UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For
the quarterly period ended
OR
For the transition period from _______________ to __________________
Commission
file number
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Securities registered pursuant to Section 12(b) of the Act: N/A
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Securities registered pursuant to section 12(g) of the Act:
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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
At November 10, 2023, there were shares of Mentor Capital, Inc.’s common stock outstanding and 11 shares of Series Q Preferred Stock outstanding.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains “forward-looking statements,” as defined in the United States Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities and Exchange Act 1934, as amended. All statements contained in this report, other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “seek,” “look,” “hope,” “intend,” “expect,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, acquisition plans, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions. For example, statements in this Form 10-Q regarding the potential future impact of inflation, interest rate increases, tax increases, tariff increases, recession, climate regulation, the COVID-19 outbreak, economic sanctions, cybersecurity risks, increased risk to oil markets, potential banking crises, future weakness in the credit markets, increased rates of default and bankruptcy, political change, the outbreak of war in Ukraine, and the Israel-Hamas war on the Company’s business and results of operations are forward-looking statements. Moreover, due to our past investments in the cannabis-related industry or other industries, we may be subject to heightened scrutiny, and our portfolio companies may be subject to additional laws, rules, regulations, and statutes. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Form 10-Q may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.
All references in this Form 10-Q to the “Company,” “Mentor,” “we,” “us,” or “our,” are to Mentor Capital, Inc.
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MENTOR CAPITAL, INC.
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Mentor Capital, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Investments in securities, fair value | ||||||||
| Accounts receivable, net | ||||||||
| Other receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment | ||||||||
| Property and equipment | ||||||||
| Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Property and equipment, net | ||||||||
| Other assets | ||||||||
| Operating lease right-of-use assets | ||||||||
| Finance lease right-of-use assets | ||||||||
| Investment in account receivable, net of discount and current portion | ||||||||
| Security Deposit | ||||||||
| Long term investments | ||||||||
| Goodwill | ||||||||
| Total other assets | ||||||||
| Total assets | $ | $ | ||||||
See accompanying Notes to Financial Statements
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Mentor Capital, Inc.
Condensed Consolidated Balance Sheets (Unaudited, Continued)
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Related Party Loans | ||||||||
| Economic injury disaster loan, current portion | ||||||||
| Finance lease liability, current portion | ||||||||
| Operating lease liability, current portion | ||||||||
| Current portion of long-term debt | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities | ||||||||
| Accrued salary, retirement, and incentive fee - related party | ||||||||
| Economic injury disaster loan, net of current portion | ||||||||
| Finance lease liability, net of current portion | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Long term debt, net of current portion | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Shareholders’ equity | ||||||||
| Preferred stock, $par value, shares authorized; and shares issued and outstanding at September 30, 2023 and December 31, 2022* | ||||||||
| Common stock, $par value, shares authorized; and shares issued and outstanding at September 30, 2023 and December 31, 2022 | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Non-controlling interest | ( | ) | ||||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
| * |
See accompanying Notes to Financial Statements
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Mentor Capital, Inc.
Condensed Consolidated Income Statements (Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | ||||||||||||||||
| Service fees | $ | $ | $ | $ | ||||||||||||
| Finance lease revenue | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Operating income (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income and (expense) | ||||||||||||||||
| Employee retention credits | ||||||||||||||||
| Gain (loss) on investments | ( | ) | ||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on asset disposal | ||||||||||||||||
| Other income (expense) | ||||||||||||||||
| Total other income and (expense) | ( | ) | ( | ) | ||||||||||||
| Income (loss) before provision for income taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Provision for income taxes | ||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Gain (loss) attributable to non-controlling interest | ( | ) | ( | ) | ||||||||||||
| Net income (loss) attributable to Mentor | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted net income (loss) per Mentor common share: | ||||||||||||||||
| Basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average number of shares of Mentor common stock outstanding: | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
See accompanying Notes to Financial Statements
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Mentor Capital, Inc.
Condensed Consolidated Statement of Shareholders’ Equity (Unaudited)
For the Three Months Ended September 30, 2023 and 2022
| Controlling Interest | Non- | |||||||||||||||||||||||||||||||||||
| Preferred stock | Common stock | Additional | Accumulated | controlling | ||||||||||||||||||||||||||||||||
| Shares | $0.0001 par* | Shares | $0.0001 par | paid in capital | equity (deficit) | Total | equity (deficit) | Totals | ||||||||||||||||||||||||||||
| Balances at June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| Treasury stock buy-backs | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net income (loss) | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| Balances at June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| Net income (loss) | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| * |
See accompanying Notes to Financial Statements
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Mentor Capital, Inc.
