Annual report pursuant to Section 13 and 15(d)

Note 11 - Notes Payable

v3.21.1
Note 11 - Notes Payable
 12 Months Ended
Dec. 31, 2020
Notes to Financial Statements  
Debt Disclosure [Text Block]
11.
Notes Payable
 
IPFS Corporation
 
In
November 2018,
we prepaid
$393,000
of insurance premiums through the issuance of a note payable to IPFS Corporation (“IPFS”) with an interest rate of
5.1%.
The note was payable in
ten
monthly installments of
$40,000,
with the final payment made in
August 2019.
In
November 2020,
we prepaid
$442,000
of insurance premiums through the issuance of a note payable to IPFS with an interest rate of
3.5%.
The note is payable in
seven
monthly installments of
$64,000,
with the final payment due in
June 2021.
 
Interest expense related to the IPFS notes payable totaled
$1,000
and
$6,000
during the years ended
December 31, 2020
and
2019,
respectively. The balance of the IPFS note was approximately
$379,000
as of
December 31, 2020,
and was included in notes payable, current in the consolidated balance sheets.
 
First Insurance Funding
 
In
November 2019,
we prepaid
$349,000
of insurance premiums through the issuance of a note payable to First Insurance Funding (“FIF”) with an interest rate of
5.0%.
The note was payable in
eight
monthly installments of
$44,000,
with the final payment made in
July 2020.
 
Interest expense related to the FIF note payable totaled
$5,000
and
$1,000
during the years ended
December 31, 2020
and
2019,
respectively. The balance of the FIF note was approximately
$306,000
as of
December 31, 2019,
and was included in notes payable, current in the consolidated balance sheets.
 
Payroll Protection Program
 
The CARES Act was enacted on
March 27, 2020.
Among the provisions contained in the CARES Act was the creation of the PPP that provides for SBA Section
7
(a) loans for qualified small businesses. PPP Loan proceeds are available to be used to pay for payroll costs, including salaries, commissions, and similar compensation, group health care benefits, and paid leaves; rent; utilities; and interest on certain other outstanding debt. On
May 18, 2020,
the Lender funded the PPP Loan in the amount of
$366,000.
The interest rate on the PPP Loan is a fixed rate of
1%
per annum. The amount that
may
be forgiven is calculated in part with reference to the Company's full-time headcount during the
eight
-week or
twenty-four
-week period following the funding of the PPP loan. In accordance with the loan forgiveness requirements of the CARES Act, the Company used the proceeds from the PPP Loan primarily for payroll costs, rent and utilities. To the extent that the amounts owed under the PPP Loan, or a portion of them, are
not
forgiven, the Company would be required to make principal and interest payments in monthly installments beginning
ten
months from the end of the loan forgiveness covered period, or
May 12, 2021.
The PPP Loan matures on
May 1, 2022.
The PPP Loan includes events of default. Upon the occurrence of an event of default, the Lender would have the right to exercise remedies against the Company, including the right to require immediate payment of all amounts due under the PPP Note. On
February 23, 2021,
the Lender notified the Company that the entire PPP Loan amount of
$366,000
has been forgiven. See Note
2.
 
Summary
 
During the years ended
December 31, 2020
and
2019,
we recorded interest expense of
$6,000
and
$8,000,
respectively, related to our notes payable. Annual principal maturities of our notes payable are
$379,000
in
2021.