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 September 30, 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
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(Address of Principal Executive Offices, including Registrant's zip code and
telephone number)
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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 October 30, 2002:
16,950,312
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 Enterprise)
For the three and nine month periods ended September 30, 2002
1
MENTOR CAPITAL CONSULTANTS, INC
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
September 30, 2002 December 31, 2001
---------------------------------------------
(Unaudited) (Audited)
ASSETS
Current assets
Cash $ 30,854 $ 513,057
Accounts receivable - 5,000
Prepaid expenses & other 1,528 3,636
---------------------------------------------
Total current assets 32,382 521,693
Property and equipment
Property and equipment 142,810 133,216
Less accumulated depreciation (48,319) (30,167)
---------------------------------------------
Property and equipment, net 94,491 103,049
Marketable securities (Note 2) 93,555 -
Deposits 6,132 3,132
---------------------------------------------
Total assets $ 226,560 $ 627,874
=============================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 94,260 $ 64,605
Accrued expenses 55,780 25,238
---------------------------------------------
Total current liabilities 150,040 89,843
Stockholders' equity (Note 3)
Preferred stock, $.0001 par
value, 25,000,000 shares
authorized, none issued
and outstanding - -
Common stock, $.0001 par
value, 100,000,000 shares
authorized, 16,930,312 and
16,541,612 shares issued
and outstanding at
September 30, 2002 and
December 31, 2001,
respectively 1,693 1,654
Additional paid-in capital 2,572,741 2,290,536
(Deficit) accumulated during
the development stage (2,497,914) (1,754,159)
---------------------------------------------
Total stockholders' equity 76,520 538,031
---------------------------------------------
Total liabilities and
stockholders' equity $ 226,560 $ 627,874
=============================================
See accompanying summary of accounting policies and notes to
financial statements
2
MENTOR CAPITAL CONSULTANTS, INC
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Cumulative
During Three Months Nine Months
Development Ended September 30 Ended September 30
Stage 2002 2001 2002 2001
---------------------------------------------------------------
Revenue
Consulting
revenues $ 488,550 $ 1,200 $ 32,000 $ 415,550 $ 48,000
Operating expenses
Cost of revenues 94,107 - 20,978 29,885 57,685
Selling, general
and
administrative 2,862,349 225,369 236,922 1,111,051 784,389
Depreciation 48,319 6,099 5,589 18,152 14,921
---------------------------------------------------------------
Total
operating
expenses 3,004,775 231,468 263,489 1,159,088 856,995
---------------------------------------------------------------
Income (loss)
from operations (2,516,225) (230,268) (231,489) (743,538) (808,995)
Other income
(expense), net
Other income 6,200 - - - -
Interest income
(expense), net 14,400 37 2,144 902 16,391
Franchise tax (2,289) - - (1,119) (1,170)
---------------------------------------------------------------
Total other
income
(expense), net 18,311 37 2,144 (217) 15,221
---------------------------------------------------------------
Net income (loss)$(2,497,914) $ (230,231) $ (229,345) $ (743,755) $ (793,774)
===============================================================
Net income (loss)
per share, basic
and diluted $ (0.16) $ (0.01) $ (0.01) $ (0.04) $ (0.05)
===============================================================
Weighted average
number of common
shares
outstanding,
basic and
diluted 15,250,937 16,907,269 15,830,125 16,709,994 15,637,550
===============================================================
See accompanying summary of accounting policies and notes to
financial statements
3
MENTOR CAPITAL CONSULTANTS, INC
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Cumulative
During Nine Months Ended September 30
Development ------------------------------
Stage 2002 2001
-------------------------------------------
Cash flows from operating activities:
Net (loss) $ (2,497,914) $ (743,755) $ (793,774)
Adjustments to reconcile net (loss)
to cash (used) by operations:
Fair value of warrants received
in exchange for services
provided (371,250) (371,250) -
Warrants exchanged and recorded
as marketing expense 237,600 237,600 -
Warrants issued and recorded as
commission expense 40,095 40,095 -
Depreciation 48,319 18,152 14,921
Issuance of common stock and
options for services 195,102 36,954 70,187
Issuance of employee stock
options 10,950 - 10,950
Change in assets and liabilities:
Accounts receivable - 5,000 (5,000)
Other current assets (1,528) 2,108 -
Deferred offering costs - - (93,459)
Accounts payable 94,260 29,655 -
Accrued expenses - (25,238) (16,602)
Deferred expenses 55,780 55,780
Deposits (6,132) (3,000) (1,132)
-------------------------------------------
Net cash (used) by operating
activities $ (2,194,718) $ (717,899) $ (813,909)
Cash flows from investing
activities:
Purchases of property and
equipment (142,810) (9,594) (30,065)
