UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For
the quarterly period ended
OR
For the transition period from _______________ to __________________
Commission
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Securities registered pursuant to Section 12(b) of the Act: N/A
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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
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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
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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 ☐ No
At November 12, 2024, 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 on the Company’s business and results of operations of inflation, interest rate increases, tax increases, tariff increases, recession, climate regulation, economic sanctions, cybersecurity risks, evolving and sophisticated cyber-attacks and other attempts to gain unauthorized access to our information technology systems, increased risk to oil markets, potential banking crises, future weakness in the credit markets, increased rates of default and bankruptcy, political change, the 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 or current involvement in oil, gas, coal, or uranium-related industry or other industries, we may be subject to heightened scrutiny, and, as a result, 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
| -3- |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Mentor Capital, Inc.
Condensed Consolidated Balance Sheets
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Investments in securities, fair value | ||||||||
| Accounts receivable, net | ||||||||
| Accrued interest receivable | ||||||||
| Note 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 | ||||||||
| Investment in account receivable, net of discount and current portion | ||||||||
| Long term investments | ||||||||
| 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, | |||||||
| 2024 | 2023 | |||||||
| (unaudited) | ||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities | ||||||||
| Accrued salary, retirement, and incentive fee related party | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 16) | ||||||||
| Shareholders’ equity | ||||||||
| Preferred stock, $ par value, shares authorized; and series Q preferred shares issued and outstanding at September 30, 2024 and December 31, 2023.* | ||||||||
| Common stock, $ par value, shares authorized; and and shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively. | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Non-controlling interest | ||||||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
| * |
See accompanying Notes to Financial Statements
| -5- |
Mentor Capital, Inc.
Condensed Consolidated Income Statements (Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | ||||||||||||||||
| Service fees | $ | $ | $ | $ | ( | ) | ||||||||||
| Total revenue | ( | ) | ||||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ( | ) | ||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Operating income (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income and (expense) | ||||||||||||||||
| Loss on investments | ( | ) | ||||||||||||||
| Interest income | ||||||||||||||||
| Unrealized gain (loss) on investments | ( | ) | ( | ) | ||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||
| Other income (expense) | ||||||||||||||||
| Total other income and (expense) | ( | ) | ( | ) | ||||||||||||
| Income (loss) before provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ( | ) | ( | ) | ||||||||||||
| Net income (loss) – from continued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Income (loss) from discontinued operations before tax | ( | ) | ||||||||||||||
| Provision for income taxes on discontinued operations | ( | ) | ||||||||||||||
| Net income (loss) - from discontinued operations | ( | ) | ||||||||||||||
| 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, 2024 and 2023
| 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, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| Treasury stock buy-backs | - | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Net income (loss) | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balances at September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| Balances at June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| Treasury stock buy-backs | - | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Net income (loss) | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balances at September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| * |
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, 2024 and 2023
| 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 | ||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||||
| Treasury stock buy-backs | - | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Net income (loss) | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balances at September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| Balances at December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
| Treasury stock buy-backs | - | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Net income (loss) | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balances at September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| * |
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, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Less net income from discontinued operations | ( | ) | ||||||
| Adjustments to reconcile net (loss) to net cash provided by (used by) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of discount on investment in account receivable | ( | ) | ( | ) | ||||
| (Gain) loss on investment in securities at fair value | ( | ) | ||||||
| Loss on long-term investments | ||||||||
| Decrease (increase) in operating assets | ||||||||
| Accounts receivable - trade | ( | ) | ||||||
| Accrued interest receivable | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Increase (decrease) in operating liabilities | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ( | ) | ||||||
| Accrued salary, retirement, and benefits - related party | ||||||||
| Net cash provided by (used by) operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchases of investment securities | ( | ) | ||||||
| Distributions from Waste Consolidators, Inc. | ||||||||
| Purchases of property and equipment | ( | ) | ||||||
| Proceeds from investment in receivable | ||||||||
