Exhibit
4.1


 


NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS NOTE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL
BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.


 


Principal
Amount: $100,000


Date:
February 2, 2018


 


FORM
OF DEMAND CONVERTIBLE PROMISSORY NOTE


 


PositiveID
Corp., (hereinafter called the “Company”), hereby promises to pay to the order of M2B Funding Corp., or
its registered assigns (the “Holder”) the sum of up to $100,000 on the Maturity Date (as defined below), together
with any interest as set forth herein, and to pay interest on the unpaid principal balance hereof at the rate of Twelve percent
(12%) (the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due
and payable, whether at maturity or upon acceleration or by prepayment or otherwise.


 


This
Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Interest shall commence accruing
on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed,
notwithstanding the first year’s interest is guaranteed. All payments due hereunder (to the extent not converted into common
stock) shall be made in lawful money of the United States of America. Following any Event of Default, interest shall accrue at
the lesser of Twenty Percent (24%) per annum or the maximum interest permitted by Law.


 


All
payments shall be made at such address as the Holder shall hereafter give to the Company by written notice made in accordance
with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is
not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest
payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken
into account for purposes of determining the amount of interest due on such date. As used in this Note, the term “business
day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York
are authorized or required by law or executive order to remain closed. Each capitalized term used herein, and not otherwise defined,
shall have the meaning ascribed thereto in the supporting documents of same date (attached hereto).


 






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This
Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive
rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.


 


The
following terms shall apply to this Note:


 


ARTICLE
I. CONVERSION RIGHTS


 


1.1 Conversion
Right. The Holder shall have the right and at any time from the execution of this Note to convert all or any part of the outstanding
and unpaid principal amount of this Note into fully paid and non- assessable shares of Common Stock, as such Common Stock exists
on the Issue Date, or any shares of capital stock or other securities of the Company into which such Common Stock shall hereafter
be changed or reclassified at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”);
provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of
that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the
Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Company subject to a limitation
on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable
upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result
in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes
of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder. The number
of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount
(as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, (the “Notice
of Conversion”), delivered to the Company by the Holder in accordance with the Sections below; provided that the Notice
of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice)
to the Company before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”). Notwithstanding
the foregoing, the term “4.99%” above shall be replaced with “9.99%” following any Event of Default if
the Holder, in its sole discretion and in writing, elects to demand the replacement. If the term “4.99%” is replaced
with “9.99%” pursuant to the preceding sentence, such increase to “9.99%” shall remain at 9.99% until
decreased by the Holder in writing.


 


The
number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion
Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion,
(the “Notice of Conversion”), delivered to the Company by the Holder in accordance with the Sections below.


 






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The
term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of
this Note to be converted in such conversion plus (2) at the Company’s option, accrued and unpaid interest, if any,
on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Company’s
option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4)
at the Holder’s option, any amounts owed to the Holder.


 


1.2 Conversion
Price.


 


(a) Calculation
of Conversion Price. Holder, at its discretion, shall have the right to convert this Note in its entirety or in part(s)
into common stock of the Company valued at a thirty-seven and a half percent (37.5%) discount off of the lowest price for the
Company’s common stock during the fifteen (15) trading days immediately preceding a conversion date, as reported by Quotestream
Media.



If at any time after the execution of this Note, the Company experiences a “DTC Chill,” the Conversion Price Discount
shall be increased by five percent (5%). If at any time following the execution of this Note, the Company becomes ineligible to
participate in the DTC’s “DWAC” system, the Conversion Price Discount will be increased by five percent (5%).
Following any Event of Default, the Conversion Price discount shall be increased to forty-five percent (45%).


 


1.3 Authorized
Shares. The Company covenants that during the period the conversion right exists the Company will reserve from its authorized
and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock
upon the full conversion of this Note. The Company is required at all times to have authorized and reserved three times the number
of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Notes in effect from
time to time)(the “Reserved Amount”). The Reserved Amount shall be increased from time to time in accordance with
the Company’s obligations.





The
Company represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition,
if the Company shall issue any securities or make any change to its capital structure which would change the number of shares
of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Company shall at the same
time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved,
free from preemptive rights, for conversion of the outstanding Notes.


 


The
Company (i) acknowledges that it will irrevocably instruct its transfer agent to issue certificates for the Common
Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to
its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates
for shares of Common Stock in accordance with the terms and conditions of this Note.


