NOTE 15. SUBSEQUENT EVENTS

Effective April 12, 2020, the Company was approved for a loan of approximately $442,000 under the Paycheck Protection Program (“PPP”) under the CARES Act. The application for this loan required the Company to, in good faith, certify that the current economic uncertainty made the loan request necessary to support the ongoing operations of the Company. This certification further requires the Company to take into account its current business activity and its ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. The receipt of these funds, and the forgiveness of the loan attendant to these funds, is dependent on the Company having initially qualified for the loan and qualifying for the forgiveness of such loan based on future adherence to the forgiveness criteria as described below.

The Company has under 25 employees and is considered a small business. The interest rate on the loan is one percent fixed, and the maturity date is April 12, 2022. Payment terms are to make seventeen consecutive monthly payments of principal and interest in an amount sufficient to fully amortize the loan over the remaining term, commencing six months after the effective date, and a final payment on the earliest of the acceleration of the promissory note; or the maturity date.

A key feature of the PPP is that loan proceeds used by borrowers to pay certain expenses during a specified eight-week period (the covered period) are eligible to be forgiven.

●

Forgiveness is available to the extent proceeds are used to pay payroll, rent or interest on mortgages, and utilities during the covered period.

●

In addition, the CARES Act provides that any amounts forgiven pursuant to this rule are not taxable (i.e., no cancellation of debt income for the borrower).

●

The amount of loan forgiveness available to the borrower is reduced if the borrower does not retain its employees or cuts their salaries by more than 25% (not including salaries of highly paid employees).

●

A reduction in workforce is measured by comparing the average number of full-time employee equivalents (“FTEEs”) during the period following the loan to a prior equivalent period in either 2019 or early “pre-COVID 2019 period” in 2020.

●

Loan forgiveness is reduced by the same percentage the FTEEs are found to have been reduced. A borrower that rehires employees or reverses salary reductions by June 30, 2020, can generally avoid having its loan forgiveness amount reduced.