Note 9 - Finance leases receivable
|12 Months Ended|
Dec. 31, 2020
|Note 9 - Finance leases receivable||
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 for the years ended December 31, 2020 or 2019.
As discussed in Notes 8, on February 22, 2019, the City of Corona Building Department closed access to G Farmas 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 Farmas 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 and is classified as non-performing on the consolidated balance sheets at December 31, 2019. Bad debt expense of $19,519 and $765,001, for the years ended December 31, 2020 and 2019, respectively, is included in selling, general and administrative expenses in the consolidated income statement.
On January 31, 2020, all remaining equipment leased to G Farma by Mentor Partner I which was not impounded by the Corona Police was repossessed by the Company and moved to storage under the Companys control. In March 2020, we discovered that an additional component valued at $36,594 was missing from the equipment recovered by Mentor earlier in 2020. In the quarter ended March 31, 2020, the Company sold a portion of the recovered equipment, with an original cost of $495,967, for net proceeds of $222,031. In the quarter ended June 30, 2020, the Company sold all remaining recovered equipment, with an original cost of $126,703, for net proceeds of $27,450, after deducting shipping and delivery costs. All proceeds from sale of repossessed equipment has been applied to the G Farma lease receivable balance. Remaining net lease payments receivable from G Farma are fully reserved at December 31, 2020. The Company has initiated an action against the G Farma Lease Entities and the G Farma Lease Guarantors in the Superior Court of California in the County of Marin seeking, among other things, damages caused by G Farmas and its guarantors breaches of the various agreements. We will continue to pursue collection to the maximum extent possible from the G Farma Lease Entities and G Farma Lease Guarantors for collection on all amounts due that have not been recovered through the sale of assets.
Net finance leases receivable, non-performing, consists of the following at December 31, 2020 and 2019:
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. Partner II recorded equipment sales revenue of $0 and $74,889 for the years ended December 31, 2020 and 2019, respectively. At December 31, 2020, 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, 2020 and 2019:
Finance lease revenue recognized on Partner I finance leases for the years ended December 31, 2020 and 2019, was $0 and $23,811, respectively.
Finance lease revenue recognized on Partner II finance leases for the years ended December 31, 2020 and 2019 was $47,707 and $51,603, respectively.
At December 31, 2020, minimum future payments receivable for performing finance leases receivable were as follows:
The entire disclosure for lessee entity's leasing arrangements including, but not limited to, all of the following: (a.) The basis on which contingent rental payments are determined, (b.) The existence and terms of renewal or purchase options and escalation clauses, (c.) Restrictions imposed by lease agreements, such as those concerning dividends, additional debt, and further leasing.
Reference 1: http://fasb.org/us-gaap/role/ref/otherTransitionRef