Form 8-K
8-K — iQSTEL Inc
Accession: 0001663577-26-000330
Filed: 2026-10-26
Period: 2026-10-20
CIK: 0001527702
SIC: 4813 (TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE))
Item: Entry into a Material Definitive Agreement
Item: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
Item: Unregistered Sales of Equity Securities
Item: Other Events
Item: Financial Statements and Exhibits
Documents
8-K — iqst8k102626.htm (Primary)
EX-4.1 — SENIOR SECURED PROMISSORY NOTE, DATED OCTOBER 20, 2026, ISSUED BY IQSTEL INC. TO ADI FUNDING LLC. (ex4_1.htm)
EX-4.2 — SENIOR SECURED PROMISSORY NOTE, DATED OCTOBER 20, 2026, ISSUED BY IQSTEL INC. TO M2B FUNDING CORP. (ex4_2.htm)
EX-4.3 — COMMON STOCK PURCHASE PRE-FUNDED WARRANT, DATED OCTOBER 20, 2026, ISSUED BY IQSTEL INC. TO ADI FUNDING LLC (210,000 SHARES). (ex4_3.htm)
EX-4.4 — COMMON STOCK PURCHASE PRE-FUNDED WARRANT, DATED OCTOBER 20, 2026, ISSUED BY IQSTEL INC. TO M2B FUNDING CORP. (210,000 SHARES). (ex4_4.htm)
EX-10.1 — SECURITIES PURCHASE AGREEMENT, DATED OCTOBER 20, 2026, BY AND AMONG IQSTEL INC., M2B FUNDING CORP., AND ADI FUNDING LLC. (ex10_1.htm)
EX-10.2 — SECURITY AGREEMENT, DATED OCTOBER 20, 2026, BY AND AMONG IQSTEL INC., M2B FUNDING CORP. (AS COLLATERAL AGENT), AND ADI FUNDING LLC. (ex10_2.htm)
EX-99.1 — PRESS RELEASE, DATED OCTOBER 26, 2026. (ex99_1.htm)
XML — IDEA: XBRL DOCUMENT (R1.htm)
8-K — FORM 8-K
8-K (Primary)
Filename: iqst8k102626.htm · Sequence: 1
iQSTEL Inc. - Form 8-K - October 20, 2026
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date
of Report (Date of earliest event reported): October
20, 2026
iQSTEL Inc.
(Exact name of registrant as specified in its charter)
Nevada
000-55984
45-2808620
(State or other jurisdiction of incorporation)
(Commission File Number)
(I.R.S. Employer Identification No.)
300 Aragon Avenue, Suite 375
Coral Gables, FL 33134
33134
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (954) 951-8191
________________________________________________
(Former name or former address, if changed since last
report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following provisions:
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17CFR 230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol
Name of each exchange on which registered
Common Stock
IQST
Nasdaq Capital Market
Indicate by check mark whether the registrant is an emerging growth company
as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934
(§240.12b-2 of this chapter).
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act. [ ]
1
Item 1.01 Entry into a Material Definitive Agreement.
On October 20, 2026, iQSTEL Inc. (the “Company”) entered into
a Securities Purchase Agreement (the “Purchase Agreement”) with M2B Funding Corp. (“M2B”) and ADI Funding LLC
(“ADI,” and together with M2B, the “Purchasers”). Pursuant to the Purchase Agreement, the Company issued and sold
to each Purchaser a senior secured, non-convertible promissory note in a maximum principal amount of $1,500,000 (each, a “Note,”
and together, the “Notes”), for an aggregate maximum principal amount of $3,000,000. Concurrently, the Company issued to each
Purchaser a pre-funded warrant to purchase 210,000 shares of the Company’s common stock (subject to adjustment) (the “Warrants”),
for an aggregate of 420,000 shares, and entered into a Security Agreement (the “Security Agreement”) with the Purchasers (with
M2B designated as Collateral Agent).
Each Note is funded in two tranches: (i) an initial advance of $750,000
per Purchaser (Tranche A), funded on or about October 20, 2026, and (ii) a second advance of up to $750,000 per Purchaser (Tranche B),
to be funded on or before December 1, 2026, subject to the satisfaction of closing conditions and the absence of an event of default.
At the initial closing, the Company paid each Purchaser a $10,000 legal fee and a $10,000 non-accountable expense fee, deducted from the
Tranche A advance, resulting in net proceeds of $730,000 per Purchaser for Tranche A ($1,460,000 aggregate net proceeds). The full $750,000
per Note is deemed outstanding principal and accrues interest. No additional fees are deducted from Tranche B absent a separate agreement.
The Notes bear interest at 18% per annum (computed on a 360-day year),
payable monthly in cash in arrears. Principal under each tranche is payable in four equal installments of 25% of the original funded principal
of that tranche, due six, twelve, eighteen, and twenty-four months after the actual funding date of the applicable tranche. Each tranche
matures twenty-four months after its funding date. The Notes are non-convertible at the election of the holders. The Company may, at its
option and subject to conditions (including written agreement on a stock payment price formula, Nasdaq rules, beneficial ownership limitations,
and share reservation requirements), elect to pay scheduled principal installments in shares of common stock valued at the lowest volume-weighted
average price over the prior 10 trading days. Until the parties agree in writing on the stock payment price formula, principal is payable
solely in cash. Interest remains payable in cash. Upon an event of default that remains uncured for the applicable period, the holders
may accelerate and demand payment of 120% of the outstanding funded principal plus accrued interest and other amounts.
The obligations under the Notes are secured by a first-priority security
interest in the Collateral (as defined in the Security Agreement), subject only to expressly permitted liens. M2B serves as Collateral
Agent for the Secured Parties. The Security Agreement includes customary representations, covenants, events of default, and remedies,
including the right of the Collateral Agent to take possession of and dispose of the Collateral upon an Event of Default.
The Warrants are exercisable at any time on or after the Grant Date (October
20, 2026) at a nominal exercise price of $0.0001 per share (subject to adjustment). The Warrants were fully earned and issued at the initial
closing, regardless of whether Tranche B is funded. They include cashless exercise provisions available six months after the Grant Date
if no effective registration statement is available for resale, beneficial ownership limitations (initially 4.99%, increasable to 9.99%
upon 61 days’ notice), anti-dilution adjustments for stock splits, dividends, and certain dilutive issuances, and Exchange Cap protections
consistent with Nasdaq rules. The Purchasers have piggyback registration rights with respect to the shares underlying the Warrants and
any shares issued in satisfaction of principal under the Notes, as set forth in the Purchase Agreement.
The proceeds of the financing are intended to support the Company’s
planned acquisition of a 51% controlling interest in Ultranet Telecom Group (“Ultranet”), as previously disclosed in the Company’s
Current Report on Form 8-K filed on or about June 4, 2026. The Company expects to execute a definitive share purchase agreement for the
Ultranet transaction in November 2026 and is targeting a closing in the middle of the first quarter of 2027, subject to customary closing
conditions. The Company expects Ultranet to contribute to making the Company cash-flow positive on a consolidated basis.
The foregoing description of the Purchase Agreement, Notes, Security Agreement,
Warrants, and related documents does not purport to be complete and is qualified in its entirety by reference to the full text of such
documents, copies of which are filed as Exhibits 4.1 through 4.4 and 10.1 and 10.2 hereto and incorporated herein by reference.
2
Item 2.03 Creation of a Direct Financial Obligation or an Obligation
under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 of this Current Report on Form 8-K
is incorporated by reference into this Item 2.03.
Item 3.02 Unregistered Sales of Equity Securities.
The information set forth in Item 1.01 of this Current Report on Form 8-K
relating to the issuance of the Warrants is incorporated by reference into this Item 3.02. The Warrants were issued in a private placement
in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Regulation
D promulgated thereunder, to accredited investors. The Company relied on the representations and warranties of the Purchasers in the Purchase
Agreement in making this determination. The Warrants and the shares issuable upon exercise thereof have not been registered under the
Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
Item 8.01 Other Events.
On October 26, 2026, the Company issued a press release announcing the
closing of the first financing tranche described in Item 1.01 above and providing an update on the planned Ultranet acquisition. A copy
of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information in this Item 8.01, including Exhibit 99.1, is being furnished
and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise
subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of
1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No.
Description
4.1
Senior Secured Promissory Note, dated October 20, 2026, issued by iQSTEL Inc. to ADI Funding LLC.
4.2
Senior Secured Promissory Note, dated October 20, 2026, issued by iQSTEL Inc. to M2B Funding Corp.
4.3
Common Stock Purchase Pre-funded Warrant, dated October 20, 2026, issued by iQSTEL Inc. to ADI Funding LLC (210,000 shares).
4.4
Common Stock Purchase Pre-funded Warrant, dated October 20, 2026, issued by iQSTEL Inc. to M2B Funding Corp. (210,000 shares).
10.1
Securities Purchase Agreement, dated October 20, 2026, by and among iQSTEL Inc., M2B Funding Corp., and ADI Funding LLC.
10.2
Security Agreement, dated October 20, 2026, by and among iQSTEL Inc., M2B Funding Corp. (as Collateral Agent), and ADI Funding LLC.
99.1
Press Release, dated October 26, 2026.
104
Cover Page Interactive Data File (embedded within the Inline XBRL document).
3
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
iQSTEL Inc.
/s/ Leandro Iglesias
Leandro Iglesias
Chief Executive Officer
Date: October 26, 2026
4
EX-4.1 — SENIOR SECURED PROMISSORY NOTE, DATED OCTOBER 20, 2026, ISSUED BY IQSTEL INC. TO ADI FUNDING LLC.
EX-4.1
Filename: ex4_1.htm · Sequence: 2
THIS NOTE HAS NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR UPON RECEIPT BY THE COMPANY
OF AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT. THIS NOTE AND THE SECURITIES
ISSUABLE UPON CONVERSION OF THIS NOTE MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES. ANY TRANSFEREE
OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES
ISSUABLE UPON CONVERSION HEREOF, MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF, PURSUANT TO THE TERMS OF THIS NOTE.
IQSTEL, INC.
SENIOR SECURED PROMISSORY
NOTE
Initial Issuance Date: October 20,
2026
Principal: $1,500,000.00
Tranche A Funding Date:
October 20, 2026
Tranche A Maturity: October 20, 2028
Tranche B Funding Deadline: December 1, 2026
Tranche B Maturity: 24 months
FOR VALUE
RECEIVED, iQSTEL, Inc., a Nevada corporation (the “Maker” or “Company”), promises to pay to the order of ADI Funding
LLC, a Florida limited liability company, or registered assigns (the “Holder”), the aggregate principal actually advanced,
up to $1,500,000, together with interest and other amounts payable under this Senior Secured Promissory Note (the “Note”).
No original issue discount is contemplated. The Company shall maintain a tranche-by-tranche loan ledger. In exchange for delivery of this
Note on the Funding Dates referred to above, the Holder shall lend the Maker $1,500,000.00 in United States dollars.
ARTICLE 1 — FUNDING, INTEREST
AND REPAYMENT
1.1
Purchase Agreement. This Note is issued pursuant to the Securities Purchase Agreement dated October
20, 2026 between Maker and Holder (the “Purchase Agreement”), if executed. Defined terms in the Purchase Agreement apply only
to the extent not inconsistent with this Note. In a conflict regarding payment obligations, this Note controls.
1.2
Advances. Holder shall advance $750,000 on October 20, 2026 (“Tranche A”) and an additional
$750,000 on or before December 1, 2026 (“Tranche B”), subject to the closing conditions and absence of an Event of Default
under the Transaction Documents. The Tranche B funding date shall be the date funds are actually received by Maker. No interest accrues
on an unfunded amount. Maker may not demand funding after December 1, 2026 without Holder’s written consent, which may be withheld,
delayed, denied, or conditioned for any reason or for no reason in Maker’s sole and absolute discretion.
1.2
A Closing Fees; Net Proceeds. At the initial Closing, Maker shall pay Holder a $10,000 legal fee and a
$10,000 non-accountable
expense fee, fully earned and nonrefundable. Holder may deduct such $20,000 from its $750,000 Tranche A advance, resulting in $730,000
net cash proceeds to Maker. The full $750,000 is deemed advanced and bears interest. No further fee deduction applies to Tranche B absent
written agreement. Across both Purchasers, the aggregate fees are $30,000 and aggregate net proceeds, assuming full funding, are $2,970,000.
1.3
Interest. Interest accrues separately on the unpaid
funded principal of each tranche at 18% per annum, computed on a 360-day year of twelve 30-day months, beginning on its actual funding
date. Accrued interest is payable monthly in arrears on the first Trading Day of each month, beginning November 2, 2026 for Tranche A
and on the first Trading Day of the month following Tranche B funding for Tranche B, and on each tranche’s maturity. The Company
shall pay interest in cash unless Holder separately agrees in writing to another form of payment. No interest is guaranteed for any period
following an actual principal repayment.
1.4
Scheduled Principal. Each tranche shall be repaid in four equal installments of 25% of its original
funded principal ($187,500 per tranche), on the dates six, twelve, eighteen and twenty-four months after that tranche’s actual funding
date. The fourth installment is the final maturity payment for that tranche. All unpaid interest, costs and other amounts applicable to
a tranche shall also be paid by its maturity. A non-Trading Day payment date moves to the next Trading Day.
1.5
Company Election to Pay Principal in Cash or Stock. At
Maker’s sole option, any scheduled principal installment may be discharged in cash or in fully paid and nonassessable shares of
Common Stock (“Payment Shares”), provided Maker delivers an irrevocable written election at least five Trading Days before
the due date. The number of Payment Shares equals the principal amount elected for stock payment divided by the Stock Payment Price. “Stock
Payment Price” means the lowest VWAP in the prior 10 trading days. Until the parties agree in writing on that formula, principal
is payable solely in cash. No stock election is effective if the issuance would violate applicable law, Nasdaq rules, beneficial ownership
limitations or the authorized-share requirement. Maker shall then pay cash on the original due date. Interest remains payable in cash.
Holder has no conversion right, optional or otherwise, under this Note.
1.6
Stock Delivery. For a valid stock payment election,
Maker shall cause its transfer agent to deliver Payment Shares by DWAC or other DTC-eligible delivery, where lawful, no later than the
scheduled payment date. Otherwise, the transfer agent shall deliver the Payment Shares by book entry notation. Maker bears all transfer
agent, DTC and issuance costs. If shares are not timely delivered, the principal installment remains outstanding and is immediately payable
in cash, without prejudice to Default Interest, damages, enforcement expenses and all other remedies. Restrictive legends shall be removed
only when permitted under the Securities Act and supported by applicable documentation.
1.7
Securities Character; Rule 144. The parties intend that
this Note constitute a security for purposes of applicable federal securities law. The Company acknowledges that the Holder is acquiring
this Note for investment and that any Payment Shares may constitute securities issued in satisfaction of outstanding indebtedness. Nothing
herein represents or guarantees Rule 144 eligibility, holding-period tacking, freely tradable status or exemption from registration; those
determinations shall be made under applicable law based on the facts at issuance and payment.
1.7 A
Piggyback Registration Rights. Holder shall have the registration rights set forth in Section 4.4A of the Securities Purchase Agreement
for the shares underlying its Pre-funded Warrant and any Payment Shares issued or issuable under this Note. The Company shall include
such shares in its next eligible registration statement, subject to applicable SEC requirements and the conditions in the Purchase Agreement.
1.8
Prepayment. Retaining the economic structure of Section
1.3 of the January Precedent (as that term is defined below), Maker may prepay outstanding funded principal, together with accrued interest
and a prepayment premium equal to 10% of the principal prepaid, upon fifteen (15) Trading Days’ written notice, so long as no Event
of Default exists.
1.9
Security. All obligations under this Note are secured
by the collateral described in a contemporaneous Security Agreement. The parties intend a first-priority perfected security interest,
subject only to liens expressly identified in an agreed permitted-lien schedule and any written intercreditor agreement accepted by Holder.
Maker shall authorize UCC filings and execute all instruments reasonably required to perfect and maintain Holder’s security interest.
No description in this Note alone substitutes for the Security Agreement or perfection filings.
2
1.10
Equity Kicker. At the initial Closing, Maker shall issue to Holder a separate pre-funded warrant
covering 210,000 shares of Common Stock (subject to adjustment under that warrant), exercisable at
$0.0001 per share. The warrant is issued in full at the initial Closing, regardless of whether Tranche B is funded, and shall not
be reduced for any unfunded portion. The warrant and Purchase Agreement govern exercise, consideration allocation, registration rights
and related share-delivery mechanics. The parties shall confirm the economic and accounting treatment of the warrant consideration before
execution.
ARTICLE 2 — EVENTS OF
DEFAULT AND REMEDIES
2.1
Events of Default. The following provisions are incorporated
substantively from Article 2 of the January 1, 2024 IQSTEL secured convertible note (“January Precedent”), adapted to eliminate
Holder conversion rights and to cover Payment Shares and the new security documents. Each is an Event of Default unless waived in writing
by Holder:
(a)
failure to pay principal, interest, premiums, costs or other sums when due, including failure to deliver valid Payment Shares or
cash in their place;
(b) failure
to perform any covenant or agreement in this Note or any Transaction Document, including restrictions on debt and liens;
(c)
cross-default on indebtedness of $50,000 or more, including an acceleration right;
(d) Company
notice of inability or intent not to comply with a valid stock-payment election or share-delivery obligation;
(e)
failure to remove legends when legally required or to cause timely delivery of legally unrestricted shares;
(f)
failure to deliver Payment Shares when due;
(g) failure
to reserve shares sufficient for an outstanding valid stock-payment election or the Pre-funded Warrant;
(h)
materially false or misleading representations or warranties;
(i)
voluntary bankruptcy, insolvency, receivership, assignment for creditors or analogous action;
(j)
involuntary bankruptcy or similar proceedings not dismissed or stayed within the periods specified in the January Precedent (sixty
(60) days for proceedings; thirty (30) days for analogous actions);
(k)
final money judgments exceeding $50,000 not dismissed or stayed within thirty (30) days;
(l)
material noncompliance with Exchange Act reporting requirements, including untimely SEC reports without a timely Rule 12b-25 extension;
(m)
financial restatement disclosure accompanied by the 20% VWAP decline test in the January Precedent;
(n)
delisting without immediate listing on a qualifying Nasdaq or NYSE market;
(o) failure
of legally eligible shares to qualify for unrestricted resale under Rule 144 after the applicable period, subject to the actual legal
availability of Rule 144;
(p)
going-private transaction terminating Section 12(b) registration;
(q)
SEC stop order, trading suspension or transfer agent restriction lasting two Trading Days;
(r)
DTC transfer unavailability or chill lasting not less than two Trading Days;
(s)
replacement transfer agent without satisfactory irrevocable instructions where applicable;
(t)
prohibited Variable Rate Transaction;
(u)
loss of DWAC eligibility;
(v)
material noncompliance with Securities Act or Exchange Act;
3
(w)
invalidity, challenge to enforceability or written repudiation of any Transaction Document;
(x)
failure to perfect or maintain the agreed senior-priority security interest, or unauthorized lien on collateral; and
(y)
failure to fund Tranche B caused by Maker’s failure to satisfy agreed closing conditions, if such failure constitutes a breach of
the Transaction Documents.
2.2
Default Interest. From and after an Event of Default
and during its continuance, interest automatically increases to the lesser of 24% per annum or the maximum lawful rate, compounds monthly
on the basis of a 360-day year, and is payable on the first Trading Day of each month. Upon cure, the ordinary rate resumes prospectively;
accrued Default Interest remains due and payable.
2.3
Acceleration and Mandatory Default Amount. If an Event
of Default remains uncured for ten (10) Trading Days (with no cure period for voluntary or involuntary insolvency events), Holder may
accelerate and demand immediate payment of 120% of the then outstanding funded principal plus accrued and unpaid interest, together with
collection and enforcement expenses and other amounts lawfully due (“Mandatory Default Amount”). Holder may enforce the Security
Agreement and pursue all remedies at law or equity. Maker shall notify Holder within two (2) Trading Days after becoming aware of an Event
of Default. No alternative conversion price or Holder conversion remedy applies.
ARTICLE 3 — PAYMENT SHARES; CORPORATE
EVENTS
3.1
No Holder Conversion. Notwithstanding the title or any
provision of the January Precedent, this Note is nonconvertible at Holder’s election. All references in the January Precedent to
Conversion Notice, Conversion Price, Alternative Conversion Price, conversion resets, anti-dilution adjustments of the Note, and Holder-initiated
conversion are intentionally omitted and have no effect herein. Only Maker’s optional stock repayment right in Section 1.5 applies.
3.2
Share Delivery Protections. With respect solely to Payment
Shares validly elected by Maker, the obligations to issue fully paid nonassessable shares, DTC/FAST delivery, payment of issuance taxes
and fees, no impairment, regulatory compliance, and remedies for delivery failure are retained from Sections 3.2 and 3.6 of the January
Precedent to the extent applicable. Any failure to issue lawful Payment Shares by the payment deadline is a failure to pay the relevant
principal installment; Holder may demand cash instead.
3.3
Beneficial Ownership. No Payment Shares or Pre-funded
Warrant exercise shares shall be issued to the extent issuance would cause Holder and its attribution parties to exceed 4.99% beneficial
ownership, calculated under Section 13(d) of the Exchange Act. Holder may increase the limit to no more than 9.99% upon sixty-one (61)
days’ prior written notice. If the cap blocks a stock payment, the affected principal shall be paid in cash when due.
3.4
Fundamental Transaction. Maker shall not consummate
a Fundamental Transaction without written assumption by a successor of all outstanding Note and Security Agreement obligations on terms
reasonably satisfactory to Holder. Upon a Change of Control, Holder may require repayment at 120% of the outstanding balance, following
the notice and timing mechanism of January Precedent Section 3.5(c)-(d).
ARTICLE 4 — AFFIRMATIVE AND
NEGATIVE COVENANTS
4.1
The covenants in January Precedent Section 4.1(b)-(q)
are retained as affirmative obligations and restrictions, as applicable: limitations on additional indebtedness and liens; restricted
payments and dividends; restrictions on asset dispositions; preservation of existence, properties, intellectual property and insurance;
arm’s-length affiliate transactions; use of proceeds; ordinary-course operation; compliance with Transaction Documents; taxes; and
prohibition of unauthorized Variable Rate Transactions. For clarity, any exceptions for Permitted Indebtedness and Permitted Liens must
be expressly set out in the Purchase Agreement or Security Agreement, and no undefined “Senior Lender” lien is automatically
permitted.
