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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2024

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______________ to __________________

 

Commission file number 000-55323

 

Mentor Capital, Inc.
(Exact name of registrant as specified in its charter)

 

Delaware   77-0395098

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

5964 Campus Court, Plano, Texas 75093
(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code (760) 788-4700

 

Securities registered pursuant to Section 12(b) of the Act: N/A

 

         
Title of each class to be so registered   Trading Symbols (s)   Name of each exchange on which each class is to be registered

 

Securities registered pursuant to section 12(g) of the Act:

 

Common Stock
(Title of class)

 

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. Yes ☒. No ☐.

 

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). Yes ☒. No ☐.

 

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
Non-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 21,830,393 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.

 

-2-
 

 

MENTOR CAPITAL, INC.

 

TABLE OF CONTENTS

 

    Page
PART I FINANCIAL INFORMATION 4
Item 1. Financial Statements: 4
  Condensed Consolidated Balance Sheets (Unaudited) – September 30, 2024 and December 31, 2023 4
  Condensed Consolidated Income Statements (Unaudited) – Three Months and Nine Months Ended September 30, 2024 and 2023 6
  Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) – Three Months Ended September 30, 2024 and 2023 7
  Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) – Nine Months Ended September 30, 2024 and 2023 8
  Condensed Consolidated Statements of Cash Flows (Unaudited) - Nine Months Ended September 30, 2024 and 2023 9
  Notes to Condensed Financial Statements 10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 31
Item 3. Quantitative and Qualitative Disclosures about Market Risk 37
Item 4. Controls and Procedures 37
     
PART II OTHER INFORMATION 38
Item 1. Legal Proceedings 38
Item 1A. Risk Factors 38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 44
Item 3. Defaults Upon Senior Securities 44
Item 4. Mine Safety Disclosures 44
Item 5. Other Information 44
Item 6. Exhibits 44
     
SIGNATURES 45

 

-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  $1,682,845   $2,431,299 
Investments in securities, fair value   627,438    647,363 
Accounts receivable, net   -    1,800 
Accrued interest receivable   60,000    15,000 
Note Receivable   1,000,000    1,000,000 
Prepaid expenses and other current assets   12,289    6,508 
           
Total current assets   3,382,572    4,101,970 
           
Property and equipment          
Property and equipment   48,239    48,239 
Accumulated depreciation and amortization   (47,455)   (46,648)
           
Property and equipment, net   784    1,591 
           
Other assets          
Investment in account receivable, net of discount and current portion   -    238,849 
Long term investments   104,431    104,431 
Total other assets   104,431    343,280 
           
Total assets  $3,487,787   $4,446,841 

 

See accompanying Notes to Financial Statements

 

-4-
 

 

Mentor Capital, Inc.

Condensed Consolidated Balance Sheets (Unaudited) (Continued)

 

   September 30,   December 31, 
   2024   2023 
   (unaudited)     
LIABILITIES AND SHAREHOLDERS’ EQUITY          
           
Current liabilities          
Accounts payable  $6,483   $3,152 
Accrued expenses   59,474    91,460 
Total current liabilities   65,957    94,612 
           
Long-term liabilities          
Accrued salary, retirement, and incentive fee related party   466,646    436,512 
Total long-term liabilities   466,646    436,512 
Total liabilities   532,603    531,124 
           
Commitments and Contingencies (Note 16)   -    - 
           
Shareholders’ equity          
Preferred stock, $0.0001 par value, 5,000,000 shares authorized; and 11 series Q preferred shares issued and outstanding at September 30, 2024 and December 31, 2023.*   -    - 
Common stock, $0.0001 par value, 75,000,000 shares authorized; and 21,830,393 and 24,686,105 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively.   2,183    2,469 
Additional paid in capital   11,927,705    12,101,055 
Accumulated deficit   (8,974,704)   (8,187,807)
Non-controlling interest   -    - 
Total shareholders’ equity   2,955,184    3,915,717 
           
Total liabilities and shareholders’ equity  $3,487,787   $4,446,841 

 

*Par value is less than $0.01.

 

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  $-   $-   $-   $(291)
                     
Total revenue   -    -    -    (291)
                     
Cost of sales   -    -    -    - 
                     
Gross profit   -    -    -    (291)
                     
Selling, general and administrative expenses   154,279    145,054    637,571    434,991 
                     
Operating income (loss)   (154,279)   (145,054)   (637,571)   (435,282)
                     
Other income and (expense)                    
Loss on investments   -    939    (250,208)   715 
Interest income   39,627    10,729    136,136    27,563 
Unrealized gain (loss) on investments   (42,563)   -    (19,925)   - 
Interest expense   -    (4,529)   -    (13,580)
Other income (expense)   -    1    -    1,291 
                     
Total other income and (expense)   (2,936)   7,140    (133,997)   15,989 
                     
Income (loss) before provision for income taxes   (157,215)   (137,914)   (771,568)   (419,293)
                     
Provision for income taxes   -    -    (15,329)   (8,160)
                     
Net income (loss) – from continued operations   (157,215)   (137,914)   (786,897)   (427,453)
Net Income (loss) from discontinued operations before tax   -    (71,678)   -    136,145 
Provision for income taxes on discontinued operations   -    -    -    

(5,783

)
Net income (loss) - from discontinued operations   -    (71,678)   -    130,362 
                     
Net income (loss)   (157,215)   (209,592)   (786,897)   (297,091)
                     
Gain (loss) attributable to non-controlling interest   -    (36,429)   -    54,730 
                     
Net income (loss) attributable to Mentor  $(157,215)  $(173,163)  $(786,897)  $(351,821)
                     
Basic and diluted net income (loss) per Mentor common share:                    
Basic and diluted  $(0.007)  $(0.008)  $(0.033)  $(0.015)
                     
Weighted average number of shares of Mentor common stock outstanding:                    
Basic and diluted   22,921,018    22,749,918    23,980,070    22,864,781 

 

See accompanying Notes to Financial Statements

 

-6-
 

 

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   11   $-    23,284,559   $2,328   $12,022,470   $(8,817,489)  $3,207,309   $-   $3,207,309 
                                              
Treasury stock buy-backs   -    -    (1,454,166)   (145)   (94,765)   -    (94,910)   -    (94,910)
                                              
Net income (loss)   -    -    -    -    -    (157,215)   (157,215)   -    (157,215)
                                              
Balances at September 30, 2024   11   $-    21,830,393   $2,183   $11,927,705   $(8,974,704)  $2,955,184   $-   $2,955,184 
                                              
Balances at June 30, 2023   11   $-    22,941,357   $2,294   $13,085,380   $(11,524,123)  $1,563,551   $74,436   $1,637,987 
                                              
Treasury stock buy-backs   -    -    (255,252)   (25)   (7,246)   -    (7,271)   -    (7,271)
Net income (loss)   -    -    -    -    -    (173,163)   (173,163)   (36,429)   (209,592)
                                              
Balances at September 30, 2023   11   $-    22,686,105   $2,269   $13,078,134   $(11,697,286)  $1,383,117   $38,007   $1,421,124 

 

*Par value of series Q preferred shares is less than $1.

