As filed with the Securities and Exchange Commission on February 25, 2001.
Registration No: 333-82568
=========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
AMENDMENT NO.1
TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-------------------
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 2,100,000 shares $2.00(1) $4,200,000(1) $ 386.40
- --------------------------------------------------------------------------------
Warrants 1,098,000 warrants - - -
Common Stock 1,098,000 shares(2) $3.00 $3,294,000 $ 303.05
issuable upon
exercise of
warrants
- --------------------------------------------------------------------------------
Warrants 1,098,000 warrants - - -
Common Stock 1,098,000 shares(2) $4.00 $4,392,000 $ 404.06
issuable upon
exercise of
warrants
- --------------------------------------------------------------------------------
Totals 4,296,000 shares $11,886,000(1) $1,093.51
2,196,000 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.
(Facing Page Continued)
Prospectus (Subject to Completion)
Dated February 25, 2002
875,000 Units
MENTOR CAPITAL CONSULTANTS, INC.
Common Stock and Warrants
(Minimum Purchase: 3,125 Units)
Mentor Capital Consultants, Inc. is offering a minimum of 12,500 units and a
maximum of 875,000 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.
To date, we have conducted only minimal consulting operations and have not
generated significant revenues.
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 "MCAP".
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 (1)............... $4.00 -0- $4.00
Minimum (12,500 units)..... $50,000 -0- $50,000
Maximum (875,000 units).... $3,500,000 -0- $3,500,000
(1) The per share price of the common stock purchased as a component of units
may be effectively reduced if a purchase qualifies for bonus shares as
described under "Plan of Distribution."
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 12,500 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 12,500-unit minimum
offering, but we will use our best efforts to sell all of the 875,000 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 12,500 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 120 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 875,000 units are sold or March 31, 2003, whichever occurs first.
However, we may terminate the offering at any earlier time if we choose to do
so.
, 2002
The information in this prospectus is not commplete 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.
TABLE OF CONTENTS
Page
Prospectus Summary. . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . 6
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 9
Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . 9
Dilution. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Selected Financial Data . . . . . . . . . . . . . . . . . . . 11
Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . 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 consolidated 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 is 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, Small Issue Initial Public Offering or SIIPOP 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, and
we have been engaged by four clients to provide 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 have established
relationships with three broker-dealers to whom we may refer suitable clients.
In addition, we have formed an affiliate corporation, MCAP Investment Banking
Services, which, as of the date of this prospectus, has substantially completed
the process required to become a licensed broker-dealer, including SEC
registration and NASD membership.
We are a start-up company, having commenced operations in 2001, 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 private offerings of our common stock, our initial public
offering during 2001 and fees paid for consulting services provided by us to two
clients in order to test and evaluate our methods.
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
At the end of 2001, we completed our initial public offering, having raised an
aggregate of $542,000. This offering is essentially a continuation of our
initial public offering, inasmuch as we are saelling identical units on the same
terms.
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 . . . . . . . . . . . . . . . . . . . . . 875,000 units
Common stock outstanding before the offering. . . . . . . . 16,541,612 shares
Common stock to be outstanding after minimum offering . . . 16,566,612 shares
Common stock to be outstanding after maximum offering . . . 18,291,612 shares
Common stock to be subject to warrants after minimum offering 296,000 shares
Common stock to be subject to warrants after maximum offering 2,021,000 shares
Proposed OTC Bulletin Board trading symbol. . . . . . . . . MCAP
Each unit consists of two shares of its common stock and two warrants to
purchase additional shares of common stock. At any time on or before September
30, 2003, 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. The
amounts shown above assume that no bonus shares, as described under "Plan of
Distribution," are issued.
This is a minimum maximum offering which will be sold by us through our
officers and directors, without the participation of an underwriter. Unless
collected funds sufficient to purchase at least the minimum offering of 12,500
units, containing 25,000 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 120 days, the
offering will terminate and no shares will be sold. If the 12,500-unit minimum
offering is fully sold within the foregoing period, the initial disbursement of
escrowed funds will take place, and the offering may continue until 875,000
units, containing 1,750,000 shares of common stock, are sold or March 31, 2003,
whichever occurs first.
4
We are not obligated to (1) sell any number or dollar amount of our common
stock in excess of the 12,500-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 management, technical and marketing personnel; (2)
advertising and marketing; (3) marketing of our software products; (4)
establishment of a business presence in one or more additional major
metropolitan areas to expand our client base; 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
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements, and the related notes,
which are included elsewhere in this prospectus. The information shown below as
of December 31, 2001, and for the year then ended, and for the cumulative period
from March 13, 2000 (inception) to December 31, 2001, has been taken from our
consolidated financial statements, which have been audited by Gordon, Hughes &
Banks, LLP, independent certified public accountants, for the foregoing periods
and by Van Dorn & Bossi, independent certified public accountants, for the
period from March 13, 2000 (inception) to December 31, 2000.
Mentor Capital Consultants, a Development-Stage Enterprise
Statement of Income Data:
CUMULATIVE
MARCH 13, 2000 YEAR MARCH 13, 2000
(INCEPTION) ENDED (INCEPTION)
TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
2001 2001 2000
------------ ------------ ------------
Total income . . . . . . . $ 73,000 $ 73,000 $ -
Total operating expenses . $ 1,845,687 1,191,902 1,406
----------- ----------- -----------
Net loss . . . . . . . . . $ (1,754,159) $(1,101,780) $ (652,379)
=========== =========== ===========
Net loss per common share. $ (0.12) $ (0.07) $ (0.05)
=========== =========== ===========
Weighted average common
shares outstanding. . 14,640,168 15,833,085 13,133,326
Balance Sheet Data:
December 31, 2001
-----------------
Cash and cash equivalents. . . . . . . . . $ 513,057
Total assets . . . . . . . . . . . . . . . $ 627,874
Long-term debt, less current portion . . . $ -0-
Deficit accumulated during
development stage. . . . . . . . . . . $ (1,754,159)
Stockholders' equity . . . . . . . . . . . $ 538,031
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 intended.
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 12,500-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. Management believes that the net
proceeds of our initial public offering, which was conducted during the second
half of 2001, will be sufficient to support our operations for six to eight
months. It is intended that sales in this offering, which is essentially a
continuation of our initial public offering, will enhance our operating capital
position. However, our inability to obtain financing in excess of the minimum
in this offering 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 price of our common stock in this offering 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.
6
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.
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 price of our common stock in this offering is substantially higher than
its book value immediately after the offering. As a result, if you invest in
this offering at an assumed offering price of $2.00 per share, you will incur
immediate dilution of at least $1.78 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 12,500-unit minimum offering, you will experience dilution
of $1.97 per share. You will incur this dilution largely because our earlier
investors paid substantially less than the 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 16,541,612 shares of our common
stock outstanding, including 271,000 shares sold in our initial public offering
during 2001; the remaining 16,270,612 shares outstanding were sold in private
transactions and are considered "restricted securities" under the securities
laws. The shares sold in our initial public offering are freely tradeable
without restriction or further registration under the Securities Act of
1933. The restricted securities may only be transferred in compliance with Rule
144 under the Securities Act of 1933; the transfer of these restricted shares is
further limited by lock-up agreements between the respective holders of such
shares and us.
