarily related to research and development costs for cyber encryption software and prototype products being developed and tested.  Of those costs incurred (both for the quarter and for the period year to date) $65,092 was recognized as compensation expense in connection with the issuance of stock options.

Six months ended June 30, 2017 compared to Six months ended June 30, 2016

During the six month period ended June 30, 2017, the Company had a net loss of $4,361,523 compared to a net loss of $9,249 during the six month period ended June 30, 2016.  This represents an increased net loss of $4,325,247 during the six month period ended June 30, 2017 compared to the same prior year period. The increase in net loss for the six month period is similar to that for the three month period ended June 30, 2017 in that the increases are attributable to an increase in costs for software and new patent development costs, general and administrative expenses, officer and director fees, and professional fees during the six month period ended June 30, 2017.  Many of the costs incurred were non-cash in that they were recognized as compensation expense in connection with the issuance of IronClad common stock or stock options.

General and administrative expenses recognized for the six month period were $1,597,661 of which $1,258,648 was recognized as compensation expense in connection with the issuance of stock options.  Similarly, of the $1,569,730 of officer and director expenses recognized, $1,458,730 was recognized as compensation expense in connection with the issuance of stock options.

Investment banking fees and investor relation costs totaled $739,050.  Of the expenses incurred, $236,250 was paid for by directly issuing common stock and another $390,170 of the expenses was recognized as compensation expense in connection with the issuance of issuing stock options.  Most of expenses and especially those related to equity-based payments were made for investment banking related services targeted at raising capital for the Company.

Recent Accounting Pronouncements

Recent accounting pronouncements which may affect the Company are described in Note 2 — “New Accounting Requirements and Disclosures” in Part I, Item 1 — “Financial Statements” of this Quarterly Report.

Liquidity and Capital Resources

The Company’s working capital (current assets minus current liabilities) at June 30, 2017 was $37,246 compared to working capital of $23,339 at December 31, 2016. Working capital increased primarily due to the sale of unregistered common stock of IronClad.

As of the date of this filing the Company’s cash balances are less than the $250,000 total at June 30, 2017, and are less than the combined sum of its accounts payable and accrued liabilities.  As a result, and absent additional cash inflows, we do not have adequate capital resources to continue to meet all of our current and

16

future obligations as they may come due over the next quarter and next twelve months.  Being able to continue with our operations will depend on our obtaining additional resources by issuing either debt or equity securities.

No assurance can be given that any of these actions can be completed.

Net cash used in operating activities was $756,545 during the six month period ended June 30, 2017 compared with $642 during the six month period ended June 30, 2016.  The uses of cash for operations are described above in the discussions of results of operations.

Cash flow used by investing activities was $79,733 for the six month period ended June 30, 2017 and zero for the six month period ended June 30, 2016.  The costs primarily relate to new patent applications and related filing costs.

Cash flow from financing activities was $1,035,596 for the six month period ended June 30, 2017, compared to $700 for the six month period ended June, 2016.  The single largest element of the cash source for the six month period ended June 30, 2017 relates to the cash raised during the quarter ended March 31, 2017 in a private placement of unregistered IronClad common stock for gross proceeds of approximately $1,086,593.

As a net result of all cash flow activities, cash increased by $199,318 during the six month period ended June 30, 2017.  The Company had cash of $250,000 as of June 30, 2017.  Cash at the beginning of the period at December 31, 2016 was $50,682.

Off-Balance Sheet Arrangements

There are no off-balance sheet agreements or understandings, preliminary or otherwise, between the Company and its officers and directors or affiliates or lending institutions with respect to any loan agreements.

Item 3. Quantitative and Qualitative Disclosures about Market Risks

All of our transactions are within the United States of America, our functional currency is the US dollar and consequently we have no exposure to risks associated with foreign currencies.  We have no debt at June 30, 2017 and thus have no exposure to interest rate risk.  We do not believe our exposure to these or similar financial instrument market risks to be material.

Item 4.  Control and Procedures

a)           Evaluation of Disclosure Controls and Procedures

During the first quarter of 2017 the Company underwent a reverse merger with InterLok and experienced a complete change in board membership and executive officer leadership.  As a result it changed from a shell corporation to an active operational entity and is in the process of implementing more efficient and effective disclosure controls and procedures. This is an evolving process, and leadership continues to update and evaluate its policies, though an official evaluation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)) has not been completed as of June 30, 2017.

Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including the Principal Executive Officer and the Principal Financial Officer, to allow timely decisions regarding required disclosures.

17

b)           Changes in Internal Control over Financial Reporting

Since transitioning from a shell corporation to an active operating company, additional staff and constant policy and procedural assessments have continued to improve our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the period ended June 30, 2017.  Since we are a developing company these processes are continually evolving.  Nevertheless, management has identified at least two material weaknesses in internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The material weaknesses identified are:

·

Lack of appropriate Independent Oversight.  The board of directors has not provided an appropriate level of independent oversight of the Company’s consolidated financial reporting and procedures for internal control over financial reporting.  The independent directors do not provide oversight of the adequacy of financial reporting and internal control procedures.

·

Lack of sufficient staffing and full-time personnel.  Without sufficient staffing it is not possible to ensure appropriate segregation of duties between incompatible functions, and formalized monitoring procedures have not been established or implemented.

As a result of these material weaknesses in internal control over financial reporting The Company’s management has concluded that as of June 30, 2017 the Company’s internal control over financial reporting was not effective based on the criteria in Internal Control – Integrated Framework by COSO - 2013.

18

PART II – OTHER INFORMATION

Item 1.  Legal Proceedings

  None

Item 1A.  Risk Factors

Risks associated with the Market

We lack an operating history, have never had revenues, have no current prospects for significant future revenues, and have losses which we expect to continue into the future. As a result, we may have to suspend or cease operations.

The Company, formerly named Butte Highlands Mining Company, was incorporated on May 3, 1929 for the purpose of mining.  On January 6, 2017, Butte completed an exchange of restricted shares of Butte’s common stock for 100% of the capital stock of InterLok Key Management, Inc., a Texas corporation, and changed Butte’s business focus from mining to patented encryption technology.  The Company, especially InterLok, has no recent profitable operating history upon which an evaluation of our future success or failure can be made. Losses incurred are a result of costs incurred from the issuance of stock and, re-incorporation between states, and legal and accounting costs. We have never had revenues and we do not have any current prospects for future revenues. Our ability to achieve and maintain profitability and positive cash flow is dependent upon:

o

our ability to sell encryption software licenses and related hardware

o

our ability to generate revenues and cash flows from the sale of encryption software and hardware

o

our ability to manage software development and operating costs.

Based on current plans, we expect to incur operating losses and negative cash flows from operations in future periods. This will happen because the costs and expenses associated with the research and development of encryption applications are likely to exceed modest operating revenues (if any) in the near future.

As a result, we may not generate revenues, profits or positive net cash flows in the future.  Failure to generate revenues or positive cash flows from operating activities could cause us to suspend or cease operations.

Because we are small and do not have much capital, we may have to limit our development activity which may result in a loss of the value of your investment.

Because we are small and do not have much capital, we must limit our development activity. As such we may not be able to complete a software and hardware development program that is as complete or thorough as we would like or as might be expected from potential customers.  Therefore, we have not considered and will not consider any activity beyond developing and generating revenue related to our current patented technology.

Because our Chief Technology Officer has other outside business activities he will only be devoting 70% of his time or approximately thirty hours per week to our operations.

19

Risks associated with the Company

Because our officers and directors will own more than 50% of the outstanding shares they will control the company and will be able to decide who will be directors.  As a result you may not be able to otherwise elect any directors.

Need for substantial additional capital.

We are in need of additional capital, without which our ability to continue as a going concern will be jeopardized. In order to fund our ongoing, day-to-day operations, we will continue to require significant amounts of additional capital, and the failure to obtain such additional capital will materially adversely affect our operations. Monthly cash outflow is approximately $200,000 to support operations, administrative expenses, and the development of products and services.  In order to effectively implement our plan of operation, we will need to raise at least an additional $1,000,000.

There is no assurance that we will be successful in raising additional capital. If we raise additional capital through the sale of common stock, you could experience dilution. If we are unsuccessful in raising such additional capital, you could lose the entire value of your investment.

FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock.

The Financial Industry Regulation Authority (“FINRA”) has adopted rules that apply to broker/dealers in recommending an investment to a customer. The broker/dealers must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative, low-priced securities such as ours to their non-institutional customers, broker/dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information.

Under interpretations of these rules, FINRA believes that there is a high probability that speculative, low-priced securities such as ours will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker/dealers to recommend buying our common stock to their customers and this may have the effect of reducing the level of trading activity and liquidity of our common stock. Further, many brokers charge higher transactional fees for penny stock transactions such as buying our common stock. As a result, fewer broker/dealers may be willing to make a market in our common stock thus reducing our stockholder’s ability to resell shares of our common stock.

Our future sales of our common shares could cause our stock price to decline.

There is no restriction on our ability to issue additional shares. We cannot predict the effect, if any, that market sales of our common shares or the availability of shares for sale will have on the market price prevailing from time to time. Sales by us of our common shares in the public market, or the perception that our sales may occur, could cause the trading price of our stock to decrease or to be lower than it might be in the absence of those sales or perceptions.

The market price of our common stock may be volatile.

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 the factors that may cause the market price of our common stock to fluctuate include:

o

fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;

o

changes in estimates of our financial results or recommendations by securities analysts;

o

failure of any of our products to achieve or maintain market acceptance;

o

changes in market valuations of similar companies;

20

o

significant products, contracts, acquisitions or strategic alliances of our competitors;

o

success of competing products or services;

o

changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;

o

regulatory developments;

o

litigation involving our company, our general industry or both;

o

additions or departures of key personnel;

o

investors’ general perception of us; and

o

changes in general economic, industry or market conditions.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

During the period beginning January 30, 2017 and ending March 31, 2017 the Company issued restricted equity securities 1) as part of a private placement to accredited investors to whom the Company sold 7,243,954 shares of Class A common stock for approximately $876,593 in cash net of transaction costs, and 2) as part of a conversion to common stock for $210,000 of convertible notes.

During the month of April 2017, as part of the same private placement, the Company sold an additional 240,333 restricted shares of Class A common stock to three accredited investors for $36,050 in cash.  The private placement offering was subsequently closed on April 20, 2017.

On June 26, 2017 IronClad entered into a Securities Purchase Agreement to issue a 12% convertible note payable for an aggregate principal amount of $78,500 with the intent of meeting certain conditions precedent to closing and funding on or before July 7, 2017.  The closing conditions were met prior to that date and the convertible note payable was closed and funded on July 6, 2017.  The Company received cash proceeds of $75,000 net of transaction costs of $3,500 and will use the proceeds for general corporate purposes.

The private placement, sale and issuance of the units and common shares were not registered under the Securities Act of 1933, as amended (“Securities Act”), or the securities laws of any state, and are subject to resale restrictions and may not be offered or sold in the United States absent registration under the Securities Act or an applicable exemption from such the registration requirements in accordance with all applicable state securities laws.  The issuances of securities has been determined to be exempt from registration in reliance on Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder, as transactions by an issuer not involving a public offering, in which the investors are accredited and have acquired the securities for investment purposes only and not with a view to or for sale in connection with any distribution thereof.

Item 3.  Defaults Upon Senior Securities.

  Not applicable.

Item 4.  Mine Safety Disclosures

  Not applicable:  As of May 17, 2007 the Company had disposed of all of its mineral properties or claims.

Item 5.  Other Information.

  Stock Purchase Agreement Between Historical and New Owners and Officers

In an agreement dated June 20, 2016 and related to eventually setting up the reverse merger transaction governed by the Share Exchange Agreement (entered into and closed later on January 6, 2017), Mr. Paul A. Hatfield, at the time an officer and shareholder of Butte, entered into a Stock Purchase Agreement with Mr. James D. McGraw, of Houston, Texas and now the President of IronClad.  Mr. McGraw was instrumental in negotiating the definitive letter of intent to enter into the Share Exchange Agreement.

21

Pursuant to the terms of the Stock Purchase Agreement, Mr. McGraw or his assigns were granted the right to purchase from Mr. Hatfield a maximum of 500,000 shares of Butte that were personally owned by Mr. Hatfield at a price of $0.15 per share.  The Stock Purchase Agreement is effective for a period of twenty-four months commencing upon the closing of the Share Exchange Agreement transaction that was contemplated by the letter of intent.

22

Item 6.  Exhibits

	Exhibit Number		Description
3.1 *				Amended and Restated Articles of Incorporation of IronClad Encryption Corporation, dated June 29, 2017
3.2 *				Bylaws of IronClad Encryption Corporation (Composite as Amended), dated June 29, 2017
4.1 *				Form of Common Stock Certificate (Class A) of IronClad Encryption Corporation
10.01*				IronClad Encryption Corporation 2017 Equity Incentive Plan effective as of January 6, 2017
10.02*				Form of Stock option Agreement (Incentive and Non-Qualified Stock Options) under IronClad Encryption Corporation 2017 Equity Incentive Plan
10.03*				Securities Purchase Agreement by and between IronClad Encryption Corporation and PowerUp Lending Group, Ltd. dated June 26, 2017
10.04*				Convertible Promissory Note (principal amount of $78,500) pursuant to Securities Purchase Agreement by and between IronClad Encryption Corporation and PowerUp Lending Group, Ltd. dated June 26, 2017
10.05*+				Employment Agreement by and between IronClad Encryption Corporation and Jeff B. Barrett effective as of January 6, 2017
10.06*+				Employment Agreement by and between IronClad Encryption Corporation and Daniel M. Lerner effective as of January 6, 2017
10.07*+				Employment Agreement by and between IronClad Encryption Corporation and James D. McGraw effective as of January 6, 2017
10.08*+				Employment Agreement by and between IronClad Encryption Corporation and Len E. Walker effective as of January 6, 2017
10.09*+				Employment Agreement by and between IronClad Encryption Corporation and David G. Gullickson effective as of May 1, 2017
10.10*+				Employment Agreement by and between IronClad Encryption Corporation and Monty R. Points effective as of May 1, 2017
10.11*+				Employment Agreement by and between IronClad Encryption Corporation and Randall W. Rice effective as of June 1, 2017
31.1 *				Certification of Principal Executive Officer of IronClad Encryption Corporation required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 *				Certification of Principal Financial Officer of IronClad Encryption Corporation required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 **				Certification of Principal Executive Officer of IronClad Encryption Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)
32.2 **				Certification of Principal Financial Officer of IronClad Encryption Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)
	101.INS*		XBRL Instance Document
	101.SCH*		XBRL Taxonomy Extension Schema Document
	101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
	101.DEF*	XBRL Taxonomy Extension Definitions Linkbase Document
	101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
	101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

*   Filed herewith.

** Furnished herewith.

+   Management contract or compensatory plan or arrangement.

23

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

IronClad Encryption Corporation

(Registrant)

   /s/ James D. McGraw                        

James D. McGraw

President and Principal Executive Officer

Dated:  August 21, 2017

   /s/ David G. Gullickson                     

David G. Gullickson

Vice President of Finance, Treasurer, and

Principal Financial and Accounting Officer

Dated:  August 21, 2017

24

Index to Exhibits

Exhibit Number		Description
3.1 *		Amended and Restated Articles of Incorporation of IronClad Encryption Corporation, dated June 29, 2017
3.2 *		Bylaws of IronClad Encryption Corporation (Composite as Amended), dated June 29, 2017
4.1 *		Form of Common Stock Certificate (Class A) of IronClad Encryption Corporation
10.01*		IronClad Encryption Corporation 2017 Equity Incentive Plan effective as of January 6, 2017
10.02*		Form of Stock option Agreement (Incentive and Non-Qualified Stock Options) under IronClad Encryption Corporation 2017 Equity Incentive Plan
10.03*		Securities Purchase Agreement by and between IronClad Encryption Corporation and PowerUp Lending Group, Ltd. dated June 26, 2017
10.04*		Convertible Promissory Note (principal amount of $78,500) pursuant to Securities Purchase Agreement by and between IronClad Encryption Corporation and PowerUp Lending Group, Ltd. dated June 26, 2017
10.05*+		Employment Agreement by and between IronClad Encryption Corporation and Jeff B. Barrett effective as of January 6, 2017
10.06*+		Employment Agreement by and between IronClad Encryption Corporation and Daniel M. Lerner effective as of January 6, 2017
10.07*+		Employment Agreement by and between IronClad Encryption Corporation and James D. McGraw effective as of January 6, 2017
10.08*+		Employment Agreement by and between IronClad Encryption Corporation and Len E. Walker effective as of January 6, 2017
10.09*+		Employment Agreement by and between IronClad Encryption Corporation and David G. Gullickson effective as of May 1, 2017
10.10*+		Employment Agreement by and between IronClad Encryption Corporation and Monty R. Points effective as of May 1, 2017
10.11*+		Employment Agreement by and between IronClad Encryption Corporation and Randall W. Rice effective as of June 1, 2017
31.1 *		Certification of Principal Executive Officer of IronClad Encryption Corporation required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 *		Certification of Principal Financial Officer of IronClad Encryption Corporation required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 **		Certification of Principal Executive Officer of IronClad Encryption Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)
32.2 **		Certification of Principal Financial Officer of IronClad Encryption Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definitions Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.

*   Filed herewith.

** Furnished herewith.

+   Management contract or compensatory plan or arrangement.

25

EX-3

Exhibit 3.1

AMENDED AND RESTATED

 ARTICLES OF INCORPORATION

 OF

IRONCLAD ENCRYPTION CORPORATION

Pursuant to the provision of the Nevada Business Corporation Act, ss.78.010, et. seq. the undersigned corporation hereby adopts the following Articles of Incorporation as follows:

ARTICLE I

NAME

The name of this corporation is IRONCLAD ENCRYPTION CORPORATION

ARTICLE II

DURATION

This corporation has perpetual existence.

ARTICLE III

CORPORATION PURPOSES

The purpose or purposes for which the Corporation is organized are all things necessary or convenient to carry out any lawful business, as well as those itemized under Chapter 78 of Nevada Revised Statutes, including any amendments thereto or successor statute that may hereinafter be enacted.

ARTICLE IV

CAPITALIZATION

Section 1: Aggregate Number of Shares

The total number of shares which the Corporation shall have authority to issue is 521,707,093 having a par value of $0.001 per share of which (a) 20,000,000 shares shall be Preferred Stock, (b) 500,000,000 shares shall be Class A Common Stock, and (c) 1,707,093 shares shall be Class B Common Stock.

Section 2: Rights of Preferred Stock

The Preferred Stock may be issued from time to time in one or more series and with such designation for each such series as shall be stated and expressed in the resolution or resolutions providing for the issue of each such series adopted by the Board of Directors. The Board of Directors in any such resolution or resolutions is expressly authorized to state and express for each such series:

(i)

The voting powers, if any, of the holders of stock of such series;

(ii)

The rate per annum and the times at and conditions upon which the holders of stock of such series shall be entitled to receive dividends, and whether such dividends shall be cumulative or noncumulative and if cumulative the terms upon which such dividends shall be cumulative;

(iii)

The price or prices and the time or times at and the manner in which the stock of such series shall be redeemable and the terms and amount of any sinking fund provided for the purchase or redemption of shares;

(iv)

The rights to which the holders of the shares of stock of such series shall be entitled upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation;

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(v)

The terms, if any, upon which shares of stock of such series shall be convertible into, or exchangeable for, shares of stock of any other class or classes or of any other series of the same or any other class or classes, including the price or prices or the rate or rates of conversion or exchange and the terms of adjustment, if any; and

(vi)

Any other designations, preferences, and relative participating, optimal or other special rights, and qualifications, limitations or restrictions thereof so far as they are not inconsistent with the provisions of the Articles of Incorporation, as amended, and to the full extent now or hereafter permitted by the laws of Nevada.

Section 3: Rights of Common Stock

The Common Stock may be issued from time to time in one or more Classes and with such designation for each such Classes as shall be stated and expressed in the resolution or resolutions providing for the issue of each such Classes adopted by the Board of Directors. The Board of Directors in any such resolution or resolutions is expressly authorized to state and express for each such Class:

(i)

The voting powers, if any, of the holders of stock of such Class;

(ii)

The rate per annum and the times at and conditions upon which the holders of stock of such Class shall be entitled to receive dividends, and whether such dividends shall be cumulative or noncumulative and if cumulative the terms upon which such dividends shall be cumulative;

(iii)

The terms, if any, upon which shares of stock of such series shall be convertible into, or exchangeable for, shares of stock of any other class or classes or of any other series of the same or any other class or classes, including the price or prices or the rate or rates of conversion or exchange and the terms of adjustment, if any; and

(iv)

Any other designations, preferences, and relative participating, optimal or other special rights, and qualifications, limitations or restrictions thereof so far as they are not inconsistent with the provisions of the Articles of Incorporation, as amended, and to the full extent now or hereafter permitted by the laws of Nevada.

ARTICLE V

PREEMPTIVE RIGHTS

Except as may otherwise be provided by the Board of Directors, no preemptive rights shall exist with respect to shares of stock or securities convertible into shares of stock of this corporation.

ARTICLE VI

NO CUMULATIVE VOTING

Each shareholder entitled to vote at any election for Directors shall have the right to vote, in person or by proxy, one vote for each share of stock owned by such shareholder for as many persons as there are Directors to be elected and for whose election such shareholder has a right to vote, and no shareholder shall be entitled to cumulate their votes.

ARTICLE VII

BYLAWS

The Board of Directors shall have the power to adopt, amend or repeal the Bylaws or adopt new Bylaws. Nothing herein shall deny the concurrent power of the shareholders to adopt, alter, amend or repeal the Bylaws.

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ARTICLE VIII

DIRECTORS' LIABILITY

To the full extent from time to time permitted by law, no director of the corporation shall be personally liable to the corporation or its shareholders for damages for conduct as a director.  Neither the amendment or repeal of this Article, nor the adoption of any provision of the Articles of Incorporation inconsistent with this Article, shall eliminate or reduce the protection afforded by this Article to a director of the corporation with respect to any matter which occurred, or any cause of action, suit or claim which but for this Article would have accrued or arisen, prior to such amendment, repeal or adoption.

ARTICLE IX

LIMITATION ON RIGHT TO CALL SPECIAL SHAREHOLDERS' MEETING

Special meetings of stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors, upon not less than 30 nor more than 50 days' written notice to the stockholders of the Corporation.

ARTICLE X

AMENDMENT TO ARTICLES OF INCORPORATION

This corporation reserves the right to amend or repeal any provisions contained in these Articles of Incorporation, in any manner now or hereafter permitted by law, and all rights and powers conferred herein on the shareholders and directors of this corporation are subject to this reserved power.

ARTICLE XI

BOARD OF DIRECTORS

The qualifications, terms, of office, manner of election, time and place of meetings, and powers and duties of the Directors shall be prescribed in the Bylaws.

ARTICLE XII

OFFICER AND DIRECTOR INDEMNITY

The Corporation shall have the power to indemnify its directors, officers, employees and agents to the full extent permitted by Chapter 78 of the Nevada Revised Statutes of the State of Nevada as now in effect or as hereafter amended.

ARTICLE XIII

STATUTES NOT APPLICABLE

The provisions of Nevada Revised Statutes, 78.378 through 787.3793, inclusive, regarding the voting of a controlling interest in stock of a Nevada corporation and sections 78.411 through 78.444, inclusive, regarding combinations with interested stockholders, shall not be applicable to this Corporation.

IN WITNESS WHEREOF, the Corporation has caused these Amended and Restated Articles of Incorporation to be accepted and signed by its President and Chief Executive Officer this 29th day of June 2017.

By:   /s/ James D. McGraw  

James D. McGraw

President / Chief Executive Officer

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EX-3

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Exhibit 3.2

BYLAWS OF

IRONCLAD ENCRYPTION CORPORATION

(Composite As Amended)

ARTICLE 1

REGISTERED OFFICE AND RESIDENT AGENT

The registered office of the corporation shall be located in the State of Nevada at such place as may be fixed from time to time by the officers of the Corporation upon filing such notices as may be required by law, and the resident agent shall have a business office identical with such registered office. Any change in the resident agent or registered office shall be effective upon filing such change with the Office of the Secretary of State of the State of Nevada unless a later date is specified.

ARTICLE 2

STOCKHOLDERS

2.1

Place of Meeting. All meetings of the stockholders shall be held at the principal place of business of the corporation, or at such other place, within or without the State of Nevada, as shall be determined from time to time by the Board, and the place at which any such meeting shall be held shall be stated in the notice of the meeting.

2.2

Annual Meeting. The annual meeting of stockholders for election of Directors and for transaction of such other business as may properly come before the meeting shall be held on the date and at the time fixed, from time to time, by the Board of Directors, provided that there shall be an annual meeting every calendar year. Shareholder annual meetings, may occur through the use of any means of communication by which all stockholders participating can hear each other during the meeting, or by tele-facsimile transmission.

2.3

Special Meetings. Special meetings of stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors, or by the holders of ten percent (10%) of the voting power of the Corporation, upon not less than 30 nor more than 50 days written notice to the stockholders of the Corporation. Shareholder special meetings may occur through the use of any means of communication by which all stockholders participating can hear each other during the meeting, or by tele-facsimile transmission.

2.4

Notice of Meeting.

2.4.1

Annual Meeting. Notice of the time and place of the annual meeting of the stockholders shall be given by delivering personally or by mailing a written or printed notice of the same to each shareholder of record entitled to vote at the meeting, at least ten days and not more than sixty days prior to the meeting.

2.4.2

Special Meeting. At least ten days and not more than fifty days prior to the meeting, written or printed notice of each special meeting of the stockholders, stating the place, day and hour of such meeting and the purpose or purposes for which the meeting is called, shall be delivered personally or mailed to each shareholder of record entitled to vote at such meeting.

2.5

Voting Record. At least ten days before each meeting of the stockholders, a complete record of stockholders entitled to vote at such meeting, or any adjournment thereof, shall be made, arranged in alphabetical order with the address of and number of shares held by each shareholder, which record shall be kept on file at the registered office of the corporation for a period of ten days prior to such meeting. The record shall be kept open at the time and place of such meeting for inspection by any shareholder. Failure to comply with the requirements of this subsection shall not affect the validity of any action taken at a meeting.

2.6

Quorum and Adjourned Meetings. A majority of the voting power of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of the stockholders. If less

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than a majority of the voting power entitled to vote are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. If a quorum is present or represented at a reconvened meeting following such an adjournment, any business may be transacted that might have been transacted at the meeting as originally called. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

2.7

Manner of Acting. Except as may be otherwise provided in the Nevada Business Corporation Act, if a quorum is present, the affirmative vote of the majority of the voting power represented at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless the vote of a greater number is required by these Bylaws, the Articles of Incorporation or the Nevada Business Corporation Act.

2.8

Voting of Shares. Except as otherwise provided in these Bylaws or to the extent voting rights of shares of any class or classes are limited or denied by the Articles of Incorporation, on each matter submitted to a vote at a meeting of stockholders, each shareholder shall have one vote for each share of stock registered in his name in the books of the corporation. Voting by ballot shall not be required for any corporate action except as otherwise provided by Nevada law.

2.9

Fixing of Record Date for Determining Stockholders. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or stockholders entitled to receive payment of any distribution, or in order to make a determination of stockholders for any other purpose, the Board may fix in advance a date as the record date for any such determination. Such record date shall not be more than sixty days, and in case of a meeting of stockholders, not less than ten days prior to the date on which the particular action requiring such determination is to be taken. If no record date is fixed for the determination of stockholders entitled to notice of or to vote at a meeting or to receive payment of a distribution, the date and hour on which the notice of meeting is mailed or on which the resolution of the Board declaring such distribution is adopted, as the case may be, shall be the record date and time for such determination. Such determination shall apply to any adjournment of the meeting.

2.10

Proxies. A shareholder may vote either in person or by written proxy executed by the shareholder or his duly authorized attorney-in-fact. Such proxy shall be filed with the Secretary of the corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution unless otherwise provided in the proxy. Any proxy regular on its face shall be presumed to be valid.

2.11

Waiver of Notice. A waiver of any required shareholder notice signed either before or after the time stated therein for the meeting by the person or persons entitled to such notice shall be equivalent to giving notice.

2.12

Voting for Directors. Except as otherwise provided in the Articles of Incorporation or in these Bylaws, every shareholder of record shall have the right at every stockholders' meeting to one (1) vote for every share standing in his/her name on the books of the Corporation, and the affirmative vote of a majority of the shares represented at a meeting and entitled to vote thereat shall be necessary for the adoption of a motion or for the determination of all questions and business which shall come before the meeting.

2.13

Action by Stockholders without a Meeting.  Any action required or which may be taken at a stockholders meeting may be taken without a meeting if a written consent setting forth the action so taken is signed by the holders of a majority of the voting power of the Corporation entitled to vote with respect to the subject matter thereof. Such consent shall be inserted in the minute book as if it were the minutes of a meeting of the stockholders.  In no instance where action by written consent is authorized need a meeting be called or noticed.

2.14

Action of Stockholders by Communication Equipment. Stockholders may participate in stockholders meetings by means of conference telephone or similar communication equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at a meeting.

2.15

Conduct of Meeting. Meetings of the stockholders shall be presided over by one of the following officers in the order of seniority and if present and acting: The Chairman of the Board, if any; the

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President; a Vice-President; or if none of the foregoing is in office and present and acting, by a chairman to be chosen by the stockholders. The Secretary of the corporation, or in his absence an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present, the chairman of the meeting shall appoint a secretary of the meeting.

2.16

Inspectors and Judges. The Board of Directors in advance of any meeting may, but need not, appoint one or more inspectors of election or judges of the vote, as the case may be, to act at the meeting or any adjournment thereof. If any inspector or inspectors, or judge or judges, are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors or judges.  In case any person who may be appointed as an inspector or judge fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting, or at the meeting by the person presiding thereat. The inspectors or judges, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots and consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate votes, ballots and consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders.  On request of the person presiding at the meeting, the inspector or inspectors or judge or judges, if any, shall make a report in writing of any challenge, question or matter determined by him or them, and execute a certificate of any fact found by him or them.

ARTICLE 3

SHARES

3.1

Issuance of Shares. No shares of stock shall be issued unless authorized by the Board. Such authorization shall include the maximum number of shares to be issued and the consideration to be received for each share. No certificate shall be issued for any share until consideration for such share is fully paid.

3.2

Certificates. Certificates representing shares of the corporation shall be issued in numerical order, and each shareholder shall be entitled to a certificate signed by the President, or a Vice President, and the Secretary or an Assistant Secretary, and may be sealed with the seal of the corporation or a facsimile thereof. The signatures of such officers may be facsimiles if the certificate is manually signed on behalf of a transfer agent, or registered by a registrar, other than the corporation itself or an employee of the corporation. If an officer who has signed or whose facsimile signature has been placed upon such certificate ceases to be such officer before the certificate is issued, it may be issued by the corporation with the same effect as if the person were an officer on the date of issue.

Each certificate of shares shall state:

(a)

that the corporation is organized under the laws of the State of Nevada;

(b)

the name of the person to whom issued; and

(c)

the number and class of shares and the designation of the series, if any, which such certificate represents.

3.3

Transfers.

3.3.1

Record of Transfer.  Transfer of shares shall be made only upon the stock transfer books of the corporation which shall be kept at the registered office of the corporation, its principal place of business, or at the office of its transfer agent or registrar. The Board may, by resolution, open a share register in any state and may employ an agent or agents to keep such register and to record transfers of shares therein.

3.3.2

Requirements for Transfer. Shares of the corporation shall be transferred by delivery of the certificates therefor, accompanied either by an assignment in writing on the back of the certificate, an assignment separate from certificate or a written power of attorney to sell, assign and transfer the same signed by the holder of the certificate. No shares of the corporation shall be transferred on the books of the corporation until the outstanding certificates therefor have been surrendered to the corporation.

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3.4

Registered Owner.

3.4.1

Name of Shareholder. Registered stockholders shall be treated by the corporation as holders in fact of shares standing in their respective names and the corporation shall not be bound to recognize any equitable or other claim to or interest in any share on the part of any other person, whether or not it shall have express or other notice thereof, except as expressly provided below or by the laws of the State of Nevada.

3.4.2

Voting of Shares by Certain Holders. Shares standing in the name of another corporation may be voted by such officer, agent, or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the Board of Directors of such corporation may determine. Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name, if authority to do so be contained in an appropriate order of the court by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.

3.4.3

Certification Procedure. The Board may adopt by resolution a procedure whereby a shareholder may certify in writing to the corporation that all or a portion of the shares registered in the name of such shareholder are held for the account of a specified person or persons. The resolution shall set forth:

(a)

the classification of shareholder who may certify;

(b)

the purpose or purposes for which the certification may be made;

(c)

the form of certification and information to be contained therein;

(d)

if the certification is with respect to a record date or closing of share transfer books, the date by which the certification must be received by the corporation;

(e)

and, such other provisions with respect to the procedure as are deemed necessary or desirable.

3.4.4

Deemed Holder of Record. Upon receipt from the corporation of a certification complying with the procedure, the persons specified in the certification shall be deemed, for the purpose or purposes set forth in the certification, to be the holder of record of the number of shares specified in place of the shareholder making the certification.

3.5

Mutilated, Lost or Destroyed Certificates.  In case of any mutilation, loss or destruction of any certificate of shares, another may be issued in its place on proof of such mutilation, loss or destruction. The Board may impose conditions on such issuance and may require the giving of a satisfactory bond or indemnity to the corporation in such sum as the Board might determine or establish such other procedures as the Board deems necessary.

3.6

Fractional Shares or Scrip. The corporation may: (a) issue fractions of shares which shall entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any assets of the corporation in the event of liquidation; (b) arrange for the disposition of fractional interests by those entitled thereto; (c) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such shares are determined; or (d) issue scrip in registered or bearer form which shall entitle the holder to receive a certificate for a full share upon surrender of scrip aggregating a full share.

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ARTICLE 4

BOARD OF DIRECTORS

4.1

General Powers. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of the Board, except as may be otherwise provided in the Articles of Incorporation or the Nevada Business Corporation Act.

4.2

Number, Tenure and Qualifications. The authorized number of directors of the Corporation shall not be less than one (1), shall be not be an even number, and shall not have a maximum limit.  Each director shall serve for a term ending on the annual meeting following the annual meeting at which such director was elected.  The foregoing notwithstanding, each director shall serve until his successor shall have been duly elected and qualified, unless he shall resign, become disqualified or disabled, or shall otherwise be removed. At each annual election held thereafter, the directors chosen to succeed those whose terms then expire shall be identified, and the terms shall be the same as the directors they succeed.

4.2.1

A majority of the directors at any time in office shall constitute a quorum for the transaction of business, and if at any meeting of the board of directors there shall be less than such a quorum, a majority of those present may adjourn the meeting from time to time. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the board of directors unless a greater number be required by law or by this Amended bylaw.

4.2.2

A director need not be a stockholder. The election of Directors need not be by ballot unless the Bylaws require.

4.3

Vacancies. Subject to the rights of the holders of any series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled by a majority of the remaining directors, though less than a quorum, and directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of the class to which they have been elected expires or, in each case, until their respective successors are duly elected and qualified. No decrease in the number of directors constituting the Board shall shorten the term of any incumbent director. When any director shall give notice of resignation effective at a future date, the Board may fill such vacancy to take effect when such resignation shall become effective.

4.4

Nomination of Directors.  The holders of at least ten percent (10%) of the voting power of the Corporation may nominate an individual for selection as a director.

4.5

Removal of Directors. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any director, or the entire Board of Directors, may be removed from office at any time, but only by the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting power of all of the shares of the Corporation entitled to vote for the election of directors.

4.6

Annual and Regular Meetings. An annual Board meeting shall be held without notice immediately after and at the same place as the annual meeting of stockholders. By resolution, the Board, or any committee thereof, may specify the time and place either within or without the State of Nevada for holding regular meetings thereof without other notice than such resolution.

4.7

Special Meetings. Special meetings of the Board or any committee appointed by the Board may be called by or at the request of the President, the Secretary or, in the case of special Board meetings, any two Directors and, in the case of any special meeting of any committee appointed by the Board, by the Chairman thereof. The person or persons authorized to call special meetings may fix any place either within or without the State of Nevada as the place for holding any special Board or committee meeting called by them.

4.8

Notice of Special Meetings. Notice of a special Board or committee meeting stating the place, day and hour of the meeting shall be given to a Director in writing or orally by telephone or in person. Neither the business to be transacted at, nor the purpose of, any special meeting need be specified in the notice of such meeting.

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4.8.1

Personal Delivery. If notice is given by personal delivery, the notice shall be effective if delivered to a Director at least two days before the meeting.

4.8.2

Delivery by Mail. If notice is delivered by mail, the notice shall be deemed effective if deposited in the official government mail properly addressed to a Director at the Director's address shown on the records of the corporation with postage prepaid at least three days before the meeting.

4.8.3

Oral Notice. If notice is delivered orally, by telephone or in person, the notice shall be deemed effective if personally given to the Director at least one day before the meeting.

4.9

Quorum and Voting.

4.9.2

Action of Board. Except as provided in subsection 4.8.3, the act of the majority of the Directors present at a Board meeting at which there is a quorum shall be the act of the Board, unless the vote of a greater number is required by these Bylaws, the Articles of Incorporation or the Nevada Business Corporation Act. The Directors present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough Directors to leave less than a quorum.

4.9.2

Interest in Transaction.  If a transaction or contract with the corporation in which a Director or officer of the corporation has a direct or indirect interest is authorized, approved, or ratified by a vote of the majority of Directors with no direct or indirect interest in the transaction, then:

(a)

a quorum for purposes of taking such action is present; and

(b)

the act of such majority of disinterested Directors shall constitute the act of the Board.

4.10

Waiver of Notice.

4.10.1

In Writing. Whenever notice is required to be given to any Director or committee member under these Bylaws, the Articles of Incorporation or the Nevada Business Corporation Act, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board or any committee appointed by the Board need be specified in the waiver of notice of such meeting.

4.10.2

By Attendance. The attendance of a Director or committee member at a meeting shall constitute a waiver of notice of such meeting, except where the Director or committee member attends a meeting for the express purpose of objecting to the transaction or any business because the meeting is not lawfully called or convened.

4.11

Presumption of Assent. A Director present at a Board meeting at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless he votes against the matter, unless his dissent is entered in the minutes of the meeting, unless he files his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof, or unless he forwards such dissent by registered mail to the secretary immediately after adjournment of the meeting. Such right to dissent shall not apply to a Director who voted in favor of such action.

4.12

Resignation. Any Director may resign at any time by delivering written notice to the President, Secretary or registered office of the corporation, or by giving oral notice at any Directors or stockholders meeting.

4.13

Executive and Other Committees. The Board, by resolution adopted by a majority of the full Board, may designate from among its members an Executive Committee and one or more other standing or special committees. The Executive Committee shall have and may exercise all the authority of the Board, and other standing or special committees may be invested with such powers, subject to such conditions, as the Board shall see fit; provided that notwithstanding the above, no committee of the Board shall have the authority to: (1) authorize distributions, or the issuance of shares, unless a resolution of the Board, or the Bylaws or the Articles of

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Incorporation expressly so provide; (2) approve or recommend to stockholders actions or proposals required by the Nevada Business Corporation At to be approved by stockholders; (3) fill vacancies on the Board or any committee thereof; (4) amend the Bylaws; (5) fix compensation of any Director for serving on the Board or on any committee thereof; (6) approve a plan of merger, consolidation or exchange of shares not requiring shareholder approval; (7) appoint other committees of the Board or the members thereof; or (8) amend the Articles of Incorporation, except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares adopted by the Board, fix any of the relative rights and preferences of shares of any preferred or special class as permitted under the Nevada Business Corporation Act. All committees so appointed shall keep regular minutes of their meetings and shall cause them to be recorded in books kept for that purpose in the office of the corporation. The designation of any such committee and the delegation of authority thereto shall not relieve the Board, or any member thereof, of any responsibility imposed by law.

4.14

Compensation. The Board of Directors, by affirmative vote of a majority of the Directors then in office, and irrespective of any personal interest of any of its members, may establish reasonable compensation for their services as Directors and such reimbursement for any reasonable expenses incurred in attending Directors' meetings.  The compensation of Directors may be on such basis as is determined by the Board of Directors.  The Board of Directors may also establish compensation for members of standing or special committees of the Board for serving on such committees.

4.15

Action by Board or Committee Without a Meeting. Any action required or which may be taken at a meeting of the Board or a committee thereof may be taken without a meeting if a consent in writing, setting forth the action so taken or to be taken, shall be signed by all Directors or committee members as the case may be.

4.16

Participation of Directors by Communication Equipment. Members of the Board or committees thereof may participate in a meeting of the Board or a committee by means of conference telephone or similar communication equipment allowing all persons participating in the meeting to hear each other at the same time.  Participation by such means shall constitute presence in person at a meeting.

ARTICLE 5

OFFICERS

5.1

Designations. The officers of corporation shall be a President, a Secretary and a Treasurer, each of whom shall be elected by the Board. One or more Vice Presidents and such other officers and assistant officers may be elected or appointed by the Board, such officers and assistant officers to hold office for such period, have such authority and perform such duties as are provided in these Bylaws or as may be provided by resolution of the Board. Any officer may be assigned by the Board any additional title that the Board deems appropriate. The Board may delegate to any officer or agent the power to appoint any such subordinate officers or agents and to prescribe their respective terms of office, authority and duties. Any two or more offices may be held by the same person, except the offices of President and Secretary; provided, however, that if there is only one shareholder, all corporate offices can be held by one individual.

5.2

Election and Term of Office. The officers of the corporation shall be elected annually by the Board at the meeting of the Board held after the annual meeting of the stockholders. If the election of officers is not held at such meeting, such election shall be held as soon thereafter as a Board meeting conveniently may be held. Unless an officer dies, resigns or is removed from office, the officer shall hold office until the next annual meeting of the Board or until his or her successor is elected.

5.3

President. The President shall be the Chief Executive Officer of the corporation and shall have general control and management of the business affairs and policies of the corporation. He or she shall be generally responsible for the proper conduct of the business of the corporation.  The President shall possess the power to sign all certificates, contracts and other instruments of the corporation. The President shall, unless a Chairman of the Board is elected, preside at all meetings of the stockholders and of the Board. The President shall have such other powers and perform such other duties as from time to time may be conferred or imposed upon the President by the Board of Directors.

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5.4

Vice President. During the absence or disability of the President, the Executive Vice Presidents, if any, and the Vice Presidents, if any, in the order designated by the Board, shall exercise all functions of the President. Each Vice President shall have such powers and discharge such duties as may be assigned to him from time to time by the President or the Board.

5.5

Secretary and Assistant Secretaries. The Secretary shall issue notices for all meetings, except notices for special stockholders meetings and special Directors meetings called by those persons so authorized, shall keep minutes of all meetings, shall have charge of the seal and the corporate books, and shall make such reports and perform such other duties as are incident to such office or as are properly required of the Secretary by the Board.  The Assistant Secretary, or Assistant Secretaries in the order designated by the Board, shall perform all duties of Secretary during the absence or disability of the Secretary, and at other times shall perform such duties as are directed by the President or the Board.

5.6

Treasurer. The Treasurer shall have the custody of all monies and securities of the corporation and shall keep regular books of account. The Treasurer shall disburse the funds of the corporation in payment of the just demands against the corporation or as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the Board, from time to time as may be required of the Treasurer, an account of all transactions as Treasurer and of the corporation's financial condition. The Treasurer shall perform other duties incident to his office as are properly required of him by the Board. The Assistant Treasurer, or Assistant Treasurers in the order designated by the Board, shall perform all duties of Treasurer in the absence or disability of the Treasurer, and at other times shall perform such other duties as are directed by the President or the Board.

5.7

Delegation.  In the case of absence or inability to act of any officer of the corporation and, of any person herein authorized to act in the place of such person, the Board may from time to time delegate the powers or duties of such officer to any other officer, Director or person whom it may select.

5.8

Other Officers. The Board may appoint such other officers and agents as it shall deem necessary or expedient, who shall hold offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board.

5.9

Resignation. Any officer may resign at any time by delivering written notice to the President, a Vice President, the Secretary, or the Board, or by giving oral notice at any meeting of the Board. Any such resignation shall take effect at the time specified therein, or if time is not specified, upon delivery thereof and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

5.10

Removal. Any officer or agent elected or appointed by the Board may be removed by the Board whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.

5.11

Vacancies. A vacancy in any office because of death, resignation, removal, disqualification, creation of a new office or any other cause may be filled by the Board for the unexpired portion of the term or for a new term established by the Board.

5.12

Salaries. The salaries of the officers shall be fixed from time to time by the Board or by any person or persons to whom the Board has delegated such authority. No officer shall be prevented from receiving such salary because he or she is also a Director of the corporation.

ARTICLE 6

CONTRACTS, LOANS, CHECKS AND DEPOSITS

6.1

Contracts. The Board may authorize any officer or officers, or agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation. Such authority may be general or confined to specific instances.

6.2

Loans to the Corporation. No loans shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the Board. Such authority may be general or confined to specific instances.

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June 29, 2017

6.3

Loans to Directors. The corporation may not lend money to or guarantee the obligation of a Director unless either (a) the loan or guarantee is approved by the holders of at least a majority of the votes represented by the outstanding shares of all classes entitled to vote thereon, excluding the votes of the benefited Director or, (b) the Board determines that the loan or guarantee benefits the corporation and either approves the specific loan or guarantee or a general plan authorizing loans and guarantees.

6.4

Checks, Drafts, Etc. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, or agent or agents, of the corporation and in such manner as is from time to time determined by resolution of the Board.

6.5

Deposits. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the Board may select.

ARTICLE 7

INDEMNIFICATION OF DIRECTORS AND OFFICERS

7.1

Non-derivative Lawsuits.  This Corporation does hereby indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the Corporation, by reason of the fact that he is or was a director, officer, employee or agent of this Corporation, or is or was serving at the request of this Corporation as director, officer, employee or agent of another corporation, against expenses, including attorneys' fees, judgment, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to a criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent does not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe his conduct was unlawful.

7.2

Derivative Actions. The Corporation does hereby indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of this Corporation, or is or was serving at the request of this Corporation as a director, trustee, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the actions or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation. Indemnification may not be made for any claim, issue or matter as to which such a person shall have been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to this Corporation or for amounts paid in settlement to this Corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper..

7.3

If Director or Officer Prevails. To the extent that a director, trustee, officer, employee or agent of the Corporation has been successful on the merits or otherwise, in defense of any action, suit or proceeding referred to in Sections 7.1. and 7.2 of this Article 7, or in defense of any claim, issue or matter therein, he must be indemnified against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense.

7.4

Approval. Any indemnification under Sections 7.1 and 7.2 of this Article 7, unless ordered by a Court, or advanced pursuant to section 7.5 herein, must be made by the Corporation only as authorized in the specific case upon a determination that the indemnification of the director, trustee, officer, employee or agent is proper in the circumstances. Such determination shall be made

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June 29, 2017

(a)

by the stockholders; or

(b)

by the Board of Directors by majority vote of a quorum consisting of directors who were not parties to such act, suit or proceeding; or

(c)

if a majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding, so orders, by independent legal counsel in a written opinion: or

(d)

if a quorum consisting of directors who were not parties to the act, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion.

7.5

Advances. The expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding shall be paid by this Corporation, as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director, trustee, officer, employee or agent, to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by this Corporation. The provisions of this subsection do not affect any rights to advancement of expenses to which corporate personnel other than directors or officers may be entitled under any contract or otherwise by law.

7.6

Non-Exclusivity. The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this Article 7:

(e)

Does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the Articles of Incorporation or any Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his official capacity or an action in another capacity while holding his office, except that indemnification, unless ordered by a court pursuant to section 7.2 above, may not be made to or on behalf of any director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or knowing violation of the law and was material to the cause of action.

(f)

Continues for a person who has ceased to be a director, trustee, officer, employee or agent and inures to the benefit of the heirs, spouses, executors, and administrators of such a person.

ARTICLE 8

BOOKS AND RECORDS

8.1

Books of Accounts. Minutes. and Share Registrar. The corporation shall keep complete books and records of accounts and minutes of the proceedings of the Board and stockholders and shall keep at its registered office, principal place of business, or at the office of its transfer agent or registrar a share register giving the names of the stockholders in alphabetical order and showing their respective addresses and the number of shares held by each.

8.2

Copies of Resolutions. Any person dealing with the corporation may rely upon a copy of any of the records of the proceedings, resolutions, or votes of the Board or stockholders, when certified by the President or Secretary.

ARTICLE 9

CORPORATE SEAL

The Board may provide for a corporate seal which shall have inscribed thereon the name of the corporation, the year and state of incorporation and the words "corporate seal".

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June 29, 2017

ARTICLE 10

ACCOUNTING FISCAL YEAR

The accounting year of the corporation shall be the calendar year unless a different accounting year is selected by resolution of the Board.

ARTICLE 11

AMENDMENTS

These Bylaws may be altered, amended or repealed and new Bylaws may be adopted by the Board of Directors. The stockholders may also alter, amend and repeal these Bylaws or adopt new Bylaws. All Bylaws made by the Board of Directors may be amended, repealed, altered or modified by the stockholders.

