NOTE 6 – DEBENTURES, CONVERTIBLE BRIDGE NOTES, AND NOTES PAYABLE

Debentures

The Company has Original Issue Discount Senior Secured Convertible Debentures (the “Debentures”) in the aggregate amount of $0 and $35,000 outstanding as of December 31, 2022 and 2021, respectively. In the first quarter of 2021, the two institutional holders of the debentures converted an aggregate of $102,500 into 12,927 shares of common stock, and the Company recognized a loss on the two debenture conversions of $356,454 which is included in loss on debentures and accrued expenses converted to common stock on the consolidated statements of operations. As of December 31, 2021, the outstanding amount of $35,000 was in default. On February 22, 2022, the holder of the debenture converted the full balance of $35,000 into 5,469 shares of common stock at $6.40 per share, and the balance as of December 31, 2022 on the convertible debenture is currently $0.

Convertible Bridge Notes

In prior years, the Company issued a total of $2,801,908 in a convertible promissory note (the “Bridge Notes”) offering, which included three of the Company’s directors converting $156,368 and one shareholder converting $11,784 of prior notes and cash advances, including interest thereon, into the offering. In 2020, $2.9 million of the Bridge Notes, inclusive of principal and accrued and capitalized interest, was converted into 332,804 shares of common stock at $8.80 per share. As of March 31, 2021, all remaining Bridge Notes inclusive of principal and accrued and capitalized interest, were settled with the holders of these notes converting their debt into a total of 165,692 shares of common stock of the Company with a fair value of $4,378,488 based on the stock price of the Company on the date of conversion. The Company recorded a loss on extinguishment of these Bridge Notes of $744,205 for the year ended December 31, 2021, which is included in loss on conversion of bridge notes and accrued interest, as other income expenses in the statements of operations.

Convertible Promissory Notes

In the fourth quarter of 2021, the Company issued a total of $605,000 in convertible notes payable. The convertible notes mature on December 31, 2023, and include a 6% simple interest rate per annum payable upon maturity. The notes are convertible, at the option of the holder, any time prior to maturity at a conversion price of $8.00. Each of the convertible notes have an automatic conversion feature in the event that the Company completes an equity offering resulting in gross proceeds to the Company of at least $5,000,000 or lists its equity securities on NASDAQ or NYSE. In the fourth quarter of 2022, two note holders converted $132,932 of principal and interest on their notes into 22,155 shares of common stock, at a reduced conversion price approved by the Board of $6.00. In addition to the notes payable, each holder received a warrant for the purchase of shares of common stock with a purchase price of $24.00, which expired in 2022. In accordance with accounting standards, the warrants were valued using a Black Scholes Model and the relative fair value of the warrant was applied against the convertible note for a debt discount of $72,600. During the years ended December 31, 2022 and 2021, the Company recorded interest expense related to the amortization of the discount of $36,300 and $0, respectively. As of December 31, 2022 and 2021, unamortized debt discount was $72,600 and $36,300, respectively, and the convertible liability balance, net of a discount was $443,700 and $532,400.

Paycheck Protection Program

On April 14, 2020, the Company received $142,942 under the Paycheck Protection Program (PPP) overseen by the U.S. Small Business Administration. The loan has an annual interest rate of 1% with loan payments being deferred six months from the date of the loan with a maturity date of April 2022. On July 14, 2021, the Company’s PPP loan was forgiven, resulting in $142,492 gain on forgiveness of debt which is included as other income (expense) on the consolidated statements of operations.