Document:

Exhibit 10.1

 

SECURITIES
PURCHASE AND FINANCING AGREEMENT

 

This
SECURITIES PURCHASE AND FINANCING AGREEMENT (the “Agreement”), dated as of January 26, 2021, is made by and
among Quantum Materials Corp., a Nevada corporation (the “Company”), and Pasaca Capital Inc., a Nevada corporation
(“Pasaca”), and the investors listed on the Schedule of Investors attached hereto and as amended from
time to time by Pasaca (individually, “Investor” and collectively, “Investors”). Pasaca
or its designee(s) may be Investors.

 

WHEREAS:

 

A.
The Company, through its wholly owned subsidiaries, Solterra Renewable Technologies, Inc. and QMC HealthID Incorporated, specializes
in the design, development, production and supply of quantum dots, including tetrapod quantum dots, a high-performance variant
of quantum dots, and highly uniform nanoparticles, using its patented automated continuous flow production process, and integrating
the quantum dots in various applications and solutions. The Company, through its acquisition of the intangible assets of Capstan
Platform, Inc., is involved in distributed ledger technology, DLT or blockchain technology, solutions for business enterprises.
The Company, through its patent-pending QMCTM DLT platform, combined with its quantum dot production process, has a technology
to track goods end-to-end in supply chains, from manufacture to retail point of sale, addressing counterfeit, product liability
and other product-track and -trace issues. Through its QMCTM HealthID product, the Company provides end-to-end visibility
to support testing and immunization for infectious diseases. The foregoing business segments are referred to herein collectively
as the “Business.”

 

B.
The Business has significant intellectual property, existing software and solutions, historical licensing revenue and significant
in-process sales, and future sales prospects.

 

C.
The Business has historically and does currently operate at a loss. Pasaca has previously loaned Three Million Dollars ($3,000,000)
to the Company (the “Bridge Loans”) pursuant to certain notes (the “Bridge Notes”). The
Company has determined that financing from Investors in an amount of up to Four Million Five Hundred Thousand Dollars ($4,500,000)
(inclusive of the amount of the Bridge Loans) will enable the Company, upon the achievement of certain milestones, to complete
certain corporate actions necessary to issue equity in the Company in connection with the contemplated financing, as well as achieve
significant in-process and future sales and licensing revenue, significantly enhancing the value of the Company, and the Company
desires to complete the initial financing contemplated in this Agreement. Pasaca has agreed to make such additional funds available
by (i) making an additional convertible bridge loan, in the amount of One Million Five Hundred Dollars ($1,500,000), to be consolidated
with the Bridge Loans into a single loan in the principal amount of Four Million Five Hundred Dollars ($4,500,000).

 

D.
The Company has determined that it will also be necessary for the Company, following completion of the initial investment contemplated
in this Agreement, to have access to additional capital to continue to operate and expand the Business. The Company has indicated
to Pasaca that the Company desires up to Ten Million Five Hundred Dollars ($10,500,000) of said additional capital and Pasaca
has agreed to make such additional funds available pursuant to the purchase of Ten Million Five Hundred Dollars ($10,500,000)
worth of common stock as provided in Section 1(a)(ii) below upon the satisfaction of the conditions to such purchase set
forth in this Agreement.

 

E.
The Company and Pasaca have also discussed the desirability of Pasaca’s subsidiary Innova Medical Group, Inc. or designees
(collectively, “Licensee”) to license the rights to use and distribute the Company’s QMCTM HealthID
product and, in connection therewith, purchase the Company’s quantum dot products. The Company and Pasaca have also discussed
the desirability of having Innova and the Company engage in joint sales activities with customers looking to purchase Innova Medical
Group, Inc. products for the purposes of “pulling through” the sale of the QMC HealthID product as an adjunct to Innova
product sales. In the aforementioned joint sales activities, Licensee would be playing the role of a sales agent for the Company.
The foregoing licensing and sales opportunities are referred to herein collectively as the “Licensing & Sales Opportunity”
or equivalently “LSO.”

 

    	 

     

    

 

F.
The Company and Licensee, shall contemporaneously have entered into world-wide, assignable, sublicensable Distribution Agreement
(the “Distribution Agreement”) substantially in the form of Exhibit C to this Agreement.

 

G.
The Company and Pasaca wish by this Agreement to facilitate the implementation of the initial equity investment and the Licensing
& Sales Opportunity and also to set forth the framework in which the Company, with Pasaca’s participation and support
as a major stockholder in the Comapny, may obtain the additional financing required for future operation of the Company and additional
support and resources needed by the Company following completion of the initial equity investment.

 

H.
Investors will severally and not jointly provide to the Company investments (“Financing”) pursuant to this
Agreement and upon the terms and conditions to be set forth in supplemental agreements and documents (together with this Agreement
and each of the other agreements to which it is or will become a party or by which it is or will become bound and which is or
will be entered into by the parties hereto in connection with the transactions contemplated hereby and thereby (collectively,
including the documents listed in Schedule A to this Agreement, the “Transaction Documents”). The Company
and the Investors agree that any securities to be issued pursuant to the Transaction Documents (the “Securities”)
are or will be offered and sold in reliance upon the exemption from securities registration afforded by Rule 506(b) of Regulation
D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”)
under Section 4(a)(2) of the Securities Act of 1933, as amended (the “1933 Act”) or such other exemption from
registration or registration process as shall be approved by Pasaca.

 

I.
Contemporaneously with the initial Closing (as defined in Section 1(a)) and thereafter from time to time in connection
with the Financing, the parties hereto and thereto will execute and deliver a Registration Rights Agreement in the form of Exhibit
B to this Agreement (collectively, the “Registration Rights Agreement”), pursuant to which the Company
will agree to file a registration statement under the 1933 Act and the rules and regulations promulgated thereunder, and applicable
state securities laws with respect to any Securities.

 

NOW
THEREFORE, the Company, Pasaca, and Investors hereby agree as follows:

 

1.
Financings.

 

(a)
Investments.

 

(i)
At the initial closing under this Agreement (such closing and each subsequent closing of the conversion of a security issued at
the initial closing, a “Closing”), Investors will purchase from the Company and the Company will issue and
sell to Purchaser: in consideration of the aggregate payment by Investors of Four Million Five Hundred Thousand Dollars ($4,500,000)
(the “Initial Payment”), senior secured convertible voting notes (“Notes”) in the initial
principal amount of Four Million Five Hundred Thousand Dollars ($4,500,000). The Notes have a maturity date of March 31, 2021
and the principal thereof will initially be convertible into an aggregate of 154,228,625 shares (the “Note Shares”)
of the Company’s common stock, par value $.001 per share (the “Common Stock”).

 

(ii)
In consideration of the aggregate payment by Investors of Ten Million Five Hundred Thousand Dollars ($10,500,000) (the “Stock
Payment”), at the second Closing Investors will purchase from the Company and the Company will issue and sell to Purchaser
a number of shares of Common Stock (the “Purchased Shares”) that, together with the Note Shares issued on account
of the conversion of principal of the Notes, represent fifty-one percent (51%) of the fully diluted Common Stock of the Company
immediately following the second Closing.

 

(iii)
The forms of payment for the Notes and the Purchased Shares shall be as set forth in Section 1(e) below.

 

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(b)
Investment Principles.

 

(i)
The Purchased Shares, together with the Note Shares issued on account of the conversion of principal of the Notes, shall represent
fifty-one percent (51%) of the fully diluted Common Stock of the Company immediately following the second Closing.

 

(ii)
Concurrently with issuance and sale of the Purchased Shares at the second Closing, the Investors shall convert the Notes into
Common Stock and the Common Stock so issued shall also constitute Purchased Shares for purposes of this Agreement not related
to the second Closing.

 

(c)
Forms of Security. The Notes shall be in the form of Exhibit A to this Agreement. The Common Stock will be in certificate
or book-entry form, as requested by Investors.

 

(d)
The Closing Dates. The date and time of the initial Closing and the second Closing under this Agreement (each a “Closing
Date”) shall be 10:00 a.m., Los Angeles time, on the first day other than Saturday, Sunday or other day on which commercial
banks in the State of California are authorized or required by law to remain closed (a “Business Day”) following
the date on which all of the conditions to the respective Closing set forth in Sections 6(a) and 7(a) (or such later
or earlier date as is mutually agreed to by the Company and Investors participating in such Financing) have been satisfied or
waived by the respective party. A Closing shall occur on the Closing Date at the offices of Pasaca or at such other time, date
and place as the Company and Pasaca may designate in writing.

 

(e)
Forms of Payment.

 

(i)
On the initial Closing Date, Pasaca will pay the Initial Payment by (A) tender of delivery of the Bridge Notes to be exchanged
as the $3,000,000 portion of the Notes, and (B) payment of One Million Five Hundred Thousand Dollars ($1,500,000) by wire transfer
of immediately available funds by wire transfer of immediately available funds in accordance with the Company’s written
wire instructions to an account of the Company (“Company’s Account”). Therefore, the total $4,500,000
consideration for the Notes is comprised of the exchange of the Bridge Notes and cash loan proceeds of $1,500,000.

 

(ii)
On the second Closing Date, which shall be no later than two (2) Business Days after the filing of the amended and restated Articles
of Incorporation required in Section 4(f), Pasaca will pay the Stock Payment by payment of Ten Million Five Hundred Thousand Dollars
($10,500,000) by wire transfer of immediately available funds to Company’s Account, less any amount withheld pursuant to
Section 4(h).

 

(iii)
Any Investor other than Pasaca participating in a Closing shall provide its applicable portion of the respective consideration
for such Investor’s participation in such Financing on the respective Closing Date, with any payments or advances (other
than conversion of the Bridge Loans) being by wire transfer to Company’s Account, less any amount withheld pursuant to Section
4(h), and (ii) the Company shall deliver to each Investor any certificates or other documents representing or evidencing any
securities to be issued or created in connection such Financing, duly executed on behalf of the Company and, as applicable, registered
in the name of such Investor.

 

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2.
Investor’s Representations and Warranties.

 

Each
Investor represents and warrants, severally and not jointly, as of the date of this Agreement or the respective Transaction Document
and on the respective Closing Date, with respect to only itself, that:

 

(a)
Investment Purpose. Such Investor (i) is acquiring any Securities purchased by such Investor and (ii) upon any conversion
thereof, will acquire any Securities then issuable, for its own account and not with a view towards, or for offer or resale in
connection with, the public sale or distribution thereof, except pursuant to sales registered under or exempted from the registration
requirements of the 1933 Act; provided, however, that by making the representations herein, such Investor does not agree to hold
any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time pursuant
to a registration statement that has been declared and is effective under the 1933 Act or in accordance with an exemption from
the registration requirements of the 1933 Act.

 

(b)
Accredited Investor Status. Such Investor is an “accredited investor” as that term is defined in Rule
501(a) of Regulation D.

 

(c)
Reliance on Exemptions. Such Investor understands and agrees that any Securities are being offered and sold to it in reliance
on specific exemptions from the registration requirements of the United States federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and such Investor’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Investor set forth herein in order to determine the availability of such
exemptions and the eligibility of such Investor to acquire the Securities.

 

(d)
Information. Such Investor and its advisors, if any, have been furnished with all materials relating to the business, finances
and operations of the Company and materials relating to the offer and sale of the Securities that have been requested by such
Investor. Such Investor and its advisors, if any, have been afforded the opportunity to ask questions of and receive answers from
the Company. Neither such inquiries nor any other due diligence investigations conducted by such Investor or its advisors, if
any, or its representatives shall modify, amend or affect such Investor’s right to rely on the truth, accuracy and completeness
of the Company’s representations and warranties contained in the Transaction Documents. Such Investor understands that its
investment in the Securities involves a high degree of risk. Such Investor has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an Investment in the Securities. Such Investor has sought
such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its
acquisition of the Securities.

 

(e)
No Governmental Review. Such Investor understands that no United States federal or state agency or any other government
or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability
of the investment in the Securities nor have such authorities passed upon or endorsed the merits of any offering of the Securities.

 

(f)
Transfer or Resale. Such Investor understands that, except as provided in the Registration Rights Agreement, (i) any Securities
have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold,
assigned or transferred unless (A) subsequently registered thereunder, (B) such Investor shall have delivered to the Company an
opinion of counsel, in a generally acceptable form, to the effect that such Securities to be sold, assigned or transferred may
be sold, assigned or transferred pursuant to an exemption from such registration, or (C) such Investor provides the Company with
reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144 promulgated by the United
States Securities and Exchange Commission (“SEC”) under the 1933 Act (or a successor rule thereto) (“Rule
144”); (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of
Rule 144, and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or
the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither
the Company nor any other person is under any obligation to register the Securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption thereunder. 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.

 

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(g)
Legends. Such Investor understands that the certificates or other instruments representing any Securities, until such time
as the sale thereof have been registered under the 1933 Act as contemplated by the Registration Rights Agreement, the certificates
or instruments representing the Securities, except as set forth below, shall bear a restrictive legend in substantially the following
form (and a stop-transfer order may be placed against transfer of such stock certificates):

 

THE
SECURITIES [REPRESENTED / EVIDENCED] BY THIS [CERTIFICATE / INSTRUMENT] HAVE NOT 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
APPLICABLE STATE SECURITIES LAWS OR (B) AN APPROPRIATE EXCEPTION UNDER SAID ACT OR APPLICABLE SECURITIES LAWS OR (II) UNLESS SOLD
PURSUANT TO RULE 144 OR 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 a certificate or instrument without such legend to the holder
of the Securities upon which it is stamped if (i) such Securities are registered for resale under the 1933 Act, (ii) in connection
with a sale transaction, such holder provides the Company with an opinion of counsel, in a generally acceptable form, to the effect
that a public sale, assignment or transfer of the Securities may be made without registration under the 1933 Act, (iii) such holder
provides the Company with reasonable assurance that the Securities can be sold pursuant to Rule 144(b) promulgated under the 1933
Act (or a successor rule thereto), or (iv) such holder provides the Company with reasonable assurance that the Securities have
been or are being sold pursuant to Rule 144.

 

(h)
Authorization; Enforcement; Validity. Such Investor, if an entity, is a validly existing corporation, limited liability
company, partnership, or other entity and has the requisite corporate, partnership, limited liability or other organizational
power and authority to purchase the Securities or make the Financing pursuant to this Agreement and the applicable Transaction
Documents. This Agreement and the applicable Transaction Documents have been duly and validly authorized, executed and delivered
on behalf of such Investor and are valid and binding agreements of such Investor enforceable against such Investor in accordance
with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general
principles of equity relating to enforceability (regardless of whether considered in a proceeding at law or in equity).

 

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3.
Representations and Warranties of the Company.

 

The
Company has delivered to Pasaca on behalf of the Investors a disclosure schedule (the “Company Disclosure Schedule”),
which includes specific disclosures and exclusions related to the following representations and warranties, each cross-referenced
to the Sections in this Agreement. The Company represents and warrants, as of the date of this Agreement and on the Closing Date,
to each of Investors, that (to the extent appropriate in the context in this Section 3, references to the Company shall
be to the Company and, to the extent appropriate in the context in this Section 3, references to the Company shall include
all Subsidiaries):

 

(a)
Organization and Qualification. Set forth on Schedule 3(a) of the Company Disclosure Schedule is a true and correct
list of the entities in which the Company, directly or indirectly, owns capital stock or holds an equity or similar interest,
together with their respective jurisdictions of organization and the percentage of the outstanding capital stock or other equity
interests of such person that is held by the Company or any Subsidiary of the Company. Other than with respect to the entities
listed on Schedule 3(a) of the Company Disclosure Schedule, the Company does not, directly or indirectly, own any securities
or beneficial ownership interests in any other person (including through joint ventures or partnership arrangements) or have any
investment in any other person. Each of the Company and its Subsidiaries is a corporation, limited liability company, partnership
or other entity and is duly organized and validly existing in good standing under the laws of the jurisdiction in which it is
incorporated or organized and has the requisite corporate, partnership, limited liability company or other organizational power
and authority to own its properties and to carry on its business as now being conducted. The Company is duly qualified to do business
and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it
makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not
have a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect” means any material adverse
effect on (i) the business, properties, assets, operations, results of operations, condition (financial or otherwise), credit
worthiness or prospects of the Company and its Subsidiaries, taken as a whole, or on the transactions contemplated hereby or on
any of the agreements and instruments to be entered into in connection herewith (including, without limitation, the legality,
validity or enforceability thereof), or on the authority or ability of the Company and its Subsidiaries to perform their respective
obligations under the Transaction Documents or (ii) the rights and remedies of Investors or Pasaca under the Transaction Documents.
Except as set forth in Schedule 3(a) of the Company Disclosure Schedule, the Company holds all right, title and interest
in and to 100% of the capital stock, equity or similar interests of each of its Subsidiaries, in each case, free and clear of
any Liens (as defined below), including any restriction on the use, voting, transfer, receipt of income or other exercise of any
attributes of free and clear ownership by a current holder, and no such Subsidiary owns capital stock or holds an equity or similar
interest in any other person. “Lien” means, with respect to any asset, any mortgage, lien, pledge, hypothecation,
charge, security interest, encumbrance or adverse claim of any kind and any restrictive covenant, condition, restriction or exception
of any kind that has the practical effect of creating a mortgage, lien, pledge, hypothecation, charge, security interest, encumbrance
or adverse claim of any kind (including any of the foregoing created by, arising under or evidenced by any conditional sale or
other title retention agreement, the interest of a lessor with respect to a Capital Lease Obligation, or any financing lease having
substantially the same economic effect as any of the foregoing). “Subsidiary” means any person in which the
Company, directly or indirectly, owns twenty percent (20%) or more of the outstanding capital stock, equity or similar interests
or voting power of such person at the time of this Agreement or at any time hereafter.

