Note 6 - Notes Payable

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Debt Disclosure [Text Block]

NOTE 6 – NOTES PAYABLE

The balances of notes payable were as follows:

	Due Date	December 31, 2021		December 31, 2020
2018 Investor loan	March 31, 2021	$	-	$	1,721,776
Promissory note 2019	March 27, 2021		-		1,490,833
Promissory note 2020	March 31, 2021		-		1,464,146
Total Notes Payable, gross			-		4,676,755
Less: Unamortized discount			-		244,830
Total Notes Payable, net		$	-	$	4,431,925

Secured Notes and Repayment in Full

In September 2018, the Company issued convertible secured promissory notes to two private investors in the original principal amount of an aggregate $2,297,727 (together, the “2018 Investor Note”) in exchange for cash proceeds of $2,000,000. As additional consideration for the 2018 Investor Note, the Company issued an aggregate 65,000 shares of its common stock as inducement shares plus warrants to acquire up to an aggregate 107,178 shares of common stock at an exercise price of $11.55 per share. Pursuant to a security agreement between the Company and the investors, the Company granted to the investors a security interest in its assets to secure repayment of the note. The 2018 Investor Note accrued interest at a rate of 8% per annum. In February 2019, the Company entered into a forbearance agreement with the 2018 Investor Note investors pursuant to which, among other things, the investors agreed to forbear on their rights to accelerate the 2018 Investor Note based on an event of default and a claimed event of default. In connection with such forbearance, an additional $344,659 in principal and an additional 16,667 common shares were issued to the investors. In September 2019, the 2018 Investor Note of one investor was paid in full. On March 19, 2020, the Company and the L2 Capital, LLC (“L2”) agreed to extend the note maturity to June 28, 2020. The Company and L2 further agreed to extend the due date to July 15, 2020 and then in July 2020 agreed to extend to September 30, 2020. Effective September 30, 2020, L2 and the Company agreed to extend to March 31, 2021.

Each investor received the right to convert all or any part of its portion of the 2018 Investor Note into shares of the Company’s common stock at a discounted price, subject to certain limitations. During the year ended December 31, 2020, L2 converted $267,328 of the principal balance, and received 170,000 shares of the Company’s common stock.

During September 2019, the Company issued a secured promissory note with a principal amount of $847,500 (the “2019 Investor Note”) to Oasis Capital, LLC (“Oasis”), an affiliate of L2, in exchange for cash proceeds of $700,000. As additional consideration for the loan, the Company issued an aggregate 8,857 shares of its common stock to Oasis plus warrants to acquire up to 68,237 shares of the Company’s common stock at an exercise price of $6.21 per share. The warrants are exercisable beginning on the sixth month anniversary of the effective date through the fifth-year anniversary thereof. The 2019 Investor Note accrued interest at a rate of 8% per annum. On March 19, 2020, the Company entered into an agreement to extend the due date the 2019 Investor Note from March 2020 to June 27, 2020. The Company increased the principal amount due on the 2019 Investor Note by $300,000 and issued 30,000 shares of its common stock as consideration for the extension. The change in value resulting from the extension exceeded 10% and as a result the extension was accounted for as an extinguishment under ASC 470, Debt. During the first quarter of 2020, the Company incurred a $300,000 loss on debt extinguishment related to the extension of the note. The Company and Oasis further agreed to extend the due date of the note to July 15, 2020 and then agreed to extend to September 30, 2020. The change in value resulting from the extension to September 30, 2020 exceeded 10% and as a result the extension was accounted for as an extinguishment under ASC 470, Debt. During the third quarter of 2020, the Company incurred a $345,000 loss on debt extinguishment related to the extension of the 2019 Investor Note to September 30, 2020. Effective September 30, 2020, Oasis and the Company agreed to further extend the maturity date of the 2019 Investor Note to March 31,2021. The change in value resulting from the extension to March 31, 2021 exceeded 10% and as a result the extension was accounted for as an extinguishment under ASC 470, Debt. During the third quarter of 2020, the Company incurred a $690,000 loss on debt extinguishment related to the extension of the note to March 31, 2021. Further, the parties agreed that the note shall be convertible into shares of the Company’s common stock, at a conversion price equal to the lesser of (i) $1.00 and (ii) 70% of the lowest VWAP (as defined in the note) of the Company’s common stock during the twenty (20) Trading Day (as defined) period ending on either (i) the last complete Trading Day prior to the conversion date or (ii) the conversion date, as determined by the holder in its sole discretion upon such conversion (subject to adjustment). During the fourth quarter of 2020, Oasis converted $525,000 in outstanding principal of the 2019 Investor Note in exchange for 1,136,448 shares of the Company’s common stock. No payment penalties were paid in relation to payments on this promissory note during the year ended December 31, 2020 and $320,542 in payment penalties were accrued but not paid as of December 31, 2020. As of December 31, 2020, the remaining balance on the promissory note was $1,490,833 with $244,830 unamortized discount.

