Document:

NEITHER THIS 15% SECURED CONVERTIBLE
PROMISSORY NOTE (THIS “NOTE”), NOR THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF, HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER APPLICABLE FEDERAL OR STATE SECURITIES LAWS,
AND HAVE BEEN ISSUED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS, INCLUDING, WITHOUT LIMITATION,
THE EXEMPTION CONTAINED IN SECTION 4(2) OF THE SECURITIES ACT. NEITHER THIS NOTE NOR SUCH SECURITIES MAY BE SOLD OR TRANSFERRED
UNLESS (1) A REGISTRATION STATEMENT HAS BECOME AND IS THEN EFFECTIVE WITH RESPECT TO SUCH SECURITIES, (2) THIS NOTE OR SUCH SECURITIES,
AS APPLICABLE, IS TRANSFERRED PURSUANT TO RULE 144 PROMULGATED UNDER THE SECURITIES ACT (OR ANY SUCCESSOR RULE) OR (3) THE COMPANY
(AS HEREINAFTER DEFINED) HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT, TO THE EFFECT THAT THE PROPOSED SALE
OR TRANSFER OF THIS NOTE OR SUCH SECURITIES IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND ALL OTHER APPLICABLE FEDERAL
OR STATE SECURITIES LAWS.

 

	US$_____________	____________, 2014

 

QUANTUMSPHERE, INC.

 

15% SECURED CONVERTIBLE PROMISSORY NOTE

 

FOR VALUE RECEIVED, QuantumSphere,
Inc., a California corporation (the “Company”), promises to pay to the order of ____________________________,
an individual, or such person’s successors and assigns (collectively, the “Holder”), the principal amount
of _______________________________ Dollars (US$___________) (“Principal”), together with all accrued
and unpaid interest hereunder, on or before March 31, 2014 (the “Maturity Date”), subject to automatic extension
thru the period concluding on the thirty (30) day anniversary of finalization of all comments of securities regulatory agencies
in connection with the pending merger by and between the Company and PubCo (as defined in Section 4(a) hereinbelow), but in no
event later than July 31, 2014. Interest shall accrue and be payable as specified in Section 2.

 

A.This Note is one
of a series (the “Series”) of notes designated as the “15% Secured Convertible Promissory Notes”,
in an aggregate principal amount not to exceed Four Million Five Hundred Dollars ($4,500,000).

 

B.The obligations
due under this Note and the other notes in the Series are secured by a Security Agreement (the “Security Agreement”)
dated as of the date hereof and executed by the Company for the benefit of each Holder, and junior in priority to the debt financing
to be secured by the Company from Novus Capital in a principal amount up to $750,000 (the “Novus Capital Financing”).
In the event the Company elects not to enter into definitive agreements with respect to the Novus Capital Financing, then in in
such event this Note and the other notes in the Series shall be junior in priority to an alternative senior debt financing obtained
by the Company in a principal amount not to exceed $750,000. Additional rights of Holder and the other holders of notes in the
Series are set forth in the Security Agreement. The Company, the Holder, the other holders of the notes in the Series and a collateral
agent have also entered into an Intercreditor Agreement dated of even date herewith.

 

    	 

    	 

    

 

C.This Note is
convertible into securities of the Company as provided herein.

 

The following is a statement of the rights
of the Holder and certain conditions to which this Note is subject, and to which the Holder, by the acceptance of this Note, agrees:

 

1.Definitions. As used in this
Note, the following capitalized terms have the following meanings:

 

(a)“Business
Day” means a day (i) other than Saturday or Sunday, and (ii) on which commercial banks are open for business in the State
of California.

 

(b)“Default
Rate” means an interest rate of eighteen percent (18%) per annum.

 

(c)“Event
of Default” has the meaning given in Section 6 hereof.

 

(d)“Highest
Lawful Rate” means the maximum non-usurious rate of interest, as in effect from time to time, which may be charged, contracted
for, reserved, received or collected by the Holder in connection with this Note under applicable law.

 

(e)“Holder”
shall mean the person or entity specified in the introductory paragraph of this Note or any person or entity who shall at the time
be the registered holder of this Note.

 

(f)“Note”
shall mean this 15% Secured Convertible Promissory Note.

 

(g)“Obligations”
means all debts, liabilities and obligations of the Company to the Holder under this Note and the Security Agreement, including
all unpaid Principal of this Note, all Interest accrued hereon, and all other amounts payable by the Company to the Holder hereunder
and under the Security Agreement, whether due or to become due, absolute or contingent, liquidated or unliquidated, determined
or undetermined.

