NOTES PAYABLE

12 Months Ended

Dec. 31, 2018

Debt Disclosure [Abstract]

NOTES PAYABLE

NOTE 5: NOTES PAYABLE

Convertible Notes Payable

Eagle Equities LLC

During 2018, the Company entered into three notes with Eagle Equities LLC. The notes are convertible at the holder’s discretion into shares of the Company’s common stock based on a conversion formula of 60% multiplied by the lowest price of the common shares for the 15 day trading period prior to which the Notice of Conversion is received. In the event the Company experiences a DTC Chill on its shares, the Conversion Price shall be decreased to 50% instead of 60% while that chill is in effect. In accordance with ASC 835-30-45, Interest, the Company records the fees, costs, and original issue discount as reduction of the carrying amount of the debt and amortizes the balances over the life of the debt instrument. If the Company fails to maintain the share reserve at the 4x discount of the note 60 days after the issuance of the note, the conversion discount shall be increased by 10%. The conversion formula created an embedded derivative conversion feature for each note (See NOTE 4 - Fair Value of Financial Instruments). The notes are summarized as follows:

On July 3, 2018, the Company entered into a convertible note with Eagle Equities LLC. The note, with a face value of $100,000, bears interest at 8% per annum and is payable on July 3, 2019. The net proceeds received after issuance costs and fees was $96,500. Accrued interest at December 31, 2018 totaled $6,549. The Company valued the related conversion feature using the Black Scholes valuation model with the following assumptions: (i) as of December 31,

2018: dividend yield of zero, 184 days term to maturity, risk free interest rate of 2.56% and annualized volatility of 337%, valued at $322,892. The value of the conversion feature was assigned to the derivative liability and created a loss and debt discount to be amortized over the life of the convertible debt.

On August 10, 2018, the Company entered into a convertible note with Eagle Equities LLC. The note, with a face value of $300,000, bears interest at 8% per annum and is payable on August 10, 2019. The net proceeds received after

issuance costs and fees was $285,000. Accrued interest at December 31, 2018 totaled $12,471. The Company valued the related conversion feature using the Black Scholes valuation model with the following assumptions: (i) as of December 31, 2018: dividend yield of zero, 222 days term to maturity, risk free interest rate of 2.56% and annualized volatility of 319%, valued at $956,139. The value of the conversion feature was assigned to the derivative liability and created a loss and a debt discount to be amortized over the life of the convertible debt.

On August 10, 2018, the Company entered into a convertible note with Eagle Equities LLC. The note, with a face value of $100,000, bears interest at 8% per annum and is payable on August 10, 2019. The net proceeds received after issuance costs and fees was $95,000. Accrued interest at December 31, 2018 totaled $3,994. The Company valued the related conversion feature using the Black Scholes valuation model with the following assumptions: (i) as of December 31, 2018: dividend yield of zero, 222 days term to maturity, risk free interest rate of 2.56% and annualized volatility of 319%, valued at $318,214. The value of the conversion feature was assigned to the derivative liability and created a loss and debt discount to be amortized over the life of the convertible debt.

Firstfire Global Opportunity Fund, LLC

On September 11, 2018, the Company entered into a convertible note with Firstfire Global Opportunities Fund, LLC. The note, with a face value of $210,000, bears interest at 5% per annum and was payable on July 11, 2018. The note was issued at a $10,000 (“OID”) discount. The net proceeds received after issuance costs and fees was $195,000. Accrued interest at December 31, 2018 totaled $3,194.

Additionally, the note is convertible at the holder's discretion into shares of the Company's common stock based on a conversion formula of 65% multiplied by the lowest price of the common shares for the 20 consecutive trading days period immediately preceding the Trading Day that the Company receives a Notice of Conversion. The conversion formula created an embedded derivative conversion feature.

The Company valued this conversion feature using the Black Scholes valuation model with the following assumptions: (i) as of December 31, 2018: dividend yield of zero, 162 day term to maturity, risk free interest rate of 2.56% and annualized volatility of 355%, valued at $590,702. The value of the conversion feature was assigned to the derivative liability and created a loss and a debt discount to be amortized over the life of the convertible debt.

2018 Convertible Notes Payable Summary

		December 31, 2018
Lender		Principal				Unamortized Debt Discount				Net

Firstfire Global Opportunities Fund, LLC		$	210,000			$	(124,615	)		$	85,385
Eagle Equities, LLC			500,000				(293,699	)			206,301
Total:		$	710,000			$	(418,314	)		$	291,686

On March 27, 2017, the Company entered into a convertible advance with Crown Bridge Partners, LLC. The agreement provided that the Company may have borrowed up to $675,000. Borrowings under the line bore interest at 8% upon maturity and included a 10% issue discount. The maturity date for each tranche funded was 12 months from the effective date of each tranche. Additionally, the note was convertible at the holder's discretion into shares of the Company's common stock based on a conversion formula of 55% multiplied by the lowest price of the common shares for the 20 trading prior to which the Notice of Conversion was received. As of December 31, 2017, the Company had drawn a $75,000 credit line, resulting in net proceeds received after discount of $63,750. During the year ended December 31, 2018, the noteholder converted $48,720 of principal and interest into common stock, and transferred the remaining $40,000 to a related party, resulting in a $0 balance owed at December 31, 2018.

