Up to $3,500,000 of senior secured notes (the “Note” or “Notes”) are being issued by Drop Zone Canopy Company, LLC (“DZCC” or the “Company”) via one or more Tranches (as further defined herein) to procure raw materials and advance labor costs for the manufacturing of parachutes by Paradigm Parachute and Defense, Inc. (“Paradigm”).

Paradigm is in the business of providing high quality, precision manufactured, military style parachute systems and associated defense products to global commercial, government, and humanitarian customers.

The materials purchased by DZCC will be transported and stored by Paradigm at its Pensacola, Florida parachute manufacturing facility before being incorporated into contracted parachute systems on behalf of Paradigm and sold to its customers.

The Notes will be an obligation of DZCC and be secured by the inventory, accounts receivable, and cash of DZCC.

DZCC is a North Carolina limited liability company recently organized, managed, and 100% owned by Carolina Financial Group, LLC for the procurement of raw materials and advancement of labor costs for parachute manufacturing on behalf of Paradigm.

Individuals and institutional investors who qualify as accredited investors as defined by Rule 501 of Regulation D of the U.S. securities laws (each an “Investor” and together the “Investors”).

Up to $3,500,000 of Notes are being issued by DZCC. The Notes shall be issued as a result of a request by Paradigm that DZCC purchase certain raw materials and advance certain labor costs, with each such issuance referred to herein as a “Tranche”.

The minimum investment amount for an investment in the Notes will be $15,000, subject to exception by DZCC.

Funds advanced by Investors but not yet utilized for the purchase of raw materials and/or the advancement of labor costs, and in turn a Tranche, shall remain in the bank account of DZCC (with such funds being referred to herein as “Unallocated Funds”). Unallocated Funds shall not incur interest until a Tranche is issued utilizing such funds. In the event that Unallocated Funds exceed the required amount of funds needed in the issuance of a Tranche, the Unallocated Funds of each Investor shall be allocated to such Tranche based on each Investor’s pro-rata portion of the aggregate Unallocated Funds.

The Notes will pay Investors an annual interest rate equaling 12.0% of any outstanding principal amount, calculated on a 30./360 basis. Payment will be due on the first day of the calendar month following the calendar month after which a Tranche is issued (for illustration purposes only: If a Tranche is issued on April 7th, the first interest payment for such Tranche shall be due on May 1st) and the first day of each month thereafter until the Maturity Date (as defined below).

May 1st, 2025 (the “Maturity Date”), upon which time all outstanding Note principal and interest is due and payable.

Beginning on the first day of the ninth calendar month following the month in which a Tranche is issued, DZCC shall make payments of principal on a straight-line amortization style until the Maturity Date (for illustration purposes only: If a Tranche is issued on April 7th, amortizing principal payments shall begin on January 1st).

The Notes may be prepaid at any time, in whole or in part, but only if investors have been paid, through a combination of previous interest payments and, if necessary, additional amounts at the time of the prepayment, an amount totaling at least one full year of 12.0% interest, based upon their original principal investment. In the event that multiple Tranches are outstanding, any amounts prepaid by DZCC shall be apportioned amongst such tranches based on their pro-rata portion of the aggregate outstanding principal.

It is expected that the first Tranche of Notes will be issued on or before April 7th, 2023. The final Tranche of Notes shall be issued on or before July 31st, 2023.

Investors shall have a perfected security interest in the (i) Accounts, and (ii) Inventory of DZCC (the “Collateral”). DZCC shall file a financing statement against Paradigm perfecting a security interest on Paradigm’s Inventory acquired as a result of a Purchase Advance (as further defined herein).

DZCC shall make certain warranties and representations usual for transactions of this type, including but not limited to: accuracy of financial statements; no material adverse change; absence of litigation; no violation of agreements; compliance with laws; payment of taxes; solvency; compliance with environmental matters; accuracy of information; and validity, and priority and perfection of security interest in the collateral.

Collateral Coverage – The Collateral (with Inventory valued at its cost) will always be in excess of 94% of the outstanding principal balance of the Notes. DZCC will provide Investors with a Borrowing Base Certificate which will perform this calculation and certify whether DZCC is in compliance.

Restricted Member Distributions - If not in compliance with any other covenants associated with the Notes, DZCC shall not, without the prior written the Investors holding a majority of the outstanding principal balance under the Notes, make any distributions on a quarterly basis to its members/shareholders, other than tax distributions, which can be made at any time.