ARTICLE 12

RULES OF ORDER

The rules contained in the most recent edition of Robert's Rules of Order, Newly Revised, shall govern all meetings of stockholders and Directors where those rules are not inconsistent with the Articles of Incorporation, Bylaws, or special rules of order of the Corporation.

ARTICLE 13

REIMBURSEMENT OF DISALLOWED EXPENSES

If any salary, payment, reimbursement, employee fringe benefit, expense allowance payment, or other expense incurred by the Corporation for the benefit of an employee is disallowed in whole or in part as a deductible expense of the Corporation for Federal Income Tax purposes, the employee shall reimburse the Corporation, upon notice and demand, to the full extent of the disallowance. This legally enforceable obligation is in accordance with the provisions of Revenue Ruling 69-115, 1969-1 C.B. 50, and is for the purpose of entitling such employee to a business expense deduction for the taxable year in which the repayment is made to the Corporation. In this manner, the Corporation shall be protected from having to bear the entire burden of disallowed expense items.

IN WITNESS WHEREOF, the Corporation has caused these Composite as Amended By-Laws to be accepted on this 29th day of June 2017.

By:    /s/  Len Walker  

Len Walker

  Secretary / General Counsel

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EX-4

Exhibit 4.1

EX-10

Exhibit 10.1

IRONCLAD ENCRYPTION CORPORATION

2017 EQUITY INCENTIVE PLAN

TABLE OF CONTENTS

Page

SECTION 1.

PURPOSE

1

SECTION 2.

DEFINITIONS

1

SECTION 3.

ADMINISTRATION

6

SECTION 4.

COMMON STOCK SUBJECT TO THE PLAN

7

SECTION 5.

ELIGIBILITY TO RECEIVE AWARDS

8

SECTION 6.

STOCK OPTIONS

8

SECTION 7.

STOCK APPRECIATION RIGHTS

11

SECTION 8.

RESTRICTED STOCK AWARDS

13

SECTION 9.

STOCK BONUS AWARDS

15

SECTION 10.

OTHER STOCK-BASED AWARDS

15

SECTION 11.

CANCELLATION OR RESCISSION OF AWARDS

16

SECTION 12.

LOANS

17

SECTION 13.

SECURITIES LAW REQUIREMENTS

17

SECTION 14.

RESTRICTIONS ON TRANSFER; REPRESENTATIONS OF PARTICIPANT; LEGENDS

17

SECTION 15.

SINGLE OR MULTIPLE AGREEMENTS

18

SECTION 16.

RIGHTS OF A STOCKHOLDER

18

SECTION 17.

NO RIGHT TO CONTINUE EMPLOYMENT OR SERVICE

19

SECTION 18.

WITHHOLDING

19

SECTION 19.

INDEMNIFICATION

19

SECTION 20.

NON-ASSIGNABILITY

19

SECTION 21.

NONUNIFORM DETERMINATIONS

20

SECTION 22.

ADJUSTMENTS

20

SECTION 23.

TERMINATION AND AMENDMENT

20

SECTION 24.

SEVERABILITY

20

SECTION 25.

EFFECT ON OTHER PLANS

21

SECTION 26.

EFFECTIVE DATE OF THE PLAN

21

SECTION 27.

GOVERNING LAW

21

SECTION 28.

GENDER AND NUMBER

21

SECTION 29.

ACCELERATION OF EXERCISABILITY AND VESTING

21

SECTION 30.

MODIFICATION OF AWARDS

21

SECTION 31.

NO STRICT CONSTRUCTION

22

SECTION 32.

SUCCESSORS

22

SECTION 33.

PLAN PROVISIONS CONTROL

22

SECTION 34.

HEADINGS

22

SECTION 35.

CHANGE IN CONTROL

22

SECTION 36.

COMPLIANCE WITH SECTION 409A OF THE CODE

22

-i-

IRONCLAD ENCRYPTION CORPORATION

2017 EQUITY INCENTIVE PLAN

Section 1.

Purpose.  The Ironclad Encryption Corporation 2017 Equity Incentive Plan (the “Plan”) has been established by Ironclad Encryption Corporation, a Nevada corporation (the “Company”), effective (subject to stockholder approval) as of January 6, 2017 (the “Effective Date”), to foster and promote the long-term financial success of the Company and its Subsidiaries and thereby increase stockholder value.  The Plan provides for the Award (as defined in Section 3) of equity incentives to those employees, directors, or officers of, or key advisers or consultants to, the Company or any of its Subsidiaries who are responsible for or contribute to the management, growth or success of the Company or any of its Subsidiaries.  

Section 2.

Definitions.  For purposes of this Plan, the following terms used herein shall have the following meanings, unless a different meaning is clearly required by the context.

2.1

“Board” means the Board of Directors of the Company.

2.2

 “Change in Control” means the occurrence of any of the following:

(a)

the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act)) (a “Person”) of “beneficial ownership” (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (i) the then-outstanding shares of common stock of the Company, assuming conversion of any outstanding preferred stock (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that the following acquisitions shall not constitute a Change in Control:  (A) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (B) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (C) any acquisition by any corporation or other entity pursuant to a reorganization, merger, consolidation or other business combination, if, following such reorganization, merger, consolidation or other business combination, the conditions described in (i), (ii) and (iii) of Section 2.2(c) are satisfied;

(b)

if individuals who, as of the date hereof, constitute the Board of the Company (the “Incumbent Board”) cease for any reason to constitute at least two-thirds of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a two-thirds vote of the directors then constituting the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest subject to Regulation 14A promulgated under the Exchange Act or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

(c)

approval by the stockholders of the Company of a reorganization, merger, consolidation or other business combination, unless following such reorganization, merger, consolidation or other business combination (i) more than 50% of, respectively, the then-outstanding shares of common stock or other equity interests of the corporation or other entity resulting from such reorganization, merger, consolidation or other business combination and the combined voting power of the then-outstanding voting securities of such corporation or other entity entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger, consolidation or other business combination in substantially the same proportions as their ownership, immediately prior to such reorganization, merger, consolidation or other business combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be (for purposes of determining whether such percentage test is satisfied, there shall be excluded from the number of shares or other equity interests and voting securities of the resulting corporation or other entity owned by the Company’s stockholders, but not from the total number of outstanding shares or other equity interests and voting securities of the resulting corporation or other entity, any shares or voting securities received by any such stockholder in respect of any consideration other than shares or other equity interests or voting securities of the Company); (ii) no Person (excluding the Company, any employee benefit plan (or related trust) of the Company, any qualified employee benefit plan of such corporation or other entity resulting from such reorganization, merger, consolidation or other business combination and any Person beneficially owning, immediately prior to such reorganization, merger, consolidation or other business combination, directly or indirectly, 50% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 50% or more of, respectively, the then-outstanding shares of common stock or other equity interests of the corporation or other entity resulting from such reorganization, merger, consolidation or other business combination or the combined voting power of the then-outstanding voting securities of such corporation entitled to vote generally in the election of directors; and (iii) at least two-thirds of the members of the board of directors of the corporation or other entity resulting from such reorganization, merger, consolidation or other business combination were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger, consolidation or other business combination; or

(d)

(i) approval by the stockholders of the Company of a complete liquidation or dissolution of the Company or (ii) the first to occur of (A) the sale or other disposition (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company, or (B) the approval by the stockholders of the Company of any such sale or disposition, other than, in each case, any such sale or disposition to a corporation or other entity, with respect to which immediately thereafter, (1) more than 50% of, respectively, the then-outstanding shares of common stock or other equity interests of such corporation or other entity and the combined voting power of the then-outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same

2

proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be (for purposes of determining whether such percentage test is satisfied, there shall be excluded from the number of shares or other equity interests and voting securities of the transferee corporation or other entity owned by the Company’s stockholders, but not from the total number of outstanding shares and voting securities of the transferee corporation or other entity, any shares or other equity interests or voting securities received by any such stockholder in respect of any consideration other than shares or voting securities of the Company), (2) no Person (excluding the Company and any employee benefit plan (or related trust) of the Company, any qualified employee benefit plan of such transferee corporation or other entity and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, 50% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 50% or more of, respectively, the then-outstanding shares of common stock or other equity interests of such transferee corporation or other entity and the combined voting power of the then-outstanding voting securities of such transferee corporation or other entity entitled to vote generally in the election of directors and (3) at least two-thirds of the members of the board of directors of such transferee corporation or other entity were members of the Incumbent Board at the time of the execution of the initial agreement or action of the board providing for such sale or other disposition of assets of the Company.

Notwithstanding anything to the contrary in the foregoing, a transaction shall not constitute a Change in Control if it is effected for the purpose of changing the place of incorporation or form of organization of the ultimate parent entity (including where the Company is succeeded by an issuer incorporated under the laws of another state, country or foreign government for such purpose and whether or not the Company remains in existence following such transaction) where all or substantially all of the persons or group that beneficially own all or substantially all of the combined voting power of the Company’s voting securities immediately prior to the transaction beneficially own all or substantially all of the combined voting power of the Company in substantially the same proportions of their ownership after the transaction.

2.3

“Code” means the Internal Revenue Code of 1986, as amended.

2.4

“Committee” shall have the meaning provided in Section 3 of the Plan.

2.5

“Common Stock” means the Class A common stock, $0.001 par value per share, of the Company.

2.6

“Continuous Service” means that the Participant’s service with the Company, any Parent Company or any Subsidiary, whether as an employee, officer, director, adviser or consultant, is not interrupted or terminated.  The Participant’s Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders service to the Company, any Parent Company or any Subsidiary as an employee, officer, consultant, adviser or director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s Continuous Service.  For example, a change in status from an employee of the Company to a consultant of

3

any Parent Company or a Subsidiary or a director will not constitute an interruption of Continuous Service.  The Committee, in its sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by the Committee, including sick leave, military leave or any other personal leave; provided, however, that for purposes of determining whether a Stock Option is entitled to Incentive Stock Option status, a Participant’s Continuous Service shall be treated as terminated ninety (90) days after such Participant goes on leave, unless such Participant’s right to return to active work is guaranteed by law or by a contract..

2.7

“Disability” means (a) as it relates to the exercise of an Incentive Stock Option after termination of employment, a disability within the meaning of Section 22(e)(3) of the Code, and (b) for all other purposes, shall have the meaning given that term by the group disability insurance, if any, maintained by the Company for its employees or otherwise shall mean the complete inability of the Participant, [with or] without a reasonable accommodation, to perform his or her duties with the Company, any Parent Company or any Subsidiary on a full-time basis as a result of physical or mental illness or personal injury he or she has incurred, as determined by an independent physician selected with the approval of the Company, any Parent Company or any Subsidiary and the Participant. Notwithstanding the foregoing, in the event an Award issued under the Plan is subject to Section 409A of the Code, then, in lieu of the foregoing definition and solely to the extent necessary to comply with the distribution requirements of Section 409A of the Code, the definition of “Disability” for purposes of such Award shall be the definition of “disability” provided for under Section 409A of the Code and the regulations or other guidance issued thereunder

2.8

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

2.9

“Fair Market Value” means, (i) if the Common Stock is listed on the Nasdaq Stock Market, the last sale price as quoted on the Nasdaq Stock Market on the trading day for which the determination is being made or, in the event that no such sale takes place on such day, the average of the reported closing bid and asked prices on such day, or, (ii) if the Common Stock is listed on a national securities exchange, the last reported sale price on the principal national securities exchange on which the Common Stock is listed or admitted to trading on the trading day for which the determination is being made or, if no such reported sale takes place on such day, the average of the closing bid and asked prices on such day on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or, (iii) if the Common Stock is not quoted on such Nasdaq Stock Market nor listed or admitted to trading on a national securities exchange, then, until such time as the Company completes a public offering of Common Stock pursuant to a registration statement filed with the Securities and Exchange Commission with gross proceeds of not less than $25 million, the volume weighted average closing price for the trading days within the 30 calendar day period (but in no event earlier than January 31, 2017) immediately preceding the date for which the determination is made and thereafter (or earlier if elected by the Committee in its sole discretion) the average of the closing bid and asked prices on the day immediately preceding the date for which the determination is being made in the over-the-counter market as reported by Nasdaq or, (iv) if bid and asked prices for the Common Stock on such day shall not have been reported through Nasdaq, the average of the bid and asked prices for such day as furnished by any New York Stock Exchange member firm regularly making a market in the Common Stock selected for such purpose by the Board or

4

a committee thereof, or, (v) if none of the foregoing is applicable, then the fair market value of the Common Stock as determined in good faith by the Committee in its sole discretion.

2.10

“Immediate Family” shall have the meaning provided in Section 20 of the Plan.

2.11

“Incentive Stock Option” means a stock option granted under the Plan which is intended to be designated as an “incentive stock option” within the meaning of Section 422 of the Code.

2.12

“Non-Qualified Stock Option” means a stock option granted under the Plan which is not intended to be an Incentive Stock Option, including any stock option that provides (as of the time such option is granted) that it will not be treated as an Incentive Stock Option.

2.13

“Other Stock-Based Award” means Awards (other than Stock Options, Stock Appreciation Rights, Restricted Stock Awards, and Stock Bonus Awards) denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of Common Stock and granted pursuant to Section 10.

2.14

“Outside Director” means a member of the Board who is not employed by the Company, any Parent Company or any Subsidiary.

2.15

“Parent Company” means: (i) as it relates to Incentive Stock Options, any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if, at the time of the granting of the Stock Option, each of the corporations other than the Company owns stock possessing 50% or more of the combined voting power of all classes of stock in one of the other corporations in the chain; and (ii) for all other purposes, any corporation (other than the Company) or other entity in an unbroken chain of corporations or other entities ending with the Company if, at the time of the granting of the Stock Option or other Award, each of the corporations or other entities other than the Company owns stock possessing 50% or more of the combined voting power of all classes of stock or other equity interests in one of the other corporations or other entities in the chain.

2.16

“Participant” shall mean any employee, director or officer of, or key adviser or consultant to, the Company, any Parent Company or any Subsidiary to whom an Award is granted under the Plan.

2.17

 “Restricted Stock Award” means an Award of Common Stock made pursuant to Section 8.

2.18

“Stock Appreciation Right” means an Award made pursuant to Section 7.

2.19

“Stock Bonus Award” means an Award made pursuant to Section 9.

2.20

“Stock Option” means any option to purchase Common Stock granted pursuant to Section 6.

2.21

“Subsidiary” means:  (i) as it relates to Incentive Stock Options, any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if,

5

at the time of the granting of the Stock Option, each of the corporations (other than the last corporation in the unbroken chain) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain; and (ii) for all other purposes, a corporation or other entity of which not less than 50% of the total voting power is held by the Company or by a Subsidiary, whether or not such corporation or other entity now exists or is hereafter organized or acquired by the Company or by a Subsidiary .

2.22

“Term of the Plan” means the period beginning on the Effective Date and ending on the earlier to occur of (i) the date the Plan is terminated by the Board in accordance with Section 23 and (ii) the day before the tenth anniversary of the Effective Date.

Section 3.

Administration.  The Plan shall be administered by the Compensation Committee of the Board or such other committee as may be appointed by the Board from time to time for the purpose of administering this Plan, or if no such committee is appointed or acting, the entire Board; provided, however, that the Board, at its discretion or as otherwise necessary to comply with the requirements of Section 162(m), of the Code Rule 16b-3 promulgated under the Exchange Act or to the extent required under applicable law or regulation, and if the Plan is to be administered by a committee, then such committee shall consist of two or more members of the Board, each of whom shall each qualify as a “non-employee director” within the meaning of Rule 16b-3 of the Exchange Act and, if applicable, as an “independent director” under applicable national securities exchange or Nasdaq Stock Market rules, and also qualify as an “outside director” within the meaning of Section l62(m) of the Code and regulations pursuant thereto.  For purposes of the Plan, the Board acting in this capacity or the Compensation Committee described in the preceding sentence shall be referred to as the “Committee.”  The Committee shall have the power and authority to grant to eligible persons pursuant to the terms of the Plan:  (1) Stock Options, (2) Stock Appreciation Rights, (3) Restricted Stock Awards, (4) Stock Bonus Awards, (5) Other Stock-Based Awards, or (6) any combination of the foregoing (collectively referred to as “Awards”).

The Committee shall have authority in its discretion to interpret the provisions of the Plan and to decide all questions of fact arising in its application.  Except as otherwise expressly provided in the Plan, the Committee shall have authority to select the persons to whom Awards shall be made under the Plan; to determine whether and to what extent Awards shall be made under the Plan; to determine the types of Award to be made and the amount, size, terms and conditions of each such Award; to determine the time when the Awards shall be granted; to determine whether, to what extent and under what circumstances Common Stock and other amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the Participant; to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable; and to make all other determinations necessary or advisable for the administration and interpretation of the Plan. The Committee, in its sole discretion, may determine that an Award will be immediately exercisable or vested, in whole or in part, or that all or any portion may not be exercised until a date, or dates, subsequent to its date of grant, or until the occurrence of one or more specified events, including the attainment of performance criteria, subject in any case to the terms of the Plan.  If the Committee imposes conditions upon exercise or vesting, then subsequent to the date of grant, the Committee may, in its sole discretion, accelerate the date on which all or any portion of the Award may be exercised or may vest. Notwithstanding anything

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in the Plan to the contrary, in the event that the Committee determines that it is advisable to grant Awards which shall not qualify for the exception for performance-based compensation from the tax deductibility limitations of Section 162(m) of the Code, the Committee may make such grants or Awards, or may amend the Plan to provide for such grants or Awards, without satisfying the requirements of Section 162(m) of the Code.

Notwithstanding anything in the Plan to the contrary, the Committee also shall have authority in its sole discretion to vary the terms of the Plan to the extent necessary to comply with foreign, federal, state or local law or to meet the objectives of the Plan.  The Committee may, where appropriate, establish one or more sub-plans for this purpose.

All decisions made by the Committee pursuant to the provisions of the Plan shall be final and binding on all persons who participate in the Plan.

All expenses and liabilities incurred by the Committee in the administration and interpretation of the Plan shall be borne by the Company.  The Committee may employ attorneys, consultants, accountants or other persons in connection with the administration and interpretation of the Plan.  The Company, and its officers and directors, shall be entitled to rely upon the advice, opinions or valuations of any such persons.  

Section 4.

Common Stock Subject to the Plan.

4.1

Share Reserve.  Subject to the following provisions of this Section 4 and to such adjustment as may be made pursuant to Section 22, the maximum number of shares available for issuance under the Plan shall be equal to seventy million (70,000,000) shares of Common Stock. The maximum number of shares that may be issued upon the exercise of Incentive Stock Options granted under the Plan shall not exceed thirty-five (35,000,000) shares of Common Stock (as adjusted pursuant to Section 22).  During the terms of the Awards under the Plan, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Awards.

4.2

Source of Shares.  Such shares may consist in whole or in part of authorized and unissued shares or treasury shares or any combination thereof as the Committee may determine.  Except as otherwise provided herein, any shares subject to an option or right granted or awarded under the Plan which for any reason expires or is terminated unexercised, becomes unexercisable, or is forfeited or otherwise terminated, surrendered or cancelled as to any shares, or if any shares are not delivered because an Award under the Plan is settled in cash or the shares are used to satisfy the applicable tax withholding obligation or pay the exercise price of a Stock Option, such shares shall not be deemed to have been delivered for purposes of determining the maximum number of shares of Common Stock available for issuance under the Plan and shall again become eligible for issuance under the Plan.  If the exercise price of any Stock Option granted under the Plan is satisfied by tendering shares of Common Stock to the Company (whether by actual delivery or by attestation and whether or not such surrendered shares were acquired pursuant to any Award granted under the Plan), only the number of shares of Common Stock issued net of the shares of Common Stock tendered shall be deemed delivered for purposes of determining the maximum number of shares of Common Stock available for issuance under the Plan.  No Awards may be granted following the end of the Term of the Plan.

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4.3

Code Section 162(m) Limitation.  The total number of shares of Common Stock for which Stock Options and Stock Appreciation Rights may be granted to any employee during any twelve-month period shall not exceed twelve million (12,000,000) shares in the aggregate (as adjusted pursuant to Section 22).  The total number of shares of Common Stock for which Restricted Stock Awards, Stock Bonus Awards and Other Stock-Based Awards that are intended to constitute “qualified performance-based compensation” under Section 162(m) of the Code may be granted to any employee during any twelve-month period shall not exceed twelve million (12,000,000) shares in the aggregate (as adjusted pursuant to Section 22).  

Section 5.

Eligibility to Receive Awards.  An Award may be granted to any employee, director, or officer of, or key adviser or consultant to, the Company, Parent Company  or any Subsidiary, who is responsible for or contributes to the management, growth or success of the Company, Parent Company or any Subsidiary, provided that bona fide services shall be rendered by consultants or advisers to the Company, Parent Company or its Subsidiaries and, unless otherwise approved by the Committee, such services must not be in connection with the offer and sale of securities in a capital-raising transaction and must not directly or indirectly promote or maintain a market for the Company’s securities.  Subject to the preceding sentence and Section 6.7, the Committee shall have the sole authority to select the persons to whom an Award is to be granted hereunder and to determine what type of Award is to be granted to each such person.  No person shall have any right to participate in the Plan.  Any person selected by the Committee for participation during any one period will not by virtue of such participation have the right to be selected as a Participant for any other period.

Section 6.

Stock Options.  A Stock Option may be an Incentive Stock Option or a Non-Qualified Stock Option.  Only employees of the Company or a Subsidiary are eligible to receive Incentive Stock Options.  To the extent that any Stock Option does not qualify as an Incentive Stock Option, it shall constitute a separate Non-Qualified Stock Option.  Stock Options may be granted alone or in addition to other Awards granted under the Plan.  Except as otherwise expressly provided in Section 6.7, the terms and conditions of each Stock Option granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written Stock Option agreement between the Company and the Participant in such form as the Committee shall approve from time to time or as may be reasonably required in view of the terms and conditions approved by the Committee from time to time.  No person shall have any rights under any Stock Option granted under the Plan unless and until the Company and the person to whom such Stock Option shall have been granted shall have executed and delivered an agreement expressly granting the Stock Option to such person and containing provisions setting forth the terms and conditions of the Stock Option.  The terms and conditions of each Incentive Stock Option shall be such that each Incentive Stock Option issued hereunder shall constitute and shall be treated as an “incentive stock option” as defined in Section 422 of the Code.  The terms and conditions of each Non-Qualified Stock Option will be such that each Non-Qualified Stock Option issued hereunder shall not constitute nor be treated as an “incentive stock option” as defined in Section 422 of the Code or an option described in Section 423(b) of the Code and will be a “non-qualified stock option” for federal income tax purposes.  The terms and conditions of any Stock Option granted hereunder need not be identical to those of any other Stock Option granted hereunder.  The Stock Option agreements shall contain in substance the following terms and conditions and may contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable.

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6.1

Type of Option.  Each Stock Option agreement shall identify the Stock Option represented thereby as an Incentive Stock Option or a Non-Qualified Stock Option, as the case may be.

6.2

Option Price.  The Incentive Stock Option exercise price shall be fixed by the Committee but shall in no event be less than 100% (or 110% in the case of an employee referred to in Section 6.6(ii) below) of the Fair Market Value of the shares of Common Stock subject to the Incentive Stock Option on the date the Incentive Stock Option is granted.  The Non-Qualified Stock Option exercise price shall be fixed by the Committee but shall in no event be less than 100% of the Fair Market Value of the shares of Common Stock subject to the Non-Qualified Stock Option at the time the Stock Option is granted.  

6.3

Exercise Term.  Each Stock Option agreement shall state the period or periods of time within which the Stock Option may be exercised, in whole or in part, which shall be such period or periods of time as may be determined by the Committee, provided that no Stock Option shall be exercisable after ten years from the date of grant thereof (or, in the case of an Incentive Stock Option granted to an employee referred to in Section 6.6(ii) below, such term shall in no event exceed five years from the date on which such Incentive Stock Option is granted).  The Committee shall have the power to permit an acceleration of previously established exercise upon such circumstances and subject to such terms and conditions as the Committee deems appropriate.

6.4

Payment for Shares.  A Stock Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Stock Option agreement by the Participant entitled to exercise the Stock Option and full payment for the shares of Common Stock with respect to which the Stock Option is exercised has been received by the Company.  The Committee, in its sole discretion, may permit the exercise price for any Stock Option to be paid by (i) cash, certified or cashier’s check, bank draft, money order, wire transfer payable to the order of the Company, free from all collection charges; (ii) delivery of shares of Common Stock already owned by the Participant and having a Fair Market Value equal to the aggregate exercise price, or by a combination of cash and shares of Common Stock, in each case to the extent permitted by applicable law and not in violation of any instrument or agreement to which the Company is a party and, unless approved by the Committee, not resulting in a charge to the Company’s reported earnings; or (iii) delivery (including by facsimile or by electronic mail) to the Company or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions from the Participant to a broker or dealer, reasonably acceptable to the Company, to sell certain of the shares of Common Stock purchased upon exercise of the Stock Option or to pledge such shares as collateral for a loan and promptly deliver to the Company the amount of sale or loan proceeds necessary to pay such purchase price and any tax withholding obligations that may arise in connection with such exercise (otherwise known as a “cashless exercise”).  No shares of Common Stock shall be issued to any Participant upon exercise of a Stock Option until the Company receives full payment therefor as described above.  Upon the receipt of notice of exercise and full payment for the shares of Common Stock, the shares of Common Stock shall be deemed to have been issued and the Participant shall be entitled to receive such shares of Common Stock and shall be a stockholder with respect to such shares, and the shares of Common Stock shall be considered fully paid and nonassessable.  No adjustment will be made

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for a dividend or other right for which the record date is prior to the date on which the Common Stock is issued, except as provided in Section 22 of the Plan.  Each exercise of a Stock Option shall reduce, by an equal number, the total number of shares of Common Stock that may thereafter be purchased under such Stock Option.

6.5

Rights upon Termination of Continuous Service.  Subject to the terms of any agreement relating to a Stock Option granted under the Plan, in the event that a Participant’s Continuous Service terminates for any reason, other than for death, Disability, any rights of the Participant under any Stock Option shall immediately terminate; provided, however, that the Participant (or any successor or legal representative) shall have the right to exercise the Stock Option to the extent that the Stock Option was exercisable at the time of termination, until the earlier of (i) the date that is six months after the effective date of such termination of Continuous Service, or such other date as determined by the Committee in its sole discretion, or (ii) the expiration of the term of the Stock Option.

Notwithstanding the foregoing, the Participant (or any successor or legal representative) shall not have any rights under any Stock Option to the extent that such Stock Option has not previously been exercised, and the Company shall not be obligated to sell or deliver shares of Common Stock (or have any other obligation or liability) under such Stock Option if the Committee shall determine in its sole discretion that the Participant’s Continuous Service shall have been terminated for “Cause” (as such term is defined in the Participant’s Stock Option agreement or employment agreement, if any), which determination shall be made in good faith.  If there is a conflict between the definition of Cause as defined in the Participant’s Stock Option agreement and as defined in the Participant’s employment agreement, if any, the most restrictive definition of Cause shall apply unless the employment agreement expressly provides otherwise.  In the event of such determination, the Participant (or any successor or legal representative) shall have no right under any Stock Option, to the extent that such Stock Option has not previously been exercised, to purchase any shares of Common Stock.  Any Stock Option may be terminated entirely by the Committee at the time or at any time subsequent to a determination by the Committee under this Section 6.5 which has the effect of eliminating the Company’s obligation to sell or deliver shares of Common Stock under such Stock Option.  

In the event that a Participant’s Continuous Service terminates because such Participant dies or suffers a Disability prior to the expiration of the Stock Option and without the Participant’s having fully exercised the Stock Option, the Participant or his or her successor or legal representative shall be fully vested in the Stock Option and shall have the right to exercise the Stock Option within the next 12 monthsfollowing such event, or such other period as determined by the Committee in its sole discretion, but not later than the expiration of the term of the Stock Option.

6.6

Special Incentive Stock Option Rules.  Notwithstanding the foregoing, in the case of an Incentive Stock Option, each Stock Option agreement shall contain such other terms, conditions and provisions as the Committee determines necessary or desirable in order to qualify such Stock Option as an Incentive Stock Option under the Code including, without limitation, the following:

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(i)

To the extent that the aggregate Fair Market Value (determined as of the time the Stock Option is granted) of the Common Stock, with respect to which Incentive Stock Options granted under this Plan (and all other plans of the Company, any Parent Company and any Subsidiary) become exercisable for the first time by any person in any calendar year, exceeds $100,000, such Stock Options shall be treated as Non-Qualified Stock Options.

(ii)

No Incentive Stock Option shall be granted to any employee if, at the time the Incentive Stock Option is granted, the employee (by reason of the attribution rules applicable under Section 424(d) of the Code) owns more than 10% of the combined voting power of all classes of stock of the Company or any Parent Company or Subsidiary unless at the time such Incentive Stock Option is granted the Stock Option exercise price is at least 110% of the Fair Market Value (determined as of the time the Incentive Stock Option is granted) of the shares of Common Stock subject to the Incentive Stock Option and such Incentive Stock Option by its terms is not exercisable after the expiration of five years from the date of grant.  

If an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option shall thereafter be treated as a Non-Qualified Stock Option.

6.7

Conversion of Director Fees.  The Board may, at its sole discretion, permit an Outside Director to receive all or a portion of his or her annual retainer fee, any fees for attending meetings of the Board or committees thereof, committee chairmanship fees or any other fees payable to an Outside Director in the form of a Stock Option.  The terms and conditions of such Stock Option, Restricted Stock Award or Other Stock-Based Award, including (without limitation) the method for converting the annual retainer fee or any other fee payable to an Outside Director into a Stock Option, Restricted Stock Award or Other Stock-Based Award, the date of grant, the vesting schedule, if any, and the time period for an Outside Director to elect such a Stock Option, Restricted Stock Award or Other Stock-Based Award shall be determined solely by the Board.  The Board’s decision shall be final, binding and conclusive.

Section 7.

Stock Appreciation Rights.  Stock Appreciation Rights entitle Participants to increases in the Fair Market Value of shares of Common Stock.  The terms and conditions of each Stock Appreciation Right granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written agreement between the Company and the Participant in such form as the Committee shall approve from time to time or as may be reasonably required in view of the terms and conditions approved by the Committee from time to time. The agreements shall contain in substance the following terms and conditions and may contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable.

7.1

Award.  Stock Appreciation Rights shall entitle the Participant, subject to such terms and conditions determined by the Committee, to receive upon exercise thereof an Award equal to all or a portion of the excess of:  (i) the Fair Market Value of a specified number of shares of Common Stock at the time of exercise over (ii) a specified price which shall not be less than 100% of the Fair Market Value of the Common Stock at the time the right is granted.  Such amount may be paid by the Company in cash, Common Stock (valued at its then Fair Market Value) or any combination thereof, as the Committee may determine.  In the event of the

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exercise of a Stock Appreciation Right that is fully or partially settled in shares of Common Stock, the number of shares reserved for issuance under this Plan shall be reduced by the number of shares issued upon exercise of the Stock Appreciation Right.

7.2

Term.  Each agreement shall state the period or periods of time within which the Stock Appreciation Right may be exercised, in whole or in part, subject to such terms and conditions prescribed for such purpose by the Committee, provided that no Stock Appreciation Right shall be exercisable after ten years from the date of grant thereof. The Committee shall have the power to permit an acceleration of previously established exercise terms upon such circumstances and subject to such terms and conditions as the Committee deems appropriate.

7.3

Rights upon Termination of Continuous Service. In the event that a Participant’s Continuous Service terminates for any reason, other than death or Disability, any rights of the Participant under any Stock Appreciation Right shall immediately terminate; provided, however, the Participant (or any successor or legal representative) shall have the right to exercise the Stock Appreciation Right to the extent that the Stock Appreciation Right was exercisable at the time of termination, until the earlier of (i) the date that is three months after the effective date of such termination of Continuous Service, or such other date as determined by the Committee in its sole discretion, or (ii) the expiration of the term of the Stock Appreciation Right.

Notwithstanding the foregoing, the Participant (or any successor or legal representative) shall not have any rights under any Stock Appreciation Right, to the extent that such Stock Appreciation Right has not previously been exercised, and the Company shall not be obligated to pay or deliver any cash, Common Stock or any combination thereof (or have any other obligation or liability) under such Stock Appreciation Right if the Committee shall determine in its sole discretion that the Participant’s Continuous Service shall have been terminated for “Cause” (as such term is defined in the Participant’s Stock Appreciation Right agreement or employment agreement, if any), which determination shall be made in good faith.  If there is a conflict between the definition of Cause as defined in the Participant’s Stock Appreciation Right agreement and as defined in the Participant’s employment agreement, if any, the most restrictive definition of Cause shall apply unless the employment agreement expressly provides otherwise.  In the event of such determination, the Participant (or any successor or legal representative) shall have no right under such Stock Appreciation Right, to the extent that such Stock Appreciation Right has not previously been exercised.  Any Stock Appreciation Right may be terminated entirely by the Committee at the time of or at any time subsequent to the determination by the Committee under this Section 7.3 which has the effect of eliminating the Company’s obligations under such Stock Appreciation Right.  

In the event that a Participant’s Continuous Service terminates because such Participant dies or suffers a Disability prior to the expiration of his or her Stock Appreciation Right and without having fully exercised his or her Stock Appreciation Right, the Participant or his or her successor or legal representative shall be fully vested in the Stock Appreciation Right and shall have the right to exercise any Stock Appreciation Right within the next 12 months following such event, or such other period as determined by the Committee in its sole discretion, but not later than the expiration of the Stock Appreciation Right.

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Section 8.

Restricted Stock Awards.  Restricted Stock Awards shall consist of shares of Common Stock restricted against transfer (“Restricted Stock”) and subject to a substantial risk of forfeiture.  The Committee may, in its sole discretion, grant Restricted Stock at no cost to a Participant or it may establish a cost (the “Purchase Price”), which may be less than or equal to the Fair Market Value of a share of Common Stock on the date of grant, for each share of Restricted Stock granted to a Participant.  The terms and conditions of each Restricted Stock Award granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written agreement between the Company and the Participant in such form as the Committee shall approve from time to time or as may be reasonably required in view of the terms and conditions approved by the Committee from time to time.  The agreements shall contain in substance the following terms and conditions and may contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable.

8.1

Vesting Period.  Restricted Stock Awards shall be subject to the restrictions described in the preceding paragraph over such vesting period as the Committee determines.  To the extent the Committee deems necessary or appropriate to structure the Restricted Stock Awards to constitute “qualified performance-based compensation” under Section 162(m) of the Code, Restricted Stock Awards to any Participant may also be subject to certain conditions with respect to attainment of one or more pre-established performance objectives which shall relate to corporate, subsidiary, division, group or unit performance in terms of growth in gross revenue, earnings per share or ratios of earnings to equity or assets, net profits, stock price, market share, sales or costs.  In order to take into account unforeseen events or changes in circumstances, the Committee may provide that one or more objectively determinable adjustments shall be made to the performance objectives.

8.2

Restriction upon Transfer.  Shares awarded, and the right to vote such shares and to receive dividends thereon, may not be sold, assigned, transferred, exchanged, pledged, hypothecated or otherwise encumbered, except as herein provided or as provided in any agreement entered into between the Company and a Participant in connection with the Plan, during the vesting period applicable to such shares. Notwithstanding the foregoing, and except as otherwise provided in the Plan, the Participant shall have all the other rights of a stockholder including, but not limited to, the right to receive dividends and the right to vote such shares, until such time as the Participant disposes of the shares or forfeits the shares pursuant to the agreement relating to the Restricted Stock Award.

8.3

Certificates.  Any stock certificate issued in respect of shares awarded to a Participant shall be registered in the name of the Participant and deposited with the Company, or its designee, and shall bear the following legend:

“THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE PROVISIONS AND RESTRICTIONS AGAINST TRANSFER) CONTAINED IN THE IRONCLAD ENCRYPTION CORPORATION 2017 EQUITY INCENTIVE PLAN AND A RESTRICTED STOCK AWARD AGREEMENT ENTERED INTO BETWEEN THE REGISTERED

13

OWNER AND IRONCLAD ENCRYPTION CORPORATION  RELEASE FROM SUCH TERMS AND CONDITIONS SHALL BE OBTAINED ONLY IN ACCORDANCE WITH THE PROVISIONS OF THE PLAN AND AGREEMENT, A COPY OF EACH OF WHICH IS ON FILE IN THE OFFICE OF THE SECRETARY OF IRONCLAD ENCRYPTION CORPORATION”

Each Participant, as a condition of any Restricted Stock Award, shall have delivered a stock power, endorsed in blank, relating to the Common Stock covered by such Award.

8.4

Termination of Continuous Service.  Except as otherwise provided in the written agreement relating to the Participant’s Restricted Stock Award, in the event that a Participant’s Continuous Service terminates for any reason, other than death or Disability, any rights of the Participant or his or her successors or legal representatives under any Restricted Stock Award that remains subject to restrictions shall immediately terminate and any Restricted Stock Award with unlapsed restrictions shall be forfeited to the Company without payment of any consideration; provided that, if a Participant paid a Purchase Price in connection with the grant of a share of Restricted Stock, upon forfeiture of such a share of Restricted Stock the Company shall pay to the Participant, as soon as reasonably practicable following such forfeiture, the lesser of (i) the Purchase Price or (ii) the Fair Market Value of a share of Common Stock on the date of forfeiture.  

Unless the written agreement between the Participant and the Company relating to the Restricted Stock Award provides otherwise, in the event that a Participant’s Continuous Service terminates because such Participant dies or suffers a Disability, all remaining shares of a Restricted Stock Award shall no longer be subject to any unlapsed restrictions.

Section 9.

Stock Bonus Awards.  Stock Bonus Awards shall consist of Awards of [fully vested] shares of Common Stock.  

The terms and conditions of each Stock Bonus Award granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written agreement between the Company and the Participant in such form as the Committee shall approve from time to time or as may be reasonably required in view of the terms and conditions approved by the Committee from time to time.  Shares of Common Stock subject to a Stock Bonus Award may be:  (i) subject to additional restrictions (including, without limitation, restrictions on transfer) or (ii) granted directly to a person free of any restrictions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable.

Section 10.

Other Stock-Based Awards.  Other Stock-Based Awards may be awarded, subject to limitations under applicable law and this Plan, that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of Common Stock, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, restricted stock units, purchase rights, convertible or exchangeable debentures, dividend equivalent rights or other rights convertible into shares of Common Stock and Awards valued by reference to the value of securities of or the performance of specified Subsidiaries.  Other Stock-Based Awards may be awarded either alone or in addition to or in

14

tandem with any other Awards under the Plan or any other plan of the Company.  The terms and conditions of each Other Stock-Based Award granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written agreement between the Company and the Participant in such form as the Committee shall approve from time to time or as may be reasonably required in view of the terms and conditions approved by the Committee from time to time.  Each Other Stock-Based Award granted under this Plan must satisfy the requirements of, or be exempt from, Section 409A of the Code.

To the extent the Committee deems necessary or appropriate to structure the Stock-Based Awards to constitute “qualified performance-based compensation” under Section 162(m) of the Code, Other Stock-Based Awards to any Participant may also be subject to certain conditions with respect to attainment of one or more pre-established performance objectives which shall relate to corporate, subsidiary, division, group or unit performance in terms of growth in gross revenue, earnings per share or ratio of earnings to equity or assets, net profits, stock price, market share, sales or costs.  In order to take into account unforeseen events or changes in circumstances, the Committee may provide that one or more objectively determinable adjustments shall be made to the performance objectives.

Section 11.

Cancellation or Rescission of Awards.

(a)

Unless the agreement evidencing an Award specifies otherwise, the Committee may cancel, rescind, suspend, withhold or otherwise limit or restrict any unexpired, unpaid, or deferred Awards at any time if the Participant is not in compliance with all applicable provisions of the applicable Award agreement and the Plan, or if the Participant engages in any “Detrimental Activity.”

For purposes of this Section 11, “Detrimental Activity” shall include:

(i)

the rendering of services for any organization or engaging directly or indirectly in any business which is or becomes competitive with the Company, any Parent Company or any Subsidiary or the willful or intentional breach of any agreement between the Company, a Parent Company or a Subsidiary and the Participant regarding noncompetition with the Company, such Parent Company or such Subsidiary (or the finding by a court or other tribunal that any such agreement regarding noncompetition is unenforceable);

(ii)

the willful or intentional breach of any agreement or policy of the Company, any Parent Company or a Subsidiary regarding the protection and disclosure of the confidential information of the Company, any Parent Company or any Subsidiary;

(iii)

the willful or intentional breach of the provisions of any agreement between the Company, any Parent Company or a Subsidiary and the Participant regarding the protection, declaration or assignment of inventions or the protection, declaration or assignment of copyrights;

(iv)

the willful or intentional breach of the provisions of any agreement between the Company, a Parent Company or a Subsidiary and the Participant prohibiting the Participant from directly or indirectly (i) inducing or attempting to induce any employee of

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the Company, a Parent Company or a Subsidiary to quit employment with the Company, a Parent Company or a Subsidiary; (ii) otherwise interfering with or disrupting the Company’s, a Parent Company’s or a Subsidiary’s relationship with its employees, customers or suppliers; (iii) identifying employees of the Company, a Parent Company or a Subsidiary for any future employer of the Participant; (iv) soliciting, enticing or hiring away any employee of the Company, a Parent Company or a Subsidiary; or (v) hiring or engaging any employee of the Company, a Parent Company or a Subsidiary or any former employee of the Company, a Parent Company or a Subsidiary whose employment with the Company, a Parent Company or a Subsidiary ceased less than one year before the date of such hiring or engagement (or the finding by a court or other tribunal that any such agreement regarding such matters is unenforceable); or

(v)

any activity that may result in termination of the Participant's employment for “Cause” as defined in the Participant’s Award Agreement or an employment agreement between the Company, a Parent Company or a Subsidiary and the Participant.

(b)

Upon exercise, payment or delivery pursuant to an Award, the Participant shall certify in a manner acceptable to the Committee that he or she is in compliance with the terms and conditions of the Plan.  In the event a Participant fails to comply with any applicable provision of the applicable Award agreement and the Plan, or engages in Detrimental Activity, prior to, or during the two years after, any exercise, payment or delivery pursuant to an Award, such exercise, payment or delivery may be rescinded within two years thereafter.  In the event of any such rescission, the Participant shall pay to the Company the amount of any gain realized or payment received as a result of the rescinded exercise, payment or delivery, in such manner and on such terms and conditions as may be required, and the Company shall be entitled to set-off against the amount of any such gain any amount owed to the Participant by the Company, any Parent Company or any Subsidiary.

Section 12.

Loans.  The Committee may, in its sole discretion and to further the purpose of the Plan, provide for loans to persons in connection with all or any part of an Award under the Plan; provided that no Participant who is a non-employee member of the Board or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be issued a loan or an extension of credit arranged by the Company in violation of Section 13(k) of the Exchange Act.  Any loan made pursuant to this Section 12 shall be evidenced by a loan agreement, promissory note or other instrument in such form and which shall contain such terms and conditions (including without limitation, provisions for interest, payment, schedules, collateral, forgiveness, acceleration of such loans or parts thereof or acceleration in the event of termination) as the Committee shall prescribe from time to time.  Notwithstanding the foregoing, each loan shall comply with all applicable laws, regulations and rules of the Board of Governors of the Federal Reserve System and any other governmental agency having jurisdiction.

Section 13.

Securities Law Requirements.  No shares of Common Stock shall be issued upon the exercise or payment of any Award unless and until:

(i)

The shares of Common Stock underlying the Award have been registered under the Securities Act of 1933, as amended (the “Act”), or the Company has

16

determined that an exemption from the registration requirements under the Act is available or the registration requirements of the Act do not apply to such exercise or payment;

(ii)

The Company has determined that all applicable listing requirements of any stock exchange or quotation system on which the shares of Common Stock are listed have been satisfied; and

(iii)

The Company has determined that any other applicable provision of state or Federal law, including without limitation applicable state securities laws, has been satisfied.

Section 14.

Restrictions on Transfer; Representations of Participant; Legends.  Regardless of whether the offering and sale of shares of Common Stock has been registered under the Act or has been registered or qualified under the securities laws of any state, the Company may impose restrictions upon the sale, pledge, or other transfer of such shares, including the placement of appropriate legends on stock certificates, if, in the judgment of the Company and its counsel, such restrictions are necessary or desirable in order to achieve compliance with the provisions of the Act, the securities laws of any state, or any other law.  As a condition to the Participant’s receipt of shares, the Company may require the Participant to represent that such shares are being acquired for investment, and not with a view to the sale or distribution thereof, except in compliance with the Act, and to make such other representations as are deemed necessary or appropriate by the Company and its counsel.  

The Company may, but shall not be obligated to, register or qualify the sale of shares under the Act or other applicable law.  In the event of a public offering of Common Stock or any other securities of the Company, it may be necessary for the Company to restrict for a period of time (during or following the offering process) the transfer of shares of Common Stock issued to a Participant under the Plan (including any securities issued with respect to such shares in accordance with Section 22 of the Plan).  

Section 15.

Single or Multiple Agreements. Multiple forms of Awards or combinations thereof may be evidenced by a single agreement or multiple agreements, as determined by the Committee.

Section 16.

Rights of a Stockholder.  The recipient of any Award under the Plan, unless otherwise expressly provided by the Plan, shall have no rights as a stockholder with respect thereto unless and until shares of Common Stock are issued to him.

Section 17.

No Right to Continue Employment or Service.  Nothing in the Plan or any instrument executed or Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company, Parent Company or any Subsidiary in the capacity in effect at the time the Award was granted or shall affect the right of the Company, Parent Company or any Subsidiary to terminate (i) the employment of an employee with or without notice and with or without cause, (ii) the service of a consultant or adviser pursuant to the terms of such consultant’s or adviser’s agreement with the Company, Parent Company or any Subsidiary, if any or (iii) the service of a director pursuant to the Bylaws of the Company, Parent

17

Company or any Subsidiary and any applicable provisions of the corporate law of the state in which the Company, Parent Company or any Subsidiary is incorporated, as the case may be.

Section 18.

Withholding.The Company’s obligations hereunder in connection with any Award shall be subject to applicable foreign, federal, state and local withholding tax requirements.  Foreign, federal, state and local withholding tax due under the terms of the Plan may be paid in cash or shares of Common Stock (either through the surrender of already-owned shares of Common Stock that the Participant has held for the period required to avoid a charge to the Company’s reported earnings or the withholding of shares of Common Stock otherwise issuable upon the exercise or payment of such Award) having a Fair Market Value equal to the required withholding and upon such other terms and conditions as the Committee shall determine; provided, however, the Committee, in its sole discretion, may require that such taxes be paid in cash; and provided, further, any election by a Participant subject to Section 16(b) of the Exchange Act to pay his or her withholding tax in shares of Common Stock shall be subject to and must comply with Rule 16b-3 of the Exchange Act.

Section 19.

Indemnification.No member of the Board or the Committee, nor any officer or employee of the Company or Parent Company or Subsidiary acting on behalf of the Board or the Committee, shall be personally liable for any action, determination or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Committee and each and any officer or employee of the Company or any Parent Company or any Subsidiary acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination or interpretation.

Section 20.

Non-Assignability.  No right or benefit hereunder shall in any manner be subject to the debts, contracts, liabilities or torts of the person entitled to such right or benefit.  No Award under the Plan shall be assignable or transferable by the Participant except by will, by the laws of descent and distribution and by such other means as the Committee may approve from time to time, and all Awards shall be exercisable, during the Participant’s lifetime, only by the Participant.

However, the Participant, with the approval of the Committee, may transfer an Award other than an Incentive Stock Option for no consideration to or for the benefit of the Participant’s Immediate Family (including, without limitation, to a trust for the benefit of the Participant’s Immediate Family or to a partnership or limited liability company for one or more members of the Participant’s Immediate Family), subject to such limits as the Committee may establish, and the transferee shall remain subject to all the terms and conditions applicable to the Award prior to such transfer.  The foregoing right to transfer Award shall apply to the right to consent to amendments to the Award agreement and, in the discretion of the Committee, shall also apply to the right to transfer ancillary rights associated with the Award.  The term “Immediate Family” shall mean the Participant’s spouse, parents, children, stepchildren, adoptive relationships, sisters, brothers and grandchildren (and, for this purpose, shall also include the Participant).

At the request of the Participant and subject to the approval of the Committee, Common Stock issued under an Award may be issued or transferred into the name of the Participant and his or her spouse jointly with rights of survivorship.

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Except as set forth above or in a Stock Option agreement, any attempted assignment, sale, transfer, pledge, mortgage, encumbrance, hypothecation, or other disposition of an Award under the Plan contrary to the provisions hereof, or the levy of any execution, attachment, or similar process upon an Award under the Plan shall be null and void and without effect.

Section 21.

Nonuniform Determinations.  The Committee’s determinations under the Plan (including without limitation determinations of the persons to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and the agreements evidencing same, and the establishment of values and performance targets) need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated.