7
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."
The arbitrary determination of the price of the units to be sold in this
offering 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 offering price of the units to be sold in this offering 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 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.
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.
As of the date of this prospectus, our directors and officers owned 48.1% of our
outstanding common stock, enabling them in most circumstances, if they vote as a
group, to control the managment, business and affairds of our company,
notwithstanding the objectives and/or preference of their shareholders.
If our directors and officers continue to own the 48.1% of our outstanding
common stock held by them as of the date of this prospectus, while such
ownership does not constitute a voting majority of such common stock, they are
likely, as a practical matter and in most circumstances, to 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 of the election and removal of our 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. Accordingly, if they act together, our directors and officers may
exercise the degree of control described above and may make decision that you
may deem to be adverse to your interests. See "Principal Stockholders" for the
most information about the ownership of 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 $10,000 if the
minimum offering of 12,500 units, containing 25,000 shares of common stock, is
sold at an assumed public offering price of $4.00 per unit and $3,460,000 if the
maximum offering of 875,000 units, containing 1,750,000 shares, is sold. The
primary purposes of this offering are to obtain additional equity capital, aid
in the creation of 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 12,500-unit
offering and the maximum 875,000-unit offering:
Assuming 12,500 Assuming 875,000
Units, containing Units, containing
25,000 shares, are sold 1,750,000 shares, are sold
in this offering in this offering
------------------ --------------------
Marketing and
Technology Staff (2) $ -0- $ 1,250,000
Non- Personnel
Marketing Expenses (3) -0- 1,250,000
Software Development -0- 150,000
Broker-dealer formation (4) -0- 110,000
General unallocated
working capital 10,000 700,000
------------- -------------
Totals: $ 10,000 $ 3,460,000
(1) We can provide no assurance that all or any part of the units offered by
this prospectus in excess of the 12,500-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 in this offering, we will allocate
all net proceeds to general working capital. 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) Completion of our formation of MCAP Investment Banking Services, including
its registration as a broker-dealer and related required membership in the
NASD, as well as salaries and other general and administrative expenses.
See "Management's Discussion and Analysis of Financial Position and
Results of Operations" and "Business" concerning our formation of a
broker-dealer affiliate.
The above amounts reflect our best estimates at this time. We anticipate that
the proceeds of our initial public offering and this offering, combined with
current working capital, will be sufficient to allow us to continue operating
for at least the next eighteen 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 six to eight 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 December 31, 2001 was approximately
$538,031, or $0.03 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 12,500 units, containing 25,000 shares of common stock, is
sold, and also at certain arbitrarily determined sales levels in excess of the
minimum (ie., 700,000 shares, 1,200,000 shares and 1,750,000 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 December
31, 2001 would have been $548,031, $1,898,031, $2,898,031 or $3,998,031,
respectively, or $0.03, $0.11, $0.16 or $0.22, respectively, per share of common
stock, representing an immediate increase in net tangible book value of less
than $0.01, $0.08, $0.13 or $0.19, respectively, per share to existing
stockholders and immediate dilution of $1.97, $1.89, $1.84 or $1.78,
respectively, per share to new investors.
Number of shares of common stock sold in the offering (1)
----------------------------------------------------------
12,500 700,000 1,200,000 1,750,000
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. . . . . 0.03 0.03 0.03 0.03
Increase in net tangible
book value attributable
to new investors . . . . . . - 0.08 0.13 0.19
------- -------- -------- ---------
Pro forma net tangible
book value per share
after the offering . . . . . . 0.03 0.11 0.16 0.22
------- -------- -------- ---------
Dilution per share to new
public investors . . . . . . . $1.97 $1.89 $1.84 $1.78
======= ======= ======== =========
(1) The numbers of shares of common stock shown as sold in the above table, in
excess of the minimum offering of 12,500 units, containing 25,000 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 December 31, 2001,
after giving effect to the sale of the minimum offering of 12,500 units,
containing 25,000 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. . . . 16,541,612 99.8% $2,292,190 97.9% $0.14
New public
investors(1). . . . 25,000 0.2% 50,000 2.1% $2.00
---------- ------ --------- ------ -------
Total . . . . . . . 16,566,612 100.0% $2,342,190 100.0%
========== ====== ========= ======
(1) If sales levels of 700,000 shares, 1,200,000 shares and 1,750,000 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 4.1%, 6.8% and 9.6%,
respectively; and the aggregate consideration paid by new investors would
be $1,400,000, $2,400,000 or $3,500,000, respectively, or 37.9%, 51.1% or
60.4%, 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 12,500 units, containing 25,000 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 summary financial data in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements, and the related notes,
which are included elsewhere in this prospectus. The financial information
shown below as of December 31, 2001, and for the year then ended, and for the
cumulative period from March 13, 2000 (inception) to December 31, 2001, has been
taken from our consolidated financial statements, which have been audited by
Gordon, Hughes & Banks, LLP, independent certified public accountants, for the
foregoing periods and by Van Dorn & Bossi, independent certified public
accountants, for the period from March 13, 2000 (inception) to December 31,
2000.
Mentor Capital Consultants, a Development-Stage Enterprise
Statement of Income Data:
CUMULATIVE
MARCH 13, 2000 YEAR MARCH 13, 2000
(INCEPTION) ENDED (INCEPTION)
TO DECEMBER 31, DECEMBER 31, MARCH 31,
2001 2001 2000
------------ ------------ ------------
Total revenues . . . . . . $ 91,528 $ 90,122 $ 1,406
Total costs and expenses . 1,845,687 1,191,902 653,785
--------- -------------- ------------
Net income (loss). . . . . $ (1,754,159) $ (1,101,780) $ (652,379)
========= ============== ============
Net income (loss) per
common share . . . . . $ (0.12) $ (0.07) $ (0.05)
========= ============== ============
Weighted average common
shares outstanding. . . . 14,640,168 $ 15,833,085 $13,133,326
Balance Sheet Data:
December 31, 2001
-----------------
(unaudited)
Cash and cash equivalents. . . . . . . . . $ 513,057
Total assets . . . . . . . . . . . . . . . $ 627,874
Long-term debt, less current portion . . . $ -0-
Deficit accumulated during
development stage. . . . . . . . . . . $ (1,754,159)
Total stockholders' equity . . . . . . . . $ 538,031
11
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Revenue
Initial consulting revenue for 2001 amounted to $73,000 compared to $0 for
2000, our initial year in business. During the second six months of 2001, we
signed consulting agreements with three clients. Revenue generated during the
latter half of 2001 amounted to 78% of the total revenue generated for the year.
Operating Expenses
For fiscal 2001, operating expenses increased by $538,117 or 82% over fiscal
2000, which was nine and a half months long.
We began to build our management infrastructure which resulted in labor and
benefits increasing by $348,857 or 106% over 2000. In addition, we began to
implement our business plan incurring business development costs and advertising
expenditures of $117,137 in 2001, a $93,936 or 405% increase over 2000. We
incurred costs of $37,978 to develop our proprietary software program and
$27,809 to formulate our broker/dealer subsidiary in 2001, compared to no such
costs in 2000. Administratively, our occupancy expenses increased to $59,266 in
fiscal 2001 from $29,707 in fiscal 2000. This was primarily due to our moving
into larger offices, and we were operating two and a half more months in 2001
than 2000.
