Quarterly report pursuant to Section 13 or 15(d)

NOTES PAYABLE

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NOTES PAYABLE
9 Months Ended
Sep. 30, 2020
Notes Payable [Abstract]  
NOTES PAYABLE

NOTE 7 – NOTES PAYABLE


Notes payable totaled $147,128 and $219,617 at September 30, 2020 and December 31, 2019, respectively.


Due to the ongoing uncertainty about the severity and duration associated with the COVID-19 pandemic, the Company considered furloughing or eliminating employees and taking other measures to reduce operating costs until there is more certainty about the short-term and long-term effects of the COVID-19 pandemic on the nation’s economy and the Company’s business. On May 1, 2020, the Company entered a promissory note agreement with its bank in exchange for $123,318 bearing an interest rate of 1.0% per annum. The loan was made pursuant to the Paycheck Protection Program under the CARES Act after receiving confirmation from the U.S. Small Business Administration (“SBA”). The note contains a deferment period of six months from the date of funding. After sixty, but not more than ninety, days from the date of funding, the Company can apply to the bank for loan forgiveness. The bank will then request confirmation from the SBA. If the SBA confirms full and complete loan forgiveness, the Company’s obligation under the note will be deemed fully satisfied and paid in full. If the SBA denies full and complete loan forgiveness or only partly confirms forgiveness, the Company will be obligated to repay the bank for the total outstanding balance of the note, including principal and interest. The bank will establish terms, including monthly payments based on a maturity of two years from the date of funding and not more than 1.0% interest per annum. No principal or interest payments will be due prior to the end of the six-month deferment period. The Paycheck Protection Program Flexibility Act requires that the funds be used to maintain the current number of employees as well as cover payroll-related costs, monthly mortgage or rent payments and utilities and not more than 40% can be expended on non-payroll-related costs. After providing documented evidence of the number of employees and the use of funds, the SBA will provide loan forgiveness for the documented costs.


On July 8, 2020, the Company negotiated with an accredited investor who holds several demand notes payable to agree to settle the remaining principal balance of $191,965 and accrued interest of $15,729 for $150,000 of restricted common shares.  The remaining balance of $57,694 was forgiven.  The conversion price of $0.132 per share was agreed upon for 1,136,364 restricted common shares and an equal amount of five-year warrants with an exercise price of $0.396 per share.


Interest expense for the Company’s notes payable for the three and nine months ended September 30, 2020 was $1,405 and $6,110, respectively, compared to $2,410 and $4,892 to the three and nine months ended September 30, 2019. Accrued interest for the Company’s notes payable at September 30, 2020 and December 31, 2019 was $580 and $11,244, respectively.