<SUBMISSION>
<ACCESSION-NUMBER>0001415889-11-000022
<TYPE>8-K
<PUBLIC-DOCUMENT-COUNT>4
<PERIOD>20110114
<ITEMS>1.01
<ITEMS>2.03
<ITEMS>3.02
<ITEMS>9.01
<FILING-DATE>20110121
<DATE-OF-FILING-DATE-CHANGE>20110121
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>PepperBall Technologies, Inc.
<CIK>0001216199
<ASSIGNED-SIC>3480
<IRS-NUMBER>201978398
<STATE-OF-INCORPORATION>CO
<FISCAL-YEAR-END>1231
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<FILING-VALUES>
<FORM-TYPE>8-K
<ACT>34
<FILE-NUMBER>001-32566
<FILM-NUMBER>11541979
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<BUSINESS-ADDRESS>
<STREET1>6142 NANCY RIDGE DRIVE
<STREET2>SUITE 101
<CITY>SAN DIEGO
<STATE>CA
<ZIP>92121
<PHONE>858-638-0236
</BUSINESS-ADDRESS>
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<STREET1>6142 NANCY RIDGE DRIVE
<STREET2>SUITE 101
<CITY>SAN DIEGO
<STATE>CA
<ZIP>92121
</MAIL-ADDRESS>
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<FORMER-CONFORMED-NAME>Security With Advanced Technology, Inc.
<DATE-CHANGED>20061010
</FORMER-COMPANY>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>A4S SECURITY, INC.
<DATE-CHANGED>20050602
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<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>A4S TECHNOLOGIES INC
<DATE-CHANGED>20030128
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<TYPE>8-K
<SEQUENCE>1
<FILENAME>form8k-01212011_020132.htm
<TEXT>
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<font style="DISPLAY: inline; font-size: 10pt; FONT-FAMILY: Times New Roman;">Date of report (Date of earliest event reported): &nbsp;</font><font style="DISPLAY: inline; font-size: 10pt; FONT-FAMILY: Times New Roman; TEXT-DECORATION: underline">January 14 , 2011</font>
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<font style="DISPLAY: inline; font-size: 10pt; FONT-FAMILY: Times New Roman">Commission File Number: &nbsp;</font><font style="DISPLAY: inline; font-size: 10pt; FONT-FAMILY: Times New Roman; TEXT-DECORATION: underline">00132566 </font>
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	<font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman">Pepperball Technologies, Inc.</font><br><font style="DISPLAY: inline; font-size: 10pt; FONT-FAMILY: Times New Roman">(Exact name of small business issuer as specified in its charter)</font>
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			<font style="DISPLAY: inline; font-size: 10pt; FONT-FAMILY: times new roman; TEXT-DECORATION: underline">Colorado</font><br><font style="DISPLAY: inline; font-size: 10pt; FONT-FAMILY: times new roman;">(State or other jurisdiction of incorporation or organization)</font>
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			<font style="DISPLAY: inline; font-size: 10pt; FONT-FAMILY: times new roman; TEXT-DECORATION: underline">201978398</font><br><font style="DISPLAY: inline; font-size: 10pt; FONT-FAMILY: times new roman">(IRS Employer Identification No.)</font>
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	<font style="DISPLAY: inline; font-size: 10pt; FONT-FAMILY: times new roman; TEXT-DECORATION: underline">6142 Nancy Ridge Drive, Suite 101, San Diego, California 92121</font><br><font style="DISPLAY: inline; font-size: 10pt; FONT-FAMILY: Times New Roman">(Address of principal executive offices)</font>
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	<font style="DISPLAY: inline; font-size: 10pt; FONT-FAMILY: times new roman; TEXT-DECORATION: underline">858-638-0236</font><br><font style="DISPLAY: inline; font-size: 10pt; FONT-FAMILY: Times New Roman">(Registrant's Telephone number)</font>
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	<font style="DISPLAY: inline; font-size: 10pt; FONT-FAMILY: Times New Roman;  TEXT-DECORATION: underline">Not Applicable</font><br><font style="DISPLAY: inline; font-size: 10pt; FONT-FAMILY: Times New Roman">(Former Name or Former Address, if Changed Since Last Report)</font>
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	<font style="DISPLAY: inline; font-size: 10pt; FONT-FAMILY: Times New Roman">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):</font>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; text-align:left;"><font style="DISPLAY: inline; font-size: 10pt; FONT-FAMILY: Times New Roman">[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)</font></div>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt;text-align:left;"><font style="DISPLAY: inline; font-size: 10pt; FONT-FAMILY: Times New Roman">[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)</font></div>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt;text-align:left;"><font style="DISPLAY: inline; font-size: 10pt; FONT-FAMILY: Times New Roman">[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))</font></div>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt;text-align:left;"><font style="DISPLAY: inline; font-size: 10pt; FONT-FAMILY: Times New Roman">[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))</font></div>

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<div class="left" style="text-align:left;"><font style="display: inline; font-weight: bold; font-size: 10pt; font-family: Times New Roman;"><b>Item 1.01 Entry into a Material Definitive Agreement.</b></font></div>

<p align="left" style="clear:both;"><font style="display: inline; font-size: 10pt; font-family: Times New Roman;text-align:left;">Loan Agreement Amendments and Warrant<br><br>
On January 14, 2011, PepperBall Technologies, Inc., a Colorado corporation (the "Company"), entered into a Loan Agreement Amendment ("Loan Agreement Amendment #1") with J.A. &amp; G.L. Simpson Trust, DTD May 18, 1988 ("Simpson Trust") and a Loan Agreement Amendment ("Loan Agreement Amendment #2" and collectively with Loan Agreement Amendment #1, the "Loan Amendments") with James Simpson Foundation ("Simpson Foundation" and collectively with Simpson Trust, the "Lenders").  The original Loan Agreements with the Lenders were previously issued on January 15, 2010.<br><br>
Pursuant to the Loan Agreement Amendments, the Company borrowed an aggregate of $550,000 from the Lenders.  As security for the Company's obligations under the Loan Agreements, the Company granted the Lenders a security interest in all of its assets. The Loan Amendments are subject to an InterCreditor Agreement with Primary Funding Corporation, with whom the Company factors some of its accounts receivables, but only up to the amount owed to Primary Funding Corporation by the Company.<br><br>
Amounts outstanding under the Loan Agreement Amendments require monthly payments of principle (in addition to monthly interest payments at 15% per annum) to be made pursuant to amortization schedules set forth in the Loan Agreements.  All amounts outstanding under the Loan Agreements are due on December 31, 2011.  <br><br>
The Loan Agreement Amendments also specify that upon the occurrence of an "Event of Default" under the loan agreement, Lender may acquire an additional 100,000 warrant shares of Borrower at $0.05 per share for the first 30 day period the Default remains uncured and an additional 150,000 warrant shares of Borrower at $0.05 per share for each subsequent 30 day period the Default remains uncured.  Additionally, in the event of a default, the interest rate will increase to 18% until the default is cured, and a default fee of $6,000 will be charged per month up to a cumulative total of 25% of any amounts due.<br>