 


If,
at any time the Company does not maintain the Reserved Amount it will be considered an Event of Default as defined in this Note.


 






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1.4 Method
of Conversion.


 


(a) Mechanics
of Conversion. This Note may be converted by the Holder in whole or in part at any time from time to time after the Issue
Date, by (A) submitting to the Company a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication
dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time).


 


(b) Surrender
of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance
with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless the entire unpaid
principal amount of this Note is so converted. The Holder and the Company shall maintain records showing the principal amount
so 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 each such conversion. In the event of any dispute or discrepancy, such
records of the Holder shall, prima facie, be controlling and determinative in the absence of manifest error. The Holder
and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following
conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be
less than the amount stated on the face hereof.


 


(c) Payment
of Taxes. The Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the
issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that
of the Holder (or in street name), and the Company shall not be required to issue or deliver any such shares or other securities
or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are
to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Company the amount of any such
tax or shall have established to the satisfaction of the Company that such tax has been paid.


 


(d) Delivery
of Common Stock Upon Conversion. Upon receipt by the Company from the Holder of a facsimile transmission or e-mail (or other
reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section,
the Company shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the
Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and,
solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the
terms hereof.


 


Within
Five (5) business days of having received common stock pursuant to a Notice of Conversion and prior to having traded any shares
from that specific conversion, Holder may elect to rescind the Notice of Conversion and return the shares, at Holder’s expense,
to the Company’s Transfer Agent. In the event of such rescission, the principal amount outstanding under this Note shall
be adjusted to include the Conversion Amount which was deducted from the Note as part of the rescinded Notice of Conversion.


 






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(e) Obligation
of Company to Deliver Common Stock. Upon receipt by the Company of a Notice of Conversion, the Holder shall be deemed to be
the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued
and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Company defaults on its obligations
under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except
the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the
Holder shall have given a Notice of Conversion as provided herein, the Company’s obligation to issue and deliver the certificates
for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same,
any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to
enforce the same, any failure or delay in the enforcement of any other obligation of the Company to the holder of record, or any
setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to
the Company, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder
in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so
long as the Notice of Conversion is received by the Company before 6:00 p.m., New York, New York time, on such date.


 


(f) Delivery
of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable
upon conversion, provided the Company is participating in the Depository Trust Company (“DTC”) Fast Automated Securities
Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section
1.1 and in this Section 1.4, the Company shall use its best efforts to cause its transfer agent to electronically transmit the
Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Broker with DTC through its Deposit
Withdrawal Agent Commission (“DWAC”) system.


 


(g) Failure
to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies,
including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion
of this Note is not delivered by the Deadline the Company shall pay to the Holder $2,000 per day in cash, for each day beyond
the Deadline that the Company fails to deliver such Common Stock. Such cash amount shall be paid to Holder by the fifth day of
the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Company by the
first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which
event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible
into Common Stock in accordance with the terms of this Note. The Company agrees that the right to convert is a valuable right
to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult
if not impossible to qualify.


 


Accordingly the parties acknowledge that the liquidated damages provision contained in this Section
are justified. Any delay or failure of performance by the Company hereunder shall be excused if and to the extent caused by Force
Majeure. For purposes of this agreement, Force Majeure shall mean a cause or event that is not reasonably foreseeable and not
caused by the Company, including acts of God, fires, floods, explosions, riots wars, hurricanes, etc.


 






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1.5 Concerning
the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such
shares are sold pursuant to an effective registration statement under the Act or (ii) the Company or its transfer agent shall
have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of
counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant
to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor
rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the
Company who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited
Investor. Except as otherwise provided herein (and subject to the removal provisions set forth below), until such time as the
shares of Common Stock issuable upon conversion of this Note have been registered under the Act or otherwise may be sold pursuant
to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold,
each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective
registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits
removal of the legend, shall bear a legend substantially in the following form, as appropriate:


 


“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE  SECURITIES  ARE EXERCISABLE HAVE  BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES.”