 

(b)
Authorization; Enforcement; Validity. Subject to the increase in the authorized capital of the Company described in Schedule
3(b) of the Company Disclosure Schedule, the Company has the requisite corporate power and authority to enter into and perform
its obligations under each of this Agreement, the Registration Rights Agreement, the Irrevocable Transfer Agent Instructions (as
defined in Section 5), the other Transaction Documents, and to issue any Securities in accordance with the terms hereof
and thereof. The execution and delivery of the Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby have been or will prior to their execution and delivery be duly authorized by the
board of directors of the Company (the “Board of Directors”) and no further consent or authorization is or
shall be required by the Company, its stockholders or the Board of Directors. This Agreement and the other Transaction Documents
dated as of the date hereof have been and any other Transaction Documents will be duly executed and delivered by Company and,
if applicable, its Subsidiaries and constitute the valid and binding obligations of such parties, enforceable against such parties
in accordance with their terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance or transfer, moratorium or similar laws affecting the enforcement of creditors’ rights generally and
by general principles of equity relating to enforceability (regardless of whether considered in a proceeding at law or in equity),
and except to the extent that indemnification provisions thereof may be limited by federal or state securities laws. As of each
Closing, the Transaction Documents dated after the date of this Agreement and on or prior to the date of such Closing shall have
been duly executed and delivered by the Company and shall constitute the valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting the enforcement of creditors’ rights
generally and by general principles of equity relating to enforceability (regardless of whether considered in a proceeding at
law or in equity).

 

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(c)
Capitalization. As of the date of this Agreement, the authorized capital stock of the Company consists of 750,000,000 shares
of Common Stock, of which, as the date of this Agreement, 689,153,592 shares are issued and outstanding, 121,600,000 shares of
Common Stock are reserved for issuance pursuant to the Company’s stock option, restricted stock and stock purchase plans,
of which 121,600,000 shares are reserved for issuance pursuant to outstanding options and 64,049,738 shares of which are reserved
for issuance pursuant to outstanding warrants exercisable or exchangeable for, or convertible into, shares of Common Stock, 124,246,699
common share are reserved for debt convertible into common shares and 8,980,202 are reserved for payment of services or purchase
of digital assets. All of such outstanding or issuable shares have been, or upon issuance will be, validly issued and are, or
upon issuance will be, fully paid and non-assessable. Except as set forth in the first sentence of this Section 3(c) or
as disclosed in Schedule 3(c) of the Company Disclosure Schedule: (A) no shares of the capital stock of the Company are
issued or outstanding; (B) no shares of the capital stock of the Company are subject to preemptive rights or any other similar
rights or any Liens suffered or permitted by the Company; (C) there are no outstanding options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable or
exercisable for, any shares of capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings
or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries, or options, warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exercisable for, any shares of capital stock of the Company
or any of its Subsidiaries; (D) there are no agreements or arrangements under which the Company or any of its Subsidiaries is
obligated to register the sale of any of their securities under the 1933 Act (except the Registration Rights Agreement); (E) there
are no outstanding securities or instruments of the Company or any of its Subsidiaries that contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company and no other stockholder or similar agreements to which the Company
is party; (F) there are no outstanding securities or instruments containing anti-dilution or similar provisions that will or may
be triggered by the issuance of the Securities; and (G) the Company does not have any stock appreciation rights or “phantom
stock” plans or agreements or any similar plan or agreement. The Company has furnished to each Investor true and correct
copies of the Company’s articles of incorporation, as amended and as in effect on the date hereof (the “Articles
of Incorporation”), and the Company’s bylaws, as amended and as in effect on the date hereof (the “Bylaws”),
the organizational documents and bylaws of each of the Company’s Subsidiaries, as amended and in effect on the date this
representation is made and the terms of all outstanding securities convertible into, or exercisable or exchangeable for, Common
Stock, and the material rights of the holders thereof in respect thereto.

 

(d)
Issuance of Securities. The Notes have been duly authorized and, upon issuance in accordance with the terms hereof, shall
be duly and validly issued, fully paid and non-assessable and free from all taxes and Liens with respect to the issuance thereof,
with the holders of the Notes being entitled to all rights accorded to a holder of Notes as set forth in the Notes and any other
rights set forth in the Transaction Documents. Subject to the increase in the authorized capital of the Company as described in
Schedule 3(b) of the Company Disclosure Schedule, the Note Shares and the Purchased Shares will have been duly authorized
and, upon issuance in accordance with the terms hereof and the Notes, shall be duly and validly issued, fully paid and non-assessable
and free from all taxes and Liens with respect to the issuance thereof, with the holders of the Note Shares and the Purchased
Shares being entitled to all rights accorded to a holder of Common Stock and the rights set forth in the Transaction Documents.
Assuming the accuracy of the representations and warranties of the initial Investor set forth in Section 2, the issuance
by the Company of the Note Shares, the Note Shares, and the Purchased Shares will be exempt from registration under the 1933 Act
and applicable state securities laws.

 

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(e)
No Conflicts. The execution and delivery of the Transaction Documents by the Company, the performance by the Company of
its obligations hereunder and thereunder and the consummation by the Company of the transactions contemplated hereby and thereby
will not (i) result in a violation of the Articles of Incorporation or the Bylaws of the Company or any organizational document
or bylaws of any Subsidiary; (ii) conflict with, or constitute a breach or default (or an event which, with the giving of notice
or lapse of time or both, constitutes or would constitute a breach or default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or other remedy with respect to, any agreement, indenture or instrument to which the
Company or any Subsidiary is a party; or (iii) result in a violation of any Requirements of Law. Neither the Company nor any Subsidiary
is in violation of any term of its certificate of incorporation (or the organizational charter) or bylaws or operating agreement,
as applicable. Neither the Company nor any Subsidiary is in material violation of any term of or in material default under (or
with the giving of notice or lapse of time or both would be in violation of or default under) any contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or
any of its Subsidiaries. The business of the Company and each Subsidiary is not being conducted, and shall not be conducted, in
violation in any material respect of any Requirements of Law. Other than the filings described in Section 4(b) and Section
4(g), in the case of the Registration Rights Agreement, such filings as will be made under the 1933 Act or state securities
laws, and the filing of instruments to perfect security interests, neither the Company nor any Subsidiary is required to obtain
any consent, authorization or order of, or make any filing or registration with, any court or governmental agency or any regulatory
or self-regulatory agency in order for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction
Documents in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations that
the Company or any of its Subsidiaries is required to obtain as described in the preceding sentence have been obtained or effected
on or prior to the date of this Agreement. If such Act were applicable to the Company, neither the Company nor any of its Subsidiaries
would be in violation of any applicable provision of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulation
thereunder (collectively, “Sarbanes-Oxley”). The Company is unaware of any facts or circumstances that might
give rise to any violation of any applicable provision of Sarbanes-Oxley, if it were applicable to the Company. As used in this
Agreement, “Governmental Entity” means the government of any nation, state, city, locality or other political
subdivision thereof, any person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining
to government and any corporation or other person owned or controlled, through stock or capital ownership or otherwise, by any
of the foregoing. “Requirements of Law” means, as to any person, any United States or foreign law, statute,
treaty, rule, regulation, right, privilege, qualification, license or franchise or determination of an arbitrator or a court or
other Governmental Entity, in each case applicable or binding upon such person or any of its property or to which such person
or any of its property is subject or pertaining to any or all of the transactions contemplated or referred to herein.

 

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(f)
SEC Documents; Financial Statements. Except as set forth in Schedule 3(f) of the Company Disclosure Schedule, since
July 1, 2018, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”)
(all of the foregoing filed at least five (5) Business Days prior to the date hereof (including all exhibits included therein
and financial statements and schedules thereto and documents incorporated by reference therein) being hereinafter referred to
as the “SEC Documents”). Except as set forth in Schedule 3(f) of the Company Disclosure Schedule, the
Company has filed or will file prior to or on the Closing Date all such other reports, schedules, forms, statutes, and other documents
that have not been filed at least five (5) Business Days prior to the date hereof as are required to be filed on or prior to the
Closing Date (the “Additional SEC Documents”). A complete and accurate list of the SEC Documents (and, to the
extent required to be filed prior to the Closing Date, the Additional SEC Documents) is set forth on the SEC’s website www.sec.gov
and in Schedule 3(f) of the Company Disclosure Schedule. The Company has made available (or will make available no later
than contemporaneously with their filing) to the Investors or their respective representatives true and complete copies of the
SEC Documents and the Additional SEC Documents. Except as set forth in Schedule 3(f) of the Company Disclosure Schedule,
each of the SEC Documents and the Additional SEC Documents was filed (or will be filed) with the SEC within the time frames prescribed
by the SEC for the filing of such SEC Documents and Additional SEC Documents (including any extensions of such time frames permitted
by Rule 12b-25 under the 1934 Act, but subject to the timing set forth in Schedule 3(f)) of the Company Disclosure Schedule
such that each filing was timely filed (or deemed timely filed pursuant to Rule 12b-25 under the 1934 Act or as otherwise provided
for in Schedule 3(f)) of the Company Disclosure Schedule with the SEC. As of their respective dates, the SEC Documents
and the Additional SEC Documents complied (or will comply) in all material respects with the requirements of the 1934 Act and
the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents and the Additional SEC Documents.
None of the SEC Documents or Additional SEC Documents, at the time they were filed (or will be filed) with the SEC, contained
(or will contain) any untrue statement of a material fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Since
the filing of the SEC Documents and any Additional SEC Documents filed prior to the date hereof, no event has occurred that would
require an amendment or supplement to any of the SEC Documents or any of the Additional SEC Documents to the extent such SEC Documents
or Additional SEC Documents have not already been amended or supplemented as of the date hereof. Except for correspondence with
respect to written requests by the Company, from time to time, for confidential treatment of specified information in agreements
required to be filed as exhibits to SEC Documents, copies of which have been previously provided to the Investors, the Company
has not received any written comments from the SEC staff that have not been resolved to the satisfaction of the SEC staff. As
of their respective dates, the financial statements of the Company included in the SEC Documents or in the Additional SEC Documents
complied (or will comply) as to form in all material respects with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto. Except as permitted with respect to foreign acquired entities, such financial
statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”),
consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the
notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof
and the results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments that are not material individually or in the aggregate). None of the Company or, to the Company’s
knowledge, any stockholder, officer, director or Affiliate (as defined in Section 4(j)) of the Company has issued any press
release or made any other public statement or communication on behalf of the Company or otherwise relating to the Company or any
of its Subsidiaries that contains any untrue statement of a material fact or omits any statement of material fact necessary in
order to make the statements therein, in the light of the circumstances under which they were made, not misleading or has provided
any other information to Investors, including information referred to in Section 2(d), that contains any untrue statement
of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Except as set forth on Schedule 3(w) of the Company Disclosure
Schedule, which will be filed with the Form 8-K to be filed by the Company pursuant to Section 4(h) hereof, none of the
Company or any of its officers, directors, employees or agents has provided Investors with any material, nonpublic information.
The Company is not required to file and will not be required to file any agreement, note, lease, mortgage, deed or other instrument
entered into prior to the date hereof and to which the Company is a party or by which the Company is bound that has not been previously
filed as an exhibit (including by way of incorporation by reference) to its reports filed or made with the SEC under the 1934
Act. The accounting firm of RBSM LLP, which has expressed or has been engaged to express its opinion with respect to the consolidated
financial statements for the Company for the fiscal years ended June 30, 2018, 2019, and 2020 included or to be included in the
Company’s annual reports filed or to be filed on Form 10-K for the fiscal years ended June 30, 2018, 2019, and 2020 (the
“Audit Opinions”) and reviewed the consolidated financial statements for the Company’s most recently
completed fiscal quarters to be included in the quarterly reports to be filed on Form 10-Q for the subsequent fiscal quarters
in fiscal year 2021, is independent of the Company pursuant to the standards set forth in Rule 2-01 of Regulation S-X promulgated
by the SEC, and such firm is otherwise qualified to render the Audit Opinions and complete such review under applicable law. There
is no transaction, arrangement or other relationship between the Company and an unconsolidated or other off-balance-sheet person
that is required to be disclosed by the Company in its reports pursuant to the 1934 Act that has not been so disclosed in the
SEC Documents. Since July 1, 2018, neither the Company nor, to the knowledge of the Company, any director, officer or employee,
of the Company, has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim,
whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or
its internal accounting controls, including any complaint, allegation, assertion or claim that the Company has engaged in questionable
accounting or auditing practices. No attorney representing the Company, whether or not employed by the Company, has reported evidence
of a material violation of securities laws, breach of fiduciary duty or similar violation by the Company or any of its officers,
directors, employees or agents to the Board of Directors or any committee thereof or to any director or officer of the Company
pursuant to Section 307 of the Sarbanes-Oxley Act of 2002, and the SEC’s rules and regulations promulgated thereunder. Since
June 30, 2004, there have been no internal or SEC investigations regarding accounting or revenue recognition discussed with, reviewed
by or initiated at the direction of the chief executive officer, principal financial officer, the Board of Directors or any committee
thereof. Other than filing the Additional SEC Documents, the Company is eligible to register the Note Shares and the Purchased
Shares for resale by Investors on Form S-3 promulgated under the 1933 Act.

 

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(g)
Absence of Certain Changes. Except as disclosed in any SEC Documents that were filed with the SEC at least five (5) days
prior to the date of this Agreement or as disclosed on Schedule 3(g) of the Company Disclosure Schedule, since December
31, 2019, there has been no Material Adverse Effect. The Company has not taken any steps, and the Company currently does not expect
to take any steps, to seek protection pursuant to any bankruptcy law nor does the Company have any knowledge or reason to believe
that the creditors of the Company intend to initiate involuntary bankruptcy proceedings or any knowledge of any fact that would
reasonably lead a creditor to do so. The Company is not as of the date hereof, nor after giving effect to the transactions contemplated
hereby, will be Insolvent (as defined below). For purposes of this Section 3(g), “Insolvent” means (i)
the present fair saleable value of the Company’s assets is less than the amount required to pay the Company’s total
indebtedness, contingent or otherwise, (ii) the Company is unable to pay its debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured, (iii) the Company intends to incur, prior to December 31,
2022, or believes that it will incur, prior to December 31, 2022, debts that would be beyond its ability to pay as such debts
mature or (iv) the Company has unreasonably small capital with which to conduct the business in which it is engaged as such business
is now conducted and is proposed to be conducted. Except as disclosed in Schedule 3(g) of the Company Disclosure Schedule,
since December 31, 2019, the Company has not declared or paid any dividends or sold any assets outside of the ordinary course
of business, individually or in the aggregate, in excess of $20,000. Except as disclosed in Schedule 3(g) of the Company
Disclosure Schedule, since December 31, 2019, the Company has not had any capital expenditures outside the ordinary course of
its business in excess of $20,000.

 

(h)
Absence of Litigation. Except as set forth on Schedule 3(h) of the Company Disclosure Schedule and except for actions
or litigation brought by persons (other than any Governmental Entity) in which the only claim made was for money damages and neither
the amount claimed nor the aggregate payments made exceeded $25,000 and no other remedy or relief was provided, (i) there is no,
nor during the past five years has there been any, action, suit, proceeding, claim, inquiry, complaint, dispute, arbitration or
investigation (each, a “Claim”) before or by any court, public board, government agency, self-regulatory organization
or body pending or, to the knowledge of the Company, threatened against or affecting the Company, the Common Stock or any of the
Company’s Subsidiaries or any of the Company’s or its Subsidiaries’ officers or directors in their capacities
as such, and (ii) to the knowledge of the Company, none of the directors or officers of the Company has been involved as a plaintiff,
defendant or third-party witness in securities-related litigation during the past five years. None of the matters described in
Schedule 3(h) of the Company Disclosure Schedule, regardless of their outcome, will have a Material Adverse Effect.

 

(i)
Acknowledgment Regarding Investors’ Purchase of Securities. The Company acknowledges and agrees that each Investor
is acting solely in the capacity of an arm’s length purchaser with respect to the Company in connection with the Transaction
Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that each Investor is not acting
as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and
the transactions contemplated hereby and thereby, and any advice given by any Investor or any of their respective representatives
or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental
to such Investor’s purchase of the Securities. The Company further represents to each Investor that the Company’s
decision to enter into the Transaction Documents has been based solely on the independent evaluation by the Company and its representatives.

 

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(j)
No Undisclosed Events, Liabilities, Developments or Circumstances. Except for the issuance of the Notes, the Note Shares,
and the Purchased Shares contemplated by this Agreement, and as set forth in Schedule 3(f) of the Company Disclosure Schedule,
no event, liability, development or circumstance has occurred or exists, or is contemplated to occur, with respect to the Company
or its Subsidiaries or their respective business, properties, credit worthiness, prospects, operations or financial condition,
that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made
on a registration statement on Form S-1 or Form S-3 filed with the SEC relating to an issuance and sale by the Company of Common
Stock and that has not been disclosed in an SEC Document filed with the SEC at least five (5) days prior to the date of this Agreement
or in the Company Disclosure Schedule.

 

(k)
No General Solicitation. Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf,
has engaged or will engage in any form of general solicitation or general advertising (within the meaning of Regulation D under
the 1933 Act) in connection with the offer or sale of the Securities.

 

(l)
No Integrated Offering. Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security under circumstances
that would require registration of any of the Securities under the 1933 Act or cause this offering of the Securities to be integrated
with prior offerings by the Company for purposes of the 1933 Act or any applicable stockholder approval provisions of any authority,
nor will the Company take any action or steps that would require registration of the issuance of any of the Securities under the
1933 Act or cause the offering of the Securities to be Integrated with other offerings for purposes of the 1933 Act other than
as contemplated in the Registration Rights Agreement.

 

(m)
Dilutive Effect. The Company understands and acknowledges that the number of Note Shares and the Purchased Shares issued
under this Agreement will be substantially dilutive to the outstanding Common Stock. The Company further acknowledges that its
obligation to issue the Note Shares and the Purchased Shares in accordance with this Agreement is absolute and unconditional regardless
of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Company. Taking the
foregoing into account, the Board of Directors has determined in its good faith business judgment that the issuance of the Note
Shares and the Purchased Shares and the consummation of the other transactions contemplated hereby are in the best interests of
the Company and its stockholders.