Limitation on Additional Indebtedness – DZCC will not create, incur, assume or permit to be outstanding any indebtedness that exceeds $500,000 and such indebtedness, if any, will not be allowed to place secondary liens or other liens on the Collateral.

As is usual for transactions of this type, including but not limited to performance of obligations; delivery of agreed financial information and compliance certificates; notices of default and litigation; maintenance of satisfactory insurance; compliance with laws; and payment of taxes.

As is usual for transactions of this type, including but not limited to transfer of assets, incurrence of additional debt above the allowable amount, mergers, changes in primary business, etc.

An “Event of Default” under the Notes shall include: (a) the failure to pay when due any required interest or principal; or (b) any warranty, representation, statement, report or certificate made or delivered to the Administrative Agent or the Investors by DZCC or any of DZCC’s officers, directors, employees or agents, now or in the future, shall be untrue or misleading in any material respect; or (c) DZCC shall fail or neglect to perform or shall violate any Financial Covenant, Affirmative Covenant or Negative Covenant as specified in the Loan and Security Agreement supporting the Notes, subject to a 5 business day grace period.

If any interest or principal due to the Investors is not paid when due or DZCC is otherwise in default, the DZCC shall incur an incremental 5% (annualized) “Penalty Fee” per month for so long as such default is in effect. The Penalty Fee shall be based upon the aggregate principal balances of all outstanding Notes together with unpaid interest, subject to a five working day grace period and the occurrence of a force majeure event. Once the default has been remedied, the interest rate will return to 12.0%.

DZCC and Paradigm shall enter into a Materials Purchase Agreement whereby DZCC shall occasionally purchase certain raw materials and advance labor costs required by Paradigm for the manufacturing of its parachutes.

In exchange for the purchases of such materials and advancement of labor, Paradigm shall store such raw materials until utilized by Paradigm in its manufacturing process and repay the amount of such purchases along with certain fees.

Upon the identification of raw materials to be acquired and labor costs to be advanced, Paradigm shall request in writing (each a “Purchase Request”) that DZCC either (1) submit a purchase order to the supplier of such materials and acquire the raw materials, or (2) advance the required funds for such purchase to Paradigm, after which, within 5 business days, Paradigm shall purchase the materials from the supplier. The raw materials shall be stored by Paradigm until utilized in the manufacturing of parachutes (the “Finished Parachutes”).

In addition to the purchase of raw materials identified in a Purchase Request, DZCC shall also advance funds pursuant to a commercially reasonable estimate of labor costs associated with the manufacturing of Finished Parachutes in connection with the Purchase Request.

Upon the issuance of a Purchase Request, DZCC shall issue to Paradigm a summary of each purchase (each a “Purchase Summary”) detailing the total amount of funds utilized in the purchase of such materials ( including the advancement of estimated labor costs, and with the aggregate of each such purchase amount referred to herein as the “Outstanding Purchase Balance”) and a schedule detailing the applicable Balance Reduction Payments and Advance Fees (as further defined herein).

Beginning on the 1st day of the ninth calendar month following the issuance of a Purchase Summary, and on the 1st day of every calendar month thereafter, Paradigm shall make equal monthly payments to reduce the Outstanding Purchase Balance of each Purchase Summary to zero on May 1st, 2025 (each a “Balance Reduction Payment”). For illustration purposes only: If a Purchase Summary is issued on April 7th, Balance Reduction Payments shall begin on January 1st)

Beginning on the first day of the calendar month following the calendar month after in which a Purchase Summary is issued and the first day of each month thereafter until May 1st, 2025, Paradigm shall pay to DZCC a monthly “Advance Fee” in an amount equal to 12.0% (per annum) of the Outstanding Purchase Balance, calculated on a 30/360 basis (for illustration purposes only: If a Purchase Summary is issued on April 7th, the first Advance Fee payment for such Outstanding Purchase Balance shall be due on May 1st)

In the event that Paradigm fails to make any Balance Reduction Payment or pay any Advance Fee when due, the rate at which the Advance Fee is calculated shall be increased by 5.0% for so long as such payment is late, provided that Paradigm shall have a five business day cure period prior to incurring such Late Fee.