 


The
legend set forth above shall be removed and the Company shall issue to the Holder a new certificate therefore free of any
transfer legend if (i) the Company or its transfer agent shall have received an opinion of counsel, in form, substance and
scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such
Common Stock may be made without registration under the Act, which opinion shall be accepted by the Company so that the sale
or transfer is effected or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is
registered for sale by the Holder under an effective registration statement filed under the Act or otherwise may be sold
pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be
immediately sold. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to
the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it
will be considered an Event of Default pursuant to this note.


 






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1.6 Effect
of Certain Events.


 


(a) Effect
of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all
of the assets of the Company, the effectuation by the Company of a transaction or series of related transactions in which more
than 50% of the voting power of the Company is disposed of, or the consolidation, merger or other business combination of the
Company with or into any other Person (as defined below) or Persons when the Company is not the survivor shall either: (i) be
deemed to be an Event of Default (as defined in Article III) pursuant to which the Company shall be required to pay to the Holder
upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III)
or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability
company, partnership, association, trust or other entity or organization.


 


(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior
to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization,
or other similar event, as a result of which shares of Common Stock of the Company shall be changed into the same or a different
number of shares of another class or classes of stock or securities of the Company or another entity, or in case of any sale or
conveyance of all or substantially all of the assets of the Company other than in connection with a plan of complete liquidation
of the Company, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the
basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable
upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had
this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth
herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this
Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and
of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable
in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Company shall not affect any transaction
described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but
in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve,
or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization
or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting
successor or acquiring entity (if not the Company) assumes by written instrument the obligations of this Section 1.6(b). The above
provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.


 






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(c)
Adjustment Due to Distribution. If the Company shall declare or make any distribution of its assets (or rights to acquire
its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any
dividend or distribution to the Company’s shareholders in cash or shares (or rights to acquire shares) of capital stock
of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion
of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such
assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had
such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to
such Distribution.


 


(d) Adjustment
Due to Dilutive Issuance. If, at any time when any Notes are issued and outstanding, the Borrower issues or sells, or in accordance
with this Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock in connection with a financing transaction
based on a variable price formula (the “Alternative Variable Price Formula”) that is more favorable to the investor
in such financing transaction than the formula for calculating the Conversion Price in effect on the date of such issuance (or
deemed issuance) of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance,
the formula for the Conversion Price will be adjusted to match the Alternative Variable Price Formula. If it is unclear whether
the Alternative Variable Price Formula is better or worse, then Holder, in its sole discretion, may elect at the time of such
issuance whether to switch to the Alternative Variable Price Formula or not.





(e) Purchase
Rights. If, at any time when any Notes are issued and outstanding, the Company issues any convertible securities or
rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the
record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had
held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations
on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.


 


(f) Notice
of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described
in this Section 1.6, the Company, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish
to the Holder of a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment
or readjustment is based. The Company shall, upon the written request at any time of the Holder, furnish to such Holder a like
certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number
of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion
of the Note.


 






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1.7 Not
Used.


 


1.8 Status
as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares,
if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount
or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder
of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares
of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure
by the Company to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates
for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion
of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common
Stock by so notifying the Company) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted
portions of this Note and the Company shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note
has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the
Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default
Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default
and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3)
for the Company’s failure to convert this Note.


 


1.9 Demand
Payment. Holder can demand payment to be made on any day after 90 calendar days from the issuance date at 105% of the Principal
and Interest Outstanding. To exercise the demand right the Holder must give 5 days’ written notice to the Company. Written
notice may be U.S. Mail or electronic mail.


 


ARTICLE
II. CERTAIN COVENANTS


 


2.1 Distributions
on Capital Stock. So long as the Company shall have any obligation under this Note, the Company shall not without the Holder’s
written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property
or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional
shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect
of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority
of the Company’s disinterested directors.


 


2.2 Restriction
on Stock Repurchases. So long as the Company shall have any obligation under this Note, the Company shall not without the
Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other
securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Company or
any warrants, rights or options to purchase or acquire any such shares.


 






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2.3 Borrowings.
So long as the Company shall have any obligation under this Note, the Company shall not, without providing the Holder with the
right of first refusal, create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon
the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments
for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed
on the date hereof and of which the Issuer has informed Holder in writing prior to the date hereof, (b) indebtedness to trade
creditors or financial institutions incurred in the ordinary course of business or (c) borrowings, the proceeds of which shall
be used to repay this Note. Holder shall have 3 business days from receipt of the terms of any potential borrowings to confirm
if they want to provide such financing on similar terms.