4
4.2
Maker shall furnish evidence of good standing, UCC search results, insurance and such other collateral
information as reasonably requested. No new lien senior to or pari passu with Holder’s
security interest is permitted absent Holder’s prior written consent.
ARTICLE 5 — MISCELLANEOUS
5.1
Notices. Notices must be written and delivered by email,
overnight courier or actual receipt, following the notice effectiveness convention of January Precedent Section 5.1. Notice addresses
shall be specified in the Purchase Agreement or separately in writing.
5.2
Governing Law; Venue. This Note and all claims arising
out of or relating to this Note shall be governed by and construed in accordance with the laws of the State of Nevada, without giving
effect to conflict-of-laws principles. Maker irrevocably submits to the exclusive jurisdiction of the state courts located in Clark County,
Nevada, and the United States District Court for the District of Nevada, for any action arising out of or relating to this Note. Maker
waives any objection based on personal jurisdiction, improper venue or forum non conveniens. Nothing herein limits Holder’s right
to bring an action in another jurisdiction solely to enforce a judgment or realize upon collateral located there.
5.3 Cumulative Remedies.
Remedies are cumulative, including damages, specific performance and injunctive relief, consistent with January Precedent Section
5.4. Maker shall reimburse reasonable attorneys’ fees, enforcement costs and expert expenses as in January Precedent Section 5.5.
5.4
Binding Effect; Amendments; Waivers. This Note binds
Maker and its successors. No amendment or waiver is effective unless in writing signed by Maker and Holder. Delay in enforcement is not
waiver. Maker waives presentment, demand, protest and, to the extent permitted by law, trial by jury, consistent with January Precedent
Sections 5.6, 5.7, 5.10 and 5.11.
5.5
Compliance with Securities Laws. Holder acquires this
Note for its own account for investment and agrees not to transfer it in violation of applicable securities laws. Transfers may be made
subject to law and the Transaction Documents.
5.6
Definitions. “Trading Day,” “VWAP,”
“Exchange Act,” “Securities Act,” “Affiliate,” “Subsidiary,” “Indebtedness,”
“Fundamental Transaction,” “Change of Control,” “DTC,” and “Transfer Agent” have the substantive
meanings in January Precedent Section 5.12 unless expressly modified herein. “Outstanding Balance” means outstanding funded
principal, accrued unpaid interest, premiums, fees, collection costs and other sums due. “Transaction Documents” means this
Note, the Purchase Agreement (if executed), Security Agreement, Pre-funded Warrant, and related closing instruments.
5.7
Severability; Counterparts. Invalidity of any provision
shall not impair the remainder. This Note may be executed electronically and in counterparts.
5
SIGNATURE
IN WITNESS WHEREOF, Maker
has executed this Senior Secured Promissory Note as of October 20, 2026.
IQSTEL, INC.
By: /s/ Leandro Iglesias
Name: Leandro Iglesias
Title: Chief Executive Officer
6
EX-4.2 — SENIOR SECURED PROMISSORY NOTE, DATED OCTOBER 20, 2026, ISSUED BY IQSTEL INC. TO M2B FUNDING CORP.
EX-4.2
Filename: ex4_2.htm · Sequence: 3
THIS NOTE HAS NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR UPON RECEIPT BY THE COMPANY
OF AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT. THIS NOTE AND THE SECURITIES
ISSUABLE UPON CONVERSION OF THIS NOTE MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES. ANY TRANSFEREE
OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES
ISSUABLE UPON CONVERSION HEREOF, MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF, PURSUANT TO THE TERMS OF THIS NOTE.
IQSTEL, INC.
SENIOR SECURED PROMISSORY
NOTE
Initial Issuance Date: October 20,
2026
Principal: $1,500,000.00
Tranche A Funding Date:
October 20, 2026
Tranche A Maturity: October 20, 2028
Tranche B Funding Deadline: December 1, 2026
Tranche B Maturity: 24 months
FOR VALUE
RECEIVED, iQSTEL, Inc., a Nevada corporation (the “Maker” or “Company”), promises to pay to the order of M2B Funding
Corp., a Florida corporation, or registered assigns (the “Holder”), the aggregate principal actually advanced, up to $1,500,000,
together with interest and other amounts payable under this Senior Secured Promissory Note (the “Note”). No original issue
discount is contemplated. The Company shall maintain a tranche-by-tranche loan ledger. In exchange for delivery of this Note on the Funding
Dates referred to above, the Holder shall lend the Maker $1,500,000.00 in United States dollars.
ARTICLE 1 — FUNDING, INTEREST
AND REPAYMENT
1.1
Purchase Agreement. This Note is issued pursuant to the Securities Purchase Agreement dated October
20, 2026 between Maker and Holder (the “Purchase Agreement”), if executed. Defined terms in the Purchase Agreement apply only
to the extent not inconsistent with this Note. In a conflict regarding payment obligations, this Note controls.
1.2
Advances. Holder shall advance $750,000 on October 20, 2026 (“Tranche A”) and an additional
$750,000 on or before December 1, 2026 (“Tranche B”), subject to the closing conditions and absence of an Event of Default
under the Transaction Documents. The Tranche B funding date shall be the date funds are actually received by Maker. No interest accrues
on an unfunded amount. Maker may not demand funding after December 1, 2026 without Holder’s written consent, which may be withheld,
delayed, denied, or conditioned for any reason or for no reason in Maker’s sole and absolute discretion.
1.2
A Closing Fees; Net Proceeds. At the initial Closing, Maker shall pay Holder a $10,000 legal fee and a
$10,000 non-accountable
expense fee, fully earned and nonrefundable. Holder may deduct such $20,000 from its $750,000 Tranche A advance, resulting in $730,000
net cash proceeds to Maker. The full $750,000 is deemed advanced and bears interest. No further fee deduction applies to Tranche B absent
written agreement. Across both Purchasers, the aggregate fees are $30,000 and aggregate net proceeds, assuming full funding, are $2,970,000.
1.3
Interest. Interest accrues separately on the unpaid
funded principal of each tranche at 18% per annum, computed on a 360-day year of twelve 30-day months, beginning on its actual funding
date. Accrued interest is payable monthly in arrears on the first Trading Day of each month, beginning November 2, 2026 for Tranche A
and on the first Trading Day of the month following Tranche B funding for Tranche B, and on each tranche’s maturity. The Company
shall pay interest in cash unless Holder separately agrees in writing to another form of payment. No interest is guaranteed for any period
following an actual principal repayment.
1.4
Scheduled Principal. Each tranche shall be repaid in four equal installments of 25% of its original
funded principal ($187,500 per tranche), on the dates six, twelve, eighteen and twenty-four months after that tranche’s actual funding
date. The fourth installment is the final maturity payment for that tranche. All unpaid interest, costs and other amounts applicable to
a tranche shall also be paid by its maturity. A non-Trading Day payment date moves to the next Trading Day.
1.5
Company Election to Pay Principal in Cash or Stock. At
Maker’s sole option, any scheduled principal installment may be discharged in cash or in fully paid and nonassessable shares of
Common Stock (“Payment Shares”), provided Maker delivers an irrevocable written election at least five Trading Days before
the due date. The number of Payment Shares equals the principal amount elected for stock payment divided by the Stock Payment Price. “Stock
Payment Price” means the lowest VWAP in the prior 10 trading days. Until the parties agree in writing on that formula, principal
is payable solely in cash. No stock election is effective if the issuance would violate applicable law, Nasdaq rules, beneficial ownership
limitations or the authorized-share requirement. Maker shall then pay cash on the original due date. Interest remains payable in cash.
Holder has no conversion right, optional or otherwise, under this Note.
1.6
Stock Delivery. For a valid stock payment election,
Maker shall cause its transfer agent to deliver Payment Shares by DWAC or other DTC-eligible delivery, where lawful, no later than the
scheduled payment date. Otherwise, the transfer agent shall deliver the Payment Shares by book entry notation. Maker bears all transfer
agent, DTC and issuance costs. If shares are not timely delivered, the principal installment remains outstanding and is immediately payable
in cash, without prejudice to Default Interest, damages, enforcement expenses and all other remedies. Restrictive legends shall be removed
only when permitted under the Securities Act and supported by applicable documentation.
1.7
Securities Character; Rule 144. The parties intend that
this Note constitute a security for purposes of applicable federal securities law. The Company acknowledges that the Holder is acquiring
this Note for investment and that any Payment Shares may constitute securities issued in satisfaction of outstanding indebtedness. Nothing
herein represents or guarantees Rule 144 eligibility, holding-period tacking, freely tradable status or exemption from registration; those
determinations shall be made under applicable law based on the facts at issuance and payment.
1.7 A
Piggyback Registration Rights. Holder shall have the registration rights set forth in Section 4.4A of the Securities Purchase Agreement
for the shares underlying its Pre-funded Warrant and any Payment Shares issued or issuable under this Note. The Company shall include
such shares in its next eligible registration statement, subject to applicable SEC requirements and the conditions in the Purchase Agreement.
1.8
Prepayment. Retaining the economic structure of Section
1.3 of the January Precedent (as that term is defined below), Maker may prepay outstanding funded principal, together with accrued interest
and a prepayment premium equal to 10% of the principal prepaid, upon fifteen (15) Trading Days’ written notice, so long as no Event
of Default exists.
1.9
Security. All obligations under this Note are secured
by the collateral described in a contemporaneous Security Agreement. The parties intend a first-priority perfected security interest,
subject only to liens expressly identified in an agreed permitted-lien schedule and any written intercreditor agreement accepted by Holder.
Maker shall authorize UCC filings and execute all instruments reasonably required to perfect and maintain Holder’s security interest.
No description in this Note alone substitutes for the Security Agreement or perfection filings.
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1.10
Equity Kicker. At the initial Closing, Maker shall issue to Holder a separate pre-funded warrant
covering 210,000 shares of Common Stock (subject to adjustment under that warrant), exercisable at
$0.0001 per share. The warrant is issued in full at the initial Closing, regardless of whether Tranche B is funded, and shall not
be reduced for any unfunded portion. The warrant and Purchase Agreement govern exercise, consideration allocation, registration rights
and related share-delivery mechanics. The parties shall confirm the economic and accounting treatment of the warrant consideration before
execution.
ARTICLE 2 — EVENTS OF
DEFAULT AND REMEDIES
2.1
Events of Default. The following provisions are incorporated
substantively from Article 2 of the January 1, 2024 IQSTEL secured convertible note (“January Precedent”), adapted to eliminate
Holder conversion rights and to cover Payment Shares and the new security documents. Each is an Event of Default unless waived in writing
by Holder:
(a)
failure to pay principal, interest, premiums, costs or other sums when due, including failure to deliver valid Payment Shares or
cash in their place;
(b) failure
to perform any covenant or agreement in this Note or any Transaction Document, including restrictions on debt and liens;
(c)
cross-default on indebtedness of $50,000 or more, including an acceleration right;
(d) Company
notice of inability or intent not to comply with a valid stock-payment election or share-delivery obligation;
(e)
failure to remove legends when legally required or to cause timely delivery of legally unrestricted shares;
(f)
failure to deliver Payment Shares when due;
(g) failure
to reserve shares sufficient for an outstanding valid stock-payment election or the Pre-funded Warrant;
(h)
materially false or misleading representations or warranties;
(i)
voluntary bankruptcy, insolvency, receivership, assignment for creditors or analogous action;
(j)
involuntary bankruptcy or similar proceedings not dismissed or stayed within the periods specified in the January Precedent (sixty
(60) days for proceedings; thirty (30) days for analogous actions);
(k)
final money judgments exceeding $50,000 not dismissed or stayed within thirty (30) days;
(l)
material noncompliance with Exchange Act reporting requirements, including untimely SEC reports without a timely Rule 12b-25 extension;
(m)
financial restatement disclosure accompanied by the 20% VWAP decline test in the January Precedent;
(n)
delisting without immediate listing on a qualifying Nasdaq or NYSE market;
(o) failure
of legally eligible shares to qualify for unrestricted resale under Rule 144 after the applicable period, subject to the actual legal
availability of Rule 144;
(p)
going-private transaction terminating Section 12(b) registration;
(q)
SEC stop order, trading suspension or transfer agent restriction lasting two Trading Days;
(r)
DTC transfer unavailability or chill lasting not less than two Trading Days;
(s)
replacement transfer agent without satisfactory irrevocable instructions where applicable;
(t)
prohibited Variable Rate Transaction;
(u)
loss of DWAC eligibility;
(v)
material noncompliance with Securities Act or Exchange Act;
3
(w)
invalidity, challenge to enforceability or written repudiation of any Transaction Document;
(x)
failure to perfect or maintain the agreed senior-priority security interest, or unauthorized lien on collateral; and
(y)
failure to fund Tranche B caused by Maker’s failure to satisfy agreed closing conditions, if such failure constitutes a breach of
the Transaction Documents.
2.2
Default Interest. From and after an Event of Default
and during its continuance, interest automatically increases to the lesser of 24% per annum or the maximum lawful rate, compounds monthly
on the basis of a 360-day year, and is payable on the first Trading Day of each month. Upon cure, the ordinary rate resumes prospectively;
accrued Default Interest remains due and payable.
2.3
Acceleration and Mandatory Default Amount. If an Event
of Default remains uncured for ten (10) Trading Days (with no cure period for voluntary or involuntary insolvency events), Holder may
accelerate and demand immediate payment of 120% of the then outstanding funded principal plus accrued and unpaid interest, together with
collection and enforcement expenses and other amounts lawfully due (“Mandatory Default Amount”). Holder may enforce the Security
Agreement and pursue all remedies at law or equity. Maker shall notify Holder within two (2) Trading Days after becoming aware of an Event
of Default. No alternative conversion price or Holder conversion remedy applies.
ARTICLE 3 — PAYMENT SHARES; CORPORATE
EVENTS
3.1
No Holder Conversion. Notwithstanding the title or any
provision of the January Precedent, this Note is nonconvertible at Holder’s election. All references in the January Precedent to
Conversion Notice, Conversion Price, Alternative Conversion Price, conversion resets, anti-dilution adjustments of the Note, and Holder-initiated
conversion are intentionally omitted and have no effect herein. Only Maker’s optional stock repayment right in Section 1.5 applies.
3.2
Share Delivery Protections. With respect solely to Payment
Shares validly elected by Maker, the obligations to issue fully paid nonassessable shares, DTC/FAST delivery, payment of issuance taxes
and fees, no impairment, regulatory compliance, and remedies for delivery failure are retained from Sections 3.2 and 3.6 of the January
Precedent to the extent applicable. Any failure to issue lawful Payment Shares by the payment deadline is a failure to pay the relevant
principal installment; Holder may demand cash instead.
3.3
Beneficial Ownership. No Payment Shares or Pre-funded
Warrant exercise shares shall be issued to the extent issuance would cause Holder and its attribution parties to exceed 4.99% beneficial
ownership, calculated under Section 13(d) of the Exchange Act. Holder may increase the limit to no more than 9.99% upon sixty-one (61)
days’ prior written notice. If the cap blocks a stock payment, the affected principal shall be paid in cash when due.
3.4
Fundamental Transaction. Maker shall not consummate
a Fundamental Transaction without written assumption by a successor of all outstanding Note and Security Agreement obligations on terms
reasonably satisfactory to Holder. Upon a Change of Control, Holder may require repayment at 120% of the outstanding balance, following
the notice and timing mechanism of January Precedent Section 3.5(c)-(d).
ARTICLE 4 — AFFIRMATIVE AND
NEGATIVE COVENANTS
4.1
The covenants in January Precedent Section 4.1(b)-(q)
are retained as affirmative obligations and restrictions, as applicable: limitations on additional indebtedness and liens; restricted
payments and dividends; restrictions on asset dispositions; preservation of existence, properties, intellectual property and insurance;
arm’s-length affiliate transactions; use of proceeds; ordinary-course operation; compliance with Transaction Documents; taxes; and
prohibition of unauthorized Variable Rate Transactions. For clarity, any exceptions for Permitted Indebtedness and Permitted Liens must
be expressly set out in the Purchase Agreement or Security Agreement, and no undefined “Senior Lender” lien is automatically
permitted.
4
4.2
Maker shall furnish evidence of good standing, UCC search results, insurance and such other collateral
information as reasonably requested. No new lien senior to or pari passu with Holder’s
security interest is permitted absent Holder’s prior written consent.
ARTICLE 5 — MISCELLANEOUS
5.1
Notices. Notices must be written and delivered by email,
overnight courier or actual receipt, following the notice effectiveness convention of January Precedent Section 5.1. Notice addresses
shall be specified in the Purchase Agreement or separately in writing.
5.2
Governing Law; Venue. This Note and all claims arising
out of or relating to this Note shall be governed by and construed in accordance with the laws of the State of Nevada, without giving
effect to conflict-of-laws principles. Maker irrevocably submits to the exclusive jurisdiction of the state courts located in Clark County,
Nevada, and the United States District Court for the District of Nevada, for any action arising out of or relating to this Note. Maker
waives any objection based on personal jurisdiction, improper venue or forum non conveniens. Nothing herein limits Holder’s right
to bring an action in another jurisdiction solely to enforce a judgment or realize upon collateral located there.
5.3 Cumulative Remedies.
Remedies are cumulative, including damages, specific performance and injunctive relief, consistent with January Precedent Section
5.4. Maker shall reimburse reasonable attorneys’ fees, enforcement costs and expert expenses as in January Precedent Section 5.5.
5.4
Binding Effect; Amendments; Waivers. This Note binds
Maker and its successors. No amendment or waiver is effective unless in writing signed by Maker and Holder. Delay in enforcement is not
waiver. Maker waives presentment, demand, protest and, to the extent permitted by law, trial by jury, consistent with January Precedent
Sections 5.6, 5.7, 5.10 and 5.11.
5.5
Compliance with Securities Laws. Holder acquires this
Note for its own account for investment and agrees not to transfer it in violation of applicable securities laws. Transfers may be made
subject to law and the Transaction Documents.
5.6
Definitions. “Trading Day,” “VWAP,”
“Exchange Act,” “Securities Act,” “Affiliate,” “Subsidiary,” “Indebtedness,”
“Fundamental Transaction,” “Change of Control,” “DTC,” and “Transfer Agent” have the substantive
meanings in January Precedent Section 5.12 unless expressly modified herein. “Outstanding Balance” means outstanding funded
principal, accrued unpaid interest, premiums, fees, collection costs and other sums due. “Transaction Documents” means this
Note, the Purchase Agreement (if executed), Security Agreement, Pre-funded Warrant, and related closing instruments.
5.7
Severability; Counterparts. Invalidity of any provision
shall not impair the remainder. This Note may be executed electronically and in counterparts.
5
SIGNATURE
IN WITNESS WHEREOF, Maker
has executed this Senior Secured Promissory Note as of October 20, 2026.
IQSTEL,
INC.
By: /s/ Leandro Iglesias
Name: Leandro Iglesias
Title: Chief Executive Officer
6
EX-4.3 — COMMON STOCK PURCHASE PRE-FUNDED WARRANT, DATED OCTOBER 20, 2026, ISSUED BY IQSTEL INC. TO ADI FUNDING LLC (210,000 SHARES).
EX-4.3
Filename: ex4_3.htm · Sequence: 4
NEITHER THIS SECURITY NOR THE SECURITIES
FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE
PRE-FUNDED WARRANT
iQSTEL, INC.
Shares of
Pre-funded Warrant Stock: 210,000
Grant Date:
October 20, 2026
THIS COMMON STOCK PURCHASE PRE-FUNDED
WARRANT (the “Pre-funded Warrant”) certifies that, for value received, ADI
Funding LLC, a Florida limited liability company, or its assigns (the “Holder”) is entitled, upon the terms and subject
to the limitations on exercise and the conditions hereinafter set forth, at any time on or after October 20, 2026 (the “Grant
Date”), to subscribe for and purchase from iQSTEL, Inc., a Nevada corporation (the “Company”), up to (as subject
to adjustment hereunder) two hundred ten thousand (210,000) shares of the Company’s Common Stock, par value $0.001 per share
(the “Common Stock”). The purchase price of one share of Common Stock under this Pre-funded Warrant shall be equal to
the Exercise Price, as defined in Section 2(b).
Section 1.
Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase
Agreement (the “Purchase Agreement”), dated as of October 20, 2026, by and among the Company and the investor signatory thereto.
Registration Rights. The Company shall
register for resale the shares underlying this Pre-funded Warrant on its next eligible registration statement in accordance with Section
4.4A of the Securities Purchase Agreement, without requiring prior exercise. The registration obligation is subject to applicable SEC
requirements and the conditions and procedures set forth in that Agreement.
Section 2. Exercise.
a)
Exercise of Pre-funded Warrant. Exercise of the purchase rights represented by this Pre-funded Warrant may be made, in whole
or in part, at any time or times on or after the Grant Date by delivery to the Company of a duly executed facsimile copy or PDF copy submitted
by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the “Notice of Exercise”). Within
the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section
2(d)(i)) following the date of exercise as aforesaid, the Holder shall deliver to the Company the aggregate Exercise Price for the
shares of Pre-funded Warrant Stock specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a
United States bank unless the cashless exercise procedure specified in Section 2(c) is specified in the applicable Notice of Exercise.
No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of
any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender
this Pre-funded Warrant to the Company until the Holder has purchased all of the shares of Pre-funded Warrant Stock available hereunder
and the Pre-funded Warrant has been exercised in full, in which case, the Holder shall surrender this Pre-funded Warrant to the Company
for cancellation within two (2) Trading Days of the date on which the final Notice
of Exercise is delivered to the Company.