Section 22.

Adjustments.  In the event of any change in the outstanding shares of Common Stock, without the receipt of consideration by the Company, by reason of a stock dividend, stock split, reverse stock split or distribution (other than a regular dividend), recapitalization, merger, reorganization, reclassification, consolidation, split-up, spin-off, combination of shares, exchange of shares or other change in corporate structure affecting the Common Stock and not involving the receipt of consideration by the Company, the Committee shall make appropriate adjustments in (a) the aggregate number of and kind of shares of Common Stock (i) available for issuance under the Plan, (ii) for which grants or Awards may be made to any Participant or to any group of Participants (e.g., Outside Directors), (iii) which are available for issuance under Incentive Stock Options, (iv) covered by outstanding unexercised Awards and grants denominated in shares or units of Common Stock, and (v) underlying Stock Options granted pursuant to Section 6.7, (vi) the Code Section 162(m) limitations; (b) the exercise or other applicable price related to outstanding Awards or grants and (c) the appropriate Fair Market Value and other price determinations relevant to outstanding Awards or grants and shall make such other adjustments as may be appropriate under the circumstances; provided, that the number of shares subject to any Award or grant always shall be a whole number.

Section 23.

Termination and Amendment.  The Board may terminate or amend the Plan or any portion thereof at any time and the Committee may amend the Plan to the extent provided in Section 3, without approval of the stockholders of the Company, unless stockholder approval is required by Rule 16b-3 of the Exchange Act, applicable stock exchange or NASDAQ or other quotation system rules, applicable Code provisions, or other applicable laws or regulations.  No amendment, termination or modification of the Plan shall affect any Award theretofore granted in any material adverse way without the consent of the recipient.

Section 24.

Severability.  If any of the terms or provisions of this Plan, or Awards made under this Plan, conflict with the requirements of Section 162(m) or Section 422 of the Code with respect to Awards subject to or governed by Section 162(m) or Section 422 of the Code, then such terms or provisions shall be deemed inoperative to the extent they so conflict with the requirements of Section 162(m) or Section 422 of the Code. With respect to an Incentive Stock Option, if this Plan does not contain any provision required to be included herein under Section 422 of the Code (as the same shall be amended from time to time), such provision shall be deemed to be incorporated herein with the same force and effect as if such provision had been set out herein.  If any provision of the Plan is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or

19

unenforceability shall not affect any other provision or any other jurisdiction, and the Plan shall be reformed, construed and enforced in such jurisdiction so as to best give effect to the intent of the Company under the Plan.

Section 25.

Effect on Other Plans.  Participation in this Plan shall not affect an employee’s eligibility to participate in any other benefit or incentive plan of the Company or any Subsidiary and any Awards made pursuant to this Plan shall not be used in determining the benefits provided under any other plan of the Company or any Subsidiary unless specifically provided.

Section 26.

Effective Date of the Plan.  The Plan shall become effective on the Effective Date, subject to approval of the stockholders of the Company within twelve months after the Effective Date.

Section 27.

Governing Law.  This Plan and all agreements executed in connection with the Plan shall be governed by, and construed in accordance with, the laws of the State of Nevada, without regard to its conflicts of law doctrine.  

Section 28.

Gender and Number.  Words denoting the masculine gender shall include the feminine gender, and words denoting the feminine gender shall include the masculine gender.  Words in the plural shall include the singular, and the singular shall include the plural.

Section 29.

Acceleration of Exercisability and Vesting.  The Committee shall have the power to accelerate the time at which an Award may first be exercised or the time during which an Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Award stating the time at which it may first be exercised or the time during which it will vest.

Section 30.

Modification of Awards.  Within the limitations of the Plan and subject to Sections 22 and 35, the Committee may modify outstanding Awards or accept the cancellation of outstanding Awards for the granting of new Awards in substitution therefor.  Notwithstanding the preceding sentence, except for any adjustment described in Section 22 or 34, no modification of an Award shall, without the consent of the Participant, alter or impair any rights or obligations under any Award previously granted under the Plan in any material adverse way without the affected Participant’s consent.  For purposes of the preceding sentence, any modification to any of the following terms or conditions of an outstanding unexercised Award or grant shall be deemed to be a material modification: (i) the number of shares of Common Stock covered by such Award or grant, (ii) the exercise or other applicable price or Fair Market Value determination related to such Award or grant, (iii) the period of time within which the Award or grant vests and is exercisable and the terms and conditions of such vesting and exercise, (iv) the type of Award or Stock Option, and (v) the restrictions on transferability of the Award or grant and of any shares of Common Stock issued in connection with such Award or grant (including the Company’s right of repurchase, if any).

Section 31.

No Strict Construction.  No rule of strict construction shall be applied against the Company, the Committee, or any other person in the interpretation of any of

20

the terms of the Plan, any agreement executed in connection with the Plan, any Award granted under the Plan, or any rule, regulation or procedure established by the Committee.

Section 32.

Successors.  This Plan is binding on and will inure to the benefit of any successor to the Company, whether by way of merger, consolidation, purchase, or otherwise.

Section 33.

Plan Provisions Control.  The terms of the Plan govern all Awards granted under the Plan, and in no event will the Committee have the power to grant any Award under the Plan which is contrary to any of the provisions of the Plan.  Notwithstanding the foregoing, to the extent the provisions of the Plan conflict with the terms and conditions of any written agreement between the Company and a Participant (including the vesting and settlement of any Awards upon termination of employment), the terms and conditions of such agreement shall control.

Section 34.

Headings.  The headings used in the Plan are for convenience only, do not constitute a part of the Plan, and shall not be deemed to limit, characterize, or affect in any way any provisions of the Plan, and all provisions of the Plan shall be construed as if no captions had been used in the Plan.

Section 35.

Change in Control.  In the event of a Change in Control, each Participant shall have the rights set forth in his individual Award agreement or such other rights as may be determined by the incumbent Board, in its sole discretion, prior to the Change in Control.

Section 36.

Compliance with Section 409A of the Code.  All Awards granted hereunder shall be granted in compliance with, or shall be structured to be exempt from, the provisions of Section 409A of the Code.  Notwithstanding anything to the contrary in the Plan, any and all Awards, payments, distributions, deferral elections, transactions and any other actions or arrangements made or entered into pursuant to the Plan shall remain subject at all times to compliance with the requirements of Section 409A of the Code.  If the Committee determines that an Award, payment, distribution, deferral election, transaction or any other action or arrangement contemplated by the provisions of the Plan would, if undertaken, cause a Participant to become subject to Section 409A of the Code, such Award, payment, distribution, deferral election, transaction or other action or arrangement shall not be undertaken and the related provisions of the Plan shall be deemed modified or, if necessary, rescinded in order to comply with the requirements of Section 409A of the Code to the extent determined by the Committee. Notwithstanding any provision of the Plan to the contrary, in the event that following the date an Award is granted the Committee determines that the Award may be subject to Section 409A of the Code and related U.S. Department of Treasury guidance (including such guidance as may be issued after the Effective Date), the Committee may adopt such amendments to the Plan and the applicable Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, including amendments or actions that would result in a reduction to the benefits payable under an Award, in each case, without the consent of the Participant, that the Committee determines are necessary or appropriate to (a) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (b) comply with the requirements of Section 409A of the Code and related U.S. Department of

21

Treasury guidance and thereby avoid the application of any penalty taxes under such Section or mitigate any additional tax, interest and/or penalties or other adverse tax consequences that may apply under Section 409A of the Code if compliance is not practical. To the extent required in order to avoid the imposition of any interest and/or additional tax under Section 409A(a)(1)(B) of the Code, any payments or deliveries due upon the Participant’s “separation from service” within the meaning of Section 409A shall be delayed for six months if a Participant is deemed to be a “specified employee” as defined by Section 409A(a)(2)(i)(B) of the Code.Nothing in this Plan or in an Award agreement shall provide a basis for any person to take any action against the Company or any affiliate based on matters covered by Section 409A of the Code, including the tax treatment of any Awards, and neither the Company nor any affiliate will have any liability under any circumstances to the Participant or any other party if the Award that is intended to be exempt from, or compliant with, Section 409A of the Code, is not so exempt or compliant or for any action taken by the Committee with respect thereto.

Section 37.

Clawback/Recovery. All Awards granted under the Plan will be subject to recoupment in accordance with any clawback policy that the Company is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable laws.  

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CERTIFICATE

I, Len Walker, Secretary of Ironclad Encryption Corporation hereby certify that the attached document is a correct copy of the Ironclad Encryption Corporation 2017 Equity Incentive Plan, as effective January 6, 2017.

Dated this 15 day of August, 2017.

/s/  Len Walker

Secretary

EX-9

Exhibit 10.2

IRONCLAD ENCRYPTION CORPORATION

2017 EQUITY INCENTIVE PLAN

STOCK OPTION AGREEMENT

(INCENTIVE AND NON-QUALIFIED STOCK OPTIONS)

Pursuant to your Stock Option Grant Notice (“Grant Notice”) and this Stock Option Agreement (“Agreement”), Ironclad Encryption Corporation, a Nevada corporation (the “Company”), has granted you an option (“Stock Option”) under its 2017 Equity Incentive Plan (the “Plan”) to purchase the number of shares of the Company’s Common Stock indicated in your Grant Notice at the exercise price indicated in your Grant Notice.  Defined terms not explicitly defined in this Stock Option Agreement but defined in the Plan shall have the same definitions as in the Plan.

The details of your Stock Option are as follows:

Section 1.

Grant of Stock Option.  

1.1

Type of Stock Option.  The type of Stock Option that you have been awarded is referenced in your Grant Notice.

1.2

Incentive Stock Option $100,000 Limitation.   As stated in Section 6.8 of the Plan, to the extent that the aggregate Fair Market Value (determined as of the time the Stock Option is granted) of the Common Stock with respect to which Incentive Stock Options granted under the Plan (and all other plans of the Company and its Subsidiaries and Parent Company) become exercisable for the first time by any Optionee in any calendar year exceeds $100,000, such Stock Options or portions thereof which exceed such limit (according to the order in which they are granted) shall be treated as Non-Qualified Stock Options.

1.3

Number of Shares and Exercise Price.  The number of shares of Common Stock subject to your Stock Option and the exercise price per share referenced in your Grant Notice may be adjusted from time to time for capitalization adjustments, as provided in Section 22 of the Plan.

Section 2.

Vesting.  Subject to the limitations contained herein, your Stock Option will vest as provided in your Grant Notice, provided that vesting will cease upon the termination of your Continuous Service except as otherwise provided in your Grant Notice, Employment Agreement, or the Plan.  The unvested portion of your Stock Option, after giving effect to the vesting schedule provided in your Grant Notice, will terminate immediately upon the termination of your Continuous Service, unless otherwise specified in your Employment Agreement or the Plan.

Section 3.

Exercise of Stock Options.  Except as otherwise provided herein, and subject to the provisions of the Plan (including the requirements in Section 14 of the Plan, restrictions on the transferability of the Stock Option and special provisions relating to exercise

or termination of the Stock Option following your termination of Continuous Service, death or Disability, certain changes in capitalization of the Company or a Change in Control), the Stock Option granted pursuant to this Agreement shall be subject to exercise as follows:

(a)

You may exercise the vested portion of your Stock Option during its term by delivering a Notice of Exercise (in a form designated by the Company) together with the exercise price to the Committee, or to such other person as the Committee may designate, during regular business hours, together with such additional documents as the Company may then require.

(b)

By exercising your Stock Option, you agree that, as a condition to any exercise of a Stock Option, the Company may require you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (1) the exercise of your Stock Option, (2) the lapse of any substantial risk of forfeiture to which the shares of Common Stock are subject at the time of exercise, or (3) the disposition of shares of Common Stock acquired upon such exercise.

(c)

If your Stock Option is an Incentive Stock Option, by exercising your Stock Option, you agree to notify the Company in writing within 15 days after the date of any disposition of any of the shares of Common Stock issued upon exercise of your Stock Option that occurs within two years after the Date of Grant or within one year after such shares of Common Stock are issued upon exercise of your Stock Option.

Section 4.

Method of Payment.  Payment of the exercise price is due in full upon exercise of all or any part of the Stock Option.  You may elect to make payment of the exercise price in any manner permitted by the Grant Notice, which may include one or more the following:

(a)

Payment by cash, certified or cashier’s check, bank draft, money order, wire transfer payable to the order of the Company, free from all collection charges;

(b)

Delivery of shares of Common Stock already owned by you and having a Fair Market Value equal to the aggregate exercise price, or by a combination of cash and shares of Common Stock, in each case to the extent permitted by applicable law and not in violation of any instrument or agreement to which the Company is a party and, unless approved by the Committee, not resulting in a charge to the Company’s reported earnings; or

(c)

If permitted by the Committee, in its sole discretion, at the time your Stock Option is exercised, delivery (including by facsimile or by electronic mail) to the Company or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions from the Participant to a broker or dealer, reasonably acceptable to the Company, to sell certain of the shares of Common Stock purchased upon exercise of the Stock Option and promptly deliver to the Company the amount of sale proceeds necessary to pay such purchase price and any tax withholding obligations that may arise in connection with such exercise (otherwise known as a “cashless exercise”).

Section 5.

Whole Shares.  You may exercise your Stock Option only for whole shares of Common Stock.

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Section 6.

Term of Stock Option.

6.1

Commencement.  The term of your Stock Option commences on the Date of Grant, which is set forth in the Grant Notice.

6.2

Expiration.  The term of your Stock Option expires upon the earliest of the following:

(a)

immediately upon the termination of your Continuous Service for “Cause” (as such term is defined in your Grant Notice or employment agreement, if any) or upon the breach by you of any restrictive covenant set forth in any agreement with the Company or a Subsidiary or Parent Company;

(b)

three months after the termination of your Continuous Service for any reason other than death or Disability, provided that if during any part of such three month period your Stock Option is not exercisable solely because of the condition set forth in Section 7 below relating to “Securities Law Compliance”, your Stock Option shall not expire until the earlier of the Expiration Date indicated in your Grant Notice or until it shall have been exercisable for an aggregate period of three months after the termination of your Continuous Service, except as may otherwise by required to comply with the requirements for exemption under Section 409A of the Code;

(c)

12 months after the termination of your Continuous Service due to death or Disability;

(d)

the Expiration Date indicated in your Grant Notice; or

(e)

the tenth anniversary of the Date of Grant.

For purposes of clause (a) above, if there is a conflict between the definition of “Cause” as defined in your Grant Notice and as defined in your employment agreement, if any, the most restrictive definition of “Cause” shall apply unless your employment agreement expressly provides otherwise.

6.3

Cancellation; Rescission; Etc.  The Committee may cancel, rescind, suspend, withhold or otherwise limit or restrict your Stock Option at any time if you are not in compliance with all applicable provisions of this Agreement and the Plan, or if you engage in any “Detrimental Activity.”

For purposes of this Section 6.3, “Detrimental Activity” shall include:

(i)

the rendering of services for any organization or engaging directly or indirectly in any business which is or becomes competitive with the Company, any Parent Company or any Subsidiary or the willful or intentional breach of any agreement between the Company, a Parent Company or a Subsidiary and you regarding noncompetition with the Company, such Parent Company or such Subsidiary (or the finding by a court or other tribunal that any such agreement regarding noncompetition is unenforceable);

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(ii)

the willful or intentional breach of any agreement or policy of the Company, any Parent Company or a Subsidiary regarding the protection and disclosure of the confidential information of the Company, any Parent Company or any Subsidiary;

(iii)

the willful or intentional breach of the provisions of any agreement between the Company, any Parent Company or a Subsidiary and you regarding the protection, declaration or assignment of inventions or the protection, declaration or assignment of copyrights;

(iv)

the willful or intentional breach of the provisions of any agreement between the Company, a Parent Company or a Subsidiary and you prohibiting you from directly or indirectly (i) inducing or attempting to induce any employee of the Company, a Parent Company or a Subsidiary to quit employment with the Company, a Parent Company or a Subsidiary; (ii) otherwise interfering with or disrupting the Company’s, a Parent Company’s or a Subsidiary’s relationship with its employees, customers or suppliers; (iii) identifying employees of the Company, a Parent Company or a Subsidiary for any future employer of you; (iv) soliciting, enticing or hiring away any employee of the Company, a Parent Company or a Subsidiary; or (v) hiring or engaging any employee of the Company, a Parent Company or a Subsidiary or any former employee of the Company, a Parent Company or a Subsidiary whose employment with the Company, a Parent Company or a Subsidiary ceased less than one year before the date of such hiring or engagement (or the finding by a court or other tribunal that any such agreement regarding such matters is unenforceable); or

(v)

any activity that may result in termination of your employment or removal as a director for “Cause” as defined in this Agreement or your Grant Notice or an employment agreement between the Company, a Parent Company or a Subsidiary and you.

Upon exercise of your Stock Option, you must certify in a manner acceptable to the Committee that you are in compliance with the terms and conditions of the Plan and this Agreement.  In the event you fail to comply with the provisions of this Section 6.3 prior to, or during the two years after, any exercise of your Stock Option, such exercise may be rescinded within two years thereafter.  In the event of any such rescission, you must pay to the Company the amount of any gain realized or payment received as a result of the rescinded exercise, in such manner and on such terms and conditions as may be required, and the Company shall be entitled to set-off against the amount of any such gain any amount owed you by the Company, any Parent Company or any Subsidiary.

6.4

Incentive Stock Option Employee Rule.  If your Stock Option is an Incentive Stock Option, note that to obtain the federal income tax advantages associated with an “Incentive Stock Option,” the Code requires that at all times beginning on the Date of Grant of your Stock Option and ending on the day three months before the date of your Stock Option’s exercise, you must be an employee of the Company or a Subsidiary or Parent Company, except in the event of your death or Disability.  The Company has provided for extended exercisability of your Stock Option under certain circumstances for your benefit but cannot guarantee that your Stock Option will necessarily be treated as an “Incentive Stock Option” if you continue to provide services to

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the Company or a Subsidiary or Parent Company as a consultant, adviser or director after your employment terminates or if you otherwise exercise your Stock Option more than three months after the date your employment terminates.

Section 7.

Securities Law Requirements.  Notwithstanding anything to the contrary contained herein, you may not exercise your Stock Option unless the shares of Common Stock issuable upon such exercise are then registered under the Act or, if such shares of Common Stock are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Act.  The exercise of your Stock Option must also comply with other applicable laws and regulations governing your Stock Option, and you may not exercise your Stock Option if the Company determines that such exercise would not be in material compliance with such laws and regulations or would result in liability under Section 16 of the Exchange Act.

Section 8.

No Right to Continue Employment or Service. Nothing in this Agreement, the Plan, your Grant Notice or your Notice of Exercise shall confer upon you any right to continue to serve the Company or any Subsidiary or Company Parent in the capacity in effect at the time the Stock Option was granted or shall affect the right of the Company or any Subsidiary or Company Parent to terminate (i) your employment, if you are an employee, with or without notice and with or without cause, (ii) your service as a consultant or adviser, if you are a consultant or adviser, pursuant to the terms of your agreement with the Company or any Subsidiary or Company Parent or (iii) your service as a director, if you are a director, pursuant to the Bylaws of the Company or any Subsidiary or Company Parent and any applicable provisions of the corporate law of the state in which the Company or any Subsidiary or Company Parent is incorporated, as the case may be.

Section 9.

Withholding of Taxes.

(a)

At the time you exercise your Stock Option, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a “cashless exercise” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or a Subsidiary or Company Parent, if any, which arise in connection with your Stock Option.

(b)

Upon your request and subject to approval by the Company (or the Committee, if the Participant is subject to Section 16 of the Exchange Act, in its/their sole discretion, and compliance with any applicable conditions or restrictions of law, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your Stock Option a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the amount of tax required to be withheld by law, which shall be based on the minimum or any other statutory rate of withholding, including the maximum statutory rate applicable in the Participant’s jurisdiction, as determined in the sole discretion of the Company.

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(c)

You may not exercise your Stock Option unless the tax withholding obligations of the Company and/or any Subsidiary and/or any Company Parent are satisfied.  Accordingly, you may not be able to exercise your Stock Option when desired even though your Stock Option is vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein or under the Plan.

Section 10.

Non-Assignability.  Your Stock Option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you.  Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your Stock Option.

Further, with the approval of the Committee, you may transfer your Non-Qualified Stock Option for no consideration to or for the benefit of your Immediate Family (including, without limitation, to a trust for the benefit of your Immediate Family or to a partnership or limited liability company for one or more members of your Immediate Family), subject to such limits as the Committee may establish, and the transferee shall remain subject to all the terms and conditions applicable to your Non-Qualified Stock Option prior to such transfer.  The term “Immediate Family” shall mean your spouse, parents, children, stepchildren, adoptive relationships, sisters, brothers and grandchildren (and, for this purpose, shall also include you).

At your request and subject to the approval of the Committee, Common Stock purchased upon exercise of your Non-Qualified Stock Option may be issued or transferred into your name and the name of your spouse jointly with rights of survivorship.

Section 11.

Notice.  For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given (a) three business days after being delivered or mailed by United States registered mail, return receipt requested, postage prepaid or (b) one business day after being sent via overnight delivery service, as follows:

If to the Company:

Ironclad Encryption Corporation
777 S. Post Oak Lane, Suite 1700
Houston, Texas 77056
Attn: General Counsel

and, if to you, to the address shown on your Grant Notice, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

Section 12.

Governing Plan Document.  Your Stock Option granted pursuant to this Agreement is subject to the terms and conditions set forth in the Plan, a copy of which is attached to this Agreement.  All the terms and conditions of the Plan, as may be amended from time to time, and any rules, guidelines and procedures which may from time to time be promulgated and adopted pursuant to the Plan, are hereby incorporated into this Agreement, without regard to whether such terms and conditions (including, for example, provisions relating

- 6 -

to certain changes in capitalization of the Company) are not otherwise set forth in this Agreement.  In the event of any conflict between the provisions of this Agreement and of the Plan, the provisions of the Plan shall govern.

Section 13.

Compliance with Section 409A of the Code.  Your Stock Option shall remain subject at all times to compliance with the requirements for exemption from Section 409A of the Code.  If the Committee determines that your Stock Option or any payment, distribution, deferral election, transaction or any other action or arrangement contemplated by your Stock Option or the Plan would, if undertaken, cause you to become subject to Section 409A of the Code, your Stock Option or such payment, distribution, deferral election, transaction or other action or arrangement shall not be undertaken and the related provisions of the Plan and this Agreement shall be deemed modified or, if necessary, rescinded in order to comply with the requirements for exemption from Section 409A of the Code to the extent determined by the Committee.

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EX-10

Exhibit 10.3

SECURITIES  PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of June 26, 2017, by and between IRONCLAD ENCRYPTION CORPORATION, a Nevada corporation, with its address at 777 S. Post Oak Lane, Suite 1700, Houston, Texas 77056 (the "Company"), and POWER UP LENDING GROUP LTD., a Virginia corporation, with its address at 111 Great Neck Road, Suite 216, Great Neck, NY 11021 (the "Buyer").

WHEREAS:

A.

The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933 Act"); and

B.

Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement a convertible note of the Company, in the form attached hereto as Exhibit A, in the aggregate principal amount of $78,500.00 (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the "Note"), convertible into shares of common stock, $0.001 par value per share, of the Company  (the "Common  Stock"), upon the terms and subject to  the limitations  and conditions  set forth in such Note.

NOW THEREFORE, the Company and the Buyer severally (and not jointly) hereby agree as follows:

1.

Purchase and Sale of Note.

a.

Purchase of Note. On the Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees to purchase from the Company such principal amount of Note as is set forth immediately below the Buyer's name on the signature pages hereto.

b.

Form of Payment. On the Closing Date (as defined below), {i) the Buyer shall pay the purchase price for the Note to be issued and sold to it at the Closing (as defined below) (the "Purchase Price") by wire transfer of immediately available funds to the Company, in accordance with the Company's written wiring instructions, against delivery of the Note in the principal amount equal to the Purchase Price as is set forth immediately below the Buyer's name on the signature pages hereto, and the Company shall deliver such duly executed Note on behalf of the Company, to the Buyer, against delivery of such Purchase Price.

c.

Closing Date. Subject to the satisfaction (or written waiver) of the conditions theretoset forth in Section 6 and Section 7 below, the date and time of the issuance and sale  of the Note pursuant to this Agreement (the "Closing Date") shall be 12:00 noon, Eastern Standard Time on or about July 7, 2017, or such other mutually agreed upon time.   The closing of the transactions contemplated by this Agreement (the "Closing") shall occur on the Closing Date at such location as may be agreed to by the parties.

2.

Buyer's Representations and Warranties.   The Buyer represents and warrants to the Company that:

a.

Investment Purpose. As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon conversion of or otherwise pursuant to the  Note (such shares of Common Stock being collectively referred to herein as the "Conversion Shares" and, collectively with the Note, the "Securities") for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or  exempted  from  registration under the 1933 Act.

b.

Accredited Investor Status. The Buyer is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D (an "Accredited Investor").

c.

Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer's compliance with, the representations , warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.

d.

Information. The Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information unless such information is disclosed to the public prior to_,or promptly  following such disclosure to  the Buy er.

e.

Legends. The Buyer understands that the Note and , until such time as the Conversion Shares have been registered under the 1933 Act; or may be sold pursuant to an applicable exemption from registration, the Conversion Shares may bear a restrictive legend in substantially the following  form:

"THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE ISSUER OF SUCH SECURITIES RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY ACCEPTABLE TO THE ISSUER'S TRANSFER AGENT, THAT SUCH SECURITIES MAY BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE

TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS."

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to an exemption from registration without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

f.

Authorization; Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.

3.

Representations and Warranties of the Company. The Company represents and warrants to  the Buyer that:

a.

Organization and Qualification. The Company and each of its Subsidiaries (as defined below), if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted. "Subsidiaries" means any corporation or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership interest.

b.

Authorization; Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the transactions  contemplated  hereby  and thereby  (including without  limitation , the issuance of the Note and the issuance and reservation for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company's Board of Directors and no further  consent or authorization of the Company, its Board of Directors, or its shareholders is required,

(iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute, a legal , valid and binding obligation of the Company enforceable against the Company in accordance with its terms.

c.

Capitalization. As of the date hereof, the authorized common stock of the Company consists of 500,000,000 authorized shares of Common Stock, $0.001par value per share, of which 65,908,195 shares are issued and outstanding; and 289,846 shares are reserved for issuance upon conversion of the Note. All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable ..

d.

Issuance of Shares. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders  of the Company  and will not impose  personal liability upon the holder t hereof.

e.

No Conflicts. The execution, delivery and performance  of  this Agreement, the Note by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for  issuance of  the  Conversion Shares) will not (i) conflict with or result in a violation of any provision of the  Certificate of Incorporation or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event  which with notice or lapse of time or both could become  a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to  which the Company or any of its Subsidiaries  is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment  or decree  (including federal and state securities laws and regulations and regulations of any self -regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations,  amendments,  accelerations, cancellations  and violations as would not, individually or in the aggregate, have a Material Adverse Effect).  The businesses of the Company and its Subsidiaries, if any, are not being conducted, and shall not be conducted so long as the Buyer owns any of the Securities, in violation of any law, ordinance or regulation of any governmental  entity.  "Material  Adverse  Effect" means any material adverse effect on the business, operations, assets, financial condition or prospects of the Company or its Subsidiaries,  if  any, taken as a whole, or on the transactions contemplated  hereby or

by the agreements or instruments to be entered into in connection herewith.

f.

SEC Documents; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act") (all of the foregoing filed prior to the date hereof and all exhibits included therein  and financial statements  and

schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the "SEC Documents"). Upon written request the Company will deliver to the Buyer true and complete copies of the SEC Documents, except for such exhibits and incorporated documents. As of their respective dates or if amended, as of the dates of the amendments, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for such statements as have been amended or updated in subsequent filings prior the date hereof). As of their respective dates or if amended, as of the dates of the amendments, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). The Company is subject to the reporting requirements of the 1934 Act.

g.

Absence of Certain Changes. Since March 31, 2017, except as set forth in the SEC Documents, there has been no material adverse change and no material adverse development in the assets, liabilities, business, properties, operations, financial condition, results of operations, prospects or 1934 Act reporting status of the Company or any of its Subsidiaries.

h.

Absence of Litigation. Except as set forth in the SEC Documents, there is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity as such, that could have a Material Adverse Effect. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

i.

No Integrated Offering. Neither  the  Company,  nor any of  its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration  under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities to  the Buyer will not be integrated with any other issuance  of  the Company's securities (past, current  or future) for purposes of any shareholder  approval provisions applicable to the Company or its  securities.

j.

No Brokers. The Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby.

k.

No Investment Company. The Company is not, and upon the issuance and sale of the Securities as contemplated by this Agreement will not be an "investment company" required to be registered under the Investment Company Act of 1940 (an "Investment Company"). The Company is not controlled by an Investment Company.

l.

Breach of Representations and Warranties by the Company. If the Company breaches any of the representations or warranties set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of default  under  Section 3.4 of the Note.

4.

COVENANTS.

a.

Best Efforts. The Company shall use its best efforts to satisfy timely each of  the conditions  described in Section 7 of this Agreement.

b.

Form D; Blue Sky Laws. The Company agrees to timely make any filings required by federal and state laws as a result of the closing of the transactions contemplated by this Agreement.

c.

Use of Proceeds.  The  Company  shall  use  the  proceeds  for general working capital purposes.

d.

Expenses. At the Closing, the Company's obligation with respect to the transactions contemplated by this Agreement is to reimburse Buyer' expenses shall be $3,500.00 for Buyer's legal fees and due diligence fee.

e.

Corporate Existence. So long as the Buyer beneficially owns any Note,  the Company shall maintain its corporate existence and shall not sell all or substantially all of  the Company's  assets, except with the prior written consent of the Buyer .

f.

Breach of Covenants. If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it  will be considered  an event of  default under Section 3.4 of the Note.

g.

Failure to Comply with the 1934 Act. So long as the Buyer beneficially owns the Note, the Company shall comply with the reporting requirements of the 1934 Act; and the Company shall continue to be subject to the reporting requirements of the 1934 Act.

h.

Trading Activities. Neither the Buyer nor its affiliates has an open short position in the common stock of  the Company and the Buyer agrees that it shall not, and that it  will cause its affiliates not to, engage in any short sales of or hedging transactions with respect to the common stock of the  Company.

i.

Right of First Refusal. Unless it shall have first delivered to the Buyer, at least forty eight (48) hours prior to the closing of such Future Offering (as defined herein), written notice describing the proposed Future Offering ("ROFR Notice"), including the terms and conditions thereof, identity of the proposed purchaser and proposed definitive documentation to be entered into in connection therewith, and providing the Buyer an option during the forty eight (48) hour period following delivery of such notice to purchase the securities being offered in the Future Offering on the same terms as contemplated by such Future Offering (the limitations referred to in this sentence and the preceding sentence are collectively referred to as the "Right of First Refusal"), the Company will not conduct any equity (or debt with an equity component) financing in an amount less than $75,000 ("Future Offering(s)") during the period beginning on the Closing Date and ending nine (9) months following the Closing Date. In the event the terms and conditions of a proposed Future Offering are amended in any respect after delivery of the notice to the Buyer concerning the proposed Future Offering, the Company shall deliver a new notice to the Buyer describing the amended terms and conditions of the proposed Future Offering and the Buyer thereafter shall have an option during the forty eight (48) hour period following delivery of such new notice to purchase its pro rata share of the securities being offered on the same terms as contemplated by such proposed Future Offering, as amended. Notwithstanding anything contained herein to the contrary, any subsequent offer by an investor, or an affiliate of such investor, identified on an ROFR Notice is subject to this Section 4(h) and the Right of First Refusal.

5.

Transfer  Agent Instructions.  The Company  shall issue irrevocable  instructions  to its transfer agent to issue certificates, registered in the name of the Buyer  or  its  nominee,  for  the Conversion Shares in such amounts as specified from time to time by the Buyer to the Company upon conversion of the Note in accordance with  the  terms  thereof  (the  "Irrevocable  Transfer  Agent Instructions"). In the event that the Company proposes to replace its transfer agent, the Company shall provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to this Agreement (including but not limited to the provision to irrevocably  reserve shares of  Common Stock in the Reserved Amount as such term is defined in the Note) signed by the successor transfer agent to Company and the Company. Prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant  to  an exemption  from registration,  all such certificates  shall bear the  restrictive  legend specified in Section 2(e) of this Agreement. The Company warrants  that:  (i)  no  instruction  other  than  the Irrevocable Transfer Agent Instructions referred to in this Section 5, will be given by the Company to its transfer agent and that the Securities  shall otherwise  be freely  transferable  on the books  and records of the Company as and to the extent provided in this Agreement and the Note; (ii) it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its  transfer  agent  in  transferring  (or issuing)(electronically or in certificated form) any certificate for Conversion Shares  to  be issued  to  the Buyer upon conversion of or otherwise  pursuant to  the Note as and when required  by the  Note and this

Agreement; and (iii) it will not fail to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and/or this Agreement. If the Buyer provides the Company and the Company's transfer, at the cost of the Buyer, with an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act, the Company shall permit the transfer, and, in the case of the Conversion Shares, promptly instruct its transfer agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required.

6.

Conditions to the Company's Obligation to Sell. The obligation of the Company hereunder to issue and sell the Note to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions thereto, provided that these conditions are for the Company's sole benefit and may be waived by the  Company  at any time in its sole discretion:

a.

The Buyer shall have executed this Agreement and delivered the same to the Company.

b.

The Buyer shall have delivered the Purchase Price in accordance with Section 1(b) above.

c.

The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date.

d.

No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

7.

Conditions to the Buyer's Obligation to Purchase. The obligation of the Buyer hereunder to purchase the  Note at the Closing is subject to  the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions are for  the Buyer's  sole benefit  and  may be waived by the  Buyer at any time in its sole discretion:

a.

The Company shall have executed this Agreement and delivered the same to the Buyer.

b.

The Company shall have delivered to the Buyer the duly executed Note (in such denominations as the Buyer shall request) in accordance with Section l(b) above.

c.

The Irrevocable Transfer Agent Instructions, in form and substance satisfactory to the Buyer, shall have been delivered to and acknowledged in writing by the Company's Transfer Agent.

d.

The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Buyer shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer including, but not limited to certificates with respect to the Board of Directors' resolutions relating to the transactions contemplated hereby.

e.

No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

f.

No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the 1934 Act reporting status of the Company or the failure of the Company to be timely in its 1934 Act reporting obligations.

g.

The Conversion Shares shall have been authorized for quotation on an exchange or electronic quotation system and trading in the Common Stock on such exchange or electronic quotation system shall not have been suspended by the SEC or an exchange or electronic quotation system.

h.

The Buyer shall have received an officer's certificate described in Section 3(d) above, dated as of the Closing Date.

8.

Governing Law; Miscellaneous.

a.

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Virginia without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state and county of Nassau.  The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Company and Buyer waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement, the Note or any related document or agreement by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

b.

Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party.

c.

Headings. The headings of this Agreement are for convenience of reference only and shall not  form part of, or affect the  interpretation of, this Agreement.

d.

Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

e.

Entire Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No

provision of this Agreement may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.

f.

Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be as set forth in the heading of this Agreement with a copy by fax only to {which copy shall not constitute notice) to Naidich Wurman LLP, 111 Great Neck Road, Suite 214, Great Neck, NY 11021, Attn: Allison Naidich, facsimile: 516-466-3555, email: Allison@nwlaw.com.  Each party shall provide notice to the other party of any change in address.

g.

Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Buyer may assign its rights hereunder to any person that purchases Securities in a private transaction from the Buyer or to any of its "affiliates," as that term is defined under the 1934 Act, without the consent of the Company.

h.

Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred .

i.

Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 j.

No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

k.

Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.

IRONCLAD ENCRYPTION CORPORATION

By:  /s/ James D. McGraw  

James D. McGraw President

POWER UP LENDING GROUP LTD.
By:   /s/ Curt Kramer
Name: Curt Kramer Title:  Chief Executive Officer 111 Great Neck Road, Suite 216 Great Neck, NY 11021
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Note:	$78,500.00
Aggregate Purchase Price:	$78,500.00

EX-10

Exhibit 10.4

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THESECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A} AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

Principal Amount: $78,500.00                                                                             Issue Date: June 26, 2017

Purchase Price: $78,500.00

CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED,  IRONCLAD ENCRYPTION CORPORATION,  a Nevada  corporation (hereinafter called the " Borrower " }, hereby promises to pay to the order of POWER UP LENDING GROUP LTD., a Virginia corporation, or registered assigns {the "Holder") the sum of $78,500.00 together with any interest as set forth herein, on March 30, 2018 (the "Maturity Date"), and to pay interest on the unpaid principal balance hereof at the rate of twelve percent {12%)(the "Interest Rate") per annum from the date hereof (the "Issue Date") until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid ("Default Interest"). Interest shall be computed on the basis of a 365 day year and the actual number of days elapsed. Interest shall commence accruing on the Issue Date but shall not be payable until the Note becomes payable (whether at Maturity Date or upon acceleration or by prepayment). All payments due hereunder (to the extent not converted into common stock, $0.01par value per share (the "Common Stock") in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the "Purchase Agreement" ).

This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

The following terms shall apply to this Note:

ARTICLE I. CONVERSION RIGHTS

1.1

Conversion Right. The Holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of

the Default Amount (as defined in Article Ill}, each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the "Conversion Price") determined as provided herein (a "Conversion"); provided, however, that in no event shall the  Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination  of this proviso is being made, would result in beneficial ownership  by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso. The beneficial ownership limitations on conversion as set forth in the section may NOT be waived by the Holder. The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the "Notice of Conversion"), delivered to the  Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the "Conversion Date"}; however, if the Notice of Conversion is sent after 6:00pm, New York, New York time the Conversion Date shall be the next business day. The term "Conversion Amount" means, with respect to  any conversion of this Note, the sum of (1) the  principal amount of this Note to be converted in such conversion plus (2) at the Holder's option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, (3) at the Holder's option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder's option, any amounts owed to the Holder pursuant to Sections 1.4 hereof.

1.2

Conversion Price. The conversion price (the "Conversion Price") shall equal the Variable Conversion Price (as defined herein) {subject to equitable adjustments by the Borrower relating to the Borrower's securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 65% multiplied by the Market Price (as defined herein) (representing a discount rate of 35%). "Market Price" means the average of the lowest one (1) Trading Price (as defined below) for the Common Stock during the fifteen (15) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means, for any security as of any date, the closing bid price on the OTCQB, OTCQX, Pink Sheets electronic quotation system or applicable trading market (the "OTC") as reported by a reliable reporting service ("Reporting Service") designated by the Holder {i.e. Bloomberg) or, if the OTC is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid

prices of any market makers for such security that are listed in the "pink sheets". If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes. "Trading Day" shall mean any day on which the Common Stock is tradable for any period on the OTC, or on the principal securities exchange or other securities market on which the Common Stock is then  being traded.

1.3

Authorized Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and reserved six times the number of shares that would be issuable upon full conversion of the Note (assuming that the 4.99% limitation set forth in Section 1.1 is not in effect)(based on the respective Conversion Price of the Note (as defined in Section 1.2) in effect from time to time, initially 289,846)(the "Reserved Amount" ). The Re served Amount shall be increased (or decreased with the written consent of the Holder) from time to time in accordance with the Borrower's obligation s hereunder. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper  provision  so that thereafter  there shall  be a sufficient  number  of  shares of Common Stock authorized  and reserve, d  free from  preemptive  rights,  for conversion  of  the  outstanding Note.   The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.

If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.

1.4

Method of Conversion.

(a)

Mechanics of Conversion. As set forth in Section 1.1 hereof, from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower (upon payment in full of any amounts owed hereunder).

(b)

 Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical

surrender of this Note upon each such conversion.

(c)

Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower  from the Holder of a facsimile  transmission or e-mail  (or other  reasonable means of  communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the "Deadline") (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations hereunder, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower's obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment , limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion.

(d)

Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the Holder and its compliance with the provisions set forth herein, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder's Prime Broker with DTC through its Deposit Withdrawal Agent Commission ("DWAC") system.

(e)

Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder's right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the  Deadline due to  action and/or inaction of the  Borrower, the  Borrower  shall pay to  the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock (the "Fail to Deliver Fee"); provided; however that the Fail to Deliver Fee shall not be due if the failure is a result of a third party (i.e., transfer agent; and not the result of any failure to pay such transfer agent) despite the best efforts of the Borrower to effect delivery of such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of  the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly, the  parties acknowledge

that the liquidated damages provision contained in this Section 1.4(e) are justified.

1.5

Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless: (i} such shares are sold pursuant to an effective registration statement under the  Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration (such as Rule 144 or a successor rule) ("Rule 144"); or (iii) such shares are transferred to an "affiliate" (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement).

Any restrictive legend on certificates representing shares of Common Stock issuable upon conversion of this Note shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if the Borrower or its transfer agent shall have received an opinion of counsel from Holder's counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that (i) a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected; or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act; or otherwise may be sold pursuant to an exemption from registration. In the event that the Company does not reasonably accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration (such as Rule 144), at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

1.6

Effect of Certain Events.

(a)

Effect of Merger, Consolidation. Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall be deemed to be an Event of Default (as defined in Article Ill) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article Ill). "Person" shall mean any individual,  corporation,  limited  liability  company,  partnership,  association,  trust  or  other  entity or organization.

(b)

Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Note, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the

Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, ten (10) days prior written notice (but in any event at least five (5) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Note. The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

(c)

Adjustment  Due to  Distribution.  lf the Borrower  shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower's shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a "Distribution"), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

1.7

Prepayment.  Notwithstanding anything to the contrary contained in this Note, at any time during the periods set forth on the table immediately following this paragraph (the "Prepayment Periods"), the Borrower shall have the right, exercisable on not more than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.7. Any notice of prepayment hereunder (an "Optional Prepayment Notice") shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the "Optional Prepayment Date"), the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to Holder, or upon the direction of the Holder as specified by the Holder in a writing to the Borrower (which direction shall to be sent to Borrower by the Holder at least one (1) business day prior to the Optional Prepayment Date). If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash equal to the percentage ("Prepayment Percentage'') as set forth in the table immediately following this paragraph opposite the applicable Prepayment Period, multiplied by the sum of: (w} the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Section 1.4 hereof (the "Optional Prepayment Amount").

Prepayment Period	Prepayment Percentage
1. The period beginning on the Issue Date and ending on the date which is thirty {30) days following the Issue Date.	110%
2. The period beginning on the date which is thirty-one (31) days following the Issue Date and ending on the date which is sixty (60) days following the Issue Date.	115%
3. The period beginning on the date which is sixty-one (61) days following the Issue Date and ending on the date which is ninety (90) days following the Issue Date.	120%
4. The period beginning on the date that is ninety-one (91) day from the Issue Date and ending one hundred twenty {120} days following the Issue Date.	125%
5. The period beginning on the date that is one hundred twenty-one (121) day from the Issue Date and ending one hundred fifty (150) days following the Issue Date.	130%
6. The period beginning on the date that is one hundred fifty-one  (151)  day from the Issue Date and ending one hundred eighty (180) days following the Issue Date.	135%

After the expiration of one hundred eighty (180) days following the Issue Date, the Borrower shall have no right of prepayment.

ARTICLE II.  CERTAIN COVENANTS

2.1

Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder's written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

ARTICLE Ill. EVENTS OF DEFAULT

If any of the following events of default (each, an "Event of Default") shall occur:

3.1

Failure to Pay Principal and Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity or upon acceleration and such breach continues for a period of five (5} days after written notice from the Holder.

3.2

Conversion and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing} (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this

Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower's transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty-eight (48) hours of a demand from the Holder.

3.3

Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not  limited to the Purchase Agreement and such breach continues for a period of twenty (20) days after written notice thereof to  the Borrower from the Holder.

3.4

Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

3.5

Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.  

3.6

Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against theBorrower or any subsidiary of the Borrower.

3.7

Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTC (which specifically includes the quotation platforms maintained by the OTC Markets Group} or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq Small Cap Market, the New York Stock Exchange, or the American Stock Exchange.

3.8

Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

3.9

Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

3.10

Cessation  of  Operations.  Any cessation of operations  by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts  become due,  provided,

however, that any disclosure of the Borrower's ability to continue as a "going concern" shall not be an admission  that  the Borrower  cannot  pay  its  debts as they become  due.

3.11

Financial Statement Restatement.  The restatement of any financial statements filed by the Borrower with the SEC at any time after 180 days after the Issuance Date for any date or period until this Note is no longer outstanding, if the result of such restatement would, by comparison to the un-restated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

3.12

Replacement of Transfer Agent. ln the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.

3.13

Cross-Default. Notwithstanding anything to the  contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. "Other Agreements" means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2} the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term "Other Agreements" shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing

and future debt of Borrower to the Holder.

Upon the occurrence and during the continuation of any Event of Default specified in Section  3.1 (solely with respect to failure to pay the principal hereof or interest thereon  when due at  the  Maturity  Date), the Note shall become immediately due and payable and the Borrower shall pay to the Holder,  in  full satisfaction of its obligations hereunder, an amount equal to the  Default Sum (as defined herein).  UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the continuation of any Event of Default specified in Sections 3.1 {solely with respect to failure to pay the principal hereof or interest thereon when due on this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.7, 3.8, 3.10, 3.11, 3.12, 3.13, and/or 3.14 exercisable through the delivery of written notice to the Borrower by such Holders (the "Default Notice"), and upon the occurrence of an Event of Default specified the remaining sections of Articles 111 {other than failure to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the ''Mandatory Prepayment Date”) plus (y) Default Interest, if any, on the amounts referred to  in clauses (w) and/or (x) (z) any amounts owed to the

Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the "Default Sum") or (ii) the "parity value" of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately preceding the Mandatory Prepayment Date as the "Conversion Date" for purposes of determining the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in respect of a specific Conversion Date in which case such Conversion Date shall be the Conversion Date), multiplied by (b) the highest Closing Price for the Common Stock during the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the "Default Amount") and  all other  amounts  payable  hereunder  shall immediately  become  due  and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

ARTICLE IV. MISCELLANEOUS

4.1

Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

4.2

Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of  such mailing, whichever shall first occur.  The addresses for such communications shall be:

If to the Borrower, to:

IRONCLAD ENCRYPTION CORPORATION

777  S. Post Oak Lane, Suite 1700

Houston, Texas 77056

Attn: James D. McGraw, President

Fax:

Email: len.walker@ironcladencryption.com    

If to the Holder:

POWER UP LENDING GROUP LTD.

111 Great Neck Road, Suite 214

Great Neck, NY 11021

Attn: Curt Kramer, Chief  Executive Officer

e-mail: info@poweruplending.com

With a copy by fax only to (which copy sha1l not constitute notice): Naidich Wurman LLP

111 Great Neck Road, Suite 216

Great Neck, NY 11021 Attn: Allison Naidich facsimile:  516A66-3555

e-mail; allison@nwlaw.com

4.3

Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term "Note" and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement} as originally executed, or if later amended or supplemented, then as so amended or supplemented.

4.4

Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an "accredited investor" (as defined in Rule 501(a) of the Securities and Exchange Commission). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement; and may be assigned by the Holder without the consent of the Borrower.

4.5

Cost of Collection. lf default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys' fees.

4.6

Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Virginia without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of New York or in the federal courts located in the state and county of Nassau. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Borrower and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable

attorney's fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note, any agreement or any other document delivered in connection with this Note by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery} to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

4.7

Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

4.8

Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this on June 26, 2017

IRONCLAD  ENCRYPTION CORPORATION  

By:  /s/ James D. McGraw  

           James D. McGraw

           President

EXHIBIT A-- NOTICE OF CONVERSION

The undersigned hereby elects to convert $______________principal amount of  the Note(defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note ("Common Stock") as set forth below, of IRONCLAD ENCRYPTION CORPORATION, a Nevada corporation (the "Borrower") according to the conditions of  the  convertible  note  of  the  Borrower dated as of June 26, 2017 (the "Note"), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

Box Checked as to applicable instructions:

[ ]  The Borrower  shall  electronically transmit  the  Common  Stock issuable  pursuant  to  this Notice of Conversion to the  account of  the undersigned or  its nominee with DTC through its Deposit Withdrawal Agent Commission  system ("DWAC Transfer").

Name of DTC Prime Broker: Account Number:

[ ]    The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder's calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

POWER UP LENDING GROUP LTD.

111 Great Neck Road, Suite 214 Great Neck, NY 11021 Attention: Certificate Delivery

e-mail: info@poweruplendinggroup.com

Date of conversion: Applicable Conversion Price:                                        

Number of shares of common stock to be issued            $ _____________

pursuant to conversion of the Notes:

 Amount of Principal Balance due remaining

under the Note after this conversion:

POWER UP LENDING GROUP LTD.

By: ___________________________

Name:  Curt Kramer

Title:  Chief Executive Officer

Date: _________________

EX-10

Exhibit 10.5

IRONCLAD ENCRYPTION CORPORATION

EMPLOYMENT AGREEMENT

This Employment Agreement is executed as of August 17, 2017 to be effective as of the 6th day of January 2017 (“Effective Date”), by and between Ironclad Encryption Corporation (together with its successors and assigns, the “Company” or “Ironclad”), and Jeff B. Barrett ("Executive").