 

See accompanying Notes to Financial Statements

 

-7-
 

 

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   11    -    24,686,105   $2,469   $12,101,055   $(8,187,807)  $3,915,717   $-   $3,915,717 
                                              
Treasury stock buy-backs   -    -    (2,855,712)   (286)   (173,350)   -    (173,636)   -    (173,636)
                                              
Net income (loss)   -    -    -    -    -    (786,897)   (786,897)   -    (786,897)
                                              
Balances at September 30, 2024   11   $-    21,830,393   $2,183   $11,927,705   $(8,974,704)  $2,955,184   $-   $2,955,184 
                                              
Balances at December 31, 2022   11   $-    22,941,357   $2,294   $13,085,993   $(11,345,465)  $1,742,822   $(16,723)  $1,726,099 
                                              
Treasury stock buy-backs   -    -    (255,252)   (25)   (7,859)   -    (7,884)   -    (7,884)
Net income (loss)   -    -    -    -    -    (351,821)   (351,821)   54,730    (297,091)
                                              
Balances at September 30, 2023   11   $-    22,686,105   $2,269   $13,078,134   $(11,697,286)  $1,383,117   $38,007   $1,421,124 

 

*Par value of series Q preferred shares is less than $1.

 

See accompanying Notes to Financial Statements

 

-8-
 

 

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)  $(786,897)  $(297,091)
Less net income from discontinued operations   -    (130,362)
Adjustments to reconcile net (loss) to net cash provided by (used by) operating activities:          
Depreciation and amortization   807    1,092 
Amortization of discount on investment in account receivable   (9,559)   (27,091)
(Gain) loss on investment in securities at fair value   19,925    (715)
     Loss on long-term investments   250,208    - 
Decrease (increase) in operating assets          
Accounts receivable - trade   -    (900)
Accrued interest receivable   (45,000)   - 
Prepaid expenses and other current assets   (5,781)   (2,629)
Increase (decrease) in operating liabilities          
Accounts payable   3,331    5,568 
Accrued expenses   (31,986)   25,715 
Accrued salary, retirement, and benefits - related party   30,134    19,205 
           
Net cash provided by (used by) operating activities   (574,818)   (407,208)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchases of investment securities   -    (14,899)
Distributions from Waste Consolidators, Inc.   -    54,809 
Purchases of property and equipment   -    (2,291)
Proceeds from investment in receivable   -    117,900 
           
Net cash (used by) investing activities - continuing operations   -    155,519 
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from related party loans   -    50,545 
Proceeds from Waste Consolidators, Inc. note payable        63,121 
Paid in capital adjustment - stock repurchase   (286)   - 
Payments on repurchase of stock   (173,350)   (7,884)
           
Net cash provided by (used by) financing activities - continuing operations   (173,636)   105,782 
           
Net change in cash - continuing operations   (748,454)   (145,907)
           
Operating cash flow - discontinued operations   -    365,506 
Investing activities - discontinued operations   -    (137,870)
Financing activities - discontinued operations   -    (400,929)
Net change in cash   (748,454)   (319,200)
           
Cash beginning of period - continued operations   2,431,299    283,431 
Cash beginning of period - discontinued operations   -    506,499 
Beginning cash   2,431,299    789,930 
           
Cash - end of period - continued operations   1,682,845    137,524 
Cash - end of period - discontinued operations   -    333,207 
Ending cash  $1,682,845   $470,731 
           
SUPPLEMENTARY INFORMATION:          
Cash paid for interest – all operations   -    (32,425)
Less cash paid for interest – discontinued operations   -    (16,412)
Cash paid for interest – continued operations  $-   $(48,837)
           
Cash paid for income taxes – all operations   14,289    11,224 
Less cash paid for income taxes – discontinued operations   -    (5,784)
Cash paid for income taxes – continued operations  $14,289   $5,440 
           
NON-CASH INVESTING AND FINANCING TRANSACTIONS:          
           
Right of use assets acquired through finance lease liability - all operations   -    934,905 
Less right of use assets acquired through finance lease liability - discontinued operations   -    (934,905)
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 Delaware in September 2015.

 

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 July 29, 1994. On September 12, 1996, the Company’s offering statement was qualified pursuant to Regulation A of the Securities Act, and the Company began to trade its shares publicly. On August 21, 1998, the Company filed for voluntary reorganization, and on January 11, 2000, the Company emerged from Chapter 11 reorganization. The Company relocated to San Diego, California, and contracted to provide financial assistance and investment in small businesses. On May 22, 2015, a corporation named Mentor Capital, Inc. (“Mentor Delaware”) was incorporated under the laws of the State of Delaware. A shareholder-approved merger between Mentor and Mentor Delaware was approved by the California and Delaware Secretaries of State and became effective September 24, 2015, thereby establishing Mentor as a Delaware corporation. In September 2020, Mentor relocated its corporate office from San Diego, California, to Plano, Texas.

 

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 100% owned subsidiaries, Mentor IP, LLC (“MCIP”), Mentor Partner I, LLC, (“Partner I”), Mentor Partner II, LLC (“Partner II”), and TWG, LLC (“TWG”), are headquartered in Plano, Texas.

 

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 $803,399 and $1,045,051, respectively, plus accrued interest (“Settlement Agreement”). On October 12, 2021, the parties filed a Stipulation for Dismissal and Continued Jurisdiction with the Superior Court of California in the County of Marin. The Court ordered that it retain jurisdiction over the parties under Section 664.6 of the California Code of Civil Procedure to enforce the Settlement Agreement until the performance in full of its terms is met.