Partial exercises of this Pre-funded Warrant resulting in purchases of a portion of the total number of shares of Pre-funded Warrant Stock
available hereunder shall have the effect of lowering the outstanding number of shares of Pre-funded Warrant Stock purchasable hereunder
in an amount equal to the applicable number of shares of Pre-funded Warrant Stock purchased. The Holder and the Company shall maintain
records showing the number of shares of Pre-funded Warrant Stock purchased and the date of such purchases. The Company shall deliver any
objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance
of this Pre-funded Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion
of the shares of Pre-funded Warrant Stock hereunder, the number of shares of Pre-funded Warrant Stock available for purchase hereunder
at any given time may be less than the amount stated on the face hereof.
b)
Exercise Price. The “Exercise Price” under this Pre-funded Warrant, subject to adjustment as provided
herein, shall be equal to US$0.0001 per share of Common Stock.
c)
Cashless Exercise. If at any time following the date that is six months after the Grant Date, there is no effective registration
statement registering, or no current prospectus available for, the resale of the shares of Pre-funded Warrant Stock by the Holder, then
this Pre-funded Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which
the Holder shall be entitled to receive a number of shares of Pre-funded Warrant Stock equal to the quotient obtained by dividing [(A-B)
(X)] by (A), where:
(A)
= as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice
of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both
executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading
hours” (as defined in Rule 600(b) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii)
at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of
Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as
reported by Bloomberg L.P. (“Bloomberg”) as of the time of the Holder’s execution of the applicable Notice
of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered
within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading
Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such
Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a)
hereof after the close of “regular trading hours” on such Trading Day;
(B) = the Exercise Price of this Pre-funded
Warrant, as adjusted hereunder; and
(X) =
the number of shares of Pre-funded Warrant Stock that would be issuable upon exercise of this Pre-funded Warrant in accordance with the
terms of this Pre-funded Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
If shares of Pre-funded
Warrant Stock are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the
Securities Act, the shares of Pre-funded Warrant Stock shall take on the characteristics of the Pre-funded Warrants being exercised, and
the holding period of the shares of Pre-funded Warrant Stock being issued may be tacked on to the holding period of this Pre-funded Warrant.
The Company agrees not to take any position contrary to this Section 2(c).
“VWAP”
means, for any date, the price determined by the first of the following clauses that applies:
(a) if the Common Stock are then listed
or quoted on a Trading Market, the daily volume weighted average
2
price of the Common Stock for such
date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg
L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if the Common Stock is quoted
on the OTCQX® Best Market (“OTCQX”) or the OTCQB® Venture Market (“OTCQB”),
the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQX or OTCQB, as applicable,
(c) if the Common Stock is not then listed or quoted for trading on OTCQX or OTCQB and if prices for the Common Stock are then reported
on the OTCID™ Basic Market published by OTC Markets Group Inc. (or a similar organization or agency succeeding to its functions
of reporting prices), the most recent bid price per share of Common Stock so reported, or (d) in all other cases, the fair market value
of a share of Common Stock as determined by an independent appraiser selected in good faith by the Investor, the fees and expenses of
which shall be paid by the Company.
d)
Mechanics of Exercise.
i.
Delivery of shares of Pre-funded Warrant Stock Upon Exercise. The Company shall cause the shares of Pre-funded Warrant Stock
purchased hereunder to be transmitted by the Transfer Agent to the Holder if the Company is then a participant in the Deposit and Withdrawal
at Custodian service (“DWAC”) of the Depository Trust Company (“DTC”) and either (A) there is an
effective registration statement permitting the issuance of the shares of Pre-funded Warrant Stock to or resale of the shares of Pre-funded
Warrant Stock by the Holder or (B) the shares of Pre-funded Warrant Stock are eligible for resale by the Holder without volume or manner-of-sale
limitations pursuant to Rule 144 (assuming cashless exercise of the Pre-funded Warrant s), then, such transmission, at the request of
the Holder shall be (i) to the third-party purchaser in the resale thereof by the Holder or (ii) by crediting the account of the Holder’s
(or its designee’s) broker with DTC through its DWAC system as instructed by the Holder (or its designee), in which case such shares
of Pre-funded Warrant Stock (x) shall only be used by such broker to deliver such shares of Pre-funded Warrant Stock to DTC for the purpose
of settling the Holder’s share delivery obligations with respect to the sale of such shares of Pre-funded Warrant Stock, which may
include delivery to other accounts of such broker and inclusion in the number of shares of Pre-funded Warrant Stock delivered by that
broker in “net settling” that broker’s trading of shares of Pre-funded Warrant Stock, including its positions with the
brokers of the respective persons who purchase such shares of Pre-funded Warrant Stock from the Holder, and (y) shall remain “restricted
securities” as such term is defined in Rule 144(a)(3) under the 1933 Act until so delivered, and, otherwise, such transmission shall
be by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee,
for the number of shares of Pre-funded Warrant Stock to which the Holder is entitled pursuant to such exercise to the address specified
by the Holder in the Notice of Exercise by the date that is the earliest of (i) two (2) Trading Days after the delivery to the Company
of the Notice of Exercise, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company, and (iii) the number
of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise and aggregate Exercise
Price (if not a cashless exercise) (such date, the “Pre-funded Warrant Share Delivery Date”). Upon delivery of the
Notice of Exercise, the Holder shall be deemed for all corporate (but not Rule 144) purposes to have become the holder of record of the
shares of Pre-funded Warrant Stock with respect to which this Pre-funded Warrant has been exercised, irrespective of the date of delivery
of the shares of Pre-funded Warrant Stock, provided that payment of the aggregate Exercise Price (other than in the case of a cashless
exercise) is received by the Company prior to the Holder becoming the holder of record of the shares of Pre-funded Warrant Stock. If the
Company fails for any reason to deliver to the Holder the shares of Pre-funded Warrant Stock subject to a Notice of Exercise by the Pre-funded
Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each US$1,000.00
of shares of Pre-funded Warrant Stock subject to such exercise (based on the VWAP of the
3
Common Stock on the date of the
applicable Notice of Exercise), US$10.00 per Trading Day (increasing to US$20.00 per Trading Day on the third (3rd) Trading
Day the Pre-funded Warrant Share Delivery Date) for each Trading Day after such Pre-funded Warrant Share Delivery Date until such shares
of Pre-funded Warrant Stock are delivered or Holder rescinds such exercise; provided that the maximum amount of liquidated damages payable
pursuant to this section shall not exceed US$100.00 for each US$1,000.00 of shares of Pre-funded Warrant Stock. The Company agrees to
maintain a transfer agent that is a participant in the FAST program so long as this Pre-funded Warrant remains outstanding and exercisable.
As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading
Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice
of Exercise.
ii.
Delivery of New Pre-funded Warrants Upon Exercise. If this Pre-funded Warrant shall have been exercised in part, the Company
shall, at the request of a Holder and upon surrender of this Pre-funded Warrant certificate, at the time of delivery of the shares of
Pre-funded Warrant Stock, deliver to the Holder a new Pre-funded Warrant evidencing the rights of the Holder to purchase the unpurchased
shares of Pre-funded Warrant Stock called for by this Pre-funded Warrant, which new Pre-funded Warrant shall in all other respects be
identical with this Pre-funded Warrant.
iii.
Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the shares of Pre-funded Warrant
Stock pursuant to Section 2(d)(i) by the Pre-funded Warrant Share Delivery Date, then the Holder will have the right to rescind
such exercise.
iv.
Compensation for Buy-In on Failure to Timely Deliver shares of Pre-funded Warrant Stock Upon Exercise. In addition to any
other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the shares of Pre-funded
Warrant Stock in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Pre-funded Warrant
Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise)
or the Holder’s brokerage firm otherwise purchases, Common Stock to deliver in satisfaction of a sale by the Holder of the shares
of Pre-funded Warrant Stock which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company
shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions,
if any) for the Common Stock so purchased exceeds (y) the product of (1) the number of shares of Pre-funded Warrant Stock that the Company
was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise
to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Pre-funded Warrant
and equivalent number of shares of Pre-funded Warrant Stock for which such exercise was not honored (in which case such exercise shall
be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely
complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase
price of US$11,000.00 to cover a Buy-In with respect to an attempted exercise of Common Stock with an aggregate sale price giving rise
to such purchase obligation of US$10,000.00, under clause (A) of the immediately preceding sentence the Company shall be required to pay
the Holder US$1,000.00. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of
the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to
pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance
and/or injunctive relief with respect to the
4
Company’s failure to timely deliver
Common Stock upon exercise of the Pre-funded Warrant as required pursuant to the terms hereof.
v.
No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise
of this Pre-funded Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise,
the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise
Price.
vi.
Charges, Taxes and Expenses. Issuance of shares of Pre-funded Warrant Stock shall be made without charge to the Holder for
any issue or transfer tax or other incidental expense in respect of the issuance of such shares of Pre-funded Warrant Stock, all of which
taxes and expenses shall be paid by the Company, and such shares of Pre-funded Warrant Stock shall be issued in the name of the Holder
or in such name or names as may be directed by the Holder; provided, however, that in the event that shares of Pre-funded
Warrant Stock are to be issued in a name other than the name of the Holder, this Pre-funded Warrant when surrendered for exercise shall
be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto,
the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees
required for same-day processing of any Notice of Exercise and all fees to The Depository Trust Company (or another established clearing
corporation performing similar functions) required for same-day electronic delivery of the shares of Pre-funded Warrant Stock. The Company
shall pay all attorney fees required for the issuance of attorney legal opinions for removal of restrictive legends on shares of Pre-funded
Warrant Stock.
vii.
Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise
of this Pre-funded Warrant, pursuant to the terms hereof.
e)
Holder’s Exercise Limitations. The Company shall not effect any exercise of this Pre-funded Warrant, and a Holder
shall not have the right to exercise any portion of this Pre-funded Warrant, pursuant to Section 2 or otherwise, to the extent
that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with
the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates
(such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as
defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its
Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Pre-funded Warrant
with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable
upon (i) exercise of the remaining, nonexercised portion of this Pre-funded Warrant beneficially owned by the Holder or any of its Affiliates
or Attribution Parties and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company
(including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the
preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d)
of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not
representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible
for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e)
applies, the determination of whether this Pre-funded Warrant is exercisable (in relation to other securities owned by the Holder together
with any Affiliates and Attribution Parties) and of which portion of this Pre-funded Warrant is exercisable shall be in the sole discretion
of the
5
Holder, and the submission of a Notice
of Exercise shall be deemed to be the Holder’s determination of whether this Pre-funded Warrant is exercisable (in relation to other
securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Pre-funded Warrant is
exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm
the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance
with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e),
in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock
as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more
recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number
of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within one Trading Day confirm
orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares
of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Pre-funded
Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common
Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of Common Stock outstanding
immediately after giving effect to the issuance of Common Stock issuable upon exercise of this Pre-funded Warrant. The Holder, upon sixty-one
(61) day’s written notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section
2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of Common Stock outstanding
immediately after giving effect to the issuance of Common Stock upon exercise of this Pre-funded Warrant held by the Holder and the provisions
of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the
61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented
in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof)
which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor
holder of this Pre-funded Warrant.
f)
Trading Market Regulation. The Company shall not issue any shares of Common Stock upon the exercise of this Pre-funded Warrant
that (taken together with the issuance of such shares upon the stock repayment of the Note sold and issued in connection with the grant
of this Pre-funded Warrant would exceed the aggregate number of shares of Common Stock that the Company may issue upon exercise or conversion
or otherwise pursuant to the terms of the Note and this Pre-funded Warrant without breaching the Company’s obligations, if any,
under the rules or regulations of the Trading Market (the number of shares that may be issued without violating such rules and regulations,
the “Exchange Cap”), except that such limitation shall not apply in the event that the Company (A) obtains the approval of
its stockholders as required by the applicable rules of the Trading Market for issuances of shares of Common Stock in excess of the Exchange
Cap or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, that opinion shall be reasonably
satisfactory to the Holder. Until such approval or such written opinion is obtained, no Holder shall be issued in the aggregate, upon
conversion or exercise (as the case may be) of any Notes or any of this Pre-funded Warrant or otherwise pursuant to the terms of the Notes
or this Pre-funded Warrant, shares of Common Stock in an amount greater than the product of (i) the Exchange Cap as of the Grant Date
multiplied by (ii) the quotient of the original principal amount of the Note issued to such Holder pursuant to the Purchase Agreement
on the Closing Date (as defined in the Purchase Agreement). In the event that any Holder shall sell or otherwise transfer any of such
Holder’s Pre-funded Warrant s, the transferee shall be allocated a pro rata portion of such Holder’s Exchange Cap with respect
to such portion of such Pre-funded Warrant so transferred, and the restrictions of the prior sentence shall apply to such transferee with
respect to the portion of the Exchange Cap so allocated to such transferee. At any time after the Grant Date, in the event that the Company
is then prohibited from issuing any shares of Common Stock pursuant to this Section 2(f) or for any other reason as prescribed by the
Commission or the Trading Market (or such applicable Eligible Market in that the Common Stock of the
6
Company is then principally trading)
(the “Exchange Cap Shares”), in lieu of issuing and delivering such Exchange Cap Shares to the Holder, the Company shall pay
cash to the Holder in exchange for the cancellation of such portion of this Pre-funded Warrant exercisable into such Exchange Cap Shares
(the “Exchange Cap Payment Amount”) at a price equal to the sum of (x) the product of (A) such number of Exchange Cap Shares
and (B) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date the Holder delivers
the applicable Exercise Notice with respect to such Exchange Cap Shares to the Company and ending on the date of such payment under this
Section 2(f) to the extent the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction
of a sale by the Holder of Exchange Cap Shares, any brokerage commissions and other out-of-pocket expenses, if any, of the Holder incurred
in connection therewith.
Section 3. Certain
Adjustments.
a) Stock
Dividends and Splits. If the Company, at any time while this Pre-funded Warrant is outstanding: (i) pays a stock dividend or
otherwise makes a distribution or distributions on its Common Stock or any other equity or equity equivalent securities payable in
Common Stock (which, for avoidance of doubt, shall not include any Common Stock issued by the Company upon exercise of this
Pre-funded Warrant), (ii) subdivides outstanding Common Stock into a larger number of shares, (iii) combines (including by way of
reverse stock split) outstanding Common Stock into a smaller number of shares or (iv) issues by reclassification of Common Stock any
shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such
event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the
number of shares issuable upon exercise of this Pre-funded Warrant shall be proportionately adjusted such that the aggregate
Exercise Price of this Pre-funded Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(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)
Adjustment Upon Issuance of Common Stock. If and whenever on or after the date hereof, the Company issues or sells, or in
accordance with this Section 3 is deemed to have issued or sold, any Common Stock (including the issuance or sale of Common Stock
owned or held by or for the account of the Company, but excluding any issuance of Exempted Securities (except for issuances under clause
(d) of the definition of Exempted Securities in the Purchase Agreement) issued or sold or deemed to have been issued or sold) for a consideration
per share (the “New Issuance Price”) less than the Exercise Price then in effect (such Exercise Price then in effect
is referred to as the “Applicable Price”) (the foregoing, a “Dilutive Issuance”), then immediately
after such Dilutive Issuance, the Exercise Price then in effect shall be reduced to the New Issuance Price and the number of shares of
Pre-funded Warrant Stock issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder, after taking
into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment. For the avoidance
of doubt, the aggregate Exercise Price prior to such adjustment is calculated as follows: the total number of shares of Pre-funded Warrant
Stock issuable upon exercise of this Pre-funded Warrant immediately prior to such adjustment (without regard to the Beneficial Ownership
Limitation) multiplied by the Exercise Price in effect immediately prior to such adjustment divided by the New Issuance Price (the aforementioned
adjustment of the total number of shares of Pre-funded Warrant Stock shall be referred to herein as the “Share Amount Adjustment”).
By way of example, if E is the total number of shares of Pre-funded Warrant Stock issuable upon exercise of this Pre-funded Warrant immediately
prior to such adjustment (without regard to the Beneficial Ownership Limitation), F is the Exercise Price in effect immediately prior
to such adjustment, and G is the New Issuance Price, the adjustment to the number of shares of Pre-funded Warrant Stock can be expressed
in the following formula: Total number of shares of Pre-funded Warrant Stock after such Dilutive Issuance = the number obtained from dividing
[E x F] by G; provided, however, that an adjustment of the Exercise Price pursuant to this Section 3(b) shall not
result in an Exercise Price which is higher than the Exercise Price prior to such adjustment. For all purposes of the
7
foregoing (including, without limitation,
determining the adjusted Exercise Price and consideration per share under this Section 3(b)), the following shall be applicable:
i.
Issuance of Common Stock Equivalents. If the Company in any manner issues or sells any Common Stock Equivalents (other than
Common Stock Equivalents that qualify as Exempted Securities (except for issuances under clause (d) of the definition of Exempted Securities
in the Purchase Agreement)) and the lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise
or exchange thereof is less than the Applicable Price, then such Common Stock shall be deemed to be outstanding and to have been issued
and sold by the Company at the time of the issuance or sale of such Common Stock Equivalents for such price per share. For the purposes
of this Section 3(b)(i), the “lowest price per share for which one share of Common Stock is issuable upon the conversion,
exercise or exchange thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received
or receivable by the Company with respect to one share of Common Stock upon the issuance or sale of the Stock Equivalent and upon conversion,
exercise or exchange of such Common Stock Equivalent and (y) the lowest conversion price set forth in such Common Stock Equivalent for
which one share of Common Stock is issuable upon conversion, exercise or exchange thereof minus (2) the sum of all amounts paid or payable
to the holder of such Common Stock Equivalent (or any other Person) upon the issuance or sale of such Common Stock Equivalent plus the
value of any other consideration received or receivable by, or benefit conferred on, the holder of such Common Stock Equivalent (or any
other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of such
Common Stock upon conversion, exercise or exchange of such Common Stock Equivalents, and if any such issue or sale of such Common Stock
Equivalents is made upon exercise of any options for which adjustment of this Pre-funded Warrant has been or is to be made pursuant to
other provisions of this Section 3(b), except as contemplated below, no further adjustment of the Exercise Price shall be made
by reason of such issue or sale.
ii.
Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any options, the additional
consideration, if any, payable upon the issue, conversion, exercise, or exchange of any Common Stock Equivalents, or the rate at which
any Common Stock Equivalents are convertible into or exercisable or exchangeable for Common Stock increases or decreases at any time,
the Exercise Price in effect at the time of such increase or decrease shall be adjusted to the Exercise Price which would have been in
effect at such time had such options or Common Stock Equivalents provided for such increased or decreased purchase price, additional consideration
or increased or decreased conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section
3, if the terms of any option or Common Stock Equivalent that was outstanding as of the date of issuance of this Pre-funded Warrant
are increased or decreased in the manner described in the immediately preceding sentence, then such option or Common Stock Equivalent
and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date
of such increase or decrease. No adjustment pursuant to this Section 3 shall be made if such adjustment would result in an increase
of the Exercise Price then in effect.
iii.
Calculation of Consideration Received. If any option and/or Common Stock Equivalent and/or Adjustment Right is issued in
connection with the issuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the
“Primary Security”, and such option and/or Common Stock Equivalent and/or Adjustment Right, the “Secondary
Securities”), together comprising one integrated transaction, the consideration per share of Common Stock with respect to such
Primary Security shall be deemed to be equal to the difference of (x) the lowest price per share for
8
which one share of Common Stock was
issued in such integrated transaction (or was deemed to be issued pursuant to Section 3(b)(i) or 3(b)(ii) above, as applicable)
solely with respect to such Primary Security, minus (y) with respect to such Secondary Securities, the sum of (I) the Black Scholes Consideration
Value of each such option, if any, (II) the fair market value (as determined by the Holder) or the Black Scholes Consideration Value,
as applicable, of such Adjustment Right, if any, and (III) the fair market value (as determined by the Holder) of such Common Stock Equivalent,
if any, in each case, as determined on a per share basis in accordance with this Section 3(b)(iii). If any Common Stock, options,
or Common Stock Equivalents are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor (for
the purpose of determining the consideration paid for such Common Stock, option, or Common Stock Equivalent, but not for the purpose of
the calculation of the Black Scholes Consideration Value) will be deemed to be the net amount of consideration received by the Company
therefor. If any Common Stock, options or Common Stock Equivalents are issued or sold for a consideration other than cash (for the purpose
of determining the consideration paid for such Common Stock, option or Common Stock Equivalent, but not for the purpose of the calculation
of the Black Scholes Consideration Value), the amount of such consideration received by the Company will be the fair value of such consideration,
except where such consideration consists of publicly traded securities, in which case the amount of consideration received by the Company
for such securities will be the arithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding
the date of receipt. If any Common Stock, options or Common Stock Equivalents are issued to the owners of the non-surviving entity in
connection with any merger in which the Company is the surviving entity (for the purpose of determining the consideration paid for such
Common Stock, option or Common Stock Equivalent, but not for the purpose of the calculation of the Black Scholes Consideration Value),
the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non- surviving
entity as is attributable to such Common Stock, options or Common Stock Equivalents, as the case may be. The fair value of any consideration
other than cash or publicly traded securities (for the purpose of determining the consideration paid for such Common Stock, option, or
Common Stock Equivalent, but not for the purpose of the calculation of the Black Scholes Consideration Value) will be determined jointly
by the Company and the Holder. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring
valuation (the “Valuation Event”), the fair value of such consideration will be determined within five (5) Trading
Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selected by the
Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the
fees and expenses of such appraiser shall be borne by the Company.
iv.
For the avoidance of doubt, the number of shares issuable upon exercise of this Pre-funded Warrant shall not be proportionately
adjusted nor shall the aggregate Exercise Price of this Pre-funded Warrant be adjusted as a result of the Business Combination Transaction.
c)
Reserved.
d)
Pro-rata Distributions. During such time as this Pre-funded Warrant is outstanding, if the Company shall declare or make
any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Common Stock, by way of return of capital
or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend,
spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”),
at any time after the issuance of this Pre-funded Warrant, then, in each such case, the Holder shall be entitled to participate
in such Distribution to the same extent that the Holder would have
9
participated
therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Pre-funded Warrant
(without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately
before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders
of Common Stock is to be determined for the participation in such Distribution; provided, however, that, to the extent that
the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then
the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any Common Stock
as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the
Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation.
e)
Fundamental Transaction. If, at any time while this Pre-funded Warrant is outstanding, (i) the Company, directly or indirectly,
in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company,
directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange
offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender
or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding
Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization
or recapitalization 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, or (v) the Company, directly or indirectly, in one or more related transactions consummates
a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization,
spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than
50% of the outstanding Common Stock (not including any Common Stock held by the other Person or other Persons making or party to, or associated
or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each,
a “Fundamental Transaction”), then, upon any subsequent exercise of this Pre-funded Warrant, the Holder shall have
the right to receive, for each Pre-funded Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence
of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise
of this Pre-funded Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is
the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result
of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Pre-funded Warrant is exercisable immediately
prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Pre-funded Warrant).
