Exhibit 4.1


 


NEITHER THIS NOTE NOR THE SECURITIES INTO
WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE. THESE SECURITIES HAVE BEEN SOLD IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. 


 


Arkados
Group, Inc.


 


Convertible
Promissory Note


 


	Issuance Date:  October 28, 2016	Original Principal Amount:	$38,500
	Note No. AKDS-1	Consideration Paid at Close:	$35,000


 


FOR VALUE RECEIVED,
Arkados Group, Inc., a Delaware corporation with a par value of $0.0001 per common share (“Par Value”) (the
“Company”), hereby promises to pay to the order of Lucas Hoppel or registered assigns (the “Holder”)
the amount set out above as the Original Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion
or otherwise, the “Principal”) when due, whether upon the Maturity Date (as defined below), acceleration, redemption
or otherwise (in each case in accordance with the terms hereof) and to pay interest (“Interest”) on any outstanding
Principal at the applicable Interest Rate from the date set out above as the Issuance Date (the “Issuance Date”)
until the same becomes due and payable, upon the Maturity Date or acceleration, conversion, redemption or otherwise (in each case
in accordance with the terms hereof).


 


The Original Principal Amount
is $38,500 (thirty-eight thousand five hundred) plus accrued and unpaid interest and any other fees. The Consideration is $35,000
(thirty-five thousand) payable by wire transfer (there exists a $3,500 original issue discount (the “OID”)). The Holder
shall pay $35,000 of Consideration upon closing of this Note.


 


(1)         GENERAL
TERMS


 


(a)          Payment
of Principal. The “Maturity Date” shall be January 30th, 2017, as may be extended at the option
of the Holder in the event that, and for so long as, an Event of Default (as defined below) shall not have occurred and be continuing
on the Maturity Date (as may be extended pursuant to this Section 1) or any event shall not have occurred and be continuing on
the Maturity Date (as may be extended pursuant to this Section 1) that with the passage of time and the failure to cure would
result in an Event of Default.


 


(b)          Interest.
A one-time interest charge of eight percent (8%) (“Interest Rate”) shall be applied on the Issuance Date to
the Original Principal Amount. Interest hereunder shall be paid on the Maturity Date (or sooner as provided herein) to the Holder
or its assignee in whose name this Note is registered on the records of the Company regarding registration and transfers of Notes
in cash or converted into Common Stock at the Conversion Price provided the Equity Conditions are satisfied.


 




    	 	 	 



     


    

 


(c)          Security.
This Note shall not be secured by any collateral or any assets pledged to the Holder


 


(2)         EVENTS
OF DEFAULT.


 


(a)          An
“Event of Default”, wherever used herein, means any one of the following events (whatever the reason and whether
it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court,
or any order, rule or regulation of any administrative or governmental body):


 


(i)          The
Company’s failure to pay to the Holder any amount of Principal, Interest, or other amounts when and as due under this Note
(including, without limitation, the Company’s failure to pay any redemption payments or amounts hereunder);


 


(ii)         A
Conversion Failure as defined in section 3(b)(ii)


 


(iii)        The
Company or any subsidiary of the Company shall commence, or there shall be commenced against the Company or any subsidiary of the
Company under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company
or any subsidiary of the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief
of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating
to the Company or any subsidiary of the Company or there is commenced against the Company or any subsidiary of the Company any
such bankruptcy, insolvency or other proceeding which remains undismissed for a period of 61 days; or the Company or any subsidiary
of the Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding
is entered; or the Company or any subsidiary of the Company suffers any appointment of any custodian, private or court appointed
receiver or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of sixty
one (61) days; or the Company or any subsidiary of the Company makes a general assignment for the benefit of creditors; or the
Company or any subsidiary of the Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay,
its debts generally as they become due; or the Company or any subsidiary of the Company shall call a meeting of its creditors with
a view to arranging a composition, adjustment or restructuring of its debts; or the Company or any subsidiary of the Company shall
by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate
or other action is taken by the Company or any subsidiary of the Company for the purpose of effecting any of the foregoing;


 


(iv)        The
Company or any subsidiary of the Company shall default in any of its obligations under any other Note or any mortgage, credit agreement
or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there
may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement
of the Company or any subsidiary of the Company in an amount exceeding $100,000, whether such indebtedness now exists or shall
hereafter be created; and


 


(v)         The
Common Stock is suspended or delisted for trading on the Over the Counter OTCQB Venture Marketplace or OTCPink Open Marketplace
(the “Primary Market”).


