UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 2002
( ) Transition report pursuant of Section 13 or 15(d) of the Securities
Exchange Act of 1939 for the transition period _____ to______
COMMISSION FILE NUMBER
0-32931
Mentor Capital Consultants, Inc.
-----------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 84-1569905
------------------------------- ----------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4940 Pearl East Circle, Suite 104, Boulder, Colorado 80301 (303) 444-7755
- ----------------------------------------------------------------------------
(Address of Principal Executive Offices, including
Registrant's zip code and telephone number)
---------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed
Indicate by check mark whether the registrant (1) has filed all reports required
To be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports,), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No []
The number of shares of the registrant's common stock as of May 1, 2002:
16,549,612 shares.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Financial Statements of
Mentor Capital Consultants, Inc.
(A Development Stage Company)
For the three and nine month periods ended March 31, 2002
1<page>
MENTOR CAPITAL CONSULTANTS, INC
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
March 31, 2002 December 31, 2001
------------------ -----------------
(Unaudited) (Audited)
ASSETS
Current assets
Cash $ 174,524 $ 513,057
Accounts receivable 5,000 5,000
Prepaid expenses & other 7,339 3,636
------------------ -----------------
Total current assets 186,863 521,693
Property and equipment
Property and equipment 142,020 133,216
Less: accumulated depreciation (36,140) (30,167)
------------------ -----------------
Property and equipment, net 105,880 103,049
Deferred offering costs (Note 2) 23,891 -
Deposits 3,132 3,132
------------------ -----------------
Total assets $ 319,766 $ 627,874
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 41,310 $ 64,605
Accrued expenses 33,778 25,238
------------------ -----------------
Total current liabilities 75,088 89,843
Stockholders' equity (Note 4)
Preferred stock, $.0001 par value,
25,000,000 shares authorized,
none issued and outstanding - -
Common stock, $.0001 par value,
100,000,000 shares authorized,
16,549,612 and 16,541,612 shares
issued and outstanding at
March 31, 2002 and December 31,
2001, respectively 1,655 1,654
Additional paid-in capital 2,315,148 2,290,536
(Deficit) accumulated during the
development stage (2,072,125) (1,754,159)
------------------ -----------------
Total stockholders' equity 244,678 538,031
------------------ -----------------
Total liabilities and
stockholders' equity $ 319,766 $ 627,874
================== =================
See accompanying summary of accounting policies and notes to financial
statements
2<page>
MENTOR CAPITAL CONSULTANTS, INC
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Cumulative
During Three Months Ended March 31
Development -----------------------------
Stage 2002 2001
--------------------------------------------------
Revenue
Consulting revenues $ 116,100 $ 43,100 $ 8,300
Operating expenses
Cost of revenues 94,107 29,885 20,788
Selling, general and
administrative 2,076,121 324,823 262,852
Depreciation 36,139 5,972 5,421
--------------------------------------------------
Total operating expenses 2,206,367 360,680 289,061
--------------------------------------------------
Income (loss) from operations (2,090,267) (317,580) (280,761)
Other income (expense), net
Other income 6,200 - -
Interest income (expense),
net 14,231 733 9,618
Franchise tax (2,289) (1,119) (1,170)
--------------------------------------------------
Total other income
(expense), net 18,142 (386) 8,448
--------------------------------------------------
Net income (loss) $(2,072,125) $ (317,966) $ (272,313)
==================================================
Net income (loss) per share,
basic and diluted $ (0.14) $ (0.02) $ (0.02)
==================================================
Weighted average number of
common shares outstanding,
basic and diluted 14,873,912 16,549,079 15,510,484
==================================================
See accompanying summary of accounting policies and notes to financial
statements
3<page>
MENTOR CAPITAL CONSULTANTS, INC
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Cumulative
During
Development Three Months Ended March 31
Stage 2002 2001
-----------------------------------------------
Cash flows from operating
activities:
Net (loss) $(2,072,125) $ (317,966) $ (272,313)
Adjustments to reconcile net
(loss) to cash provided
(used) by operations:
Depreciation 36,139 5,972 5,421
Issuance of common stock
and options for services 166,762 8,614 15,949
Issuance of employee
stock options 10,950 - -
Change in assets and liabilities:
Accounts receivable (4,252) 748 -
Other current assets (8,086) (4,450) -
Accounts payable 41,310 (23,295) -
Other current liabilities (2,562) (2,562) (29,259)
Accrued expenses 36,339 11,101 -
Deposits (3,132) - (644)
-----------------------------------------------
