Document:

Exhibit 10.6

 

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

 

Principal
Amount: $1,105,000 Date: October 28, 2016

 

CONVERTIBLE
PROMISSORY NOTE

 

Vape
Holdings, Inc., (hereinafter called the “Company”), hereby promises to pay to the order of GHS
Investments, LLC, a Nevada Limited Liability Company, or its registered assigns (the “Holder”) the sum of
$1,105,000 (or other amounts outstanding) on the Maturity Date (as defined below), together with any interest as set forth
herein, and to pay interest on the unpaid principal balance hereof at the rate of Ten percent (10%) (the “Interest
Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at
maturity or upon acceleration or by prepayment or otherwise. This Note is being issued with a ten percent (10%) Original
Issuance Discount and with $5,000 being charged to offset initial transaction fees, as described in the Securities Purchase
Agreement of same date.

 

The
Principal Sum (and corresponding interests) due to the Holder shall be prorated based on the consideration actually paid by the
Holder in accordance with the Securities Purchase Agreement of same date. The Company is not required to repay any unfunded portion
of this Note. The Maturity Date for each funded tranche shall be Nine (9) months from the date on which the funds are received
by the Company. 

 

This
Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest
on this Note which is not paid when due shall bear interest at the rate of twenty percent (20%) per annum from the due date thereof
until the same is paid (“Default Interest”). Interest shall commence accruing on the date that the Note is fully paid
and shall be computed on the basis of a 365-day year and the actual number of days elapsed. All payments due hereunder (to the
extent not converted into common stock) shall be made in lawful money of the United States of America.

 

     

     

    

 

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

 

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

 

The
following terms shall apply to this Note:

 

ARTICLE
I. CONVERSION RIGHTS

 

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

 

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

 

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

 

1.2       Conversion
Price.

 

(a)  Calculation
of Conversion Price. Holder, at its discretion, shall have the right to convert this Note in its entirety or in part(s)
into common stock of the Company valued at the lower of (A) a forty five percent (45%) discount ("Conversion Price Discount")
off of the lowest closing bid price for the Company’s common stock during the twenty (20) trading days immediately preceding
a conversion date or (B) a forty five percent (45%) discount off of the lowest trading price for the Company’s common stock
during the twenty (20) trading days immediately preceding a conversion date as reported by Quotestream Media.

 

If
at any time after the execution of this Note, the Company experiences a "DTC Chill," the Conversion Price Discount shall
be increased by five percent (5%) to fifty percent (50%). If at any time following the execution of this Note, the Company becomes
ineligible to participate in the DTC's "DWAC" system, the Conversion Price Discount will be increased by five percent
(5%). Following any Event of Default, the Conversion Price discount shall be increased by five percent (5%). If at any time during
the twenty (20) calendar days preceding a conversion, the price per share shall equal $.0025 or lower, the Conversion Price Discount
shall be increased by 10% for all future conversions.

 

1.3       Authorized
Shares. Holder acknowledges that in order to satisfy Holder’s conversion rights granted hereunder, the Company
must, among other things, amend its certificate of incorporation in order to increase its authorized Common Stock. The Company
will use its best efforts to take the necessary steps and obtain the necessary consents in order to increase its authorized Common
Stock within forty-five (45) calendar days of the Issue Date. Notwithstanding the foregoing, the Company covenants, that by no
later than one hundred and twenty (120) calendar days from the Issuance Date of this Note and during the period the conversion
right exists, the Company will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from
preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note. Following the increase in
the Company’s authorized Common Stock, the Company is required at all times to have authorized and reserved two times
the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Notes
in effect from time to time)(the “Reserved Amount”). The Reserved Amount shall be increased from time to time in accordance
with the Company’s obligations.

 

    	 	3	 

     

    

 

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

 

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

 

If,
at any time after one hundred and twenty (120) calendar days from the execution and issuance of this Note, the Company does not
maintain the Reserved Amount it will be considered an Event of Default as defined in this Note.