 

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, $2,000,000 was added to the amount payable by the G Farma Settlors in accordance with the terms of the Settlement Agreement. The Company and Partner I sought entry of a stipulated judgment against the G Farma Settlors for (1) $494,450, the remaining amount of the $500,000 settlement amount, which has not yet been paid by the G Farma Settlors plus $2,000,000 and all accrued unpaid interest, (2) the Company’s incurred costs, and (3) attorneys’ fees paid by the Company to obtain the judgment.

 

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 $2,539,597, which is comprised of $2,494,450 in principal (calculated as the aggregate settlement amount, less payments made by the G Farma Settlors, plus the default addition) plus accrued and unpaid interest of $40,219, costs of $1,643, and attorneys’ fees of $3,285 incurred by Mentor and Mentor Partner I in connection with obtaining the judgment. The judgment also accrues post-judgment interest at the rate of 10% from July 11, 2023 until such time as the judgment is paid in full.

 

-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 $3,550 and $2,000 were included in other income in the consolidated financial statements for the year ended December 31, 2022 and 2021, respectively. The last recovery payment was received on October 11, 2022. The $2,539,597 judgment and interest receivable of $311,014 for the nine months ended September 30, 2024 is fully reserved pending the outcome of the Company’s collection process. See Notes 8 and 16.

 

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 $245,369. On September 28, 2022, Partner II transferred full title to the equipment to Pueblo West. Originally, Mentor contributed $400,000 to Partner II to facilitate the purchase of manufacturing equipment to be leased from Partner II by Pueblo West under a Master Equipment Lease Agreement dated February 11, 2018, as amended. On March 12, 2019, Mentor agreed to use Partner II earnings of $61,368 to facilitate the purchase of additional manufacturing equipment to Pueblo West under a Second Amendment to the lease. See Note 8.

 

On November 18, 2022, following the filing of a declaratory relief action, Mentor received $459,990 from Electrum Partners, LLC (“Electrum”) pursuant to a certain November 14, 2022 Settlement Agreement and Mutual Release, following the Company’s October 21, 2022 lawsuit against Electrum and the escrow agent in the County of San Mateo. The Company applied $196,666 to a certain October 30, 2018, Recovery Purchase Agreement, and $200,000 to an October 31, 2018 and January 28, 2019 Capital Agreement. The Company applied the remaining $63,324 to its $194,028 equity interest in Electrum; this resulted in a $130,704 loss on the Company’s investment in Electrum. See Note 9.

 

On November 22, 2017 and October 31, 2018, the Company purchased convertible notes in principal face value of $50,000 and $25,000, respectively, from NeuCourt, Inc. (“NeuCourt”) that each bore interest at 5% per annum. On November 7, 2019, October 28, 2020, and January 4, 2022, the Company received 25,000, 52,000, and 27,630 warrants covering an aggregate of 105,130 shares of NeuCourt common stock exercisable at $0.02 per share in exchange for the Company’s agreement to extend the maturity dates of the convertible notes. 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, the SAFE Purchase Amount is $93,756. See Note 7.

 

On December 21, 2018, Mentor paid $10,000 to purchase 500,000 shares of NeuCourt common stock, representing approximately 6.13% of NeuCourt’s issued and outstanding common stock at September 30, 2024.

 

The Company held an interest in a facilities operations company, Waste Consolidators Inc. (“WCI”) until October 2023. The Company purchased a 50% interest in WCI in 2003 and increased its ownership stake by 1% in 2014. On October 4, 2023, the Company sold the entirety of its ownership interest in WCI for $6,000,000. Following the sale, the Company received no new income from WCI and had no further involvement or continuing influence over its operations. As a result of this sale, our facilities operations segment was eliminated, and its results of operations, assets, and liabilities were excluded from our continuing operations. Therefore, WCI is presented as a discontinued operation in our consolidated financial statements for the prior periods of December 31, 2023 and September 30, 2023. See Note 3.

 

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.

 

-11-
 

 

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 ($8,974,704) as of September 30, 2024. The Company has recently received significant profit on the sale of its former majority owned subsidiary, although negative cash flows from operations continue.

 

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 4,250,000 Series D warrants outstanding, and the Company has reset the exercise price to $0.02 per share, which is below the current market price. The Company may reverse split the stock to raise the stock price to a level 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. These consolidated financial statements do not include any adjustments that might result from repricing the outstanding warrants.

 

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 $116,430 on February 15, 2022, due to a reduction in our estimated collection amount for the 2020 annual installment payment, which was affected by the COVID-19 pandemic, and the terms of the investment were modified, resulting in an additional loss of $41,930 and at June 11, 2024 the receivable was fully impaired due to a history of uncertain payments. The Company’s recognition of an impairment loss due to the uncertainty of collection does not diminish its contractual rights to collect the full amounts due pursuant to the contract. The Company intends to continue to vigorously pursue the payment of the amounts owed by available legal means. See Note 4.

 

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 $6,000,000. Following the sale, the Company received no new income from the discontinued operation, and it had no further involvement or continuing influence over its operations. As a result, our facilities operations segment was deconsolidated on the date of the sale, and our former facilities operations segment is reported as a discontinued operation. See Note 3.

 

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 no short-term debt securities as of September 30, 2024 and December 31, 2023.

 

-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 no allowance for doubtful accounts on normal course receivables.

 

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 $93,756. See Note 7.

 

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 $116,430 on February 15, 2022 and the terms of the investment were modified, resulting in an additional loss of $41,930.

 

On January 10, 2023, the Company received the 2023 annual installment payment of $117,000. Three additional $117,000 annual installment payments are due in early 2024, 2025, and 2026. The 2024 annual installment payment has not been received. At June 11, 2024, the receivable was fully impaired due to a history of uncertain payments. The Company’s recognition of an impairment loss due to the uncertainty of collection does not diminish its contractual rights to collect the full amounts due pursuant to the contract. The Company intends to continue to pursue the payment of the amounts owed by available legal means. See Note 4.

 

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 4 years. Fleet vehicle leases entered into on or after January 1, 2019, for which the lease was expected to be extended to 5 years, were classified as finance leases. Our discontinued operation’s leases had remaining lease terms of 1 month to 48 months. Our discontinued operation’s fleet finance leases contained a residual value guarantee. As most of our discontinued operation’s leases did not provide an implicit rate, we used our incremental borrowing rate based on the information available at the commencement date to determine the present value of lease payments.