 

(n)
Employee Relations. Neither the Company nor any of its Subsidiaries is involved in any labor union dispute nor, to the
knowledge of the Company or any of its Subsidiaries, is any such dispute threatened. Except as set forth on Schedule 3(n)
of the Company Disclosure Schedule, none of the employees of the Company or any of its Subsidiaries is a member of a union that
relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries
is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that the Company’s relations
with its employees and the relations of its Subsidiaries with their respective employees are good. Except as disclosed previously
disclosed in the SEC Documents filed at least five (5) Business Days prior to the date hereof or in the Company Disclosure Schedule,
no executive officer (as defined in Rule 3b-7 under the 1934 Act), nor any other person whose termination would be required to
be disclosed pursuant to Item 5.02 of Form 8-K, has notified the Company that such person intends to leave the Company or otherwise
terminate such person’s employment with the Company. To the knowledge of the Company or its Subsidiaries, no executive officer
is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary
information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and, to the
Company’s knowledge, the continued employment of each such executive officer does not subject the Company or its Subsidiaries
to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all federal,
state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment
and wages and hours, except where the failure to be in compliance would not result, either individually or in the aggregate, in
a Material Adverse Effect.

 

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(o)
Intellectual Property Rights. The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service mark, service names, and all applications and registrations therefor, trade-dress, internet
domain names, web pages, patents, patent applications, patent rights, copyrights (whether or not registered), inventions, licenses,
approvals, governmental authorizations, trade secrets, know-how, databases, processes, procedures, customer lists, personally-identifiable
information, confidential business information, computer software and related documentation and other intellectual property rights
necessary to conduct their respective businesses as now conducted (collectively, the “Intellectual Property”).
Schedule 3(o) of the Company Disclosure Schedule contains a complete and correct list of Intellectual Property used, intended
to be used, or deemed useful by the Company in the Business as presently conducted or as contemplated to be conducted. The Intellectual
Property listed on Schedule 3(o) of the Company Disclosure Schedule constitutes all Intellectual Property (together with
Intellectual Property that will be developed and owned by the Company in the future) necessary to conduct the Business as presently
conducted or as contemplated to be conducted by the Company. Schedule 3(o) of the Company Disclosure Schedule also contains
a complete and correct list of all patented and registered Intellectual Property owned by the Company and its Subsidiaries and
all pending patent applications and applications for the registration of other Intellectual Property owned or filed by the Company
or its Subsidiaries. Schedule 3(o) of the Company Disclosure Schedule also contains a complete and correct list of all
licenses and other rights granted by the Company to any third party with respect to the Intellectual Property and licenses and
other rights with respect to Intellectual Property granted by any third party to the Company. All such items of Intellectual Property
and licenses with respect thereto are valid, subsisting any enforceable and in full force and effect. None of the rights of the
Company in any Intellectual Property have expired or terminated, and none are expected to expire or terminate within five years
from the date of this Agreement. Except as described in Schedule 3(o) of the Company Disclosure Schedule, none of the Intellectual
Property, products or services used, developed, provided, imported, made, sold, licensed or otherwise exploited by the Company
or any of its Subsidiaries infringes upon or otherwise violates any Intellectual Property rights of others. Except as described
in Schedule 3(o) of the Company Disclosure Schedule, no litigation is pending and no claim has been made against the Company
or any of its Subsidiaries or, to the knowledge of the Company, is threatened, contesting the right of the Company or any Subsidiary
to sell, license or use the Intellectual Property presently sold, licensed or used by the Company or any of its Subsidiaries.
To the Company’s knowledge, there is no patent or patent application which contains claims that interfere with the issued
or pending claims of any of the Intellectual Property owned, licensed or used by the Company. The Company and its Subsidiaries
and, to the Company’s knowledge, the inventors of the Intellectual Property owned, licensed or used by the Company and the
Company’s licensors, have complied with the duty of candor and disclosure set forth in 37 C.F.R. § 1.56 with respect
to each of the patents and patent applications comprising the Intellectual Property owned, licensed or used by the Company. None
of the technology employed by the Company or its Subsidiaries has been obtained or is being used by the Company or its Subsidiaries
in violation of any contractual obligation binding on the Company or its Subsidiaries or, to the Company’s knowledge, any
of its officers, directors or employees in violation of the rights of any persons. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality, and value of all of their Intellectual Property. Except
as described in Schedule 3(o) of the Company Disclosure Schedule, to the knowledge of the Company, no third party is infringing
upon or otherwise violating the Intellectual Property rights of the Company or any of its Subsidiaries. To the Company’s
knowledge, at no time during the conception or reduction to practice of the Company’s or any of its Subsidiaries’
Intellectual Property was any developer, inventor, or other contributor to such Intellectual Property operating under any grants
from any governmental authority. Each present or past employee, officer, consultant, or other person who developed any part of
any product or service that is or will be used in the conduct of the Company’s business as currently contemplated has executed
a valid and enforceable agreement with the Company that conveys any and all right, title and interest in and to all Intellectual
Property developed by such person in connection with such person’s employment or contract with the Company, and establishes
that, to the extent such person is an author of a copyrighted work created in connection with such person’s employment or
contract, such work is a “work made for hire.”

 

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(p)
Environmental Laws. Each of the Company and its Subsidiaries (i) is in compliance with any and all Environmental Laws (as
defined below), (ii) has received all permits, licenses or other approvals required of it under applicable Environmental Laws
to conduct its business, (iii) is in compliance with all terms and conditions of any such permit, license or approval and (iv)
to the Company’s knowledge, there are no events, conditions or circumstances reasonably likely to result in liability of
the Company or any Subsidiary pursuant to Environmental Laws. The term “Environmental Laws” means all federal,
state, local or foreign laws relating to pollution or protection of human health or the environment (including ambient air, surface
water, groundwater, land surface or subsurface strata), including laws relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of hazardous materials,
as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice
letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

 

(q)
Title. The Company and its Subsidiaries have good and valid title to all personal property owned by them that is material
to the business of the Company, in each case free and clear of all Liens except such as are described in Schedule 3(q)
of the Company Disclosure Schedule and except for Liens incurred to secure Indebtedness used to purchase or refinance any such
personal property that only secures such personal property. The Company does not own (rather than lease) any interest in any real
property.

 

(r)
Insurance. The Company and each Subsidiary is insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the
Company and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been refused any insurance coverage
sought or applied for, and neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not have a Material Adverse Effect.

 

(s)
Regulatory Permits. The Company and its Subsidiaries possess all certificates, authorizations, approvals, licenses and
permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses
as presently conducted (“Permits”), including all Permits required by any Governmental Entity (as applicable,
collectively the “Agency”) or any other federal, state or foreign agencies or bodies engaged in the regulation
of the Company’s activities or biohazardous materials, and neither the Company nor any Subsidiary has received any notice
of proceedings relating to the revocation or modification of any such Permit. Each of the Company and each Subsidiary is, and
at all times since December 31, 2017, has been, in compliance with all Permits and all Requirements of Law applicable to such
person or by which any property or asset of such person is bound or affected, and has not received written notice of any violation
of any such Requirements of Law, except as has not had, or would not reasonably be expected to have, a Material Adverse Effect.
The Company is not in violation of any of the rules, regulations or requirements of the OTC Markets Group Inc. (the “Principal
Market”; provided, however, that, if after the date of this Agreement the Common Stock is listed on the New York Stock
Exchange or a market of Nasdaq, Inc. (“NASDAQ”), the “Principal Market” shall mean such exchange,
as applicable), and has no knowledge of any facts or circumstances that could reasonably lead to suspension or termination of
trading of the Common Stock on the Principal Market. Since October 5, 2007, (i) the Company’s Common Stock has been eligible
for quotation on the Principal Market, (ii) trading in the Common Stock has not been suspended by the SEC or the Principal Market
and (iii) the Company has received no communication, written or oral, from the SEC or the Principal Market regarding the suspension
or termination of trading of the Common Stock on the Principal Market. The Company satisfies the quantitative and qualitative
standards applicable to smaller reporting company (as defined in Rule 405 promulgated under the 1933 Act).

 

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(t)
Internal Accounting Controls; Disclosure Controls and Procedures. The Company and each of its Subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset and liability accountability, (iii) access to assets or incurrence of
liability is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability
for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has timely filed and made available to the Investors all certifications
and statements required by (A) Rule 13a-14 or Rule 15d-14 under the 1934 Act and (B) Section 906 of Sarbanes-Oxley with respect
to any Company SEC Documents. The Company maintains disclosure controls and procedures required by Rule 13a-15 or Rule 15d-15
under the 1934 Act; such controls and procedures are effective to ensure that the information required to be disclosed by the
Company in the reports that it files with or submits to the SEC (X) is recorded, processed, summarized and reported accurately
within the time periods specified in the SEC’s rules and forms and (Y) is accumulated and communicated to the Company’s
management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions
regarding required disclosure. The Company maintains internal control over financial reporting required by Rule 13a-15 or Rule
15d-15 under the 1934 Act; such internal control over financial reporting is effective and does not contain any material weaknesses.

 

(u)
No Materially Adverse Contracts, Etc. Except as has not had, and would not reasonably be expected to have, a Material Adverse
Effect, (i) each Specified Contract is a legal, valid and binding obligation of the Company or a Subsidiary, as applicable, in
full force and effect and enforceable against the Company or a Subsidiary in accordance with its terms, subject to the effect
of any applicable bankruptcy, insolvency (including all laws relating to fraudulent transfers), reorganization, moratorium or
similar laws affecting creditors’ rights generally and subject to the effect of general principles of equity, (ii) to the
knowledge of the Company, each Specified Contract is a legal, valid and binding obligation of the counterparty thereto, in full
force and effect and enforceable against such counterparty in accordance with its terms, subject to the effect of any applicable
bankruptcy, insolvency (including all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting
creditors’ rights generally and subject to the effect of general principles of equity, (iii) neither the Company nor any
of its Subsidiaries is and, to the Company’s knowledge, no counterparty is, in breach or violation of, or in default under,
any Specified Contract, (iv) none of the Company or any of the Subsidiaries has received any claim of default under any Specified
Contract or any written notice of an intention to terminate, not renew or challenge the validity or enforceability of any Specified
Contract and (v) to the Company’s knowledge, no event has occurred which would result in a breach or violation of, or a
default under, any Specified Contract (with or without notice or lapse of time or both). For purposes of this Agreement, the term
“Specified Contract” means any contract, agreement or understanding currently in effect that has been disclosed
(or should have been disclosed) as an exhibit to any SEC Document or is otherwise described or incorporated by reference in such
SEC Document. Neither the Company nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction,
or any judgment, decree, order, rule or regulation that has, or is expected in the future to have, a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is a party to any contract, agreement or understanding that in the judgment of
the Company’s officers has or is expected to have a Material Adverse Effect.

 

(v)
Tax Status. The Company and each of its Subsidiaries (i) has made or filed all material foreign, federal, state and local
income and other tax returns, reports and declarations required by any jurisdiction in which it is subject to tax, (ii) has paid
all taxes and other governmental assessments and charges that are material in amount and due, whether shown to be due on such
returns, reports and declarations or otherwise, except those being contested in good faith and for which the Company has made
appropriate reserves on its books, and (iii) has set aside on its books provisions reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns, reports or declarations (referred to in clause (i) above) apply.
There are no unpaid taxes in any material amount claimed in writing to be due by the taxing authority of any jurisdiction, and,
to the Company’s knowledge, there is no basis for any such claim.

 

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(w)
Transactions with Affiliates. Except as set forth in Schedule 3(w) of the Company Disclosure Schedule or as otherwise
set forth in the Company Disclosure Schedule, no Related Party (as defined in Section 4(j)) of the Company or any of its
Subsidiaries, or any of their respective Affiliates, is presently, or has been within the past two years, a party to any transaction,
contract, agreement, instrument, commitment, understanding or other arrangement or relationship with the Company (other than directly
for services as an employee, officer and/or director), whether for the furnishing of services to or by, providing for rental of
real or personal property to or from, or otherwise requiring payments or consideration to or from any such Related Party. Except
as set forth in Schedule 3(w) of the Company Disclosure Schedule, no Related Party of the Company or any of its Subsidiaries,
or any of their respective Affiliates, has any direct or indirect ownership interest in any person (other than ownership of less
than 1% of the outstanding common stock of a publicly traded corporation) in which the Company or any of its Subsidiaries has
any direct or indirect ownership interest or with which the Company or any of its Subsidiaries competes or has a business relationship.

 

(x)
Application of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business combination or other similar anti-takeover provision under
the Articles of Incorporation or the laws of Nevada (including NRS §§ 78.378 through 78.3793 and NRS Chapter 92A, NRS
§§ 92A.005 through 92A.500) that is or could become applicable to Investors as a result of the transactions contemplated
by this Agreement, including the Company’s issuance of the Securities and Investors’ ownership of the Securities.

 

(y)
Rights Agreement. The Company has not adopted a stockholder rights plan or similar arrangement relating to accumulations
of beneficial ownership of Common Stock or a change in control of the Company.

 

(z)
Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor to the Company’s knowledge, any
director, officer, agent, employee or other person acting on behalf of the Company or any of its Subsidiaries has, in the course
of its actions for, or on behalf of, the Company or any of its Subsidiaries, used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to
any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of
the U.S. Foreign Corrupt Practices Act of 1977, as amended (whether or not applicable to the Company); or made any unlawful bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

 

(aa)
No Other Agreements. As of the Closing Date, the Company has not, directly or indirectly, made any agreements with any
Investors relating to the terms or conditions of the transactions contemplated by the Transaction Documents except as set forth
in the Transaction Documents.

 

(bb)
Outstanding Indebtedness; Liens. Payments of principal and other payments due under any loans made pursuant to the Transaction
Documents will rank senior to all other indebtedness of the Company and its Subsidiaries other than, to the extent of the specific
security interest grant in the Company property, payments of principal due from the Company under those certain financing documents
set forth in Schedule 3(bb) of the Company Disclosure Schedule (the “Facility”). Except as set forth
on Schedule 3(bb) of the Company Disclosure Schedule, (a) neither the Company nor any of its Subsidiaries has any outstanding
Indebtedness or trade accounts payable, (b) there are no Liens on any of the respective assets of the Company or any of its Subsidiaries,
and (c) there are no financing statements securing obligations of any amounts filed against the Company or any of its Subsidiaries
or any respective assets. As of the initial Closing, the aggregate amount of the outstanding Indebtedness and trade accounts payable
of the Company or any of its Subsidiaries shall not exceed the aggregate amount of Indebtedness and trade accounts payable set
forth on Schedule 3(bb) of the Company Disclosure Schedule by more than $5,000.

 

    	15

     

    

 

(cc)
Leases. Neither the Company nor any of its Subsidiaries owns any real property. Schedule 3(cc) of the Company Disclosure
Schedule contains a complete and correct list of all the real property which provide for a monthly rent in excess of $2,000 per
month; facilities that (i) are leased or otherwise possessed by the Company or any of its Subsidiaries, (ii) in connection with
which the Company or any of its Subsidiaries has entered into an option agreement, participation agreement or acquisition agreement
or (iii) the Company or any of its Subsidiaries has agreed (or has an option) to lease or otherwise acquire or may be obligated
to lease or otherwise acquire in connection with the conduct of its business (collectively, the “Leased Real Property”).
Schedule 3(cc) of the Company Disclosure Schedule also contains a complete and correct list, along with a summary of material
terms, of all leases and other agreements with respect to which the Company or any of its Subsidiaries is a party or otherwise
bound or affected with respect to the Leased Real Property (the “Real Property Leases”). Except as set forth
in Schedule 3(cc) of the Company Disclosure Schedule, the Company or its Subsidiaries is the sole legal and equitable owner
of a leasehold interest in the Leased Real Property, and possesses good and marketable, indefeasible title thereto, free and clear
of all Liens and other matters affecting title to such leasehold that could impair the ability of the Company or its Subsidiaries
to realize the benefits of the rights provided to it under the Real Property Leases. All of the Real Property Leases are valid
and in full force and effect and are enforceable against the Company or its Subsidiaries and neither the Company nor any other
party thereto is in default under any of such Real Property Leases and no event has occurred which with the giving of notice or
the passage of time or both could constitute a default under any of such Real Property Leases. Except as set forth in Schedule
3(cc) of the Company Disclosure Schedule, no Real Property Lease is subject to termination, modification or acceleration as
a result of the transactions contemplated hereby or by the other Transaction Documents. All of the Real Property Leases will remain
in full force and effect upon, and permit, the consummation of the transactions contemplated hereby or by the other Transaction
Documents. The Leased Real Property is properly zoned for its present use, are permitted, conforming structures and complies with
all applicable building codes, ordinances and other Requirements of Law. There are no pending or, to the knowledge of the Company,
threatened condemnation, eminent domain or similar proceedings, or litigation or other proceedings affecting the Leased Real Property,
or any portion or portions thereof. To the knowledge of the Company, there are no pending or threatened requests, applications
or proceedings to alter or restrict any zoning or other use restrictions applicable to the Leased Real Property that would interfere
with the conduct of the Company’s business. There are no restrictions applicable to the Leased Real Property that would
interfere with the Company’s or any Subsidiary’s making an assignment to Investors as contemplated by the Transaction
Documents, including any requirement under any Real Property Leases requiring the consent of, or notice to, any lessor of any
such Leased Real Property.

 

(dd)
Communication with the Agency and other Governmental Authorities. The Company has no knowledge of any pending communication
from the Agency or other similar foreign Governmental Entity that would cause the Company to revise its strategy for marketing
or sales of Company products or services or other products or services under development.

 

(ee)
Brokers’ Fees. There are no brokerage commissions, finder’s fees, or similar fees or commissions payable by
the Company or any of its Subsidiaries in connection with the transactions contemplated hereby or by the other Transaction Documents
based on any agreement, arrangement or understanding with the Company or any of its Subsidiaries.

 

(ff)
Products.

 

(i)
There are no product liability claims against or involving the Company or any of its Subsidiaries or any product or service manufactured,
provided, marketed or distributed at any time by the Company or any of its Subsidiaries (“Products”) and no
such claims in excess of $10,000 in the aggregate have been settled, adjudicated or otherwise disposed of since December 31, 2017.

 

(ii)
There are no statements, citations or decisions by any Governmental Authority specifically stating that any Product is defective
or unsafe or fails to meet any standards promulgated by any such Governmental Authority. There have been no recalls ordered by
any such Governmental Authority with respect to any Product. To the Company’s knowledge, there is no (A) fact relating to
any Product that may impose upon the Company or any of its subsidiaries a duty to recall any Product or a duty to warn customers
of a defect in any Product, (B) latent or overt design, manufacturing or other defect in any Product or (C) material liability
for warranty claims or returns with respect to any Product not fully reflected on the Company’s financial statements referred
to in Section 4(e) hereof.