 

1.4       Method
of Conversion.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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(g)  Failure
to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other
remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable
upon conversion of this Note is not delivered by the Deadline the Company shall pay to the Holder $2,000 per day in cash, for
each day beyond the Deadline that the Company fails to deliver such Common Stock. Such cash amount shall be paid to Holder by
the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to
the Company by the first day of the month following the month in which it has accrued), shall be added to the principal
amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such
additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Company
agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to
frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly the parties
acknowledge that the liquidated damages provision contained in this Section are justified. Any delay or failure of
performance by the Company hereunder shall be excused if and to the extent caused by Force Majeure. For purposes of this
agreement, Force Majeure shall mean a cause or event that is not reasonably foreseeable and not caused by the Company,
including acts of God, fires, floods, explosions, riots wars, hurricanes, etc.

 

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

 

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

 

    	 	6	 

     

    

 

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

 

1.6       Effect
of Certain Events.

 

(a)   Adjustment
Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all
of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar
event, as a result of which shares of Common Stock of the Company shall be changed into the same or a different number of shares
of another class or classes of stock or securities of the Company or another entity, or in case of any sale or conveyance of all
or substantially all of the assets of the Company other than in connection with a plan of complete liquidation of the Company,
then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon
the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion,
such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted
in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such
case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that
the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares
issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities
or assets thereafter deliverable upon the conversion hereof. The Company shall not affect any transaction described in this Section
1.6(b) unless (the resulting successor or acquiring entity (if not the Company) assumes by written instrument the obligations
of this Section 1.6(b). The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or
share exchanges.

 

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

 

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

 

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

 

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

 

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

 

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1.8       Prepayment.
Maker may prepay this Note, in accordance with the following schedule: If within 60 calendar days from the execution of
this Note, 120% of all amounts due on each outstanding Note in one payment; After 60 calendar days from the execution of the note
and within 120 days from execution, 127.5% of all outstanding amounts due on each outstanding Note in one payment. Between 121
and 180 days from the date of execution, the Note may be prepaid for 135% of all outstanding amounts due on each outstanding Note
in one payment.

 

ARTICLE
II. CERTAIN COVENANTS

 

2.1       Distributions
on Capital Stock. So long as the Company shall have any obligation under this Note, the Company shall not without the
Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in
cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form
of additional shares of Common Stock.

 

2.2       Omit

 

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

 

2.4       Advances
and Loans. So long as the Company shall have any obligation under this Note, the Company shall not, without the Holder’s
written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without
limitation, officers, directors, employees, subsidiaries and affiliates of the Company, except loans, credits or advances (a)
in existence or committed on the date hereof and which the Company has informed Holder in writing prior to the date hereof, (b)
made in the ordinary course of business or (c) not in excess of $100,000.

 

ARTICLE
III. EVENTS OF DEFAULT

 

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

 

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

 

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

 

3.3       Breach
of Covenants. The Company breaches any covenant or other term or condition contained in this Note and any collateral documents
including but not limited to the Purchase Agreement.

 

3.4       Breach
of Representations and Warranties. Any representation or warranty of the Company made herein or in any agreement,
statement or certificate given inwriting pursuant hereto or in connection herewith (including, without limitation, the Purchase
Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of
time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

 

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

 

3.6       Judgments.
Any money judgment, writ or similar process shall be entered or filed against the Company or any subsidiary of the Company
or any of its property or other assets for more than $200,000, and shall remain unvacated, unbonded or unstayed for a period of
twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

 

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

 

    	 	10	 

     

    

 

3.8       Delisting of Common Stock. Within twenty (20) calendar days following the Execution of this Note, the Company shall fail
to maintain in good standing the listing of the Common Stock on the OTC Bulletin Board or an equivalent replacement exchange,
the Nasdaq National Market, the Nasdaq SmallCap Market or the New York Stock Exchange. Holder acknowledges that as of the Issue
Date, the Company is delinquent in its filings; specifically, the Company has not filed its quarterly report on Form 10Q for the
quarter ended June 30, 2016.

