| Convertible Note Payable |
Note
13 – Convertible Note Payable
Convertible
note payable consists of the following at December 31, 2021 and 2020, respectively:
Schedule
of Convertible Note Payable
| |
|
December 31, |
|
|
December 31, |
|
| |
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
| |
|
$ |
750,000 |
|
|
$ |
- |
|
| On September 24, 2021, the Company completed the sale of a (i) Promissory Note in the
principal amount of $750,000
(the “Second AJB Note”) to AJB Capital Investments LLC (“AJB Capital”), (ii) a three-year
warrant to purchase 1,500,000
shares of the Company’s common stock at an initial exercise price of $0.25
per share, and (iii) a three-year
warrant to purchase 2,000,000
shares of the Company’s common stock at an initial exercise price of $0.50
per share, for an aggregate purchase price of $705,000,
pursuant to a Securities Purchase Agreement between the Company and AJB Capital (the “Purchase Agreement”). The Company
received net proceeds of $678,750
after deductions of debt discounts, consisting of $45,000
pursuant to an original issue discount, $15,000
of legal fees and $11,250
of brokerage fees. The Note matures on September
24, 2022 (the “Maturity Date”), bears interest at a rate of 8%
per annum, and, following an event of default only, is convertible into shares of the Company’s common stock at a conversion
price equal to the lesser of 90% of the lowest trading price during (i) the 20
trading day period preceding the issuance date of the note, or (ii) the 20 trading day period preceding date of conversion of the
Note. The Note is also subject to covenants, events of defaults, penalties, default interest and other terms and conditions
customary in transactions of this nature. Pursuant to the Purchase Agreement, the Company paid a commitment fee to AJB Capital in
the amount of $250,000
(the “Commitment Fee”) in the form of 1,250,000
shares of the Company’s common stock (the “Commitment Fee Shares”). During the six month period following the six
month anniversary of the closing date, AJB Capital shall be entitled to be issued additional shares of common stock of the Company
to the extent AJB Capital’s sale of the Commitment Fee Shares has resulted in net proceeds in an amount less than the
Commitment Fee. The Commitment Fee Shares resulted in a debt discount of $150,062
that is being amortized over the life of the loan.
The obligations of the Company to AJB Capital under the Note and the Purchase Agreement are secured by a lien on the Company’s assets pursuant to a Security Agreement between the Company and AJB Capital. |
|
$ |
750,000 |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
| Total convertible notes payable |
|
|
750,000 |
|
|
|
- |
|
| Less: unamortized debt discounts |
|
|
412,673 |
|
|
|
- |
|
| Convertible note payable, net of discounts |
|
$ |
337,327 |
|
|
$ |
- |
|
ONE
WORLD PRODUCTS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
Company recognized debt discounts for the years ended December 31, 2021 and 2020, as follows:
Schedule of Convertible Debt Discounts
| |
|
December 31, |
|
|
December 31, |
|
| |
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
| Fair value of 3,250,000 commitment shares of common stock |
|
$ |
418,312 |
|
|
$ |
- |
|
| Fair value of warrants to purchase 3,500,000 shares of common stock |
|
|
358,017 |
|
|
|
- |
|
| Original issue discounts |
|
|
53,700 |
|
|
|
- |
|
| Legal and brokerage fees |
|
|
39,300 |
|
|
|
- |
|
| Total debt discounts |
|
|
869,329 |
|
|
|
- |
|
| Amortization of debt discounts |
|
|
456,656 |
|
|
|
- |
|
| Unamortized debt discounts |
|
$ |
412,673 |
|
|
$ |
- |
|
The
aggregate debt discounts of $869,329, for the year ended December 31, 2021, are being amortized over the life of the loan using the straight-line
method, which approximates the effective interest method. The Company recorded finance expense in the amount of $456,656 on the amortization
of these discounts for the year ended December 31, 2021.
The
convertible note limits the maximum number of shares that can be owned by the note holder as a result of the conversions to common stock
to 4.99% of the Company’s issued and outstanding shares.
The
Company recorded interest expense pursuant to the stated interest rates on the convertible notes in the amount of $36,243 and $21,516
for the years ended December 31, 2021 and 2020, respectively. In addition, the Company recognized $456,656 of interest expense related
to the debt discounts for the year ended December 31, 2021.
|