 

    	16

     

    

 

(gg)
Investment Company. The Company is not, and upon the Closing will not be, an “investment company,” a company
controlled by an “investment company,” or an “affiliated person” of, or “promoter” or “principal
underwriter” for, an “investment company,” as such terms are defined in the Investment Company Act of 1940,
as amended.

 

(hh)
Privacy of Customer Information. Each of the Company and its Subsidiaries has a privacy policy (the “Privacy Policy”)
regarding the collection and use of information from customers and other parties (“Customer Information”),
copies of which have been provided to Investors in the Company Disclosure Schedule. Neither the Company nor any of its Subsidiaries
uses any of the Customer Information in an unlawful manner, or in a manner violative of the Privacy Policy or the privacy rights
of its customers. Neither the Company nor any of its Subsidiaries has collected any Customer Information through its website in
an unlawful manner or in violation of its Privacy Policy. Each of the Company and its Subsidiaries has adequate security measures
in place to protect the Customer Information from illegal use by third parties or use by third parties in a manner violative of
the rights of privacy of its customers. No third party has obtained unauthorized access to the Customer Information. The consummation
of the transactions and the transfer of the Customer Information will not violate the Privacy Policy of the Company or any of
its Subsidiaries as it currently exists or as it existed at any time during which any of the Customer Information was collected
or obtained, or any rights of consumers relating thereto.

 

4.
Covenants.

 

(a)
Reasonable Best Efforts. Each party shall use its reasonable best efforts to timely satisfy each of the conditions to be
satisfied by it as provided in Sections 6 and 7 of this Agreement.

 

(b)
Form D and Blue Sky. The Company agrees to timely file a Form D with respect to the Securities as required under Regulation
D and to provide a copy thereof to each Investor promptly after such filing. The Company shall, on or before the Closing Date,
take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the
Securities for, sale to Investors at the Closing pursuant to this Agreement under applicable securities or “Blue Sky”
laws of the states of the United States, and shall provide evidence of any such action so taken to Investors on or prior to the
Closing Date. The Company shall make all filings and reports relating to the offer and sale of the Securities required under applicable
securities or “Blue Sky” laws of the states of the United States following the Closing Date. Notwithstanding the foregoing,
the Company shall in no event be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to
take any action that would subject it to service of process in suits, other than those arising out of the offering or sale of
the Securities, or to taxation as doing business in any jurisdiction where it is not now subject.

 

(c)
Reporting Status. Until the later of (i) the date as of which the holders of Notes, Note Shares, or Purchased Shares may
sell all of the Note Shares and Purchased Shares without restriction pursuant to Rule 144 promulgated under the 1933 Act (or successor
thereto), and (ii) the date on which no Notes, Note Shares, or Purchased Shares remain outstanding (the “Reporting Period”),
the Company shall timely file all reports required to be filed with the SEC pursuant to the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations
thereunder would otherwise permit such termination.

 

(d)
Use of Proceeds. The Company will use the proceeds received pursuant to this Agreement (x) (i) as set forth in Schedule
4(d)(x)(i) to this Agreement, including to cause the Company promptly to be in compliance with all filing and reporting requirements
under the 1934 Act and (ii) to pay expenses (including expenses of Investors) related to this Agreement and the Transaction Documents
in an amount of $75,000 and (y) the balance of the proceeds for general corporate purposes including working capital.

 

    	17

     

    

 

(e)
Financial Information. The Company agrees to deliver the following to each holder of Notes, Note Shares, or Purchased Shares
during the Reporting Period: (i) within one (1) day after the filing thereof with the SEC, a copy of its annual reports on Form
10-K, its quarterly reports on Form 10-Q, any current reports on Form 8-K and any registration statements (other than on Form
S-8) or amendments or supplements filed pursuant to the 1933 Act, unless the foregoing are filed with the SEC through the SEC’s
Electronic Data Gathering Analysis and Retrieval system (“EDGAR”) and are immediately available to the public
through EDGAR; (ii) on the same day as the release thereof, facsimile copies of all press releases issued by the Company or any
of its Subsidiaries, except to the extent such release is available through Bloomberg Financial Markets (or any successor thereto)
contemporaneously with such issuance; and (iii) copies of any notices and other information made available or given to the stockholders
of the Company generally, contemporaneously with the making available or giving thereof to the stockholders, unless the foregoing
are filed with the SEC through EDGAR and are immediately available to the public through EDGAR on the same date given or made
available to the stockholders.

 

(f)
Amendment and Restatement of Articles of Incorporation; Authorization of Shares; Reservation of Shares; Share Issuance Limitations.
The Company shall, in accordance with the timing set forth in Schedule 3(f) of the Company Disclosure Schedule (which shall
provide that all action necessary to cause the Company to be current in its filings with the SEC shall be taken on or before March
31, 2021), take the additional actions set forth in such Schedule 3(f) to amend and restate its Articles of Incorporation
substantially as set forth in Exhibit D to this Agreement (with such changes thereto as shall be approved by Pasaca) to,
among other things, authorize sufficient shares of Common Stock to be issued upon conversion of all Notes and issuance of all
Purchased Shares as provided for in this Agreement. In addition, as an integral part thereof and thereafter the Company shall
take all action necessary to at all times have authorized, and reserved for the purpose of issuance, no less than 120% of the
number of shares of Common Stock needed to provide for issuance of Common Stock upon conversion of any outstanding exercisable,
convertible, or exchangeable Securities (without regard to any limitations on exercise, conversion, or exchange thereof). From
and after the date hereof, without the prior consent of Pasaca and, following issuance of Notes and Purchased Shares, respectively,
the holders of a majority of the Notes (on an as-converted basis) and Purchased Shares, as applicable, then outstanding, the Company
shall not issue any Common Stock or any other security convertible into, exchangeable for, or exercisable to acquire Common Stock,
or any other security with voting rights in respect of the Company, if the effect of the cumulative of all such issuances will
cause the voting rights of the holders of Securities (on an as-converted basis) will be less than Fifty-One Percent (51%) of all
voting rights on matters submitted to persons holding voting rights in respect of matters put to stockholders of the Company or
in the election of directors.

 

(g)
Listing. The Company shall promptly secure the listing of all of the Registrable Securities upon each national securities
exchange and automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice
of issuance) and shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Registrable
Securities from time to time issuable under the terms of the Transaction Documents. Neither the Company nor any of its Subsidiaries
shall take any action which would be reasonably expected to result in the suspension or termination of trading of the Common Stock
on any market. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section
4(g).

 

(h)
Expenses. Subject to Section 9(k), at the Closing, the Company shall pay or reimburse the fees, costs and expenses
(including all legal fees and expenses) of each Investor incurred in connection with the due diligence, negotiating and preparing
the Transaction Documents and consummating the transactions contemplated hereby and thereby in an aggregate amount of $75,000.
The amount payable to each Investor pursuant to the preceding sentence at the Closing may at Investors’ election be withheld
as an offset by Investors from consideration to be paid at Closing.

 

    	18

     

    

 

(i)
Disclosure of Transactions and Other Material Information. Contemporaneous with or prior to the earlier of (i) the Company’s
first public announcement of the transactions contemplated hereby and (ii) 8:00 a.m. (New York City time) on the second (2nd)
Business Day following the Closing Date, the Company shall file a Form 8-K with the SEC describing the terms of the transactions
contemplated by the Transaction Documents and including as exhibits to such Form 8-K this Agreement (including the schedules hereto)
and the Registration Rights Agreement, in the form required by the 1934 Act (the “Announcing Form 8-K”). The
Company shall not make any public announcement regarding the transactions contemplated hereby prior to the Closing. The Company
represents and warrants that, from and after the filing of the Announcing Form 8-K with the SEC, no Investor shall be in possession
of any material nonpublic information received from the Company, any of its Subsidiaries or any of their respective officers,
directors, employees or agents. The Company shall not, and shall cause each of its Subsidiaries and its and each of their respective
officers, directors, employees and agents not to, provide any Investor with any material nonpublic information regarding the Company
or any of its Subsidiaries from and after the filing of the Announcing Form 8-K with the SEC without the express prior written
consent of such Investor. In the event of a breach of the foregoing covenant, which breach continues for five (5) Business Days,
by the Company, any of its Subsidiaries, or any of its or their respective officers, directors, employees and agents, in addition
to any other remedy provided herein or in the Transaction Documents, an Investor shall have the right to make a public disclosure,
in the form of a press release, public advertisement or otherwise, of such material nonpublic information without the prior approval
by the Company, its Subsidiaries, or any of its or their respective officers, directors, employees or agents. No Investor shall
have any liability to the Company, its Subsidiaries, or any of its or their respective officers, directors, employees, stockholders
or agents for any such disclosure. Subject to the foregoing, neither the Company nor any Investor shall issue any press releases
or any other public statements with respect to the transactions contemplated hereby or disclosing the name of any Investor; provided,
however, that the Company shall be entitled, without the prior approval of any Investor, to make any press release or other public
disclosure with respect to such transactions (i) in substantial conformity with the Announcing Form 8-K and contemporaneously
therewith or subsequent thereto and (ii) as is required by applicable Requirements of Law (provided that each Investor shall be
consulted by the Company in connection with any such press release or other public disclosure prior to its release and shall be
provided with a copy thereof).

 

(j)
Transactions with Affiliates. From the date of this Agreement until the first date following the Closing Date on which
no Securities are outstanding, the Company shall not, and shall cause each of its Subsidiaries not to, without the prior written
consent of the holders of a majority in principal amount or number of each class of outstanding obligation or Security, enter
into, amend, modify or supplement any transaction, contract, agreement, instrument, commitment, understanding or other arrangement
with any of its or any Subsidiary’s officers, directors, persons who were officers or directors at any time during the previous
two years, stockholders, or Affiliates of the Company or any of its Subsidiaries, or with any individual related by blood, marriage
or adoption to any such individual or with any person in which any such person owns a beneficial interest (each a “Related
Party”), except for customary employment arrangements and benefit programs on reasonable terms. “Affiliate”
for purposes hereof means any person who is an “affiliate” as defined in Rule 12b-2 of the General Rules and Regulations
under the 1934 Act.

 

(k)
Stockholder Approval. If at any time following the Closing Date any exchange or other third-party consent or approval would
be needed to issue 150% of the Common Stock issuable in respect of all Securities, then upon the request of the holders of at
least a majority of amount or number of any class of Securities outstanding, the Company shall solicit such consent or approval
(such consent or approval being referred to herein as “Approval”), with the recommendation of the Board of
Directors that such Approval be granted, and take all other action necessary to receive such Approval (“Action”)
as soon as is reasonably practicable. If the Company fails to take any such Action, then, as partial relief (which remedy shall
not be exclusive of any other remedies available at law or in equity), the Company shall pay to each holder of each class of Security
then outstanding an amount in cash equal to the product of (i) the aggregate principal or subscription amount of all Securities
held by such holder, multiplied by (ii) .02 multiplied by (iii) the quotient of (x) the sum of the number of days after the date
such Action(s) should reasonably have been taken and prior to the date on which such Action(s) are taken, divided by (y) 30. The
Company shall make the payments referred to in the immediately preceding sentence within five (5) days of the earlier of (I) the
Action so taken, the failure of which resulted in the requirement to make such payments, and (II) the last day of each 30-day
period beginning date such Action should have been taken, as the case may be. In the event the Company fails to make such payments
in a timely manner, such payments shall bear interest at the rate of 2.0% per month (prorated for partial months) until paid in
full.

 

    	19

     

    

 

(l)
Pledge of Securities. The Company acknowledges and agrees that the Securities may be pledged by a holder thereof in connection
with a bona fide margin agreement or other loan secured by the Securities. To the extent provided by applicable law, the pledge
of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and no holder effecting any
such pledge of Securities shall be required to provide the Company with any notice thereof or otherwise make any delivery to the
Company pursuant to this Agreement or any other Transaction Document, including Section 2(f) of this Agreement; provided
that a holder and its pledgee shall be required to comply with the provisions of Section 2(f) in order to effect a sale,
transfer or assignment of Securities to such pledgee. The Company hereby agrees to execute and deliver such documentation as a
pledgee of the Securities may reasonably request in connection with a pledge of the Securities to such pledgee by a holder of
Securities.

 

(m)
Directors.

 

(i)
On the initial Closing Date, the Company shall expand the Board of Directors of the Company to five (5) directors. Concurrently
therewith, the Investors will nominate three (3) persons to be appointed to and serve on the Board of Directors. Upon such nomination,
the incumbent members of the Board of Directors (who shall remain on the Board of Directors) shall appoint each such nominee to
fill each of three newly created vacancies, and, if there shall be any other vacancies, the Board of Directors shall appoint up
to two (2) persons to serve as directors for the two remaining seats (the “Incumbent Directors”).

 

(ii)
Thereafter, the size of the Board of Directors of the Company shall not be changed without the prior consent of Pasaca and, following
issuance of Notes and Purchased Shares, respectively, the holders of a majority of the Notes (on an as-converted basis) and Purchased
Shares, as applicable.

 

(n)
No Inconsistent Agreement or Actions. From the date of this Agreement until the first date following the Closing Date on
which no Securities are outstanding, the Company and its Subsidiaries shall not enter into any contract, agreement or understanding
which limit or restrict the Company’s ability to perform under, or take any other voluntary action to avoid or seek to avoid
the observance or performance of any of the terms to be observed or performed by it under, this Agreement or any of the other
Transaction Documents.

 

(o)
Compliance with Covenants. From the date of this Agreement until the first date following the Closing Date on which no
Securities are outstanding, the Company shall comply with and not violate or breach the covenants or agreements set forth in any
Transaction Document, such provisions being incorporated herein and made a part hereof.

 

5.
Transfer Agent Instructions.

 

The
Company shall issue irrevocable instructions to its transfer agent in the form attached hereto as Exhibit 5 (the “Irrevocable
Transfer Agent Instructions”), and any subsequent transfer agent, to issue certificates or credit shares to the applicable
balance accounts at the Depository Trust Company (“DTC”), registered in the name of each Investor or its respective
nominee(s), for Securities in such amounts as specified from time to time by each Investor to the Company upon conversion of any
Securities. Prior to registration of Securities under the 1933 Act, all such certificates shall bear the restrictive legend specified
in Section 2(g). The Company warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred
to in this Section 5 and stop transfer instructions to give effect to Section 2(f) and Section 2(g) (in the
case of Securities to be registered, prior to registration of the Securities under the 1933 Act) will be given by the Company
to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as
and to the extent provided in this Agreement and the Registration Rights Agreement. If an Investor provides the Company with an
opinion of counsel, in a generally acceptable form, to the effect that a public sale, assignment or transfer of the Securities
may be made without registration under the 1933 Act or Investor provides the Company with reasonable assurance that the Securities
can be sold pursuant to Rule 144 without any restriction as to the number of securities acquired as of a particular date that
can then be immediately sold, the Company shall permit the transfer and, in the case of to-be-issued Securities, promptly instruct
its transfer agent to issue one or more certificates or credit shares to the applicable balance accounts at DTC in such name and
in such denominations as specified by such Investor and without any restrictive legend. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to Investors by vitiating the intent and purpose of the transactions
contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section
5 will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section
5, that Investors shall be entitled, in addition to all other available remedies, to an order and/or injunction restraining
any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond
or other security being required.

 

    	20

     

    

 

6.
Conditions to the Company’s Obligation to Issue Securities.

 

(a)
Closing Date. The obligation of the Company to issue and sell the Securities to each Investor at the Closing is subject
to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for
the Company’s sole benefit and may be waived by the Company at any time in its sole discretion by providing each Investor
participating in such Closing with prior written notice thereof:

 

(i)
The Investor shall have executed each of the respective Transaction Documents to which it is a party and delivered the same to
the Company.

 

(ii)
The Investor shall have delivered to the Company any consideration required under the respective Transaction Documents (less any
amount withheld pursuant to Section 4(h)) at the Closing (in the case of cash payments, by wire transfer of immediately
available funds pursuant to the wire instructions provided by the Company), with the consideration at the initial Closing being
as provided in Section 1(a).

 

(iii)
The representations and warranties of the Investor shall be true and correct as of the date when made and as of the Closing Date
as though made at that time (except for representations and warranties that speak as of a specific date, which shall be true and
correct as of such date), and such Investor shall have performed, satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied with by the Investor at or prior to the Closing Date
(which as to the initial Closing shall be the covenants, agreements and conditions set forth in this Agreement without reference
to other Transaction Documents).

 

(iv)
The Company and Pasaca shall have entered into the Distribution Agreement.

 

(v)
The Investor shall have delivered to the Company such other standard and customary documents relating to the transactions contemplated
by this Agreement as the Company may reasonably request.

 

    	21

     

    

 

7.
Conditions to Each Investor’s Obligation to Purchase.

 

(a)
Closing Date. The obligation of each Investor hereunder to provide consideration at a Closing is subject to the satisfaction,
at or before the Closing Date, of each of the following conditions, provided that these conditions are for each Investor’s
sole benefit and may be waived only by such Investor at any time in its sole discretion by providing the Company with prior written
notice thereof:

 

(i)
The Company shall have executed each of the Transaction Documents to which it is a party and delivered the same to such Investor.

 

(ii)
The representations and warranties of the Company shall be true and correct as of the date when made and as of the Closing Date
as though made at that time (except for representations and warranties that speak as of a specific date, which shall be true and
correct as of such date), and the Company and its Subsidiaries shall have performed, satisfied and complied with the covenants,
agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company or
any of its Subsidiaries at or prior to the Closing Date. Such Investor shall have received a certificate, executed by the Chief
Executive Officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Investor, including an update as of the Closing Date of the representations contained in Section
3(b).

 

(iii)
Such Investor shall have received such opinions of counsel in form and substance and from such law firms as shall be acceptable
to Pasaca (which shall include Grable Martin Fulton PLLC), dated as of the Closing Date, which opinions will address, among other
things, law of the States of California and Nevada and federal law applicable to the transactions contemplated by the Transaction
Documents.

 

(iv)
The Company shall have executed and delivered to such Investor the certificates or notes for any Securities being purchased by
such Investor at the Closing.

 

(v)
The Company and Pasaca shall have entered into the Distribution Agreement.