 

3.9       Failure to Comply with the Exchange Act. Within thirty (30) calendar days following the Execution of this Note, the Company
shall fail to comply, in a timely manner, with the reporting requirements of the Exchange Act; and/or the Company shall cease
to be subject to the reporting requirements of the Exchange Act. Holder acknowledges that as of the Issue Date, the Company is
delinquent in its filings; specifically, the Company has not filed its quarterly report on Form 10Q for the quarter ended June
30, 2016.

 

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

 

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

 

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

 

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

 

3.14       Omit

 

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

 

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

 

    	 	11	 

     

    

 

Upon
the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure
to pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and
payable and the Company shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the
Default Sum (as defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION
3.2, THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE COMPANY SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS
OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the
occurrence and during the continuation of any Event of Default specified in Sections 3.1 (solely with respect to failure to
pay the principal hereof or interest thereon when due on this Note upon a Trading Market Prepayment Event pursuant to Section
1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, and/or 3. 15 exercisable through the delivery of
written notice to the Company by such Holders (the “Default Notice”), and upon the occurrence of an Event of
Default specified the remaining sections of Articles III (other than failure to pay the principal hereof or interest thereon
at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due and payable and the Company
shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i) 150% times
the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the
unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”) plus (y)
Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder
pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the
amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or (ii) the
“parity value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of
Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the
Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes of
determining the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in respect of a
specific Conversion Date in which case such Conversion Date shall be the Conversion Date), multiplied by (b) the
highest Closing Price for the Common Stock during the period beginning on the date of first occurrence of the Event of
Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other
amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which
hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection,
and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

 

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

 

    	 	12	 

     

    

 

ARTICLE
IV. MISCELLANEOUS

 

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

 

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

 

If
to the Company, to:

_______________________

_______________________

_______________________

 

If
to the Holder:

 

GHS
Investments, LLC.

200
Stonehinge Lane Suite 3

Carle
Place, NY 11514

718.530.0182

 

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

 

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

 

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

 

    	 	13	 

     

    

 

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

 

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

 

4.8       Purchase
Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Securities Purchase
Agreement and supporting documents of same date.

 

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

 

    	 	14	 

     

    

 

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

 

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

 

	 	Vape
    Holdings, Inc.
	 	 	 
	 	By:	/s/
    Benjamin Beaulieu
	 	Print:	Benjamin
    Beaulieu
	 	Title/Date: 	CEO
          10/28/16

 

 

15Exhibit 10.7

 

THIS
NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR UNDER THE SECURITIES LAWS OF APPLICABLE STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY
AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT
TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.

 

SECURED
SERIES B PREFERRED STOCK CONVERTIBLE PROMISSORY NOTE

 

	Principal
    Amount $50,000.00	Original
    Issue Date: December 10, 2015

 

THIS
SECURED SERIES B PREFERRED STOCK CONVERTIBLE PROMISSORY NOTE (this "Note") is one of a series of duly authorized
and validly issued Secured Series B Preferred Stock Convertible Notes (the "Notes") of Vape Holdings, Inc., a
Delaware corporation (the "Company"), having its principal place of business at 21822 Lassen Street, Suite A,
Chatsworth, CA 91311.

 

FOR
VALUE RECEIVED, the Company promises to pay to HIVE Ceramics, LLC or its registered assigns (the "Holder"),
or shall have paid pursuant to the terms hereunder, the principal sum of $50,000.00 USD on December 10, 2016 (the "Maturity
Date") or such earlier date as this Note is required or permitted to be repaid as provided hereunder, or such later date
as may be permitted by the Holder as set forth in Section 2 hereof, and to pay interest to the Holder on the aggregate
unconverted and then outstanding principal amount of this Note in accordance with the provisions hereof.

