8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  July 31, 2006

Element 21 Golf Company

(Exact name of registrant as specified in its charter)

Delaware	000-15260	88-0218411
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

200 Queens Quay East, Unit #1 Toronto, Ontario, Canada,	M5A 4K9
(Address of principal executive offices)	(Zip Code)
Registrant's telephone number, including area code	800-710-2021

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o      Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement

On July 31, 2006 (the “Initial Closing Date”), Element 21 Golf Company (the “Company”) consummated a $4 million equity financing by entering into two Series B Convertible Preferred Stock Subscription Agreements (each a “Subscription Agreement” and collectively the “Subscription Agreements”) with each of Clearline Capital, LLC and Vladimir Goryunov (each a “Purchaser” and collectively, the “Purchasers”). Each Subscription Agreement provides for the sale by the Company to the applicable Purchaser of 117,648 shares of the Company’s Series B Convertible Preferred Stock, par value $0.10 per share (the “Series B Preferred Stock”), and warrants to purchase an aggregate of 17,647,059 shares of the Company’s Common Stock, $.01 par value per share (the “Common Stock”), in exchange for and in consideration of an aggregate investment by each Purchaser of $2 million in cash (each Purchaser’s “Investment Amount”), which amount is to be invested by each Purchaser in two equal $1 million installments, the first of which occurred on the Initial Closing Date and the second of which will occur at a subsequent closing to occur on or before November 30, 2006 (the “Subsequent Closing”, and the date of such Subsequent Closing, the “Subsequent Closing Date”); provided that the Company satisfies the necessary condition precedent to the Subsequent Closing as described below.

On the Initial Closing Date, each Purchaser invested $1 million in the Company in return for 58,824 shares of Series B Preferred Stock and two warrants (the terms of which are more fully described below) to purchase an aggregate of 8,823,530 shares of Common Stock. The Subscription Agreements obligate each Purchaser to invest the remaining $1 million of its Investment Amount (each Purchaser’s “Additional Investment Amount”) in the Company no later than November 30, 2006, subject only to the Company converting at least 80% of the aggregate outstanding principal amount evidenced by those certain convertible promissory notes issued by the Company between February 2006 and July 31, 2006 (collectively, the “Promissory Notes”) into shares of Common Stock prior to the Subsequent Closing Date. In exchange for each Purchaser’s Additional Investment Amount, the Company will issue to each Purchaser an additional 58,824 shares of Series B Preferred Stock and two additional warrants (the terms of which are more fully described below) to purchase an aggregate of an additional 8,823,529 shares of Common Stock. On August 3, 2006, the Company issued a press release to announce the consummation of the equity financing. A copy of the press release issued by the Company is attached hereto as Exhibit 99.1.

Each share of Series B Preferred Stock will initially be:

· convertible into 100 shares of Common Stock (subject to adjustment in the event of dilutive issuances, stock splits, combinations, certain dividends and distributions, and mergers, reorganizations or other similar recapitalization events);

·  entitled to vote on all matters submitted to a vote of the holders of the Common Stock on an as-if converted to common stock basis;

· entitled to accruing dividends at a rate per annum of 4% of the base amount per share (defined as the original issue price of $17.00 per share plus the amount of accrued but unpaid dividends as calculated on each anniversary of the date of issuance of such Series B Preferred Stock shares);

· upon the occurrence of certain events (each a “Liquidating Event”), entitled to a liquidation preference equal to the greater of: (i) the amount that would have been payable on each share of Series B Preferred Stock had each share been converted into Common Stock immediately prior to such Liquidating Event, or (ii) $17.00 per share (adjusted to reflect any stock dividend, stock split, combination, recapitalization or reorganization) plus all accruing dividends and all other declared but unpaid dividends. A merger or consolidation of the Company into another corporation or entity or the sale of all or substantially all of the Company’s assets will be deemed to be a Liquidating Event unless otherwise decided by the majority vote of the then outstanding shares of the Series B Preferred Stock.

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Additionally, at any time when at least 25,000 shares of Series B Preferred Stock are outstanding (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization event affecting such shares), the Company may not do any of the following without the written consent or affirmative vote of the holders of at least a majority of the then outstanding shares of Series B Preferred Stock: (i) effect any merger or consolidation of the Company; (ii) amend or repeal any provision of, or add any provision to, the Company’s Certificate of Incorporation or By-laws if such action would alter or change the preferences, rights, privileges or powers of, or the restrictions provided for the benefit of, such Series B Preferred Stock; (iii) create, or authorize the creation of, or issue or obligate itself to issue shares of, or increase the authorized number of shares of, any additional class or series of capital stock unless the same ranks junior to the Series B Preferred Stock; (iv) acquire another entity by means of a purchase of all or a portion of the capital stock or assets of such entity for consideration in excess of $2,000,000; (v) liquidate, wind up, or dissolve the Company or adopt any plan for the same; (vi) effect any sale, lease, transfer, pledge or other disposition of assets of the Company or its subsidiaries, not in the ordinary course of business, unless the value of such assets; singly or in connection with any related series of transactions does not in the aggregate exceed $5,000,000; (vii) enter into any transaction with any officer, director or beneficial owner of five percent (5%) or more of the Common Stock; (viii) authorize or effect the issuance by the Company of any shares of capital stock or rights to acquire shares of capital stock pursuant to stock option, stock bonus or other employee stock plans for the benefit of the employees of the Corporation other than the issuance of options to purchase up to 20,000,000 shares of Common Stock pursuant to the Company’s existing stock option plan; (ix) incur any indebtedness for borrowed money in excess of $1,000,000 outstanding at any time; (x) acquire any material assets of another person for consideration in excess of $2,000,000 other than in the ordinary course of business, or (xi) permit any subsidiary to do any of the foregoing. The protective provisions described above in subsections (iv)-(xi) will cease to be of further force and effect if the Purchasers fail to invest the Additional Investment Amount on or prior to November 30, 2006 for any reason other than the failure of the Company to convert at least 80% of the aggregate outstanding principal amount evidenced by the Promissory Notes into shares of Common Stock prior to November 30, 2006.

On the Initial Closing Date the Company granted each Purchaser (i) one warrant to purchase 3,750,000 shares of Common Stock at an exercise price of $0.22 per share in the event the warrant is exercised on or prior to July 31, 2007, and $0.28 per share in the event the warrant is exercised on or after August 1, 2007, and (ii) one warrant to purchase 5,073,530 shares of Common Stock at an exercise price of $0.28 per share (each an “Initial Warrant”, and collectively, the “Initial Warrants”). Assuming that the conditions precedent to the Subsequent Closing are satisfied, on the Subsequent Closing Date, the Company will grant each Purchaser (i) one additional warrant to purchase 3,750,000 shares of Common Stock at an exercise price of $0.22 per share in the event the warrant is exercised on or prior to July 31, 2007, which increases to $0.28 per share in the event the warrant is exercised on or after August 1, 2007, and (ii) one additional warrant to purchase 5,073,530 shares of Common Stock at an exercise price of $0.28 per share (each a “Subsequent Warrant”, collectively, the “Subsequent Warrants” and collectively with the Initial Warrants, the “Warrants”). The Warrants expire on January 31, 2009. The exercise prices of the Warrants are subject to adjustment in the event of certain dilutive issuances, stock dividends, stock splits, share combinations or other similar recapitalization events. The Warrants may only be exercised by the payment of the applicable exercise price to the Company in cash, no cashless exercise is permitted. The terms of the Initial Warrants and the Subsequent Warrants are identical. Forms of each of the two Initial Warrants are attached hereto as Exhibits 4.1 and 4.2 respectively.

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The Certificate (as defined in Section 3.03 below) relating to the Series B Preferred Convertible Stock is attached hereto as Exhibit 3(i) and is incorporated herein by reference. A form of the two identical Subscription Agreements is attached hereto as Exhibit 10.1 and is incorporated herein by reference. Forms of each of the two Initial Warrants are attached hereto as Exhibits 4.1 and 4.2 respectively and each is incorporated herein by reference. The foregoing description of the Series B Preferred Stock does not purport to be complete and is qualified in its entirety by reference to Section 5.03 and to Exhibit 3(i).

Item 3.02 Unregistered Sales of Equity Securities

As described above, on the Initial Closing Date, the Company sold an aggregate of 117,648 shares of Series B Preferred Stock and issued warrants to purchase an aggregate of 17,647,060 shares of Common Stock for an aggregate purchase price of $2,000,000. The Company did not pay any underwriting discounts or commissions in connection with its issuance of shares of Series B Preferred Stock and the accompanying warrants. The shares of Series B Preferred Stock are convertible into shares of Common Stock at the election of the Purchasers. Each share of Series B Preferred Stock is initially convertible into 100 shares of Common Stock, with such conversion ratio subject to adjustment in the event of dilutive issuances, stock splits, combinations, certain dividends and distributions, and mergers, reorganizations or other similar recapitalization events. The warrants may be exercised in whole or in part for shares of Common Stock by payment by the Purchasers of the applicable exercise price in cash prior to the expiration of the warrants on January 31, 2009. Neither the shares of Series B Preferred Stock, the warrants, or the shares of Common Stock issuable upon conversion of the shares of Series B Preferred Stock or upon the exercise of the warrants were registered under the Securities Act of 1933, as amended (“Securities Act”). The offer and sale of the shares Series B Preferred Stock and warrants to the Purchasers was (and we anticipate that the issuance of shares of Common Stock upon conversion of the Series B Preferred Stock and upon exercise of the warrants, will be) exempt from the registration requirements of Section 5 of the Securities Act pursuant to Section 4(2) of the Securities Act and Rule 506 of Regulation D thereunder. The Company relied on the following facts in determining that the offer and sale of the shares of Series B Preferred Stock and accompanying warrants qualified for the exemption provided by Rule 506:

·   The offer and sale satisfied the terms and conditions of Rule 501 and 502 under the Securities Act; and

·   Pursuant to Rule 506 under the Securities Act, no more than 35 purchasers purchased the Series B Preferred Stock and warrants, as determined in accordance with Rule 501(e) under the Securities Act.

Item 3.03 Material Modifications to Rights of Security Holders

As discussed below in Item 5.03, the Company has designated 350,000 shares of its authorized preferred stock as Series B Convertible Preferred Stock pursuant to a Certificate of the Powers, Designations, Preferences and Rights of the Series B Convertible Preferred Stock, $0.10 par value per share (the “Certificate”). As described in Item 1.01 above, as of the Initial Closing Date, the Company sold an aggregate of 117,648 shares of Series B Preferred Stock to the Purchasers. As more specifically described in Item 1.01, the designation and issuance of the shares of Series B Preferred Stock materially affects the rights and powers of the holders of the Company's Common Stock in the following ways:

· Each share of Series B Preferred Stock is convertible into 100 shares of Common Stock (subject to adjustment in the event of dilutive issuances, stock splits, combinations, certain dividends and distributions, and mergers, reorganizations or other similar recapitalization events).

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· Each share of Series B Preferred Stock is entitled to vote on all matters submitted to a vote of the holders of the Common Stock on an as-if converted to common stock basis. 

· Each holder of Series B Preferred Stock is entitled to receive accruing dividends with respect to each shares of Series B Preferred Stock held by such holder at a rate per annum of 4% of the base amount (defined as the original issue price of $17.00 per share plus the amount of accrued but unpaid dividends as calculated on each anniversary of the date of issuance of such Series B Preferred Stock shares). The Company may not pay a dividend to holders of Common Stock unless the accruing dividends payable with respect to the shares of Series B Preferred Stock have been paid in full and a similar dividend is paid with respect to each share of Series B Preferred Stock on an as-converted-to-Common Stock basis.

· Upon the occurrence of a Liquidating Event, each holder of Series B Preferred Stock is entitled to a per-share liquidation preference equal to the greater of: (i) the amount that would have been payable on each share of Series B Preferred Stock had each share been converted into Common Stock immediately prior to such Liquidating Event, or (ii) $17.00 per share (adjusted to reflect any stock dividend, stock split, combination, recapitalization or reorganization) plus all accruing dividends and all other declared but unpaid dividends. A merger or consolidation of the Company into another corporation or entity or the sale of all or substantially all of the Company’s assets will be deemed to be a Liquidating Event unless otherwise decided by the majority vote of the then outstanding shares of the Series B Preferred Stock.

Additionally, at any time when at least 25,000 shares of Series B Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares) are outstanding, the Company may not do any of the following without the written consent or affirmative vote of the holders of at least a majority of the then outstanding shares of Series B Preferred Stock: (i) effect any merger or consolidation of the Company; (ii) amend or repeal any provision of, or add any provision to, the Company’s Certificate of Incorporation or By-laws if such action would alter or change the preferences, rights, privileges or powers of, or the restrictions provided for the benefit of, such Series B Preferred Stock; (iii) create, or authorize the creation of, or issue or obligate itself to issue shares of, or increase the authorized number of shares of, any additional class or series of capital stock unless the same ranks junior to the Series B Preferred Stock; (iv) acquire another entity by means of a purchase of all or a portion of the capital stock or assets of such entity for consideration in excess of $2,000,000; (v) liquidate, wind up, or dissolve the Company or adopt any plan for the same; (vi) effect any sale, lease, transfer, pledge or other disposition of assets of the Company or its subsidiaries, not in the ordinary course of business, unless the value of such assets; singly or in connection with any related series of transactions does not in the aggregate exceed $5,000,000; (vii) enter into any transaction with any officer, director or beneficial owner of five percent (5%) or more of the Common Stock; (viii) authorize or effect the issuance by the Company of any shares of capital stock or rights to acquire shares of capital stock pursuant to stock option, stock bonus or other employee stock plans for the benefit of the employees of the Corporation other than the issuance of options to purchase up to 20,000,000 shares of Common Stock pursuant to the Company’s existing stock option plan; (ix) incur any indebtedness for borrowed money in excess of $1,000,000 outstanding at any time; (x) acquire any material assets of another person for consideration in excess of $2,000,000 other than in the ordinary course of business, or (xi) permit any subsidiary to do any of the foregoing. The protective provisions described above in subsections (iv)-(xi) will cease to be of further force and effect if the Purchasers fail to invest the Additional Investment Amount on or prior to November 30, 2006 for any reason other than the failure of the Company to convert at least 80% of the aggregate outstanding principal amount evidenced by the Promissory Notes into shares of Common Stock prior to November 30, 2006.

