More interesting things in the recent 8-K:
The TAURIGA SCIENCES, INC.
8% CONVERTIBLE REDEEMABLE NOTE
DUE SEPTEMBER 11, 2018
says "FOR VALUE RECEIVED, Tauriga Sciences, Inc. (the “Company”) promises to pay to the order of ADAR BAYS, LLC and its authorized successors and Permitted Assigns, defined below, (“Holder”), the aggregate principal face amount of Thirty Thousand Dollars exactly (U.S. $30,000.00) on September 11, 2018 (“Maturity Date”) and to pay interest on the principal amount outstanding hereunder at the rate of 8% per annum commencing on September 11, 2017."
The Form 8-K itself says:
"The first 8% Convertible Redeemable Note (the “First Note”) was funded with gross cash proceeds of $28,000 to the Company by September 12, 2017."
There's no explanation in the Form 8-K itself for the $2,000 difference. We've seen original issued discounts, where the face value of the note on which the interest and conversions are calculated is less than the cash received, but there is no mention of an original issue discount in any of the documents. Instead, tucked up beyond the signature section of the Securities Purchase agreement filed as an exhibit we see this:
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AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Note: $210,000.00
Aggregate Purchase Price:
Note 1: $30,000.00, less $2,000.00 in legal fees.
Back End Note 1: $30,000.00 less $2,000.00 in legal fees.
Back End Note 2: $30,000.00 less $2,000.00 in legal fees.
Back End Note 3: $30,000.00 less $2,000.00 in legal fees.
Back End Note 4: $30,000.00 less $2,000.00 in legal fees.
Back End Note 5: $30,000.00 less $2,000.00 in legal fees.
Back End Note 6: $30,000.00 less $2,000.00 in legal fees.
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The deal that looks like a simple too-good-to-be-true series of 8% notes has some hidden "features".
If one was to assume that the notes will be converted versus paid off (that's what usually happens, isn't it?) the company would receive $196,000 for their $210,000 worth of notes, the difference being an original issue discount disguised as legal fees.
The payment for that $210K, which is to result in $28k increments of cash totaling $196K with the first already paid and the rest on an as needed basis between March and September of 2018) is due on September 11, 2018 along with any accrued interest. (The effective interest rate based on the net cash received turns into
Alternatively the amount due is convertible into common shares at a discount of 40% to what everyone else is paying at any time after the cash for any notes has been loaned to the company.
There's a long list of "Events of Default" which could lead to some expensive penalties including a bump up to a 24% interest rate and/or a 50% conversion discount. A few of of those are:
(m) The Company’s Common Stock has a closing bid price of less than $0.0004 per share for at least 5 consecutive trading days; or
(n) The aggregate dollar trading volume of the Company’s Common Stock is less than twenty five thousand dollars ($25,000.00) in any 5 consecutive trading days;
And there's a separate calculation for penalties "if the Company fails for any reason to deliver to the Holder the conversion shares by the by the 3rd business day following the delivery of a Notice of Conversion to the Company and if the Holder incurs a Failure to Deliver Loss.
These terms don't appear in your every day CONVERTIBLE REDEEMABLE NOTE.
But can it core A apple?
Yes Ralph, of course it can core A apple.
