The Management Board of Proguns Group S.A., with its registered officein Warsaw (the "Issuer"), hereby announces that on 21 October 2025, theIssuer signed a Term Sheet with Forum 119 Closed-End Investment Fund,with its registered office in Kraków (the "Investor"), GrupaNiewiadów-PGM S.A., with its registered office in Warsaw ("GN-PGM"),and Zakłady Sprzętu Precyzyjnego Niewiadów sp. z o.o., with itsregistered office in Osiedle Niewiadów 49 ("ZSP").

The Term Sheet defines the key terms of the planned investment by theInvestor, valued at PLN 60 million, concerning the establishment inPoland of a factory producing 40 mm medium-caliber ammunition (the"Project").

The Project will be implemented in cooperation with ST EngineeringAdvanced Material Engineering Pte. Ltd., based in Singapore ("STEngineering"). The conclusion of a Memorandum of Understanding(MoU) between ST Engineering and ZSP was disclosed by GN-PGM in CurrentReport ESPI No. 56/2025, dated 3 September 2025.

The Term Sheet constitutes a preparatory stage for the technologytransfer and launch of 40 mm ammunition production at Fabryka AmunicjiPocisk S.A., based in Warsaw ("FAP"). According to the Term Sheet,during the implementation of the Project, the shareholders of FAP willbe ZSP, holding shares representing 51% of FAP's share capital, and theIssuer, holding shares representing 49% of FAP's share capital. Both ZSPand the Issuer are part of the GN-PGM Capital Group.

According to the provisions of the Term Sheet:

GN-PGM will exercise rights under the Issuer's Series A, B, and Csubscription warrants, acquiring - in exchange for PLN 7.4 million -shares representing, together with previously held shares, 50.20% of theIssuer's share capital, as a result of which the Issuer will becomea subsidiary of GN-PGM.

Subsequently, the Issuer will issue new shares, to be subscribed for asfollows:

a) GN-PGM will acquire 7,916,667 new shares in exchange fora contribution in kind, consisting of FAP shares representing 25% ofFAP's share capital;

b) The Investor will acquire 4,519,167 new bearer shares (the "NewIssue") in exchange for a cash contribution of PLN 20 million.

The subscription of the New Issue by the Investor will be subject to thefollowing conditions precedent:

a) registration of changes in the Issuer's shareholding structureconfirming that GN-PGM holds shares representing at least 50.20% of theIssuer's share capital;

b) acquisition by ZSP of no less than 67% of the shares in the sharecapital of FAP;

c) presentation by ZSP of a signed agreement with ST Engineering,providing for the possibility of transferring the rights and obligationsunder that agreement to an entity in which ZSP holds at least 51% ofshares or stock.

The Issuer will issue subscription warrants to the Investor, entitlingthe Investor to subscribe for up to 10% of the Issuer's share capital.

The Issuer and ZSP will sign a cooperation agreement, defining the termsof the Project's implementation and establishing the Issuer's obligationto transfer to ZSP PLN 4 million to support cooperation, particularly inthe production of 40 mm ammunition under a license granted by STEngineering.

GN-PGM and ZSP will enter into a share purchase agreement, under whichZSP will acquire 670,000 bearer shares in FAP, representing no lessthan 67% of FAP's share capital.

The Issuer will subscribe for shares representing 24% of FAP's increasedshare capital, in exchange for a cash contribution of PLN 19 million.

Upon acquisition and subscription of FAP shares in accordance withpoints 2(a) and 7, the Issuer will hold shares in FAP representing atotal of 49% of its share capital.

GN-PGM and ZSP will take steps to obtain ST Engineering's consent totransfer all rights and obligations arising from the MoU and thepreviously concluded 40 mm ammunition production agreement to FAP.

GN-PGM, ZSP, and the Issuer will take actions to ensure that FAP becomesthe owner of the real property located in Osiedle Niewiadów, where abuilding will be constructed in compliance with the requirementsnecessary to launch the production of 40 mm ammunition, as agreed withST Engineering (the "Property").

After registration of changes in FAP resulting from the acquisition andsubscription of shares by ZSP and the Issuer, FAP's Management Boardwill convene a General Meeting to adopt a resolution on the issuanceof participation bonds (the "Bonds") for a total issue price of PLN 40million, to be subscribed for by the Investor under the agreed issuanceterms.

The completion of the above-described investments is conditional uponthe successful completion of legal, financial, tax, and commercial duediligence of the Issuer and FAP, the execution of detailed transactiondocumentation(including agreements and documents defining the terms ofthe investment, share and bond acquisition), obtaining allnecessary corporate approvals, and the absence of any material adversechanges in the operations of the Issuer and FAP.

The terms of the Investor's subscription for the Bonds will be definedin the transaction documentation. The Bonds to be acquired by theInvestor will be secured, inter alia, by a pledge on FAP shares held bythe Issuer, a mortgage on the Property, and a call option granted by theIssuer in favor of the Investor.

The conclusion of the Term Sheet marks the first step towardstrengthening cooperation among the parties and achieving their sharedgoal of establishing a modern factory in Poland for the production of 40mm medium-caliber ammunition.

The implementation of the investment will enable the Issuer toparticipate in the creation of an integrated medium-caliber ammunitionproduction segment in Poland, covering design, licensed production, andsales of ammunition and components.

According to data from the European Defence Agency (EDA) and the NATOIndustrial Advisory Group Report (2024), the European 40 mm ammunitionmarket exceeds EUR 2 billion annually, with growing demand from thearmed forces of NATO member states and industrial partners in theCentral and Eastern European region.

The signing of the Term Sheet represents a further step in implementingthe Issuer's strategy, which assumes the development of competencies inthe defense technology market.

The Issuer considers the above information to be material, due to itssignificance for the Issuer's development and its potential impact onfinancial results. In the opinion of the Issuer's Management Board, theexecution and implementation of the Term Sheet will support the Issuer'sgrowth and significantly improve its financial performance.