Note 2 - Summary of significant accounting policies: Convertible notes receivable (Policies)
|6 Months Ended|
Jun. 30, 2017
|Convertible notes receivable||
Convertible notes receivable
The convertible note receivable from Electrum Partners, LLC (Electrum) was recorded at the principal face amount of $100,000 plus accrued interest of $6,874 at December 31, 2016. The note bore interest at 10% per annum and would have matured March 12, 2022. The note called for monthly interest payments of $898 through March 12, 2017 after which monthly payments of principal and interest would be $2,290 until the note was paid full. On April 28, 2017, an addendum to the convertible note provided for continued monthly interest payments of $898 until such time as the Company requested commencement of principal and interest of $2,290 per month. Effective June 30, 2017, the Company elected to convert the note plus accrued interest of $7,772 into equity in Electrum. The conversion resulted in an ownership interest in Electrum of approximately 4.71% as of the conversion date. The minority interest in the investment in Electrum is reported on the condensed consolidated balance sheets at cost of $107,772 at June 30, 2017.
On April 28, 2017, the Company entered into an Addendum to Convertible Note and Purchase Option Agreement (Addendum) with Electrum. Under the Addendum, the Company invested an additional $100,000 in Electrum by purchase of a second promissory note in principal face amount of $100,000 (Note II) from Electrum with interest at 10% per annum compounded monthly. Note II is recorded at the principal face amount plus accrued interest of $833 at June 30, 2017. Note II requires monthly principal and interest payments of $2,290 to the Company beginning June 12, 2017, until fully repaid on May 12, 2022 or until the Company requests that the residual principal and unpaid interest be converted into an equity investment in Electrum, based upon a fixed equity conversion rate of $164 per share. The note is collateralized by cannabis equity securities owned by Electrum.
The Company has a convertible note receivable from NeuCourt, Inc., which it entered into on November 8, 2016, that is recorded at the principal face amount of $25,000 plus accrued interest of $801 and $181 at June 30, 2017 and December 31, 2016. The note bears 5% interest and matures on November 8, 2018. No payments are required prior to maturity. Principal and unpaid interest may be converted into a blend of shares of a to-be-created series of Preferred Stock, and common stock, of NeuCourt (defined as Conversion Shares) (i) on closing of a future financing round of at least $750,000, (ii) on the election of NeuCourt on maturity of the Note, or (iii) an election of Mentor following NeuCourts election to prepay the Note. The Conversion Price for the Note is the lower of (i) 75% of the price paid in the Next Equity Financing, or the price obtained by dividing a $3,000,000 valuation cap by the fully diluted number of shares. The number of Conversion Shares issued on conversion shall be the quotient obtained by dividing the outstanding principal and unpaid accrued interest on a Note to be converted on the date of conversion by the Conversion Price (the Total Number of Shares). The Total Number of Shares shall consist of Preferred Stock and Common Stock as follows: (i) That number of shares of Preferred Stock obtained by dividing (a) the principal amount of each Note and all accrued and unpaid interest thereunder by (b) the price per share paid by other purchasers of Preferred Stock in the Next Equity Financing (such number of shares, the "Number of Preferred Stock") and (ii) that number of shares of Common Stock equal to the Total Number of Shares minus the Number of Preferred Stock. Using the valuation cap of $3,000,000, the Note would today convert into 128,583 Conversion Shares. In the event of a Corporate Transaction prior to repayment or conversion of the Note, the Company shall receive back two times its investment, plus all accrued unpaid interest. NeuCourt is a Delaware corporation that is developing a technology that is expected to be useful in the cannabis space.
Disclosure of accounting policy for determining the lower of cost or fair value of committed and uncommitted loans, including mortgage and non-mortgage loans.
Reference 1: http://www.xbrl.org/2003/role/presentationRef