Investment in account receivable

3 Months Ended

Mar. 31, 2023

Receivables [Abstract]

Investment in account receivable

Note 3 – Investment in account receivable

On April 10, 2015, the Company entered into an exchange agreement whereby the Company received an investment in an account receivable with annual installment payments of $117,000 for 11 years through 2026, totaling $1,287,000 in exchange for 757,059 shares of Mentor Common Stock obtained through the exercise of 757,059 Series D warrants at $1.60 per share plus a $0.10 per warrant redemption price.

The Company valued the transaction based on the market value of Company common 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. In the fourth quarter of 2020, we were notified that due to the effect of COVID-19 on the estimated receivable, we may not receive the 2020 installment payment or the full 2021 installment payment. Based on management’s collection estimates, we recorded an investment loss of ($139,148) on the investment in account receivable at December 31, 2021. In 2021, the Company reevaluated estimated collections and recorded an investment gain of $22,718. The loss of ($41,930) and gain of $22,718 were reflected in other income on the consolidated income statement for the years ended December 31, 2022 and 2021, respectively.

On February 16, 2022, subject to effecting certain agreed upon payment changes, the parties agreed to modify the terms of the installment payments and the Company retained annual payments of $100,000 for the remaining four years of the agreement and an additional $100 per month through the end of the agreement term. The modification was accounted for using the same original discount rate, and a loss of $0 and $41,930 was recognized in the quarter ended March 31, 2023 and 2022.

On January 10, 2023, the Company received the 2022 annual installment payment of $117,000. Three additional $117,000 annual installment payments are due in late 2023, 2024, and 2025. The Company has retained its impairment reserves and recorded losses on investment due to a history of uncertain payments.

The investment in account receivable consists of the following at March 31, 2023 and December 31, 2022:

	March 31, 2023			December 31, 2022
Face value*	$	286,300		$	403,600
Unamortized discount		(81,727	)		(88,291	)
Net balance		204,573			315,309
Current portion		-			-
Long term portion	$	204,573		$	315,309

* On January 10, 2023, the Company received the 2022 annual installment payment of $117,000. The Company applied the $117,000 to the face value of its investment in account receivable. Additionally, the Company reduced the face value of its investment in account receivable by an additional $100 per month in January, February, and March 2023.

For the three months ended March 31, 2023, and 2022, $6,456 and $13,470 of discount amortization is included in interest income, respectively.