 

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, 3 years to 5 years; furniture and equipment, 7 years; and vehicles and trailers, 4 years to 5 years. Depreciation on vehicles used by our discontinued operation to service its customers is included in the cost of goods sold. All other depreciation is included in selling, general, and administrative costs in the consolidated income statements.

 

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 $6,000,000, which significantly exceeded the prior combined carrying value and goodwill of WCI, with proceeds initially recorded as $5,000,000 cash and a $1,000,000 one-year note receivable. Following the sale, the Company received no new income from WCI and had no further involvement or continuing influence over its operations. Prior to the sale, goodwill of $1,324,142 was derived from consolidating WCI effective January 1, 2014, and $102,040 of goodwill was derived from the 2003 acquisition of a 50% interest in WCI. In accordance with ASC 350, “Intangibles-Goodwill and Other,” goodwill and other intangible assets with indefinite lives were no longer subject to amortization but were tested for impairment annually or whenever events or changes in circumstances indicate that the asset might be impaired prior to the sale. Effective October 4, 2023, on the date of the sale of our WCI shares, we met the criteria outlined in ASC Topic 205-20 “Discontinued Operations,” for our $1,426,182 goodwill to be reduced to $0 and the results of operations and assets and liabilities for our facilities operations segment were excluded from our continuing operations and presented as a discontinued operation in our consolidated financial statements. As a result, goodwill in an aggregate amount of $1,426,182 was reduced to $0. No goodwill was reported in the Company’s condensed consolidated balance sheets at September 30, 2024 and December 31, 2023. See Note 3.

 

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.

 

Basic and diluted income (loss) per common share

 

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 4,250,000 and 4,250,000 as of September 30, 2024 and December 31, 2023, respectively. There were no 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 50% interest in Waste Consolidators, Inc., a facilities operation company that comprised our facilities operation segment (“WCI”) and increased its ownership stake in WCI by 1% in 2014. Since January 1, 2014, our controlling interest investment in WCI included a facilities operations segment, which provided waste management and disposal services to business park owners, governmental centers, and apartment complexes in Phoenix, Austin, San Antonio, Houston, and Dallas. On October 4, 2023, the Company sold the entirety of its interest in WCI by entering into a Stock Purchase Agreement whereby the Company as a shareholder of WCI sold all of its outstanding shares of stock to Ally Waste Services, LLC for $6,000,000.

 

In connection with the sale, the Company received net, after WCI debt payoff, $5,000,000 in cash and a one-year unsecured, subordinated, promissory note in the initial principal face amount of $1,000,000. The note accrues interest at 6% per annum. For further disclosures related to the promissory note receivable, see Note 5.

 

At December 31, 2023, the Company recognized a $4,805,389 gain on our sale of WCI. See Note 3 in the Company’s Annual Report for the period ended December 31, 2023 on Form 10-K as filed with the Securities and Exchange Commission on April 1, 2024 for further discussion regarding the Company’s former interest in WCI.

 

Goodwill

 

Effective October 4, 2023, on the date of the $6,000,000 sale of WCI, we met the criteria outlined in ASC Topic 205-20 “Discontinued Operations,” for our $1,426,182 goodwill to be reduced to $0 and the results of operations and assets and liabilities for our facilities operations segment were excluded from our continuing operations and presented as a discontinued operation and reported in our consolidated financial statements. As a result, goodwill in an aggregate amount of $1,426,182 was reduced to $0 at December 31, 2023.

 

-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 $4,805,389. The $4,805,389 gain on disposal of discontinued operation represented the amount of our purchase price allocation at 51% WCI assets and liabilities, net investment in 51% of WCI earnings, and net investment in WCI distributions offset by the sale price as of the disposal date of October 4, 2023. We have eliminated WCI from our consolidated financials on October 4, 2023. Accordingly, WCI was excluded from the Company’s continuing operations on December 31, 2023, and prior periods of comparison and WCI’s financial results are presented as a discontinued operation in the Company’s consolidated financial statements.

 

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:

 

Schedule of segment reporting on disposal groups, including discontinued operations 

   Discontinued Operation 
Three months ended September 30, 2023     
Net revenue  $2,151,811 
Operating income (loss)   (47,675)
Interest income   1 
Interest expense   25,023 
Property additions   46,763 
Depreciation and amortization   18,754 
      
Nine months ended September 30, 2023     
Net revenue  $6,432,907 
Operating income (loss)   178,854 
Interest income   1 
Interest expense   62,770 
Property additions   83,062 
Depreciation and amortization   49,260 
Total assets   3,357,852 

 

-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:

 

Schedule of reconciliation of revenue from segments to consolidated on disposal groups, including discontinued operations 

  

Three Months
Ended

September 30, 2023

 
Operating loss  $(47,675)
Employee retention tax credit (WCI)   - 
Interest income   1 
Interest expense   (25,023)
Gain (loss) on asset disposal   - 
Other income   1,019 
Loss before income taxes  $(71,678)

 

  

Nine months
Ended

September 30, 2023

 
Operating loss  $178,854 
Employee retention tax credit (WCI)   6,921 
Interest income   1 
Interest expense   (62,770)
Gain (loss) on asset disposal   - 
Other income   13,139 
Income before income taxes  $136,145 

 

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 $117,000 for 11 years through 2026, totaling $1,287,000 in exchange for 757,059 shares of Mentor Common Stock obtained through the exercise of 757,059 Series D warrants at $1.60 per share plus a $0.10 per warrant redemption price.

 

The Company valued the transaction based on the market value of Company common shares exchanged in the transaction, resulting in a 17.87% discount from the face value of the account receivable. The discount is being amortized monthly to interest over the 11-year term of the 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. Based on management’s collection estimates, we recorded an investment loss of ($139,148) on the investment in account receivable at December 31, 2020. In 2021, the Company re-evaluated estimated collections and recorded an investment gain of $22,718. Subsequently, on February 15, 2022, the terms of the investment were planned to be modified, resulting in an additional loss of ($41,930). The loss of ($41,930) and gain of $22,718 were reflected in other income on the consolidated income statement for the years ended December 31, 2022 and 2021, respectively.

