CONVERTIBLE NOTES

3 Months Ended

Mar. 31, 2022

Convertible Notes Payable [Abstract]

CONVERTIBLE NOTES [Text Block]

7. CONVERTIBLE NOTES

On February 15, 2022 (“February Notes”) and March 28, 2022 (“March Notes”), the Company issued a convertible promissory notes that bear interest of 4.0% and have a term of two years. Both notes have an initial conversion price to the Company’s common stock of $0.34 per share. The notes were issued with an original issue discount. In addition, the Company issued 221,402 shares of its common stock with a fair value of $60,000 as brokerage fee. Along with the notes, the Company also issued warrants with an exercise price to common stock of $0.60 and a term of warrants have a term of five years. The net proceeds were allocated to the convertible debt and the warrants using the relative fair value method.

Following is a summary of the allocation of proceeds:

		February 15, 2022			March 28, 2022			Total
Face value	$	1,620,000		$	956,880		$	2,576,880
Original issue discount		(120,000	)		(70,880	)		(190,880	)
Legal and brokerage fees		(127,500	)		-			(127,500	)
Cash proceeds		1,372,500			886,000			2,258,500
Noncash brokerage fee		(60,000	)		-			(60,000	)
Other Legal fees		(30,374	)		-			(30,374	)
Net Proceeds	$	1,282,126		$	886,000			2,168,126
Allocation to:
Convertible note	$	839,671		$	554,669			1,394,340
Warrants		442,455			331,331			773,786
	$	1,282,126		$	886,000		$	2,168,126

The Company valued the warrants using the Black-Scholes valuation method. The number of warrants issued with the notes and the variables used in determining the relative fair value of the notes is a follows:

	February 15, 2022	March 28, 2022	Total
Number of warrants issued	3,573,529	2,110,765	5,684,294
Black Scholes assumptions
Risk-free rate (%)	1.94	2.54
Expected stock price volatility (%)	154.14	159.80
Expected dividend yield (%)	0.00	0.00
Expected life of options (years)	5.0	5.0

Upon issuance of the notes, the Company recognized total debt discount of $1,182,540 which will be amortized over the term of the debt using the interest method. During the three month period ended March 31, 2022, the Company recognized $8,126 in interest expense and $47,781 in financing costs associated with the amortization of the debt discount.

The Company may close a second tranche of the February Notes having a face value of $1,080,000 and warrants to purchase up to an additional 2,382,353 shares of the Company’s common stock for gross proceeds of $1,000,000. Closing of the second tranche under the Convertible Note Offering is conditional upon completion of the Evasyst Acquisition and certain other conditions precedent.

The Company may prepay the notes (i) at any time during the first 90 days following closing at the face value of the, (ii) at any time during the period from 91 to 180 days following closing at a premium of 110% of the face value, and (iii) thereafter at 120% of the face value. The February Notes contain a number of customary events of default. Additionally, the February Notes are secured by all of the assets of the Company, including a lien on and security interest in all of the issued and outstanding equity interests of the wholly-owned subsidiaries of the Company. The March Notes are unsecured.