 

(vi)
The Board of Directors shall have adopted resolutions consistent with Sections 3(b) and 4(m) and in a form reasonably
acceptable to Pasaca (the “Resolutions”).

 

(vii)
The Irrevocable Transfer Agent Instructions shall have been delivered to and acknowledged in writing by the Company’s transfer
agent, and the Company shall have delivered a copy thereof to such Investor.

 

(viii)
The Company shall have delivered to such Investor certificates of good standing for the Company and each Subsidiary, in each case
dated as of a date within five (5) days of the Closing Date.

 

(ix)
The Company shall have delivered to such Investor a secretary’s certificate, dated as of the Closing Date, certifying (A)
that the attached Resolutions are true, complete and correct and remain un-amended and in full force and effect, (B) as to the
Articles of Incorporation of the Company, certified as of a date within five (5) days of the Closing Date, by the Secretary of
State of the State of Nevada, (C) that the Bylaws of the Company are true, complete and correct and remain un-amended and in full
force and effect, and (D) as to the incumbency and specimen signature of each officer of the Company executing this Agreement,
the other Transaction Documents, and any other document delivered in connection herewith or therewith on behalf of the Company.

 

(x)
The Company shall have made all filings under all applicable federal and state securities laws necessary to consummate the issuance
of the Securities pursuant to this Agreement in compliance with such laws to the extent such filings must be made on or prior
to the Closing Date.

 

    	22

     

    

 

(xi)
The Company shall have delivered to such Investor a letter from the Company’s transfer agent certifying the number of shares
of Common Stock outstanding as of a date within two (2) days of the Closing Date.

 

(xii)
As of the second Closing, the Company shall have (A) filed with the Nevada Secretary of State the Amended and Restated Articles
of Incorporation as provided in Section 4(f) and (B) reserved out of its authorized and unissued shares of Common Stock
sufficient shares of Common Stock for issuance of all Note Shares and Purchased Shares.

 

(xiii)
As of the second Closing, the Purchased Shares issued at the second Closing, together with the Note Shares issued on account of
the conversion of principal of the Notes, shall represent fifty-one percent (51%) of the fully diluted Common Stock of the Company
immediately following the second Closing.

 

(xiv)
The Company shall not have made any public announcement regarding the transactions contemplated by the respective Transaction
Documents prior to the Closing.

 

(xv)
The Company and its Subsidiaries shall have delivered to such Investor such other standard and customary documents relating to
the transactions contemplated by this Agreement as such Investor or its counsel may reasonably request.

 

8.
Indemnification.

 

(a)
In consideration of each Investor’s execution and delivery of this Agreement, providing any consideration and acquiring
any Securities thereunder and in addition to all of the Company’s other obligations under the Transaction Documents, the
Company shall defend, protect, indemnify and hold harmless each holder of the Securities and all of their stockholders, partners,
officers, directors, members, managers, employees and direct or indirect investors and any of the foregoing persons’ agents
or other representatives (including those retained in connection with the transactions contemplated by this Agreement) (collectively,
the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, diminution
in value, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee
is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements
(the “Indemnified Liabilities”), incurred by any Indemnitees as a result of, or arising out of, or relating
to (a) any misrepresentation or breach of any representation or warranty made by the Company in the Transaction Documents or any
other certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation
of the Company contained in the Transaction Documents or any other certificate, instrument or document contemplated hereby or
thereby or (c) any cause of action, suit or claim brought by, or made against, such Indemnitees and arising out of or resulting
from the execution, delivery, performance or enforcement of the Transaction Documents in accordance with the terms thereof or
any other certificate, instrument or document contemplated hereby or thereby in accordance with the terms thereof. To the extent
that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities that is permissible under applicable law.

 

    	23

     

    

 

(b)
Promptly after receipt by an Indemnitee under this Section 8 of notice of the commencement of any Claim (including any
governmental action or proceeding) against such Indemnitee in respect of which indemnity may be sought from the Company under
this Section 8, such Indemnitee shall deliver to the Company a written notice of the commencement thereof, and the Company
shall have the right to participate in, and, to the extent the Company so desires, to assume control of the defense thereof with
counsel mutually satisfactory to the Company and the Indemnitee. In any such proceeding, any Indemnitee may retain its own counsel,
but, except as provided in the following sentence, the fees and expenses of that counsel will be at the expense of that Indemnitee,
unless (i) the Company and the Indemnitee shall have mutually agreed to the retention of that counsel, (ii) the Company does not
assume the defense of such proceeding in a timely manner or (iii) in the reasonable opinion of counsel retained by the Company,
the representation by such counsel for the Indemnitee and the Company would be inappropriate due to actual or potential differing
interests between such Indemnitee and any other party represented by such counsel in such proceeding. The Company shall pay reasonable
fees for up to one separate legal counsel for Investors of each class of Security or providing other consideration, and such legal
counsel shall be selected by Investors holding a majority in principal amount or number of the respective class of Security or
the aggregate amount of other consideration. The Indemnitee shall cooperate reasonably with the Company in connection with any
negotiation or defense of any such action or Claim by the Company and shall furnish to the Company all information reasonably
available to the Indemnitee which relates to such action or Claim. The Company shall keep the Indemnitee fully apprised at all
times as to the status of the defense or any settlement negotiations with respect thereto. The Company shall not be liable for
any settlement of any action, claim or proceeding effected without its prior written consent, provided, however, that the Company
shall not unreasonably withhold, delay or condition its consent. The Company shall not, without the prior written consent of the
Indemnitee, consent to entry of any judgment or enter into any settlement or other compromise with respect to any pending or threatened
action or claim in respect of which indemnification or contribution may be or has been sought hereunder (whether or not the Indemnitee
is an actual or potential party to such action or claim) which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnitee of a release from all liability in respect to such Claim or litigation. Following
indemnification as provided for hereunder, the Company shall be subrogated to all rights of the Indemnitee with respect to all
third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written
notice to the Company within a reasonable time of the commencement of any such action shall not relieve the Company of any liability
to the Indemnitee under this Section 8, except to the extent that the Company is prejudiced in its ability to defend such
action.

 

(c)
The indemnification required by this Section 8 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or Indemnified Liabilities are incurred.

 

(d)
The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnitee against
the Company or others, and (ii) any liabilities the Company may be subject to pursuant to the law.

 

9.
Governing Law; Miscellaneous.

 

(a)
Governing Law; Arbitration; Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of California, including Section 1646.5 of the California
Civil Code, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of California
or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of California.
Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting the County of Los
Angeles, California, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such 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 manner permitted by law. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction
or the validity or enforceability of any provision of this Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

    	24

     

    

 

(b)
Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one
and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other
party; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile signature.

 

(c)
Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation
of, this Agreement.

 

(d)
Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or
the validity or enforceability of any provision of this Agreement in any other jurisdiction.

 

(e)
Entire Agreement; Amendments. This Agreement supersedes all other prior oral or written agreements between the parties
hereto with respect to the matters discussed herein, and this Agreement and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor any Investor makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and Investors
holding a majority of the aggregate principal amount or number of outstanding Company indebtedness or Securities held by Investors
of each affected class as of the date of any such proposed amendment, or if prior to a Closing, by Investors listed on the Schedule
of Investors as being obligated to purchase at least a majority of the aggregate principal amount or number of indebtedness,
obligation or Security in such Closing. Any such amendment shall bind all holders of the respective class. No such amendment shall
be effective to the extent that it applies to less than all of the holders of a class then outstanding. No consideration shall
be offered or paid to any person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents
unless the same consideration also is offered to all of the parties to the Transaction Documents or holders of the class, as the
case may be.

 

(f)
Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt (as provided for in Section 116(a)(3) of the Delaware General Corporation Law, Del. Code, Tit. 8, Ch. 1), when sent by
electronic transmission (as defined in Section 232(d) of the Delaware General Corporation Law, Del. Code, Tit. 8, Ch. 1); (iii)
one (1) Business Day after deposit with a nationally recognized overnight delivery service, or (iv) four Business Days after deposit
in the continental United States in the U.S. Mail, Certified Mail and postage prepaid, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such communications shall be:

 

If
to the Company:

 

Quantum
Materials Corp.

3055
Hunter Road

San
Marcos, Texas 78666

Attention:
Steve Squires

 

If
to Pasaca or Pasaca:

 

Pasaca
Capital Inc.

800
East Colorado Boulevard, Suite 888

Pasadena,
California 91011, USA

Attention:
Robert A. Kasprzak, Esq.

Robert.Kasprzak@PasacaCapital.com

 

    	25

     

    

 

If
to an Investor, to it at the address and facsimile number set forth on the Schedule of Investors, with copies to such Investor’s
representatives as set forth on the Schedule of Investors, or, in the case of an Investor or any other party named above,
at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified
by written notice given to each other party in accordance with this Section 9(f) five (5) days prior to the effectiveness
of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication,
(B) as contemplated in Section 116(a)(3) of the Delaware General Corporation Law, Del. Code, Tit. 8, Ch. 1, (C) provided by a
nationally recognized overnight delivery service, or (D) stamped Certified Mail receipt with address provided by the U.S. Postal
Service shall be rebuttable evidence of personal service, receipt by electronic transmission, deposit with a nationally recognized
overnight delivery service, or deposit in the U.S. Mail in accordance with clause (i), (ii), (iii), or (iv) above, respectively.

 

(g)
Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective
successors and assigns, including any assignees of Investors. The Company shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the holders of at least a majority of each class of obligation and Security then
outstanding, with the Note Shares and Purchased Shares constituting a class for such purpose, including by merger, consolidation
or operation of law. An Investor may assign some or all of its rights hereunder without the consent of the Company; provided,
however, that any such assignment shall not release such Investor from its obligations hereunder unless such obligations are assumed
by such assignee and the Company has consented to such assignment and assumption, which consent shall not be unreasonably withheld.
Notwithstanding anything to the contrary contained in the Transaction Documents, Investors shall be entitled to pledge the Securities
in connection with a bona fide margin account or other loan or financing arrangement secured by the Securities.

 

(h)
No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted
successors and assigns and, to the extent provided in Section 8 hereof, each Indemnitee, and is not for the benefit of,
nor may any provision hereof be enforced by, any other person.

 

(i)
Survival. Unless this Agreement is terminated under Section 9(k), the representations and warranties of the Company and
Investors contained in Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and
9, and the indemnification provisions set forth in Section 8, shall survive the Closing. Each Investor shall be
responsible only for its own representations, warranties, agreements and covenants hereunder.

 

(j)
Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions
contemplated hereby.

 

(k)
Termination. In the event that the Closing shall not have occurred with respect to an Investor on or before the fifth (5th)
Business Day following the date of this Agreement or the respective Transaction Document relating to such Investor’s Closing
due to the Company’s or such Investor’s failure to satisfy the conditions set forth in Sections 6(a) and 7(a)
(and the non-breaching party’s failure to waive such unsatisfied condition(s)), the non-breaching party shall have the
option to terminate this Agreement with respect to such breaching party at the close of business on such date without liability
of any party to any other party; provided, however, that if this Agreement is terminated pursuant to this Section 9(k),
the Company shall be obligated to pay each Investor (so long as such Investor is not a breaching party) its fees, costs and expenses
(including all legal fees and expenses) incurred in connection with its due diligence review of the Company and the negotiation
and preparation of the Transaction Documents and documents related thereto in an aggregate amount of $75,000.

 

(l)
No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied against any party.

 

    	26

     

    

 

(m)
Remedies. Each Investor and each holder of Securities shall have all rights and remedies set forth in the Transaction Documents
and all rights and remedies that such Investors and holders have been granted at any time under any other agreement or contract
and all of the rights that such Investors and holders have under any law. Any person having any rights under any provision of
this Agreement shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce such rights
specifically (without posting a bond or other security or proving actual damages), to recover damages by reason of any breach
of any provision of this Agreement and to exercise all other rights granted by law.

 

(n)
Payment Set Aside. To the extent that the Company makes a payment or payments to Investors hereunder or pursuant to the
Registration Rights Agreement or any Transaction Document or Investors enforce or exercise their rights hereunder or thereunder,
and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, by a trustee, receiver or any other person under any law (including any bankruptcy law, state or federal
law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.

 

(o)
Independent Nature of Investors. The obligations of each Investor hereunder are several and not joint with the obligations
of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor
hereunder. Each Investor shall be responsible only for its own representations, warranties, agreements and covenants hereunder.
The decision of each Investor to provide any consideration for any purpose in connection with any Closing pursuant to this Agreement
has been made by such Investor independently of any other Investor and independently of any information, materials, statements
or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial
or otherwise) or prospects of the Company or any of its Subsidiaries which may have been made or given by any other Investor or
by any agent or employee of any other Investor, and no Investor or any of its agents or employees shall have any liability to
any other Investor (or any other person) relating to or arising from any such information, materials, statements or opinions.
Nothing contained herein, and no action taken by any Investor pursuant hereto or thereto, shall be deemed to constitute Investors
as a partnership, an association, a joint venture or any other kind of person, or create a presumption that Investors are in any
way acting in concert or as a group with respect to such obligations or the transactions contemplated hereby. Each Investor shall
be entitled to independently protect and enforce its rights, including the rights arising out of this Agreement, any Transaction
Document or any Security, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding
for such purpose.

 

(p)
Interpretative Matters. Unless the context otherwise requires, (a) all references to Sections, Schedules or Exhibits are
to Sections, Schedules or Exhibits contained in or attached to this Agreement, (b) each accounting term not otherwise defined
in this Agreement has the meaning assigned to it in accordance with GAAP, (c) references to “person” shall
include entities and other customarily recognized legal persons, including Governmental Entities; (d) words in the singular or
plural include the singular and plural and pronouns stated in either the masculine, the feminine or neuter gender shall include
the masculine, feminine and neuter and (e) the use of the word “including” in this Agreement shall be by way
of example rather than limitation.

 

*
* * * * *

 

    	27

     

    

 

IN WITNESS WHEREOF, the initial Investors, Pasaca, and the Company have caused this Transaction Completion and Financing Agreement
to be duly executed as of the date first written above.

 

	 	“The Company”
	 	 	 
	 	Quantum
    Materials Corp.
	 	 
	 	By
    	/s/Stephen
    Squires
	 	 	Steve
    Squires
	 	 	President
    & CEO
	 	 	 
	 	“Pasaca”
	 	 	 
	 	Pasaca
    Capital Inc.
	 	 
	 	By
    	/s/Charles
    Huang
	 	Name:
    	Charles
Huang
	 	Title:
    	Chairman
and CEO

 

    	28

     

    

 

Schedule
of Investors

 

	Name,
    Consideration, and Notice Information	 	Signature to Transaction Completion and 

Financing Agreement
	Initial
                                         Closing:

        Pasaca
        Capital Inc.

        800
        East Colorado Boulevard, Suite 888

        Pasadena,
California 91011, USA

Attention: Robert A. Kasprzak, Esq.

        
	 	 

        By

	/s/ Charles Huang

	Robert.Kasprzak@PasacaCapital.com	 	Name:	Charles Huang
	Principal
        Amount of Notes – $4,500,000	 	Title:	Chairman and CEO
	 	 	 	 
	Second
                                         Closing:

        Pasaca
        Capital Inc.

        800
        East Colorado Boulevard, Suite 888

        Pasadena,
        California 91011, USA

        Attention: Robert A. Kasprzak, Esq.

        Robert.Kasprzak@PasacaCapital.com

        Purchased
        Shares – $10,500,000, with the Purchased Shares, together with the Note Shares issued on account of the conversion
        of principal of the Notes to equal 51% of the fully diluted Common Stock of the Company immediately following the second
        Closing
	 	 	 

 

    	 

     

    

 

Schedule
A

 

Transaction
Documents

 

Securities
Purchase and Financing Agreement

 

Bridge
Notes (promissory notes evidencing the Bridge Loans)

 

Bridge
Loan Conversion Election and Notice

 

Form
of Note (Exhibit A)

 

Registration
Rights Agreement (Exhibit B)

 

Distribution
Agreement (Exhibit C)

 

Amended
and Restated Articles of Incorporation (Exhibit D)

 

Irrevocable
Transfer Agent Instructions (Exhibit 5)

 

Company
Director Resolutions (Sections 3(b) and 4(m)(i))

 

Legal
Opinion

 

Transfer
Agent Letter Certifying Outstanding Shares (Section 7(a)(xi))Exhibit 10.2

 

NEITHER
THE SECURITIES EVIDENCED BY THIS INSTRUMENT NOR ANY SECURITIES INTO WHICH THIS MAY BE CONVERTED HAVE NOT 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 APPLICABLE STATE SECURITIES LAWS OR (B) AN APPROPRIATE EXCEPTION UNDER SAID ACT OR APPLICABLE SECURITIES
LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR 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.

 

	$4,500,000	January
    26, 2021

 

QUANTUM
MATERIALS CORP.

 

SECURED
CONVERTIBLE PROMISSORY NOTE 

 

FOR
VALUE RECEIVED, this Convertible Promissory Note (this “Note”) is made by Quantum Materials Corp., a
Nevada corporation (the “Company”), to Pasaca Capital Inc. (the “Holder”),
dated as of the date here in, by and between the Company and Holder. The Holder takes this Note subject to the terms and restrictions
set forth in this Note Agreement.

 

This
Note is the senior secured convertible note issued pursuant to the Securities Purchase and Financing Agreement (the “Agreement”),
dated as of January 26, 2021, by and between the Company and Holder. Terms used but not defined in this Note shall have the meanings
or usage, if any, ascribed thereto in the Agreement.

 

Section
1. Interest and Payments.

 

(a)
Payments.

 

(i)
Principal. All outstanding principal and any accrued and unpaid interest on this Note shall be due and payable on the Maturity
Date. If the conditions to the second Closing set forth in Sections 6(a) and 7(a) of the Agreement have been satisfied or waived
on or prior to the Maturity Date, the principal amount shall be payable in such number of shares of common stock, par value $0.001
per share (the “Common Stock”), of the Company determined by dividing the amount to be paid by the Conversion
Price. Such payment shall be an automatic conversion of the principal of this Note as contemplated in Section 4 below.

 

(ii)
Interest. Accrued and unpaid interest only on this Note is due and payable upon demand of Holder in installments no more
frequently than the end of each fiscal quarter of the Company, commencing no sooner than sixty calendar days following date of
this Note.

 

(iii)
Conversion Price.