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The Certificate is attached hereto as Exhibit 3(i) and is incorporated herein by reference. The foregoing description of the rights of the holders of Series B Preferred Stock does not purport to be complete and is qualified in its entirety by reference to such exhibit.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

The Company designated 350,000 shares of its authorized preferred stock as Series B Convertible Preferred Stock pursuant to the authority granted to the Board of Directors by the Company’s Certificate of Incorporation, as amended. In connection with such designation, the Company filed the Certificate with the Secretary of State of the State of Delaware on July 31, 2006. A copy of the Certificate is attached hereto as Exhibit 3(i). Upon filing, the Certificate became a part of the Company's Certificate of Incorporation, as amended. The Certificate sets forth the voting powers, designation, preferences, limitations, restrictions and relative rights of the Series B Preferred Stock. The rights of the holders of the Series B Preferred Stock are described under Items 1.01 and 3.03 above.

The foregoing description of the Certificate does not purport to be complete and is qualified in its entirety by reference to Exhibit 3(i) which is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

Exhibits

Exhibit Number	Description
3(i)	Certificate of the Powers, Designations, Preferences and Rights of the Series B Convertible Preferred Stock, Par Value $0.10 Per Share
4.1	Form of Warrant for Purchase of 3,750,000 Shares of Common Stock dated July 31, 2006
4.2	Form of Warrant for Purchase of 5,073,530 Shares of Common Stock dated July 31, 2006
10.1	Form of Subscription Agreement for Shares of Series B Convertible Preferred Stock dated as of July 31, 2006
99.1	Press Release issued by the Company on August 3, 2006

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: August 3, 2006	ELEMENT 21 GOLF COMPANY
	By:	/s/ Nataliya Hearn
		Name: Nataliya Hearn
		Title: President

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Exhibit Index

Exhibit Number	Description
3(i)	Certificate of the Powers, Designations, Preferences and Rights of the Series B Convertible Preferred Stock, Par Value $0.10 Per Share
4.1	Form of Warrant for Purchase of 3,750,000 Shares of Common Stock dated July 31, 2006
4.2	Form of Warrant for Purchase of 5,073,530 Shares of Common Stock dated July 31, 2006
10.1	Form of Subscription Agreement for Shares of Series B Convertible Preferred Stock dated as of July 31, 2006
99.1	Press Release issued by the Company on August 3, 2006

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EX-3.(I)

EXHIBIT 3(i)

ELEMENT 21 GOLF COMPANY

CERTIFICATE OF THE

POWERS, DESIGNATIONS, PREFERENCES AND RIGHTS OF THE

SERIES B CONVERTIBLE PREFERRED STOCK, $.10 PAR VALUE PER SHARE

Of the 5,000,000 shares of Preferred Stock authorized under the Certificate of Incorporation of Element 21 Golf Company (the “Corporation”), 350,000 shares are hereby designated as Series B Convertible Preferred Stock (the “Series B Preferred Stock”) with the voting powers, preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions as set forth below:

Section 1.Definitions.

For the purposes hereof, the following definitions shall apply:

“Board of Directors” shall mean the Board of Directors of this Corporation.

“Conversion Price” means the amount set forth in Section 4(a), as adjusted pursuant to Section 5.

“Junior Shares” means all shares of Common Stock and Series A Convertible Preferred Stock of this Corporation, or any other stock ranking junior to the Series B Preferred Stock in dividends or liquidation rights.

“Original Issue Date” means the date on which a share of Series B Preferred Stock was first issued.

“Original Issue Price” means $17.00.

Section 2.Dividend Rights.

From and after the date of the issuance of any shares of Series B Preferred Stock, dividends at the rate per annum of 4% of the base amount per share shall accrue on such shares of Series B Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares) (the “Accruing Dividends”). The base amount per share shall initially be the Original Issue Price and shall be increased on each anniversary of the purchase of such share by the amount of accrued dividends for the year ending on such anniversary. Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative; providedhowever, that except as set forth in this Section 2, the Corporation shall be under no obligation to pay such Accruing Dividends. The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock or Series A Preferred Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in the Certificate of Incorporation) the holders of the Series B Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series B Preferred Stock in an amount at least equal to the greater of (i) the amount of the aggregate Accruing Dividends then accrued on such share of Series B Preferred Stock and not previously paid and (ii) (A) in the case of a dividend on Common Stock, the sum of (1) the amount of the aggregate Accruing Dividends then accrued on such share of Series B Preferred Stock and not previously paid plus (2) the dividend payable on each share of Series B Preferred Stock if such share had been converted into Common Stock immediately prior to the record date for such dividend, (B) in the case of a dividend on Series A Preferred Stock or any other class or series that is convertible into Common Stock, that dividend per share of Series B Preferred Stock as would equal the product of (1) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (2) the number of shares of Common Stock issuable upon conversion of a share of Series B Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend or (C) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of Series B Preferred Stock determined by (1) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares) and (2) multiplying such fraction by an amount equal to the Original Issue Price (as defined below); provided that, if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Series B Preferred Stock pursuant to this Section 2 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Series B Preferred Stock dividend.  

Section 3.Liquidation Preference.

(a)Preference.  In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, voluntarily or involuntarily, the holders of each share of Series B Preferred Stock, prior to any distribution to the holders of Junior Shares, shall be entitled to receive pro rata a preferential amount equal to the greater of (i) such amount per share as would have been payable had each such share been converted to into Common Stock immediately prior to such liquidation, dissolution or winding up , or (ii) $17.00 per share (adjusted to reflect any stock split, stock dividend, combination, recapitalization or reorganization) of Series B Preferred Stock held by them plus all Accruing Dividends accrued thereon, plus all other declared but unpaid dividends (the “Series B Preferred Stock Liquidation Preference”).  If, upon such liquidation, dissolution or winding up, the assets of the Corporation are insufficient (after payment of the liquidation preference of any class of preferred stock ranking senior on liquidation to the Series B Preferred Stock) to provide for the payment of the Series B Preferred Stock Liquidation Preference for each share of Series B Preferred Stock outstanding, such assets as are available shall be paid out pro rata among the shares of Series B Preferred Stock and no payment shall be made to the holders of Junior Shares. After payment to the holders of the Series B Preferred Stock of the Series B Preferred Stock Liquidation Preference, the entire remaining assets and funds of the Corporation legally available for distribution, if any, shall be distributed among the holders of Junior Shares in the manner described in the Certificate of the Powers, Designations, Preferences And Rights Of The Series A Convertible Preferred Stock, $.001 Par Value Per Share as filed with the Secretary of State of the State of Delaware on February 22, 2006.

(b)Acquisition Treated as Liquidation.  Unless otherwise decided upon a vote of the holders of at least a majority of the then outstanding shares of Series B Preferred Stock, a merger or consolidation of the corporation with or into another corporation or entity (whether or not the corporation is the surviving entity if, after the merger or consolidation, more than 50% of the voting stock of the surviving corporation is owned by persons who were not holders of voting stock of this corporation prior to the merger or consolidation), or the sale of all or substantially all the assets of the Corporation, shall be deemed to be a liquidation, dissolution or winding up within the meaning of this Section 3.

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Section 4.Conversion of Series B Preferred Stock.

The holders of the Series B Preferred Stock shall have conversion rights in accordance with the following provisions:

(a)Right to Convert and Conversion Price.  Each share of Series B Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the Original Issue Date, at the office of the Corporation or any transfer agent for the Series B Preferred Stock, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Original Issue Price by the Conversion Price, determined and adjusted as hereafter provided, in effect at the time of conversion.  The initial “Conversion Price” shall initially be $0.17, and such price shall be subject to adjustment as provided in Section 5. The Original Issue Price is $17.00 such that as of the date of this Certificate of the Powers, Designations, Preferences and Rights of the Series B Convertible Preferred Stock, $.10 par value per share, each share of Series B Preferred Stock is convertible into 100 shares of Common Stock.

(b)Mechanics of Conversion.  No fractional shares of Common Stock shall be issued upon conversion of Series B Preferred Stock.  In lieu of any fractional share to which a holder of Series B Preferred Stock would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the then effective Conversion Price.  Before any holder of Series B Preferred Stock shall be entitled to convert the same into full shares of Common Stock, the holder shall surrender the certificate or certificates therefor, duly endorsed for transfer, at the office of the Corporation or of any transfer agent for the Series B Preferred Stock, and shall give written notice to the Corporation at such office that he elects to convert the same.  The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series B Preferred Stock a certificate or certificates for the number of shares of Common Stock to which he shall be entitled as aforesaid and a check payable to the holder in the amount of any cash amounts payable in order to avoid a conversion into fractional shares of Common Stock.  Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series B Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date.

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(c)Notices of Record Date, etc.  In the event that the Corporation shall propose at any time:

(i)to declare any dividend or distribution upon its Common Stock, whether in cash, property, stock or other securities, whether or not a regular cash dividend and whether or not out of earnings or earned surplus;

(ii)to offer for subscription pro rata to the holders of any class of its stock any additional shares of stock of any class or other rights;

(iii)to subdivide or combine its outstanding Common Stock;

(iv)to effect any reclassification or recapitalization of its Common Stock outstanding involving a change in the Common Stock; or

(v)to merge or consolidate with or into any other corporation, or sell, lease or convey all or substantially all its property or business, or to liquidate, dissolve or wind up;

then, in connection with each such event, the Corporation shall send to the holders of the Series B Preferred Stock:

(1)  at least 10 days' prior written notice of the date on which a record shall be taken for such dividend, distribution, subscription rights, subdivision or combination (and specifying the date on which the holders of Common Stock shall be entitled thereto) or for determining rights to vote in respect of the matters referred to in clauses (iv) and (v) above; and

(2)  in the case of the matters referred to in clauses (iv) and (v) above, at least 10 days' prior written notice of the date when the same shall take place (specifying the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon the occurrence of such event).

Each such written notice shall be given by certified mail, postage prepaid, addressed to the holders of Series B Preferred Stock at the address for each such holder as shown on the books of the Corporation.

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(d)Reservation of Common Stock.  The Corporation shall, at all times when the Series B Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued stock, for the purpose of effecting the conversion of the Series B Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series B Preferred Stock.  Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value of the shares of Common Stock issuable upon conversion of the Series B Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of such Common Stock at such adjusted Conversion Price.

(e)Cancellation of Series B Preferred Stock.  All shares of Series B Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares, including the rights, if any, to receive notices and to vote, shall forthwith cease and terminate except only the right of the holders thereof to receive shares of Common Stock in exchange therefor and payment of any declared but unpaid dividends thereon.  Any shares of Series B Preferred Stock so converted shall be retired and cancelled, and shall not be reissued, and the Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized Series B Preferred Stock accordingly.

Section 5.Adjustment of Conversion Price on Series B Preferred Stock.

(a)Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Series B Original Issue Date effect a subdivision of the outstanding Common Stock, the Conversion Price in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Series B Original Issue Date combine the outstanding shares of Common Stock, the Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective.

(b)Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time or from time to time after the Series B Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event the Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price then in effect by a fraction: the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution. Notwithstanding the foregoing, (X) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price shall be adjusted pursuant to this subsection as of the time of actual payment of such dividends or distributions; and (Y) that no such adjustment shall be made if the holders of Series B Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of Series B Preferred Stock had been converted into Common Stock on the date of such event.

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(c)Adjustment for Merger or Reorganization, etc. Subject to the provisions of Section 3(b), if there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Series B Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Sections 5(a) or 5(b)), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Series B Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of Series B Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Corporation) shall be made in the application of the provisions in this Section 5 with respect to the rights and interests thereafter of the holders of the Series B Preferred Stock, to the end that the provisions set forth in this Section 5 (including provisions with respect to changes in and other adjustments of the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Series B Preferred Stock.

(d)Adjustments to Conversion Price of Series B Preferred Stock for Diluting Issues. For purposes of this Section 5(d), the following definitions shall apply:

(i)“Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

(ii)“Series B Original Issue Date” shall mean the date on which the first share of Series B Preferred Stock was issued.

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(iii)“Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.

(iv)“Additional Shares of Common Stock” shall mean all shares of Common Stock issued (or, pursuant to this Section 5(d), deemed to be issued) by the Corporation after the Series B Original Issue Date, other than the following shares of Common Stock, and shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (collectively “Exempted Securities”):

a.the issuance of any shares of Common Stock as a stock dividend to holders of shares of the Company’s capital stock or upon any subdivision or combination of shares of the Company’s capital stock that is covered pursuant to Section 5(a), 5(b) or 5(c) above;

b.the issuance of any shares of Common Stock upon conversion of shares of Series B Preferred Stock or any other shares of convertible preferred stock outstanding as of the date hereof;

c.the issuance of up to 20,000,000 shares of Common Stock or options with respect thereto (subject in either case to appropriate adjustment for stock splits, stock dividends, recapitalizations and similar events occurring after the date of this Agreement), issued or issuable to employees, directors or officers of, or consultants to, the Company or any subsidiary of the Company pursuant to any plan, agreement or arrangement approved by the Board of Directors of the Company (it being understood that any shares subject to options that expire or terminate unexercised or any restricted stock repurchased by the Company shall not be counted towards the maximum number set forth in this clause c. unless and until regranted or reissued pursuant to any such plan, agreement or arrangement);

d.the issuance of shares of Common Stock upon the exercise of any warrant to purchase shares of Common Stock outstanding as of the Series B Original Issue Date or any warrant issued to the Investor or any other purchaser of Series B Preferred Stock in connection with the Company’s Series B Preferred Stock equity financing;

e.the issuance of securities solely in consideration for the acquisition (whether by merger or otherwise) by the Company or any subsidiary of the Company of all or substantially all of the stock or assets of any other entity;

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f.the issuance of shares of Common Stock by the Company in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act; or

g.the issuance of shares of Common Stock, or the grant of options or warrants therefor, in connection with (i) any present or future borrowing, line of credit, leasing or similar financing arrangement approved by the Board of Directors of the Company, or (ii) sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board of Directors of the Company.

(v)No adjustment in the Conversion Price of Series B Preferred Stockshall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the holders of at least a majority of the then outstanding shares of Series B Preferred Stock agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock.

(vi)If the Corporation at any time or from time to time after the Series B Original Issue Date shall issue any Options or Convertible Securities (excluding Options or Convertible Securities which are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date.

(vii)If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Conversion Price of Series B Preferred Stock pursuant to the terms of this Section 5(d), are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (2) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Conversion Price computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Conversion Price as would have obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this clause (b) shall have the effect of increasing the Conversion Price to an amount which exceeds the lower of (i) the Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (ii) the Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.