On March 24, 2017, the Company entered into a convertible advance with Eagle Equities, LLC. The advance, with a face value of $75,000, bore interest at 8% per annum and was payable on March 24, 2018. The note was issued at a 10% discount, resulting in net proceeds received after issuance costs and fees of $63,750. Additionally, the note wass convertible at the holder's discretion into shares of the Company's common stock based on a conversion formula of 55% multiplied by the lowest price of the common shares for the 20 trading prior to which the Notice of Conversion was received. During the year ended December 31, 2018, the noteholder converted $66,871 of principal and interest into common stock, resulting in a $0 balance owed at December 31, 2018.

On May 30, 2017, the Company entered into a convertible advance with Power Up Lending Group, LTD. The advance, with a face value of $38,000, bore interest at 12% per annum and was payable on March 5, 2018. The note was issued at a 7% discount, resulting in net proceeds received after issuance costs and fees of $35,000. Additionally, the note was convertible at the holder's discretion into shares of the Company's common stock based on a conversion formula of 60% multiplied by the lowest price of the common shares for the 15 trading prior to which the Notice of Conversion was received. During the year ended December 31, 2018, the noteholder converted $50,858 of principal and interest into common stock, resulting in $0 and $2,387 in principal and interest, respectively, owed at December 31, 2018.

On May 15, 2017, the Company entered into a convertible advance with Kodiak Capital Group, LLC. The agreement provided that the Company may have borrowed up to $337,500. Borrowings under the line bore interest at 8% per annum and included a 10% issue discount. The maturity date for each tranche funded was 12 months from the effective date of each tranche. Additionally, the note was convertible at the holder's discretion into shares of the Company's common stock based on a conversion formula of 55% multiplied by the lowest price of the common shares for the 20 trading prior to which the Notice of Conversion was received. As of December 31, 2017, the Company had drawn a $37,500 credit line, resulting in net proceeds received after discount of $30,000. During 2018, Kodiak Capital declared a default of the convertible note payable to them, thereby invoking 22% retroactive interest and a penalty of $2,000 per day for non-delivery of the shares according to the note agreement, which led to increasing the balance of the note to $142,633 (including $2,630 accrued interest on the Kodiak note). On February 15, 2018, S&E Capital, LLC, a related party to Canna Corporation reached an agreement with Kodiak Capital to purchase the note (see NOTE 6). The new S&E note extended the maturity date to October 15, 2018, reduced the interest rate from 22% back to 8%, and included a revised conversion rate of 75% of the average of the three lowest trading prices during the 50 days prior to receiving the Notice of Conversion. As a result of the significant modifications to the original terms, the transaction was deemed to be a debt extinguishment and issuance of new debt. The extinguishment of the Kodiak note resulted in a gain of $137,054.

During the year ended December 31, 2018, the noteholder transferred $37,401 principal and accrued interest to a related party (see NOTE 6), resulting in a $0 balance owed at December 31, 2018.

On September 27, 2017, the Company entered into a convertible advance with PowerUp Lending Group, LTD. The advance with a face value of $28,000, bore interest at 12% per annum and was payable on July 10, 2018. The note was issued at a 10% discount, resulting in net proceeds received after issuance cost and fees of $25,000. Additionally, the note was convertible at the holder's discretion into shares of the Company's common stock based on a conversion formula of 58% multiplied by the lowest price of the common shares for the 15 trading days prior to which the Notice of Conversion was received. During the year ended December 31, 2018, the noteholder converted $56,000 of principal and interest into common stock, resulting in a $0 balance owed at December 31, 2018.

Debt discount amortization on the convertible notes totaled $418,314 and $62,866 during the years ended December 31,2018 and 2017, respectively. At December 31, 2017, the Company had $30,040 (net of $190,634 unamortized debt discount) of convertible loans issued and outstanding. These loans, along with interest and default interest for total aggregate balance of $211,694, were subsequently converted during 2018 at an average price of $.06 for 3,645,673 shares of the Company’s common stock (NOTE 7). The conversion formula of each of the above notes created an embedded derivative conversion feature the with values of $2,296,080 and $4,454,993 at December 31, 2018 and 2017, respectively.

Loans Payable

LENDER		LOAN AMOUNT				NET OF PROCEEDS				BALANCE AS OF DECEMBER 31, 2018				DEBT DISC. & ORIGIN. FEES				INT RATE				TERMS OF PAYMENT				NET BALANCE AS OF DEC. 31, 2018
Ultegra Financial Partners (1)		$	486,500			$	339,500			$	474,917			$	143,500				84.98	%			Weekly-42 weeks			$	331,417
Atlas Advanced Funding (1)			109,425				67,450				98,482				36,585				332.38	%			Daily-90 days				61,898
707 Flats Road (2)			134,900				—				134,900								—				180 days				134,900
Marsan Properties (2)			600,000				—				482,500								5	%			12 months				482,500
TOTAL:																										$	1,010,714

During the year ended December 31, 2018, the Company engaged in the following loan activity:

(1)

The Company recognized $55,612 in debt discount amortization on these loans during 2018.

(2)

Proceeds totaling $734,900 used to finance fixed assets, plus guarantees, for total fixed asset financing of $843,705 (NOTE 4 Property and Equipment).