For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction,
and the Company shall apportion the Exercise 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 exercise of this Pre-funded Warrant following such Fundamental Transaction. The Company shall cause any successor
entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in
writing all of the obligations of the Company under this Pre-funded Warrant and the other Transaction Documents in accordance with the
provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and
approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver
to the Holder in exchange for this Pre-funded Warrant a security of the Successor Entity evidenced by a written instrument substantially
similar in form and substance to this Pre-funded Warrant which is exercisable for a corresponding number of shares of capital stock of
such Successor Entity (or its parent entity) equivalent to the Common Stock acquirable and receivable upon exercise of this Pre-funded
Warrant (without regard to any limitations on
10
the exercise of this Pre-funded Warrant)
prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital
stock (but taking into account the relative value of the Common Stock pursuant to such Fundamental Transaction and the value of
such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic
value of this Pre-funded Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory
in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and
be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Pre-funded Warrant and the
other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every
right and power of the Company and shall assume all of the obligations of the Company under this Pre-funded Warrant and the other Transaction
Documents with the same effect as if such Successor Entity had been named as the Company herein.
f)
Calculations. All calculations under this Section 3 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 3, 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.
g)
i.
Adjustment to Exercise Price. Whenever the Exercise Price is
adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by facsimile or email a
notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of shares of Pre-funded Warrant
Stock and setting forth a brief statement of the facts requiring such adjustment.
ii.
Notice to Allow Exercise 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 rights or Pre-funded 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, or 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 delivered by facsimile or email to the
Holder at its last facsimile number or email address as it shall appear upon the Pre-funded Warrant Register of the Company, at least
15 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 Pre-funded Warrant s, 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 Pre-funded 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 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. To the extent that any notice provided
in this Pre-funded Warrant constitutes, or contains, material, on-public information regarding the Company or any of
11
the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise
this Pre-funded Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice
except as may otherwise be expressly set forth herein.
h)
Exchange Cap Limitation. For purposes of clarity, no such adjustments in Section 3 shall result in the issuance of shares
pursuant to the exercise of this Pre-funded Warrant which would result in the violation of the Exchange Cap.
Section 4. Transfer
of Pre-funded Warrant.
a)
Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d)
hereof and to the provisions of Section 4.1, this Pre-funded Warrant and all rights hereunder (including, without limitation, any
registration rights) are transferable, in whole or in part, upon surrender of this Pre-funded Warrant at the principal office of the Company
or its designated agent, together with a written assignment of this Pre-funded Warrant substantially in the form attached hereto duly
executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.
Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Pre-funded Warrant or Pre-funded Warrants
in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment
and shall issue to the assignor a new Pre-funded Warrant evidencing the portion of this Pre-funded Warrant not so assigned, and this Pre-funded
Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender
this Pre-funded Warrant to the Company unless the Holder has assigned this Pre-funded Warrant in full, in which case, the Holder shall
surrender this Pre-funded Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment
form to the Company assigning this Pre-funded Warrant in full. The Pre-funded Warrant, if properly assigned in accordance herewith, may
be exercised by a new holder for the purchase of shares of Pre-funded Warrant Stock without having a new Pre-funded Warrant issued.
b)
New Pre-funded Warrant s. This Pre-funded Warrant may be divided or combined with other Pre-funded Warrants upon presentation
hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Pre-funded
Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer
which may be involved in such division or combination, the Company shall execute and deliver a new Pre-funded Warrant or Pre-funded Warrants
in exchange for the Pre-funded Warrant or Pre-funded Warrants to be divided or combined in accordance with such notice. All Pre-funded
Warrants issued on transfers or exchanges shall be dated the Grant Date and shall be identical with this Pre-funded Warrant except as
to the number of shares of Pre-funded Warrant Stock issuable pursuant thereto.
c)
Pre-funded Warrant Register. The Company shall register this Pre-funded Warrant, upon records to be maintained by the Company
for that purpose (the “Pre-funded Warrant Register”), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Pre-funded Warrant as the absolute owner hereof for the purpose of any exercise
hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
d)
Transfer Restrictions. If, at the time of the surrender of this Pre-funded Warrant in connection with any transfer of this
Pre-funded Warrant, the transfer of this Pre-funded Warrant shall not be either (i) registered pursuant to an effective registration statement
under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale
restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such
transfer, that the Holder or transferee of this Pre-funded Warrant, as the case may be, comply with the provisions of Section 3(f) of
the Purchase Agreement.
12
e)
Representation by the Holder. The Holder, by the acceptance hereof, represents and Pre-funded Warrants that it is acquiring
this Pre-funded Warrant and, upon any exercise hereof, will acquire the shares of Pre-funded Warrant Stock issuable upon such exercise,
for its own account and not as a nominee for any other party, and for investment, and that the Holder shall not offer, sell or otherwise
dispose of this Pre-funded Warrant and, upon any exercise hereof, the shares of Pre-funded Warrant Stock issuable upon such exercise,
in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities
Act. This Pre-funded Warrant, any Pre-funded Warrant issued in substitution or replacement therefor, and any shares of Pre-funded Warrant
Stock issuable upon such exercise hereof or thereof, shall be stamped or imprinted with a legend in substantially the following form:
“NEITHER THIS SECURITY
NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.”
Section 5. Miscellaneous.
a)
No Rights as Stockholder Until Exercise. This Pre-funded Warrant does not entitle the Holder to any voting rights, dividends,
or other rights as a stockholder of the Company prior to the exercise hereof.
b)
Loss, Theft, Destruction, or Mutilation of Pre-funded Warrant. The Company covenants that upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction, or mutilation of this Pre-funded Warrant or any stock certificate
relating to the shares of Pre-funded Warrant Stock, and in case of loss, theft, or destruction, of indemnity or security reasonably satisfactory
to it (which, in the case of the Pre-funded Warrant, shall not include the posting of any bond), and upon surrender and cancellation of
such Pre-funded Warrant or stock certificate, if mutilated, the Company will make and deliver a new Pre-funded Warrant or stock certificate
of like tenor and dated as of such cancellation, in lieu of such Pre-funded Warrant or stock certificate.
c)
Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right
required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding
Business Day.
d)
Authorized Shares.
The Company covenants
that, during the period the Pre-funded Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of the shares of Pre-funded Warrant Stock upon the exercise of any purchase rights under
this Pre-funded Warrant. The Company further covenants that its issuance of this Pre-funded Warrant shall constitute full authority to
its officers who are charged with the duty of issuing the necessary shares of Pre-
13
funded Warrant Stock upon the exercise
of the purchase rights under this Pre-funded Warrant. The Company will take all such reasonable action as may be necessary to assure that
such shares of Pre-funded Warrant Stock may be issued as provided herein without violation of any applicable law or regulation, or of
any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all shares of Pre-funded
Warrant Stock which may be issued upon the exercise of the purchase rights represented by this Pre-funded Warrant will, upon exercise
of the purchase rights represented by this Pre-funded Warrant and payment for such shares of Pre-funded Warrant Stock in accordance herewith,
be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in
respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the
extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its Certificate
of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Pre-funded Warrant, but will
at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate
to protect the rights of Holder as set forth in this Pre-funded Warrant against impairment. Without limiting the generality of the foregoing,
the Company will (i) not increase the par value of any shares of Pre-funded Warrant Stock above the amount payable therefor upon such
exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of Pre-funded Warrant Stock upon the exercise of this Pre-funded
Warrant, and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions, or consents from any public regulatory
body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Pre-funded Warrant.
Before taking
any action which would result in an adjustment in the number of shares of Pre-funded Warrant Stock for which this Pre-funded Warrant is
exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as
may be necessary from any public regulatory body or bodies having jurisdiction thereof.
e)
Governing Law; Jurisdiction. All questions concerning the construction, validity, enforcement, and interpretation of this
Pre-funded Warrant shall be determined in accordance with the provisions of the Purchase Agreement. All questions concerning the construction,
validity, enforcement, and interpretation of this Pre-funded Warrant shall be governed by and construed and enforced in accordance with
the internal laws of the State of Nevada, without regard to the principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Pre-funded Warrant (whether
brought against a party hereto or their respective affiliates, directors, officers, shareholders, partners, members, employees, or agents)
shall be commenced exclusively in the state and federal courts sitting in the City of Las Vegas, Count of Clark, State of Nevada. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of Las Vegas, County
of Clark, State of Nevada, 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 improper or is an 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 Pre-funded Warrant 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. If either party shall commence an action, suit or proceeding to enforce any provisions of
this Pre-funded Warrant, the prevailing party in such action, suit or proceeding shall be reimbursed by the
14
other party for their reasonable attorneys’
fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
f)
Restrictions. The Holder acknowledges that the shares of Pre-funded Warrant Stock acquired upon the exercise of this Pre-funded
Warrant, if not registered and the Holder does not utilize cashless exercise after six months from the date hereof, may have restrictions
upon resale imposed by state and federal securities laws.
g)
Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder
shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers, or remedies. Without limiting any other
provision of this Pre-funded Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision
of this Pre-funded Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall
be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate
proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers,
or remedies hereunder.
h)
Notices. Any notice, request or other document required or permitted to be given or delivered to the Holders by the Company
shall be delivered in accordance with the notice provisions of the Purchase Agreement.
i)
Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Pre-funded
Warrant to purchase shares of Pre-funded Warrant Stock, and no enumeration herein of the rights or privileges of the Holder, shall give
rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability
is asserted by the Company or by creditors of the Company.
j)
Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Pre-funded Warrant. The Company agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Pre-funded Warrant and hereby agrees
to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
k)
Successors and Assigns. Subject to applicable securities laws, this Pre-funded Warrant and the rights and obligations evidenced
hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted
assigns of Holder. The provisions of this Pre-funded Warrant are intended to be for the benefit of any Holder from time to time of this
Pre-funded Warrant and shall be enforceable by the Holder or holder of shares of Pre-funded Warrant Stock.
l)
Amendment; Waivers. Any modifications, amendments, or waivers of the provisions hereof shall be subject to Section 11(f)
of the Purchase Agreement.
m)
Severability. Wherever possible, each provision of this Pre-funded Warrant shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Pre-funded Warrant shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Pre-funded Warrant
n)
Headings. The headings used in this Pre-funded Warrant are for the convenience of reference only and shall not, for any
purpose, be deemed a part of this Pre-funded Warrant.
********************
(Signature Page Follows)
15
IN WITNESS WHEREOF,
the Company has caused this Pre-funded Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
iQSTEL, INC.
By:
/s/ Leandro Iglesias
Leandro Iglesias
Chief
Executive Officer
16
EX-4.4 — COMMON STOCK PURCHASE PRE-FUNDED WARRANT, DATED OCTOBER 20, 2026, ISSUED BY IQSTEL INC. TO M2B FUNDING CORP. (210,000 SHARES).
EX-4.4
Filename: ex4_4.htm · Sequence: 5
NEITHER THIS SECURITY NOR THE SECURITIES
FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE
PRE-FUNDED WARRANT
iQSTEL, INC.
Shares of
Pre-funded Warrant Stock: 210,000
Grant Date: October 20, 2026
THIS COMMON STOCK PURCHASE PRE-FUNDED
WARRANT (the “Pre-funded Warrant”) certifies that, for value received, M2B
Funding Corp., a Florida corporation, or its assigns (the “Holder”) is entitled, upon the terms and subject to the
limitations on exercise and the conditions hereinafter set forth, at any time on or after October 20, 2026 (the “Grant
Date”), to subscribe for and purchase from iQSTEL, Inc., a Nevada corporation (the “Company”), up to (as subject
to adjustment hereunder) two hundred ten thousand (210,000) shares of the Company’s Common Stock, par value $0.001 per share
(the “Common Stock”). The purchase price of one share of Common Stock under this Pre-funded Warrant shall be equal to
the Exercise Price, as defined in Section 2(b).
Section 1.
Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase
Agreement (the “Purchase Agreement”), dated as of October 20, 2026, by and among the Company and the investor signatory thereto.
Registration Rights. The Company shall
register for resale the shares underlying this Pre-funded Warrant on its next eligible registration statement in accordance with Section
4.4A of the Securities Purchase Agreement, without requiring prior exercise. The registration obligation is subject to applicable SEC
requirements and the conditions and procedures set forth in that Agreement.
Section 2. Exercise.
a)
Exercise of Pre-funded Warrant. Exercise of the purchase rights represented by this Pre-funded Warrant may be made, in whole
or in part, at any time or times on or after the Grant Date by delivery to the Company of a duly executed facsimile copy or PDF copy submitted
by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the “Notice of Exercise”). Within
the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section
2(d)(i)) following the date of exercise as aforesaid, the Holder shall deliver to the Company the aggregate Exercise Price for the
shares of Pre-funded Warrant Stock specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a
United States bank unless the cashless exercise procedure specified in Section 2(c) is specified in the applicable Notice of Exercise.
No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of
any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender
this Pre-funded Warrant to the Company until the Holder has purchased all of the shares of Pre-funded Warrant Stock available hereunder
and the Pre-funded Warrant has been exercised in full, in which case, the Holder shall surrender this Pre-funded Warrant to the Company
for cancellation within two (2) Trading Days of the date on which the final Notice
of Exercise is delivered to the Company.
Partial exercises of this Pre-funded Warrant resulting in purchases of a portion of the total number of shares of Pre-funded Warrant Stock
available hereunder shall have the effect of lowering the outstanding number of shares of Pre-funded Warrant Stock purchasable hereunder
in an amount equal to the applicable number of shares of Pre-funded Warrant Stock purchased. The Holder and the Company shall maintain
records showing the number of shares of Pre-funded Warrant Stock purchased and the date of such purchases. The Company shall deliver any
objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance
of this Pre-funded Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion
of the shares of Pre-funded Warrant Stock hereunder, the number of shares of Pre-funded Warrant Stock available for purchase hereunder
at any given time may be less than the amount stated on the face hereof.
b)
Exercise Price. The “Exercise Price” under this Pre-funded Warrant, subject to adjustment as provided
herein, shall be equal to US$0.0001 per share of Common Stock.
c)
Cashless Exercise. If at any time following the date that is six months after the Grant Date, there is no effective registration
statement registering, or no current prospectus available for, the resale of the shares of Pre-funded Warrant Stock by the Holder, then
this Pre-funded Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which
the Holder shall be entitled to receive a number of shares of Pre-funded Warrant Stock equal to the quotient obtained by dividing [(A-B)
(X)] by (A), where:
(A)
= as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice
of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both
executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading
hours” (as defined in Rule 600(b) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii)
at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of
Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as
reported by Bloomberg L.P. (“Bloomberg”) as of the time of the Holder’s execution of the applicable Notice
of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered
within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading
Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such
Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a)
hereof after the close of “regular trading hours” on such Trading Day;
(B) = the Exercise Price of this Pre-funded
Warrant, as adjusted hereunder; and
(X) =
the number of shares of Pre-funded Warrant Stock that would be issuable upon exercise of this Pre-funded Warrant in accordance with the
terms of this Pre-funded Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
If shares of Pre-funded
Warrant Stock are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the
Securities Act, the shares of Pre-funded Warrant Stock shall take on the characteristics of the Pre-funded Warrants being exercised, and
the holding period of the shares of Pre-funded Warrant Stock being issued may be tacked on to the holding period of this Pre-funded Warrant.
The Company agrees not to take any position contrary to this Section 2(c).
“VWAP”
means, for any date, the price determined by the first of the following clauses that applies:
(a) if the Common Stock are then listed
or quoted on a Trading Market, the daily volume weighted average
2
price of the Common Stock for such
date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg
L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if the Common Stock is quoted
on the OTCQX® Best Market (“OTCQX”) or the OTCQB® Venture Market (“OTCQB”),
the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQX or OTCQB, as applicable,
(c) if the Common Stock is not then listed or quoted for trading on OTCQX or OTCQB and if prices for the Common Stock are then reported
on the OTCID™ Basic Market published by OTC Markets Group Inc. (or a similar organization or agency succeeding to its functions
of reporting prices), the most recent bid price per share of Common Stock so reported, or (d) in all other cases, the fair market value
of a share of Common Stock as determined by an independent appraiser selected in good faith by the Investor, the fees and expenses of
which shall be paid by the Company.
d)
Mechanics of Exercise.
i.
Delivery of shares of Pre-funded Warrant Stock Upon Exercise. The Company shall cause the shares of Pre-funded Warrant Stock
purchased hereunder to be transmitted by the Transfer Agent to the Holder if the Company is then a participant in the Deposit and Withdrawal
at Custodian service (“DWAC”) of the Depository Trust Company (“DTC”) and either (A) there is an
effective registration statement permitting the issuance of the shares of Pre-funded Warrant Stock to or resale of the shares of Pre-funded
Warrant Stock by the Holder or (B) the shares of Pre-funded Warrant Stock are eligible for resale by the Holder without volume or manner-of-sale
limitations pursuant to Rule 144 (assuming cashless exercise of the Pre-funded Warrant s), then, such transmission, at the request of
the Holder shall be (i) to the third-party purchaser in the resale thereof by the Holder or (ii) by crediting the account of the Holder’s
(or its designee’s) broker with DTC through its DWAC system as instructed by the Holder (or its designee), in which case such shares
of Pre-funded Warrant Stock (x) shall only be used by such broker to deliver such shares of Pre-funded Warrant Stock to DTC for the purpose
of settling the Holder’s share delivery obligations with respect to the sale of such shares of Pre-funded Warrant Stock, which may
include delivery to other accounts of such broker and inclusion in the number of shares of Pre-funded Warrant Stock delivered by that
broker in “net settling” that broker’s trading of shares of Pre-funded Warrant Stock, including its positions with the
brokers of the respective persons who purchase such shares of Pre-funded Warrant Stock from the Holder, and (y) shall remain “restricted
securities” as such term is defined in Rule 144(a)(3) under the 1933 Act until so delivered, and, otherwise, such transmission shall
be by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee,
for the number of shares of Pre-funded Warrant Stock to which the Holder is entitled pursuant to such exercise to the address specified
by the Holder in the Notice of Exercise by the date that is the earliest of (i) two (2) Trading Days after the delivery to the Company
of the Notice of Exercise, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company, and (iii) the number
of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise and aggregate Exercise
Price (if not a cashless exercise) (such date, the “Pre-funded Warrant Share Delivery Date”). Upon delivery of the
Notice of Exercise, the Holder shall be deemed for all corporate (but not Rule 144) purposes to have become the holder of record of the
shares of Pre-funded Warrant Stock with respect to which this Pre-funded Warrant has been exercised, irrespective of the date of delivery
of the shares of Pre-funded Warrant Stock, provided that payment of the aggregate Exercise Price (other than in the case of a cashless
exercise) is received by the Company prior to the Holder becoming the holder of record of the shares of Pre-funded Warrant Stock. If the
Company fails for any reason to deliver to the Holder the shares of Pre-funded Warrant Stock subject to a Notice of Exercise by the Pre-funded
Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each US$1,000.00
of shares of Pre-funded Warrant Stock subject to such exercise (based on the VWAP of the
3
Common Stock on the date of the
applicable Notice of Exercise), US$10.00 per Trading Day (increasing to US$20.00 per Trading Day on the third (3rd) Trading
Day the Pre-funded Warrant Share Delivery Date) for each Trading Day after such Pre-funded Warrant Share Delivery Date until such shares
of Pre-funded Warrant Stock are delivered or Holder rescinds such exercise; provided that the maximum amount of liquidated damages payable
pursuant to this section shall not exceed US$100.00 for each US$1,000.00 of shares of Pre-funded Warrant Stock. The Company agrees to
maintain a transfer agent that is a participant in the FAST program so long as this Pre-funded Warrant remains outstanding and exercisable.
As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading
Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice
of Exercise.
ii.
Delivery of New Pre-funded Warrants Upon Exercise. If this Pre-funded Warrant shall have been exercised in part, the Company
shall, at the request of a Holder and upon surrender of this Pre-funded Warrant certificate, at the time of delivery of the shares of
Pre-funded Warrant Stock, deliver to the Holder a new Pre-funded Warrant evidencing the rights of the Holder to purchase the unpurchased
shares of Pre-funded Warrant Stock called for by this Pre-funded Warrant, which new Pre-funded Warrant shall in all other respects be
identical with this Pre-funded Warrant.
iii.
Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the shares of Pre-funded Warrant
Stock pursuant to Section 2(d)(i) by the Pre-funded Warrant Share Delivery Date, then the Holder will have the right to rescind
such exercise.
iv.
Compensation for Buy-In on Failure to Timely Deliver shares of Pre-funded Warrant Stock Upon Exercise. In addition to any
other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the shares of Pre-funded
Warrant Stock in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Pre-funded Warrant
Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise)
or the Holder’s brokerage firm otherwise purchases, Common Stock to deliver in satisfaction of a sale by the Holder of the shares
of Pre-funded Warrant Stock which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company
shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions,
if any) for the Common Stock so purchased exceeds (y) the product of (1) the number of shares of Pre-funded Warrant Stock that the Company
was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise
to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Pre-funded Warrant
and equivalent number of shares of Pre-funded Warrant Stock for which such exercise was not honored (in which case such exercise shall
be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely
complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase
price of US$11,000.00 to cover a Buy-In with respect to an attempted exercise of Common Stock with an aggregate sale price giving rise
to such purchase obligation of US$10,000.00, under clause (A) of the immediately preceding sentence the Company shall be required to pay
the Holder US$1,000.00. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of
the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to
pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance
and/or injunctive relief with respect to the
4
Company’s failure to timely deliver
Common Stock upon exercise of the Pre-funded Warrant as required pursuant to the terms hereof.
v.
No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise
of this Pre-funded Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise,
the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise
Price.
vi.
Charges, Taxes and Expenses. Issuance of shares of Pre-funded Warrant Stock shall be made without charge to the Holder for
any issue or transfer tax or other incidental expense in respect of the issuance of such shares of Pre-funded Warrant Stock, all of which
taxes and expenses shall be paid by the Company, and such shares of Pre-funded Warrant Stock shall be issued in the name of the Holder
or in such name or names as may be directed by the Holder; provided, however, that in the event that shares of Pre-funded
Warrant Stock are to be issued in a name other than the name of the Holder, this Pre-funded Warrant when surrendered for exercise shall
be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto,
the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees
required for same-day processing of any Notice of Exercise and all fees to The Depository Trust Company (or another established clearing
corporation performing similar functions) required for same-day electronic delivery of the shares of Pre-funded Warrant Stock. The Company
shall pay all attorney fees required for the issuance of attorney legal opinions for removal of restrictive legends on shares of Pre-funded
Warrant Stock.
vii.
Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise
of this Pre-funded Warrant, pursuant to the terms hereof.
e)
Holder’s Exercise Limitations. The Company shall not effect any exercise of this Pre-funded Warrant, and a Holder
shall not have the right to exercise any portion of this Pre-funded Warrant, pursuant to Section 2 or otherwise, to the extent
that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with
the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates
(such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as
defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its
Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Pre-funded Warrant
with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable
upon (i) exercise of the remaining, nonexercised portion of this Pre-funded Warrant beneficially owned by the Holder or any of its Affiliates
or Attribution Parties and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company
(including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the
preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d)
of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not
representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible
for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e)
applies, the determination of whether this Pre-funded Warrant is exercisable (in relation to other securities owned by the Holder together
with any Affiliates and Attribution Parties) and of which portion of this Pre-funded Warrant is exercisable shall be in the sole discretion
of the
5
Holder, and the submission of a Notice
of Exercise shall be deemed to be the Holder’s determination of whether this Pre-funded Warrant is exercisable (in relation to other
securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Pre-funded Warrant is
exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm
the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance
with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e),
in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock
as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more
recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number
of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within one Trading Day confirm
orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares
of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Pre-funded
Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common
Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of Common Stock outstanding
immediately after giving effect to the issuance of Common Stock issuable upon exercise of this Pre-funded Warrant. The Holder, upon sixty-one
(61) day’s written notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section
2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of Common Stock outstanding
immediately after giving effect to the issuance of Common Stock upon exercise of this Pre-funded Warrant held by the Holder and the provisions
of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the
61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented
in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof)
which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor
holder of this Pre-funded Warrant.
f)
Trading Market Regulation. The Company shall not issue any shares of Common Stock upon the exercise of this Pre-funded Warrant
that (taken together with the issuance of such shares upon the stock repayment of the Note sold and issued in connection with the grant
of this Pre-funded Warrant would exceed the aggregate number of shares of Common Stock that the Company may issue upon exercise or conversion
or otherwise pursuant to the terms of the Note and this Pre-funded Warrant without breaching the Company’s obligations, if any,
under the rules or regulations of the Trading Market (the number of shares that may be issued without violating such rules and regulations,
the “Exchange Cap”), except that such limitation shall not apply in the event that the Company (A) obtains the approval of
its stockholders as required by the applicable rules of the Trading Market for issuances of shares of Common Stock in excess of the Exchange
Cap or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, that opinion shall be reasonably
satisfactory to the Holder. Until such approval or such written opinion is obtained, no Holder shall be issued in the aggregate, upon
conversion or exercise (as the case may be) of any Notes or any of this Pre-funded Warrant or otherwise pursuant to the terms of the Notes
or this Pre-funded Warrant, shares of Common Stock in an amount greater than the product of (i) the Exchange Cap as of the Grant Date
multiplied by (ii) the quotient of the original principal amount of the Note issued to such Holder pursuant to the Purchase Agreement
on the Closing Date (as defined in the Purchase Agreement). In the event that any Holder shall sell or otherwise transfer any of such
Holder’s Pre-funded Warrant s, the transferee shall be allocated a pro rata portion of such Holder’s Exchange Cap with respect
to such portion of such Pre-funded Warrant so transferred, and the restrictions of the prior sentence shall apply to such transferee with
respect to the portion of the Exchange Cap so allocated to such transferee. At any time after the Grant Date, in the event that the Company
is then prohibited from issuing any shares of Common Stock pursuant to this Section 2(f) or for any other reason as prescribed by the
Commission or the Trading Market (or such applicable Eligible Market in that the Common Stock of the
6
Company is then principally trading)
(the “Exchange Cap Shares”), in lieu of issuing and delivering such Exchange Cap Shares to the Holder, the Company shall pay
cash to the Holder in exchange for the cancellation of such portion of this Pre-funded Warrant exercisable into such Exchange Cap Shares
(the “Exchange Cap Payment Amount”) at a price equal to the sum of (x) the product of (A) such number of Exchange Cap Shares
and (B) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date the Holder delivers
the applicable Exercise Notice with respect to such Exchange Cap Shares to the Company and ending on the date of such payment under this
Section 2(f) to the extent the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction
of a sale by the Holder of Exchange Cap Shares, any brokerage commissions and other out-of-pocket expenses, if any, of the Holder incurred
in connection therewith.
Section 3. Certain
Adjustments.
a) Stock
Dividends and Splits. If the Company, at any time while this Pre-funded Warrant is outstanding: (i) pays a stock dividend or
otherwise makes a distribution or distributions on its Common Stock or any other equity or equity equivalent securities payable in
Common Stock (which, for avoidance of doubt, shall not include any Common Stock issued by the Company upon exercise of this
Pre-funded Warrant), (ii) subdivides outstanding Common Stock into a larger number of shares, (iii) combines (including by way of
reverse stock split) outstanding Common Stock into a smaller number of shares or (iv) issues by reclassification of Common Stock any
shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such
event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the
number of shares issuable upon exercise of this Pre-funded Warrant shall be proportionately adjusted such that the aggregate
Exercise Price of this Pre-funded Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(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)
Adjustment Upon Issuance of Common Stock. If and whenever on or after the date hereof, the Company issues or sells, or in
accordance with this Section 3 is deemed to have issued or sold, any Common Stock (including the issuance or sale of Common Stock
owned or held by or for the account of the Company, but excluding any issuance of Exempted Securities (except for issuances under clause
(d) of the definition of Exempted Securities in the Purchase Agreement) issued or sold or deemed to have been issued or sold) for a consideration
per share (the “New Issuance Price”) less than the Exercise Price then in effect (such Exercise Price then in effect
is referred to as the “Applicable Price”) (the foregoing, a “Dilutive Issuance”), then immediately
after such Dilutive Issuance, the Exercise Price then in effect shall be reduced to the New Issuance Price and the number of shares of
Pre-funded Warrant Stock issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder, after taking
into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment. For the avoidance
of doubt, the aggregate Exercise Price prior to such adjustment is calculated as follows: the total number of shares of Pre-funded Warrant
Stock issuable upon exercise of this Pre-funded Warrant immediately prior to such adjustment (without regard to the Beneficial Ownership
Limitation) multiplied by the Exercise Price in effect immediately prior to such adjustment divided by the New Issuance Price (the aforementioned
adjustment of the total number of shares of Pre-funded Warrant Stock shall be referred to herein as the “Share Amount Adjustment”).
By way of example, if E is the total number of shares of Pre-funded Warrant Stock issuable upon exercise of this Pre-funded Warrant immediately
prior to such adjustment (without regard to the Beneficial Ownership Limitation), F is the Exercise Price in effect immediately prior
to such adjustment, and G is the New Issuance Price, the adjustment to the number of shares of Pre-funded Warrant Stock can be expressed
in the following formula: Total number of shares of Pre-funded Warrant Stock after such Dilutive Issuance = the number obtained from dividing
[E x F] by G; provided, however, that an adjustment of the Exercise Price pursuant to this Section 3(b) shall not
result in an Exercise Price which is higher than the Exercise Price prior to such adjustment. For all purposes of the
7
foregoing (including, without limitation,
determining the adjusted Exercise Price and consideration per share under this Section 3(b)), the following shall be applicable:
i.
Issuance of Common Stock Equivalents. If the Company in any manner issues or sells any Common Stock Equivalents (other than
Common Stock Equivalents that qualify as Exempted Securities (except for issuances under clause (d) of the definition of Exempted Securities
in the Purchase Agreement)) and the lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise
or exchange thereof is less than the Applicable Price, then such Common Stock shall be deemed to be outstanding and to have been issued
and sold by the Company at the time of the issuance or sale of such Common Stock Equivalents for such price per share. For the purposes
of this Section 3(b)(i), the “lowest price per share for which one share of Common Stock is issuable upon the conversion,
exercise or exchange thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received
or receivable by the Company with respect to one share of Common Stock upon the issuance or sale of the Stock Equivalent and upon conversion,
exercise or exchange of such Common Stock Equivalent and (y) the lowest conversion price set forth in such Common Stock Equivalent for
which one share of Common Stock is issuable upon conversion, exercise or exchange thereof minus (2) the sum of all amounts paid or payable
to the holder of such Common Stock Equivalent (or any other Person) upon the issuance or sale of such Common Stock Equivalent plus the
value of any other consideration received or receivable by, or benefit conferred on, the holder of such Common Stock Equivalent (or any
other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of such
Common Stock upon conversion, exercise or exchange of such Common Stock Equivalents, and if any such issue or sale of such Common Stock
Equivalents is made upon exercise of any options for which adjustment of this Pre-funded Warrant has been or is to be made pursuant to
other provisions of this Section 3(b), except as contemplated below, no further adjustment of the Exercise Price shall be made
by reason of such issue or sale.
ii.
Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any options, the additional
consideration, if any, payable upon the issue, conversion, exercise, or exchange of any Common Stock Equivalents, or the rate at which
any Common Stock Equivalents are convertible into or exercisable or exchangeable for Common Stock increases or decreases at any time,
the Exercise Price in effect at the time of such increase or decrease shall be adjusted to the Exercise Price which would have been in
effect at such time had such options or Common Stock Equivalents provided for such increased or decreased purchase price, additional consideration
or increased or decreased conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section
3, if the terms of any option or Common Stock Equivalent that was outstanding as of the date of issuance of this Pre-funded Warrant
are increased or decreased in the manner described in the immediately preceding sentence, then such option or Common Stock Equivalent
and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date
of such increase or decrease. No adjustment pursuant to this Section 3 shall be made if such adjustment would result in an increase
of the Exercise Price then in effect.
iii.
Calculation of Consideration Received. If any option and/or Common Stock Equivalent and/or Adjustment Right is issued in
connection with the issuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the
“Primary Security”, and such option and/or Common Stock Equivalent and/or Adjustment Right, the “Secondary
Securities”), together comprising one integrated transaction, the consideration per share of Common Stock with respect to such
Primary Security shall be deemed to be equal to the difference of (x) the lowest price per share for
8
which one share of Common Stock was
issued in such integrated transaction (or was deemed to be issued pursuant to Section 3(b)(i) or 3(b)(ii) above, as applicable)
solely with respect to such Primary Security, minus (y) with respect to such Secondary Securities, the sum of (I) the Black Scholes Consideration
Value of each such option, if any, (II) the fair market value (as determined by the Holder) or the Black Scholes Consideration Value,
as applicable, of such Adjustment Right, if any, and (III) the fair market value (as determined by the Holder) of such Common Stock Equivalent,
if any, in each case, as determined on a per share basis in accordance with this Section 3(b)(iii). If any Common Stock, options,
or Common Stock Equivalents are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor (for
the purpose of determining the consideration paid for such Common Stock, option, or Common Stock Equivalent, but not for the purpose of
the calculation of the Black Scholes Consideration Value) will be deemed to be the net amount of consideration received by the Company
therefor. If any Common Stock, options or Common Stock Equivalents are issued or sold for a consideration other than cash (for the purpose
of determining the consideration paid for such Common Stock, option or Common Stock Equivalent, but not for the purpose of the calculation
of the Black Scholes Consideration Value), the amount of such consideration received by the Company will be the fair value of such consideration,
except where such consideration consists of publicly traded securities, in which case the amount of consideration received by the Company
for such securities will be the arithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding
the date of receipt. If any Common Stock, options or Common Stock Equivalents are issued to the owners of the non-surviving entity in
connection with any merger in which the Company is the surviving entity (for the purpose of determining the consideration paid for such
Common Stock, option or Common Stock Equivalent, but not for the purpose of the calculation of the Black Scholes Consideration Value),
the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non- surviving
entity as is attributable to such Common Stock, options or Common Stock Equivalents, as the case may be. The fair value of any consideration
other than cash or publicly traded securities (for the purpose of determining the consideration paid for such Common Stock, option, or
Common Stock Equivalent, but not for the purpose of the calculation of the Black Scholes Consideration Value) will be determined jointly
by the Company and the Holder. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring
valuation (the “Valuation Event”), the fair value of such consideration will be determined within five (5) Trading
Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selected by the
Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the
fees and expenses of such appraiser shall be borne by the Company.
iv.
For the avoidance of doubt, the number of shares issuable upon exercise of this Pre-funded Warrant shall not be proportionately
adjusted nor shall the aggregate Exercise Price of this Pre-funded Warrant be adjusted as a result of the Business Combination Transaction.
c)
Reserved.
d)
Pro-rata Distributions. During such time as this Pre-funded Warrant is outstanding, if the Company shall declare or make
any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Common Stock, by way of return of capital
or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend,
spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”),
at any time after the issuance of this Pre-funded Warrant, then, in each such case, the Holder shall be entitled to participate
in such Distribution to the same extent that the Holder would have
9
participated
therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Pre-funded Warrant
(without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately
before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders
of Common Stock is to be determined for the participation in such Distribution; provided, however, that, to the extent that
the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then
the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any Common Stock
as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the
Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation.
e)
Fundamental Transaction. If, at any time while this Pre-funded Warrant is outstanding, (i) the Company, directly or indirectly,
in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company,
directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange
offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender
or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding
Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization
or recapitalization 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, or (v) the Company, directly or indirectly, in one or more related transactions consummates
a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization,
spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than
50% of the outstanding Common Stock (not including any Common Stock held by the other Person or other Persons making or party to, or associated
or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each,
a “Fundamental Transaction”), then, upon any subsequent exercise of this Pre-funded Warrant, the Holder shall have
the right to receive, for each Pre-funded Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence
of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise
of this Pre-funded Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is
the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result
of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Pre-funded Warrant is exercisable immediately
prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Pre-funded Warrant).
For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction,
and the Company shall apportion the Exercise 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 exercise of this Pre-funded Warrant following such Fundamental Transaction. The Company shall cause any successor
entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in
writing all of the obligations of the Company under this Pre-funded Warrant and the other Transaction Documents in accordance with the
provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and
approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver
to the Holder in exchange for this Pre-funded Warrant a security of the Successor Entity evidenced by a written instrument substantially
similar in form and substance to this Pre-funded Warrant which is exercisable for a corresponding number of shares of capital stock of
such Successor Entity (or its parent entity) equivalent to the Common Stock acquirable and receivable upon exercise of this Pre-funded
Warrant (without regard to any limitations on
10
the exercise of this Pre-funded Warrant)
prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital
stock (but taking into account the relative value of the Common Stock pursuant to such Fundamental Transaction and the value of
such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the
economic value of this Pre-funded Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably
satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall
succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Pre-funded
Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and
may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Pre-funded Warrant
and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.
f)
Calculations. All calculations under this Section 3 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 3, 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.
g)
i.
Adjustment to Exercise Price. Whenever the Exercise Price is
adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by facsimile or email a
notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of shares of Pre-funded Warrant
Stock and setting forth a brief statement of the facts requiring such adjustment.
ii.
Notice to Allow Exercise 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 rights or Pre-funded 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, or 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 delivered by facsimile or email to the
Holder at its last facsimile number or email address as it shall appear upon the Pre-funded Warrant Register of the Company, at least
15 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 Pre-funded Warrant s, 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 Pre-funded 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 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. To the extent that any notice provided
in this Pre-funded Warrant constitutes, or contains, material, on-public information regarding the Company or any of
11
the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise
this Pre-funded Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice
except as may otherwise be expressly set forth herein.
h)
Exchange Cap Limitation. For purposes of clarity, no such adjustments in Section 3 shall result in the issuance of shares
pursuant to the exercise of this Pre-funded Warrant which would result in the violation of the Exchange Cap.
Section 4. Transfer
of Pre-funded Warrant.
a)
Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d)
hereof and to the provisions of Section 4.1, this Pre-funded Warrant and all rights hereunder (including, without limitation, any
registration rights) are transferable, in whole or in part, upon surrender of this Pre-funded Warrant at the principal office of the Company
or its designated agent, together with a written assignment of this Pre-funded Warrant substantially in the form attached hereto duly
executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.
Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Pre-funded Warrant or Pre-funded Warrants
in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment
and shall issue to the assignor a new Pre-funded Warrant evidencing the portion of this Pre-funded Warrant not so assigned, and this Pre-funded
Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender
this Pre-funded Warrant to the Company unless the Holder has assigned this Pre-funded Warrant in full, in which case, the Holder shall
surrender this Pre-funded Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment
form to the Company assigning this Pre-funded Warrant in full. The Pre-funded Warrant, if properly assigned in accordance herewith, may
be exercised by a new holder for the purchase of shares of Pre-funded Warrant Stock without having a new Pre-funded Warrant issued.
b)
New Pre-funded Warrant s. This Pre-funded Warrant may be divided or combined with other Pre-funded Warrants upon presentation
hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Pre-funded
Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer
which may be involved in such division or combination, the Company shall execute and deliver a new Pre-funded Warrant or Pre-funded Warrants
in exchange for the Pre-funded Warrant or Pre-funded Warrants to be divided or combined in accordance with such notice. All Pre-funded
Warrants issued on transfers or exchanges shall be dated the Grant Date and shall be identical with this Pre-funded Warrant except as
to the number of shares of Pre-funded Warrant Stock issuable pursuant thereto.
c)
Pre-funded Warrant Register. The Company shall register this Pre-funded Warrant, upon records to be maintained by the Company
for that purpose (the “Pre-funded Warrant Register”), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Pre-funded Warrant as the absolute owner hereof for the purpose of any exercise
hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
d)
Transfer Restrictions. If, at the time of the surrender of this Pre-funded Warrant in connection with any transfer of this
Pre-funded Warrant, the transfer of this Pre-funded Warrant shall not be either (i) registered pursuant to an effective registration statement
under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale
restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such
transfer, that the Holder or transferee of this Pre-funded Warrant, as the case may be, comply with the provisions of Section 3(f) of
the Purchase Agreement.
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e)
Representation by the Holder. The Holder, by the acceptance hereof, represents and Pre-funded Warrants that it is acquiring
this Pre-funded Warrant and, upon any exercise hereof, will acquire the shares of Pre-funded Warrant Stock issuable upon such exercise,
for its own account and not as a nominee for any other party, and for investment, and that the Holder shall not offer, sell or otherwise
dispose of this Pre-funded Warrant and, upon any exercise hereof, the shares of Pre-funded Warrant Stock issuable upon such exercise,
in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities
Act. This Pre-funded Warrant, any Pre-funded Warrant issued in substitution or replacement therefor, and any shares of Pre-funded Warrant
Stock issuable upon such exercise hereof or thereof, shall be stamped or imprinted with a legend in substantially the following form:
“NEITHER THIS SECURITY
NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.”
Section 5. Miscellaneous.
a)
No Rights as Stockholder Until Exercise. This Pre-funded Warrant does not entitle the Holder to any voting rights, dividends,
or other rights as a stockholder of the Company prior to the exercise hereof.
b)
Loss, Theft, Destruction, or Mutilation of Pre-funded Warrant. The Company covenants that upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction, or mutilation of this Pre-funded Warrant or any stock certificate
relating to the shares of Pre-funded Warrant Stock, and in case of loss, theft, or destruction, of indemnity or security reasonably satisfactory
to it (which, in the case of the Pre-funded Warrant, shall not include the posting of any bond), and upon surrender and cancellation of
such Pre-funded Warrant or stock certificate, if mutilated, the Company will make and deliver a new Pre-funded Warrant or stock certificate
of like tenor and dated as of such cancellation, in lieu of such Pre-funded Warrant or stock certificate.
c)
Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right
required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding
Business Day.
d)
Authorized Shares.
The Company covenants
that, during the period the Pre-funded Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of the shares of Pre-funded Warrant Stock upon the exercise of any purchase rights under
this Pre-funded Warrant. The Company further covenants that its issuance of this Pre-funded Warrant shall constitute full authority to
its officers who are charged with the duty of issuing the necessary shares of Pre-
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funded Warrant Stock upon the exercise
of the purchase rights under this Pre-funded Warrant. The Company will take all such reasonable action as may be necessary to assure that
such shares of Pre-funded Warrant Stock may be issued as provided herein without violation of any applicable law or regulation, or of
any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all shares of Pre-funded
Warrant Stock which may be issued upon the exercise of the purchase rights represented by this Pre-funded Warrant will, upon exercise
of the purchase rights represented by this Pre-funded Warrant and payment for such shares of Pre-funded Warrant Stock in accordance herewith,
be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in
respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the
extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its Certificate
of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Pre-funded Warrant, but will
at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate
to protect the rights of Holder as set forth in this Pre-funded Warrant against impairment. Without limiting the generality of the foregoing,
the Company will (i) not increase the par value of any shares of Pre-funded Warrant Stock above the amount payable therefor upon such
exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of Pre-funded Warrant Stock upon the exercise of this Pre-funded
Warrant, and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions, or consents from any public regulatory
body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Pre-funded Warrant.
Before taking
any action which would result in an adjustment in the number of shares of Pre-funded Warrant Stock for which this Pre-funded Warrant is
exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as
may be necessary from any public regulatory body or bodies having jurisdiction thereof.
e)
Governing Law; Jurisdiction. All questions concerning the construction, validity, enforcement, and interpretation of this
Pre-funded Warrant shall be determined in accordance with the provisions of the Purchase Agreement. All questions concerning the construction,
validity, enforcement, and interpretation of this Pre-funded Warrant shall be governed by and construed and enforced in accordance with
the internal laws of the State of Nevada, without regard to the principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Pre-funded Warrant (whether
brought against a party hereto or their respective affiliates, directors, officers, shareholders, partners, members, employees, or agents)
shall be commenced exclusively in the state and federal courts sitting in the City of Las Vegas, Count of Clark, State of Nevada. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of Las Vegas, County
of Clark, State of Nevada, 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 improper or is an 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 Pre-funded Warrant 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. If either party shall commence an action, suit or proceeding to enforce any provisions of
this Pre-funded Warrant, the prevailing party in such action, suit or proceeding shall be reimbursed by the
14
other party for their reasonable attorneys’
fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
f)
Restrictions. The Holder acknowledges that the shares of Pre-funded Warrant Stock acquired upon the exercise of this Pre-funded
Warrant, if not registered and the Holder does not utilize cashless exercise after six months from the date hereof, may have restrictions
upon resale imposed by state and federal securities laws.
g)
Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder
shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers, or remedies. Without limiting any other
provision of this Pre-funded Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision
of this Pre-funded Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall
be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate
proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers,
or remedies hereunder.
h)
Notices. Any notice, request or other document required or permitted to be given or delivered to the Holders by the Company
shall be delivered in accordance with the notice provisions of the Purchase Agreement.
i)
Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Pre-funded
Warrant to purchase shares of Pre-funded Warrant Stock, and no enumeration herein of the rights or privileges of the Holder, shall give
rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability
is asserted by the Company or by creditors of the Company.
j)
Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Pre-funded Warrant. The Company agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Pre-funded Warrant and hereby agrees
to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
k)
Successors and Assigns. Subject to applicable securities laws, this Pre-funded Warrant and the rights and obligations evidenced
hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted
assigns of Holder. The provisions of this Pre-funded Warrant are intended to be for the benefit of any Holder from time to time of this
Pre-funded Warrant and shall be enforceable by the Holder or holder of shares of Pre-funded Warrant Stock.
l)
Amendment; Waivers. Any modifications, amendments, or waivers of the provisions hereof shall be subject to Section 11(f)
of the Purchase Agreement.
m)
Severability. Wherever possible, each provision of this Pre-funded Warrant shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Pre-funded Warrant shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Pre-funded Warrant
n)
Headings. The headings used in this Pre-funded Warrant are for the convenience of reference only and shall not, for any
purpose, be deemed a part of this Pre-funded Warrant.
