11.	CONVERTIBLE NOTES PAYABLE

Convertible notes payable as of

March 31, 2020

and

December 31, 2019

consist of the following:

	March 31,		December 31,
	2020		2019

Secured Purchase Agreement dated July 10, 2019	$	2,061,472	$	2,255,454
January 2020 Note		143,913		-
February 2020 Note		96,571		-
Convertible notes payable, net	$	2,301,956	$	2,255,454

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

$1.50

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

$0.65

per share. Due to the debt restructuring, the balance of the Amended Note was increased by an additional

$729,000

in interest. The Company accounted for the transaction as a debt extinguishment, and therefore, the balance of the fees and unamortized discount associated with the Original Note were written off and included as loss on extingushment of debt. On the day of the conversion, the closing stock price for the day was

$0.76,

which resulted in a beneficial conversion of

$0.11

per share outstanding or

$641,215

to be amortized to interest expense over the term of the Amended Note as adjusted for any debt conversion. At

March 31, 2020,

the Investor converted

$1,500,000

into

2,307,690

shares of common stock.

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 the date of this report, the Investor has converted

$3,500,000

into

5,384,610

shares of common stock and the remaining principal balance is

$289,000.

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 Amended and Original Notes, net of unamortized debt discount and debt issuance costs consisted of:

	March 31,			December 31,
	2020			2019
Principal amount	$	3,789,000		$	3,060,000
Less: conversion of principal into shares of common stock		(1,500,000	)		-
Net Principal amount		2,289,000			3,060,000

Less: unamortized debt discount and beneficial conversion feature		(227,528	)		(574,330	)
Less: unamortized debt issuance costs		-			(230,216	)
Notes payable, net of unamortized debt discount and debt issuance costs	$	2,061,472		$	2,255,454

January 2020

Note

January 13, 2020,

the Company issued a

$157,000

principal amount secured

10%

convertible redeemable note (the

“January 2020

Note”) to an institutional investor with a maturity date of

June 13, 2020

which is convertible into common stock at a conversion price of

$1.50

per share. The

January 2020

Note is redeemable at any time by payment of a premium to the principal balance starting at

10%

and increasing to

30%.

At the closing, the Company agreed to issue

650,000

shares of common stock in lieu of payment of a

$75,000

commitment fee which would be reduced to

50,000

shares if the

January 2020

Note is repaid prior to the maturity date. The Company paid

$7,000

of legal fees for the

January 2020

Note.

Convertible note payable relating to the

January 2020

Note, net of unamortized debt issuance costs consisted of:

	March 31,			December 31,
	2020			2019
Principal amount	$	157,000		$	-
Add: prepayment premium		23,550			-
Add: accrued interest		3,270			-
Less: unamortized debt issuance costs		(39,907	)		-
Notes payable, net of unamortized debt issuance costs	$	143,913		$	-

February 2020

Note

February 13, 2020,

the Company issued a

$126,000

principal amount secured

10%

convertible redeemable note (the

“February 2020

Note”) to an institutional investor with a maturity date of

July 13, 2020

which is convertible into common stock at a conversion price of

$1.15

per share. If the Company offers a conversion discount or other more favorable conversion terms, then the investor shall be allowed to convert this

February 2020

Note at the same price. On

March 12, 2020,

the Original Note was amended to convert at the option of the Investor into shares of common stock at a fixed conversion price of

$0.65

per share, which triggered the more favorable conversion terms and resulted in an additional deemed dividend expense of

$70,998.

The

February 2020

Note is redeemable at any time by payment of a premium to the principal balance starting at

10%

and increasing to

30%.

At the closing, the Company agreed to issue

550,000

shares of common stock in lieu of payment of a

$57,500

commitment fee which would be reduced to

50,000

shares if the

February 2020

Note is repaid prior to the maturity date. To date, the Company has only issued

50,000

shares at the request of the lender. The Company paid

$6,000

of legal fees for the

February 2020

Note.

Secured convertible note payable relating to the

February 2020

Note, net of unamortized debt issuance costs consisted of:

	March 31,			December 31,
	2020			2019
Principal amount	$	126,000		$	-
Add: prepayment premium		12,600			-
Add: accrued interest		1,575			-
Less: unamortized debt issuance costs		(43,604	)		-
Notes payable, net of unamortized debt issuance costs	$	96,571		$	-