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(viii)If the terms of any Option or Convertible Security (excluding Options or Convertible Securities which are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Conversion Price pursuant to the terms of this Section 5(d) (either because the consideration per share of the Additional Shares of Common Stock subject thereto was equal to or greater than the Conversion Price then in effect, or because such Option or Convertible Security was issued before the Series B Original Issue Date), are revised after the Series B Original Issue Date as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (2) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto shall be deemed to have been issued effective upon such increase or decrease becoming effective.

(ix)Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) which resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Conversion Price pursuant to the terms of this Section 5(d), the Conversion Price shall be readjusted to such Conversion Price as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.

(x)If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Conversion Price provided for in this Section 5(d) shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (vii) and (viii) of this Section 5(d)). If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to the Conversion Price that would result under the terms of this Section 5(d) at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to the Conversion Price that such issuance or amendment took place at the time such calculation can first be made.

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(xi)In the event the Corporation shall at any time after the Series B Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to this Section 5(d)), without consideration or for a consideration per share less than the Conversion Price in effect immediately prior to such issue, then the Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest one-hundredth of a cent) determined in accordance with the following formula:

CP₂ = CP₁ * (A + B) ¸ (A + C).

For purposes of the foregoing formula, the following definitions shall apply:

“CP₂”shall mean the Conversion Price in effect immediately after such issue of Additional Shares of Common Stock

“CP₁” shall mean the Conversion Price in effect immediately prior to such issue of Additional Shares of Common Stock;

“A” shall mean the number of shares of Common Stock outstanding immediately prior to such issue of Additional Shares of Common Stock (including for this purpose as outstanding all shares of Common Stock issuable upon exercise or conversion of Options or Convertible Securities outstanding immediately prior to such issue);

“B” shall mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued at a price per share equal to CP₁ (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP₁); and

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“C” shall mean the number of such Additional Shares of Common Stock issued in such transaction.

For purposes of this Section 5(d)(xi), the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows:

a.Cash and Property: Such consideration shall insofar as it consists of cash, (X) be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest; and insofar as it consists of property other than cash, (Y) be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors of the Corporation; and in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (X) and (Y) above, as determined in good faith by the Board of Directors of the Corporation.

b.Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to this Section 5(d), relating to Options and Convertible Securities, shall be determined by dividing (X) the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by (Y) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.

(xii)Multiple Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Conversion Price pursuant to the terms of Section4(d)(xi) above then, upon the final such issuance, the Conversion Price shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period).

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(e)Certificate as to Adjustments.  Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 5, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than 10 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series B Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Series B Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of Series B Preferred Stock (but in any event not later than 10 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the Conversion Price then in effect, and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Series B Preferred Stock.

Section 6.Voting Rights of Series B Preferred Stock.

(a)General.  Except as expressly set forth in this Section and except as otherwise required by law, each share of Series B Preferred Stock issued and outstanding shall entitle the holder thereof to cast that number of votes as is equal to the number of votes that such holder would be entitled to cast had such holder converted its shares of Series B Preferred Stock into shares of Common Stock pursuant to Section 4 below on the record date for determining the stockholder of the Corporation eligible to vote on any such matters. The holders of the Series B Preferred Stock shall vote with the Common Stock as a single class unless otherwise set forth herein.

(b)Series B Preferred Stock Protective Provisions. At any time when at least 25,000 shares of Series B Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares) are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the holders of at least a majority of the then outstanding shares of Series B Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class:

(i)effect any merger or consolidation of the Corporation with or into another corporation or entity (whether or not the Corporation is the surviving entity if, after the merger or consolidation, more than 50% of the voting stock of the surviving corporation is owned by persons who were not holders of voting stock of this Corporation prior to the merger or consolidation), or sell all or substantially all the assets of the Corporation, or consent to any of the foregoing;

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(ii)amend or repeal any provision of, or add any provision to, the Corporation's Certificate of Incorporation or By-laws if such action would alter or change the preferences, rights, privileges or powers of, or the restrictions provided for the benefit of, such Series B Preferred Stock.

(iii)create, or authorize the creation of, or issue or obligate itself to issue shares of, any additional class or series of capital stock unless the same ranks junior to the Series B Preferred Stock with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends and redemption rights, or increase the authorized number of shares of Series B Preferred Stock or increase the authorized number of shares of any additional class or series of capital stock unless the same ranks junior to the Series B Preferred Stock with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends and redemption rights.

(iv)acquire another entity by means of a purchase of all or a portion of the capital stock or assets of such entity for consideration in excess of $2,000,000;

(v)liquidate, wind up, or dissolve the Corporation or adopt any plan for the same;

(vi)effect any sale, lease, transfer, pledge or other disposition of assets of the Corporation or its subsidiaries, not in the ordinary course of business, unless the value of such assets; singly or in connection with any related series of transactions does not in the aggregate exceed $5,000,000;

(vii)enter into any transaction with any officer, director or beneficial owner of five percent (5%) or more of the Common Stock or any affiliate of any of the foregoing, unless such transaction is in the ordinary course of business and approved by the Corporation’s Board of Directors;

(viii)authorize or effect the issuance by the Corporation of any shares of capital stock or rights to acquire capital stock pursuant to stock option, stock bonus or other employee stock plans for the benefit of the employees of the Corporation or its subsidiaries in existence as of such date, other than issuances referred to in Section 5(d)(iv)(c);

(ix)incur any Indebtedness for borrowed money in excess of $1,000,000 outstanding at any time;

(x)acquire any material assets of another person for consideration in excess of $2,000,000 other than acquisitions of inventory and raw material made in the ordinary course of business; or

(xi)permit any subsidiary to do any of the foregoing (except for payment of dividends to the Corporation or another wholly-owned subsidiary of the Corporation).

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Notwithstanding the foregoing, from and after December 1, 2006, the provisions of paragraphs (iv)-(xi) above will cease to be of further force and effect in the event that the investors that are party to those certain Subscription Agreements for shares of Series B Convertible Preferred Stock of the Company dated as of July 14, 2006 (collectively, the “Subscription Agreements”) fail to invest the Remaining Investment Amount (as such term is defined in the Subscription Agreements) in the Corporation as provided in the Subscription Agreements on or prior to November 30, 2006 for any reason other than the failure of the Company to satisfy the condition set forth in Section 4(i) of the Subscription Agreements.

IN WITNESS WHEREOF, the undersigned has executed this Certificate of Designations as of July31, 2006.

ELEMENT 21 GOLF COMPANY

By:/s/Nataliya Hearn

Name: Nataliya Hearn

Title: President

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EX-4.1

EXHIBIT 4.1

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

ELEMENT 21 GOLF COMPANY

COMMON STOCK PURCHASE WARRANT

Element 21 Golf Company, a Delaware corporation (the “Company”), hereby certifies that, for value received, _______________, or any transferee or assignee of this Warrant (the “Warrantholder”), is entitled, subject to the terms set forth below, to purchase from the Company at any time or from time to time before 5:00 p.m. Eastern time, on the Expiration Date (as hereinafter defined), that number of fully paid and nonassessable shares of common stock, $.01 par value per share, of the Company (the “Warrant Shares”) as is equal to the Warrant Number (as hereinafter defined), at a purchase price per share as shall be equal to the Purchase Price (as hereinafter defined) in effect at the time of the exercise of this Warrant. The Warrant Number and the Purchase Price are subject to adjustment as provided in this Warrant.

As used herein the following terms, unless the context otherwise requires, have the following respective meanings:

(a)The term “Company” shall include Element 21 Golf Company and any corporation that shall succeed to or assume the obligations of Element 21 Golf Company hereunder.

(b)The term “Expiration Date” mean January 31, 2009.

(c)The term “Purchase Price” shall mean $0.22 in the event the Warrant is exercised on or prior to July 31, 2007 and $0.28, in the event the Warrant is exercised on or after August 1, 2007. In each case, the Purchase Price is subject to adjustment pursuant to Section 6 below.

(d)The term “Warrant Number” shall mean3,750,000, subject to adjustment pursuant to Section 6 below.

(e)The term “Warrant Shares” includes the Company's common stock, $.01 par value per shareand any other securities or property of the Company or of any other person (corporate or otherwise) which the Warrantholder at any time shall be entitled to receive on the exercise hereof in lieu of or in addition to such Common Stock, or which at any time shall be issuable in exchange for or in replacement of such Common Stock.

1.Expiration. This Warrant may be exercised at any time or from time to timeuntil 5:00 p.m., Eastern time, on the Expiration Date.

2.Exercise of Warrant.

(a)This Warrant may be exercised in whole or in part by presentation and surrender hereof to the Company at its principal office, or at the office of its stock transfer agent, if any, with the Purchase Form annexed hereto (the “Purchase Form”) duly executed and accompanied by payment of the Purchase Price for the number of shares of Common Stock specified in such form. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the rights of the Warrantholder hereof to purchase the balance of the shares of Common Stock purchasable hereunder. Upon receipt by the Company of this Warrant at its office, or by the stock transfer agent of the Company at its office, in proper form for exercise, the Warrantholder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to the Warrantholder.

(b)For any partial exercise or redemption pursuant to Section 2(a) hereof, the Warrantholder shall designate in the Purchase Form the number of shares of Common Stock that it wishes to purchase. On any such partial exercise, the Company at its expense shall forthwith issue and deliver to the Warrantholder a new warrant of like tenor, in the name of the Warrantholder, which shall be exercisable for such number of shares of Common Stock represented by this Warrant which have not been purchased upon such exercise.

3.Effectiveness of Exercise. The exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the business day on which this Warrant is surrendered to the Company as provided in Section 2.

4.Delivery on Exercise. As soon as practicable after the exercise of this Warrant in full or in part pursuant to Section 2, as the case may be, and in any event within five (5) business days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes but excluding the payment of taxes to which the Warrantholder is subject as a result of the conduct of its business activity) will cause to be issued in the name of and delivered to the Warrantholder, or as such Warrantholder may direct, a certificate or certificates for the number of fully paid and nonassessable full Warrant Shares to which such holder shall be entitled on such exercise, together with cash, in lieu of any fraction of a share, equal to such fraction of the then fair market value of one full share as determined in good faith by the Board of Directors of the Company.

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5.Adjustment for Reorganization, Consolidation, Merger, etc.

(a)General. In case at any time or from time to time, the Company shall (a) effect a reorganization, (b) consolidate with or merge into any other person, or (c) transfer all or substantially all of its properties or assets to any other person under any plan or arrangement contemplating the dissolution of the Company (each of the foregoing, a “Business Combination”),and such Business Combination shall be effected in such a way that holders of shares of the Company’s Common Stock (or any shares of stock or other securities at the time issuable upon exercise of this Warrant ) shall be entitled to receive stock, securities or assets, with respect to or in exchange for such shares, then, in each such case, the holder of this Warrant, on the exercise hereof as provided in Section 2 at any time after the consummation of such Business Combination or the effective date of such dissolution, as the case may be, shall receive, in lieu of the Warrant Shares issuable on such exercise prior to such consummation or such effective date, the stock and other securities and property (including cash) to which such holder would have been entitled upon such consummation or in connection with such dissolution, as the case may be, if such holder had so exercised this Warrant, immediately prior thereto, all subject to further adjustment thereafter as provided in Section 6.

(b)Dissolution. In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, prior to such dissolution, shall at its expense deliver or cause to be delivered to the Warrantholder the stock and other securities and property (including cash, where applicable) receivable by the Warrantholder after the effective date of such dissolution pursuant to this Section 5provided, however, that the Warrantholder may request that such securities or property be delivered to a trustee for the holder or holders of the Warrants and the Company shall bear reasonable expenses for such delivery.

(c)Continuation of Terms. Upon any reorganization, consolidation, merger or transfer (and any dissolution following any transfer) referred to in this Section 5, this Warrant, to the extent not yet exercised in full, shall continue in full force and effect and the terms hereof shall be applicable to the shares of stock and other securities and property receivable on the exercise of this Warrant after the consummation of such reorganization, consolidation or merger or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any such stock or other securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of the Company, whether or not such person shall have expressly assumed the terms of this Warrant.

6.Adjustment of Purchase Price and Number of Shares. The number of the Warrant Shares issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) and the purchase price therefor, are subject to adjustment upon the occurrence of the following events:

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(a)Adjustment for Stock Splits, Stock Dividends, Recapitalizations, etc. The exercise price of this Warrant and the number of Shares issuable upon exerciseof this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall be appropriately adjusted to reflect any stock dividend, stock split, combination of shares, reclassification, recapitalization or other similar event affecting the number of outstanding shares of Common Stock (orother stock or securities if the Warrantholder is then entitled to receive such stock or securities upon exercise of this Warrant). For example, if there should be a 2-for-1 stock split of the Common Stock, the exercise price would be divided by two and such number of shares would be doubled.

(b)Adjustment for Other Dividends and Distributions. In case the Company shall make or issue, or shall fix a record date for the determination of eligible holders entitled to receive, a dividend or other distribution after the date hereof with respect to the Warrant Shares (or any shares of stock or other securities at the time issuable upon exercise of the Warrant) payable in (i) securities of the Company (other than shares of Stock) or (ii) assets (excluding cash dividends paid or payable solely out of current or retained earnings), then, in each case, the holder of this Warrant on exercise hereof at any time after the consummation or record date of such event (provided the event is later consummated), shall receive, in addition to the Warrant Shares (or such other stock or securities) issuable on such exercise prior to such date, the securities or such other assets of the Company to which such holder would have been entitled upon such date if such holder had exercised this Warrant immediately prior thereto (all subject to further adjustment as provided in this Warrant).

(c)Anti-Dilution Protection. (i)General. If the Company shall at any time or from time to time, issue, sell or otherwise dispose of any additional shares of Common Stock (including shares owned or held by or for the account of the Company), however designated (other than shares of Common Stock excepted from the provisions of this Section 6(c) by subsection (iv) or otherwise covered by Sections 6(a) and (b)) without consideration or for a net consideration per share less than the Purchase Price in effect immediately prior to such issuance, then, and in each such case: (a) the Purchase Price shall be lowered to the price (but in no event below $.01 per share) determined by dividing (i) an amount equal to the sum of (a) the number of shares of Common Stock outstanding immediately prior to such issue or sale multiplied by the then existing Purchase Price, and (b) the consideration, if any, received by the Corporation upon such issue or sale, by (ii) the sum of the total number of shares of Common Stock outstanding immediately prior to such issue or sale plus the number of shares of Common Stock so issued and sold; and (b) the holder of this Warrant shall thereafter, on the exercise hereof, be entitled to receive the Warrant Number determined by multiplying the Warrant Number which would be issuable on such exercise immediately prior to such issuance by the fraction of which (i) the numerator is the Purchase Price in effect immediately prior to such issuance and (ii) the denominator is the Purchase Price in effect on the date of such exercise.

