NOTE 11 CORONAVIRUS AID, RELIEF, AND ECONOMIC SECURITY ACT (“CARES ACT”)

Employee Retention Credit (“ERC”)

The CARES Act, which was enacted on March 27, 2020, provides an Employee Retention Credit (“ERC”) for qualifying businesses keeping employees on their payroll during the COVID-19 pandemic. The ERC was subsequently amended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020, the Consolidated Appropriation Act of 2021, and the American Rescue Plan Act of 2021, all of which amended and extended the ERC availability and guidelines under the CARES Act. Following these amendments, the Company determined that it was eligible for the ERC, and as a result of the foregoing legislations, is eligible to claim a refundable tax credit against the Company’s share of certain payroll taxes equal to 70% of the qualified wages paid to employees between July 1, 2021 and September 30, 2021. Qualified wages are limited to $10,000 per employee per calendar quarter in 2021 for a maximum allowable ERC per employee of $7,000 per calendar quarter in 2021. For purposes of the amended ERC, an eligible employer is defined as having experienced a significant (20% or more) decline in gross receipts during one or more of the first three 2021 calendar quarters when compared to 2019.

During the third quarter of 2022, the Company determined it was eligible for the ERC and amended its third quarter 2021 employer payroll tax filings claiming a refund from the U.S. Treasury in the amount of approximately $1,975,000. As there is no authoritative guidance under U.S. GAAP on accounting for government assistance to for-profit business entities, we account for the ERC by analogy to International Accounting Standard (“IAS”) 20, Accounting for Government Grants and Disclosure of Government Assistance. In accordance with IAS 20, management determined it has reasonable assurance for receipt of the ERC and recorded the expected refund as other income (within “Other income (expense)”) on the Company’s Consolidated Statements of Operations and other receivables (within “Prepaid and other assets”) on the Company’s Consolidated Balance Sheets. For federal income tax purposes, this item was treated as a reduction in payroll costs for 2021, the year in which the costs originated. This resulted in a timing difference for the benefit between financial statement inclusion and tax inclusion between 2021 and 2022. This timing difference does not impact the Company’s effective tax rate.

Paycheck Protection Program (“PPP”) Loan

In April 2020, the Company received a PPP Loan in the amount of approximately $5,318,000 under the CARES Act, as amended. The PPP Loan was administered by the SBA. Proceeds from the promissory note was used by the Company for eligible payroll costs, mortgage interest, rent and utility costs as permitted by the CARES Act, as amended. The annual interest rate on the PPP Loan was 1.0%. In late 2020, the Company applied for forgiveness on repayment of the PPP Loan and effective June 15, 2021, the entire balance of the PPP Loan of approximately $5,318,000, along with accrued interest of approximately $63,000 was forgiven by the SBA. Accordingly, the Company recorded the entire forgiven PPP Loan balance, along with accrued interest, totaling approximately $5,381,000 as “Gain on extinguishment of debt” on its Consolidated Statement of Operations for the year ended 2021.

Deferral of Employment Tax Deposits

The CARES Act, as amended, provided employers the option to defer the payment of an employer’s share of social security taxes beginning on March 27, 2020 through December 31, 2020 with 50% of the amount of social security taxes deferred to become due on December 31, 2021 with the remaining 50% due on December 31, 2022. The Company’s deferment of such taxes totaled approximately $1,252,000 of which approximately $626,000 was paid in December 2021 with the remaining paid in December 2022 (previously included in “Accrued expenses” within current liabilities in our Consolidated Balance Sheets).