The foregoing description of the Loan Agreement Amendments is qualified by reference to the Loan Agreement Amendments, which are attached hereto as Exhibits 10.1 and 10.2, respectively, and incorporated herein by reference.<br><br>
In connection with the execution of the Loan Agreement Amendments, the Company issued to the Simpson Trust a warrant (the "Warrant") to purchase up to $550,000 of the Company's common stock.  The warrant is exercisable at any time prior to December 31, 2017 and carries an exercise price per share equal to the lesser of (i) $0.05 or (ii) the price per share at which the Company sells or issues its common stock in a transaction or a series of transactions in which the Company receives at least $500,000 (as a result, the Warrant is exercisable to purchase a minimum of up to 1,500,000 shares of the Company's common stock).  The Warrant provides that the exercise price will be adjusted pursuant to a weighted-average formula in the event the Company issues additional common shares during the term of the Warrant at a price per share that is less than the then-effective exercise price.  In addition, upon the occurrence of an Event of Default under the Loan Agreement, the Simpson Trust may acquire a warrant to purchase an additional 100,000 shares of the Company's common stock for the first 30 days the default remains uncured and may acquire warrants to purchase an additional 150,000 shares of the Company's common stock for each subsequent 30 day period during which the default remains uncured.  <br><br>
The Warrant and the securities issuable upon exercise of the said Warrants have not been and will not be registered under the Securities Act of 1933, as amended (the "Securities Act") in reliance upon an exemption from registration provided by Section 4(2) of the Securities Act and/or Regulation D promulgated thereunder.  Such securities may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.<br><br>
The foregoing description of the Warrant is qualified by reference to the Warrantwhich is attached hereto as Exhibit 10.3 and incorporated herein by reference.  </font></p>

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<div class="left" style="text-align:left;"><font style="display: inline; font-weight: bold; font-size: 10pt; font-family: Times New Roman;"><b>Item 2.03 Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant.</b></font></div>

<p align="left" style="clear:both;"><font style="display: inline; font-size: 10pt; font-family: Times New Roman;text-align:left;">The information set forth above under Item 1.01, Entry into a Material Definitive Agreement, is hereby incorporated by reference into this Item 2.03.</font></p>

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<div class="left" style="text-align:left;"><font style="display: inline; font-weight: bold; font-size: 10pt; font-family: Times New Roman;"><b>Item 3.02 Unregistered Sales of Equity Securities.</b></font></div>

<p align="left" style="clear:both;"><font style="display: inline; font-size: 10pt; font-family: Times New Roman;text-align:left;">The information set forth above under Item 1.01, Entry into a Material Definitive Agreement, is hereby incorporated by reference into this Item 3.02.</font></p>

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<div class="left" style="text-align:left;"><font style="display: inline; font-weight: bold; font-size: 10pt; font-family: Times New Roman;"><b>Item 9.01 Financial Statements and Exhibits.</b></font></div>

<p align="left" style="clear:both;"><font style="display: inline; font-size: 10pt; font-family: Times New Roman;text-align:left;">(d) Exhibits.<br><br>
10.1		Loan Agreement Amendment dated as of January 14, 2011 by and between J.A. &amp; G.L. Simpson Trust, a California trust DTD May 18, 1988, and PepperBall Technologies, Inc.	<br>
10.2		Loan Agreement Amendment dated as of January 14, 2011 by and between James Simpson Foundation, a California non profit corporation, and PepperBall Technologies, Inc.	<br>
10.3		Warrant to Purchase Common Stock issued on January 14, 2011 by PepperBall Technologies, Inc. to J.A. &amp; G.L. Simpson Trust, a California trust DTD May 18, 1988.</font></p>


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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt;" align="center"><font style="display: inline; font-weight: bold; font-size: 10pt; font-family: Times New Roman;">SIGNATURES </font></div>
<div style="display: block; text-indent: 0pt;">&nbsp;</div>
<div style="display: block; margin-left: 0pt; text-indent: 0pt; margin-right: 0pt; text-align: justify;" align="justify"><font style="display: inline; font-size: 10pt; font-family: Times New Roman;">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. </font></div>
<div style="display: block; text-indent: 0pt;">&nbsp;</div>
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       				<font style="font-size: 10pt; font-family: Times New Roman;FONT-WEIGHT: bold;">Pepperball Technologies, Inc.</font>
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        <div style="float:left; width:49%; text-align:left;"><font style="font-size: 10pt; font-family: Times New Roman;">Date:&nbsp;&nbsp; <i>January 21, 2011</i></font></div>
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<td width="30" rowspan="4" valign="top"><font style="font-size: 10pt; font-family: Times New Roman;">By:</font></td>
                    <td nowrap align="left"><font style="font-size: 10pt; font-family: Times New Roman;">/s/ Christin A. Lewis</font></td>
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<td nowrap align="left"><font style="font-size: 10pt; font-family: Times New Roman;"><i>Name: Christin A. Lewis</i></font></td>
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<td align="left"><font style="font-size: 10pt; font-family: Times New Roman;"><i>Title: Chief Financial Officer</i></font></td>
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<div align="center"><font style="display: inline; font-weight: bold; font-size: 10pt; font-family: Times New Roman;">Exhibit Index</font></div>
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				<font size="2">&nbsp;&nbsp;</font>
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<TYPE>EX-10
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<p style="margin:0px" align="right"><b>Exhibit 10.1</b></p>
<p style="margin:0px" align="center"><b>First AMENDMENT</b></p>
<p style="margin:0px" align="center"><b>TO</b></p>
<p style="margin-top:0px; margin-bottom:13.333px" align="center"><b><u>LOAN AGREEMENT</u></b></p>
<p style="margin-top:0px; margin-bottom:13.333px; text-indent:48px" align="justify">This First Amendment to Loan Agreement is entered into as of January 14, 2011 (the &#147;Amendment&#148;), by and between J.A. G.L. Simpson Trust, Dtd May 18, 1988, A California Trust (&#147;Lender&#148;) and PEPPERBALL TECHNOLOGIES, INC., a Colorado corporation (&#147;Borrower&#148;).</p>
<p style="margin-top:0px; margin-bottom:13.333px" align="center"><b><u>RECITALS</u></b></p>
<p style="margin-top:0px; margin-bottom:13.333px; text-indent:48px" align="justify">Borrower and Lender are parties to that certain Loan Agreement dated as of January 15, 2010, and as may be further amended from time to time (collectively, the &#147;Agreement&#148;). The parties desire to amend the Agreement in accordance with the terms of this Amendment.</p>
<p style="margin-top:0px; margin-bottom:13.333px; text-indent:48px; font-size:6pt" align="justify"><b>NOW, THEREFORE</b><b style="font-size:10pt;font-weight:normal;">, the parties agree as follows:</b></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:72px; float:left">1.</p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:72px; text-indent:-2px" align="justify">Section 1(a) (<b>Closing</b>) of this Agreement to read as follows:</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:96px; width:144px; clear:left; float:left">(a)</p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:48px; text-indent:-2px" align="justify">Upon execution of the amendment of this Loan Agreement, Lender shall deliver to Borrower $254,000 ($350,000 credit facility - $96,000 principal balance as of amendment date). </p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:96px; clear:left; float:left">2.</p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:48px; text-indent:-2px" align="justify">Section 1(b) (<b>Interest</b>) of the Agreement to read as follows:</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:96px; width:144px; clear:left; float:left">(b)</p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:48px; text-indent:-2px" align="justify">The Credit Facility shall begin amortizing on January 31, 2011 at $29,167 per month (in addition to the 15% monthly interest payments) through Maturity (See Amortization of Principal Schedule below).</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:96px; clear:left; float:left">3.</p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:48px; text-indent:-2px" align="justify">Section 1(c) (<b>Warrant</b>) of the Agreement to read as follows:</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:96px; width:144px; clear:left; float:left">(c)</p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:48px; text-indent:-2px" align="justify">Borrower is concurrently issuing to Lender a Warrant to Purchase Stock on the terms and conditions set forth therein (the &#147;Warrant&#148;), dated January 14, 2011.</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:96px; clear:left; float:left">4.</p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:48px; text-indent:-2px" align="justify">Section 1(d) (<b>Maturity Date</b>) of the Agreement to read as follows:</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:96px; width:144px; clear:left; float:left">&nbsp;(d)</p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:48px; text-indent:-2px" align="justify">All amounts outstanding hereunder are due and payable on December 31, 2011. </p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:84px; clear:left; float:left">5.</p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:48px; text-indent:-2px" align="justify">Section 1(e) (<b>Amortization of Principal</b>) of the Agreement to read as follows:</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:102px; width:144px; clear:left; float:left">(e)<b> </b></p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:144px; text-indent:-2px" align="justify">The amortization of principal associated with this Credit Facility shall be made as follows:</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:240px; width:384px; clear:left; float:left"><b>Month</b></p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:192px; text-indent:-2px" align="justify"><b>Amortization of Principal</b></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:247.8px; width:384px; clear:left; float:left">January 31</p>
<p style="margin:0px; text-indent:-2px" align="justify">$29,167</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:241.133px; width:384px; clear:left; float:left">February 28</p>
<p style="margin:0px; text-indent:-2px" align="justify">29,167</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:254.467px; width:384px; clear:left; float:left">March 31</p>
<p style="margin:0px; text-indent:-2px" align="justify">29,167</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:261.133px; width:384px; clear:left; float:left">April 30</p>
<p style="margin:0px; text-indent:-2px" align="justify">29,167</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:264.867px; width:384px; clear:left; float:left">May 31</p>
<p style="margin:0px; text-indent:-2px" align="justify">29,167</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:264.867px; width:384px; clear:left; float:left">June 30</p>
<p style="margin:0px; text-indent:-2px" align="justify">29,167</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:267.067px; width:384px; clear:left; float:left">July 31</p>
<p style="margin:0px; text-indent:-2px" align="justify">29,167</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:250.8px; width:384px; clear:left; float:left">August 31</p>
<p style="margin:0px; text-indent:-2px" align="justify">29,167</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:232.2px; width:384px; clear:left; float:left">September 30</p>
<p style="margin:0px; text-indent:-2px" align="justify">29,167</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:246.333px; width:384px; clear:left; float:left">October 31</p>
<p style="margin:0px; text-indent:-2px" align="justify">29,167</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:233px; width:384px; clear:left; float:left">November 30</p>
<p style="margin:0px; text-indent:-2px" align="justify">29,167</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:234.467px; width:384px; clear:left; float:left">December 31</p>
<p style="margin:0px; text-indent:-2px" align="justify">29,163</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:96px; float:left">6.</p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:48px; text-indent:-2px" align="justify">Section 6(e) (Loan Default) of the Agreement to read as follows:</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:96px; width:144px; clear:left; float:left">(e) </p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:144px; text-indent:-2px" align="justify">Loan Default. Upon the occurrence of an Event of Default under the loan agreement, Lender may acquire an additional 100,000 warrant shares of Borrower at $0.05 per share for the first 30 day period the Default remains uncured and an additional 150,000 warrant shares of Borrower at $0.05 per share for each subsequent 30 day period the Default remains uncured. Additionally, in the event of a default, the interest rate will increase to 18% until the default is cured, and a default fee of $6,000 will be charged per month up to a cumulative total of 25% of any amounts due.</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:96px; clear:left; float:left">7. </p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:48px; text-indent:-2px" align="justify">Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement. &nbsp;The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. &nbsp;Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Lender under the Agreement, as in effect prior to the date hereof. &nbsp;Borrower ratifies and reaffirms the continuing effectiveness of all instruments, documents and agreements entered into in connection with the Agreement.</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:96px; clear:left; float:left">8.</p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:48px; text-indent:-2px" align="justify">This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:96px; clear:left; float:left">9.</p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:48px; text-indent:-2px" align="justify">As a condition to the effectiveness of this Amendment, Lender shall have received, in form and substance satisfactory to Lender, the following:</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:96px; width:144px; clear:left; float:left">i) </p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:48px; text-indent:-2px" align="justify">this Amendment, duly executed by Borrower;</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:96px; width:144px; clear:left; float:left">ii) </p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:48px; text-indent:-2px" align="justify">a Warrant to Purchase Stock in substantially the form attached dated January 14, 2011;</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:96px; width:144px; clear:left; float:left">iii) </p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:48px; text-indent:-2px" align="justify">Corporate Resolutions to Borrow;</p>
