Quarterly report pursuant to Section 13 or 15(d)

Notes Payable

Notes Payable
6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Notes Payable


On May 7, 2020, the Company received $855,666 in connection with a loan (the “PPP Loan”) under the CARES Act Paycheck Protection Program (the “PPP”). The PPP provides for loans to qualifying businesses for amounts of up to 2.5 times their average monthly payroll expenses. The loan principal and accrued interest are forgivable, as long as the borrower uses loan proceeds for eligible purposes during the eight weeks following disbursement, such as payroll, benefits, rent, and utilities, and maintains its payroll levels. The amount of loan forgiveness is reduced if the borrower terminates employees or reduces salaries during this eight-week period, subject to certain qualifications and exclusions. The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first seven months. The Company is using PPP proceeds it received for purposes consistent with PPP criteria. While the Company believes its use of PPP loan proceeds should meet the conditions for forgiveness of the loan, it cannot provide assurance that it will not take actions that may cause the Company to be ineligible for loan forgiveness in whole or in part or that PPP eligibility requirements may not change that would result in making the Company or the Company’s use of the PPP proceeds ineligible. As of June 30, 2020, the Company had not received any notice of forgiveness of the PPP Loan. Once an amount is forgiven under the PPP Loan, the Company intends to recognize a gain on forgiveness of note payable in the period in which it obtained forgiveness. As of June 30, 2020, the Company utilized $764,025 of the proceeds of the PPP Loan. The remaining proceeds under the PPP Loan were utilized subsequent to June 30, 2020.


On June 5, 2020, the President signed into law the Payroll Protection Program Flexibility Act (“PPP Flexibility Act”) which made several critical changes to the PPP, which was created under the CARES Act. Under the act, the deferral period was extended to the date the lender received the forgiven amount from SBA. If the Company does not apply for loan forgiveness within 10 months following the end of the covered period, the deferral period will end on the date that is 10 months after the last day of the covered period. Following enactment of the CARES Act, SBA issued guidance requiring that no more than 25 percent of the forgiven amount be attributable to non-payroll costs. This meant that if payroll costs did not account for at least 75 percent of the total costs eligible for forgiveness, then the borrower’s loan forgiveness would be capped at the 75 percent level. The PPP Flexibility Act loosens this requirement and increases the percentage for non-payroll costs to up to 40 percent. However, the actual language of the PPP Flexibility Act requiring a borrower to use at least 60 percent of the loan amount for payroll costs.