NOTES PAYABLE AND PPP LOAN

9 Months Ended

Sep. 30, 2021

NOTES PAYABLE AND PPP LOAN

NOTE 11 - NOTES PAYABLE AND PPP LOAN

NOTE 11 – NOTES PAYABLE AND PPP LOAN

Notes payable consist of the following at September 30, 2021 and December 31, 2020 (in thousands):

	September 30, 2021		December 31, 2020
Note to an individual, non-interest bearing, unsecured and due on demand	$	50	$	50
Promissory note to a company due May 18, 2021; interest payable at 8% per annum; unsecured; principal and accrued interest automatically convert into a convertible promissory note		250		250
Promissory note to a company due August 12, 2021; interest payable at 8% per annum; unsecured; principal and accrued interest automatically convert into a convertible promissory note		500		500
Promissory note to a company due January 13, 2022; unsecured; principal and accrued interest automatically convert into a convertible promissory note		500		-
Promissory note to a company due April 8, 2022; unsecured; principal and accrued interest automatically convert into a convertible promissory note		250		-
Promissory note to a company due October 30, 2021; interest payable at 8% per annum; unsecured; principal and accrued interest automatically convert into a convertible promissory note		250
Current portion of note payable	$	1,800	$	800

On May 18, 2020 and August 12, 2020, the Company entered into unsecured promissory notes (“Notes”) with an investor for $0.3 million and $0.5 million, respectively. The Notes are due on May 18, 2021 and August 12, 2021, respectively, and have an interest rate of 8% per annum, payable in quarterly payments. The principal and accrued interest under the Notes can convert into convertible promissory notes if the Company consummates a debt financing for the sale and issuance of promissory notes that are convertible into common stock of the Company on terms that are more favorable to new investors than the terms described in the term sheet included in the Notes. Upon notice by the Company of such debt financing, the holder of the Notes shall have the right, but not the obligation, to convert the Notes into convertible promissory notes, with the same principal amount and interest accruing from the date of issuance of the Notes, on the same terms as the convertible promissory notes issued to such new investors. The investor did not elect to convert their Notes into a convertible promissory note, with the same principal and interest accruing from the date of issuance of the Notes, on the same terms as the convertible promissory notes issued to such new investors. As of the date of this report, both the Company and the investor agreed to extend the $0.3 million and $0.5 million unsecured promissory notes and are currently negotiating the terms of the amendment.

On September 25, 2020 the Company issued a demand secured promissory note to Ionic Ventures, LLC (“Ionic”), dated September 25, 2020 (the “Promissory Note”), in the principal amount of $1.1 million with the Company receiving gross proceeds of $1.0 million and $0.1 million being an original issue discount. The Promissory Note is secured by certain assets of the Company as further set forth therein, bears no interest rate and is subject to payment on demand of Ionic after the earlier of either (a) the initial date after September 25, 2020 of any offering of securities by the Company with gross proceeds of at least $1.0 million or (b) October 31, 2020. The outstanding principal amount and any unpaid accrued Late Charges (as defined below) may be prepaid at any time, without notice, premium or penalty. Payments will be credited first to the accrued Late Charges then due and payable and the remainder applied to the outstanding principal. On October 30, 2020, the Company repaid in full the outstanding principal balance and all accrued but unpaid interest expense of $1.1 million from the proceeds of the Series A Note further described in Note 13.

On January 13, 2021 and February 25, 2021, the Company received a total of $0.5 million from an investment company (“Investor”) in exchange for a promissory note. Both the Company and Investor agreed to negotiate the terms of the promissory note and as of the filing date of this report, the Company and Investor are still negotiating the terms of the promissory note.

On April 8, 2021 and September 24, 2021, the Company received $0.3 million and $0.3 million, respectively, from an investment company (“Investor”) in exchange for two promissory notes. Both the Company and Investor agreed to negotiate the terms of the promissory notes and as of the filing date of this report, the Company and Investor are still negotiating the terms of the promissory notes.

Paycheck protection program consist of the following at September 30, 2021 and December 31, 2020 (in thousands):

	September 30, 2021		December 31, 2020
Payment Protection Program Loan due April 2022, including interest at 1% per annum; unsecured. On February 5, 2021, $0.4 million was forgiven as permitted under Section 1106 of the CARES Act.	$	-	$	399
Payment Protection Program Loan due April 2022, including interest at 1% per annum; unsecured. On June 9, 2021, $0.2 million was forgiven as permitted under Section 1106 of the CARES Act.		-		206
Payment protection program loan	$	-	$	605

In April 2020, the CURE Pharmaceutical and Sera Labs received loan proceeds in the amount of approximately $0.4 million and $0.2 million under the Paycheck Protection Program (“PPP”). The PPP, established as part of the CARES Act, provides for loans to qualifying businesses. A portion of the loans and accrued interest are forgivable as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries. No collateral or guarantees were provided in connection with the PPP loans. On February 5, 2021, $0.4 million was forgiven as permitted under Section 1106 of the CARES Act and the Company recorded a gain on extinguishment of debt during the three months ended March 31, 2021. On June 9, 2021, $0.2 million was forgiven as permitted under Section 1106 of the CARES Act and the Company recorded a gain on extinguishment of debt during the three months ended September 30, 2021.

Interest expense for the three months ended September 30, 2021 and 2020 was $0.05 million and $0.01 million, respectively. Interest expense for the nine months ended September 30, 2021 and 2020 was $0.11 million and $0.01 million, respectively.