Other income (expense) net, increased $15,716 in 2001 from 2000 principally
due to interest income generated from our money market account.
Net Income (Loss)
For 2001 as compared to 2000, our revenue increased by $73,000, while
operating expenses and other income (expense) increased by $538,117 and $15,716
respectively, resulting in an increase in our net (loss) to ($1,101,780) in 2001
from ($652,379) in 2000.
We expect to continue to grow our company through the further implementation
of our business plan. That is, continuing to develop new clients through our
direct marketing campaigns; completion and licensure of our broker/dealer
subsidiary in the first quarter of 2002; completing the development of our
proprietary software for sale during the first quarter of 2002; and expanding
our business to other cities across the country.
Financial Condition
Liquidity; Commitments for Capital Resources; and Sources of Funds
As we have been in the development stage to date, there has been no liquidity
from operations. Liquidity has been generated by utilizing the proceeds of
private placements of common stock during 2000 and the first half of 2001.
During the fourth quarter of 2001, we made an initial public offering of up to
2,000,000 shares of stock and 2,000,000 warrants at a price to the public of
$4.00 per unit. We anticipate our principal sources of liquidity during the
next year will be cash from operations and net proceeds of this ongoing
offering.
We do not currently have any major capital commitments.
12
Changes in Assets and Liabilities
During 2001, we substantially reduced our cash on hand, from $934,233 at
December 31, 2000 to $513,057 at the end of 2001. This was primarily due to
building the company's management infrastructure and increasing expenditures for
business development and marketing as we begin to implement our business plan.
Fixed assets increased by $33,142 or 33%, from 2000 to 2001, primarily as a
result of the purchase of furniture, office equipment, and computers for use in
our new offices by newly hired personnel.
Current liabilities increased $60,584 from 2000 to 2001, reflecting an
increase in operational activities at December 31, 2001 compared to December 31,
2000.
Common stock and additional paid-in capital increased 39% from 2000 to 2001,
from $1,649,804 to $2,292,190, principally as a result of our private placements
and public offering of common stock and units respectively. Our deficit
accumulated during the development stage increased by 169% from 2000 to 2001 as
discussed under Net Income (Loss), above.
Inflation and Other Factors That May Affect Future Results.
We have not been affected by inflation in the past, 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
principally funded through our sales of securities, including private placements
of our common stock in 2000 and 2001 and our initial public offering of common
stock and warrants during the second half of 2001. This offering is essentially
a continuation of our initial public offering, inasmuch as we are selling
identical units (two shares of common stock and two warrants bearing the same
terms as those offered in our IPO) for the same price.
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 have developed, completed testing and anticipate shipping during
the first quarter of 2002 an "off-the-shelf" software product, Small Issue
Initial Public Offering or SIIPOP 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 Form U-7 for Small Corporate Offerings (SCORs) and Form 1-A used in a
Regulation A offerings. We also provide clients with referrals to
broker-dealers for underwriting and 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 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 identification of target markets
and develop a methodology to reach them;
* 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 underwritings,
such as 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
53202; 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 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. In September 2001, we organized a subsidiary
Delaware corporation, MCAP Investment Banking Services, to become a registered
broker-dealer under the regulations of the SEC and the NASD. As of the date of
this prospectus, MCAP has substantially completed the process required to become
a licensed broker-dealer. Until such time as MCAP is fully licensed, we will
refer our clients for the provision of all underwriting services to registered
broker-dealers, including those listed above, and 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 Small Issue Initial Public Offering or SIIPOP 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 Small Issue Initial Public Offering or "SIIPOP" 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 continue to 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 our market test and our engagement by four clients, we will
continue 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 the successful registration of our subsidiary, MCAP
Investment Banking Services, 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 or our business.
Personnel and Facilities
We currently employ fourteen persons, comprised of seven 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(s)
Michael Bissonnette 53 Chief Executive Officer, President and Director
Jerry L. Gutterman 59 Chief Financial Officer and Treasurer
John K. Thompson 40 Vice President
Elizabeth B. Lane 42 Secretary and Director
Richard A. Kranitz 57 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.
Jerry L. Gutterman has been Chief Financial Officer of Mentor Capital
Consultants since November 2001 and its Treasurer since January 2002. From 1995
until his engagement with the company, Mr. Gutterman was a principal of J.L.
Gutterman and Associates, a Santa Barbara, California-based financial and
general management consulting practice focusing on small to medium sized
companies. Mr. Gutterman served as the Chief Financial Officer and a Director of
Voice Powered Technology from 1990 to 1994, where he was responsible for all of
the company's financial, accounting and regulatory (both SEC and NASD)
reporting. Mr. Gutterman also served as General Manager and Chief Financial
Officer for Knight Protective Industries from 1987 to 1989, after which he was
elected to the post of President and CEO of the Company, from 1989 to 1990. Mr.
Gutterman has more than 30 years of accounting experience as well as extensive
experience in senior management of public and private companies.
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.
19
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.
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, 2001. Compensation has been reported for the year ended
December 31, 2001. 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 $100,000 for our fiscal year, which ended
December 31, 2001, only compensation paid by us to our Chief Executive Officer
is included in the table.
Annual Compensation All Other
Name and Principal Positions Year Salary($) Bonus($) Compensation($)
- ---------------------------- ---- --------- -------- ---------------
Michael Bissonnette . . . . . 2001 $150,000 - -
Chief Executive Officer,
President, Treasurer and
Director (1)
(1) Mr. Bissonnette served as Treasurer for the year ended December 31, 2001,
after which he was succeeded by Jerry L. Gutterman. See "Management -
Directors and Officers."
Option Grants in the Last Fiscal Year. No options were granted to our Chief
Executive Officer, our only named executive officer, for the year ended December
31, 2001.
Option Exercises in 2001 and Aggregate Option Values at December 31, 2001. No
options have been exercised by our Chief Executive Officer, our only named
executive officer, during fiscal 2001. As of December 31, 2001, 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 concentrating 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 December 31, 2001, and as adjusted to
reflect the sale of the minimum offering of 12,500 units, containing 25,000
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. . 7,622,250 46.1% 7,622,250 46.0%
4940 Pearl East Circle
Boulder, Colorado 80301
Elizabeth B. Lane . . . . 74,925 0.5% 74,925 0.5%
4940 Pearl East Circle
Boulder, Colorado 80301
Richard A. Kranitz. . . . 120,000 0.7% 120,000 0.7%
1238 Twelfth Avenue
Grafton, Wisconsin 53024
Diane Paoli . . . . . . . 1,250,000 7.6% 1,250,000 7.5%
202 State Street A
Santa Barbara, California
All directors and
executive officers as
a group (5 persons) . . 7,959,701 48.1% 7,959,701 48.0%
(1) We cannot guarantee that all or any part of the common stock offered in
excess of the minimum offering of 12,500 units, containing 25,000 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 200,000
shares, 700,000 shares, 1,200,000 shares or 1,750,000 shares, ownership
percentages would be as follows:
Assumed number of shares of common
stock sold in the offering
----------------------------------------
200,000 200,000 1,200,000 1,750,000
Shares Shares Shares Shares
------- --------- --------- ---------
W. Michael Bissonnette . . 45.5% 44.2% 43.0% 41.7%
Elizabeth B. Lane. . . . . 0.4% 0.4% 0.4% 0.4%
Richard A. Kranitz.. . . . 0.7% 0.7% 0.7% 0.7%
Diane Paoli. . . . . . . . 7.5% 7.2% 7.0% 6.8%
Directors and executive
officers as a group. . . 47.5% 46.2% 44.9% 43.5%
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 December 31, 2001, 16,541,612 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, in whole or in part, on or prior to
September 30, 2003, 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
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.
