As filed with the Securities and Exchange Commission on June 29, 2001.
Registration No: 333-58844
=========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
AMENDMENT NO. 2
TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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MENTOR CAPITAL CONSULTANTS, INC.
(Name of small business issuer in its charter)
-------------------
Delaware 8742 84-1569905
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification Number)
incorporation or Code Number)
organization)
4940 Pearl East Circle, Suite 104
Boulder, Colorado 80301 4940 Pearl East Circle, Suite 104
(303) 444-7755 Fax (303) 444-0406 Boulder, Colorado 80301
(Address and telephone number (Address of principal
of principal executive offices) place of business)
W. Michael Bissonnette
Mentor Capital Consultants, Inc.
4940 Pearl East Circle, Suite 104
Boulder, Colorado 80301
(303) 444-7755 Fax (303) 444-0406
(Name, address and telephone number of agent for service)
Copies of communications to:
Robert J. Philipp, Esq.
Kranitz & Philipp
2230 East Bradford Avenue
Milwaukee, Wisconsin 53211
(414) 332-2118 Fax (414) 332-4480
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended, other than securities offered only in connection with
dividend or interest reinvestment plans, please check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_] ____________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] ____________________ If this Form is a
post-effective amendment filed pursuant to Rule 462(d) under the Securities Act,
check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
[_] ____________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
(See following page)
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
MENTOR CAPITAL CONSULTANTS, INC.
Registration Statement on Form SB-2
Under
The Securities Act of 1933
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of each class Amount Maximum Maximum Amount of
of securities to be to be offering price aggregate Registration
registered registered per unit offering price fee
- --------------------------------------------------------------------------------
Common Stock 2,000,000 shares $2.00(1) $4,000,000(1) $1,000.00
- --------------------------------------------------------------------------------
Warrants 1,000,000 warrants - - -
Common Stock 1,000,000 shares(2) $3.00 $3,000,000 $ 750.00
issuable upon
exercise of
warrants
- --------------------------------------------------------------------------------
Warrants 1,000,000 warrants - - -
Common Stock 1,000,000 shares(2) $4.00 $4,000,000 $1,000.00
issuable upon
exercise of
warrants
- --------------------------------------------------------------------------------
Totals 4,000,000 shares $11,000,000(1) $2,750.00(3)
2,000,000 warrants
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Pursuant to Rule 416 under the Securities Act, there are also being
registered such indeterminable number of shares of Common Stock as may be
issued pursuant to the anti-dilution provisions of such warrants.
(3) Pursuant to Rule 457(p), filing fee offset in full with $4,125 fee paid
upon filing of prior Form SB-2 by this Registrant (File No. 333-57066;
initially filed March 15, 2001), which registration statement was
withdrawn as of April 2, 2001, no sales of securities having been made
pursuant thereto.
(Facing Page Continued)
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Prospectus (Subject to Completion)
Dated June 29, 2001
1,000,000 Units
MENTOR CAPITAL CONSULTANTS, INC.
Common Stock and Warrants
(Minimum Purchase: 6,000 Units)
Mentor Capital Consultants, Inc. is offering a minimum of 125,000 units and
a maximum of 1,000,000 units, each unit consisting of two shares of its common
stock and two warrants to purchase additional shares of common stock. The
warrants will entitle the holder to purchase two additional shares of common
stock at the price of $3.00 and $4.00, respectively, as described in this
prospectus under "Description of Securities - Warrants." We will utilize the
proceeds of this offering and the exercise of warrants, if any, to establish and
operate our business of providing consulting services to companies seeking to
raise capital, including our proposed formation or acquisition of an NASD-member
securities broker-dealer. To date, we have conducted only minimal consulting
operations and have not generated significant revenues.
This is our initial public offering and no public market currently exists
for our common stock or warrants, which will be transferable separately and are
not required to be transferred as units. We do not expect that any public
market will develop for our warrants. We anticipate that, within approximately
four months following the completion of this offering, our common stock will be
quoted on the NASD's OTC Bulletin Board under the symbol "_______." The initial
public offering price will be $4.00 per unit, or 2.00 per share.
Investing in our securities involves substantial risks.
See "Risk Factors" beginning on page 6.
Price $4.00 Per Unit
Price to Underwriting Proceeds to
Public Discounts and Mentor Capital
Commissions Consultants
Per Unit................... $4.00 -0- $4.00
Minimum (125,000 units).... $500,000 -0- $500,000
Maximum (1,000,000 units).. $4,000,000 -0- $4,000,000
Neither the Securities and Exchange Commission nor any state securities
regulator has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
This is a minimum-maximum offering which will be sold by us through our
officers and directors. We must sell the minimum offering of 125,000 units if
any are sold. Neither we nor any other person is required to sell any specific
number or dollar amount of securities in excess of the 125,000-unit minimum
offering, but we will use our best efforts to sell all of the 1,000,000 units
offered. Funds received from subscribers will be held in escrow by Grafton
State Bank. Unless collected funds sufficient to purchase at least the minimum
offering of 125,000 units are received by the escrow agent from accepted
subscribers within 90 days from the date of this prospectus, unless extended by
us in our sole discretion for an additional 90 days, all purchase payments will
be returned in full to subscribers, without interest or deduction. If the
minimum offering is sold within the foregoing period, the offering may continue
until 1,000,000 units are sold or December 31, 2001, whichever occurs first.
However, we may terminate the offering at any earlier time if we choose to do
so.
_____________, 2001
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TABLE OF CONTENTS
Page
Prospectus Summary. . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . 6
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 9
Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . 9
Dilution. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Selected Financial Data . . . . . . . . . . . . . . . . . . . 11
Plan of Operation . . . . . . . . . . . . . . . . . . . . . . 12
Business. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Management. . . . . . . . . . . . . . . . . . . . . . . . . . 19
Advisory Board. . . . . . . . . . . . . . . . . . . . . . . . 21
Certain Relationships and Related Transactions. . . . . . . . 22
Principal Stockholders. . . . . . . . . . . . . . . . . . . . 23
Description of Securities . . . . . . . . . . . . . . . . . . 24
Shares Eligible for Future Sale . . . . . . . . . . . . . . . 27
Plan of Distribution. . . . . . . . . . . . . . . . . . . . . 29
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . 30
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Where You Can Find Additional Information . . . . . . . . . . 30
Index to Financial Statements . . . . . . . . . . . . . . . . 31
Exhibit A (Subscription Agreement). . . . . . . . . . . . . . A-1
Exhibit B (Form of Warrant) . . . . . . . . . . . . . . . . . B-1
2
PROSPECTUS SUMMARY
You should carefully read the following summary in conjunction with the more
detailed information appearing elsewhere in this Prospectus concerning our
company and the common stock being offered, including our financial statements
and related notes.
Our Company
Mentor Capital Consultants was incorporated in March 2000 under the laws of
Delaware as IPO Investors Network, Inc. We changed our name in March 2001 to
Mentor Capital Consultants, Inc. Our principal business will be to provide a
comprehensive suite of business management and marketing consulting services to
pre-start-up through 5-year-old emerging growth companies and the entrepreneurs
that operate them. Our operations will initially include:
Business Strategic Planning and Marketing Consulting Services
We will assist our clients in assessing their industry and the
competition, refining their business model, preparing a business plan, and
implementing their business strategy. We will review, evaluate, and refine
our clients' current marketing strategy and assist in the design and
development of a custom marketing plan and assist in its execution.
Broker-dealer Referral Services
To the extent that our clients require advice and assistance in raising
capital for their business, we have developed relationships with three
broker-dealers to whom we will refer appropriately developed clients in need
of underwriting and private placement services.
Development and Sale of a Software Product
This software, The Mentor Capitalist's Primer on Capital Formation Options
TM, will provide a comprehensive education in capital formation, including
the self-financing options available, as well as a step-by-step tutorial on
completing the Form U-7 for Small Corporate Offerings (SCORs) as well as the
Form 1-A used in Regulation A offerings.
Our Strategy
We will target as consulting clients those start-ups and emerging growth
businesses that we believe have exceptional growth potential, and which offer
products or services with national or international sales potential. Over time,
we intend to expand our marketing campaign to attract business clients in major
metropolitan areas of the country.
We will market our services and our software product through three primary
means: (a) direct response advertising, including AM news and business news
radio, television, and print advertising; (b) through our attendance and
participation at industry forums, conferences, and seminars; and (c) through
traditional public relations methods. We have conducted a market test, the
results of which indicated an interest in our suite of consulting services. We
intend to expand our consulting resources by creating alliances with other
businesses with expertise in business, marketing, advertising, and media buying
consulting.
3
Our business plan for future operations contemplates offering our clients a
full spectrum of consulting services, including services relating to strategies
and options for capital formation. To this end, we intend to either purchase or
establish a broker-dealer which will deliver the capital raising and
underwriting services that we will rely on our three broker dealer referrals to
provide for our clients until such time as we have purchased or established our
own broker-dealer.
We are a start-up company with minimal current revenues and a limited
operating history. In addition, our management has a limited background in the
operation of a management consulting and brokerage business. Further, we intend
to operate our business in a sector with considerable competition from more
established businesses with better capitalization, name recognition, and
operating histories. To date, our operations have been focused on planning our
business, developing our software product, and raising the capital necessary to
launch our business consulting operations, complete the development of our
software and commence sales. The limited revenues we have generated to date
have consisted of interest earned on capital raised from a private offering of
our common stock and fees paid for consulting services provided by us to a
two clients in order to test and evaluate our methods.
We anticipate needing to sell the 125-000 unit minimum offering in order to
raise sufficient capital to launch our business consulting operations and either
purchase or form a securities broker-dealer. While we expect to commence our
consulting operations within three months following the date of this prospectus,
broker-dealer operations are not expected to commence for up to six to nine
months, principally due to the time required to apply and be accepted for NASD
membership, including the time required for personnel to meet related
examination requirements. If we are able to acquire a registered broker-dealer
on acceptable terms, this process may be shortened somewhat, depending upon the
qualifications of any personnel who join us as a result of such acquisition.
Our principal office is located at 4940 Pearl East Circle, Suite 104,
Boulder, Colorado 80301. Our telephone number is (303) 444-7755, and our
facsimile number is (303) 444-0406.
The Offering
Units offered, each unit consisting of
two shares of common stock and two
warrants, each warrant providing for
the purchase of one additional share
of common stock . . . . . . . . . . . . . . . . . . . . . 1,000,000 units
Common stock outstanding before the offering. . . . . . . . 15,530,762 shares
Common stock to be outstanding after minimum offering . . . 15,780,762 shares
Common stock to be outstanding after maximum offering . . . 18,530,762 shares
Common stock to be subject to warrants after minimum offering 250,000 shares
Common stock to be subject to warrants after maximum offering 3,000,000 shares
Proposed OTC Bulletin Board trading symbol. . . . . . . . .
Each unit consistsng of two shares of its common stock and two warrants to
purchase additional shares of common stock. Commencing six months after the
date of this prospectus, and for eighteen months thereafter, the warrants may be
exercised to purchase two additional shares of common stock at the price of
$3.00 and $4.00, respectively. Please see "Description of Securities -
Warrants" for a description of the terms of the warrants, including the
conditions under which they may be redeemed by us.
This is a minimum-maximum offering which will be sold by us through our
officers and directors, without the participation of an underwriter.
4
Unless collected funds sufficient to purchase at least the minimum offering
of 125,000 units, containing 250,000 shares of common stock, are received by the
escrow agent from accepted subscribers within 90 days from the date of this
prospectus, unless extended by us in our sole discretion for an additional 90
days, the offering will terminate and no shares will be sold. If the
125,000-unit minimum offering is sold within the foregoing period, the initial
disbursement of escrowed funds will take place, and the offering may continue
until 1,000,000 units, containing 2,000,000 shares of common stock, are sold or
December 31, 2001, whichever occurs first. We are not obligated to (1) sell any
number or dollar amount of our common stock in excess of the 125,000-unit
minimum offering or (2) purchase any shares at any time. While we will use our
best efforts to sell all of the units offered, we cannot guarantee how many
units in excess of the required minimum, if any, will actually be sold in the
offering. See "Risk Factors" and "Plan of Distribution" for additional
information concerning the terms of this offering.
Use of Proceeds
We intend to allocate the net proceeds received by us from this offering to
working capital, for use in connection with the development and expansion of our
business, including expenditures with respect to the following: (1) recruitment
and training of additional technical and marketing personnel; (2) advertising
and marketing; (3) development of software products; (4) formation or
acquisition of an NASD-member broker-dealer; and (5) development and maintenance
of web sites. See "Use of Proceeds."
Summary Financial Data
You should read the following summary financial data in conjunction with
"Plan of Operation" and our financial statements, and the related notes, which
are included in this prospectus. The information shown below as of December 31,
2000, and for the year then ended, has been taken from our financial statements,
which have been audited by Van Dorn & Bossi, independent certified public
accountants. Our unaudited consolidated financial statements as of March 31,
2001, and for the three-month period then ended, and for the period from March
13, 2000 (inception) to March 31, 2001, reflect, in the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial condition and results for such periods.
Mentor Capital Consultants, a Development-Stage Enterprise
Statement of Income Data:
MARCH 13, 2000 THREE MONTHS MARCH 13, 2000
(INCEPTION) ENDED (INCEPTION)
TO DECEMBER 31, MARCH 31, MARCH 31,
2000 2001 2001
------------ ------------ ------------
(unaudited) (unaudited)
Total income . . . . . . . $ 9,816 $ 17,918 $ 27,734
Total operating expenses . $ 662,195 290,231 952,426
----------- ----------- -----------
Net loss . . . . . . . . . $ (652,379) $ (272,313) $ (924,692)
=========== =========== ===========
Net loss per common share. $ (0.05) $ (0.02)
=========== ===========
Weighted average common
shares outstanding. . 13,122,186 15,510,484
Balance Sheet Data:
March 31, 2001
-----------------
(unaudited)
Cash and cash equivalents. . . . . . . . . $ 603,460
Total assets . . . . . . . . . . . . . . . $ 753,561
Long-term debt, less current portion . . . $ -0-
Deficit accumulated during
development stage. . . . . . . . . . . $ (924,692)
Stockholders' equity . . . . . . . . . . . $ 753,561
5
RISK FACTORS
This offering and an investment in our common stock and warrants involve a
high degree of risk. You should carefully consider the following risk factors
and the other information in this prospectus, including our financial statements
and the related notes, before purchasing units. If any of the following risks
actually occurs, our business, operating results, prospects or financial
condition could be seriously harmed. The trading price of our common stock
could decline, and you could lose all or part of your investment.
This is a self-underwritten, minimum-maximum offering, and we may not raise
enough capital from the sale of our common stock and warrants to fund our plans
for growth and expansion as quickly as needed.
While we will use our best efforts to sell all of the units offered by this
prospectus, we are not obligated to sell any number or dollar amount of our
common stock and warrants in excess of the 125,000-unit minimum offering, and we
cannot guarantee how many units in excess of the required minimum, if any, will
actually be sold in this offering. We intend to expend all the proceeds we
receive from this offering to grow and expand our existing business, principally
by developing an Internet site and otherwise increasing our marketing efforts.
We believe that proceeds of the 125,000-unit minimum offering will be sufficient
to establish and/or support our operations for the next twelve months. However,
our inability to obtain financing in excess of the minumum will impede the
implementation of our plans for growth and expansion, thereby possibly extending
the time required for you to realize a positive return, if any, on your
investment in our company.
