Note 5 - Notes Payable

During the nine months ended September 30, 2018, the Company entered into Note and Warrant Purchase Agreements (the “Purchase Agreements”) with certain accredited investors (the “Investors”) pursuant to which the Company issued to the Investors $3,902,500 aggregate principal amount of its 8% Unsecured Promissory Notes due in March 2021 (the “Notes”). The Notes were issued together with warrants to purchase up to an aggregate of 780,500 shares of the Company’s common stock. Notes in the aggregate amount of $532,500 were purchased by officers and directors of the Company. The warrants are exercisable any time prior to March 29, 2021. The Company determined the fair value of the warrants issued using the Black-Scholes pricing model with the following assumptions:

The aggregate deferred debt discount related to the Notes was $1,253,390. The Company amortized $206,039 of the deferred debt discount during the nine months ended September 30, 2018. The Company also deferred the costs related to the Notes which totaled $57,923 and recorded amortization of $9,148 of that amount during the nine months ended September 30, 2018.