Note 17 - Paycheck Protection Plan loans and Economic Injury Disaster Loan
|6 Months Ended|
Jun. 30, 2020
|Note 17 - Paycheck Protection Plan loans and Economic Injury Disaster Loan||Note 17 Paycheck Protection Plan loans and Economic Injury Disaster Loan
On April 23, 2020 and May 5, 2020, The Company and WCI each received loans in the amount of $76,500 and $383,342, respectively, from the Bank of Southern California and Republic Bank of Arizona (collectively, the PPP Loans). The Paycheck Protection Program was established under Sections 1102 and 1106 of the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"), which was enacted March 27, 2020. The CARES Act temporarily amends Section 7(a) of the Small Business Act to expand the scope and criterion of a businesss eligibility to receive financial assistance from the Small Business Administration (SBA).
Originally, Section 1106 of the CARES Act limited the period during which PPP loan expenditures were eligible for forgiveness to eight weeks after the loan disbursement date. On June 5, 2020, the Paycheck Protection Program Flexibility Act (PPP Flexibility Act) extended the PPP loan term and forgiveness period to the earlier of (i) twenty-four weeks after the PPP loan disbursement date, or (ii) December 31, 2020. Section 1106 of the CARES Act required that 75% of PPP loan proceeds be spent on eligible payroll costs during the forgiveness period to qualify for loan forgiveness, with the remaining 25% of PPP proceeds spent on qualified non-payroll expenses. In contrast, the PPP Flexibility Act requires that borrowers spend at least 60% of PPP loan proceeds on eligible payroll costs, with the remaining 40% of PPP loan proceeds spent on any combination of qualified non-payroll expenses.
The PPP loans may be forgivable so long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the forgiveness period.
On April 24, 2020, WCI received a $10,000 SBA Economic Injury Disaster Loan Advance (EIDL Advance). The EIDL Advance is an emergency grant under Section 1110 of the Cares Act, which expands businesss access to Economic Injury Disaster Loans under Section 7(b)(2) of the Small Business Act. The EIDL Advance does not need to be repaid and is recognized in other income for the three and six months ended June 30, 2020. This amount will reduce the portion of PPP Loans available for forgiveness by $10,000.
The Company has recorded the PPP Loans as a liability in accordance with FASB ASC 470, Debt and has recorded accrued interest through June 30, 2020. Proceeds from the PPP Loans will remain recorded as a liability until either (1) the PPP Loans are, in part or wholly, forgiven and the Company has been legally released, or (2) the Company pays off the PPP Loans. If the PPP Loans are, in part or wholly, forgiven the liability will be reduced and a gain on the extinguishment will be recognized.
Paycheck protection plan loan balances at June 30, 2020 consist of the following:
Interest expense on PPP Loans for the three and six months ended June 30, 2020 was $705.
The Company has used approximately 96% of its PPP Loans proceeds to fund payroll expenses, with the remainder spent for utilities and rent. As a result, the Company believes that at June 30, 2020, it had met the PPP eligibility criteria for forgiveness on $320,962 of the PPP Loans. Subsequent to quarter end, as of July 30, 2020, the Company met the PPP eligibility criteria for forgiveness of all PPP Loans amounts in excess of the $10,000 EIDL Advance received by WCI and plans to apply for forgiveness of the loans in the third quarter of 2020.
The Company does not anticipate taking any action that would cause any portion of the loans to be ineligible for forgiveness. However, to the extent that any amount is deemed unforgivable, such amount is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months.
Subsequent to June 30, 2020, WCI received an additional Economic Injury Disaster Loan of $150,000, see Note 22.
Represents the textual narrative disclosure of Paycheck Protection Plan loans and Economic Injury Disaster Loan, during the indicated time period.
No definition available.