Note 9 – Finance leases receivable

Mentor Partner I

Partner I entered into a Master Equipment Lease Agreement with G FarmaLabs Limited and G FarmaLabs DHS, LLC (the “G Farma Lease Entities”) with guarantees by GFBrands, Inc., formerly known as G FarmaBrands, Inc, Ata Gonzalez and Nicole Gonzalez (collectively, the “G Farma Lease Guarantors”) dated January 16, 2018, and amended March 7, April 4, June 20, and September 7, 2018, and March 4, 2019. Partner I acquired and delivered manufacturing equipment as selected by G Farma Lease Entities under sales-type finance leases. Partner I did not report equipment sales revenue or lease revenue for the years ended December 31, 2022 or 2021.

As discussed in Notes 1 and 7, on February 22, 2019, the City of Corona Building Department closed access to G Farma’s corporate location; the Company was not informed by G Farma of this incident until March 14, 2019. On April 24, 2019, the Company was informed that certain G Farma assets at its corporate location, including equipment valued at approximately $427,804 leased to the G Farma Lease Entities under the Master Equipment Lease Agreement, was impounded by the Corona Police. This event severely impacted G Farma’s ability to pay amounts due the Company in the future and the G Farma lease receivable was put on non-accrual status effective April 1, 2019. In 2019 an impairment of $783,880 was recorded. Additional bad debt expense of $0 and $0, recognized for the years ended December 31, 2022 and 2021, respectively, is included in selling, general and administrative expenses in the consolidated income statement.

In 2020, the Company repossessed leased equipment under G Farma’s control with a cost of $622,569 and sold it to the highest offerors for net proceeds of $348,734, after shipping and delivery costs. Net sales proceeds were applied against the finance lease receivable.

On August 27, 2021, the Company and Mentor Partner I entered into a Settlement Agreement and Mutual Release with the G Farma Entities to resolve and settle all outstanding claims as further discussed in Notes 1 8, and 20.

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 Company pursuant to the Settlement Agreement. As a result, $2,000,000 should be added to the amount payable by the G Farma Settlors in accordance with the terms of the Settlement Agreement. The Company is requesting that the stipulated judgment be entered against the G Farma Settlors for (1) 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. See Notes 1, 8, and 20.

Net finance leases receivable from G Farma remain fully impaired at December 31, 2022 and 2021. Payment received under this settlement will first be applied against the notes receivable described in Note 8 and if any additional amounts are recovered, will then be applied against the finance leases receivable.

Net finance leases receivable, non-performing, consists of the following at December 31, 2022 and 2021:

 Schedule of net finance leases receivable, non-performing

Mentor Partner II

Partner II entered into a Master Equipment Lease Agreement with Pueblo West, dated February 11, 2018, amended November 28, 2018 and March 12, 2019. Partner II acquired and delivered manufacturing equipment as selected by Pueblo West under sales-type finance leases.

On September 27, 2022, Pueblo West exercised its lease prepayment option and purchased the manufacturing equipment for $245,369. On September 28, 2022 Partner II transferred full title to the equipment to Pueblo West.

At December 31, 2021 and September 27, 2022, all Partner II leased equipment under finance leases receivable is located in Colorado.

Performing net finance leases receivable consists of the following at December 31, 2022 and 2021:

 Schedule of net finance leases receivable, performing

Mentor Capital, Inc.

Notes to Consolidated Financial Statements

December 31, 2022 and 2021

Finance lease revenue recognized on Partner I finance leases for the years ended December 31, 2022 and 2021, was $0 and $0, respectively.

Finance lease revenue recognized on Partner II finance leases for the years ended December 31, 2022 and 2021 was $37,659 and $40,764, respectively.

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 Company’s lease receivable of $87,039, $94,731, $42,976, and $5,177 for 2023, 2024, 2025, and 2026, respectively, reported as of December 31, 2021 and the Company’s interest receivable of $20,391, $10,989, $2,131, and $226 for 2023, 2024, 2025, and 2026, respectively, reported as of December 31, 2021 is no longer applicable. At December 31, 2022, minimum future payments receivable for performing finance leases receivable were $0.