-------------------------------------------
Net cash (used) by investing
activities (142,810) (9,594) (30,065)
Cash flows from financing
activities:
Proceeds from issuance of common
stock 2,742,773 359,000 262,500
Offering costs (374,391) (113,710) (33,237)
-------------------------------------------
Net cash provided (used) by
financing activities 2,368,382 245,290 229,263
-------------------------------------------
Net increase (decrease) in cash $ 30,854 $ (482,203) $ (614,711)
Cash, beginning of period - 513,057 934,233
-------------------------------------------
Cash, end of period $ 30,854 $ 30,854 $ 319,522
===========================================
Supplemental disclosure of non-cash
investing and financing activities:
Issuance of common stock and
options for services $ 195,102 $ 36,954 $ 70,187
===========================================
Issuance of employee stock options
at less than fair market value $ 10,950 - $ 10,950
===========================================
Interest paid $ 9,102 $ 160 $ 420
===========================================
See accompanying summary of accounting policies and notes to
financial statements
4
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" and "MentorCap") 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. In
addition, the Company may pursue partnering or joint venture agreements with
companies whose products or services lend themselves to our direct marketing
strategies.
The Company formed a wholly owned subsidiary, MCAP Investment Banking Services,
Inc. on September 6, 2001 in expectation of being approved by the NASD as a
broker/dealer. On March 14, 2002, the NASD approved the broker/dealer license
for MCAP Investment Banking Services, Inc. MCAP Investment Banking Services
intends to provide funding services for its clients and MentorCap's wholly owned
subsidiaries.
For the period March 13, 2000 (Inception) to September 30, 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 September 30, 2002, the Company has revenues of $488,550 and
has expensed costs in the amount of $2,986,464 during the development stage.
The Company has maintained adequate cash resources through its private placement
and self-directed initial public offering until now.
Consolidated Financial Statements
The consolidated financial statements include the Company and its wholly owned
subsidiaries, MentorCap Marketing Partners, Inc. (formerly known as IPO
Management Group, Inc.), MentorCap Licensing Partners, Inc. (formerly known as
IPO Marketing Group, Inc.), IPO Investor Services, Inc., AeroGrow International,
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 September 30, 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 September 30, 2002 and the results
of operations for the three month and nine month periods then ended have been
made. Significant accounting policies have been consistently applied in the
interim unaudited financial statements and the audited financial statements.
5
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
Note 2 - Marketable Securities and Warrant Received in Exchange for Services
On June 28, 2002 the Company, as a success fee, was granted a warrant to
purchase 375,000 fully paid and non-assessable shares of JOMY Safety Products,
Inc. ("JOMY") common stock, $0.001 par value per share, at an exercise price of
$0.01 per share for three years. The warrants are immediately vested. The
Company recorded revenue of $371,250 as of June 30, 2002 as it had completed all
service performance requirements to JOMY and thus, had earned the warrants. The
warrants were recorded at fair value as determined in accordance with the
Black-Scholes valuation model.
Immediately thereafter, the Company provided 240,000 of the warrants received
from JOMY to certain of the Company's accredited investors who participated in
the direct public offering of JOMY. The warrants provided to the Company's
investor network were recorded as an expense at a fair value equal to those
received or a total of $237,600 as of June 30, 2002. The Company gave away
these warrants as an incentive to the investors in its network to continue to
participate in future direct public offerings with which the Company may assist
its client companies. The transaction is considered a promotions expense by the
Company.
During the three months ended September 30, 2002, the Company issued 40,500 of
the warrants received from JOMY to certain of the Company's associates who were
instrumental in the success of the JOMY offering. The warrants provided to
these associates were recorded as a commission expense at a fair value equal to
those received or a total of $40,095.
As a result, the Company as of September 30, 2002 maintains an investment equal
to $93,555 representing the fair value of the warrants the Company has remaining
in JOMY. The Company is accounting for this investment as if the security is
available for sale and will continue to value its investment in JOMY warrants at
fair value in future periods and record any declines to that fair value in
accordance with FASB Statement No. 115, Accounting for Certain Investments in
Debt and Equity Securities. However, the Company cannot record increases in
fair value since the security is not currently traded on an active exchange.