<p style="margin-top:0px; margin-bottom:13.333px; text-indent:48px; font-size:6.6pt; clear:left" align="justify"><b>IN WITNESS WHEREOF</b><b style="font-size:10pt;font-weight:normal;">, the undersigned have executed this Amendment as of the first date above written.</b></p>
<p style="margin-top:0px; margin-bottom:13.333px; text-indent:280px" align="justify"><b>PEPPERBALL TECHNOLOGIES, INC.</b></p>
<p style="margin-top:0px; margin-bottom:13.333px; text-indent:280px" align="justify">By: &nbsp;/s/ John Stiska</p>
<p style="margin-top:0px; margin-bottom:13.333px; text-indent:280px" align="justify">Title: &nbsp;Chief Executive Officer</p>
<p style="margin-top:0px; margin-bottom:13.333px" align="justify"><br></p>
<p style="margin-top:0px; margin-bottom:13.333px; text-indent:280px" align="justify"><b>J.A. G.L. Simpson Trust, Dtd May 18, 1988</b></p>
<p style="margin-top:0px; margin-bottom:13.333px; text-indent:280px" align="justify">By: &nbsp;/s/ James Simpson</p>
<p style="margin-top:0px; margin-bottom:13.333px; text-indent:280px" align="justify">Title: &nbsp;Trustee</p>
<p style="margin-top:0px; margin-bottom:13.333px" align="justify"><br><br><br><br><br><br><br><br><br><br></p>
</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>ex10-01212011_020121.htm
<TEXT>
<!DOCTYPE html PUBLIC "-//IETF//DTD HTML//EN">
<html>
<head>
<title>Begin Typing Here</title>
<meta name="author" content="HALEJB">
<meta name="date" content="01/21/2011">
</head>
<body style="margin-top:0;font-family:Times New Roman; font-size:10pt; color:#000000">
<p style="margin:0px" align="right"><b>Exhibit 10.2</b></p>
<p style="margin:0px" align="right"><br></p>
<p style="margin:0px" align="center"><b>First AMENDMENT</b></p>
<p style="margin:0px" align="center"><b>TO</b></p>
<p style="margin:0px" align="center"><b><u>LOAN AGREEMENT</u></b></p>
<p style="margin:0px" align="center"><br></p>
<p style="margin:0px; text-indent:48px" align="justify">This First Amendment to Loan Agreement is entered into as of January 14, 2011 (the &#147;Amendment&#148;), by and between James Simpson Foundation (&#147;Lender&#148;) and PEPPERBALL TECHNOLOGIES, INC., a Colorado corporation (&#147;Borrower&#148;).</p>
<p style="margin:0px" align="justify"><br></p>
<p style="margin:0px" align="center"><b><u>RECITALS</u></b></p>
<p style="margin:0px" align="center"><br></p>
<p style="margin:0px; text-indent:48px" align="justify">Borrower and Lender are parties to that certain Loan Agreement dated as of January 15, 2010, and as may be further amended from time to time (collectively, the &#147;Agreement&#148;). The parties desire to amend the Agreement in accordance with the terms of this Amendment.</p>
<p style="margin:0px" align="justify"><br></p>
<p style="margin-top:0px; margin-bottom:13.333px; text-indent:48px; font-size:6pt" align="justify"><b>NOW, THEREFORE</b><b style="font-size:10pt;font-weight:normal;">, the parties agree as follows:</b></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:72px; float:left">1.</p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:72px; text-indent:-2px" align="justify">Section 1(a) (Closing) of this Agreement to read as follows:</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:96px; width:144px; clear:left; float:left">(a)</p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:48px; text-indent:-2px" align="justify">Upon execution of the amendment of this Loan Agreement, Lender shall deliver to Borrower $136,000 ($200,000 credit facility - $64,000 principal balance as of amendment date). </p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:96px; clear:left; float:left">2.</p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:48px; text-indent:-2px" align="justify">Section 1(b) (Interest) of the Agreement to read as follows:</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:96px; width:144px; clear:left; float:left">(b)</p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:48px; text-indent:-2px" align="justify">The Credit Facility shall begin amortizing on January 31, 2011 at $16,667 per month (in addition to the 15% monthly interest payments) through Maturity (See Amortization of Principal Schedule below).</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:96px; clear:left; float:left">3.</p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:48px; text-indent:-2px" align="justify">Section 1(c) (Maturity Date) of the Agreement to read as follows:</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:96px; width:144px; clear:left; float:left">(c)</p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:48px; text-indent:-2px" align="justify">All amounts of outstanding hereunder are due and payable on December 31, 2011.</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:96px; clear:left; float:left">4.</p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:48px; text-indent:-2px" align="justify">Section 1(d) (Amortization of Principal) of the Agreement to read as follows:</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:96px; width:144px; clear:left; float:left">&nbsp;(d)</p>
<p style="margin-top:0px; margin-bottom:13.333px; padding-left:48px; text-indent:-2px" align="justify">The amortization of principal associated with this Credit Facility shall be made as follows: </p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:240px; width:384px; clear:left; float:left"><b>Month</b></p>
<p style="margin:0px; padding-left:192px; text-indent:-2px" align="justify"><b>Amortization of Principal</b></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:247.8px; width:384px; clear:left; float:left">January 31</p>
<p style="margin:0px; text-indent:-2px" align="justify">$16,667</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:241.133px; width:384px; clear:left; float:left">February 28</p>
<p style="margin:0px; text-indent:-2px" align="justify">16,667</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:254.467px; width:384px; clear:left; float:left">March 31</p>
<p style="margin:0px; text-indent:-2px" align="justify">16,667</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:261.133px; width:384px; clear:left; float:left">April 30</p>
<p style="margin:0px; text-indent:-2px" align="justify">16,667</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:264.867px; width:384px; clear:left; float:left">May 31</p>
<p style="margin:0px; text-indent:-2px" align="justify">16,667</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:264.867px; width:384px; clear:left; float:left">June 30</p>
