Note 3 – Discontinued operation

Acquisition

Waste Consolidators, Inc. (“WCI”) was a legacy investment that originated when the Company purchased 50% of the outstanding shares of WCI on October 1, 2003, in a stock for stock exchange that was originally valued at $1,000,000 and was later reduced to a cost basis of $79,200 on October 28, 2007, pursuant to a purchase price related addendum between WCI and the Company. Effective January 1, 2014, the Company purchased an additional 1% of the outstanding shares of WCI for $25,000, which resulted in the Company owning a 51% controlling interest in WCI and an amendment to our change in valuation of WCI due to our controlling interest. As a result, WCI was included in the consolidated financial statements since January 1, 2014, and the Company recognized a fair value of $1,250,000 of non-cash gain on the adjustment to the fair value of the investment in WCI. This resulted in a total of $1,275,000 investment in WCI in its audited financials for the year ended December 31, 2014. Additionally, the Company recognized a ($47,216) effect of consolidating our interest in WCI that was previously accounted for at cost prior to December 31, 2014.

Mentor Capital, Inc.

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

Prior to acquiring a controlling interest in WCI on January 1, 2014, Mentor accounted for the investment in WCI using the equity method based on the ownership interest and the Company’s limited ability to exercise significant influence from December 31, 2003 to December 31, 2013. Accordingly, the investment was initially recorded at cost with adjustments to the carrying amount of the investment to recognize our share of the earnings or losses of the investee each reporting period.

In accordance with ASC 810-10, “Consolidation – Overall,” Mentor remeasured its previously held equity interest in WCI at the acquisition-date fair value, which was reported at December 31, 2014 as follows:

 Schedule of equity interest at the acquisition date fair value

Purchase price allocation at 51% of WCI assets and liabilities:

 Schedule of purchase price allocation

Goodwill of $1,324,143 was derived from consolidating WCI effective January 1, 2014. The remaining $102,040 of goodwill was related to our first acquisition of a 50% interest in WCI. The Company accounted for its goodwill in accordance with ASC 350, “Intangibles – Goodwill and Other,” which required the Company to test goodwill for impairment annually or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable, rather than amortize. No impairment write-downs were required prior to our sale of WCI on October 4, 2023.

Mentor Capital, Inc.

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

Disposal

On October 4, 2023, the Company sold the entirety of its interest in WCI for $6,000,000 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. In connection with the sale, the Company received $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 accrued interest at 6% per annum and matured on October 4, 2024. The $5,000,000 cash payment was paid by Ally on October 4, 2023. The $1,000,000 initial principal face amount of the note plus accrued interest of $60,000 was paid by Ally on October 4, 2024.

At December 31, 2023 we recognized a $4,805,389 gain on our sale of WCI as follows:

 Schedule of gain on sale of WCI 

Effective October 4, 2023, on the date of the 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. As a result, goodwill in an aggregate amount of $1,426,182 was reduced to $0.

Consolidation and deconsolidation

Consolidation

As a result of the acquisition of our 51% ownership interest in WCI on January 1, 2014, in accordance with ASC 810-10, “Consolidation – Overall,” we included WCI in our consolidated financial statements and eliminated all significant intercompany balances and transactions. Net income (loss) attributable to our 49% non-controlling interest in WCI was excluded from net income (loss) attributable to Mentor Capital, Inc. in prior annual reports on Form 10-K for and between the years ended December 31, 2014 to December 31, 2022.

Mentor Capital, Inc.

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

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 eliminated WCI from our consolidated financials on October 4, 2023. Accordingly, WCI was excluded from the Company’s continuing operations 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 and the prior period of comparison, and WCI’s financial results are presented as a discontinued operation in the Company’s consolidated financial statements.

Discontinued operation financial statement presentation and disclosures

Financial statement presentation

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 we presented WCI as a discontinued operation in our December 31, 2023 consolidated financial statements and the prior reporting period in accordance with ASC Topic 205-20-45, “Discontinued Operations.”

Mentor Capital, Inc.

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

Discontinued operations balance sheet

The following is a summary of the assets and liabilities of our discontinued operation that were sold effective October 4, 2023:

  Schedule of balance sheet

Mentor Capital, Inc.

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

Net income (loss) from discontinued operations before tax

The following is a reconciliation of the major classes of financial statement line items constituting net income (loss) from discontinued operations before tax from WCI, our discontinued operation, that is disclosed in the notes to the financial statements and presented in the consolidated statements of net (loss) income for fiscal year December 31, 2023, following our October 4, 2023 sale of WCI:

 Schedule of disposal groups, including discontinued operations

Cash flow disclosures

Prior to the October 4, 2023 sale date, on September 30, 2023, our discontinued operation had net cash used in operating activities totaling $333,207, accounts receivable of $728,657, other receivable of $20,374, prepaid expenses of $82,984, property and equipment of $392,838, operating lease assets of $323,875, finance lease assets of $1,560,757, accrued expenses of $523,178, finance lease liability of $1,488,883, an operating lease liability of $323,875, an EIDL loan liability of $58,031, and long term debt of $0.

At December 31, 2023 we reported a $4,805,389 gain on disposal of our discontinued operation, which is reported above in this Note 3, in our consolidated income statements, and our consolidated statements of cash flows.

Mentor Capital, Inc.

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

Lease commitment disclosures

Prior to the October 4, 2023 sale date, on September 30, 2023, our discontinued operation had entered into non-cancellable operating and finance leases for office and warehouse space, computers, furniture, fixtures, machinery, and vehicles. The following summarizes our discontinued operations’ lease liability maturities for operating and finance leases effective October 4, 2023:

 Schedule of lease liability maturities for operating and finance leases

Term debt disclosures

Our discontinued operation had no term debt on the date of the sale.

Economic injury disaster loan disclosures

On July 9, 2020, our discontinued operation received an additional economic injury disaster loan in the amount of $149,900 through the Small Business Administration. The loan was secured by all tangible and intangible personal property of our discontinued operation, bore interest at 3.75% per annum, required monthly installment payments of $731 beginning July 2021, and matured July 2050. In March 2021, the Small Business Administration extended the deferment period for payments, which extended the initial payment until July 2022. The loan was collateralized by all tangible and intangible assets of our discontinued operation. Coincident with the sale, the economic injury disaster loan plus interest was paid in full.

Other receivable disclosures

Other receivable consisted of the following:

 Schedule of other receivable

Mentor Capital, Inc.

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

Property, plant, and equipment disclosures

Property and equipment for our discontinued operation were comprised of the following:

 Schedule of property, plant and equipment

Mentor Capital, Inc.

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

Prior to the October 4, 2023 sale date, on September 30, 2023, depreciation and amortization expenses was $49,260. Of these amounts, depreciation on our discontinued operation’s vehicles used to service customer accounts included in the cost of goods sold and was $16,325. All other depreciation was associated with our discontinued operation’s selling, general, and administrative expenses.

Lessee Leases disclosures

Our discontinued operation’s operating leases were comprised of office space and office equipment leases. Fleet and vehicle leases were entered into prior to January 1, 2019, and under ASC 840 guidelines, they had 4-year terms and were classified as operating leases. Fleet leases entered into beginning January 1, 2019, under ASC 842 guidelines, were expected to be extended to 5-year terms and are classified as finance leases.

Prior to the October 4, 2023 sale date, on September 30, 2023, gross right of use assets recorded under finance leases related to our discontinued operation’s vehicle fleet leases were $2,272,984 and accumulated amortization associated with our discontinued operation’s finance leases was $712,227.

Our discontinued operation’s lease costs were as follows:

 Schedule of lease costs recognized in consolidated statements of operations

Prior to the October 4, 2023 sale date, on September 30, 2023, right of use asset amortization under our discontinued operations operating agreements were $46,289.

Lease amounts of our discontinued operations were as follows:

 Schedule of lease amounts of discontinued operations

Mentor Capital, Inc.

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

Finance lease liabilities were as follows:

 Schedule of finance lease liabilities

Operating lease liabilities were as follows:

 Schedule of operating lease liabilities

Lease maturities of our discontinued operation were follows:

Maturity of lease liabilities

 Schedule of lease maturities

Mentor Capital, Inc.

Notes to Consolidated Financial Statements

December 31, 2024 and 2023

Facilities operations segment disclosures

Following the October 4, 2023 sale of our discontinued operation, WCI, the Company received no new income from WCI and had no further involvement or continuing influence over its operations. Consequently, our facilities operations segment, WCI, was eliminated at the time of sale. Additionally, the results of operations associated with our facilities operations segment were excluded from our continuing operations and presented as a discontinued operation in our consolidated financial statements. WCI worked with business park owners, governmental centers, and apartment complexes to reduce their facility-related operating costs.

Following is our discontinued operations segment information before income taxes as of October 4, 2023:

 Schedule of segment information

Schedule of reconciliation of revenue from segments to consolidated 

Mentor Capital, Inc.

Notes to Consolidated Financial Statements

December 31, 2024 and 2023