 


(vi)        The
Company loses its status as “DTC Eligible.”


 


(vii)       The
Company shall become late or delinquent in its filing requirements as a fully-reporting issuer registered with the Securities &
Exchange Commission.


 




    	 	2	 



     


    

 


(viii)      The
Company shall fail to reserve and keep available out of its authorized Common Stock a number of shares equal to at least 3 (three)
times the full number of shares of Common Stock issuable upon conversion of all outstanding amounts under this Note.


 


(b)          Upon
the occurrence of any Event of Default, the Outstanding Balance shall immediately increase to 140% of the Outstanding Balance immediately
prior to the occurrence of the Event of Default (the “Default Effect”) and a daily penalty of $500 (five hundred) will
accrue until the default is remedied. The Default Effect shall automatically apply upon the occurrence of an Event of Default without
the need for any party to give any notice or take any other action.


 


(3)         CONVERSION
OF NOTE. This Note shall be convertible into shares of the Company’s Common Stock, on the terms and conditions set forth
in this Section 3.


 


(a)          Conversion
Right. Upon the event of a default, subject to the provisions of Section 3(c), at any time or times on or after the Issuance
Date, the Holder shall have the right but not the obligation to convert any portion of the outstanding and unpaid Conversion Amount
(as defined below) into fully paid and nonassessable shares of Common Stock in accordance with Section 3(b), at the Conversion
Price (as defined below). The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to this
Section 3(a) shall be equal to the quotient of dividing the Conversion Amount by the Conversion Price. The Company shall not issue
any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share
of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall
pay any and all transfer agent fees, legal fees, costs and any other fees or costs that may be incurred or charged in connection
with the issuance of shares of the Company’s Common Stock to the Holder arising out of or relating to the conversion of
this Note.


 


(i)          “Conversion
Amount” means the portion of the Original Principal Amount and Interest to be converted, plus any penalties, redeemed
or otherwise with respect to which this determination is being made.


 


(ii)         “Conversion
Price” shall equal 65% of the average of the three lowest traded prices occurring during the twenty-five (25) consecutive
Trading Days immediately preceding the applicable Conversion Date on which the Holder elects to convert all or part of this Note,
subject to adjustment as provided in this Note.


 


(b)          Mechanics
of Conversion.


 


(i)          Optional
Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a “Conversion Date”),
the Holder shall (A) transmit by email, facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., New York, NY
Time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit A (the “Conversion
Notice”) to the Company. On or before the third Business Day following the date of receipt of a Conversion Notice (the
“Share Delivery Date”), the Company shall (A) if legends are not required to be placed on certificates of Common
Stock pursuant to the then existing provisions of Rule 144 of the Securities Act of 1933 (“Rule 144”) and provided
that the Transfer Agent is participating in the Depository Trust Company’s (“DTC”) Fast Automated Securities
Transfer Program, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder’s
or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system or (B) if the Transfer
Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the address as specified
in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common
Stock to which the Holder shall be entitled which certificates shall not bear any restrictive legends unless required pursuant
the Rule 144. If this Note is physically surrendered for conversion and the outstanding Principal of this Note is greater than
the Principal portion of the Conversion Amount being converted, then the Company shall, upon request of the Holder, as soon as
practicable and in no event later than three (3) Business Days after receipt of this Note and at its own expense, issue and deliver
to the holder a new Note representing the outstanding Principal not converted. The Person or Persons entitled to receive the shares
of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such
shares of Common Stock upon the transmission of a Conversion Notice.


