Notes Payable

6 Months Ended

Jun. 30, 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. The Promissory Note was amended on May 23, 2022 to extend the maturity date by one year to, May 24, 2023, and restructure the payment to time up to the adjusted maturity date. The remaining balance of $1,000,000 as of June 30, 2022 will be paid in ten equal installments of $100,000 over a period of ten months, with the first installment being paid on July 24, 2022 (see Note 9, subsequent events) and the final installment to be paid on April 24, 2023.

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 matured two years from the disbursement date. This loan bears interest at a rate of 1.00% per annum, with the first six-months ended of interest deferred. Principal and interest are payable monthly commencing six-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. During the six months ended June 30, 2020, the company paid the remaining balance of the loan in the aggregate of $23,553 in four equal payments, with loan formally repaid on April 20, 2022. As a result, as of June 30, 2022, no principal or interest was outstanding on this loan.

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 June 30, 2022, the outstanding balance on the note was $97,464 and was recorded as notes payable, a currently liability, in the company’s condensed consolidated balance sheet.

Notes Payable Reconciliation

The following reconciles notes payable as of June 30, 2022, and December 31, 2021:

	June 30, 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		(101,524	)		(1,646,513	)
Extinguishment of debt		-			(81,550	)
Converted into common stock		-			(47,498	)
Total		1,098,100			1,024,190
Less-Notes payable – current		1,098,100			1,024,190
Notes payable – non-current	$	-		$	-

Future principal payments for the company’s Notes as of June 30, 2022, are as follows:

2022	$	698,100
2023		400,000
Thereafter		-
Total	$	1,098,100

The company’s note payable balance of $1,098,100 is due within the next twelve months, in accordance with the terms of note payable. $1,000,000 of the outstanding notes payable balance at June 30, 2022 will be paid in ten equal installments of $100,000 over a period of ten months, with the first installment being paid on July 24, 2022 (see Note 9, subsequent events) and the final installment to be paid on April 24, 2023.