********************
(Signature Page Follows)
15
IN WITNESS WHEREOF,
the Company has caused this Pre-funded Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
iQSTEL, INC.
By: /s/
Leandro Iglesias
Leandro Iglesias
Chief
Executive Officer
16
EX-10.1 — SECURITIES PURCHASE AGREEMENT, DATED OCTOBER 20, 2026, BY AND AMONG IQSTEL INC., M2B FUNDING CORP., AND ADI FUNDING LLC.
EX-10.1
Filename: ex10_1.htm · Sequence: 6
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this “Agreement”)
is made as of October 20, 2026, by and among iQSTEL, Inc., a Nevada corporation (the “Company”), M2B Funding Corp., a Florida
corporation (“M2B”), and ADI Funding LLC, a Florida limited liability company (“ADI”; each of M2B and ADI, a “Purchaser”
and collectively, the “Purchasers”).
The Company desires to issue and sell, and
each Purchaser desires to acquire, two separate senior secured, nonconvertible promissory notes, each in a principal amount of up to $1,500,000
(each a “Note” and together the “Notes”), funded in two tranches, together with a pre-funded common stock purchase
warrant (the “Warrant”), on the terms below. The Notes, Pre-funded Warrant and any shares issuable under them are the “Securities.”
ARTICLE I — PURCHASE AND CLOSINGS
1.1
Purchase and Funding. Subject to this Agreement, each Purchaser shall acquire its own senior secured
nonconvertible promissory note in a maximum principal amount of $1,500,000 (each a “Note” and collectively, the “Notes”),
through (a) an initial gross advance of $750,000 by each Purchaser on October 20, 2026 (“Tranche A”), aggregating $1,500,000,
and (b) a second gross advance of $750,000 by each Purchaser on or before December 1, 2026 (“Tranche B”), aggregating $1,500,000,
subject in each case to the applicable closing conditions. Outstanding principal under each Note equals amounts actually advanced by the
applicable Purchaser, including fees withheld from Tranche A under Section 1.3 that are deemed funded principal. The Company shall execute
and deliver a separate Note to each Purchaser evidencing both of that Purchaser’s tranches, with a separate funding and amortization
ledger.
1.2
Note Economics. Each tranche bears interest at 18% per annum, payable monthly in cash, and amortizes
in four installments equal to 25% of the original principal of that tranche at six, twelve, eighteen and twenty-four months after its
actual funding date. Each tranche matures twenty-four months after its actual funding date. The Notes shall govern computation conventions,
default interest, prepayment, issuer stock-payment elections, and remedies. The Notes does not grant each Purchaser a conversion right.
1.3
Fees and Net Proceeds. At the initial Closing, the Company shall pay to each Purchaser a $10,000
legal fee and a $10,000 non-accountable expense fee, each fully earned and nonrefundable, by deduction from that Purchaser’s $750,000
gross Tranche A advance. Accordingly, $750,000 of principal shall be deemed funded and outstanding under each Note at the initial Closing,
and each Purchaser shall remit $730,000 net cash to the Company ($1,460,000 aggregate net cash). No additional fee shall be deducted from
Tranche B absent a separate written agreement with the affected Purchaser; the contemplated Tranche B net remittance is $750,000 per Purchaser
($1,500,000 aggregate).
1.4
Pre-funded Warrants. At the initial Closing, the Company shall issue to M2B one Pre-funded Warrant
exercisable for 210,000 shares and to ADI one Pre-funded Warrant exercisable for 210,000 shares, totaling 420,000 shares of Common Stock,
in each case subject to adjustment under the respective warrant. The nominal exercise price is $0.0001 per share. Both warrants are fully
earned and issued at the initial Closing, regardless of whether Tranche B is funded. The parties shall confirm the consideration allocation
and accounting treatment before execution; no additional $300,000 cash contribution is presumed.
1.5
Issuer Stock Payments. Only the Company, not each Purchaser, may elect to satisfy scheduled Note
principal with common stock, strictly subject to the Notes. No stock payment election is effective until the parties execute a written
Stock Payment Price formula and applicable issuance conditions are met; otherwise the affected principal is payable in cash when due.
Interest is payable in cash. Neither this Agreement nor the Notes guarantees Rule 144 eligibility, holding-period tacking or unrestricted
resale.
1.6
Closings and Deliveries. The initial Closing may occur by exchange of signed documents and wire
transfer. The Company shall deliver (i) executed Note, (ii) executed Security Agreement and perfection deliverables,
(iii) executed Pre-funded Warrant, (iv) board
resolutions and officer certificate, (v) good-standing and charter evidence, (vi) lien-search results and agreed lien releases or subordinations,
(vii) transfer-agent acknowledgment
and warrant share-reservation evidence, and
(viii) other documents reasonably necessary to establish the contemplated security and valid issuance. each Purchaser shall deliver the
net initial wire. At Tranche B Closing, the Company shall deliver a bring-down certificate, updated lien searches on request, updated
borrowing and collateral confirmation and any required reaffirmations; each Purchaser shall wire the second advance.
1.7
Conditions to Purchaser Funding. Each advance is conditioned upon: accurate Company representations
in all material respects (qualified representations accurate as written); performance of covenants; absence of Default or Event of Default
and no event reasonably expected to cause a Material Adverse Effect; effective Transaction Documents; perfected first-priority liens subject
solely to Permitted Liens identified in writing; no injunction or legal prohibition; and continued listing/trading and DTC eligibility,
except as Purchaser expressly waives in writing. The second advance is not due if these conditions are unmet by December 1, 2026; each
Purchaser may waive or extend them in writing without waiving other rights.
ARTICLE II — COMPANY REPRESENTATIONS
2.1
Organization; Authority; Enforceability. The Company is duly organized, validly existing and in
good standing under Nevada law, has power to own its property and conduct its business, and has authorized execution, performance, borrowing,
granting security interests, issuance of the Pre-funded Warrant and issuance of underlying shares. Transaction Documents are binding obligations,
subject to generally applicable bankruptcy and equitable principles. No further corporate approval is required other than approvals expressly
identified on Schedule 1.
2.2
Capitalization and Issuance. The capitalization, outstanding convertible securities, warrants,
options and commitments disclosed on Schedule 1 are true and complete in all material respects. Pre-funded Warrant shares, when duly issued
in accordance with the Pre-funded Warrant, will be validly issued, fully paid and nonassessable. Sufficient authorized shares are reserved
for the Pre-funded Warrant, and for any valid Company stock-payment election when permitted. No issuance will violate applicable exchange
shareholder-approval rules.
2.3
SEC Reports; Financial Statements; No Misstatements. The Company has timely filed all material
Exchange Act reports required during the preceding twelve months, taking permitted extensions into account, and those filings, taken as
a whole and as corrected by later filings, contain no material misstatement or omission. Its financial statements fairly present in all
material respects its financial condition in accordance with the accounting standards stated therein. Except as disclosed in SEC filings
or Schedule 1, there has been no Material Adverse Effect since the latest reported financial statements.
2.4
No Conflict; Litigation; Compliance. Execution and performance do not violate the charter, applicable
law, material agreements or court orders, and do not trigger any unwaived consent, default, acceleration or lien. There is no pending
or, to the Company’s knowledge, threatened material litigation, investigation or insolvency proceeding except as disclosed in Schedule
1 or SEC filings. The Company is in material compliance with applicable securities laws and exchange rules.
2.5
Collateral; Title; Existing Debt. The Company and each applicable grantor own or have rights in
the collateral purported to be pledged, free of liens other than the Permitted Liens disclosed on Schedule 1. Schedule 1 accurately lists
all material secured debt, liens, existing financing arrangements and material restrictions on further indebtedness or liens. No other
creditor has priority over Purchaser except as expressly accepted in writing by Purchaser. The Company has not granted an undisclosed
conflicting security interest.
2.6
Investment Transaction; Disclosure. The Company has not engaged any broker entitled to compensation
from Purchaser. It has provided Purchaser access to material information reasonably requested for this transaction. The Company shall
not selectively disclose material nonpublic information to Purchaser without each Purchaser’s prior written consent and a mutually
agreed confidentiality and public-disclosure protocol.
2.7
Subsidiaries; Ownership; Investments.
Schedule 1 identifies each subsidiary, jurisdiction,
percentage ownership and material asset-holding entity. Except as specifically disclosed, the Company owns the equity interests it purports
to own free of undisclosed
2
liens. No subsidiary assets are represented
to be collateral unless the applicable subsidiary executes a separate enforceable grant and perfection documents.
2.8
Taxes; Indebtedness; Solvency.
The Company has filed material tax returns
and paid material taxes due except good-faith contested amounts with adequate reserves. Schedule 1 lists outstanding secured indebtedness,
guarantees, defaults and material payment obligations. After giving effect to each advance, the Company is not insolvent under applicable
fraudulent-transfer standards and is not entering into the Transaction Documents with intent to hinder, delay or defraud creditors.
2.9
Material Contracts; Defaults.
Except as disclosed in Schedule 1, the Company
is not in material default under a material contract, loan, lease, license or judgment. Neither funding tranche, issuance of the Pre-funded
Warrant nor the grant of security causes an undisclosed acceleration, cross-default, anti-dilution adjustment, consent right, mandatory
prepayment or competing lien.
2.10
Intellectual Property; Insurance; Assets.
The Company owns or has valid rights to use
intellectual property material to its business and has not received written notice of material infringement claims, except as disclosed.
It maintains commercially reasonable property and liability insurance, and owns or leases the material assets used in its business, subject
to disclosed liens and customary exceptions.
2.11
Regulatory and Securities Compliance.
Except as disclosed in SEC Reports or Schedule
1, the Company is not subject to a material unresolved SEC or exchange enforcement action, stop order, trading suspension, DTC restriction
or delisting determination. The private placement will be effected pursuant to an available registration exemption, with required federal
and state notices timely filed.
2.12
No Undisclosed Placement Compensation; No General Solicitation.
No broker, finder or investment banker is entitled
to compensation from Purchaser in connection with this transaction. Neither the Company nor anyone acting on its behalf has conducted
general solicitation inconsistent with the exemption relied upon. The Company is responsible for fees of any intermediary it retained.
ARTICLE III — PURCHASER REPRESENTATIONS
3.1
Investment Intent; Status. Purchaser acquires the Securities for its own account for investment
and not with a present view to an unlawful distribution; is an “accredited investor” under Regulation D; understands the Securities
have not been registered and may be subject to resale restrictions; and has had an opportunity to review Company disclosures and ask questions.
Purchaser is not relying on Company representations other than those expressly contained in the Transaction Documents, without limiting
liability for fraud.
3.2
Authority. Purchaser has the requisite authority to execute and perform this Agreement. each Purchaser’s
obligations to fund Tranche B are expressly conditioned as set forth herein and do not waive any condition by reason of funding Tranche
A.
ARTICLE IV — COVENANTS AND INVESTOR PROTECTIONS
4.1
Security and Priority. The Company shall execute and maintain the Security Agreement and cause
each required grantor to execute joinders, UCC financing statements, control agreements, intellectual-property filings, lien releases
and subordination agreements reasonably requested by Purchaser. The intended lien is first-priority and perfected, subject only to expressly
approved Permitted Liens. Company shall not impair, contest or permit termination of each Purchaser’s security without written consent.
3
4.2
Negative Covenants. While any Note obligation remains outstanding, without each Purchaser’s
prior written consent, Company shall not, and shall cause material subsidiaries not to: (a) incur indebtedness except ordinary-course
trade payables and indebtedness expressly listed as permitted; (b) create or permit liens other than Permitted Liens; (c) pay dividends,
repurchase equity or make distributions except as permitted in the Notes;
(d) sell material assets outside the ordinary course;
(e) enter affiliate transactions except on arm’s-length terms;
(f) merge, reorganize or transfer substantially
all assets without successor assumption and compliance with the Notes; or (g) amend organizational documents in a manner materially adverse
to Purchaser. More protective restrictions in the Notes or Security Agreement control.
4.3
Information and Compliance. The Company shall remain current in required SEC reporting, maintain
its corporate existence, preserve material assets and insurance, pay material taxes subject to good-faith contests, and promptly notify
Purchaser of any Default, material litigation, material adverse development, threatened delisting, DTC chill or lien claim. On reasonable
request it shall provide financial and collateral information, compliance certificates and reasonable inspection access, subject to customary
confidentiality safeguards.
4.4
Pre-funded Warrant; Share Reservation; Transfer Agent. The Company shall reserve sufficient authorized
common stock for all Pre-funded Warrant shares, maintain transfer-agent arrangements, pay issuance, DTC and transfer-agent costs, and
deliver shares promptly upon valid exercise, subject to applicable law and beneficial-ownership limitations in the Pre-funded Warrant.
The Company shall use commercially reasonable efforts to support lawful legend removal and Rule 144 documentation when actually available,
without guaranteeing eligibility or tacking.
4.4
A Piggyback Registration Rights. Upon the Company’s next filing of a registration statement under
the Securities Act covering shares of Common Stock for its own account or any other securityholder (excluding Form S-4, Form S-8 or successor
forms used solely for business combinations or employee plans), the Company shall include for resale all shares underlying each Purchaser’s
Pre-funded Warrant, whether exercised or unexercised, and all shares issued or issuable in payment of principal under either Note, to
the extent such shares are determinable and eligible for registration under applicable SEC rules. Company shall give each Purchaser at
least ten Business Days’ advance written notice, and each Purchaser shall timely provide customary selling-stockholder information.
If the SEC requires a cutback, any cutback between M2B and ADI shall be pro rata, and omitted securities shall be registered on the next
eligible registration statement. The Company shall use commercially reasonable efforts to secure effectiveness and keep the statement
effective until all covered shares have been sold or can be sold without restriction under Rule 144. The Company shall pay registration
and filing costs, excluding selling commissions and separate Purchaser counsel fees. Neither Purchaser must exercise its warrant before
the underlying shares are registered. This covenant does not guarantee SEC acceptance or Rule 144 eligibility.
4.5
Additional Financings; Anti-Circumvention. No subsequent financing, security issuance or asset
transfer shall be structured to evade the Notes’ negative covenants, collateral protections or the Pre-funded Warrant’s anti-dilution
provisions. Any variable-rate financing prohibition in the Notes applies fully. The Company shall give Purchaser prompt written notice
of material proposed indebtedness, secured financing or equity-linked issuances that may affect each Purchaser’s rights.
4.6
Disclosure; Form D; Listing. The Company shall make all required Form D and state notice filings
and any timely Form 8-K or other securities-law disclosure relating to the transaction, subject to applicable legal requirements. It shall
maintain its exchange listing and DTC eligibility to the extent required by the Notes, and not disclose each Purchaser’s name in
publicity beyond legally required disclosures without reasonable advance notice where practicable.
4.7
Indemnification. Company shall indemnify Purchaser and its affiliates, officers, directors, agents
and counsel against third-party claims, losses and reasonable documented expenses arising from Company’s material breach of its
representations, covenants or Transaction Documents or material violation of law in the issuance, except to the extent caused by an indemnified
person’s gross negligence, willful misconduct or material breach. Indemnity
4
includes reasonable defense costs and survives
repayment, subject to applicable law; no duplicative recovery is permitted.
4.8
Enforcement; Expenses. The Company shall reimburse Purchaser for reasonable documented out-of-pocket
enforcement costs, including attorneys’ fees, to the extent provided in the Notes and Security Agreement. Rights and remedies are
cumulative, including specific performance and injunctive relief where legally available. Payments later avoided in bankruptcy or clawed
back reinstate the corresponding obligation to the extent permitted by law.
4.9
Right of Participation in Subsequent Financings. While any principal remains outstanding, the Company
shall provide Purchaser written notice of any proposed debt or equity-linked financing, including material economics and security terms,
at least five Business Days before consummation (or a shorter period Purchaser accepts). each Purchaser shall have the right, but not
the obligation, to participate for up to 25% of the cash amount of that financing on substantially the same economic terms, subject to
applicable securities law and exchange rules. This right does not obligate Purchaser to fund any amount and does not waive the negative
covenants restricting indebtedness and liens.
4.10
Most Favored Nation; No More Favorable Secured Debt. While the Notes is outstanding, if the Company
issues to another financing counterparty debt securities with more favorable financial covenants, default remedies, default rates, collateral
rights or prepayment protection, the Company shall promptly notify Purchaser and, upon each Purchaser’s written election, amend
the corresponding protections in the Transaction Documents to provide substantially equivalent terms, to the extent legally permissible.
No provision hereof authorizes otherwise prohibited indebtedness or liens.
4.11
Restriction on Variable-Rate Securities. Without each Purchaser’s prior written consent,
which may be withheld, delayed, denied, or conditioned by Purchaser for any reason or for no reason in is sole and absolute discretion,
while the Notes remains outstanding, the Company shall not enter into any new floating-price convertible debt, variable-rate equity line,
floorless convertible security or other financing whose share issuance price is determined by a discount to future market prices, except
transactions specifically listed and approved in Schedule 1. This covenant is in addition to, not in lieu of, the indebtedness and lien
restrictions.
4.12
No Circumvention; Corporate Existence. The Company shall not amend, reorganize, transfer assets,
enter into affiliate transactions or use subsidiaries or successor entities for the purpose of circumventing any Purchaser protection.
It shall preserve corporate existence and material rights, and shall not consummate a merger, consolidation or substantially-all-assets
sale unless the successor assumes the Obligations in writing and all lien rights remain valid and perfected.
4.13
Transfer Restrictions and Legend Removal. The Pre-funded Warrant and underlying shares may be transferred
only in compliance with the Securities Act and applicable state law. The Company shall instruct its transfer agent to issue shares upon
valid Pre-funded Warrant exercise in accordance with the definitive Pre-funded Warrant and shall remove restrictive legends when supported
by an effective registration statement or an available exemption and customary supporting documentation. No automatic Rule 144 holding-period
tacking or immediate unrestricted issuance is promised.
4.14
Disclosure; Material Nonpublic Information. The Company shall timely disclose material terms of
the transaction to the extent required by securities laws and exchange rules. The Company shall not provide Purchaser material nonpublic
information without prior written consent and an agreed confidentiality and public-disclosure protocol. The Company shall not assert that
Purchaser is restricted from lawful trading solely by virtue of having executed the Transaction Documents.
4.15
Equity Protection; Stock Splits; Pre-funded Warrant. The Company shall maintain sufficient authorized
and unissued common shares to satisfy the Pre-funded Warrant, subject to applicable exchange and shareholder approval requirements. The
definitive Pre-funded Warrant shall provide customary adjustments for stock splits, combinations, reclassifications, dividends and fundamental
transactions, without creating a holder right to convert
5
the Notes. The two warrants cover an aggregate
of 420,000 underlying shares, 210,000 for each Purchaser, subject to adjustments in the definitive warrants.
4.16
Further Assurances; Subsidiary Joinders. The Company shall execute and cause applicable subsidiaries
to execute reasonably requested further documents, including additional grants, joinders, deposit account control agreements, intellectual
property security agreements, financing statements, lien releases and subordination instruments, to the extent required to establish the
expressly agreed collateral package. No subsidiary becomes bound merely by being named in this Agreement.
4.17
Specific Performance; Cumulative Remedies. each Purchaser may seek specific performance and injunctive
relief for breaches of covenants for which damages would be inadequate, subject to applicable law and equitable principles. All contractual
and statutory rights and remedies are cumulative; exercise or nonexercise of any right does not waive another.
ARTICLE V — ADDITIONAL REPRESENTATIONS
AND COVENANTS (JANUARY 2024 PRECEDENT PROTECTIONS)
5.1
Financial Statements; Internal Controls. The Company represents that the financial statements included
in its SEC Reports comply in all material respects with applicable accounting requirements and fairly present its financial position,
results of operations and cash flows for the periods presented, subject to disclosed qualifications and normal year-end adjustments for
interim statements. Except as disclosed in SEC Reports or Schedule 1, there has been no material change in accounting methods, no material
undisclosed liability required to be reflected under applicable accounting standards, and no material weakness in internal controls that
the Company is required to disclose but has not disclosed. The Company shall promptly provide Purchaser with copies of any auditor resignation,
going-concern notice or material restatement announcement.
5.2
Litigation; Investigations; Orders. Except as set forth in the SEC Reports or Schedule 1, there
is no action, suit, claim, inquiry, investigation or proceeding pending or, to the knowledge of the Company, threatened against the Company
or any material subsidiary that would reasonably be expected to impair the Company’s ability to perform its obligations under the
Transaction Documents, the validity of the Pre-funded Warrant or the enforceability or priority of the Security Interest. Neither the
Company nor, to its knowledge, any director or executive officer acting in that capacity is subject to an undisclosed material injunction,
cease-and-desist order or securities-related disqualification that would prohibit the contemplated transaction.
5.3
Material Changes; Undisclosed Events. Since the date of the most recent financial statements included
in the SEC Reports, except as specifically disclosed in subsequent SEC Reports or Schedule 1, the Company has not:
(a) incurred a material uninsured loss; (b)
disposed of material assets outside the ordinary course; (c) created a material undisclosed lien; (d) declared or paid an extraordinary
dividend; (e) made a material change in capital structure or issued securities requiring disclosure; (f) entered into an undisclosed material
related-party transaction; or (g) experienced an event reasonably expected to constitute a Material Adverse Effect. This representation
is repeated at each funding date subject to written disclosure accepted by Purchaser.
5.4
Title; Priority; Perfection. The Company represents that Schedule 1 accurately identifies existing
secured creditors, material collateral, all outstanding financing statements of which it is aware after reasonable inquiry, and any restrictions
on granting further liens. It shall provide complete copies of requested credit agreements, collateral documents and payoff letters. The
Company shall not represent that Purchaser holds a perfected first-priority security interest until the necessary filings, possession,
control, releases and subordination steps have actually been completed. each Purchaser may refuse either advance if satisfactory evidence
of the agreed lien priority has not been provided.