W I T N E S S E T H:

WHEREAS, Company desires to employ Executive in capacities with Company or, from time to time, other corporations or entities controlled directly or indirectly by Company (each, a "Subsidiary"), and Executive desires to accept such employment; and

WHEREAS, Company and Executive desire to enter into this employment agreement to set forth the terms and conditions of the relationship between the Company and Executive (this "Agreement").

NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, Company and Executive (individually a "Party" and together the "Parties") agree to be bound in accordance with the terms of this Agreement.

1.

Term of Employment.  The term of Executive's employment under this Agreement shall commence upon the Effective Date, and end on January 31, 2021 (the ''Original Term of Employment"), unless terminated earlier in accordance herewith. The Original Term of Employment shall be automatically renewed for successive one-year terms (the "Renewal Terms") unless at least 90 days prior to the expiration of the Original Term of Employment or any Renewal Term, either Party notifies the other Party in writing that he or it is electing to terminate this Agreement at the expiration of the then current Term of Employment. "Term of Employment" shall mean the Original Term of Employment and all Renewal Terms.

2.

Position, Duties and Responsibilities.

(a)

Executive's Principal Position.  Pursuant to this Agreement, Executive shall be employed by Company and shall serve as the Vice President of Planning of Company ("Executive's Principal Position") commencing on the Effective Date.

(b)

Additional Duties.  Executive shall have and perform such duties, responsibilities, and authorities as are customary for the Vice President of Planning of corporations of similar size and businesses as Company, and as are customary for such additional offices and titles as shall be assigned to Executive by the Board, and as such duties, responsibilities and authorities may be amended, altered, expanded or limited by the Board.  Executive shall devote substantially all of his business time and attention (except for periods of vacation or absence due to illness), and his best efforts, abilities, experience, and talent to the duties and responsibilities to which he shall become subject under this Agreement.

(c)

Other Activities.  Anything herein to the contrary notwithstanding, nothing in this Agreement shall preclude Executive from (i) serving on the boards of directors of a reasonable number of other corporations or the boards of a reasonable number of trade associations and/or charitable organizations, (ii) engaging in charitable activities and community affairs, and (iii) managing his personal investments and affairs, provided that all such activities, in the aggregate, do not, in the judgment of the Board, materially interfere with the proper performance of Executive's duties and responsibilities under this Agreement.

IRONCLAD EMPLOYMENT AGREEMENT

Page 1

3.

Compensation.

(a)

Base Salary.  Employee shall be paid a base salary ("Base Salary"), payable in accordance with the regular payroll practices of Company, as follows:

(i)

commencing on the Effective Date of this Agreement and continuing until June 30, 2017, the Executive will be paid Five Thousand Dollars ($5,000) per month;

 (ii)

commencing July 1, 2017 and continuing until the “Salary Deferral Termination Date,” the Executive will be paid Five Thousand Dollars ($5,000) per month and will defer receipt of Seven Thousand Five Hundred Dollars ($7,500) per month.

For purposes of this section, the “Salary Deferral Termination Date” means the date on which the Board of Directors (the “Board”) or the Compensation Committee of the Board (the "Compensation Committee"), in its sole discretion, determines that the Company is financially able to pay the full monthly amount of the Executive’s annualized base salary of One Hundred Fifty Thousand Dollars ($150,000). Following the Salary Deferral Termination Date, the Board or the Compensation Committee, in its sole discretion, will determine the timing and amount of payment to the Executive of all deferred salary amounts.  Following the Salary Deferral Termination Date, the Company shall not be entitled to defer the payment of Executive’s Base Salary without the Executive’s written consent. The Board or the Compensation Committee may increase the Base Salary from time to time in its discretion.

(b)

Annual Incentive Awards.  Executive shall be eligible to participate in any annual incentive compensation plan established by the Compensation Committee ("annual incentive award").  Payment of any annual incentive award shall be made by the Company at the same time that other senior-level executives receive their annual incentive awards; provided, however, that the failure of the Company to award such incentive bonus shall not give rise to any claim against the Company if Executive has failed to meet any targets established for him as determined in the sole and absolute discretion of the Compensation Committee.

(c)

Employee Benefit Programs.  During the Term of Employment, except as otherwise noted below, Executive shall be entitled to participate in such employee pension and welfare benefit plans and programs of Company as are made available to Company's employees generally, as such plans or programs may be in effect from time to time, including, without limitation, medical, dental, long-term disability, Section 401k retirement plan, supplemental retirement plan or plans, and tax and financial planning services; provided, however, nothing herein shall be construed as requiring the Company to establish or continue any particular benefit plan in discharge of its obligations under this Agreement.  Executive shall be entitled to four (4) weeks of paid vacation per year, and to Company holiday leave in accordance with Company's standard holiday schedule as amended from time to time.

(d)

Reimbursement of Business Expenses.  Executive is authorized to incur reasonable business expenses in carrying out his duties and responsibilities under this Agreement, and Company shall reimburse him for all reasonable business expenses incurred in connection therewith, subject to Company's applicable policies and documentation requirements for business expense reimbursement.

(e)

Initial Stock Option Grant.  Executive shall receive from the Company, effective as of January 6, 2017, options (“the “Initial Options”) to purchase up to One Million (1,000,000) shares of the Company's Common Stock, at Fifteen Cents ($0.15) per share, constituting the Fair Market Value as of the Effective Date.  Of the Initial Options granted, Two Hundred Fifty Thousand (250,000) shares (25%) shall vest on January 5, 2018 and options to purchase an additional Two Hundred Fifty Thousand (250,000) shares shall vest on each one-year anniversary of January 5, for three (3) consecutive years.  Once vested, the Initial Options must be exercised no later than three (3) years from vesting. The Company will register the shares of Common Stock issuable upon exercise of the Initial Options pursuant to a registration statement on Form S-8.

IRONCLAD EMPLOYMENT AGREEMENT

Page 2

4.

Termination of Employment.

(a)

Termination Due to Death.  This Agreement shall terminate automatically upon Executive's death, in which event Executive's estate or his beneficiaries, as the case may be, shall be entitled to, and their sole remedies under this Agreement shall be:

(i)

Base Salary through the date of termination, which shall be paid in a cash lump sum not later than thirty (30) days following the date of death;

(ii)

any incentive awards earned as of December 31 of the prior year (but not yet paid), which shall be paid in a cash lump sum not later than thirty (30) days following the date of death;

(iii)

payment of a pro-rata portion of any annual incentive award contemplated by Paragraph 3(b) for the year during which death occurs payable as provided in Paragraph 3(b);

(iv)

all of Executive's outstanding but unvested stock options shall vest immediately and remain exercisable for one (1) year from the date of termination and the elimination of all restrictions on restricted stock or deferred stock awards (the term stock, for purposes of this Agreement, shall mean all forms of equity and equity based compensation, including phantom stock);

(v)

other or additional benefits then due or earned in accordance with applicable plans and programs of Company; and

(vi)

settlement of all deferred compensation arrangements in accordance with any then applicable deferred compensation or election form.

(b)

Termination Due to Disability.  This Agreement may be terminated by Company in the event Executive has a "Disability" as defined below which lasts, or Company reasonably determines is likely to last (based on the written opinion of a board certified physician), for a period exceeding 120 days from the onset of such Disability.  Executive shall be deemed to be under a Disability if Executive becomes eligible for coverage under Company's Long-Term Disability Program, if any, or if Executive is otherwise unable, by virtue of illness or physical or mental incapacity or disability (from any cause or causes whatsoever), to perform Executive's essential job functions hereunder, whether with or without reasonable accommodation, in substantially the manner and to the extent required hereunder prior to the commencement of such Disability.  In the event of Executive's Disability, Company may terminate any or all of Executive's titles, positions, and responsibilities hereunder (including Executive's Principal Position) or Company may terminate Executive's employment hereunder.  If Executive is terminated due to Disability, (i) Executive shall be entitled to receive all earned awards (including a pro-rata portion of any annual incentive award); (ii) all of Executive's outstanding but unvested stock options shall vest immediately and remain exercisable for one (1) year from the date of termination; and (iii) all restrictions regarding Executive's restricted or deferred stock shall immediately lapse.

During the Term of Employment, Executive shall be entitled to disability coverage in accordance with the terms of Company's Long-Term Disability Program, if any.  Executive shall not be entitled to any annual incentive award for the time during which Executive is receiving such disability benefits.  If Executive recommences his position after a leave for Disability, he shall be entitled to a pro rata annual incentive award for the year he resumes such position and shall thereafter be entitled to annual incentive awards in accordance with this Agreement.

During the period Executive is receiving Disability benefits from Company, he shall continue to be treated as an employee for purposes of all employee benefits and entitlements in which he was participating on the date such benefits commenced, except that Executive shall not be entitled to receive any annual salary increases or any new long-term incentive plan grants during his Disability.

(c)

Termination by Company for Cause.  The Company shall have the right to terminate Executive's employment for "Cause" at any time.

IRONCLAD EMPLOYMENT AGREEMENT

Page 3

(i)

For purposes of this Agreement, "Cause" shall include without limitation the following occurrences:

(A)

Executive is indicted, convicted or pleads guilty or nolo contendere to a felony or any crime involving moral turpitude, dishonesty or theft;

(B)

Executive fails to comply with applicable laws or governmental regulations with respect to Company operations or performance of Executive's duties;

(C)

Executive engages in conduct deemed by the Board to constitute neglect or misconduct in carrying out his duties under this Agreement;

(D)

Executive refuses to comply with any lawful directive of the Board or otherwise meet his obligations under this Agreement; or

(E)

Executive breaches Paragraphs 5, 6, or 7 of this Agreement.

(ii)

In the event Company terminates Executive's employment for Cause, Executive shall be entitled to, and his sole remedies under this Agreement shall be:

(A)

Base Salary through the date of the termination, which shall be paid in a cash lump sum not later than 30 days following the date of termination; and

(B)

other or additional benefits then due in accordance with applicable plans or programs of Company.

(d)

Termination Without Cause or by Executive for Good Reason.  The Company shall have the right to terminate Executive's employment Without Cause and Executive shall have the right to terminate with Good Reason (as each of those terms are defined below).

(i)

In the event Company terminates Executive's employment Without Cause (which termination shall be effective as of the date specified by Company in a written notice to Executive), or in the event Executive terminates this Agreement for Good Reason, Executive shall be entitled to, and his sole remedies under this Agreement shall be:

(A)

Base Salary through the date of termination, which shall be paid in cash in a lump sum not later than thirty (30) days following the date of termination;

(B)

1/12th of Executive's Base Salary in effect on the date of termination (or, in the event a Base Salary reduction is the basis for a Good Reason termination, the Base Salary in effect immediately prior to such reduction), payable monthly ("Severance Payments") for the longer of (x) the remaining duration of the Term of Employment, or (y) twelve (12) months (the "Severance Period");

(C)

immediate vesting of all outstanding stock options.  Executive shall have the right to exercise all vested stock options for a period of two (2) years from the termination date;

(D)

elimination of all restrictions on any restricted stock or deferred stock awards which would have lapsed through the conclusion of the Severance Period;

IRONCLAD EMPLOYMENT AGREEMENT

Page 4

(E)

the balance of any incentive awards earned as of December 31 of the prior year (but not yet paid), which shall be paid in a cash lump sum not later than thirty (30) days following the date of termination;

(F)

payment of a pro-rata portion of any annual incentive award contemplated by Paragraph 3(b), if any, for the year during which such termination occurs, payable as provided in Paragraph 3(b):

(G)

immediate vesting of Executive's accrued benefits under any supplemental retirement benefit plan ("SERP") maintained by Company, with the payments to be made in accordance with the terms and conditions of the SERP;

(H)

other or additional benefits then due or earned in accordance with applicable plans and programs of Company;

(I)

settlement of all deferred compensation arrangements in accordance with any then applicable deferred compensation or election form; and

(J)

continued participation in medical, dental and life insurance plans for which Executive remains eligible at benefit levels substantially equal to those at which Executive was participating on the date of termination (excluding any long term disability benefits for a disability occurring after the date of termination) until the earlier of:

(1)

the end of the Severance Period; or

(2)

the date, or dates, Executive receives coverage and benefits under the plans and programs of a subsequent employer; provided, however, nothing herein shall be construed as requiring the Company to establish or continue any particular benefit plan in discharge of its obligations under this Agreement.

(ii)

For purposes of this Agreement, "Termination Without Cause" shall mean Executive's employment is terminated by Company for any reason other than Cause (as defined in Paragraph 4(c)(i)), Executive's death or Executive's Disability (as defined in Paragraph 4(b)).

(iii)

For purposes of this Agreement, "Good Reason" shall mean Executive's termination of his employment within one year following the occurrence, without Executive's written consent, of a "Material Event" or a "Change in Control," as defined below; provided, however, that notwithstanding the foregoing, Executive's termination of employment shall not constitute a “Good Reason” event if, in advance of or subsequent to the Material Event or Change in Control, Executive, in his sole discretion, agrees in writing that such event shall not constitute a “Good Reason” event within the meaning of this Agreement:

(A)

Material Event.  A Material Event shall be deemed to occur if:

(1)

there is a material diminution in Executive's position, title, office, status, rank, or authority regarding Executive's Principal Position, other than during or following a Disability, which is not cured within thirty (30) days of receipt by the Board of written notice from Executive;

IRONCLAD EMPLOYMENT AGREEMENT

Page 5

(2)

there is any material decrease in Executive's annual Base Salary during the Original Term of Employment (which occurs other than as an across the board reduction applicable generally to all senior executive officers);

(3)

there is any failure to secure the agreement of any successor corporation or other entity to Company to fully assume Company's obligations under this Agreement; or

(4)

there is any other failure by Company to perform any material obligation under, or breach by Company of any material provision of, this Agreement which is not cured within thirty (30) days of receipt by the Board of written notice from Executive.

(B)

Change in Control.  A Change in Control shall be deemed to have occurred if:

(1)

there shall be consummated any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation;

(2)

during any calendar year during the term of this Agreement, individuals who at the beginning of such year constitute the Board of Directors of the Company cease for any reason to constitute at least sixty percent (60%) of the Board of Directors of the Company; or

(3)

there shall be any sale, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company.

(iv)

For purposes of this Agreement, “Termination Date,” “date of termination” or similar phrases shall mean the date as of which the Executive incurs a termination of employment with the Company that constitutes “separation of service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended.  Any notice of termination of the Executive’s employment given by the Executive or the Company pursuant to the provisions of this Agreement shall specify the Termination Date or date of termination.

(e)

Voluntary Termination.  In the event of a termination of employment by Executive on his own initiative, after delivery of ten (10) business days advance written notice, other than a termination due to Disability, Executive shall have the same entitlements as provided in Paragraph 4(c)(ii) above for a termination for Cause.

5.

Confidentiality, Cooperation with Regard to Litigation; Non-Disparagement.

(a)

For purposes of this Agreement, "Confidential Information" shall mean all information:  (i) disclosed to or known by Executive as a consequence of or through his employment with the Company or any of its Subsidiaries; (ii) not generally known outside the Company; or (iii) which relates to any aspect of Company's or any Subsidiary's business, research, or development.  Confidential Information includes, but is not limited to proprietary, sensitive or other information concerning Company's or Subsidiary's products, product development, trade secrets, customers, suppliers, finances, compensation information, business plans and strategies, and information provided to the Company by a third party under restrictions against disclosure or use by the Company. Excluded from the definition of Confidential Information is

IRONCLAD EMPLOYMENT AGREEMENT

Page 6

information that is or becomes part of the public domain, other than through the breach of this Agreement by Executive.

(b)

Executive acknowledges that he will have access to Confidential Information of the Company, its Subsidiaries and its customers.  Executive agrees that during the Term of Employment and thereafter for a period of three (3) years (including following termination of Executive's employment for any reason), Executive shall not, without the Board's prior written consent, directly or indirectly, disclose to anyone or make use of any Confidential Information, except in the performance of his duties hereunder or when required to do so by legal process, by any governmental agency having supervisory authority over the business of Company or by any administrative or legislative body (including a committee thereof) that requires him to divulge, disclose or make accessible such information. In the event that Executive is so ordered, he shall give prompt written notice to Company to allow Company the opportunity to object to or otherwise resist such order.

(c)

During the Term of Employment and thereafter, Executive shall not disclose the existence or contents of this Agreement unless such disclosure is required by law, by a governmental agency, or in a document required by law to be filed with a governmental agency or in connection with enforcement of his rights under this Agreement. In the event that disclosure is so required, Executive shall give prompt written notice to Company to allow Company the opportunity to object to or otherwise resist such requirement. This restriction shall not apply to such disclosure by him to members of his immediate family, his tax, legal or financial advisors, any lender, or tax authorities, or to potential future employers to the extent necessary, each of whom shall be advised not to disclose such information.

(d)

Executive agrees to cooperate with Company, during the Term of Employment and thereafter  (including following termination of Executive's employment for any reason), by making himself reasonably available to testify on behalf of Company or any Subsidiary in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, and to assist Company, or any Subsidiary, in any such action, suit, or proceeding, by providing information and meeting and consulting with the Board or its representatives or counsel, or representatives or counsel to Company, or any Subsidiary as reasonably requested.  Company agrees to reimburse Executive for all expenses actually incurred in connection with his provision of testimony or assistance.

(e)

Executive agrees that, during the Term of Employment and thereafter (including following  termination of Executive's employment for any reason) he will not make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage Company or any Subsidiary or their respective officers, directors, employees, advisors, businesses or reputations. Company agrees that, during the Term of Employment and thereafter (including following termination of Executive's employment for any reason), Company will not make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may directly or indirectly, disparage Executive or his business or reputation. Notwithstanding the foregoing, nothing in this Agreement shall preclude either Executive or Company from making truthful statements or disclosures that are required by applicable law, regulation, or legal process.

6.

Non-Competition.

(a)

Non-Competition During Employment.  Executive agrees that for the duration of his employment, he shall not engage in Competition with Company or any Subsidiary. "Competition" shall mean engaging in any activity for, or having a Financial Interest in (as defined below), a Competitor of Company or of any Subsidiary.  A "Competitor" shall mean any corporation or other entity which offers or performs services or products substantially similar to those provided by Company or any Subsidiary, and thereby competes, directly or indirectly, with the business conducted by Company and overseen by Executive as part of his position, duties and/or responsibilities during his employment with the Company, as determined on the date of termination of Executive's employment.

IRONCLAD EMPLOYMENT AGREEMENT

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(b)

Non-Competition After Termination.  Executive agrees that for a period of [two (2)] years following the later of (i) termination of Executive's employment for whatever reason, or (ii) the conclusion of the period, if any, during which the Company is making payments to Executive pursuant to this Agreement above, Executive shall not, directly or indirectly, whether or not for compensation and whether or not as an employee, engage in Competition with Company or any Subsidiary, or have any Financial Interest in any Competitor to the Company or Subsidiary within any state, region or locality in which the Company or Subsidiary is then doing business.

(c)

Financial Interest Defined.  For purposes of this Agreement, Executive shall be deemed to be engaged in or to have a "Financial Interest" in a business if Executive is an employee, independent contractor, consultant, principal, agent, officer, director, partner, or shareholder, or if Executive directly or indirectly performs services for such entity, or if Executive or any member of Executive's immediate family beneficially owns an equity interest, or interest convertible into equity, in any such entity; provided, however that the foregoing shall not prohibit Executive or a member of Executive's immediate family from owning, for the purpose of passive investment, less than one percent (1%) of any class of securities of any publicly held company.

7.

Non-Solicitation.  During the period beginning with the Effective Date and ending [two (2)] years following the termination of Executive's employment, Executive shall not:  (i)  induce, or attempt to induce, employees of Company or any Subsidiary to terminate their employment; (ii) solicit or encourage any of Company's or any Subsidiary's customers, or joint venture partners to terminate or diminish their relationship with Company or any Subsidiary; or (iii) solicit or encourage any person or entity in a contractual relationship with Company or any Subsidiary to violate any agreement with any of them.  During such period, Executive shall not hire, either directly or through any employee, agent or representative, any employee of Company or any Subsidiary or any person who was employed by Company or any Subsidiary within 180 days of such hiring.

8.

Acknowledgment of Need for Restrictive Covenants.  Executive acknowledges the necessity of the restrictive covenants set forth herein to:  protect the Company's legitimate interests in its Confidential Information; protect the Company's competitive business advantage, customer relations and the goodwill with customers and suppliers that the Company has established at its substantial investment; and protect the Company as a result of providing Executive with specialized knowledge, training and insight regarding Company's operations.  Executive further agrees and acknowledges that the restrictive covenant is a reasonable limitation as to time, geographic area and scope of activities to be restricted and that such restrictions do not impose a greater restraint on Executive than is necessary to protect the goodwill, Confidential Information, and other legitimate business interests of the Company.

9.

Remedies.  If Executive breaches any of the provisions contained in Paragraphs 5, 6 or 7 above, Company shall have the right to immediately terminate all payments and benefits due under this Agreement and shall have the right to seek injunctive relief. Executive acknowledges that such a breach of Paragraphs 5, 6, or 7 would cause irreparable injury and that money damages would not provide an adequate remedy for Company.  Therefore, Executive consents to enforcement of these foregoing paragraphs by means of temporary or permanent injunction and other appropriate equitable relief in any competent court, in addition to any remedies the Company may have under this Agreement or otherwise.

10.

Indemnification.

(a)

Company Indemnity.  Company agrees that if Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of Company or any Subsidiary or is or was serving at the request of Company or any Subsidiary as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, Executive shall be indemnified and held harmless by Company to the fullest extent legally permitted or authorized by Company's certificate of incorporation or bylaws or resolutions of Company's Board against all cost, expense, liability and loss (including, without limitation, attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by Executive in connection therewith, and such indemnification shall continue as to Executive even if he has ceased to be a director, member, officer,

IRONCLAD EMPLOYMENT AGREEMENT

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employee or agent of Company or other entity and shall inure to the benefit of Executive's heirs, executors and administrators; provided, however, that Executive shall not be entitled to any indemnification hereunder in the event that any court having jurisdiction over this matter determines that Executive's conduct was illegal, malicious, fraudulent, or resulted from gross negligence.  Company shall advance to Executive all reasonable costs and expenses to be incurred by him in connection with a Proceeding within twenty (20) days after receipt by Company of a written request for such advance.  Such request shall include an undertaking by Executive to repay the amount of such advance if it shall ultimately be determined that he is not entitled to be indemnified against such costs and expenses.  The provisions of this Paragraph 10(a) shall not be deemed exclusive of any other rights of indemnification to which Executive may be entitled or which may be granted to him, and it shall be in addition to any rights of indemnification to which he may be entitled under any policy of insurance.

(b)

No Presumption Regarding Standard of Conduct.  Neither the failure of Company (including its Board, independent legal counsel or stockholders) to have made a determination prior to the commencement of any proceeding concerning payment of amounts claimed by Executive under Paragraph 10(a) above that indemnification of Executive is proper because he has met the applicable standard of conduct, nor a determination by Company (including its Board, independent legal counsel or stockholders) that Executive has not met such applicable standard of conduct, shall create a presumption that Executive has not met the applicable standard of conduct.

(c)

Liability Insurance.  Company agrees to continue and maintain a directors and officers' liability insurance policy covering Executive to the extent Company provides such coverage for its other executive officers or directors.

11.

Resolution of Disputes.  Any controversy or claim arising out of or relating to this Agreement or any breach or asserted breach hereof or questioning the validity and binding effect hereof arising under or in connection with this Agreement, other than seeking injunctive relief under Paragraphs 5, 6 or 7, shall be resolved by mediation and, if necessary, final and binding arbitration, to be held in Houston, Texas.  Disputes arising under this Agreement must first be submitted for non-binding mediation before a neutral third party.  Mediation shall be conducted and administered by the American Arbitration Association ("AAA") under its Employment Mediation Rules or as otherwise agreed between the parties.  If a covered dispute remains unresolved at the conclusion of the mediation process, either party may submit the dispute for resolution by final and binding arbitration in accordance with the Employment Dispute Resolution Rules of the AAA.  Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.  All costs and expenses of any mediation shall be borne by Company.  All costs and expenses of any arbitration or court proceeding (including fees and disbursements of counsel) shall be borne by the respective party incurring such costs and expenses, but the prevailing party shall be entitled to reimbursement from the other party.

12.

Effect of Agreement on Other Benefits.  Except as specifically provided in this Agreement, the existence of this Agreement shall not be interpreted to preclude, prohibit or restrict Executive's participation in any other employee benefit or other plans or programs in which he currently participates.

13.

Assignability; Binding Nature.  This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs (in the case of Executive) and permitted assigns.  No obligation of Company under this Agreement may be assigned or transferred by Company except that such rights or obligations shall be assigned or transferred in connection with a merger, consolidation or sale or transfer of all or substantially all of the assets of Company, provided that the assignee or transferee is the successor to all or substantially all of the assets of Company and such assignee or transferee assumes the liabilities, obligations and duties of Company, as contained in this Agreement, either contractually or as a matter of law.  Company further agrees that, in the event of a merger, consolidation or sale or transfer of assets as described in the preceding sentence, it shall take whatever action it legally can as appropriate in order to cause such assignee or transferee to expressly assume the liabilities, obligations and duties of Company hereunder.  For the avoidance of doubt, this Agreement shall be binding upon any entity into which Company merges.  No rights or obligations of Executive under this Agreement may be assigned or transferred by Executive other than his rights to compensation and benefits, which may be transferred only by will or operation of law, except as provided in Paragraph 17 below.

IRONCLAD EMPLOYMENT AGREEMENT

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14.

Amendment or Waiver.  No provision in this Agreement may be amended unless such amendment is agreed to in writing and signed by Executive and an authorized officer of Company.  Except as set forth herein, no delay or omission to exercise any right, power or remedy accruing to any Party shall impair any such right, power or remedy or shall be construed to be a waiver of or an acquiescence to any breach hereof.  No waiver by either Party of any breach by the other Party of any condition or provision contained in this Agreement to be performed by such other Party shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time.  Any waiver must be in writing and signed by Executive or an authorized officer of Company, as the case may be.

15.

Severability.  In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.

16.

Survivorship.  The respective rights and obligations of the Parties hereunder shall survive any termination of Executive's employment to the extent necessary to the intended preservation of such rights and obligations.

17.

Beneficiaries/References.  Executive shall be entitled, to the extent permitted under any applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following Executive's death by giving Company written notice thereof.  In the event of Executive's death or a judicial determination of his incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative.

18.

Notices.  Any notice given to a Party shall be in writing and shall be deemed to have been given when delivered personally or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the Party concerned at the address indicated below or to such changed address as such Party may subsequently give such notice of:

If to Company:

Ironclad Encryption Corporation

Attention: Chairman

777 S. Post Oak Lane Suite 1700

Houston, TX 77056

If to Executive:

Jeff B. Barrett

1110 Crossroads Drive

Houston, Texas 77079

19.

Governing Law/Jurisdiction.  This Agreement shall be governed by and construed and interpreted in accordance with the laws of Texas without reference to principles of conflict of laws.  Subject to Paragraph 11 Company and Executive hereby consent to the jurisdiction of any court of the State of Texas in Harris County for purposes of resolving any dispute under this Agreement.  Company and Executive further agree that any service of process or notice requirements in any such proceeding shall be satisfied if the rules of such court relating thereto have been substantially satisfied.  Company and Executive hereby waive, to the fullest extent permitted by applicable law, any objection which it or he may now or hereafter have to such jurisdiction and any defense of inconvenient forum.

20.

Headings.  The headings of the paragraphs contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement.

IRONCLAD EMPLOYMENT AGREEMENT

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IN WITNESS WHEREOF, the undersigned have executed this Agreement on the 17th day of  August 2017 to be effective as of the Effective Date.

IRONCLAD ENCRYPTION CORPORATION

By: /s/ James D. McGraw

       James D. McGraw

Its:  Chief Executive Officer / President

/s/  Jeff  B. Barrett   

JEFF B. BARRETT

IRONCLAD EMPLOYMENT AGREEMENT

Page 11

	EXHIBIT A Defined Terms
(a)	"Base Salary" shall have the meaning set forth in Paragraph 3.
(b)	"Company" shall have the meaning set forth in the first paragraph.
(c)	"Board" shall have the meaning set forth in Paragraph 2.
(d)	"Cause" shall have the meaning set forth in Paragraph 4(c)(i).
(e)	"Vice President of Planning" shall have the meaning set forth in Paragraph 2.
(f)	"Compensation Committee" shall have the meaning set forth in Paragraph 3(a).
(g)	"Competitor" or "Competition" shall have the meaning set forth in Paragraph 6(a).
(h)	"Confidential Information" shall have the meaning set forth in Paragraph 5(c).
(i) (j)	“Effective Date” shall have the meaning set forth in Paragraph 1. “Fair Market Value” as of any date means the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, (d) the sales price of Company Common Stock shares in a Private Placement Memorandum within the same period, or (e) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Board, the fees and expenses of which shall be paid by the Company.
(j)	"Good Reason" shall have the meaning set forth in Paragraph 4(d)(iii).
(k)	"Original Term of Employment" shall have the meaning set forth in Paragraph 1.
(l)	"Proceeding" shall have the meaning set forth in Paragraph 10.
(m)	"Renewal Term" shall have the meaning set forth in Paragraph 1.
(n)	"Restricted Shares" shall have the meaning set forth in Paragraph 4(a)(iii).
(o)	"Severance Payments shall have the meaning set forth in Paragraph 4(d)(i).
(p)	“Severance Period" shall have the meaning set forth in Paragraph 4(d)(i)(B).
(q)	"Subsidiary" shall have the meaning set forth in the first recital.
(r)	"Term of Employment" shall have the meaning set forth in Paragraph 1.
(s)	"Termination Without Cause" shall have the meaning set forth in Paragraph 4(d)(ii).

EX-10

Exhibit 10.6

IRONCLAD ENCRYPTION CORPORATION

EMPLOYMENT AGREEMENT

This Employment Agreement is executed as of August 17, 2017 to be effective as of the 6th day of January 2017 (“Effective Date”), by and between Ironclad Encryption Corporation (together with its successors and assigns, the “Company” or “Ironclad”), and Daniel Lerner ("Executive").

W I T N E S S E T H:

WHEREAS, Company desires to employ Executive in capacities with Company or, from time to time, other corporations or entities controlled directly or indirectly by Company (each, a "Subsidiary"), and Executive desires to accept such employment; and

WHEREAS, Company and Executive desire to enter into this employment agreement to set forth the terms and conditions of the relationship between the Company and Executive (this "Agreement").

NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, Company and Executive (individually a "Party" and together the "Parties") agree to be bound in accordance with the terms of this Agreement.

1.

Term of Employment.  The term of Executive's employment under this Agreement shall commence upon the Effective Date, and end on January 31, 2021 (the ''Original Term of Employment"), unless terminated earlier in accordance herewith. The Original Term of Employment shall be automatically renewed for successive one-year terms (the "Renewal Terms") unless at least 90 days prior to the expiration of the Original Term of Employment or any Renewal Term, either Party notifies the other Party in writing that he or it is electing to terminate this Agreement at the expiration of the then current Term of Employment. "Term of Employment" shall mean the Original Term of Employment and all Renewal Terms.

2.

Position, Duties and Responsibilities.

(a)

Executive's Principal Position.  Pursuant to this Agreement, Executive shall be employed by Company and shall serve as the Vice President of Engineering, and Chief Technology Officer (“CTO”) of Company ("Executive's Principal Position") commencing on the Effective Date.  

(b)

Additional Duties.  Executive shall have and perform such duties, responsibilities, and authorities as are customary for the Vice President of Engineering and CTO for corporations of similar size and businesses as Company, and as are customary for such additional offices and titles as shall be assigned to Executive by the Company’s Board of Directors (the “Board”), and as such duties, responsibilities and authorities may be amended, altered, expanded or limited by the Board.  Executive shall devote substantially all of business time and attention (except for periods of vacation or absence due to illness), and his best efforts, abilities, experience, and talent to the duties and responsibilities to which he shall become subject under this Agreement.

3.

Patents.

(a)

Assignment.  All inventions, creations, contrivances, or patents resulting from, arising from, Executive’s duties or work for Company shall be considered a work for hire and will be assigned to Company, or its successor.  All related legal and registration fees will be paid by Company or its successor.  All patents which are completed outside the scope of Company’s business will be retained by Executive.  All of Executive’s inventions, creations, contrivances or patents are presumed to be within the scope of Executive’s duties unless established by clear and convincing evidence that they are not. Exhibit B, “Daniel Lerner Exclusive Patents” lists Mr. Lerner’s current, in-progress and potential patents; created outside the scope of his employment at Company.  This list will be continuously updated, then verified and certified by

IRONCLAD EMPLOYMENT AGREEMENT

Page 1

the standing President, CEO and/or the Chairman of the Board.  In the event that Company and its successors and assigns are dissolved, liquidated, and/or cease to exist as a technology encryption organization or subsidiary utilizing encryption related technology; the intellectual property rights and patents owned by the organization where Daniel Lerner is listed as a named inventor shall revert back to Daniel Lerner and his heirs.   

4.

Compensation.

(a)

Base Salary.  Employee shall be paid a base salary ("Base Salary"), payable in accordance with the regular payroll practices of Company, as follows:

(i)

commencing on the Effective Date of this Agreement and continuing until June 30, 2017, the Executive will be paid Five Thousand Dollars ($5,000) per month;

(ii)

commencing July 1, 2017 and continuing until August 30, 2017, the Executive will be paid Five Thousand Dollars ($5,000) per month and will defer receipt of Eleven Thousand Six Hundred Sixty-Seven Dollars ($11,667) per month; and

(iii)

commencing September 1, 2017 and continuing until the “Salary Deferral Termination Date,” the Executive will be paid Twelve Thousand Dollars ($12,000) per month and will defer receipt of Four Thousand Six Hundred Sixty-Seven Dollars ($4,667) per month.

For purposes of this section, the “Salary Deferral Termination Date” means the date on which the Board of Directors (the “Board”) or the Compensation Committee of the Board (the "Compensation Committee"), in its sole discretion, determines that the Company is financially able to pay the full monthly amount of the Executive’s annualized base salary of Two Hundred Thousand Dollars ($200,000). Following the Salary Deferral Termination Date, the Board or the Compensation Committee, in its sole discretion, will determine the timing and amount of payment to the Executive of all deferred salary amounts.  Following the Salary Deferral Termination Date, the Company shall not be entitled to defer the payment of Executive’s Base Salary without the Executive’s written consent. The Board or the Compensation Committee may increase the Base Salary from time to time in its discretion.

(b)

Annual Incentive Awards.  Executive shall be eligible to participate in any annual incentive compensation plan established by the Compensation Committee ("annual incentive award").  Payment of any annual incentive award shall be made by the Company at the same time that other senior-level executives receive their annual incentive awards; provided, however, that the failure of the Company to award such incentive bonus shall not give rise to any claim against the Company if Executive has failed to meet any targets established for him as determined in the sole and absolute discretion of the Compensation Committee.

(c)

Employee Benefit Programs.  During the Term of Employment, except as otherwise noted below, Executive shall be entitled to participate in such employee pension and welfare benefit plans and programs of Company as are made available to Company's employees generally, as such plans or programs may be in effect from time to time, including, without limitation, medical, dental, long-term disability, Section 401k retirement plan, supplemental retirement plan or plans, and tax and financial planning services; provided, however, nothing herein shall be construed as requiring the Company to establish or continue any particular benefit plan in discharge of its obligations under this Agreement.  Executive shall be entitled to four (4) weeks of paid vacation per year, and to Company holiday leave in accordance with Company's standard holiday schedule as amended from time to time.

(d)

Reimbursement of Business Expenses.  Executive is authorized to incur reasonable business expenses in carrying out his duties and responsibilities under this Agreement, and Company shall reimburse him for all reasonable business expenses incurred in connection therewith, subject to Company's applicable policies and documentation requirements for business expense reimbursement.

IRONCLAD EMPLOYMENT AGREEMENT

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(e)

Initial Stock Option Grant.  Executive shall receive from the Company, effective as of January 6, 2017, options (“the “Initial Options”) to purchase up to Three Million (3,000,000) shares of the Company's Common Stock, at Fifteen Cents ($0.15) per share, constituting the Fair Market Value as of the Effective Date.  Of the Initial Options granted, options to purchase One Million (1,000,000) shares (33.3%) shall vest on January 5, 2018 and options to purchase an additional One Million (1,000,000) shares shall vest on each one-year anniversary of January 5, for two (2) consecutive years. Once vested, the Initial Options must be exercised no later than three (3) years from vesting. The Company will register the shares of Common Stock issuable upon exercise of the Initial Options pursuant to a registration statement on Form S-8.  

5.

Termination of Employment.

(a)

Termination Due to Death.  This Agreement shall terminate automatically upon Executive's death, in which event Executive's estate or his beneficiaries, as the case may be, shall be entitled to, and their sole remedies under this Agreement shall be:

(i)

Base Salary through the date of termination, which shall be paid in a cash lump sum not later than thirty (30) days following the date of death;

(ii)

any incentive awards earned as of December 31 of the prior year (but not yet paid), which shall be paid in a cash lump sum not later than thirty (30) days following the date of death;

(iii)

payment of a pro-rata portion of any annual incentive award contemplated by Paragraph 3(b) for the year during which death occurs payable as provided in Paragraph 3(b);

(iv)

all of Executive's outstanding but unvested stock options shall vest immediately and remain exercisable for one (1) year from the date of termination and the elimination of all restrictions on restricted stock or deferred stock awards (the term stock, for purposes of this Agreement, shall mean all forms of equity and equity based compensation, including phantom stock);

(v)

other or additional benefits then due or earned in accordance with applicable plans and programs of Company; and

(vi)

settlement of all deferred compensation arrangements in accordance with any then applicable deferred compensation or election form.

(b)

Termination Due to Disability.  This Agreement may be terminated by Company in the event Executive has a "Disability" as defined below which lasts, or Company reasonably determines is likely to last (based on the written opinion of a board certified physician), for a period exceeding 120 days from the onset of such Disability.  Executive shall be deemed to be under a Disability if Executive becomes eligible for coverage under Company's Long-Term Disability Program, if any, or if Executive is otherwise unable, by virtue of illness or physical or mental incapacity or disability (from any cause or causes whatsoever), to perform Executive's essential job functions hereunder, whether with or without reasonable accommodation, in substantially the manner and to the extent required hereunder prior to the commencement of such Disability.  In the event of Executive's Disability, Company may terminate any or all of Executive's titles, positions, and responsibilities hereunder (including Executive's Principal Position) or Company may terminate Executive's employment hereunder.  If Executive is terminated due to Disability, (i) Executive shall be entitled to receive all earned awards (including a pro-rata portion of any annual incentive award); (ii) all of Executive's outstanding but unvested stock options shall vest immediately and remain exercisable for one (1) year from the date of termination; and (iii) all restrictions regarding Executive's restricted or deferred stock shall immediately lapse.

IRONCLAD EMPLOYMENT AGREEMENT

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During the Term of Employment, Executive shall be entitled to disability coverage in accordance with the terms of Company's Long-Term Disability Program, if any.  Executive shall not be entitled to any annual incentive award for the time during which Executive is receiving such disability benefits.  If Executive recommences his position after a leave for Disability, he shall be entitled to a pro rata annual incentive award for the year he resumes such position and shall thereafter be entitled to annual incentive awards in accordance with this Agreement.

During the period Executive is receiving Disability benefits from Company, he shall continue to be treated as an employee for purposes of all employee benefits and entitlements in which he was participating on the date such benefits commenced, except that Executive shall not be entitled to receive any annual salary increases or any new long-term incentive plan grants during his Disability.

(c)

Termination by Company for Cause.  The Company shall have the right to terminate Executive's employment for "Cause" at any time.

(i)

For purposes of this Agreement, "Cause" shall include without limitation the following occurrences:

(A)

Executive is indicted, convicted or pleads guilty or nolo contendere to a felony or any crime involving moral turpitude, dishonesty or theft;

(B)

Executive fails to comply with applicable laws or governmental regulations with respect to Company operations or performance of Executive's duties;

(C)

Executive engages in conduct deemed by the Board to constitute neglect or misconduct in carrying out his duties under this Agreement;

(D)

Executive refuses to comply with any lawful directive of the Board or otherwise meet his obligations under this Agreement; or

(E)

Executive breaches Paragraphs 5, 6, or 7 of this Agreement.

(ii)

In the event Company terminates Executive's employment for Cause, Executive shall be entitled to, and his sole remedies under this Agreement shall be:

(A)

Base Salary through the date of the termination, which shall be paid in a cash lump sum not later than 30 days following the date of termination; and

(B)

other or additional benefits then due in accordance with applicable plans or programs of Company.

(d)

Termination Without Cause or by Executive for Good Reason.  The Company shall have the right to terminate Executive's employment Without Cause and Executive shall have the right to terminate with Good Reason (as each of those terms are defined below).

(i)

In the event Company terminates Executive's employment Without Cause (which termination shall be effective as of the date specified by Company in a written notice to Executive), or in the event Executive terminates this Agreement for Good Reason, Executive shall be entitled to, and his sole remedies under this Agreement shall be:

(A)

Base Salary through the date of termination, which shall be paid in cash in a lump sum not later than thirty (30) days following the date of termination;

IRONCLAD EMPLOYMENT AGREEMENT

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(B)

1/12th of Executive's Base Salary in effect on the date of termination (or, in the event a Base Salary reduction is the basis for a Good Reason termination, the Base Salary in effect immediately prior to such reduction), payable monthly ("Severance Payments") for the longer of (x) the remaining duration of the Term of Employment, or (y) twelve (12) months (the "Severance Period");

(C)

immediate vesting of all outstanding stock options.  Executive shall have the right to exercise all vested stock options for a period of two (2) years from the termination date;

(D)

elimination of all restrictions on any restricted stock or deferred stock awards which would have lapsed through the conclusion of the Severance Period;

(E)

the balance of any incentive awards earned as of December 31 of the prior year (but not yet paid), which shall be paid in a cash lump sum not later than thirty (30) days following the date of termination;

(F)

payment of a pro-rata portion of any annual incentive award contemplated by Paragraph 3(b), if any, for the year during which such termination occurs, payable as provided in Paragraph 3(b):

(G)

immediate vesting of Executive's accrued benefits under any supplemental retirement benefit plan ("SERP") maintained by Company, with the payments to be made in accordance with the terms and conditions of the SERP;

(H)

other or additional benefits then due or earned in accordance with applicable plans and programs of Company;

(I)

settlement of all deferred compensation arrangements in accordance with any then applicable deferred compensation or election form; and

(J)

continued participation in medical, dental and life insurance plans for which Executive remains eligible at benefit levels substantially equal to those at which Executive was participating on the date of termination (excluding any long term disability benefits for a disability occurring after the date of termination) until the earlier of:

(1)

the end of the Severance Period; or

(2)

the date, or dates, Executive receives coverage and benefits under the plans and programs of a subsequent employer; provided, however, nothing herein shall be construed as requiring the Company to establish or continue any particular benefit plan in discharge of its obligations under this Agreement.

(ii)

For purposes of this Agreement, "Termination Without Cause" shall mean Executive's employment is terminated by Company for any reason other than Cause (as defined in Paragraph 4(c)(i)), Executive's death or Executive's Disability (as defined in Paragraph 4(b)).

IRONCLAD EMPLOYMENT AGREEMENT

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(iii)

For purposes of this Agreement, "Good Reason" shall mean Executive's termination of his employment within one year following the occurrence, without Executive's written consent, of a "Material Event" or a "Change in Control," as defined below; provided, however, that notwithstanding the foregoing, Executive's termination of employment shall not constitute a “Good Reason” event if, in advance of or subsequent to the Material Event or Change in Control, Executive, in his sole discretion, agrees in writing that such event shall not constitute a “Good Reason” event within the meaning of this Agreement:

(A)

Material Event.  A Material Event shall be deemed to occur if:

(1)

there is a material diminution in Executive's position, title, office, status, rank, or authority regarding Executive's Principal Position, other than during or following a Disability, which is not cured within thirty (30) days of receipt by the Board of written notice from Executive;

(2)

there is any material decrease in Executive's annual Base Salary during the Original Term of Employment (which occurs other than as an across the board reduction applicable generally to all senior executive officers);

(3)

there is any failure to secure the agreement of any successor corporation or other entity to Company to fully assume Company's obligations under this Agreement; or

(4)

there is any other failure by Company to perform any material obligation under, or breach by Company of any material provision of, this Agreement which is not cured within thirty (30) days of receipt by the Board of written notice from Executive.

(B)

Change in Control.  A Change in Control shall be deemed to have occurred if:

(1)

there shall be consummated any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation;

(2)

during any calendar year during the term of this Agreement, individuals who at the beginning of such year constitute the Board of Directors of the Company cease for any reason to constitute at least sixty percent (60%) of the Board of Directors of the Company; or

(3)

there shall be any sale, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company.

(iv)

For purposes of this Agreement, “Termination Date,” “date of termination” or similar phrases shall mean the date as of which the Executive incurs a termination of employment with the Company that constitutes “separation of service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended.  Any notice of termination of the Executive’s employment given by the Executive or the Company pursuant to the provisions of this Agreement shall specify the Termination Date or date of termination.

IRONCLAD EMPLOYMENT AGREEMENT

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(e)

Voluntary Termination.  In the event of a termination of employment by Executive on his own initiative, after delivery of ten (10) business days advance written notice, other than a termination due to Disability, Executive shall have the same entitlements as provided in Paragraph 4(c)(ii) above for a termination for Cause.

6.

Confidentiality, Cooperation with Regard to Litigation; Non-Disparagement.

(a)

For purposes of this Agreement, "Confidential Information" shall mean all information:  (i) disclosed to or known by Executive as a consequence of or through his employment with the Company or any of its Subsidiaries; (ii) not generally known outside the Company; or (iii) which relates to any aspect of Company's or any Subsidiary's business, research, or development.  Confidential Information includes, but is not limited to proprietary, sensitive or other information concerning Company's or Subsidiary's products, product development, trade secrets, customers, suppliers, finances, compensation information, business plans and strategies, and information provided to the Company by a third party under restrictions against disclosure or use by the Company. Excluded from the definition of Confidential Information is information that is or becomes part of the public domain, other than through the breach of this Agreement by Executive.

(b)

Executive acknowledges that he will have access to Confidential Information of the Company, its Subsidiaries and its customers.  Executive agrees that during the Term of Employment and thereafter for a period of three (3) years (including following termination of Executive's employment for any reason), Executive shall not, without the Board's prior written consent, directly or indirectly, disclose to anyone or make use of any Confidential Information, except in the performance of his duties hereunder or when required to do so by legal process, by any governmental agency having supervisory authority over the business of Company or by any administrative or legislative body (including a committee thereof) that requires him to divulge, disclose or make accessible such information. In the event that Executive is so ordered, he shall give prompt written notice to Company to allow Company the opportunity to object to or otherwise resist such order.

(c)

During the Term of Employment and thereafter, Executive shall not disclose the existence or contents of this Agreement unless such disclosure is required by law, by a governmental agency, or in a document required by law to be filed with a governmental agency or in connection with enforcement of his rights under this Agreement. In the event that disclosure is so required, Executive shall give prompt written notice to Company to allow Company the opportunity to object to or otherwise resist such requirement. This restriction shall not apply to such disclosure by him to members of his immediate family, his tax, legal or financial advisors, any lender, or tax authorities, or to potential future employers to the extent necessary, each of whom shall be advised not to disclose such information.

(d)

Executive agrees to cooperate with Company, during the Term of Employment and thereafter (including following termination of Executive's employment for any reason), by making himself reasonably available to testify on behalf of Company or any Subsidiary in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, and to assist Company, or any Subsidiary, in any such action, suit, or proceeding, by providing information and meeting and consulting with the Board or its representatives or counsel, or representatives or counsel to Company, or any Subsidiary as reasonably requested.  Company agrees to reimburse Executive for all expenses actually incurred in connection with his provision of testimony or assistance.

(e)

Executive agrees that, during the Term of Employment and thereafter (including following  termination of Executive's employment for any reason) he will not make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage Company or any Subsidiary or their respective officers, directors, employees, advisors, businesses or reputations. Company agrees that, during the Term of Employment and thereafter (including following termination of Executive's employment for any reason), Company will not make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may directly or indirectly, disparage Executive or his business or reputation. Notwithstanding the foregoing, nothing in this Agreement shall preclude either

IRONCLAD EMPLOYMENT AGREEMENT

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Executive or Company from making truthful statements or disclosures that are required by applicable law, regulation, or legal process.

7.

Non-Competition.

(a)

Non-Competition During Employment.  Executive agrees that for the duration of his employment, he shall not engage in Competition with Company or any Subsidiary. "Competition" shall mean engaging in any activity for, or having a Financial Interest in (as defined below), a Competitor of Company or of any Subsidiary.  A "Competitor" shall mean any corporation or other entity which offers or performs services or products substantially similar to those provided by Company or any Subsidiary, and thereby competes, directly or indirectly, with the business conducted by Company and overseen by Executive as part of his position, duties and/or responsibilities during his employment with the Company, as determined on the date of termination of Executive's employment.

