What are the potential consequences of a Best Brains franchisee failing to meet their obligations regarding advertising (Item 9) in a non-exclusive territory (Item 12)?

Note 2-Initial Training Fee. This is the fee to attend our initial training.

Note 3-Initial Inventory, Center Décor, & Equipment. You will need inventory, Center Décor, and equipment to complete and stock your learning center with books and learning materials.

Note 4-Transportation and Living Expenses During Training. You will incur transportation, lodging, and meal expenses during initial training. These costs will vary depending upon how far you travel, the time of year, the level of accommodations you select, and other factors.

Note 5-Lease Security Deposit. You will be required to pay a security deposit on your leased location. These costs vary considerably in different parts of the country.

Note 6-Utility Security Deposits. Utility companies such as gas and electric normally require security deposits to begin service.

Note 7-First Month's Rent. We estimate the cost for your first month's rent for your learning center. Real estate leasing costs vary in different areas of the country.

Note 8-Leasehold Improvements. You will need to build out your learning center to our specifications. You may incur little expense if the premises were previously used for a similar concept and more expense if you must remodel premises from scratch or which were previously built out for another business format.

Note 9-Signage. You must use signage pursuant to our specifications. Your costs will vary.

Note 10-Furniture and Fixtures. You must obtain chairs, desks, and other items to complete your learning center.

Note 11-Office Equipment and Supplies. You will need basic office equipment and supplies for the back office support of your learning center.

Note 12-Business Licenses and Permits. You must obtain needed state and local licenses and permits to operate. Your costs will vary.

Note 13-Professional Fees. You may incur professional fees to assist with this franchise purchase and the set up of your franchisee entity.

Note 14-Business Insurance. You must obtain insurance pursuant to our specifications. We estimate your costs for the first 90 days only. Your costs will vary.

Note 15-Grand Opening Advertising. You must engage in Grand Opening Advertising to promote the opening of your business pursuant to our guidelines.

Note 16- Grand Opening Representative Fee. Before opening for business, you must pay to us a Grand Opening Representative Fee of $3,500, which covers travel, lodging, and other costs for a Corporate Representative to attend your Grand Opening.

Note 17-Additional Funds for First 3 Months. This item estimates additional start-up expenses such as payroll and miscellaneous expenses. These expenses do not include any draw or salary for you nor any repayment of debt obligations. We relied on our shareholder's learning center experience since 2011 to compile these estimates.

Note 18-Total. Amounts paid to us or the Brand Development Fund are not refundable. Amounts paid to others may or may not be refundable depending upon the policies of the third parties.

ITEM 8. RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES

The Goods or Services Required to be Purchased or Leased

Advertising Material.

You must either use advertising templates which we make available or specify or obtain our approval before placing any advertising.

Computer Hardware and Software.

You must purchase the computer hardware and software that we specify.

Furniture, Fixtures, Equipment, Inventory, Center Décor, and Signs.

You must purchase furniture, fixtures, equipment, inventory, center décor, and signs pursuant to our specifications or prior written approval.

You must purchase certain inventory, equipment, and center décor from us.

Instructional Material.

You are required to purchase Abacuses and Student Worksheets, Merchandise, and Instructional Materials solely from us.

Insurance.

You must purchase insurance in the types and amounts of coverage that we specify and we reserve the right to specify designated broker(s) or insurance carrier(s). At present, we require franchisees to purchase the following minimum insurance requirements:

• 1. Commercial general liability insurance policy, including products liability, combined single limit for bodily injury and property damage liability in the minimum amount of $1,000,000 per occurrence and $2,000,000 aggregate.
• 1. Workers' compensation insurance as required by local law.
• 1. Best Brains, Inc. must be listed as an additional insured and provide for written communication at least 30 days in advance of a cancellation of the policy.
• 1. It is recommended but not required that franchisees acquire sexual misconduct liability insurance for themselves and employees.

Lease and Leasehold Improvement.

You may lease from any landlord but your site selection is subject to our approval. You must build out your premises pursuant to our standards.

Teacher Licensure.

To acquire a Teacher Learning Center, you must be a certified teacher in the United States or Canada.

Training Services.

You must purchase or use the training services that we offer.

Whether We or Our Affiliates Are Approved Suppliers

We are an approved supplier of advertising material, instructional materials, certain inventory, equipment, and center décor, and training services, and the only approved supplier of instructional materials, certain inventory, equipment, center décor, and training services.

Officer Interests in Suppliers

Our officers, Lakshmi Boppana, Ajay Sunkara, Anil Sunkara, and Anil Uppalapati, own an interest in us.

Our officer, Ajay Sunkara, owns an interest in A1 Kaiser, Inc., a supplier of information technology services to our franchisees.

Our officer, Anil Sunkara, owns an interest in Advansoft International Inc., a supplier of information technology services to our franchisees. Anil Sunkara also owns an interest in Opportunity Media, a supplier of print and design material to our franchisees.

Approval of Alternate Suppliers

To have an alternate supplier approved, you must first notify us in writing, submit sufficient specifications, samples and information, along with our then current fee (which is currently $500 per day) for each person we provide for this determination plus reasonable expenses. Our criteria for approving suppliers is confidential and is not available to franchisees. You may contract only with suppliers whom we have approved. We will notify you of our approval or disapproval within 30 days of our receiving all requested information. We may revoke our approval of a supplier at any time for any reason and will notify you through the Operations Manual or other written bulletin.

Specifications

We issue specifications to franchisees. We issue and modify the specifications by updating the confidential Manual.

Revenue from franchisee purchases

We derive revenue from required purchases by franchisees.

In the fiscal year ending December 31, 2024, our revenues from selling Training Services, Abacuses and Student Worksheets and Instructional Materials to franchisees was $2,824,687 or 32.3% of our total revenue of $8,746,534.

Required Purchases and Leases as a Proportion of Costs

We estimate your required purchases and leases will represent 25-50% of your overall purchases and leases in establishing and operating the Franchised Business.

Supplier Payments to Us

At present, suppliers do not make payments to us from franchisee purchases, but we reserve the right to enter into such arrangements.

Cooperatives

We do not have any purchasing or distribution cooperatives.

Purchase Arrangements

We may negotiate purchase price arrangements with suppliers, including price terms, for the benefit of franchisees.

Material benefits

We do not provide material benefits to you based on your use of a particular supplier. However, in order to renew your franchise agreement, you must be in compliance with it, including supplier standards, and we can terminate your franchise agreement if you breach it.

ITEM 9. FRANCHISEE'S OBLIGATIONS

FRANCHISEE'S OBLIGATIONS

This table lists your principal obligations under the franchise and other agreements. It will help you find more detailed information about your obligations in these agreements and in other items of this disclosure document.

| Obligation | Section in Agreement | Item in Disc