7. Short-Term Notes Payable

As of September 30, 2020, and December 31, 2019, the Company had $472,148 and $143,864, respectively, in short-term notes payable for the financing of various insurance policies and for the financing of certain expenses covered under the Paycheck Protection Program.

Paycheck Protection Program

On May 5, 2020, the Company received loan proceeds in the amount of $132,088 under the Paycheck Protection Program (the “PPP”). The PPP, established by the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) administered by the Small Business Administration, provides for loans to qualifying businesses for amounts up to 2.5 times the average monthly payroll expenses of the qualifying business. The loan and accrued interest are forgivable after an initial period of eight weeks (extended to twenty-four weeks on June 5, 2020) as long as the Company uses the proceeds for eligible purposes, including payroll, benefits, rent, and utilities and maintains it payroll levels. The amount of the loan forgiveness will be reduced if the Company terminates employees or reduces salaries during the twenty-four-week period.

The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with deferral of payments over the first six months. The Company believes that its use of the loan proceeds will meet the conditions for forgiveness of the loan, however no assurance can be provided that action will not be taken that could cause the Company to be ineligible for forgiveness of the loan, in whole or in part.

Products Liability Insurance

On March 10, 2019, the Company entered into a short-term note payable for $17,688 bearing interest at 5.69% per annum to finance the product liability insurance. Principal and interest payments on this note began April 10, 2019 and are made evenly based on a straight-line amortization over an 11-month period with the final payment being made on February 14, 2020.

Directors’ and Officers’ Insurance

On July 24, 2020, the Company entered into a short-term note payable for $413,784 bearing interest at 5.39% to finance a portion of the directors’ and officers’ liability insurance and employment practices liability insurance premiums. Principal and interest payments on this note began August 24, 2020 and are made evenly based on a straight-line amortization over an 11-month period with the final payment being due on June 24, 2021.

On August 7, 2019 the Company entered into a short-term note payable for $254,889 bearing interest at 5.74% to finance a portion of the directors’ and officers’ liability insurance and employment practices liability insurance premiums. Principal and interest payments on this note began August 24, 2019 and were made evenly based on a straight-line amortization over an 11-month period with the final payment being made on June 22, 2020.