| Net cash (used by) investing activities - continuing operations | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from related party loans | ||||||||
| Proceeds from Waste Consolidators, Inc. note payable | ||||||||
| Paid in capital adjustment - stock repurchase | ( | ) | ||||||
| Payments on repurchase of stock | ( | ) | ( | ) | ||||
| Net cash provided by (used by) financing activities - continuing operations | ( | ) | ||||||
| Net change in cash - continuing operations | ( | ) | ( | ) | ||||
| Operating cash flow - discontinued operations | ||||||||
| Investing activities - discontinued operations | ( | ) | ||||||
| Financing activities - discontinued operations | ( | ) | ||||||
| Net change in cash | ( | ) | ( | ) | ||||
| Cash beginning of period - continued operations | ||||||||
| Cash beginning of period - discontinued operations | ||||||||
| Beginning cash | ||||||||
| Cash - end of period - continued operations | ||||||||
| Cash - end of period - discontinued operations | ||||||||
| Ending cash | $ | $ | ||||||
| SUPPLEMENTARY INFORMATION: | ||||||||
| Cash paid for interest – all operations | ( | ) | ||||||
| Less cash paid for interest – discontinued operations | ( | ) | ||||||
| Cash paid for interest – continued operations | $ | $ | ( | ) | ||||
| Cash paid for income taxes – all operations | ||||||||
| Less cash paid for income taxes – discontinued operations | ( | ) | ||||||
| Cash paid for income taxes – continued operations | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING TRANSACTIONS: | ||||||||
| Right of use assets acquired through finance lease liability - all operations | ||||||||
| Less right of use assets acquired through finance lease liability - discontinued operations | ( | ) | ||||||
| Right of use assets acquired through finance lease liability | $ | $ | ||||||
See accompanying Notes to Financial Statements
| -9- |
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 current target industry focus includes the classic energy sectors of oil, gas, coal, uranium, and related ventures. Additionally, the Company has residual investments in legal dispute resolution services, collecting on an annuity-like financing, and the collection of a judgment that it intends to continue to pursue.
Mentor’s
MCIP held intellectual property and licensing rights related to one United States and one Canadian patent associated with vape pens. On October 24, 2023, MCIP divested its intellectual property and licensing rights related to the United States and Canadian patents. Maintenance fees and secretary of state fees were expensed when paid, and no capitalized assets related to MCIP are recognized on the consolidated financial statements at September 30, 2024 and December 31, 2023 because the divestment activity had been limited to secretary of state and registered agent fees.
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 the Company pursuant to the Settlement Agreement. As a result, $
On
July 11, 2023, the Court entered judgment against the G Farma Settlors and in favor of Mentor and Partner I in the amount of $
| -10- |
Note 1 - Nature of operations (continued)
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 $
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 $
The
Company held an interest in a facilities operations company, Waste Consolidators Inc. (“WCI”) until October 2023. The Company
purchased a
Note 2 - Summary of significant accounting policies
Condensed consolidated financial statements
The unaudited condensed consolidated financial statements of the Company for the three and nine month periods ended September 30, 2024 and 2023 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, 2023 was derived from the audited financial statements included in the Company’s financial statements as of and for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on April 1, 2024. These financial statements should be read in conjunction with that report.
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Note 2 - Summary of significant accounting policies (continued)
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 will endeavor to raise additional capital to fund its acquisitions from both related and unrelated parties to generate increasing
growth and revenues. The Company has
Management’s plans include increasing revenues through acquisition, investment, and organic growth. Management anticipates funding new activities by raising additional capital through the sale of equity securities and debt.
Impact Related to Endemic Factors
Our
future financial condition may be materially and adversely impacted as a result of the ongoing worldwide economic, political, and military situations, economic
sanctions, the impact of inflation, interest rate increases, tax increases, tariff increases, recession, climate regulation, cybersecurity
risks, evolving and sophisticated cyber-attacks and other attempts to gain access to our information technology systems, increased risk
to oil and energy markets, potential banking crises, the 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, 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,
the collectability of our investment in account receivable was impaired by $
The risk of inflation, interest rate increases, tax increases, recession, high energy prices, and supply-demand imbalances are expected to continue in 2024.
We anticipate that current cash and associated resources without new inflows would be sufficient for us to execute our business plan for four years after the date these financial statements are issued. The ultimate impact of the war in Ukraine, the Israel-Hamas war, potential cyber-attacks, 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, which are uncertain and cannot be predicted at this time.
| -12- |
Note 2 - Summary of significant accounting policies (continued)
Segment reporting
Continuing operations
The Company has determined that there are currently two reportable segments: 1) the historic residual operations segment and 2) the Company’s energy segment.
Discontinued operation
On
October 4, 2023, the Company’s facilities operations segment was sold for $
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.
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 Financial Standards Accounting Board (“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.
Segment Reporting: Improvements to Reportable Segment Disclosures - On November 27, 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” updates ASC 280 to expand annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements.
