| Convertible Note Payable |
Note
14 – Convertible Note Payable
Convertible
note payable consists of the following at December 31, 2022 and 2021, respectively:
Schedule
of Convertible Note Payable
| |
|
December 31, |
|
|
December 31, |
|
| |
|
2022 |
|
|
2021 |
|
| On September 27, 2022, |
|
$ |
750,000 |
|
|
$ |
- |
|
| On September 27, 2022, the Company completed the sale of a Convertible
Promissory Note in the principal amount of $750,000 (the “Convertible McCabe Note”) to Dr. John McCabe. The unsecured note
matures on 16, 2024 (the “Maturity Date”), bears interest at a rate of 8% per annum, and the principal and interest is convertible
into shares of the Company’s convertible Series B common stock at a conversion price of $15 per share. |
|
$ |
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 aggregate estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 197% and a call option value of $0.1053 and $0.1001, respectively, was $358,017, and is being amortized as a debt discount over the life of the loan. 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. The note was repaid on September 27, 2022.
|
|
$ |
- |
|
|
$ |
750,000 |
|
| |
|
|
|
|
|
|
|
|
| Total convertible notes
payable |
|
|
750,000 |
|
|
|
750,000 |
|
| Less:
unamortized debt discounts |
|
|
- |
|
|
|
412,673 |
|
| Convertible
note payable, net of discounts |
|
$ |
750,000 |
|
|
$ |
337,327 |
|
ONE
WORLD PRODUCTS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
Company recognized debt discounts for the years ended December 31, 2022 and 2021, as follows:
Schedule of Convertible Debt Discounts
| |
|
December 31, |
|
|
December 31, |
|
| |
|
2022 |
|
|
2021 |
|
| |
|
|
|
|
|
|
| Fair value
of 3,250,000 commitment shares of common stock |
|
$ |
106,894 |
|
|
$ |
418,312 |
|
| Fair value of warrants
to purchase 3,500,000 shares of common stock |
|
|
255,026 |
|
|
|
358,017 |
|
| Original issue discounts |
|
|
32,055 |
|
|
|
53,700 |
|
| Legal
and brokerage fees |
|
|
18,698 |
|
|
|
39,300 |
|
| Total
debt discounts |
|
|
412,673 |
|
|
|
869,329 |
|
| Amortization
of debt discounts |
|
|
412,673 |
|
|
|
456,656 |
|
| Unamortized
debt discounts |
|
$ |
- |
|
|
$ |
412,673 |
|
The
aggregate debt discounts of $869,329 incurred during the year ended December 31, 2021, were amortized over the life of the loans using
the straight-line method, which approximated the effective interest method. The Company recorded finance expense in the amount of $412,673
and $456,656 on the amortization of these discounts for the years ended December 31, 2022 and 2021, respectively.
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 $59,023 and $36,243
for the years ended December 31, 2022 and 2021, respectively. In addition, the Company recognized $412,673 and $456,656 of interest expense
related to the debt discounts for the years ended December 31, 2022 and 2021, respectively.
ONE
WORLD PRODUCTS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|