Net cash (used) by operating
activities $(1,798,657) $ (321,838) $ (280,846)
Cash flows from investing
activities:
Purchases of property and
equipment (142,020) (8,804) (4,648)
-----------------------------------------------
Net cash (used) by
investing activities (142,020) (8,804) (4,648)
Cash flows from financing
activities:
Proceeds from issuance of
common stock, net of
offering costs 2,115,201 (7,891) (45,279)
-----------------------------------------------
Net cash provided by
financing activities 2,115,201 (7,891) (45,279)
-----------------------------------------------
Net increase (decrease) in cash $ 174,524 $ (338,533) $ (330,773)
Cash, beginning of period - 513,057 934,233
-----------------------------------------------
Cash, end of period $ 174,524 $ 174,524 $ 603,460
===============================================
Supplemental disclosure of
non-cash investing and
financing activities:
Issuance of common stock and
options for services $ 166,762 $ 8,614 $ 15,949
===============================================
Issuance of employee stock
options at less than fair
market value $ 10,950 $ - $ -
===============================================
Interest paid $ 9,046 $ 104 $ -
===============================================
See accompanying summary of accounting policies and notes to financial
statements
4<page>
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, marketing,
consulting and venture 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 March 31, 2002, the Company has
been in the development stage. The Company's activities since inception have
consisted of developing and refining its business plan, raising capital and
initial business plan implementation.
From inception to March 31, 2002, the Company has revenues of $116,100 and has
expensed costs in the amount of $2,188,225 during the development stage. The
Company has maintained adequate cash resources through its private placement and
self-directed initial public offering
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. MCAP
Investment Banking Services, Inc. is the only active subsidiary. The other
subsidiaries are currently inactive and have had no operating activities for the
period since inception through March 31, 2002.
Basis of Presentation
The accompanying financial statements have been prepared by management in
accordance with basic rules established by the Securities and Exchange
Commission for Form 10-QSB. Not all financial disclosures required to present
the financial position and results of operations in accordance with generally
accepted accounting principles are included herein. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's December 31, 2001 audited
financial statements on Form 10-KSB to the Securities and Exchange Commission
filed on March 26, 2002. In the opinion of management, all accruals and
adjustments (each of which is of a normal recurring nature) necessary for a fair
presentation of the financial position as of March 31, 2002 and the results of
operations for the three-month period then ended have been made. Significant
accounting policies have been consistently applied in the interim unaudited
financial statements and the audited financial statements.
Note 2 - Deferred Offering Costs
Beginning in January, 2002, the Company has recorded deferred offering costs of
$23,891 for the Company's self-directed public offering. These costs are
continuing under the Company's post-effective amendment to its registration
statement. (See Note 6)
5<page>
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
Note 3 - 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 technological 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 three months ended March 31, 2002 and the period from March
13, 2000 (Inception) to March 31, 2002, no software costs have been capitalized.
Note 4 - 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 common stock was offered
in units. Each unit is 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. 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.
During the three months ended March 31, 2002, a total of 8,000 shares and 8,000
warrants were issued in conjunction with the public offering, raising an
additional $16,000 for the Company. As of March 31, 2002, all of the
aforementioned warrants remain outstanding.
The Company also issued 67,900 shares at $0.25, $0.50, and $2.00 per share to
consultants for services provided during the period from March 13, 2000
(Inception) to March 31, 2002. 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 March
31, 2002, no shares of preferred stock have been issued.
6<page>
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
Note 5 - 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. For the three month period ended March 31, 2002 a
director of the Company, who is a partner in the law firm of Kranitz and
Philipp, was paid legal fees of $5,000. In addition, for the three month period
ended March 31, 2002, the Company retained several consultants who received
common stock options and their fees for services provided totaled $14,297.