Note 3 - 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 its initial public offering dated July 5, 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,
6
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
Note 3 - Shareholders' Equity (cont.)
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. 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 when the initial public offering expired.
On February 25, 2002, the Company filed its second public offering. During the
three months ended March 31, 2002, a total of 8,000 shares and 8,000 warrants
were issued in conjunction with the second public offering, raising an
additional $16,000 for the Company. As of September 30, 2002, all of the
aforementioned warrants remain outstanding.
The Company filed a post-effective amendment to its second registration
statement that became effective May 1, 2002. Pursuant to such amendment,
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. The
Company issued shares to investors in our initial public offering pursuant to
our amended registration statement.
During the three month and nine month periods ended September 30, 2002, a total
of 90,000 and 380,700 shares and 90,000 and 380,700 warrants, respectively, were
issued in conjunction with the second public offering, raising an additional
$90,000 and $359,000, respectively, for the Company. As of September 30, 2002,
all of the aforementioned warrants remain outstanding.
The Company also issued 297,636 shares at $0.25, $0.40, $0.50 and $1.00 per
share to consultants for services provided during the period from March 13, 2000
(Inception) to September 30, 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
September 30, 2002, no shares of preferred stock have been issued.
Note 4 - Related Party Transactions
For the nine month period ended September 30, 2002, a director of the Company,
who is a partner in the law firm of Kranitz and Philipp, was paid legal fees of
$10,000. In addition, for the three month and nine month periods ended
September 30, 2002, the Company retained several consultants who received common
stock options and their fees for services provided totaled $18,262, and
$65,425, respectively.
7
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Revenue
For the three months ended September 30, 2002, and 2001, we had revenue of
$1,200 and $32,000, respectively. During the nine months ended September 30,
2002 and 2001, we had revenue of $415,550 and $48,000, respectively. The major
reason for the increase in revenues is reflected by a success fee received from
a client in the form of a warrant grant of 375,000 shares of common stock valued
at $.99 per share or $371,250.
Operating Expenses
For the three months ended September 30, 2002, and 2001, operating expenses
decreased by $32,021 or 12.2%. During the three months ended September 30,
2002, the Company began reducing its overhead in light of the difficult economic
and investing climate. For the nine months ended September 30, 2002, and 2001,
operating expenses increased $302,093 or 35.3%.
The increase in operating expenses for the nine months ended September 30,
2002 primarily reflected the $237,600 marketing expenses associated with
providing 240,000 of the warrants received from JOMY Safety Products, Inc. to
the Company's accredited investors who participated in the direct public
offering of JOMY Safety Products, Inc. In addition, the Company incurred $40,095
of commission expense as compensation to associates who were instrumental in the
success of the JOMY offering. They were issued 40,500 of the warrants received
from JOMY.
For the three months ended September 30, 2002, and 2001, other income
(expense) net, was $37 and $2,144, respectively. For the nine months ended
September 30, 2002 and 2001 other income (expense) net, was $(217) and $15,221
respectively. The net decrease in 2002 versus 2001 for both periods was due to
a reduction of interest income generated from the Company's money market account
as a result of less funds being raised through its public offering.
Net Income (Loss)
For the three months ended September 30, 2002, we incurred a net (loss) of
($230,231) compared with a net (loss) of ($229,345) for the same period ended
September 30, 2001. We have had a net (loss) from operations for each quarterly
period since inception. From inception to September 30, 2002, we incurred a net
(loss) of ($2,497,914) or ($0.16) per share.
Our net operating (losses) improved slightly for both the three months and
nine months ended September 30, 2002 as compared to 2001 primarily due to the
recognition of revenue from the warrant grant from JOMY Safety Products, Inc.
The losses continued due to legal and accounting costs associated with being a
public company, the financial support of our broker/dealer operation,
advertising, and research and development costs related to new product
development.
The Company has identified two distinct business strategies. One is to assist
companies in funding their businesses through direct public offerings, which may
be supported by our wholly owned broker/dealer subsidiary, MCAP Investment
Banking Services, Inc.
Its second strategy utilizes its wholly owned subsidiary, MentorCap Marketing
Partners, Inc., to identify companies or inventors with proprietary,
breakthrough consumer products. It then forms strategic product development and
marketing alliances, protected by exclusive worldwide direct marketing rights,
for the purpose of marketing its own branded products.
8
Results of Operations (cont.)
