Notes Payable

3 Months Ended

Mar. 31, 2022

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 three months ended March 31, 2022, the company made payments in the amount of $0 for this promissory note. As of March 31, 2022 and December 31, 2021, 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 three-months ended of interest deferred. Principal and interest are payable monthly commencing three-months ended 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 three payments during the quarter ended March 31, 2022, for a total of $17,420. As of March 31, 2022, $6,770 in principal and $0 in interest were outstanding and continued to accrue interest at 1% per annum. The loan is due to be repaid on April 20, 2022.

Premium Financing

On April 8, 2022, the company entered into an agreement with Oakwood D&O Insurance to provide financing in an amount of $234,367 for the insurance premium associated with two D&O policies. Both policies commenced March 12, 2022, and provided coverage for the next 12 months, expiring March 12, 2023. The loan bears interest at a fixed rate of 5% per annum and required the company to prepay $58,932 and appears on the balance sheet as a current asset. On April 12, 2022, the company commenced monthly principal and interest payments of $19,901, which was the first payment of nine remaining months due of $175,435, the last payment of which is scheduled to be made on December 31, 2022. As of March 31, 2022, the outstanding balance on the note was $175,435 and was recorded as notes payable, a currently liability, in the Company’s condensed consolidated balance sheet.

The following reconciles notes payable as of March 31, 2022, and December 31, 2021:

	March 31, 2022			December 31, 2021
Beginning balance	$	1,024,190		$	2,681,157
Notes payable		175,435			117,209
Accrued interest		-			1,385
Payments on notes payable		(17,420	)		(1,646,513	)
Extinguishment of debt		-			(81,550	)
Converted into common stock		-			(47,498	)
Total		1,182,205			1,024,190
Less-Notes payable – current		1,182,205			1,024,190
Notes payable – non-current	$	-		$	-

Future principal payments for the company’s Notes as of March 31, 2022, are as follows:

2022	$	1,182,205
2023		-
Thereafter		-
Total	$	1,182,205

The company’s note payable balance of $1,182,205 is due within the next twelve months, in accordance with the terms of note payable. Of the $1,182,205, $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.