The accompanying notes are an integral part
of these condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 – Business Organization,
Nature of Operations and Basis of Presentation
Eyenovia. Inc. (“Eyenovia”
or the “Company”) is a clinical stage ophthalmic biopharmaceutical company developing a pipeline of microdose
therapeutics utilizing its patented piezo-print delivery technology, branded the OptejetTM. Eyenovia aims to achieve
clinical microdosing of next-generation formulations of well-established ophthalmic pharmaceutical agents using its high-precision
targeted ocular delivery system, which has the potential to replace conventional eye dropper delivery and improve safety, tolerability,
patient compliance and topical delivery success for ophthalmic eye treatments. In the clinic, the Optejet has demonstrated the
ability to horizontally deliver opthalmic medication with a success rate significantly higher than that of traditional eye drops
(~ 90% vs. ~ 50%). Using its proprietary delivery technology, Eyenovia is developing the next generation of smart ophthalmic therapies
which target new indications or new combinations where there are currently no comparable drug therapies approved by the U.S. Food
and Drug Administration (the “FDA”). Eyenovia’s microdose therapeutics follow the FDA-designated pharmaceutical
registration and regulatory process. Its products are classified by the FDA as drugs, and not medical devices or drug-device combination
products.
The accompanying unaudited condensed financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly,
they do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion
of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary
for a fair presentation of the condensed financial statements of the Company as of March 31, 2020 and for the three months ended
March 31, 2020 and 2019. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of
the operating results for the full year ending December 31, 2020 or any other period. These unaudited condensed financial statements
should be read in conjunction with the audited financial statements and related disclosures of the Company as of December 31, 2019
and for the year then ended, which were included in the Company’s Annual Report on Form 10-K filed with the Securities and
Exchange Commission (“SEC”) on March 30, 2020.
Note 2 – Summary of Significant
Accounting Policies
Since the date of the Company’s Annual
Report on Form 10-K for the year ended December 31, 2019, there have been no material changes to the Company’s significant
accounting policies, except as disclosed below.
Liquidity and Going Concern
As of March 31, 2020, the Company had cash of approximately
$13.7 million and an accumulated deficit of approximately $63.1 million. For the three months ended March 31, 2020 and 2019, the
Company incurred net losses of approximately $5.5 million and $5.9 million, respectively, and used cash in operations of approximately
$5.9 million and $5.9 million, respectively. The Company has not yet generated revenues or achieved profitability and expects to
continue to incur cash outflows from operations. The Company expects that its research and development and general and administrative
expenses will continue to increase and, as a result, it will eventually need to generate significant product revenues to achieve
profitability. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern within
one year after the date that the financial statements are issued. Implementation of the Company’s plans and its ability to
continue as a going concern will depend upon the Company’s ability to raise further capital, through the sale of additional
equity or debt securities or otherwise, to support its future operations.
The Company’s operating needs include
the planned costs to operate its business, including amounts required to fund working capital and capital expenditures. The Company’s
future capital requirements and the adequacy of its available funds will depend on many factors, including the Company’s
ability to successfully commercialize its products and services, competing technological and market developments, and the need
to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement its product
and service offerings. If the Company is unable to secure additional capital, it may be required to curtail its research and development
initiatives and take additional measures to reduce costs in order to conserve its cash.
EYENOVIA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 2 – Summary of Significant
Accounting Policies – Continued
Cash
The Company considers all highly liquid
investments with an original maturity of three months or less to be cash equivalents in the financial statements.
The Company has cash deposits in a financial
institution which, at times, may be in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The
Company has not experienced losses in such accounts and periodically evaluates the creditworthiness of its financial institutions.
As of March 31, 2020 and December 31, 2019, the Company had cash balances in excess of FDIC insurance limits of $13,406,091 and
$13,902,601, respectively.
Stock-Based Compensation
The Company measures the cost of services
received in exchange for an award of equity instruments based on the fair value of the award. The fair value of the award is measured
on the grant date and the fair value amount is then recognized over the period during which services are required to be provided
in exchange for the award, usually the vesting period. Upon the exercise of an option, the Company issues new shares of common
stock out of the shares reserved for issuance under its equity plans.
Convertible Instruments
The Company evaluates its convertible instruments
to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately
accounted for in accordance with Topic 815 of the Financial Accounting Standards Board ("FASB") Accounting Standards
Codification (“ASC”). The accounting treatment of derivative financial instruments requires that the Company record
embedded conversion options and any related freestanding instruments at their fair values as of the inception date of the agreement
and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income
or expense for each reporting period at each balance sheet date. The Company reassesses the classification of its derivative instruments
at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified
as of the date of the event that caused the reclassification. Embedded conversion options and any related freestanding instruments
are recorded as a discount to the host instrument.