 




    	 	3	 



     


    

 


(ii)         Company’s
Failure to Timely Convert. If within two (2) Trading Days after the Company’s receipt of the facsimile or email copy
of a Conversion Notice the Company shall fail to issue and deliver to Holder via “DWAC/FAST” electronic transfer the
number of shares of Common Stock to which the Holder is entitled upon such holder’s conversion of any Conversion Amount
(a “Conversion Failure”), the Original Principal Amount of the Note shall increase by $2,000 per day until
the Company issues and delivers a certificate to the Holder or credit the Holder’s balance account with DTC for the number
of shares of Common Stock to which the Holder is entitled upon such holder’s conversion of any Conversion Amount (under
Holder’s and Company’s expectation that any damages will tack back to the Issuance Date). Company will not be subject
to any penalties once its transfer agent processes the shares to the DWAC system. If the Company fails to deliver shares in
accordance with the timeframe stated in this Section, resulting in a Conversion Failure, the Holder, at any time prior to selling
all of those shares, may rescind any portion, in whole or in part, of that particular conversion attributable to the unsold shares
and have the rescinded conversion amount returned to the Outstanding Balance with the rescinded conversion shares returned to
the Company (under Holder’s and Company’s expectations that any returned conversion amounts will tack back to the
original date of the Note).


 


(iii)         DWAC/FAST Eligibility. If the Company fails for any reason to deliver to the Holder the Shares by DWAC/FAST electronic
transfer (such as by delivering a physical stock certificate), or if there is a Conversion Failure as defined in Section 3(b)(ii),
and if the Holder incurs a Market Price Loss, then at any time subsequent to incurring the loss the Holder may provide the Company
written notice indicating the amounts payable to the Holder in respect of the Market Price Loss and the Company must make the
Holder whole by either of the following options at Holder’s election:


 


Market Price Loss = [(High
trade price for the period between the day of conversion and the day the shares clear in the Holder’s brokerage
account) x (Number of shares receivable from the conversion)] – [(Net Sales price realized by Holder) x (Number of
shares receivable from the conversion)].


 


Option A – Pay Market
Price Loss in Cash. The Company must pay the Market Price Loss by cash payment, and any such cash payment must be made by the
third business day from the time of the Holder’s written notice to the Company.


 


Option B – Add Market
Price Loss to Outstanding Balance. The Company must pay the Market Price Loss by adding the Market Price Loss to the
Outstanding Balance (under Holder’s and the Company’s expectation that any Market Price Loss amounts will tack
back to the Issuance Date).


 


In the case that conversion shares are not deliverable by DWAC/FAST
electronic transfer an additional 10% discount to the Conversion Price will apply.


 


(iv)         DTC
Eligibility & Sub-Penny. If the Company fails to maintain its status as “DTC Eligible” for any reason, or,
if the effective Conversion Price as calculated in Section 3(a)(ii) is less than $0.01 at any time (regardless of whether or not
a Conversion Notice has been submitted to the Company), the Principal Amount of the Note shall increase by ten thousand dollars
($10,000) (under Holder’s and Company’s expectation that any Principal Amount increase will tack back to the Issuance
Date). In addition, the Conversion Price shall be permanently redefined to equal the lesser of (a) $0.01 or (b) 50% of the lowest
trade occurring during the twenty five (25) consecutive Trading Days immediately preceding the applicable Conversion Date on which
the Holder elects to convert all or part of this Note, subject to adjustment as provided in this Note.