We cannot guarantee that an active trading market for our common stock will
develop or be sustained.
While we intend that our common stock will be quoted on the NASD's OTC
Bulletin Board upon completion of this offering, we cannot provide definite
assurance that our shares will be actively traded. The development and
continuation of a trading market will depend principally upon our business,
financial condition and operating results.
If the market price of our shares remains below $5.00 per share, sales effected
by registered broker-dealers may be subject to considerable additional rules and
regulations, compliance with which may adversely affect our stock's liquidity
and price.
The initial public offering price of our common stock will be less than $5.00
per share, and no assurance can be given that the market price for our common
stock will exceed $5.00 per share at any time following the completion of this
offering. Accordingly, SEC rules may impose additional requirements upon
broker-dealers who effect transactions in our shares, principally with respect
to (1) additional disclosures concerning the risks of investment in lower-priced
stocks, (2) written investor-suitability determinations and (3) written
authorization of these transactions by the proposed purchasers. Compliance with
these rules could impede trading and adversely impact the price and liquidity of
your shares.
Evaluation of our prospects may be more difficult in light of our limited
operating history.
Our company was formed in March 2000, and we have a limited operating
history upon which to base an evaluation of our prospects. As a relatively new
enterprise, we are subject to the risks, expenses and uncertainties that face
any company during its early development. We are confident that we will be able
to address and overcome these risks through our management's experience, our
attention to changes in the market to which we seek to deliver our services, and
our technological expertise. However, there can be no definite assurance that
we will be able to adequately address these risks, and our failure to do so may
adversely affect the value of your investment in our common stock.
Our management may not be successful in applying the proceeds of this offering
in a manner that increases the value of your investment.
We plan to utilize the net proceeds of this offering in the manner described
in this prospectus under "Use of Proceeds." Nevertheless, we will have broad
discretion in determining specific expenditures. You will be entrusting your
funds to our management, upon whose judgment you must depend, with limited
information concerning the purposes to which the funds will ultimately be
applied. We may not be successful in spending the proceeds of this offering,
whether in our existing operations or for external investments, in ways which
increase our profitability or market value, or otherwise yield favorable
returns.
6
We may be unable to manage growth that results from a successful offering.
To implement our business plan, we must expand our operations, financial
systems, and personnel. We may be unable to hire and train sufficient personnel
to manage the growth that may result from a successful offering, which would
result in our being unable to capitalize on the opportunity in the market, and
might cause our financial condition and results of operations to suffer. Should
our financial condition and/or results of operations suffer, the value of your
investment in our common stock may be adversely affected.
Purchasers in this offering will experience immediate and substantial dilution.
The initial public offering price of our common stock is substantially
higher than its book value immediately after the offering. As a result, if you
invest in this offering at an assumed initial public offering price of $2.00 per
share, you will incur immediate dilution of at least $1.73 per share in the book
value of the shares purchased from the price you pay for your stock if we sell
the entire offering. If we sell only the 125,000-unit minimum offering, you
will experience dilution of $1.92 per share. You will incur this dilution
largely because our earlier investors paid substantially less than the initial
public offering price when they purchased their common stock. See the
discussion under "Dilution" for a calculation of the dilution you will
experience, assuming various levels of sales in this offering.
Our president is not covered by an employment contract or "key person" life
insurance, and his loss could adversely affect our business results and the
value of your investment.
Our future success depends upon the continued services of our president,
Michael Bissonnette, and the loss of his services could have a material adverse
effect on our business, financial condition, operating results and, potentially,
the value of your investment in our common stock. In addition, if Mr.
Bissonnette joins a competitor firm or forms a competing company, the resulting
loss of existing or potential clients and business relationships, including
merger or acquisition candidates, could have a serious adverse effect upon our
business and the value of your investment in our common stock. None of our
employees, including Michael Bissonnette, is bound by an employment agreement,
and these personnel may terminate their employment at any time. If Mr.
Bissonnette were to leave our company, we might be unable to prevent the
unauthorized disclosure of our strategic planning, procedures, practices or
client lists. In addition, we do not have "key person" life insurance policies
covering any of our employees, including Michael Bissonnette.
Future sales of our common stock may depress our stock price.
As of the date of this prospectus, there were 15,530,762 shares of our common
stock outstanding. We intend to register up to 2,500,000 of such shares under
the Securities Act of 1933 upon the termination of this offering, including
350,000 shares owned by our officers and directors. As a condition of such
registration, our officers and directors have entered into lock-up agreements
with us which provide that they will not sell, transfer or otherwise dispose of,
directly or indirectly, any shares of common stock, or any securities
convertible or exchangeable for shares of common stock, until June 30, 2002 or
the sale of the entire 1,000,000-unit offering, whichever first occurs. If such
registration is accomplished, the shares registered will be freely tradeable
without restriction or further registration under the Securities Act of 1933,
subject to the above-described lock-up agreements in the case of sales by our
officers and directors.
Whether or not we register up to 2,500,000 shares of our common stock
outstanding as of the date of this prospectus, as described above, and
regardless of the period of time for which any such registration remains
effective, 18,530,762 shares of our common stock will be outstanding after this
offering, assuming that the entire offering is sold. Sales of substantial
amounts of our common stock in the public market, particularly sales by officers
and directors, or conceivably only the perception that such sales may occur,
could create the impression in the public of difficulties or problems with our
business. This might adversely affect the market price of our common stock and
could impair our ability to sell additional common stock or other equity
securities on terms that we consider satisfactory. Further, the offer for sale
of large blocks of our common stock could hinder the ability of stockholders to
identify buyers willing to purchase their shares at prices considered by such
stockholders to be satisfactory. For a more detailed discussion of potential
future sales by our existing stockholders, see "Shares Eligible for Future
Sale."
7
The arbitrary determination of our initial public offering price and the absence
of a public market for our common stock may adversely affect your ability to
assess whether you will be able to sell any shares you purchase for an amount
equal to or greater than the price you pay to acquire them.
The initial public offering price of our common stock has been arbitrarily
determined by us and is not the result of arms-length negotiations with any
underwriter or other party. Such price is not necessarily related to our asset
value, net worth, results of operations or any other established criteria of
value. The foregoing factors may diminish your ability to assess the likelihood
that your purchase price will be recovered, if not exceeded, upon sale, and no
assurance can be given in that regard. Please see "Plan of Distribution" for a
discussion of the factors considered by us in determining the initial public
offering price.
Unless the price of our common stock equals or exceeds the exercise price of the
warrants at the time of such exercise, you may be unable to profitably exercise
your warrants.
There can be no assurance that the price of our common stock will meet or
exceed the exercise price of the warrants during the exercise period or at any
time thereafter. Accordingly, should you choose to exercise warrants, the value
of the common stock purchased upon such exercise may be less than the price you
pay. Please see "Description of Securities - Warrants" for additional
information as to the terms of the warrants.
Unless more than 351,369 units, containing 702,738 shares of common stock, are
sold in this offering, our president, Michael Bissonnette, will continue to own
a controlling percentage of our common stock, and the voting power of other
stockholders will be limited.
If only the minimum 125,000-unit offering is sold, our president, Michael
Bissonnette, will continue to own 8,116,750 shares, or 51.4%, of our outstanding
common stock and will have the ability to control all matters submitted to our
stockholders for approval and to exercise controlling influence over our
business and affairs. This includes any determination as to the election and
removal of directors and the approval of any merger or other business
combination, the acquisition or disposition of our assets, whether or not we
incur indebtedness, the issuance of any additional common stock or other equity
securities and the payment of dividends on our common stock. Moreover, unless
more than 607,494 units, containing 1,214,988 shares of common stock are sold,
our directors and executive officers, including Mr. Bissonnette, will
beneficially own, in the aggregate, more than 50% of our outstanding common
stock. Accordingly, even if Michael Bissonnette does not control us by himself,
these stockholders, if they act together, may exercise the same degree of
control described above for Mr. Bissonnette individually and may make decisions
that are adverse to your interests. See "Principal Stockholders" for more
information about the ownership of our common stock.
We plan to use the Internet as an important component of our business, and our
inability to keep pace with the rapid technological changes associated with the
Internet may affect the price of our common stock.
We intend to use the Internet as a tool to promote our business and attract
potential clients. In this connection, we plan to conduct e-mail campaigns and
establish an extensive network of Internet hyperlinks to maximize our visibility
to web-searching entrepreneurs. There continue to be rapid technological
changes associated with the Internet. If we are unable to keep pace with such
technological changes in order to achieve our goals, our growth and,
accordingly, the value of your investment in our shares may be negatively
affected.
The business development network that we plan to provide clients will depend
on the alliances that we form with selected companies from related industries.
We intend to offer our clients a network that has experience in solving
problems that are typically faced by emerging businesses. We intend to create
such a network by forming alliances with companies in the legal, Internet,
financial, marketing, and business consulting industries. Our ability to
service the needs of emerging growth companies will be enhanced, we believe, by
leveraging the services of our alliance partners. The inability on our part to
successfully form and maintain such alliances with companies in the legal,
Internet, financial, marketing, and business consulting industries, may limit
our ability to service the needs of our clients, thereby impeding our growth and
adversely affecting the value of your investment in our common stock.
8
USE OF PROCEEDS
We estimate that our net proceeds from the sale of this offering, after
deducting offering expenses payable by us, will be approximately $435,000 if the
minimum offering of 125,000 units, containing 250,000 shares of common stock, is
sold at an assumed initial public offering price of $4.00 per unit and
$3,935,000 if the maximum offering of 1,000,000 units, containing 2,000,000
shares, is sold. The primary purposes of this offering are to obtain additional
equity capital, create a public market for our common stock and facilitate
future access to public markets. The following table shows our anticipated uses
of the net proceeds of this offering, assuming the sale of the minimum
125,000-unit offering and the maximum 1,000,000-unit offering:
Assuming 125,000 Assuming 1,000,000
Units, containing Units, containing
250,000 shares, are sold 2,000,000 shares, are sold
in this offering in this offering (1)
------------------ --------------------
Marketing and
Technology Staff (2) $ 100,000 $ 1,100,000
Marketing Expenses (3) 100,000 1,250,000
Software Development 50,000 100,000
Acquisitions (4) 50,000 100,000
Working Capital 135,000 1,385,000
------------- -------------
Totals: $ 435,000 $ 3,935,000
(1) We can provide no assurance that all or any part of the units offered by
this prospectus in excess of the 125,000-unit minimum will be sold.
Please see "Risk Factors" and "Plan of Distribution" for additional
information concerning the terms of this offering.
(2) We anticipate that these funds will be used for staff salaries. To the
extent that only the minimum is raised, we would hire only a couple of
additional staff members. The funds would pay their salaries for
approximately one year. Should the maximum be raised, we may hire up to
ten marketing and technology staff members and pay their salaries for
approximately one year, or, hire fewer staff members and fund their
salaries for a longer period of time.
(3) Non-personnel marketing expenses will include the purchase of television,
radio and print advertising, as well as the development and maintenance of
our websites.
(4) We intend to purchase or form a broker-dealer business to meet our
clients' capital formation needs. Our research indicates that we can
purchase a licensed brokerage, with minimal assets, employees, and
capital, for between $50,000 and $100,000.
The above amounts reflect our best estimates at this time. We anticipate
that the proceeds of this offering, combined with current working capital, will
be sufficient to allow us to continue operating for at least the next twelve
months. Even if we sell only the minimum offering, our management believes that
we will have sufficient funds to continue operations for at least the next
twelve months; however, we may be required to reduce the rate of our growth and
expansion.
If we determine that the intended use of proceeds described above is
inadvisable or impractical, we reserve the right to vary the application and
amount of its use of proceeds as we deem advisable, given all known facts and
circumstances. Pending their use, the net proceeds of this offering will be
invested in short-term, investment-grade, interest-bearing securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings to finance the growth and
development of our business and therefore do not anticipate paying any cash
dividends in the foreseeable future. Any future determination to pay cash
dividends will be made at the discretion of our board of directors and will
depend on our financial condition, results of operations, capital requirements,
general business condition and other factors that our board of directors may
deem relevant. Our right to declare a dividend is not limited by any
restrictive covenant, contract or agreement.
9
DILUTION
Our net tangible book value as of March 31, 2001 was approximately $753,561,
or $0.05 per share of common stock. Net tangible book value per share
represents the amount of total tangible assets less total liabilities, divided
by the number of shares of common stock outstanding. The following table
illustrates the dilution to purchasers of common stock in this offering if the
minimum offering of 125,000 units, containing 250,000 shares of common stock, is
sold, and also at certain arbitrarily determined sales levels in excess of the
minimum (ie., 1,000,000 shares, 1,500,000 shares and 2,000,000 shares), at an
assumed public offering price of $4.00 per unit, or $2.00 per share, in all
cases after deduction of estimated offering expenses payable by us. At the
sales levels indicated, our pro forma net tangible book value at March 31, 2001
would have been $1,188,561, $2,688,561, $3,688,561 or $4,688,561, respectively,
or $0.08, $0.16, $0.22 or $0.27, respectively, per share of common stock,
representing an immediate increase in net tangible book value of $0.03, $0.11,
$0.17 or $0.22, respectively, per share to existing stockholders and immediate
dilution of $1.92, $1.84, $1.78 or $1.73, respectively, per share to new
investors.
Number of shares of common stock sold in the offering (1)
----------------------------------------------------------
250,000 1,000,000 1,500,000 2,000,000
Shares Shares Shares Shares
------- --------- --------- ---------
Initial public offering
price per share. . . . . . . $2.00 $2.00 $2.00 $2.00
Net tangible book value
before the offering. . . . . 0.05 0.05 0.05 0.05
Increase in net tangible
book value attributable
to new investors . . . . . . 0.03 0.11 0.17 0.22
------- -------- -------- ---------
Pro forma net tangible
book value per share
after the offering . . . . . . 0.08 0.16 0.22 0.27
------- -------- -------- ---------
Dilution per share to new
public investors . . . . . . . $1.92 $1.84 $1.78 $1.73
======= ======= ======== =========
(1) The numbers of shares of common stock shown as sold in the above table, in
excess of the minimum offering of 150,000 units, containing 250,000 shares
of common stock, have been arbitrarily selected by us for purposes of
illustration only. We can provide no assurance that all or any part of
the common stock offered by this prospectus in excess of the minimum will
be sold. See "Risk Factors" and "Plan of Distribution" for additional
information concerning the terms of this offering.
The following table summarizes, on a pro forma basis as of March 31, 2001,
after giving effect to the sale of the minimum offering of 125,000 units,
containing 250,000 shares of common stock, the difference between the number of
shares of common stock purchased from Mentor Capital Consultants, the total
consideration paid and the average price per share paid by the existing
stockholders and by new public investors purchasing shares in this offering at
an assumed initial public offering price of $4.00 per unit, or $2.00 per share
of common stock, and before deduction of estimated offering expenses payable by
us:
Shares Total
Purchased Consideration Average
------------------ ------------------ Consideration
Amount Percent Amount Percent Paid Per Share
-------- --------- -------- --------- ---------------
Existing
stockholders. . . . 15,530,762 98.4% $1,678,253 77.0% $0.11
New public
investors(1). . . . 250,000 1.6% 500,000 23.0% $2.00
---------- ------ --------- ------ -------
Total . . . . . . . 15,780,762 100.0% $2,178,253 100.0%
========== ====== ========= ======
(1) If sales levels of 1,000,000 shares, 1,500,000 shares and 2,000,000 shares
are assumed for purposes of illustration only, at an assumed initial
public offering price of $2.00 per share, the percent of total shares sold
which are purchased by new investors would be 6.0%, 8.8% and 11.4%,
respectively; and the aggregate consideration paid by new investors would
be $2,000,000, $3,000,000 or $4,000,000, respectively, or 54.4%, 64.1% or
70.4%, respectively, of the total consideration paid for all of the common
stock to be outstanding after this offering. The average consideration
paid per share, by both existing stockholders and new investors, remains
the same at all levels of sales. There can be no assurance that all or
any of the units offered by this prospectus in excess of the minimum
offering of 125,000 units, containing 250,000 shares, will be sold. See
"Risk Factors" and "Plan of Distribution" for additional information
concerning the terms of this offering.