Condensed Consolidated Statement of Shareholders’ Equity (Unaudited)
For the Nine Months Ended September 30, 2023 and 2022
| Controlling Interest | Non- | |||||||||||||||||||||||||||||||||||
| Preferred stock | Common stock | Additional | Accumulated | controlling | ||||||||||||||||||||||||||||||||
| Shares | $0.0001 par* | Shares | $0.0001 par | paid in capital | equity (deficit) | Total | equity (deficit) | Totals | ||||||||||||||||||||||||||||
| Balances at December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
| Treasury stock buybacks | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Net income (loss) | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| Balances at December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
| Conversion of warrants to common stock | - | | ||||||||||||||||||||||||||||||||||
| Net income (loss) | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| * |
See accompanying Notes to Financial Statements
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Mentor Capital, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net (loss) | $ | ( | ) | $ | ||||
| Adjustments to reconcile net (loss) to net cash provided by (used by) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of right of use asset | ||||||||
| Gain on asset disposal | ( | ) | ||||||
| Bad debt expense | ||||||||
| Amortization of discount on investment in account receivable | ( | ) | ( | ) | ||||
| Decrease in accrued investment interest income | ||||||||
| (Gain) loss on investment in securities at fair value | ( | ) | ||||||
| Gain on long-term investments | ( | ) | ||||||
| Increase (Decrease) in deposits | ( | ) | ||||||
| Decrease (increase) in operating assets | ||||||||
| Finance leases receivable | ||||||||
| Accounts receivable - trade | ( | ) | ||||||
| Other receivables | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Employee advances | ( | ) | ||||||
| Increase (decrease) in operating liabilities | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ( | ) | ||||||
| Deferred revenue | ( | ) | ||||||
| Accrued salary, retirement, and benefits - related party | ||||||||
| Net cash provided by (used by) operating activities | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of investment securities | ( | ) | ||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Down payments on right of use assets | ( | ) | ||||||
| Proceeds from investment in receivable | ||||||||
| Net cash (used by) investing activities | ( | ) | ||||||
See accompanying Notes to Financial Statements
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Mentor Capital, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited, Continued)
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from related party loan | $ | $ | ||||||
| Proceeds from warrants converted to common stock | ||||||||
| Payments on repurchase of stock | ( | ) | ||||||
| Payments on related party payable | ( | ) | ||||||
| Payments on long-term debt | ( | ) | ( | ) | ||||
| Payments on finance lease liability | ( | ) | ( | ) | ||||
| Net cash provided by (used by) financing activities | ( | ) | ( | ) | ||||
| Net change in cash | ( | ) | ||||||
| Beginning cash | ||||||||
| Ending cash | $ | $ | ||||||
| SUPPLEMENTARY INFORMATION: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING TRANSACTIONS: | ||||||||
| Right of use assets acquired through operating lease liability | $ | $ | ||||||
| Right of use assets acquired through finance lease liability | $ | $ | ||||||
| Property and equipment acquired through long-term debt | ||||||||
See accompanying Notes to Financial Statements
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Note 1 - Nature of operations
Corporate Structure Overview
Mentor
Capital, Inc. (“Mentor” or “the Company”), reincorporated under the laws of the State of
The
entity was originally founded as an investment partnership in Silicon Valley, California, by the current CEO in 1985 and subsequently
incorporated under the laws of the State of California on
The Company’s common stock trades publicly under the trading symbol OTCQB: MNTR.
The Company’s broad target industry focus includes energy, facilities operations, and management services with the goal of ensuring increased market opportunities.
Mentor
has a
Mentor’s
MCIP holds intellectual property and licensing rights related to one United States and one Canadian patent associated with THC and CBD vape pens. Patent application and national phase maintenance fees were expensed when paid rather than capitalized and therefore, no capitalized assets related to MCIP are recognized on the consolidated financial statements at September 30, 2023 and December 31, 2022. Subsequent to quarter end, on October 24, 2023, MCIP divested its intellectual property and licensing rights related to the United States and the Canadian patents. See Note 20.
On
August 27, 2021, the Company and Mentor Partner I entered into a Settlement Agreement and Mutual Release with the G Farma Entities and
guarantors (“G Farma Settlors”) to resolve and settle all outstanding claims on an unpaid finance lease receivable and notes
receivable of balances of $
In
August 2022, September 2022, and October 2022, the G Farma Settlors failed to make monthly payments, and failed to cure each default
within 10 days’ notice from Company pursuant to the Settlement Agreement. In February 2023, the Company and Mentor Partner I filed
a Request for Court Judgment requesting that the stipulated judgment agreed as part of the Settlement Agreement be entered against the
G Farma Settlors for (1) the remaining amount of the $
The
Company has retained the full reserve on the unpaid notes receivable balance and collections of the unpaid lease receivable balance due
to the long history of uncertain payments from G Farma and the G Farma Settlors. Payments from G Farma and G Farma Settlors will be recognized
in Other Income as they are received. Recovery payments of $
| -11- |
Note 1 - Nature of operations (continued)
On
September 27, 2022, Pueblo West Organics, LLC, a Colorado limited liability company (“Pueblo West”) exercised a lease prepayment
option and purchased manufacturing equipment from Partner II for $
On
November 18, 2022, following the filing of a declaratory relief action, Mentor received $
On
November 22, 2017 and October 31, 2018, the Company purchased convertible notes in principal face value of $
On
December 21, 2018, Mentor paid $
Note 2 - Summary of significant accounting policies
Condensed consolidated financial statements
The unaudited condensed consolidated financial statements of the Company for the nine month period ended September 30, 2023 and 2022 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the financial position and the results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2022 was derived from the audited financial statements included in the Company’s financial statements as of and for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 28, 2023. These financial statements should be read in conjunction with that report.
Basis of presentation
The accompanying consolidated financial statements and related notes include the activity of subsidiaries in which a controlling financial interest is owned. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Significant intercompany balances and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform with the current period presentation.
As
shown in the accompanying financial statements, the Company has a significant accumulated deficit of $
Ongoing Capital Formation
The
Company may seek to recover unused funds from its affiliated entities, sell one or more investments that management has determined have
significantly appreciated, are at the end of their lifecycle or no longer fit within the Company’s desired focus, or raise additional
capital to fund its operations. Mentor will continue to attempt to raise capital resources from both related and unrelated parties. Additionally,
the Company has
| -12- |
Impact Related to COVID-19 and Global Economic Factors
The
effect of the novel coronavirus (“COVID-19”) has significantly impacted the United States and the global economy. COVID-19
and the measures taken by many countries in response have adversely affected and could in the future materially adversely impact the
Company’s business, acquisitions plans, results of operations, financial condition, and stock price. The ongoing worldwide economic
situation, including the COVID-19 outbreak, economic sanctions, the impact of inflation, interest rate increases, tax increases, tariff
increases, recession, climate regulation, cybersecurity risks, increased risk to oil markets, potential banking crises, the outbreak
of war in Ukraine, the Israel-Hamas war, future weakness in the credit markets, increased rates of default and bankruptcy, political
change, and significant liquidity problems for the financial services industry may impact our financial condition in a number of ways.