 

On January 10, 2023, the Company received the 2023 annual installment payment of $117,000. Three additional $117,000 annual installment payments are due in early 2024, 2025, and 2026. The 2024 annual installment payment has not been received. At June 11, 2024, the receivable was fully impaired due to a history of uncertain payments.

 

-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:

 

Schedule of receivables with imputed interest 

  

September 30,

2024

  

December 31,

2023

 
Face value*  $287,200   $285,400 
Impairment   (250,208)   - 
Total   36,992    285,400 
Unamortized discount   (36,992)   (46,551)
Net balance   -    238,849 
Current portion   -    - 
Long term portion  $-   $238,849 

 

*Coincident with the June 11, 2024 impairment, accounts receivable of $2,300 was reclassed and concurrently impaired. Prior to the full impairment, the Company reduced the face value of its investment in account receivable by an additional $100 per month for five receivable payment installments at the nine months ended September 30, 2024.

 

On June 11, 2024, our investment in account receivable was impaired by $250,208. The $250,208 impairment consisted of the Company’s estimate of the reduction of $287,200 purchased receivable offset by a ($36,992) purchased receivable discount. The Company’s recognition of an impairment loss due to the uncertainty of collection does not diminish its contractual rights to collect the full amounts due pursuant to the contract. The Company intends to continue to vigorously pursue the payment of the annual payments and associated amounts owed by available legal means.

 

For the three months ended September 30, 2024 and 2023, $0 and $10,484 of discount amortization is included in interest income, respectively. For the nine months ended September 30, 2024 and 2023, $9,559 and $27,091 of discount amortization is included in interest income, respectively.

 

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 $1,000,000 from Ally Waste Services, LLC (“Ally”) at 6% per annum. The note is recorded at the principal face amount of $1,000,000 plus accrued interest of $60,000 and $15,000 at September 30, 2024 and December 31, 2023, respectively. The note is unsecured, subordinated, and junior in right of payment of the indebtedness of borrowed money and obligations of Ally owed to senior lenders. Subject to the terms of agreements with senior lenders, the note principal plus accrued interest is payable on October 4, 2024. Ally’s failure to pay the principal and accrued interest on October 4, 2024, among other enumerated events of default, will result in the interest rate retroactively increasing to 12% per annum. The note may be set off against any indemnification obligations owed by the Company to Ally, which indemnification obligations are secondary to indemnification obligations owed by the other WCI selling shareholder to Ally. The Company has continued to receive assurances from Ally that the purchased business is performing well, and the note will be paid, so management has not impaired the note receivable. If management is given any indication from Ally or the other selling shareholder of WCI that collection is uncertain, the Company will impair the note receivable at such time. At September 30, 2024 and December 31, 2023, our note receivable consisted of the following:

 

Schedule of note receivable 

  

September 30,

2024

  

December 31,

2023

 
October 4, 2023 Ally Waste Services, LLC subordinated promissory note receivable, including accrued interest of $60,000 and $15,000, at September 30, 2024 and December 31, 2023, respectively. The note bore interest at 6% per annum. No payments are required under the note until the maturity date, October 4, 2024. Ally has the option to pay the note plus any accrued interest at any time prior to its maturity without penalty. Any prepayment shall be applied first to accrued but unpaid interest and then to the outstanding principal.  $1,060,000   $1,015,000 
           
Total note receivable, including interest  $1,060,000   $1,015,000 

 

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:

 

Schedule of property, plant and equipment 

  

September 30,

2024

  

December 31,

2023

 
Computers  $33,626   $33,626 
Furniture and fixtures   14,613    14,613 
Machinery and vehicles   -    - 
Gross Property and equipment   48,239    48,239 
Accumulated depreciation and amortization   (47,455)   (46,648)
Property and equipment of discontinued operations   -    - 
Accumulated depreciation of discontinued operations   -    - 
           
Net Property and equipment  $784   $1,591 

 

Depreciation and amortization expense were $269 and $427 for the three months ended September 30, 2024 and 2023, and $807 and $1,092 for the nine months ended September 30, 2024 and 2023, respectively.

 

Depreciation and amortization expense for our discontinued operation was $18,754 for the three months ended September 30, 2023 and $49,260 for the nine months ended September 30, 2023. Our discontinued operation was sold for $6,000,000 on October 4, 2023 and on the date of sale our discontinued operation was deconsolidated from the Company’s financials and our discontinued operation is presented separately for prior reporting periods. See Note 3.

 

Note 7 – Convertible notes receivable

 

On November 22, 2017, the Company invested $25,000 in NeuCourt, Inc. (“NeuCourt”) as a convertible note receivable. The note bore interest at 5% per annum, originally matured November 22, 2019, and was amended to extend the maturity date to November 22, 2021. No payments were required prior to maturity. However, at the time the November 22, 2017 note was extended, interest accrued through November 4, 2019, was remitted to Mentor. As consideration for the extension of the maturity date for the $25,000 note, a warrant to purchase up to 25,000 shares of NeuCourt common stock at $0.02 per share was issued to Mentor.

 

On October 31, 2018, the Company invested an additional $50,000 as a convertible note receivable in NeuCourt, which bore interest at 5%, originally matured on October 31, 2020, and was amended to extend the maturity date to October 31, 2022. As consideration for the extension of the maturity date for the $50,000 note plus accrued interest of $5,132, a warrant to purchase up to 52,500 shares of NeuCourt common stock at $0.02 per share was issued to Mentor. On June 13, 2022, the Company sold $2,161 in note principal to a third party, thereby reducing the principal face value of the note to $47,839.

 

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 $750,000, (ii) on the election of NeuCourt on the maturity of the Note, or (iii) on the election of Mentor following NeuCourt’s election to prepay the Note.

 

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 $3,000,000 valuation cap by the fully diluted number of shares. The number of Conversion Shares to be issued on conversion was the quotient obtained by dividing the outstanding principal and unpaid accrued interest on a Note to be converted on the date of conversion by the Conversion Price (the “Total Number of Shares”), The Total Number of Shares consisted of Preferred Stock and Common Stock as follows: (i) That number of shares of Preferred Stock obtained by dividing (a) the principal amount of each Note and all accrued and unpaid interest thereunder by (b) the price per share paid by other purchasers of Preferred Stock in the Next Equity Financing (such number of shares, the “Number of Preferred Stock”) and (ii) that number of shares of Common Stock equal to the Total Number of Shares minus the Number of Preferred Stock.