To date, the Company has researched and analyzed over 1,500 companies that
have responded to its radio campaigns, seeking its services. From those, it
selected three companies that best met the criteria of its two core business
strategies. They are JOMY Safety Products, Inc., AgriHouse, LLC, and VPT, LLC.
In March 2002, the Company formed a wholly owned subsidiary, AeroGrow
International, Inc., to develop and direct market a state-of-the-art consumer
aeroponic vegetable, herb and flower kitchen crop appliance. On June 25, 2002,
the Company signed a joint product development agreement with AgriHouse LLC, a
nationally recognized company in the aeroponic field. This agreement calls for
AgriHouse LLC, which has already developed a patented commercial product, to
bring its patented technology, knowledge and expertise to work with the Company
to develop a low cost consumer aeroponic unit, called the "Vegetable Herb and
Flower Garden". The Company's intent is to market the product and additional
accessories direct to the consumer at the current estimated price of $99 in the
U.S. and Canada; followed by sales through retailers such as Wal-Mart, Target,
Costco, or Sam's Club. Upon a successful North American launch, the Company
intends to market the product in Europe and Japan through joint ventures. The
ten year agreement gives the Company exclusive worldwide marketing rights to
consumers using direct mail, print advertising, web solicitation, radio and
television commercials and infomercials. In addition, the Company signed a
ten-year worldwide non-exclusive licensing agreement with the same company to
market its ODC/Beyond plant nutrient and growth enhancer.
On July 19, 2002, the Company signed a joint product development agreement
with VPT, LLC, a company with worldwide marketing rights to a product currently
being sold as the "IQ Voice Organizer". This agreement calls for VPT, LLC to
bring its marketing rights agreement, including its patent rights, knowledge and
expertise to work with the Company to develop a state-of-the-art portable voice
recorder which marries patented voice recognition technology with a digital
recorder to be called the "Voice Organizer". The Company's intent is to market
the product direct to the consumer at the current estimated price of $129 in the
U.S. and Canada. Upon a successful North American launch, the company intends to
market the product in Europe and Japan through joint ventures. The ten year
agreement gives the Company exclusive worldwide marketing rights to consumers,
using direct mail, print advertising, web solicitation, radio and television
commercials and infomercials. Certain members of management in the Company were
originally responsible for the design, development and marketing of the "IQ
Voice Organizer" in a previous association with another company.
During the three months ended September 30, 2002, the Company focused its
business efforts on product development and marketing its new product, the
AeroGrow Kitchen Garden. First of all, it established the working technology
and design of the AeroGrow Kitchen Garden. Patent counsel conducted extensive
"prior art" patent research, both nationally and internationally, on existing
patents and patents pending for soil-less growing methodologies. It was
concluded that AeroGrow's technology is fundamentally unique and novel from all
existing gardening, farming and crop production patent and patent pending
methods and technologies worldwide. The Company filed for a comphrehensive
utility patent for a proprietary and core aeroponic nutrient delivery engine to
be used in the AeroGrow Kitchen Garden. This technology enables the Company to
build an aeroponic unit which is small enough for the kitchen counter,
attractive, quiet, low cost and low maintenance. In addition, the Company
assembled a world renown International Scientific Advisory Board of the foremost
authorities in the science, technology and business of aeroponics. The Company
also has negotiated and secured a Chinese manufacturer for low cost, high volume
production runs for consumer products. A comphrensive website for AeroGrow was
developed for securing and educating customers, including potential retailers,
distributors and catalogers, for carrying the AeroGrow product line,
establishing a network of beta-testers for the product and using the website as
one of the marketing tools to sell the product direct to the consumer, which
includes product information and sales presentation materials, and online direct
order "shopping cart" system.
We expect to continue to grow the Company through new products developed and
marketed by the Company in the years ahead.
9
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 2001 and from proceeds generated from our ongoing self-directed public
offering during the final quarter of 2001 through the third quarter of 2002. We
anticipate our principal sources of liquidity during the remaining portion of
2002 will be net proceeds from our ongoing public offering. In light of the
difficult economic and investing climate during the three months ended September
30, 2002, the Company temporarily slowed down its self-directed public offering.
The Company intends to continue its public offering in November, 2002 when it is
perceived to be a better time to do so.
We do not currently have any major capital commitments.
