CONVERTIBLE NOTES

12 Months Ended

Dec. 31, 2023

CONVERTIBLE NOTES

CONVERTIBLE NOTES

NOTE 8 – CONVERTIBLE NOTES

Other Notes Payable 

The notes payable to Miguel Cambero for $100,000 and Ernie Sparks for $25,000 originally matured on October 23, 2022. Both notes were extended through April 30, 2023. On or about May 16, 2023, Ernest Sparks’ note and accrued interest of $4,032 was converted into 6,222 shares of the Company’s common stock. The conversion terms of the promissory note, called for conversion of the principal and accrued interest totaling $29,033 into common shares of Hempacco at a 25% discount to the weighted average closing price for the 30-days prior to the conversion date, which calculation produced a conversion rate of $0.4665. The additional interest expense due to the discounted conversion rate was $6,434.The Company’s note payable to Miguel Cambero, including accrued interest, was converted into 33,240 shares of common stock on August 9, 2023.The conversion terms of the promissory note date May 6, 2021, called for conversion of the principal and accrued interest totaling $117,907 into common shares of Hempacco at a 25% discount to the weighted average closing price for the 30-days prior to the conversion date, which calculation produced a conversion rate of $3.547. The additional interest expense due to the discounted conversion rate was $15,052.

Green Star Acquisition Note

On July 24, 2023, the Company issued a convertible promissory note in the amount of $3,200,000 in connection with the acquisition of 50% of Green Star Labs, Inc. See Note 2. The promissory note carries a 10% interest rate and matures twelve months from the issue date. The holder has the right, after 6-months after the issue date, to convert all or part of the then outstanding principal balance of the note into common stock of the issuer, provided, however, that the holder may not convert the note into Company common stock to the extent that such conversion would result in the holder’s beneficial ownership of the Company common stock being in excess of 4.99% of the Company’s issued and outstanding common stock. Additionally, the note contains a maximum issuance limitation such that the note will no longer be convertible after the Company has issued an aggregate of 5,572,000 shares upon conversion of the Note. The applicable conversion price shall be 95.238% of the average closing price of the Company’s common stock during the three days immediately preceding the conversion. The note may be converted at any time after the 6-month anniversary of the note date. As of the date of issuance of these financial statements, this loan has matured and is currently in default. The Viva Veritas note does not become convertible until January 24, 2024, consequently the calculation of an embedded derivative value as of December 31, 2023, is not applicable until the end of Q1 2024. See Note 15 for details of current default status.

Convertible Notes Payable

On or around October 18, 2023, the Company issued a one-year Promissory Note, a Share Purchase Agreement and other supporting legal documents in connection with a series of Securities Purchase Agreements for the issuance of convertible promissory notes for each tranche of funding with First Fire Global Opportunities Fund, LLC. (“First Fire”) who will bring in a participating partner, Mast Hill Fund, L.P. ("Mat Hill"), who will, from time-to-time advance additional funds on the same terms and conditions that apply to the First Fire loans. The aggregate amount of these agreements is not to exceed $3,000,000 (the Commitment), with the first Promissory Note having a principal amount of $277,778 and a purchase amount of $250,000. Each Note will carry an interest rate of 10% per year in addition to the 10% Original Issuer Discount (“OID”). The investors will receive additional compensation comprised of i) the issue of common shares (the commitment shares) amounting to 10% of each Promissory Note amount and warrants to purchase common shares at $1.50 per share (provided the loan is not in default) during a period of five years from the date of the Promissory Note. The warrant number is derived from the percentage that 1,300,000 warrants bear to a total purchase commitment of $3,000,000. The Note Holder is restricted from holding more than 4.99% of the Company’s outstanding common shares at any time.

On October 18 and October 19, 2023, First Fire and Mast Hill Fund funded tranches one and two of the commitment in the gross amounts of $277,778 and $835,000 respectively. After deduction of 10% original issuer discount of $27,778 and $83,500 respectively, and brokers’ commission and fees of $30,000 and $64,740 respectively, the Company received net proceeds of $220,000 and $686,760 respectively. Additional compensation comprising 11,127 placement shares and 48,220 warrants were issued to the lenders and brokers. Loan repayments are scheduled to commence on February 18 and February 19, 2024, respectively in the amounts of $46,300 and $139,178 for six months followed by two payments of $9,300 and $27,956 respectively.

On December 12 and December 19, 2023, Mast Hill and First Fire funded tranches three and four of the commitment in the gross amounts of $835,000 and $277,778 respectively. After deduction of 10% original issuer discount of $83,500 and $27,778 respectively, and brokers’ commission and fees of $47,940 and $22,500, the Company received net proceeds of $703,560 and $227,500 respectively. Additional compensation comprising 11,127 placement shares and 48,220 warrants were issued to the lenders and brokers. Loan repayments are scheduled to commence on April 11 and April 18, 2024, respectively in the amounts of $139,178 and $46,300 for six months followed by two payments of $27,956 and $9,300 respectively.

All four of the First Fire and Mast Hill promissory Notes may be converted, at the lenders discretion, into Hempacco common shares at a fixed conversion rate of $15.00 per share, or, should the loans be in default due to non-payment of the scheduled amortization payments, at the default conversion rate of 87.5% of the 5-day closing VWAP of Hempacco common shares. See Note 15 for subsequent conversions of convertible notes.