<p style="margin:0px; text-indent:-2px" align="justify">16,667</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:267.067px; width:384px; clear:left; float:left">July 31</p>
<p style="margin:0px; text-indent:-2px" align="justify">16,667</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:250.8px; width:384px; clear:left; float:left">August 31</p>
<p style="margin:0px; text-indent:-2px" align="justify">16,667</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:232.2px; width:384px; clear:left; float:left">September 30</p>
<p style="margin:0px; text-indent:-2px" align="justify">16,667</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:246.333px; width:384px; clear:left; float:left">October 31</p>
<p style="margin:0px; text-indent:-2px" align="justify">16,667</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:233px; width:384px; clear:left; float:left">November 30</p>
<p style="margin:0px; text-indent:-2px" align="justify">16,667</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:234.467px; width:384px; clear:left; float:left">December 31</p>
<p style="margin:0px; text-indent:-2px" align="justify">16,663</p>
<p style="margin:0px; clear:left" align="justify"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:96px; float:left">5. </p>
<p style="margin:0px; padding-left:48px; text-indent:-2px" align="justify">Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement. &nbsp;The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. &nbsp;Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Lender under the Agreement, as in effect prior to the date hereof. &nbsp;Borrower ratifies and reaffirms the continuing effectiveness of all instruments, documents and agreements entered into in connection with the Agreement.</p>
<p style="margin:0px; clear:left" align="justify"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:96px; float:left">6.</p>
<p style="margin:0px; padding-left:48px; text-indent:-2px" align="justify">This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.</p>
<p style="margin:0px; clear:left" align="justify"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:96px; float:left">7.</p>
<p style="margin:0px; padding-left:48px; text-indent:-2px" align="justify">As a condition to the effectiveness of this Amendment, Lender shall have received, in form and substance satisfactory to Lender, the following:</p>
<p style="margin:0px; clear:left" align="justify"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:96px; width:144px; float:left">i)</p>
<p style="margin:0px; padding-left:144px; text-indent:-2px" align="justify">this Amendment, duly executed by Borrower;</p>
<p style="margin:0px; clear:left" align="justify"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:96px; width:144px; float:left">ii)</p>
<p style="margin:0px; padding-left:144px; text-indent:-2px" align="justify">Corporate Resolutions to Borrow;</p>
<p style="margin:0px; clear:left" align="justify"><br></p>
<p style="margin:0px; text-indent:48px; font-size:6.6pt" align="justify"><b>IN WITNESS WHEREOF</b><b style="font-size:10pt;font-weight:normal;">, the undersigned have executed this Amendment as of the first date above written.</b></p>
<p style="margin:0px" align="justify"><br></p>
<p style="margin:0px; text-indent:280px" align="justify"><b>PEPPERBALL TECHNOLOGIES, INC.</b></p>
<p style="margin:0px" align="justify"><br></p>
<p style="margin:0px; text-indent:280px" align="justify">By: &nbsp;/s/ John Stiska</p>
<p style="margin:0px; text-indent:280px" align="justify">Title: &nbsp;Chief Executive Officer</p>
<p style="margin:0px" align="justify"><br></p>
<p style="margin:0px; text-indent:280px" align="justify"><b>James Simpson Foundation</b></p>
<p style="margin:0px" align="justify"><br></p>
<p style="margin:0px; text-indent:280px" align="justify">By: &nbsp;/s/ James Simpson</p>
<p style="margin:0px; text-indent:280px" align="justify">Title: &nbsp;Manager</p>
<p style="margin:0px" align="justify"><br><br><br><br><br><br><br><br><br><br></p>
<p style="line-height:10pt; margin:0px"><br></p>
<p style="margin:0px"><br></p>
</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>ex10-01212011_020122.htm
<TEXT>
<!DOCTYPE html PUBLIC "-//IETF//DTD HTML//EN">
<html>
<head>
<title>ex10-01212011_020122.htm</title>
<meta name="date" content="01/21/2011">
</head>
<body style="margin-top:0;font-family:Times New Roman; font-size:10pt; color:#000000">
<p style="margin:0px" align="right"><b>Exhibit 10.3</b></p>
<p style="margin:0px"><br></p>
<p style="margin:0px">THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF OR IN ACCORDANCE WITH APPLICABLE LAW.</p>
<p style="margin:0px"><br></p>
<p style="margin:0px" align="center">WARRANT TO PURCHASE STOCK &nbsp;</p>
<p style="margin:0px" align="justify"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; width:144px; float:left">Corporation:</p>
<p style="margin:0px; text-indent:-2px" align="justify">PEPPERBALL TECHNOLOGIES, INC.</p>
<p style="margin-top:0px; margin-bottom:-2px; width:144px; clear:left; float:left">Number of Shares:</p>
<p style="margin:0px; text-indent:-2px" align="justify">$550,000/Warrant Price</p>
<p style="margin-top:0px; margin-bottom:-2px; width:144px; clear:left; float:left">Class of Stock:</p>
<p style="margin:0px; text-indent:-2px" align="justify">Common </p>
<p style="margin-top:0px; margin-bottom:-2px; width:144px; clear:left; float:left">Initial Exercise Price:</p>
<p style="margin:0px; text-indent:-2px" align="justify">See below</p>
<p style="margin-top:0px; margin-bottom:-2px; width:144px; clear:left; float:left">Issue Date:</p>
<p style="margin:0px; text-indent:-2px" align="justify">January 14, 2011</p>
<p style="margin-top:0px; margin-bottom:-2px; width:144px; clear:left; float:left">Expiration Date:</p>
<p style="margin:0px; text-indent:-2px" align="justify">December 31, 2017</p>
<p style="margin:0px; clear:left" align="justify"><br></p>
<p style="margin:0px; text-indent:48px" align="justify">THIS WARRANT CERTIFIES THAT, in consideration of the payment of $1.00 and for other good and valuable consideration, J.A.&amp; G.L. SIMPSON TRUST, DTD MAY 18, 1988, A CALIFORNIA TRUST or registered assignee (&#147;Holder&#148;) is entitled to purchase the number of fully paid and nonassessable shares (the &#147;Shares&#148;) of Common Stock of PEPPERBALL TECHNOLOGIES, INC. (the &#147;Company&#148;), in the number, at the price, and for the term specified above. &nbsp;The exercise price per share (the &#147;Warrant Price&#148;) is equal to the lowest of (i) $0.05 or (ii) the price at which the Company sells or issues its Common Stock after the Issue Date in a transaction or series of transactions in which the Company or any of its subsidiaries receives at least $500,000. &nbsp;This Warrant and the Warrant Shares shall not be subject to any agreements entered into between the Company and any person or entity that has the effect of reducing the number of Shares that Holder may acquire hereunder.</p>
<p style="margin:0px" align="justify"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; width:72px; float:left">ARTICLE 1.</p>
<p style="margin:0px; text-indent:-2px"><u>EXERCISE</u></p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:72px; float:left">1.1</p>