If the instrument is determined to not
be a derivative liability, the Company then evaluates for the existence of a beneficial conversion feature by comparing the commitment
date fair value to the effective conversion price of the instrument.
Net Loss Per Common Share
Basic net loss per common share is computed
by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted earnings per share
reflects the potential dilution that could occur if securities or other instruments to issue common stock were exercised or converted
into common stock.
The following securities are excluded from
the calculation of weighted average diluted common shares because their inclusion would have been anti-dilutive:
|
|
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Options
|
|
|
2,262,438
|
|
|
|
1,598,181
|
|
Warrants
|
|
|
3,344,154
|
|
|
|
-
|
|
Restricted stock units
|
|
|
60,355
|
|
|
|
20,165
|
|
Total potentially dilutive shares
|
|
|
5,666,947
|
|
|
|
1,618,346
|
|
EYENOVIA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 2 – Summary of Significant
Accounting Policies – Continued
Recently Adopted Accounting Pronouncements
In July 2017, the FASB issued ASU No. 2017-11,
“Earnings Per Share (Topic 260) and Derivatives and Hedging (Topic 815)- Accounting for Certain Financial Instruments with
Down Round Features” (“ASU 2017-11”). Equity-linked instruments, such as warrants and convertible instruments
may contain down round features that result in the strike price being reduced on the basis of the pricing of future equity offerings.
Under ASU 2017-11, a down round feature will no longer require a freestanding equity-linked instrument (or embedded conversion
option) to be classified as a liability that is remeasured at fair value through the income statement (i.e. marked-to-market).
However, other features of the equity-linked instrument (or embedded conversion option) must still be evaluated to determine whether
liability or equity classification is appropriate. Equity classified instruments are not marked-to-market. For earnings per share
("EPS") reporting, the ASU requires companies to recognize the effect of the down round feature only when it is triggered
by treating it as a dividend and as a reduction of income available to common shareholders in basic EPS. The amendments in this
ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15,
2019. This standard was adopted on January 1, 2020 and did not have a material impact on the Company’s financial position,
results of operations or cash flows.
EYENOVIA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 3 – Prepaid Expenses and Other Current Assets
and Short Term Note Payable
On February 24, 2020, the Company issued
a note payable for the purchase of a directors and officers liability insurance policy. The note payable is payable in 9 monthly
payments of $53,750 for an aggregate principal amount of $475,216. The note accrues interest at a rate of 4.29% per year and matures
on November 24, 2020.
As of March 31, 2020 and December 31, 2019,
prepaid expenses and other current assets consisted of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(unaudited)
|
|
|
|
|
|
Prepaid insurance expenses
|
|
$
|
581,765
|
|
|
$
|
33,923
|
|
Payroll tax receivable
|
|
|
85,932
|
|
|
|
95,233
|
|
Prepaid research and development expenses
|
|
|
46,526
|
|
|
|
17,978
|
|
Prepaid Nasdaq annual fees
|
|
|
42,375
|
|
|
|
-
|
|
Prepaid patent expenses
|
|
|
24,662
|
|
|
|
12,404
|
|
Prepaid conference expenses
|
|
|
25,000
|
|
|
|
10,600
|
|
Prepaid rent and security deposit
|
|
|
26,576
|
|
|
|
2,463
|
|
Other
|
|
|
28,081
|
|
|
|
24,079
|
|
Total prepaid expenses and other current assets
|
|
$
|
860,917
|
|
|
$
|
196,680
|
|
Note 4 – Accrued Compensation
As of March 31, 2020 and December 31, 2019,
accrued compensation consisted of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(unaudited)
|
|
|
|
|
Accrued bonus expenses
|
|
$
|
190,160
|
|
|
$
|
897,839
|
|
Accrued payroll expenses
|
|
|
157,849
|
|
|
|
19,034
|
|
Total accrued compensation
|
|
$
|
348,009
|
|
|
$
|
916,873
|
|
EYENOVIA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 5 – Accrued Expenses and Other Current Liabilities
As of March 31, 2020 and December 31, 2019,
accrued expenses and other current liabilities consisted of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(unaudited)
|
|
|
|
|
Accrued research and development expenses
|
|
$
|
204,134
|
|
|
$
|
208,175
|
|
Accrued private placement offering costs
|
|
|
115,656
|
|
|
|
-
|
|
Accrued professional services
|
|
|
72,466
|
|
|
|
97,396
|
|
Credit card payable
|
|
|
35,025
|
|
|
|
56,979
|
|
Leasehold improvements
|
|
|
20,000
|
|
|
|
42,500
|
|
Accrued legal expenses
|
|
|
42,328
|
|
|
|
-
|
|
Accrued franchise tax
|
|
|
8,195
|
|
|
|
40,995
|
|
Accrued travel and entertainment expenses
|
|
|
3,492
|
|
|
|
7,385
|
|
Other
|
|
|
12,667
|
|
|
|
-
|
|
Total accrued expenses and other current liabilities
|
|
$
|
513,963
|
|
|
$
|
453,430
|
|
Note 6 – Commitments and Contingencies
Litigations, Claims and Assessments
The Company may be involved in legal proceedings,
claims and assessments arising in the ordinary course of business. The Company records legal costs associated with loss contingencies
as incurred and accrues for all probable and estimable settlements.
