Note 15 – Paycheck Protection Program Loans and Economic Injury Disaster Loans

Paycheck Protection Program loans

In 2020, the Company and WCI each received loans in the amount of $76,500 and $383,342, respectively, from the Bank of Southern California and the Republic Bank of Arizona (collectively, the “PPP Loans”). The PPP Loans were forgiven in November 2020, except for $10,000 of WCI’s loan that was not eligible for forgiveness due to receipt of a $10,000 Economic Injury Disaster Loan Advance (“EIDL Advance”). However, on December 27, 2020, Section 1110(e)(6) of the CARES Act was repealed by Section 333 of the Economic Aid Act. As a result, the SBA automatically remitted a reconciliation payment to WCI’s PPP lender, the Republic Bank of Arizona, for the previously deducted EIDL Advance amount, plus interest through the remittance date. On March 16, 2021, The Republic Bank of Arizona notified WCI of receipt of the reconciliation payment and full forgiveness of the EIDL Advance. The $10,000 forgiveness is reflected as other income for the six months ended June 30, 2021, in the condensed consolidated income statements.

On February 17, 2021, Mentor received a second PPP Loan in the amount of $76,593 (“Second PPP Loan”) pursuant to Division N, Title III, of the Consolidated Appropriations Act, 2021 (the “Economic Aid Act”) as further set forth at Section 311 et. seq. of the Economic Aid Act.

The Second PPP Loan is forgivable so long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent, utilities, and other covered operations expenditures, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the forgiveness period.

Note 15 – Paycheck Protection Program loans and Economic injury disaster loan (continued)

The Company records PPP Loans as a liability in accordance with FASB ASC 470, “Debt” and records accrued interest through the effective date of forgiveness on the PPP Loans. Total gain on extinguishment of the PPP Loans and accrued interest is reported in other income and expense in the consolidated income statement.

PPP loan balances consist of the following:

 Schedule of paycheck protection plan loan balances

Interest expense on PPP Loans for the three months ended June 30, 2021 and 2020 was $191 and $705, respectively. Interest expense on PPP Loans for the six months ended June 30, 2021 and 2020 was $270 and $705, respectively

Economic injury disaster loan

On July 9, 2020, WCI received an additional Economic Injury Disaster Loan in the amount of $150,000 through the SBA. The loan is secured by all tangible and intangible personal property of WCI, bears interest at 3.75% per annum, requires monthly installment payments of $731 beginning July 2020, and matures July 2050. The loan is collateralized by all tangible and intangible assets of WCI.

EIDL loan balances at June 30, 2021 consist of the following:

 Schedule of EIDL loan balances

Interest expense on the EIDL Loan for the three months ended June 30, 2021 and 2020 was $1,420 and $0, respectively.

Interest expense on the EIDL Loan for the six months ended June 30, 2021 and 2020 was $2,811 and $0, respectively.