 




    	 	4	 



     


    

 


(v)         Par
Value True-Up. In the event that the Conversion Price is less than Par Value on the Conversion Date, the Holder may elect
to submit a Conversion Notice (attached hereto as Exhibit A) with a conversion price equal to the Company’s Par Value. In
addition, upon written notice from the Holder in the form attached hereto as Exhibit B (the “True-Up Notice”), the
Holder may require the Company, at the Holder’s election, to either (A) issue and deliver to the Holder a number of shares
of Common Stock as equals (X) the Conversion Amount divided by 60% of the lowest trade occurring during the twenty five (25) consecutive
Trading Days immediately preceding the applicable Conversion Date, less (Y) the Conversion Amount divided by the Par Value (Any
additional shares of Common Stock issuable pursuant to this Section 3(b)(v) shall be referred to herein as “True-Up Shares”),
or (B) add to the Outstanding Balance a dollar amount equal to the number of True-Up Shares (as calculated above) multiplied by
the high trade price on the Conversion Date (Any dollar amount added to the Outstanding Balance pursuant to this Section 3(b)(v)
shall be referred to herein as the “True-Up Balance”) (under Holder’s and the Company’s expectation that
any True-Up Balance amounts will tack back to the Issuance Date).


 


(vi)         Book-Entry.
Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the
terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion
Amount represented by this Note is being converted or (B) the Holder has provided the Company with prior written notice (which
notice may be included in a Conversion Notice) requesting reissuance of this Note upon physical surrender of this Note. The Holder
and the Company shall maintain records showing the Principal and Interest converted and the dates of such conversions or shall
use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this
Note upon conversion.


 


(c) Limitations
on Conversions or Trading.


 


(i)          Beneficial
Ownership. The Company shall not effect any conversions of this Note and the Holder shall not have the right to convert any
portion of this Note or receive shares of Common Stock as payment of interest hereunder to the extent that after giving effect
to such conversion or receipt of such interest payment, the Holder, together with any affiliate thereof, would beneficially own
(as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 4.99% of
the number of shares of Common Stock outstanding immediately after giving effect to such conversion or receipt of shares as payment
of interest. Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold
at the time of a conversion hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in
excess of 4.99% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned
by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction
contained in this Section will limit any particular conversion hereunder and to the extent that the Holder determines that the
limitation contained in this Section applies, the determination of which portion of the principal amount of this Note is convertible
shall be the responsibility and obligation of the Holder. If the Holder has delivered a Conversion Notice for a principal amount
of this Note that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in
the issuance in excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the
conversion for the maximum principal amount permitted to be converted on such Conversion Date in accordance with Section 3(a)
and, any principal amount tendered for conversion in excess of the permitted amount hereunder shall remain outstanding under this
Note. In the event that the Market Capitalization of the Company falls below $2,500,000, the term “4.99%” above shall
be permanently replaced with “9.99%”. “Market Capitalization” shall be defined as the product of (a) the
closing price of the Common Stock of the Common stock multiplied by (b) the number of shares of Common Stock outstanding as reported
on the Company’s most recently filed Form 10-K or Form 10-Q. The provisions of this Section may be waived by Holder upon
not less than 65 days prior written notification to the Company.


 




    	 	5	 



     


    

 


(ii)         Capitalization.
So long as this as this Note is outstanding, upon written request of the Holder, the Company shall furnish to the Holder the then-current
number of common shares issued and outstanding, the then-current number of common shares authorized, and the then-current number
of shares reserved for third parties.


 


(d) Other Provisions.


 


(i)          Share
Reservation. The Company shall at all times reserve and keep available out of its authorized Common Stock a number of shares
equal to at least 3 (three) times the full number of shares of Common Stock issuable upon conversion of all outstanding amounts
under this Note; and within 3 (three) Business Days following the receipt by the Company of a Holder’s notice that such
minimum number of shares of Common Stock is not so reserved, the Company shall promptly reserve a sufficient number of shares
of Common Stock to comply with such requirement. The Company will at all times reserve at least 1,250,000 shares of Common
Stock for conversion.


 


(ii)         Prepayment.
At any time prior to the Maturity Date, the Company shall have the option to pre-pay the entire remaining outstanding principal
amount of this Note in cash, provided that (i) the Company shall pay the Holder 100% of the Outstanding Balance and (ii) the Holder
may still convert this Note pursuant to the terms hereof at all times until such prepayment amount has been received in full.