 


2.4 Sale
of Assets. So long as the Company shall have any obligation under this Note, the Company shall not, without the Holder’s
written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business.
Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.


 


2.5 Advances
and Loans. So long as the Company shall have any obligation under this Note, the Company shall not, without the Holder’s
written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without
limitation, officers, directors, employees, subsidiaries and affiliates of the Company, except loans, credits or advances (a)
in existence or committed on the date hereof and which the Company has informed Holder in writing prior to the date hereof, (b)
made in the ordinary course of business or (c) not in excess of $50,000.


 


ARTICLE
III. EVENTS OF DEFAULT


 


If
any of the following events of default (each, an “Event of Default”) shall occur:


 


3.1 Failure
to Pay Principal or Interest. The Company fails to pay the principal hereof or interest thereon when due on this Note,
whether at maturity, upon acceleration or otherwise.


 


3.2 Conversion
and the Shares. The Company fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that
it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with
the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form)
any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when
required by this Note, the Company directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer
agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued
to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or
directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive
legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued
to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement,
statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue
uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for
three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Company to remain
current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is
delayed, hindered or frustrated due to a balance owed by the Company to its transfer agent. If at the option of the Holder, the
Holder advances any funds to the Company’s transfer agent in order to process a conversion, such advanced funds shall be
paid by the Company to the Holder within forty eight (48) hours of a demand from the Holder.


 






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3.3 Breach
of Covenants. The Company breaches any covenant or other term or condition contained in this Note and any collateral documents.


 


3.4 Breach
of Representations and Warranties. Any representation or warranty of the Company made herein or in any
agreement, statement or certificate given in writing pursuant hereto or in connection herewith, shall be false or misleading
in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse
effect on the rights of the Holder with respect to this Note.


 


3.5 Receiver
or Trustee. The Company or any subsidiary of the Company shall make an assignment for the benefit of creditors, or apply for
or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a
receiver or trustee shall otherwise be appointed.


 


3.6 Judgments.
Any money judgment, writ or similar process shall be entered or filed against the Company or any subsidiary of the Company or
any of its property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty
(20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.


 


3.7 Bankruptcy.
Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under
any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Company or any subsidiary of the
Company.


 


3.8 Delisting
of Common Stock. The Company shall fail to maintain, in good standing, the listing of the Common Stock on the OTCQB or an
equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market or the New York Stock Exchange.


 






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3.9 Failure
to Comply with the Exchange Act. The Company shall fail to comply, in a timely manner, with the reporting requirements of
the Exchange Act; and/or the Company shall cease to be subject to the reporting requirements of the Exchange Act.


 


3.10 Liquidation.
Any dissolution, liquidation, or winding up of Company or any substantial portion of its business.


 


3.11 Cessation
of Operations. Any cessation of operations by Company or Company admits it is otherwise generally unable to pay its debts
as such debts become due, provided, however, that any disclosure of the Company’s ability to continue as a “going
concern” shall not be an admission that the Company cannot pay its debts as they become due.


 


3.12 Maintenance
of Assets. The failure by Company to maintain any material intellectual property rights, personal, real property or other
assets which are necessary to conduct its business (whether now or in the future).


 


3.13 Financial
Statement Restatement. The restatement of any financial statements filed by the Company with the SEC for any date or period
from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement
would, by comparison to the original financial statement, have constituted a material adverse effect on the rights of the Holder
with respect to this Note or supporting documents.


 


3.14 Reverse
Splits. The Company effectuates a reverse split of its Common Stock without at least twenty (20) days prior
written notice to the Holder.


 


3.15 Replacement
of Transfer Agent. In the event that the Company proposes to replace its transfer agent, the Company fails to provide, prior
to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered
with this Note (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount)
signed by the successor transfer agent to Company and the Company.


 


3.16 Cross-Default.
Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default
by the Company of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable
notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements,
in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the
terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements”
means, collectively, all agreements and instruments between, among or by: (1) the Company, and, or for the benefit of, (2) the
Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term “Other
Agreements” shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted
with each other loan transaction and with all other existing and future debt of Company.


 






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Upon
the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to
pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable
and the Company shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum
(as defined herein). 