Income Taxes: Improvements to Income Tax Disclosures - In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topics 740): Improvements to Income Tax Disclosures,” updates ASC 740 to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements.
There were no accounting pronouncements issued during the three and nine months ended September 30, 2024 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 money market and 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
| -13- |
Note 2 - Summary of significant accounting policies (continued)
Accounts receivable
Accounts
receivable consist 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 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, 2024 and December 31, 2023, the Company had
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 and to report changes in the fair value of equity investments as unrealized investment gains (losses), net.
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, 2024 and December 31, 2023, 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, 2024 and December 31, 2023,
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 account receivable was impaired by $
On
January 10, 2023, the Company received the 2023 annual installment payment of $
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.
| -14- |
Note 2 - Summary of significant accounting policies (continued)
Lessee Leases
We determine whether an arrangement is a lease at inception under ASC 842 “Leases.” This includes general descriptions of leases and various details regarding terms and conditions, such as the basis that variable lease payments are determined. 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
discontinued operation’s operating leases were comprised of office space leases and office equipment. Fleet vehicle leases entered
into prior to January 1, 2019, were classified as operating leases based on an expected lease term of
Costs associated with operating lease assets were recognized on a straight-line basis over the term of the lease, within cost of goods sold for vehicles used in direct servicing of our discontinued operation customers and in operating expenses for costs associated with all other operating leases. Finance lease assets were amortized within the cost of goods sold for vehicles used in direct servicing of our discontinued operation 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 was included in interest expense and recognized using the effective interest method over the lease term. Our discontinued operation had agreements that contained both lease and non-lease components. For vehicle fleet operating leases, we accounted 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 using 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. See Note 6.
| -15- |
Note 2 - Summary of significant accounting policies (continued)
The Company reviews intangible assets subject to amortization quarterly to determine if any adverse conditions exist or if 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, 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
On
October 4, 2023, the Company sold the entirety of its interest in Waste Consolidators, Inc. (“WCI”) by entering into a Stock
Purchase Agreement whereby the shareholders of WCI sold all of the outstanding shares of stock to Ally Waste Services, LLC for $
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.
The discontinued operation that we sold on October 4, 2023, worked with business park owners, governmental centers, and apartment complexes to reduce facilities-related costs. Our discontinued operation performed monthly services pursuant to agreements with customers. Customer monthly service fees were based on our discontinued operation’s assessment of the amount and frequency of monthly services requested by a customer. Our discontinued operation may have also provided 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 were invoiced and recognized as revenue in the month the agreed-on services were performed. Our discontinued operation was deconsolidated and presented as a “discontinued operation” at December 31, 2023 and at December 31, 2022 in the Company’s Form 10-K filed with the Securities and Exchange Commission on April 1, 2024. Our discontinued operation is deconsolidated and presented as a “discontinued operation” at September 30, 2023 and December 31, 2023 in this Form 10-Q.
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.
| -16- |
Note 2 - Summary of significant accounting policies (continued)
The Company, through its subsidiaries Mentor Partner I, LLC and Mentor Partner II, LLC, 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 income or loss per share includes no dilution and is computed by dividing the net income or 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 or loss per share takes into consideration shares of Common Stock outstanding (computed under basic net income or 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, 2024 and December 31, 2023, respectively. There were potentially dilutive shares outstanding at September 30, 2024 and December 31, 2023.
Conversion of Series Q Preferred Stock into Common Stock would be anti-dilutive for the three and nine months ended September 30, 2024 and 2023 and is not included in calculating the diluted weighted average number of shares outstanding.