Changes in Assets and Liabilities
As of September 30, 2002, our cash balance was $30,854 as compared with
$513,057 at December 31, 2001. Cash was used primarily to build the Company's
management infrastructure, formulate and operate its broker/dealer operation,
business development, advertising, marketing and product development as the
Company continues to refine and implement its business plan. As a result of the
slow down of funds raised in the Company's direct public offering, an austerity
program was instituted during the three months ended September 30, 2002.
Overhead was reduced through employee layoffs, negotiated rent reduction, and
reduced advertising and legal expenses. In addition, the Company negotiated
ninety day moratoriums on monies due to three of its largest vendors. Beginning
with the quarter ended September 30, 2002, the Company began deferring certain
employee's compensation in order to help preserve cash flow .
Fixed assets increased by $9,594 or 7.2% from December 31, 2001 to September
30, 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 12.3% from December 31,
2001 to September 30, 2002, from $2,292,190 to $2,574,434, respectively. The
increase was a result of investments made by outsiders 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 42.4% from December 31, 2001 to September 30, 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 outside consultants
and employees. The valuation of the expense associated with the issuance of
common stock options to non-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. The valuation of the options issued
to employees is in accordance with APB No. 25.
Critical Accounting Policies (cont.)
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. We have recognized
revenue in the nine-month period ended September 30, 2002 that was related to
earning stock purchase warrants exercisable at $0.01 per share in one of our
clients. This revenue has been earned as all services have been provided and
the valuation of the revenue recognized was done in accordance with the
Black-Scholes valuation model. The Company believes its investment is carried
at fair value; however, this was a non-cash transaction and there can be no
assurances the ultimate cash flow will approximate the fair value recorded on
the day the revenue was earned.
ITEM 4: Controls and Procedures
1. Evaluation of disclosure controls and procedures. Our chief executive
officer and our chief accounting officer, after evaluating the
effectiveness of the Company's "disclosure controls and procedures" (as
defined in Exchange Act Rules 13a-14(c) and 15d-14(c) as of a date (the
"Evaluation Date") within 90 days prior to the filing date of this
quarterly report, have concluded that, as of the Evaluation Date, our
disclosure controls and procedures were adequate to ensure that material
information relating to the registrant and its consolidated subsidiaries
would be made known to them by others within those entities.
2. Changes in internal controls. To our knowledge, there are no significant
changes in the Company's internal controls or in other factors that could
significantly affect internal controls subsequent to the Evaluation Date.
11
Part 2: Other Information
Item 1 Legal Proceedings
None
Item 2 Change In Securities and Use Of Proceeds
None
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
(a) Exhibits
Number Description
99.1 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section
906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this
report is filed.
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: November 14, 2002 By: /s/ W. Michael Bissonnette
--------------------------------------
W. Michael Bissonnette,
President (Principal Executive Officer)
Dated: November 14, 2002 By: /s/ Jerry L. Gutterman
--------------------------------------
Jerry L. Gutterman
Treasurer (Principal Financial Officer)
12
CERTIFICATION
I, W. Michael Bissonnette, Principal Executive Officer of Mentor Capital
Consultants, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Mentor Capital
Consultants, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made know to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date");
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date; and
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions);
a) all significant deficiencies on the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have indentified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002 By: /s/ W. Michael Bissonnette
--------------------------------------
W. Michael Bissonnette,
President (Principal Executive Officer)
13
CERTIFICATION
I, Jerry L. Gutterman, Principal Financial Officer of Mentor Capital
Consultants, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Mentor Capital
Consultants, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made know to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date");
5. The registrant's other certifying officers and we have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions);
a) all significant deficiencies on the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have indentified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls;
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date; and
6. The registrant's other certifying officers and we have indicated in this
quarterly report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002 By: /s/ Jerry L. Gutterman
--------------------------------
Jerry L. Gutterman
Treasurer (Principal Financial Officer)
14
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -------------------
99.1 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
15
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Mentor Capital Consultants, Inc.
("Company") on Form 10-QSB for the period ending September 30, 2002, as filed
with the Securities and Exchange Commission on the date hereof ("Report"), we,
W. Michael Bissonnette, President (Chief Executive Officer) and Jerry L.
Gutterman, Treasurer (Chief Financial Officer) of the Company, jointly and
severally certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934, (15 U.S.C. 78m or 78o(d)); and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
By: /s/ W. Michael Bissonnette
- ---------------------------------------
W. Michael Bissonnette,
President (Chief Executive Officer)
By: /s/ Jerry L. Gutterman
- --------------------------------
Jerry L. Gutterman
Treasurer (Chief Financial Officer)
November 14, 2002
16