Quarterly report pursuant to Section 13 or 15(d)

Convertible Note Payable

Convertible Note Payable
6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Convertible Note Payable

Note 12 – Convertible Note Payable


Convertible note payable consists of the following at June 30, 2020 and December 31, 2019, respectively:


    June 30,   December 31,  
    2020   2019  
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 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 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. A Qualified Financing subsequently occurred on February 4, 2019, at which time the convertible note became convertible at a fixed conversion price of $0.40 per share. The Company’s obligations under this Note are secured by a lien on the assets of the Company.   $ 300,000   $ 300,000  
On July 22, 2019, a total of $207,332, consisting of $200,000 of principal and $7,332 of unpaid interest, on two outstanding demand notes owed to CSW that originated on November 26, 2018 and December 26, 2018, were exchanged for a convertible promissory note in the principal amount of $207,332, due on demand (the “Second Convertible CSW Note”). The Second Convertible CSW Note bears interest at 6% per annum and is convertible at the option of the holder into shares of common stock at a price of $0.50 per share.     207,332     207,332  
Less: unamortized debt discounts     -     -  
Convertible note payable   $ 507,332   $ 507,332  


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 discounts equal to $332,332 for the year ended December 31, 2019. 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 $15,178 and $10,323 for the six months ended June 30, 2020 and 2019, respectively, and $125,000 of interest expense related to the debt discount for the six months ended June 30, 2019.