Note 6 - Subsequent Events
The Company filed a post-effective amendment to its registration statement that
became effective May 1, 2002. Management reduced the price from $2.00 per share
or $4.00 per unit to $1.00 per share or $2.00 per unit in order to expedite the
sale of the offering. In addition, the warrants were reduced from $3.00 per
share and $4.00 per share to $1.50 per share and $2.00 per share respectively.
The composition of each unit remained the same as well as the number of units
offered.
7<page>
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Revenue
For the three months ended March 31, 2002, and 2001, we had revenue of $43,100
and $8,300, respectively. During the three months ended March 31, 2002, we
signed consulting agreements with three new clients resulting in the increase in
revenue of 419% over the prior comparable period.
Operating Expenses
Operating expenses increased by $71,619 or 24.8% in the three months ended
March 31, 2002 compared to the three month period ended March 31, 2001.
The increases in operating expenses reflect the building of the Company's
management infrastructure, refining and implementing the business plan,
development of the Company's proprietary software program, costs to formulate
our broker/dealer operation, and legal and accounting costs associated with
being a public company. Administratively, occupancy costs increased primarily
due to our moving into larger offices.
For the three months ended March 31, 2002, and 2001, other income (expense)
net, was ($386) and $8,448, respectively. The net decrease in 2002 versus 2001
was due to interest income generated during 2001 from our money market account
as a result of funds raised through our private placement.
Net Income (Loss)
For the three months ended March 31, 2002, we incurred a net (loss) of
($317,966) compared with a net (loss) of ($272,313) for the same period ended
March 31, 2001. We have had a net (loss) from operations for each quarterly
period since inception. From inception to March 31, 2002, we incurred a net
(loss) of ($2,072,125) or ($0.14) per share.
Our net operating (losses) are due primarily to the building of the Company's
management infrastructure, implementing our business plan, development of the
Company's proprietary software program, the formulation of our broker/dealer
operation, and legal and accounting costs related to being a public company.
We expect to continue to grow our Company through the further refinement and
implementation of our business plan; that is, continuing to develop new clients
through our direct marketing campaigns; completing the licensure of our
broker/dealer operation; completing the development of our proprietary software;
and ultimately expanding our business to other cities across the country.
8<page>
Financial Condition
Liquidity; Commitments for Capital Resources; and Sources of Funds
As we have been in the development stage to date, there has been little
liquidity from operations. Liquidity has been generated by utilizing the
proceeds of a private placement of common stock during 2000 and the first half
of 2001and from proceeds generated from our ongoing self-directed public
offering during the final quarter of 2001 and the first quarter of 2002. We
anticipate our principal sources of liquidity during the remaining portion of
2002 will be cash from operations and net proceeds of our ongoing public
offering.
We do not currently have any major capital commitments.
Changes in Assets and Liabilities
As of March 31, 2002 our cash balance was $174,524 as compared with $513,057
at December 31, 2001. Cash was used primarily to build the Company's
management infrastructure, completing the licensure of its broker/dealer
operation, business development, and marketing as we continue to refine and
implement our business plan. In addition, the Company incurred $23,891 of
deferred offering costs in anticipation of continuing its self-directed public
offering.
Fixed assets increased by $8,804 or 7% from December 31, 2001 to March 31,
2002. Purchases of office equipment and computer hardware were made for both
existing and newly hired personnel.
Common stock and additional paid-in capital increased 1.1% from December 31,
2001 to March 31, 2002, from $2,292,190 to $2,316,803, respectively. The
increase was a result of an investment in our self- directed public offering of
common stock as well as the issuance of common stock options for services
rendered. Our (deficit) accumulated during the development stage increased by
18.1% from December 31, 2001 to March 31, 2002 as discussed in the Net Income
(Loss) paragraph above.
Critical Accounting Policies
We have identified the policies below as critical to our business operations and
the understanding of our results of operations. The impact and any associated
risks related to these policies on our business operations is discussed
throughout management's Discussion and Analysis of Financial Condition and
Results of Operations where such policies affect our reported and expected
financial results. For a detailed discussion on the application of these and
other accounting policies, see Note 1 in the Notes to the Consolidated Financial
Statements in our Annual Report on Form 10-KSB filed on March 26, 2002. Note
that our preparation of this Quarterly Report on Form 10-QSB requires us to make
estimates and assumptions that affect the reported amount of assets and
liabilities, disclosure of contingent assets and liabilities at the date of our
financial statements, and the reported amounts of revenue and expenses during
the reporting period. There can be no assurance that actual results will not
differ from those estimates.