10
SELECTED FINANCIAL DATA
You should read the following selected financial data in conjunction with
"Plan of Operation" and our financial statements, and the related notes, which
are included in this prospectus. The information shown below as of December 31,
2000, and for the year then ended, has been taken from our financial statements,
which have been audited by Van Dorn & Bossi, independent certified public
accountants. Our unaudited consolidated financial statements as of March 31,
2001, and for the three-month period then ended, and for the period from March
13, 2000 (inception) to March 31, 2001, reflect, in the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial condition and results for such periods.
Mentor Capital Consultants, a Development-Stage Enterprise
Statement of Income Data:
MARCH 13, 2000 THREE MONTHS MARCH 13, 2000
(INCEPTION) ENDED (INCEPTION)
TO DECEMBER 31, MARCH 31, MARCH 31,
2000 2001 2001
------------ ------------ ------------
(unaudited) (unaudited)
Total revenues . . . . . . $ 9,816 $ 17,918 $ 27,734
Total costs and expenses . 662,195 290,231 952,426
--------- -------------- ------------
Net income (loss). . . . . $ (652,379) $ (272,313) $ (924,692)
========= ============== ============
Net income (loss) per
common share . . . . . $ (0.05) $ (0.02)
========= ==============
Weighted average common
shares outstanding. . . . 13,122,186 $ 15,510,484
Balance Sheet Data:
March 31, 2001
-----------------
(unaudited)
Cash and cash equivalents. . . . . . . . . $ 603,460
Total assets . . . . . . . . . . . . . . . $ 753,561
Long-term debt, less current portion . . . $ -0-
Deficit accumulated during
development stage. . . . . . . . . . . $ (924,692)
Total stockholders' equity . . . . . . . . $ 753,561
11
PLAN OF OPERATION
Certain of the information discussed in this prospectus, and in particular
in this section entitled "Plan of Operation," contains forward-looking
statements that involve risks and uncertainties that might adversely affect our
operating results in the future in a material way. Such risks and uncertainties
include, without limitation, our possible inability to obtain additional
financing, loss of personnel, rate changes, technological changes and increased
competition. Many of these risks are beyond our control. We are not entitled
to rely upon the "safe harbor" provisions of Section 27A of the Securities Act
of 1933 or Section 21E of the Securities Exchange Act of 1934 when making
forward-looking statements.
Overview
Since its inception in March 2000, Mentor Capital Consultants has been
principally engaged in structuring and raising capital for its business.
We will charge fees for the various services provided to our clients on
either an hourly or flat fee basis, depending on the nature and extent of
services performed for our client companies. Compensation received will be in
the form of cash, stock in the client company, or a combination thereof.
Our ability to generate revenues and achieve profitability will be dependent
on our ability to attract as clients start-up and emerging growth companies that
may benefit from our consulting services. We plan to market our services by
utilizing direct marketing methods and traditional public relations techniques,
through our participation in industry conferences and seminars and by means of
the Internet.
Plan of Operation
Our plan of operation for the next twelve months is to:
* implement a marketing campaign to attract businesses in need of our
consulting services;
* expand our staff to include individuals with the necessary skill sets to
provide our consulting services to those clients; and
* continue to develop relationships within the investment banking community,
thereby enhancing our ability to service our clients, and acquire or form an
NASD-member broker-dealer, which will allow us to directly offer
underwriting, investment banking and related services to our clients.
We anticipate being able to fully commence our consulting operations and sale
of our software product, The Mentor Capitalist's Primer on Capital Formation
Options TM, within approximately three months following the commencement of this
offering. However, even if there are unanticipated delays in launching these
two revenue-generating activities, we believe that the funds which we currently
have available, plus the net proceeds from the sale of the 125,000 units which
must be sold to satisfy the minimum requirement for this offering, will be
sufficient to fund our planned operations for at least the next twelve months.
Additional capital will be needed in the future if the minimum is all we raise.
To the extent we raise any amount in excess of the minimum, we will be able to
more expeditiously implement our business plan.
Early-Stage Activities
Since its inception, Mentor Capital Consultants has been in the development
stage, engaged primarily in raising capital, and has not generated significant
revenues. During the period from March 13, 2000 (inception) through March 31,
2001, we provided consulting services to two clients in order to test and
evaluate our methods, for which we were paid an aggregate of $14,500 in fees.
12
During the period prior to July 1, 2000, we primarily utilized services of
outside professionals rather than employees. From inception through March 31,
2001, our costs for such services was $247,597. We hired four full-time
employees as of July 1, 2000, and have since supplemented that number with four
additional full-time employees and seven part-time employees. As a result, we
anticipate that consulting costs will be reduced in the future, and salary costs
will increase. Other expenses during this period consisted of general
administrative expenses totaling $704,829.
As of March 31, 2001, we had incurred a net loss of $(924,692).
Liquidity and Capital Resources
As of March 31, 2001, we had cash in the amount of $603,460, and our working
capital totaled $661,583. To date, our principal source of liquidity has been
the sale of our common stock in a private placement, from which we have received
$1,591,489.
Net cash used for operating activities through March 31, 2001 was $(881,307).
We have expended $106,722 for investing activities, including the purchase of
furniture and equipment. We believe that the net proceeds of the 125,000-unit
minimum offering will be necessary to provide sufficient capital to fully
implement our business consulting operations and to acquire or form an
NASD-member broker-dealer.
Seasonality
We do not believe that our business will be seasonal.
Impact of Inflation
We have not been affected by inflation to date, and do not expect inflation to
have a significant effect on operations in the foreseeable future.
13
BUSINESS
Mentor Capital Consultants was incorporated in March 2000 under the laws of
Delaware as IPO Investors Network, Inc. We changed our name in March 2001 to
Mentor Capital Consultants, Inc. Since inception, our preliminary
organizational functions, including market research, hiring of staff, and the
development of marketing and communication modes and methods have been funded
with the proceeds of a private placement of our common stock.
Synopsis of our Business
Our principal business will be to provide a comprehensive suite of business
management and marketing consulting services to pre-start-up through 5-year-old
emerging growth companies, in virtually any area of business, and the
entrepreneurs that operate them.
We will offer consulting services in a wide range of business disciplines
for new and emerging companies, including: strategic planning, business plan
development, marketing, media buying, and management recruiting. To address our
clients' needs for information on capital formation, we are developing an
"off-the-shelf" software product, The Mentor Capitalist's Primer on Capital
Formation Options TM, which will provide entrepreneurs with a comprehensive
education in capital formation, including the various self-financing options
available, as well as a step-by-step tutorial on completing the Form U-7 for
Small Corporate Offerings (SCORs) and the Form 1-A used in Regulation A
offerings. We will also provide our clients with referrals to broker-dealers
for underwriting and other investment banking services, as needed.
Business Strategic Planning and Marketing Consulting Services
Entrepreneurs launching new businesses often lack the skills and experience
necessary to build a successful and sustainable organization. A study published
in a recent issue of the Harvard Business Review describes how various types of
business incubators and mentor capitalists have stepped in to fill the vacuum
left as venture capitalists have become increasingly focused on narrow business
fields, such as high technology.
"[Business Architects] help entrepreneurs create and refine a business
model, find top talent, build business processes, [and] test their ideas in
the marketplace [.] They are a key piece of the value creating ecology in
Silicon Valley. And as Net fever subsides and the word profitability
reenters people's vocabulary, these business architects will play a greater
role in the creation of vital new businesses." Harvard Business Review,
November/December 2000.
We will provide small businesses and their entrepreneur owners a comprehensive
suite of business, marketing, and strategic planning services.
On behalf of such clients we will:
* Interview management and relevant experts in order to understand their
business; we will conduct a SWOT (strengths, weaknesses, opportunities, and
threats) analysis of their business, review the company's business plan, if
any, and research the company's products, services, market potential,
competition, growth objectives, and capital requirements;
* Provide strategic planning services, assisting management in the development
and refinement of their core business model;
* Assist in the writing or refining of a business plan;
* Assist in the execution of their business strategy; and
* Provide management recruiting services.
14
With specific reference to marketing consulting, we will:
* Review and evaluate current marketing strategies and assist in developing of
a comprehensive marketing plan, including indentification of target markets
and develop a methodology to reach them;
* Identify target markets and develop a marketing methodology to reach these
markets;
* Design advertising and marketing campaigns and assist in media buying
strategies; and
* Assist in recruiting key marketing and sales personnel.
Business Development Network - Alliance Program
We plan to increase our ability to service the needs of emerging growth
companies by leveraging the services of select companies in the financial,
marketing, Internet, legal and business consulting industries. The alliances we
establish with these companies will collectively be known as our "business
development network." By providing access to the services of our alliance
partners, we will permit our clients to evolve more fully and effectively, while
allowing them to focus on their respective core businesses.
By aligning ourselves with companies that specialize in working with
emerging growth businesses, we intend to offer our clients a network that has
experience in solving the typical problems of emerging businesses. We also
believe that a broad base of alliance partners will enhance our exposure to
additional potential clients. Should we choose to expand this model, it may be
used to assist in our own growth by allowing us to provide a variety of services
in a location without necessarily having to establish an office in that area.
We have not yet established any business alliances.
Fees
We will charge our clients consulting fees based on the type and extent of
services provided. Fees will be charged on an hourly or a flat-rate basis and
may be payable in the form of cash, stock and/or warrants to purchase stock in
our client companies or a combination of the foregoing. We will also derive
revenue from the sale of our software.
Broker-dealer Referral Services
To facilitate our consulting clients' needs for capital formation advice and
services, we have developed relationships with three broker-dealers to whom we
may refer appropriate clients for the purpose of participating in best efforts
underwritings such as: small issue initial public offerings, post-IPO offerings,
and private placements.
The broker-dealers with whom we have established referral relationships are:
* Blake Street Securities, 1860 Blake Street, Denver, Colorado 80202;
* Liss Financial Services, 424 East Wisconsin Avenue, Milwaukee, Wisconsin
53201; and
* ACAP Financial, 47 West 200 South American Plaza, Salt Lake City, Utah
84101.
Our relationships with the above three firms are delineated by verbal
agreements, pursuant to which Mentor Capital is not required to refer a certain
number or type of prospect and none of the broker-dealers is obligated to
undertake any underwriting or other commitment on behalf of a referred client,
having only agreed with us to review and evaluate any potential underwriting
candidate referred by us. The determination of whether or when to proceed with
an offering on behalf of a referred client will be at the sole discretion of the
broker-dealer, based on that firm's standards and procedures. We will have no
role or discretion in this determination. Similarly, we will not receive any
finder's fees or other compensation for our referrals, nor will we share in any
way in such underwriting compensation as may be paid a broker-dealer by our
client. Notwithstanding our acquisition or formation of a broker-dealer, as
described below, we intend to seek additional referral relationships with other
broker-dealers.
15
Our business plan contemplates that we will either acquire or form an
NASD-member broker-dealer. Until such time as we have accomplished one or the
other of these goals, we will refer our clients for the provision of all
underwriting services to registered broker-dealers, including those listed
above. Between now and the time when we have either purchased or formed a
broker-dealer, we will not engage in any activity that would subject us to being
licensed as a broker-dealer, investment company or investment advisor.
Our Software Product - The Mentor Capitalist's Primer on Capital Formation
Options TM
We are developing a comprehensive software package for sale to our consulting
clients whose capital needs are either too small or for whom it is too early in
their business cycle to seek the services of a broker-dealer intermediary. This
software, titled The Mentor Capitalist's Primer on Capital Formation Options TM,
will provide a comprehensive education in capital formation, including the
sources, benefits and burdens of various forms of debt and equity financing, as
well as the various self-financing options available. The software offers users
a step-by-step tutorial on completing the Form U-7 for Small Corporate Offerings
(SCORs), as well as the Form 1-A used in Regulation A offerings. In addition to
describing and explaining the various questions which appear on these forms, our
software provides examples of how different businesses (e.g., manufacturing,
specialty products, services, and educational software) might respond to the
various questions asked.
Marketing Strategy
Our target market consists of entrepreneurs and early stage businesses with
products or services that we perceive as having compelling features and
providing benefits which will be well-received in the marketplace, with national
or international sales potential.
We have developed a multi-pronged marketing strategy that we believe will
generate interest from companies that meet our criteria. Our marketing strategy
has been influenced by information we gathered as result of a market test we
conducted at the beginning of 2001.
Market Research
Beginning in January 2001, we conducted a market research test. Initially,
we ran a 60-second test advertisement promoting our marketing and business
consulting services on a Denver AM business news radio station. We later
expanded the test by running the ad on two additional AM business news stations.
The ad ran for approximately 75 days and cost approximately $30,000. We had
several purposes for the test: First, we wanted to confirm the extent of the
demand for our business and marketing consulting services in the Denver metro
area. Second, we wanted to test the efficacy of AM radio, particularly news and
business news programs, as a means by which we might reach our target market, as
well as have an opportunity to assess the quality of the businesses responding
to our ad. Finally, we hoped that through conversations with the entrepreneurs
responding to our ad, we could learn more about the types of consulting services
that interested emerging businesses most. The test was not intended as a
vehicle to market our services, and, to date, we have neither solicited nor
contracted to provide consulting services to any responding party.
During the 75 days that we ran the test ad, we received more than 300
responses from entrepreneurs and business executives at many different stages in
their business development. The market test generally confirmed an interest in
the types of business and marketing consulting services we offer. It also
revealed the existence of a broad range of businesses likely to seek the type of
management and business consulting services we offer. In addition, we learned
that many small businesses and the entrepreneurs behind them are interested in
raising capital to fund and grow their operations, but lack the knowledge and
experience necessary to locate capital for their businesses. It was this
information which contributed to the idea that we develop a software program
which would offer entrepreneurs a comprehensive "education" in capital
formation, including sources of capital, self-financing options, and the
benefits and burdens associated with various capital-raising options. Our
decision to establish relationships with broker-dealers to whom we could refer
clients in need of underwriting and investment banking services, as well as
related advice and consultation, was similarly based.
16
Marketing Methods
Based upon the results of our market test, we plan to employ the following
marketing methods:
* We intend to run ads promoting our consulting services as well as our
software on AM news and business news radio, in local business newspapers
and magazines such as the Denver Business Journal, as well as local and
cable television business programs such as Bloomberg's Reports and CNBC's
Squawk Box;
* We also intend to attend conferences, seminars, and trade shows held by
entrepreneurial associations, venture associations, and business angel
groups. Whether it be in the role of exhibitor, speaker, or attendee, we
expect that our company will use these gatherings as occasions to promote
our company and the services and solutions we can offer entrepreneurs and
their emerging businesses;
* We intend to launch a public relations campaign that will include press
releases, print articles, interviews and other public appearances that we
believe will generate local and national interest in our company's business
model and services; and
* We intend to use the World Wide Web as a tool to promote our business and
attract potential clients. We believe that entrepreneurs are increasingly
using the web as a resource to aid them in building their businesses. To
this end, we intend to conduct e-mail campaigns and establish an extensive
network of Internet hyperlinks to maximize our visibility to web-searching
entrepreneurs.