24
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 January 5, 2002, 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 benefitted 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
defense
25
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 file another
registration statement with the SEC to register up to 2,500,000 of the currently
outstanding 16,541,612 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
Whether or not we successfully register 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, 18,291,612 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 or previously in our initial public
offering during 2001 (up to 2,021,000) 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,
control, or are controlled by, or are under common control with us.
16,270,612 shares of common stock outstanding as of the date of this
prospectus, 7,959,701 of which are held by our affiliates, are considered
"restricted securities" as that term is defined in Rule 144. These restricted
shares of common stock:
* may only be sold if they are registered under the Securities Act of 1933 or
are exempt from such registration; and
* are subject to lock-up agreements, pursuant to which our officers and
directors, as well as investors who have acquired our common stock in
private transactions, have agreed to limit any sales or other transfers of
our common stock.
27
In the case of our officers and directors, these lock-up agreements provide
that such persons may 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 January 1, 2003. Transfers
by such persons are further restricted by the provisions of Rule 144 under
the Securities Act of 1933, described below. In the case of purchasers in
our private placements and other holders of shares of common stock
considered to be restricted securities, lock-up agreements provide that,
commencing twelve months following the completion of this offering, such
persons may sell, transfer or otherwise dispose of, directly or indirectly,
up to 50% of the shares of common stock, or any securities convertible or
exchangeable for shares of common stock, held by them as of the date of this
prospectus; the balance of the restricted shares held by such persons may be
transferred commencing twenty-four months following the completion of this
offering. Except for restrictions provided by the lock-up agreements
described above, all of the 16,270,612 restricted shares will become
eligible for sale in the public market prior to March 31, 2002 under Rule
144.
Stock Options and Warrants
As of the date of this prospectus, 487,385 shares of our common stock are
subject to outstanding options. 155,058 of such options are exercisable for a
period of five years, commencing January 5, 2002; 40,000 are exercisable for a
period of five years, commencing July 5, 2002; and 292,327 are exercisable for
five years, commencing six months following the date of this offering. 128,339
of such options are held by our affiliates, and 359,046 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 2,021,000 shares of common stock may be issued upon the exercise of
warrants sold in this offering or in our initial public offering in 2001. These
warrants are exercisable until September 30, 2003, provided that the common
stock issuable upon the exercise of any 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 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
182,916 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 Exchange 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 12,500-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
12,500 units, containing 25,000 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 120
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 12,500 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) 875,000 units, containing 1,750,000 shares of
common stock, are sold or (2) March 31, 2003, 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, as well as investors who have acquired our common
stock in private transactions, have agreed to limit sales and other transfers of
our common stock as described above under "Shares Eligible for Future Sale."
29
Bonus Shares
Each subscriber who purchases at least 5,000 units will receive, at no
additional cost, additional units in an amount equal to 10% of the units
subscribed for. For example an investor purchasing 12,500 units for $50,000
will receive 1,250 additional bonus shares, containing 2,500 shares of common
stock and warrants to purchase an 2,500 shares, at no additional cost. No
fractional units will be issued.
Determination of Offering Price
Prior to this offering, there has been no public market for our securities.
The 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 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
Gordon, Hughes & Banks, LLP, Greenwood Village, Colorado, independent
certified public accountants, have audited our consolidated financial statements
as of December 31, 2001, and for the year then ended, and for the cumulative
period from March 13, 2000 (inception) through December 31, 2001, as set forth
in their report. We have included our consolidated financial statements in this
prospectus in reliance upon the report of Gordon, Hughes & Banks, LLP, given on
their authority as experts in auditing and accounting. Van Dorn & Bossi,
Boulder, Colorado, independent certified public accountants, have audited our
financial statements as of December 31, 2000, and for the period from March 13,
2000 (inception) through December 31, 2000, as set forth in their report. We
have included our financial statements in this prospectus in reliance upon the
report of Van Dorn & Bossi, given on their authority as experts in auditing and
accounting.
On December 20, 2001, we engaged Gordon, Hughes & Banks, LLP as our principal
independent public accountants and auditors upon the resignation of Van Dorn &
Bossi. No report issued at any time by Van Dorn & Bossi on the financial
statements of Mentor Capital Consultants or its subsidiaries has contained an
adverse opinion or disclaimer of opinion, or was modified as to uncertainty,
audit scope or accounting principles. Further, there were no disagreements with
Van Dorn & Bossi, whether or not resolved, on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which, if not resolved to the satisfaction of Van Dorn & Bossi, would
have caused them to make reference to the subject matter of the disagreement(s)
in connection with their report. The change in accountants described above was
approved by our board of directors.
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
30
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.
We are 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.
INDEX TO FINANCIAL STATEMENTS
Page
--------
Independent Auditor's Report. . . . . . . . . . . . . . . . . . F-1
Independent Accountant's Report . . . . . . . . . . . . . . . . F-2
Financial Statements:
Consolidated Balance Sheets at December 31, 2001
and December 31, 2000 . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Operations for the year
ended December 31, 2001 and for the period from
March 13, 2000 (Inception) through December 31, 2000. . . . F-4
Consolidated Statement of Stockholders' Equity
for the period from March 13, 2000 (Inception)
to December 31, 2001. . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Cash Flows for the year
ended December, 31, 2001 and for the period from
March 13, 2000 (Inception) through December 31, 2000. . . . F-6
Notes to Financial Statements . . . . . . . . . . . . . . . . . F-7
31
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Mentor Capital Consultants, Inc. (A Development Stage Enterprise)
Boulder, Colorado
We have audited the accompanying consolidated balance sheet of Mentor Capital
Consultants, Inc. (A Development Stage Enterprise) as of December 31, 2001 and
the related consolidated statements of operations, stockholders' equity and cash
flows for the year then ended, and for the cumulative period from March 13, 2000
(Inception) to December 31, 2001. 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. The Company's
consolidated financial statements as of December 31, 2000 and for the period
March 13, 2000 (Inception) through December 31, 2000 were audited by other
auditors whose report, dated January 10, 2001, expressed an unqualified opinion
on those statements. The financial statements for the period March 13, 2000
(Inception) through December 31, 2000 reflect total revenues and net loss of $0
and $652,379, respectively, of the related totals. The other auditors' report
has been furnished to us, and our opinion, insofar as it relates to the amounts
included for such prior period, is based solely on the report of such other
auditors.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Mentor Capital
Consultants, Inc. (A Development Stage Enterprise) as of December 31, 2001 and
the results of its operations and cash flows for the year ended December 31,
2001 and the cumulative period March 13, 2000 (Inception) to December 31, 2001,
in conformity with accounting principles generally accepted in the United
States.