Note 7 – Related Party Transactions
Consulting Agreements
A company in which a member of the Company’s
Board of Directors is part owner is a party to a consulting agreement with the Company dated July 6, 2017 that provides for the
payment of $9,567 per month, and $250 per hour for any additional work, for advisory services performed by such director. The Company
incurred expenses of $28,701 and $48,201 for the three months ended March 31, 2020 and 2019, respectively, related to the agreement,
which was included within general and administrative expenses on the condensed statements of operations.
Lease Agreements
The Company’s Vice President of Research
and Development and Manufacturing (“VP of R&D”) owns a company that entered into a lease agreement with the Company
on September 15, 2016 to lease 953 square feet of space located in Reno, NV with respect to its research and development activities.
The initial monthly base rent was $3,895 per month over the term of the lease and the security deposit was $3,895. On September
15, 2018, the Company amended the lease agreement to extend it until September 14, 2020 and increase the monthly base rent and
security deposit to $4,012. The Company made $60,157 of leasehold improvements related to this lease which are included on the
balance sheet. The Company’s rent expense amounted to $12,036 for the three months ended March 31, 2020 and 2019.
EYENOVIA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 7 – Related Party Transactions – Continued
Research and Development Activities
The VP of R&D is the sole owner and
President of a company that performs contract engineering services for the Company. During the three months ended March 31, 2020
and 2019, the Company recognized research and development expense of $243,771 and $320,140, respectively, related to services provided
by such vendor. The Company had a liability of $110,965 and $89,052 to the vendor as of March 31, 2020 and December 31, 2019, respectively.
The Company recognized $51,337 of compensation
expense related to the VP of R&D’s salary during the three months ended March 31, 2020 and $48,050 of compensation expense
during the three months ended March 31, 2019.
License Agreement
During 2015, the Company entered into an Exclusive License Agreement
with Senju Pharmaceuticals Co., Ltd. (“Senju”) whereby the Company agreed to grant to Senju an exclusive, royalty-bearing
license for its microdose product candidates for Asia to sublicense, develop, make, have made, manufacture, use, import, market,
sell, and otherwise distribute the microdose product candidates. In consideration for the license, Senju agreed to pay to Eyenovia
five percent (5%) royalties for the term of the license agreement. The agreement will continue in full force and effect, on a country-by-country
basis, until the latest to occur of: (i) the tenth (10th) anniversary of the first commercial sale of a microdose product candidate
in Asia; or (ii) the expiration of the licensed patents. As of the date of this filing, there had been no commercial sales of a
microdose product candidate in Asia, such that no royalties had been earned. Senju is owned by the family of a former member of
the Company’s Board of Directors and, together, they beneficially own greater than 5% of the Company’s common stock.
The Exclusive License Agreement was amended on April 8, 2020.
See Note 10 – Subsequent Events for details of the amendment.
EYENOVIA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 8 – Stockholders’ Equity
Securities Purchase Agreement
On March 24, 2020, the Company closed on
a private placement of approximately $6.0 million of Units. Each Unit consists of (i) one share of the Company’s common stock,
(ii) a one-year warrant to purchase 0.5 of a share of common stock (“Class A Warrant”), and (iii) a five-year warrant
to purchase 0.75 of a share of common stock (“Class B Warrant”) (collectively, the Class A Warrants and Class B Warrants,
the “Warrants”). The Units were sold to the public at a price of $2.21425 per Unit and to certain directors and executive
officers at a price of $2.42625 per Unit. The Company generated approximately $5.45 million of net proceeds in the offering after
deducting placement agent fees and offering expenses of $0.53 million. In the offering, the Company issued an aggregate of 2,675,293
shares of common stock, Class A Warrants to purchase up to 1,337,659 shares of common stock, and Class B Warrants to purchase up
to 2,006,495 shares of common stock. The exercise price of the Class A Warrants issued to the public is $2.058 per share and the
exercise price of the Class A Warrants issued to the directors and officers is $2.27 per share. These warrants, taken together,
had an intrinsic value of $293,131 as of March 31, 2020. The exercise price of the Class B Warrants issued to the public is $2.4696
per share and the exercise price of the Class B Warrants issued to the directors and officers is $2.724 per share. These warrants,
taken together, had no intrinsic value at March 31, 2020.
