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 and consisted of the following:

The note was paid and extinguished in March 2015.  For the three months ended September 30, 2015 and 2014, $0 of discount amortization is included in interest income.  For the nine months ended September 30, 2015 and 2014, $2,250 and $0 of discount amortization is included in interest income, respectively. 

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 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 investment in account receivable is supported by an exchange agreement and consisted of the following:

For the three months ended September 30, 2015 and 2014, $24,458 and $0 of discount amortization is included in interest income, respectively.  For the nine months ended September 30, 2015 and 2014, $43,014 and $0 of discount amortization is included in interest income, respectively.