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(ii)Definitions, etc. For purposes of this Section 6: The issuance of any warrants, options or other subscription or purchase rights with respect to shares of Common Stock and the issuance of any securities convertible into or exchangeable for such shares of Common Stock (or the issuance of any warrants, options or any rights with respect to such convertible or exchangeable securities) shall be deemed an issuance at such time of such Common Stock if the Net Consideration Per Share which may be received by the Company for such Common Stock (as hereinafter determined) shall be less than the Purchase Price at the time of such issuance and, except as hereinafter provided, an adjustment in the Purchase Price and the number of shares of Common Stock issuable upon exercise of this Warrant shall be made upon each such issuance in the manner provided in subsection (i). Any obligation, agreement or undertaking to issue warrants, options, or other subscription or purchase rights at any time in the future shall be deemed to be an issuance at the time such obligation, agreement or undertaking is made or arises. Except as otherwise provided herein, no adjustment of the Purchase Price and the number of shares of Common Stock issuable upon exercise of this Warrant shall be made under subsection (i) upon the issuance of any shares of Common Stock which are issued pursuant to the exercise of any warrants, options or other subscription or purchase rights or pursuant to the exercise of any conversion or exchange rights in any convertible securities if any adjustment shall previously have been made upon the issuance of any such warrants, options or other rights or upon the issuance of any convertible securities (or upon the issuance of any warrants, options or any rights therefor) as above provided. Any adjustment of the Purchase Price and the number of shares of Common Stock issuable upon exercise of this Warrant with respect to this subsection (ii) which relates to warrants, options or other subscription or purchase rights with respect to shares of Common Stock shall be disregarded if, as, and when the respective warrant, option or other subscription or purchase rights expire or are cancelled without being exercised, so that the Purchase Price effective immediately upon such cancellation or expiration shall be equal to the Purchase Price in effect at the time of the issuance of the expired or cancelled warrants, options or other subscriptions or purchase rights, with such additional adjustments as would have been made to that Purchase Price had the expired or cancelled warrants, options or other subscriptions or purchase rights not been issued. For purposes of this subsection (ii), the “Net Consideration Per Share” which may be received by the Company shall be determined as follows:

(A)The “Net Consideration Per Share” shall mean the amount equal to the total amount of consideration, if any, received by the Company for the issuance of such warrants, options, subscriptions, or other purchase rights or convertible or exchangeable securities, plus the minimum amount of consideration, if any, payable to the Company upon exercise or conversion thereof, divided by the aggregate number of shares of Common Stock that would be issued if all such warrants, options, subscriptions, or other purchase rights or convertible or exchangeable securities were exercised, exchanged or converted.

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(B)If the “Net Consideration Per Share” which may be received by the Company shall change (other than under or by reason of provisions designed to protect against dilution), the Purchase Price in effect at the time of such event shall forthwith be readjusted to the Purchase Price which would have been in effect at such time had such warrants, options, subscriptions, or other purchase rights or convertible or exchangeable securities provided for such changed “Net Consideration Per Share” at the time initially granted, issued or sold, but only if as a result of such adjustment the Purchase Price then in effect hereunder is thereby reduced. If the “Net Consideration Per Share” shall be reduced at any time under or by reason of provisions designed to protect against dilution, then in case of the delivery of Common Stock upon the exercise or conversion of any such warrants, options, subscriptions, or other purchase rights or convertible or exchangeable securities, the Purchase Price then in effect hereunder shall forthwith be adjusted to such amount as would have obtained had such warrant, option, subscription, or other purchase right or convertible or exchangeable security never been issued as to such Common Stock and had adjustments been made upon the issuance of the Common Stock delivered as aforesaid, but only if as a result of such adjustment the Purchase Price then in effect hereunder is thereby reduced.

For purposes of this Section 6(c), if a part or all of the consideration received by the Company in connection with the issuance of shares of the Common Stock or the issuance of any of the securities described in this Section 6(c), consists of property other than cash, such consideration shall be deemed to have the same value as shall be determined in good faith by the board of directors of the Company, without deduction of any expenses incurred or any underwriting commissions or concessions paid or allowed by the Company in connection therewith.

This subsection (ii) shall not apply under any of the circumstances described in Sections 6(a) or 6(b).

(iii)Dilution in Case of Other Securities. In case any securities other than shares of stock of the Company shall be issued or sold, or shall become subject to issue upon the conversion or exchange of any shares of stock of the Company (or any other person referred to in Section 5) or subscription, purchase or other acquisition pursuant to any rights or options granted by the Company (or such other person), for a consideration per share such as to dilute the purchase rights evidenced by this Warrant, the computations, adjustments and readjustments provided for in this Section (c) with respect to the Purchase Price and the number of shares of Common stock issuable upon exercise of this Warrant shall be made as nearly as possible in the manner so provided and applied to determine the amount of other securities from time to time receivable on the exercise of the Warrants, so as to protect the holders of the Warrants against the effect of such dilution.

(iv)Certain Issues of Common Stock. Anything herein to the contrary notwithstanding, the Company shall not be required to make any adjustment of the Purchase Price in the case of:

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a.the issuance of any shares of Common Stock as a stock dividend to holders of shares of the Company’s capital stock or upon any subdivision or combination of shares of the Company’s capital stock;

b.the issuance of any shares of Common Stock upon conversion of shares of Series B Convertible Preferred Stock or any other shares of convertible preferred stock outstanding as of the date hereof;

c.the issuance of up to 20,000,000 shares of Common Stock or options with respect thereto (subject in either case to appropriate adjustment for stock splits, stock dividends, recapitalizations and similar events occurring after the date of this Agreement), issued or issuable to employees, directors or officers of, or consultants to, the Company or any subsidiary of the Company pursuant to any plan, agreement or arrangement approved by the Board of Directors of the Company (it being understood that any shares subject to options that expire or terminate unexercised or any restricted stock repurchased by the Company shall not be counted towards the maximum number set forth in this clause c. unless and until regranted or reissued pursuant to any such plan, agreement or arrangement);

d.the issuance of shares of Common Stock upon the exercise of any warrant to purchase shares of Common Stock outstanding as of the date hereof or any warrant issued to a purchaser of shares of the Company’s Series B Preferred Stock in connection with the Company’s Series B Preferred Stock equity financing;

e.the issuance of securities solely in consideration for the acquisition (whether by merger or otherwise) by the Company or any subsidiary of the Company of all or substantially all of the stock or assets of any other entity;

f.the issuance of shares of Common Stock by the Company in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act; or

g.the issuance of shares of Common Stock, or the grant of options or warrants therefor, in connection with (i) any present or future borrowing, line of credit, leasing or similar financing arrangement approved by the Board of Directors of the Company, or (ii) sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board of Directors of the Company.

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(d)Certificate as to Adjustments. In case of any adjustment or readjustment in the price or kind of securities issuable on the exercise of this Warrant, the Company will promptly give written notice thereof to the holder of this Warrant in the form of a certificate, certified and confirmed by the President of the Company, setting forth such adjustment or readjustment and showing in reasonable detail the facts upon which such adjustment or readjustment is based.

7.No Impairment. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment. Without limiting the generality of the foregoing the Company (a) will not increase the par value of any shares of stock receivable on the exercise of this Warrant above the amount payable therefore on such exercise, (b) will at all times reserve and keep available a number of its authorized shares of Common Stock, free from all preemptive rights therein, which will be sufficient to permit the exercise of this Warrant by the Warrantholder, and (c) shall take all such action as may be necessary or appropriate in order that all Warrant Shares as may be issued pursuant to the exercise of this Warrant will, upon issuance in accordance with the terms hereof, be duly and validly issued, fully paid and nonassessable and free from all liens and charges with respect to the issue thereof.

8.Notices of Record Date, etc. In the event of

(a)any taking by the Company of a record of the holders ofCommon Stock (or shares of stock or other securities at the time issuable upon exercise of this Warrant) for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, or

(b)any reclassification or recapitalization of the Common Stock (or shares of stock or other securities at the time issuable upon exercise of this Warrant), or any transfer of all or substantially all the assets of the Company to or consolidation or merger of the Company with or into any other person, or

(c)any voluntary or involuntary dissolution, liquidation or winding-up of the Company,

then and in each such event the Company will mail to the holder hereof a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, and (ii) the date on which any such reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or any shares of stock or other securities at the time issuable upon the exercise of this Warrant) shall be entitled to exchange their shares for securities or other property deliverable on such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up. Such notice shall be mailed at least 10 days prior to the date therein specified.

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9.Replacement of Warrant. On receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of such Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.

10.Investment Intent. Unless a current registration statement under the Securities Act of 1933, as amended, shall be in effect with respect to the issuance of the securities to be issued upon exercise of this Warrant, the holder thereof, by accepting this Warrant, covenants and agrees that, at the time of exercise hereof, and at the time of any proposed transfer of securities acquired upon exercise hereof, such holder will deliver to the Company a written statement that the securities acquired by the holder upon exercise hereof are for the own account of the holder for investment and are not acquired with a view to, or for sale in connection with, any distribution thereof (or any portion thereof) and with no present intention (at any such time) of offering and distributing such securities (or any person thereof).

11.Transfer. Subject to compliance with applicable federal and state securities laws, this Warrant may be transferred by the Warrantholder with respect to any or all of the shares purchasable hereunder. Upon surrender of this Warrant to the Company, together with the assignment hereof properly endorsed, for transfer of this Warrant as an entirety by the Warrantholder, the Company shall issue a new warrant of the same denomination to the assignee. Upon surrender of this Warrant to the Company, together with the assignment hereof properly endorsed, by the Warrantholder for transfer with respect to a portion of the shares of Common Stock purchasable hereunder, the Company shall issue a new warrant to the assignee, in such denomination as shall be requested by the Warrantholder, and shall issue to such Warrantholder a new warrant covering the number of shares in respect of which this Warrant shall not have been transferred.

12.No Rights or Liability as a Stockholder. This Warrant does not entitle the Warrantholder to any voting rights or other rights as a stockholder of the Company. No provisions hereof, in the absence of affirmative action by the Warrantholder to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Warrantholder shall give rise to any liability of such Warrantholder as a stockholder of the Company.

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13.Damages. The Company recognizes and agrees that the Warrantholder will not have an adequate remedy if the Company fails to comply with the terms of this Warrant and that damages will not be readily ascertainable, and the Company expressly agrees that, in the event of such failure, it shall not oppose an application by the holder of this Warrant or any other person entitled to the benefits of this Warrant requiring specific performance of any and all provisions hereof or enjoining the Company from continuing to commit any such breach on the terms hereof.

14.Notices. All notices referred to in this Warrant shall be in writing and shall be delivered personally or by certified or registered mail, return receipt requested, postage prepaid and will be deemed to have been given when so delivered or mailed (i) to the Company, at its principal executive offices and (ii) to the Warrantholder, at such Warrantholder's address as it appears in the records of the Company (unless otherwise indicated in accordance with the provisions of this Section 15 by such holder).

15.Payment of Taxes. All Warrant Shares issued upon the exercise of this Warrant in accordance with its terms shall be validly issued, fully paid and nonassessable, and the Company shall pay taxes and other governmental charges that may be imposed in respect to the issue or delivery thereof, excluding taxes to which the Warrantholder and/or any other person receiving the Warrant Shares is subject as a result of the conduct of its business activity.

16.Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the Warrantholder and the Company. This Warrant shall be governed by and construed and enforced in accordance with the law of the State of Delaware. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof.

Dated as of July 31, 2006
	ELEMENT 21 GOLF COMPANY
Date:	By:
		Name:
		Title

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PURCHASE FORM

Dated: , 20

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

_________________

INSTRUCTIONS FOR REGISTRATION OF STOCK

Name  _________________________________________

(Please typewrite or print in block letters)

Signature _________________________________________

Social Security or Employer Identification No. _________________________________________

ASSIGNMENT FORM

FOR VALUE RECEIVED,

hereby sells, assigns and transfer unto

Name _________________________________________

(Please typewrite or print in block letters)

Address _________________________________________

Social Security or Employer Identification No. _________________________________________

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

Dated: , 20

Signature

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EX-4.2

EXHIBIT 4.2

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

ELEMENT 21 GOLF COMPANY

COMMON STOCK PURCHASE WARRANT

Element 21 Golf Company, a Delaware corporation (the “Company”), hereby certifies that, for value received, ___________, or any transferee or assignee of this Warrant (the “Warrantholder”), is entitled, subject to the terms set forth below, to purchase from the Company at any time or from time to time before 5:00 p.m. Eastern time, on the Expiration Date (as hereinafter defined), that number of fully paid and nonassessable shares of common stock, $.01 par value per share, of the Company (the “Warrant Shares”) as is equal to the Warrant Number (as hereinafter defined), at a purchase price per share as shall be equal to the Purchase Price (as hereinafter defined) in effect at the time of the exercise of this Warrant. The Warrant Number and the Purchase Price are subject to adjustment as provided in this Warrant.

As used herein the following terms, unless the context otherwise requires, have the following respective meanings:

(a)The term “Company” shall include Element 21 Golf Company and any corporation that shall succeed to or assume the obligations of Element 21 Golf Company hereunder.

(b)The term “Expiration Date” mean January 31, 2009.

(c)The term “Purchase Price” shall mean $0.28, subject to adjustment pursuant to Section 6 below.

(d)The term “Warrant Number” shall mean 5,073,530, subject to adjustment pursuant to Section 6 below.

(e)The term “Warrant Shares” includes the Company's common stock, $.01 par value per shareand any other securities or property of the Company or of any other person (corporate or otherwise) which the Warrantholder at any time shall be entitled to receive on the exercise hereof in lieu of or in addition to such Common Stock, or which at any time shall be issuable in exchange for or in replacement of such Common Stock.

1.Expiration. This Warrant may be exercised at any time or from time to timeuntil 5:00 p.m., Eastern time, on the Expiration Date.

2.Exercise of Warrant.

(a)This Warrant may be exercised in whole or in part by presentation and surrender hereof to the Company at its principal office, or at the office of its stock transfer agent, if any, with the Purchase Form annexed hereto (the “Purchase Form”) duly executed and accompanied by payment of the Purchase Price for the number of shares of Common Stock specified in such form. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the rights of the Warrantholder hereof to purchase the balance of the shares of Common Stock purchasable hereunder. Upon receipt by the Company of this Warrant at its office, or by the stock transfer agent of the Company at its office, in proper form for exercise, the Warrantholder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to the Warrantholder.