Future Growth Strategy
It is our intention to expand our management and marketing consulting services
to other major metropolitan areas in the United States. The time frame and
extent to which we accomplish this expansion will depend on the amount raised in
this offering.
In addition, to enable us to more fully service the needs of our business
clients, including their need for consulting on the key issue when and how best
to raise capital to fund their business' growth, an important element of our
future strategy is to either purchase a broker-dealer or become registered as a
broker-dealer.
In cases we deem appropriate, we may enter into partnering or joint venture
agreements with companies whose products or services lend themselves to our
direct marketing strategies. We may also sponsor fee-based educational forums
and seminars for "angel" investors on how to locate investment opportunities,
analyze business plans, conduct effective "due diligence" examinations and
otherwise evaluate potential investment opportunities. We continually evaluate
and discuss potential acquisitions, investments and strategic alliances;
however, we have no present commitments or agreements with respect to any of the
foregoing.
Competition
We compete in a rapidly changing marketplace that is intensely competitive,
and our ability to compete effectively depends on many factors. Because our
business model blends management consulting, marketing, and finance, we will
have potential competition in each of these areas, and there is no assurance
that we will be successful in achieving our competitive goals.
As a management and business consultant, Mentor Capital Consultants faces
considerable competition from a broad array of business consultants, management
consultants, attorneys, and accountants. In addition to established management
consulting businesses, such as Andersen Consultants, now Accenture, and KPMG
Consulting, there are many smaller "boutique" management and marketing
consultants from which we will also face intense competition.
17
As marketing consultants, we face competition from advertising agencies,
public relations firms, and regional and local marketing firms. Our software
product will compete in a marketplace filled with financial education software
and other business and capital raising tutorials.
Many of our existing competitors, as well as a number of potential new
competitors have extensive operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical, and marketing
resources than our company. This may allow them to devote greater resources to
the development and promotion of their services than Mentor Capital can bring to
bear with respect to its business. Such competitors may also engage in more
extensive research and development, undertake more far-reaching marketing
campaigns, adopt more aggressive pricing policies and make more attractive
offers to existing and potential employees, advertisers, and potential strategic
partners.
New market entrants also pose a competitive threat to our business. We do not
own any patented technology that precludes or inhibits competitors from entering
the market in which we operate or from providing services and solutions similar
to ours. Our competitors may develop or offer services or solutions that are
superior to ours at a lower price.
Mentor Capital will use the Internet as an important component of its
business, and will thus be subject to the intense competition and rapid
technological change associated with the Internet. See "Risk Factors" for
additional information concerning this challenge.
Legal Proceedings
Neither our company nor any of our officers or directors is, or has ever been,
a party to any legal proceeding material to our company.
Personnel and Facilities
We currently employ fifteen persons, comprised of eight full-time employees
and seven part-time employees and consultants. We believe that our relations
with our employees are good. We intend to perform most of our functions through
our own personnel, but we expect to purchase some services from other
professionals and experts, such as attorneys, accountants, and tax planning
personnel.
We operate our business from 2,000 square feet of office space located in
Boulder, Colorado, which we rent from an unaffiliated party under a lease
agreement which expires September 1, 2003. The space is adequate and sufficient
for our current and reasonably foreseeable operations. Upon the expiration of
our current lease, we expect that we will be able to obtain either a renewal
lease, if desired, or a new lease at an equivalent or better location.
18
MANAGEMENT
Directors and Officers
The following table shows the names and ages of our directors and officers and
the positions they hold with our company.
Name Age Position
Michael Bissonnette 52 Chief Executive Officer, President,
Treasurer and Director
John K. Thompson 40 Vice President
Elizabeth B. Lane 41 Secretary and Director
Richard A. Kranitz 56 Director
Michael Bissonnette has been the President, Treasurer and a director of
Mentor Capital Consultants since founding our company in March 2000. From 1994
to 2000, Mr. Bissonnette was self-employed as a private investor, having retired
in 1993 from Voice Powered Technology International, a company which he founded
in 1989 and which developed and manufactured advanced, low-cost voice powered
recognition technology and related equipment for consumer products such as VCRs;
he was the President and a director of Voice Powered Technology International
from 1989 to 1993. From 1977 to 1989, Mr. Bissonnette was the President and a
director of Knight Protective Industries, Inc., a home security business which
he founded in 1977.
John K. Thompson has been a Vice President of Mentor Capital Consultants
since March 2001. From 1990 to 1999, Mr. Thompson held senior management
positions at CareerTrack, an $80 million training company built upon the
innovative use of direct mail and telesales. At the time of his departure from
CareerTrack in 1999, he was Sales and Marketing Manager. From 1999 to 2000, Mr.
Thompson was the Director of Marketing at Productivity Point International
(PPI), a $150 million computer training company.
From 2000 until joining Mentor Capital Consultants in 2001, Mr. Thompson was
President of Innovative Marketing Solutions, a marketing consulting agency,
which he owned.
Elizabeth B. Lane has been the Secretary and a director of Mentor Capital
Consultants since our inception in March 2000. Previously, from 1992 to 2000,
Ms. Lane was General Counsel for Colorado Commodities Management Corporation, a
commodities trading advisor which managed as much as $600 million in client
assets; she also served as Director of Investor Relations, from 1997 to 2000,
and Operations Manager, from 1995 to 1996, of Colorado Commodities Management.
Richard A. Kranitz has been a director of Mentor Capital Consultants since our
inception in March 2000. From 1984 to the present, he has been a senior partner
in the law firm of Kranitz & Philipp, specializing in securities, banking and
business law. Mr. Kranitz is a director of the Grafton State Bank.
All of our directors hold office until the next annual meeting of stockholders
and the election and qualification of their successors. Officers are elected
annually by our board of directors and serve at the discretion of the board.
See "Principal Stockholders" for information concerning ownership of our
common stock by our directors and officers.
Management Compensation
Directors. Our directors are not compensated for acting as directors, nor are
they reimbursed for expenses related to their service as directors.
19
Summary Compensation Table. The following table provides information
concerning compensation earned by our Chief Executive Officer for services
rendered to Mentor Capital Consultants in all capacities during the fiscal year
ended December 31, 2000. Compensation has been reported for the period from
March 13, 2000 (inception) through December 31, 2000. We are required to
disclose in the table the compensation we paid to our Chief Executive Officer
and to any other executive officer of our company who was paid in excess of
$100,000. These persons are referred to in this prospectus as "named executive
officers." Because no executive officer of our company was paid more than
$100,000 for our initial fiscal year, which ended December 31, 2000, only
compensation paid by us to our Chief Executive Officer is included in the table.
Annual Compensation All Other
Name and Principal Positions Year Salary($) Bonus($) Compensation($)
- ----------------------------- ---- --------- -------- ---------------
Michael Bissonnette . . . . . 2000 $77,083(1) - -
Chief Executive Officer,
President, Treasurer
and Director
(1) Includes compensation received from March 13, 2000 (inception) through
December 31, 2000. Mr. Bissonnette's annual compensation for the fiscal
year ending December 31, 2001, exclusive of bonuses, if any, is $150,000.
Option Grants in the Last Fiscal Year. No options were granted to our Chief
Executive Officer, our only named executive officer, for the period from March
13, 2000 (inception) through December 31, 2000.
Option Exercises in 2000 and Aggregate Option Values at December 31, 2000.
No options have been exercised by our Chief Executive Officer, our only named
executive officer, during fiscal 2000; as of December 31, 2000, no unexercised
options were held by our Chief Executive Officer.
Limitation of Liability and Indemnification
Our bylaws provide for the elimination, to the fullest extent permissible
under Delaware law, of the liability of our directors to us for monetary
damages. This limitation of liability does not affect the availability of
equitable remedies such as injunctive relief. Our bylaws also provide that we
shall indemnify our directors and officers against certain liabilities that may
arise by reason of their status or service as directors or officers, other than
liabilities arising from certain specified misconduct. We are required to
advance their expenses incurred as a result of any proceeding against them for
which they could be indemnified, including in circumstances in which
indemnification is otherwise discretionary under Delaware law. At the present
time, there is no pending litigation or proceeding involving a director,
officer, employee or other agent of our company in which indemnification would
be required or permitted. We are not aware of any threatened litigation or
proceeding which may result in a claim for such indemnification.
20
ADVISORY BOARD
Mentor Capital Consultants has organized an Advisory Board of key individuals
with experience in corporate finance, entrepreneurship, securities law, and
business accounting. We will draw on the expertise of the advisory board, as
needed, to provide our clients with additional management, marketing and
financial consulting services.
Current members of the Advisory Board are:
* Michael Bissonnette: Mr. Bissonnette is the President and founder of Mentor
Capital Consultants.
* Richard Furber: Mr. Furber is a former President of Dean Witter
International and Managing Director of Lehman Brothers. While at Lehman,
Mr. Furber had a key role in the evaluation of scores of companies seeking
underwriting services from Lehman Brothers. He had significant involvement
in every aspect of the public offering process of hundreds of high growth
companies underwritten by Lehman Brothers. Currently, Mr. Furber is the CEO
and founder of MediMerge Group LLC and sits on the boards of Intelidyne,
Inc., Encap, Inc., and Advanced Health Technologies;
* Ralph Bellizzi, CBI, CBC, SBA: Mr. Bellizzi is the founder, President and
Colorado Licensed Principal Broker of Aaron Bell International, Inc., a firm
specializing in business market analysis, mergers, and acquisitions. During
his more than 30 years experience in business sales, strategic business
planning, equity funding, and business organization, Mr. Bellizzi has
founded and built 17 companies.
* Richard A. Kranitz: Mr. Kranitz is an attorney specializing in securities
regulation, corporate finance, and business planning. In his more than 30
years of practice, Mr. Kranitz has formed more than 100 new businesses and
served as an officer and/or director of over 30 of those businesses. He
currently serves as a director of Mentor Capital Consultants.
* Bradley J. Fehn, CPA: Mr. Fehn is a former senior auditor with KPMG Peat
Marwick. He is the Director of Finance for isherpa.com, one of the largest
incubators in the State of Colorado, and has considerable expertise in the
creation and execution of complex financial modeling for new businesses, as
well as valuation analysis and strategic partner planning and agreement
negotiation.
Upon the sale of the minimum offering, members of the Advisory Board will be
compensated on a quarterly basis with a cash fee of $2,500 and 2,500 shares of
our common stock.
21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Transactions
At the inception of Mentor Capital Consultants, our president, Michael
Bissonnette, sold certain assets to us, consisting primarily of furniture,
computers and software, for the aggregate price of $55,000. Such amount was
determined by our board of directors to be the "fair market value" of such
assets. The transaction was disclosed and approved in accordance with the
procedures described below under "Certain Relationships and Related Transactions
- - Conflicts of Interest."
We have no loans outstanding to any of our directors or officers.
Conflicts of Interest
Certain potential conflicts of interest are inherent in the relationships
between our affiliates and us.
From time to time, one or more of our affiliates may form or hold an ownership
interest in and/or manage other businesses both related and unrelated to the
type of business that we own and operate. These persons expect to continue to
form, hold an ownership interest in and/or manage additional other businesses
which may compete with ours with respect to operations, including financing and
marketing, management time and services and potential customers. These
activities may give rise to conflicts between or among the interests of Mentor
Capital Consultants and other businesses with which our affiliates are
associated. Our affiliates are in no way prohibited from undertaking such
activities, and neither we nor our shareholders will have any right to require
participation in such other activities.
Further, because we intend to transact business with some of our officers,
directors and affiliates, as well as with firms in which some of our officers,
directors or affiliates have a material interest, potential conflicts may arise
between the respective interests of Mentor Capital Consultants and these related
persons or entities. We believe that such transactions will be effected on
terms at least as favorable to us as those available from unrelated third
parties.
With respect to transactions involving real or apparent conflicts of interest,
we have adopted policies and procedures which require that (1) the fact of the
relationship or interest giving rise to the potential conflict be disclosed or
known to the directors who authorize or approve the transaction prior to such
authorization or approval, (2) the transaction be approved by a majority of our
disinterested outside directors and (3) the transaction be fair and reasonable
to Mentor Capital Consultants at the time it is authorized or approved by our
directors.
22
PRINCIPAL STOCKHOLDERS
The following table sets forth as of March 31, 2001, and as adjusted to
reflect the sale of the minimum offering of 125,000 units, containing 250,000
shares of common stock, certain information with respect to the beneficial
ownership of our common stock by:
* each person known by us to beneficially own more than 5% of our common
stock;
* each of our directors;
* our sole named executive officer; and
* all of our directors and executive officers as a group.
We believe that, subject to applicable community and marital property laws,
the beneficial owners of our common stock listed below have full voting and
dispositive power with respect to such shares.
Shares beneficially owned Shares beneficially owned
Name and Address of prior to offering after minimum offering(1)
Beneficial Owner Number Percent Number Percent
- ---------------------- -------- ------- -------- -------
W. Michael Bissonnette. . 8,116,750 52.3% 8,116,750 51.4%
4940 Pearl East Circle
Boulder, Colorado 80301
Elizabeth B. Lane . . . . 36,125 0.2% 36,125 0.2%
4940 Pearl East Circle
Boulder, Colorado 60301
Richard A. Kranitz. . . . 120,000 0.8% 120,000 0.8%
1238 Twelfth Avenue
Grafton, Wisconsin 53024
Diane Paoli . . . . . . . 1,250,000 8.0% 1,250,000 8.0%
202 State Street A
Santa Barbara, California
All directors and
executive officers as
a group (4 persons) . . 8,372,875 53.9% 8,372,875 53.1%
(1) We cannot guarantee that all or any part of the common stock offered in
excess of the minimum offering of 125,000 units, containing 250,000 shares
of common stock, will be sold. See "Risk Factors" and "Plan of
Distribution" for information concerning the terms of this offering. If
the number of shares of common stock sold in the offering, as arbitrarily
selected by us for purposes of illustration only, is assumed to be 500,000
shares, 1,000,000 shares, 1,500,000 shares or 2,000,000 shares, ownership
percentages would be as follows:
Assumed number of shares of common
stock sold in the offering
----------------------------------------
500,000 1,000,000 1,500,000 2,000,000
Shares Shares Shares Shares
------- --------- --------- ---------
W. Michael Bissonnette . . 50.6% 49.1% 47.7% 46.3%
Elizabeth B. Lane. . . . . 0.2% 0.2% 0.2% 0.2%
Richard A. Kranitz.. . . . 0.7% 0.7% 0.7% 0.7%
Diane Paoli. . . . . . . . 7.8% 7.6% 7.3% 7.1%
Directors and executive
officers as a group. . . 52.2% 50.7% 49.2% 47.8%
23
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 100,000,000 shares of common stock,
par value $0.0001 per share, and 25,000,000 shares of preferred stock, par value
$0.0001 per share. As of March 31, 2001, 15,530,762 shares of common stock and
no shares of preferred stock were outstanding.