Gordon, Hughes & Banks, LLP
January 21, 2002
Greenwood Village, Colorado
F-1
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-2
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET
ASSETS:
DECEMBER 31, DECEMBER 31,
2001 2000
------------ -----------
Current assets:
Cash (Note 1) $ 513,057 $ 934,233
Accounts Receivable 5,000 -
Prepaid expenses & other 3,636 -
------------ -----------
Total current assets 521,693 934,233
Property and equipment (Note 1)
Property and equipment 133,216 100,074
Less accumulated depreciation (30,167) (9,623)
------------ -----------
Property and equipment, net 103,049 90,451
Deposits 3,132 2,300
------------ -----------
Total assets $ 627,874 $1,026,684
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 64,605 $ -
Accrued expenses $ 25,238 $ 29,259
------------ -----------
Total current liabilities 89,843 29,259
Stockholders' equity (Notes 3 and 6):
Preferred stock, $.0001 par value,
25,000,000 shares authorized, none
issued and outstanding - -
Common stock, $.0001 par value;
100,000,000 shares authorized, 16,541,612
and 15,505,762 shares issued and outstanding
at December 31, 2001 and 2000 respectively $ 1,654 $ 1,551
Additional paid-in-capital 2,290,536 1,648,253
Deficit accumulated during the development
stage (1,754,159) (652,379)
------------ -----------
Total stockholders' equity 538,031 997,425
------------ -----------
Total liabilities and stockholders' equity $ 627,874 $1,026,684
============ ===========
See accompanying summary of accounting policies
and notes to financial statements.
F-3
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
Cumulative Period from
During Year Ended March 13, 2000
Development December 31, (Inception) to
Stage 2001 December 31, 2001
------------- ------------ -----------------
Revenue
Consulting revenues $ 73,000 $ 73,000 $ -
Operating expenses
Cost of revenues $ 64,222 $ 64,222 -
Selling, general and
administrative 1,751,298 1,107,136 644,162
Depreciation 30,167 20,544 9,623
------------ ------------ -------------
Total operating expenses 1,845,687 1,191,902 653,785
------------ ------------ -------------
Income (loss) from operations (1,722,287) (1,118,902) (653,785)
Other income (expense), net 6,200 - 6,200
Other income
Interest income
(expense),net 13,498 18,292 (4,794)
Franchise tax (1,170) (1,170) -
------------ ------------ -------------
Total other income
(expense), net 18,528 17,122 1,406
------------ ------------ -------------
Net loss $(1,754,159) $ (1,101,780) $ (652,379)
============ ============ =============
Net loss per share, basic
and diluted $ (0.12) $ (0.07) $ (0.05)
============ ============ =============
Weighted average number of
common shares outstanding,
basic and diluted $14,640,168 $ 15,833,085 $13,133,326
============ ============ =============
See accompanying summary of accounting policies
and notes to financial statements.
F-4
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Period from March 13, 2000 (Inception) To December 31, 2001
Accumulated
(Deficit)
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage Total
----------- ----------- ----------- ----------- -----------
Issuance of common
stock on March 13,
2000 (inception) 11,682,500 $ 1,168 $ 84,685 $ - $ 85,863
Issuance of common
stock for cash
during private
placement from
March 13, 2000 to
December 31, 2000
(Note 6) 3,645,000 365 1,492,760 - 1,493,125
Issuance of common
stock for services
provided from
March 13, 2000 to
December 31, 2000
(Note 6) 178,262 18 50,798 - 50,816
Issuance of stock
options to non-
employees for
services provided
from March 13, 2000
to December 31, 2000
(Note 6) - - 20,000 - 20,000
Net (loss) for the
period from March 13,
2000 (Inception) to
December 31, 2000
(Note 6) - - - (652,379) (652,379)
----------- ----------- ----------- ----------- -----------
Balances, December
31, 2000 15,505,762 1,551 1,648,253 (652,379) 997,425
Issuance of common
stock for cash
during private
placement from
January to August,
2001 at $0.50 and
$0.25 per share,
net of $33,238 in
offering costs 675,250 68 229,194 - 229,262
Issuance of common
stock for cash
during private
placement from
September to
December, 2001 at
$2.00per share,
net of $227,159
in offering costs 292,700 29 314,812 - 314,841
Issuance of common
stock for services
provided from
January to December,
2001 at $0.50,$0.25,
and $2.00 per share,
(Note 6) 67,900 6 27,919 - 27,925
Issuance of stock
options to non-
employees for
services provided
from January to
December, 2001
(Note 3) - - 59,408 - 59,408
Issuance of stock
options to
employees
from January to
December, 2001
(Note 3) - - 10,950 - 10,950
Net (loss) - - - (1,101,780) (1,101,780)
----------- ----------- ----------- ----------- -----------
Balances, December
31, 2000 16,541,612 $ 1,654 $2,290,536 $(1,754,159) $ 538,031
=========== =========== =========== =========== ===========
See accompanying summary of accounting policies
and notes to financial statements.
F-5
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
Cumulative Period from
During March 13, 2000
Development Year Ended (Inception) to
Stage December 31, 2001 December 31, 2001
------------- ----------------- -----------------
Cash flows from
operating activities
Net (loss) $ (1,754,159) $ (1,101,780) $ (652,379)
Adjustments to reconcile
net (loss) to cash
provided (used) by
operations
Depreciation $ 30,167 $ 20,544 $ 9,623
Issuance of common
stock and options
for services 158,148 87,333 70,815
Issuance of employee
stock options 10,950 10,950 -
Change in assets and
liabilities
Accounts receivable (5,000) (5,000) -
Other current assets (3,636) (3,636) -
Accounts payable 64,605 64,605 -
Accrued expenses 25,238 (4,021) 29,259
Deposits (3,132) (1,132) (2,000)
------------- ----------------- -----------------
Net cash (used) by
operating expenses $ (1,476,819) $ (932,137) $ (544,682)
Cash flows from investing
activities
Purchases of property
and equipment (133,216) (33,142) (100,074)
------------- ----------------- -----------------
Net cash (used) by
investing
activities (133,216) (33,142) (100,074)
Cash flows from financing
activities
Proceeds from issuance
of common stock, net
of offering costs 2,123,092 544,103 1,578,989
------------- ----------------- -----------------
Net cash provided by
financing activities 2,123,092 544,103 1,578,989
------------- ----------------- -----------------
Net increase (decrease)
in cash $ 513,057 $ (421,176) $ 934,233
Cash, beginning of
period - 934,233 -
------------- ----------------- -----------------
Cash, end of period $ 513,057 $ 513,057 $ 934,233
============= ================= =================
Supplemental disclosure
of non-cash investing
and financing
activities;
Issuance of common
stock and options
for services $ 158,148 $ 87,333 $ 70,815
============= ================= =================
Issuance of employee
stock options at
less than fair
market value $ 10,950 $ 10,950 $ -
============= ================= =================
Interest paid $ 8,942 $ 532 $ 8,410
============= ================= =================
See accompanying summary of accounting policies
and notes to financial statements.
F-6
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
Note 1 - 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.
The Company was organized to provide strategic business planning and marketing
consulting services to small and medium sized businesses, and through wholly
owned affiliates or business alliances, to provide specialized investment
banking, investment advisory and related services to its clients.
