12. Notes Payable

In September 2019, the Company borrowed $1.0 million with a 5.0% rate of interest related to a multi-year agreement with a customer. See Note 2 for the disclosure related to the receivables.

In October 2019, the Company borrowed $2.0 million with a 5.1% rate of interest related to a multi-year agreement with a customer.

On April 17, 2020, CSP, Inc. and Modcomp, Inc., its wholly owned subsidiary (collectively, the “Borrowers”) each received a loan in the form of a promissory note from Paragon Bank (“Lender”) in the amounts of $827,000 and $1,353,600, respectively (the “SBA Loans”) under the Paycheck Protection Program, which was established under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S. Small Business Administration (“SBA”). The SBA Loans have a two-year term and carry an annual fixed interest rate of 1%.

The SBA Loans provide for customary events of default, including, among others, those relating to failure to make payment, bankruptcy, materially false or misleading representations to Lender or SBA, and adverse changes in the financial condition or business operations that Lender believes may materially affect Borrowers’ ability to pay the SBA Loans. The Borrowers did not provide any collateral or guarantees for the SBA Loans and the Borrowers may prepay the principal of the SBA Loans at any time without penalty.

The Borrowers may apply to the Lender for forgiveness of an amount due on the SBA Loans in an amount equal to the sum of certain costs during the 8 or 24-week period beginning on the date of the first disbursement of the SBA Loans. The Company elected to use the 24-week period. However, based on guidance from the SBA the borrowers may submit a loan forgiveness application any time on or before the maturity date of the loan – including before the end of the covered period – if the borrower has used all of the loan proceeds for which the borrower is requesting forgiveness, which is our intention. The amount of SBA Loans forgiveness shall be calculated in accordance with the requirements of the Paycheck Protection Program, including provisions of Section 1106 of the CARES Act. We intend to use the SBA Loans proceeds in accordance with the applicable SBA guidelines. Subsequent to September 30, 2020 and as of the date of this filing, we have received forgiveness for the SBA Loans from the SBA.

Interest expense related to the notes for the year ended September 30, 2020 was $131 thousand. There was no interest expense related to a note for the year ended September 30, 2019 as only one note was taken out, which was at the end of the period. Below are details of the notes payable.


Fiscal year ending September 30:	(Amounts in thousands)
2021	$	1,702
2022		1,662
2023		449
2024		449
Total		4,262
Less: note discount		164
Total	$	4,098


	September 30, 2020		September 30, 2019
	(Amounts in thousands)
Current	$	1,702	$	359
Less: notes discount		89		42
Notes payable - current portion	$	1,613	$	317

Noncurrent	$	2,559	$	718
Less: notes discount		74		34
Notes payable - noncurrent portion	$	2,485	$	684