5.5
Continuing Financial and Operational Reporting. Until all Obligations have been discharged, the
Company shall deliver, within ten Business Days after filing, copies of its Forms 10-K, 10-Q and 8-K upon request (or notify Purchaser
that such filings are publicly available); promptly furnish written notice of any payment default, acceleration demand, covenant breach
or material enforcement action by another creditor; and, within fifteen Business Days after each calendar quarter, provide an officer
certificate addressing outstanding Note principal by
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tranche, accrued and
paid interest, scheduled amortization, material liens, outstanding litigation and compliance with the Transaction Documents. each Purchaser
may request reasonable supporting schedules, bank statements and collateral information where necessary to verify compliance, subject
to confidentiality and applicable law.
5.6
Preservation and Maintenance of Collateral. The Company shall maintain the material property constituting
Collateral in good working order, ordinary wear and tear excepted; maintain customary insurance for similar businesses; pay taxes, assessments
and charges before they become delinquent, except good-faith contests supported by adequate reserves; and preserve and defend title to
Collateral. Insurance proceeds relating to material Collateral losses shall be applied in accordance with the Security Agreement and any
applicable lender loss-payee endorsement. The Company shall not terminate or materially modify insurance in a manner adverse to Purchaser
without reasonable prior notice.
5.7
Restricted Payments; Affiliate Transactions. While any principal or accrued interest remains outstanding,
the Company shall not, without each Purchaser’s prior written consent, pay cash dividends or other distributions, redeem or repurchase
equity, make extraordinary payments to affiliates, forgive affiliate indebtedness or transfer material assets to an affiliate other than
for fair value in the ordinary course of business, except transactions expressly approved in Schedule 1. Ordinary-course compensation
and disclosed contractual payments on arm’s-length terms are permitted only to the extent not otherwise restricted by the Notes
or Security Agreement.
5.8
Debt and Lien Incurrence; Cross-Default Notice. The Company shall not incur, guarantee or permit
new funded indebtedness or grant or permit any lien other than indebtedness and liens expressly permitted under the Transaction Documents
or approved in advance in writing by Purchaser. The Company shall give Purchaser prompt written notice of any default notice, acceleration,
foreclosure threat, material lien filing or collateral seizure involving any existing or future creditor. No failure by Purchaser to object
to a disclosed transaction shall constitute consent to a new lien or waiver of first-priority requirements.
5.9
Change of Control; Asset Sales; Successor Assumption. The Company shall not enter into a merger,
consolidation, reorganization, change of control or sale of all or substantially all assets unless it has complied with any mandatory
prepayment and consent provisions in the Notes and, if the Obligations remain outstanding, the successor assumes all Obligations by enforceable
written instrument and grants or continues security interests with no diminution in agreed priority. The Company shall deliver advance
notice and transaction documents reasonably requested by Purchaser. Nothing in this provision authorizes a transaction otherwise prohibited
by the Notes.
5.10
Securities Issuance and Exchange Compliance. The Company shall obtain all corporate, stockholder,
exchange and transfer-agent approvals legally required for issuance of the Pre-funded Warrant and its underlying shares. It shall not
issue securities in violation of applicable Nasdaq shareholder approval or pricing rules. The Company shall maintain an accurate capitalization
table, notify Purchaser of any reverse split, reclassification, recapitalization or fundamental transaction affecting Pre-funded Warrant
rights, and comply with the definitive Pre-funded Warrant’s adjustment and exercise procedures.
5.11
Enforcement and Protective Advances. Following an Event of Default, each Purchaser may exercise
all rights under the Notes, Security Agreement and applicable law. Reasonable amounts paid by Purchaser to preserve or protect Collateral,
discharge an impermissible senior lien, maintain required insurance or enforce Transaction Documents shall be reimbursed by the Company
to the extent authorized by those documents and applicable law. Purchaser is not obligated to make protective advances, continue funding
or take possession of Collateral. The Company shall cooperate with commercially reasonable enforcement measures without waiving nonwaivable
statutory protections.
5.12
Conditions Not Waived by Prior Funding. The funding of Tranche A, the acceptance of any partial
payment, or each Purchaser’s knowledge of any condition shall not waive any requirement for Tranche B unless Purchaser expressly
agrees in a signed writing. The Company shall bring down its representations at the second funding date and confirm no continuing Default
or Event of Default, no material adverse development, and
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continued effectiveness of the collateral
and securities documents. A breach of any continuing covenant remains subject to the applicable cure and default provisions in the Notes
and Security Agreement.
ARTICLE VI — MISCELLANEOUS
6.1
Transaction Documents; Priority. “Transaction Documents” means this Agreement, the
Notes, the Security Agreement, the Pre-funded Warrant and related executed closing instruments. The Notes governs economic terms, payment
obligations, stock-payment elections and default remedies; the Security Agreement governs collateral attachment, perfection and enforcement;
the Pre-funded Warrant governs warrant exercise and adjustments. This Agreement supplements rather than limits those documents. No holder
conversion right is created.
6.2
Governing Law; Venue; Jury Waiver. This Agreement and disputes arising from the Transaction Documents
shall be governed by Nevada law, without regard to conflicts principles, except mandatory law governing perfection and priority of security
interests. Each party submits to exclusive jurisdiction of the state courts located in Clark County, Nevada and the United States District
Court for the District of Nevada, to the extent subject-matter jurisdiction exists, and waives objections to venue and inconvenient forum.
EACH PARTY KNOWINGLY AND VOLUNTARILY WAIVES TRIAL BY JURY TO THE MAXIMUM EXTENT PERMITTED BY LAW.
6.3
Notices. Notices shall be in writing and delivered by confirmed email, nationally recognized overnight
courier or personal delivery to the addresses and email contacts designated in writing by the parties. Email notice is effective when
transmitted without a delivery-failure message on a Business Day before 5:00 p.m. recipient local time; otherwise the next Business Day.
Default notices shall also be sent by overnight courier where reasonably practicable.
6.4
Amendment; Waiver; Assignment. Any amendment or waiver must be written and signed by Company and
Purchaser. No delay or partial exercise waives a right. each Purchaser may assign its rights and Note subject to securities laws and the
Notes; Company may not assign obligations without each Purchaser’s prior written consent. This Agreement binds permitted successors
and assigns.
6.5
Survival; Entire Agreement; Severability. Company representations survive each Closing and repayment
for eighteen months, except fraud claims and covenants intended to survive, which survive according to law and their terms. The Transaction
Documents and written schedules constitute the entire agreement. An unenforceable provision shall be severed only to the extent necessary
without invalidating the balance. Counterparts and electronic signatures are effective as originals.
6.6
Termination of Unfunded Commitment. If Tranche B has not closed by December 1, 2026 due to unmet
conditions or Company breach, each Purchaser may terminate its remaining funding commitment by written notice without affecting the outstanding
Tranche A Note, Pre-funded Warrant, liens, indemnities or remedies. No termination releases any accrued liability.
6.7
Payment Set Aside; Reinstatement. If any payment or transfer to Purchaser is subsequently avoided,
recovered or required to be repaid under bankruptcy, fraudulent-transfer or similar law, the relevant obligation shall be reinstated to
the extent permitted by law, together with related security interests, as though the payment had not been made.
6.8
Usury Savings. Notwithstanding anything in the Transaction Documents, interest and other amounts
treated as interest under applicable law shall not exceed the maximum lawful rate. Any excess received shall be applied to principal or
refunded as required by law. This clause does not independently modify the agreed 18% ordinary rate or the Notes’ default-rate provisions
except as required by law.
6.9
No Waiver; Severability; Counterparts. No course of dealing, delay or partial exercise waives any
Purchaser right. An invalid or unenforceable provision shall be severed or limited to the extent necessary without affecting the remainder.
This Agreement may be executed in counterparts and electronically, each treated as an original.
8
6.10
Successors; Assignments; Third Parties. This Agreement binds and benefits permitted successors
and assigns. The Company may not assign its obligations without each Purchaser’s prior written consent. each Purchaser may assign
its rights with a permitted transfer of the Notes, subject to applicable securities law. No person other than the parties and expressly
covered indemnified persons has third-party beneficiary rights.
6.11
Construction; No Implied Conversion. The parties have had an opportunity to review the Transaction
Documents with counsel. Headings are for convenience. No language in this Agreement, including share-reservation or transfer-agent provisions,
gives Purchaser any right to convert principal or interest into common stock. Only the Company may elect stock repayment of scheduled
principal if and when a written stock-payment formula and related issuance conditions have been agreed.
[Signatures on following page]
9
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed
this Securities Purchase Agreement as of the date first written above.
COMPANY:
IQSTEL, INC.
By: /s/ Leandro Iglesias
Name: Leandro Iglesias
Title: Chief Executive Officer
Date: 10/20/2026
PURCHASER:
ADI FUNDING LLC
By: /s/ Ariella A. Basdeo
Name: Ariella A. Basdeo
Title: Managing Member
Date: 10/20/2026
PURCHASER:
M2B FUNDING CORP.
By: /s/ Daniel Kordash
Name: Daniel Kordash
Title: President
Date: 10/20/2026
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EX-10.2 — SECURITY AGREEMENT, DATED OCTOBER 20, 2026, BY AND AMONG IQSTEL INC., M2B FUNDING CORP. (AS COLLATERAL AGENT), AND ADI FUNDING LLC.
EX-10.2
Filename: ex10_2.htm · Sequence: 7
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of October
20, 2026 (this “Agreement”) is entered into by and between iQSTEL, Inc., a Nevada corporation (“Obligor”), and
M2B Funding Corp., a Florida corporation (“M2B”), and ADI Funding LLC, a Florida limited liability company (“ADI”;
together with M2B, the “Secured Parties”). M2B is designated collateral agent for the Secured Parties (in that capacity, the
“Collateral Agent”).
WITNESSETH
WHEREAS, Obligor and the Collateral Agent are
parties to that certain Securities Purchase Agreement, dated as of October 20, 2026 by and among Obligor and the Collateral Agent (the
“Purchase Agreement”), pursuant to which the Obligor is issuing two separate senior secured, nonconvertible promissory notes,
each providing for up to $1,500,000 of principal advances in two tranches of up to $750,000 each, one issued to M2B and one to ADI (together,
the “Notes”); and
WHEREAS, the parties hereto acknowledge that
the Notes, as well as the obligations under the Purchase Agreement, shall be entitled to the benefits of the security interest provided
for the benefits of the holders of the Notes.
WHEREAS, in order to induce the Collateral Agent
to purchase the Notes, the Obligor agreed to execute and deliver to the Collateral Agent this Agreement for the benefit of the Collateral
Agent and to grant to it a first priority security interest in the Collateral (as defined in Section 1 below) of the Obligor to secure
the prompt payment, performance, and discharge in full of the Obligor’s obligations under the Notes (as defined below).
NOW, THEREFORE, in consideration of the agreements
herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
1.
Certain Definitions. As used in this Agreement, the
following terms shall have the meanings set forth in this Section 1. Terms used but not otherwise defined in this Agreement that are defined
in Article 9 of the UCC (such as “general intangibles” and “proceeds”) shall have the respective meanings given
such terms in Article 9 of the UCC.
(a)
“Collateral” means the collateral in which the Collateral Agent is granted a security
interest by this Agreement and which shall include all of the assets set forth on Exhibit A attached hereto.
(b)
“Obligations” means all of the Obligor’s obligations under this Agreement and
the Notes in each case, whether now or hereafter existing, voluntary or involuntary, direct or indirect, absolute or contingent, liquidated
or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later increased,
created or incurred, and all or any portion of such obligations or liabilities that are paid, to the extent all or any part of such payment
is avoided or recovered directly or indirectly from the Collateral Agent as a preference, fraudulent transfer or otherwise as such obligations
may be amended, supplemented, extended or modified from time to time.
(c)
“Obligor” shall have the meaning set forth in the preamble of this Agreement.
(d)
“UCC” means the Uniform Commercial Code, as currently in effect in the State of Nevada,
except where the UCC choice-of-law provisions require application of another jurisdiction’s law.
2.
Grant of Security Interest. As an inducement for the Collateral Agent to purchase the Notes from
Obligor and to advance funds to Obligor and to secure the complete and timely payment, performance, and discharge in full, as the case
may be, of all of the Obligations, Obligor hereby, unconditionally and irrevocably, pledges, grants, and hypothecates to the Collateral
Agent a continuing security interest in, a
first-priority lien upon, and a right of
set-off against all of the Obligor’s right, title, and interest of whatsoever kind and nature in and to the Collateral (the “Security
Interest”).
3.
Representations, Warranties, Covenants, and Agreements of the Obligor. Obligor represents and warrants
to, and covenants and agrees with, the Collateral Agent as follows:
(a)
Obligor has the requisite corporate power and authority to enter into this Agreement and otherwise
to carry out its obligations thereunder. The execution, delivery, and performance by Obligor of this Agreement and the filings contemplated
therein have been duly authorized by all necessary action on the part of Obligor and no further action is required by the Obligor.
(b)
Obligor represents and warrants that it has no place of business or offices where its respective
books of account and records are kept (other than temporarily at the offices of its attorneys or accountants) or places where Collateral
is stored or located, except as set forth on Schedule A attached hereto;
(c)
Except as set forth on Schedule 3(c), Obligor is the sole owner of the Collateral (except for non-exclusive
licenses granted by Obligor in the ordinary course of business), free and clear of any liens, security interests, encumbrances, rights
or claims, and is fully authorized to grant the Security Interest in and to pledge the Collateral. Except as set forth on Schedule 3(c),
there is not on file in any governmental or regulatory authority, agency or recording office an effective financing statement, security
agreement, license, or transfer or any notice of any of the foregoing (other than those that have been filed in favor of the Collateral
Agent pursuant to this Agreement) covering or affecting any of the Collateral. Except as set forth on Schedule 3(c), so long as this Agreement
shall be in effect, the Obligor shall not execute and shall not knowingly permit to be on file in any such office or agency any such financing
statement or other document or instrument (except to the extent filed or recorded in favor of the Collateral Agent pursuant to the terms
of this Agreement).
(d)
No part of the Collateral has been judged invalid or unenforceable. No written claim has been received
that any Collateral or Obligor’s use of any Collateral violates the rights of any third parties. There has been no adverse decision
to Obligor’s claim of ownership rights in or exclusive rights to use the Collateral in any jurisdiction or to the Obligor’s
right to keep and maintain such Collateral in full force and effect, and there is no proceeding involving said rights pending or, to the
best knowledge of any Obligor, threatened before any court, judicial body, administrative or regulatory agency, arbitrator, or other governmental
authority.
(e)
Obligor shall at all times maintain its books of account and records relating to the Collateral
at its principal place of business and its Collateral at the locations set forth on Schedule A attached hereto and may not relocate such
books of account and records or tangible Collateral unless it delivers to the Collateral Agent at least thirty
(30) days prior to such relocation (i) written notice
of such relocation and the new location thereof (which must be within the United States) and (ii) evidence that appropriate financing
statements and other necessary documents have been filed and recorded and other steps have been taken to perfect the Security Interest
to create in favor of the Collateral Agent valid, perfected and continuing first priority liens in the Collateral.
(f)
This Agreement creates in favor of the Collateral Agent a valid security interest in the Collateral
securing the payment and performance of the Obligations and, upon making the filings described in the immediately following sentence,
a perfected security interest in such Collateral. Except for the filing of financing statements on Form UCC-1 under the UCC with the jurisdictions
indicated on Schedule B, attached hereto, no authorization or approval of or filing with or notice to any governmental authority or regulatory
body is required either (i) for the grant by the Obligor of, or the effectiveness of, the Security Interest granted hereby or for the
execution, delivery and performance of this Agreement by the Obligor or (ii) for the perfection of or exercise by the Collateral Agent
of its rights and remedies hereunder.
(g)
On the date of execution of this Agreement, Obligor will deliver to the Collateral Agent one or
more executed UCC financing statements on Form UCC-1 under the UCC with respect to the Security Interest for filing with the jurisdictions
indicated on Schedule B, attached hereto and in such other jurisdictions as may be requested by the Collateral Agent.
2
(h)
The execution, delivery, and performance of this Agreement does not conflict with or cause a breach
or default, or an event that with or without the passage of time or notice, shall constitute a breach or default, under any agreement
to which the Obligor is a party or by which the Obligor is bound. Except as set forth on Schedule 3(h), no consent (including, without
limitation, from stockholders or creditors of the Obligor) is required for the Obligor to enter into and perform its obligations hereunder.
(i)
Obligor shall at all times maintain the liens and Security Interest provided for hereunder as valid
and perfected liens and security interests in the Collateral in favor of the Collateral Agent until this Agreement and the Security Interest
hereunder shall be terminated pursuant to Section 11 hereof. Obligor hereby agrees to defend the same against any and all persons. The
Obligor shall safeguard and protect all Collateral for the account of the Collateral Agent. At the request of the Collateral Agent, the
Obligor will sign and deliver to the Collateral Agent at any time or from time to time one or more financing statements pursuant to the
UCC (or any other applicable statute) in form reasonably satisfactory to the Collateral Agent and will pay the cost of filing the same
in all public offices wherever filing is, or is deemed by the Collateral Agent to be, necessary or desirable to effect the rights and
obligations provided for herein. Without limiting the generality of the foregoing, the Obligor shall pay all fees, taxes and other amounts
necessary to maintain the Collateral and the Security Interest hereunder, and the Obligor shall obtain and furnish to the Collateral Agent
from time to time, upon demand, such releases and/or subordinations of claims and liens which may be required to maintain the priority
of the Security Interest hereunder.
(j)
Obligor will not transfer, pledge, hypothecate, encumber, license (except for sales of inventory
and non-exclusive licenses granted by such Obligor in the ordinary course of business), sell, or otherwise dispose of any of the Collateral
without the prior written consent of the Collateral Agent.
(k)
Obligor shall, within ten (10) days of obtaining knowledge thereof, advise the Collateral Agent
promptly in writing, in sufficient detail, of any substantial change in the Collateral, and of the occurrence of any event which would
have a material adverse effect on the value of the Collateral or on the Collateral Agent’s Security Interest therein.
(l)
Obligor shall promptly execute and deliver to the Collateral Agent such further deeds, mortgages,
assignments, security agreements, financing statements, or other instruments, documents, certificates, and assurances and take such further
action as the Collateral Agent may from time to time request and may in its sole discretion deem necessary to perfect, protect, or enforce
its Security Interest in the Collateral.
(m)
Obligor shall permit the Collateral Agent and its representatives and agents to inspect the Collateral
at any time, and to make copies of records pertaining to the Collateral as may be requested by the Collateral Agent from time to time.
(n)
Obligor will take all steps reasonably necessary to diligently pursue and seek to preserve, enforce
and collect any rights, claims, causes of action, and accounts receivable in respect of the Collateral.
(o)
Obligor shall promptly notify the Collateral Agent in writing and in sufficient detail upon becoming
aware of any attachment, garnishment, execution, or other legal process levied against any Collateral and of any other information received
by the Obligor that may materially affect the value of the Collateral, the Security Interest or the rights and remedies of the Collateral
Agent hereunder.
(p)
All information heretofore, herein or hereafter supplied to the Collateral Agent by or on behalf
of the Obligor with respect to the Collateral is accurate and complete in all material respects as of the date furnished.
4.
Defaults. The following events shall be “Events
of Default”:
(a)
The occurrence of an Event of Default (as defined in the Notes) under the Notes;
(b)
Any representation or warranty of the Obligor in this Agreement shall prove to have been incorrect
in any material respect when made; and
3
(c)
The failure by Obligor to observe or perform any of its obligations hereunder or the Notes, for
five (5) days after receipt by Obligor of notice of such failure from the Collateral Agent.
5.
Duty To Hold In Trust. Upon the occurrence of any Event of Default and at any time thereafter,
Obligor shall, upon receipt by it of any revenue, income or other sums subject to the Security Interest, whether payable pursuant to the
Notes or otherwise, or of any check, draft, note, trade acceptance, or other instrument evidencing an obligation to pay any such sum,
hold the same in trust for the Collateral Agent, such funds to be segregated from other funds of the Obligor in the deposit account to
be opened designated by the Collateral Agent in writing, and shall forthwith endorse and transfer any such sums or instruments, or both,
to the Collateral Agent for application to the satisfaction of the Obligations.
6.
Rights and Remedies Upon Default. Upon the occurrence of any Event of Default and at any time thereafter,
the Collateral Agent shall have the right to exercise all of the remedies conferred hereunder and under the Notes, and the Collateral
Agent shall have all the rights and remedies of a secured party under the UCC and/or any other applicable law (including the Uniform Commercial
Code of any jurisdiction in which any Collateral is then located). Without limitation, the Collateral Agent shall have the following rights
and powers:
(a)
The Collateral Agent shall have the right to take possession of the Collateral and, for that purpose,
enter, without breach of the peace and to the extent permitted by applicable law, with the aid and assistance of any person, any premises
where the Collateral, or any part thereof, is or may be placed and remove the same, and the Obligor shall assemble the Collateral and
make it available to the Collateral Agent at places which the Collateral Agent shall reasonably select, whether at the Obligor’s
premises or elsewhere, and make available to the Collateral Agent, without rent, all of the Obligor’s respective premises and facilities
for the purpose of the Collateral Agent taking possession of, removing, or putting the Collateral in saleable or disposable form.
(b)
The Collateral Agent shall have the right to operate the business of the Obligor using the Collateral
and shall have the right to assign, sell, lease, or otherwise dispose of and deliver all or any part of the Collateral, at public or private
sale or otherwise, either with or without special conditions or stipulations, for cash or on credit or for future delivery, in such parcel
or parcels and at such time or times and at such place or places, and upon such terms and conditions as the Collateral Agent may deem
commercially reasonable, all without (except as shall be required by applicable statute and cannot be waived) advertisement or demand
upon or notice to the Obligor or right of redemption of the Obligor, which are hereby expressly waived. Upon each such sale, lease, assignment
or other transfer of Collateral, the Collateral Agent may, unless prohibited by applicable law which cannot be waived, purchase all or
any part of the Collateral being sold, free from and discharged of all trusts, claims, right of redemption and equities of the Obligor,
which are hereby waived and released.
7.