 

2.Interest. Interest shall accrue
on all outstanding Principal from the date hereof until paid at a rate of Fifteen Percent (15%) per annum (“Interest”).
Interest shall be computed on the basis of the actual number of days elapsed and a year of three hundred sixty (360) days. During
the existence of an Event of Default, Interest shall accrue on all outstanding Principal at the Default Rate.

 

3.Prepayment. The Principal and
Interest may not be prepaid by the Company without the prior written consent of the Holder.

 

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4.Conversion.

 

(a)The
Company plans to identify and enter into a reverse merger transaction (the “Reverse Merger”) with a publicly
traded corporation having securities registered under Section 12(g) of the Securities Exchange Act of 1934, as amended, and quoted
on the OTC Bulletin Board (“Pubco”), pursuant to which the Company will become a wholly-owned subsidiary of
Pubco and the Company’s shareholders will own a controlling interest in Pubco. Immediately prior to the close of the Reverse
Merger, the Company plans to complete a private placement of units (the “Units”), each consisting of one (1)
share of the Company’s common stock and one-half (.5) warrant having a term of five (5) years and an exercise price of $1.50
per full share, for a sales price of $2.00 per Unit, which will result in minimum proceeds to the Company of Two Million Dollars
($2,000,000) (the “Financing). In the event the Reverse Merger and the Financing are completed prior to the Maturity
Date, the outstanding Principal and Interest shall automatically be converted into Units of the Company at a price per Unit equal
to Ninety Percent (90%) of the sales price for the Units in the Financing. The conversion shall be subject to the closing of the
Reverse Merger but shall be deemed to occur immediately prior to the closing of the Reverse Merger. In the event the Reverse Merger
and the Financing are not completed prior to the Maturity Date, the Principal and Interest shall be due and payable on the Maturity
Date as provided herein.

 

(b)Until
the repayment in full of this Note, in the sole and absolute discretion of the Holder, the Principal and Interest on this Note
shall be convertible at any time, and from time to time, into Units at a price of $1.80 per Unit by submitting to the Company a
notice of conversion, the form of which is attached hereto as Exhibit A (by facsimile or other reasonable means of communications,
to the attention of the Company’s CEO & President).

 

(c)On
each conversion date and in accordance with the automatic conversion or the notice of voluntary conversion, the Company shall make
the appropriate reduction to the Interest due and payable and then the Principal due and payable and on such date and shall provide
written notice thereof to the Holder as well as a description of the derivation thereof. In the event of an automatic or voluntary
conversion of this Note, as soon as reasonably practicable thereafter the Company shall issue instructions to the transfer agent
to issue the required number of Units to the Holder, which shall be accompanied by an opinion of counsel to the Company, if required.
In the case of an automatic conversion pursuant hereto, the Units shall be deemed to have been issued immediately prior to the
close of the Merger and the Financing. In the case of a voluntary conversion, the Units shall be deemed to have been issued on
the date the notice of conversion is received by the Company. The Holder shall be treated for all purposes as the holder of record
of the Units unless the Holder provides the Company with written instructions to the contrary or as otherwise required by law.

 

(d)If
the Company shall at any time from the date hereof through the repayment of this Note in full or the earlier conversion in full
hereof, by reclassification or otherwise, change the Company’s common stock into the same or a different number of securities
of any class or classes, or effect a split or reverse split of the Company’s common stock, this Note, as to the unpaid Principal
and Interest, shall thereafter be deemed to evidence the right to purchase an adjusted number of Units and underlying securities
as would have been issuable as a result of such change with respect to the Company’s common stock if the Holder held such
Units prior to such change. Whenever any event referenced in the first sentence of this subsection shall become effective or be
earlier approved by the Board of Directors of the Company, the Company shall promptly mail by registered or certified mail, return
receipt requested, to the Holder of this Note notice of such adjustment or adjustments setting forth the number of Units (and other
securities or property) issuable upon the conversion of this Note and the conversion price (and other securities or property) after
such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which
such adjustment was made. Such notice, in the absence of manifest error, shall be conclusive evidence of the correctness of such
adjustment.

