Note 9 – Finance leases receivable

Prior to 2024, the G Farma Settlors, coincidently with default on the Notes Purchase Agreement, as mentioned in Note 8 above, defaulted on certain related equipment finance leases with Partner I, resulting in an eventual final $803,399 recordation of an expected credit loss and impairment by Partner I. Under ASC 326, “Current Expected Credit Loss” the Company’s impairment of the equipment finance leases involved estimating losses based on historical data, current conditions, and reasonable forecasts. The Company’s investment in accounts receivable was evaluated for impairment because, collectively, there were risk characteristics that created an allowance for expected credit losses on its collection of future equipment finance lease payments. On July 11, 2023, a $2,539,597 Judgment was entered against the G Farma Settlors in favor of Partner I’s collection of its fully impaired finance leases receivable and the Company’s collection on certain fully impaired Notes Purchase Agreement receivables described at Note 8. In addition to the Judgment, interest of $628,985 is due at December 31, 2025. However, collection is unlikely, and since its inception, the Judgment has remained fully reserved. See “Credit quality of notes receivable and finance leases receivable and credit loss reserve” under “Critical Accounting Policies” at Note 2 for further explanation. The Company routinely monitors post-judgment collection potential and feasibility from a long-term collection perspective regarding the finance leases receivable portion of the Judgment related to Partner I’s share of the Judgment collection proceeds. Payment received will first be applied against the notes receivable described in Note 8, and if any additional amounts are recovered, they will then be applied against the finance leases receivable. No recovery payments were included in other income in the consolidated financial statements for the year ended December 31, 2025 and 2024, respectively. See Note 9 to the consolidated financial statements and the Company’s Annual Report for the period ended December 31, 2024, on Form 10-K as filed with the Securities and Exchange Commission on March 31, 2025, for further information related to notes purchase agreement and consulting agreement with G Farma.