 

This
Note is subject to the following additional provisions:

 

1.       Definitions.
For the purposes hereof, in addition to the terms defined elsewhere in this Note, the following terms shall have the following
meanings:

 

"Bankruptcy
Event" means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule
1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency, or liquidation or similar law of any jurisdiction relating to the Company
or any Significant Subsidiary thereof; (b) there is commenced against the Company or any Significant Subsidiary thereof any such
case or proceeding that is not dismissed within sixty (60) days after commencement; (c) the Company or any Significant Subsidiary
thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered;
(d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial
part of its property that is not discharged or stayed within sixty (60) calendar days after such appointment; (e) the Company
or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors; (f) the Company or any Significant
Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment, or restructuring of its
debts; or (g) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent
to, approval of, or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any
of the foregoing.

 

     

     

    

 

"Business
Day" means any day except any Saturday, any Sunday, any day which shall be a federal legal holiday in the United States
or any day on which banking institutions in the State of California are authorized or required by law or other governmental action
to close.

 

"Common
Stock" means the common stock of the Company.

 

"Common
Stock Equivalents" means any securities of the Company or its subsidiaries which would entitle the holder thereof to
acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants, or other
instrument that is at any time convertible into, or exercisable or exchangeable for, or otherwise entitles the holder thereof
to receive, Common Stock.

 

"Exchange
Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

"Securities
Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

"Series
B Shares" means, collectively, the shares of Series B Preferred Stock issued or issuable upon conversion of this Note
in accordance with the terms hereof.

 

2.       Interest;
Prepayment.

 

(a)       Interest
Rate. Interest shall accrue daily on the outstanding principal amount of this Note at a rate per annum equal to eight (8%),
subject to Section 2(d) hereof.

 

(b)       Payment
of Interest. On the Maturity Date, the Company shall pay to the Holder any accrued but unpaid and unconverted interest hereunder
on the aggregate unconverted and then outstanding principal amount of this Note, and on each Conversion Date (as defined herein),
the Company shall pay to the Holder any accrued but unpaid and unconverted interest hereunder on that portion of the principal
amount then being converted. The amount of interest payable on each Conversion Date and the Maturity Date (the "Interest
Amount") may be added to, and included with, the principal amount being so converted on such date.

 

(c)       Interest
Calculations. Interest shall be calculated on the basis of a three hundred sixty (360)-day year, consisting of twelve (12)
thirty (30) calendar day periods, and shall accrue daily commencing on the Original Issue Date, until payment in full of the outstanding
principal, together with all accrued and unpaid interest and other amounts which may become due hereunder, has been made. Interest
hereunder will be paid to the Person in whose name this Note is registered on the records of the Company regarding registration
and transfers of this Note (the "Note Register").

 

    	 	2	 

     

    

 

(d)       Default
Interest. After the occurrence, and during the continuance of, any Event of Default, the interest rate on this Note shall
accrue at an interest rate equal to the lesser of sixteen percent (16%) per annum, compounded daily, or the maximum rate permitted
under applicable law.

 

(e)       Prepayment.
Without prejudice to the Holder's rights under clause 4 below, the Company may prepay this Note in cash at any time prior to the
Maturity Date without penalty upon ten (10) days' prior written notice to the Holder.

 

3.       Registration
of Transfers and Exchanges. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of
the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose
of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company
nor any such agent shall be affected by notice to the contrary.

 

4.       Security.
The indebtedness evidenced by this Notes is secured by all of the assets and property of the Company.

 

5.       Conversion.

 