<p style="margin:0px; text-indent:-2px" align="justify"><u>Method of Exercise</u>. &nbsp;Holder may exercise this Warrant by delivering this Warrant and a duly executed Notice of Exercise in substantially the form attached as Appendix&nbsp;1 to the principal office of the Company. &nbsp;Unless Holder is exercising the conversion right set forth in Section&nbsp;1.2, Holder shall also deliver to the Company a check for the aggregate Warrant Price for the Shares being purchased.</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:72px; float:left">1.2</p>
<p style="margin:0px; text-indent:-2px" align="justify"><u>Conversion Right</u>. &nbsp;In lieu of exercising this Warrant as specified in Section&nbsp;1.1, Holder may from time to time convert this Warrant, in whole or in part, into a number of Shares determined by dividing (a)&nbsp;the aggregate fair market value of the Shares or other securities otherwise issuable upon exercise of this Warrant minus the aggregate Warrant Price of such Shares by (b)&nbsp;the fair market value of one Share. &nbsp;The fair market value of the Shares shall be determined pursuant to Section&nbsp;1.3.</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:72px; float:left">1.3</p>
<p style="margin:0px; text-indent:-2px" align="justify"><u>Fair Market Value</u>. &nbsp;If the Shares are traded regularly in a public market, the fair market value of the Shares shall be the average closing price of the Shares (or the closing price of the Company&#146;s stock into which the Shares are convertible) reported for the ten (10) business day immediately before Holder delivers its Notice of Exercise to the Company. &nbsp;If the Shares are not regularly traded in a public market, the Board of Directors of the Company shall determine fair market value in its reasonable good faith judgment. &nbsp;The foregoing notwithstanding, if Holder advises the Board of Directors in writing that Holder disagrees with such determination, then the Company and Holder shall promptly agree upon a reputable investment banking firm to undertake such valuation. &nbsp;If the valuation of such investment banking firm is greater than that determined by the Board of Directors, then all fees and expenses of such investment banking firm shall be paid by the Company. &nbsp;In all other circumstances, such fees and expenses shall be paid by Holder.</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:72px; float:left">1.4</p>
<p style="margin:0px; text-indent:-2px" align="justify"><u>Delivery of Certificate and New Warrant</u>. &nbsp;Promptly after Holder exercises or converts this Warrant, the Company shall deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new Warrant representing the Shares not so acquired.</p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:72px; clear:left; float:left">1.5</p>
<p style="margin:0px; text-indent:-2px" align="justify"><u>Replacement of Warrants</u>. &nbsp;On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation, or surrender and cancellation of this Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor.</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; width:72px; float:left">ARTICLE 2.</p>
<p style="margin:0px; text-indent:-2px" align="justify"><u>ADJUSTMENTS TO THE SHARES</u>.</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:72px; float:left">2.1</p>
<p style="margin:0px; text-indent:-2px" align="justify"><u>Stock Dividends, Splits, Etc</u>. &nbsp;If the Company declares or pays a dividend on its common stock payable in common stock, or other securities, subdivides the outstanding common stock into a greater amount of common stock, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend or subdivision occurred.</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:72px; float:left">2.2</p>
<p style="margin:0px; text-indent:-2px" align="justify"><u>Reclassification, Exchange or Substitution</u>. &nbsp;Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this Warrant, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number and kind of securities and property that Holder would have received for the Shares if this Warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. &nbsp;Such an event shall include any automatic conversion of the outstanding or issuable securities of the Company of the same class or series as the Shares to common stock pursuant to the terms of the Company&#146;s Certificate of Incorporation upon the closing of a registered public offering of the Company&#146;s common stock. &nbsp;Upon the closing of any sale, license, or other disposition of all or substantially all of the assets (including intellectual property) of the Company, or any reorganization, consolidation, or merger of the Company where the holders of the Company&#146;s securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction, the successor entity shall assume the obligations of this Warrant, and this Warrant thereafter shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing. &nbsp;The Warrant Price shall be adjusted accordingly. &nbsp;The Company or its successor shall promptly issue to Holder a new Warrant for such new securities or other property. &nbsp;The new Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article&nbsp;2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the new Warrant. &nbsp;The provisions of this Section&nbsp;2.2 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events.</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:72px; float:left">2.3</p>
<p style="margin:0px; text-indent:-2px" align="justify"><u>Adjustments for Combinations, Etc</u>. &nbsp;If the outstanding Shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased.</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:72px; float:left">2.4</p>
<p style="margin:0px; text-indent:-2px" align="justify"><u>Weighted Average Adjustment</u>. &nbsp;If the Company issues additional common shares (including shares of common stock ultimately issuable upon conversion of a security convertible into common stock) after the date of the Warrant and the consideration per additional common share is less than the Warrant Price in effect immediately before such issue shall be reduced, concurrently with such Issue, to a price determined by multiplying the Warrant Price by a fraction:</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:144px; width:168px; float:left">(a)</p>
<p style="margin:0px; text-indent:-2px" align="justify">the numerator of which is the amount of common stock outstanding immediately before such Issue plus the amount of common stock that the aggregate consideration received by the Company for the additional common shares would purchase at the Warrant Price in effect immediately before such Issue, and</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:144px; width:168px; float:left">(b)</p>
<p style="margin:0px; text-indent:-2px" align="justify">the denominator of which is the amount of common stock outstanding immediately before such issue plus the number of such additional common shares.</p>
<p style="margin:0px; clear:left" align="justify">Upon each adjustment of the Warrant Price, the number of Shares issuable upon exercise of the Warrant shall be increased to equal the quotient obtained by dividing (a)&nbsp;the product resulting from multiplying (i)&nbsp;the number of Shares issuable upon exercise of the Warrant and (ii)&nbsp;the Warrant Price, in each case as in effect immediately before such adjustment, by (b)&nbsp;the adjusted Warrant Price.</p>
<p style="margin:0px" align="justify"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:72px; float:left">2.5</p>
