Notes Payable

12 Months Ended

Dec. 31, 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 company made the first three payments of $500,000 on February 10, 2021, May 24, 2021, and November 19, 2021, respectively. In accordance with the terms of the note, $500,000 is due on May 24, 2022 and the remaining $500,000 is 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 year ended December 31, 2021, the company made payments in the amount of $1,500,000, in the aggregate, for this promissory note. As of December 31, 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 $132,760 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 (“SBA”) under the PPP. The company partially used the loan amount for designated qualifying expenses and received notice from the SBA on June 30, 2021, that the company would not be required to repay $81,550 in proceeds. As a result, 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. Additionally, the company made five payments during the year ended December 31, 2021, for a total of $29,306. As of December 31, 2021, $22,804 in principal and $1,385 in interest were outstanding and continue to accrue interest at 1% per annum. The loan is due to be repaid on April 20, 2022.

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 during the last three months of the term. On April 12, 2021, the company commenced monthly principal and interest payments of $13,024 on the remaining nine months due of $117,209, for the remaining nine months. The last payment was made on December 31, 2021. As of December 31, 2021, the outstanding balance on the note was $0.

During the year ended December 31, 2021, the company converted $47,498 of notes payable into 158,329 shares of common stock.

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

	December 31, 2021			December 31, 2020
Beginning balance	$	2,681,157		$	4,967,890
Notes payable		117,209			4,456,760
Accrued interest		1,385			297,849
Transfer from prepaid		-			108,064
Initial beneficial conversion feature		-			(919,000	)
Amortize beneficial conversion feature		-			919,000
Payments on notes payable		(1,646,513	)		(1,480,951	)
Repayment of interest		-			(152,603	)
Extinguishment of Debt		(81,550	)		-
Converted into common stock		(47,498	)		(5,515,852	)
Total		1,024,190			2,681,157
Less-Notes payable - current		1,024,190			(1,547,695	)
Notes payable - non-current	$	-		$	1,133,462

Future principal payments for the company’s Notes as of December 31, 2021 are as follows:

2022	$	1,024,190
Thereafter		-
Total	$	1,024,190

The company’s note payable balance of $1,204,190 is due within the next twelve months, in accordance with the terms of note payable. Of the remaining $1,204,190, $1,000,000 consists of two remaining payments of $500,000, due on May 24, 2022 and November 24, 2022, which is the remaining balance on the note payable that the company assumed as part of the agreement to acquire Applied Optical Sciences. In accordance with the terms of note payable, the company made the first three payments of $500,000 on February 10, 2021, May 24, 2021, and November 19, 2021.

Subsequent to the year ended December 31, 2021, the company entered into a $175,434.65 financing agreement to finance its Directors and Officers insurance premiums.