| Convertible Note Payable |
Note 12 – Convertible Note Payable
Convertible note payable consists of the following
at December 31, 2019 and 2018, respectively:
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December 31, |
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December 31, |
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2019 |
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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 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 $0.40 per share. The Company’s obligations under this Note are secured by a lien on the assets of the Company. |
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$ |
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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| 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 $0.50 per share. |
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207,332 |
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| Less: unamortized debt discounts |
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| Convertible note payable |
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$ |
507,332 |
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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 discounts equal to $332,332 and $75,000 for the year ended December 31, 2019 and the period from inception (March
27, 2018) to December 31, 2018, respectively. The Company recorded finance expense in the amount of $332,332 for the year ended
December 31, 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 $24,751 and $1,529 for the year ended December 31, 2019
and the period from inception (March 27, 2018) to December 31, 2018, respectively. In addition, the Company recognized $332,332
of interest expense related to the debt discount for the year ended December 31, 2019.
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