(a)       Voluntary
Conversion. At any time after the Original Issue Date until this Note is no longer outstanding, this Note shall be convertible,
in whole or in part, into the Series B Shares
at the option of the Holder, at any time and from time to time (subject to the conversion limitations set forth in Section
5(c) hereof). The Holder shall effect conversions by delivering to the Company a Notice of Conversion, the form of which is
attached hereto as Annex A (a "Notice of Conversion"), specifying therein the principal amount of this
Note and any accrued but unpaid interest thereon to be converted and the future date (which may be the same date as the date such
notice is deemed effective pursuant to Section 8(a) hereof) on which such conversion shall be effected (such date, the
"Conversion Date"). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be
the date that such Notice of Conversion is deemed delivered hereunder. To effect conversions hereunder, the Holder shall not be
required to physically surrender this Note to the Company unless the entire principal amount of this Note, plus all accrued and
unpaid interest thereon, has been so converted. Conversions hereunder shall have the effect of lowering the outstanding principal
amount of this Note in an amount equal to the applicable conversion. The Holder and the Company shall maintain records showing
the principal amount(s) converted and the date of such conversion(s). In the event of any dispute or discrepancy, the records
of the Company shall be controlling and determinative in the absence of manifest error. The Holder, and any assignee by acceptance
of this Note, acknowledge and agree that, by reason of the provisions of this Section 5(a), following conversion of a portion
of this Note, the unpaid and unconverted principal amount of this Note may be less than the amount stated on the face hereof.

 

(b)       Conversion
Price. The conversion price shall be $0.01 per share, subject to adjustment herein (the "Conversion Price")

 

    	 	3	 

     

    

 

(c)       Conversion
Limitations. Unless otherwise approved in writing by the Company, any individual conversion under Section 5(a) hereof
must be for at least an amount of Five Thousand Dollars ($5,000) of the principal amount of this Note and any accrued but unpaid
interest thereon.

 

(d)       Mechanics
of Conversion.

 

(i)       Series
B Shares Issuable Upon Conversion of Principal Amount. The number of Series B Shares issuable upon a conversion hereunder
shall be determined by the quotient obtained by dividing (A) the outstanding principal amount of this Note to be converted plus
any accrued but unpaid interest thereon, by (B) the Conversion Price.

 

(ii)       Delivery
of Certificate Upon Conversion. Not later than five (5) Business Days after each Conversion Date (the "Share Delivery
Date"), the Company shall deliver, or cause to be delivered, to the Holder a certificate or certificates representing
the Series B Shares representing the number of Series B Shares being acquired upon the conversion of this Note.

 

(iii)       Failure
to Deliver Certificates. If in the case of any Notice of Conversion such certificate(s) or shares are not delivered to or
as directed by the applicable Holder by the fifth (5th) Business Day after the Conversion Date, the Holder shall be
entitled to elect by written notice to the Company at any time on or before its receipt of such certificate or certificates, to
rescind such conversion, in which event the Company shall promptly return to the Holder any original Note delivered to the Company
and the Holder shall promptly return to the Company the certificates representing the principal amount of the Note unsuccessfully
tendered for conversion to the Company.

 

(iv)       Reservation
of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its
authorized and unissued shares of Series B Shares for the sole purpose of issuance upon conversion of this Note and payment of
interest on this Note, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of
Persons other than the Holder (and the other holders of the Notes), not less than such aggregate number of shares of the Series
B Shares as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the
adjustments of Section 6 hereof) upon the conversion of the outstanding principal amount of this Note and payment of interest
hereunder. The Company covenants that all shares of Series B Shares that shall be so issuable shall, upon issue, be duly authorized,
validly issued, fully paid and nonassessable.

 

(v)       Fractional
Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Note. As
to any fraction of a share which Holder would otherwise be entitled to purchase upon such conversion, the Company shall at its
election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the
Conversion Price or round up to the next whole share.

 

    	 	4	 

     

    

 

(vi)       Transfer
Taxes. The issuance of certificates for shares of the Series B Shares on conversion of this Note shall be made without charge
to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such
certificates, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Note and
the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.

 

6.       Certain
Adjustments.

 

(a)       Stock
Dividends and Stock Splits. If the Company, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise
makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents
(which, for avoidance of doubt, shall not include any Series B Shares issued by the Company upon conversion of, or payment of
interest on, the Notes); (ii) subdivides outstanding shares of Common Stock into a larger number of shares; (iii) combines (including
by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares; or (iv) issues, in the event
of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall
be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares
of the Company) outstanding immediately before such event and of which the denominator shall be the number of shares of Common
Stock outstanding immediately after such event. Any adjustment made pursuant to this Section 6(a) shall become effective
immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and
shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.