Paradigm shall have the option to reduce the Outstanding Purchase Balance of any Purchase Summary ahead of the Payment Schedule, provided that the total payments under such Purchase Summary equal an amount equal to the Outstanding Purchase Balance plus the Advance Fees that would have been earned had the Outstanding Purchase Balance been outstanding for a full year.

DZCC shall receive a monthly management fee equal to $10,000 per month, which shall accrue until paid from funds received by Paradigm from sales of Finished Parachutes.

All purchased materials shall be delivered to and stored at the facilities of Paradigm in Pensacola, FL. Materials purchased by DZCC shall be stored separately from the materials owned by Paradigm and clearly identified as the property of DZCC.

In the event Paradigm has raw materials available in its own inventory to meet the demand for its parachutes, Paradigm shall first use its own raw materials prior to utilizing the raw materials purchased by and belonging to DZCC.

CFG Financial Services, LLC (the “Administrative Agent”), an affiliate of CFS and CFG, shall serve as administrative agent. The role of the Administrative Agent includes: Oversight of DZCC compliance with all Note covenants, processing of interest and principal payments from DZCC to Investors, preparation and payment of all Regulation D filings and other actions required in the administration of the Notes on behalf of the Investors.

Carolina Financial Securities, LLC (“CFS”). CFS, a FINRA-registered broker dealer, is the exclusive Placement Agent for the Offering and will receive a placement fee payable by DZCC equal to 6.0% of the gross proceeds received by DZCC as a result of the Offering. Such placement fee will be equal to 4.0% for gross proceeds received by DZCC from Investors that are shareholders of Paradigm. CFS may share up to 50% of its fees with Carofin, LLC, an affiliated Broker-Dealer, for its assistance in the placement of the Offering.

The Placement Fee will be allocated towards each Tranche as each such Tranche is issued and payable directly from DZCC to CFS. (for illustration purposes only: if a tranche is issued for $1,000,000 worth of materials, the total Outstanding Purchase Balance payable by Paradigm shall be $1,063,829.79).

The Loan being offered should be considered a speculative investment. The ability of DZCC to achieve its objectives may be determined by factors beyond its control that cannot be predicted at this time. Consequently, there can be no assurance that DZCC and Paradigm’s efforts to continue its business operations will prove to be sufficient to enable DZCC to generate the funds required to repay the Loan. Anyone investing in the Loan should do so only if they are financially able to sustain the loss of their entire investment and should recognize that such a possibility exists.

A fundamental risk, relating to all Loans, is a chance that DZCC will fail to make a principal and interest payment when due. Borrowers with higher credit risks typically offer higher yields for this added risk, such as DZCC. Changes in financial conditions of DZCC, changes in economic and political conditions in general, changes in economic or political conditions specific to DZCC and Paradigm are factors that may have an adverse impact on DZCC’s credit quality and security values.

This offering is predicated upon the Loan and Security Agreement between DZCC and the Investors for the repayment of its borrowings from the Investors, and, if necessary, on the third-party sale of the Collateral, which secures the Notes. If the Agreement becomes unenforceable or is not honored by DZCC for any reason it will have a severe adverse effect on the sale of the collateral.

The DZCC’s business is initially dependent on the Parachute industry. If demand were greatly diminished, it could affect the DZCC and Paradigm’s ability to sell product to its current customers and it would have to seek new markets for its product.

As this Loan is a private transaction, there is currently no public market for the Notes being offered herein. This Note is not a publicly registered security and will have no secondary sale liquidity.

Investors in the Notes shall hold a first priority perfected security interest in the inventory and Accounts of DZCC. It is possible that the value of the Inventory and Accounts is reduced in the event of a sale to repay the Investors and that the amount recovered for such collateral is insufficient to repay any outstanding amounts in full.

CFG Financial Services, LLC, the Administrative Agent for this Offering is also the administrative agent for those loans issued by Paradigm pursuant to that certain Loan and Security Agreement dated March 1st, 2022 (the “Paradigm Notes”). In addition, certain Investors in this Offering may also be lenders under the Paradigm LSA or shareholders of Paradigm. As such, CFG FS, shareholders and the holders of the Paradigm Notes may have interests adverse of Paradigm to the Investors in the Notes.

The Loan and Security Agreement contains certain aspects which may affect Investors as a whole upon the consent of a Investors holding a certain threshold of outstanding principal and without the affirmative consent of other Investors, which may include affiliates and employees of Paradigm as well as other parties with conflicts of interest. As such, purchasers of the Securities shall carefully weigh how such governance mechanics may adversely affect them as it pertains to their membership in the Company.