 

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(e)The
Company covenants that until the repayment in full of this Note or the earlier conversion in full hereof, the Company will reserve
from its respective authorized and unissued shares of common stock a sufficient number of shares, free of preemptive rights, to
provide for the issuance of the Units upon the full conversion of this Note. The Company is required to have authorized and reserved
such number of shares of Company common stock as is actually issuable upon full conversion of the Notes and exercise of the warrants
underlying the Units (based upon the conversion price in effect from time to time). The Company represents that upon issuance of
the Units, such Units and securities underlying the Units shall be duly and validly issued, fully paid, and nonassessable. In addition,
if the Company shall issue any securities or make any change to its capital structure which would change the number of Units into
which this Note 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 Units (and securities underlying the Units) authorized and reserved, free
from preemptive rights, for conversion of the Note. The Company agrees that its issuance of this Note shall constitute full authority
to the respective officers and agents of the Company who are charged with the duty of executing certificates, if any, to execute
and issue the necessary Units in accordance with the terms and conditions of this Note.

 

(f)Upon
any partial conversion of this Note pursuant to Section 3(b), a new Note containing the same date, terms, and provisions
shall, at the request of the Holder, be issued by the Company to the Holder for the Principal balance of this Note and the Interest
which shall not have theretofore been converted or paid.

 

(g)No
fraction of a Unit will be issued upon conversion, but the number of such Units issuable shall be rounded to the nearest whole
Unit.

 

(h)Nothing
contained in this Note shall be construed as conferring upon the Holder or any other person or entity the right to vote or to consent
or to receive notice as a shareholder in respect of meeting of shareholders for the election of directors of the Company or any
other matters or any rights whatsoever as a shareholder of the Company; and no dividends shall be payable or accrued in respect
of this Note.

 

(i)If
at any time during the three year period following the automatic or voluntary conversion of this Note, the Company shall determine
to prepare and file with the United States Securities and Exchange Commission (the “SEC”) a registration statement
relating to an offering for its own account or the account of others under the Securities Act of 1933, as amended (the “Securities
Act”) of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act)
or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or
business or equity securities issuable in connection with the Company’s stock option or other employee benefit plans, then
the Company shall deliver to the Purchaser a written notice of such determination and, if within twenty (20) days after the date
of the delivery of such notice, the Purchaser shall so request in writing, the Company shall at its expense include in such registration
statement all or any part of the Units acquired by Purchaser upon conversion of this Note (or pursuant to exercise of the warrants
underlying the Units) which the Purchaser requests to be registered; provided, however, that the Company shall not be required
to register any securities pursuant to this Section 3(i) that are eligible for resale pursuant to Rule 144 (without volume
restrictions or current public information requirements) promulgated by the Securities and Exchange Commission pursuant to the
Securities Act or that are the subject of a then effective registration statement. If the registration, as described above, involves
an underwritten offering, the Company will not be required to register the Units or the underlying securities in excess of the
amount that the principal underwriter reasonably and in good faith recommends may be included in such offering (a “Cutback”),
which recommendation, and supporting reasoning, shall be delivered to the Holder. If such a Cutback occurs, the number of shares
that are entitled to be included in the registration and underwriting shall be allocated in the following manner: (i) first, to
the Company for any securities it proposes to sell for its own account, and (ii) second, to the Holder and other holders of stock
of the Company requesting inclusion in the registration, pro rata among the respective holders thereof on the basis of the number
of shares for which each such requesting holder has requested registration.

 

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5.Highest Lawful Rate. Notwithstanding
any provision to the contrary contained herein, if during any period for which Interest is computed hereunder, the amount of Interest
computed on the basis provided for in this Note, together with all fees, charges and other payments which are treated as interest
under applicable law, as provided for herein or in any other document executed in connection herewith, would exceed the amount
of such Interest computed on the basis of the Highest Lawful Rate, the Company shall not be obligated to pay, and the Holder shall
not be entitled to charge, collect, receive, reserve or take Interest in excess of the Highest Lawful Rate, and during any such
period the Interest payable hereunder shall be computed on the basis of the Highest Lawful Rate.