 

(b)       Fundamental
Transaction. If, at any time while this Note is outstanding, (i) the Company effects any merger or consolidation of the Company
with or into another Person, (ii) the Company effects any sale of all, or substantially all, of its assets in one or a series
of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv)
the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock
is effectively converted into or exchanged for other securities, cash or property (each, a "Fundamental Transaction"),
then, upon any subsequent conversion of this Note, the Holder shall have the right to receive, for each Series B Share that would
have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the same kind and
amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction
if it had been, immediately prior to such Fundamental Transaction, the holder of one (1) share of Common Stock (the "Alternate
Consideration"). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1)
share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate
Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.
If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Note
following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company
or surviving entity in such Fundamental Transaction shall issue to the Holder a new Note consistent with the foregoing provisions
and evidencing the Holder's right to convert such Note into Alternate Consideration. The terms of any agreement pursuant to which
a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the
provisions of this Section 6(b) and insuring that this Note (or any such replacement security) will be similarly adjusted
upon any subsequent transaction analogous to a Fundamental Transaction. Notice of any such proposed Fundamental Transaction and
of such election shall be given to the Holder at least fifteen (15) calendar days before such closing. In connection with such
purchase, the Holder shall assign this Note to the Company or its assignee, free and clear of any liens, claims or encumbrances
other than transfer restrictions under applicable securities laws.

 

    	 	5	 

     

    

 

(c)       Calculations.
All calculations under this Section 6 shall be made to the nearest cent or the nearest 1/100th of a share, as the case
may be. For purposes of this Section 6, the number of shares of Common Stock deemed to be issued and outstanding as of
a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

(d)       Notice
to the Holder.

 

(i)       Adjustment
to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 6, the Company
shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.

 

(ii)       Notice
to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on
the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C)
the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required
in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any
sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of this Note, and shall cause to be delivered to the Holder at its last address
as it shall appear upon the Note Register, at least twenty (20) calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record
to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date
as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect
the validity of the corporate action required to be specified in such notice. The Holder is entitled to convert this Note during
the twenty (20)-day period commencing on the date of such notice through the effective date of the event triggering such notice.

 

    	 	6	 

     

    

 

7.       Events of Default:

 

(a)       "Event
of Default" means, wherever used herein, any of the following events (whatever the reason for such event and whether
such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental body), provided that an event specified in clauses
(i), (ii), or (iii) below will not become an Event of Default unless and until it is not cured, if possible to cure, within five
(5) Business Days after notice of such failure sent by the Holder:

 

(i)       any
default in the payment of (A) the principal amount of any Note or (B) interest and other amounts owing to a Holder on any Note,
as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise;

 

(ii)       the
Company shall fail to observe or perform any other covenant or agreement contained in the Notes;

 

(iii)       any
representation or warranty made in this Note, any written statement pursuant hereto or thereto or any other report, financial
statement or certificate made or delivered to the Holder or any other Holder shall be untrue or incorrect in any material respect
as of the date when made or deemed made;

 

(iv)       the
Company shall provide at any time notice to the Holder, including by way of public announcement, of the Company's intention to
not honor requests for conversions of any Notes in accordance with the terms hereof.

 

(b)       Acceleration
Upon Event of Default. If any Event of Default occurs, the outstanding principal amount of this Note, plus accrued but unpaid
interest and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder's election,
immediately due and payable in cash. After the occurrence and during the continuance of any Event of Default, the interest rate
on this Note shall accrue as set forth in Section 2(d) hereof. If there is such an acceleration, then upon the payment
in full of the outstanding principal amount of this Note, plus accrued but unpaid interest and other amounts owing in respect
thereof, the Holder shall promptly surrender this Note to or as directed by the Company. In connection with such acceleration
described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice
of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder
at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as
the Holder receives full payment pursuant to this Section 7(b).

