|12 Months Ended|
Dec. 31, 2020
6. PPP Loan
The CARES Act was enacted on March 27, 2020. Among the provisions contained in the CARES Act was the creation of the Paycheck Protection Program (“PPP”) that provides for under the Small Business Administration (“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. The amount that will be forgiven will be calculated in part with reference to the Company’s full-time headcount during the eight-week period following the funding of the PPP loan. The Company applied for the PPP loan and on May 5, 2020, the Company received total proceeds of $651,077 from the SBA. In accordance with the loan forgiveness requirements under the CARES Act, the Company utilized the proceeds from the PPP Loan for payroll costs, rent and utilities.
The Company accounted for the proceeds received from the PPP loan as debt in accordance with ASC 470, Debt. Accordingly, the Company accounted for the proceeds received as short-term and long-term loan in its consolidated balance sheets until forgiveness of the PPP loan was received. The Company applied for loan forgiveness during the fourth quarter of 2020 and the PPP loan was fully forgiven by the SBA. Upon receiving forgiveness of the PPP loan, the Company eliminated the short-term and long-term loan debt liability and the loan forgiveness amount of $651,077 was applied as PPP loan forgiveness in the other income section of the Company’s consolidated statements of operations during the fourth quarter of 2020.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef