Note 19 – Commitments and contingencies

On December 29, 2016, Mentor obtained a judgment in the amount of $1,921,535 against Bhang Corporation and its predecessor in interest, Bhang Chocolate Company, Inc., in the United States District Court for the Northern District of California related to an action filed by Mentor on August 11, 2014 seeking rescission of the February 28, 2014 co-operative funding agreement with Bhang Corporation (“Bhang Agreement”) and return of the $1,500,000 paid by the Company to Bhang. The judgment accrues interest at the rate of 10% from December 29, 2016 until such time as the judgment is satisfied. Collections of $55,585 received in the quarter ended September 30, 2017 were applied against accrued interest and, in addition, the associated reserve pending collections was reduced and interest income of $55,585 was recognized during the quarter. Mentor is continuing its efforts to collect on the judgment in California and other states in which Bhang operates. Mentor intends to enforce this judgment.

As part of the judgment Bhang owners, Scott Van Rixel and Richard Sellers, who together purchased 117,000 shares of the Company’s Common Stock pursuant to the Bhang Agreement have the option until December 29, 2017 to return some or all of those shares in exchange for payment of the original purchase price of $1.95 per share plus a pro-rata amount of $58,568.92 in interest for such returned shares. Mentor will account for the return of the shares as a capital transaction if and when the shares are remitted back to the Company. See Note 5 to condensed consolidated financial statements.

In July 2015, Mentor was served with a complaint in an action in the United States District Court for the District of Utah initiated by the wife and daughter of Bhang’s corporate counsel related to 75,000 shares of Mentor’s Common Stock purchased from Bhang Corporation’s CEO in a secondary sale. The shares purchased by plaintiffs are returnable to Mentor per the judgement awarded in the Bhang matter, above. On September 25, 2017, the Court granted plaintiffs’ motion for partial summary judgment related to one cause of action in plaintiffs’ complaint. On October 23, 2017, Mentor filed a motion for reconsideration of the Court’s September 25, 2017 order. Regardless of the outcome of Mentor’s motion for reconsideration, Mentor still intends to pursue Cross-Defendants Richard Golden and Scott Van Rixel for indemnity. Mentor was not a party to this transaction and intends to vigorously defend itself against all claims in this case. No trial date has currently been set in this action.