For example, our current or potential customers, or the current or potential customers of our partners or affiliates, may delay or decrease
spending with us, or may not pay us, or may delay paying us for previously purchased products and services. Also, we, or our partners
or affiliates, may have difficulties in securing additional financing. Additionally, due to a reduction in expected collections, the
collectability of our investment in accounts receivable was impaired by $
Public health efforts to mitigate the impact of COVID-19 have included government actions such as travel restrictions, limitations on public gatherings, shelter-in-place orders, and mandatory closures. These actions have substantially lifted. Supply chain disruptions, inflation, interest rate increases, tax increases, recession, high energy prices, and supply-demand imbalances are expected to continue in 2023. WCI has not experienced an overall reduced demand for services initially anticipated because WCI helps lower monthly service costs paid by its client properties. However, WCI has been directly affected by rapid increases to direct costs of fuel, labor, and landfill usage in 2020, 2021, 2022, and 2023. WCI’s clients may experience a delay in collecting rent from tenants, which may cause slower payments to WCI. WCI closely monitors customer accounts and has not experienced significant delays in the collection of accounts receivable.
We anticipate that current cash and associated resources will be sufficient to execute our business plan for the next twelve months. The ultimate impact of COVID-19 impacts, the outbreak of war in Ukraine, the Israel-Hamas war, and inflation, interest rate increases, tax increases, and a potential recession on our business, results of operations, cybersecurity, financial condition, and cash flows are dependent on future developments, including the political climate, COVID-19, crisis in Ukraine, Israel-Hamas war, government responses, and related drag on the economy, which are uncertain and cannot be predicted at this time.
Use of estimates
The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to make estimates, assumptions, and judgments that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of our consolidated financial statements, and the reported amount of revenues and expenses during the reporting period.
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Note 2 - Summary of significant accounting policies (continued)
Significant estimates relied upon in preparing these consolidated financial statements include revenue recognition, accounts and notes receivable reserves, expected future cash flows used to evaluate the recoverability of long-lived assets, estimated fair values of long-lived assets used to record impairment charges related to investments, goodwill, amortization periods, accrued expenses, and recoverability of the Company’s net deferred tax assets and any related valuation allowance.
Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. Acquisitions and divestitures are not announced until certain. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results may differ from management’s estimates if past experience or other assumptions do not turn out to be substantially accurate.
Recent Accounting Standards
From time to time, the FASB, or other standards-setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standard Codifications (“ASCs”) are communicated through the issuance of an Accounting Standards Update (“ASU”). Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on our consolidated financial statements upon adoption.
There were no accounting pronouncements issued during the nine months ended September 30, 2023, that are expected to have a material impact on the Company’s condensed consolidated financial statements.
Concentrations of cash
The Company maintains its cash and cash equivalents in bank deposit accounts, which at times may exceed federally insured Federal Deposit Insurance Corporation limits. The Company has not experienced any losses in such accounts, nor does the Company believe it is exposed to any significant credit risk on cash and cash equivalents. The Company will continue to monitor its accounts and the banking sector for potential financial institution risk.
Cash and cash equivalents
The
Company considers all short-term debt securities purchased with a maturity of three months or less to be cash equivalents. The Company
had
Accounts receivable
Accounts
receivable consists of trade accounts arising in the normal course of business and are classified as current assets and carried at original
invoice amounts less an estimate for doubtful receivables based on historical losses as a percent of revenue in conjunction with a review
of outstanding balances on a quarterly basis. The estimate of the allowance for doubtful accounts is based on the Company’s bad
debt experience, market conditions, and aging of accounts receivable, among other factors. If the financial condition of the Company’s
customers deteriorates, resulting in the customer’s inability to pay the Company’s receivables as they come due, additional
allowances for doubtful accounts will be required. At September 30, 2023 and December 31, 2022, the Company has an allowance for doubtful
receivables in the amount of $
Investments in securities at fair value
Investment in securities consists of debt and equity securities reported at fair value. Under ASU 2016-01, “Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities,” the Company elected to report changes in the fair value of equity investment in realized investment gains (losses), net.
| -14- |
Note 2 - Summary of significant accounting policies (continued)
Long term investments
The Company’s investments in entities where it is a minority owner and does not have the ability to exercise significant influence are recorded at fair value if readily determinable. If the fair market value is not readily determinable, the investment is recorded under the cost method. Under this method, the Company’s share of the earnings or losses of such investee company is not included in the Company’s financial statements. The Company reviews the carrying value of its long-term investments for impairment each reporting period.
Investments in debt securities
At
September 30, 2023 and December 31, 2022, the Company held no investments in debt securities. The Company’s former investment in
debt securities consisted of two convertible notes receivable from NeuCourt, Inc. On July 15, 2022, all principal and accrued interest
on the notes were converted into a Simple Agreement for Future Equity (“SAFE”). At September 30, 2023 and December 31, 2022,
the SAFE Purchase Amount was $
Investment in account receivable, net of discount
The
Company’s investments in accounts receivable is stated at face value, net of unamortized purchase discount. The discount is amortized
to interest income over the term of the exchange agreement. In the fourth quarter of 2020, we were notified that due to the effect of
COVID-19 on the estimated receivable, we may not receive the 2020 installment payment or the full 2021 installment payment. Due to a
reduction in expected collections, the collectability of our investment in accounts receivable was impaired by $
Credit quality of notes receivable and finance leases receivable, and credit loss reserve
As our notes receivable and finance leases receivable are limited in number, our management is able to analyze estimated credit loss reserves based on a detailed analysis of each receivable as opposed to using portfolio-based metrics. Our management does not use a system of assigning internal risk ratings to each of our receivables. Rather, each note receivable and finance lease receivable are analyzed quarterly and categorized as either performing or non-performing based on certain factors including, but not limited to, financial results, satisfying scheduled payments, and compliance with financial covenants. A note receivable or finance lease receivable will be categorized as non-performing when a borrower experiences financial difficulty and has failed to make scheduled payments.