(b)For any partial exercise or redemption pursuant to Section 2(a) hereof, the Warrantholder shall designate in the Purchase Form the number of shares of Common Stock that it wishes to purchase. On any such partial exercise, the Company at its expense shall forthwith issue and deliver to the Warrantholder a new warrant of like tenor, in the name of the Warrantholder, which shall be exercisable for such number of shares of Common Stock represented by this Warrant which have not been purchased upon such exercise.

3.Effectiveness of Exercise. The exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the business day on which this Warrant is surrendered to the Company as provided in Section 2.

4.Delivery on Exercise. As soon as practicable after the exercise of this Warrant in full or in part pursuant to Section 2, as the case may be, and in any event within five (5) business days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes but excluding the payment of taxes to which the Warrantholder is subject as a result of the conduct of its business activity) will cause to be issued in the name of and delivered to the Warrantholder, or as such Warrantholder may direct, a certificate or certificates for the number of fully paid and nonassessable full Warrant Shares to which such holder shall be entitled on such exercise, together with cash, in lieu of any fraction of a share, equal to such fraction of the then fair market value of one full share as determined in good faith by the Board of Directors of the Company.

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5.Adjustment for Reorganization, Consolidation, Merger, etc.

(a)General. In case at any time or from time to time, the Company shall (a) effect a reorganization, (b) consolidate with or merge into any other person, or (c) transfer all or substantially all of its properties or assets to any other person under any plan or arrangement contemplating the dissolution of the Company (each of the foregoing, a “Business Combination”),and such Business Combination shall be effected in such a way that holders of shares of the Company’s Common Stock (or any shares of stock or other securities at the time issuable upon exercise of this Warrant ) shall be entitled to receive stock, securities or assets, with respect to or in exchange for such shares, then, in each such case, the holder of this Warrant, on the exercise hereof as provided in Section 2 at any time after the consummation of such Business Combination or the effective date of such dissolution, as the case may be, shall receive, in lieu of the Warrant Shares issuable on such exercise prior to such consummation or such effective date, the stock and other securities and property (including cash) to which such holder would have been entitled upon such consummation or in connection with such dissolution, as the case may be, if such holder had so exercised this Warrant, immediately prior thereto, all subject to further adjustment thereafter as provided in Section 6.

(b)Dissolution. In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, prior to such dissolution, shall at its expense deliver or cause to be delivered to the Warrantholder the stock and other securities and property (including cash, where applicable) receivable by the Warrantholder after the effective date of such dissolution pursuant to this Section 5provided, however, that the Warrantholder may request that such securities or property be delivered to a trustee for the holder or holders of the Warrants and the Company shall bear reasonable expenses for such delivery.

(c)Continuation of Terms. Upon any reorganization, consolidation, merger or transfer (and any dissolution following any transfer) referred to in this Section 5, this Warrant, to the extent not yet exercised in full, shall continue in full force and effect and the terms hereof shall be applicable to the shares of stock and other securities and property receivable on the exercise of this Warrant after the consummation of such reorganization, consolidation or merger or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any such stock or other securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of the Company, whether or not such person shall have expressly assumed the terms of this Warrant.

6.Adjustment of Purchase Price and Number of Shares. The number of the Warrant Shares issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) and the purchase price therefor, are subject to adjustment upon the occurrence of the following events:

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(a)Adjustment for Stock Splits, Stock Dividends, Recapitalizations, etc. The exercise price of this Warrant and the number of Shares issuable upon exerciseof this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall be appropriately adjusted to reflect any stock dividend, stock split, combination of shares, reclassification, recapitalization or other similar event affecting the number of outstanding shares of Common Stock (orother stock or securities if the Warrantholder is then entitled to receive such stock or securities upon exercise of this Warrant). For example, if there should be a 2-for-1 stock split of the Common Stock, the exercise price would be divided by two and such number of shares would be doubled.

(b)Adjustment for Other Dividends and Distributions. In case the Company shall make or issue, or shall fix a record date for the determination of eligible holders entitled to receive, a dividend or other distribution after the date hereof with respect to the Warrant Shares (or any shares of stock or other securities at the time issuable upon exercise of the Warrant) payable in (i) securities of the Company (other than shares of Stock) or (ii) assets (excluding cash dividends paid or payable solely out of current or retained earnings), then, in each case, the holder of this Warrant on exercise hereof at any time after the consummation or record date of such event (provided the event is later consummated), shall receive, in addition to the Warrant Shares (or such other stock or securities) issuable on such exercise prior to such date, the securities or such other assets of the Company to which such holder would have been entitled upon such date if such holder had exercised this Warrant immediately prior thereto (all subject to further adjustment as provided in this Warrant).

(c)Anti-Dilution Protection. (i)General. If the Company shall at any time or from time to time, issue, sell or otherwise dispose of any additional shares of Common Stock (including shares owned or held by or for the account of the Company), however designated (other than shares of Common Stock excepted from the provisions of this Section 6(c) by subsection (iv) or otherwise covered by Sections 6(a) and (b)) without consideration or for a net consideration per share less than the Purchase Price in effect immediately prior to such issuance, then, and in each such case: (a) the Purchase Price shall be lowered to the price (but in no event below $.01 per share) determined by dividing (i) an amount equal to the sum of (a) the number of shares of Common Stock outstanding immediately prior to such issue or sale multiplied by the then existing Purchase Price, and (b) the consideration, if any, received by the Corporation upon such issue or sale, by (ii) the sum of the total number of shares of Common Stock outstanding immediately prior to such issue or sale plus the number of shares of Common Stock so issued and sold; and (b) the holder of this Warrant shall thereafter, on the exercise hereof, be entitled to receive the Warrant Number determined by multiplying the Warrant Number which would be issuable on such exercise immediately prior to such issuance by the fraction of which (i) the numerator is the Purchase Price in effect immediately prior to such issuance and (ii) the denominator is the Purchase Price in effect on the date of such exercise.

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(ii)Definitions, etc. For purposes of this Section 6: The issuance of any warrants, options or other subscription or purchase rights with respect to shares of Common Stock and the issuance of any securities convertible into or exchangeable for such shares of Common Stock (or the issuance of any warrants, options or any rights with respect to such convertible or exchangeable securities) shall be deemed an issuance at such time of such Common Stock if the Net Consideration Per Share which may be received by the Company for such Common Stock (as hereinafter determined) shall be less than the Purchase Price at the time of such issuance and, except as hereinafter provided, an adjustment in the Purchase Price and the number of shares of Common Stock issuable upon exercise of this Warrant shall be made upon each such issuance in the manner provided in subsection (i). Any obligation, agreement or undertaking to issue warrants, options, or other subscription or purchase rights at any time in the future shall be deemed to be an issuance at the time such obligation, agreement or undertaking is made or arises. Except as otherwise provided herein, no adjustment of the Purchase Price and the number of shares of Common Stock issuable upon exercise of this Warrant shall be made under subsection (i) upon the issuance of any shares of Common Stock which are issued pursuant to the exercise of any warrants, options or other subscription or purchase rights or pursuant to the exercise of any conversion or exchange rights in any convertible securities if any adjustment shall previously have been made upon the issuance of any such warrants, options or other rights or upon the issuance of any convertible securities (or upon the issuance of any warrants, options or any rights therefor) as above provided. Any adjustment of the Purchase Price and the number of shares of Common Stock issuable upon exercise of this Warrant with respect to this subsection (ii) which relates to warrants, options or other subscription or purchase rights with respect to shares of Common Stock shall be disregarded if, as, and when the respective warrant, option or other subscription or purchase rights expire or are cancelled without being exercised, so that the Purchase Price effective immediately upon such cancellation or expiration shall be equal to the Purchase Price in effect at the time of the issuance of the expired or cancelled warrants, options or other subscriptions or purchase rights, with such additional adjustments as would have been made to that Purchase Price had the expired or cancelled warrants, options or other subscriptions or purchase rights not been issued. For purposes of this subsection (ii), the “Net Consideration Per Share” which may be received by the Company shall be determined as follows:

(A)The “Net Consideration Per Share” shall mean the amount equal to the total amount of consideration, if any, received by the Company for the issuance of such warrants, options, subscriptions, or other purchase rights or convertible or exchangeable securities, plus the minimum amount of consideration, if any, payable to the Company upon exercise or conversion thereof, divided by the aggregate number of shares of Common Stock that would be issued if all such warrants, options, subscriptions, or other purchase rights or convertible or exchangeable securities were exercised, exchanged or converted.

(B)If the “Net Consideration Per Share” which may be received by the Company shall change (other than under or by reason of provisions designed to protect against dilution), the Purchase Price in effect at the time of such event shall forthwith be readjusted to the Purchase Price which would have been in effect at such time had such warrants, options, subscriptions, or other purchase rights or convertible or exchangeable securities provided for such changed “Net Consideration Per Share” at the time initially granted, issued or sold, but only if as a result of such adjustment the Purchase Price then in effect hereunder is thereby reduced. If the “Net Consideration Per Share” shall be reduced at any time under or by reason of provisions designed to protect against dilution, then in case of the delivery of Common Stock upon the exercise or conversion of any such warrants, options, subscriptions, or other purchase rights or convertible or exchangeable securities, the Purchase Price then in effect hereunder shall forthwith be adjusted to such amount as would have obtained had such warrant, option, subscription, or other purchase right or convertible or exchangeable security never been issued as to such Common Stock and had adjustments been made upon the issuance of the Common Stock delivered as aforesaid, but only if as a result of such adjustment the Purchase Price then in effect hereunder is thereby reduced.

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For purposes of this Section 6(c), if a part or all of the consideration received by the Company in connection with the issuance of shares of the Common Stock or the issuance of any of the securities described in this Section 6(c), consists of property other than cash, such consideration shall be deemed to have the same value as shall be determined in good faith by the board of directors of the Company, without deduction of any expenses incurred or any underwriting commissions or concessions paid or allowed by the Company in connection therewith.

This subsection (ii) shall not apply under any of the circumstances described in Sections 6(a) or 6(b).

(iii)Dilution in Case of Other Securities. In case any securities other than shares of stock of the Company shall be issued or sold, or shall become subject to issue upon the conversion or exchange of any shares of stock of the Company (or any other person referred to in Section 5) or subscription, purchase or other acquisition pursuant to any rights or options granted by the Company (or such other person), for a consideration per share such as to dilute the purchase rights evidenced by this Warrant, the computations, adjustments and readjustments provided for in this Section (c) with respect to the Purchase Price and the number of shares of Common stock issuable upon exercise of this Warrant shall be made as nearly as possible in the manner so provided and applied to determine the amount of other securities from time to time receivable on the exercise of the Warrants, so as to protect the holders of the Warrants against the effect of such dilution.

(iv)Certain Issues of Common Stock. Anything herein to the contrary notwithstanding, the Company shall not be required to make any adjustment of the Purchase Price in the case of:

a.the issuance of any shares of Common Stock as a stock dividend to holders of shares of the Company’s capital stock or upon any subdivision or combination of shares of the Company’s capital stock;

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b.the issuance of any shares of Common Stock upon conversion of shares of Series B Convertible Preferred Stock or any other shares of convertible preferred stock outstanding as of the date hereof;

c.the issuance of up to 20,000,000 shares of Common Stock or options with respect thereto (subject in either case to appropriate adjustment for stock splits, stock dividends, recapitalizations and similar events occurring after the date of this Agreement), issued or issuable to employees, directors or officers of, or consultants to, the Company or any subsidiary of the Company pursuant to any plan, agreement or arrangement approved by the Board of Directors of the Company (it being understood that any shares subject to options that expire or terminate unexercised or any restricted stock repurchased by the Company shall not be counted towards the maximum number set forth in this clause c. unless and until regranted or reissued pursuant to any such plan, agreement or arrangement);

d.the issuance of shares of Common Stock upon the exercise of any warrant to purchase shares of Common Stock outstanding as of the date hereof or any warrant issued to a purchaser of shares of the Company’s Series B Preferred Stock in connection with the Company’s Series B Preferred Stock equity financing;

e.the issuance of securities solely in consideration for the acquisition (whether by merger or otherwise) by the Company or any subsidiary of the Company of all or substantially all of the stock or assets of any other entity;

f.the issuance of shares of Common Stock by the Company in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act; or

g.the issuance of shares of Common Stock, or the grant of options or warrants therefor, in connection with (i) any present or future borrowing, line of credit, leasing or similar financing arrangement approved by the Board of Directors of the Company, or (ii) sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board of Directors of the Company.

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(d)Certificate as to Adjustments. In case of any adjustment or readjustment in the price or kind of securities issuable on the exercise of this Warrant, the Company will promptly give written notice thereof to the holder of this Warrant in the form of a certificate, certified and confirmed by the President of the Company, setting forth such adjustment or readjustment and showing in reasonable detail the facts upon which such adjustment or readjustment is based.

7.No Impairment. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment. Without limiting the generality of the foregoing the Company (a) will not increase the par value of any shares of stock receivable on the exercise of this Warrant above the amount payable therefore on such exercise, (b) will at all times reserve and keep available a number of its authorized shares of Common Stock, free from all preemptive rights therein, which will be sufficient to permit the exercise of this Warrant by the Warrantholder, and (c) shall take all such action as may be necessary or appropriate in order that all Warrant Shares as may be issued pursuant to the exercise of this Warrant will, upon issuance in accordance with the terms hereof, be duly and validly issued, fully paid and nonassessable and free from all liens and charges with respect to the issue thereof.

8.Notices of Record Date, etc. In the event of

(a)any taking by the Company of a record of the holders ofCommon Stock (or shares of stock or other securities at the time issuable upon exercise of this Warrant) for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, or

(b)any reclassification or recapitalization of the Common Stock (or shares of stock or other securities at the time issuable upon exercise of this Warrant), or any transfer of all or substantially all the assets of the Company to or consolidation or merger of the Company with or into any other person, or

(c)any voluntary or involuntary dissolution, liquidation or winding-up of the Company,

then and in each such event the Company will mail to the holder hereof a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, and (ii) the date on which any such reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or any shares of stock or other securities at the time issuable upon the exercise of this Warrant) shall be entitled to exchange their shares for securities or other property deliverable on such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up. Such notice shall be mailed at least 10 days prior to the date therein specified.

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9.Replacement of Warrant. On receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of such Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.

10.Investment Intent. Unless a current registration statement under the Securities Act of 1933, as amended, shall be in effect with respect to the issuance of the securities to be issued upon exercise of this Warrant, the holder thereof, by accepting this Warrant, covenants and agrees that, at the time of exercise hereof, and at the time of any proposed transfer of securities acquired upon exercise hereof, such holder will deliver to the Company a written statement that the securities acquired by the holder upon exercise hereof are for the own account of the holder for investment and are not acquired with a view to, or for sale in connection with, any distribution thereof (or any portion thereof) and with no present intention (at any such time) of offering and distributing such securities (or any person thereof).