<p style="margin:0px; text-indent:-2px" align="justify"><u>No Impairment</u>. &nbsp;The Company shall not, by amendment of its Certificate of Incorporation or through a 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 to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out all the provisions of this Article&nbsp;2 and in taking all such action as may be necessary or appropriate to protect Holder&#146;s rights under this Article against impairment. &nbsp;If the Company takes any action affecting the Shares or its common stock other than as described above that adversely affects Holder&#146;s rights under this Warrant, the Warrant Price shall be adjusted downward and the number of Shares issuable upon exercise of this Warrant shall be adjusted upward in such a manner that the aggregate Warrant Price of this Warrant is unchanged.</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:72px; float:left">2.6</p>
<p style="margin:0px; text-indent:-2px" align="justify"><u>Certificate as to Adjustments</u>. &nbsp;Upon each adjustment of the Warrant Price, the Company at its expense shall promptly compute such adjustment, and furnish Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the facts upon which such adjustment is based. &nbsp;The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price in effect upon the date thereof and the series of adjustments leading to such Warrant Price.</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:72px; float:left">2.7</p>
<p style="margin:0px; text-indent:-2px"><u>Event of Default Adjustments</u>. &nbsp;Upon the occurrence of an Event of Default under the Loan Agreement, Lender may acquire an additional 50,000 Shares of Borrower for the first 30 day period the Default remains uncured and an additional 75,000 Shares of Borrower for each subsequent 30 day period the Default remains uncured. &nbsp;</p>
<p style="margin:0px; clear:left" align="justify"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; width:72px; float:left">ARTICLE 3.</p>
<p style="margin:0px; text-indent:-2px"><u>REPRESENTATIONS AND COVENANTS OF THE COMPANY</u>.</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:72px; float:left">3.1</p>
<p style="margin:0px; text-indent:-2px" align="justify"><u>Representations and Warranties</u>. &nbsp;The Company hereby represents and warrants to the Holder as follows:</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:144px; width:168px; float:left">(a)</p>
<p style="margin:0px; text-indent:-2px" align="justify">The initial Warrant Price referenced on the first page of this Warrant is not greater than the fair market value of the Shares as of the date of this Warrant.</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:144px; width:168px; float:left">(b)</p>
<p style="margin:0px; text-indent:-2px" align="justify">All Shares that may be issued upon the exercise of the purchase right represented by this Warrant, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws.</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:144px; width:168px; float:left">(c)</p>
<p style="margin:0px; text-indent:-2px" align="justify">The capitalization table attached hereto correctly sets forth the authorized, issued and outstanding shares of capital stock of the Company and all options to acquire any such shares.</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:72px; float:left">3.2</p>
<p style="margin:0px; text-indent:-2px" align="justify"><u>Notice of Certain Events</u>. &nbsp;If the Company proposes at any time (a)&nbsp;to declare any dividend or distribution upon its common stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b)&nbsp;to offer for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other rights; (c)&nbsp;to effect any reclassification or recapitalization of common stock; (d)&nbsp;to merge or consolidate with or into any other corporation, or sell, lease, license, or convey all or substantially all of its assets, or to liquidate, dissolve or wind up; or (e)&nbsp;offer holders of registration rights the opportunity to participate in an underwritten public offering of the company&#146;s securities for cash, then, in connection with each such event, the Company shall give Holder (1)&nbsp;at least 20&nbsp;days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of common stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) and (b) above; (2)&nbsp;in the case of the matters referred to in (c) and (d) above at least 20&nbsp;days prior written notice of the date when the same will take place (and specifying the date on which the holders of common stock will be entitled to exchange their common stock for securities or other property deliverable upon the occurrence of such event); and (3)&nbsp;in the case of the matter referred to in (e) above, the same notice as is given to the holders of such registration rights.</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; width:72px; float:left">ARTICLE 4.</p>
<p style="margin:0px; text-indent:-2px"><u>MISCELLANEOUS</u>.</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:72px; float:left">4.1</p>
<p style="margin:0px; text-indent:-2px" align="justify"><u>Term</u>. &nbsp;This Warrant is exercisable, in whole or in part, at any time and from time to time on or before the Expiration Date set forth above. </p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:72px; float:left">4.2</p>
<p style="margin:0px; text-indent:-2px" align="justify"><u>Legends</u>. &nbsp;This Warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin:0px; padding-left:48px; padding-right:48px">THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR IN ACCORDANCE WITH APPLICABLE LAW.</p>
<p style="margin:0px"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:72px; float:left">4.3</p>
<p style="margin:0px; text-indent:-2px" align="justify"><u>Compliance with Securities Laws on Transfer</u>. &nbsp;This Warrant and the Shares issuable upon exercise this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee.</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:72px; float:left">4.4</p>
<p style="margin:0px; text-indent:-2px" align="justify"><u>Transfer Procedure</u>. &nbsp;Subject to the provisions of Section&nbsp;4.3, Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the securities issuable, directly or indirectly, upon conversion of the Shares, if any) by giving the Company notice of the portion of the Warrant being transferred setting forth the name, address and taxpayer identification number of the transferee and surrendering this Warrant to the Company for reissuance to the transferee(s) (and Holder, if applicable), provided that no such notice shall be required for a transfer to an affiliate of Holder.</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:72px; float:left">4.5</p>
<p style="margin:0px; text-indent:-2px" align="justify"><u>Notices</u>. &nbsp;All notices and other communications from the Company to the Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company or the Holder, as the case may be, in writing by the Company or such Holder from time to time.</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:72px; float:left">4.6</p>
<p style="margin:0px; text-indent:-2px" align="justify"><u>Waiver</u>. &nbsp;This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.</p>
<p style="margin:0px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:72px; float:left">4.7</p>
<p style="margin:0px; text-indent:-2px" align="justify"><u>Attorneys&#146; Fees</u>. &nbsp;In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys&#146; fees.</p>
