Annual report pursuant to Section 13 and 15(d)

Commitment and Contingencies

Commitment and Contingencies
12 Months Ended
Dec. 31, 2015
Commitment and Contingencies:  
Commitments and Contingencies Disclosure

Note 21 – Commitments and contingencies


During the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with FASB ASC 450-20-50, Contingencies. The Company evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines than an unfavorable outcome is probable and can be reasonably estimated, it establishes the necessary accruals. As of December 31, 2015, the Company is not aware of any contingent liabilities that should be reflected in the accompanying financial statements.


Mentor lawsuit seeking rescission of co-operative funding agreement with Bhang


On August 11, 2014, Mentor filed suit against Bhang and its owners, in the United States District Court for the Northern District of California for rescission of the February 28, 2014 co-operative funding agreement with Bhang, seeking return of the $1,500,000 investment the Company made in Bhang. This was in response to the June 24, 2014, unilateral announcement by Bhang that they were terminating all details of their relationship with Mentor, leaving Mentor with nothing, but declining to return any of the $1,500,000 paid to Bhang and its shareholders by Mentor during the preceding, and only, four months of interaction. As directed by the court, arbitration has been initiated with the American Arbitration Association and a panel of arbitrators has been appointed. Arbitration is scheduled to occur in May 2016. The Company intends to continue to vigorously pursuing return of its $1,500,000. See Note 4.


In March 2015, Bhang and its owners filed a counterclaim against Mentor in the arbitration action. Bhang contends it has suffered losses and should be able to keep the $1,500,000 they received from Mentor. The final outcome of the arbitration is not known at this time. The Company believes the counterclaim is without merit and plans to vigorously defend itself against all claims.


In July 2015, Mentor was served with a complaint in a Federal District Court for the District of Utah action initiated by the wife and daughter of Bhang’s corporate counsel for reimbursement of the purchase price for shares of Mentor’s common stock purchased from the CEO of Bhang. The Company was not a party to this transaction and intends to vigorously defend itself against all claims in this case. On August 6, 2015, Mentor filed a motion to dismiss all causes of action brought by the plaintiffs against Mentor. On September 29, 2015, plaintiffs filed a Second Amended Complaint. On October 13, 2015, Mentor and its co-defendants filed a motion to dismiss all causes of action brought by the plaintiffs against Mentor and its co-defendants. On November 24, 2015, Mentor filed a motion requesting sanctions against plaintiffs and their counsel for violations of Federal Rule of Civil Procedure Rule 11. Among other issues, the court has set a hearing on April 7, 2016 to hear Mentor’s motion to dismiss the Second Amended Complaint and request for sanctions against plaintiffs and their counsel.


Mentor lawsuit seeking return of loan commitment fee


In March 2014, the Company paid $621,250, which represented 1.75% of a prospective loan amount, in refundable fees paid for credit default insurance to a third party as required by the lender on an international loan facility. The lender was unable to fund the loan and a cooperative exit from the loan commitment was agreed to by the parties on June 12, 2014. The lender has released the requirement for credit default insurance and the insurance company has agreed to return the fee, however the refund has not yet been received. On September 5, 2014, the Company filed suit in San Mateo County Superior Court against Wm. E. Fielding and Associates, Inc., the name of the account holder to whom the $621,250 was wired, for conversion and fraud seeking return of the $621,250 in credit insurance premiums that had been paid, had been promised to be returned, and which were not returned. The court entered a default against the defendant. On March 1, 2016, Mentor was granted a judgment in the amount of $746,500.29 against defendant and Mentor now intends to collect on this judgment. The $621,250 in fees was expensed as loan costs in June 2014, pending the outcome of the suit.