For the period March 13, 2000 (Inception) to December 31, 2001, the Company has
been in the development stage. The Company's activities since inception have
consisted of developing the business plan, raising capital and initial business
plan implementation.
Significant Accounting Policies
Consolidated Financial Statements
The consolidated financial statements include the Company and its wholly owned
subsidiaries, IPO Management Group, Inc., IPO Marketing Group, Inc., IPO
Investor Services, Inc. and MCAP Investment Banking Services, Inc. Significant
intercompany accounts and transactions, if any, have been eliminated. The
subsidiaries are currently inactive and have had no operating activities for the
period since inception through December 31, 2001.
Cash and cash equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash and cash equivalents.
Property and equipment
Property and equipment are stated at cost. Depreciation for financial
accounting purposes is computed using the straight-line method over the
estimated lives of the respective assets. Furniture and equipment is
depreciated over 7 years, computer software is depreciated over 3 years, and
computer hardware is depreciated over 5 years.
Property and equipment consist of the following:
December 31
2001 2000
------------ ------------
Furniture and office equipment $ 77,248 $ 59,955
Computer hardware 50,363 39,150
Computer software 5,605 969
------------ ------------
133,216 100,074
Less: accumulated depreciation (30,167) (9,623)
------------ ------------
$ 103,049 $ 90,451
============ ============
Advertising
The Company expenses advertising costs as they are incurred. Advertising
expenses for 2001 and the period from March 13, 2000 (Inception) to December 31,
2000 totaled $52,915 and $23,201, respectively.
F-7
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
Significant Accounting Policies (cont.)
Use of estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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. The amounts of such revenues are recorded based on the fair value of
the compensation received in exchange for the services. To date, the Company
has contracted its services for payments in cash only.
Concentration of Credit Risk and Financial Instruments
Statement of Financial Accounting Standards ("SFAS") No. 105, "Disclosure of
Information About Financial Instruments with Off-Balance Sheet Risk and
Financial Instruments with Concentrations of Credit Risk", requires disclosure
of significant concentrations of credit risk regardless of the degree of such
risk. Financial instruments with significant credit risk include cash. The
Company transacts its business with two financial institutions. The amount on
deposit with one of those financial institutions does exceed the $100,000
federally insured limit at December 31, 2001. However, management believes that
the financial institution is financially sound and the risk is minimal.
Financial instruments consist of cash and cash equivalents, accounts receivable
and accounts payable. The carrying values of all financial instruments
approximate fair value.
Software Development Costs
The costs incurred to develop computer software products to be sold or otherwise
marketed are charged to expense until technological feasibility of the product
has been established. Once technologically feasibility of related software
products has been established, computer software development costs will be
capitalized and reported at the lower of amortized cost or net realizable value.
When a product is ready for general release, its capitalized costs will be
amortized using the straight-line method of amortization over a reasonable
period. During the year ended December 31, 2001 and the period from March 13,
2000 (Inception) to December 31, 2000, no software costs have been capitalized.
Stock Based Compensation
The Company follows Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB No. 25") in accounting for stock based
compensation. Under APB No. 25, the Company recognizes no compensation expense
related to employee or director stock options unless options are granted with an
exercise price below fair value on the day of grant. Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
No. 123") provides an alternative method of accounting for stock-based
compensation arrangements for employees and directors, based on fair value of
the stock-based compensation utilizing various assumptions regarding the
underlying attributes of the options and stock. Stock, options or warrants
issued to consultants and outsiders are recorded at fair value under SFAS No.
123. The Financial Accounting Standards Board encourages, but does not require,
entities to adopt the fair-value based method. The Company will continue its
accounting under APB No. 25 for employees and directors but uses the
disclosure-only provisions of SFAS No. 123 for any options issued to employees
and directors. See Note 3 for disclosure on those options issued for the
periods ended December 31, 2001 and 2000.
F-8
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
Significant Accounting Policies (cont.)
Income taxes
The Company accounts for deferred income taxes in accordance with the liability
method as required by Statement of Financial accounting Standards ("SFAS")
No.109, "Accounting for Income Taxes." Deferred income taxes are recognized for
the tax consequences in future years for differences between the tax basis of
assets and liabilities and their financial reporting amounts at the end of each
period, based on enacted laws and statutory rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established, when necessary, to reduce deferred tax assets and
liabilities. Any liability for actual taxes to taxing authorities is recorded
as income tax liability.
Reclassifications
Certain prior year amounts have been reclassified to conform with current year
presentation. The impact of these changes is not material and did not affect
net (loss).
Comprehensive Income
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" requires the presentation and disclosure of all changes in equity from
non-owner sources as "Comprehensive Income". The Company had no items of
comprehensive income in the year ended December 31, 2001 or the period from
March 13, 2000 (Inception) to December 31, 2000.
Segments Of An Enterprise And Related Information
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS 131") replaces the industry
segment approach under previously issued pronouncements with the management
approach. The management approach designates the internal organization that is
used by management for allocating resources and assessing performance as the
source of the Company's reportable segments. SFAS 131 also requires disclosures
about products and services, geographic areas and major customers. At present,
the Company only operates in one segment.
Earnings (loss) per common share
Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
requires two presentations of earnings per share - "basic" and "diluted". Basic
earnings or (loss) per common share is computed using the weighted average
number of shares of common stock outstanding during the period. Diluted
earnings per common share is computed using the weighted average number of
shares of common stock outstanding, adjusted for the dilutive effect of
potential common shares consisting of common stock options and warrants and
contingently issuable shares of common stock. Potential common shares
outstanding are calculated using the treasury stock method. As a result of the
Company's net loss, common stock equivalents have been excluded because their
effect would be anti-dilutive.
Recent accounting pronouncements
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
141 "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible
Assets". SFAS 141 requires all business combinations initiated after June 30,
2001 to be accounted for under the purchase method. For all business
combinations for which the date of acquisition is after June 30, 2001, SFAS No.
141 also establishes specific criteria for the recognition of intangible assets
separately from goodwill and requires unallocated negative goodwill to be
written off immediately as an extraordinary gain rather than deferred and
amortized. SFAS No. 142 changes the accounting for goodwill and other
intangible assets after an
F-9
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
Significant Accounting Policies (cont.)
Recent Accounting Pronouncements (cont.)
acquisition. The most significant changes made by SFAS No. 142 are: 1) goodwill
and intangible assets with indefinite lives will no longer be amortized; 2)
goodwill and intangible assets with indefinite lives must be tested for
impairment at least annually; and 3) the amortization period for intangible
assets with finite lives will no longer be limited to forty years. The Company
does not currently have any goodwill or intangible assets recorded nor has it
ever entered into a business combination and therefore, the Company does not
believe that the adoption of these statements will have a material effect on its
financial position, results of operations, or cash flows.
In June 2001, the FASB also approved for issuance SFAS No. 143, "Asset
Retirement Obligations." SFAS No. 143 establishes accounting requirements for
retirement obligations associated with tangible long-lived assets, including (1)
the timing of the liability recognition, (2) initial measurement of the
liability, (3) allocation of assets retirement cost to expense, (4) subsequent
measurement of the liability, and (5) financial statement disclosure. SFAS No.
