THIS NOTE AND THE COMMON STOCK ISSUABLE
UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT")


 


US $31,500.00


 


IDS INDUSTRIES, INC.


8% CONVERTIBLE REDEEMABLE NOTE


DUE JULY 11, 2015


 


FOR VALUE RECEIV ED, IDS
Industries, Inc. (the "Company") promises to pay to the order of LG CAPITAL FUNDING, LLC and its authorized successors
and permitted a signs ("Holder"), the aggregate principal face amount of Thirty One Thousand Five Hundred dollars
exactly (U.S. $31,500.00) on July 11, 2015 ("Maturity Date") and to pay interest on the principal amount outstanding
hereunder at the rate of 8% per annum commencing on July 11, 2014. The interest will be paid to the Holder in whose name this Note
is registered on the records of the Company regarding registration and transfers of this Note. The principal of, and interest on,
this Note are payable at 1218 Union Street, Suite #2, Brooklyn, NY 11225 initially, and if changed, last appearing on the records
of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and
the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or
withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records
of the Company. The forwarding of such check o transfer shall constitute a payment of outstanding principal hereunder and shall
satisfy a charge the liability for principal on this Note to the extent of the sum represented by such or wire transfer. Interest
shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.


 


This Note is subject to the
following additional provisions:


 


1.                  
This Note is exchangeable for an equal aggregate principal amount of Note of different authorized
denominations, as requested by the Holder surrendering the same.


 


No service charge will be made for such registration
or transfer or exchange, except that shall pay any tax or other governmental charges payable in connection therewith.




    	 



    	 



    

 


2.                  
The Company shall be entitled to withhold from all payments any amounts required to be withheld
under applicable laws.


 


3.                  
This Note may be transferred or exchanged only in compliance with the Securities Act of 1933,
as amended ("Act") and applicable state securities laws. Any attempted transfer to a non-qualifying party shall
be treated by the Company as void. Prior to due presentment for transfer of this Note, the Company and any agent of the Company
may treat the person in whose name this Note is duly registered on the Company's records as the owner hereof or all other purposes,
whether or not this Note be overdue, and neither the Company nor an such agent shall be affected or bound by notice to the contrary.
Any Holder of this Note elect ng to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements
set forth in Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation
that this Note is being converted ("Notice of Conversion") in the form annexed hereto as Exhibit A. The
date of receipt (including receipt by telecopy) o such Notice of Conversion shall be the Conversion Date.


 


4.                  
(a) The Holder of this Note is entitled, at its option, at any time after 180 days, to convert
all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the "Common
Stock") without restrictive legend of any nature, at a price ("Conversion Price") for each share of Common
Stock equal to 55% of the lowest trading price of the Common Stock as reported on the National Quotations Bureau OTCQB exchange
which the Company's shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"),
for the ten prior trading days including the day upon which a Notice of Conversion is received by the Company (provided
such Notice of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard
or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within
3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the
shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Once the Holder
has received such shares of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing
such Holder's intention to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof in blank.
Accrued, but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will
be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. In the event the Company
experiences a DTC "Chill" on its shares, the conversion price shall be decreased to 45% instead of 55% while that "Chill"
is in effect.


 


(b)Interest on any unpaid
principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company in cash only.




    	2



    	 



    

 


(c)During the first six
months this Note is in effect, the Company may deem this Note by paying to the Holder an amount as follows, 140% of the face amount
plus any accrued interest. This Note may not be prepaid after the 180111 day. The redemption must be closed and paid for within
3 business days of the Company sending the redemption demand or the redemption will be invalid and the Company may not redeem this
Note.


 


(d)Upon (i) a transfer
of all or substantially all of the assets of the Company to any person in a single transaction or series of related transactions,
(ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock, other than
a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into another person
or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change the jurisdiction
of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock
solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a "Sale Event"), then, in
each case, the Company shall, upon request of the redeem this Note in cash for 140% of the principal amount, plus accrued but unpaid
interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount
of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale
Event at the Conversion Price.


 


(e)In case of any Sale
Event (not to include a sale of all or substantially all the Company's assets) in connection with which this Note is not redeemed
or converted, the Company shall cause effective provision to be made so that the Holder of this Note shall the right thereafter,
by converting this Note, to purchase or convert this Note into the kind number of shares of stock or other securities or property
(including cash) receivable upon reclassification, capital reorganization or other change, consolidation or merger by a holder
the number of shares of Common Stock that could have been purchased upon exercise Note and at the same Conversion Price, as defined
in this Note, immediately prior to sue Event. The foregoing provisions shall similarly apply to successive Sale Events. If the
consideration received by the holders of Common Stock is other than cash, the value shall be as mined by the Board of Directors
of the Company or successor person or entity acting in good faith.


 


5.                  
No provision of this Note shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.


 


6.                  
The Company hereby expressly waives demand and presentment for payment, notice of non-payment
, protest , notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any
action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and
to be owing hereto.


 


7.                  
The Company agrees to pay all costs and expenses, including reasonable attorneys' fees and
expenses, which may be incurred by the Holder in collecting any amount due under this Note.




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8.                  
If one or more of the following described "Events of Default" shall occur:


 


(a)                
The Company shall default in the payment of principal or interest on this Note or any other
note issued to the Holder by the Company; or


 


(b)                
Any of the representations or warranties made by the Company herein or in any certificate
or financial or other written statements heretofore or hereafter furnished by or on behalf of the Company in connection with the
execution and delivery of this Note, or the Securities Purchase Agreement under which this note was issued shall be false or misleading
any respect; or


 


(c)                
The Company shall fail to perform or observe, in any respect, any covenant, term, provision,
condition, agreement or obligation of the Company under this Note or any other note issued to the Holder; or


 


(d)                
The Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts
generally as they mature; (3) make an assignment for the benefit of creditors or commence proceedings for its dissolution; (4)
apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property
or business; (5) file a petition for bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary
petition for bankruptcy relief, all under federal or state laws as applicable; or


 


(e)                
A trustee, liquidator or receiver shall be appointed for the Company or for a substantial
part of its property or business without its consent and shall not be discharged within sixty (60) days after such appointment;
or


 


(f)                 
Any governmental agency or any court of competent jurisdiction at the instance of any governmental
agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company; or


 


(g)                
Unless previously disclosed in the Company's filings with the Securities and Exchange Commission
, one or more money judgments , writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000)
in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid
, unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than e (5) days prior to the date of
any proposed sale thereunder.


 


(h)                
The Company shall have defaulted on or breached any term of any other note of similar debt
instrument into which the Company has entered and failed to cure s fault within the appropriate grace period; or


 


(i)                  
The Company shall have its Common Stock delisted from an exchange (including the OTCBB exchange)
or, if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive
days;


 


(j)                 
If a majority of the members of the Board of Directors of the Company on the date hereof are
no longer serving as members of the Board;




    	4



    	 



    

 


(k)                
The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein
without restrictive legend within 3 business days of its receipt of a Notice of Conversion; or


 


(l)                  
The Company shall not replenish the reserve set forth in Section 12,within 3 business days
of the request of the Holder; or 


 


(m)              
The Company shall not be "current" in its filings with the Securities and Exchange
Commission; or


 


(n)                
The Company shall lose the "bid" price for its stock in a market (including the
OTCQB marketplace or other exchange).


 


Then, or at any time thereafter , unless cured,
and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall
not be deemed be a waiver of any subsequent default) at the option of the Holder and in the Holder's sole discretion, the Holder
may consider this Note immediately due and payable, without presentment, demand, protest or (further) notice of any kind (other
than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other instruments contained
to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of grace, enforce any and
all of the Holder's rights and remedies provided herein or any other rights or remedies afforded by law. Upon an Event of Default,
interest shall accrue at a fault interest rate of 16% per annum or, if such rate is usurious or not permitted by current law, then
at the highest rate of interest permitted by law. In the event of a breach of Section 8(k) the penalty shall be $250 per day the
shares are not issued beginning on the 4th day after the conversion notice was delivered to the Company. This penalty shall increase
to $500 per day beginning on the101 day. The penalty for a breach of Section 8(n) shall be an increase of the outstanding principal
amounts by 20%. In case of a breach of Section 8(i), the outstanding principal due und r this Note shall increase by 50%. If this
Note is not paid at maturity, the outstanding principa1 due under this Note shall increase by 10%.


 


If the Holder shall commence an action or proceeding
to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails in such
action, the Holder shall be reimbursed by the Company for its attorneys' fees and other costs and expenses incurred in the investigation,
preparation and prosecution of such action or proceeding.


 


9.                  
In case any provision of this Note is held by a court of competent jurisdiction to be excessive
in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is
enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not
in a way be affected or impaired thereby.


 


10.               
Neither this Note nor any term hereof may be amended, waived, discharged or terminated other
than by a written instrument signed by the Company and the Holder.




    	5



    	 



    

 


11.               
The Company represents that it is not a "shell" issuer and has never been a "shell"
issuer or that if it previously has been a "shell" issuer that at least 12 months have passed since the Company has reported
form 10 type information indicating it is no longer a "shell issuer. Further. The Company will instruct its counsel to either
(i) write a 144- 3(a) (9) opinion allow for salability of the conversion shares or (ii) accept such opinion from Holder's counsel.


 


12.               
The Company shall issue irrevocable transfer agent instructions reserving 12,500,000 shares
of its Common Stock for conversions under this Note (the "Share Reserve"). The reserve shall be replenished as needed
to allow for conversions of this Note. Up conversion of this Note, any shares remaining in the Share Reserve shall be cancelled.
The Company shall pay all costs associated with issuing and delivering the shares.


 


13.               
The Company will give the Holder direct notice of any corporate actions including but not
limited to name changes, stock splits, recapitalizations etc. This notice shall be given to the Holder as soon as possible under
law.


 


14.               
This Note shall be governed by and construed in accordance with the laws of New York applicable
to contracts made and wholly to be performed within the State of New York and shall be binding upon the successors and assigns
of each party hereto. The Holder and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and
venue in the courts of the State of New York. This Agreement may be executed in counterparts, and the facsimile transmission of
an executed counterpart to this Agreement shall be effective as an original.




    	6



    	 



    

 


IN WITNESS WHEREOF, the
Company has caused this Note to be duly executed by an officer thereunto duly authorized.


 


 


Dated: 7/14/2012


 


 


 


IDS INDUSTRIES, INC.


 


 


By: /s/ Scott Plantinga


Title CEO




    	7



    	 



    

 


EXHIBIT A


 


 


NOTICE OF CONVERSION


 


(To be Executed by the Registered Holder in
order to Convert the Note)


 


The undersigned hereby
irrevocably elects to convert $_____________ of the above Note into _____________Shares of Common Stock of IDS Industries, Inc.
("Shares") according to the conditions set forth in such Note, as of the date written below.


 


If Shares are to be issued
in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with
respect thereto.


 


Date of Conversion:


Applicable Conversion Price:


 


Signature:


[Print Name of Holder and Title of Signer]


 


Address:


 


SSN or EIN:


Shares are to be registered in the following
name:


 


Name:


Address:


Tel:


Fax:


SSN or EIN:


 


Shares are to be sent or delivered to the following
account:


 


Account Name:


Address:








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