11.Transfer. Subject to compliance with applicable federal and state securities laws, this Warrant may be transferred by the Warrantholder with respect to any or all of the shares purchasable hereunder. Upon surrender of this Warrant to the Company, together with the assignment hereof properly endorsed, for transfer of this Warrant as an entirety by the Warrantholder, the Company shall issue a new warrant of the same denomination to the assignee. Upon surrender of this Warrant to the Company, together with the assignment hereof properly endorsed, by the Warrantholder for transfer with respect to a portion of the shares of Common Stock purchasable hereunder, the Company shall issue a new warrant to the assignee, in such denomination as shall be requested by the Warrantholder, and shall issue to such Warrantholder a new warrant covering the number of shares in respect of which this Warrant shall not have been transferred.

12.No Rights or Liability as a Stockholder. This Warrant does not entitle the Warrantholder to any voting rights or other rights as a stockholder of the Company. No provisions hereof, in the absence of affirmative action by the Warrantholder to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Warrantholder shall give rise to any liability of such Warrantholder as a stockholder of the Company.

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13.Damages. The Company recognizes and agrees that the Warrantholder will not have an adequate remedy if the Company fails to comply with the terms of this Warrant and that damages will not be readily ascertainable, and the Company expressly agrees that, in the event of such failure, it shall not oppose an application by the holder of this Warrant or any other person entitled to the benefits of this Warrant requiring specific performance of any and all provisions hereof or enjoining the Company from continuing to commit any such breach on the terms hereof.

14.Notices. All notices referred to in this Warrant shall be in writing and shall be delivered personally or by certified or registered mail, return receipt requested, postage prepaid and will be deemed to have been given when so delivered or mailed (i) to the Company, at its principal executive offices and (ii) to the Warrantholder, at such Warrantholder's address as it appears in the records of the Company (unless otherwise indicated in accordance with the provisions of this Section 15 by such holder).

15.Payment of Taxes. All Warrant Shares issued upon the exercise of this Warrant in accordance with its terms shall be validly issued, fully paid and nonassessable, and the Company shall pay taxes and other governmental charges that may be imposed in respect to the issue or delivery thereof, excluding taxes to which the Warrantholder and/or any other person receiving the Warrant Shares is subject as a result of the conduct of its business activity.

16.Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the Warrantholder and the Company. This Warrant shall be governed by and construed and enforced in accordance with the law of the State of Delaware. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof.

Dated as of July 31, 2006
	ELEMENT 21 GOLF COMPANY
	By:
		Name:
		Title

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PURCHASE FORM

Dated: , 20

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

_________________

INSTRUCTIONS FOR REGISTRATION OF STOCK

Name __________________________________________________

(Please typewrite or print in block letters)

Signature  __________________________________________________

Social Security or Employer Identification No.  __________________________________________________

ASSIGNMENT FORM

FOR VALUE RECEIVED,

hereby sells, assigns and transfer unto

Name  __________________________________________________

(Please typewrite or print in block letters)

Address  __________________________________________________

Social Security or Employer Identification No.  __________________________________________________

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

Dated: , 20

Signature  __________________________________________________

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EX-10.1

EXHIBIT 10.1

Name of Investor:

SUBSCRIPTION AGREEMENT

July __, 2006

Element 21 Golf Company

200 Queens Quay East, Unit 1

Toronto, Ontario, Canada, M5J2L4

1.Investment. The undersigned (“Investor”) hereby agrees to invest an aggregate of $2,000,000 (the “Investment Amount”) in Element 21 Golf Company, a Delaware corporation (the “Company”) in exchange for (i) 117,647 shares of Series B Convertible Preferred Stock, $.10 par value per share (the “Preferred Stock”), and (ii) warrants to purchase 17,647,059 shares of the Company’s Common Stock, $.01 par value per share (the “Common Stock”), a form of which is attached hereto as Exhibit A (the “Warrants”), on the terms and conditions described herein. The Preferred Stock shall have the rights preferences and privileges set forth in the Series B Certificate of Designations attached hereto as Exhibit B (the “Certificate of Designations”). The Preferred Stock, the Warrants, the shares of Common Stock issuable upon conversion of the Preferred Stock and the shares of Common Stock issuable upon exercise of the Warrants (the “Warrant Shares”) are collectively referred to herein as the “Securities”.

2.Payment and Issuance of Securities.

(a)Prior to July 31, 2006, the Investor will deliver to the Company (i) one manually executed copy of the Investor’s Accredited Investor Questionnaire which is attached hereto as Annex A, (ii) one manually executed copy of the Investor’s stock certificate questionnaire which is attached hereto as Annex B, and (iii) one manually executed copy of the Investor’s Registration Statement Questionnaire which is attached hereto as Annex C. On July 31, 2006, the Investor will tender to the Company $1,000,000, an amount equal to 50% percent of the Investment Amount, and in exchange therefor, the Company will deliver to the Investor a certificate for 58,824 shares of Preferred Stock and two Warrants to purchase an aggregate of 8,823,529 shares of Common Stock.

(b)The Investor irrevocably agrees to tender $1,000,000, the remaining portion of the Investment Amount (the “Remaining Investment Amount”), on or prior to November 30, 2006, subject only to the fulfillment or waiver by the Investor of the condition referred to in Section 4(i) hereof relating to the conversion of outstanding promissory notes. In exchange for the Remaining Investment Amount, the Company shall deliver to the Investor a certificate for 58,824 shares of Preferred Stock and three Warrants to purchase an aggregate of 8,823,530 shares of Common Stock.

The Investor fully understands that the Company has a limited operating history and that his, her or its investment in the Company involves a high degree of risk of loss of his, her or its entire investment. The Investor fully understands the nature of the risks of an investment in the Company and is qualified by his, her or its knowledge and experience to evaluate investments of this type. The Investor has carefully considered the potential risks relating to the Company and an investment in the Company and has, in particular, reviewed each of the risks set forth in Annex D attached hereto and the Securities and Exchange Commission (“SEC”) filings described in Annex E attached hereto (collectively, the “SEC Filings”) which may be obtained at www.sec.gov. Both the Investor and his, her or its advisors have had the opportunity to ask questions of and receive answers from representatives of the Company or persons acting on its behalf concerning the Company and the terms and conditions of a proposed investment in the Company and have also have had the opportunity to obtain additional information necessary to verify the accuracy of information furnished about the Company. Accordingly, the Investor has independently evaluated the risks of making an investment in the Company.

3.Investor Representations and Warranties. The Investor acknowledges, represents and warrants to, and agrees with, the Company as follows:

(a)The Investor is aware that his, her or its investment involves a high degree of risk, certain of which risks are disclosed in the Risk Factors attached hereto as Annex D. The Investor is aware that the Company commenced its present business in October 2002, has incurred significant losses during each fiscal year thereafter and needs additional financing.

(b)The Investor acknowledges and is aware that there is no assurance as to the future performance of the Company.

(c)The Investor acknowledges that there may be certain adverse tax consequences resulting from an investment in the Securities and the Company has advised the Investor to seek the advice of experts in such areas prior to making this investment.

(d)The Investor is making the investment in the Securities for his, her or its own account for investment purposes only and not with a view to or in connection with the distribution of the Securities nor with any present intention of selling or otherwise disposing of all or any part of the Securities. The Investor agrees that he, she or it must bear the economic risk of the investment for an indefinite period of time because, among other reasons, none of the Securities have been registered under the Securities Act or under the securities laws of any state and, therefore, cannot be resold, pledged, assigned or otherwise disposed of unless they are subsequently registered under the Securities Act and under applicable securities laws of certain states or an exemption from such registration is available. The Investor hereby authorizes the Company to place a legend denoting the foregoing restrictions on any of the Securities.

(e)The Investor is not a member of the National Association of Securities Dealers, Inc. (“NASD”); The Investor is not and has not, for a period of 12 months prior to the date of this Subscription Agreement, been affiliated or associated with any company, firm, or other entity which is a member of the NASD; and the Investor does not own any stock or other interest in any member of the NASD (other than interests acquired in open market purchases).

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(f)The Investor recognizes that the Securities, as an investment, involve a high degree of risk including, but not limited to, the risk of economic losses from operations of the Company and the total loss of the Investor’s investment. The Investor believes that an investment in the Securities is suitable based upon his, her or its investment objectives and financial needs, and the Investor has adequate means for providing for his, her or its current financial needs and contingencies and has no need for liquidity with respect to his, her or its investment in the Securities.

(g)The Investor has been given access to full and complete information regarding the Company and the Securities and has utilized such access to his, her or its satisfaction for the purpose of obtaining information, and the Investor has either met with or been given reasonable opportunity to meet with officers of the Company for the purpose of asking questions and receiving answers from, such officers concerning the terms and conditions of the issuance of the Securities and the business and operations of the Company and to obtain any additional information, to the extent reasonably available.

(h)The Investor has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of making the loan, and thereby investing in the Securities and has obtained, in his, her or its judgment, sufficient information from the Company to evaluate the merits and risks of an investment in the Securities. The Investor has not utilized any person as a purchaser representative as defined in Regulation D promulgated by the SEC pursuant to the Securities Act in connection with evaluating such merits and risks.

(i)The Investor has relied solely upon his, her or its own investigation in making a decision to invest in the Securities.

(j)The Investor has received no representation or warranty from the Company or any of its respective officers, directors, employees, consultants or agents in respect of his, her or its investment in the Securities and the Investor has received no information (written or otherwise) from them relating to the Company or its business other than as contained in the Series B Preferred Stock Investment Booklet and the SEC Filings. The Investor is not participating in the offer as a result of or subsequent to: (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio or (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.

(k)The Investor has had full opportunity to ask questions and to receive satisfactory answers concerning the offering and other matters pertaining to his, her or its investment in the Securities and all such questions have been answered to the Investor’s full satisfaction.

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(l)The Investor has been provided an opportunity to obtain any additional information concerning the Securities and the Company and all other information to the extent the Company possesses such information or can acquire it without unreasonable effort or expense.

(m)The Investor is an “accredited investor” as defined in Section 2(15) of the Securities Act and in Rule 501 promulgated thereunder.

(n)The Investor understands that (i) the Securities have not been registered under the Securities Act, or the securities laws of any state in reliance on specific exemptions from registration, (ii) no securities administrator of any state or the federal government has recommended or endorsed the offering of Securities or made any finding or determination relating to the fairness of an investment in the Company and (iii) the Company is relying on the Investor’s representations and agreements for the purpose of determining whether this transaction meets the requirements of the exemptions afforded by the Securities Act and certain state securities laws.

(o)The Investor understands that since neither the offer nor sale of the Securities has been registered under the Securities Act or the securities laws of any state, the Securities may not be sold, assigned, pledged or otherwise disposed of unless they are so registered or an exemption from such registration is available.

(p)The Investor has been urged to seek independent advice from professional advisors relating to the suitability of an investment in the Securities in view of the Investor’s overall financial needs and with respect to the legal and tax implications of such investment.

(q)If the undersigned is a corporation, company, trust, employee benefit plan, individual retirement account, Keogh Plan, or other tax-exempt entity, it is authorized and qualified to become an investor in the Company and the person signing this Subscription Agreement on behalf of such entity has been duly authorized by such entity to do so.

(r)The information contained in the Accredited Investor Questionnaire, as well as any information which the Investor has furnished to the Company with respect to the Investor’s financial position and business experience, is correct and complete as of the date of this Subscription Agreement and, if there should be any material change in such information prior to the consummation of the transactions contemplated hereby, the Investor will furnish such revised or corrected information to the Company.

(s)The Investor hereby acknowledges and is aware that except for any rescission rights that may be provided under applicable laws, the Investor is not entitled to cancel, terminate or revoke this subscription. If the Investor is an individual, and any agreements made in connection herewith shall survive the Investor’s death or disability.

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4.Company Representations, Warranties and Covenants. The Company hereby represents and warrants to, and covenants with, the Investor as follows:

(a)The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and the Company is qualified to do business as a foreign corporation in each jurisdiction in which qualification is required, except where failure to so qualify would not reasonably be expected to have a Material Adverse Effect

(as defined herein). The Company has no subsidiaries. For purposes of this Agreement, the term “Material Adverse Effect” shall mean a material adverse effect upon the business, financial condition, properties or results of operations of the Company.

(b)The authorized capital stock of the Company consists of 300,000,000 shares of Common Stock, $.01 par value per share, 99,630,554 of which are issued and outstanding as of the date hereof, and 5,000,000 shares of Preferred Stock, 2,200,000 shares of which have been designated as Series A Convertible Preferred Stock, $.10 par value per share, 2,113,556of which are issued and outstanding as of the date hereof, and 350,000 shares of which have been designated as Series B Convertible Preferred Stock, $.10 par value per share, noneof which are issued and outstanding as of the date hereof.

(c)The Securities have been duly authorized and, when issued, delivered and paid for in the manner set forth in this Agreement, the Warrants and the Certificate of Designations will be duly authorized, validly issued, fully paid and nonassessable and free and clear of all pledges, liens, restrictions and encumbrances (other than restrictions on transfer under state and/or federal securities laws). The Company has reserved from its duly authorized shares of capital stock the maximum number of shares of Common Stock issuable upon the exercise of the Warrants and conversion of the Preferred Stock. No further approval or authority of the stockholders or the Board of Directors of the Company will be required for the issuance and sale of the Securities as contemplated herein.

(d)The Company has full legal right, corporate power and authority to enter into this Agreement and perform the transactions contemplated hereby. This Agreement has been duly authorized, executed and delivered by the Company. The execution, delivery and performance of this Agreement by the Company and the consummation of the transactions herein contemplated will not violate any provision of the certificate of incorporation or bylaws of the Company or conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any lien upon any of the properties or assets of the Company, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company debt or otherwise) or other understanding to which the Company is a party or by which any property or asset of the Company is bound or affected, or conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject. No consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body is required for the execution and delivery of this Agreement or the consummation of the transactions contemplated by this Agreement, except for compliance with the blue sky laws and federal securities laws applicable to the offering of the Securities. Upon the execution and delivery of this Agreement, and assuming the valid execution thereof by the Investor, this Agreement will constitute a valid and binding obligation of the Company, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' and contracting parties' rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and except as the indemnification agreements herein may be limited by federal or state securities laws or the public policy underlying such laws.