143 requires that an asset retirement cost should be capitalized as part of the
cost of the related long-lived asset and subsequently allocated to expense using
a systematic and rational method. The adoption of SFAS No. 143 is not expected
to have a material effect on the Company's financial position, results of
operations, or cash flows.
In August 2001, the FASB also approved SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 replaces SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of". The new accounting model for long-lived assets to be
disposed of by sale applies to all long-lived assets, including discontinued
operations, and replaces the provisions of APB Opinion No. 30, "Reporting
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business", for the disposal of segments of a business. SFAS No. 144 requires
that those long-lived assets be measured at the lower of carrying amount or fair
value less cost to sell, whether reported in continuing operations or in
discontinued operations. Therefore, discontinued operations will no longer be
measured at net realizable value or include amounts for operating losses that
have not yet occurred. SFAS No. 144 also broadens the reporting of discontinued
operations to include all components of an entity and that will be eliminated
from the ongoing operations of the entity in a disposal transaction. The
provisions of SFAS No. 144 are effective for financial statements issued for
fiscal years beginning after December 15, 2001 and, generally, are to be applied
prospectively. The adoption of SFAS No. 144 is not expected to have a material
effect on the Company's financial position, results of operations, or cash
flows.
Note 2 - Income Taxes
The Company did not record any provision for federal and state income taxes for
December 31, 2001 and December 31, 2000. Variations from the federal statutory
rate are as follows:
Cumulative Period from
During March 13, 2000
Development Year Ended (Inception) to
Stage December 31, 2001 December 31, 2001
------------- ----------------- -----------------
Expected federal income
tax benefit at statutory
rate of 34% $ (817,038) $ (595,229) $ (221,809)
Net operating loss
carryforward $ 817,038 $ 595,229 $ 221,809
------------- ----------------- -----------------
Net tax expense $ - $ - $ -
------------- ----------------- -----------------
F-10
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
Note 2 - Income Taxes (cont.)
Deferred income tax assets result from federal and state operating loss
carryforwards in the amount of $1,523,887 and $581,600 plus timing difference
related to deductions for non-cash compensation and to other temporary
differences in the amounts of $162,799 and $63,987 at December 31, 2001 and
$70,816 and $0 at December 31, 2000, respectively. The loss carryforwards
expire in 2020 and 2021 respectively.
Net deferred tax assets consist of the following as of December 31:
2001 2000
---------- ----------
Tax effect of net operating loss
carryforwards $ 518,121 $ 197,732
Tax effect of timing differences related
to compensation expense 55,352 24,077
Tax effect of other temporary differences 21,756 -
Less valuation allowance (595,229) (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 3 - Stock Options
In 2000, the Company's board of directors approved a Stock Option Plan (the
Plan) pursuant to which incentive stock options and nonqualified stock options
are reserved for issuance to eligible employees, consultants and directors of
the Company. The Plan is administered by the Board of Directors, which has the
authority to select the individuals to whom awards are to be granted, the number
of shares of common stock to be covered by each award, the vesting schedule of
stock options, and all other terms and conditions of each award.
The Company has granted nonqualified stock options to purchase shares of common
stock to certain employees at exercise 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" ("SFAS
No. 123"). Accordingly, the Company continues to account for options using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25
("APB No. 25").
F-11
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
Note 3 - Stock Options (Cont.)
A summary of activity in the Plan is as follows:
Period from
March 13, 2000
Year ended (Inception) to
December 31, 2001 December 31, 2000
-------------------- -------------------
Number Weighted Number Weighted
of Average of Average
Options Exercise Options Exercise
Price Price
--------- --------- --------- --------
Outstanding at beginning of
period 115,058 $ 0.32 - $ -
Granted during year 127,824 0.39 115,058 0.32
Exercised during year - - - -
--------- --------- --------- --------
Outstanding at end of period 242,882 $ 0.36 115,058 $ 0.32
========= ========= ========= ========
Exercisable at end of period 242,882 $ 0.36 115,058 $ 0.32
========= ========= ========= ========
As of December 31, 2001, outstanding options have weighted average contractual
lives remaining of approximately four years with an exercise price of $0.36 per
share. Of those options outstanding at December 31, 2001, all are fully vested.
In 2001, the Company issued to two employees options that were at exercise
prices below the fair market value of the stock on the dates of grant. In
accordance with APB No. 25 and utilizing the intrinsic valuation method
associated with APB No. 25, the Company has recorded $10,950 of compensation
expense related to these option grants.
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 included in the net (loss) for the periods ended December
31, 2001 and 2000 would have increased by $28,081 and $21,910, respectively,
resulting in pro-forma net losses of ($1,129,861) and ($674,289), respectively,
or ($0.07) and ($0.05) per share, respectively.
For purposes of calculating fair value under FAS No. 123, the fair value of each
option grant, as opposed to its exercisable price, is estimated on the date of
grant using the Black-Scholes option-pricing model with the following weighted
average assumptions: no dividend yield, expected volatility of 141.60% and 0% as
of December 31, 2001 and 2000, respectively; risk free interest rates of 8% and
6% as of December 31, 2001 and 2000, respectively; and expected lives of 2
years.
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 the options provided in lieu of
cash has been included in selling, general and administrative expense.
The assumptions utilized to value employee options in accordance with the
disclosure requirements of SFAS No. 123 were also used to value the options
issued to the consultants. For the year ended December 31, 2001 and the period
from March 13, 2000 (Inception) to December 31, 2000, the Company has recognized
consulting expense related to the non-employee options of $59,408 and $20,000,
respectively.
F-12
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
Note 3 - Stock Options (Cont.)
Following is a reconciliation of transactions during the period for options
granted to consultants:
Period from
March 13, 2000
Year ended (Inception) to
December 31, 2001 December 31, 2000
------------------------ ----------------------
Average Average
Number of Exercise Number of Exercise
----------- ---------- ----------- ---------
Outstanding at the
beginning of the
period 80,000 $ 0.25 - $ -
Granted during the
period 164,503 0.41 80,000 0.25
Exercised during the
period - - - -
----------- ---------- ----------- ---------
Outstanding at the end
of the period 244,503 0.36 80,000 0.25
Exercisable at end of
period 255,503 0.36 80,000 0.25
=========== ========== =========== =========
Outstanding non-employee options have a weighted average contractual life
remaining of approximately four years with an exercise price of $0.36 per share.
Of those consultant options outstanding at December 31, 2001, all are fully
vested.
Note 4 - 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. During 2001, the Company paid legal fees to a director
in the amount of $39,700 In addition, during 2001, the Company retained several
consultants who received common stock and fees for services provided totaling
$46,100.
Note 5 - Operating Leases
The Company leases certain facilities and office space under non-cancelable
operating lease agreements. Rent expense for the year ended December 31, 2001
and the period from March 13, 2000 (Inception) to December 31, 2000 was
approximately $59,266 and $29,707, respectively.
Future minimum rental commitments for the operating leases are as follows:
YEAR
2002 $52,332
2003 34,888
-------
Total lease payments $87,220
=======
F-13
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
Note 6 - Shareholders' Equity
During the period from March 13, 2000 (Inception) to December 31, 2000, the
Company issued a private placement memorandum under Regulation D, Rule 504 of
the Securities and Exchange Act of 1933, as amended, for the purpose of raising
capital for administrative costs, marketing costs, capital expenditures and for
the establishment of a cash reserve. Pursuant to the private placement, the
Company sold 1,279,500 shares at $0.25 per share and 2,365,500 shares at $0.50
per share.