 

    	 	7	 

     

    

 

8.       Miscellaneous.

 

(a)       Notices.
Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation,
any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight
courier service, addressed to the Company, at the address set forth above, or such other facsimile number or address as the Company
may specify for such purpose by notice to the Holder delivered in accordance with this Section 8(a). Any and all notices
or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by
facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address
of the Holder appearing on the books of the Company, or if no such facsimile number or address appears, at the principal place
of business of the Holder. Any and all notices or other communications or deliveries required or permitted to be provided hereunder
shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission or delivery, if such
notice or communication is delivered via facsimile at the facsimile number, or delivered by a U.S. nationally recognized overnight
courier service to the address, set forth on the signature pages attached hereto prior to 5:30p.m. (Los Angeles time) on a Business
Day, (b) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the
facsimile number, or delivered by such courier service to the address, set forth on the signature pages attached hereto on a day
that is not a Business Day or later than 5:30 p.m. (Los Angeles time) on any Business Day, or (c) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature
pages attached hereto.

 

(b)       Absolute
Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, and accrued interest, as applicable, on this Note at the time, place,
and rate, and in the coin or currency, herein prescribed.

 

(c)       Lost
or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange
and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed
Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence
of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.

 

    	 	8	 

     

    

  

(d)       Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by
and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of
conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense
of the Note (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees
or agents) shall be commenced in the state and federal courts sitting in the County of Los Angeles (the "Los Angeles Courts").
Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Los Angeles Courts 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 such Los Angeles Courts, or such Los Angeles Courts are improper or inconvenient venue for such proceeding. 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 via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this 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
other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated
hereby. If either party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party
in such action or proceeding shall be reimbursed by the other party for its attorneys' fees and other costs and expenses reasonably
incurred in the investigation, preparation and prosecution of such action or proceeding.

 

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

 

(f)       Severability.
If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.
If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury,
the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under
applicable law.

 

(g)       Next
Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day.

 

(h)       Headings.
The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit
or affect any of the provisions hereof.

 

(i)       Assumption.
Any successor to the Company or any surviving entity in a Fundamental Transaction shall (i) assume, prior to such Fundamental
Transaction, all of the obligations of the Company under this Note pursuant to written agreements in form and (ii) issue to the
Holder a new Note or such successor entity evidenced by a written instrument substantially similar in form and substance to this
Note, including, without limitation, having a principal amount and interest rate equal to the principal amount and the interest
rate of this Note and having similar ranking to this Note, which shall be satisfactory to the Holder (any such approval not to
be unreasonably withheld or delayed). The provisions of this Section 8(i) shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any limitations of this Note.

 

*********************

    	 	9	 

     

    

 

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

 

	VAPE
    HOLDINGS, INC.	 
	 	 	 
	By:	/s/
    Ben Beaulieu	 
	Name: 	Ben
    Beaulieu	 
	Title:
    	Chief
    Operating Officer	 

 

Address
for Notice:

 

21822
Lassen Street, Suite A

Chatsworth, CA 91311

 

    	 	10	 

     

    

 

ANNEX
"A"

 

NOTICE
OF CONVERSION

 

The
undersigned hereby elects to convert principal under the Series B Preferred Stock Convertible Promissory Note (the "Note")
due December 10, 2016 of Vape Holdings, a Delaware corporation (the "Company"), into shares of Series B Preferred Stock
(the "Series B Shares") of the Company according to the conditions hereof, as of the date written below. If Series B
Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance
therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.

 

The
undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with
any transfer of the aforesaid Series B Shares pursuant to any prospectus.

 

	Conversion
    calculations:	Date
    to Effect Conversion:
	 	 
	 	Principal
        Amount of Note to be Converted:

         

        Interest
        Accrued on Account of Conversion at Issue:

         

        Number
        of shares of Series B Preferred Stock to be issued:

         

        Signature:

         

        Name:

         

        Address
        for Delivery of Series B Preferred Stock Certificates:

         

  

 

11

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