Applications of Proceeds. The proceeds of any such sale, lease, or other disposition of the Collateral
hereunder shall be applied first, to the expenses of retaking, holding, storing, processing and preparing for sale, selling, and the like
(including, without limitation, any taxes, fees and other costs incurred in connection therewith) of the Collateral, to the reasonable
attorneys’ fees and expenses incurred by the Collateral Agent in enforcing their rights hereunder and in connection with collecting,
storing and disposing of the Collateral, and then to satisfaction of the Obligations, and to the payment of any other amounts required
by applicable law, after which the Collateral Agent shall pay to the Obligor any surplus proceeds. If, upon the sale, license, or other
disposition of the Collateral, the proceeds thereof are insufficient to pay all amounts to which the Collateral Agent are legally entitled,
the Obligor will be liable for the deficiency, together with interest thereon, at the default rate specified in the Notes (currently 24%
per annum, compounded monthly, subject to applicable law) or such lesser amount permitted by applicable law (the “Default Rate”),
and the reasonable fees of any attorneys employed by the Collateral Agent to collect such deficiency. To the extent permitted by applicable
law, the Obligor waives all claims,
4
damages, and demands against the Collateral
Agent arising out of the repossession, removal, retention, or sale of the Collateral, unless due to the gross negligence or willful misconduct
of the Collateral Agent.
8.
Costs and Expenses. The Obligor agrees to pay all out-of-pocket fees, costs, and expenses incurred
in connection with any filing required hereunder, including without limitation, any financing statements, continuation statements, partial
releases, and/or termination statements related thereto or any expenses of any searches reasonably required by the Collateral Agent. The
Obligor shall also pay all other claims and charges which in the reasonable opinion of the Collateral Agent might prejudice, imperil,
or otherwise affect the Collateral or the Security Interest therein. The Obligor will also, upon demand, pay to the Collateral Agent the
amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, which
the Collateral Agent may incur in connection with (a) the enforcement of this Agreement, (b) the custody or preservation of, or the sale
of, collection from, or other realization upon, any of the Collateral, or (c) the exercise or enforcement of any of the rights of the
Collateral Agent under the Notes. Until so paid, any fees payable hereunder shall be added to the principal amount of the Notes and shall
bear interest at the Default Rate.
9.
Responsibility for Collateral. Obligor assumes all liabilities and responsibility in connection
with all Collateral, and the obligations of the Obligor hereunder or under the Notes shall in no way be affected or diminished by reason
of the loss, destruction, damage, or theft of any of the Collateral or its unavailability for any reason.
10.
Security Interest Absolute. All rights of the Collateral Agent and all Obligations of the Obligor
hereunder, shall be absolute and unconditional, irrespective of (a) any lack of validity or enforceability of this Agreement, the Notes,
or any agreement entered into in connection with the foregoing, or any portion hereof or thereof, (b) any change in the time, manner,
or place of payment or performance of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or
any consent to any departure from the Notes, the Transaction Documents (as defined in the Purchase Agreement), or any other agreement
entered into in connection with the foregoing, (c) any exchange, release, or nonperfection, of any of the Collateral, or any release or
amendment or waiver of or consent to departure from any other collateral for, or any guaranty, or any other security, for all or any of
the Obligations, (d) any action by the Collateral Agent to obtain, adjust, settle, and cancel in their sole discretion any insurance claims
or matters made or arising in connection with the Collateral, or (e) any other circumstance which might otherwise constitute any legal
or equitable defense available to the Obligor, or a discharge of all or any part of the Security Interest granted hereby. Until the Obligations
shall have been paid and performed in full, the rights of the Collateral Agent shall continue even if the Obligations are barred for any
reason, including, without limitation, the running of the statute of limitations or bankruptcy. The Obligor expressly waives presentment,
protest, notice of protest, demand, notice of nonpayment, and demand for performance. If any time any transfer of any Collateral or any
payment received by the Collateral Agent hereunder shall be deemed by final order of a court of competent jurisdiction to have been a
voidable preference or fraudulent conveyance under the bankruptcy or insolvency laws of the United States, or shall be deemed to be otherwise
due to any parties other than the Collateral Agent, then, in any such event, the Obligor’s obligations hereunder shall survive cancellation
of this Agreement, and shall not be discharged or satisfied by any prior payment thereof and/or cancellation of this Agreement, but shall
remain a valid and binding obligation enforceable in accordance with the terms and provisions hereof. The Obligor waives all right to
require the Collateral Agent to proceed against any other person or to apply any Collateral which the Collateral Agent may hold at any
time, or to marshal assets, or to pursue any other remedy. The Obligor waives any defense arising by reason of the application of the
statute of limitations to any Obligation secured hereby.
11.
Term of Agreement. This Agreement and the Security Interest shall terminate on the date on which
all payments under the Notes have been made in full and all other Obligations have been paid or discharged. Upon such termination, the
Collateral Agent, at the request and at the expense of the Obligor,
5
will join in executing any termination
statement with respect to any financing statement executed and filed pursuant to this Agreement.
12.
Power of Attorney; Further Assurances.
(a)
The Obligor authorizes the Collateral Agent, and does hereby make, constitute and appoint it, and
its respective officers, agents, successors or assigns with full power of substitution, as the Obligor’s true and lawful attorney-in-fact,
with power, in its own name or in the name of the Obligor, to, after the occurrence and during the continuance of an Event of Default,
(i) endorse any notes, checks, drafts, money orders, or other instruments of payment (including payments payable under or in respect of
any policy of insurance) in respect of the Collateral that may come into possession of such Secured Party; (ii) to sign and endorse any
UCC financing statement or any invoice, freight or express bill, bill of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with accounts, and other documents relating to the Collateral; (iii) to pay or discharge
taxes, liens, security interests, or other encumbrances at any time levied or placed on or threatened against the Collateral; (iv) to
demand, collect, receipt for, compromise, settle, and sue for monies due in respect of the Collateral; and (v) generally, to do, at the
option of such Secured Party, and at the Obligor’s expense, at any time, or from time to time, all acts and things which such Secured
Party deems necessary to protect, preserve, and realize upon the Collateral and the Security Interest granted therein in order to effect
the intent of this Agreement, the Notes, and the Transaction Documents all as fully and effectually as the Obligor might or could do;
and the Obligor hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof. This power of attorney
is coupled with an interest and shall be irrevocable for the term of this Agreement and thereafter as long as any of the Obligations shall
be outstanding.
(b)
On a continuing basis, Obligor will make, execute, acknowledge, deliver, file and record, as the
case may be, in the proper filing and recording places in any jurisdiction, including, without limitation, the jurisdictions indicated
on Schedule B, attached hereto, all such instruments, and take all such action as may reasonably be deemed necessary or advisable, or
as reasonably requested by the Collateral Agent, to perfect the Security Interest granted hereunder and otherwise to carry out the intent
and purposes of this Agreement, or for assuring and confirming to the Collateral Agent the grant or perfection of a security interest
in all the Collateral.
(c)
Obligor hereby irrevocably appoints the Collateral Agent as its attorney-in- fact, with full authority
in the place and stead of the Obligor and in the name of the Obligor, from time to time in such Collateral Agent’s discretion, to
take any action and to execute any instrument which such Secured Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including the filing, in its sole discretion, of one or more financing or continuation statements and amendments thereto, relative
to any of the Collateral without the signature of the Obligor where permitted by law.
13.
Notices. All notices, requests, demands and other communications
hereunder shall be in writing, with copies to all the other parties hereto, and shall be deemed to have been duly given when (i) if delivered
by hand, upon receipt, (ii) upon transmission if sent by electronic mail, (iii) if sent by nationally recognized overnight delivery service
(receipt requested), the next business day or (iv) if mailed by first-class registered or certified mail, return receipt requested, postage
prepaid, four days after posting in the U.S. mails, in each case if delivered to the following addresses:
If to Obligor: iQSTEL, Inc.
300 Aragon Avenue, Suite 375 Coral Gables, FL 33134
Attention: Leandro Iglesias Email: ceo@iqstel.com
6
If to Secured Party:
M2B Funding Corp.
66 W Flagler St, Suite 900
#10189 Miami, FL 33130
Attention: Daniel Kordash Email: dk@m2bfunding.com
14.
Other Security. To the extent that the Obligations are now or hereafter secured by property other
than the Collateral or by the guarantee, endorsement, or property of any other person, firm, corporation, or other entity, then the Collateral
Agent shall have the right, in its sole discretion, to pursue, relinquish, subordinate, modify or take any other action with respect thereto,
without in any way modifying or affecting any of the Collateral Agent’s rights and remedies hereunder.
15.
Miscellaneous.
(a)
No course of dealing between the Obligor and the Collateral Agent, nor any failure to exercise,
nor any delay in exercising, on the part of the Collateral Agent, any right, power, or privilege hereunder or under the Notes shall operate
as a waiver thereof; nor shall any single or partial exercise of any right, power, or privilege hereunder or thereunder preclude any other
or further exercise thereof or the exercise of any other right, power, or privilege.
(b)
All of the rights and remedies of the Collateral Agent with respect to the Collateral, whether
established hereby or by the Notes or by any other agreements, instruments or documents or by law shall be cumulative and may be exercised
singly or concurrently.
(c)
This Agreement constitutes the entire agreement of the parties with respect to the subject matter
hereof and is intended to supersede all prior negotiations, understandings, and agreements with respect thereto. Except as specifically
set forth in this Agreement, no provision of this Agreement may be modified or amended except by a written agreement specifically referring
to this Agreement and signed by the parties hereto.
(d)
If any provision of this Agreement is held to be invalid, prohibited, or unenforceable in any jurisdiction
for any reason, unless such provision is narrowed by judicial construction, this Agreement shall, as to such jurisdiction, be construed
as if such invalid, prohibited or unenforceable provision had been more narrowly drawn so as not to be invalid, prohibited or unenforceable.
If, notwithstanding the foregoing, any provision of this Agreement is held to be invalid, prohibited, or unenforceable in any jurisdiction,
such provision, as to such jurisdiction, shall be ineffective to the extent of such invalidity, prohibition, or unenforceability without
invalidating the remaining portion of such provision or the other provisions of this Agreement and without affecting the validity or enforceability
of such provision or the other provisions of this Agreement in any other jurisdiction.
(e)
No waiver of any breach or default or any right under this Agreement shall be considered valid
unless in writing and signed by the parties giving such waiver, and no such waiver shall be deemed a waiver of any subsequent breach or
default or right, whether of the same or similar nature or otherwise.
(f)
This Agreement shall be binding upon and inure to the benefit of each of the parties hereto and
its successors and assigns.
(g)
Each of the parties hereto shall take such further action and execute and deliver such further
documents as may be necessary or appropriate to carry out the provisions and purposes of this Agreement.
(h)
This Agreement shall be construed in accordance with the laws of the State of Nevada except to
the extent the validity, perfection, or enforcement of a security interest hereunder in respect of any particular Collateral which are
governed by a jurisdiction other than the State of Nevada in which case such law shall govern. Each of the parties hereto irrevocably
submits to the exclusive jurisdiction of any Nevada State or United States Federal court over any action or proceeding arising out of
or relating to this Agreement, and the parties hereto hereby irrevocably agree that all claims in respect of such action or proceeding
may be heard and determined in such Nevada State or Federal court. The parties hereto agree that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other inner
7
provided by law. The parties hereto further
waive any objection to venue in the State of Nevada and any objection to an action or proceeding in the State of Nevada, on the basis
of forum non conveniens.
(i)
This Agreement may be executed in any number of counterparts, each of which when so executed shall
be deemed to be an original and, all of which taken together shall constitute one and the same Agreement in the event that any signature
is delivered by electronic mail transmission, such signature shall create a valid binding obligation of the parties executing (or on whose
behalf such signature is executed) the same with the same force and effect as if such electronic signature were the original thereof.
IN WITNESS WHEREOF, the parties hereto have
caused this Security Agreement to be duly executed and delivered as of the date first above written.
OBLIGOR:
IQSTEL, INC.
By: /s/ Leandro Iglesias
Name: Leandro Iglesias Title: CEO
SECURED PARTY:
M2B FUNDING CORP.
(as Collateral Agent and Secured Party)
By: /s/ Daniel Kordash
Name: Daniel Kordash Title: President
SECURED PARTY:
ADI FUNDING LLC
By: /s/ Ariella Basdeo
Name: Ariella Basdeo
Title: Managing Member
8
EX-99.1 — PRESS RELEASE, DATED OCTOBER 26, 2026.
EX-99.1
Filename: ex99_1.htm · Sequence: 8
IQST - IQSTEL Closes Two-Year Non-Convertible Financing for
Ultranet, a Profitable $131 Million-Revenue West African Telecom Platform Expected to Make IQSTEL Cash-Flow Positive on a Consolidated
Basis
•
Up to $3 million in two-year senior secured, non-convertible promissory notes closed — debt financing with no conversion
feature.
•
Ultranet generated $130.9 million in 2025 revenue, up 30%, with $5.0 million in EBITDA and $4.6 million in net income, and
is expected to make IQSTEL cash-flow positive on a consolidated basis.
•
Ultranet’s six markets — Nigeria, Côte d’Ivoire, Ghana, Burkina Faso, Mali and Senegal — sit
in Sub-Saharan Africa, one of the world’s fastest-growing mobile regions.
•
IQSTEL Digital’s microdrama service is in commercial outreach to seven mobile operators serving approximately 93 million
subscribers.
New York, NY — October 26, 2026 — IQSTEL Inc.
(NASDAQ: IQST) (“IQSTEL” or the “Company”), a global telecommunications and technology company, today announced
that it has closed the first financing tranche for its planned acquisition of a 51% controlling interest in Ultranet Telecom Group (“Ultranet”).
The financing consists of two-year senior secured, non-convertible promissory notes of up to $3 million, together with pre-funded
warrants to purchase up to 420,000 shares of common stock. Full terms will be described in a Current Report on Form 8-K to be filed with
the U.S. Securities and Exchange Commission.
“We funded this step with two-year non-convertible
debt, so shareholders are not taking on conversion dilution to move Ultranet forward,” said Leandro Iglesias, CEO of IQSTEL.
“Ultranet gives us profitable scale in six fast-growing West African markets. Ultranet builds the base, and Digital Services,
starting with our microdrama, builds the margin.”
Ultranet: profitable scale in West Africa
Headquartered in Accra, Ghana, Ultranet provides international
telecom and messaging services across six West African markets, supported by exclusive international SMS gateway agreements with African
mobile operators. In 2025, Ultranet’s revenue grew 30% to $130.9 million from $100.9 million in 2024. It generated $5.0 million
in EBITDA, $4.6 million in net income and $5.5 million in cash flow from operations.1 IQSTEL expects Ultranet to bring the
Company to approximately $9 million in annualized adjusted EBITDA and to make it cash-flow positive on a consolidated basis.
Ultranet operates in one of the world’s fastest-growing
mobile regions. The GSMA estimates that mobile technologies contributed $240 billion to Africa’s economy in 2025,2 up
from about $220 billion in 2024,3 and expects that figure to reach $290 billion by 2030.2 Nigeria alone has more
than 195 million mobile subscriptions.4 Across the region, SMS remains the main channel for mobile-money confirmations and
identity-verification codes, the traffic that runs through gateways like Ultranet’s.5 IQSTEL also sees room to grow by
offering its Digital Services, including AI-driven communications, cybersecurity, fintech and content, to Ultranet’s operator customers.
Digital Services: microdramas as the first
recurring-revenue product
IQSTEL Digital’s first consumer subscription product
is a microdrama service built with IDILIO TV, a Colombian platform for short, vertical, Spanish-language serialized dramas. IDILIO TV
is backed by a seed round led by a16z speedrun, with Goodwater Capital, WndrCo and Nubank founder David Vélez, and has more than
2 million downloads.6
Omdia estimates global microdrama revenue at about $11 billion
in 2025, rising to about $14 billion by the end of 2026. More than 60% of that revenue comes from subscriptions and transactional payments,
and Chinese-language platforms account for roughly 83% of the market,7 leaving the more than 630 million Spanish speakers worldwide8
largely underserved. Regional streamers such as ViX have begun commissioning microdramas of their own.9
The service is sold through mobile operators and billed on
the customer’s phone bill, which matters where many consumers lack credit cards. IQSTEL Digital is in commercial outreach with seven
mobile operators serving approximately 93 million subscribers, and has set a 2027 operating objective of 300,000 active paid monthly subscriptions.
At an assumed price of $4 to $6 per month and a profit contribution of $0.50 to $1.00 per subscription per month after revenue sharing,
300,000 subscriptions would represent approximately $1.8 million to $3.6 million in annual profit contribution to IQSTEL Digital.
These figures are illustrative and are not guidance.10 No operator distribution agreements have been executed to date.
“Operators want content that keeps subscribers engaged
and adds revenue to the monthly bill. Microdramas do both,” Iglesias added. “Our focus now is turning discussions
with seven operators into signed distribution agreements.”
Financing and timeline
The two-year notes are secured and cannot be converted into
shares. Shares issued on exercise of the pre-funded warrants are subject to a holding period. The notes carry 18% annual interest, paid
monthly, and are structured to amortize in four equal semiannual installments, with 25% of the principal payable every six months over
the two-year term. IQSTEL expects the principal payments to be funded by the Company’s expected positive cash flow following the
acquisition. The Company expects to execute the Share Purchase Agreement in November 2026 and is targeting closing in the middle of the
first quarter of 2027, subject to customary closing conditions. The Company will file a Current Report on Form 8-K with the U.S. Securities
and Exchange Commission setting out the full details of the financing.
IQSTEL invites shareholders and investors to visit its investor
landing page at www.landingpage.iqstel.com for the Company’s latest presentations, growth roadmap and Ultranet updates.
Notes and sources
1 Ultranet figures are from its combined financial statements
for the year ended December 31, 2025, prepared in accordance with US GAAP, audited by an independent accounting firm and filed on Form
8-K. They are shown on a 100% basis; IQSTEL is acquiring a 51% interest. EBITDA, a non-GAAP measure, is profit before interest and tax
plus depreciation and amortization. Cash flow from operations excludes owner drawings that will not continue after the acquisition.
2 GSMA, The Mobile Economy Africa 2026, June 2026.
3 GSMA, The Mobile Economy Africa 2025.
4 Nigerian Communications Commission, industry statistics,
July 2026.
5 Mordor Intelligence, A2P SMS Market: Growth, Trends
and Forecasts (2026–2031).
6 IDILIO TV company data, as reported in IQSTEL’s
press release of August 27, 2026.
7 Omdia, microdrama market estimates, as cited in IQSTEL’s
press releases of September 3 and September 17, 2026.
8 Instituto Cervantes, El español: una lengua
viva, 2025 yearbook.
9 Ampere Analysis, Latin American commissioning data,
H1 2026.
10 Pricing and unit-economics assumptions are set out
in IQSTEL’s press releases of September 17 and October 8, 2026.
Market and industry data are from third-party sources that the Company
has not independently verified.
2
About IQSTEL Inc.
IQSTEL Inc. (NASDAQ: IQST) is a global telecommunications and
technology company operating through two core business divisions: Telecom and Digital Services. The Telecom Division is the foundation
of IQSTEL’s global platform, operating across 24 countries with more than 600 telecommunications carrier interconnections and delivering
international voice, SMS, messaging, and connectivity solutions to some of the world’s largest telecom operators and enterprise
customers. Through these customer relationships, IQSTEL’s platform has the potential to reach approximately 2.3 billion end users
worldwide. Building on this global infrastructure and commercial reach, the Digital Services Division is focused on higher-margin technology
solutions across Content Services, Artificial Intelligence, Intelligent Communications, Cybersecurity, Fintech, and Enterprise Automation.
Built through nearly two decades of organic growth and strategic acquisitions, IQSTEL is leveraging the scale and reach of its Telecom
business to accelerate the growth of Digital Services and drive its next phase of revenue and adjusted EBITDA expansion.
For more information, visit:
Corporate website: www.iqstel.com
Investor Relations Portal: www.ir.iqstel.com
IQSTEL Telecom website: www.iqsteltelecom.com
IQSTEL Digital Services website: www.iqsteldigital.com
Official Investor Landing Page: www.landingpage.iqstel.com
Safe Harbor Statement: This press release contains
forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include
statements regarding the expected timing of execution of the Ultranet purchase agreement; the expected closing of the acquisition; the
expected financial contribution of Ultranet (including revenue, EBITDA, net income, and cash flow from operations); the Company’s
expected consolidated cash-flow position following the acquisition; the Company’s ability to service the notes from operations;
the expected timing of closing and accounting consolidation; the Company’s ability to offer Digital Services to Ultranet’s
customers; the Company’s microdrama distribution objectives, operator outreach, subscription objectives, pricing and illustrative
unit economics; and market and industry growth. These statements are based on current expectations and assumptions and involve risks and
uncertainties that could cause actual results to differ materially from those projected. Important factors that could cause actual results
to differ include, among others: failure to execute the purchase agreement or to satisfy or waive closing conditions; delays or adverse
outcomes in regulatory, compliance, or due diligence matters; the accuracy and completeness of Ultranet’s historical financial information;
integration risks and costs; political, economic, currency and regulatory conditions in the African markets in which Ultranet operates;
changes in the telecommunications market or customer relationships; failure to execute operator distribution agreements or to achieve
subscriber, pricing, retention or revenue-sharing assumptions for microdrama or other digital services; the accuracy of third-party market
data; the Company’s ability to generate sufficient cash flow to service the notes and other obligations; dilution or other effects
from the pre-funded warrants; the impact of the secured nature of the notes and related covenants; and the other risks and uncertainties
described in the Company’s filings with the Securities and Exchange Commission, including its most recent Annual Report on Form
10-K and subsequent Quarterly Reports on Form 10-Q. The Company undertakes no obligation to update or revise any forward-looking statements,
whether as a result of new information, future events, or otherwise.
Media and Investor Relations:
Ethan Walfish
Head of Investor Relations
IQSTEL Inc.
300 Aragon Avenue, Suite 375
Coral Gables, FL 33134
Phone: +1-4848-IQSTEL (477835)
Email: ir@iqstel.com
3
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Boolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act.
+ References
Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 14d
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- Definition
Title of a 12(b) registered security.
+ References
Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
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- Definition
Name of the Exchange on which a security is registered.
+ References
Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
-Subsection d1-1
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- Definition
Boolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as soliciting material pursuant to Rule 14a-12 under the Exchange Act.
+ References
Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 14a
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Trading symbol of an instrument as listed on an exchange.
+ References
No definition available.
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- Definition
Boolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as written communications pursuant to Rule 425 under the Securities Act.
+ References
Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Securities Act
-Number 230
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