(b)

Non-Competition After Termination.  Executive agrees that for a period of [two (2)] years following the later of (i) termination of Executive's employment for whatever reason, or (ii) the conclusion of the period, if any, during which the Company is making payments to Executive pursuant to this Agreement above, Executive shall not, directly or indirectly, whether or not for compensation and whether or not as an employee, engage in Competition with Company or any Subsidiary, or have any Financial Interest in any Competitor to the Company or Subsidiary within any state, region or locality in which the Company or Subsidiary is then doing business.

(c)

Financial Interest Defined.  For purposes of this Agreement, Executive shall be deemed to be engaged in or to have a "Financial Interest" in a business if Executive is an employee, independent contractor, consultant, principal, agent, officer, director, partner, or shareholder, or if Executive directly or indirectly performs services for such entity, or if Executive or any member of Executive's immediate family beneficially owns an equity interest, or interest convertible into equity, in any such entity; provided, however that the foregoing shall not prohibit Executive or a member of Executive's immediate family from owning, for the purpose of passive investment, less than one percent (1%) of any class of securities of any publicly held company.

8.

Non-Solicitation.  During the period beginning with the Effective Date and ending [two (2)] years following the termination of Executive's employment, Executive shall not:  (i)  induce, or attempt to induce, employees of Company or any Subsidiary to terminate their employment; (ii) solicit or encourage any of Company's or any Subsidiary's customers, or joint venture partners to terminate or diminish their relationship with Company or any Subsidiary; or (iii) solicit or encourage any person or entity in a contractual relationship with Company or any Subsidiary to violate any agreement with any of them.  During such period, Executive shall not hire, either directly or through any employee, agent or representative, any employee of Company or any Subsidiary or any person who was employed by Company or any Subsidiary within 180 days of such hiring.

9.

Acknowledgment of Need for Restrictive Covenants.  Executive acknowledges the necessity of the restrictive covenants set forth herein to:  protect the Company's legitimate interests in its Confidential Information; protect the Company's competitive business advantage, customer relations and the goodwill with customers and suppliers that the Company has established at its substantial investment; and protect the Company as a result of providing Executive with specialized knowledge, training and insight regarding Company's operations.  Executive further agrees and acknowledges that the restrictive covenant is a reasonable limitation as to time, geographic area and scope of activities to be restricted and that such restrictions do not impose a greater restraint on Executive than is necessary to protect the goodwill, Confidential Information, and other legitimate business interests of the Company.

10.

Remedies.  If Executive breaches any of the provisions contained in Paragraphs 5, 6 or 7 above, Company shall have the right to immediately terminate all payments and benefits due under this Agreement and shall have the right to seek injunctive relief. Executive acknowledges that such a breach of Paragraphs 6, 7, or 8 would cause irreparable injury and that money damages would not provide an adequate remedy for Company.  

IRONCLAD EMPLOYMENT AGREEMENT

Page 8

Therefore, Executive consents to enforcement of these foregoing paragraphs by means of temporary or permanent injunction and other appropriate equitable relief in any competent court, in addition to any remedies the Company may have under this Agreement or otherwise.

11.

Indemnification.

(a)

Company Indemnity.  Company agrees that if Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of Company or any Subsidiary or is or was serving at the request of Company or any Subsidiary as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, Executive shall be indemnified and held harmless by Company to the fullest extent legally permitted or authorized by Company's certificate of incorporation or bylaws or resolutions of Company's Board against all cost, expense, liability and loss (including, without limitation, attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by Executive in connection therewith, and such indemnification shall continue as to Executive even if he has ceased to be a director, member, officer, employee or agent of Company or other entity and shall inure to the benefit of Executive's heirs, executors and administrators; provided, however, that Executive shall not be entitled to any indemnification hereunder in the event that any court having jurisdiction over this matter determines that Executive's conduct was illegal, malicious, fraudulent, or resulted from gross negligence.  Company shall advance to Executive all reasonable costs and expenses to be incurred by him in connection with a Proceeding within twenty (20) days after receipt by Company of a written request for such advance.  Such request shall include an undertaking by Executive to repay the amount of such advance if it shall ultimately be determined that he is not entitled to be indemnified against such costs and expenses.  The provisions of this Paragraph 10(a) shall not be deemed exclusive of any other rights of indemnification to which Executive may be entitled or which may be granted to him, and it shall be in addition to any rights of indemnification to which he may be entitled under any policy of insurance.

(b)

No Presumption Regarding Standard of Conduct.  Neither the failure of Company (including its Board, independent legal counsel or stockholders) to have made a determination prior to the commencement of any proceeding concerning payment of amounts claimed by Executive under Paragraph 10(a) above that indemnification of Executive is proper because he has met the applicable standard of conduct, nor a determination by Company (including its Board, independent legal counsel or stockholders) that Executive has not met such applicable standard of conduct, shall create a presumption that Executive has not met the applicable standard of conduct.

(c)

Liability Insurance.  Company agrees to continue and maintain a directors and officers' liability insurance policy covering Executive to the extent Company provides such coverage for its other executive officers or directors.

12.

Resolution of Disputes.  Any controversy or claim arising out of or relating to this Agreement or any breach or asserted breach hereof or questioning the validity and binding effect hereof arising under or in connection with this Agreement, other than seeking injunctive relief under Paragraphs 5, 6 or 7, shall be resolved by mediation and, if necessary, final and binding arbitration, to be held in Houston, Texas.  Disputes arising under this Agreement must first be submitted for non-binding mediation before a neutral third party.  Mediation shall be conducted and administered by the American Arbitration Association ("AAA") under its Employment Mediation Rules or as otherwise agreed between the parties.  If a covered dispute remains unresolved at the conclusion of the mediation process, either party may submit the dispute for resolution by final and binding arbitration in accordance with the Employment Dispute Resolution Rules of the AAA.  Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.  All costs and expenses of any mediation shall be borne by Company.  All costs and expenses of any arbitration or court proceeding (including fees and disbursements of counsel) shall be borne by the respective party incurring such costs and expenses, but the prevailing party shall be entitled to reimbursement from the other party.

IRONCLAD EMPLOYMENT AGREEMENT

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13.

Effect of Agreement on Other Benefits.  Except as specifically provided in this Agreement, the existence of this Agreement shall not be interpreted to preclude, prohibit or restrict Executive's participation in any other employee benefit or other plans or programs in which he currently participates.

14.

Assignability; Binding Nature.  This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs (in the case of Executive) and permitted assigns.  No obligation of Company under this Agreement may be assigned or transferred by Company except that such rights or obligations shall be assigned or transferred in connection with a merger, consolidation or sale or transfer of all or substantially all of the assets of Company, provided that the assignee or transferee is the successor to all or substantially all of the assets of Company and such assignee or transferee assumes the liabilities, obligations and duties of Company, as contained in this Agreement, either contractually or as a matter of law.  Company further agrees that, in the event of a merger, consolidation or sale or transfer of assets as described in the preceding sentence, it shall take whatever action it legally can as appropriate in order to cause such assignee or transferee to expressly assume the liabilities, obligations and duties of Company hereunder.  For the avoidance of doubt, this Agreement shall be binding upon any entity into which Company merges.  No rights or obligations of Executive under this Agreement may be assigned or transferred by Executive other than his rights to compensation and benefits, which may be transferred only by will or operation of law, except as provided in Paragraph 17 below.

15.

Amendment or Waiver.  No provision in this Agreement may be amended unless such amendment is agreed to in writing and signed by Executive and an authorized officer of Company.  Except as set forth herein, no delay or omission to exercise any right, power or remedy accruing to any Party shall impair any such right, power or remedy or shall be construed to be a waiver of or an acquiescence to any breach hereof.  No waiver by either Party of any breach by the other Party of any condition or provision contained in this Agreement to be performed by such other Party shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time.  Any waiver must be in writing and signed by Executive or an authorized officer of Company, as the case may be.

16.

Severability.  In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.

17.

Survivorship.  The respective rights and obligations of the Parties hereunder shall survive any termination of Executive's employment to the extent necessary to the intended preservation of such rights and obligations.

18.

Beneficiaries/References.  Executive shall be entitled, to the extent permitted under any applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following Executive's death by giving Company written notice thereof.  In the event of Executive's death or a judicial determination of his incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative.

19.

Notices.  Any notice given to a Party shall be in writing and shall be deemed to have been given when delivered personally or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the Party concerned at the address indicated below or to such changed address as such Party may subsequently give such notice of:

If to Company:

Ironclad Encryption Corporation

Attention: Chairman

777 S. Post Oak Lane Suite 1700

Houston, TX 77056

If to Executive:

Daniel Lerner

4346 King Cotton Lane

IRONCLAD EMPLOYMENT AGREEMENT

Page 10

Missouri City, Texas 77459

20.

Governing Law/Jurisdiction.  This Agreement shall be governed by and construed and interpreted in accordance with the laws of Texas without reference to principles of conflict of laws.  Subject to Paragraph 11 Company and Executive hereby consent to the jurisdiction of any court of the State of Texas in Harris County for purposes of resolving any dispute under this Agreement.  Company and Executive further agree that any service of process or notice requirements in any such proceeding shall be satisfied if the rules of such court relating thereto have been substantially satisfied.  Company and Executive hereby waive, to the fullest extent permitted by applicable law, any objection which it or he may now or hereafter have to such jurisdiction and any defense of inconvenient forum.

21.

Headings.  The headings of the paragraphs contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement.

IN WITNESS WHEREOF, the undersigned have executed this Agreement on the 17th day of August 2017 to be effective as of the Effective Date.

IRONCLAD ENCRYPTION CORPORATION

By: /s/  James D. McGraw

James D. McGraw

Its:  Chief Executive Officer/President

/s/  Daniel Lerner

DANIEL LERNER

IRONCLAD EMPLOYMENT AGREEMENT

Page 11

	EXHIBIT A Defined Terms
(a)	"Base Salary" shall have the meaning set forth in Paragraph 4(a).
(b)	"Company" shall have the meaning set forth in the first paragraph.
(c)	"Board" shall have the meaning set forth in Paragraph 2.
(d)	"Cause" shall have the meaning set forth in Paragraph 5(c)(i).
(e)	"CTO" shall have the meaning set forth in Paragraph 2.
(f)	"Compensation Committee" shall have the meaning set forth in Paragraph 4(a).
(g)	"Competitor" or "Competition" shall have the meaning set forth in Paragraph 7(a).
(h)	"Confidential Information" shall have the meaning set forth in Paragraph 6(c).
(i) (j)	“Effective Date” shall have the meaning set forth in Paragraph 1. “Fair Market Value” as of any date means the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, (d) the sales price of Company Common Stock shares in a Private Placement Memorandum within the same period, or (e) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Board, the fees and expenses of which shall be paid by the Company.
(k)	"Original Term of Employment" shall have the meaning set forth in Paragraph 1.
(l)	"Proceeding" shall have the meaning set forth in Paragraph 11(a).
(m)	"Renewal Term" shall have the meaning set forth in Paragraph 1.
(n)	"Restricted Shares" shall have the meaning set forth in Paragraph 5(a)(iii).
(o)	"Severance Payments shall have the meaning set forth in Paragraph 5(d)(i).
(p)	“Severance Period" shall have the meaning set forth in Paragraph 5(d)(i)(B).
(q)	"Subsidiary" shall have the meaning set forth in the first recital.
(r)	"Term of Employment" shall have the meaning set forth in Paragraph 1.
(s)	"Termination Without Cause" shall have the meaning set forth in Paragraph 5(d)(ii).

EXHIBIT B

(page 1)

DANIEL LERNER EXCLUSIVE PATENTS

(Current Patents, Patentable Work In-Progress, Projected Patents)

Date (Projected Date) Description Patent Number (ID number) Verification / Certification (signature / date)

EXHIBIT B

(page 2)

DANIEL LERNER EXCLUSIVE PATENTS

(Current Patents, Patentable Work In-Progress, Projected Patents)

Date (Projected Date) Description Patent Number (ID number) Verification / Certification (signature / date)

EX-10

Exhibit 10.7

IRONCLAD ENCRYPTION CORPORATION

EMPLOYMENT AGREEMENT

This Employment Agreement is executed as of August 17, 2017 to be effective as of the 6th day of January 2017 (“Effective Date”), by and between Ironclad Encryption Corporation (together with its successors and assigns, the “Company” or “Ironclad”), and James D. McGraw (“Executive”).

W I T N E S S E T H:

WHEREAS, Company desires to employ Executive in capacities with the Company or, from time to time, other corporations or entities controlled directly or indirectly by the Company (each, a “Subsidiary”), and Executive desires to accept such employment; and

WHEREAS, Company and Executive desire to enter into this employment agreement to set forth the terms and conditions of the relationship between the Company and Executive (this “Agreement”).

NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, Company and Executive (individually a “Party” and together the “Parties”) agree to be bound in accordance with the terms of this Agreement.

1.

Term of Employment.  The term of Executive's employment under this Agreement shall commence upon the Effective Date, and end on January 31, 2021 (the ''Original Term of Employment”), unless terminated earlier in accordance herewith. The Original Term of Employment shall be automatically renewed for successive one-year terms (the “Renewal Terms”) unless at least 90 days prior to the expiration of the Original Term of Employment or any Renewal Term, either Party notifies the other Party in writing that he or it is electing to terminate this Agreement at the expiration of the then current Term of Employment. “Term of Employment” shall mean the Original Term of Employment and all Renewal Terms.

2.

Position, Duties and Responsibilities.

(a)

Executive's Principal Position.  Pursuant to this Agreement, Executive shall be employed by Company and shall serve as the President and Chief Executive Officer (“CEO”) of Company (“Executive's Principal Position”) commencing on the Effective Date.  Executive will also serve as a member of Company’s Board of Directors (the “Board”).

(b)

Additional Duties.  Executive shall have and perform such duties, responsibilities, and authorities as are customary for the office of President/CEO of corporations of similar size and businesses as Company, and as are customary for such additional offices and titles as shall be assigned to Executive by the Board, and as such duties, responsibilities and authorities may be amended, altered, expanded or limited by the Board.  Executive shall devote substantially all of his business time and attention (except for periods of vacation or absence due to illness), and his best efforts, abilities, experience, and talent to the duties and responsibilities to which he shall become subject under this Agreement.

(c)

Other Activities.  Anything herein to the contrary notwithstanding, nothing in this Agreement shall preclude Executive from (i) serving on the boards of directors of a reasonable number of other corporations or the boards of a reasonable number of trade associations and/or charitable organizations, (ii) engaging in charitable activities and community affairs, and (iii) managing his personal investments and affairs, provided that all such activities, in the aggregate, do not, in the judgment of the Board, materially interfere with the proper performance of Executive's duties and responsibilities under this Agreement.

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3.

Compensation.

(a)

Base Salary.  Employee shall be paid a base salary ("Base Salary"), payable in accordance with the regular payroll practices of Company, as follows:

(i)

commencing on the Effective Date of this Agreement and continuing until June 30, 2017, the Executive will be paid Five Thousand Dollars ($5,000) per month;

 (ii)

commencing July 1, 2017 and continuing until the “Salary Deferral Termination Date,” the Executive will be paid Five Thousand Dollars ($5,000) per month and will forgo the majority of his salary, deferring receipt of Three Thousand Seven Hundred Dollars ($3,700) per month.

For purposes of this section, the “Salary Deferral Termination Date” means the date on which the Board of Directors (the “Board”) or the Compensation Committee of the Board (the "Compensation Committee"), in its sole discretion, determines that the Company is financially able to pay the full monthly amount of the Executive’s annualized base salary of Five Hundred Thousand Dollars ($500,000). Following the Salary Deferral Termination Date, the Board or the Compensation Committee, in its sole discretion, will determine the timing and amount of payment to the Executive of all deferred salary amounts.  Following the Salary Deferral Termination Date, the Company shall not be entitled to defer the payment of Executive’s Base Salary without the Executive’s written consent. The Board or the Compensation Committee may increase the Base Salary from time to time in its discretion.

(b)

Annual Incentive Awards.  Executive shall be eligible to participate in any annual incentive compensation plan established by the Compensation Committee (“annual incentive award”).  Payment of any annual incentive award shall be made by the Company at the same time that other senior-level executives receive their annual incentive awards; provided, however, that the failure of the Company to award such incentive bonus shall not give rise to any claim against the Company if Executive has failed to meet any targets established for him as determined in the sole and absolute discretion of the Board or the Compensation Committee.

(c)

Employee Benefit Programs.  During the Term of Employment, except as otherwise noted below, Executive shall be entitled to participate in such employee pension and welfare benefit plans and programs of Company as are made available to Company's employees generally, as such plans or programs may be in effect from time to time, including, without limitation, medical, dental, long-term disability, Section 401k retirement plan, supplemental retirement plan or plans, and tax and financial planning services; provided, however, nothing herein shall be construed as requiring the Company to establish or continue any particular benefit plan in discharge of its obligations under this Agreement.  Executive shall be entitled to four (4) weeks of paid vacation per year, and to Company holiday leave in accordance with Company's standard holiday schedule as amended from time to time.

(d)

Reimbursement of Business Expenses.  Executive is authorized to incur reasonable business expenses in carrying out his duties and responsibilities under this Agreement, and Company shall reimburse him for all reasonable business expenses incurred in connection therewith, subject to Company's applicable policies and documentation requirements for business expense reimbursement.

(e)

Stock Options.  In addition to any other benefits provided to Executive pursuant to employee stock benefit plans of the Company, subject to the approval of the Board or the Compensation Committee, Executive is entitled to receive awards of the following stock options:

(i)

Initial Stock Option Grant. Executive shall receive from the Company, effective as of January 6, 2017, options (“the “Initial Options”) to purchase up to Four Million (4,000,000) shares of the Company's Common Stock at an exercise price of Fifteen Cents ($0.15) per share, constituting the Fair Market Value as of the Effective Date.  Of the Initial Options granted, options to purchase One Million (1,000,000) shares (25%) shall vest on January 5, 2018 and options to

IRONCLAD EMPLOYMENT AGREEMENT

Page 2

purchase an additional One Million (1,000,000) shares shall vest on each one-year anniversary of January 5, for three (3) consecutive years.  Once vested, the Initial Options must be exercised no later than three (3) years from vesting. The Company will register the shares of Common Stock issuable upon exercise of the Initial Options pursuant to a registration statement on Form S-8.

(ii)

Performance-Based Non-Qualified Stock Options.  As incentive to achieve growth,  Executive shall also receive from the Company, effective as of January 6, 2017, additional options (“the “Additional Options”) to purchase Ten Million (10,000,000) shares of the Company’s Common Stock at an exercise price of One Dollar ($1) per share. The Additional Options shall vest and become exercisable once the Fair Market Value of the Company’s Common Stock equals or exceeds Fifteen Dollars ($15) per share.  Once vested, the Additional Options must be exercised within two (2) years of vesting.

4.

Termination of Employment.

(a)

Termination Due to Death.  This Agreement shall terminate automatically upon Executive's death, in which event Executive's estate or his beneficiaries, as the case may be, shall be entitled to, and their sole remedies under this Agreement shall be:

(i)

Base Salary through the date of termination, which shall be paid in a cash lump sum not later than thirty (30) days following the date of death;

(ii)

any incentive awards earned as of December 31 of the prior year (but not yet paid), which shall be paid in a cash lump sum not later than thirty (30) days following the date of death;

(iii)

payment of a pro-rata portion of any annual incentive award contemplated by Paragraph 3(b) for the year during which death occurs payable as provided in Paragraph 3(b);

(iv)

all of Executive's outstanding but unvested stock options shall vest immediately and remain exercisable for one (1) year from the date of termination and the elimination of all restrictions on restricted stock or deferred stock awards (the term stock, for purposes of this Agreement, shall mean all forms of equity and equity based compensation, including phantom stock);

(v)

other or additional benefits then due or earned in accordance with applicable plans and programs of Company; and

(vi)

settlement of all deferred compensation arrangements in accordance with any then applicable deferred compensation or election form.

(b)

Termination Due to Disability.  This Agreement may be terminated by Company in the event Executive has a “Disability” as defined below which lasts, or Company reasonably determines is likely to last (based on the written opinion of a board certified physician), for a period exceeding 120 days from the onset of such Disability.  Executive shall be deemed to be under a Disability if Executive becomes eligible for coverage under Company's Long-Term Disability Program, if any, or if Executive is otherwise unable, by virtue of illness or physical or mental incapacity or disability (from any cause or causes whatsoever), to perform Executive's essential job functions hereunder, whether with or without reasonable accommodation, in substantially the manner and to the extent required hereunder prior to the commencement of such Disability.  In the event of Executive's Disability, Company may terminate any or all of Executive's titles, positions, and responsibilities hereunder (including Executive's Principal Position) or Company may terminate Executive's employment hereunder.  If Executive is terminated due to Disability, (i) Executive shall be entitled to receive all earned awards (including a pro-rata portion of any annual incentive award); (ii) all of Executive's outstanding but unvested stock options shall vest

IRONCLAD EMPLOYMENT AGREEMENT

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immediately and remain exercisable for one (1) year from the date of termination; and (iii) all restrictions regarding Executive's restricted or deferred stock shall immediately lapse.

During the Term of Employment, Executive shall be entitled to disability coverage in accordance with the terms of Company's Long-Term Disability Program, if any.  Executive shall not be entitled to any annual incentive award for the time during which Executive is receiving such disability benefits.  If Executive recommences his position after a leave for Disability, he shall be entitled to a pro rata annual incentive award for the year he resumes such position and shall thereafter be entitled to annual incentive awards in accordance with this Agreement.

During the period Executive is receiving Disability benefits from Company, he shall continue to be treated as an employee for purposes of all employee benefits and entitlements in which he was participating on the date such benefits commenced, except that Executive shall not be entitled to receive any annual salary increases or any new long-term incentive plan grants during his Disability.

(c)

Termination by Company for Cause.  The Company shall have the right to terminate Executive's employment for “Cause” at any time.

(i)

For purposes of this Agreement, “Cause” shall include without limitation the following occurrences:

(A)

Executive is indicted, convicted or pleads guilty or nolo contendere to a felony or any crime involving moral turpitude, dishonesty or theft;

(B)

Executive fails to comply with applicable laws or governmental regulations with respect to Company operations or performance of Executive's duties;

(C)

Executive engages in conduct deemed by the Board to constitute neglect or misconduct in carrying out his duties under this Agreement;

(D)

Executive refuses to comply with any lawful directive of the Board or otherwise meet his obligations under this Agreement; or

(E)

Executive breaches Paragraphs 5, 6, or 7 of this Agreement.

(ii)

In the event Company terminates Executive's employment for Cause, Executive shall be entitled to, and his sole remedies under this Agreement shall be:

(A)

Base Salary through the date of the termination, which shall be paid in a cash lump sum not later than 30 days following the date of termination; and

(B)

other or additional benefits then due in accordance with applicable plans or programs of Company.

(d)

Termination Without Cause or by Executive for Good Reason.  The Company shall have the right to terminate Executive's employment Without Cause and Executive shall have the right to terminate with Good Reason (as each of those terms are defined below).

(i)

In the event Company terminates Executive's employment Without Cause (which termination shall be effective as of the date specified by Company in a written notice to Executive), or in the event Executive terminates this Agreement for Good Reason, Executive shall be entitled to, and his sole remedies under this Agreement shall be:

IRONCLAD EMPLOYMENT AGREEMENT

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(A)

Base Salary through the date of termination, which shall be paid in cash in a lump sum not later than thirty (30) days following the date of termination;

(B)

1/12th of Executive's Base Salary in effect on the date of termination (or, in the event a Base Salary reduction is the basis for a Good Reason termination, the Base Salary in effect immediately prior to such reduction), payable monthly (“Severance Payments”) for the longer of (x) the remaining duration of the Term of Employment, or (y) twelve (12) months (the “Severance Period”);

(C)

immediate vesting of all outstanding stock options.  Executive shall have the right to exercise all vested stock options for a period of two (2) years from the termination date;

(D)

elimination of all restrictions on any restricted stock or deferred stock awards which would have lapsed through the conclusion of the Severance Period;

(E)

the balance of any incentive awards earned as of December 31 of the prior year (but not yet paid), which shall be paid in a cash lump sum not later than thirty (30) days following the date of termination;

(F)

payment of a pro-rata portion of any annual incentive award contemplated by Paragraph 3(b), if any, for the year during which such termination occurs, payable as provided in Paragraph 3(b):

(G)

immediate vesting of Executive's accrued benefits under any supplemental retirement benefit plan (“SERP”) maintained by Company, with the payments to be made in accordance with the terms and conditions of the SERP;

(H)

other or additional benefits then due or earned in accordance with applicable plans and programs of Company;

(I)

settlement of all deferred compensation arrangements in accordance with any then applicable deferred compensation or election form; and

(J)

continued participation in medical, dental and life insurance plans for which Executive remains eligible at benefit levels substantially equal to those at which Executive was participating on the date of termination (excluding any long term disability benefits for a disability occurring after the date of termination) until the earlier of:

(1)

the end of the Severance Period; or

(2)

the date, or dates, Executive receives coverage and benefits under the plans and programs of a subsequent employer; provided, however, nothing herein shall be construed as requiring the Company to establish or continue any particular benefit plan in discharge of its obligations under this Agreement.

IRONCLAD EMPLOYMENT AGREEMENT

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(ii)

For purposes of this Agreement, “Termination Without Cause” shall mean Executive's employment is terminated by Company for any reason other than Cause (as defined in Paragraph 4(c)(i)), Executive's death or Executive's Disability (as defined in Paragraph 4(b)).

(iii)

For purposes of this Agreement, “Good Reason” shall mean Executive's termination of his employment within one year following the occurrence, without Executive's written consent, of a “Material Event” or a “Change in Control,” as defined below; provided, however, that notwithstanding the foregoing, Executive's termination of employment shall not constitute a “Good Reason” event if, in advance of or subsequent to the Material Event or Change in Control, Executive, in his sole discretion, agrees in writing that such event shall not constitute a “Good Reason” event within the meaning of this Agreement:

(A)

Material Event.  A Material Event shall be deemed to occur if:

(1)

there is a material diminution in Executive's position, title, office, status, rank, or authority regarding Executive's Principal Position, other than during or following a Disability, which is not cured within thirty (30) days of receipt by the Board of written notice from Executive;

(2)

there is any material decrease in Executive's annual Base Salary during the Original Term of Employment (which occurs other than as an across the board reduction applicable generally to all senior executive officers);

(3)

there is any failure to secure the agreement of any successor corporation or other entity to Company to fully assume Company's obligations under this Agreement; or

(4)

there is any other failure by Company to perform any material obligation under, or breach by Company of any material provision of, this Agreement which is not cured within thirty (30) days of receipt by the Board of written notice from Executive.

(B)

Change in Control.  A Change in Control shall be deemed to have occurred if:

(1)

there shall be consummated any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation;

(2)

during any calendar year during the term of this Agreement, individuals who at the beginning of such year constitute the Board of Directors of the Company cease for any reason to constitute at least sixty percent (60%) of the Board of Directors of the Company; or

(3)

there shall be any sale, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company.

(iv)

For purposes of this Agreement, “Termination Date,” “date of termination” or similar phrases shall mean the date as of which the Executive incurs a termination of employment with the Company that constitutes “separation of service” within the meaning of Section 409A of

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the Internal Revenue Code of 1986, as amended.  Any notice of termination of the Executive’s employment given by the Executive or the Company pursuant to the provisions of this Agreement shall specify the Termination Date or date of termination.

(e)

Voluntary Termination.  In the event of a termination of employment by Executive on his own initiative, after delivery of ten (10) business days advance written notice, other than a termination due to Disability, Executive shall have the same entitlements as provided in Paragraph 4(c)(ii) above for a termination for Cause.

5.

Confidentiality, Cooperation with Regard to Litigation; Non-Disparagement.

(a)

For purposes of this Agreement, “Confidential Information” shall mean all information:  (i) disclosed to or known by Executive as a consequence of or through his employment with the Company or any of its Subsidiaries; (ii) not generally known outside the Company; or (iii) which relates to any aspect of Company's or any Subsidiary's business, research, or development.  Confidential Information includes, but is not limited to proprietary, sensitive or other information concerning Company's or Subsidiary's products, product development, trade secrets, customers, suppliers, finances, compensation information, business plans and strategies, and information provided to the Company by a third party under restrictions against disclosure or use by the Company. Excluded from the definition of Confidential Information is information that is or becomes part of the public domain, other than through the breach of this Agreement by Executive.

(b)

Executive acknowledges that he will have access to Confidential Information of the Company, its Subsidiaries and its customers.  Executive agrees that during the Term of Employment and thereafter for a period of three (3) years (including following termination of Executive's employment for any reason), Executive shall not, without the Board's prior written consent, directly or indirectly, disclose to anyone or make use of any Confidential Information, except in the performance of his duties hereunder or when required to do so by legal process, by any governmental agency having supervisory authority over the business of Company or by any administrative or legislative body (including a committee thereof) that requires him to divulge, disclose or make accessible such information. In the event that Executive is so ordered, he shall give prompt written notice to Company to allow Company the opportunity to object to or otherwise resist such order.

(c)

During the Term of Employment and thereafter, Executive shall not disclose the existence or contents of this Agreement unless such disclosure is required by law, by a governmental agency, or in a document required by law to be filed with a governmental agency or in connection with enforcement of his rights under this Agreement. In the event that disclosure is so required, Executive shall give prompt written notice to Company to allow Company the opportunity to object to or otherwise resist such requirement. This restriction shall not apply to such disclosure by him to members of his immediate family, his tax, legal or financial advisors, any lender, or tax authorities, or to potential future employers to the extent necessary, each of whom shall be advised not to disclose such information.

(d)

Executive agrees to cooperate with Company, during the Term of Employment and thereafter (including following termination of Executive's employment for any reason), by making himself reasonably available to testify on behalf of Company or any Subsidiary in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, and to assist Company, or any Subsidiary, in any such action, suit, or proceeding, by providing information and meeting and consulting with the Board or its representatives or counsel, or representatives or counsel to Company, or any Subsidiary as reasonably requested.  Company agrees to reimburse Executive for all expenses actually incurred in connection with his provision of testimony or assistance.

(e)

Executive agrees that, during the Term of Employment and thereafter (including following  termination of Executive's employment for any reason) he will not make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage Company or any Subsidiary or their respective officers, directors, employees, advisors, businesses or reputations. Company agrees that, during the Term of

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Employment and thereafter (including following termination of Executive's employment for any reason), Company will not make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may directly or indirectly, disparage Executive or his business or reputation. Notwithstanding the foregoing, nothing in this Agreement shall preclude either Executive or Company from making truthful statements or disclosures that are required by applicable law, regulation, or legal process.

6.

Non-Competition.

(a)

Non-Competition During Employment.  Executive agrees that for the duration of his employment, he shall not engage in Competition with Company or any Subsidiary. “Competition” shall mean engaging in any activity for, or having a Financial Interest in (as defined below), a Competitor of Company or of any Subsidiary.  A “Competitor” shall mean any corporation or other entity which offers or performs services or products substantially similar to those provided by Company or any Subsidiary, and thereby competes, directly or indirectly, with the business conducted by Company and overseen by Executive as part of his position, duties and/or responsibilities during his employment with the Company, as determined on the date of termination of Executive's employment.

(b)

Non-Competition After Termination.  Executive agrees that for a period of [two (2)] years following the later of (i) termination of Executive's employment for whatever reason, or (ii) the conclusion of the period, if any, during which the Company is making payments to Executive pursuant to this Agreement above, Executive shall not, directly or indirectly, whether or not for compensation and whether or not as an employee, engage in Competition with Company or any Subsidiary, or have any Financial Interest in any Competitor to the Company or Subsidiary within any state, region or locality in which the Company or Subsidiary is then doing business.

(c)

Financial Interest Defined.  For purposes of this Agreement, Executive shall be deemed to be engaged in or to have a “Financial Interest” in a business if Executive is an employee, independent contractor, consultant, principal, agent, officer, director, partner, or shareholder, or if Executive directly or indirectly performs services for such entity, or if Executive or any member of Executive's immediate family beneficially owns an equity interest, or interest convertible into equity, in any such entity; provided, however that the foregoing shall not prohibit Executive or a member of Executive's immediate family from owning, for the purpose of passive investment, less than one percent (1%) of any class of securities of any publicly held company.

7.

Non-Solicitation.  During the period beginning with the Effective Date and ending [two (2)] years following the termination of Executive's employment, Executive shall not:  (i)  induce, or attempt to induce, employees of Company or any Subsidiary to terminate their employment; (ii) solicit or encourage any of Company's or any Subsidiary's customers, or joint venture partners to terminate or diminish their relationship with Company or any Subsidiary; or (iii) solicit or encourage any person or entity in a contractual relationship with Company or any Subsidiary to violate any agreement with any of them.  During such period, Executive shall not hire, either directly or through any employee, agent or representative, any employee of Company or any Subsidiary or any person who was employed by Company or any Subsidiary within 180 days of such hiring.

8.

Acknowledgment of Need for Restrictive Covenants.  Executive acknowledges the necessity of the restrictive covenants set forth herein to:  protect the Company's legitimate interests in its Confidential Information; protect the Company's competitive business advantage, customer relations and the goodwill with customers and suppliers that the Company has established at its substantial investment; and protect the Company as a result of providing Executive with specialized knowledge, training and insight regarding Company's operations.  Executive further agrees and acknowledges that the restrictive covenant is a reasonable limitation as to time, geographic area and scope of activities to be restricted and that such restrictions do not impose a greater restraint on Executive than is necessary to protect the goodwill, Confidential Information, and other legitimate business interests of the Company.

9.

Remedies.  If Executive breaches any of the provisions contained in Paragraphs 5, 6 or 7 above, Company shall have the right to immediately terminate all payments and benefits due under this Agreement and

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shall have the right to seek injunctive relief. Executive acknowledges that such a breach of Paragraphs 5, 6, or 7 would cause irreparable injury and that money damages would not provide an adequate remedy for Company.  Therefore, Executive consents to enforcement of these foregoing paragraphs by means of temporary or permanent injunction and other appropriate equitable relief in any competent court, in addition to any remedies the Company may have under this Agreement or otherwise.

10.

Indemnification.

(a)

Company Indemnity.  Company agrees that if Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that he is or was a director, officer or employee of Company or any Subsidiary or is or was serving at the request of Company or any Subsidiary as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, Executive shall be indemnified and held harmless by Company to the fullest extent legally permitted or authorized by Company's certificate of incorporation or bylaws or resolutions of Company's Board against all cost, expense, liability and loss (including, without limitation, attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by Executive in connection therewith, and such indemnification shall continue as to Executive even if he has ceased to be a director, member, officer, employee or agent of Company or other entity and shall inure to the benefit of Executive's heirs, executors and administrators; provided, however, that Executive shall not be entitled to any indemnification hereunder in the event that any court having jurisdiction over this matter determines that Executive's conduct was illegal, malicious, fraudulent, or resulted from gross negligence.  Company shall advance to Executive all reasonable costs and expenses to be incurred by him in connection with a Proceeding within twenty (20) days after receipt by Company of a written request for such advance.  Such request shall include an undertaking by Executive to repay the amount of such advance if it shall ultimately be determined that he is not entitled to be indemnified against such costs and expenses.  The provisions of this Paragraph 10(a) shall not be deemed exclusive of any other rights of indemnification to which Executive may be entitled or which may be granted to him, and it shall be in addition to any rights of indemnification to which he may be entitled under any policy of insurance.

(b)

No Presumption Regarding Standard of Conduct.  Neither the failure of Company (including its Board, independent legal counsel or stockholders) to have made a determination prior to the commencement of any proceeding concerning payment of amounts claimed by Executive under Paragraph 10(a) above that indemnification of Executive is proper because he has met the applicable standard of conduct, nor a determination by Company (including its Board, independent legal counsel or stockholders) that Executive has not met such applicable standard of conduct, shall create a presumption that Executive has not met the applicable standard of conduct.

(c)

Liability Insurance.  Company agrees to continue and maintain a directors and officers' liability insurance policy covering Executive to the extent Company provides such coverage for its other executive officers or directors.

11.

Resolution of Disputes.  Any controversy or claim arising out of or relating to this Agreement or any breach or asserted breach hereof or questioning the validity and binding effect hereof arising under or in connection with this Agreement, other than seeking injunctive relief under Paragraphs 5, 6 or 7, shall be resolved by mediation and, if necessary, final and binding arbitration, to be held in Houston, Texas.  Disputes arising under this Agreement must first be submitted for non-binding mediation before a neutral third party.  Mediation shall be conducted and administered by the American Arbitration Association (“AAA”) under its Employment Mediation Rules or as otherwise agreed between the parties.  If a covered dispute remains unresolved at the conclusion of the mediation process, either party may submit the dispute for resolution by final and binding arbitration in accordance with the Employment Dispute Resolution Rules of the AAA.  Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.  All costs and expenses of any mediation shall be borne by Company.  All costs and expenses of any arbitration or court proceeding (including fees and disbursements of counsel) shall be borne by the respective party incurring such costs and expenses, but the prevailing party shall be entitled to reimbursement from the other party.

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12.

Effect of Agreement on Other Benefits.  Except as specifically provided in this Agreement, the existence of this Agreement shall not be interpreted to preclude, prohibit or restrict Executive's participation in any other employee benefit or other plans or programs in which he currently participates.

13.

Assignability; Binding Nature.  This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs (in the case of Executive) and permitted assigns.  No obligation of Company under this Agreement may be assigned or transferred by Company except that such rights or obligations shall be assigned or transferred in connection with a merger, consolidation or sale or transfer of all or substantially all of the assets of Company, provided that the assignee or transferee is the successor to all or substantially all of the assets of Company and such assignee or transferee assumes the liabilities, obligations and duties of Company, as contained in this Agreement, either contractually or as a matter of law.  Company further agrees that, in the event of a merger, consolidation or sale or transfer of assets as described in the preceding sentence, it shall take whatever action it legally can as appropriate in order to cause such assignee or transferee to expressly assume the liabilities, obligations and duties of Company hereunder.  For the avoidance of doubt, this Agreement shall be binding upon any entity into which Company merges.  No rights or obligations of Executive under this Agreement may be assigned or transferred by Executive other than his rights to compensation and benefits, which may be transferred only by will or operation of law, except as provided in Paragraph 17 below.

14.

Amendment or Waiver.  No provision in this Agreement may be amended unless such amendment is agreed to in writing and signed by Executive and an authorized officer of Company.  Except as set forth herein, no delay or omission to exercise any right, power or remedy accruing to any Party shall impair any such right, power or remedy or shall be construed to be a waiver of or an acquiescence to any breach hereof.  No waiver by either Party of any breach by the other Party of any condition or provision contained in this Agreement to be performed by such other Party shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time.  Any waiver must be in writing and signed by Executive or an authorized officer of Company, as the case may be.

15.

Severability.  In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.

16.

Survivorship.  The respective rights and obligations of the Parties hereunder shall survive any termination of Executive's employment to the extent necessary to the intended preservation of such rights and obligations.

17.

Beneficiaries/References.  Executive shall be entitled, to the extent permitted under any applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following Executive's death by giving Company written notice thereof.  In the event of Executive's death or a judicial determination of his incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative.

18.

Notices.  Any notice given to a Party shall be in writing and shall be deemed to have been given when delivered personally or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the Party concerned at the address indicated below or to such changed address as such Party may subsequently give such notice of:

If to Company:

Ironclad Encryption Corporation

Attention: Chairman

777 S. Post Oak Lane Suite 1700

Houston, TX 77056

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If to Executive:

James D. McGraw

9726 Westview Drive

Houston, TX 77055

19.

Governing Law/Jurisdiction.  This Agreement shall be governed by and construed and interpreted in accordance with the laws of Texas without reference to principles of conflict of laws.  Subject to Paragraph 11 Company and Executive hereby consent to the jurisdiction of any court of the State of Texas in Harris County for purposes of resolving any dispute under this Agreement.  Company and Executive further agree that any service of process or notice requirements in any such proceeding shall be satisfied if the rules of such court relating thereto have been substantially satisfied.  Company and Executive hereby waive, to the fullest extent permitted by applicable law, any objection which it or he may now or hereafter have to such jurisdiction and any defense of inconvenient forum.

20.

Headings.  The headings of the paragraphs contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement.

IN WITNESS WHEREOF, the undersigned have executed this Agreement on the 17th day of August 2017 to be effective as of the Effective Date.

IRONCLAD ENCRYPTION CORPORATION



By: /s/  Len Walker
      Len Walker

Its:  Vice President/General Counsel

/s/  James D. McGraw  
JAMES D. MCGRAW

IRONCLAD EMPLOYMENT AGREEMENT

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	EXHIBIT A Defined Terms
(a)	“Base Salary” shall have the meaning set forth in Paragraph 3.
(b)	“Company” shall have the meaning set forth in the first paragraph.
(c)	“Board” shall have the meaning set forth in Paragraph 2.
(d)	“Cause” shall have the meaning set forth in Paragraph 4(c)(i).
(e)	“CEO” shall have the meaning set forth in Paragraph 2.
(f)	“Compensation Committee” shall have the meaning set forth in Paragraph 3(a).
(g)	“Competitor” or “Competition” shall have the meaning set forth in Paragraph 6(a).
(h)	“Confidential Information” shall have the meaning set forth in Paragraph 5(c).
(i) (j)	“Effective Date” shall have the meaning set forth in Paragraph 1. “Fair Market Value” as of any date means the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, (d) the sales price of Company Common Stock shares in a Private Placement Memorandum within the same period, or (e) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Board, the fees and expenses of which shall be paid by the Company.
(k)	“Good Reason” shall have the meaning set forth in Paragraph 4(d)(iii).
(l)	“Original Term of Employment” shall have the meaning set forth in Paragraph 1.
(m)	“Proceeding” shall have the meaning set forth in Paragraph 10(a).
(n)	“Renewal Term” shall have the meaning set forth in Paragraph 1.
(o)	“Restricted Shares” shall have the meaning set forth in Paragraph 4(a)(iii).
(p)	“Severance Payments shall have the meaning set forth in Paragraph 4(d)(i).
(q)	“Severance Period” shall have the meaning set forth in Paragraph 4(d)(i)(B).
(r)	“Subsidiary” shall have the meaning set forth in the first recital.
(s)	“Term of Employment” shall have the meaning set forth in Paragraph 1.
(t)	“Termination Without Cause” shall have the meaning set forth in Paragraph 4(d)(ii).

EX-10

Exhibit 10.8

IRONCLAD ENCRYPTION CORPORATION

EMPLOYMENT AGREEMENT

This Employment Agreement is executed as of August 17, 2017 to be effective as of the 6th day of January 2017 (“Effective Date”), by and between Ironclad Encryption Corporation (together with its successors and assigns, the “Company” or “Ironclad”), and Len Walker ("Executive").

W I T N E S S E T H:

WHEREAS, Company desires to employ Executive in capacities with Company or, from time to time, other corporations or entities controlled directly or indirectly by Company (each, a "Subsidiary"), and Executive desires to accept such employment; and

WHEREAS, Company and Executive desire to enter into this employment agreement to set forth the terms and conditions of the relationship between the Company and Executive (this "Agreement").

NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, Company and Executive (individually a "Party" and together the "Parties") agree to be bound in accordance with the terms of this Agreement.

1.

Term of Employment.  The term of Executive's employment under this Agreement shall commence upon the Effective Date, and end on January 31, 2021 (the ''Original Term of Employment"), unless terminated earlier in accordance herewith. The Original Term of Employment shall be automatically renewed for successive one-year terms (the "Renewal Terms") unless at least 90 days prior to the expiration of the Original Term of Employment or any Renewal Term, either Party notifies the other Party in writing that he or it is electing to terminate this Agreement at the expiration of the then current Term of Employment. "Term of Employment" shall mean the Original Term of Employment and all Renewal Terms.

2.

Position, Duties and Responsibilities.

(a)

Executive's Principal Position.  Pursuant to this Agreement, Executive shall be employed by Company and shall serve as the Vice President of Legal and General Counsel of Company ("Executive's Principal Position") commencing on the Effective Date.  As such, Executive will be responsible to provide senior management with effective advice on company strategies and their implementation, manage the legal function, and obtain and oversee the work of outside counsel. As well, the executive will draft and review all corporate documents,  and manage, direct and oversee all state and federal compliance requirements and Security and Exchange Commission filings.   Finally, he will be directly involved in complex business transactions requiring negotiation of critical contracts.

(b)

Additional Duties.  Executive shall have and perform such duties, responsibilities, and authorities as are customary for the Vice President of Legal and General Counsel of corporations of similar size and businesses as Company, and as are customary for such additional offices and titles as shall be assigned to Executive by the Board, and as such duties, responsibilities and authorities may be amended, altered, expanded or limited by the Board.  Executive shall devote substantially all of his business time and attention (except for periods of vacation or absence due to illness), and his best efforts, abilities, experience, and talent to the duties and responsibilities to which he shall become subject under this Agreement.

(c)

Other Activities.  Anything herein to the contrary notwithstanding, nothing in this Agreement shall preclude Executive from (i) serving on the boards of directors of a reasonable number of other corporations or the boards of a reasonable number of trade associations and/or charitable organizations, (ii) serving as an officer in another organization or company (iii) engaging in charitable activities and community affairs, and (iv) managing his personal investments and affairs, provided that all

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such activities, in the aggregate, do not, in the judgment of the Board, materially interfere with the proper performance of Executive's duties and responsibilities under this Agreement.

3.

Compensation.

(a)

Base Salary.  Employee shall be paid a base salary ("Base Salary"), payable in accordance with the regular payroll practices of Company, as follows:

(i)

commencing on the Effective Date of this Agreement and continuing until June 30, 2017, the Executive will be paid Five Thousand Dollars ($5,000) per month;

 (ii)

commencing July 1, 2017 and continuing until the “Salary Deferral Termination Date,” the Executive will be paid Five Thousand Dollars ($5,000) per month and will defer receipt of Eleven Thousand Six Hundred Sixty-Seven Dollars ($11,667) per month.

For purposes of this section, the “Salary Deferral Termination Date” means the date on which the Board of Directors (the “Board”) or the Compensation Committee of the Board (the "Compensation Committee"), in its sole discretion, determines that the Company is financially able to pay the full monthly amount of the Executive’s annualized base salary of Two Hundred Thousand Dollars ($200,000). Following the Salary Deferral Termination Date, the Board or the Compensation Committee, in its sole discretion, will determine the timing and amount of payment to the Executive of all deferred salary amounts.  Following the Salary Deferral Termination Date, the Company shall not be entitled to defer the payment of Executive’s Base Salary without the Executive’s written consent. The Board or the Compensation Committee may increase the Base Salary from time to time in its discretion.

(b)

Initial Stock Option Grant.  Executive shall receive from the Company, effective as of January 6, 2017, options (“the “Initial Options”) to purchase up to One Million (1,000,000) shares of the Company's Common Stock, at Fifteen Cents ($0.15) per share, constituting the Fair Market Value as of the Effective Date.  Of the Initial Options granted, Two Hundred Fifty Thousand (250,000) shares (25%) shall vest on January 5, 2018 and options to purchase an additional Two Hundred Fifty Thousand (250,000) shares shall vest on each one-year anniversary of January 5, for three (3) consecutive years.  Once vested, the Initial Options must be exercised no later than three (3) years from vesting. The Company will register the shares of Common Stock issuable upon exercise of the Initial Options pursuant to a registration statement on Form S-8.

(c)

Annual Incentive Awards.  Executive shall be eligible to participate in any annual incentive compensation plan established by the Compensation Committee ("annual incentive award").  Payment of any annual incentive award shall be made by the Company at the same time that other senior-level executives receive their annual incentive awards; provided, however, that the failure of the Company to award such incentive bonus shall not give rise to any claim against the Company if Executive has failed to meet any targets established for him as determined in the sole and absolute discretion of the Compensation Committee.

(d)

Employee Benefit Programs.  During the Term of Employment, except as otherwise noted below, Executive shall be entitled to participate in such employee pension and welfare benefit plans and programs of Company as are made available to Company's employees generally, as such plans or programs may be in effect from time to time, including, without limitation, medical, dental, long-term disability, Section 401k retirement plan, supplemental retirement plan or plans, and tax and financial planning services; provided, however, nothing herein shall be construed as requiring the Company to establish or continue any particular benefit plan in discharge of its obligations under this Agreement.  Executive shall be entitled to four (4) weeks of paid vacation per year, and to Company holiday leave in accordance with Company's standard holiday schedule as amended from time to time.

(e)

Reimbursement of Business Expenses.  Executive is authorized to incur reasonable business expenses in carrying out his duties and responsibilities under this Agreement, and Company shall reimburse him for all reasonable business expenses incurred in connection therewith, subject to Company's

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applicable policies and documentation requirements for business expense reimbursement. This shall include all annual professional legal membership fees and Continuing Legal Education seminars.

(f)

Legal Malpractice Insurance.  The company will provide Executive with suitable and comprehensive legal malpractice insurance and pay all associated costs, fees, premiums and deductibles.

4.

