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Subsequent Events
3 Months Ended
Mar. 31, 2020
Subsequent Events [Abstract]  
Subsequent Events

Note M: Subsequent Events

   

The ramifications of the coronavirus (“COVID-19”) outbreak reported to have started in December 2019 and spread globally are filled with uncertainty and changing quickly.  In March 2020, the World Health Organization declared COVID-19 a pandemic. 

 

The Company is considered an essential service and has remained operational.  As of the middle of March 2020, all of the Company’s employees began working from home and did not experience any significant interruptions during this transition.  The Company has worked with key suppliers to ensure there is an adequate supply of components and capacity to manufacture and deliver products.  On April 13, 2020, Econolite informed the Company that Econolite had agreed to temporarily close its manufacturing facility in Tecate, Mexico, under guidance from the local government due to COVID-19. Based on information obtained by the Company, Econolite has made alternative arrangements to manufacture Autoscope and related products that had been manufactured at its Mexican facility. We do not know whether the plant remains closed.

  

The COVID-19 pandemic began to impact our operations late in the first quarter of 2020 and is likely to continue to adversely affect our business and results of operations, including as a result of government authorities imposing mandatory closures, work-from-home orders and social distancing protocols, or imposing other restrictions. These actions could materially adversely affect our ability to adequately staff and maintain our operations, impair our ability to sustain sufficient financial liquidity, and adversely impact our financial results.

 

At this time, the Company has not experienced any payment interruptions or requests for special terms.  The Company has taken actions to reduce costs, including reductions in fixed-cost compensation and various austerity measures to curtail discretionary spending in light of the circumstances. Other variable costs, including hourly wages, overtime, sales commissions, temporary labor, performance-based compensation, advertising, and delivery expenses, are expected to moderate consistently with our overall business activity. 

 

The COVID-19 pandemic has resulted, and is likely to continue to result, in significant economic disruption and has and will likely to continue to adversely affect our business and results of operations. Although these disruptions are expected to be temporary, significant uncertainty exists concerning the magnitude of the impact and duration of the COVID-19 pandemic. As we cannot predict the duration or scope of the COVID-19 pandemic, the anticipated negative financial impact to our results of operations cannot be reasonably estimated but could be material and last for an extended period of time.

 

Under the Paycheck Protection Program (the “PPP”), the United States Small Business Administration (the “SBA”) approved the application of the Company to receive a loan in the amount of $923,700 (the “PPP Loan”). The PPP was established under the congressionally approved Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the SBA. The PPP Loan to the Company was made through BMO Harris Bank N. A. (the “Lender”).  On April 21, 2020, the Company’s Board of Directors approved the PPP Loan, and the Company signed the promissory note (the “Note”) evidencing the PPP Loan, which is dated as of April 17, 2020.  The Lender disbursed the proceeds of the PPP Loan to the Company on April 22, 2020.

 

Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of loans made under the PPP after eight weeks if the recipients use the PPP loan proceeds for eligible purposes, including payroll costs, mortgage interest, rent or utility costs and meet other requirements regarding, among other things, the maintenance of employment and compensation levels. The Company intends to use the entire PPP Loan amount for qualifying expenses and to apply for forgiveness of the loan in accordance with the terms of the CARES Act.  No assurance is provided that the Company will obtain forgiveness of the PPP Loan in whole or in part.  To obtain full or partial forgiveness of the PPP Loan, the Company must request forgiveness and provide satisfactory documentation in accordance with applicable SBA guidelines.  Interest payable on the PPP Loan will be forgiven only if the SBA agrees to pay such interest on the forgiven principal amount of the PPP Loan.