The Company also issued 178,262 shares at $0.25 and $0.50 per share to
consultants for services provided in the period from March 13, 2000 (Inception)
to December 31, 2000.
During the year ended December 31, 2001, the Company continued its private
placement offering initiated in 2000 and issued common stock to new investors at
$.25 per share for 300,250 shares, and at $.50 per share for 375,000 shares.
Offering costs of $33,238 were incurred and recorded as an offset against the
proceeds from the private placement offering in the year ended December 31,
2001.
Through a public offering in 2001, the Company issued common stock to new
investors at $2.00 per share for 292,700 shares. The commons stock was offered
in units. Each unit was comprised of two shares of common stock and two
warrants to purchase additional shares of common stock. Each warrant is
exercisable to purchase a share of common stock at prices of $3.00 and $4.00
per share, respectively. A total of 292,700 warrants were issued in
conjunction with the public offering. As of December 31, 2001, all of the
warrants remain outstanding. The warrants are exercisable over a period not to
exceed 18 months commencing six months from the effective date of the initial
registration statement, which was July 5, 2001. The Company, at its option, may
redeem the warrants at a price of $0.01 per warrant at any time during the
exercise period if the stock price, as traded on a national securities exchange,
equals or exceeds $5.00 per share for a period of 20 consecutive days. No
assignment of fair value was assigned to the warrants issued but any future
exercises will dilute the holdings of current and future shareholders.
Offering costs of $227,159 were incurred and recorded as an offset against the
proceeds from the public offering in the year ended December 31, 2001.
The Company also issued 67,900 shares at $.25, $0.50 and $2.00 per share to
consultants for services provided. These shares were valued based on the price
at which shares were being issued at the time services were rendered.
The Company's Articles of Incorporation authorize the issuance of 25,000,000
shares of preferred stock with $.0001 par value. The preferred stock may be
issued from time to time with such designation, rights, preferences and
limitations as the Board of Directors may determine by resolution. As of
December 31, 2001 and December 31, 2000, no shares of preferred stock have been
issued.
F-14
EXHIBIT A
875,000 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 $4.00 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.)
___________________________________
_____________________________________
___________________________________ Social Security or Federal Tax I.D. Number
Name(s)
___________________________________
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)
_________________________________ of _________________________________________
(Print or Type Title or Position) (Print or Type Name of Subscribing Entity)
("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 _____________________, 2002.
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 the period from issuance through September 30,
2003, 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 of 1933, as amended ("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.
B-1
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.
Commencing January 5, 2002, 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
B-2
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.
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 its corporate seal or a facsimile to be imprinted
hereon 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 , 2002 (90 days after the commencement of this offering),
all dealers that buy, sell or trade our securities, 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 . . . . . . . . . . . . . $ 1,094
Legal fees and expenses. . . . . . . . . . . . 28,000*
Accounting fees and expenses . . . . . . . . . 8,000*
Blue Sky fees and expenses . . . . . . . . . . 750*
Escrow fees and expenses . . . . . . . . . . . 1,000*
Printing and engraving . . . . . . . . . . . . 1,000*
Miscellaneous. . . . . . . . . . . . . . . . . 156*
--------------
Total . . . . . . . . . . . . . . . . . . $ 40,000*
* 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 January 1, 2001 through December 5, 2001, the Registrant sold 698,950
shares of common stock in private transactions to 40 individual investors (36
accredited and 4 nonaccredited) for aggregate consideration in the amount of
$262,500. 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 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 January 5, 2002; 40,000 of such options are exercisable
for a period of five years, commencing July 5, 2002. 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.
From January 1, 2001 through December 31, 2001, the Registrant granted options
covering 292,327 shares of its common stock to 17 persons (7 employees and 10
non-employees). All such options are exercisable for a period of five years,
commencing six months following the initial effective date of this registration
statement. 103,308 of such options are exercisable at the price of $0.25 per
share; 107,224 are exercisable at $0.40 per share; 72,039 are exercisable at
$0.50 per share; 6,650 are exercisable at $1.00 per share; and 3,106 are
exercisable at $2.00 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.
II-2
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 Partnership,
Ltd., LLLP *
16.1 Letter of Van Dorn & Bossi, as to change in accountants **
16.2 Letter of Gordon, Hughes & Banks, LLP., as to change in accountants **
23.1 Consent of Kranitz & Philipp (included in Exhibit 5.1) **
23.2 Consent of Gordon, Hughes & Banks, LLP **
23.3 Consent of Van Dorn & BossiGordon, Hughes & Banks, LLP **
24.1 Power of Attorney (included at Page II-4) **
* Incorporated by reference to the registration statement of Registrant on
Form SB-2, initially effective as of July 5, 2001 (File No. 333-58844).
** Previously filed.
Item 28. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "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 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 whether such indemnification by it is
against public policy as expressed in the 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 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 Act
as part of this registration statement as of the time the Commission
declared it effective.
(2) For determining any liability under the 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-3
(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, notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would exceed that which was
registered) and any deviation from the high or low end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in the volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement.
(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-4
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 February 25, 2002.
Signature Title
------------- ----------
W. Michael Bissonnette Chief Executive Officer, President
(Principal Executive Officer)
and Director
Elizabeth B. Lane Secretary and Director
Richard A. Kranitz Director
By: /s/ W. MICHAEL BISSONNETTE
____________________________
W. Michael Bissonnette
Signing personally as Chief Executive officer
(Principal Executive Officer), President
and Director, and as
Attorney-in-Fact for the
directors and officers whose
names appear above, on
February 25, 2002
POWER OF ATTORNEY
Each person whose signature appears below on this Registration Statement
hereby constitutes and appoints W. Michael Bissonnette and Richard A. Kranitz,
and each of them, with full power to act without the other, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution for him or her and in his or her name, place and stead, in any
and all capacities (until revoked in writing) to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary fully to all
intents and purposes as he or she might or could do in person thereby ratifying
and confirming all that said attorneys-in-fact and agents, or any of them, or
their, his or her substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
Signature Title Date
------------- ---------- ----------
/s/ W. Michael Bissonnette President, Treasurer February 11, 2002
___________________________ (Principal Executive,
W. Michael Bissonnette Financial and Accounting
Officer) and Director
/s/ Elizabeth B. Lane Secretary and Director February 11, 2002
___________________________
Elizabeth B. Lane
/s/ Richard A. Kranitz Director February 11, 2002
___________________________
Richard A. Kranitz
II-5
875,000 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 *
16.1 Letter of Van Dorn & Bossi, as to change in accountants **
16.2 Letter of Gordon, Hughes & Banks, LLP., as to change in accountants **
23.1 Consent of Kranitz & Philipp (included in Exhibit 5.1) **
23.2 Consent of Gordon, Hughes & Banks, LLP **
23.3 Consent of Van Dorn & BossiGordon, Hughes & Banks, LLP **
24.1 Power of Attorney (included at Page II-4) **
* Incorporated by reference to the registration statement of Registrant on
Form SB-2, initially effective as of July 5, 2001 (File No. 333-58844).
** Previously filed.
Exhibit Index