Lessee Leases
We determine whether an arrangement is a lease at inception. Lessee leases are classified as either finance leases or operating leases. A lease is classified as a finance lease if any one of the following criteria is met: (i) the lease transfers ownership of the asset by the end of the lease term, (ii) the lease contains an option to purchase the asset that is reasonably certain to be exercised, and (iii) the lease term is for a significant part of the remaining useful life of the asset or the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it does not meet any one of these criteria. Our operating leases are comprised of office space leases and office equipment. Fleet vehicle leases entered into prior to January 1, 2019, are classified as operating leases based on an expected lease term of four years. Fleet vehicle leases entered into on or after January 1, 2019, for which the lease is expected to be extended to five years, are classified as finance leases. Our leases have remaining lease terms of one to forty-eight months. Our fleet finance leases contain a residual value guarantee which, based on past lease experience, is unlikely to result in liability at the end of the lease. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date to determine the present value of lease payments.
| -15- |
Note 2 - Summary of significant accounting policies (continued)
Costs associated with operating lease assets are recognized on a straight-line basis, over the term of the lease, within cost of goods sold for vehicles used in direct servicing of WCI customers and in operating expenses for costs associated with all other operating leases. Finance lease assets are amortized within cost of goods sold for vehicles used in direct servicing of WCI customers and within operating expenses for all other finance lease assets, on a straight-line basis over the shorter of the estimated useful lives of the assets or the lease term. The interest component of a finance lease is included in interest expense and recognized using the effective interest method over the lease term. We have agreements that contain both lease and non-lease components. For vehicle fleet operating leases, we account for lease components together with non-lease components (e.g., maintenance fees).
Property and equipment
Property
and equipment are recorded at cost less accumulated depreciation. Depreciation is computed on the declining balance method over the estimated
useful lives of various classes of property. The estimated lives of the property and equipment are generally as follows: computer equipment,
Expenditures for major renewals and improvements are capitalized, while minor replacements, maintenance, and repairs, which do not extend the asset lives, are charged to operations as incurred. Upon sale or disposition, the cost and related accumulated depreciation are removed from the accounts, and any gain or loss is included in operations. The Company continually monitors events and changes in circumstances that could indicate that the carrying balances of its property and equipment may not be recoverable in accordance with the provisions of ASC 360, “Property, Plant, and Equipment.” When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets.
The Company reviews intangible assets subject to amortization quarterly to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset, a product recall, or an adverse action or assessment by a regulator. If an impairment indicator exists, we test the intangible asset for recoverability. For purposes of the recoverability test, we group our amortizable intangible assets with other assets and liabilities at the lowest level of identifiable cash flows if the intangible asset does not generate cash flows independent of other assets and liabilities. If the carrying value of the intangible asset (asset group) exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the intangible asset (asset group), the Company will write the carrying value down to the fair value in the period identified.
Goodwill
Goodwill
of $
| -16- |
Note 2 - Summary of significant accounting policies (continued)
The Company reviews the goodwill allocated to each of our reporting units for possible impairment annually as of December 31, and whenever events or changes in circumstances indicate carrying amount may not be recoverable. In the impairment test, the Company measures the recoverability of goodwill by comparing a reporting unit’s carrying amount, including goodwill, to the estimated fair value of the reporting unit. If the carrying amount of a reporting unit is in excess of its fair value, the Company recognizes an impairment charge equal to the amount in excess. To estimate the fair value, management uses valuation techniques which included the discounted value of estimated future cash flows. The evaluation of impairment requires the Company to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and are subject to change as future events and circumstances change. Actual results may differ from assumed and estimated amounts. Management determined that no impairment write-downs were required as of September 30, 2023 and December 31, 2022.
Revenue recognition
The Company recognizes revenue in accordance with ASC 606, “Revenue from Contracts with Customers,” and FASB ASC Topic 842, “Leases.” Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to government authorities.
WCI works with business park owners, governmental centers, and apartment complexes to reduce facilities-related costs. WCI performs monthly services pursuant to agreements with customers. Customer monthly service fees are based on WCI’s assessment of the amount and frequency of monthly services requested by a customer. WCI may also provide additional services, such as apartment cleanout services, large item removals, or similar services, on an as needed basis at an agreed upon rate as requested by customers. All services are invoiced and recognized as revenue in the month the agreed-on services are performed.
For each finance lease, the Company recognized as a gain the amount equal to (i) the net investment in the finance lease less (ii) the net book value of the equipment at the inception of the applicable lease. At lease inception, we capitalized the total minimum finance lease payments receivable from the lessee, the estimated unguaranteed residual value of the equipment at lease termination, if any, and the initial direct costs related to the lease, less unearned income. Unearned income was recognized as finance income over the term of the lease using the effective interest rate method.