 

(A)
“Conversion Price” shall mean Conversion Price of $0.029177463 for any purpose under this Note, subject
to adjustment as provided in Exhibit A hereto, which is incorporated herein by this reference.

 

(iv)
Business Days. If any required payment falls due on a Saturday, Sunday or a national or state bank holiday in the State
of Texas, then such date shall be extended to the next succeeding day that is not a Saturday, Sunday or a day on which commercial
banks in San Marcos, Texas are required or authorized to be closed.

 

    	 

    	 

    

 

(v)
No Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion or payment of this Note. Instead
of any fractional share which would otherwise be issuable upon conversion or payment, the Company will round up the number of
shares of Common Stock issuable upon such conversion or payment.

 

(b)
Maturity Date. The “Maturity Date” shall mean March 31, 2021. The Holder shall have one (1) option
to extend the Maturity Date to April 30, 2021, which may be exercised at any time prior to the then-existing Maturity Date by
written notice thereof to the Company; provided that the Company has completed and filed at least one-half (1⁄2) of the SEC
filings identified on Schedule 3(f) to the Agreement or the Company has substantially completed at least three-fourths (3⁄4)
of the SEC filings identified on Schedule 3(f) to the Agreement.

 

Section
2. Interest Rate. Except as otherwise set forth in Section 3, interest shall be payable on the unpaid principal
amounts hereof at the rate equal to the lesser of (a) eight percent (8%) per annum, or (b) the Highest Lawful Rate (as defined
in Section 3), until such time as all amounts due and owing have been paid in full, in each case on a non-compounding basis.
For avoidance of doubt interest shall accrue from the date of advance of any funds to the Company, whether before, on or after
the date of this Note.

 

Section
3. Maximum Rate. It is the intention of the parties hereto to conform strictly to any usury laws in force that apply
to the transactions contemplated hereby. Accordingly, in no contingency, whether by reason of acceleration of the maturity of
the amounts owing under this Note or otherwise, shall the interest (and all other sums that are deemed to be interest) contracted
for, charged or received by Holder with respect to this Note, exceed the Highest Lawful Rate. The “Highest Lawful
Rate” means the maximum non-usurious interest rate, if any, that at any time or from time to time may be charged,
contracted for, received, reserved or taken under the laws of the United States and the laws of such states as may be applicable
thereto which are presently in effect or, to the extent allowed under such applicable laws of the United States and the laws of
such states, which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws
now allow. If, from any circumstance whatsoever, interest under any agreement to which the Company and Holder are parties would
otherwise be payable in excess of the Highest Lawful Rate, and if from any circumstance Holder shall ever receive anything of
value deemed interest by applicable law in excess of the Highest Lawful Rate, then Holder’s receipt of such excess interest
shall be deemed a mistake and the same shall, so long as no Event of Default (as defined below) under this Note shall be continuing,
at the option of the Company, either be repaid to the Company or credited to the unpaid principal; provided, however,
that if an Event of Default shall have occurred and be continuing, and Holder shall receive excess interest during such period,
then Holder shall have the option of either crediting such excess amount to principal or refunding such excess amount to the Company.
All interest paid or agreed to be paid to Holder shall, to the extent allowed by applicable law, be allocated, amortized, prorated
and spread throughout the full period of the Company’s credit relationship with Holder until payment in full of the principal
(including the period of any renewal or extension) so that the interest for such full period shall not exceed the Highest Lawful
Rate.

 

Section
4. Prepayment and Conversion.

 

(a)
Right to Prepay. This Note may only be prepaid in shares of Common Stock pursuant to Section 1(a)(i) above if the conditions
to the second Closing set forth in Sections 6(a) and 7(a) of the Agreement have been satisfied or waived prior to the Maturity
Date. Such payment shall be an automatic conversion of the principal of this Note as contemplated in Section 4(b) below.

 

(b)
Conversion.

 

(i)
Conversion. The principal of this Note shall convert into shares of Common Stock automatically as provided in Sections
1(a)(i) and 4(a) above (an “Automatic Conversion”). Upon notice from Holder to the Company, Holder may
also elect to convert all but only all of the outstanding principal of this Note into shares of Common Stock (subject to prior
Automatic Conversion) (an “Optional Conversion”).

 

    	2

    	 

    

 

(ii)
No action shall be necessary to effect an Automatic Conversion. To effect an Optional Conversion, Holder must tender to the Company
at its principal executive office this Note together with a written notice of exercise of such conversion right.

 

(iii)
Upon conversion (which shall, in the case of an Automatic Conversion, be concurrent with the sale of Purchased Shares pursuant
to the Agreement and shall, in the case of an Optional Conversion, be effective upon the giving of the notice of conversion and
receipt of this Note as hereinabove provided), no further interest shall accrue upon the converted indebtedness hereof, and the
Company shall issue to Holder certificates representing the shares of Common Stock issued upon conversion of this Note (or a notice
of a notation representing such shares of Common Stock in the direct registration system maintained for the Common Stock, as applicable)
and record the issuance of shares of Common Stock upon such conversion in the books and records of the Company.

 

(iv)
Holder acknowledges and agrees that the Company does not currently have adequate shares of Common Stock in its treasury to permit
the conversion of the Note. The Company has in the Agreement covenanted and agreed to take all action necessary to have sufficient
authorized and unissued shares at the earliest practicable date, including to amend its articles of incorporation. Holder acknowledges
that action will require approval of the Company’s shareholders, and the Company agrees to use its best efforts to amend
its articles of incorporation at the earliest practicable date; provided however, that there can be no assurance that the Company
will be successful in its efforts to obtain shareholder approval for the amendment to the Company’s articles of incorporation
to increase the authorized number of shares of Common Stock, such that there will be an adequate number of shares of Common Stock
to permit the conversion of the Note. Accordingly, Holder acknowledges and agrees that it may not be able to be issued shares
of Common Stock upon conversion of this Note in the foreseeable future.

 

(v)
The number of shares of Common Stock issuable upon conversion of this Note pursuant to this Section 4 shall be determined
by dividing the outstanding principal and any accrued and unpaid interest on this Note subject to such conversion to be paid by
the Conversion Price.

 

Section
5. Security.

 

(a)
As collateral security for the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) and
performance of the obligations under this Note, the Company hereby pledges and grants to Holder a security interest in and to
all of the Company’s right, title and interest in and to the following property, whether now owned or hereafter acquired
by the Company and whether now existing or hereafter coming into existence (collectively, the “Collateral”):
all personal property of the Company, including all goods, accounts, chattel paper (including electronic and tangible), commercial
tort claims, documents, equipment, general intangibles, instruments, inventory, investment property, letter-of-credit rights,
payment intangibles, and supporting obligations and any proceeds of any of the foregoing, and any deposit accounts into which
any proceeds of any of the foregoing may be deposited (as all such terms are defined in the Texas Uniform Commercial Code).

 

(b)
The Company shall:

 

(i)
upon the acquisition after the date hereof by the Company of any securities Collateral, promptly either (x) transfer and deliver
to Holder all such securities Collateral (together with the certificates representing such securities Collateral duly endorsed
in blank or accompanied by undated stock powers duly executed in blank) or (y) take such other action as Holder shall deem necessary
or appropriate to perfect, and establish the priority of, the liens granted by this Note in such securities Collateral;

 

    	3

    	 

    

 

(ii)
upon the acquisition after the date hereof by the Company of any instrument Collateral, promptly deliver and pledge to Holder
all such instruments, endorsed or accompanied by such instruments of assignment and transfer in such form and substance as Holder
may request;

 

(iii)
upon the acquisition after date hereof by the Company of any equipment covered by a certificate of title or ownership, promptly
cause Holder to be listed as the lienholder on such certificate of title and within 120 days of the acquisition of such equipment
deliver evidence of the same to Holder;

 

(iv)
upon the Company’s acquiring, or otherwise becoming entitled to the benefits of, any copyright (or copyrightable material),
patent (or patentable invention), trademark (or associated goodwill) or other intellectual property or upon or prior to the Company’s
filing, either directly or through any agent, licensee or other designee, of any application with any governmental authority for
any copyright, patent, trademark, or other intellectual property, in each case after the date hereof, execute and deliver such
contracts, agreements and other instruments as Holder may request to evidence, validate, perfect and establish the priority of
the liens granted by this Note in such and any related intellectual property; and

 

(v)
give, execute, deliver, file or record any and all collateral assignments, financing statements, notices, contracts, agreements
or other instruments, obtain any and all governmental approvals, rights, or authorizations and take any and all steps that may
be necessary or as Holder may request to create, perfect, establish the priority of, or to preserve the validity, perfection or
priority of, the liens granted by this Note or to enable Holder to exercise and enforce its rights, remedies, powers and privileges
under this Note with respect to such liens, including causing any or all securities Collateral to be transferred of record into
the name of Holder or its nominee (and Holder agrees that if any securities Collateral is transferred into its name or the name
of its nominee, Holder will thereafter promptly give to the Company copies of any notices and communications received by it with
respect to the securities Collateral pledged by the Company).

 

(c)
The Company hereby appoints Holder the attorney in fact of the Company for the purpose of carrying out the provisions of this
Note and taking any action and executing any instruments which Holder may deem necessary or advisable to accomplish the purposes
of this Note, to preserve the validity, perfection and priority of the liens granted by this Note and, following any default,
to exercise its rights, remedies, powers and privileges under this Note. This appointment as attorney in fact is irrevocable and
coupled with an interest. Without limiting the generality of the foregoing, Holder shall be entitled under this Note upon the
occurrence and continuation of any Event of Default (i) to make, sign, file and record any security instruments, (ii) to ask,
demand, collect, sue for, recover, receive and give receipt and discharge for amounts due and to become due under and in respect
of all or any part of the Collateral; (iii) to receive, endorse and collect any instruments or other drafts, instruments, documents
and chattel paper in connection with clause (ii) above (including any draft or check representing the proceeds of insurance or
the return of unearned premiums); (iv) to file any claims or take any action or proceeding that Holder may deem necessary or advisable
for the collection of all or any part of the Collateral, including the collection of any compensation due and to become due under
any contract or agreement with respect to all or any part of the Collateral; and (v) to execute, in connection with any sale or
disposition of the Collateral, any endorsements, assignments, bills of sale or other instruments of conveyance or transfer with
respect to all or any part of the Collateral.

 

(d)
Without limiting the rights and powers of Holder under Section 5(c), the Company hereby appoints Holder as its attorney in fact,
effective date hereof and terminating upon the satisfaction in full of the obligations under the Note, for the purpose of (A)
preparing, executing on behalf of the Company, filing, and recording collateral assignment and financing statement documents with
appropriate state and county agencies to perfect and enforce the liens granted by this Note, (B) executing on behalf of the Company
title or ownership applications for filing with appropriate state agencies, (C) filing such applications with such state agencies
and (D) executing such other documents and instruments on behalf of, and taking such other action in the name of, the Company
as Holder may deem necessary or advisable to accomplish the purposes of this Note (including the purpose of creating in favor
of Holder a perfected lien on the property and exercising the rights and remedies of Holder hereunder). This appointment as attorney
in fact is irrevocable and coupled with an interest.

 

    	4

    	 

    

 

(e)
Without limiting the rights and powers of Holder under Sections 5(c) or 5(d), as authorized by Section 9-509 of the Uniform Commercial
Code (as enacted and applicable in any relevant jurisdiction, the “UCC” and citations are to the 2010
version of the UCC but shall be to the corresponding provision in any applicable jurisdiction), the Company is authenticating
and delivering this Section 5(e) as an Authorization to File UCC Record (this “Authorization”). Terms
used but not defined in this Authorization shall have the meanings, if any, ascribed thereto in the Agreement or in the UCC, in
that order of preference. Authorization to file a record:

 

(i)
Pursuant to Section 9-509(a) and (b) of the UCC, by entering into and issuing this Note, the Company authorizes Holder and any
of its designees (“Authorized Persons”) to file an initial financing statement or financing statements
and an amendment or amendments covering: (1) the Collateral described in Section 5(a) and (2) property that becomes
Collateral under Section 9-315(a)(2) of the UCC, whether or not Section 5(a) expressly covers proceeds.

 

(ii)
In addition, by this Authorization, the Company hereby further authorizes each of the Authorized Persons to file an initial
financing statement or statements covering the Collateral, amendments that add Collateral covered by a financing statement,
or amendments that adds a debtor to a financing statement on behalf of and as requested or directed by Holder.

 

(iii)
In addition, the Company hereby confirms that, by acquiring Collateral in which a security interest continues under Section
9-315(a)(1) of the UCC, the Debtor authorizes the filing of an initial financing statement or statements and an amendment or
amendments covering the Collateral and property that become collateral under Section 9-315(a)(2).

 

(iv)
This Authorization constitutes an authenticated record within the meaning of Sections 9-102(a)(7), 9-102(a)(70), 9-509, and
9-510(a) of the UCC.

 

Section
6. Remedies.

 

(a)
Remedies. Upon the occurrence of an Event of Default (as defined below):

 

	 	(i)	the
    principal amount of this Note shall be increased to 105% of the principal amount of this Note as of immediately prior to the
    Event of Default;

 

	 	(ii)	a
    daily administrative late charge of $10.00 shall accrue and be payable from the date of the occurrence of the Event of Default
    until the date such Event of Default is cured or remedied;

 

	 	(iii)	Holder
    may declare all of the principal then outstanding together with interest accrued thereon and all other amounts owing or payable
    hereunder (the “Acceleration Amount”) immediately due and payable, in cash, all without presentment,
    demand, protest or further act or notice of any kind, all of which are expressly waived by the Company;

 

	 	(iv)	Holder
    may exercise any and all rights and remedies available to Holder under this Note, the Agreement or any other Transaction Document;
    and

 

    	5

    	 

    

 

	 	(v)	Holder
    may exercise any and all remedies available under applicable law.

 

(b)
“Event of Default” Defined. “Event of Default” shall mean:

 

	 	(i)	default
    in payment of any principal amount due under this Note, when and as due;

 

	 	(ii)	default
    in payment of any interest on this Note that is not included in an amount described in the immediately preceding clause (i)
    that is not cured within two (2) Business Days from the date such interest was due;

 

	 	(iii)	any
    default in the observance or performance of any covenant or agreement contained in Exhibit A;

 

	 	(iv)	failure
    by the Company to comply with any other provision of this Note or any other Transaction Document in all material respects
    within ten (10) days after the earlier of (x) the Company’s receipt of notice to comply with such provision or (y) the
    Company becoming aware of such default;

 

	 	(v)	any
    representation, warranty, certification or statement of fact made or deemed made by or on behalf of the Company in this Note,
    the Agreement, any Transaction Document or in any certificate or other document delivered pursuant hereto or thereto, shall
    be incorrect in any material respect when made or deemed made;

 

	 	(vi)	any
    default in payment of at least $100,000, individually or in the aggregate, under or acceleration prior to maturity, or any
    event or circumstances arising such that, any person is entitled, or could, with the giving of notice and/or lapse of time
    and/or the fulfillment of any condition and/or the making of any determination, become entitled, to require repayment before
    its stated maturity of, or to take any step to enforce any security for, any mortgage, indenture or instrument under which
    there may be issued or by which there may be secured or evidenced any Indebtedness of at least $100,000 by the Company or
    any of its Subsidiaries, whether such Indebtedness now exists or shall be created hereafter, provided, however, that the foregoing
    shall not include judgments arising from litigation matters disclosed in the Company’s SEC Reports filed prior to the
    date of this Note;

 

	 	(vii)	any
    of the Transaction Documents or any subordination provisions in any subordinated indebtedness shall cease, for any reason,
    to be in full force and effect, or the Company or any of its Subsidiaries shall so assert;

 

	 	(viii)	any
    Lien created by any of the Transaction Documents shall cease to be enforceable and of the same effect and priority purported
    to be created thereby, or the Company or any of its Subsidiaries shall so assert (other than in accordance with the Transaction
    Documents);

 

    	6

    	 

    

 

	 	(ix)	if
    the Company or any of its Subsidiaries pursuant to or within the meaning of any Bankruptcy Law (as defined below); (A) commences
    a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the
    appointment of a Custodian of it or any of its Subsidiaries for all or substantially all of its property; (D) makes a general
    assignment for the benefit of its creditors; or (E) admits in writing that it is generally unable to pay its debts as the
    same become due; (x) an involuntary case or other proceeding is commenced directly against the Company or any of its Subsidiaries
    seeking liquidation, reorganization or other relief with respect to it or its Indebtedness under any Bankruptcy Law now or
    hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of
    it or any substantial part of its property, and such involuntary case or other Bankruptcy Law proceeding remains undismissed
    and unstayed for a period of thirty (30) days, or an order of relief is entered against the Company or any of its Subsidiaries
    as debtor under the Bankruptcy Laws as are now or hereafter in effect; or

 

	 	(xi)	one
    or more judgments, non-interlocutory orders or decrees shall be entered by a U.S. state or federal or a foreign court or administrative
    agency of competent jurisdiction against any the Company or any of its Subsidiaries involving in the aggregate a liability
    (to the extent not covered by independent third party insurance as to which the insurers has not denied coverage) as to any
    single or related series of transactions, incidents or conditions, of $100,000 or more, and the same shall remain unsatisfied,
    unvacated, unbonded or unstayed pending appeal for a period of thirty (30) days after the entry thereof. The term “Bankruptcy
    Law” means Title 11, U.S. Code, or any similar federal, state or foreign law for the relief of debtors. The term “Custodian”
    means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. Within five (5) Business Days
    after the occurrence of any Event of Default set forth in clause (vi), (ix), (x) or (xi) above, the Company shall deliver
    written notice thereof to the Holder.

 

Section
7. Remedies Cumulative. The remedies of Holder, as provided herein, shall be cumulative and concurrent, and may be
pursued singularly, successively or together, at the sole discretion of Holder, and may be exercised as often as occasion therefor
shall arise. No act of omission or commission of Holder, including specifically any failure to exercise any right, remedy or recourse,
shall be deemed to be a waiver or release of the same, such waiver or release to be effected only through a written document executed
by Holder and then only to the extent specifically recited therein. A waiver or release with reference to any one event shall
not be construed as continuing, as a bar to, or as a waiver or release of, any subsequent right, remedy or recourse as to a subsequent
event.