 

On July 15, 2022, the Company and NeuCourt, Inc. entered into an Exchange Agreement by which the $25,000 and $47,839 principal amounts of the NeuCourt November 22, 2017 and October 31, 2018 convertible notes and accrued unpaid interest in the amounts of $3,518 and $9,673, respectively, were exchanged for a Simple Agreement for Future Equity (“SAFE”), a security providing for the conversion of the SAFE into shares of NeuCourt common or preferred stock (“Capital Stock”) at some future date. As of July 15, 2022, the Company received SAFEs in the aggregate face amount of $86,030 (the “Purchase Amount”).

 

The valuation cap of the SAFE is $3,000,000 (“Valuation Cap”), and the discount rate is 75% (“Discount Rate”).

 

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 $500,000, Mentor’s SAFE shall be converted into shares equal to the Purchase Amount divided by the lessor of (x) the price per share of the Equity Preferred Stock multiplied by the Discount Rate and (y) the price per share equal to the Valuation Cap divided by the number of outstanding shares of NeuCourt on a fully diluted, as-converted basis (“Conversion Shares”). The Conversion Shares shall consist of (a) the number of shares of Equity Preferred Stock equal to the Purchase Amount divided by the price per share of the Equity Preferred Stock (“Preferred Stock”) and (b) the number of shares of common stock equal to the Conversion Shares minus the Preferred Stock.

 

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 $500,000 or more prior to expiration or termination of the SAFE, the Company may elect to convert the SAFE into the number of shares of a to-be-created series of preferred stock equal to the (x) Purchase Amount divided by (y) the Valuation Cap divided by the number of outstanding shares of NeuCourt on a fully diluted, as-converted basis (“Default Conversion”). Additionally, if NeuCourt experiences a change of control, initial public offering, ceases operations, or enters into a general assignment for the benefit of its creditors prior to conversion, termination, or expiration of the SAFE, the Company will receive the greater of (a) a cash payment equal to the Purchase Amount and (b) the value of the shares issuable on Default Conversion.

 

On July 22, 2022, the Company sold $989 of the SAFE Purchase Amount to a third party. On August 1, 2022, the Company sold an additional $1,285 of the SAFE Purchase Amount to a third party, thereby reducing the aggregate outstanding SAFE Purchase Amount to $83,756.

 

On January 20, 2023, the Company and NeuCourt entered into a SAFE Purchase Agreement by which the Company invested an additional $10,000 in the form of a NeuCourt Simple Agreement for Future Equity under the same terms as the previous July 15, 2022 SAFE Purchase Agreement between NeuCourt and the Company, increasing the aggregate SAFE Purchase Amount to $93,756. At September 30, 2024 and December 31, 2023, the SAFE Purchase Amount was $93,756.

 

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:

 

Schedule of net finance leases receivable, non-performing 

  

September 30,

2024

  

December 31,

2023

 
Gross minimum lease payments receivable  $1,203,404   $1,203,404 
Accrued interest   -    - 
Less: unearned interest   (400,005)   (400,005)
Less: reserve for bad debt   (803,399)   (803,399)
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 $245,369. On September 28, 2022 Partner II transferred full title to the equipment to Pueblo West. At September 30, 2024 and December 31, 2023, Partner II recognized no finance lease revenue.

 

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 $459,990 to the Company pursuant to a certain November 14, 2022 Settlement Agreement and Mutual Release, following the Company’s October 21, 2022 lawsuit against Electrum and the escrow agent in the County of San Mateo. The Company applied $196,666 to the Recovery Purchase Agreement, $200,000 to the Capital Agreements, and the remaining $63,324 to its $194,028 equity interest in Electrum, resulting in a net $130,704 loss on the Company’s March 12, 2014 and April 27, 2017 equity investments in Electrum at December 31, 2022.

 

Note 10 – Investments and fair value

 

The hierarchy of Level 1, Level 2 and Level 3 Assets are listed as following:

 

    (Level 1)     (Level 2)     (Level 3)     (Level 3)  
          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   $ -     $ -     $ 675     $ 93,756  
Total gains or losses                                          
Included in earnings (or changes in net assets)     (2,484 )     -       -       -  
Purchases, issuances, sales, and settlements                                
Purchases     649,847       -       -       10,000  
Issuances     -       -       -       -  
Sales     -       -       -       -  
Settlements     -       -       -       -  
Balance at December 31, 2023   $ 647,363       -       675       103,756  
                                 
Total gains or losses                                
Included in earnings (or changes in net assets)     (19,925)       -       -       -  
Purchases, issuances, sales, and settlements                                
Purchases     -       -       -       -  
Issuances     -       -       -       -  
Sales     -       -       -       -  
Settlements     -       -       -       -  
Balance at September 30, 2024   $ 627,438     $ -     $ 675     $ 103,756  

 

Note 11 - Common stock warrants

 

On August 21, 1998, the Company filed for voluntary reorganization with the United States Bankruptcy Court for the Northern District of California, and on January 11, 2000, the Company’s Plan of Reorganization was approved. Among other things, the Company’s Plan of Reorganization allowed creditors and claimants to receive new Series A, B, C, and D warrants in settlement of their prior claims. The warrants expire on May 11, 2038.

 

-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 $0.10 per share redemption fee payable to the original warrant holders. All such changes in the exercise price of warrants were provided for by the court in the Plan of Reorganization to provide a mechanism for all debtors to receive value even if they could not or did not exercise their warrants. Therefore, Management believes that the act of lowering the exercise price is not a change from the original warrant grants, and the Company did not record an accounting impact as the result of such change in exercise prices.

 

Exercise prices in effect from January 1, 2015 through September 30, 2023 for Series D warrants were $1.60 per share plus a $0.10 per warrant redemption fee, if applicable. On October 14, 2023, the Board of Directors of the Company authorized a reset of the Series D warrants strike price to $0.02 plus the $0.10 per warrant redemption fee, if applicable, and the exercise price in effect at September 30, 2024 for the Series D warrants is $0.02 per share plus a $0.10 per warrant redemption fee, if applicable.