Common Stock
Subject to preferences that may apply to shares of preferred stock outstanding
at the time, the holders of outstanding shares of common stock are entitled to
receive dividends out of assets legally available therefore at times and in
amounts as our board of directors may determine. Each stockholder is entitled
to one vote for each share of common stock held on all matters submitted to a
vote of the stockholders. Cumulative voting is not provided for in our amended
and restated certificate of incorporation, which means that the majority of the
shares voted can elect all of the directors then standing for election. The
common stock is not entitled to preemptive rights and is not subject to
conversion or redemption. Upon the occurrence of a liquidation, dissolution or
winding-up, the holders of shares of common stock are entitled to share ratably
in all assets remaining after payment of liabilities and satisfaction of
preferential rights of any outstanding preferred stock. There are no sinking
fund provisions applicable to the common stock. The outstanding shares of
common stock are, and the shares of common stock to be issued upon completion of
this offering will be, fully paid and non-assessable.
Preferred Stock
Our board of directors has the authority, within the limitations and
restrictions in the amended and restated certificate of incorporation, to issue
25,000,000 shares of preferred stock in one or more series and to fix the
rights, preferences, privileges and restrictions thereof, including dividend
rights, dividend rates, conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares constituting
any series or the designation of any series, without further vote or action by
the stockholders. The issuance of preferred stock may have the effect of
delaying, deferring or preventing a change in control of Mentor Capital
Consultants without further action by the stockholders. The issuance of
preferred stock with voting and conversion rights may adversely affect the
voting power of the holders of common stock, including voting rights, of the
holders of common stock. In some circumstances, this issuance could have the
effect of decreasing the market price of the common stock. We currently have no
plans to issue any shares of preferred stock.
Warrants
General. The two warrants to purchase common stock which are components of
the units offered by this prospectus are exercisable in whole at any time or in
part from time to time (provided that at least 100 shares, or an integral
multiple thereof, must be purchased upon each such partial exercise), at the
prices, respectively, of $3.00 and $4.00 per share of common stock purchased.
The warrants will be exercisable for a period of eighteen months, commencing
six months following the initial effective date of the registration statement
relating to this offering, provided that the common stock issuable upon the
exercise of such warrant is, at the time of exercise, registered or otherwise
qualified for sale under the Securities Act and the securities or "blue sky"
laws of the jurisdiction in which the exercise of such warrant is proposed to be
effected. Thereafter, each warrant will expire and become void and of no value.
Registration and Transfer. Warrants may not be transferred or exercised
unless (1) such warrants and the shares of common stock issuable upon the
exercise thereof are registered under the Securities Act of 1933 and applicable
state securities laws, or exempt from such registration, or (2) such transfer or
exercise (and the issuance of common stock pursuant to such exercise) is exempt
from registration under such Act and such laws. Mentor Capital Consultants has
undertaken to use its best efforts to register the warrants and the common stock
24
issuable upon the exercise thereof, and/or the transactions pursuant to which
such securities are transferred or issued, under the Securities Act of 1933 and
the securities laws of the jurisdictions in which units are sold. The warrants
will be registered at the office of Grafton State Bank, Grafton, Wisconsin, the
warrant agent, and are transferable only at such office by the registered
warrant holder (or duly authorized attorney) upon surrender of the warrant
certificate, with the form of "Assignment" appearing on the certificate
completed and executed. No transfer of warrants shall be registered unless the
warrant agent is satisfied that such transfer will not result in a violation of
the Securities Act of 1933 or any applicable state securities laws.
Exercise of Warrants. In order to exercise a warrant, the warrant certificate
must be surrendered at the office of the warrant agent in Grafton, Wisconsin
prior to the expiration of the warrant exercise period described above, with the
form of "Subscription" appearing on the certificate completed and executed as
indicated, accompanied by payment of the full exercise price for the number of
warrants being exercised. Payment shall be by certified funds or cashier's
check payable to "Grafton State Bank, Warrant Agent." In the case of partial
exercise, the warrant agent will issue a new warrant certificate to the
exercising warrant holder, or assigns, evidencing the warrants which remain
unexercised. In its discretion, the warrant agent may designate a location
other than its office in Grafton, Wisconsin for surrender of warrants in the
case of transfer or exercise.
Redemption. Commencing six months following the initial effective date of the
registration statement relating to this offering, and at any time thereafter
until and including, but not after, the expiration of the warrant exercise
period described above, Mentor Capital Consultants may, at its option, redeem
all of the warrants at any time or some of them from time to time, upon payment
of $0.01 per warrant to the warrant holder, provided that the closing bid or
sale price of the common stock, as quoted on the NASD OTC Bulletin Board, or
other national securities exchange, equals or exceeds $5.00 per share for 20
consecutive trading days ending within 15 days of the date upon which notice of
redemption is given as provided herein.
In case less than all of the warrants at the time outstanding are to be
redeemed, the warrants to be redeemed shall be selected by us by lot. Notices
of such redemption will be mailed at least 15 days prior to the redemption date
to each holder of warrants to be redeemed at the registered address of such
holder.
Adjustments; Rights of Holders. The exercise price and number of shares of
common stock to be received upon the exercise of warrants are subject to
adjustment upon the occurrence of certain events, such as stock splits, stock
dividends or the recapitalization of the Company. In the event of the
liquidation, dissolution or winding up of Mentor Capital Consultants, the
holders of warrants will not be entitled to participate in the distribution of
our assets. Holders of warrants will have no voting, pre-emptive, subscription
or other rights of shareholders in respect of the warrants, and no dividends
will be declared or paid on the warrants.
The foregoing summary does not purport to be complete and is qualified in its
entirety by reference to the form of warrant appearing elsewhere in this
prospectus. See Exhibit B.
Limitation of Director Liability
Section 180.0828 of the Delaware General Corporation Law, or DGCL, provides
that our directors can be held personally liable only for intentional breaches
of fiduciary duties, criminal acts, transactions from which the director derived
an improper personal profit and willful misconduct. These provisions may have
the effect of reducing the likelihood of derivative litigation against directors
and may discourage or deter shareholders or management from bringing a lawsuit
against directors for breach of their duty of care, even though such an action,
if successful, might otherwise have benefited Mentor Capital Consultants and its
shareholders.
Indemnification
Under our Certificate of Incorporation and the DGCL, our directors and
officers are entitled to mandatory indemnification from us against certain
liabilities and expenses (1) if the officer or director is successful in the
25
defense of an action brought against him or her and (2) if the officer or
director is not successful in the defense of an action brought against him or
her, unless, in the latter case only, it is determined that the director or
officer breached or failed to perform his or her duties to Mentor Capital
Consultants and such breach or failure constituted: (a) a willful failure to
deal fairly with us or our shareholders in connection with a matter in which the
director or officer had a material conflict of interest; (b) a violation of the
criminal law unless the director or officer had reasonable cause to believe his
or her conduct was lawful or had no reasonable cause to believe his or her
conduct was unlawful; (c) a transaction from which the director or officer
derived an improper personal profit; or (d) willful misconduct. Our bylaws
provide for the indemnification of our directors and officers by us to the
fullest extent permitted by Delaware law.
Anti-Takeover Provisions
Delaware Law. Upon the effectiveness of this offering, we expect to become
subject to Section 203 of the DGCL, which regulates corporate acquisitions,
prevents certain public Delaware corporations from engaging, under certain
circumstances in a "business combination" with any "interested stockholder" for
three years following the date that such stockholder becomes an interested
stockholder. For purposes of Section 203 of the DGCL, a "business combination"
includes, among other things, a merger or consolidation involving Mentor Capital
Consultants and the interested stockholder and the sale of more than 10% of our
assets. In general, DGCL Section 203 defines an "interested stockholder" as any
entity or person beneficially owning 15% or more of the outstanding voting stock
of Mentor Capital Consultants and any entity or person affiliated with or
controlling or controlled by such entity or person. A Delaware corporation may
"opt out" of DGCL Section 203 with an express provision in its original
certificate of incorporation or an express provision in its certificate of
incorporation or by-laws resulting from amendments approved by the holders of at
least a majority of the corporation's outstanding voting shares. We have not
"opted out" of the provisions of DGCL Section 203.
Number of Directors; Removal; Vacancies. Our bylaws currently provide that we
may have up to seven directors. The authorized number of directors may be
changed by amendment of the bylaws. The bylaws also provide that our board of
directors shall have the exclusive right to fill vacancies on the board,
including vacancies created by expansion of the board or removal of a director,
and that any director elected to fill a vacancy shall serve until the next
annual meeting of our shareholders. The bylaws further provide that directors
may be removed by the shareholders only by the affirmative vote of the holders
of at least a majority of the votes then entitled to be cast in an election of
directors. This provision, in conjunction with the provisions of the bylaws
authorizing the board to fill vacant directorships, could prevent shareholders
from removing incumbent directors and filling the resulting vacancies with their
own nominees.
Amendments to the Certificate of Incorporation. The DGCL provides authority
to Mentor Capital Consultants to amend its certificate of incorporation at any
time to add or change a provision that is required or permitted to be included
in the certificate or to delete a provision that is not required to be included
in such certificate. Our board of directors may propose one or more amendments
to our certificate of incorporation for submission to a shareholder vote. The
board may condition its submission of the proposed amendment on any basis it
chooses if it notifies each shareholder, whether or not entitled to vote, of the
meeting at which the proposed amendment will be voted upon.
Anti-Takeover Consequences. Certain provisions of our certificate of
incorporation and bylaws may have significant anti-takeover affects, including
the inability of our shareholders to remove directors without cause, and the
ability of the remaining directors to fill vacancies.
Transfer Agent and Registrar
We are currently the transfer agent and registrar for our common stock.
Grafton State Bank, the warrant agent, is the transfer agent and registrar for
our warrants.
26
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock, and sales of substantial amounts of common stock in the public market
after this offering could adversely affect market prices prevailing from time to
time and could impair our ability to raise capital through the sale of equity
securities. See "Risk Factors" for additional information concerning the
potential adverse impact of such sales on your investment in our common stock.
Registration of Outstanding Shares
Immediately upon the termination of this offering, we intend to register up
to 2,500,000 of the currently outstanding 15,530,762 shares of our common stock
under the Securities Act of 1933. Pursuant to such registration, the holders of
such shares will be entitled to sell their common stock at various times as
follows:
* on the OTC Bulletin Board (or any stock exchange on which the shares may
be listed); in the over-the-counter market;
* in negotiated transactions other than on such exchange;
* by pledge to secure debts and other obligations;
* in connection with the writing of non-traded and exchange-traded call
options, in hedge transactions, in covering previously established short
positions and in settlement of other transactions in standardized or
over-the-counter options; or
* in a combination of any of the foregoing transactions.
Sales of Restricted Shares
Notwithstanding the registration of up to 2,500,000 shares of our common
stock outstanding as of the date of this prospectus (350,000 of which are held
by our officers and directors), as described above, or the period of time for
which any such registration remains effective, 18,530,762 shares of our common
stock will be outstanding after this offering, assuming that the entire offering
is sold.
All of the shares sold in this offering (up to 2,000,000) will be freely
tradeable without restriction or further registration under the Securities Act
of 1933, except that any shares purchased by our "affiliates," as that term is
defined in Rule 144 under the Securities Act of 1933, may only be sold in
compliance with the provisions of Rule 144, as described below. In general, our
affiliates are any persons that directly, or indirectly through one or more
intermediaries, contol, or are controlled by, or are under common control with
us.
The 15,530,762 shares of common stock outstanding as of the date of this
prospectus, 8,372,875 of which are held by our affiliates, will be considered
"restricted securities" as that term is defined in Rule 144. These restricted
shares:
* may only be sold if they are registered under the Securities Act of
1933, as in the case of the 2,500,000 shares to be registered as described
above under "Shares Eligible for Future Sale - Registration of Outstanding
Shares," or are exempt from such registration; and
* are subject to lock-up agreements, pursuant to which our officers and
directors have agreed not to sell, transfer or otherwise dispose of,
directly or indirectly, any shares of common stock, or any securities
convertible or exchangeable for shares of common stock, until (1) June 30,
2002 or (2) the entire offering of 1,000,000 units is sold, whichever first
occurs.
27
Subject to the lock-up agreements described above, 15,530,762 restricted
shares will become eligible for sale in the public market prior to March 31,
2002 under Rule 144, including the volume, availability of public information,
manner of sale and notice requirements of the Rule, as follows:
* approximately 11,882,500 shares became eligible during the first quarter of
2001;
* approximately 306,045 shares will become eligible during the second quarter
of 2001;
* approximately 1,405,580 shares will become eligible during the third quarter
of 2001;
* approximately 1,886,637 shares will become eligible during the fourth
quarter of 2001; and
* approximately 50,000 shares will become eligible during the first quarter of
2002.
Stock Options and Warrants
As of the date of this prospectus, 195,058 shares of our common stock are
subject to outstanding options. 155,058 of such options are exercisable for a
period of five years, commencing six months following the initial effective date
of this registration statement, and 40,000 of such options are exercisable for a
period of five years, commencing one year following the initial effective date
of this registration statement. 115,058 of such options are held by our
affiliates, and 80,000 are held by non-affiliates. Shares of common stock
acquired upon the exercise of these options will be restricted securities and
may only be sold if they are registered under the Securities Act of 1933 or are
exempt from such registration, including pursuant to Rule 144.
Up to 2,000,000 shares of common stock may be issued upon the exercise of
warrants sold in this offering, which will be exercisable for a period of
eighteen months, commencing six months following the initial effective date of
the registration statement relating to this offering, provided that the common
stock issuable upon the exercise of such warrant is, at the time of exercise,
registered or otherwise qualified for sale under the Securities Act of 1933 and
the securities or "blue sky" laws of the jurisdiction in which the exercise of
such warrant is proposed to be effected. All such shares are included in the
registration statement relating to this offering and, provided such registration
statement is effective at the time of sale, will be freely tradeable without
restriction or further registration under the Securities Act of 1933, except for
any shares purchased by our affiliates which generally may only be sold in
compliance with the provisions of Rule 144. If such registration statement is
not effective at the time of sale, non-affiliates generally must comply with
Rule 144 in order to make public sales.
Rule 144
In general, under Securities Act Rule 144, a stockholder who owns restricted
shares that have been outstanding for at least one year is entitled to sell,
within any three-month period, a number of these restricted shares that does not
exceed the greater of:
* 1% of the then outstanding shares of common stock, or approximately 185,058
shares immediately after this offering, assuming the entire offering is
sold, or
* the average weekly reported trading volume in the common stock during the
four calendar weeks preceding filing of a notice on Form 144 with respect to
the sale.
In addition, our affiliates must comply with the restrictions and requirements
of Rule 144, other than the one-year holding period requirement, to sell shares
of common stock that are not restricted securities. Sales under Rule 144 are
also governed by manner of sale provisions and notice requirements, and current
public information about us must be available. Under Rule 144(k), a stockholder
who is not currently, and who has not been for at least three months before the
sale, an affiliate of ours and who owns restricted shares that have been
outstanding for at least two years may resell these restricted shares without
compliance with the above requirements. The one- and two-year holding periods
described above do not begin to run until the full purchase price is paid by the
person acquiring the restricted shares from us or an affiliate of ours.