<p style="margin-top:0px; margin-bottom:13.333px; clear:left"><br></p>
<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:72px; float:left">4.8</p>
<p style="margin:0px; text-indent:-2px" align="justify"><u>Governing Law</u>. &nbsp;This Warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its principles regarding conflicts of law.</p>
<p style="margin-top:0px; margin-bottom:13.333px; clear:left"><br></p>
<table style="margin-top:0px; font-size:10pt" cellpadding="0" cellspacing="0" align="center">
<tr style="font-size:0">
<td width="289.2"></td>
<td width="60"></td>
<td width="289.2"></td>
</tr>
<tr>
<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="289.2"><p style="margin:0px">&nbsp;</p></td>
<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="60"><p style="margin:0px">&nbsp;</p></td>
<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="289.2">
<p style="margin:0px">PEPPERBALL TECHNOLOGIES, INC.</p>
</td>
</tr>
<tr>
<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="289.2"><p style="margin:0px; padding-left:9.6px; padding-right:9.6px">&nbsp;</p></td>
<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="60"><p style="margin:0px; padding-left:9.6px; padding-right:9.6px">&nbsp;</p></td>
<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="289.2"><p style="margin:0px; padding-left:9.6px; padding-right:9.6px">&nbsp;</p></td>
</tr>
<tr>
<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="289.2"><p style="margin:0px; padding-left:9.6px; padding-right:9.6px">&nbsp;</p></td>
<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="60"><p style="margin:0px; padding-left:9.6px; padding-right:9.6px">&nbsp;</p></td>
<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="289.2">
<p style="margin:0px">By: &nbsp;/s/ John Stiska</p>
</td>
</tr>
<tr>
<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="289.2"><p style="margin:0px; padding-left:9.6px; padding-right:9.6px">&nbsp;</p></td>
<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="60"><p style="margin:0px; padding-left:9.6px; padding-right:9.6px">&nbsp;</p></td>
<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="289.2"><p style="margin:0px; padding-left:9.6px; padding-right:9.6px">&nbsp;</p></td>
</tr>
<tr>
<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="289.2"><p style="margin:0px; padding-left:9.6px; padding-right:9.6px">&nbsp;</p></td>
<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="60"><p style="margin:0px; padding-left:9.6px; padding-right:9.6px">&nbsp;</p></td>
<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="289.2">
<p style="margin:0px">Name: &nbsp;John Stiska</p>
</td>
</tr>
<tr>
<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="289.2"><p style="margin:0px; padding-left:9.6px; padding-right:9.6px">&nbsp;</p></td>
<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="60"><p style="margin:0px; padding-left:9.6px; padding-right:9.6px">&nbsp;</p></td>
<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="289.2"><p style="margin:0px; padding-left:9.6px; padding-right:9.6px">&nbsp;</p></td>
</tr>
<tr>
<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="289.2"><p style="margin:0px; padding-left:9.6px; padding-right:9.6px">&nbsp;</p></td>
<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="60"><p style="margin:0px; padding-left:9.6px; padding-right:9.6px">&nbsp;</p></td>
<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="289.2">
<p style="margin:0px">Title: &nbsp;Chief Executive Officer</p>
</td>
</tr>
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<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="289.2"><p style="margin:0px; padding-left:9.6px; padding-right:9.6px">&nbsp;</p></td>
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<p style="margin:0px; page-break-before:always" align="center">APPENDIX 1</p>
<p style="margin:0px" align="center"><u>NOTICE OF EXERCISE</u></p>
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<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:96px; float:left">1.</p>
<p style="margin:0px; text-indent:-2px">The undersigned hereby elects to purchase ______________ shares of the Common Stock of PEPPERBALL TECHNOLOGIES, INC.<b> </b>pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full.</p>
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<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:96px; float:left">1.</p>
<p style="margin:0px; text-indent:-2px">The undersigned hereby elects to convert the attached Warrant into Shares in the manner specified in the Warrant. &nbsp;This conversion is exercised with respect to ______________ of the Shares covered by the Warrant.</p>
<p style="margin:0px; text-indent:48px; clear:left">[Strike paragraph that does not apply.]</p>
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<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:96px; float:left">2.</p>
<p style="margin:0px; text-indent:-2px">Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name as is specified below:</p>
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<p style="margin:0px; padding-left:96px" align="justify">J.A.&amp; G.L. Simpson Trust, dtd May 18, 1988, a California Trust</p>
<p style="margin:0px; padding-left:96px" align="justify">____________________</p>
<p style="margin:0px; padding-left:96px" align="justify">____________________</p>
<p style="margin:0px; padding-left:96px" align="justify">Or Registered Assignee</p>
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<p style="margin-top:0px; margin-bottom:-2px; text-indent:48px; width:96px; float:left">3.</p>
<p style="margin:0px; text-indent:-2px">The undersigned represents it is acquiring the shares solely for its own account and not as a nominee for any other party and not with a view toward the resale or distribution thereof except in compliance with applicable securities laws.</p>
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<p style="margin:0px">J.A.&amp; G.L. SIMPSON TRUST, DTD MAY 18, 1988, A CALIFORNIA TRUST or Registered Assignee</p>
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<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="289.2"><p style="margin:0px; padding-left:9.6px; padding-right:9.6px">&nbsp;</p></td>
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<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="60"><p style="margin:0px; padding-left:9.6px; padding-right:9.6px">&nbsp;</p></td>
<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="289.2"><p style="margin:0px; padding-left:9.6px; padding-right:9.6px">&nbsp;</p></td>
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<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="60"><p style="margin:0px">&nbsp;</p></td>
<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="289.2"><p style="margin:0px">&nbsp;</p></td>
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<p style="margin:0px">(Signature)</p>
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<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="60"><p style="margin:0px; padding-left:9.6px; padding-right:9.6px">&nbsp;</p></td>
<td style="margin-top:0px; padding-left:9.6px; padding-top:0px; padding-right:9.6px; padding-bottom:0px" valign="top" width="289.2"><p style="margin:0px; padding-left:9.6px; padding-right:9.6px">&nbsp;</p></td>
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<p style="margin:0px">(Date)</p>
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