The Company, through its subsidiaries, was the lessor of manufacturing equipment subject to leases under master leasing agreements. The leases contained an element of dealer profit and lessee bargain purchase options at prices substantially below the subject assets’ estimated residual values at the exercise date for the options. Consequently, the Company classified the leases as sales-type leases (the “finance leases”) for financial accounting purposes. For such finance leases, the Company reported the discounted present value of (i) future minimum lease payments (including the bargain purchase option, if any) and (ii) any residual value not subject to a bargain purchase option as a finance lease receivable on its balance sheet and accrued interest on the balance of the finance lease receivable based on the interest rate inherent in the applicable lease over the term of the lease. For each finance lease, the Company recognized revenue in an amount equal to the net investment in the lease and cost of sales equal to the net book value of the equipment at the inception of the applicable lease.
We compute net income (loss) per share in accordance with ASC 260, “Earnings Per Share.” Under the provisions of ASC 260, basic net loss per share includes no dilution and is computed by dividing the net loss available to common stockholders for the period by the weighted average number of shares of Common Stock outstanding during the period. Diluted net income (loss) per share takes into consideration shares of Common Stock outstanding (computed under basic net loss per share) and potentially dilutive securities that are not anti-dilutive.
Outstanding warrants that had no effect on the computation of the dilutive weighted average number of shares outstanding as their effect would be anti-dilutive were approximately and as of September 30, 2023 and December 31, 2022, respectively. There were potentially dilutive shares outstanding at September 30, 2023 and December 31, 2022.
Conversion of Series Q Preferred Stock into Common Stock would be anti-dilutive for the nine months ended September 30, 2023 and 2022 and is not included in calculating the diluted weighted average number of shares outstanding.
| -17- |
Note 3 – Investment in account receivable
On
April 10, 2015, the Company entered into an exchange agreement whereby the Company received an investment in an account receivable with
annual installment payments of $
The
Company valued the transaction based on the market value of Company common shares exchanged in the transaction, resulting in a
On
February 16, 2022, subject to effecting certain agreed upon payment changes, the parties agreed to modify the terms of the installment
payments and the Company retained annual payments of $
On
January 10, 2023, the Company received the 2022 annual installment payment of $
The investment in account receivable consists of the following at September 30, 2023 and December 31, 2022:
| September 30, 2023 | December 31, 2022 | |||||||
| Face value* | $ | $ | ||||||
| Unamortized discount | ( | ) | ( | ) | ||||
| Net balance | ||||||||
| Current portion | ||||||||
| Long term portion | $ | $ | ||||||
| * |
For
the three months ended September 30, 2023 and 2022, $
| -18- |
Note 4 – Other receivable
Other receivables consisted of the following:
Schedule of other receivables
| September 30, 2023 | December 31, 2022 | |||||||
| Employee retention tax credits | $ | $ | ||||||
| Accrued sales tax receivable from customers* | ||||||||
| Other | ( | ) | ||||||
| Total Other receivable | $ | $ | ||||||
| * |
In
2022, WCI received an Employee Retention Tax Credit (“ERTC”) in the amount of $
ERTC
income of $
The
December 31, 2021, ERTC balance of $
Note 5 - Property and equipment
Property and equipment are comprised of the following:
| September 30, 2023 | December 31, 2022 | |||||||
| Computers | $ | $ | ||||||
| Furniture and fixtures | ||||||||
| Machinery and vehicles | ||||||||
| Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Net Property and equipment | $ | $ | ||||||
Depreciation
and amortization expense were $
| -19- |
Note 6 – Lessee Leases
Operating leases are comprised of office space and office equipment leases. Fleet leases entered into prior to January 1, 2019, are classified as operating leases. Fleet leases entered into on or after January 1, 2019, under ASC 842 guidelines, are classified as finance leases.
Gross
right of use assets recorded under finance leases related to WCI vehicle fleet leases were $
Lease costs recognized in our consolidated statements of operations is summarized as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Operating lease cost included in cost of goods | $ | $ | $ | $ | ||||||||||||
| Operating lease cost included in operating costs | ||||||||||||||||
| Total operating lease cost (1) | ||||||||||||||||
| Finance lease cost, included in cost of goods: | ||||||||||||||||
| Amortization of lease assets | ||||||||||||||||
| Interest on lease liabilities | ||||||||||||||||
| Total finance lease cost | ||||||||||||||||
| Short-term lease cost | ||||||||||||||||
| Total lease cost | $ | $ | $ | $ | ||||||||||||
| (1) |
Other information about lease amounts recognized in our condensed consolidated financial statements is summarized as follows:
| September 30, 2023 | December 31, 2022 | |||||||
| Weighted-average remaining lease term – operating leases | ||||||||
| Weighted-average remaining lease term – finance leases | ||||||||
| Weighted-average discount rate – operating leases | % | % | ||||||
| Weighted-average discount rate – finance leases | % | % | ||||||
| -20- |
Note 6 – Lessee Leases (continued)
Finance lease liabilities were as follows:
| September 30, 2023 | December 31, 2022 | |||||||
| Gross finance lease liabilities | $ | $ | ||||||
| Less: imputed interest | ( | ) | ( | ) | ||||
| Present value of finance lease liabilities | ||||||||
| Less: current portion | ( | ) | ( | ) | ||||
| Long-term finance lease liabilities | $ | $ | ||||||
Operating lease liabilities were as follows:
| September 30, 2023 | December 31, 2022 | |||||||
| Gross operating lease liabilities | $ | $ | ||||||
| Less: imputed interest | ( | ) | ( | ) | ||||
| Present value of operating lease liabilities | ||||||||
| Less: current portion | ( | ) | ( | ) | ||||
| Long-term operating lease liabilities | $ | $ | ||||||
Lease maturities were as follows:
Maturity of lease liabilities
| 12 months ending September 30, | Finance leases | Operating leases | ||||||
| 2024 | $ | $ | ||||||
| 2025 | ||||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| Total | ||||||||
| Less: Current maturities | ( | ) | ( | ) | ||||
| Long-term liability | $ | $ | ||||||
| -21- |
Note 7 – Convertible notes receivable
On
November 22, 2017, the Company invested $
On
October 31, 2018, the Company invested an additional $
Principal
and unpaid interest on the Notes could have been converted into a blend of shares of a to-be-created series of Preferred Stock and Common
Stock of NeuCourt (i) on the closing of a future financing round of at least $
On
July 15, 2022, the November 22, 2017 and October 31, 2018 convertible notes were exchanged for a Simple Agreement for Future Equity (“SAFE”).