On February 5, 2020, the Company issued a secured promissory note with a principal amount of $1,450,000 (the “2020 Investor Note”) to Oasis. Net proceeds of $400,000 were received for each of the first, second, and third tranches on February 5, 2020, March 5, 2020, and April 5, 2020, respectively. The Company granted to Oasis a security interest in its assets to secure repayment of the note. The 2020 Investor Note accrued interest at a rate of 8% per annum. Subject to certain limitations, the outstanding principal amount of the note and interest thereon were convertible at the election of the investor into shares of the Company’s common stock at a conversion price equal to $2.589. The conversion price was amended effective September 30, 2020 to a variable price equal to 70% of the lowest VWAP (as defined in the note) of Company’s common stock during the twenty (20) Trading Day (as defined in the note) period ending on either (i) the last complete Trading Day prior to the conversion date or (ii) the conversion date, as determined by the holder in its sole discretion upon such conversion (subject to adjustment). The note contains a conversion feature and a put which were determined to be derivatives and are discussed further below. Effective July 15, 2020, the Company and Oasis agreed to amend the maturity date of the note to September 30, 2020. The change in value resulting from the amendment to maturity to September 30, 2020 exceeded 10% and as a result the amendment was accounted for as an extinguishment under ASC 470, Debt. During the third quarter of 2020, the Company incurred a $172,500 loss on debt extinguishment related to the amendment of the note to September 30, 2020. Effective September 30, 2020, the investor and the Company agreed to further extend the maturity date of the 2020 Investor Note to March 31, 2021. The change in value resulting from the extension to March 31, 2021 exceeded 10% and as a result the extension was accounted for as an extinguishment under ASC 470, Debt. During the third quarter of 2020, the Company incurred a $345,000 loss on debt extinguishment related to the extension of the note to March 31, 2021. As additional consideration, the Company issued to Oasis warrants to purchase 94,631, 92,700 and 92,700 shares of the Company’s common stock at the closing of the first, second and third tranches, respectively. The warrants are exercisable beginning on the sixth month anniversary of the issuance date at an exercise price equal $2.992 per share. The Company also issued 46,875 shares of its common stock to Oasis at the closing of the first tranche. During the fourth quarter of 2020, Oasis converted $503,354 in outstanding principal in exchange for 1,075,911 shares of the Company’s common stock. No payment penalties were paid in relation to payments on this promissory note during the year ended December 31, 2020 and $314,011 in payment penalties were accrued but not paid as of December 31, 2020. As of December 31, 2020, the outstanding balance on the promissory note was $1,464,146 with no remaining unamortized discount.

On March 1, 2021, the Company used $5,906,802 of the proceeds of the private placement on February 23, 2021, described below under “2021 Offerings”, to repay in full the outstanding principal and interest and applicable premium amounts under the 2018 Investor Note, the 2019 Investor Note and the 2020 Investor Note.

