Note 17 - Paycheck Protection Plan loans and Economic Injury Disaster Loans |
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||
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Note 17 - Paycheck Protection Plan loans and Economic Injury Disaster Loans |
Note 17 Paycheck Protection Plan loans and Economic Injury Disaster Loans
Paycheck protection plan loans
On April 23, 2020 and May 5, 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 Republic Bank of Arizona (collectively, the PPP Loans). The Paycheck Protection Program was established under Sections 1102 and 1106 of the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"), as amended. The CARES Act temporarily amends Section 7(a) of the Small Business Act to expand the scope and criterion of a businesss eligibility to receive financial assistance from the Small Business Administration (SBA). Subsequent to December 31, 2020, Mentor received a second PPP Loan in the amount of $76,593 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; see Note 23.
The PPP Loans were forgivable so long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, 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.
The Company recorded the PPP Loans as a liability in accordance with FASB ASC 470, Debt and recorded accrued interest through the effective date of forgiveness on the PPP Loans. Mentor received forgiveness effective November 20, 2020, of its $76,500 PPP Loan principal plus accrued interest of $440. WCI received forgiveness effective November 25, 2020, of $373,342 PPP Loan principal plus accrued interest of $2,066. Total gain on extinguishment of the PPP Loans and accrued interest of $452,348 for the year ended December 31, 2020, is reported in other income and expense in the consolidated income statement.
Pursuant to Section 1110(e)(6) of the CARES Act, WCI was not eligible for forgiveness on $10,000 of the PPP Loan 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 WCIs PPP lender, the Republic Bank of Arizona, for the previously-deducted EIDL Advance amount, plus interest through the remittance date. Subsequent to year-end, on March 16, 2021, The Republic Bank of Arizona notified WCI of receipt of the reconciliation payment and full forgiveness of the EIDL Advance, see Note 23.
PPP loan balances at December 31, 2020 consist of the following:
Economic injury disaster loan
On April 24, 2020, WCI received a $10,000 SBA EIDL Advance. The EIDL Advance is an emergency grant under Section 1110 of the Cares Act, which expands businesses access to Economic Injury Disaster Loans under Section 7(b)(2) of the Small Business Act. Pursuant to Section 1110(e)(6) of the CARES Act, WCI was not eligible for forgiveness on $10,000 of the PPP Loan 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 will automatically remit a reconciliation payment to WCIs PPP lender, the Republic Bank of Arizona, for the previously-deducted EIDL Advance amount, plus interest through the remittance date. Subsequent to year-end, on March 16, 2021, The Republic Bank of Arizona notified WCI of receipt of the reconciliation payment and full forgiveness of the EIDL Advance, see Note 23.
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 balance at December 31, 2020 consist of the following:
*All payments in 2021 will offset accrued interest incurred in the deferral period and therefore the current maturity of principal is $0 at December 31, 2020.
Interest expense on the EIDL Loan for the year ended December 31, 2020 was $2,602. |