ITEM 1.01 Entry Into a Material Definitive Agreement.
Paycheck Protection Program
Myomo, Inc. (the “Company”) previously submitted an application to Silicon Valley Bank (the “Lender”) under the Small Business Administration (the “SBA”) Paycheck Protection Program (the “PPP”) enabled by the Coronavirus Aid, Relief and Economic Security Act of 2020 (the “CARES Act”). The application was subsequently approved and on April 24, 2020, the Company entered into the U.S. Small Business Administration Paycheck Protection Program Note (the “Note”) with the Lender for a loan in the amount of $1,077,590 (the “Loan”). The Company received the full amount of the Loan on April 24, 2020 and currently plans to use the proceeds to support working capital such as payroll costs, rent and utilities in accordance with the relevant terms and conditions of the CARES Act.
The advance under the Loan bears interest at a rate per annum of 1%. The term of the Loan is two years, ending April 24, 2022 (the “Maturity Date”). No payments are due on the Loan for six months from the date of first disbursement of the Loan (the “Deferment Period”), but interest will continue to accrue during the Deferment Period. Following the Deferment Period, the Company must pay monthly principal and interest payments on the outstanding principal balance of the Loan amortized over the term of the Loan (the “Loan Payments”), unless forgiven in whole or in part in accordance with the PPP regulations. These repayments will begin seven months from the date of the first disbursement of the Loan until the Maturity Date.
The Company may prepay the principal of the Loan at any time without incurring any prepayment charges.
The Loan may be forgiven partially or fully if the funding received is used for payroll costs, interest on covered mortgages, covered rent, and covered utilities, provided that at least 75% of the forgiven amount has been used for payroll costs. Forgiveness is based on the Company’s maintaining, or quickly rehiring employees and maintaining applicable salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease. Any forgiveness of the Loan shall be subject to approval of the SBA and will require the Company and the Lender to apply to the SBA for such treatment in the future.
The Company did not provide any collateral or personal guarantees for the Loan, nor did the Company pay any facility charge to the government or to the Lender.
The Promissory Note also provides for customary events of default, including, among others, events of default relating to failure to make payment or comply with the covenants contained in the Note and related loan documents, defaults on any other loan with the Lender, defaults on any loan or agreement with another creditor (if the Lender believes the default may materially affect the Company’s ability pay the Note), failure to pay any taxes when due, bankruptcy, breaches of representations, judgment, reorganization, merger, consolidation or other changes in ownership or business structure without the Lender’s prior written consent, and material adverse changes in financial condition or business operation. Upon an event of default the Lender may require immediate payment of all amounts owing under the Note, collect all amounts owing from the Company, or file suit and obtain judgment.
The foregoing summary of the Note does not purport to be complete and is qualified in its entirety by reference to the Note, which is filed as Exhibit 10.1 to this Current Report on Form8-K and incorporated herein by reference.
ITEM 2.03 Creation of a Direct Financial Obligation or an Obligation Under anOff-Balance Sheet Arrangement of a Registrant.
See the discussion set forth in Item 1.01, “Entry into a Material Definitive Agreement” of this Current Report on Form8-K,
which discussion is incorporated herein by this reference.
Forward-Looking Statements
This Current Report on Form8-K contains forward-looking statements concerning the Company’s expectations, anticipations, intentions, beliefs or strategies regarding the Loan. These express or implied statements are not promises or guarantees and involve substantial risks and uncertainties. Among the factors that could cause actual results to differ materially from those described or projected herein are the following: financial market conditions; actions by the Loan parties; changes by the SBA or other governmental authorities regarding the CARES Act, the Paycheck Protection Program or related administrative matters; the