Termination of Employment.

(a)

Termination Due to Death.  This Agreement shall terminate automatically upon Executive's death, in which event Executive's estate or his beneficiaries, as the case may be, shall be entitled to, and their sole remedies under this Agreement shall be:

(i)

Base Salary through the date of termination, which shall be paid in a cash lump sum not later than thirty (30) days following the date of death;

(ii)

any incentive awards earned as of December 31 of the prior year (but not yet paid), which shall be paid in a cash lump sum not later than thirty (30) days following the date of death;

(iii)

payment of a pro-rata portion of any annual incentive award contemplated by Paragraph 3(b) for the year during which death occurs payable as provided in Paragraph 3(b);

(iv)

all of Executive's outstanding but unvested stock options shall vest immediately and remain exercisable for one (1) year from the date of termination and the elimination of all restrictions on restricted stock or deferred stock awards (the term stock, for purposes of this Agreement, shall mean all forms of equity and equity based compensation, including phantom stock);

(v)

other or additional benefits then due or earned in accordance with applicable plans and programs of Company; and

(vi)

settlement of all deferred compensation arrangements in accordance with any then applicable deferred compensation or election form.

(b)

Termination Due to Disability.  This Agreement may be terminated by Company in the event Executive has a "Disability" as defined below which lasts, or Company reasonably determines is likely to last (based on the written opinion of a board certified physician), for a period exceeding 120 days from the onset of such Disability.  Executive shall be deemed to be under a Disability if Executive becomes eligible for coverage under Company's Long-Term Disability Program, if any, or if Executive is otherwise unable, by virtue of illness or physical or mental incapacity or disability (from any cause or causes whatsoever), to perform Executive's essential job functions hereunder, whether with or without reasonable accommodation, in substantially the manner and to the extent required hereunder prior to the commencement of such Disability.  In the event of Executive's Disability, Company may terminate any or all of Executive's titles, positions, and responsibilities hereunder (including Executive's Principal Position) or Company may terminate Executive's employment hereunder.  If Executive is terminated due to Disability, (i) Executive shall be entitled to receive all earned awards (including a pro-rata portion of any annual incentive award); (ii) all of Executive's outstanding but unvested stock options shall vest immediately and remain exercisable for one (1) year from the date of termination; and (iii) all restrictions regarding Executive's restricted or deferred stock shall immediately lapse.

During the Term of Employment, Executive shall be entitled to disability coverage in accordance with the terms of Company's Long-Term Disability Program, if any.  Executive shall not be entitled to any annual incentive award for the time during which Executive is receiving such disability benefits.  If Executive recommences his position after a leave for Disability, he shall be entitled to a pro rata annual

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incentive award for the year he resumes such position and shall thereafter be entitled to annual incentive awards in accordance with this Agreement.

During the period Executive is receiving Disability benefits from Company, he shall continue to be treated as an employee for purposes of all employee benefits and entitlements in which he was participating on the date such benefits commenced, except that Executive shall not be entitled to receive any annual salary increases or any new long-term incentive plan grants during his Disability.

(c)

Termination by Company for Cause.  The Company shall have the right to terminate Executive's employment for "Cause" at any time.

(i)

For purposes of this Agreement, "Cause" shall include without limitation the following occurrences:

(A)

Executive is indicted, convicted or pleads guilty or nolo contendere to a felony or any crime involving moral turpitude, dishonesty or theft;

(B)

Executive fails to comply with applicable laws or governmental regulations with respect to Company operations or performance of Executive's duties;

(C)

Executive engages in conduct deemed by the Board to constitute neglect or misconduct in carrying out his duties under this Agreement;

(D)

Executive refuses to comply with any lawful directive of the Board or otherwise meet his obligations under this Agreement; or

(E)

Executive breaches Paragraphs 5, 6, or 7 of this Agreement.

(ii)

In the event Company terminates Executive's employment for Cause, Executive shall be entitled to, and his sole remedies under this Agreement shall be:

(A)

Base Salary through the date of the termination, which shall be paid in a cash lump sum not later than 30 days following the date of termination; and

(B)

other or additional benefits then due in accordance with applicable plans or programs of Company.

(d)

Termination Without Cause or by Executive for Good Reason.  The Company shall have the right to terminate Executive's employment Without Cause and Executive shall have the right to terminate with Good Reason (as each of those terms are defined below).

(i)

In the event Company terminates Executive's employment Without Cause (which termination shall be effective as of the date specified by Company in a written notice to Executive), or in the event Executive terminates this Agreement for Good Reason, Executive shall be entitled to, and his sole remedies under this Agreement shall be:

(A)

Base Salary through the date of termination, which shall be paid in cash in a lump sum not later than thirty (30) days following the date of termination;

(B)

1/12th of Executive's Base Salary in effect on the date of termination (or, in the event a Base Salary reduction is the basis for a Good Reason termination, the Base Salary in effect immediately prior to such

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reduction), payable monthly ("Severance Payments") for the longer of (x) the remaining duration of the Term of Employment, or (y) twelve (12) months (the "Severance Period");

(C)

immediate vesting of all outstanding stock options.  Executive shall have the right to exercise all vested stock options for a period of two (2) years from the termination date;

(D)

elimination of all restrictions on any restricted stock or deferred stock awards which would have lapsed through the conclusion of the Severance Period;

(E)

the balance of any incentive awards earned as of December 31 of the prior year (but not yet paid), which shall be paid in a cash lump sum not later than thirty (30) days following the date of termination;

(F)

payment of a pro-rata portion of any annual incentive award contemplated by Paragraph 3(b), if any, for the year during which such termination occurs, payable as provided in Paragraph 3(b):

(G)

immediate vesting of Executive's accrued benefits under any supplemental retirement benefit plan ("SERP") maintained by Company, with the payments to be made in accordance with the terms and conditions of the SERP;

(H)

other or additional benefits then due or earned in accordance with applicable plans and programs of Company;

(I)

settlement of all deferred compensation arrangements in accordance with any then applicable deferred compensation or election form; and

(J)

continued participation in medical, dental and life insurance plans for which Executive remains eligible at benefit levels substantially equal to those at which Executive was participating on the date of termination (excluding any long term disability benefits for a disability occurring after the date of termination) until the earlier of:

(1)

the end of the Severance Period; or

(2)

the date, or dates, Executive receives coverage and benefits under the plans and programs of a subsequent employer; provided, however, nothing herein shall be construed as requiring the Company to establish or continue any particular benefit plan in discharge of its obligations under this Agreement.

(ii)

For purposes of this Agreement, "Termination Without Cause" shall mean Executive's employment is terminated by Company for any reason other than Cause (as defined in Paragraph 4(c)(i)), Executive's death or Executive's Disability (as defined in Paragraph 4(b)).

(iii)

For purposes of this Agreement, "Good Reason" shall mean Executive's termination of his employment within one year following the occurrence, without Executive's written consent, of a "Material Event" or a "Change in Control," as defined below; provided, however, that notwithstanding the foregoing, Executive's termination of employment shall not

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constitute a “Good Reason” event if, in advance of or subsequent to the Material Event or Change in Control, Executive, in his sole discretion, agrees in writing that such event shall not constitute a “Good Reason” event within the meaning of this Agreement:

(A)

Material Event.  A Material Event shall be deemed to occur if:

(1)

there is a material diminution in Executive's position, title, office, status, rank, or authority regarding Executive's Principal Position, other than during or following a Disability, which is not cured within thirty (30) days of receipt by the Board of written notice from Executive;

(2)

there is any material decrease in Executive's annual Base Salary during the Original Term of Employment (which occurs other than as an across the board reduction applicable generally to all senior executive officers);

(3)

there is any failure to secure the agreement of any successor corporation or other entity to Company to fully assume Company's obligations under this Agreement; or

(4)

there is any other failure by Company to perform any material obligation under, or breach by Company of any material provision of, this Agreement which is not cured within thirty (30) days of receipt by the Board of written notice from Executive.

(B)

Change in Control.  A Change in Control shall be deemed to have occurred if:

(1)

there shall be consummated any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation;

(2)

during any calendar year during the term of this Agreement, individuals who at the beginning of such year constitute the Board of Directors of the Company cease for any reason to constitute at least sixty percent (60%) of the Board of Directors of the Company; or

(3)

there shall be any sale, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company.

(iv)

For purposes of this Agreement, “Termination Date,” “date of termination” or similar phrases shall mean the date as of which the Executive incurs a termination of employment with the Company that constitutes “separation of service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended.  Any notice of termination of the Executive’s employment given by the Executive or the Company pursuant to the provisions of this Agreement shall specify the Termination Date or date of termination.

(e)

Voluntary Termination.  In the event of a termination of employment by Executive on his own initiative, after delivery of ten (10) business days advance written notice, other than a termination due to Disability, Executive shall have the same entitlements as provided in Paragraph 4(c)(ii) above for a termination for Cause.

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5.

Confidentiality, Cooperation with Regard to Litigation; Non-Disparagement.

(a)

For purposes of this Agreement, "Confidential Information" shall mean all information:  (i) disclosed to or known by Executive as a consequence of or through his employment with the Company or any of its Subsidiaries; (ii) not generally known outside the Company; or (iii) which relates to any aspect of Company's or any Subsidiary's business, research, or development.  Confidential Information includes, but is not limited to proprietary, sensitive or other information concerning Company's or Subsidiary's products, product development, trade secrets, customers, suppliers, finances, compensation information, business plans and strategies, and information provided to the Company by a third party under restrictions against disclosure or use by the Company. Excluded from the definition of Confidential Information is information that is or becomes part of the public domain, other than through the breach of this Agreement by Executive.

(b)

Executive acknowledges that he will have access to Confidential Information of the Company, its Subsidiaries and its customers.  Executive agrees that during the Term of Employment and thereafter for a period of three (3) years (including following termination of Executive's employment for any reason), Executive shall not, without the Board's prior written consent, directly or indirectly, disclose to anyone or make use of any Confidential Information, except in the performance of his duties hereunder or when required to do so by legal process, by any governmental agency having supervisory authority over the business of Company or by any administrative or legislative body (including a committee thereof) that requires him to divulge, disclose or make accessible such information. In the event that Executive is so ordered, he shall give prompt written notice to Company to allow Company the opportunity to object to or otherwise resist such order.

(c)

During the Term of Employment and thereafter, Executive shall not disclose the existence or contents of this Agreement unless such disclosure is required by law, by a governmental agency, or in a document required by law to be filed with a governmental agency or in connection with enforcement of his rights under this Agreement. In the event that disclosure is so required, Executive shall give prompt written notice to Company to allow Company the opportunity to object to or otherwise resist such requirement. This restriction shall not apply to such disclosure by him to members of his immediate family, his tax, legal or financial advisors, any lender, or tax authorities, or to potential future employers to the extent necessary, each of whom shall be advised not to disclose such information.

(d)

Executive agrees to cooperate with Company, during the Term of Employment and thereafter (including following termination of Executive's employment for any reason), by making himself reasonably available to testify on behalf of Company or any Subsidiary in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, and to assist Company, or any Subsidiary, in any such action, suit, or proceeding, by providing information and meeting and consulting with the Board or its representatives or counsel, or representatives or counsel to Company, or any Subsidiary as reasonably requested.  Company agrees to reimburse Executive for all expenses actually incurred in connection with his provision of testimony or assistance.

(e)

Executive agrees that, during the Term of Employment and thereafter (including following  termination of Executive's employment for any reason) he will not make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage Company or any Subsidiary or their respective officers, directors, employees, advisors, businesses or reputations. Company agrees that, during the Term of Employment and thereafter (including following termination of Executive's employment for any reason), Company will not make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may directly or indirectly, disparage Executive or his business or reputation. Notwithstanding the foregoing, nothing in this Agreement shall preclude either

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Executive or Company from making truthful statements or disclosures that are required by applicable law, regulation, or legal process.

6.

Non-Competition.

(a)

Non-Competition During Employment.  Executive agrees that for the duration of his employment, he shall not engage in Competition with Company or any Subsidiary. "Competition" shall mean engaging in any activity for, or having a Financial Interest in (as defined below), a Competitor of Company or of any Subsidiary.  A "Competitor" shall mean any corporation or other entity which offers or performs services or products substantially similar to those provided by Company or any Subsidiary, and thereby competes, directly or indirectly, with the business conducted by Company and overseen by Executive as part of his position, duties and/or responsibilities during his employment with the Company, as determined on the date of termination of Executive's employment.

(b)

Non-Competition After Termination.  Executive agrees that for a period of [two (2)] years following the later of (i) termination of Executive's employment for whatever reason, or (ii) the conclusion of the period, if any, during which the Company is making payments to Executive pursuant to this Agreement above, Executive shall not, directly or indirectly, whether or not for compensation and whether or not as an employee, engage in Competition with Company or any Subsidiary, or have any Financial Interest in any Competitor to the Company or Subsidiary within any state, region or locality in which the Company or Subsidiary is then doing business.

(c)

Financial Interest Defined.  For purposes of this Agreement, Executive shall be deemed to be engaged in or to have a "Financial Interest" in a business if Executive is an employee, independent contractor, consultant, principal, agent, officer, director, partner, or shareholder, or if Executive directly or indirectly performs services for such entity, or if Executive or any member of Executive's immediate family beneficially owns an equity interest, or interest convertible into equity, in any such entity; provided, however that the foregoing shall not prohibit Executive or a member of Executive's immediate family from owning, for the purpose of passive investment, less than one percent (1%) of any class of securities of any publicly held company.

7.

Non-Solicitation.  During the period beginning with the Effective Date and ending [two (2)] years following the termination of Executive's employment, Executive shall not:  (i)  induce, or attempt to induce, employees of Company or any Subsidiary to terminate their employment; (ii) solicit or encourage any of Company's or any Subsidiary's customers, or joint venture partners to terminate or diminish their relationship with Company or any Subsidiary; or (iii) solicit or encourage any person or entity in a contractual relationship with Company or any Subsidiary to violate any agreement with any of them.  During such period, Executive shall not hire, either directly or through any employee, agent or representative, any employee of Company or any Subsidiary or any person who was employed by Company or any Subsidiary within 180 days of such hiring.

8.

Acknowledgment of Need for Restrictive Covenants.  Executive acknowledges the necessity of the restrictive covenants set forth herein to:  protect the Company's legitimate interests in its Confidential Information; protect the Company's competitive business advantage, customer relations and the goodwill with customers and suppliers that the Company has established at its substantial investment; and protect the Company as a result of providing Executive with specialized knowledge, training and insight regarding Company's operations.  Executive further agrees and acknowledges that the restrictive covenant is a reasonable limitation as to time, geographic area and scope of activities to be restricted and that such restrictions do not impose a greater restraint on Executive than is necessary to protect the goodwill, Confidential Information, and other legitimate business interests of the Company.

9.

Remedies.  If Executive breaches any of the provisions contained in Paragraphs 5, 6 or 7 above, Company shall have the right to immediately terminate all payments and benefits due under this Agreement and shall have the right to seek injunctive relief. Executive acknowledges that such a breach of Paragraphs 5, 6, or 7 would cause irreparable injury and that money damages would not provide an adequate remedy for Company.  

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Therefore, Executive consents to enforcement of these foregoing paragraphs by means of temporary or permanent injunction and other appropriate equitable relief in any competent court, in addition to any remedies the Company may have under this Agreement or otherwise.

10.

Indemnification.

(a)

Company Indemnity.  Company agrees that if Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of Company or any Subsidiary or is or was serving at the request of Company or any Subsidiary as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, Executive shall be indemnified and held harmless by Company to the fullest extent legally permitted or authorized by Company's certificate of incorporation or bylaws or resolutions of Company's Board against all cost, expense, liability and loss (including, without limitation, attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by Executive in connection therewith, and such indemnification shall continue as to Executive even if he has ceased to be a director, member, officer, employee or agent of Company or other entity and shall inure to the benefit of Executive's heirs, executors and administrators; provided, however, that Executive shall not be entitled to any indemnification hereunder in the event that any court having jurisdiction over this matter determines that Executive's conduct was illegal, malicious, fraudulent, or resulted from gross negligence.  Company shall advance to Executive all reasonable costs and expenses to be incurred by him in connection with a Proceeding within twenty (20) days after receipt by Company of a written request for such advance.  Such request shall include an undertaking by Executive to repay the amount of such advance if it shall ultimately be determined that he is not entitled to be indemnified against such costs and expenses.  The provisions of this Paragraph 10(a) shall not be deemed exclusive of any other rights of indemnification to which Executive may be entitled or which may be granted to him, and it shall be in addition to any rights of indemnification to which he may be entitled under any policy of insurance.

(b)

No Presumption Regarding Standard of Conduct.  Neither the failure of Company (including its Board, independent legal counsel or stockholders) to have made a determination prior to the commencement of any proceeding concerning payment of amounts claimed by Executive under Paragraph 10(a) above that indemnification of Executive is proper because he has met the applicable standard of conduct, nor a determination by Company (including its Board, independent legal counsel or stockholders) that Executive has not met such applicable standard of conduct, shall create a presumption that Executive has not met the applicable standard of conduct.

(c)

Liability Insurance.  Company agrees to continue and maintain a directors and officers' liability insurance policy covering Executive to the extent Company provides such coverage for its other executive officers or directors.

11.

Resolution of Disputes.  Any controversy or claim arising out of or relating to this Agreement or any breach or asserted breach hereof or questioning the validity and binding effect hereof arising under or in connection with this Agreement, other than seeking injunctive relief under Paragraphs 5, 6 or 7, shall be resolved by mediation and, if necessary, final and binding arbitration, to be held in Houston, Texas.  Disputes arising under this Agreement must first be submitted for non-binding mediation before a neutral third party.  Mediation shall be conducted and administered by the American Arbitration Association ("AAA") under its Employment Mediation Rules or as otherwise agreed between the parties.  If a covered dispute remains unresolved at the conclusion of the mediation process, either party may submit the dispute for resolution by final and binding arbitration in accordance with the Employment Dispute Resolution Rules of the AAA.  Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.  All costs and expenses of any mediation shall be borne by Company.  All costs and expenses of any arbitration or court proceeding (including fees and disbursements of counsel) shall be borne by the respective party incurring such costs and expenses, but the prevailing party shall be entitled to reimbursement from the other party.

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12.

Effect of Agreement on Other Benefits.  Except as specifically provided in this Agreement, the existence of this Agreement shall not be interpreted to preclude, prohibit or restrict Executive's participation in any other employee benefit or other plans or programs in which he currently participates.

13.

Assignability; Binding Nature.  This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs (in the case of Executive) and permitted assigns.  No obligation of Company under this Agreement may be assigned or transferred by Company except that such rights or obligations shall be assigned or transferred in connection with a merger, consolidation or sale or transfer of all or substantially all of the assets of Company, provided that the assignee or transferee is the successor to all or substantially all of the assets of Company and such assignee or transferee assumes the liabilities, obligations and duties of Company, as contained in this Agreement, either contractually or as a matter of law.  Company further agrees that, in the event of a merger, consolidation or sale or transfer of assets as described in the preceding sentence, it shall take whatever action it legally can as appropriate in order to cause such assignee or transferee to expressly assume the liabilities, obligations and duties of Company hereunder.  For the avoidance of doubt, this Agreement shall be binding upon any entity into which Company merges.  No rights or obligations of Executive under this Agreement may be assigned or transferred by Executive other than his rights to compensation and benefits, which may be transferred only by will or operation of law, except as provided in Paragraph 17 below.

14.

Amendment or Waiver.  No provision in this Agreement may be amended unless such amendment is agreed to in writing and signed by Executive and an authorized officer of Company.  Except as set forth herein, no delay or omission to exercise any right, power or remedy accruing to any Party shall impair any such right, power or remedy or shall be construed to be a waiver of or an acquiescence to any breach hereof.  No waiver by either Party of any breach by the other Party of any condition or provision contained in this Agreement to be performed by such other Party shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time.  Any waiver must be in writing and signed by Executive or an authorized officer of Company, as the case may be.

15.

Severability.  In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.

16.

Survivorship.  The respective rights and obligations of the Parties hereunder shall survive any termination of Executive's employment to the extent necessary to the intended preservation of such rights and obligations.

17.

Beneficiaries/References.  Executive shall be entitled, to the extent permitted under any applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following Executive's death by giving Company written notice thereof.  In the event of Executive's death or a judicial determination of his incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative.

18.

Notices.  Any notice given to a Party shall be in writing and shall be deemed to have been given when delivered personally or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the Party concerned at the address indicated below or to such changed address as such Party may subsequently give such notice of:

If to Company:

Ironclad Encryption Corporation

Attention: Chairman

777 S. Post Oak Lane, Suite 1700

Houston, TX 77056

IRONCLAD EMPLOYMENT AGREEMENT

Page 10

If to Executive:

Len Walker

802 Lochtyne Way

Houston, Texas 77024

19.

Governing Law/Jurisdiction.  This Agreement shall be governed by and construed and interpreted in accordance with the laws of Texas without reference to principles of conflict of laws.  Subject to Paragraph 11 Company and Executive hereby consent to the jurisdiction of any court of the State of Texas in Harris County for purposes of resolving any dispute under this Agreement.  Company and Executive further agree that any service of process or notice requirements in any such proceeding shall be satisfied if the rules of such court relating thereto have been substantially satisfied.  Company and Executive hereby waive, to the fullest extent permitted by applicable law, any objection which it or he may now or hereafter have to such jurisdiction and any defense of inconvenient forum.

20.

Headings.  The headings of the paragraphs contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement.

IN WITNESS WHEREOF, the undersigned have executed this Agreement on the 17th day of August 2017 to be effective as of the Effective Date.

IRONCLAD ENCRYPTION CORPORATION



By: /s/ James D. McGraw

       James D. McGraw
Its:  Chief Executive Officer / President



/s/  Len Walker

LEN WALKER

IRONCLAD EMPLOYMENT AGREEMENT

Page 11

	EXHIBIT A Defined Terms
(a)	"Base Salary" shall have the meaning set forth in Paragraph 3.
(b)	“Company" shall have the meaning set forth in the first paragraph.
(c)	"Board" shall have the meaning set forth in Paragraph 2.
(d)	"Cause" shall have the meaning set forth in Paragraph 4(c)(i).
(e)	"Vice President of Legal" and “General Counsel” shall have the meaning set forth in Paragraph 2.
(f)	"Compensation Committee" shall have the meaning set forth in Paragraph 3(a).
(g)	"Competitor" or "Competition" shall have the meaning set forth in Paragraph 6(a).
(h)	"Confidential Information" shall have the meaning set forth in Paragraph 5(c).
(i) (j)	“Effective Date” shall have the meaning set forth in Paragraph 1. “Fair Market Value” as of any date means the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, (d) the sales price of Company Common Stock shares in a Private Placement Memorandum within the same period, or (e) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Board, the fees and expenses of which shall be paid by the Company.
(j)	"Good Reason" shall have the meaning set forth in Paragraph 4(d)(iii).
(k)	"Original Term of Employment" shall have the meaning set forth in Paragraph 1.
(l)	"Proceeding" shall have the meaning set forth in Paragraph 10(a).
(m)	"Renewal Term" shall have the meaning set forth in Paragraph 1.
(n)	"Restricted Shares" shall have the meaning set forth in Paragraph 4(a)(iii).
(o)	"Severance Payments shall have the meaning set forth in Paragraph 4(d)(i).
(p)	“Severance Period" shall have the meaning set forth in Paragraph 4(d)(i)(B).
(q)	"Subsidiary" shall have the meaning set forth in the first recital.
(r)	"Term of Employment" shall have the meaning set forth in Paragraph 1.
(s)	"Termination Without Cause" shall have the meaning set forth in Paragraph 4(d)(ii).

EX-10

Exhibit 10.9

IRONCLAD ENCRYPTION CORPORATION

EMPLOYMENT AGREEMENT

This Employment Agreement is executed as of August 17, 2017 to be effective as of the 1st day of May 2017 (“Effective Date”), by and between Ironclad Encryption Corporation (together with its successors and assigns, the “Company” or “Ironclad”), and David G. Gullickson ("Executive").

W I T N E S S E T H:

WHEREAS, Company desires to employ Executive in capacities with Company or, from time to time, other corporations or entities controlled directly or indirectly by Company (each, a "Subsidiary"), and Executive desires to accept such employment; and

WHEREAS, Company and Executive desire to enter into this employment agreement to set forth the terms and conditions of the relationship between the Company and Executive (this "Agreement").

NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, Company and Executive (individually a "Party" and together the "Parties") agree to be bound in accordance with the terms of this Agreement.

1.

Term of Employment.  The term of Executive's employment under this Agreement shall commence upon the Effective Date, and end on January 31, 2021 (the ''Original Term of Employment"), unless terminated earlier in accordance herewith. The Original Term of Employment shall be automatically renewed for successive one-year terms (the "Renewal Terms") unless at least 90 days prior to the expiration of the Original Term of Employment or any Renewal Term, either Party notifies the other Party in writing that he or it is electing to terminate this Agreement at the expiration of the then current Term of Employment. "Term of Employment" shall mean the Original Term of Employment and all Renewal Terms.

2.

Position, Duties and Responsibilities.

(a)

Executive's Principal Position.  Pursuant to this Agreement, Executive shall be employed by Company and shall serve as the Vice President of Finance, Treasurer, Principle Accounting Officer, and Principle Financial Officer of Company ("Executive's Principal Position") commencing on the Effective Date.

(b)

Additional Duties.  Executive shall have and perform such duties, responsibilities, and authorities as are customary for the Vice President of Finance, Treasurer, Principle Accounting Officer, and Principle Financial Officer of corporations of similar size and businesses as Company, and as are customary for such additional offices and titles as shall be assigned to Executive by the Board, and as such duties, responsibilities and authorities may be amended, altered, expanded or limited by the Board.  Executive shall devote substantially all of his business time and attention (except for periods of vacation or absence due to illness), and his best efforts, abilities, experience, and talent to the duties and responsibilities to which he shall become subject under this Agreement.

(c)

Other Activities.  Anything herein to the contrary notwithstanding, nothing in this Agreement shall preclude Executive from (i) serving on the boards of directors of a reasonable number of other corporations or the boards of a reasonable number of trade associations and/or charitable organizations, (ii) serving as an officer in another organization or company (iii) engaging in charitable activities and community affairs, and (iv) managing his personal investments and affairs, provided that all such activities, in the aggregate, do not, in the judgment of the Board, materially interfere with the proper performance of Executive's duties and responsibilities under this Agreement.

IRONCLAD EMPLOYMENT AGREEMENT

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3.

Compensation.

(a)

Base Salary.  Employee shall be paid a base salary ("Base Salary"), payable in accordance with the regular payroll practices of Company, as follows:

(i)

commencing on the Effective Date of this Agreement and continuing until June 30, 2017, the Executive will be paid Five Thousand Dollars ($5,000) per month;

 (ii)

commencing July 1, 2017 and continuing until the “Salary Deferral Termination Date,” the Executive will be paid Five Thousand Dollars ($5,000) per month and will defer receipt of Thirteen Thousand Seven Hundred Fifty Dollars ($13,750) per month.

For purposes of this section, the “Salary Deferral Termination Date” means the date on which the Board of Directors (the “Board”) or the Compensation Committee of the Board (the "Compensation Committee"), in its sole discretion, determines that the Company is financially able to pay the full monthly amount of the Executive’s annualized base salary of Two Hundred Twenty-Five Thousand Dollars ($225,000). Following the Salary Deferral Termination Date, the Board or the Compensation Committee, in its sole discretion, will determine the timing and amount of payment to the Executive of all deferred salary amounts.  Following the Salary Deferral Termination Date, the Company shall not be entitled to defer the payment of Executive’s Base Salary without the Executive’s written consent. The Board or the Compensation Committee may increase the Base Salary from time to time in its discretion.

(b)

Initial Stock Option Grant. Executive shall receive from the Company, effective as of May 5, 2017 options (“the “Initial Options”) to purchase up to Five Hundred Thousand (500,000) shares of the Company's Common Stock, at One Dollar and Forty-Seven Cents ($1.47) per share, constituting the Fair Market Value as of the date granted.  Of the Initial Options granted, options to purchase One Hundred Twenty-Five Thousand (125,000) shares shall vest on January 5, 2018 and options to purchase an additional One Hundred Twenty-Five Thousand (125,000) shares shall vest on each one-year anniversary of January 5, for three (3) consecutive years. Once vested, the Initial Options must be exercised no later than three (3) years from vesting. The Company will register the shares of Common Stock issuable upon exercise of the Initial Options pursuant to a registration statement on Form S-8.

(c)

Annual Incentive Awards.  Executive shall be eligible to participate in any annual incentive compensation plan established by the Compensation Committee ("annual incentive award").  Payment of any annual incentive award shall be made by the Company at the same time that other senior-level executives receive their annual incentive awards; provided, however, that the failure of the Company to award such incentive bonus shall not give rise to any claim against the Company if Executive has failed to meet any targets established for him as determined in the sole and absolute discretion of the Compensation Committee.

(d)

Employee Benefit Programs.  During the Term of Employment, except as otherwise noted below, Executive shall be entitled to participate in such employee pension and welfare benefit plans and programs of Company as are made available to Company's employees generally, as such plans or programs may be in effect from time to time, including, without limitation, medical, dental, long-term disability, Section 401k retirement plan, supplemental retirement plan or plans, and tax and financial planning services; provided, however, nothing herein shall be construed as requiring the Company to establish or continue any particular benefit plan in discharge of its obligations under this Agreement.  Executive shall be entitled to four (4) weeks of paid vacation per year, and to Company holiday leave in accordance with Company's standard holiday schedule as amended from time to time.

(e)

Reimbursement of Business Expenses.  Executive is authorized to incur reasonable business expenses in carrying out his duties and responsibilities under this Agreement, and Company shall reimburse him for all reasonable business expenses incurred in connection therewith, subject to Company's applicable policies and documentation requirements for business expense reimbursement.

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4.

Termination of Employment.

(a)

Termination Due to Death.  This Agreement shall terminate automatically upon Executive's death, in which event Executive's estate or his beneficiaries, as the case may be, shall be entitled to, and their sole remedies under this Agreement shall be:

(i)

Base Salary through the date of termination, which shall be paid in a cash lump sum not later than thirty (30) days following the date of death;

(ii)

any incentive awards earned as of December 31 of the prior year (but not yet paid), which shall be paid in a cash lump sum not later than thirty (30) days following the date of death;

(iii)

payment of a pro-rata portion of any annual incentive award contemplated by Paragraph 3(b) for the year during which death occurs payable as provided in Paragraph 3(b);

(iv)

all of Executive's outstanding but unvested stock options shall vest immediately and remain exercisable for one (1) year from the date of termination and the elimination of all restrictions on restricted stock or deferred stock awards (the term stock, for purposes of this Agreement, shall mean all forms of equity and equity based compensation, including phantom stock);

(v)

other or additional benefits then due or earned in accordance with applicable plans and programs of Company; and

(vi)

settlement of all deferred compensation arrangements in accordance with any then applicable deferred compensation or election form.

(b)

Termination Due to Disability.  This Agreement may be terminated by Company in the event Executive has a "Disability" as defined below which lasts, or Company reasonably determines is likely to last (based on the written opinion of a board certified physician), for a period exceeding 120 days from the onset of such Disability.  Executive shall be deemed to be under a Disability if Executive becomes eligible for coverage under Company's Long-Term Disability Program, if any, or if Executive is otherwise unable, by virtue of illness or physical or mental incapacity or disability (from any cause or causes whatsoever), to perform Executive's essential job functions hereunder, whether with or without reasonable accommodation, in substantially the manner and to the extent required hereunder prior to the commencement of such Disability.  In the event of Executive's Disability, Company may terminate any or all of Executive's titles, positions, and responsibilities hereunder (including Executive's Principal Position) or Company may terminate Executive's employment hereunder.  If Executive is terminated due to Disability, (i) Executive shall be entitled to receive all earned awards (including a pro-rata portion of any annual incentive award); (ii) all of Executive's outstanding but unvested stock options shall vest immediately and remain exercisable for one (1) year from the date of termination; and (iii) all restrictions regarding Executive's restricted or deferred stock shall immediately lapse.

During the Term of Employment, Executive shall be entitled to disability coverage in accordance with the terms of Company's Long-Term Disability Program, if any.  Executive shall not be entitled to any annual incentive award for the time during which Executive is receiving such disability benefits.  If Executive recommences his position after a leave for Disability, he shall be entitled to a pro rata annual incentive award for the year he resumes such position and shall thereafter be entitled to annual incentive awards in accordance with this Agreement.

During the period Executive is receiving Disability benefits from Company, he shall continue to be treated as an employee for purposes of all employee benefits and entitlements in which he was

IRONCLAD EMPLOYMENT AGREEMENT

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participating on the date such benefits commenced, except that Executive shall not be entitled to receive any annual salary increases or any new long-term incentive plan grants during his Disability.

(c)

Termination by Company for Cause.  The Company shall have the right to terminate Executive's employment for "Cause" at any time.

(i)

For purposes of this Agreement, "Cause" shall include without limitation the following occurrences:

(A)

Executive is indicted, convicted or pleads guilty or nolo contendere to a felony or any crime involving moral turpitude, dishonesty or theft;

(B)

Executive fails to comply with applicable laws or governmental regulations with respect to Company operations or performance of Executive's duties;

(C)

Executive engages in conduct deemed by the Board to constitute neglect or misconduct in carrying out his duties under this Agreement;

(D)

Executive refuses to comply with any lawful directive of the Board or otherwise meet his obligations under this Agreement; or

(E)

Executive breaches Paragraphs 5, 6, or 7 of this Agreement.

(ii)

In the event Company terminates Executive's employment for Cause, Executive shall be entitled to, and his sole remedies under this Agreement shall be:

(A)

Base Salary through the date of the termination, which shall be paid in a cash lump sum not later than 30 days following the date of termination; and

(B)

other or additional benefits then due in accordance with applicable plans or programs of Company.

(d)

Termination Without Cause or by Executive for Good Reason.  The Company shall have the right to terminate Executive's employment Without Cause and Executive shall have the right to terminate with Good Reason (as each of those terms are defined below).

(i)

In the event Company terminates Executive's employment Without Cause (which termination shall be effective as of the date specified by Company in a written notice to Executive), or in the event Executive terminates this Agreement for Good Reason, Executive shall be entitled to, and his sole remedies under this Agreement shall be:

(A)

Base Salary through the date of termination, which shall be paid in cash in a lump sum not later than thirty (30) days following the date of termination;

(B)

1/12th of Executive's Base Salary in effect on the date of termination (or, in the event a Base Salary reduction is the basis for a Good Reason termination, the Base Salary in effect immediately prior to such reduction), payable monthly ("Severance Payments") for the longer of (x) the remaining duration of the Term of Employment, or (y) twelve (12) months (the "Severance Period");

IRONCLAD EMPLOYMENT AGREEMENT

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(C)

immediate vesting of all outstanding stock options.  Executive shall have the right to exercise all vested stock options for a period of two (2) years from the termination date;

(D)

elimination of all restrictions on any restricted stock or deferred stock awards which would have lapsed through the conclusion of the Severance Period;

(E)

the balance of any incentive awards earned as of December 31 of the prior year (but not yet paid), which shall be paid in a cash lump sum not later than thirty (30) days following the date of termination;

(F)

payment of a pro-rata portion of any annual incentive award contemplated by Paragraph 3(b), if any, for the year during which such termination occurs, payable as provided in Paragraph 3(b):

(G)

immediate vesting of Executive's accrued benefits under any supplemental retirement benefit plan ("SERP") maintained by Company, with the payments to be made in accordance with the terms and conditions of the SERP;

(H)

other or additional benefits then due or earned in accordance with applicable plans and programs of Company;

(I)

settlement of all deferred compensation arrangements in accordance with any then applicable deferred compensation or election form; and

(J)

continued participation in medical, dental and life insurance plans for which Executive remains eligible at benefit levels substantially equal to those at which Executive was participating on the date of termination (excluding any long term disability benefits for a disability occurring after the date of termination) until the earlier of:

(1)

the end of the Severance Period; or

(2)

the date, or dates, Executive receives coverage and benefits under the plans and programs of a subsequent employer; provided, however, nothing herein shall be construed as requiring the Company to establish or continue any particular benefit plan in discharge of its obligations under this Agreement.

(ii)

For purposes of this Agreement, "Termination Without Cause" shall mean Executive's employment is terminated by Company for any reason other than Cause (as defined in Paragraph 4(c)(i)), Executive's death or Executive's Disability (as defined in Paragraph 4(b)).

(iii)

For purposes of this Agreement, "Good Reason" shall mean Executive's termination of his employment within one year following the occurrence, without Executive's written consent, of a "Material Event" or a "Change in Control," as defined below; provided, however, that notwithstanding the foregoing, Executive's termination of employment shall not constitute a “Good Reason” event if, in advance of or subsequent to the Material Event or Change in Control, Executive, in his sole discretion, agrees in writing that such event shall not constitute a “Good Reason” event within the meaning of this Agreement:

IRONCLAD EMPLOYMENT AGREEMENT

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(A)

Material Event.  A Material Event shall be deemed to occur if:

(1)

there is a material diminution in Executive's position, title, office, status, rank, or authority regarding Executive's Principal Position, other than during or following a Disability, which is not cured within thirty (30) days of receipt by the Board of written notice from Executive;

(2)

there is any material decrease in Executive's annual Base Salary during the Original Term of Employment (which occurs other than as an across the board reduction applicable generally to all senior executive officers);

(3)

there is any failure to secure the agreement of any successor corporation or other entity to Company to fully assume Company's obligations under this Agreement; or

(4)

there is any other failure by Company to perform any material obligation under, or breach by Company of any material provision of, this Agreement which is not cured within thirty (30) days of receipt by the Board of written notice from Executive.

(B)

Change in Control.  A Change in Control shall be deemed to have occurred if:

(1)

there shall be consummated any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation;

(2)

during any calendar year during the term of this Agreement, individuals who at the beginning of such year constitute the Board of Directors of the Company cease for any reason to constitute at least sixty percent (60%) of the Board of Directors of the Company; or

(3)

there shall be any sale, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company.

(iv)

For purposes of this Agreement, “Termination Date,” “date of termination” or similar phrases shall mean the date as of which the Executive incurs a termination of employment with the Company that constitutes “separation of service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended.  Any notice of termination of the Executive’s employment given by the Executive or the Company pursuant to the provisions of this Agreement shall specify the Termination Date or date of termination.

(e)

Voluntary Termination.  In the event of a termination of employment by Executive on his own initiative, after delivery of ten (10) business days advance written notice, other than a termination due to Disability, Executive shall have the same entitlements as provided in Paragraph 4(c)(ii) above for a termination for Cause.

5.

Confidentiality, Cooperation with Regard to Litigation; Non-Disparagement.

IRONCLAD EMPLOYMENT AGREEMENT

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(a)

For purposes of this Agreement, "Confidential Information" shall mean all information:  (i) disclosed to or known by Executive as a consequence of or through his employment with the Company or any of its Subsidiaries; (ii) not generally known outside the Company; or (iii) which relates to any aspect of Company's or any Subsidiary's business, research, or development.  Confidential Information includes, but is not limited to proprietary, sensitive or other information concerning Company's or Subsidiary's products, product development, trade secrets, customers, suppliers, finances, compensation information, business plans and strategies, and information provided to the Company by a third party under restrictions against disclosure or use by the Company. Excluded from the definition of Confidential Information is information that is or becomes part of the public domain, other than through the breach of this Agreement by Executive.

(b)

Executive acknowledges that he will have access to Confidential Information of the Company, its Subsidiaries and its customers.  Executive agrees that during the Term of Employment and thereafter for a period of three (3) years (including following termination of Executive's employment for any reason), Executive shall not, without the Board's prior written consent, directly or indirectly, disclose to anyone or make use of any Confidential Information, except in the performance of his duties hereunder or when required to do so by legal process, by any governmental agency having supervisory authority over the business of Company or by any administrative or legislative body (including a committee thereof) that requires him to divulge, disclose or make accessible such information. In the event that Executive is so ordered, he shall give prompt written notice to Company to allow Company the opportunity to object to or otherwise resist such order.

(c)

During the Term of Employment and thereafter, Executive shall not disclose the existence or contents of this Agreement unless such disclosure is required by law, by a governmental agency, or in a document required by law to be filed with a governmental agency or in connection with enforcement of his rights under this Agreement. In the event that disclosure is so required, Executive shall give prompt written notice to Company to allow Company the opportunity to object to or otherwise resist such requirement. This restriction shall not apply to such disclosure by him to members of his immediate family, his tax, legal or financial advisors, any lender, or tax authorities, or to potential future employers to the extent necessary, each of whom shall be advised not to disclose such information.

(d)

Executive agrees to cooperate with Company, during the Term of Employment and thereafter  (including following termination of Executive's employment for any reason), by making himself reasonably available to testify on behalf of Company or any Subsidiary in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, and to assist Company, or any Subsidiary, in any such action, suit, or proceeding, by providing information and meeting and consulting with the Board or its representatives or counsel, or representatives or counsel to Company, or any Subsidiary as reasonably requested.  Company agrees to reimburse Executive for all expenses actually incurred in connection with his provision of testimony or assistance.

(e)

Executive agrees that, during the Term of Employment and thereafter (including following  termination of Executive's employment for any reason) he will not make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage Company or any Subsidiary or their respective officers, directors, employees, advisors, businesses or reputations. Company agrees that, during the Term of Employment and thereafter (including following termination of Executive's employment for any reason), Company will not make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may directly or indirectly, disparage Executive or his business or reputation. Notwithstanding the foregoing, nothing in this Agreement shall preclude either Executive or Company from making truthful statements or disclosures that are required by applicable law, regulation, or legal process.

6.

Non-Competition.

(a)

Non-Competition During Employment.  Executive agrees that for the duration of his employment, he shall not engage in Competition with Company or any Subsidiary. "Competition" shall

IRONCLAD EMPLOYMENT AGREEMENT

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mean engaging in any activity for, or having a Financial Interest in (as defined below), a Competitor of Company or of any Subsidiary.  A "Competitor" shall mean any corporation or other entity which offers or performs services or products substantially similar to those provided by Company or any Subsidiary, and thereby competes, directly or indirectly, with the business conducted by Company and overseen by Executive as part of his position, duties and/or responsibilities during his employment with the Company, as determined on the date of termination of Executive's employment.

(b)

Non-Competition After Termination.  Executive agrees that for a period of [two (2)] years following the later of (i) termination of Executive's employment for whatever reason, or (ii) the conclusion of the period, if any, during which the Company is making payments to Executive pursuant to this Agreement above, Executive shall not, directly or indirectly, whether or not for compensation and whether or not as an employee, engage in Competition with Company or any Subsidiary, or have any Financial Interest in any Competitor to the Company or Subsidiary within any state, region or locality in which the Company or Subsidiary is then doing business.

(c)

Financial Interest Defined.  For purposes of this Agreement, Executive shall be deemed to be engaged in or to have a "Financial Interest" in a business if Executive is an employee, independent contractor, consultant, principal, agent, officer, director, partner, or shareholder, or if Executive directly or indirectly performs services for such entity, or if Executive or any member of Executive's immediate family beneficially owns an equity interest, or interest convertible into equity, in any such entity; provided, however that the foregoing shall not prohibit Executive or a member of Executive's immediate family from owning, for the purpose of passive investment, less than one percent (1%) of any class of securities of any publicly held company.

7.

Non-Solicitation.  During the period beginning with the Effective Date and ending [two (2)] years following the termination of Executive's employment, Executive shall not:  (i)  induce, or attempt to induce, employees of Company or any Subsidiary to terminate their employment; (ii) solicit or encourage any of Company's or any Subsidiary's customers, or joint venture partners to terminate or diminish their relationship with Company or any Subsidiary; or (iii) solicit or encourage any person or entity in a contractual relationship with Company or any Subsidiary to violate any agreement with any of them.  During such period, Executive shall not hire, either directly or through any employee, agent or representative, any employee of Company or any Subsidiary or any person who was employed by Company or any Subsidiary within 180 days of such hiring.

8.

Acknowledgment of Need for Restrictive Covenants.  Executive acknowledges the necessity of the restrictive covenants set forth herein to:  protect the Company's legitimate interests in its Confidential Information; protect the Company's competitive business advantage, customer relations and the goodwill with customers and suppliers that the Company has established at its substantial investment; and protect the Company as a result of providing Executive with specialized knowledge, training and insight regarding Company's operations.  Executive further agrees and acknowledges that the restrictive covenant is a reasonable limitation as to time, geographic area and scope of activities to be restricted and that such restrictions do not impose a greater restraint on Executive than is necessary to protect the goodwill, Confidential Information, and other legitimate business interests of the Company.

9.

Remedies.  If Executive breaches any of the provisions contained in Paragraphs 5, 6 or 7 above, Company shall have the right to immediately terminate all payments and benefits due under this Agreement and shall have the right to seek injunctive relief. Executive acknowledges that such a breach of Paragraphs 5, 6, or 7 would cause irreparable injury and that money damages would not provide an adequate remedy for Company.  Therefore, Executive consents to enforcement of these foregoing paragraphs by means of temporary or permanent injunction and other appropriate equitable relief in any competent court, in addition to any remedies the Company may have under this Agreement or otherwise.

10.

Indemnification.

(a)

Company Indemnity.  Company agrees that if Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of Company or any

IRONCLAD EMPLOYMENT AGREEMENT

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Subsidiary or is or was serving at the request of Company or any Subsidiary as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, Executive shall be indemnified and held harmless by Company to the fullest extent legally permitted or authorized by Company's certificate of incorporation or bylaws or resolutions of Company's Board against all cost, expense, liability and loss (including, without limitation, attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by Executive in connection therewith, and such indemnification shall continue as to Executive even if he has ceased to be a director, member, officer, employee or agent of Company or other entity and shall inure to the benefit of Executive's heirs, executors and administrators; provided, however, that Executive shall not be entitled to any indemnification hereunder in the event that any court having jurisdiction over this matter determines that Executive's conduct was illegal, malicious, fraudulent, or resulted from gross negligence.  Company shall advance to Executive all reasonable costs and expenses to be incurred by him in connection with a Proceeding within twenty (20) days after receipt by Company of a written request for such advance.  Such request shall include an undertaking by Executive to repay the amount of such advance if it shall ultimately be determined that he is not entitled to be indemnified against such costs and expenses.  The provisions of this Paragraph 10(a) shall not be deemed exclusive of any other rights of indemnification to which Executive may be entitled or which may be granted to him, and it shall be in addition to any rights of indemnification to which he may be entitled under any policy of insurance.

(b)

No Presumption Regarding Standard of Conduct.  Neither the failure of Company (including its Board, independent legal counsel or stockholders) to have made a determination prior to the commencement of any proceeding concerning payment of amounts claimed by Executive under Paragraph 10(a) above that indemnification of Executive is proper because he has met the applicable standard of conduct, nor a determination by Company (including its Board, independent legal counsel or stockholders) that Executive has not met such applicable standard of conduct, shall create a presumption that Executive has not met the applicable standard of conduct.

(c)

Liability Insurance.  Company agrees to continue and maintain a directors and officers' liability insurance policy covering Executive to the extent Company provides such coverage for its other executive officers or directors.

11.

Resolution of Disputes.  Any controversy or claim arising out of or relating to this Agreement or any breach or asserted breach hereof or questioning the validity and binding effect hereof arising under or in connection with this Agreement, other than seeking injunctive relief under Paragraphs 5, 6 or 7, shall be resolved by mediation and, if necessary, final and binding arbitration, to be held in Houston, Texas.  Disputes arising under this Agreement must first be submitted for non-binding mediation before a neutral third party.  Mediation shall be conducted and administered by the American Arbitration Association ("AAA") under its Employment Mediation Rules or as otherwise agreed between the parties.  If a covered dispute remains unresolved at the conclusion of the mediation process, either party may submit the dispute for resolution by final and binding arbitration in accordance with the Employment Dispute Resolution Rules of the AAA.  Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.  All costs and expenses of any mediation shall be borne by Company.  All costs and expenses of any arbitration or court proceeding (including fees and disbursements of counsel) shall be borne by the respective party incurring such costs and expenses, but the prevailing party shall be entitled to reimbursement from the other party.

12.

Effect of Agreement on Other Benefits.  Except as specifically provided in this Agreement, the existence of this Agreement shall not be interpreted to preclude, prohibit or restrict Executive's participation in any other employee benefit or other plans or programs in which he currently participates.

13.

Assignability; Binding Nature.  This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs (in the case of Executive) and permitted assigns.  No obligation of Company under this Agreement may be assigned or transferred by Company except that such rights or obligations shall be assigned or transferred in connection with a merger, consolidation or sale or transfer of all or substantially all of the assets of Company, provided that the assignee or transferee is the successor to all or substantially all of the assets of Company and such assignee or transferee assumes the liabilities, obligations and duties of Company, as contained in this Agreement, either contractually or as a matter of law.  Company further agrees that, in the event of

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a merger, consolidation or sale or transfer of assets as described in the preceding sentence, it shall take whatever action it legally can as appropriate in order to cause such assignee or transferee to expressly assume the liabilities, obligations and duties of Company hereunder.  For the avoidance of doubt, this Agreement shall be binding upon any entity into which Company merges.  No rights or obligations of Executive under this Agreement may be assigned or transferred by Executive other than his rights to compensation and benefits, which may be transferred only by will or operation of law, except as provided in Paragraph 17 below.