STOCK-BASED COMPENSATION: We issue common stock options to our employees and
also to outside consultants. The valuation of the expense associated with the
issuance of common stock options to non-employees or with the issuance of common
stock options to employees that are at exercise prices below the fair market
value of our common stock is done in accordance with FASB No. 123 and the
associated Black-Scholes valuation model. .
REVENUE RECOGNITION: We recognize revenue as services to our client companies
are rendered and billed. Revenues are earned as consulting services are
delivered and we are under no further obligations to provide additional efforts
or services to earn those revenues already recognized
9<page>
Part 2: Other Information
Item 1 Legal Proceedings
None
Item 2 Change In Securities and Use Of Proceeds
See Schedule I
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission Of Matters To Vote Of Securities Holders
None
Item 5 Other Information
None
Item 6 Exhibits And Reports On Form 8-K
None
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act
of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Mentor Capital Consultants, Inc.
Dated: May 14, 2002 By: /s/ W. Michael Bissonnette
_______________________________
W. Michael Bissonnette,
President (Principal Executive Officer)
Dated: May 14, 2002 By: /s/ Jerry L. Gutterman
_______________________________
Jerry L. Gutterman,
Treasurer (Principal Financial Officer)
10<page>
SCHEDULE I
MENTOR CAPITAL CONSULTANTS, INC.
FORM 10-QSB
For the Three Months Ended March 31, 2002
Pursuant to Securities Act Rule 463, the following information (as identified in
paragraphs (f)(2) through (f)(4) of Regulation S-B Item 701) is provided
concerning the initial public offering ("Offering"), as investment units
("Units"), of its common stock, par value $0.0001 per share ("Common Stock") and
warrants to purchase additional shares of common stock ("Warrants"), each Unit
consisting of two shares of Common Stock and Warrants to purchase an additional
two shares of Common Stock conducted by Mentor Capital Consultants, Inc.
("Company"), pursuant to a registration statement on Form SB-2 under the
Securities Act of 1933 (File No. 333-58844), which initially became effective
July 5, 2001:
(f)(2) through (f)(4)(i): The Offering commenced as of July 5, 2001, and
terminated as of December 31, 2001.
(f)(4)(ii): Mentor Capital Consultants, Inc. is managing its own
self-underwritten Offering.
(f)(4)(iii) through (f)(4)(iv): 4,000,000 shares of Common Stock were
registered on Form SB-2; 2,000,000 shares were included in the Units
comprising the Offering and 2,000,000 shares were subject to Warrants
contained in such Units; all such shares were registered for the account of
the Company; the aggregate price of the Common Stock registered (calculated
at $2.00 per share, the initial public offering price) was $11,000,000
(including $4,000,000 of Common Stock contained in the Units and $7,000,000 of
common stock to cover Warrants; during the period from July 5, 2001 through
December 31, 2001, 135,500 Units containing 271,000 shares were sold in the
Offering.
(f)(4)(v): Through March 31, 2002, the Company incurred the following
expenses in connection with the Offering:
Legal and accounting fees and expenses $ 66,305.84
Printing/SEC filings (EDGAR) 78,196.33
Other expenses 106,547.99
--------------------
Total expenses $ 251,050.16
--------------------
Richard Kranitz, a director of the Company, is a partner in the law firm of
Kranitz and Philipp of Milwaukee, Wisconsin, which was paid $5,000 of the
above legal and accounting fees and expenses. None of the other above
expenses were paid, directly or indirectly, to directors or officers of the
Company, or to their affiliates, or to persons owning ten percent or more of
any class of equity securities of the Company, or to affiliates of the
Company.
(f)(4)(vi) through (f)(4)(vii): The net proceeds from the Offering from July
5, 2001 through December 31, 2001 was $314,841. The net proceeds were used for
operating capital, with the balance being held in Company accounts.
11