CONVERTIBLE PROMISSORY NOTE

January 29, 2019,

the Company agreed to issue and sell an unsecured note payable to an accredited investor (the “Accredited Investor”) for an aggregate of

$800,000

face value (the

“January 2019

Note”) that, after

six

months, is convertible into shares of the Company's common stock at a conversion price equal to the lower of (a)

$1.80

per share or (

)

90%

of the closing sale price of the Company’s common stock on the date of conversion (subject to a floor conversion price of

$0.50

The

January 2019

Note bears interest at the rate of

twenty-four

percent (

24%

) per annum and is payable quarterly in arrears. Unless sooner converted in the manner described below, all principal under the

January 2019

Note, together with all accrued and unpaid interest thereupon, will be due and payable

eighteen

(

) months from the date of the issuance of the

January 2019

Note. The

January 2019

Note

may

be prepaid without penalty at any time after it becomes convertible (at which time the holder will have the right to convert it before prepayment thereof).

On the date that is

six

months after the issuance of the

January 2019

Note, and for so long thereafter as any principal and accrued but unpaid interest under the

January 2019

Note remains outstanding, the holder of the

January 2019

Note

may

convert such holder’s

January 2019

Note, in whole or in part, into a number of shares of the Company’s common stock equal to (i) the principal amount being converted, together with any accrued or unpaid interest thereon, divided by (ii) the conversion price in effect at the time of conversion. The

January 2019

Note has customary conversion blockers at

4.99%

and

9.99%

unless otherwise agreed to by the Company and the holder. It was concluded that the conversion option was beneficial. Accordingly, the Company recorded a debt discount in the amount of

$800,000,

upon stockholder approval of the conversion feature, which occurred on

May 30, 2019.

The discount represented the fair value of the incremental shares up to the proceeds received from the convertible note.

The

January 2019

Note contains customary events of default, including the suspension or failure of the Company’s common stock to be traded on a trading platform, the Company’s failure to pay interest or principal when due, or if the Company files for bankruptcy or takes some other similar action for the benefit of creditors. In the event of any default under the

January 2019

Note, the holder

may

accelerate all outstanding interest and principal due on the

January 2019

Note.

July 23, 2019,

the Company entered into Amendment

No.

to the

January 2019

Note (“Amended Note”). Under the terms of the amendment, the maturity date of the

January 2019

Note was extended from

July 29, 2020

July 31, 2022.

All other terms of the

January 2019

Note remain the same. The Amended Note was accounted for as an extinguishment of the

January 2019

Note as the change in the fair value of the embedded conversion option featured in the

January 2019

Note immediately before and after the amendment exceeded

10%

of the carrying amount of the

January 2019

Note. Accordingly, the Company recorded a loss on the constructive extinguishment of this debt in the amount of

$840,000

for the year ended

December 31, 2019.

The fair value of the Amended Note, which amounted to

$1,473,000

was recorded as a liability. The Company also evaluated the conversion option embedded in the Amended Note and determined it was beneficial. Accordingly, the Company recorded a debt discount in the amount of

$556,000

on the Amended Note for the year ended

December 31, 2019.

The Company amortized

$77,000

of the debt discount for the

January 2019

Note to interest expense for the year ended

December 31, 2019.

The Company utilized a Monte Carlo simulation model to determine the fair value of the Amended Note.

The key assumptions used in the simulation model were:

Stock price at date of issuance	$	3.05
Exercise price (1)	$	1.80
Risk-free interest rate		1.8	%
Expected dividend yield		--
Expected term (in years)		3.02
Expected volatility		93	%

(

)

For the exercise price, the model inputs also accounted for the fair value protection under the Amended Note, which allows for the holder to convert at the lower of

$1.80

share or

90%

of the listed price of the stock on the day of conversion, whichever is lower (subject to a floor of

$0.50

During the

three

months ended

March 31, 2020,

the holder converted a portion of the face value of the note into shares of common stock. In total,

$180,000

was converted into

100,000

shares of common stock. Additionally, the unamortized premium for the portion of the note that was converted of

$22,000

was recorded to interest income during the

three

months ended

March 31, 2020.

July 23, 2019,

the Company entered into a private placement with the Accredited Investor, pursuant to which the Company issued and sold to such investor an unsecured convertible promissory note in the original principal amount of

$1,000,000

(the

“July 2019

Note”). After

six

months and subject to the receipt of stockholder approval of the conversion feature of the

July 2019

Note, such note is convertible into shares of the Company's common stock at a conversion price equal to the lower of (a)

$1.80

per share or (b)

90%

of the closing sale price of the Company’s common stock on the date of conversion (subject to a floor conversion price of

$0.50

). The

July 2019

Note bears interest at the rate of

twenty-four

percent (

24%

) per annum and is payable quarterly in arrears. Unless sooner converted in the manner described below, all principal under the

July 2019

Note, together with all accrued and unpaid interest thereupon, will be due and payable

three

years from the date of the issuance on

July 31, 2022.

However, if stockholder approval of the conversion feature of the

July 2019

Note is

not

obtained at the Company’s

2020

annual meeting of stockholders, the maturity date will accelerate to the date that is

fourteen

days after the next annual meeting.

The

July 2019

Note

may

be prepaid without penalty at any time after it becomes convertible (at which time the holder will have the right to convert it before prepayment thereof). On the date that is

six

months after the issuance of the

July 2019

Note and after receiving stockholder approval of the conversion feature described above, the holder

may

convert the

July 2019

Note as a debt instrument until the conversion feature is approved by the Company’s stockholders. If approved, the Company will account for the conversion feature at the time of its effectiveness if approved.