 


(iii)        Terms
of Future Financings. So long as this Note is outstanding, upon any issuance by the Company or any of its subsidiaries of
any security with any term more favorable to the holder of such security or with a term in favor of the holder of such security
that was not similarly provided to the Holder in this Note, then the Company shall notify the Holder of such additional or more
favorable term and such term, at Holder’s option, shall become a part of the transaction documents with the Holder. The
types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited
to, terms addressing conversion discounts, conversion lookback periods, interest rates, original issue discounts, stock sale price,
private placement price per share, and warrant coverage.


 


(iv)        All
calculations under this Section 3 shall be rounded up to the nearest $0.00001 or whole share.


 


(v)         Nothing
herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 2 herein
for the Company’s failure to deliver certificates representing shares of Common Stock upon conversion within the period specified
herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation,
a decree of specific performance and/or injunctive relief, in each case without the need to post a bond or provide other security.
The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof
or under applicable law.


 




    	 	6	 



     


    

 


(4)         SECTION
3(A)(9) OR 3(A)(10) TRANSACTION. So long as this Note is outstanding, the Company shall not enter into any transaction or
arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9)
of the Securities Act (a “3(a)(9) Transaction”) or Section 3(a)(10) of the Securities Act (a “3(a)(10) Transaction”).
In the event that the Company does enter into, or makes any issuance of Common Stock related to a 3(a)(9) Transaction or a 3(a)(10)
Transaction while this note is outstanding, a liquidated damages charge of 25% of the outstanding principal balance of this Note,
but not less than $25,000, will be assessed and will become immediately due and payable to the Holder at its election in the form
of cash payment or addition to the balance of this Note.


 


(5)         PIGGYBACK
REGISTRATION RIGHTS. The Company shall include on the next registration statement the Company files with SEC (or on the subsequent
registration statement if such registration statement is withdrawn) all shares issuable upon conversion of this Note. Failure
to do so will result in liquidated damages of 25% of the outstanding principal balance of this Note, but not less than $25,000,
being immediately due and payable to the Holder at its election in the form of cash payment or addition to the balance of this
Note.


 


(6)         REISSUANCE
OF THIS NOTE.


 


(a)          Assignability.
The Company may not assign this Note. This Note will be binding upon the Company and its successors and will inure to the benefit
of the Holder and its successors and assigns and may be assigned by the Holder to anyone of its choosing without Company’s
approval.


 


(b)          Lost,
Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by
the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the
Company shall execute and deliver to the Holder a new Note representing the outstanding Principal.


 


(7)         NOTICES.
Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing
and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party) (iii)
upon receipt, when sent by email; or (iv) one (1) Trading Day after deposit with a nationally recognized overnight delivery service,
in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications
shall be those set forth in the communications and documents that each party has provided the other immediately preceding the
issuance of this Note or at such other address and/or facsimile number and/or to the attention of such other person as the recipient
party has specified by written notice given to each other party three (3) Business Days prior to the effectiveness of such change.
Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) mechanically
or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and
an image of the first page of such transmission or (iii) provided by a nationally recognized overnight delivery service, shall
be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service
in accordance with clause (i), (ii) or (iii) above, respectively.


 




    	 	7	 



     


    

 


The addresses for such communications shall be:


   


If to the Company, to:


 


	Arkados Group, Inc.
	 
	Terrence DeFranco
	 
	211 Warren Street, Suite 320
	 
	Newark, NJ 07103
	 
	Attn: 
	Email:


 


If to the Holder:


 


Lucas Hoppel


 


Phone: 858-232-5110


Email: Luke@LukeHoppel.com


 


(8)         APPLICABLE
LAW AND VENUE. This Note shall be governed by and construed in accordance with the laws of the State of Nevada, without giving
effect to conflicts of laws thereof. Any action brought by either party against the other concerning the transactions contemplated
by this Agreement shall be brought only in the state courts of California or in the federal courts located in the city of San
Diego, in the State of California. Both parties and the individuals signing this Agreement agree to submit to the jurisdiction
of such courts.