 

Section
8. Costs of Collection. The Company promises to pay all of Holder’s costs of collection of every kind, including,
but not limited to, all reasonable attorneys’ fees, court costs, and expenses of every kind, incurred by Holder in connection
with the collection (including, but not limited to, collection through a bankruptcy or other court) or enforcement of this Note.

 

Section
9. Waivers. Except as otherwise set forth herein, the Company hereby waives demand, notice, presentment, protest and
notice of dishonor.

 

Section
10. Issuance of Shares.

 

(a)
Legal Compliance. Shares of Common Stock will not be issued pursuant to this Note unless the conversion or payment of this
Note and the issuance and delivery of such shares will comply with applicable law, including but not limited to the Securities
Act of 1933, as amended (the “Act”), and will be further subject to the approval of counsel for the
Company with respect to such compliance.

 

    	7

    	 

    

 

(b)
Investment Representations. As a condition to the issuance of shares of Common Stock pursuant to this Note, the Company
may require Holder to provide such information and to make such representations and warranties to determine whether such issuance
and delivery of shares of Common Stock complies with applicable law.

 

(c)
Restricted Securities. The Holder understands that Note and the shares of Common Stock issuable pursuant to this Note are
“restricted securities” under applicable federal securities laws and that the Act, and the rules of the Securities
and Exchange Commission (the “Commission”) provide in substance that Holder may dispose of the Note
and the shares of Common Stock issuable pursuant to this Note only pursuant to an effective registration statement under the Act
or an exemption therefrom, and Holder understands that, except as provided in the Registration Rights Agreement, the Company has
no obligation or intention to register any of the Note or the shares of Common Stock issuable pursuant to this Note or to take
action so as to permit sales pursuant to the Act, including Rule 144. As a consequence, Holder understands that there is no public
market for such securities and Holder therefore must bear the economic risks of the investment in such securities for an indefinite
period of time. The Holder understands that Holder may not at any time demand the purchase by the Company of such securities.

 

(c)
Adjustments. In the event the Common Stock shall be changed into another kind of capital stock or debt (otherwise than
through a stock dividend, split, combination or reclassification) or shall represent the right to receive some other security
or property, as a result of any capital reorganization or any merger or consolidation with another entity in which the Company
is not the surviving corporation, or any sale of all or substantially all of the assets of the Company to another entity, Holder
shall thereafter be entitled to acquire, or the Company shall be entities to deliver for payment, as applicable, upon conversion
or payment of this Note the kind and number of shares of stock or other securities or property to which Holder would have been
entitled if he, she or it had the shares of Common Stock issuable upon the conversion or payment of this Note immediately prior
to such capital reorganization, merger, consolidation or sale of assets.

 

(d)
Rights of Shareholders. No Holder of this Note shall be entitled, as a Note holder, to vote or receive dividends or be
deemed the holder of the Shares or any other securities of the Company which may at any time be issuable on the conversion or
payment hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this Note, as such,
any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted
to shareholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization,
issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive
notice of meetings, or to receive dividends or subscription rights or otherwise until the Note shall have been paid in shares
or converted and the shares issuable upon conversion or payment shall have become deliverable, as provided herein.

 

Section
11. Restrictive Legend. The shares of Common Stock issuable pursuant to this Note shall bear with a legend in substantially
the following form provided in Section 2(g) of the Agreement.

 

Section
12. Successors and Assigns. All provisions made in this Note will bind and inure to the benefit of the parties hereto
and their respective successors and assigns. This Note may not be assigned without the prior written consent of the Company.

 

Section
13. Notices. Any notices to be given hereunder by any party to the other may be effected as provided in Section 9(f)
of the Agreement.

 

    	8

    	 

    

 

Section
14. Governing Law. This Note shall be construed and enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of California, including
Section 1646.5 of the California Civil Code. Each party hereby irrevocably submits to the exclusive jurisdiction of the state
and federal courts sitting in the County of Los Angeles, California, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such
suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.
Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Note 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 manner permitted by law.

 

Section
15. Waiver Of Jury Trial. THE COMPANY, ON BEHALF OF ITSELF AND ITS SUBSIDIARIES, AND HOLDER HEREBY IRREVOCABLY WAIVE
ANY RIGHTS THEY MAY HAVE TO, AND AGREE NOT TO REQUEST, A TRIAL BY JURY IN RESPECT OF ANY ACTION BASED UPON, OR ARISING OUT OF,
THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

Section
16. Severability. If any provisions of this Note or any payments pursuant to the terms hereof shall be invalid or unenforceable
to any extent, the remainder of this Note and any other payments hereunder shall not be affected thereby and shall be enforceable
to the greatest extent permitted by law. Furthermore, in lieu of such invalid or unenforceable provisions, there shall be added
automatically as part of this Note, a provision or provisions as similar in its or their terms to such invalid or unenforceable
provisions as may be possible and be legal, valid and enforceable.

 

Section
17. No Oral Agreements. This Note as written represents the final agreement between the Company and Holder with respect
to the matters contained therein and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements
between the Company and Holder. There are no unwritten agreements between the Company and Holder.

 

Section
18. Interpretative Matters. Unless the context otherwise requires, (a) all references to Sections, Schedules or Exhibits
are to sections, schedules or exhibits contained in or attached to this Note or to the Agreement, as applicable, (b) each accounting
term not otherwise defined in this Note has the meaning assigned to it in accordance with GAAP, (c) words in the singular or plural
include the singular and plural and pronouns stated in either the masculine, the feminine or neuter gender shall include the masculine,
feminine and neuter and (d) the use of the word “including” in this Note shall be by way of example rather than limitation.
If a stock split, stock dividend, stock combination or other similar event occurs during any period over which an average price
is being determined, then an appropriate adjustment will be made to such average to reflect such event.

 

Section
19. Specific Shall Not Limit General; Construction. No specific provision contained in this Note shall limit or modify
any more general provision contained herein. This Note shall be deemed to be jointly drafted by the Company and the purchaser
of Notes pursuant to the Agreement and shall not be construed against any person as the drafter hereof.

 

Section
20. Failure or Indulgence Not Waiver. No failure or delay on the part of 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 privilege.

 

[Signature
page follows.]

 

    	9

    	 

    

 

IN
WITNESS WHEREOF, the undersigned has executed and delivered this Note as of the date and year first above written.

 

	 	“The
    Company”
	 	 
	 	Quantum Materials Corp.
	 	 	            
	 	By:	/s/
                                         Stephen Squires

	 		Steve
    Squires
	 		President
    & CEO

 

Accepted,
acknowledged and agreed to by:

 

	 	“Pasaca”
	 	 
	 	Pasaca Capital Inc.
	 	 	      
	 	By:	/s/
Charles Huang
	 	Name:	Charles
    Huang
	 	Title:	Chairman
    and CEO

 

    	 

    	 

    

 

Exhibit
A

 

Adjustments
to the Conversion Price; Other Rights of Holder

 

Adjustments
to Conversion Price. The Conversion Price, and the number and type of securities to be received upon conversion of this Note,
shall be adjusted from time to time as provided in this Exhibit A.

 

(i)
In the event that the Company shall at any time or from time to time, on or after the Issuance Date and prior to the conversion
of this Note, (A) pay a dividend or make a distribution payable in Shares on any class of shares of capital stock of the Company,
(B) subdivide its outstanding Shares into a greater number of shares, (C) combine its outstanding Shares into a smaller number
of shares or (D) issue any shares of capital stock by reclassification of its Shares, the Conversion Price in effect at the opening
of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or distribution
or at the opening of business on the day following the day on which such subdivision, combination or reclassification becomes
effective, as the case may be, shall be adjusted so that the holder of any Notes thereafter surrendered for conversion shall be
entitled to receive the number of Shares that such holder would have owned or have been entitled to receive after the happening
of any of the events described above had such Notes been converted immediately prior to the record date in the case of a dividend
or distribution or the effective date in the case of a subdivision, combination or reclassification. An adjustment made pursuant
to this (i) shall become effective immediately upon the opening of business on the day next following the record date (subject
to (viii) below) in the case of a dividend or distribution and shall become effective immediately upon the opening of business
on the day next following the effective date in the case of a subdivision, combination or reclassification.

 

(ii)
In the event that the Company shall at any time or from time to time, on or after the Issuance Date and prior to the conversion
of this Note, (A) issue Shares, Convertible Securities, or Options entitling the recipient thereof to subscribe for or purchase
Shares, at a price per share or (B) amend or otherwise modify the terms of any Convertible Securities or Options to a price per
share (such issuance, subscription or purchase price or amended or modified price being referred to as the “New Issue Price”),
in either case, less than the Conversion Price then in effect, then the Conversion Price in effect at the opening of business
on the day next following such issuance shall be adjusted to equal the New Issue Price. Such adjustment shall become effective
immediately upon the opening of business on the day next following such issuance. In determining whether any Shares are issued
or issuable, or Convertible Securities or Options entitle the holders of Notes to subscribe for or purchase Shares at less than
such Conversion Price, there shall be taken into account any consideration received by the Company upon issuance of any such securities,
the conversion of any such Convertible Securities and upon exercise of such Options the value of such consideration, if other
than cash, to be determined in good faith by the board of directors of the Company (the “Board of Directors”) in the
exercise of their fiduciary duty, with the concurrence of the holders of at least a majority of the aggregate principal amount
of the Notes then Outstanding. Notwithstanding the foregoing or any other provision herein to the contrary, no adjustment to the
Conversion Price will be required as a result of any Exempted Issuance.

 

    	A-1

    	 

    

 

(iii)
In case the Company shall at any time or from time to time, on or after the Issuance Date and prior to conversion of this Note,
distribute to all holders of Shares (including any such distribution made in connection with a merger or consolidation in which
the Company is the resulting or surviving person and the Common Stock is not changed or exchanged) cash, evidences of indebtedness
of the Company, any Subsidiary or another issuer, securities of the Company (including Convertible Securities), any Subsidiary
or another issuer or other assets (excluding dividends payable in Shares for which adjustment is made under another paragraph
of this Exhibit A and any distribution in connection with an Exempted Issuance) or Options to subscribe for or purchase of any
of the foregoing, then, and in each such case, the Conversion Price then in effect shall be adjusted (and any other appropriate
actions shall be taken by the Company) by multiplying the Conversion Price in effect immediately prior to the date of such distribution
by a fraction (x) the numerator of which shall be the Weighted Average Price of the Common Stock for the five (5) consecutive
Trading Days immediately prior to the date of distribution less the then fair market value (as determined by the Board of Directors
in the exercise of their fiduciary duties with the concurrence of the holders of at least a majority of the aggregate principal
amount of the Notes then Outstanding) of the portion of the cash, evidences of indebtedness, securities or other assets so distributed
or of such Options to subscribe applicable to one Share and (y) the denominator of which shall be the Weighted Average Price of
the Common Stock for the five (5) consecutive Trading Days immediately prior to the date of distribution (but such fraction shall
not be greater than one). Such adjustment shall be made whenever any such distribution is made and shall become effective retroactively
to a date immediately following the close of business on the record date for the determination of stockholders entitled to receive
such distribution.

 

(iv)
In the event that the Company shall at any time or from time to time, on or after the Issuance Date and prior to the conversion
of this Note, make a payment of cash or other consideration to the holders of Shares in respect of a tender offer or exchange
offer, other than an odd-lot offer, and the value of the sum of (i) the aggregate cash and other consideration paid for such Shares,
and (ii) any other consent or other fees paid to holders of Shares in respect of such tender offer or exchange offer expressed
as an amount per share of Common Stock validly tendered or exchanged pursuant to such tender offer or exchange offer, exceeds
the Weighted Average Price of the Common Stock on the Trading Day immediately prior to the date any such tender offer or exchange
offer is first publicly announced (the “Announcement Date”), then the Conversion Price shall be adjusted
in accordance with the formula:

 

	 	R’	=	R
    x	O’
    x P	 
	 	 	 	 	F
    + (P x O)	 

 

For
purposes of the foregoing formula:

 

R
= the Conversion Price in effect at the expiration time of the tender offer or exchange offer that is the subject of this (iv)
(the “Expiration Time”);

 

R’
= the Conversion Price in effect immediately after the Expiration Time;

 

F
= the fair market value (as determined by the Board of Directors in the exercise of their fiduciary duties with the concurrence
of the holders of at least a majority of the aggregate principal amount of the Notes then Outstanding) of the aggregate value
of all cash and any other consideration paid or payable for Shares validly tendered or exchanged (including any consent or other
fees) and not withdrawn prior to the Expiration Time (the “Acquired Shares”);

 

O
= the number of Shares outstanding immediately after the Expiration Time less any Acquired Shares;

 

O’
= the number of Shares outstanding immediately after the Expiration Time, plus any Acquired Shares; and

 

P
= the Weighted Average Price of the Common Stock on the Trading Day next succeeding the Announcement Date.

 

Such
decrease, if any, shall become effective immediately upon the opening of business on the day next following the Expiration Time.
In the event that the Company is obligated to purchase shares pursuant to any tender offer, but the Company is prevented by applicable
law from effecting any such purchases or all such purchases are rescinded, the Conversion Price shall again be adjusted to the
Conversion Price that would then be in effect if such tender or exchange offer had not been made. If the application of this (iv)
to any tender or exchange offer would result in an increase in the Conversion Price, no adjustment shall be made for such tender
or exchange offer under this (iv).

 

    	A-2

    	 

    

 

 

(v)
No adjustment in the Conversion Price shall be required unless such adjustment would require a cumulative decrease of at least
$0.01 in such price; provided, however, that any adjustments that by reason of this Exhibit A are not required to
be made shall be carried forward and taken into account in any subsequent adjustment until made. All calculations under this (v)
shall be made to the nearest cent (with $.005 being rounded upward) or to the nearest one-tenth of a share (with.05 of a share
being rounded upward), as the case may be.

 

(vi)
Whenever the Conversion Price is adjusted as herein provided, the Company shall promptly file with the Transfer Agent an officer’s
certificate setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring
such adjustment, which certificate shall be conclusive evidence of the correctness of such adjustment absent manifest error. Promptly
after delivery of such certificate, the Company shall prepare a notice of such adjustment of the Conversion Price setting forth
the adjusted Conversion Price and the effective date of such adjustment and shall mail such notice of such adjustment of the Conversion
Price to the holders of the Notes at such holder’s last address as shown on the stock records of the Company.

 

(vii)
In any case in which Exhibit A provides that an adjustment shall become effective on the day next following the record date for
an event, the Company may without penalty defer until the occurrence of such event issuing to the holders of any Notes converted
after such record date and before the occurrence of such event the additional Shares issuable upon such conversion by reason of
the adjustment required by such event over and above the Shares issuable upon such conversion before giving effect to such adjustment.

 

(viii)
If any action or transaction would require adjustment of the Conversion Price pursuant to more than one subsection of this Exhibit
A, only one adjustment shall be made, and such adjustment shall be the amount of adjustment that has the highest absolute value.

 

(ix)
If, at any time and from time to time on or after the Issuance Date and prior to the conversion of this Note, any event occurs
of the type contemplated by the provisions of this Exhibit A but not expressly provided for by such provisions (including the
granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s Board
of Directors will make an appropriate adjustment in the Conversion Price so as to protect the rights of Holder; provided that
no such adjustment will increase the Conversion Price as otherwise determined pursuant to this Exhibit A.

 

Definitions
and Usage.

 

Terms
used but not defined in this Note shall have the meanings or usage, if any, ascribed thereto in the Agreement. As used in the
Note or in this Exhibit A, the following terms shall have the respective meanings:

 

“Approved
Stock Plan” means any employee benefit plan that has been approved by the board of directors and stockholders of the Company
prior to the date of the Agreement and listed on Schedule 3(c) thereto, pursuant to which the Company’s securities may be
issued to any employee, officer or director for services provided to the Company.

 

“Convertible
Securities” means any stock or securities (other than Options) directly or indirectly convertible into or exchangeable or
exercisable for Shares.

 

    	A-3

    	 

    

 

“Exempted
Issuances” means (A) Shares issued or deemed to have been issued by the Company pursuant to an Approved Stock Plan; (B)
Shares issued or deemed to have been issued upon the conversion, exchange or exercise of any Option or Convertible Security outstanding
on the date prior to the Issuance Date and set forth in Schedule 3(c) to the Agreement, provided that the terms of such Option
or Convertible Security are not amended or otherwise modified on or after the date of the Agreement, and provided that the conversion
price, exchange price, exercise price or other purchase price is not reduced, adjusted or otherwise modified and the number of
Shares issued or issuable is not increased (whether by operation of, or in accordance with, the relevant governing documents or
otherwise) on or after the date of the Agreement; and (C) Shares issued or deemed to have been issued by the Company upon conversion
of the Notes or that are Purchased Shares.

 

“Indebtedness”
of any person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed
as the deferred purchase price of property or services (other than unsecured account trade payables that are (i) entered into
or incurred in the ordinary course of the Company’s and its Subsidiaries’ business, (ii) on terms that require full
payment within ninety (90) days, (iii) not unpaid in excess of fifteen (15) days beyond invoice due date or are being contested
in good faith and as to which such reserve as is required by GAAP has been made and (iv) not exceeding at any one time an aggregate
among the Company and its Subsidiaries of $500,000), (C) all reimbursement or payment obligations with respect to letters of credit,
banker’s acceptances, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures,
redeemable capital stock or similar instruments, including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under any conditional sale or other title retention
agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such
indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited
to repossession or sale of such property), (F) all capital lease obligations, (G) all indebtedness referred to in clauses (A)
through (F) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien upon or in any property or assets (including accounts and contract rights) owned by any person, even though
the person that owns such assets or property has not assumed or become liable for the payment of such indebtedness and (H) all
contingent obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G)
above.

 

“Issuance
Date” means the original date of issuance of this Note pursuant to the Agreement, regardless of any exchange or replacement
hereof.

 

“Liens”
means, with respect to any asset, any mortgage, lien, pledge, hypothecation, charge, security interest, encumbrance or adverse
claim of any kind and any restrictive covenant, condition, restriction or exception of any kind that has the practical effect
of creating a mortgage, lien, pledge, hypothecation, charge, security interest, encumbrance or adverse claim of any kind (including
any of the foregoing created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest
of a lessor with respect to a capital lease obligation, or any financing lease having substantially the same economic effect as
any of the foregoing).