Prior to the exchange, the Conversion Price for each Note was the lower of (i) 75% of the price paid in the Next Equity Financing, or
the price obtained by dividing a $
On
July 15, 2022, the Company and NeuCourt, Inc. entered into an Exchange Agreement by which the $
The
valuation cap of the SAFE is $
If,
prior to termination, conversion, or expiration of the SAFE, NeuCourt sells a series of preferred stock (“Equity Preferred Stock”)
to investors in an equity financing raising not less than $
The SAFE will expire and terminate upon i) conversion or ii) repayment. The SAFE may be repaid by NeuCourt upon sixty (60) days prior notice (“Repayment Notice”) to the Company unless the Company elects during that period to convert the SAFE.
| -22- |
Note 7 – Convertible notes receivable (continued)
If
NeuCourt does not close an equity financing round raising $
On
July 22, 2022, the Company sold $
On
January 20, 2023, the Company and NeuCourt entered into a SAFE Purchase Agreement by which the Company invested an additional $
Note 8 – Finance leases receivable
Partner I
Net
finance leases receivable from G Farma remain fully impaired at September 30, 2023 and December 31, 2022. Finance lease revenue recognized
on Partner I finance leases at September 30, 2023 and December 31, 2022 was $
Net finance leases receivable, non-performing, consists of the following at September 30, 2023 and December 31, 2022:
| September 30, 2023 | December 31, 2022 | |||||||
| Gross minimum lease payments receivable | $ | $ | ||||||
| Accrued interest | ||||||||
| Less: unearned interest | ( | ) | ( | ) | ||||
| Less: reserve for bad debt | ( | ) | ( | ) | ||||
| Finance leases receivable | $ | $ | ||||||
Partner II
Partner
II entered into a Master Equipment Lease Agreement with Pueblo West, dated February 11, 2018, amended November 28, 2018 and March 12,
2019. Partner II acquired and delivered manufacturing equipment as selected by Pueblo West under sales-type finance leases. On September
27, 2022, Pueblo West exercised its lease prepayment option and purchased the manufacturing equipment for $
| -23- |
Note 9 - Contractual interests in legal recoveries
Interest in Electrum Partners, LLC legal recovery
Electrum was the plaintiff in a certain legal action captioned Electrum Partners, LLC, Plaintiff, and Aurora Cannabis Inc., Defendant, in the Supreme Court of British Columbia (“Litigation”). See Note 10 in the Company’s Annual Report for the period ended December 31, 2022 on Form 10-K as filed with the Securities and Exchange Commission on March 28, 2023 for a discussion regarding the Company’s former interest in the Litigation.
On
November 18, 2022, Electrum repaid $
Note 10 – Investments and fair value
The hierarchy of Level 1, Level 2 and Level 3 Assets are listed as following:
| Fair Value Measurement Using | ||||||||||||||||||||
| Unadjusted Quoted Market Prices | Quoted Prices for Identical or Similar Assets in Active Markets | Significant Unobservable Inputs | Significant Unobservable Inputs | Significant Unobservable Inputs | ||||||||||||||||
| (Level 1) | (Level 2) | (Level 3) | (Level 3) | (Level 3) | ||||||||||||||||
| Investment in Securities | Contractual interest Legal Recovery | Investment in Common Stock Warrants | Other Equity Investments | |||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | $ | $ | |||||||||||||||
| Total gains or losses | ||||||||||||||||||||
| Included in earnings (or changes in net assets) | ( | ) | ( | ) | ||||||||||||||||
| Purchases, issuances, sales, and settlements | ||||||||||||||||||||
| Purchases | ||||||||||||||||||||
| Issuances | ||||||||||||||||||||
| Sales | ( | ) | ||||||||||||||||||
| Settlements | ( | ) | ( | ) | ||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | |||||||||||||||
| Total gains or losses | ||||||||||||||||||||
| Included in earnings (or changes in net assets) | ||||||||||||||||||||
| Purchases, issuances, sales, and settlements | ||||||||||||||||||||
| Purchases | ||||||||||||||||||||
| Issuances | ||||||||||||||||||||
| Sales | ||||||||||||||||||||
| Settlements | ||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | $ | $ | |||||||||||||||
| -24- |
On
All
Series A, B, C, and D warrants have been called, and all Series A, B, and C warrants have been exercised. The Company intends to allow
warrant holders or Company designees, in place of original holders, additional time as needed to exercise the remaining Series D warrants.
The Company may lower the exercise price of all or part of a warrant series at any time. Similarly, the Company could reverse split the
stock to raise the stock price above the warrant exercise price. The warrants are specifically not affected and do not split with the
shares in the event of a reverse split. If the called warrants are not exercised, the Company has the right to designate the warrants
to a new holder in return for a $
The
exercise price in effect at January 1, 2015 through September 30, 2023 for the Series D warrants is $
Subsequent
to quarter end, on October 14, 2023, our Board of Directors authorized the Company to reset the Series D warrant exercise price to $
| -25- |
Note 11 - Common stock warrants (continued)
In
2009, the Company entered into an Investment Banking agreement with Network 1 Financial Securities, Inc. and a related Strategic Advisory
Agreement with Lenox Hill Partners, LLC regarding a potential merger with a cancer development company. In conjunction with those related
agreements, the Company issued
As
of September 30, 2023, and December 31, 2022, the weighted average contractual life for all Mentor warrants was years and
years, respectively, and the weighted average outstanding warrant exercise price was $
During the nine months ended September 30, 2022, there were Series B and Series D warrants exercised and there were no warrants issued. During the nine months ended September 30, 2023 there were zero Series B and Series D warrants exercised there were no warrants issued. The intrinsic value of outstanding warrants at September 30, 2023 and December 31, 2022 was $ and $, respectively.
