Quarterly report pursuant to Section 13 or 15(d)

Investment in account receivable

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Investment in account receivable
9 Months Ended
Sep. 30, 2016
Investment in account receivable:  
Investment in account receivable

Note 5 – Investment in account receivable

 

On July 8, 2014, the Company invested $90,000 in an account receivable with a face value of $117,000 which was supported by a promissory note maturing January 15, 2015. The note was paid and extinguished in March 2015. For the three months ended September 30, 2016 and 2015, $0 and $0 of discount amortization is included in interest income. For the nine months ended September 30, 2016 and 2015, $0 and $2,250 of discount amortization is included in interest income.

 

On April 10, 2015, the Company entered into an exchange agreement whereby the Company received an investment in an account receivable with installment payments of $117,000 per year for 11 years totaling $1,287,000 in exchange for 757,059 shares of Mentor stock obtained through exercise of series D warrants at $1.60 per share. The Counterparty to the exchange agreement may elect to partially rescind the exchange at any time after June 1, 2017 and ending on the earlier of (i) December 1, 2017, and (ii) two weeks following the date on which the Counterparty receives notice from Mentor that Mentor’s warrant holders have been notified that they have approximately 30 days left to exercise Mentor warrants. The partial rescission election may be exercised for all or part of 313,820 of the Mentor shares exchanged for all or part of the installment payments due in or around January of each of 2018, 2019, 2020 and 2021. At this time management cannot determine the likelihood of a partial rescission. No adjustment has been made to the estimated present value or shares for this contingency.

 

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.

 

The April 10, 2015 investment in account receivable is supported by an exchange agreement and consisted of the following:

 

 

 

September 30, 2016

 

December 31, 2015

Face value

$

1,170,000

$

1,287,000

Unamortized discount

 

(594,614)

 

(674,427)

 Net balance

 

575,386

 

612,573

 Current portion

 

(93,399)

 

(92,542)

 Long term portion

$

481,987

$

520,031

 

In January 2016 the first installment payment of $117,000 on the investment in account receivable was due. Mentor received a cash payment of $26,000 and entered into an agreement to loan $91,000 back to the counterparty of the installment agreement. Subsequent to year end, the Company received a payment of $44,678 plus accrued interest of $322 on the loan, see Note 24. The loan bears interest at the minimum federal rate of 0.75% per annum, simple interest, with principal and interest due and payable in full 180 days following the demand thereof.

 

For the three months ended September 30, 2016 and 2015, $23,714 and $24,458 of discount amortization is included in interest income, respectively. For the nine months ended September 30, 2016 and 2015, $80,192 and $43,014 of discount amortization is included in interest income, respectively.