In connection with the offering, on March 23, 2020, the Company
also entered into a Registration Rights Agreement with the investors. Pursuant to the Registration Rights Agreement, the Company
agreed to file with the SEC, no later than 30 days following the date on which the Company files its Form 10-K for the year ended
December 31, 2019 with the SEC, a registration statement on Form S-3 covering the shares of common stock issued in the offering
and the shares of common stock underlying the Warrants. The Company timely filed the registration statement on Form S-3, which
was declared effective by the SEC on May 13, 2020.
EYENOVIA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 8 – Stockholders’ Equity
– Continued
Stock Options
On January 31, 2020, the Company granted
ten-year stock options to purchase 25,000 shares of common stock to its employees under the 2018 Plan, as amended. The shares vest
over three years from the date of grant with one-third vesting on the one-year anniversary of the date of grant and the balance
vesting monthly over the remaining 24 months. The stock options have an exercise price of $4.68 per share, which represents the
Company’s closing stock price on the date of grant. The stock options had a grant date fair value of $103,400, which the
Company expects to recognize over the vesting period.
In applying the Black-Scholes option pricing
model to stock options granted, the Company used the following approximate assumptions:
|
|
For the Three Months Ended
|
|
|
March 31,
|
|
|
2020
|
|
2019
|
Expected term (years)
|
|
5.85
|
|
5.85
|
Risk free interest rate
|
|
1.32%
|
|
2.53%
|
Expected volatility
|
|
101%
|
|
139%
|
Expected dividends
|
|
0.00%
|
|
0.00%
|
The Company has computed the fair value
of stock options granted using the Black-Scholes option pricing model. Option forfeitures are accounted for at the time of occurrence.
The expected term is the estimated period of time that options granted are expected to be outstanding. The Company utilizes the
“simplified” method to develop an estimate of the expected term of “plain vanilla” employee option grants.
The Company does not yet have a trading history to support its historical volatility calculations. Accordingly, the Company is
utilizing an expected volatility figure based on a review of the historical volatility of comparable entities over a period of
time equivalent to the expected life of the instrument being valued. The risk-free interest rate was determined from the implied
yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.
The weighted average estimated grant date fair value of the
stock options granted for the three months ended March 31, 2020 and 2019 was approximately $4.13 and $2.50 per share, respectively.
EYENOVIA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 8 – Stockholders’ Equity
– Continued
Stock Options – Continued
A summary of the option activity during the three months ended
March 31, 2020 is presented below:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Life
|
|
|
Intrinsic
|
|
|
|
Options
|
|
|
Price
|
|
|
In Years
|
|
|
Value
|
|
Outstanding January 1, 2020
|
|
|
2,237,438
|
|
|
$
|
3.51
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
25,000
|
|
|
|
4.68
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Outstanding March 31, 2020
|
|
|
2,262,438
|
|
|
$
|
3.52
|
|
|
|
7.9
|
|
|
$
|
520,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable March 31, 2020
|
|
|
1,288,545
|
|
|
$
|
3.36
|
|
|
|
7.1
|
|
|
$
|
489,678
|
|
The following table presents information related to stock options
as of March 31, 2020:
Options Outstanding
|
|
Options Exercisable
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Outstanding
|
|
|
Average
|
|
|
Exercisable
|
|
Exercise
|
|
Number of
|
|
|
Remaining Life
|
|
|
Number of
|
|
Price
|
|
Options
|
|
|
In Years
|
|
|
Options
|
|
$1.24
|
|
|
260,000
|
|
|
|
5.0
|
|
|
|
260,000
|
|
$1.95
|
|
|
700,281
|
|
|
|
7.3
|
|
|
|
611,651
|
|
$2.74
|
|
|
6,000
|
|
|
|
8.8
|
|
|
|
2,333
|
|
$3.11
|
|
|
681,572
|
|
|
|
-
|
|
|
|
-
|
|
$4.00
|
|
|
2,000
|
|
|
|
8.6
|
|
|
|
889
|
|
$4.68
|
|
|
25,000
|
|
|
|
-
|
|
|
|
-
|
|
$5.10
|
|
|
6,000
|
|
|
|
8.4
|
|
|
|
3,167
|
|
$5.19
|
|
|
16,500
|
|
|
|
8.4
|
|
|
|
8,250
|
|
$5.25
|
|
|
26,668
|
|
|
|
6.5
|
|
|
|
22,915
|
|
$6.20
|
|
|
311,499
|
|
|
|
8.3
|
|
|
|
238,185
|
|
$6.30
|
|
|
60,000
|
|
|
|
8.3
|
|
|
|
33,333
|
|
$8.72
|
|
|
166,918
|
|
|
|
8.0
|
|
|
|
107,821
|
|
|
|
|
2,262,438
|
|
|
|
7.1
|
|
|
|
1,288,545
|
|
