NOTE 14 SUBSEQUENT EVENTS
Management has evaluated subsequent events through May 15, 2020, the date on which the financial statements were available to be issued.
On April 1, 2020, the Company executed an agreement captioned Exclusive Distribution Services Agreement ("Agreement”) with Wellgistics, LLC ("Wellgistics”) to distribute the Assurance AB™ antibody-based COVID-19 diagnostic test to be imported by the Company. The Company received an initial purchase order under the Agreement for one million Assurance AB test units on April 1, 2020. Wellgistics tendered to the Company a partial payment of $5.5 million. If the remaining contract balance is not paid by Wellgistics, the Company does not have the funding to purchase the units described in the agreement. Should final payment be received, shipment of the initial one million units may be delayed as pertinent regulations in both China and the United States continue to evolve.
On April 21, 2020 the SEC issued Release No. 34-88719, which temporarily suspended trading in the Company’s common stock due to questions about the accuracy and adequacy of the Company’s previous disclosures regarding its Assurance AB™ serological COVID-19 tests. Trading in the Company’s common stock resumed on May 6, 2020 upon expiration of the suspension. Under OTC Market rules, lack of trading during the suspension resulted in trading of the Company’s common stock being transferred from the OTC Pink Sheets to the OTC Gray Sheets.
On May 6, 2020, Company received loan proceeds of $1.7 million under the Paycheck Protection Program (“PPP”) under a promissory note from a commercial bank (the “PPP Loan”). The PPP, established as part of the CARES Act, provides for loans to qualifying businesses for amounts up to 2.5 times the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after eight weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels.
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The application for these funds requires 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. Some of the uncertainties related to the Company’s operations that are directly related to COVID-19 include, but are not limited to, the severity of the virus, the duration of the outbreak, governmental, business or other actions (which could include limitations on operations or mandates to provide products or services), impacts on the supply chain, and the effect on customer demand or changes to operations. In addition, the health of the Company’s workforce and its ability to meet staffing needs are uncertain and is vital to its operations.
The PPP Loan certification further requires the Company to take into account our current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. While the Company does have availability under its Revolving Loan Agreement, the $2.8 million that is available, is in place to support working capital needs, along with current cash on hand. Further, the Company has a lack of history of being able to access the capital markets. As a result, the Company believes it meets the certification requirements.
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 our future adherence to the forgiveness criteria. The term of the Company’s PPP Loan is two years. The annual interest rate on the PPP Loan is 1% and no payments of principal or interest are due during the six-month period beginning on the date of the PPP Loan. The PPP Loan is subject to any new guidance and new requirements released by the Department of the Treasury who has recently indicated that all companies that have received funds in excess of $2.0 million will be subject to a government (Small Business Administration) audit to further ensure PPP loans are limited to eligible borrowers in need.
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