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(e)The Company is subject to the reporting requirements of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”).

(f)The Company shall use the proceeds from the sale of the Securities for general corporate purposes but in no event for the repayment of the Promissory Notes referred to in Section 4(i) hereof.

(g)Except as may be required by applicable law or regulation, the Company shall not use the Investor’s name or the name of any of its affiliates in any advertisement, announcement, press release or other similar public communication unless it has received the prior written consent of the Investor for the specific use contemplated or as otherwise required by applicable law or regulation.

(h)The financial statements of the Company and the related notes contained in the SEC Filings present fairly, in accordance with generally accepted accounting principles, the financial position of the Company as of the dates indicated, and the results of their operations, cash flows and the changes in stockholders' equity for the periods therein specified, subject, in the case of unaudited financial statements for interim periods, to normal year-end audit adjustments. Such financial statements (including the related notes) have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods therein specified, except that unaudited financial statements may not contain all footnotes required by generally accepted accounting principles.

(i)The Company will not use any of the proceeds of the Investor’s investment in the Securities to pay off any outstanding indebtedness of the Company evidenced by those certain convertible promissory notes of the Company issued between February 2006 and the date hereof (the “Promissory Notes”). The Company will use its commercially reasonable efforts to cause the holders off each of the Promissory Notes to elect to convert such Promissory Notes into shares of Common Stock. The Investor shall be under to no obligation to advance the Remaining Investment Amount if the Company shall fail to convert at least 80% of aggregate outstanding principal amount of the Promissory Notes into Common Stock prior to November 30, 2006.

(j)Preemptive Rights.

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(i)The Company shall not issue, sell or exchange, agree or obligate itself to issue, sell or exchange, or reserve or set aside for issuance, sale or exchange, (i) any shares of Common Stock, (ii) any other equity security of the Company, (iii) any debt security of the Company (other than debt with no equity feature) including without limitation, any debt security which by its terms is convertible into or exchangeable, directly or indirectly, for any equity security of the Company, (iv) any security of the Company that is a combination of debt and equity, or (v) any option, warrant or other right to subscribe for, purchase or otherwise acquire any such equity security or any such debt security of the Company (the securities described in (i)-(v) being referred to herein as the “Offered Securities”), unless in each case the Company shall have first offered to sell a portion of such Offered Securities to the Investor and each other purchaser of shares of Series B Preferred Stock (each an “Offeree” and collectively the “Offerees”) as follows: The Company shall deliver to each Offeree a written notice (the “Offer”) specifying the Company’s intention to issue, sell or exchange, or reserve or set aside for issuance, sale or exchange, Offered Securities, setting forth the number of Offered Securities it intends to issue, sell or exchange, or reserve or set aside for issuance, sale or exchange, and each material term and condition pursuant to which it intends to dispose of such Offered Securities. Each of the Offerees shall have the right to purchase that portion of the Offered Securities as shall be equal to the total number of Offered Securities proposed to be sold by the Company multiplied by a fraction, the numerator of which shall equal the number of shares of Common Stock (after giving effect to the conversion of all shares of Series B Preferred Stock held by such Offeree) then held by the Offeree and the denominator of which shall equal the total number of shares of capital stock of the Company on a fully-diluted basis (assuming full conversion and exercise of all convertible or exercisable securities of the Company then issued and outstanding), at a price and on such other terms as shall have been specified by the Company in the Offer (all Offered Securities which an Offeree is eligible to purchase according to this Section 4(j(i) being referred to herein collectively as the “Eligible Securities”). The Offer, will by its terms, remain open and irrevocable for a period of 10 days (the “Offer Period”) from receipt of the Offer.

(ii)Notice of the Offeree’s intention to accept, in whole or in part, any Offer made pursuant to Section 4(j)(i) shall be evidenced by a writing signed by the Offeree and delivered to the Company prior to the end of the Offer Period, setting forth the number of Eligible Securities such Offeree elects to purchase (each a “Notice of Acceptance”).

(iii)Assuming the Company complies with the provisions of Section 4(j) with respect to each Offeree, the Company shall have90days from the date of its delivery of the Offer to close the sale of all or any part of such Offered Securities (including the Eligible Securities, which shall be sold at a closing held simultaneously with the closing of the sale of any other Offered Securities) upon terms and conditions which are not materially more favorable, in the aggregate, to the person purchasing such Offered Securities or materially less favorable to the Company than those set forth in the Offer.

(iv)If the Company ultimately proposes to sell less than all the securities originally to be offered for sale as set forth in the Offer, then the Offeree may, at its sole option and in its sole discretion, reduce the number of Offered Securities specified in its Notice of Acceptance to an amount which shall be not less than the amount of the Offered Securities which the Offeree elected to purchase pursuant to its Notice of Acceptance multiplied by a fraction, (i) the numerator of which shall be the amount of Offered Securities which the Company actually proposes to sell, and (ii) the denominator of which shall be the amount of all Offered Securities originally proposed to be sold by the Company as set forth in the Offer.

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(v)Upon the closing of the sale of the Offered Securities, the Company shall sell to each Offeree the number of Offered Securities specified in its Notice of Acceptance, as reduced pursuant to Section 4(j)(iv) if applicable, upon the terms and conditions specified in the Offer. The purchase by an Offeree of any Eligible Securities is subject in all cases to the preparation, execution and delivery by the Company and the Offeree of a purchase agreement relating to such Offered Securities reasonably satisfactory in form and substance to the Offeree and its counsel.

(vi)The rights of the Investor as an Offeree under this Section 4(j) shall terminate on the date that is 30 months following the date hereof.

(vii)The rights of the Investor under this Section 4(j) shall not apply to:

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a. the issuance of any shares of Common Stock as a stock dividend to holders of shares of the Company’s capital stock or upon any subdivision or combination of shares of the Company’s capital stock;

b. the issuance of any shares of Common Stock upon conversion of shares of Series B Convertible Preferred Stock or any other shares of convertible preferred stock outstanding as of the date hereof;

c. the issuance of up to 20,000,000 shares of Common Stock or options with respect thereto (subject in either case to appropriate adjustment for stock splits, stock dividends, recapitalizations and similar events occurring after the date of this Agreement), issued or issuable to employees, directors or officers of, or consultants to, the Company or any subsidiary of the Company pursuant to any plan, agreement or arrangement approved by the Board of Directors of the Company (it being understood that any shares subject to options that expire or terminate unexercised or any restricted stock repurchased by the Company shall not be counted towards the maximum number set forth in this clause c. unless and until regranted or reissued pursuant to any such plan, agreement or arrangement);

d. the issuance of shares of Common Stock upon the exercise of any warrant to purchase shares of Common Stock outstanding as of the date hereof or any warrant issued to the Investor or any other purchaser of Series B Preferred Stock in connection with the Company’s Series B Preferred Stock equity financing;

e. the issuance of securities solely in consideration for the acquisition (whether by merger or otherwise) by the Company or any subsidiary of the Company of all or substantially all of the stock or assets of any other entity;

f. the issuance of shares of Common Stock by the Company in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act; or

g. the issuance of shares of Common Stock, or the grant of options or warrants therefor, in connection with (i) any present or future borrowing, line of credit, leasing or similar financing arrangement approved by the Board of Directors of the Company, or (ii) sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board of Directors of the Company.

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5.Registration; Compliance with the Securities Act.

(a)If, at any time prior to the one year anniversary of the date hereof, the Company proposes to register any shares of its Common Stock under the Securities Act of 1933 in connection with the public offering of such securities for its own account or for the accounts of other shareholders of the Company, solely for cash on a form that would also permit the registration of the shares of Common Stock issuable upon conversion of the Preferred Stock and upon exercise of the Warrants (collectively, the “Registrable Securities”), the Company shall, each such time, promptly give the Investor written notice of such determination. Upon the written request of the Investor given within twenty (20) days after mailing of any such notice by the Company, the Company shall use its best efforts to cause to be registered under the Securities Act of 1933 all of the Registrable Securities that the Investor has requested be registered. The foregoing notwithstanding, the Company may, in its discretion, withdraw any registration statement referred to in this Section 5(a) prior to the effectiveness thereof. In connection with any offering to which this Section 5(a) applies and involving an underwriting of shares being issued by the Company, the Company shall not be required under this Section 5(a) to include any of the Investor’s Registrable Securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it. If the total amount of securities that all holders of Registrable Securities request to be included in an underwritten offering exceeds the amount of securities that the underwriters reasonably believe compatible with the success of the offering, the Company shall only be required to include in the offering so many of the securities of the Investor as the underwriters reasonably believe will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among each of the holders of Registrable Securities, or in such other proportions as shall mutually be agreed to by such selling holders); provided, however, that no such reduction shall be made with respect to any securities offered by the Company for its own account.

(b)The Company shall (i) no later than 305 days following the date hereof (the “Filing Date”), prepare and file with the SEC a Registration Statement on Form SB-2 (the “Registration Statement”) relating to all of the Warrant Shares then held by, or issuable to, the Investor and the other purchasers purchasing shares of Series B Preferred Stock from the Company; and (ii) use its commercially reasonable efforts, subject to receipt of necessary information from the Investor, to cause the SEC to declare the Registration Statement effective within 60 days after the date the Registration Statement is filed with the SEC (such date, the “Required Effective Date”). However, so long as the Company filed the Registration Statement by the Filing Date, if the Registration Statement receives SEC review, then the Required Effective Date will be the one hundred and twentieth (120) calendar day after the date the Registration Statement is filed with the SEC.

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

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

(e)The Company shall bear all expenses in connection with the procedures in paragraphs (a) through (d) of this Section 5 and the registration of the Registrable Securities pursuant to the Registration Statement or any other registration statement filed by the Company pursuant to Section 5(a) (the Registration Statement and any other such registration statements filed pursuant to Section 5(a) are each referred to herein as a “Registration” and collectively as the “Registrations”), other than fees and expenses, if any, of counsel or other advisers to the Investor (or any other investors in the shares of Preferred Stock, if any), or underwriting discounts, brokerage fees and commissions incurred by the Investor (or any other investors in the shares of Preferred Stock, if any). A questionnaire related to the Registration Statement to be completed by the Investor is attached hereto as Annex C. The Investor agrees that it will promptly notify the Company of any changes in the information set forth in the Registration Statement regarding the Investor or its plan of distribution.

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

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

(ii)The Investor will severally indemnify and hold harmless the Company, each of its directors, each of its executive officers, including such officers who signed the Registration, and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, claims, damages, liabilities or expenses to which the Company, each of its directors, each of its officers who signed the Registration or controlling person may become subject, under the Securities Act, the Exchange Act, or any other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Investor) insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based upon (i) any failure to comply with the covenants and agreements contained herein with respect to the sale of the Securities, or (ii) the inaccuracy of any representation or warranty made by the Investor herein, or (iii) any untrue or alleged untrue statement of any material fact contained in the Registration, the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements in the Registration or any amendment or supplement thereto not misleading or in the Prospectus or any amendment or supplement thereto not misleading in the light of the circumstances under which they were made, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration, the Prospectus, or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Investor expressly for use therein, and will reimburse the Company, each of its directors, each of its officers who signed the Registration or controlling person for any legal and other expense reasonably incurred by the Company, each of its directors, each of its officers who signed the Registration or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the Investor’s aggregate liability under this Section 5(f) with respect to a particular Registration shall not exceed the amount of proceeds received by the Investor on the sale of the Registrable Securities pursuant to such Registration.

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

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(iv)If the indemnification provided for in this Section 5(f) is required by its terms but is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party under this Section 5(f) in respect to any losses, claims, damages, liabilities or expenses referred to herein, then each applicable indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of any losses, claims, damages, liabilities or expenses referred to herein (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Investor from the private placement of the Securities hereunder or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but the relative fault of the Company and the Investor in connection with the statements or omissions or inaccuracies in the representations and warranties in this Subscription Agreement and/or the Registration Statement which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The respective relative benefits received by the Company on the one hand and the Investor on the other shall be deemed to be in the same proportion as the amount paid by the Investor to the Company pursuant to this Subscription Agreement for the Securities purchased by the Investor that were sold pursuant to the Registration Statement bears to the difference (the “Difference”) between the amount the Investor paid for the Securities that were sold pursuant to the Registration Statement and the amount received by the Investor from such sale. The relative fault of the Company, on the one hand, and the Investor on the other shall be determined by reference to, among other things, whether the untrue or alleged statement of a material fact or the omission or alleged omission to state a material fact or the inaccurate or the alleged inaccurate representation and/or warranty relates to information supplied by the Company or by the Investor and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in this Section 5(f), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in paragraph (iii) of this Section 5(f) with respect to the notice of the threat or commencement of any threat or action shall apply if a claim for contribution is to be made under this paragraph (iv); provided, however, that no additional notice shall be required with respect to any threat or action for which notice has been given under paragraph (iii) for purposes of indemnification. The Company and the Investor agree that it would not be just and equitable if contribution pursuant to this Section 5(f) were determined solely by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in this paragraph. Notwithstanding the provisions of this Section 5(f), the Investor shall be required to contribute any amount in excess of the amount by which the Difference exceeds the amount of any damages that the Investor has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

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

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

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

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

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

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

Investor:	At the address designated on the signature page of this Subscription Agreement.
the Company:	Element 21 Golf Company
	200 Queens Quay East, Unit 1
	Toronto, Ontario, Canada, M5J2L4
	Tel:(416) 363-2121

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

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

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

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

14.Acceptance ofPurchase. The Company may accept this Subscription Agreement by executing a copy hereof as provided and notifying me within a reasonable time thereafter.

RESIDENTS OF ALL STATES: THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THIS SUBSCRIPTION AGREEMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

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RETURN THIS SIGNATURE PAGE VIA FAX TO:

EDWIN C. PEASE, ESQ.

BROWN RUDNICK BERLACK ISRAELS LLP

FAX NUMBER 617-289-0499

Dated: June __, 2006

Manner in Which Title to the Securities is to be Held. (check one)

___ Individual Ownership

___ Community Property

___ Joint Tenant with Right of Survivorship (both parties must sign)

___ Partnership

___ Tenants in common

___ Corporation

___ Trust

___ Other (Please indicate)

AGGREGATE INVESTMENT AMOUNT: $ 1,000,000 US

INDIVIDUAL INVESTORS:	ENTITY INVESTORS:
	By:
Signature (Individual)	Name:
	Title:
Signature (Joint)
(all record holders must sign)
Name(s) Typed or Printed
Address to Which Correspondence	Address to Which Correspondence
Should be Directed	Should be Directed
Tax Identification or	Tax Identification or
Social Security Number	Social Security Number

The foregoing subscription is accepted and the Company hereby agrees to be bound by its terms.

	ELEMENT 21 GOLF COMPANY
Dated: July __, 2006	By:
		Name: Nataliya Hearn
		Title:President & CEO

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ANNEX A

ACCREDITED INVESTOR QUESTIONNAIRE

ACCREDITED INVESTOR QUESTIONNAIRE

Purpose of this Questionnaire

The Securities being offered by Element 21 Golf Company, a Delaware corporation (the “Company”) pursuant to the Subscription Agreement to which this Accredited Investor Questionnaire is annexed, are being offered without registration under the Securities Act of 1933, as amended (the “1933 Act”), or the securities laws of any state, in reliance on the exemptions contained in Sections 4(2) and 4(6) of the 1933 Act and on similar exemptions under applicable state laws. Under Sections 4(2) and 4(6) and/or certain state laws, the Company may be required to determine that an individual or an individual together with a “purchaser representative” or each individual equity owner of an investing entity meets certain suitability requirements before selling the Securities to such individual or entity. THE COMPANY MAY, AT ITS ELECTION, NOT SELL ANY SECURITIES TO A SUBSCRIBER WHO HAS NOT THOROUGHLY FILLED OUT A QUESTIONNAIRE. IN THE CASE OF AN INVESTOR THAT IS A PARTNERSHIP, TRUST, OR CORPORATION, EACH EQUITY OWNER MUST COMPLETE A QUESTIONNAIRE. This Questionnaire does not constitute an offer to sell or a solicitation of an offer to buy the Securities or any other security.

Instructions

One (1) copy of this Questionnaire should be completed, signed, dated, and delivered to:

Edwin C. Pease

Brown Rudnick Berlack Israels LLP

One Financial Center

Boston, MA 02111

Fax: (617) 289-0499

Please feel free to contact Mr. Pease directly at (617) 856-8453 if you have any questions with respect to the Questionnaire.

Please Answer All Questions

If the appropriate answer is “None” or “Not Applicable,” so state. Please print or type your answers to all questions. Attach additional sheets if necessary to complete your answers to any item.

Your answers will be kept strictly confidential at all times; however, the Company may present this Questionnaire to such parties as it deems appropriate, including its counsel, in order to assure itself that the offer and sale of the Securities will not result in a violation of the registration provisions of the 1933 Act or a violation of the securities laws of any state.

1.Please provide the following personal information:

Name:       Age:

Residence Address

(including zip code): ____________________________________________

Telephone Numbers:

Residence:________________________

Business: ________________________

2.I am an accredited investor (as defined in Rule 501(a) of Reg. D) because (check each appropriate description):

_________ I am a natural person whose individual net worth, or joint net worth with my spouse, exceeds $1,000,000.

_________ I am a natural person who had individual income exceeding $200,000 in each of the two most recent years or joint income with my spouse exceeding $300,000 in each of those years and I have a reasonable expectation of reaching the same income level in the current year.

_________ I am a broker-dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934.

_________ I am an organization described in Section 501(c)(3) of the Internal Revenue Code, not formed for the specific purpose of acquiring the Securities, with total assets exceeding $5,000,000.

_________ I am a corporation, Massachusetts or similar business trust or partnership, not formed for the specific purpose of acquiring the Securities, with total assets exceeding $5,000,000.

_________ I am a trust, not formed for the specific purpose of acquiring the Securities, with total assets exceeding $5,000,000 and whose purchase is directed by a “sophisticated person,” as defined in Rule 506(b)(2)(ii) of Reg. D.

(For the purposes of this questionnaire, a “sophisticated person” means any person who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment.)

_________ I am an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 and (i) investment decisions for such plan are made by a plan fiduciary, as defined in Section 3(21) of such Act, which is a bank, savings and loan association, insurance company or registered investment advisor or (ii) such plan has total assets exceeding $5,000,000 or (iii) if a self -directed plan, investment decisions are made solely by accredited investors.

_________ I am an entity in which all of the equity owners are accredited investors.

_________ I am an accredited investor for the following reasons:

3.Check, if appropriate:

________ I hereby represent and warrant that I have such knowledge and experience in financial and business matters that I am capable of evaluating the merits and risks of any prospective investment in the Company.

4If you did not check the box to Question 3, please answer the following additional questions:

4.1Please describe any pre-existing personal or business relationship that you have with the Company or any of its officers and directors.

4.2Please describe any business or financial experience that you have had that would allow the Company to reasonably conclude that you are capable of protecting your interests in connection with your prospective investment in the Company. If none, so state.

4.3If your answer to Question 4.2 above was “None,” in order to evaluate the merits and risks of the investment, will you be relying upon the advice of any other person(s) who will be acting as your purchaser representative(s)?

Yes _____

No _____

If “yes,” please identify each such person and indicate his business address and telephone number in the space below (each such person must complete, and you must review and acknowledge, a separate purchaser representative questionnaire which will be supplied at your request and which must be returned to the Company prior to the sale of any Securities to you).

5.By signing this Questionnaire, I hereby confirm the following statements:

I am aware that the offering of the Securities pursuant to the accompanying Subscription Agreement which I hereby acknowledge as received and reviewed, will involve an investment in securities for which no market currently exists in the case of the Preferred Stock, and a limited market exists (subject to compliance with applicable state and federal securities laws) for the shares of Common Stock issuable upon the conversion of the shares of Preferred Stock and upon exercise of the Warrants, thereby requiring any investment to be maintained for an indefinite period of time, and I have no need to liquidate the investment.

I acknowledge that any delivery to me of any documentation relating to the shares of Preferred Stock and Warrants prior to the determination by the Company of my suitability as an investor shall not constitute an offer of the shares of Preferred Stock and Warrants until such determination of suitability shall be made, and I agree that I shall promptly return all such documentation to the Company upon request.

Neither I nor any of my associates or affiliates: (i) are a member or a person associated with a member firm of the NASD, (ii) own any stock or other securities of any NASD member, or (iii) made subordinated loans to any NASD member.

My answers to the foregoing questions are true and complete to the best of my information and belief, and I will promptly notify the Company of any changes in the information I have provided.

I also understand and agree that, although the Company will use its best efforts to keep the information provided in answers to this Questionnaire strictly confidential, the Company may present this Questionnaire and the information provided in answers to it to such parties as it may deem advisable if called upon to establish the availability under any federal or state securities laws of an exemption from registration of the private placement or if the contents thereof are relevant to any issue in any action, suit, or proceeding to which the Company is a party or by which it or they are or may be bound.

I realize that this Questionnaire does not constitute an offer by the Company to sell the Securities but is merely a request for information.

_____________________________________

Printed Name

_____________________________________

Signature

_____________________________________

Social Security Number or

Employee Identification Number

Date and Place Executed:

Date:

Place:

ANNEX B

ELEMENT 21 GOLF COMPANY

STOCK CERTIFICATE QUESTIONNAIRE

Please provide the following information:

1. The exact name that your Securities are to be registered in (this is the name that will appear on your stock certificate(s) for the Preferred Stock and on the Warrants). You may use a nominee name if appropriate:	___________________________________
2. If the purchaser of the Securities and the Registered Holder listed above are not the same, please disclose the relationship between the purchaser of the Securities and the Registered Holder listed in response to item 1 above
3. The mailing address of the Registered Holder listed in response to item 1 above:	___________________________________ ___________________________________ ___________________________________
4. The Social Security Number or Tax Identification Number of the Registered Holder listed in response to item 1 above	___________________________________

ANNEX C

ELEMENT 21 GOLF COMPANY

REGISTRATION STATEMENT QUESTIONNAIRE

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

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

___________________________________________________________________

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

___________________________________________________________________

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

________ Yes ________ No

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

___________________________________________________________________

___________________________________________________________________

___________________________________________________________________

___________________________________________________________________

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

________ Yes ________ No

If "yes," please describe below:

___________________________________________________________________

___________________________________________________________________

___________________________________________________________________

___________________________________________________________________

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

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

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

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

ANNEX D

RISK FACTORS

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

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

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

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

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

- Limited release of the market prices of our securities;

- Limited news coverage of us;

- Limited interest by investors in our securities;

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

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

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

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

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

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

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

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

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

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

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

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

ANNEX E

SEC FILINGS

Annual Report on Form 10-KSB for the fiscal year ended June 30, 2005.

Quarterly Report on Form 10-QSB for the quarter ended September 30, 2005.

Quarterly Report on Form 10-QSB for the quarter ended December 31, 2005.

Quarterly Report on Form 10-QSB for the quarter ended March 31, 2006.

EX-99.1

Exhibit 99.1

ELEMENT 21 GOLF COMPANY SECURES $4.0 M PRIVATE EQUITY FINANCING COMMITMENT FROM TWO STRATEGIC INVESTORS

TORONTO--(MARKET WIRE)—August 3, 2006 -- Element 21 Golf Company (“E21” or the “Company”) (OTC BB), a manufacturer of high-strength scandium alloy golf equipment, announced today that it has received a $4.0 million private equity funding commitment from two strategic investors, $2.0 million of which was received by the Company on July 31, 2006.

“We are pleased to have secured this financing from investors who can add value to the Company’s development and look forward to successfully deploying this additional capital to carry out our business plan and further the growth of the Company,” remarked Dr. Nataliya Hearn, President and Chief Executive Officer of the Company.

At an initial closing held on July 31, 2006, E21 issued 117,648 shares of its newly designated Series B Convertible Preferred Stock at a per share price of $17.00 and warrants to purchase an aggregate of 17,647,059 shares of E21’s Common Stock to two private investors in exchange for a $2 million investment in the Company. Each share of Series B Convertible Preferred Stock is initially convertible into 100 shares of E21’s Common Stock, resulting in a Common Stock price per share price to the investors of $0.17. Each investor received two warrants at the initial closing, one warrant to purchase 3,750,000 shares of E21’s Common Stock at an exercise price of $0.22 per share if the warrant is exercised on or before July 31, 2007, and $0.28 per share if the warrant is exercised on or after August 1, 2007, and one warrant to purchase 5,073,530 shares of E21’s Common Stock at an exercise price of $0.28 per share. The two investors are obligated to invest an additional $1 million each in the Company at a subsequent closing to be held no later than November 30, 2006, subject only to the Company converting certain outstanding indebtedness into shares of its Common Stock prior to such date. At the subsequent closing, the Company will issue an additional 117,648 shares of its Series B Convertible Preferred Stock and warrants to purchase an aggregate of 17,647,059 additional shares of E21’s Common Stock. The shares and warrants issued at the subsequent closing will be identical to those issued at the initial closing. All of the warrants issued and to be issued by E21 in the financing are exercisable at anytime prior to January 31, 2009, may only be exercised through a cash payment to the Company. The exercise of the warrants in full will result in an additional $9,000,000 equity investment in the Company.

The Company intends to use the proceeds of the financing to further the execution of its business plan, the critical elements of which include expanding the Company’s retail sales reach and marketing efforts, purchasing additional inventory, developing new products and increasing the Company’s PGA, LPGA, Nation Wide and Champion tour presence. The Company believes that the investors participating in the financing add strategic value to the Company as a result of their experience with applications of very high-strength titanium alloys and their involvement in raw metal commodities and precious bullion. “This investment pays attention to the fundamental nature of our business. We are excited to create an alliance with professional, strategic investors, who have a long term vision and are interested in the growth of our company and the implementation of management’s business strategy. This investment stood alone from many other funding opportunities, both in the valuation it ascribed to Element 21 Golf Company and the strategic alliances that the investors bring to the table,” commented Dr. Hearn.

Bill Dey, General Manger and Executive Vice-President, remarked that “This funding allows us to implement the details of our business plan and push E21’s exciting technology to a new level and into consumers’ hands.”

The shares of preferred stock and warrants sold in the private placement have not been registered under the Securities Act of 1933, as amended, or state securities laws and may not be offered or sold in the United States absent registration with the Securities and Exchange Commission or an applicable exemption from the registration requirements. This news release is not an offer to sell or the solicitation of an offer to buy shares of preferred stock, common stock or warrants or any other securities of the Company.

About Element 21 Golf Company:

E21 holds the exclusive right to manufacture golf products using proprietary E21 Alloys. Through a sophisticated multi-technology production path E21 manufactures shafts, drivers, and other clubs with marked improvements in distance, accuracy and feel over competing products. In recent months a number of high profile golf professionals have switched to or began testing E21's Eagle One shafts. E21 Alloys are 55% lighter and offer 25% strength to weight advantage over Titanium alloys, the current standard in the golf equipment industry. The advanced dynamics of E21 Alloys and the material economics offer a performance-enhanced alternative to manufacturing driver clubs with Titanium, the largest segment of the annual $4 billion golf equipment marketplace.

E21 recently announced its “Golf Shot Around the World Mission” in celebration of the 35th anniversary of Alan B. Shepard Jr.’s historic Apollo 14 Mission. Just about every single record for distance in the golf industry will be shattered this fall when an astronaut will hit a golf ball into orbit around the earth from the International Space Station - using an E21 golf club. It is only natural that this event takes place on the ISS, considering that E21 Alloys are also used on the Space Station in high strength, fatigue resistant applications.

E21 Golf - The Evolution is Inevitable!

Forward-Looking Statements. Statements in this release, other than statements of historical fact, may be regarded, in certain instances, as "forward-looking statements" pursuant to Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934, respectively. "Forward-looking statements" are based on expectations, estimates and projections at the time the statements are made, and involve risks and uncertainties which could cause actual results or events to differ materially from those currently anticipated, including but not limited to market acceptance of its products, delays or difficulties in manufacturing and/or bringing its products to market, changed strategies, or unanticipated factors or circumstances affecting E21 and its business and its ability to successfully implement its business plan. A number of these risks and uncertainties are described in E21’s periodic reports filed with Securities and Exchange Commission. There can be no assurance that such forward-looking statements will ever prove to be accurate and readers should not place undue reliance on any such forward-looking statements contained herein, which speak only as of the date hereof. E21 undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

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Company Contacts:

Investor Relations

Element 21 Golf Company

(416) 362-2121

investors@e21golf.com

http://www.E21Golf.com

Sales

Element 21 Golf Company

888 365-2121

sales@e21golf.com

http://www.E21Golf.com

Media members interested in testing shafts or other E21 products for an editorial review or receiving further information please contact:

The Media Group

Joe Wieczorek or Bart Henyan

(847) 956-9090

joe@themediagroupinc.com

barthenyan@hotmail.com    

Source: Element 21 Golf Company

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