Notes Payable

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

NOTES PAYABLE

NOTE 3 – NOTES PAYABLE

On May 24, 2019, the Company entered into an Asset Purchase Agreement (the “APA”) with Applied Optical Sciences, LLC (“AOS”) to acquire certain assets. As consideration for the APA, the Company entered into a promissory note issued to the shareholders of AOS for $2,500,000. The note is non-interest bearing and shall be repaid in equal installments, the first two payments were due on February 10, 2021 and subsequent payments being due May, 24, 2021 and the remainder on the last day of each six-month period thereafter, the final such payment being due on November 24, 2022. The Promissory Note may be prepaid at any time (in whole or in part). Upon inception, the Company recorded a debt discount in the amount of $2,500,000 in relation to the transaction which is being amortized over the life of the loan as compensation expense. During the six months ended June 30, 2021, the Company made payments in the amount of $1,000,000, in the aggregate, for this promissory note. As of June 30, 2021 and December 31, 2020, the note is not in default.

Paycheck Protection Program

On April 28, 2020, the Company entered into a loan agreement with Alliance Bank of Arizona, N.A. for a loan in the amount of $133,658 pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act enacted on March 27, 2020 (the “CARES Act”). This loan is evidenced by a promissory note dated April 27, 2020 and matures two years from the disbursement date. This loan bears interest at a rate of 1.00% per annum, with the first nine months of interest deferred. Principal and interest are payable monthly commencing nine months after the disbursement date and may be prepaid by the company at any time prior to maturity with no prepayment penalties. This loan contains customary events of default relating to, among other things, payment defaults or breaches of the terms of the loan. Upon the occurrence of an event of default, the lender may require immediate repayment of all amounts outstanding under the note.

Under the terms of the PPP, up to the entire amount of principal and accrued interest may be forgiven to the extent loan proceeds are used for qualifying expenses as described in the CARES Act and applicable implementing guidance issued by the U.S. Small Business Administration under the PPP. The Company partially used the loan amount as designated qualifying expenses and received on June 30, 2021 received forgiveness in accordance with the terms of the CARES Act. The company received partial forgiveness of the PPP amounting to $80,594 in principal and $956 in interest which is reflected within PPP forgiveness and other income on the statements of operations. As of June 30, 2021, $52,308 in principal and $660 in interest were outstanding and continue to accrue interest at 1% per annum. The loan is due to be repaid on April 20, 2022 and it is unlikely that the Company will obtain forgiveness of the remaining loan in whole or in part.

Premium Financing

On March 25, 2021, the company entered into an agreement with Oakwood D&O Insurance to provide financing in an amount of $156,279 for the insurance premium associated with two D&O policies. Both policies commenced March 12, 2021, and provided coverage for the next 12 months, expiring March 12, 2022. The loan bears interest at a fixed rate of 6.5% per annum and required the Company to prepay $39,070 the last three months of the term and appears on the balance sheet as a current asset. On April 12, 2021, the company commenced monthly principal and interest payments of $13,024 on the remaining nine months due of $117,209, the last payment of which is scheduled to be made on December 31, 2020. As of June 30, 2021, the outstanding balance on the note was $65,116.

During the six months ending June 30, 2021, the company converted $47,499 of notes payable into 158,329 shares of common stock.

The following reconciles notes payable as of June 30, 2021 and December 31, 2020:

	June 30, 2021			December 31, 2020
Beginning balance	$	2,681,157		$	4,697,890
Notes payable		117,209			4,456,760
Accrued interest		660			297,849
Transfer from prepaid		-			108,064
Initial beneficial conversion feature		-			(919,000	)
Amortize beneficial conversion feature		-			919,000
Payments on notes payable		(1,052,093	)		(1,480,951	)
Repayment of interest		-			(152,603	)
Extinguishment of Debt		(81,550	)
Converted into common stock		(47,499	)		(5,515,852	)
Total		1,617,884			2,681,157
Less-Notes payable - current		(1,117,884	)		(1,547,695	)
Notes payable - non-current	$	500,000		$	1,133,462

Future principal payments for the Company’s Notes as of June 30, 2021 are as follows:

2021	$	598,694
2022		1,019,190
Thereafter		-
Total	$	1,617,884

Of the $1,617,884 note payable balance, $1,117,884 are short term of which $1,000,000 are payments on the note to acquire assets of Applied Optical Sciences and $500,000 are long term. In accordance to the terms of note to acquire assets of Applied Optical Sciences, the first two payments were paid on February 10, 2021 and May 24, 2021, respectively. The remaining payments are due on the last day of each six-month period thereafter, the final such payment being due on November 24, 2022.