Note 5 - Debt

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Debt Disclosure [Text Block]

5. DEBT

Short-Term Debt

Factoring Arrangement

The Company has an accounts receivable factoring arrangement with a financial institution (the “Factor”).  Under the terms of the agreement, the Company, from time to time, sells to the Factor certain of its accounts receivable balances on a recourse basis for credit approved accounts.  The Factor remits 85% of the domestic accounts receivable balance to the Company (the “Advance Amount”), with the remaining balance, less fees to be paid to the Company once the Factor collects the entire accounts receivable balance from the customer.  The factoring fee is 0.98 % of the invoice’s face value factored for the first 30 days required to collect the invoice and prorated on a per diem basis at 0.0327 % each day thereafter.  The minimum invoice fee for any factored invoices is $1.50.  The Company includes the cost of factoring in interest expense.

As stated previously, the Company factors the accounts receivable on a recourse basis.  Therefore, if the Factor cannot collect the factored accounts receivable, the Company must refund the Advance Amount remitted to us for any uncollected accounts receivable.  Accordingly, the Company records the liability of having to refund the Advance Amount as short-term debt when the factoring arrangement is utilized.  As of March 31, 2022, no advances were outstanding under the factoring arrangement (i.e., the Company had $2.0 million of unused availability); and there was no liability.

The cost of factoring was as follows for the quarterly period ended  March 31, 2022, and the year ended December 31, 2021:

	March 31, 2022		December 31, 2021
Factoring Fees	$	-	$	87,122

Long-Term Debt

Loans Payable – EIDL

In response to COVID-19, the Small Business Administration (“SBA”) created the COVID-19 Economic Injury Disaster Loan (EIDL) program in March 2020.  The program's purpose was to help small businesses meet financial obligations that could have been met had the Covid-19 pandemic not occurred.  Unlike the Paycheck Protection Program (“PPP”) Loan Program, a loan under EIDL is not forgivable in the future but provides favorable interest and payment terms to approved applicants.  The maximum EIDL available was equivalent to six months of a business’s working capital, up to $150,000.  Businesses can use EIDL proceeds for working capital and normal operating expenses.  On June 24, 2020, the Company received loan proceeds of $150,000 under the EIDL Program.  As part of the EIDL program, the Company agreed to the SBA collateral conditions and agreed to pay annual interest of 3.75% per annum on the outstanding principal balance.  Monthly installment payments commence at the end of the anticipated deferral allowance period in June 2022 for up to a maximum of 30 years from the loan date (thus, June 24, 2050).  As of   March 31, 2022, the Company had $149,900 of principal outstanding on the EIDL loan and accrued interest of  $10,648.

Long-term debt is expected to mature as follows:

2022	$	5,117
2023		8,772
2024		8,772
2025		8,772
2026		8,772
Thereafter		109,695
	$	149,900

Loans Payable - PPP

On April 30, 2020, Guerrilla RF received loan proceeds of $535,800 under the PPP.  PPP loans and accrued interest are forgivable after a “covered period” (24 weeks) as long as the borrower maintains its payroll levels and uses the loan proceeds for eligible purposes, including payroll, benefits, rent, and utilities.  As of December 31, 2020, Guerrilla RF had $535,800 of principal outstanding on the PPP loan together with accrued interest of $3,611 as accounts payable and accrued expenses on the consolidated balance sheet.  On February 17, 2021, Guerrilla RF received notice from the SBA that the $535,800 PPP loan was forgiven, including all accrued interest.

On February 19, 2021, Guerrilla RF received a second PPP loan of $833,300 (the “2021 PPP Loan”).  Guerrilla RF used the 2021 PPP Loan to retain current employees, maintain payroll, and make lease and utility payments.  On August 18, 2021, Guerrilla RF received confirmation from the SBA that the 2021 PPP Loan, including accrued interest, had been forgiven.