 

6.Events of Default. Any of the
following events which shall occur shall constitute an “Event of Default”:

 

(a)the
Company shall fail to pay when due any amount of principal or interest hereunder or other amount payable hereunder or under the
Security Agreement, where such failure continues for five (5) days after receipt of written notice from Holder specifying such
failure; or

 

(b)the
Company shall: (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all
or any material part of its property; (ii) admit in writing its inability to pay its debts generally as they become due; (iii)
make a general assignment for the benefit of any of its creditors; (iv) be dissolved or liquidated in full or in part; (v) commence
a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment
of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it; or (vi)
take or approve any action for the purpose of effecting any of the foregoing; or

 

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(c)proceedings
for the appointment of a receiver, trustee, liquidator or custodian of the Company or of all or any material part of its property,
or a voluntary or involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to the
Company or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect, shall be commenced
and such involuntary case or proceeding shall not be dismissed or discharged within sixty (60) days of commencement; or an order
for relief shall be entered against the Company under the federal bankruptcy laws as now or hereafter in effect; or

 

(d)a
default or event of default under any agreement of the Company shall occur that gives the holder of any other indebtedness for
borrowed money of the Company the right to accelerate the maturity of such indebtedness (subject to any applicable cure periods
set forth therein, if any); or

 

(e)the
Company shall fail to observe or perform any other covenant, obligation, condition or agreement contained in this Note or the Security
Agreement and (i) such failure shall continue for fifteen (15) days, or (ii) if such failure is not curable within such fifteen
(15) day period, but is reasonably capable of cure within thirty (30) days, either (A) such failure shall continue for thirty (30)
days or (B) the Company shall not have commenced a cure in a manner reasonably satisfactory to Holder within the initial fifteen
(15) day period; or

 

(f)any
representation or warranty made or furnished by or on behalf of Company to Holder in writing in connection with this Note or the
Security Agreement shall be false, incorrect, incomplete or misleading in any material respect when made or furnished.

 

Upon the occurrence of any Event of Default,
(x) the Holder may at any time declare all unpaid Obligations to be immediately due and payable without presentment, demand, protest
or any other notice of any kind, all of which are hereby expressly waived by the Company; (y) the Holder may exercise all rights
and remedies available to the Holder hereunder and under the Security Agreement and applicable law, and (z) in the case of an Event
of Default described in Section 6(b) or 6(c), all unpaid Obligations shall automatically become immediately due and
payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly and irrevocably
waived by the Company.

 

7.Successors and Assigns. Subject
to the restrictions on transfer described in Section 10, the rights and obligations of the Company and the Holder hereunder
shall be binding upon and inure to the benefit of the successors, assigns, heirs, administrators and transferees of the parties.
Due to the reliance by the Company on the exemption from registration provided by Rule 506 of Regulation D, as promulgated pursuant
to the Securities Act, and the representation by Holder to the Company that Holder is an “accredited investor” as such
term is defined by Rule 501(a) of Regulation D, no assignment of this Note shall be made to any person who is not an “accredited
investor”, where any assignment or transfer of this Note, or any attempt thereof, shall be null and void.

 

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8.Amendments and Waivers. This
Note may not be amended or modified, nor may any of its terms be waived, except by written instruments signed by the Company and
Holder. Each waiver or consent under any provision hereof shall be effective only in the specific instances for the purpose for
which given.

 

9.Transfer of this Note. Transfers
of this Note shall be registered upon registration books maintained for such purpose by or on behalf of the Company. Prior to presentation
of this Note for registration of transfer, the Company shall treat the registered Holder hereof as the owner and the Holder of
this Note for the purpose of receiving all payments of Principal and Interest hereon and for all other purposes whatsoever, whether
or not this Note shall be overdue and the Company shall not be affected by notice to the contrary.

 

10.Assignment or Delegation by the
Company. Neither this Note nor any of the rights, interests or obligations hereunder may be assigned or delegated in whole
or in part by the Company without the prior written consent of Holder.

 

11.Notices. Except as otherwise
provided herein, all notices, requests, demands, consents, instructions or other communications to or upon the Company or Holder
under this Note shall be in writing and mailed or delivered to each party to its address set forth in the Security Agreement (or
to such other address as the recipient of any notice shall have notified the other in writing). All such notices and communications
shall be effective (a) when sent by a commercially recognized means of overnight delivery providing confirmation of receipt, on
the business day following the deposit with such service; (b) when mailed, by registered or certified mail, first class postage
prepaid and addressed as aforesaid through the United States Postal Service, upon receipt; and (c) when delivered by hand, upon
delivery.

 

12.Expenses; Waivers. If action
is instituted to collect this Note, the Company promises to pay on demand all costs and expenses, including reasonable attorneys’
fees and costs, incurred in connection with such action. The Company hereby waives notice of default, presentment or demand for
payment, protest or notice of nonpayment or dishonor and all other notices or demands relative to this instrument.