Dr. Schwartz Notes

In November 2018, Dr. Schwartz made a loan to the Company with a principal balance of $370,000. As of December 31, 2018, one promissory note was held with a principal balance of $370,000 and an unamortized discount of $63,028. From November 30, 2018 through July 15, 2019, Dr. Schwartz made numerous loans to the Company in the total amount of $1,920,000 under two promissory notes. As consideration for these amounts, Dr. Schwartz received promissory notes and warrants to purchase 22,129 shares of the Company’s common stock at $8.36 per share. Further, beginning on February 1, 2019 and the first day of each calendar month thereafter while the note remained outstanding, a number of additional warrants were issued. Beginning in October 2019, the Company and Dr Schwartz began to renegotiate the note. Due to the negotiations, the Company did not issue any additional warrants because they would be cancelled under the new deal.

During January 2020, the Company entered into an exchange agreement with Dr. Schwartz. Under the exchange agreement, the two outstanding notes were cancelled and in exchange a new promissory note in the amount of $2,115,000 bearing 12% interest per annum and maturing on September 30, 2020 was issued. In addition to the promissory note, Dr. Schwartz received 50,000 shares of the Company’s common stock. All warrants issued under the prior promissory notes were cancelled under the exchange agreement; no rights and obligations remain under the cancelled notes. The Company determined that the exchange agreement had, in substance, occurred at December 31, 2019.

Effective as of April 21, 2020, the Company and Carl Schwartz, entered into an exchange agreement relating to a promissory note of the Company dated January 31, 2020 issued by the Company in the principal amount of $2,115,000. The note bore twelve percent (12%) interest per annum and had a maturity date of September 30, 2020. The accrued interest on the note through April 21, 2020 was $77,878, resulting in a total balance of $2,192,878 in principal and accrued interest on the Note as of such date. Dr. Schwartz and the Company agreed to exchange the note for newly issued shares of common stock of the Company at market value. Pursuant to the exchange agreement, Dr. Schwartz was issued 1,583,481 shares of newly issued common stock at an exchange rate of $1.43 per share, equal to the closing price of the common stock on April 21, 2020. Dr. Schwartz agreed (1) not to sell or otherwise transfer 766,740 shares for three months after the date of the exchange agreement, and (2) not to sell or otherwise transfer the remaining 766,741 shares for six months after the date of the exchange agreement. In 2021, the Company determined that due to a calculation error, the balance of the 2020 Schwartz Note should have been higher by $143,573 at the time of the exchange agreement, and on February 24, 2021, the Company issued an additional 100,401 shares to Dr. Schwartz.

Short Term Borrowings

The Company entered into short-term borrowings with an investor. The maturity date of the notes is six months after the dates of issuance with interest rates of 8% payable at maturity. Repayment of such notes is subject to a premium. During year ended December 31, 2020, the Company issued short term notes for a total of $1,098,684 for cash proceeds of $1,020,000 and repaid $1,459,973 of principal using a portion of proceeds from the equity financing facility. Payment penalties of $247,327 were paid in relation to payments on these short-term borrowings during the year ended December 31, 2020. There were no amounts outstanding under the short-term borrowings as of December 31, 2020.

April 2020 Paycheck Protection Program

On April 20, 2020, the Company entered into a promissory note with Park State Bank, which provides for an unsecured loan of $541,867 pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act and applicable regulations (the “CARES Act”). The promissory note has a term of 2 years with a 1% per annum interest rate. Payments are deferred for 6 months from the date of the promissory note and the Company can apply for forgiveness of all or a portion of the promissory note after 60 days for covered use of funds.

Pursuant to the terms of the PPP, the promissory note, or a portion thereof, may be forgiven if proceeds are used for qualifying expenses as described in the CARES Act, such as payroll costs, costs used to continue group health care benefits, mortgage interest payments, rent and utilities. The Company has used all proceeds for qualifying expenses. The Company received forgiveness for the loan under the Paycheck Protection Program and recognized a gain in other income for the full amount of the loan during the fourth quarter of 2020.