14.

Amendment or Waiver.  No provision in this Agreement may be amended unless such amendment is agreed to in writing and signed by Executive and an authorized officer of Company.  Except as set forth herein, no delay or omission to exercise any right, power or remedy accruing to any Party shall impair any such right, power or remedy or shall be construed to be a waiver of or an acquiescence to any breach hereof.  No waiver by either Party of any breach by the other Party of any condition or provision contained in this Agreement to be performed by such other Party shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time.  Any waiver must be in writing and signed by Executive or an authorized officer of Company, as the case may be.

15.

Severability.  In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.

16.

Survivorship.  The respective rights and obligations of the Parties hereunder shall survive any termination of Executive's employment to the extent necessary to the intended preservation of such rights and obligations.

17.

Beneficiaries/References.  Executive shall be entitled, to the extent permitted under any applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following Executive's death by giving Company written notice thereof.  In the event of Executive's death or a judicial determination of his incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative.

18.

Notices.  Any notice given to a Party shall be in writing and shall be deemed to have been given when delivered personally or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the Party concerned at the address indicated below or to such changed address as such Party may subsequently give such notice of:

If to Company:

Ironclad Encryption Corporation

Attention: Chairman

777 S. Post Oak Lane Suite 1700

Houston, TX 77056

If to Executive:

David Gullickson

8725 Fairbend

Houston, Texas  77055

19.

Governing Law/Jurisdiction.  This Agreement shall be governed by and construed and interpreted in accordance with the laws of Texas without reference to principles of conflict of laws.  Subject to Paragraph 11 Company and Executive hereby consent to the jurisdiction of any court of the State of Texas in Harris County for purposes of resolving any dispute under this Agreement.  Company and Executive further agree that any service of process or notice requirements in any such proceeding shall be satisfied if the rules of such court relating

IRONCLAD EMPLOYMENT AGREEMENT

Page 10

thereto have been substantially satisfied.  Company and Executive hereby waive, to the fullest extent permitted by applicable law, any objection which it or he may now or hereafter have to such jurisdiction and any defense of inconvenient forum.

20.

Headings.  The headings of the paragraphs contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement.

IN WITNESS WHEREOF, the undersigned have executed this Agreement on the 17th day of August 2017 to be effective as of the Effective Date.

IRONCLAD ENCRYPTION CORPORATION



By: /s/  James D. McGraw     

       James D. McGraw
Its:  Chief Executive Officer / President



/s/  David G. Gullickson      

DAVID G. GULLICKSON

IRONCLAD EMPLOYMENT AGREEMENT

Page 11

	EXHIBIT A Defined Terms
(a)	"Base Salary" shall have the meaning set forth in Paragraph 3.
(b)	"Company" shall have the meaning set forth in the first paragraph.
(c)	"Board" shall have the meaning set forth in Paragraph 2.
(d)	"Cause" shall have the meaning set forth in Paragraph 4(c)(i).
(e)	"Vice President of Planning" shall have the meaning set forth in Paragraph 2.
(f)	"Compensation Committee" shall have the meaning set forth in Paragraph 3(a).
(g)	"Competitor" or "Competition" shall have the meaning set forth in Paragraph 6(a).
(h)	"Confidential Information" shall have the meaning set forth in Paragraph 5(c).
(i) (j)	“Effective Date” shall have the meaning set forth in Paragraph 1. “Fair Market Value” as of any date means the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Board, the fees and expenses of which shall be paid by the Company.
(k)	"Good Reason" shall have the meaning set forth in Paragraph 4(d)(iii).
(l)	"Original Term of Employment" shall have the meaning set forth in Paragraph 1.
(m)	"Proceeding" shall have the meaning set forth in Paragraph 10(a).
(n)	"Renewal Term" shall have the meaning set forth in Paragraph 1.
(o)	"Restricted Shares" shall have the meaning set forth in Paragraph 4(a)(iii).
(p)	"Severance Payments shall have the meaning set forth in Paragraph 4(d)(i).
(q)	“Severance Period" shall have the meaning set forth in Paragraph 4(d)(i)(B).
(r)	"Subsidiary" shall have the meaning set forth in the first recital.
(s)	"Term of Employment" shall have the meaning set forth in Paragraph 1.
(s)	"Termination Without Cause" shall have the meaning set forth in Paragraph 4(d)(ii).

EX-10

Exhibit 10.10

IRONCLAD ENCRYPTION CORPORATIOIN

EMPLOYMENT AGREEMENT

This Employment Agreement is executed as of August 17, 2017 to be effective as of the 1st day of May 2017 (“Effective Date”), by and between Ironclad Encryption Corporation (together with its successors and assigns, the “Company” or “Ironclad”), and Monty Points ("Executive").

W I T N E S S E T H:

WHEREAS, Company desires to employ Executive in capacities with Company or, from time to time, other corporations or entities controlled directly or indirectly by Company (each, a "Subsidiary"), and Executive desires to accept such employment; and

WHEREAS, Company and Executive desire to enter into this employment agreement to set forth the terms and conditions of the relationship between the Company and Executive (this "Agreement").

NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, Company and Executive (individually a "Party" and together the "Parties") agree to be bound in accordance with the terms of this Agreement.

1.

Term of Employment.  The term of Executives employment under this Agreement shall commence upon the Effective Date, and end on January 31, 2021 (the ''Original Term of Employment"), unless terminated earlier in accordance herewith. The Original Term of Employment shall be automatically renewed for successive one-year terms (the "Renewal Terms") unless at least 90 days prior to the expiration of the Original Term of Employment or any Renewal Term, either Party notifies the other Party in writing that he or it is electing to terminate this Agreement at the expiration of the then current Term of Employment. "Term of Employment" shall mean the Original Term of Employment and all Renewal Terms.

2.

Position, Duties and Responsibilities.

(a)

Executive's Principal Position.  Pursuant to this Agreement, Executive shall be employed by Company and shall serve as the Director of Software Product Development, Director of Project Management, and Senior Software Product Analyst commencing on the Effective Date.

(b)

Additional Duties.  Executive shall have and perform such duties, responsibilities, and authorities as are customary for a Director of Software Project Development, Director of Project Management, and Senior Software Product Developer of corporations of similar size and businesses as Company.  Executive shall devote substantially all of his business time and attention (except for periods of vacation or absence due to illness), and his best efforts, abilities, experience, and talent to the duties and responsibilities to which he shall become subject under this Agreement.

3.

Compensation.

(a)

Base Salary. Employee shall be paid a base salary ("Base Salary"), payable in accordance with the regular payroll practices of Company, as follows:

(i)

commencing on the Effective Date of this Agreement and continuing until June 30, 2017, the Executive will be paid Five Thousand Dollars ($5,000) per month;

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 (ii)

commencing July 1, 2017 and continuing until the “Salary Deferral Termination Date,” the Executive will be paid Five Thousand Dollars ($5,000) per month and will defer receipt of Seven Thousand Five Hundred Dollars ($7,500) per month.

For purposes of this section, the “Salary Deferral Termination Date” means the date on which the Board of Directors (the “Board”) or the Compensation Committee of the Board (the "Compensation Committee"), in its sole discretion, determines that the Company is financially able to pay the full monthly amount of the Executive’s annualized base salary of One Hundred Fifty Thousand Dollars ($150,000). Following the Salary Deferral Termination Date, the Board or the Compensation Committee, in its sole discretion, will determine the timing and amount of payment to the Executive of all deferred salary amounts.  Following the Salary Deferral Termination Date, the Company shall not be entitled to defer the payment of Executive’s Base Salary without the Executive’s written consent. The Board or the Compensation Committee may increase the Base Salary from time to time in its discretion.

(b)

Initial Stock Option Grant.  Executive shall receive from the Company, effective as of May 5, 2017, options (“the “Initial Options”) to purchase up to Four Hundred Thousand (400,000) shares of the Company's Common Stock, at One Dollar and Forty-Seven Cents ($1.47) per share, constituting the Fair Market Value as of the date granted.  Of the Initial Options granted, options to purchase One Hundred Thousand (100,000) shares shall vest on January 5, 2018 and options to purchase an additional One Hundred Thousand (100,000) shares shall vest on each one-year anniversary of January 5, for three (3) consecutive years.  Once vested, the Initial Options must be exercised no later than three (3) years from vesting. The Company will register the shares of Common Stock issuable upon exercise of the Initial Options pursuant to a registration statement on Form S-8.

(c)

Annual Incentive Awards.  Executive shall be eligible to participate in any annual incentive compensation plan established by the Compensation Committee ("annual incentive award").  Payment of any annual incentive award shall be made by the Company at the same time that other senior-level executives receive their annual incentive awards; provided, however, that the failure of the Company to award such incentive bonus shall not give rise to any claim against the Company if Executive has failed to meet any targets established for him as determined in the sole and absolute discretion of the Compensation Committee.

(d)

Employee Benefit Programs.  During the Term of Employment, except as otherwise noted below, Executive shall be entitled to participate in such employee pension and welfare benefit plans and programs of Company as are made available to Company's employees generally, as such plans or programs may be in effect from time to time, including, without limitation, medical, dental, Section 401k retirement plan, supplemental retirement plan or plans, and tax and financial planning services; provided, however, nothing herein shall be construed as requiring the Company to establish or continue any particular benefit plan in discharge of its obligations under this Agreement.  Executive shall be entitled to four (4) weeks of paid vacation per year, and to Company holiday leave in accordance with Company's standard holiday schedule as amended from time to time.

(e)

Reimbursement of Business Expenses.  Executive is authorized to incur reasonable business expenses in carrying out his duties and responsibilities under this Agreement, and Company shall reimburse him for all reasonable business expenses incurred in connection therewith, subject to Company's applicable policies and documentation requirements for business expense reimbursement.

4.

Termination of Employment.

(a)

Termination Due to Death.  This Agreement shall terminate automatically upon Executive's death, in which event Executive's estate or his beneficiaries, as the case may be, shall be entitled to, and their sole remedies under this Agreement shall be:

(i)

Base Salary through the date of termination, which shall be paid in a cash lump sum not later than thirty (30) days following the date of death;

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(ii)

any incentive awards earned as of December 31 of the prior year (but not yet paid), which shall be paid in a cash lump sum not later than thirty (30) days following the date of death;

(iii)

payment of a pro-rata portion of any annual incentive award contemplated by Paragraph 3(b) for the year during which death occurs payable as provided in Paragraph 3(b);

(iv)

all of Executive's outstanding but unvested stock options shall vest immediately and remain exercisable for one (1) year from the date of termination and the elimination of all restrictions on restricted stock or deferred stock awards (the term stock, for purposes of this Agreement, shall mean all forms of equity and equity based compensation, including phantom stock);

(v)

other or additional benefits then due or earned in accordance with applicable plans and programs of Company; and

(vi)

settlement of all deferred compensation arrangements in accordance with any then applicable deferred compensation or election form.

(b)

Termination by Company for Cause.  The Company shall have the right to terminate Executive's employment for "Cause" at any time.

(i)

For purposes of this Agreement, "Cause" shall include without limitation the following occurrences:

(A)

Executive is indicted, convicted or pleads guilty or nolo contendere to a felony or any crime involving moral turpitude, dishonesty or theft;

(B)

Executive fails to comply with applicable laws or governmental regulations with respect to Company operations or performance of Executive's duties;

(C)

Executive engages in conduct deemed by the personnel office or any officer in the Company to constitute neglect or misconduct in carrying out his duties under this Agreement;

(D)

Executive refuses to comply with any lawful directive of the Board or otherwise meet his obligations under this Agreement;

(E)

Executive is insubordinate and has received two previous warnings, however no previous warnings are required where Executive’s conduct poses a physical threat to himself or others; and

(F)

Executive breaches Paragraphs 5, 6, or 7 of this Agreement.

(ii)

In the event Company terminates Executive's employment for Cause, Executive shall be entitled to, and his sole remedies under this Agreement shall be Executive’s Base Salary through the date of the termination, which shall be paid in a cash lump sum not later than 30 days following the date of termination.

(c)

Termination Without Cause or by Executive for Good Reason.  The Company shall have the right to terminate Executive's employment Without Cause and Executive shall have the right to terminate with Good Reason (as each of those terms are defined below).

EMPLOYMENT AGREEMENT

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(i)

In the event Company terminates Executive's employment Without Cause (which termination shall be effective as of the date specified by Company in a written notice to Executive), or in the event Executive terminates this Agreement for Good Reason, Executive shall be entitled to, and his sole remedies under this Agreement shall be:

(A)

Base Salary through the date of termination, which shall be paid in cash in a lump sum not later than thirty (30) days following the date of termination;

(B)

1/6th of Executive's Base Salary in effect on the date of termination (or, in the event a Base Salary reduction is the basis for a Good Reason termination, the Base Salary in effect immediately prior to such reduction), payable monthly ("Severance Payments") for the longer of (x) the remaining duration of the Term of Employment, or (y) six (6) months (the "Severance Period");

(C)

immediate vesting of all outstanding stock options.  Executive shall have the right to exercise all vested stock options for a period of two (2) years from the termination date;

(D)

elimination of all restrictions on any restricted stock or deferred stock awards which would have lapsed through the conclusion of the Severance Period;

(E)

the balance of any incentive awards earned as of December 31 of the prior year (but not yet paid), which shall be paid in a cash lump sum not later than thirty (30) days following the date of termination;

(F)

payment of a pro-rata portion of any annual incentive award contemplated by Paragraph 3(b), if any, for the year during which such termination occurs, payable as provided in Paragraph 3(b):

(G)

immediate vesting of Executive's accrued benefits under any supplemental retirement benefit plan ("SERP") maintained by Company, with the payments to be made in accordance with the terms and conditions of the SERP;

(H)

other or additional benefits then due or earned in accordance with applicable plans and programs of Company;

(I)

settlement of all deferred compensation arrangements in accordance with any then applicable deferred compensation or election form; and

(J)

continued participation in medical, dental and life insurance plans for which Executive remains eligible at benefit levels substantially equal to those at which Executive was participating on the date of termination until the earlier of:

(1)

the end of the Severance Period; or

(2)

the date, or dates, Executive receives coverage and benefits under the plans and programs of a subsequent employer; provided, however, nothing herein shall be construed as requiring the Company to establish or continue any particular

EMPLOYMENT AGREEMENT

Page 4

benefit plan in discharge of its obligations under this Agreement.

(ii)

For purposes of this Agreement, "Termination Without Cause" shall mean Executive's employment is terminated by Company for any reason other than Cause (as defined in Paragraph 4(c)(i)), Executive's death (as defined in Paragraph 4(a)).

(iii)

For purposes of this Agreement, "Good Reason" shall mean Executive's termination of his employment within one year following the occurrence, without Executive's written consent, of a "Material Event" or a "Change in Control," as defined below; provided, however, that notwithstanding the foregoing, Executive's termination of employment shall not constitute a “Good Reason” event if, in advance of or subsequent to the Material Event or Change in Control, Executive, in his sole discretion, agrees in writing that such event shall not constitute a “Good Reason” event within the meaning of this Agreement:

(A)

Material Event.  A Material Event shall be deemed to occur if:

(1)

there is a material diminution in Executive's position, title, office, status, rank, or authority regarding Executive's Principal Position, which is not cured within thirty (30) days of receipt by the Board of written notice from Executive;

(2)

there is any material decrease in Executive's annual Base Salary during the Original Term of Employment (which occurs other than as an across the board reduction applicable generally to all senior executive officers);

(3)

there is any failure to secure the agreement of any successor corporation or other entity to Company to fully assume Company's obligations under this Agreement; or

(4)

there is any other failure by Company to perform any material obligation under, or breach by Company of any material provision of, this Agreement which is not cured within thirty (30) days of receipt by the Board of written notice from Executive.

(B)

Change in Control.  A Change in Control shall be deemed to have occurred if:

(1)

there shall be consummated any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation;

(2)

during any calendar year during the term of this Agreement, individuals who at the beginning of such year constitute the Board of Directors of the Company cease for any reason to constitute at least sixty percent (60%) of the Board of Directors of the Company; or

(3)

there shall be any sale, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company.

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(iv)

For purposes of this Agreement, “Termination Date,” “date of termination” or similar phrases shall mean the date as of which the Executive incurs a termination of employment with the Company that constitutes “separation of service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended.  Any notice of termination of the Executive’s employment given by the Executive or the Company pursuant to the provisions of this Agreement shall specify the Termination Date or date of termination.

(d)

Voluntary Termination.  In the event of a termination of employment by Executive on his own initiative, after delivery of ten (10) business days advance written notice, Executive shall have the same entitlements as provided in Paragraph 4(c)(ii) above for a termination for Cause.

5.

Confidentiality, Cooperation with Regard to Litigation; Non-Disparagement.

(a)

For purposes of this Agreement, "Confidential Information" shall mean all information:  (i) disclosed to or known by Executive as a consequence of or through his employment with the Company or any of its Subsidiaries; (ii) not generally known outside the Company; or (iii) which relates to any aspect of Company's or any Subsidiary's business, research, or development.  Confidential Information includes, but is not limited to proprietary, sensitive or other information concerning Company's or Subsidiary's products, product development, trade secrets, customers, suppliers, finances, compensation information, business plans and strategies, and information provided to the Company by a third party under restrictions against disclosure or use by the Company. Excluded from the definition of Confidential Information is information that is or becomes part of the public domain, other than through the breach of this Agreement by Executive.

(b)

Executive acknowledges that he will have access to Confidential Information of the Company, its Subsidiaries and its customers.  Executive agrees that during the Term of Employment and thereafter (including following termination of Executive's employment for any reason), Executive shall not, without the Board's prior written consent, directly or indirectly, disclose to anyone or make use of any Confidential Information, except in the performance of his duties hereunder or when required to do so by legal process, by any governmental agency having supervisory authority over the business of Company or by any administrative or legislative body (including a committee thereof) that requires him to divulge, disclose or make accessible such information. In the event that Executive is so ordered, he shall give prompt written notice to Company to allow Company the opportunity to object to or otherwise resist such order.

(c)

During the Term of Employment and thereafter, Executive shall not disclose the existence or contents of this Agreement unless such disclosure is required by law, by a governmental agency, or in a document required by law to be filed with a governmental agency or in connection with enforcement of his rights under this Agreement. In the event that disclosure is so required, Executive shall give prompt written notice to Company to allow Company the opportunity to object to or otherwise resist such requirement. This restriction shall not apply to such disclosure by him to members of his immediate family, his tax, legal or financial advisors, any lender, or tax authorities, or to potential future employers to the extent necessary, each of whom shall be advised not to disclose such information.

(d)

Executive agrees to cooperate with Company, during the Term of Employment and thereafter (including following termination of Executive's employment for any reason), by making himself reasonably available to testify on behalf of Company or any Subsidiary in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, and to assist Company, or any Subsidiary, in any such action, suit, or proceeding, by providing information and meeting and consulting with the Board or its representatives or counsel, or representatives or counsel to Company, or any Subsidiary as reasonably requested.  Company agrees to reimburse Executive for all expenses actually incurred in connection with his provision of testimony or assistance.

(e)

Executive agrees that, during the Term of Employment and thereafter (including following  termination of Executive's employment for any reason) he will not make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take

EMPLOYMENT AGREEMENT

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any action which may, directly or indirectly, disparage Company or any Subsidiary or their respective officers, directors, employees, advisors, businesses or reputations. Company agrees that, during the Term of Employment and thereafter (including following termination of Executive's employment for any reason), Company will not make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may directly or indirectly, disparage Executive or his business or reputation. Notwithstanding the foregoing, nothing in this Agreement shall preclude either Executive or Company from making truthful statements or disclosures that are required by applicable law, regulation, or legal process.

6.

Non-Competition.

(a)

Non-Competition During Employment.  Executive agrees that for the duration of his employment, he shall not engage in Competition with Company or any Subsidiary. "Competition" shall mean engaging in any activity for, or having a Financial Interest in (as defined below), a Competitor of Company or of any Subsidiary.  A "Competitor" shall mean any corporation or other entity which offers or performs services or products substantially similar to those provided by Company or any Subsidiary, and thereby competes, directly or indirectly, with the business conducted by Company and overseen by Executive as part of his position, duties and/or responsibilities during his employment with the Company, as determined on the date of termination of Executive's employment.

(b)

Non-Competition After Termination.  Executive agrees that for a period of [two (2)] years following the later of (i) termination of Executive's employment for whatever reason, or (ii) the conclusion of the period, if any, during which the Company is making payments to Executive pursuant to this Agreement above, Executive shall not, directly or indirectly, whether or not for compensation and whether or not as an employee, engage in Competition with Company or any Subsidiary, or have any Financial Interest in any Competitor to the Company or Subsidiary within any state, region or locality in which the Company or Subsidiary is then doing business.

(c)

Financial Interest Defined.  For purposes of this Agreement, Executive shall be deemed to be engaged in or to have a "Financial Interest" in a business if Executive is an employee, independent contractor, consultant, principal, agent, officer, director, partner, or shareholder, or if Executive directly or indirectly performs services for such entity, or if Executive or any member of Executive's immediate family beneficially owns an equity interest, or interest convertible into equity, in any such entity; provided, however that the foregoing shall not prohibit Executive or a member of Executive's immediate family from owning, for the purpose of passive investment, less than one percent (1%) of any class of securities of any publicly held company.

7.

Non-Solicitation.  During the period beginning with the Effective Date and ending [two (2)] years following the termination of Executive's employment, Executive shall not:  (i)  induce, or attempt to induce, employees of Company or any Subsidiary to terminate their employment; (ii) solicit or encourage any of Company's or any Subsidiary's customers, or joint venture partners to terminate or diminish their relationship with Company or any Subsidiary; or (iii) solicit or encourage any person or entity in a contractual relationship with Company or any Subsidiary to violate any agreement with any of them.  During such period, Executive shall not hire, either directly or through any employee, agent or representative, any employee of Company or any Subsidiary or any person who was employed by Company or any Subsidiary within 180 days of such hiring.

8.

Acknowledgment of Need for Restrictive Covenants.  Executive acknowledges the necessity of the restrictive covenants set forth herein to:  protect the Company's legitimate interests in its Confidential Information; protect the Company's competitive business advantage, customer relations and the goodwill with customers and suppliers that the Company has established at its substantial investment; and protect the Company as a result of providing Executive with specialized knowledge, training and insight regarding Company's operations.  Executive further agrees and acknowledges that the restrictive covenant is a reasonable limitation as to time, geographic area and scope of activities to be restricted and that such restrictions do not impose a greater restraint on Executive than is necessary to protect the goodwill, Confidential Information, and other legitimate business interests of the Company.

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9.

Remedies.  If Executive breaches any of the provisions contained in Paragraphs 5, 6 or 7 above, Company shall have the right to immediately terminate all payments and benefits due under this Agreement and shall have the right to seek injunctive relief.  Executive acknowledges that such a breach of Paragraphs 5, 6, or 7 would cause irreparable injury and that money damages would not provide an adequate remedy for Company.  Therefore, Executive consents to enforcement of these foregoing paragraphs by means of temporary or permanent injunction and other appropriate equitable relief in any competent court, in addition to any remedies the Company may have under this Agreement or otherwise.

10.

Indemnification.

(a)

Company Indemnity.  Company agrees that if Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of Company or any Subsidiary or is or was serving at the request of Company or any Subsidiary as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, Executive shall be indemnified and held harmless by Company to the fullest extent legally permitted or authorized by Company's certificate of incorporation or bylaws or resolutions of Company's Board against all cost, expense, liability and loss (including, without limitation, attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by Executive in connection therewith, and such indemnification shall continue as to Executive even if he has ceased to be a director, member, officer, employee or agent of Company or other entity and shall inure to the benefit of Executive's heirs, executors and administrators; provided, however, that Executive shall not be entitled to any indemnification hereunder in the event that any court having jurisdiction over this matter determines that Executive's conduct was illegal, malicious, fraudulent, or resulted from gross negligence.  Company shall advance to Executive all reasonable costs and expenses to be incurred by him in connection with a Proceeding within twenty (20) days after receipt by Company of a written request for such advance.  Such request shall include an undertaking by Executive to repay the amount of such advance if it shall ultimately be determined that he is not entitled to be indemnified against such costs and expenses.  The provisions of this Paragraph 10(a) shall not be deemed exclusive of any other rights of indemnification to which Executive may be entitled or which may be granted to him, and it shall be in addition to any rights of indemnification to which he may be entitled under any policy of insurance.

(b)

No Presumption Regarding Standard of Conduct.  Neither the failure of Company (including its Board, independent legal counsel or stockholders) to have made a determination prior to the commencement of any proceeding concerning payment of amounts claimed by Executive under Paragraph 10(a) above that indemnification of Executive is proper because he has met the applicable standard of conduct, nor a determination by Company (including its Board, independent legal counsel or stockholders) that Executive has not met such applicable standard of conduct, shall create a presumption that Executive has not met the applicable standard of conduct.

11.

Resolution of Disputes.  Any controversy or claim arising out of or relating to this Agreement or any breach or asserted breach hereof or questioning the validity and binding effect hereof arising under or in connection with this Agreement, other than seeking injunctive relief under Paragraphs 5, 6 or 7, shall be resolved by mediation and, if necessary, final and binding arbitration, to be held in Houston, Texas.  Disputes arising under this Agreement must first be submitted for non-binding mediation before a neutral third party.  Mediation shall be conducted and administered by the American Arbitration Association ("AAA") under its Employment Mediation Rules or as otherwise agreed between the parties.  If a covered dispute remains unresolved at the conclusion of the mediation process, either party may submit the dispute for resolution by final and binding arbitration in accordance with the Employment Dispute Resolution Rules of the AAA.  Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.  All costs and expenses of any mediation shall be borne by Company.  All costs and expenses of any arbitration or court proceeding (including fees and disbursements of counsel) shall be borne by the respective party incurring such costs and expenses, but the prevailing party shall be entitled to reimbursement from the other party.

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12.

Effect of Agreement on Other Benefits.  Except as specifically provided in this Agreement, the existence of this Agreement shall not be interpreted to preclude, prohibit or restrict Executive's participation in any other employee benefit or other plans or programs in which he currently participates.

13.

Assignability; Binding Nature.  This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs (in the case of Executive) and permitted assigns.  No obligation of Company under this Agreement may be assigned or transferred by Company except that such rights or obligations shall be assigned or transferred in connection with a merger, consolidation or sale or transfer of all or substantially all of the assets of Company, provided that the assignee or transferee is the successor to all or substantially all of the assets of Company and such assignee or transferee assumes the liabilities, obligations and duties of Company, as contained in this Agreement, either contractually or as a matter of law.  Company further agrees that, in the event of a merger, consolidation or sale or transfer of assets as described in the preceding sentence, it shall take whatever action it legally can as appropriate in order to cause such assignee or transferee to expressly assume the liabilities, obligations and duties of Company hereunder.  For the avoidance of doubt, this Agreement shall be binding upon any entity into which Company merges.  No rights or obligations of Executive under this Agreement may be assigned or transferred by Executive other than his rights to compensation and benefits, which may be transferred only by will or operation of law, except as provided in Paragraph 17 below.

14.

Amendment or Waiver.  No provision in this Agreement may be amended unless such amendment is agreed to in writing and signed by Executive and an authorized officer of Company.  Except as set forth herein, no delay or omission to exercise any right, power or remedy accruing to any Party shall impair any such right, power or remedy or shall be construed to be a waiver of or an acquiescence to any breach hereof.  No waiver by either Party of any breach by the other Party of any condition or provision contained in this Agreement to be performed by such other Party shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time.  Any waiver must be in writing and signed by Executive or an authorized officer of Company, as the case may be.

15.

Severability.  In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.

16.

Survivorship.  The respective rights and obligations of the Parties hereunder shall survive any termination of Executive's employment to the extent necessary to the intended preservation of such rights and obligations.

17.

Beneficiaries/References.  Executive shall be entitled, to the extent permitted under any applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following Executive's death by giving Company written notice thereof.  In the event of Executive's death or a judicial determination of his incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative.

18.

Notices.  Any notice given to a Party shall be in writing and shall be deemed to have been given when delivered personally or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the Party concerned at the address indicated below or to such changed address as such Party may subsequently give such notice of:

If to Company:

Ironclad Encryption Corporation
Attention: Chairman

777 S. Post Oak Lane Suite 1700

Houston, TX 77056

If to Executive:

EMPLOYMENT AGREEMENT

Page 9

Monty Points

19900 N. Indian Meridian

Luther, OK 73054

19.

Governing Law/Jurisdiction.  This Agreement shall be governed by and construed and interpreted in accordance with the laws of Texas without reference to principles of conflict of laws.  Subject to Paragraph 11 Company and Executive hereby consent to the jurisdiction of any court of the State of Texas in Harris County for purposes of resolving any dispute under this Agreement.  Company and Executive further agree that any service of process or notice requirements in any such proceeding shall be satisfied if the rules of such court relating thereto have been substantially satisfied.  Company and Executive hereby waive, to the fullest extent permitted by applicable law, any objection which it or he may now or hereafter have to such jurisdiction and any defense of inconvenient forum.

20.

Headings.  The headings of the paragraphs contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement.

IN WITNESS WHEREOF, the undersigned have executed this Agreement on the17th day of August 2017 to be effective on the Effective Date.

IRONCLAD ENCRYPTION CORPORATION



By: /s/  James D. McGraw  
       James D. McGraw
Its:  Chief Executive Officer/President

/s/  Monty Points
MONTY POINTS

EMPLOYMENT AGREEMENT

Page 10

	EXHIBIT A Defined Terms
(a)	"Base Salary" shall have the meaning set forth in Paragraph 3(a).
(b)	"Company" shall have the meaning set forth in the first paragraph.
(c)	"Board" shall have the meaning set forth in Paragraph 3(a).
(d)	"Cause" shall have the meaning set forth in Paragraph 4(b).
(e)	"Director of Software Product Development" shall have the meaning set forth in Paragraph 2.
(f)	“Director of Project Management” shall have the meaning set forth in Paragraph 2.
(g)	“Senior Software Product Developer shall have the meaning set forth in Paragraph 2.
(h)	"Compensation Committee" shall have the meaning set forth in Paragraph 3(a).
(i)	"Competitor" or "Competition" shall have the meaning set forth in Paragraph 6(a).
(j)	"Confidential Information" shall have the meaning set forth in Paragraph 5(c).
(k) (l)	“Effective Date” shall have the meaning set forth in Paragraph 1. “Fair Market Value” as of any date means the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Board, the fees and expenses of which shall be paid by the Company.
(m)	"Original Term of Employment" shall have the meaning set forth in Paragraph 1.
(n)	"Proceeding" shall have the meaning set forth in Paragraph 10(a).
(o)	"Renewal Term" shall have the meaning set forth in Paragraph 1.
(p)	"Severance Payments shall have the meaning set forth in Paragraph 4(c)(i)(A).
(q)	“Severance Period" shall have the meaning set forth in Paragraph 4(c)(i)(B).
(r)	"Subsidiary" shall have the meaning set forth in the first recital.
(s)	"Term of Employment" shall have the meaning set forth in Paragraph 1.
(s)	"Termination Without Cause" shall have the meaning set forth in Paragraph 4(c).

EX-10

Exhibit 10.11

IRONCLAD ENCRYPTION CORPORATIOIN

EMPLOYMENT AGREEMENT

This Employment Agreement is executed as of August 17, 2017 to be effective as of the 1st day of June 2017 (“Effective Date”), by and between Ironclad Encryption Corporation (together with its successors and assigns, the “Company” or “Ironclad”), and Randall Rice ("Executive").

W I T N E S S E T H:

WHEREAS, Company desires to employ Executive in capacities with Company or, from time to time, other corporations or entities controlled directly or indirectly by Company (each, a "Subsidiary"), and Executive desires to accept such employment; and

WHEREAS, Company and Executive desire to enter into this employment agreement to set forth the terms and conditions of the relationship between the Company and Executive (this "Agreement").

NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, Company and Executive (individually a "Party" and together the "Parties") agree to be bound in accordance with the terms of this Agreement.

1.

Term of Employment.  The term of Executive’s employment under this Agreement shall commence upon the Effective Date, and end on January 31, 2021 (the ''Original Term of Employment"), unless terminated earlier in accordance herewith. The Original Term of Employment shall be automatically renewed for successive one-year terms (the "Renewal Terms") unless at least 90 days prior to the expiration of the Original Term of Employment or any Renewal Term, either Party notifies the other Party in writing that he or it is electing to terminate this Agreement at the expiration of the then current Term of Employment. "Term of Employment" shall mean the Original Term of Employment and all Renewal Terms.

2.

Position, Duties and Responsibilities.

(a)

Executive's Principal Position.  Pursuant to this Agreement, Executive shall be employed by Company and shall serve as the Director of Product Testing, commencing on the Effective Date.

(b)

Additional Duties.  Executive shall have and perform such duties, responsibilities, and authorities as are customary for a Director of Product Testing of corporations of similar size and businesses as Company.  Executive shall devote substantially all  of his business time and attention (except for periods of vacation or absence due to illness), and his best efforts, abilities, experience, and talent to the duties and responsibilities to which he shall become subject under this Agreement.

(c)

Other Activities.  Anything herein to the contrary notwithstanding, nothing in this Agreement shall preclude Executive from (i) continuing the ownership and management of his family business, Rice Consulting Services, including teaching classes for the United States Federal Government, (ii) serving on the boards of directors of a reasonable number of other corporations or the boards of a reasonable number of trade associations and/or charitable organizations, (iii) engaging in charitable activities and community affairs, provided that all such activities, in the aggregate, do not, in the judgment of the Board, materially interfere with the proper performance of Executive's duties and responsibilities under this Agreement.

3.

Intellectual Property.  Executive shall have sole ownership of any rights, royalties, payments, patents, copyrights and/or trademarks arising from his previously published written books, papers and courses, and these works shall in no way be attributed to Company absent a specific written agreement between the parties. All future inventions, creations, contrivances, or patents resulting from, arising from,

EMPLOYMENT AGREEMENT

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Executive’s duties or work for Company shall be considered a work for hire and will be assigned to Company, or its successor.  All related legal and registration fees will be paid by Company or its successor.  All patents which are completed outside the scope of Company’s business will be retained by Executive.  All of Executive’s future inventions, creations, contrivances or patents are presumed to be within the scope of Executive’s duties unless established by clear and convincing evidence that they are not. Exhibit B, “Randall Rice Exclusive Patents” lists Mr. Rice’s current, in-progress and potential patents; created outside the scope of his employment at Company.  This list will be continuously updated, then verified and certified by the standing President, CEO and/or the Chairman of the Board.  In the event that Company and its successors and assigns are dissolved, liquidated, and/or cease to exist as a technology encryption organization or subsidiary utilizing encryption related technology; the intellectual property rights and patents owned by the organization where Daniel Lerner is listed as a named inventor shall revert back to Randall Rice and his heirs.  

4.

Compensation.

(a)

Base Salary.  Employee shall be paid a base salary ("Base Salary"), payable in accordance with the regular payroll practices of Company, as follows:

(i)

commencing on the Effective Date of this Agreement and continuing until June 30, 2017, the Executive will be paid Two Thousand Five Hundred Dollars ($2,500) per month;

 (ii)

commencing July 1, 2017 and continuing until the “Salary Deferral Termination Date,” the Executive will be paid Five Thousand Dollars ($5,000) per month and will defer receipt of Seven Thousand Dollars ($7,000) per month.

For purposes of this section, the “Salary Deferral Termination Date” means the date on which the Board of Directors (the “Board”) or the Compensation Committee of the Board (the "Compensation Committee"), in its sole discretion, determines that the Company is financially able to pay the full monthly amount of the Executive’s annualized base salary of One Hundred Forty-Four Thousand Dollars ($144,000). Following the Salary Deferral Termination Date, the Board or the Compensation Committee, in its sole discretion, will determine the timing and amount of payment to the Executive of all deferred salary amounts.  Following the Salary Deferral Termination Date, the Company shall not be entitled to defer the payment of Executive’s Base Salary without the Executive’s written consent. The Board or the Compensation Committee may increase the Base Salary from time to time in its discretion.

(b)

Initial Stock Option Grant.  Executive shall receive from the Company, effective as of June 12, 2017, options (“the “Initial Options”) to purchase up to Four Hundred Thousand (400,000) shares of the Company's Common Stock, at Two Dollars and Fifty Cents ($2.50) per share, constituting the Fair Market Value as of the date granted.  Of the Initial Options granted, options to purchase One Hundred Thousand (100,000) shares shall vest on January 5, 2018 and options to purchase an additional One Hundred Thousand (100,000) shares shall vest on each one-year anniversary of January 5, for three (3) consecutive years.  Once vested, the Initial Options must be exercised no later than three (3) years from vesting.. The Company will register the shares of Common Stock issuable upon exercise of the Initial Options pursuant to a registration statement on Form S-8.

(c)

Annual Incentive Awards.  Executive shall be eligible to participate in any annual incentive compensation plan established by the Compensation Committee ("annual incentive award").  Payment of any annual incentive award shall be made by the Company at the same time that other senior-level executives receive their annual incentive awards; provided, however, that the failure of the Company to award such incentive bonus shall not give rise to any claim against the Company if Executive has failed to meet any targets established for him as determined in the sole and absolute discretion of the Compensation Committee.

(d)

Employee Benefit Programs.  During the Term of Employment, except as otherwise noted below, Executive shall be entitled to participate in such employee pension and welfare benefit plans and programs of Company as are made available to Company's employees generally, as such plans or

EMPLOYMENT AGREEMENT

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programs may be in effect from time to time, including, without limitation, medical, dental, Section 401k retirement plan, supplemental retirement plan or plans, and tax and financial planning services; provided, however, nothing herein shall be construed as requiring the Company to establish or continue any particular benefit plan in discharge of its obligations under this Agreement.  Executive shall be entitled to three (3) weeks of paid vacation per year, and to Company holiday leave in accordance with Company's standard holiday schedule as amended from time to time.

(e)

Reimbursement of Business Expenses.  Executive is authorized to incur reasonable business expenses in carrying out his duties and responsibilities under this Agreement, and Company shall reimburse him for all reasonable business expenses incurred in connection therewith, subject to Company's applicable policies and documentation requirements for business expense reimbursement.

5.

Termination of Employment.

(a)

Termination Due to Death.  This Agreement shall terminate automatically upon Executive's death, in which event Executive's estate or his beneficiaries, as the case may be, shall be entitled to, and their sole remedies under this Agreement shall be:

(i)

Base Salary through the date of termination, which shall be paid in a cash lump sum not later than thirty (30) days following the date of death;

(ii)

any incentive awards earned as of December 31 of the prior year (but not yet paid), which shall be paid in a cash lump sum not later than thirty (30) days following the date of death;

(iii)

payment of a pro-rata portion of any annual incentive award contemplated by Paragraph 3(b) for the year during which death occurs payable as provided in Paragraph 3(b);

(iv)

all of Executive's outstanding but unvested stock options shall vest immediately and remain exercisable for one (1) year from the date of termination and the elimination of all restrictions on restricted stock or deferred stock awards (the term stock, for purposes of this Agreement, shall mean all forms of equity and equity based compensation, including phantom stock);

(v)

other or additional benefits then due or earned in accordance with applicable plans and programs of Company; and

(vi)

settlement of all deferred compensation arrangements in accordance with any then applicable deferred compensation or election form.

(b)

Termination by Company for Cause.  The Company shall have the right to terminate Executive's employment for "Cause" at any time.

(i)

For purposes of this Agreement, "Cause" shall include without limitation the following occurrences:

(A)

Executive is indicted, convicted or pleads guilty or nolo contendere to a felony or any crime involving moral turpitude, dishonesty or theft;

(B)

Executive fails to comply with applicable laws or governmental regulations with respect to Company operations or performance of Executive's duties;

EMPLOYMENT AGREEMENT

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(C)

Executive engages in conduct deemed by the personnel office or any officer in the Company to constitute neglect or misconduct in carrying out his duties under this Agreement;

(D)

Executive refuses to comply with any lawful directive of the Board or otherwise meet his obligations under this Agreement;

(E)

Executive is insubordinate and has received two previous warnings, however no previous warnings are required where Executive’s conduct poses a physical threat to himself or others; and

(F)

Executive breaches Paragraphs 5, 6, or 7 of this Agreement.

(ii)

In the event Company terminates Executive's employment for Cause, Executive shall be entitled to, and his sole remedies under this Agreement shall be Executive’s Base Salary through the date of the termination, which shall be paid in a cash lump sum not later than 30 days following the date of termination.

(c)

Termination Without Cause or by Executive for Good Reason.  The Company shall have the right to terminate Executive's employment Without Cause and Executive shall have the right to terminate with Good Reason (as each of those terms are defined below).

(i)

In the event Company terminates Executive's employment Without Cause (which termination shall be effective as of the date specified by Company in a written notice to Executive), or in the event Executive terminates this Agreement for Good Reason, Executive shall be entitled to, and his sole remedies under this Agreement shall be:

(A)

Base Salary through the date of termination, which shall be paid in cash in a lump sum not later than thirty (30) days following the date of termination;

(B)

1/6th of Executive's Base Salary in effect on the date of termination (or, in the event a Base Salary reduction is the basis for a Good Reason termination, the Base Salary in effect immediately prior to such reduction), payable monthly ("Severance Payments") for the longer of (x) the remaining duration of the Term of Employment, or (y) six (6) months (the "Severance Period");

(C)

immediate vesting of all outstanding stock options.  Executive shall have the right to exercise all vested stock options for a period of two (2) years from the termination date;

(D)

elimination of all restrictions on any restricted stock or deferred stock awards which would have lapsed through the conclusion of the Severance Period;

(E)

the balance of any incentive awards earned as of December 31 of the prior year (but not yet paid), which shall be paid in a cash lump sum not later than thirty (30) days following the date of termination;

(F)

payment of a pro-rata portion of any annual incentive award contemplated by Paragraph 3(b), if any, for the year during which such termination occurs, payable as provided in Paragraph 3(b):

EMPLOYMENT AGREEMENT

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(G)

immediate vesting of Executive's accrued benefits under any supplemental retirement benefit plan ("SERP") maintained by Company, with the payments to be made in accordance with the terms and conditions of the SERP;

(H)

other or additional benefits then due or earned in accordance with applicable plans and programs of Company;

(I)

settlement of all deferred compensation arrangements in accordance with any then applicable deferred compensation or election form; and

(J)

continued participation in medical, dental and life insurance plans for which Executive remains eligible at benefit levels substantially equal to those at which Executive was participating on the date of termination until the earlier of:

(1)

the end of the Severance Period; or

(2)

the date, or dates, Executive receives coverage and benefits under the plans and programs of a subsequent employer; provided, however, nothing herein shall be construed as requiring the Company to establish or continue any particular benefit plan in discharge of its obligations under this Agreement.

(ii)

For purposes of this Agreement, "Termination Without Cause" shall mean Executive's employment is terminated by Company for any reason other than Cause (as defined in Paragraph 4(c)(i)), Executive's death (as defined in Paragraph 4(a)).

(iii)

For purposes of this Agreement, "Good Reason" shall mean Executive's termination of his employment within one year following the occurrence, without Executive's written consent, of a "Material Event" or a "Change in Control," as defined below; provided, however, that notwithstanding the foregoing, Executive's termination of employment shall not constitute a “Good Reason” event if, in advance of or subsequent to the Material Event or Change in Control, Executive, in his sole discretion, agrees in writing that such event shall not constitute a “Good Reason” event within the meaning of this Agreement:

(A)

Material Event.  A Material Event shall be deemed to occur if:

(1)

there is a material diminution in Executive's position, title, office, status, rank, or authority regarding Executive's Principal Position, which is not cured within thirty (30) days of receipt by the Board of written notice from Executive;

(2)

there is any material decrease in Executive's annual Base Salary during the Original Term of Employment (which occurs other than as an across the board reduction applicable generally to all senior executive officers);

(3)

there is any failure to secure the agreement of any successor corporation or other entity to Company to fully assume Company's obligations under this Agreement; or

EMPLOYMENT AGREEMENT

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(4)

there is any other failure by Company to perform any material obligation under, or breach by Company of any material provision of, this Agreement which is not cured within thirty (30) days of receipt by the Board of written notice from Executive.

(B)

Change in Control.  A Change in Control shall be deemed to have occurred if:

(1)

there shall be consummated any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation;

(2)

during any calendar year during the term of this Agreement, individuals who at the beginning of such year constitute the Board of Directors of the Company cease for any reason to constitute at least sixty percent (60%) of the Board of Directors of the Company; or

(3)

there shall be any sale, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company.

(iv)

For purposes of this Agreement, “Termination Date,” “date of termination” or similar phrases shall mean the date as of which the Executive incurs a termination of employment with the Company that constitutes “separation of service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended.  Any notice of termination of the Executive’s employment given by the Executive or the Company pursuant to the provisions of this Agreement shall specify the Termination Date or date of termination.

(d)

Voluntary Termination.  In the event of a termination of employment by Executive on his own initiative, after delivery of ten (10) business days advance written notice, Executive shall have the same entitlements as provided in Paragraph 4(c)(ii) above for a termination for Cause.

6.

Confidentiality, Cooperation with Regard to Litigation; Non-Disparagement.

(a)

For purposes of this Agreement, "Confidential Information" shall mean all information:  (i) disclosed to or known by Executive as a consequence of or through his employment with the Company or any of its Subsidiaries; (ii) not generally known outside the Company; or (iii) which relates to any aspect of Company's or any Subsidiary's business, research, or development.  Confidential Information includes, but is not limited to proprietary, sensitive or other information concerning Company's or Subsidiary's products, product development, trade secrets, customers, suppliers, finances, compensation information, business plans and strategies, and information provided to the Company by a third party under restrictions against disclosure or use by the Company. Excluded from the definition of Confidential Information is information that is or becomes part of the public domain, other than through the breach of this Agreement by Executive.

(b)

Executive acknowledges that he will have access to Confidential Information of the Company, its Subsidiaries and its customers.  Executive agrees that during the Term of Employment and thereafter (including following termination of Executive's employment for any reason), Executive shall not, without the Board's prior written consent, directly or indirectly, disclose to anyone or make use of any Confidential Information, except in the performance of his duties hereunder or when required to do so by legal process, by any governmental agency having supervisory authority over the business of Company or by any administrative or legislative body (including a committee thereof) that requires him to divulge, disclose or make accessible such information. In the event that Executive is so ordered, he shall give

EMPLOYMENT AGREEMENT

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prompt written notice to Company to allow Company the opportunity to object to or otherwise resist such order.

(c)

During the Term of Employment and thereafter, Executive shall not disclose the existence or contents of this Agreement unless such disclosure is required by law, by a governmental agency, or in a document required by law to be filed with a governmental agency or in connection with enforcement of his rights under this Agreement. In the event that disclosure is so required, Executive shall give prompt written notice to Company to allow Company the opportunity to object to or otherwise resist such requirement. This restriction shall not apply to such disclosure by him to members of his immediate family, his tax, legal or financial advisors, any lender, or tax authorities, or to potential future employers to the extent necessary, each of whom shall be advised not to disclose such information.

(d)

Executive agrees to cooperate with Company, during the Term of Employment and thereafter (including following termination of Executive's employment for any reason), by making himself reasonably available to testify on behalf of Company or any Subsidiary in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, and to assist Company, or any Subsidiary, in any such action, suit, or proceeding, by providing information and meeting and consulting with the Board or its representatives or counsel, or representatives or counsel to Company, or any Subsidiary as reasonably requested.  Company agrees to reimburse Executive for all expenses actually incurred in connection with his provision of testimony or assistance.

(e)

Executive agrees that, during the Term of Employment and thereafter (including following  termination of Executive's employment for any reason) he will not make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage Company or any Subsidiary or their respective officers, directors, employees, advisors, businesses or reputations. Company agrees that, during the Term of Employment and thereafter (including following termination of Executive's employment for any reason), Company will not make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may directly or indirectly, disparage Executive or his business or reputation. Notwithstanding the foregoing, nothing in this Agreement shall preclude either Executive or Company from making truthful statements or disclosures that are required by applicable law, regulation, or legal process.

7.

Non-Competition.

(a)

Non-Competition During Employment.  Executive agrees that for the duration of his employment, he shall not engage in Competition with Company or any Subsidiary. "Competition" shall mean engaging in any activity for, or having a Financial Interest in (as defined below), a Competitor of Company or of any Subsidiary.  A "Competitor" shall mean any corporation or other entity which offers or performs services or products substantially similar to those provided by Company or any Subsidiary, and thereby competes, directly or indirectly, with the business conducted by Company and overseen by Executive as part of his position, duties and/or responsibilities during his employment with the Company, as determined on the date of termination of Executive's employment.  It is understood and agreed that Executive’s family business, Rice Consulting Services, is not a competitor of Company or any Subsidiary.