The following table summarizes Series B and Series D common stock warrants as of each period:
| Series B | Series D | B and D Total | ||||||||||
| Outstanding at December 31, 2021 | ||||||||||||
| Issued | ||||||||||||
| Exercised | ( | ) | ( | ) | ( | ) | ||||||
| Outstanding at December 31, 2022 | ||||||||||||
| Issued | ||||||||||||
| Exercised | ||||||||||||
| Outstanding at September 30, 2023 | ||||||||||||
Series
E, F, G, and H warrants were issued for investment banking and advisory services during 2009. Series E, F, and G warrants were exercised
in 2014. On November 14, 2022, the Series H Warrants of Lenox Hill Partners, LLC were cancelled pursuant to a Settlement Agreement.
As of December 31, 2022, there were
Series H $7.00 exercise price | ||||
| Outstanding at December 31, 2021 | ||||
| Issued | ||||
| Canceled | ||||
| Exercised | ||||
| Outstanding at December 31, 2022 | ||||
| Issued | ||||
| Exercised | ||||
| Outstanding at September 30, 2023 | ||||
On February 9, 2015, in accordance with Section 1145 of the United States Bankruptcy Code and the Company’s Third Amended Plan of Reorganization, the Company announced a minimum 30-day partial redemption of up to 1% of the already outstanding Series D warrants to provide for the court specified redemption mechanism for warrants not exercised timely by the original holder or their estates. Company designees that applied during the 30 days paid 10 cents per warrant to redeem the warrant and then exercised the Series D warrant to purchase a share of the Company’s Common Stock at the court-specified formula of not more than one-half of the closing bid price on the day preceding the 30-day exercise period. In successive months, the authorized partial warrant redemption amount was recalculated, and the redemption offer repeated according to the court formula. In the Company’s October 7, 2016 press release, Mentor stated that the 1% redemptions which were formerly priced on a calendar month schedule would subsequently be initiated and priced on a random date schedule after the prior 1% redemption was completed to prevent potential third-party manipulation of share prices at month-end. The periodic partial redemptions could continue to be recalculated and repeated until such unexercised warrants are exhausted, or the partial redemption is otherwise paused, or truncated by the Company. For the nine months ended September 30, 2023, and 2022, no warrants were redeemed.
| -26- |
Note 12 - Warrant redemption liability
The
Plan of Reorganization provides the right for the Company to call, and the Company or its designee to redeem warrants that are not exercised
timely, as specified in the Plan, by transferring a $
In prior years the Series A, Series B, and Series C redemption fees have been distributed through DTCC into holder’s brokerage accounts or directly to the holders. All Series A, Series B, and Series C warrants have been exercised and are no longer outstanding.
Once the Series D warrants have been fully redeemed and exercised, the fees for the Series D warrant series will likewise be distributed. Mr. Billingsley has agreed to assume liability for paying these redemption fees and therefore warrant redemption fees received are retained by the Company for operating costs. Should Mr. Billingsley be incapacitated or otherwise become unable to pay the warrant redemption fees, the Company will remit the warrant redemption fees to former holders from amounts otherwise due to Mr. Billingsley from the Company, which are sufficient to cover the redemption fees at September 30, 2023 and December 31, 2022.
Note 13 - Stockholders’ equity
Common Stock
The Company was incorporated in California in 1994 and was redomiciled as a Delaware corporation, effective September 24, 2015. There are authorized shares of Common Stock at $ par value. The holders of Common Stock are entitled to one vote per share on all matters submitted to a vote of the stockholders.
Issuer Purchases of Equity Securities
On August 8, 2014, the Company announced that it was initiating the repurchase of shares of its Common Stock (approximately 2% of the Company’s common shares outstanding at that time). As of September 30, 2023, and December 31, 2022, and shares have been repurchased and and shares have been retired, respectively. During the period July 1, 2023 through September 30, 2023, Mentor repurchased the following shares of Common Stock:
| Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs | Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs | ||||||||||||
| April 1 through April 30, 2023 | N/A | |||||||||||||||
| May 1 through May 31, 2023 | N/A | |||||||||||||||
| June 1 through June 30, 2023 | $ | |||||||||||||||
| July 1 through July 31, 2023 | ||||||||||||||||
| August 1 through August 31, 2023 | ||||||||||||||||
| September 1 through September 30, 2023 | ||||||||||||||||
| TOTAL | $ | |||||||||||||||
Subsequent to quarter end, on October 14, 2023, our Board of Directors approved a third stock repurchase plan. See Note 20.
| -27- |
Note 13 - Stockholders’ equity(continued)
Preferred Stock
Mentor has , $ par value, preferred shares authorized.
On July 13, 2017, the Company filed a Certificate of Designation of Rights, Preferences, Privileges and Restrictions of Series Q Preferred Stock (“Certificate of Designation”) with the Delaware Secretary of State to designate preferred shares as Series Q Preferred Stock, such series having a par value of $ per share. Series Q Preferred Stock is convertible into Common Stock, at the option of the holder, at any time after the date of issuance of such share and prior to notice of redemption of such share of Series Q Preferred Stock by the Company, into such number of fully paid and nonassessable shares of Common Stock as determined by dividing the Series Q Conversion Value by the Conversion Price at the time in effect for such share.