28
PLAN OF DISTRIBUTION
As of the date of this prospectus, we anticipate selling all of the units
offered by this prospectus exclusively through our officers and directors,
without the assistance of brokers, dealers, and finders. Our officers and
directors will participate in the distribution of the offering in reliance upon
the exemption from broker-dealer registration provided by Rule 3a4-1 under the
Securities Act of 1934. We may in the future, in our sole discretion, elect to
engage certain brokers, dealers and finders to assist in the marketing and
distribution of this offering. Such brokers, dealers, and finders will be
compensated, in accordance with all state and federal securities laws, with
cash, securities of the issuer, or both. If we choose to employ a broker-dealer
for the purpose of selling the units offered by this prospectus, we will amend
our registration statement to identify a selected broker-dealer at such time as
such broker-dealer sells 5% or more of the offering. In the view of the SEC's
Division of Corporation Finance, any broker-dealer that sells securities in this
type of an offering would be deemed an underwriter as defined in Section 2(11)
of the Securities Act of 1933. Prior to the participation of any broker-dealer
in the distribution of this offering, it will be required to obtain a no
objection position from the NASD regarding the proposed underwriting
compensation and arrangements.
This is a minimum-maximum offering. Neither we nor any other person is
obligated (1) to sell any number or dollar amount of our common stock in excess
of the 125,000-unit minimum offering or (2) to purchase any number or dollar
amount of shares at any time. We will use our best efforts to sell all of the
common stock offered by this prospectus. However, we cannot guarantee how much
stock in excess of the required minimum, if any, will actually be sold in this
offering. See "Risk Factors" for additional information concerning this type of
offering.
All funds received from subscribers for units will be held in escrow by
Grafton State Bank, Grafton, Wisconsin, as escrow agent, pursuant to an
agreement between us and the escrow agent. Pending disbursement, subscription
proceeds will be deposited in a segregated account and invested in short-term,
investment-grade, interest-bearing securities.
Unless collected funds sufficient to purchase at least the minimum offering
of 125,000 units, containing 250,000 shares of common stock, are received by the
escrow agent from accepted subscribers within 90 days from the date of this
prospectus, unless extended by us in our sole discretion for an additional 90
days, the offering will terminate and all funds received from subscribers will
be promptly returned in full by the escrow agent directly to subscribers,
without interest or deduction, as provided in the escrow agreement. Provided
that at least 125,000 units are sold within the foregoing period, the initial
disbursement of escrowed funds will take place, and we may continue to offer our
common stock for sale until (1) 1,000,000 units, containing 2,000,000 shares of
common stock, are sold or (2) December 31, 2001, whichever occurs first.
However, we may terminate the offering at any earlier time if we choose to do
so.
To purchase units, a prospective investor must (1) complete and sign a
subscription agreement, in the form attached to this prospectus as Exhibit A,
and any other documents that we may require and (2) deliver such documents to
us, together with payment in an amount equal to the full purchase price the
shares of common stock being purchased. Checks should be made payable to
"Grafton State Bank, Escrow Agent."
We will determine, in our sole discretion, to accept or reject subscriptions
within five days following their receipt. Funds of an investor whose
subscription is rejected will be promptly returned directly to such person by
the escrow agent, without interest or deduction. No subscription may be
withdrawn, revoked or terminated by the purchaser. We reserve the right to
refuse to sell units to any person at any time.
Our officers and directors have agreed not to sell, transfer or otherwise
dispose of, directly or indirectly, any shares of common stock, or any
securities convertible or exchangeable for shares of common stock, until (1)
June 30, 2002 or (2) the sale of the entire 1,000,000-unit offering, whichever
occurs first.
29
Prior to this offering, there has been no public market for our securities.
The initial public offering price of the units and the warrant exercise prices
have been arbitrarily determined by us and are not necessarily related to our
asset value, net worth, results of operations or other established criteria of
value. The factors considered in determining the initial offering price include
the history of and the prospects for Mentor Capital Consultants and the industry
in which we operate, our operating results (which are extremely limited) and the
trends of such results, our financial condition, the experience of our
management, the market price of publicly traded stock of comparable companies in
recent periods and the general condition of the securities markets at the time
of this offering.
LEGAL MATTERS
The validity of the shares of common stock offered through this prospectus
will be passed upon for us by Kranitz & Philipp, Milwaukee, Wisconsin. Richard
A. Kranitz, a director of our company, is a partner in the firm of Kranitz &
Philipp.
EXPERTS
Van Dorn & Bossi, Boulder, Colorado, independent accountants, have audited
our financial statements as of December 31, 2000, and for the period from March
15, 2000 (inception) through December 31, 2000, as set forth in their report.
We have included our financial statements in this prospectus and elsewhere in
the registration statement in reliance upon the report of Van Dorn & Bossi,
given on their authority as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form SB-2 under the
Securities Act of 1933 with respect to the common stock to be sold in this
offering. This prospectus does not contain all of the information set forth in
the registration statement and the exhibits and schedules to the registration
statement. For further information with respect to us and the common stock to
be sold in this offering, we refer you to the registration statement and the
exhibits and schedules filed as part of the registration statement. Statements
contained in this prospectus concerning the contents of any contract or any
other document are not necessarily complete. If a contract or document has been
filed as an exhibit to the registration statement, we refer you to the copy of
the contract or document that has been filed. The registration statement,
including exhibits and schedules filed with it, may be inspected without charge
at the SEC's public reference rooms at:
* Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549;
* Seven World Trade Center, 13th Floor, New York, New York 10048; or
* Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661.
Copies of all or any part of the registration statement may be obtained from
such office after payment of fees prescribed by the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. The SEC also maintains a Web site that contains registration statements,
reports, proxy and information statements and other information regarding
registrants, including us, that file electronically with the SEC at
http://www.sec.gov.
Upon the effectiveness of this offering, we expect to become subject to the
information and periodic reporting requirements of the Securities Exchange Act
of 1934 and, accordingly, will file annual reports containing consolidated
financial statements audited by an independent public accounting firm, quarterly
reports containing unaudited financial data, current reports, proxy statements
and other information with the SEC. You will be able to inspect and copy such
periodic reports, proxy statements and other information at the SEC's public
reference room, and the Web site of the SEC referred to above.
30
INDEX TO FINANCIAL STATEMENTS
Page
Independent Accountant's Report . . . . . . . . . . . . . . . F-1
Financial Statements:
Balance Sheet at December 31, 2000. . . . . . . . . . . . . . F-2
Statement of Operations for the period from
March 13, 2000 (inception)through
December 31, 2000. . . . . . . . . . . . . . . . . . . .F-3
Statement of Changes in Stockholders'
Equity for the period from March 13, 2000
(inception) through December 31, 2000. . . . . . . . . . F-4
Statement of Cash Flows for the period
from March 13, 2000 (inception)
through December 31, 2000. . . . . . . . . . . . . . . . F-5
Notes to Financial Statements. . . . . . . . . . . . . . . . .F-6
31
INDEPENDENT ACCOUNTANT'S REPORT
Board of Directors
Mentor Capital Consultants, Inc.
We have audited the accompanying balance sheet of Mentor Capital Consultants,
Inc. (a development stage enterprise) as of December 31, 2000 and the related
statements of operations, stockholders' equity and cash flows for the period
from March 13, 2000 (inception) to December 31, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with the generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mentor Capital Consultants,
Inc. as of December 31, 2000 and the results of its operations and its cash
flows for the period from March 13, 2000 (inception) to December 31, 2000 in
conformity with generally accepted accounting principles.
Van Dorn & Bossi
Certified Public Accountants
Boulder, Colorado
January 10, 2001
F-1
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
ASSETS:
Current assets: DECEMBER 31, MARCH 31,
2000 2001
------------ -----------
(Unaudited)
Cash $ 934,233 $ 603,460
Deferred offering costs - 57,779
Other 345
------------ -----------
Total current assets 934,233 661,583
Furniture and equipment (Note D) 100,074 104,722
Less accumulated depreciation (9,623) (15,044)
------------ -----------
Total Furniture and equipment 90,451 89,678
Other assets - rent deposit 2,000 2,300
------------ -----------
Total assets $1,026,684 $ 753,561
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued payroll taxes $ 29,259 $ -
------------ -----------
Total current liabilities 29,259 -
Commitments (Note E)
Stockholders' equity (Notes C and F):
Preferred stock; par value $.0001 per share;
25,000,000 shares authorized, none issued or
outstanding
Common stock; par value $.0001 per share;
100,000,000 shares authorized, 15,505,762 and
15,530,762 shares issued and outstanding 1,551 1,553
Additional paid-in-capital 1,648,253 1,676,700
Deficit accumulated during the development
stage (652,379) (924,692)
------------ -----------
Total stockholders' equity 997,425 753,561
------------ -----------
Total liabilities and stockholders' equity $1,026,684 $ 753,561
============ ===========
See Accountant's Report and Notes to Financial Statements.
F-2
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
(Unaudited with respect to the three months ended March 31,2001 and the
period from March 13, 2000 (Inception) to March 31, 2001)
PERIOD FROM PERIOD FROM
MARCH 13, 2000 THREE MONTHS MARCH 13, 2000
(INCEPTION) ENDED (INCEPTION)
TO DECEMBER 31, MARCH 31, MARCH 31,
2000 2001 2001
------------ ------------ ------------
Income
Interest income $ 3,616 $ 9,618 $ 13,234
Other income 6,200 8,300 14,500
------------ ------------ ------------
Total income 9,816 17,918 27,734
Operating expenses:
Salaries, wages, temporary
labor and employee benefits 328,141 154,950 483,091
Consulting 186,690 60,907 247,597
Rent 29,707 17,000 46,707
Advertising 23,201 24,301 47,502
Legal 22,966 2,250 25,216
Telephone 10,921 5,309 16,230
Depreciation 9,623 5,421 15,044
Supplies 8,962 2,750 11,712
Interest 8,410 - 8,410
Travel and entertainment 6,856 1,940 8,796
Publications 5,196 1,956 7,152
Computer 2,842 874 3,716
Insurance 1,500 - 1,500
Utilities 1,390 297 1,687
Postage and delivery 1,260 801 2,061
Other 14,530 11,476 26,006
------------ ------------ ------------
Total operating expenses 662,195 290,231 952,426
------------ ------------ ------------
Net loss $(652,379) $ (272,313) $(924,692)
============ ============ ============
Net loss per share
- basic and diluted $ (0.05) $ (0.02)
============ ============
See Accountant's Report and Notes to Financial Statements.
F-3
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM MARCH 13, 2000 (INCEPTION) TO MARCH 31, 2001
Deficit
Accumulated
During
Common Stock Additional Development
Shares Amount Paid-in Capital Stage
---------- ------- --------------- -----------
Issuance of common
stock on
March 13, 2000 11,682,500 $1,168 $84,695 $ -
Issuance of common
stock for cash
during private
placement from
March 13, 2000 to
December 31, 2000 (Note F) 3,645,000 365 1,492,760
Issuance of common
stock for services
provided from
March 13, 2000 to
December 31, 2000 (Note F) 178,262 18 50,798
Issuance of stock options
to non-employees for services
provided from
March 13, 2000 to
December 31, 2000 (Note C) 20,000
Net loss for the period
from March 13, 2000
(inception) to
December 31, 2000 (652,379)
---------- -------- --------------- -----------
Balance,
December 31, 2000 15,505,762 $ 1,551 $ 1,648,253 $ (652,379)
Issuance of common stock
for cash 25,000 2 12,498
Issuance of stock options
to non-employees for
services provided from
January 1, 2001
to March 15, 2001 (Note C) 15,949
Net loss for the three months
ended March 31, 2001
(Unaudited) (272,313)
---------- -------- --------------- -----------
Balance, March 31, 2001
(Unaudited) 15,530,762 $ 1,553 $ 1,676,700 $ (924,692)
========== ======== =============== ===========
See Accountant's Report and Notes to Financial Statements.
F-4
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
(Unaudited with respect to the three months ended March 31,2001 and the
period from March 13, 2000 (Inception) to March 31, 2001)
PERIOD FROM PERIOD FROM
MARCH 13, 2000 THREE MONTHS MARCH 13, 2000
(INCEPTION) ENDED (INCEPTION)
TO DECEMBER 31, MARCH 31, MARCH 31,
2000 2001 2001
------------ ------------ ------------
Cash flows used for operations:
Net loss $ (652,379) $ (272,313) $ (924,692)
Adjustments to reconcile net
loss to net cash used for
operations:
Depreciation 9,623 5,421 15,044
Services performed in
exchange for stock and
options 70,815 15,949 86,764
Changes in assets and
liabilities:
Other Assets - (58,423) (58,423)
Accrued payroll taxes 29,259 (29,259) -
------------ ------------ ------------
Net cash used for
operating activities (542,682) (338,625) (881,307)
Cash flows used for investing
activities:
Purchase of furniture and
equipment (100,074) (4,648) (104,722)
Payment of rent deposit (2,000) - (2,000)
------------ ------------ ------------
Net cash used for
investing activities (102,074) (4,648) (106,722)
Cash flows provided by financing activities:
Proceeds from issuance
of common stock 1,578,989 12,500 1,591,489
------------ ------------ ------------
Net cash provided by
financing activities 1,578,989 12,500 1,591,489
------------ ------------ ------------
Net increase in cash 934,233 (330,773) 603,460
Cash, beginning of period - 934,233 -
------------ ------------ ------------
Cash, end of period $ 934,233 $ 603,460 $ 603,460
============ ============ ============
Supplemental disclosure of
non-cash investing and
financing activities:
Common stock issued for
services $ 70,815 $ 15,949 $ 86,764
============ ============ ============
See Accountant's Report and Notes to Financial Statements.
F-5
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM MARCH 13, 2000 (INCEPTION) TO
DECEMBER 31, 2000 AND THE THREE-MONTH PERIOD ENDED MARCH 31, 2001
(Unaudited with respect to the three-month period ended March 31, 2001)
NOTE A - DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
Description of the business
Mentor Capital Consultants, Inc. ("the Company") was incorporated in the State
of Delaware on March 13, 2000.
Mentor Capital Consultants, Inc., was organized to provide business management
and marketing consulting services to start up and emerging growth companies and
the entrepreneurs that operate them.
ACCOUNTING POLICIES:
Furniture and equipment:
Furniture and equipment is recorded at cost and depreciated on the straight-line
method over the estimated useful lives.
Advertising:
All advertising costs are expensed when incurred.
Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principals requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition:
Revenues from consulting services are recognized at the time services are
rendered. Accounts Receivable are written off when deemed uncollectable.
Income taxes:
The Company recognizes deferred tax assets and liabilities based on differences
between the financial reporting and tax bases of assets and liabilities using
the enacted tax rates and laws that are expected to be in effect when the
differences are expected to be recovered. The Company provides a valuation
allowance for deferred tax assets for which it does not consider realization of
such assets to be more likely than not.
Earnings per share:
Basic earnings per share is the amount of earnings for the period available to
each share of common stock outstanding during the period. The number of shares
outstanding is computed based on a daily weighted average. Common stock
equivalents have been excluded because their effect would reduce net loss per
share.
F-6
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM MARCH 13, 2000 (INCEPTION) TO
DECEMBER 31, 2000 AND THE THREE-MONTH PERIOD ENDED MARCH 31, 2001
(Unaudited with respect to the three-month period ended March 31, 2001)
The calculation of earnings per share is as follows:
PERIOD FROM
MARCH 13, 2000 THREE MONTHS
(INCEPTION) ENDED
TO DECEMBER 31, MARCH 31,
2000 2001
------------ ------------
Net Loss $ (652,379) $ (272,313)
============ ============
Average shares outstanding 13,122,186 $15,510,484
============ ============
Basic and diluted net loss
per share $ (0.05) $ (0.02)
============ ============
Recent accounting pronouncements:
In December 1999, the Securities and Exchange Commission staff released Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB
No. 101), which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. SAB No. 101 did not impact the
Company's revenue recognition policies.