(b)

Non-Competition After Termination.  Executive agrees that for a period of [two (2)] years following the later of (i) termination of Executive's employment for whatever reason, or (ii) the conclusion of the period, if any, during which the Company is making payments to Executive pursuant to this Agreement above, Executive shall not, directly or indirectly, whether or not for compensation and whether or not as an Executive, engage in Competition with Company or any Subsidiary, or have any Financial Interest in any Competitor to the Company or Subsidiary within any state, region or locality in which the Company or Subsidiary is then doing business. It is understood and agreed that Executive’s family business, Rice Consulting Services, is specifically excluded from this provision.

(c)

Financial Interest Defined.  For purposes of this Agreement, Executive shall be deemed to be engaged in or to have a "Financial Interest" in a business if Executive is an Executive, independent

EMPLOYMENT AGREEMENT

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contractor, consultant, principal, agent, officer, director, partner, or shareholder, or if Executive directly or indirectly performs services for such entity, or if Executive or any member of Executive's immediate family beneficially owns an equity interest, or interest convertible into equity, in any such entity; provided, however that the foregoing shall not prohibit Executive or a member of Executive's immediate family from owning, for the purpose of passive investment, less than one percent (1%) of any class of securities of any publicly held company. It is understood and agreed that Executive’s family business, Rice Consulting Services, is specifically excluded from this provision.

8.

Non-Solicitation.  During the period beginning with the Effective Date and ending [two (2)] years following the termination of Executive's employment, Executive shall not:  (i)  induce, or attempt to induce, Executives of Company or any Subsidiary to terminate their employment; (ii) solicit or encourage any of Company's or any Subsidiary's customers, or joint venture partners to terminate or diminish their relationship with Company or any Subsidiary; or (iii) solicit or encourage any person or entity in a contractual relationship with Company or any Subsidiary to violate any agreement with any of them.  During such period, Executive shall not hire, either directly or through any Executive, agent or representative, any Executive of Company or any Subsidiary or any person who was employed by Company or any Subsidiary within 180 days of such hiring.

9.

Acknowledgment of Need for Restrictive Covenants.  Executive acknowledges the necessity of the restrictive covenants set forth herein to:  protect the Company's legitimate interests in its Confidential Information; protect the Company's competitive business advantage, customer relations and the goodwill with customers and suppliers that the Company has established at its substantial investment; and protect the Company as a result of providing Executive with specialized knowledge, training and insight regarding Company's operations.  Executive further agrees and acknowledges that the restrictive covenant is a reasonable limitation as to time, geographic area and scope of activities to be restricted and that such restrictions do not impose a greater restraint on Executive than is necessary to protect the goodwill, Confidential Information, and other legitimate business interests of the Company.

10.

Remedies.  If Executive breaches any of the provisions contained in Paragraphs 5, 6 or 7 above, Company shall have the right to immediately terminate all payments and benefits due under this Agreement and shall have the right to seek injunctive relief.  Executive acknowledges that such a breach of Paragraphs 5, 6, or 7 would cause irreparable injury and that money damages would not provide an adequate remedy for Company.  Therefore, Executive consents to enforcement of these foregoing paragraphs by means of temporary or permanent injunction and other appropriate equitable relief in any competent court, in addition to any remedies the Company may have under this Agreement or otherwise.

11.

Indemnification.

(a)

Company Indemnity.  Company agrees that if Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of Company or any Subsidiary or is or was serving at the request of Company or any Subsidiary as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, Executive shall be indemnified and held harmless by Company to the fullest extent legally permitted or authorized by Company's certificate of incorporation or bylaws or resolutions of Company's Board against all cost, expense, liability and loss (including, without limitation, attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by Executive in connection therewith, and such indemnification shall continue as to Executive even if he has ceased to be a director, member, officer, employee or agent of Company or other entity and shall inure to the benefit of Executive's heirs, executors and administrators; provided, however, that Executive shall not be entitled to any indemnification hereunder in the event that any court having jurisdiction over this matter determines that Executive's conduct was illegal, malicious, fraudulent, or resulted from gross negligence.  Company shall advance to Executive all reasonable costs and expenses to be incurred by him in connection with a Proceeding within twenty (20) days after receipt by Company of a written request for such advance.  Such request shall include an undertaking by Executive to repay the amount of such advance if it shall ultimately be determined that he is not entitled to be indemnified against such costs and expenses.  The provisions of this

EMPLOYMENT AGREEMENT

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Paragraph 10(a) shall not be deemed exclusive of any other rights of indemnification to which Executive may be entitled or which may be granted to him, and it shall be in addition to any rights of indemnification to which he may be entitled under any policy of insurance.

(b)

No Presumption Regarding Standard of Conduct.  Neither the failure of Company (including its Board, independent legal counsel or stockholders) to have made a determination prior to the commencement of any proceeding concerning payment of amounts claimed by Executive under Paragraph 10(a) above that indemnification of Executive is proper because he has met the applicable standard of conduct, nor a determination by Company (including its Board, independent legal counsel or stockholders) that Executive has not met such applicable standard of conduct, shall create a presumption that Executive has not met the applicable standard of conduct.

12.

Resolution of Disputes.  Any controversy or claim arising out of or relating to this Agreement or any breach or asserted breach hereof or questioning the validity and binding effect hereof arising under or in connection with this Agreement, other than seeking injunctive relief under Paragraphs 5, 6 or 7, shall be resolved by mediation and, if necessary, final and binding arbitration, to be held in Houston, Texas.  Disputes arising under this Agreement must first be submitted for non-binding mediation before a neutral third party.  Mediation shall be conducted and administered by the American Arbitration Association ("AAA") under its Employment Mediation Rules or as otherwise agreed between the parties.  If a covered dispute remains unresolved at the conclusion of the mediation process, either party may submit the dispute for resolution by final and binding arbitration in accordance with the Employment Dispute Resolution Rules of the AAA.  Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.  All costs and expenses of any mediation shall be borne by Company.  All costs and expenses of any arbitration or court proceeding (including fees and disbursements of counsel) shall be borne by the respective party incurring such costs and expenses, but the prevailing party shall be entitled to reimbursement from the other party.

13.

Effect of Agreement on Other Benefits.  Except as specifically provided in this Agreement, the existence of this Agreement shall not be interpreted to preclude, prohibit or restrict Executive's participation in any other employee benefit or other plans or programs in which he currently participates.

14.

Assignability; Binding Nature.  This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs (in the case of Executive) and permitted assigns.  No obligation of Company under this Agreement may be assigned or transferred by Company except that such rights or obligations shall be assigned or transferred in connection with a merger, consolidation or sale or transfer of all or substantially all of the assets of Company, provided that the assignee or transferee is the successor to all or substantially all of the assets of Company and such assignee or transferee assumes the liabilities, obligations and duties of Company, as contained in this Agreement, either contractually or as a matter of law.  Company further agrees that, in the event of a merger, consolidation or sale or transfer of assets as described in the preceding sentence, it shall take whatever action it legally can as appropriate in order to cause such assignee or transferee to expressly assume the liabilities, obligations and duties of Company hereunder.  For the avoidance of doubt, this Agreement shall be binding upon any entity into which Company merges.  No rights or obligations of Executive under this Agreement may be assigned or transferred by Executive other than his rights to compensation and benefits, which may be transferred only by will or operation of law, except as provided in Paragraph 17 below.

15.

Amendment or Waiver.  No provision in this Agreement may be amended unless such amendment is agreed to in writing and signed by Executive and an authorized officer of Company.  Except as set forth herein, no delay or omission to exercise any right, power or remedy accruing to any Party shall impair any such right, power or remedy or shall be construed to be a waiver of or an acquiescence to any breach hereof.  No waiver by either Party of any breach by the other Party of any condition or provision contained in this Agreement to be performed by such other Party shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time.  Any waiver must be in writing and signed by Executive or an authorized officer of Company, as the case may be.

EMPLOYMENT AGREEMENT

Page 9

16.

Severability.  In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.

17.

Survivorship.  The respective rights and obligations of the Parties hereunder shall survive any termination of Executive's employment to the extent necessary to the intended preservation of such rights and obligations.

18.

Beneficiaries/References.  Executive shall be entitled, to the extent permitted under any applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following Executive's death by giving Company written notice thereof.  In the event of Executive's death or a judicial determination of his incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative.

19.

Notices.Any notice given to a Party shall be in writing and shall be deemed to have been given when delivered personally or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the Party concerned at the address indicated below or to such changed address as such Party may subsequently give such notice of:

If to Company:

Ironclad Encryption Corporation
Attention: Chairman

777 S. Post Oak Lane Suite 1700

Houston, TX 77056

If to Executive:

Randall Rice

1608 SW 113th Place

Oklahoma City, OK 73170-4474

20.

Governing Law/Jurisdiction.  This Agreement shall be governed by and construed and interpreted in accordance with the laws of Texas without reference to principles of conflict of laws.  Subject to Paragraph 11 Company and Executive hereby consent to the jurisdiction of any court of the State of Texas in Harris County for purposes of resolving any dispute under this Agreement.  Company and Executive further agree that any service of process or notice requirements in any such proceeding shall be satisfied if the rules of such court relating thereto have been substantially satisfied.  Company and Executive hereby waive, to the fullest extent permitted by applicable law, any objection which it or he may now or hereafter have to such jurisdiction and any defense of inconvenient forum.

21.

Headings.  The headings of the paragraphs contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement.

IN WITNESS WHEREOF, the undersigned have executed this Agreement on the 17th day of August 2017 to be effective as of the Effective Date.

EMPLOYMENT AGREEMENT

Page 10

IRONCLAD ENCRYPTION CORPORATION


By: /S/  James D. McGraw  
       James D. McGraw
Its:  Chief Executive Officer/President

/S/  Randall Rice
RANDALL RICE

EMPLOYMENT AGREEMENT

Page 11

	EXHIBIT A Defined Terms
(a)	"Base Salary" shall have the meaning set forth in Paragraph 3.
(b)	"Company" shall have the meaning set forth in the first paragraph.
(c)	"Board" shall have the meaning set forth in Paragraph 4.
(d)	"Cause" shall have the meaning set forth in Paragraph 5(b)(i).
(e)	" Director of Product Testing" shall have the meaning set forth in Paragraph 2.
(f)	"Compensation Committee" shall have the meaning set forth in Paragraph 3.
(g)	"Competitor" or "Competition" shall have the meaning set forth in Paragraph 7(a).
(h)	"Confidential Information" shall have the meaning set forth in Paragraph 6(c).
(i) (j)	“Effective Date” shall have the meaning set forth in Paragraph 1. “Fair Market Value” as of any date means the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Board, the fees and expenses of which shall be paid by the Company.
(k)	"Original Term of Employment" shall have the meaning set forth in Paragraph 1.
(l)	"Proceeding" shall have the meaning set forth in Paragraph 11(a).
(m)	"Renewal Term" shall have the meaning set forth in Paragraph 1.
(n)	"Severance Payments shall have the meaning set forth in Paragraph 5(c)(i)(A).
(o)	“Severance Period" shall have the meaning set forth in Paragraph 5(c)(i)(B).
(p)	"Subsidiary" shall have the meaning set forth in the first recital.
(q)	"Term of Employment" shall have the meaning set forth in Paragraph 1.
(r)	"Termination Without Cause" shall have the meaning set forth in Paragraph 5(c)(ii).

EXHIBIT B

(page 1)

RANDALL RICE  EXCLUSIVE PATENTS

(Current Patents, Patentable Work In-Progress, Projected Patents)

Date (Projected Date) Description Patent Number (ID number) Verification / Certification (signature / date)

EXHIBIT B

(page 2)

RANDALL RICE  EXCLUSIVE PATENTS

(Current Patents, Patentable Work In-Progress, Projected Patents)

Date (Projected Date) Description Patent Number (ID number) Verification / Certification (signature / date)

EX-31

Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, James D. McGraw, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of IronClad Encryption Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 21, 2017

By:	/s/ James D. McGraw
James D. McGraw
President, and
Principal Executive Officer

EX-31

Exhibit 32.1

CERTIFICATIONS PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report of IronClad Encryption Corporation (“IronClad”), on Form 10-Q for the quarter ended June 30, 2017, as filed with the Securities and Exchange Commission (the “ Report ”), James D. McGraw, Principal Executive Officer of IronClad, does hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), that to his knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of us.

Date: August 21, 2017
By:	/s/ James D. McGraw
James D. McGraw
President, and
Principal Executive Officer

EX-32

Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David G. Gullickson certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of IronClad Encryption Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’ s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 21, 2017

By:	/s/ David G. Gullickson
David G. Gullickson
Vice President of Finance, Treasurer, and
Principal Financial and Accounting Officer

EX-32

Exhibit 32.2

CERTIFICATIONS PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report of IronClad Encryption Corporation (“IronClad”), on Form 10-Q for the quarter ended June 30, 2017, as filed with the Securities and Exchange Commission (the “Report”), David G. Gullickson, Principal Financial and Accounting Officer of IronClad, does hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), that to his knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of us.

Date: August 21, 2017
By:	/s/ David G. Gullickson
David G. Gullickson
Vice President of Finance, Treasurer, and
Principal Financial and Accounting Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Aug. 10, 2017
Entity Registrant Name	Ironclad Encryption Corp
Document Type	10-Q
Document Period End Date	Jun. 30, 2017
Amendment Flag	false
Entity Central Index Key	0001455926
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		66,008,195
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q2
Trading Symbol	irnc

XML

IRONCLAD ENCRYPTION CORPORATION AND SUBSIDIARY (Previously named Butte Highlands Mining Company) CONDENSED CONSOLIDATED BALANCE SHEETS (Interim period unaudited.) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Current assets
Cash and cash equivalents	$ 250,000	$ 50,682
Prepaid expenses and deposits	25,000
Total current assets	275,000	50,682
Other assets
Patents, net	79,786	68
Total assets	354,786	50,750
Current liabilities
Accounts payable	60,284
Accrued interest	103	4,142
Accrued liabilities	177,367	12,539
Advances payable to related party		10,662
Total current liabilities	237,754	27,343
Other liabilities
Convertible debt		210,000
Total liabilities	237,754	237,343
Commitments and contingencies	0	0
Stockholders' equity (deficit)
Common stock, Class A, $0.001 par value, 500,000,000 shares authorized; 66,008,195 and 56,655,891shares issued and outstanding, respectively	66,008	56,656
Common stock, Class B, $0.001 par value, 1,707,093 shares authorized; 1,538,872 and 0 shares issued and outstanding, respectively	1,539
Additional paid-in capital	4,604,676	31,900
Subscriptions receivable		(81,481)
Accumulated deficit	(4,555,191)	(193,668)
Total stockholders' equity (deficit)	117,032	(186,593)
Total liabilities and stockholders' equity (deficit)	$ 354,786	$ 50,750

XML

Statement of Financial Position - Parenthetical - $ / shares	Jun. 30, 2017	Dec. 31, 2016
Statement of financial position
Preferred Stock, Par Value	$ 0.001	$ 0.001
Preferred Stock, Shares Authorized	20,000,000	20,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common Stock, Class A, Par Value	$ 0.001	$ 0.001
Common Stock, Class A, Shares Authorized	500,000,000	500,000,000
Common Stock, Class A, Shares Issued	66,008,195	56,655,891
Common Stock, Class A, Shares Outstanding	66,008,195	56,655,891
Common Stock, Class B, Par Value	$ 0.01	$ 0.01
Common Stock, Class B, Shares Authorized	1,707,093	1,707,093
Common Stock, Class B, Shares Issued	1,538,872	1,538,872
Common Stock, Class B, Shares Outstanding	1,538,872	1,538,872

XML

IRONCLAD ENCRYPTION CORPORATION AND SUBSIDIARY (Previously named Butte Highlands Mining Company) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Income statement
Revenues	$ 0	$ 0	$ 0	$ 0
Operating expenses
Product development costs	327,749		332,842
General and administrative	294,856	6,690	1,579,661	9,234
Officer and director fees	901,684		1,569,730
Investor relations	519,409		759,050
Professional fees	79,573		118,261
Amortization	7	8	15	15
Total operating expenses	2,123,278	6,698	4,359,559
Loss from operations	(2,123,278)	(6,698)	(4,359,559)	(9,249)
Other income (expense)
Interest income	232		112
Interest expense			(2,076)
Total other income (expense)	232		(1,964)
Loss before taxes	(2,123,046)	(6,698)	(4,361,523)	(9,249)
Income taxes
Income tax benefit	0	0	0	0
Income tax expense			0	0
Total income tax	0	0	0	0
Net loss	$ (2,123,046)	$ (6,698)	$ (4,361,523)	$ (9,249)
Net loss per commons share, basic and diluted	$ (0.03)	$ (6.70)	$ (0.07)	$ (9.25)
Weighted average number of common stock shares (in 2017) or member units (in 2016) outstanding, basic and diluted	67,488,739	1,000	65,682,253	1,000

XML

IRONCLAD ENCRYPTION CORPORATION AND SUBSIDIARY (Previously named Butte Highlands Mining Company) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Cash flows from operating activities
Net loss	$ (4,361,523)	$ (9,249)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Amortization expense	15	15
Common stock issued for services, investor relations	236,250
Stock options issued for services, development	65,092
Stock options issued for services, general and administrative	1,258,648
Stock options issued for officers and directors	1,458,730
Stock options issued for services, investor relations	390,170
Changes in assets and liabilities:
Increase in prepaid expenses and deposits	(25,000)
Increase in accounts payable	60,284	8,592
Increase in accrued liabilities	164,828
Decrease in accrued interest	(4,039)
Net cash used by operating activities	(756,545)	(642)
Cash flows from investing activities
Patent applications	(79,733)
Net cash used by investing activities	(79,733)
Cash flows from financing activities
Advances payable to related party	(227)	700
Proceeds from issuances of common stock	983,693
Conversion of options	3,750
Cash received from merger	48,380
Net cash provided by financing activities	1,035,596	700
Increase in cash and cash equivalents	199,318	58
Cash, beginning of period	50,682
Supplemental Cash Flow Information
Interest paid	6,115
Income taxes paid	0	$ 0
Common stock issued to retire convertible debt	$ 210,000

XML

Note 1 - Organization, Recent History, and Description of Businesses-past and Present

6 Months Ended

Jun. 30, 2017

Notes

Note 1 - Organization, Recent History, and Description of Businesses-past and Present

Note 1 – Organization, Recent History, and Description of Businesses-Past and Present

History and Recent Transaction

The “Company” is the term used in these statements and notes to refer to the entity originally incorporated in the State of Delaware back in 1929 and recently reincorporated to the State of Nevada.  The registered name of the Company until early in 2017 was Butte Highlands Mining Company (“Butte”).  The name of the Company has been changed to IronClad Encryption Corporation (“IronClad”).

Butte was formed to explore and mine primarily for gold in the Butte Highlands’ “Only Chance” mine, south of Butte, Montana.  The Company was reorganized in October 1996 for the purpose of acquiring and developing additional mineral properties.  At the time of the 1996 reorganization, stockholders representing approximately 76% of the outstanding capital stock could not be located.  In order to obtain the quorum necessary for the special meetings of shareholders to authorize the reorganization, Butte obtained an order from the Superior Court of Spokane County, Washington appointing a trustee for the benefit of those stockholders who could not be located.

By May 17, 2007, eleven years after the reorganization and very limited results from its mining activities, the Company had disposed of all of its historical mineral properties or claims and eventually became a “shell company” under the rules of the Securities and Exchange Commission (“SEC”).

Now, following ten years of being a shell company with only nominal activity and limited cash or other assets, the business focus of Butte changed early in 2017.  Most notably the Company raised significant capital to implement its new business and financial plans to further develop the licensing and commercial use of its patented encryption software.  The change caused Butte’ to lose its previous shell company status.

The Company also changed its legal name of registration and state of incorporation to more appropriately reflect the fundamental change of its business to developing cyber encryption technology and away from its historical mining activities.  The terms “Company”, “IronClad” and “Butte” all refer to the same individual corporate entity, but the uses of the IronClad and Butte names are used to refer to different eras of the Company’s long history.  The historical eras generally coincide with the changes in business focus before and after the first weeks of 2017.

The business changes are a result of a common stock exchange transaction, accounted for as a “reverse merger”, between Butte and the owners of InterLok Key Management, Inc. (“InterLok”; at the time an independent and privately-held Texas corporation) whereby InterLok became a wholly-owned subsidiary of Butte.  Butte issued shares of its common stock in exchange for acquiring all of the common stock of InterLok.  At present, InterLok is the one and only subsidiary of the Company and InterLok’s patents and line of business now become the main basis of the business of the Company on a consolidated basis.

Along with the Company’s change of business came the Company’s adoption of IronClad Encryption Corporation (and the discontinuance of using the Butte name) as the name of what is now the parent corporation and the change of the state of incorporation to Nevada from Delaware.  The Company also has changed its stock market ticker symbol to “IRNC” from “BTHI” on one of the OTC Markets Group over-the-counter markets, OTC QB, where the Company’s shares have been and continue to be traded.

Description of Businesses—Present and Past

InterLok Key Management, Inc. (formerly InterLok Key Management, LLC) is a company in the business of developing and licensing the use of cyber software technology that encrypts data files and electronic communications.   Electronic file information and data transmissions are safeguarded from unauthorized access and their use is securely protected by perpetual authentication through the use of a single-key, dynamic synchronization of authentications keys.  InterLok was formed in Texas on June 12, 2006 and incorporated ten years later on June 16, 2016.

On January 6, 2017 InterLok entered into a Share Exchange Agreement ("Share Exchange") with Butte Highlands Mining Company.  Under the terms of the agreement, the shareholders of InterLok Key Management, Inc. exchanged all 56,655,891 outstanding shares of InterLok’s common stock for 56,655,891 shares of Class “A” common stock of Butte Highlands Mining Company.

The Share Exchange was treated as a “reverse merger” with InterLok Key Management, Inc. which is deemed--for accounting recognition purposes—as the accounting acquirer and Butte Highlands Mining Company deemed the accounting acquiree under the acquisition method of accounting. The reverse merger is deemed a recapitalization and the consolidated financial statements represent the substantive continuation of the operations and thus the financial statements of its subsidiary InterLok Key Management, Inc., while the capital structure (in terms of authorized preferred and common stock) of Butte Highlands Mining Company remains intact.

Principles of consolidation

The accompanying unaudited consolidated financial statements include the accounts of IronClad and its one subsidiary which is wholly-owned.  All intercompany accounts and transactions have been eliminated in consolidation.  The above unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information.

Accordingly, these unaudited interim consolidated financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements and the rules of the SEC.  These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2016.

In the opinion of management, the unaudited interim consolidated financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim periods presented.  Operating results for the six month period ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

XML

Note 2 - Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2017

Notes

Note 2 - Summary of Significant Accounting Policies

Note 2 – Summary of Significant Accounting Policies

This summary of significant accounting policies is presented to assist in understanding the Company’s interim consolidated financial statements. The financial statements and notes are representations of the Company’s management which is responsible for their integrity and objectivity.  These accounting policies conform to accounting principles generally accepted in the United States and have been consistently applied in the preparation of the financial statements.

Going Concern

As shown in the accompanying financial statements, the Company has incurred cumulative operating losses since inception. As of June 30, 2017, the Company has limited financial resources with which to achieve its objectives and attain profitability and positive cash flows from operations. As shown in the accompanying balance sheets and statements of operations, the Company has an accumulated deficit of $4,555,191.  The Company's working capital (current assets minus current liabilities) is $37,246.

Achievement of the Company's objectives will depend on its ability to obtain additional financing, to generate revenue from current and planned business operations, and to effectively manage product and software development, operating and capital costs. The Company is in a development stage and has generated no operating revenue, profits or positive cash flows from operations.

The Company plans to fund its future operations by potential sales of its common stock or by issuing debt securities.  However, there is no assurance that IronClad will be able to achieve these objectives, therefore substantial doubt about its ability to continue as a going concern exists. The financial statements do not include adjustments relating to the recoverability of recorded assets nor the implication of associated bankruptcy costs should IronClad be unable to continue as a going concern.

Fair Value Measures

The Company's financial instruments, as defined by the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 825-10-50 Financial Instruments—Overall (and subtopics), include cash, receivables, accounts payable and accrued expenses.  All instruments are accounted for on an historical cost basis, which, due to the short maturity of these financial instruments, approximates their fair values at June 30, 2017 and at December 31, 2016.

The standards under ASC 820 Fair Value Measurementdefine fair value, establish a framework for measuring fair value in accordance with generally accepted accounting principles, and expand disclosures about fair value measurements.  ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

·         Level 1.  Observable inputs such as quoted prices in active markets;

·         Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

·         Level 3.  Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The Company did not have any assets measured at fair value other than cash and deposits at June 30, 2017 and at December 31, 2016.

Provision for Income Taxes

Income taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25 Income Taxes – Recognition.  Under the approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis amounts of assets and liabilities and their financial reporting amounts at each period-end.  A valuation allowance is recorded against deferred tax asset amounts if management does not believe the Company has met the “more likely than not” standard imposed by ASC 740-10-25-5 to allow recognition of such an asset.  See Note 8.

Capitalization of Patent and Trademark Costs

The Company capitalizes its legal, patent agent and related filing fees and costs associated with the patents it holds and is developing.  The amounts are carried as an intangible asset in the financial statements.  The costs of the patents or trademarks are written off ratably (expensed) over the expected useful technological or economic life of the individual assets.  The legal life of a patent is typically about 17 years.  See Note 3.

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified to provide greater line item detail for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations.  This change in classification has no effect on previously reported cash flows in the Condensed Consolidated Statement of Cash Flows, and had no effect on the previously reported Condensed Consolidated Statement of Operation for any period.

New Accounting Requirements and Disclosures

Accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

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Note 3 - Patents

6 Months Ended

Jun. 30, 2017

Notes

Note 3 - Patents

Note 3 – Patents

Patents and trademarks are as follows:

	June 30, 2017		June 30, 2016
Patents and trademarks under development	$                   79,733	$                        -
Patents issued	398	398
Less accumulated amortization	(345)	(315)
	53	83
	$                   79,786	$                     83

Amortization expense for intangible assets during the six month periods ended June 30, 2017 and 2016 was $7 and $8, respectively.  Three patents expire in 2017, 2018 and 2021, respectively. Costs totaling $79,733 for new patents and trademarks under development (but as yet not awarded) are capitalized at June 30, 2017.  The patents and trademarks under development will not be amortized until formally issued.

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Note 4 - Concentration of Credit Risk

6 Months Ended

Jun. 30, 2017

Notes

Note 4 - Concentration of Credit Risk

Note 4 – Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At June 30, 2017 and 2016, the Company had no amounts on deposit in excess of the FDIC insured limit.

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Note 5 - Related Party Transaction

6 Months Ended

Jun. 30, 2017

Notes

Note 5 - Related Party Transaction

Note 5 – Related Party Transactions

The Company paid $15,249 in consulting fees during 2016 to Eagle Mountain 21, LLC, an entity owned by an officer of the Company.  At December 31, 2016 the Company owed an additional $10,662 amount to that same officer for operating costs incurred and submitted for reimbursement during 2016.  Reimbursement to the officer was made at the start of the quarter ended June 30, 2017.

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Note 6 - Convertible Notes Payable

6 Months Ended

Jun. 30, 2017

Notes

Note 6 - Convertible Notes Payable

Note 6 – Convertible Notes Payable

On June 26, 2017 IronClad entered into a Securities Purchase Agreement to issue a 12% convertible note payable for an aggregate principal amount of $78,500 with the intent of meeting certain conditions precedent to closing and funding on or before July 7, 2017.  The closing conditions were met prior to that date and the convertible note payable was closed and funded on July 6, 2017.  The Company received cash proceeds of $75,000 net of transaction costs of $3,500.  See also Note 11.

On August 8, 2016, InterLok issued two 5% convertible senior promissory notes for a principal amount of $30,000 each and, on August 16, 2016, issued one 5% convertible senior promissory note for $150,000 for an aggregate principal amount of $210,000.  Interest costs accrued on the unpaid principal balances at five percent (5%) annually until the principal amount and all interest accrued thereon was paid at the earlier of 1) the maturity date two years later on August 8, 2018 or August 16, 2018, respectively, or 2) on the conversion of the notes into shares of common stock at a price equal to a conversion price of $0.15 per share.

The notes automatically converted into shares of common stock at a conversion price of $0.15 per share, subject to adjustment under certain circumstances in the event of an acquisition transaction or a public offering event.  The Company could not enter into an acquisition or public offering event without the prior written approval of any of the note holders.  If any holder declined to provide approval for an acquisition transaction or public offering, the Company could have immediately prepaid the entire outstanding principal amounts and accrued interest amounts on the notes.  Two of the notes contained the option to purchase additional shares of common stock.

During the period ended March 31, 2017, the principal balances of all three 5% convertible senior promissory notes were converted into 1,400,000 shares of IronClad Class A common stock.  Accrued interest of $6,115 on the notes was paid in cash during the quarter ended June 30, 2017.

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Note 7 - Common Stock

6 Months Ended

Jun. 30, 2017

Notes

Note 7 - Common Stock

Note 7 – Common Stock

During the three month period ended March 31, 2017, i) the Company issued 5,843,954 shares of its Class A common stock at $0.15 per share for cash in the amount of $876,597 ($35,343 of which was only subscribed and still receivable at December 31, 2016), and ii) 75,000 shares at $0.15 per share for investment banking services in the amount of $11,250.

Additionally, i) the three convertible note holders converted $210,000 into 1,400,000 shares of Class A common stock, and ii) 250,000 shares were issued pursuant to the Share Exchange Agreement at $0.03 per share.  Also, iii) subscriptions receivable that were outstanding at December 31, 2016 in the amount of $81,481 were collected.

During the three month period ended June 30, 2017, the Company issued i) 240,333 shares of Class A common stock at $0.15 per share for cash in the amount of $36,050 pursuant to a Section 4(a)2 private placement offering, ii) 25,000 shares at $0.15 per share for the conversion of stock options (see Note 10), and iii) 75,000 shares at $2.90 per share for investment banking services valued at $217,500.

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Note 8 - Income Taxes

6 Months Ended

Jun. 30, 2017

Notes

Note 8 - Income Taxes

Note 8 – Income Taxes

Income taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25 Income Taxes – Recognition.  Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end.  A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard required by ASC 740-10-25-5.

Deferred income tax amounts reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes.

Significant components of the deferred tax asset amounts at an anticipated tax rate of 35% for the periods ended June 30, 2017 and December 31, 2016 are as follows:

	June 30, 2017	December 31, 2016
Net operating loss carryforwards	$  1,397,919	$    193,668
Deferred tax asset	$     489,271	$      67,780
Valuation allowance for deferred asset	(489,271)	(67,780)
Net deferred tax asset	$                0	$               0

At June 30, 2017, the Company has net operating loss carryforwards of approximately $1,397,919 which will begin to expire in the year 2033.  The increase in the allowance account amount (and also in the deferred tax asset amount) from December 31, 2016 to June 30, 2017 was $421,491.

IronClad is subject to federal level income taxes under the jurisdiction of the US, but is not subject to income taxes at any state level.  Tax periods that may still be subject to review by the Internal Revenue Service are the years 2014, 2015, and 2016.  The Company has not identified any aggressive tax positions.

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Note 9 - Share Exchange Agreement

6 Months Ended

Jun. 30, 2017

Notes

Note 9 - Share Exchange Agreement

Note 9 – Share Exchange Agreement

On January 6, 2017, the Company entered into a Share Exchange Agreement with InterLok Key Management, Inc. wherein Butte agreed to issue 56,655,891 restricted shares of Butte’s common stock in exchange for 100% of the outstanding shares of InterLok Key Management, Inc. common stock.  InterLok Key Management, Inc. is engaged in the business of developing and licensing its patented key-based encryption methods.

On January 6, 2017, Butte completed its Share Exchange Agreement with the owners of InterLok, and issued 56,655,891 restricted shares of Butte’s common stock to 29 persons and entities in exchange for all of the outstanding shares of InterLok Key Management, Inc.’s common stock.  Immediately following completion of the share exchange agreement the Company’s new board of directors elected, through a series of board resolutions and regulatory filings, to change the Company’s name to IronClad Encryption Corporation from Butte, to move the Company to Nevada from Delaware, and to change its stock trading symbol to IRNC from BTHI.

The Share Exchange was treated as a reverse merger with InterLok Key Management, Inc. deemed, for accounting recognition purposes, the accounting acquirer and Butte Highlands Mining Company deemed the accounting acquiree under the acquisition method of accounting.  The reverse merger is deemed a recapitalization and the unaudited pro forma consolidated financial statements represent the substantive continuation of the operations and thus the financial statements of InterLok Key Management, Inc., while the capital structure (with respect to authorized, issued and outstanding shares of preferred and common stock) of Butte Highlands Mining Company--now using the name IronClad--remains intact.

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Note 10 - Stock Options

6 Months Ended

Jun. 30, 2017

Notes

Note 10 - Stock Options

Note 10 – Stock Options

During the three month period ended March 31, 2017, the Company awarded 1,145,000 stock options for services and conversions of convertible notes valued at $1,305,565 and 9,000,000 stock options to officers of IronClad valued at $622,045.  Of the total 10,145,000 options awarded, 1,045,000 vested immediately and received full expense recognition in the three month period ended March 31, 2017.  The remaining 9,883,470 options vest periodically over the subsequent three years and will be expensed as they periodically vest.

In addition, 25,000 stock options that were awarded during the three month period ending March 31, 2017 were exercised for cash in the amount of $3,750.

During the three month period ended June 30, 2017, the Company awarded 2,945,000 stock options for services valued at $4,657,850 (using the Black-Scholes option pricing model) and 500,000 stock options to an officer of IronClad valued at $731,659 (using the Black-Scholes option pricing model).  Of the total 3,445,000 options awarded during the period 85,000 vested immediately and received full expense recognition during the three month period ended June 30, 2017.  The remaining 3,360,000 options vest periodically over the next two to four years and will be expensed as they periodically vest.

The fair value of stock options is estimated on the date of each award using the Black-Scholes option pricing model to value the stock option based on its terms and conditions.  The table below summarizes the assumptions used to estimate the fair values of the options:

Number of Options	Date Issued	Exercise Price	Risk-free Interest Rate	Volatility	Life of Option in years
75,000	01/16/17	$0.75	1.54%	226.01%	3.00
6,000,000	01/20/17	$0.15	1.54%	220.00%	3.00
3,000,000	01/20/17	$0.15	1.54%	220.00%	4.00
350,000	01/31/17	$0.15	1.19%	132.84%	1.93
100,000	02/01/17	$0.15	1.22%	134.90%	2.00
100,000	03/13/17	$0.15	1.40%	144.84%	2.00
500,000	03/15/17	$0.15	1.02%	114.94%	1.40
20,000	03/21/17	$0.15	1.54%	233.07%	3.00
1,700,000	05/05/17	$1.47	1.71%	565.34%	4.00
1,000,000	05/05/17	$1.47	1.32%	202.99%	2.00
80,000	05/31/17	$0.75	1.44%	196.06%	3.00
660,000	06/12/17	$2.50	1.64%	589.85%	4.00
5,000	06/30/17	$3.49	1.55%	197.13%	3.00
13,590,000

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Note 11 - Subsequent Events

6 Months Ended

Jun. 30, 2017

Notes

Note 11 - Subsequent Events

Note 11 – Subsequent Events

On July 6, 2017 IronClad closed and funded on an agreement to issue a 12% convertible note payable.  IronClad entered into the Securities Purchase Agreement on June 26, 2017 to issue the note payable for an aggregate principal amount of $78,500 with the intent of subsequently meeting certain conditions precedent to closing and funding on or before July 7, 2017.  The closing conditions precedent were met prior to that date and the convertible note payable was closed, issued and funded on July 6, 2017.  The Company received cash proceeds of $75,000 net of transaction costs of $3,500.

The note matures on March 30, 2018 and interest costs accrue on the unpaid principal balance at 12% annually until March 30, 2018, and after that interest accrues annually at 22% until the principal amount and all interest accrued and unpaid are paid.

The holder of the note, at his sole election, may convert the note into shares of common stock of the Company at any time during the period beginning on the date which is one hundred and eighty days following the date of the note (dated June 26, 2017) and ending on the later of i) the maturity date, or ii) the date of payment of a default amount, if any.

The shares to be issued are a function of a variable conversion price which is 65% of a market price defined to be the lowest one trading price for the Company’s common stock during the fifteen day trading period ending on the last trading day prior to exercising the conversion right.  The company will keep available authorized shares reserved, initially 289,846 shares, but in any event authorized shares equal to six times the number of shares that would be issuable upon full conversion of the note from time to time.

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Note 2 - Summary of Significant Accounting Policies: Going Concern (Policies)

6 Months Ended

Jun. 30, 2017

Policies

Going Concern

Going Concern

As shown in the accompanying financial statements, the Company has incurred cumulative operating losses since inception. As of June 30, 2017, the Company has limited financial resources with which to achieve its objectives and attain profitability and positive cash flows from operations. As shown in the accompanying balance sheets and statements of operations, the Company has an accumulated deficit of $4,555,191.  The Company's working capital (current assets minus current liabilities) is $37,246.

Achievement of the Company's objectives will depend on its ability to obtain additional financing, to generate revenue from current and planned business operations, and to effectively manage product and software development, operating and capital costs. The Company is in a development stage and has generated no operating revenue, profits or positive cash flows from operations.

The Company plans to fund its future operations by potential sales of its common stock or by issuing debt securities.  However, there is no assurance that IronClad will be able to achieve these objectives, therefore substantial doubt about its ability to continue as a going concern exists. The financial statements do not include adjustments relating to the recoverability of recorded assets nor the implication of associated bankruptcy costs should IronClad be unable to continue as a going concern.

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Note 2 - Summary of Significant Accounting Policies: Fair Value Measures (Policies)

6 Months Ended

Jun. 30, 2017

Policies

Fair Value Measures

Fair Value Measures

The Company's financial instruments, as defined by the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 825-10-50 Financial Instruments—Overall (and subtopics), include cash, receivables, accounts payable and accrued expenses.  All instruments are accounted for on an historical cost basis, which, due to the short maturity of these financial instruments, approximates their fair values at June 30, 2017 and at December 31, 2016.

The standards under ASC 820 Fair Value Measurementdefine fair value, establish a framework for measuring fair value in accordance with generally accepted accounting principles, and expand disclosures about fair value measurements.  ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

·         Level 1.  Observable inputs such as quoted prices in active markets;

·         Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

·         Level 3.  Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The Company did not have any assets measured at fair value other than cash and deposits at June 30, 2017 and at December 31, 2016.

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Note 2 - Summary of Significant Accounting Policies: Provision For Income Taxes (Policies)

6 Months Ended

Jun. 30, 2017

Policies

Provision For Income Taxes

Provision for Income Taxes

Income taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25 Income Taxes – Recognition.  Under the approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis amounts of assets and liabilities and their financial reporting amounts at each period-end.  A valuation allowance is recorded against deferred tax asset amounts if management does not believe the Company has met the “more likely than not” standard imposed by ASC 740-10-25-5 to allow recognition of such an asset.  See Note 8.

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Note 2 - Summary of Significant Accounting Policies: Capitalization of Internal Costs, Policy (Policies)

6 Months Ended

Jun. 30, 2017

Policies

Capitalization of Internal Costs, Policy

Capitalization of Patent and Trademark Costs

The Company capitalizes its legal, patent agent and related filing fees and costs associated with the patents it holds and is developing.  The amounts are carried as an intangible asset in the financial statements.  The costs of the patents or trademarks are written off ratably (expensed) over the expected useful technological or economic life of the individual assets.  The legal life of a patent is typically about 17 years.  See Note 3.

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Note 2 - Summary of Significant Accounting Policies: Reclassifications (Policies)

6 Months Ended

Jun. 30, 2017

Policies

Reclassifications

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified to provide greater line item detail for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations.  This change in classification has no effect on previously reported cash flows in the Condensed Consolidated Statement of Cash Flows, and had no effect on the previously reported Condensed Consolidated Statement of Operation for any period.

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Note 2 - Summary of Significant Accounting Policies: New Accounting Pronouncements, Policy (Policies)

6 Months Ended

Jun. 30, 2017

Policies

New Accounting Pronouncements, Policy

New Accounting Requirements and Disclosures

Accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

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Note 3 - Patents: Schedule of Indefinite-Lived Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2017

Tables/Schedules

Schedule of Indefinite-Lived Intangible Assets

	June 30, 2017		June 30, 2016
Patents and trademarks under development	$                   79,733	$                        -
Patents issued	398	398
Less accumulated amortization	(345)	(315)
	53	83
	$                   79,786	$                     83

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Note 8 - Income Taxes: Significant Components of The Deferred Tax Asset Amounts At An Anticipated Tax Rate of 35% For The Periods Ended June 30, 2017 and December 31, 2016 Are As Follows (Tables)

6 Months Ended

Jun. 30, 2017

Tables/Schedules

Significant Components of The Deferred Tax Asset Amounts At An Anticipated Tax Rate of 35% For The Periods Ended June 30, 2017 and December 31, 2016 Are As Follows:

Significant components of the deferred tax asset amounts at an anticipated tax rate of 35% for the periods ended June 30, 2017 and December 31, 2016 are as follows:

	June 30, 2017	December 31, 2016
Net operating loss carryforwards	$  1,397,919	$    193,668
Deferred tax asset	$     489,271	$      67,780
Valuation allowance for deferred asset	(489,271)	(67,780)
Net deferred tax asset	$                0	$               0

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Note 10 - Stock Options: Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions (Tables)

6 Months Ended

Jun. 30, 2017

Tables/Schedules

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

Number of Options	Date Issued	Exercise Price	Risk-free Interest Rate	Volatility	Life of Option in years
75,000	01/16/17	$0.75	1.54%	226.01%	3.00
6,000,000	01/20/17	$0.15	1.54%	220.00%	3.00
3,000,000	01/20/17	$0.15	1.54%	220.00%	4.00
350,000	01/31/17	$0.15	1.19%	132.84%	1.93
100,000	02/01/17	$0.15	1.22%	134.90%	2.00
100,000	03/13/17	$0.15	1.40%	144.84%	2.00
500,000	03/15/17	$0.15	1.02%	114.94%	1.40
20,000	03/21/17	$0.15	1.54%	233.07%	3.00
1,700,000	05/05/17	$1.47	1.71%	565.34%	4.00
1,000,000	05/05/17	$1.47	1.32%	202.99%	2.00
80,000	05/31/17	$0.75	1.44%	196.06%	3.00
660,000	06/12/17	$2.50	1.64%	589.85%	4.00
5,000	06/30/17	$3.49	1.55%	197.13%	3.00
13,590,000

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Note 1 - Organization, Recent History, and Description of Businesses-past and Present (Details)

6 Months Ended

Jun. 30, 2017

Details

Consolidation, Policy

Principles of consolidation

The accompanying unaudited consolidated financial statements include the accounts of IronClad and its one subsidiary which is wholly-owned.  All intercompany accounts and transactions have been eliminated in consolidation.  The above unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information.

Accordingly, these unaudited interim consolidated financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements and the rules of the SEC.  These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2016.

In the opinion of management, the unaudited interim consolidated financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim periods presented.  Operating results for the six month period ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

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Note 3 - Patents: Schedule of Indefinite-Lived Intangible Assets (Details) - USD ($)	Jun. 30, 2017	Jun. 30, 2016
Details
Other Intangible Assets, Net	$ 79,733
Finite-Lived Intangible Assets, Gross	398
Finite-Lived Intangible Assets, Accumulated Amortization	(345)	$ (315)
Finite-Lived Intangible Assets, Net	$ 83

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Note 3 - Patents (Details) - USD ($)	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Details
Amortization of Intangible Assets	$ 7	$ 8
Other Intangible Assets, Net	$ 79,733

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Note 5 - Related Party Transaction (Details) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2016
Details
Payments for Other Fees	$ 15,249
Operating costs incurred and reimbursed to related party		$ 10,662

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Note 6 - Convertible Notes Payable (Details) - USD ($)		3 Months Ended	6 Months Ended
	Jun. 26, 2017	Mar. 31, 2017	Jun. 30, 2017	Dec. 31, 2016	Aug. 16, 2016	Aug. 08, 2016
Details
Securities Purchase Agreement Aggregate Principal	$ 78,500
Convertible Notes Payable, Noncurrent					$ 150,000	$ 3,000,060,000
Convertible debt		$ 210,000		$ 210,000	$ 210,000
CommonStockIssuedForConvertibleDebtStockIssued		1,400,000
Interest paid			$ 6,115

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Note 7 - Common Stock (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2017	Dec. 31, 2016	Aug. 16, 2016
Details
Stock Issued During Period, Shares, New Issues	240,333	5,843,954
Stock Issued During Period, Value, New Issues	$ 36,050	$ 876,597
Common Stock, Shares Subscribed but Unissued		35,343
Stock Issued During Period, Shares, Issued for Services		75,000
Common stock issued for services			$ 236,250
Convertible debt		$ 210,000		$ 210,000	$ 210,000
Stock Issued During Period, Shares, Other	75,000	1,400,000
Subscriptions receivable collected		$ 81,481
Stock Issued During Period, Shares, Conversion of Convertible Securities	25,000
Stock Issued During Period, Shares, Other	75,000	1,400,000
Common stock issued to retire convertible debt			$ 210,000

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Note 8 - Income Taxes: Significant Components of The Deferred Tax Asset Amounts At An Anticipated Tax Rate of 35% For The Periods Ended June 30, 2017 and December 31, 2016 Are As Follows (Details) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Details
Deferred Tax Assets, Operating Loss Carryforwards	$ 1,397,919	$ 193,668
Deferred Tax Assets, Gross	489,271	67,780
Deferred Tax Assets, Valuation Allowance	(489,271)	(67,780)
Deferred Tax Assets, Net of Valuation Allowance	$ 0	$ 0

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Note 8 - Income Taxes (Details)	6 Months Ended
	Jun. 30, 2017 USD ($)
Details
Operating Loss Carryforwards	$ 1,397,919
Valuation Allowances and Reserves, Period Increase (Decrease)	$ 421,491

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Note 9 - Share Exchange Agreement (Details)	Jan. 06, 2017
Details
Business Acquisition, Name of Acquired Entity	InterLok Key Management, Inc.
Business Acquisition, Pro Forma Information, Description	The Share Exchange was treated as a reverse merger with InterLok Key Management, Inc. deemed, for accounting recognition purposes, the accounting acquirer and Butte Highlands Mining Company deemed the accounting acquiree under the acquisition method of accounting. The reverse merger is deemed a recapitalization and the unaudited pro forma consolidated financial statements represent the substantive continuation of the operations and thus the financial statements of InterLok Key Management, Inc., while the capital structure (with respect to authorized, issued and outstanding shares of preferred and common stock) of Butte Highlands Mining Company--now using the name IronClad--remains intact.

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Note 10 - Stock Options (Details) - shares	3 Months Ended
	Jun. 30, 2017	Mar. 31, 2017
Details
Stock options for services, and contractual obligations associated with the conversion of senior convertible notes, shares	2,945,000	1,145,000
Stock options for services, and contractual obligations associated with the conversion of senior convertible notes, value	4,657,850	1,305,565
Stock options to officers, shares	500,000	9,000,000
Stock options to officers, value	731,659	622,045
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Number	3,445,000	10,145,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Number of Shares	85,000	1,045,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares	3,360,000	9,883,470

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Note 10 - Stock Options: Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions (Details) - $ / shares	Jun. 30, 2017	Jun. 12, 2017	May 31, 2017	May 05, 2017	Mar. 21, 2017	Mar. 15, 2017	Mar. 13, 2017	Feb. 01, 2017	Jan. 31, 2017	Jan. 20, 2017	Jan. 16, 2017
Details
Fair Value Assumptions, Exercise Price	$ 3.49	$ 2.50	$ 0.75	$ 1.47	$ 0.15	$ 0.15	$ 0.15	$ 0.15	$ 0.15	$ 0.15	$ 0.75
Fair Value Assumptions, Risk Free Interest Rate	1.55%	1.64%	1.44%	1.71%	1.54%	1.02%	1.40%	1.22%	1.19%	1.54%	1.54%
Fair Value Assumptions, Expected Volatility Rate	197.13%	589.85%	196.06%	565.34%	233.07%	114.94%	144.84%	134.90%	132.84%	220.00%	226.01%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term	3 years	4 years	3 years	4 years	3 years	1 year 4 months 24 days	2 years	2 years	1 year 11 months 5 days	3 years	3 years
Number of options issued				1.47						0.15
Number of options issued				1.32						1.54
Measure of dispersion, in percentage terms (for instance, the standard deviation or variance), for a given stock price, additional items				202.99%						220.00%
Number of options issued				2.00						4.00

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Note 11 - Subsequent Events (Details)	Jul. 06, 2017
Details
Subsequent Event, Description	On July 6, 2017 IronClad closed and funded on an agreement to issue a 12% convertible note payable. IronClad entered into the Securities Purchase Agreement on June 26, 2017 to issue the note payable for an aggregate principal amount of $78,500 with the intent of subsequently meeting certain conditions precedent to closing and funding on or before July 7, 2017. The closing conditions precedent were met prior to that date and the convertible note payable was closed, issued and funded on July 6, 2017. The Company received cash proceeds of $75,000 net of transaction costs of $3,500.