The per share “Series Q Conversion Value,” as defined in the Certificate of Designation, shall be calculated by the Company at least once each calendar quarter as follows: The per share Series Q Conversion Value shall be equal to the quotient of the “Core Q Holdings Asset Value” divided by the number of issued and outstanding shares of Series Q Preferred Stock. The “Core Q Holdings Asset Value” shall equal the value, as calculated and published by the Company, of all assets that constitute Core Q Holdings which shall include such considerations as the Company designates and need not accord with any established or commonly employed valuation method or considerations. “Core Q Holdings” consists of all proceeds received by the Company on the sale of shares of Series Q Preferred Stock and all securities, acquisitions, and business acquired from such proceeds by the Company. The Company shall periodically, but at least once each calendar quarter, identify, update, account for and value, the assets that comprise the Core Q Holdings.
The
Company sold and issued shares of Series Q Preferred Stock on May 30, 2018, at a price of $ per share, for an aggregate purchase
price of $
| -28- |
Note 14 - Term Loan
Term debt as of September 30, 2023 and December 31, 2022 consists of the following:
| September 30, 2023 | December 31, 2022 | |||||||
| Bank of America auto loan, interest at | $ | $ | ||||||
| Bank of America auto loan, interest at | ||||||||
| Bank of America auto loan, interest at | ||||||||
| Total notes payable | ||||||||
| Less: Current maturities | ( | ) | ||||||
| $ | $ | |||||||
Note 15 – Economic Injury Disaster Loan
On
July 7, 2020, WCI received an Economic Injury Disaster Loan (“EIDL”) in the amount of $
EIDL loan balances at September 30, 2023 consist of the following:
| September 30, 2023 | December 31, 2022 | |||||||
| On July 7, 2020, WCI received an Economic Injury Disaster Loan, including accrued interest of $ | ||||||||
| Less: Current maturities | ( | ) | ( | ) | ||||
| Long-term portion of economic injury disaster loan | $ | $ | ||||||
Interest
expense on the EIDL Loan for the three months ended September 30, 2023 and 2022 was $
Interest
expense on the EIDL Loan for the nine months ended September 30, 2023 and 2022 was $
Subsequent to quarter end, WCI’s EIDL Loan was paid in full. See Note 20.
| -29- |
Note 16 - Accrued salary, accrued retirement, and incentive fee - related party
The Company had an outstanding liability to its CEO as follows:
| September 30, 2023 | December 31, 2022 | |||||||
| Accrued salaries and benefits | $ | $ | ||||||
| Accrued retirement and other benefits | ||||||||
| Offset by shareholder advance | ( | ) | ( | ) | ||||
| $ | $ | |||||||
As
approved by a resolution of the Board of Directors in 1998, the CEO will be paid an incentive fee and a bonus which are payable in installments
at the CEO’s option. The incentive fee is
Subsequent to quarter end, on October 14, 2023, our Board of Directors increased the CEO’s salary. See Note 20.
Note 17 – Related party transactions
On
December 15, 2020, WCI received a $
On
March 12, 2021, Mentor received a $
On
August 10, 2023, Mentor received a $
On
August 2, 2023, Mentor called a $
At
September 30, 2023 and December 31, 2022, the WCI note consisted of a note at principal face value of $
| -30- |
The
deferred balances for the three months and nine ended September 30, 2023 and September 30, 2022 were $
The deferred fees on the Company’s financials and the deferred asset on WCI’s financials are eliminated in consolidation.
Subsequent to quarter end, on October 4, 2023, all of the outstanding shares of WCI stock were sold to Ally Waste Services, LLC. See Note 20.
Note 18 – Commitments and contingencies
On
On November 4, 2020, the Court granted Mentor Capital, Inc.’s and Mentor Partner I’s motion for summary adjudication as to both causes of action against G FarmaLabs Limited for liability for breach of the two promissory notes and one cause of action against each of Mr. Gonzalez and Ms. Gonzalez related to their duties as guarantors of G FarmaLabs Limited’s obligations under the promissory notes.
On
August 27, 2021, the Company and Mentor Partner I entered into a Settlement Agreement and Mutual Release with the G Farma Entities and
guarantors (collectively, “G Farma Settlors”) to resolve and settle all outstanding claims (“Settlement Agreement”).
In
August, September, and October 2022, the G Farma Settlors failed to make monthly payments, and failed to cure each default within 10
days’ notice from Company pursuant to the Settlement Agreement. As a result, $
The
Company has retained the full reserve on the unpaid notes receivable balance and collections of the unpaid lease receivable balance due
to the long history of uncertain payments from G Farma and the G Farma Settlors. Payments from the G Farma Settlors will be recognized
in Other Income as they are received. Recovery payments of $
| -31- |
Note 19 – Segment Information
The
Company is an operating, acquisition, and investment business. Subsidiaries in which the Company has a controlling financial interest
are consolidated. The Company generally has
| Historic Segment | Facility Operations Related | Corporate and Eliminations | Consolidated | |||||||||||||
| Three months ended September 30, 2023 | ||||||||||||||||
| Net revenue | $ | $ | $ | $ | ||||||||||||
| Operating income (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest income | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Property additions | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Three months ended September 30, 2022 | ||||||||||||||||
| Net revenue | $ | $ | $ | $ | ||||||||||||
| Operating income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Property additions | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Nine months ended September 30, 2023 | ||||||||||||||||
| Net revenue | $ | $ | $ | ( | ) | $ | ||||||||||
| Operating income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Property additions | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total assets | ||||||||||||||||
| Nine months ended September 30, 2022 | ||||||||||||||||
| Net revenue | $ | $ | $ | $ | ||||||||||||
| Operating income (loss) | ||||||||||||||||