Note 4 - Acquisition of interest in Bhang Chocolate Company, Inc. and suit seeking rescission

On January 17, 2014, the Company transitioned out of its cancer related trading dormancy by announcing its first cannabis sector letter of intent amidst significantly increased share volume and price. The Company entered into a co-operative funding agreement with Bhang Chocolate Company, Inc., effective February 28, 2014, that provided for the purchase from owners of a 60% ownership in Bhang (“Bhang Agreement”). During the first 90 days, $1,500,000 was provided to Bhang owners in cash from proceeds of warrant exercises. Mentor tendered the remaining $7,500,000 to the Bhang owners in freely trading shares of Mentor Common Stock per the terms of the Bhang Agreement.

Bhang breached the Bhang Agreement by failing to provide Mentor, upon closing, with Bhang share certificates evidencing the 60% of Bhang shares which were purchased by Mentor. In addition, after repudiating the Bhang Agreement, Bhang owners have declined to return any of the $1,500,000 paid by Mentor. On August 11, 2014, Mentor filed suit against Bhang and its owners, in the United States District Court for the Northern District of California seeking rescission of the Bhang Agreement and return of the $1,500,000 paid by the Company to Bhang and its owners. On January 9, 2015, Mentor initiated Court-ordered arbitration against Bhang Chocolate Company, its successor in interest Bhang Corporation, and its three owners. In July 2016, the Arbitration Panel granted Mentor’s request for rescission of the Bhang Agreement and ordered Bhang to return the $1,500,000 received from Mentor plus interest at the rate of 10% for the period of time from the date of funding the Bhang Agreement through the date of the arbitration award. See Notes 20 and 23. Accrued interest receivable is fully reserved at September 30, 2016 and December 31, 2015 and the Company is analyzing its ability to collect the interest on this award. Mentor intends to vigorously pursue collection of the entire $1,500,000 plus accrued interest awarded by the Panel.

As part of the award issued by the Arbitration Panel, Bhang owners who purchased Mentor shares pursuant to the Bhang Agreement have the option to return all or part of those shares in exchange for payment of the original purchase price of $1.95 per share plus interest at the rate of 10% for the period of time from the date of share purchase under the Bhang Agreement through the date of the arbitration award. Mentor will account for the return of the shares as a capital transaction if and when the shares are remitted back to the Company.

Legal costs associated with the Bhang arbitration for the three months ended September 30, 2016 and 2015 were $65,583 representing ($0.007) of the loss per share and $35,454 or ($0.001) loss per share, respectively. Legal costs associated with the Bhang arbitration for the nine months ended September 30, 2016 and 2015 were $202,518 representing ($0.008) of the loss per share and $53,507 or ($0.001) loss per share, respectively.