MannKind Corporation (NASDAQ:MNKD) Files An 8-K Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
Item 2.03
(a)
The information contained in Item 8.01 of this report under the heading “Paycheck Protection Program Loan” is incorporated by reference under this Item 2.03.
Item 8.01 Other Events.
Paycheck Protection Program Loan
On April 10, 2020, MannKind Corporation (the “Company”) received the proceeds from a loan in the amount of approximately $4.9 million (the “PPP Loan”) from JPMorgan Chase Bank, N.A., as lender, to the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan matures on April 9, 2022 and bears interest at a rate of 0.98% per annum. Commencing November 9, 2020, the Company is required to pay the lender equal monthly payments of principal and interest as required to fully amortize by April 9, 2022 the principal amount outstanding on the PPP Loan as of October 9, 2020. The PPP Loan is evidenced by a promissory note dated April 9, 2020 (the “Note”), which contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties. The PPP Loan may be prepaid by the Company at any time prior to maturity with no prepayment penalties.
All or a portion of the PPP Loan may be forgiven by the U.S. Small Business Administration (“SBA”) upon application by the Company beginning 60 days but not later than 120 days after loan approval and upon documentation of expenditures in accordance with the SBA requirements. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during the eight week period beginning on the date of loan approval. For purposes of the CARES Act, payroll costs exclude compensation of an individual employee in excess of $100,000, prorated annually. Not more than 25% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. In the event the PPP Loan, or any portion thereof, is forgiven to the PPP, the amount forgiven is applied to outstanding principal.
The Company intends to use all proceeds from the PPP Loan to retain employees, maintain payroll and make lease, mortgage interest and utility payments.
A copy of the Note is filed as Exhibit 99.1 to this report.
Salary Reduction for Certain Employees
Effective April 27, 2020 (the beginning of the next payroll cycle), the Company will implement a 20% pay reduction for certain employees whose payroll costs exceed $100,000, including executive officers. The Company expects to maintain this reduction for at least 10 weeks. The Company does not intend to reduce pay for employees whose payroll costs are below $100,000.