Stock-Based Compensation Expense
The Company recorded stock-based compensation
expense related to stock options and restricted stock units of $583,865 ($307,409 of which was included within research and development
expenses and $276,456 was included within general and administrative expenses on the condensed statements of operations) and $1,032,960
($694,084 of which was included within research and development expenses and $338,876 was included within general and administrative
expenses on the condensed statements of operations) during the three months ended March 31, 2020 and 2019, respectively. As of
March 31, 2020, there was $2,768,757 of unrecognized stock-based compensation expense which the Company expects to recognize over
a weighted average period of 1.8 years.
Note 9 – Employee Benefit Plans
401(k) Plan
In April 2019, the Company adopted the
Eyenovia 401(k) Plan (the “Plan”), which went into effect in May 2019. All Company employees are able to participate
in the Plan, subject to eligibility requirements as outlined in the Plan documents. Under the terms of the Plan, eligible employees
are able to defer a percentage of their pay every pay period up to annual limitations set by Congress and the Internal Revenue
Service under Section 401(k) of the Internal Revenue Code. For 2019, the Company’s Board of Directors has approved a matching
contribution equal to 100% of elective deferrals up to 4% of eligible earnings with the matching contribution subject to certain
vesting requirements as outlined in the Plan documents. During the three months ended March 31, 2020 and 2019, the Company recorded
expense of $57,971 and $0 associated with its matching contributions, respectively.
EYENOVIA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 10 – Subsequent Events
License Agreement
On April 8, 2020, Eyenovia entered into
an amendment (the “License Amendment”) to the Exclusive License Agreement, dated March 18, 2015, by and between the
Company and Senju. Pursuant to the License Amendment, the Company can license to any third party the right to research, develop,
commercialize, manufacture or use certain products (the “Licensed Products”) previously licensed to Senju in China
(including Hong Kong, Macao, and Taiwan) and South Korea (the “Territory”) if such a license is executed by the Company
by April 8, 2021. The Licensed Products include those using piezo-print technology in a microdose dispenser with (i) atropine sulfate
as its sole active ingredient to treat myopia in humans and (ii) pilocarpine as its sole active ingredient to treat presbyopia
in humans.
Pursuant to the License Amendment, the
Company must pay Senju (a) close to a mid-double digit percentage of revenue on any lump-sum payments the Company receives from
the third party, revenue (net of costs) obtained by the Company from contract research and/or development of the Licensed Product
in the Territory, and revenue (net of costs) obtained by the Company from contract manufacture for the device of the Licensed
Product in the Territory, the aggregate of which must be at least a high seven figure dollar amount minimum payment to Senju;
and (b) a lower-double digit percentage of any sales royalty revenue the Company receives from the third party. Unless a third-party
license is executed by the Company prior to April 8, 2021 (in which case, subject to early termination as provided below, the
License Amendment shall remain in effect for the duration of such license), the License Amendment terminates on April 8, 2021,
but may be terminated earlier by Senju upon the Company’s material breach of the License Amendment, subject to a 60-day
cure period.
Paycheck Protection Program Loan
On May 8, 2020, the Company received cash
proceeds of $463,353 pursuant to a loan provided in connection with the Paycheck Protection Program under the CARES act (the “PPP
Loan”). The PPP Loan matures on May 3, 2022, and bears interest at a fixed rate of 1.00% per annum. Monthly amortized principal
and interest payments are deferred for 6 months after the date of the agreement. The Paycheck Protection Program provides that
the use of PPP Loan proceeds shall be limited to certain qualifying expenses and may be partially or wholly forgiven
in accordance with the requirements set forth in the CARES Act. The Company currently intends to use the PPP Loan for permitted
uses, although no assurance can be given that the Company will obtain forgiveness of all
or any portion of amounts due under the PPP Note