 


UPON
THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY
DUE AND PAYABLE AND THE COMPANY SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO:
(Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) 125% (2). Upon the occurrence and during the continuation of any Event
of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due
on this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11,
3.12, 3.13, 3.14, and/or 3.15 exercisable through the delivery of written notice to the Company by such Holders (the “Default
Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure
to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately
due and payable and the Company shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to
the greater of (i) 125% times the sum of (w) the then outstanding principal amount of this Note plus (x)
accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment
Date”) plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any
amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the
date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default
Sum”) or (ii) the “parity value” of the Default Sum to be prepaid, where parity value means (a) the highest
number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article
I, treating the Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes
of determining the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in respect of a
specific Conversion Date in which case such Conversion Date shall be the Conversion Date), multiplied by (b) the highest
Closing Price for the Common Stock during the period beginning on the date of first occurrence of the Event of Default and ending
one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other amounts payable hereunder shall
immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together
with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise
all other rights and remedies available at law or in equity.


 


If
the Company fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable,
then the Holder shall have the right at any time, so long as the Company remains in default (and so long and to the extent that
there are sufficient authorized shares), to require the Company, upon written notice, to immediately issue, in lieu of the Default
Amount, the number of shares of Common Stock of the Company equal to the Default Amount divided by the Conversion Price then in
effect.


 






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ARTICLE
IV. MISCELLANEOUS


 


4.1 Failure
or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative
to, and not exclusive of, any rights or remedies otherwise available.


 


4.2 Notices.
All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address
as such party shall have specified most recently by written notice. Any notice or other communication required or permitted
to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation
generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day
during normal business hours where such notice is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:


 


If
to the Company, to:


PositiveID
Corporation


1690
S. Congress Ave.,


Suite 201


Delray
Beach, FL 33445


If
to the Holder:





M2B
Funding Corp.


17201
Collins Avenue,


Unit
3207


Sunny
Isles, FL 33160


 


4.3 Amendments.
This Note and any provision hereof may only be amended by an instrument in writing signed by the Company and the Holder. The term
“Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed,
or if later amended or supplemented, then as so amended or supplemented.


 






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4.4 Assignability. This
Note shall be binding upon the Company and its successors and assigns, and shall inure to be the benefit of the Holder and its
successors and assigns. Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection
with a bona fide margin account or other lending arrangement.





4.5 Cost
of Collection. If default is made in the payment of this Note, the Company shall pay the Holder hereof costs of
collection, including reasonable attorneys’ fees.


 


4.6 Governing
Law. This Note shall be governed by and construed in accordance with the laws of the State of Nevada without regard to
principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated
by this Note shall be brought only in the state or federal courts located in the County, City and State of New York. The parties
to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not
assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Company and Holder waive
trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and
costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid
or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party
hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in
connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other manner permitted by law.


 






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4.7 Certain
Amounts. Whenever pursuant to this Note the Company is required to pay an amount in excess of the outstanding principal
amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such
interest, the Company and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note
may be difficult to determine and the amount to be so paid by the Company represents stipulated damages and not a penalty and
is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale
of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant
to this Note. The Company and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to
the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of
Common Stock.


 


4.8 Not
Used.


 


 4.9 Notice
of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common
Stock unless and only to the extent that it converts this Note into Common Stock. The Company shall provide the Holder with prior
notification of any meeting of the Company’s shareholders (and copies of proxy materials and other information sent to shareholders).
In the event of any taking by the Company of a record of its shareholders for the purpose of determining shareholders who are
entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including
by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property,
or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any
proposed sale, lease or conveyance of all or substantially all of the assets of the Company or any proposed liquidation, dissolution
or winding up of the Company, the Company shall mail a notice to the Holder, at least twenty (20) days prior to the record date
specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date
on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement
regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The
Company shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously
with the notification to the Holder in accordance with the terms of this Section 4.9.


 


4.10
Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the
Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies
at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing
or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing
economic loss and without any bond or other security being required.


 






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IN
WITNESS WHEREOF, Company has caused this Note to be signed in its name by its duly authorized officer:


 


	 	PositiveID Corp.
	 	 	 
	 	By:
    	 
	 	Print:	 
	 	Title/Date:	 


 






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