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. As amended
by SFAS No. 137, SFAS No. 133 is effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in
the fair value of derivatives are recorded in each period in current earnings or
other comprehensive income, depending on whether a derivative is designed as
part of a hedge transaction and, if it is, the type of hedge transaction. The
Company has not yet determined the impact of the adoption of SFAS No. 133 on its
financial statements or business practices.
In April 1998, the Accounting Standards Executive Committee issued Statement of
Position 98-5 "Reporting on the Costs of Start-Up Activities", which is
effective for fiscal years beginning after December 15, 1998 and provides
guidance on the financial reporting of start-up costs and organization costs.
It requires costs of start-up activities to be expensed as incurred. The
Company has expensed all start-up costs and organization costs.
Cash and cash equivalents:
For purposes of reporting cash flows, cash and cash equivalents include cash on
hand and in banks.
Interim financial information:
The unaudited interim financial statements have been prepared on the same basis
as the audited financial statements and, in the opinion of management, include
all adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial information set forth therein in accordance with
generally accepted accounting principles. The interim results are not
necessarily indicative of the results to be expected for any future period. The
company had no income or expenses during the three months ended March 31, 2001.
NOTE B - INCOME TAXES:
The Company did not record any provision for federal and state income taxes
through December 31, 2000. The actual tax expense for the period differs from
"expected" tax expense (computed by applying the
F-7
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM MARCH 13, 2000 (INCEPTION) TO
DECEMBER 31, 2000 AND THE THREE-MONTH PERIOD ENDED MARCH 31, 2001
(Unaudited with respect to the three-month period ended March 31, 2001)
statutory U.S. federal corporate tax rate of 34% to net loss before income
taxes) as follows:
PERIOD FROM PERIOD FROM
MARCH 13, 2000 THREE MONTHS MARCH 13, 2000
(INCEPTION) ENDED (INCEPTION)
TO DECEMBER 31, MARCH 31, MARCH 31,
2000 2001 2001
------------ ------------ ------------
Computed "expected" tax benefit $ (221,809) $ (92,586) $ (314,395)
Change in valuation allowance
for deferred assets 221,809 92,586 314,395
------------ ------------ ------------
Net tax benefit $ - $ - $ -
------------ ------------ ------------
At December 31, 2000, deferred income tax assets result from federal and state
operating loss carryforwards in the amount of $581,600 plus timing difference
related to deductions for non-cash compensation in the amount of $70,815. These
loss carryforwards expire in 2020. Net deferred tax assets consist of the
following:
Tax effect of net operating loss carryforwards $(197,732)
Tax effect of timing differences related to compensation expense (24,077)
Less valuation allowance 221,809
------------
Net deferred tax assets $ -
============
In assessing the realizability of deferred tax assets, the Company considers
whether it is more likely than not that some or all of the deferred tax asset
will not be realized. The Company believes that sufficient uncertainty exists
regarding the realizability of the deferred tax assets such that valuation
allowances equal to the entire balance of the deferred tax assets are necessary.
NOTE C - STOCK OPTIONS:
The Company has granted non-statutory options to purchase shares of common stock
to certain employees at prices ranging from $.25 to $.50 per share.
The Company has adopted the disclosure only provisions of Statement of Financial
Accounting Standards No. 123 "Accounting for Stock-Based Compensation."
Accordingly, the Company continues to account for options using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25.
F-8
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM MARCH 13, 2000 (INCEPTION) TO
DECEMBER 31, 2000 AND THE THREE-MONTH PERIOD ENDED MARCH 31, 2001
(Unaudited with respect to the three-month period ended March 31, 2001)
Following is a reconciliation of transactions during the periods:
Period from March 13, 2000
(inception) to Three months ended
December 31, 2000 March 31, 2001
------------------------ ------------------
Average Average
Exercise Exercise
Number Price Number Price
---------- -------- -------- --------
Outstanding at beginning
of period -- -- 115,058 $0.32
Granted during period 115,058 $0.32 34,000 $0.50
Exercised during period -- -- -- --
---------- -------- -------- --------
Outstanding at end of period 115,058 $0.32 149,058 $0.37
========== ======== ======== ========
Exercisable at end of period 115,058 $0.32 149,058 $0.37
========== ======== ======== ========
If the Company had used the Fair Value based method of accounting for its stock
option plan, as prescribed by Statement of Financial Accounting Standards No.
123, compensation cost in net income for the period ended December 31, 2000
would have increased by $21,910, resulting in net loss of ($674,289) or ($0.05)
per share, and for the three-month period ended March 31, 2001, compensation
cost would have increased by $17,000, resulting in net loss of ($289,313) or
($0.02) per share. The computation of the effects of the application of the
Fair Value based method is based on expected lives of 24 months, and a risk-free
interest rate of 6%. No dividend yield is assumed and volatility is not
considered because the Company is not a public entity.
In addition to stock options granted to employees, the Company granted options
to purchase common stock to certain consultants at the price at which stock was
being sold to new investors at the time of grant. The compensation cost of
these options, measured by the fair value of services received less the exercise
price for the options has been included in net loss for the periods. Following
is a reconciliation of transactions during the period for options granted to
consultants:
Period from March 13, 2000
(inception) to Three months ended
December 31, 2000 March 31, 2001
------------------------ ------------------
Average Average
Exercise Exercise
Number Price Number Price
---------- -------- -------- --------
Outstanding at beginning
of period -- -- 80,000 $0.25
Granted during period 80,000 $0.25 46,013 $0.35
Exercised during period -- -- -- --
---------- -------- -------- --------
Outstanding at end of period 80,000 $0.25 126,013 $0.29
========== ======== ======== ========
F-9
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM MARCH 13, 2000 (INCEPTION) TO
DECEMBER 31, 2000 AND THE THREE-MONTH PERIOD ENDED MARCH 31, 2001
(Unaudited with respect to the three-month period ended March 31, 2001)
NOTE D - RELATED PARTY TRANSACTIONS:
At the inception of the Company, the primary stockholder sold certain assets,
consisting primarily of furniture, computers and software to the Company for
$55,000. The value of the assets was estimated to be approximately fair value;
the Board of Directors approved the transaction; the primary stockholder
abstained from voting.
NOTE E - OPERATING LEASE:
The Company occupies its office space under a month-to-month lease at a rental
of $4,000 per month.
NOTE F - EQUITY TRANSACTIONS:
During the period from March 13, 2000 to December 31, 2000, the Company issued
common stock to new investors in two different increments, the first at $.25 per
share for 1,457,762 shares, and the second at $.50 per share for 2,365,500
shares.
During the same period, certain employees and consultants received common stock
for services. These shares were valued based on the price at which shares were
being issued at the time services were rendered.
F-10
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM MARCH 13, 2000 (INCEPTION) TO
DECEMBER 31, 2000 AND THE THREE-MONTH PERIOD ENDED MARCH 31, 2001
(Unaudited with respect to the three-month period ended March 31, 2001)
NOTE D - RELATED PARTY TRANSACTIONS:
At the inception of the Company, the primary stockholder sold certain assets,
consisting primarily of furniture, computers and software to the Company for
$55,000. The value of the assets was estimated to be approximately fair value;
the Board of Directors approved the transaction; the primary stockholder
abstained from voting.
NOTE E - OPERATING LEASE:
The Company occupies its office space under a month-to-month lease at a rental
of $4,000 per month.
NOTE F - EQUITY TRANSACTIONS:
During the period from March 13, 2000 to December 31, 2000, the Company issued
common stock to new investors in two different increments, the first at $.25 per
share for 1,457,762 shares, and the second at $.50 per share for 2,365,500
shares.
During the same period, certain employees and consultants received common stock
for services. These shares were valued based on the price at which shares were
being issued at the time services were rendered.
F-10
EXHIBIT A
1,500,000 Units
MENTOR CAPITAL CONSULTANTS, INC.
Common Stock and Warrants
SUBSCRIPTION AGREEMENT
-------------------
Mentor Capital Consultants, Inc.
4940 Pearl East Circle, Suite 104
Boulder, Colorado 80301
Gentlemen:
The undersigned irrevocably subscribe(s) for and agree(s) to purchase units,
each unit consisting of two shares of common stock ("Common Stock") and warrants
to purchase two additional shares of common stock of Mentor Capital Consultants,
Inc. ("Company"), to be registered in the name(s) of the undersigned at the
address appearing below. Delivered concurrently herewith is payment in full for
the Common Stock subscribed for, at the price of $_______ per unit (checks made
payable to "Grafton State Bank, Escrow Agent"). The undersigned agree(s) that
the Company has the right to reject this subscription for any reason and that,
in the event of rejection, all funds delivered herewith will be promptly
returned, without interest or deduction.
WITHHOLDING CERTIFICATION
Each of the undersigned certifies under penalty of perjury that:
(1) The Social Security Number or other Federal Tax I.D. Number entered
below is correct.
(2) The undersigned is not subject to backup withholding because:
(a) The IRS has not informed the undersigned that he/she/it is subject to
backup withholding.
(b) The IRS has notified the undersigned that he/she/it is no longer
subject to backup withholding.
Note: If this statement is not true and you are subject to backup
withholding, strike out section (2).
REGISTRATION OF SECURITIES
Common stock and warrants are to be registered as indicated below. (Please
type or print.)
______________________________________________________________________
Name(s)
__________________________________________
Social Security or Federal Tax I.D. Number
_______________________________________ (____)_______________________________
Street Address Telephone Number
_______________________________________
City, State, Zip Code
OWNERSHIP: [_] Individual [_] Marital Property [_] Joint Tenants with Right
of Survivorship [_] Tenants in Common [_] Corporation [_] Partnership
[_] Trust [_] IRA/Qualified Plan [_] Other _________________________
If common stock and warrants are to be registered jointly, all owners must
sign. For IRAs/Qualified Plans, the trustee must sign. Any registration in the
names of two or more co-owners will, unless otherwise specified, be as joint
tenants with rights of survivorship and not as tenants in common. Each
subscriber certifies that he/she/it has full capacity to enter into this
Agreement. This subscription is subject to acceptance by the Company and will
not be accepted unless accompanied by payment in full.
A-1
SUBSCRIBER SIGNATURES
Individuals (All proposed record holders must sign.)
Dated:_________________
________________________________ _______________________________
(Signature) (Signature)
________________________________ _______________________________
(Print or Type Name) (Print or Type Name)
Corporations, Partnerships, Trusts and IRAs/Qualified Plans
(Certificate of Signatory must be completed.)
Dated:__________________________ _______________________________________
(Print or Type Name of Entity)
By:_______________________________________
(Signature of Authorized Representative)
Certificate of Signatory
I,________________________________________, am the ____________________________
(Print or Type Name of Authorized Representative)(Print or Type Title
or Position)
of ____________________________________________("Entity").
(Print or Type Name of Subscribing Entity)
I certify that I am fully authorized and empowered by the Entity to execute
this Subscription Agreement and to purchase common stock and warrants, and that
this Subscription Agreement has been duly executed by me on behalf of the Entity
and constitutes a valid and binding obligation of the Entity in accordance with
its terms.
________________________________________
(Signature of Authorized Representative)
ACCEPTANCE
Subscription ___ accepted ___ rejected as of ________________________, 2001.
MENTOR CAPITAL CONSULTANTS, INC.
By:________________________________________
(Signature of Authorized Officer)
A-2
No. ___ EXHIBIT B
WARRANT
To Purchase Common Stock
of
Mentor Capital Consultants, Inc.
THIS CERTIFIES THAT, upon surrender of this Warrant at the office of the
Warrant Agent hereinafter named, in the Village of Grafton, County of Ozaukee,
State of Wisconsin, accompanied by payment as hereinafter provided, ____________
__________________________ or assigns ("Holder") is entitled to purchase at any
time prior to the expiration of the Warrant Exercise Period (as hereinafter
defined), but not thereafter, _______________________ shares of common stock
("Common Stock"), of Mentor Capital Consultants, Inc., a Delaware corporation
("Company"), as such Common Stock shall be constituted at the time of purchase,
which shares have been duly authorized and set aside for issuance and will, upon
such issuance, be fully paid and nonassessable, at the price of _______ Dollars
($______) per share, subject to the terms and provisions set forth herein and in
an agreement by and between the Company and Grafton State Bank, Grafton,
Wisconsin ("Warrant Agent"), and not otherwise.
This Warrant shall be exercisable in whole at any time or in part from time to
time (provided that not less than One Hundred (100) shares of Common Stock, or
any integral multiple of such amount, shall be purchased upon any such partial
exercise hereof), for a period of eighteen (18) months, commencing six (6)
months following the initial effective date of the registration statement of the
Company, relating to the Warrants, under the Securities Act of 1933, as amended
("Securities Act"), provided that the Common Stock issuable upon the exercise of
this Warrant is, at the time of exercise, registered or otherwise qualified for
sale under the Securities Act and the securities or "blue sky" laws of the
jurisdiction in which the exercise of this Warrant is proposed to be effected
("Warrant Exercise Period"). Upon the expiration of the Warrant Exercise
Period, this Warrant will expire and become void and of no value. No fractional
shares will be issued upon the exercise hereof. This Warrant shall be
registered at the office of the Warrant Agent and is transferable only at said
office by the registered Holder hereof or his duly authorized attorney upon
surrender of this certificate, properly endorsed.
Upon any adjustment of the number of shares of Common Stock which may be
purchased upon the exercise of this Warrant and/or the purchase price per share,
then in each such case the Company shall give written notice thereof, as
hereinbelow provided, which notice shall state the purchase price per share
resulting from such adjustment and the increase or decrease, if any, in the
number of shares of Common Stock purchasable at such price upon the exercise of
this Warrant, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based.
THIS WARRANT MAY NOT BE TRANSFERRED OR EXERCISED UNLESS SAID WARRANT AND THE
SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE THEREOF ARE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR
ARE EXEMPT FROM SUCH REGISTRATION, OR SUCH TRANSFER OR EXERCISE (AND THE
ISSUANCE OF COMMON STOCK PURSUANT TO SUCH EXERCISE) IS EXEMPT FROM REGISTRATION
UNDER SUCH ACT AND SUCH LAWS. THE COMPANY WILL USE ITS BEST EFFORTS TO SO
REGISTER OR QUALIFY THIS WARRANT, AND THE COMMON STOCK ISSUABLE UPON THE
EXERCISE HEREOF, AND/OR TO SO REGISTER OR QUALIFY THE TRANSACTIONS PURSUANT TO
WHICH SUCH SECURITIES ARE ISSUED OR TRANSFERRED, UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE SECURITIES LAWS OF THE JURISDICTIONS IN WHICH WARRANTS
ARE SOLD; THE COMPANY MAY, IN ITS SOLE DISCRETION, ATTEMPT TO SO REGISTER OR
QUALIFY SUCH SECURITIES IN JURISDICTIONS OTHER THAN THOSE IN WHICH WARRANTS ARE
SOLD.
The Holder of this Warrant shall not by virtue thereof have any rights of a
shareholder of the Company or to notice of meetings of shareholders or of any
other proceedings of the Company.
This Warrant is divisible on surrender, in which case a new Warrant or
Warrants will be issued.