Any substantial decline in the demand for products sold by DZCC and Paradigm, but not limited to, the introduction of substitute products, may cause a decline in the market value of DZCC’s product and negatively impact DZCC’s financial performance.

Pricing for parachutes varies significantly depending on market conditions. This may negatively impact DZCC’s financial performance.

Outbreaks of disease and other events, which may be beyond the company’s control, producers who sell materials to Paradigm, could significantly affect demand for its products, consumer perceptions of products, the availability of materials for purchase and its ability to conduct its operations.

Success for Paradigm’s and DZCC’s business depends, in part, on the quality and safety of Paradigm’s products. If the products are found to be defective or unsafe, or if they otherwise fail to meet customer standards, relationships with customers could suffer. Further, Paradigm’s reputation could be diminished, and Paradigm could lose sales and/or become subject to liability claims, any of which could result in a material adverse effect on the business.

Paradigm and DZCC’s activities are subject to international, federal, and state laws. Paradigm’s activities are expected to have a variety of regulatory oversight as development proceeds. Development of any of Paradigm’s operations will be dependent on Paradigm satisfying regulatory guidelines and, where required, being approved by governmental authorities. Paradigm intends to conduct their business activities in a compliant manner and in accordance with all applicable laws but may still be subject to accidents or other unforeseen events which may compromise its performance, and which may have adverse financial implications.

Changes in the laws, regulations and policies including the interpretation or enforcement thereof, that are germane to Paradigm’s industry, can affect its business including changes in accounting standards, tax laws, data privacy as well as anti-corruption laws. Additionally, as Paradigm continues to sell and expand its international business, it may be subject to laws relating to selective distribution, environmental or climate change laws, trade accords and customs regulations could adversely affect Paradigm’s distribution endeavors.

Paradigm competes with other companies in the industry. Competitors include companies that may have greater financial and other resources than Paradigm. Additionally, these competitors may use pricing or other strategies to prevent Paradigm from achieving its business development objectives. This may have a material adverse impact on the financial position and prospects of Paradigm.

Due to the size of the organization, Paradigm has a significant reliance on certain key employees, particularly Aaron Nazaruk and Alexander Alvarado. If Paradigm is unable to retain key employees it could jeopardize Paradigm’s ability to implement its business plan, its relationships with its customers, and its financial stability.

Paradigm expects to continue to grow its overall operations and this may strain Paradigm’s resources. Any inability to manage growth effectively would have a material adverse effect on Paradigm’s business.

DZCC reserves the right to accept or reject any proposed investment in its sole discretion. Subject to this discretion, it intends to accept investments on a “first-come, first-served” basis, with the consequence that Lenders will be allocated a portion of the total Offering, based upon the amounts they have committed, in the order in which such commitments have been accepted. DZCC is not required to accept all commitments tendered to it. There is no assurance, therefore, that your commitment will necessarily be accepted in whole or in part by it should it raise more or less funds than are needed to make its investments.

The financial projections contained in this Offering Summary and any supplements represent Paradigm and DZCC’s estimated results of operations. The financial projections have been prepared upon the basis of assumptions and estimates which may differ from actual events and/or circumstances.

Paradigm and DZCC has not requested and will not request any tax ruling from the IRS regarding the tax consequences of their activities. Accordingly, there is no certainty as to the tax consequences of participating in the Loan. Paradigm and DZCC have not sought or obtained a legal opinion with respect to the tax treatment of the offering proceeds or issuance of the Loan. Accordingly, Investors are urged to consult their own tax advisor with respect to the federal and state tax consequences arising from participation in this Offering.

There is a possibility that the IRS will audit DZCC’s income tax returns. If DZCC’s income tax returns are audited, your return might also be audited.

No assurance can be given that the current Congress or any future Congress will not enact federal income tax legislation that could adversely affect the tax consequences of participating in the Loan.

Potential investors should not rely exclusively on one aspect of the security structure, such as the debt service capacity of the Company when making an investment decision on whether or not to participate in this Offering.

In addition to the above risks, businesses are often subject to risks not foreseen or fully appreciated by management. Prospective investors reviewing this Offering Summary should keep in mind other possible risks that could be important to the success of their investment in the Notes.