| Convertible Note Payable |
Note
9 – Convertible Note Payable
Convertible
note payable consists of the following at June 30, 2019 and December 31, 2018, respectively:
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June
30, 2019 |
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December
31, 2018 |
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| On
November 30, 2018, the Company received proceeds of $300,000 on a secured convertible note that carries a 6% interest rate
from CSW Ventures, LP (“CSW”). The proceeds were used to fund the Company’s purchase of 875,000 shares of
common stock, on a 1:4 split adjusted basis, of One World Pharma, Inc. The Note is due on demand. In the event that the Company
consummates the closing of a public or private offering of its equity securities, resulting in gross proceeds of at least
$500,000 (“Qualified Financing”) at any time prior to the repayment of this note, then the outstanding principal
and unpaid interest may, at the option of the holder, be converted into such equity securities at a conversion price equal
to eighty percent (80%) of the purchase price paid by the investors purchasing the equity securities in the Qualified Financing.
The Company’s obligations under this Note are secured by a lien on the assets of the Company. |
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$ |
300,000 |
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$ |
300,000 |
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| On
January 14, 2019, the Company received proceeds of $500,000 on an unsecured convertible promissory note that carries a 6%
interest rate from The Sanguine Group LLC. The Note was due January 14, 2022. In the event that the Company consummated the
closing of a public or private offering of its equity securities, resulting in gross proceeds of at least $500,000 (“Qualified
Financing”) at any time prior to the repayment of this note, then the outstanding principal and unpaid interest would
automatically be converted into such equity securities at a conversion price equal to the lesser of (i) eighty percent (80%)
of the purchase price paid by the investors purchasing the equity securities in the Qualified Financing, or (ii) $0.424 per
share. The Company’s obligations under this Note were secured by a lien on the assets of the Company. A Qualified Financing
subsequently occurred on February 4, 2019, at which time the principal and interest were converted into 1,253,493 shares of
the Company’s common stock. |
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| Less:
unamortized debt discounts |
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| Convertible
note payable |
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$ |
300,000 |
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$ |
300,000 |
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In
addition, the Company recognized and measured the embedded beneficial conversion feature present in the convertible notes by allocating
a portion of the proceeds equal to the intrinsic value of the feature to additional paid-in-capital. The intrinsic value of the
feature was calculated on the commitment date using the effective conversion price of the convertible notes. This intrinsic value
is limited to the portion of the proceeds allocated to the convertible debt.
The
aforementioned accounting treatment resulted in a total debt discount equal to $125,000 and $75,000 for the six months ended June
30, 2019 and the year ended December 31, 2018, respectively. The Company recorded finance expense in the amount of $125,000 for
the six months ended June 30, 2019.
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 $10,323 and
$125,000 of interest expense related to the debt discount for the six months ended June 30, 2019.
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