 

13.Further Assurance. Each party
shall execute, acknowledge, deliver, file, notarize and register (at its own expense) all documents, instruments, certificates,
agreements and assurances and provide all information and take or forbear from all such action as the other party may reasonably
deem necessary or appropriate to achieve the purposes of the Note or satisfy the obligations of the Company hereunder.

 

14.Severability. Whenever possible,
each provision of this Note shall be interpreted in such manner as to be effective and valid under all applicable laws and regulations.
If, however, any provision of this Note shall be prohibited by or be invalid under any such law or regulation in any jurisdiction,
it shall, as to such jurisdiction, be deemed modified to conform to the minimum requirements of such law or regulation, or, if
for any reason it is not deemed so modified, it shall be ineffective and invalid only to the extent of such prohibition or invalidity
without affecting the remaining provisions of this Note, or the validity or effectiveness of such provision in any other jurisdiction.

 

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15.Cumulative Rights, etc. The
rights, powers and remedies of Holder under this Note and the Security Agreement shall be in addition to all rights, powers and
remedies given to Holder by virtue of any applicable law, rule or regulation of any governmental authority, the Security Agreement
or any other agreement, all of which rights, powers, and remedies shall be cumulative and may be exercised successively or concurrently
without impairing Holder’s rights hereunder. The Company waives any right to require Holder to proceed against any person
or entity or to exhaust any collateral or to pursue any remedy in Holder’s power.

 

16.No Waiver. No course of dealing
between the Company and the Holder or any delay on the part of the Holder in exercising any rights or remedies shall operate as
a waiver of any such right or remedy of the Holder.

 

17.Construction. Each of the
Security Agreement and this Note is the result of negotiations among, and has been reviewed by, the Company, Holder and their respective
counsel. Accordingly, this Note and the Security Agreement shall be deemed to be the product of all parties hereto, and no ambiguity
shall be construed in favor of or against the Company or Holder.

 

18.Other Interpretive Provisions.
References in this Note and the Security Agreement to any document, instrument or agreement (a) includes all exhibits, schedules
and other attachments thereto, (b) includes all documents, instruments or agreements issued or executed in replacement thereof,
and (c) means such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified and supplemented
from time to time and in effect at any given time. The words “hereof,” “herein” and “hereunder”
and words of similar import when used in this Note or the Security Agreement refer to this Note or the Security Agreement, as the
case may be, as a whole and not to any particular provision of this Note or the Security Agreement, as the case may be. The words
“include” and “including” and words of similar import when used in this Note or the Security Agreement
shall not be construed to be limiting or exclusive.

 

19.Governing Law and Jurisdiction.
This Note and all actions arising out of or in connection with this Note shall be governed by and construed in accordance with
the internal laws of the State of California, without regard to the conflicts of law rules of the State of California or of any
other jurisdiction.

 

20.Waiver of Jury Trial. EACH
OF THE COMPANY AND THE HOLDER, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL
BY JURY AS TO ANY ISSUE RELATED HERETO IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS NOTE.

 

21.Subordination. Holder expressly
agrees to the subordination of this Note to the Novus Capital Financing to be secured by the Company from Novus Capital in the
proposed amount of Seven Hundred Fifty Thousand Dollars ($750,000.00), where no further action need to be taken by the Company
other than written notice from the Company as to the funding of the Novus Capital Financing and the subordination of this Note
thereby.

 

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IN WITNESS WHEREOF, this Note has been executed
by the Company as of the date first above written.

 

	 	The Company:	 	 	 
	 	 	 	QuantumSphere, Inc.,
	 	 	 	a California Corporation
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	By:	 
	 	 	 	 	Kevin D. Maloney
	 	 	 	Title:  	CEO & President

 

Acknowledged and agreed to this ___ day of _______________

 

	 	The Holder: 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 		 	Signature	 
	 	 	 	 	 
	 	 	 	Name:	 
	 	 	 	 	 
	 	 	 	Title (if applicable): 	 

  

    	9THE SECURITIES REPRESENTED BY THIS WARRANT
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SHARES UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE
SECURITIES ACT. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS AND THE LAWS OF OTHER
APPLICABLE JURISDICTIONS.

 

COMMON STOCK PURCHASE WARRANT

 

For the Purchase of __________ Shares

of Common Stock, no par value

of

 

QUANTUMSPHERE,
INC.

A California Corporation

 

For value received,
____________________ (the “Holder”), or his assigns, is entitled to, on or before the date specified below on
which this Common Stock Purchase Warrant (the “Warrant”) expires, but not thereafter, to subscribe for, purchase and
receive the number of fully paid and nonassessable shares of the common stock, no par value (the “Common Stock”), of
QuantumSphere, Inc., a California corporation (the “Company”) set forth above, at a price of $__________ per share
(the “Exercise Price”), upon presentation and surrender of this Warrant and upon payment by bank check of the Exercise
Price for such shares of Common Stock to the Company at its principal office.

 

1.           Exercise of
Warrant. This Warrant may be exercised in whole or in part, from time to time, commencing on the date hereof (the “Issue
Date”) and expiring on the fifth (5th) anniversary date hereof, by presentation and surrender hereof to the Company, with
the Exercise Form annexed hereto duly executed and accompanied by payment by bank check of the Exercise Price for the number of
shares specified in such form, together with all federal and state taxes applicable upon such exercise, if any. If this Warrant
should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new
Warrant evidencing the right of the Holder to purchase the balance of the shares purchasable hereunder. Upon receipt by the Company
of this Warrant and the Exercise Price at the office of the Company, in proper form for exercise, the Holder shall be deemed to
be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that certificates representing
such shares of Common Stock shall not then be actually delivered to the Holder. If the subscription rights represented hereby shall
not be exercised at or before 5:00 P.M., Pacific Time, on the expiration date specified above, this Warrant shall become void and
without further force or effect, and all rights represented hereby shall cease and expire.

 

    	 

    	 

    

 

           2.           Call Provision. The Company
may redeem the Warrant at any time if, for a period twenty (20) consecutive trading days, the closing bid price of the Company’s
Common Stock is $5.00 or more (as reported by a national securities exchange or the Over the Counter Bulletin Board), upon providing
five (5) trading days prior written notice to Holder ("Redemption Notice"). The Company may redeem the Warrant, in whole
or in part, at a redemption price equal to $0.01 per share of common stock underlying this Warrant. Any redemption hereunder shall
occur on the date specified in the Redemption Notice ("Redemption Date"), provided that such Redemption Date may not
occur until at least five (5) trading days following the date on which the Holder received the Redemption Notice (the "Redemption
Notice Date"). The Company may not deliver the Redemption Notice unless, for a period twenty (20) consecutive trading days,
the closing bid price of the Company’s Common Stock is $5.00 or more (as reported by a national securities exchange or the
Over the Counter Bulletin Board). The period from the Redemption Notice Date to the Redemption Date shall be referred to herein
as the "Post-Call Period". The Holder may exercise this Warrant, including any portion subject to a Redemption Notice,
at any time and from time to time during the period from the Redemption Notice Date through the date on which the redemption price
for such Warrants is paid by the Company (and thereafter if such redemption price is not paid), and the Company shall honor all
tendered exercises of the Warrant during such period. All Redemption Notices under this Section 2 shall be irrevocable.

 

           3.           Rights of the Holder.
Prior to exercise of this Warrant, the Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company,
either at law or equity, and the rights of the Holder are limited to those expressed in this Warrant and are not enforceable against
the Company except to the extent set forth herein.

 

           4.           Adjustment in Number of Shares.

 

 

(A)           Adjustment
for Reclassifications. In case at any time, or from time to time, after the Issue Date the holders of the Common Stock of the
Company (or any shares of stock or other securities at the time receivable upon the exercise of this Warrant) shall have received,
or, on or after the record date fixed for the determination of eligible stockholders, shall have become entitled to receive, without
payment therefore, other or additional stock or other securities or property (including cash) by way of stock-split, spinoff, reclassification,
combination of shares or similar corporate rearrangement (exclusive of any stock dividend of its or any subsidiary’s capital
stock), then and in each such case the Holder(s) of this Warrant, upon the exercise hereof as provided in Section 1, shall be entitled
to receive the amount of stock and other securities and property which such Holder(s) would hold on the date of such exercise if
on the Issue Date they had been the holder of record of the number of shares of Common Stock of the Company called for on the face
of this Warrant and had thereafter, during the period from the Issue Date, to and including the date of such exercise, retained
such shares and/or all other or additional stock and other securities and property receivable by them as aforesaid during such
period, giving effect to all adjustments called for during such period. In the event of a declaration of a dividend payable in
shares of any equity security of a subsidiary of the Company, then the Company may cause to be issued a warrant to purchase shares
of the subsidiary (“Springing Warrant”) in an amount equal to such number of shares of the subsidiary’s securities
to which the Holders would have been entitled, but conditioned upon the exercise of this Warrant as a prerequisite to receiving
the shares issuable pursuant to the Springing Warrant.