 

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 689,159 Series H ($7) Warrants, with a 30-year life. On November 14, 2022, the 275,647 Series H Warrants of Lenox Hill Partners, LLC were canceled pursuant to a Settlement Agreement. As of September 30, 2024, and December 31, 2023, there were 413,512 Series H ($7) Warrants outstanding. The warrants are subject to cashless exercise based upon the ten-day trailing closing bid price preceding the exercise as interpreted by the Company.

 

As of September 30, 2024, and December 31, 2023, the weighted average contractual life for all Mentor warrants was 13.75 years and 14.5 years, respectively, and the weighted average outstanding warrant exercise price was $0.62 and $0.64 per share, respectively.

 

During the nine months ended September 30, 2024, there were no Series D warrants exercised, and no warrants were issued. The intrinsic value of outstanding warrants at September 30, 2024 and December 31, 2023 was $153,000 and $180,200, respectively.

 

The following table summarizes Series D common stock warrants as of each period:

 

    Series D  
Outstanding at December 31, 2022     6,250,000  
Issued     -  
Exercised     2,000,000  
         
Outstanding at December 31, 2023     4,250,000  
Issued     -  
Exercised     -  
Outstanding at September 30, 2024     4,250,000  

 

-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 275,647 Series H Warrants of Lenox Hill Partners, LLC were canceled pursuant to a Settlement Agreement. As of December 31, 2023, there were 413,512 Series H ($7) Warrants outstanding. The following table summarizes Series H ($7) warrants as of each period:

 

   

Series H

$7.00

exercise price

 
Outstanding at December 31, 2022     413,512  
Issued     -  
Canceled     -  
Exercised     -  
Outstanding at December 31, 2023     413,512  
Issued     -  
Exercised     -  
Outstanding at September 30, 2024     413,512  

 

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 $0.10 redemption fee to the former holders. Certain individuals desiring to become a Company designee to redeem warrants have deposited redemption fees with the Company that, when warrants are redeemed, will be forwarded to the former warrant holders through DTCC or at their last known address 30 days after the last warrant of a class is exercised, or earlier at the discretion of the Company. The Company has arranged for a service to process the redemption fees in offset to an equal amount of liability.

 

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 75,000,000 authorized shares of Common Stock at $0.0001 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 300,000 shares of its Common Stock (approximately 2% of the Company’s common shares outstanding at that time). A total of 44,748 shares were repurchased between August 8, 2014 and September 9, 2015. As of December 31, 2023, and 2022, 300,000 and 44,748 shares have been repurchased, respectively and a total of 300,000 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 3,000,000 shares of the Company’s common stock (approximately 12% of the Company’s common shares outstanding at that time) at a total repurchase amount not to exceed $200,000. During the period January 1, 2024 through September 30, 2024 a total of 2,855,712 shares have been repurchased and effectively retired, as follows:

 

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   0    N/A    0    3,000,000(1)  $200,000(2)
April 1 through June 30, 2024   1,401,546   $0.053    1,401,546    1,598,454   $121,416 
July 1 through September 30, 2024   1,454,166   $0.063    1,454,166    144,288   $26,650 
TOTAL   2,855,712   $0.058    2,855,712    144,288(1)  $26,650(2)

 

(1)Under the Board-approved repurchase plan, the Company is authorized to repurchase up to 3,000,000 shares of the Company’s common stock. At September 30, 2024, a total of 144,288 of the Company’s common shares may be repurchased under the plan.
(2)Under the Board-approved repurchase plan, the Company is authorized to spend up to $200,000 on the repurchase of the Company’s common stock. At September 30, 2024, a total of $26,650 may be spent on the repurchase of the Company’s common stock under the plan.

 

Preferred Stock

 

Mentor has 5,000,000, $0.0001 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 200,000 preferred shares as Series Q Preferred Stock, such series having a par value of $0.0001 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 “Conversion Price” of the Series Q Preferred Stock shall be at the product of 105% and the closing price of the Company’s Common Stock on a date designated and published by the Company. The Series Q Preferred Stock will be available only to accredited, institutional, or qualified investors.

 

The Company sold and issued 11 shares of Series Q Preferred Stock on May 30, 2018, at a price of $10,000 per share, for an aggregate purchase price of $110,000 (“Series Q Purchase Price”). The Company invested the Series Q Purchase Price as capital in Partner II to purchase equipment to be leased to Pueblo West. On September 27, 2022, Pueblo West exercised its lease prepayment option and purchased the manufacturing equipment for $245,369. On September 28, 2022 Partner II transferred full title to the equipment to Pueblo West. Therefore, the Core Q Holdings at September 30, 2022 and December 31, 2022 include this interest. The Core Q Holdings Asset Value at September 30, 2024 and December 31, 2023 was $20,843 and $20,843 per share, respectively. There was no contingent liability for the Series Q Preferred Stock conversion at September 30, 2024 and December 31, 2023. At September 30, 2024 and December 31, 2023, the Series Q Preferred Stock could have been converted at the Conversion Price of $0.116 and $ 0.105, respectively.

 

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  $47,655   $30,517 
Accrued retirement and other benefits   680,644    667,648 
Offset by shareholder advance   (261,653)   (261,653)
Total outstanding liability  $466,646   $436,512 

 

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 1% of the increase in market capitalization based on the bid price of the Company’s stock beyond the book value at confirmation of the bankruptcy, which was approximately $260,000. The bonus is 0.5% of the increase in market capitalization for each $1 increase in stock price up to a maximum of $8 per share (4%) based on the bid price of the stock beyond the book value at confirmation of the bankruptcy. For the nine months ended September 30, 2024 and 2023, there were no incentive fee expenses.

 

Note 15 – Related party transactions

 

On August 10, 2023, Mentor received a $50,000 loan from its CEO, which bore interest at 7.8% per annum, was compounded quarterly, and was due upon demand. On October 7, 2023, the loan plus accrued interest of $545 was paid in full.

 

On March 12, 2021, Mentor received a $100,000 loan from its CEO, which bore interest at 7.8% per annum, was compounded quarterly, and was due upon demand. On June 17, 2021, and June 5, 2022, Mentor received additional $100,000 and $50,000 loans from its CEO with the same terms as the original loan. On December 1, 2022, the loans plus accrued interest of $28,024 were paid in full.