 

“Options”
means any rights, warrants or options to subscribe for or purchase Shares or Convertible Securities.

 

“Outstanding”
when used with reference to the Notes, means, as of any date of determination, any Note, or portion thereof (a) which is held
by any person other than the Company or its Affiliates and (b) for which all principal and other amounts due thereunder have not
been repaid in full by the Company.

 

    	A-4

    	 

    

 

Other
Rights of Holder.

 

(a)
Reorganization, Reclassification, Consolidation, Merger or Sale. Any recapitalization, reorganization, reclassification, consolidation,
merger, self-tender offer for all or substantially all Shares, sale of all or substantially all of the Company’s assets
to another person or other transaction that is effected in such a way that holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock is referred
to herein as “Organic Change.” In addition to the rights of Holder to convert this Note pursuant to Section 4(b),
prior to the consummation of any (i) sale of all or substantially all of the Company’s assets to an acquiring person (including,
for the avoidance of doubt, the sale of all or substantially all of the assets of the Company’s Subsidiaries in the aggregate)
or (ii) other Organic Change following which the Company is not a surviving entity, the Company will secure from the person purchasing
such assets or the successor resulting from such Organic Change (in each case, the “Acquiring Entity”) a written agreement,
in form and substance satisfactory to the holders representing at least a majority of the aggregate principal amount of the Note
then Outstanding, to deliver to Holder in exchange for this Note, a security of the Acquiring Entity evidenced by a written instrument
substantially similar in form and substance to this Note and satisfactory to Holder. Subject to adjustments to the Conversion
Price as provided in this Exhibit A, prior to the consummation of any other Organic Change, the Company shall make appropriate
provision (in form and substance satisfactory to Holder) to ensure that Holder will thereafter have the right to acquire and receive
in lieu of or in addition to (as the case may be) the Shares immediately theretofore acquirable and receivable upon the conversion
of this Note (without regard to any limitations or restrictions on conversion) such shares of stock, securities or assets that
would have been issued or payable in such Organic Change with respect to or in exchange for the number of Shares that would have
been acquirable and receivable upon the conversion of this Note as of the date of such Organic Change (without taking into account
any limitations or restrictions on the conversion of this Note).

 

Right
of First Refusal.

 

(a)
The Company hereby grants to Holder a right of first refusal to purchase any New Securities that the Company may, from time to
time, propose to issue and sell; provided, however, that at the time of any such offer or sale Holder shall qualify as an “accredited
investor” as that term is defined in Rule 501(a) of the 1933 Act. Such right of first refusal shall allow Holder to purchase
the New Securities proposed to be issued. In the event any other holder of a right to purchase New Securities does not elect to
exercise its right so to purchase, Holder shall have the right to purchase such unpurchased New Securities until all of the New
Securities are purchased, or until no other holder of a right to purchase New Securities desires to purchase any additional New
Securities, in which case the Company may sell such unpurchased New Securities to prospective purchasers on the terms described
in the New Issue Notice (as defined below) for a period of seventy-five (75) days, but thereafter may sell additional New Securities
only after delivering another New Issue Notice as described herein. The right of first refusal granted hereunder shall terminate
if unexercised within fifteen (15) Business Days after receipt of the New Issue Notice. Notwithstanding anything contained herein
to the contrary, no New Issue Notice shall contain any material non-public information.

 

(b)
In the event that the Company proposes to undertake an issuance of New Securities, it shall give Holder written notice of its
intention (the “New Issue Notice”), describing the class and number of securities it intends to issue as New Securities,
the purchase price therefor (which shall be payable solely in cash) and the terms upon which the Company proposes to issue the
same. Holder shall have fifteen (15) Business Days from the date of its receipt of the New Issue Notice to elect to purchase all
or any portion of such New Securities for the purchase price and upon the terms specified in the New Issue Notice by giving written
notice to the Company, stating therein the quantity of New Securities to be purchased.

 

    	A-5

    	 

    

 

Covenants.

 

(a)
Limitations on Indebtedness; Liens. From the Issuance Date and for so long as any of the Notes are outstanding, subject in all
respects to the provisions of paragraph (n) below hereof, the Company shall not, and shall not permit any of its Subsidiaries
to, (a) issue, incur, assume, maintain, suffer to exist or extend the term of any Indebtedness, except for (i) Indebtedness under
the Note, (ii) Indebtedness (A) the holders of which agree in writing to be subordinate and junior in right of payments to the
Note on terms and conditions acceptable to Holder, including expressly agreeing not to take, demand or receive from the Company,
any payment of (whether as principal, interest or any other amount) or security for the whole or any part of such Indebtedness,
including any letter of credit or similar credit support facility to support the payment thereof, (B) which does not mature or
otherwise require or permit redemption or repayment prior to or on the first anniversary of the Maturity Date, and (C) which is
not secured by any of the assets of the Company or any of its Subsidiaries (“Permitted Subordinated Indebtedness”)
in an amount not to exceed $500,000 (it being understood that for purposes of this clause (ii), a guaranty, which is expressly
subordinate and junior in right of payments to the Note, by any guarantor of any Permitted Subordinated Indebtedness of the Company
shall not be included in the calculation of the maximum amount of Permitted Subordinated Indebtedness permitted under this clause
(ii)), or (iii) Indebtedness of a Subsidiary to the Company or any other Subsidiary permitted by paragraph (c) below; (b) issue
any capital stock of the Company or any Subsidiary redeemable prior to or on the one-year anniversary of the Maturity Date of
the Note; (c) directly or indirectly, create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired
by the Company or any of its Subsidiaries other than a Permitted Lien, or (d) redeem, retire, defease or otherwise repay or prepay
in cash any principal of any Indebtedness (other than Indebtedness under the Notes). The provisions of this paragraph are in furtherance
of paragraph (n) below, and in no way limit the other restrictions on or obligations of the Company pursuant thereto or otherwise.

 

(b)
Restrictions on Issuance of Securities. From the date hereof and for so long as any of the Notes or Purchased Shares (or rights
to purchase Purchased Shares) are outstanding, the Company shall not in any manner issue or sell any Options or Convertible Securities
that are convertible into or exchangeable or exercisable for shares of Common Stock other than Exempted Issuances.

 

(c)
Restriction on Loans; Investments; Subsidiary Equity. From the Issuance Date and for so long as any of the Note is outstanding,
the Company shall not, and shall not permit any of its Subsidiaries to, (i) except for Permitted Investments (as defined below),
make any loans to, or investments in, any other person, including through lending money, deferring the purchase price of property
or services (other than trade accounts receivable on terms of ninety (90) days or less), purchasing any note, bond, debenture
or similar instrument, providing any letter of credit, guaranteeing (or taking any action that has the effect of guaranteeing)
any obligations of any other person, or acquiring any equity securities of, or other ownership interest in, or making any capital
contribution to any other person (provided, however, that the Company and its Subsidiaries may make investments in any domestic
Subsidiary; and provided that the Company and any domestic Subsidiary may make investments in any foreign Subsidiary; provided
further, that any investments in a foreign Subsidiary shall be in the form of debt securities that are unsubordinated (except
with respect to the Notes) to the maximum extent possible), (ii) issue, transfer or pledge any capital stock or equity interest
in any Subsidiary to any person other than the Company, any domestic Subsidiary or any wholly-owned foreign Subsidiary or (iii)
permit any foreign Subsidiary to own, directly or indirectly, any capital stock of, or equity interest in, a domestic Subsidiary.
“Permitted Investments” means (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United
States or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within
180 days from the date of acquisition; (b) certificates of deposit, time deposits, eurodollar time deposits or overnight bank
deposits having maturities of six months or less from the date of acquisition issued by any commercial bank organized under the
laws of the United States or any state thereof having combined capital and surplus of not less than $500,000,000; (c) commercial
paper of an issuer rated at least A-1 by Standard & Poor’s Ratings Services (“S&P”) or P-1 by Moody’s
Investors Service, Inc. (“Moody’s”), or carrying an equivalent rating by a nationally recognized rating agency,
if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally, and maturing within six
months from the date of acquisition; (d) repurchase obligations of any commercial bank satisfying the requirements of clause (b)
of this definition, having a term of not more than 30 days, with respect to securities issued or fully guaranteed or insured by
the United States; (e) securities with maturities of 180 days or less from the date of acquisition issued or fully guaranteed
by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state,
commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision,
taxing authority or foreign government (as the case may be) are rated at least AA by S&P or Aa by Moody’s; (f) securities
with maturities of six months or less from the date of acquisition backed by standby letters of credit issued by any commercial
bank satisfying the requirements of clause (b) of this definition; or (g) shares of money market mutual or similar funds which
invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition or money market funds that
( i) comply with the criteria set forth in Securities and Exchange Commission Rule 2a-7 under the Investment Company Act of 1940,
as amended, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio assets of at least $5,000,000,000.

 

    	A-6

    	 

    

 

(d)
Restriction on Purchases or Payments. From the Issuance Date and for so long as any of the Note is outstanding, the Company shall
not, and shall not permit any of its Subsidiaries to, (i) declare, set aside or pay any dividends on or make any other distributions
(whether in cash, stock, equity securities or property) in respect of any capital stock or split, combine or reclassify any capital
stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any capital
stock or set any record date with respect to any of the foregoing; provided, however, that any Subsidiary may declare, set aside
or pay any dividends on or make any other distributions (whether in cash, stock, equity securities or property) in respect of
any of its capital stock that is held solely by the Company or by a Subsidiary, (ii) purchase, redeem or otherwise acquire, directly
or indirectly, any shares of the Company’s capital stock or the capital stock of any of its Subsidiaries, except as long
as no Event of Default has occurred and is continuing, repurchases of unvested shares at cost in connection with the termination
of the employment relationship with any employee pursuant to stock option or purchase agreements in effect on the Issuance Date
and set forth on Schedule 3(c) to the Agreement or (iii) grant, issue or sell any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata to the record holders of any class of its capital stock. From
the Issuance Date and for so long as any of the Notes or Purchased Shares (or rights to purchase Purchased Shares) are outstanding,
the Company and its Subsidiaries shall not enter into any agreement which would limit or restrict the Company’s or any of
its Subsidiaries’ ability to perform under, or take any other voluntary action to avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed by it under, this Note, the Agreement, and the Registration Rights
Agreement.

 

(e)
Restrictions on Capital Expenditures. From the Issuance Date and for so long as any of the Note is outstanding, the Company and
its Subsidiaries shall not authorize or make any Capital Expenditures in excess of $1,000,000 per year in the aggregate.

 

(f)
Disposition of Assets. From the Issuance Date and for so long as any of the Note is Outstanding, the Company shall not, and shall
not cause or permit any of its Subsidiaries to, sell, transfer, assign, dispose, consign, lease or remove from their respective
business locations any property or assets except that, until Holders gives the Company notice to the contrary during the existence
of any Event of Default in the case of clauses (ii) and (iii) below, the Company or any Subsidiary may (i) sell inventory in the
ordinary course of its business consistent with past practice (any sale or exchange of inventory in satisfaction of Indebtedness
of the Company or any Subsidiary shall not be deemed a sale of inventory in the ordinary course of business); (ii) sell or dispose
of obsolete assets which the Company or such Subsidiary has determined, in good faith, not to be useful in the conduct of its
business and which, in any fiscal year, do not have an aggregate fair market value in excess of $50,000 (with respect to such
sales or dispositions by the Company and its Subsidiaries in the aggregate); and (iii) sell or dispose of accounts in the course
of collection in the ordinary course of business consistent with past practice.

 

    	A-7

    	 

    

 

(g)
Mergers, Consolidations, Acquisitions. In addition to the other rights the Holder has hereunder, from the Issuance Date and for
so long as any of the Notes are outstanding, the Company shall not sell all or substantially all of the assets of the Company
(including, for the avoidance of any doubt, all or substantially all of the assets of the Company’s Subsidiaries in the
aggregate), except in the event of an Organic Change where (x) the Acquiring Entity (A) assumes the Company’s obligations
hereunder and under the agreements and instruments entered into in connection herewith and (B) is a publicly traded corporation
whose common stock is quoted on or listed for trading on the highest market segment of the New York Stock Exchange, the highest
market segment of NASDAQ or the highest market segment of another nationally recognized stock exchange or quoted on the highest
tier of the OTCX (or a successor thereto), and (y) immediately before and immediately after giving effect to such transaction,
no Triggering Event or Event of Default shall have occurred and be continuing.

 

(h)
Affiliate Transactions. From Issuance Date and for so long as any of the Note is outstanding, the Company shall not, and shall
cause each of its Subsidiaries not to, enter into or be a party to any agreement or transaction with any Affiliate (other than
a wholly-owned Subsidiary), including transfer of any assets to any such Affiliate, except in the ordinary course of the Company
or such Affiliate’s business and upon fair and reasonable terms that are no less favorable to the Company or such Affiliate,
as the case may be, than such person would obtain in a comparable arms’-length transaction with a person not an Affiliate
of the Company, and on terms consistent with the business relationship of the Company or such Subsidiary and such Affiliate prior
to the date of this Note, if any.

 

(i)
SEC Filings and Press Releases. Subject to Section 3(f) of the Agreement, from the Issuance Date and for so long as any of the
Note or Purchased Shares (or rights to purchase Purchased Shares) are outstanding, (i) the Company shall timely file with the
SEC, within the time periods specified in the SEC’s rules and regulations, all quarterly and annual financial information
required to be filed with the SEC on Forms 10-Q and 10-K, all current reports required to be filed with the SEC on Form 8-K and
any other information required to be filed with the SEC; (ii) the Company shall not terminate its status as an issuer required
to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would otherwise permit such termination
and (iii) the Company shall deliver (A) copies of all such filings with the SEC to Holder within one (1) day after the filing
thereof with the SEC, unless the foregoing are filed with the SEC through EDGAR and are immediately available to the public through
EDGAR and (B) electronic transmission copies of all press releases issued by the Company or any of its Subsidiaries on the same
day as the release thereof, except to the extent any such release is available through Bloomberg Financial Markets (or any successor
thereto) contemporaneously with such issuance. From and after the Issuance Date and until the preceding sentence is applicable,
the Company shall deliver via electronic transmission copies of all press releases issued by the Company or any of its Subsidiaries
concurrently with the release thereof.

 

(j)
Compliance with Laws. From the Issuance Date and for so long as any of the Note is outstanding, the Company will comply, and cause
each Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations and requirements
of governmental authorities (including ERISA and the rules and regulations thereunder and all environmental laws) except where
the necessity of compliance therewith is contested in good faith by appropriate proceedings diligently conducted.

 

(k)
Maintenance of Assets; Insurance. From the Issuance Date and for so long as any of the Note is outstanding, the Company will keep,
and will cause each Subsidiary to keep, all assets useful and necessary in its business in good working order and condition, ordinary
wear and tear excepted; will maintain, and will cause each Subsidiary to maintain (either in the name of the Company or in such
Subsidiary’s own name), with financially sound and reputable insurance companies, product liability insurance and insurance
on all their assets in at least such amounts and against at least such risks as are usually insured against in the same general
area by companies of established repute engaged in the same or a similar business; and will furnish to the holders of the Notes,
upon reasonable written request from the Collateral Agent, full information as to the insurance carried.

 

    	A-8

    	 

    

 

(l)
Payment of Taxes. From the Issuance Date and for so long as any of the Note is outstanding, the Company will, and will cause each
of its Subsidiaries to, pay and discharge, before the same shall become delinquent, all income and all other material Taxes, assessments
and other governmental charges or levies, imposed upon them or any of their properties or assets or in respect of their businesses
or incomes except for those being contested in good faith by proper proceedings diligently conducted and against which adequate
reserves, in accordance with GAAP, have been established.

 

(m)
Use of Proceeds. The Company will only use the proceeds from the sale of the of the Note and the Purchased Shares as provided
in Section 4(d) of the Agreement, including Schedule 4(d) thereto. Such proceeds shall be held in the Company’s account
identified to Holder in writing concurrently with the initial Closing.

 

(n)
Other Indebtedness. Payments of principal and other payments due under this Note shall not be subordinated to any obligations
of the Company and shall rank senior to all other Indebtedness other than trade accounts payable of the Company and other Indebtedness
that, in each case, is preferred by operation of law.

 

(o)
Lockup. For a period of one hundred eighty (180) days after the effective date of any registration statement under the 1933 Act
relating to securities of the Company, the Company shall use its best efforts to prevent any director or executive officer of
the Company or any Subsidiary or any Affiliate of any such director or executive officer from (i) effecting a public sale of any
Shares or any security convertible into or exchangeable for the Shares or (ii) offering to sell, contracting to sell, granting
any option to purchase or entering into any similar transaction with regard to the Shares or any security convertible into or
exchangeable for Shares which has the same economic effect as a sale of such Shares. The foregoing sentence shall not apply to
transactions relating to Shares or other securities acquired in open market transactions after the Issuance Date, bona fide gifts
or the transfer of any or all Shares or other securities owned by such persons by will or intestate succession.

 

(p)
Reservation of Shares. The Company shall take the actions called for in Section 4(f) of the Agreement to reserve sufficient shares
for conversion of this Note.

 

(q)
Notice of Certain Events. The Company will give written notice to the Holder at least ten (10) Business Days prior to the date
on which the Company closes its books or takes a record (i) with respect to any dividend or distribution upon the Common Stock,
(ii) with respect to any pro rata subscription offer to holders of Common Stock or (iii) for determining rights to vote with respect
to any Organic Change, dissolution or liquidation, provided that such information shall be made known to the public prior to or
in conjunction with such notice being provided to the Holder. The Company will also give written notice to the Holder at least
ten (10) Business Days prior to the date on which any Organic Change, dissolution or liquidation will take place, provided that
such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.

 

(r)
Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative
and in addition to all other remedies available under this Note, at law or in equity (including a decree of specific performance
and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of compliance with the provisions giving
rise to such remedy and nothing herein shall limit the Holder’s right to pursue actual damages for any failure by the Company
to comply with the terms of this Note. The Company covenants to the Holder that there shall be no characterization concerning
this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion
and the like (and the computation thereof) shall be the amounts to be received by the Holder thereof and shall not, except as
expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any
such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder
shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity
of showing economic loss and without any bond or other security being required.

 

    	A-9

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