 

 

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(B)           Adjustment
for Reorganization, Consolidation, Merger. In case of any reorganization of the Company (or any other corporation the stock
or other securities of which are at the time receivable on the exercise of this Warrant) after the Issue Date, or in case, after
such date, the Company (or any such other corporation) shall consolidate with or merge into another corporation or convey all or
substantially all of its assets to another corporation, then and in each such case the Holder(s) of this Warrant, upon the exercise
hereof as provided in Section 1, at any time after the consummation of such reorganization, consolidation, merger or conveyance,
shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise of this Warrant
prior to such consummation, the stock or other securities or property to which such Holder(s) would be entitled had the Holders
exercised this Warrant immediately prior thereto, all subject to further adjustment as provided herein; in each such case, the
terms of this Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of
this Warrant after such consummation.

 

5.           Officer’s
Certificate. Whenever the number of shares of Common Stock issuable upon exercise of this Warrant or the Exercise Price shall
be adjusted as required by the provisions hereof, the Company shall forthwith file in the custody of its Secretary at its principal
office, an officer’s certificate showing the adjusted number of shares of Common Stock or Exercise Price determined as herein
provided and setting forth in reasonable detail the facts requiring such adjustment. Each such officer’s certificate shall
be made available at all reasonable times for inspection by the Holder(s) and the Company shall, forthwith after each such adjustment,
deliver a copy of such certificate to the Holder(s). Such certificate shall be conclusive as to the correctness of such adjustment.

 

6.           Restrictions
on Transfer. Certificates for the shares of Common Stock to be issued upon exercise of this Warrant shall bear the following
legend:

 

THE SECURITIES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SHARES UNDER THE SECURITIES ACT OR AN EXEMPTION
FROM THE SECURITIES ACT. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS AND THE LAWS
OF OTHER APPLICABLE JURISDICTIONS.

 

The Holder, by acceptance
hereof, agrees that, absent an effective registration statement under the Securities Act of 1933, as amended (the “Act”),
covering the disposition of this Warrant or the Common Stock issued or issuable upon exercise hereof, such Holder(s) will not sell
or transfer any or all of this Warrant or such Common Stock without first providing the Company with an opinion of counsel reasonably
satisfactory to the Company to the effect that such sale or transfer will be exempt from the registration and prospectus delivery
requirements of the Act. The Holder agrees that the certificates evidencing the Warrant and Common Stock which will be delivered
to the Holder by the Company shall bear substantially the following legend: The Holder of this Warrant, at the time all or a portion
of such Warrant is exercised, agrees to make such written representations to the Company as counsel for the Company may reasonably
request, in order that the Company may be reasonably satisfied that such exercise of the Warrant and consequent issuance of Common
Shares will not violate the registration and prospectus delivery requirements of the Act, or other applicable state securities
laws.

 

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7.           Loss or Mutilation.
Upon receipt by the Company of evidence satisfactory to it (in the exercise of reasonable discretion) of the ownership of and the
loss, theft, destruction or mutilation of any Warrant and (in the case of loss, theft or destruction) of indemnity satisfactory
to it (in the exercise of reasonable discretion), and (in the case of mutilation) upon surrender and cancellation thereof, the
Company will execute and deliver in lieu thereof a new Warrant of like tenor.

 

8.           Reservation
of Common Stock. The Company shall at all times reserve and keep available for issue upon the exercise of the Warrants such
number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding
Warrants.

 

9.           Notices.
All notices and other communications from the Company to the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, to the address furnished to the Company in writing by the Holder.

 

10.          Change; Waiver.
Neither this Warrant nor any term hereof may be changed, waived, discharged or terminated orally but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge or termination is sought.

 

11.          Law Governing.
This Warrant shall be construed and enforced in accordance with and governed by the laws of California.

 

IN WITNESS WHEREOF,
the Company has caused this Warrant to be signed by its duly authorized officer on ____________________, 20_____.

 

	 	QUANTUMSPHERE, INC.
	 	 	 
	 	 	 
	 	By:	          	 
	 	 	Kevin D. Maloney
	 	 	Chief Executive Officer & President

 

 

 

 

 

 

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