 

On August 2, 2023, Mentor called a $1,080,000 note receivable from WCI, a related party at such time, plus accrued interest of $3,591. On September 6, 2023, WCI satisfied the note and accrued interest in full. WCI’s payment consisted of $66,712 cash and a $1,016,879 credit from the Company in exchange for the other WCI shareholder’s surrender of rights to exercise 2,259,732 Series D warrants of the Company. The Company recorded the $1,016,879 warrant credit as a reduction to additional paid in capital in accordance with ASC 480 “Distinguishing Liabilities from Equity Overall.” WCI recorded the $1,016,879 credit as a capital contribution because it was derived from the surrender of the WCI non-controlling stockholder’s rights to exercise the Company’s 2,259,732 warrants.

 

-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 $0.45 per warrant upon the surrender of such remaining unexercised warrants. The note accrued interest at 0.42% per annum with annual interest only payments due. The note was issued September 13, 2011, as payment for past amounts owed of $380,000 and included prepaid amounts of $700,000 for administrative fees payable to the Company under that certain May 31, 2005 Liquidity Agreement between the Company and WCI. The WCI note receivable and interest on the Company’s financials and the Mentor note payable and interest on WCI’s financials were eliminated in our September 30, 2023 consolidation.

 

WCI deferred fees represented deferred administrative fees relating to the paid $1,080,000 note receivable from WCI, a related party at such time. The Company recognized $2,667 in deferred fees per month and an additional $318,667 in deferred fees on September 6, 2023, concurrent with WCI’s payment of the note to the Company. The deferred fees on the Company’s financials and the deferred asset on WCI’s financials were eliminated in our September 30, 2023 consolidation.

 

On October 4, 2023, we sold the entirety of our majority, controlling 51% interest in WCI for $6,000,000. Upon the date of the sale, our legacy investment in WCI was deconsolidated, and it is now reported as a discontinued operation. See Note 3.

 

Note 16 – Commitments and contingencies

 

On May 28, 2019, the Company and Mentor Partner I, LLC filed suit against the G Farma Entities and three guarantors to the various G Farma agreements in the California Superior Court in and for the County of Marin. The Company primarily sought monetary damages for breach of the G Farma agreements, including promissory notes, leases, and other agreements, to recover collateral under a security agreement and to collect from guarantors on the agreements. The Company obtained, in January 2020, a writ of possession to recover leased equipment within G Farma’s possession. On January 31, 2020, all remaining equipment leased to G Farma by Mentor Partner I was repossessed by the Company. In the quarter ended June 30, 2020, the Company sold all of the recovered equipment, with an original cost of $622,670, for net proceeds of $249,481, after deducting shipping and delivery costs. All proceeds from the sale of repossessed equipment have been applied to the G Farma lease receivable balance that is fully reserved at September 30, 2024 and December 31, 2023.

 

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”). The Settlement Agreement requires the G Farma Settlors to pay the Company an aggregate of $500,000 plus interest, payable monthly as follows: (i) $500 per month for 12 months beginning on September 5, 2021, (ii) $1,000 per month for 12 months beginning September 5, 2022, (iii) $2,000 per month for 12 months beginning September 5, 2023, and (iv) increasing by an additional $1,000 per month on each succeeding September 5th thereafter, until the settlement amount and accrued unpaid interest is paid in full. Interest on the unpaid balance shall initially accrue at the rate of 4.25%, commencing February 25, 2021, and shall be adjusted on February 25th of each year to equal the Prime Rate as published in the Wall Street Journal plus 1%. In the event that the G Farma Settlors fail to make any monthly payment and have not cured such default within 10 days of notice from the Company, the parties have stipulated that an additional $2,000,000 will be immediately added to the amount payable by the G Farma Settlors.

 

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, $2,000,000 was added to the amount payable by the G Farma Settlors in accordance with the terms of the Settlement Agreement. The Company and Partner I sought entry of a stipulated judgment against the G Farma Settlors for (1) $494,450, the remaining amount of the $500,000 settlement amount which has not yet been paid by the G Farma Settlors plus $2,000,000 and all accrued unpaid interest, (2) the Company’s incurred costs, and (3) attorneys’ fees paid by the Company to obtain the judgment. 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 $2,539,597, which is comprised of $2,494,450 in principal (calculated as the aggregate settlement amount, less payments made by the G Farma Settlors, plus the default addition) plus accrued and unpaid interest of $40,219, costs of $1,643, and attorneys’ fees of $3,285 incurred by Mentor and Mentor Partner I in connection with obtaining the judgment. The judgment also accrues post-judgment interest at the rate of 10% from July 11, 2023 until such time as the judgment is paid in full.

 

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 $2,539,597 judgment and interest receivable of $311,014 for the nine months ended September 30, 2024 is fully reserved pending the outcome of the Company’s collection process. See Notes 1 and 8 to this Quarterly Report and Notes 1, 8, 9, and 18 to Company’s Annual Report for the period ended December 31, 2023 on Form 10-K filed with the Securities and Exchange Commission on April 1, 2024 for a discussion of the reserve against the finance lease receivable.

 

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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 two reportable segments: 1) the historic residual operations segment, which included the cost basis of our former membership interests of Electrum, the former contractual interest in the Electrum legal recovery, the settlement payments receivable from G Farma and its co-defendants, the former finance lease payments receivable from Pueblo West to Partner II, the operation of subsidiaries Mentor IP and Partner I, and 2) its classic energy segment which will consist of the Company’s operations and investment in the classic energy space. The classic energy segment includes the fair value of securities investments in (i) oil and gas through Exxon Mobil Corp. (XOM) stock, Occidental Petroleum Corp. (OXY) stock, and Chevron Corp. (CVX) stock, (ii) uranium through Cameco Corp. (CCJ) stock, and (iii) coal through Arch Resources, Inc. (ARCH) stock. Additionally, the Company formerly had small investments in securities listed on the NYSE and NASDAQ, an investment in note receivable from a non-affiliated party, the fair value of convertible notes receivable and accrued interest from NeuCourt, which on July 15, 2022, was exchanged for a NeuCourt SAFE security investment that will be carried at cost, and the investment in NeuCourt that is included in the Corporate, Other, and Eliminations section below. Segment information for our current operating segments is as follows:

 

   Energy Segment   Historic Segment   Corporate and Eliminations   Consolidated 
Three months ended September 30, 2024                    
Net revenue  $-   $-   $-   $- 
Operating income (loss)   -    (180)   (154,099