Note 3 – Discontinued operation
In
2003, the Company purchased a
In
connection with the sale, the Company received net, after WCI debt payoff, $
At
December 31, 2023, the Company recognized a $
Goodwill
Effective
October 4, 2023, on the date of the $
| -17- |
Note 3 – Discontinued operation (continued)
Deconsolidation
In
accordance with ASC Topic 810-10-40, “Consolidation — Overall – Derecognition - Deconsolidation of a Subsidiary
or Derecognition of a Group of Assets,” a parent company must deconsolidate a subsidiary as of the date the parent ceases to
have a controlling interest in that subsidiary and recognize a gain or loss in net income at that time. As a result, we deconsolidated
WCI from our consolidated financial statements on October 4, 2023 and recognized a gain on the disposal of discontinued operations totaling
$
Segment Reporting
Due to the sale of our entire ownership interest in WCI on October 4, 2023, our facilities operation segment was eliminated. Following our sale of WCI, the Company received no new income from WCI and had no further involvement or continuing influence over its operations. Consequently, we determined that the results from operations and assets and liabilities associated with our facilities operation segment were to be excluded from our continuing operations and presented as a discontinued operation in our consolidated financial statements in accordance with ASC Topic 205-20-45, “Discontinued Operations.” As a result, we classified the results from operations of our facilities accessories segment separately in captions titled “discontinued operations” on our consolidated income statements for the current and prior year period at September 30, 2023. Because we divested our discontinued operation on October 4, 2023, there were no discontinued operations to report at September 30, 2024. Prior to the sale, on September 30, 2023, our facilities operations segment was as follows:
| Discontinued Operation | ||||
| Three months ended September 30, 2023 | ||||
| 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 | ||||
| -18- |
Note 3 – Discontinued operation (continued)
The following table reconciles operating segments and corporate-unallocated operating income (loss) to consolidated income before income taxes for the three and nine months ended September 30, 2023, as presented in the unaudited condensed consolidated income statements:
Three Months September 30, 2023 | ||||
| Operating loss | $ | ( | ) | |
| Employee retention tax credit (WCI) | ||||
| Interest income | ||||
| Interest expense | ( | ) | ||
| Gain (loss) on asset disposal | ||||
| Other income | ||||
| Loss before income taxes | $ | ( | ) | |
Nine months September 30, 2023 | ||||
| Operating loss | $ | |||
| Employee retention tax credit (WCI) | ||||
| Interest income | ||||
| Interest expense | ( | ) | ||
| Gain (loss) on asset disposal | ||||
| Other income | ||||
| Income before income taxes | $ | |||
Note 4 – 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
January 10, 2023, the Company received the 2023 annual installment payment of $
| -19- |
Note 4 – Investment in account receivable (continued)
The investment in account receivable consists of the following at September 30, 2024 and December 31, 2023:
September 30, 2024 | December 31, 2023 | |||||||
| Face value* | $ | $ | ||||||
| Impairment | ( | ) | ||||||
| Total | ||||||||
| Unamortized discount | ( | ) | ( | ) | ||||
| Net balance | ||||||||
| Current portion | ||||||||
| Long term portion | $ | $ | ||||||
| * |
On
June 11, 2024, our investment in account receivable was impaired by $
For
the three months ended September 30, 2024 and 2023, $
Note 5 – Note receivable
On
October 4, 2023, in connection with the sale of the Company’s ownership interest in WCI, the Company received a one-year unsecured,
subordinated, promissory note in an initial principal face amount of $
September 30, 2024 | December 31, 2023 | |||||||
| October 4, 2023 Ally Waste Services, LLC subordinated promissory note receivable, including accrued interest of $ | $ | $ | ||||||
| Total note receivable, including interest | $ | $ | ||||||
Subsequent to quarter end, on October 4, 2024, the Company received full payment of the promissory note plus interest from Ally Waste Services, LLC. See Note 18.
| -20- |
Note 6 - Property and equipment
Property and equipment are comprised of the following:
September 30, 2024 | December 31, 2023 | |||||||
| Computers | $ | $ | ||||||
| Furniture and fixtures | ||||||||
| Machinery and vehicles | ||||||||
| Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Property and equipment of discontinued operations | ||||||||
| Accumulated depreciation of discontinued operations | ||||||||
| Net Property and equipment | $ | $ | ||||||
Depreciation
and amortization expense were $
Depreciation
and amortization expense for our discontinued operation was $
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 the earlier to occur of (i) conversion and (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.
| -21- |
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
Mentor Partner I, LLC
Net finance leases receivable from G Farma remain fully impaired at September 30, 2024 and December 31, 2023. At September 30, 2024 and December 31, 2023, Partner I recognized no finance lease revenue. See Note 16.
Net finance leases receivable, non-performing, consist of the following at September 30, 2024 and December 31, 2023:
September 30, 2024 | December 31, 2023 | |||||||
| Gross minimum lease payments receivable | $ | $ | ||||||
| Accrued interest | ||||||||
| Less: unearned interest | ( | ) | ( | ) | ||||
| Less: reserve for bad debt | ( | ) | ( | ) | ||||
| Finance leases receivable | $ | $ | ||||||
Mentor Partner II, LLC
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 $
Note 9 - Contractual interests in legal recoveries
Interest in Electrum Partners, LLC legal recovery
Electrum was the plaintiff in a certain legal action in the Supreme Court of British Columbia (“Litigation”). See Note 10 in the Company’s Annual Report for the year ended December 31, 2023 on Form 10-K as filed with the Securities and Exchange Commission on April 1, 2024 for a discussion regarding the Company’s former interest in the Litigation.
| -22- |
Note 9 - Contractual interests in legal recoveries (continued)
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 | |||||||||||||
| (Level 1) | (Level 2) | (Level 3) | (Level 3) | |||||||||||||
| Investment in Securities | Investment in Common Stock Warrants | Other Equity Investments | ||||||||||||||
| 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 December 31, 2023 | $ | |||||||||||||||
| 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, 2024 | $ | $ | $ | $ | ||||||||||||
On
| -23- |
Note 11 - Common stock warrants (continued)
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 further 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 $
Exercise
prices in effect from January 1, 2015 through September 30, 2023 for Series D warrants were $
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, 2024, and December 31, 2023, 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, 2024, there were Series D warrants exercised, and no warrants were issued. The intrinsic value of outstanding warrants at September 30, 2024 and December 31, 2023 was $ and $, respectively.
The following table summarizes Series D common stock warrants as of each period:
| Series D | ||||
| Outstanding at December 31, 2022 | ||||
| Issued | ||||
| Exercised | ||||
| Outstanding at December 31, 2023 | ||||
| Issued | ||||
| Exercised | ||||
| Outstanding at September 30, 2024 | ||||
| -24- |
Note 11 - Common stock warrants (continued)
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 canceled pursuant to a Settlement Agreement.
As of December 31, 2023, there were
Series H $7.00 exercise price |
||||
| Outstanding at December 31, 2022 | ||||
| Issued | ||||
| Canceled | ||||
| Exercised | ||||
| Outstanding at December 31, 2023 | ||||
| Issued | ||||
| Exercised | ||||
| Outstanding at September 30, 2024 | ||||
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, 2024, and 2023 no warrants were redeemed.
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, 2024 and December 31, 2023.
| -25- |
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). A total of shares were repurchased between August 8, 2014 and September 9, 2015. As of December 31, 2023, and 2022, and shares have been repurchased, respectively and a total of shares have been retired.
On
October 14, 2023, the Board of Directors of the Company approved an additional stock repurchase plan authorizing the Company to repurchase
up to shares
of the Company’s common stock (approximately % of the Company’s common shares outstanding at that time) at a total repurchase
amount not to exceed $
| 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 | Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs | |||||||||||||||
| January 1 through March 31, 2024 | N/A | (1) | $ | (2) | ||||||||||||||||
| April 1 through June 30, 2024 | $ | $ | ||||||||||||||||||
| July 1 through September 30, 2024 | $ | $ | ||||||||||||||||||
| TOTAL | $ | (1) | $ | (2) | ||||||||||||||||
| (1) |
| (2) |
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.
| -26- |
Note 13 - Stockholders’ equity (continued)
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 $
Note 14 - Accrued salary, accrued retirement, and incentive fee - related party
The Company had an outstanding liability to its CEO as follows:
| September 30, 2024 | December 31, 2023 | |||||||
| Accrued salaries and benefits | $ | $ | ||||||
| Accrued retirement and other benefits | ||||||||
| Offset by shareholder advance | ( | ) | ( | ) | ||||
| $ | $ | |||||||
As
approved by 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
Note 15 – Related party transactions
On
August 10, 2023, Mentor received a $
On
March 12, 2021, Mentor received a $
On
August 2, 2023, Mentor called a $
| -27- |
Note 15 – Related party transactions (continued)
The
note was payable on demand, and the other WCI stockholder was permitted to utilize any of his remaining Mentor warrants as currency
to partially repay the loan at a negotiated rate of $
WCI
deferred fees represented deferred administrative fees relating to the paid $
On
October 4, 2023, we sold the entirety of our majority, controlling
Note 16 – 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. No recovery payments were included in other income in the consolidated financial statements for
the periods ended September 30, 2024 and December 31, 2023. The $
| -28- |
Note 17 – Segment Information
Continuing Operations
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
| Energy Segment | Historic Segment | Corporate and Eliminations | Consolidated | |||||||||||||
| Three months ended September 30, 2024 | ||||||||||||||||
| Net revenue | $ | $ | $ | $ | ||||||||||||
| Operating income (loss) | ( | ) | ( | |||||||||||||