 


(9)         WAIVER.
Any waiver by the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any
other breach of such provision or of any breach of any other provision of this Note. The failure of the Holder to insist upon
strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term of this Note. Any waiver must be in writing.


 


(10)        LIQUIDATED
DAMAGES. Holder and Company agree that in the event Company fails to comply with any of the terms or provisions of this Note,
Holder’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’
inability to predict future interest rates, future share prices, future trading volumes and other relevant factors. Accordingly,
Holder and Company agree that any fees, balance adjustments, default interest or other charges assessed under this Note are not
penalties but instead are intended by the parties to be, and shall be deemed, liquidated damages (under Holder’s and Company’s
expectations that any such liquidated damages will tack back to the Closing Date for purposes of determining the holding period
under Rule 144).


 


[Signature Page Follows]


 




    	 	8	 



     


    

 


IN WITNESS WHEREOF, the Company has caused
this Convertible Note to be duly executed by a duly authorized officer as of the date set forth above.


 


	 	COMPANY: 
	 	 
	 	Arkados Group, Inc. 
	 	 	 
	 	By:	/s/ Terrence DeFranco
	 	 	 
	 	Name: 	Terrence DeFranco 
	 	 	 
	 	Title: 	Chief Executive Officer
	 	 
	 	HOLDER: 
	 	 
	 	Lucas Hoppel
	 	 	 
	 	By:	/s/ Lucas
    Hoppel


 


[Signature Page to Convertible Note No. AKDS-1]


 




    	 	 	 



     


    

 


EXHIBIT A


 


CONVERSION
NOTICE


 


[Company Contact, Position]


Spiral Toys, Inc.


[Company Address]


[Contact Email Address}


 


The undersigned hereby elects to convert a portion of the $________
Convertible Note _______ issued to Lucas Hoppel on ____________ into Shares of Common Stock of ____________ according to the conditions
set forth in such Note as of the date written below.


 


By accepting this notice of conversion, you are acknowledging that
the number of shares to be delivered represents less than 10% (ten percent) of the common stock outstanding. If the number of shares
to be delivered represents more than 9.99% of the common stock outstanding, this conversion notice shall immediately automatically
extinguish and debenture Holder must be immediately notified.


 


	Date of Conversion:	 	 
	 	 	 
	Conversion Amount:	 	 
	 	 	 
	Conversion Price:	 	 
	 	 	 
	Shares to be Delivered:	 	 


 


Shares delivered in name of:


 


Lucas Hoppel


 


	Signature:	 	 


 




    	 	 	 



     


    

 


EXHIBIT B



 


TRUE-UP NOTICE


 


[Company Contact, Position]


Spiral Toys, Inc.


[Company Address]


[Contact Email Address}


 


The undersigned hereby gives notice to Spiral Toys, Inc.,
a ______ corporation (the “Company”), pursuant to that certain Note dated _______ ___, 20__ by and between the Company
and the Holder (the “Note”), that the Holder elects to:


 


	 	___	Receive fully paid and non-assessable True-Up Shares pursuant to Section 3(b)(v) of the Note (such Additional Origination Shares shall be calculated as set forth below), or 
	 	 	 
	 	___	Add to the Outstanding Balance a dollar amount equal to the True-Up Amount (such True-Up Amount shall be calculated as set forth below). 


 


The number of True-Up Shares Holder is entitled to receive is calculated
as follows:


 


Conversion Amount ($___) / ___% of
the lowest trade occurring during the _________ (__) consecutive Trading Days immediately preceding the applicable Conversion Date
($_.__) - Conversion Amount ($___) divided by the Par Value ($_.__) =


 


____________ True-Up Shares 


 


The amount of True-Up Balance to be added to the Outstanding Balance
is calculated as follows:


 


Number of True-Up Shares (_____) * high trade price on
the Conversion Date ($_.__)=


 


____________ True-Up Balance 


 


Shares delivered in name of:


 


Lucas Hoppel 


 


	Signature: