NOTE N

—CONVERTIBLE NOTES PAYABLE

April 4, 2019,

the Company issued a

$550,000

secured convertible debenture which had a maturity date of

November 15, 2019

and was convertible into common stock at a conversion price of

$1.50

per share. The note was redeemable at any time by payment of a premium to the principal balance starting at

and increasing to

25%.

The note was issued at approximately

(

$40,000

) original issue discount. Subject to the mutual agreement of the Company and the investor, the Company could issue

two

additional

$550,000

principal amount notes on the same terms after

day intervals from the prior issuance, for additional net proceeds of

$1,020,000.

The convertible note contained anti-dilution protections if the Company issued shares of common stock for less than the conversion price. The convertible note was secured by substantially all the assets of the Company. At the closing, the Company issued

80,000

shares of common stock in payment of a

$120,000

commitment fee and was obligated to issue

10,000

shares of common stock monthly in payment of a monthly commitment fee of

$15,000

until the earlier of

November 1, 2019

or the repayment or conversion of the note.

June 14, 2019,

the Company issued a

$157,000

secured

10%

convertible redeemable note which had a maturity date of

November 14, 2019

and was convertible into common stock at a conversion price of

$1.50

per share. The convertible redeemable note contained anti-dilution protections if the Company offered a conversion discount or other more favorable conversion terms while the note was outstanding. The note was redeemable within the

first

five

months by payment of a premium to the principal balance starting at

10%

and increasing to

30%

of principal plus interest. At the closing, the Company agreed to issue

200,000

shares of common stock in lieu of payment of a

$30,000

commitment fee which was reduced to

20,000

shares as the note was repaid prior to the maturity date.

Both notes were repaid in full on

July 10, 2019.

For the

two

notes issued during the

second

quarter of

2019,

the Company issued a total of

130,000

shares of common stock, amounting to

$195,000

in commitment fees.

$195,000

was recorded as an offset to notes payable – debt issuance costs and was amortized over the life of the loan. The Company also incurred

$17,000

of legal fees withheld from proceeds which was also recorded as an offset to notes payable – debt issuance costs and was amortized over the life of the loan. Amortization of the debt issuance costs and debt discount are included in interest expense on the statement of operations.

Securities Purchase Agreement dated

July 10, 2019

July 10, 2019,

the Company issued a

$3,060,000

principal amount senior secured convertible note (the “Original Note”). At closing, a total of

$2,550,000

was funded. The original issue discount was

$510,000.

The principal amount due of the Original Note was due and payable as follows:

$918,000

was due

180

days after funding,

$1,071,000

was due

270

days after funding, and the remaining balance due

months after the date of funding.

The Original Note is secured by a lien on substantially all of the Company’s assets and properties and is convertible at the option of the Investor in shares of common stock at a fixed conversion price of

$1.50

per share. The Company has the right to prepay the Original Note in full at any time without penalty in which event, the Investor had the option of converting

25%

of the outstanding principal amount of the Note into shares of common stock.

In connection with the closing of the Original Note, the Company issued a

five

-year warrant to the Investor to purchase

2,000,000

shares of common stock at a fixed exercise price of

$1.50

per share, paid a

$50,000

commitment fee, and issued

266,667

shares of common stock in payment of a

$400,000

due diligence fee. The Company also paid banker fees of

$193,500

and legal fees of

$71,330.

The valuation of the warrant of

$595,662

was recorded to debt discount and is amortized over the life of the Note. The fees associated with the agreement were allocated to debt issuance costs and additional paid-in capital based on the respective ratio of the valuation of the note and warrant. Amortization of the debt issuance costs and debt discount are included in interest expense on the statement of operations.

March 12, 2020,

the Company issued a

$3,789,000

principal amount senior secured convertible note (the “Amended Note”), which replaced the Original Note. The principal amount was due and payable in full on

April 13, 2020.

The Amended Note was secured by a lien on substantially all of the Company’s assets and properties and was convertible at the option of the Investor into shares of common stock at a fixed conversion price of

$0.65

per share.

April 12, 2020,

and

May 6, 2020

the Company entered into amendments (the “Amendments”) to the Amended Note. The Amendments extended the maturity date to

June 12, 2020

and extended the Investor’s right to convert the Amended Note into shares of the Company’s common stock at a price of

$0.65

per share through

June 12, 2020.

All other provisions of the Amended Note remain the same. As of

May 12, 2020,

the Investor has converted

$3,250,000

into

4,999,995

shares of common stock.

Until the

second

anniversary of the closing, the Investor has the right to purchase up to

20%

of the securities the Company issues in any future private placement, subject to certain exceptions for, among other things, strategic investments.

Secured convertible note payable relating to the Original Note, net of unamortized debt discount and debt issuance costs at

December 31, 2019

consisted of:

Principal amount	$	3,060,000
Less unamortized debt discount		(574,330	)
Less unamortized debt issuance costs		(230,216	)
Notes payable, net of unamortized debt discount and debt issuance costs	$	2,255,454

Interest expense for the year ended

December 31, 2019

consists of:

April 4, 2019 debenture interest expense	$	55,000
April 4, 2019 debenture discount amortized		40,000
April 4, 2019 debenture deferred costs amortized		175,000
June 14, 2019 convertible note interest expense		17,822
June 14, 2019 convertible note deferred costs amortized		37,000
July 10, 2019 convertible note discount amortized		245,083
July 10, 2019 convertible note deferred costs amortized		212,980
July 10, 2019 warrant valuation (debt discount) amortization		286,249
Total	$	1,069,134