B-1
Commencing six (6) months following the initial effective date of the
registration statement of the Company, relating to the Warrants, under the
Securities Act, and at any time thereafter until and including, but not after,
the expiration of the Warrant Exercise Period, the Company may, at its option,
redeem all of the Warrants at any time or some of them from time to time, upon
payment of One Cent ($0.01) per Warrant to the Holder, provided that the closing
bid or sale price of the Common Stock, as quoted on the NASD OTC Bulletin Board,
or other national securities exchange, equals or exceeds Five Dollars ($5.00)
per share for twenty (20) consecutive trading days ending within fifteen (15)
days of the date upon which notice of redemption is given as provided herein.
In case less than all of the Warrants at the time outstanding are to be
redeemed, the Warrants to be redeemed shall be selected by the Company by lot.
Notices of such optional redemption will be mailed at least fifteen (15) days
prior to the redemption date to each holder of Warrants to be redeemed at the
registered address of such Holder. Each Holder of this Warrant, by accepting
the same, agrees upon any such notice of redemption to receive payment for this
Warrant upon the date fixed for redemption in the amount herein provided.
If prior to the expiration of this Warrant, by exercise hereof or by its
terms:
(a) The Company shall be recapitalized through the subdivision of its
outstanding shares of Common Stock into a greater number of shares, or
shall by exchange or substitution of or for its outstanding Common Stock
or otherwise, reduce the number of such shares, then in each such case
the number of shares deliverable upon the exercise of this Warrant shall
be changed in proportion to such increase or decrease of the outstanding
shares of such Common Stock of the Company, without any change in the
aggregate payment by the Warrant Holder from the aggregate payment
specified on the face of this Warrant.
(b) A dividend shall be declared or paid at any time on the Common Stock of
the Company in its Common Stock or in securities convertible into Common
Stock of the Company, then in each such case the number of shares
deliverable upon the exercise thereafter of this Warrant shall, without
requiring any payment by the Warrant Holder in addition to the payment
specified on the face hereof, be increased in proportion to the increase,
through such dividend, in the number of outstanding shares of Common
Stock of the Company. In the computation of the increased number of
shares deliverable upon the exercise of this Warrant, any dividend paid
or distributed upon the Common Stock in securities convertible into
Common Stock shall be treated as a dividend paid in Common Stock to the
extent that shares of Common Stock are issuable upon the conversion
thereof. The obligations of the Company and the rights of the Holder
hereof shall not be affected by the exercise of any conversion privileges
heretofore granted to the holders of any of the stock or securities of
the Company or of any other corporation.
(c) The Company shall, at any time while any of the Warrants are outstanding,
declare a dividend on its Common Stock, other than as provided in the
preceding paragraph (b), then in each such case the Company shall give
notice in writing to the registered Holder of this Warrant, and such
dividends so declared shall be made payable only to the shareholders of
record on a date at least ten (10) days subsequent to the date of such
notice, including stock issued pursuant to the exercise of such Warrants
prior to such record date.
(d) The Company shall be recapitalized by reclassifying its outstanding
Common Stock into stock without par value, or the Company or a successor
corporation shall consolidate or merge with, or convey all, or
substantially all, of its or any successor corporation's property or
assets to, any other corporation or corporations (any such corporation
being included within the meaning of "successor corporation" as
hereinbefore used in the event of any consolidation or merger of such
corporation with, or the sale of all, or substantially all, of the
property or assets of such corporation to another corporation or
corporations) then in each such case, as a condition of such
recapitalization, consolidation, merger or conveyance, lawful and
adequate provision shall be made whereby the Holder of each Warrant shall
thereafter have the right to purchase, upon the basis and upon the terms
and conditions specified in this Warrant, in lieu of the shares of Common
Stock of the Company theretofore purchasable upon the exercise of this
Warrant, such shares of stock, securities or other assets as may be
issued or payable with respect to, or in exchange for, the number of
shares of Common Stock of the Company theretofore purchasable upon the
exercise of this Warrant had such recapitalization, consolidation, merger
or conveyance not taken place; and in any such event the rights of the
Warrant Holder to an adjustment of the number of shares of Common Stock
purchasable upon the exercise of this Warrant as hereinbefore provided
shall continue and be preserved in respect of any stock which the Warrant
Holder becomes entitled to purchase. It shall be a condition of such
consolidation, merger or conveyance that each successor corporation shall
assume, in manner and form satisfactory to the Warrant Agent, the
obligation to deliver to the Warrant Holder, upon the exercise of this
Warrant, such shares of stock, securities or assets as, in accordance
with the provisions of this Warrant, shall have been provided for such
purpose. The Warrant Agent shall assume no liability for its exercise of
discretion hereunder, other than for wilful wrongdoing.
B-2
This Warrant shall be deemed to have been exercised, and the Holder
exercising the same to have become a shareholder of record of the
Company, for the purpose of receiving dividends and for all other
purposes whatsoever as of the date the Holder surrendered this Warrant
accompanied by payment in cash, as herein provided. The Company agrees
that, while this Warrant shall remain valid and outstanding, its stock
transfer books shall not be closed for any purpose whatsoever, except
under arrangements which shall insure to Holders exercising Warrants or
applying for transfer of stock within five (5) days after the books shall
have been reopened all rights and privileges which they might have had or
received if the transfer books had not been closed and they had exercised
their Warrants at any time during which such transfer books shall have
been closed.
Upon each increase or decrease in the number of shares of Common Stock
of the Company deliverable upon the exercise of this Warrant, or in the
event of changes in the rights of the Warrant Holders by reason of other
events hereinbefore set forth, then in each such case the Company shall
forthwith file with the Warrant Agent a certificate executed by its
President or one of its Vice Presidents, and attested by its Secretary or
one of its Assistant Secretaries, stating the increased or decreased
number of shares so deliverable and setting forth in reasonable detail
the method of calculation and the facts upon which such calculation is
based.
The Company covenants, at all times when Warrants are outstanding and
in effect, to reserve, unissued, such number of shares of Common Stock as
it may be required to deliver pursuant to the exercise of this Warrant,
subject to consolidation, merger or sale, as hereinabove set forth.
As used herein, the terms "Holder" "Warrant Holder" and "Holder of this
Warrant" shall be construed to mean the registered holder hereof, and, in
the case of any notice required by this Warrant to be given to the
Warrant Holder, it shall be sufficient if mailed to the last known
address of such Holder as the same appears on the books of the Company.
IN WITNESS WHEREOF, MENTOR CAPITAL CONSULTANTS, INC. has caused this
Warrant to be signed in its corporate name by its President or a Vice
President, manually or in facsimile, and attested by the manual or
facsimile signature of its Secretary or an Assistant Secretary, as of the
day and year first above written.
MENTOR CAPITAL CONSULTANTS, INC.
Attest:
__________________________________ By:_________________________________
Secretary President
[CORPORATE SEAL]
B-3
SUBSCRIPTION FORM
(To be Executed Upon Exercise of Warrant)
The undersigned, the Holder(s) or assignee(s) of such Holder(s) of the within
Warrant, hereby (i) subscribes for shares of Common Stock which the undersigned
is entitled to purchase under the terms of the within Warrant and (ii) tenders
herewith the full exercise price of all shares subscribed for.
Dated:___________________________
Number of Shares Subscribed For:
____________________
__________________________________
(Signature)
__________________________________
(Signature)
ASSIGNMENT
(To Be Executed By the Registered Holder to Effect
a Transfer of the Within Warrant)
FOR VALUE RECEIVED, the undersigned Warrant Holder(s) do(es) hereby sell,
assign and transfer unto ___________________________________________________ the
right to purchase common stock evidenced by this Warrant, and does hereby
irrevocably constitute and appoint _____________________________________________
to transfer the said right on the books of the Company, with full power of
substitution.
Dated:__________________________
____________________________________
(Signature)
____________________________________
(Signature)
B-4
[Inside back cover]
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, units only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of the prospectus or of any sale
of the units.
[Outside back cover]
MENTOR CAPITAL CONSULTANTS INC.
Until ___________, 2001 (90 days after the commencement of this offering), all
dealers that buy, sell or trade our secrities, whether or not participating in
this offering, may be required to deliver a prospectus. This delivery
requirement is in addition to the dealers' obligation to deliver a prospectus
when acting as underwriters and with respect to their unsold allotments or
subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law ("DGCL") empowers a
Delaware corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. A
corporation may, in advance of the final disposition of any civil, criminal,
administrative or investigative action, suit or proceeding, pay the expenses
(including attorneys, fees) incurred by any officer, director, employee or agent
in defending such action, provided that the director or officer undertakes to
repay such amount if it shall ultimately be determined that he or she is not
entitled to be indemnified by the corporation. A corporation may indemnify such
person against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
A Delaware corporation may indemnify officers and directors in an action by or
in the right of the corporation to procure a judgment in its favor under the
same conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him or
her against the expenses (including attorneys, fees) which he or she actually
and reasonably incurred in connection therewith. The indemnification provided
is not deemed to be exclusive of any other rights to which an officer or
director may be entitled under any corporation's by-law, agreement, vote or
otherwise.
In accordance with Section 145 of the DGCL, the Company's Certificate of
Incorporation ("Certificate") provides that the Company shall indemnify each
person who is or was a director, officer, employee or agent of the Company
(including the heirs, executors, administrators or estate of such person) or is
or was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, to the fullest extent permitted. The indemnification provided by
the Certificate shall not be deemed exclusive of any other rights to which any
of those seeking indemnification or advancement of expenses may be entitled
under any by-law, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
Expenses (including attorneys' fees) incurred in defending a civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by the
Company in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of the indemnified person to
repay such amount if it shall ultimately be determined that he or she is not
entitled to be indemnified by the Company. The Certificate further provides
that a director of the Company shall not be personally liable to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which
the director derived an improper personal benefit. The By-laws of the Company
provide that, to the fullest extent permitted by applicable law, the Company
shall indemnify any person who is a party or otherwise involved in any
proceeding by reason of the fact that such person is or was a director or
officer of the Company or was serving at the request of the Company.
The Registrant has not purchased insurance against costs which may be incurred
by it pursuant to the foregoing provisions of its Certificate and Bylaws, nor
does it insure its officers and directors against liabilities incurred by them
in the discharge of their functions as such officers and directors.
II-1
Item 25. Other Expenses of Issuance and Distribution.
SEC registration fee . . . . . . . . . . . . . $ 2,750
Legal fees and expenses. . . . . . . . . . . . 40,000 *
Accounting fees and expenses . . . . . . . . . 8,500 *
Blue Sky fees and expenses . . . . . . . . . . 4,500 *
Escrow fees and expenses . . . . . . . . . . . 2,500 *
Printing and engraving . . . . . . . . . . . . 3,500 *
Miscellaneous. . . . . . . . . . . . . . . . . 1,875 *
______
Total . . . . . . . . . . . . . . . . . . $ 65,000 *
________________
* Estimate
Item 26. Recent Sales of Unregistered Securities.
Upon inception (March 13, 2000), 11,682,500 shares of common stock were issued
to the initial 6 shareholders of the Company for aggregate consideration in the
amount of $85,863, including 10,335,250 shares issued to directors and officers
for $863. No selling commission or other compensation was paid in connection
with such transactions. Such sales were made in reliance upon the exemption
from registration under the Securities Act of 1933 provided by Section 4(2) of
such Act.
From September 15, 2000 through December 31, 2000, the Registrant sold
3,823,262 shares of its common stock in a private offering to 81 individual
investors (64 accredited and 17 nonaccredited) for an aggregate purchase price
of $1,547,191. All purchasers received or were given access to the information
required under Rule 502(b) of Regulation D. No selling commission or other
compensation was paid in connection with such transactions. All sales were
made in reliance upon the exemption from registration under the Securities Act
of 1933 provided by Section 4(2) of such Act and Rule 506 of Regulation D.
From September 15, 2000 through December 31, 2000, the Registrant granted
options covering 195,058 shares of its common stock to 14 persons (8 employees
and 6 non-employees). 155,058 of such options are exercisable for a period of
five years, commencing six months following the initial effective date of this
registration statement; 40,000 of such options are exercisable for a period of
five years, commencing one year following the initial effective date of this
registration statement. 81,000 of such options are exercisable at the price of
$0.25 per share, and 34,058 are exercisable at $0.50 per share. No selling
commission or other compensation was paid in connection with such grants, which
were made in reliance upon the exemption from registration under the Securities
Act of 1933 provided by Section 4(2) of such Act.
Item 27. Exhibits.
Exhibit
Number Description
3.1 Certificate of Incorporation of the Registrant *
3.2 By-Laws of the Registrant *
3.3 Certificate of Amendment to Certificate of Incorporation of the
Registrant *
5.1 Opinion of Kranitz & Philipp, as to the legality of the Units *
10.1 Escrow Agreement, between the Registrant and Grafton State Bank *
10.2 $3.00 Warrant Agreement, between the Registrant and Grafton State
Bank *
10.3 $4.00 Warrant Agreement, between the Registrant and Grafton State
Bank *
10.4 Lease Agreement, between the Registrant and Four Pearl Parnership,
Ltd., LLLP *
23.1 Consent of Kranitz & Philipp (included in Exhibit 5.1) *
23.2 Consent of Van Dorn & Bossi
24.1 Power of Attorney (included at Page II - 4) *
______________________
* Previously filed.
II-2
Item 28. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned small business issuer will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act as part of this registration statement as of the time
the Commission declared it effective.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and the offering of the securities at that time as the initial bona fide
offering of those securities.
(3) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the Act;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
registration statement; and
(iii) Include any additional or changed material information on the plan of
distribution.
(4) For determining liability under the Act, treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide offering.
(5) File a post-effective amendment to remove from registration any of the
securities which remain unsold at the end of the offering.
II-3
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of Boulder,
State of Colorado, on June 28, 2001.
MENTOR CAPITAL CONSULTANTS, INC.
/s/ W. Michael Bissonnette
By:_______________________________________
W. Michael Bissonnette,
Chief Executive Officer and President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
Signature Title(s)
----------- ----------
W. MICHAEL BISSONNETTE Chief Executive Officer and President
(Principal Executive Officer),
Treasurer (Principal Financial and
Accounting Officer) and Director
ELIZABETH B. LANE Secretary and Director
RICHARD A. KRANITZ Director
/s/ W. MICHAEL BISSONNETTE
By:_________________________________
W. Michael Bissonnette
Signing personally as Chief Executive Officer,
(Principal Executive Officer), President, Treasurer
(Principal Financial and Accounting Officer)
and Director, and as
Attorney-in-Fact for the
directors and officers whose
names appear above, on
June 28, 2001.
II-4 (Signatures)
1,500,000 Units
MENTOR CAPITAL CONSULTANTS INC.
Common Stock and Warrants
INDEX TO EXHIBITS
Exhibit
Number Description
3.1 Certificate of Incorporation of the Registrant *
3.2 By-Laws of the Registrant *
3.3 Certificate of Amendment to Certificate of Incorporation of the
Registrant *
5.1 Opinion of Kranitz & Philipp, as to the legality of the Units *
10.1 Escrow Agreement, between the Registrant and Grafton State Bank *
10.2 $3.00 Warrant Agreement, between the Registrant and Grafton State
Bank *
10.3 $4.00 Warrant Agreement, between the Registrant and Grafton State
Bank *
10.4 Lease Agreement, between the Registrant and Four Pearl Partnership,
Ltd., LLLP *
23.1 Consent of Kranitz & Philipp (included in Exhibit 5.1) *
23.2 Consent of Van Dorn & Bossi
24.1 Power of Attorney (included at Page II - 4) *
______________________
* Previously Filed
II-5