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, 2003
( ) 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.
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(Exact name of registrant as specified in its charter)
Delaware 84-1569905
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(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
May 12, 2003: 16,273,412 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 Enterprise)
For the three month period ended March 31, 2003
-1-
MENTOR CAPITAL CONSULTANTS, INC
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
March 31, 2003 December 31, 2002
-------------------------------------
(Unaudited) (Audited)
ASSETS
Current assets
Cash $ 81,407 $ 147,488
Prepaid expenses & other - 2,048
-------------------------------------
Total current assets 81,407 149,536
Property and equipment
Property and equipment 142,810 142,810
Less: accumulated depreciation (60,455) (54,427)
-------------------------------------
Property and equipment, net 82,355 88,383
Deposits 6,132 6,132
Investment (Note 2) 93,555 93,555
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Total assets $ 263,449 $ 337,606
=====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 112,749 $ 111,575
Accrued expenses 13,378 15,466
Deferred salaries, benefits and rent 124,100 86,372
-------------------------------------
Total current liabilities 250,227 213,413
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, 16,273,412 and 16,293,412 shares
issued and outstanding at March 31, 2003 and
December 31, 2002, respectively 1,627 1,629
Additional paid-in capital 2,969,504 2,828,334
(Deficit) accumulated during the development stage (2,939,909) (2,705,770)
Treasury Stock, 20,000 shares, at cost (18,000) -
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Total stockholders' equity 13,222 124,193
-------------------------------------
Total liabilities and stockholders' equity $ 263,449 $ 337,606
=====================================
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 Ended March 31
Development --------------------------------
Stage 2003 2002
--------------------------------------------------
Revenue
Consulting revenues $ 485,550 - $ 43,100
Cost of revenues (344,317) - (29,885)
--------------------------------------------------
Gross profit 141,233 - 13,215
Operating expenses
Selling, general and administrative 2,819,216 143,219 325,942
Research and development 221,558 84,893 -
Depreciation 60,455 6,028 5,972
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Total operating expenses 3,101,229 234,140 331,914
--------------------------------------------------
Income (loss) from operations (2,959,996) (234,140) (318,699)
Other income (expense), net
Other income 6,200 - -
Interest income (expense), net 13,887 1 733
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Total other income (expense), net 20,087 1 733
--------------------------------------------------
Net income (loss) $ (2,939,909) $ (234,139) $ (317,966)
==================================================
Net income (loss) per share, basic and diluted N/A $ (0.01) $ (0.02)
==================================================
Weighted average number of common shares
outstanding, basic and diluted N/A 16,291,856 16,549,079
==================================================
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 Three Months Ended March 31
Development ----------------------------
Stage 2003 2002
-------------------------------------------
Cash flows from operating activities:
Net (loss) $ (2,939,909) $ (234,139) $ (317,966)
Adjustments to reconcile net (loss) to cash provided (used) by operations:
Fair value of stock in subsidiary issued to consultants 36,000 - -
Fair value of warrants received in exchange for services (371,250) - -
Fair value of warrants provided to consultants and employees 277,695 - -
Depreciation 60,455 6,028 5,972
Issuance of common stock and options for services 225,799 21,168 8,614
Issuance of employee stock options 10,950 - -
Change in assets and liabilities:
(Increase) decrease in accounts receivable - - 748
(Increase) decrease in other current assets - 2,048 (4,450)
Increase (decrease) in accounts payable 112,749 1,174 (23,295)
Increase (decrease) in other current liabilities - - (2,562)
Increase (decrease) in accrued expenses 13,378 (2,088) 11,101
Increase (decrease) in deferred salaries, benefits and rent 124,100 37,728 -
(Increase) decrease in deposits (6,132) - -
-------------------------------------------
Net cash (used) by operating activities $ (2,456,165) $ (168,081) $ (321,838)
Cash flows from investing activities:
Purchases of property and equipment (142,810) - (8,804)
-------------------------------------------
Net cash (used) by investing activities (142,810) - (8,804)
Cash flows from financing activities:
Proceeds from issuance of common stock, net of offering costs 2,388,382 - (7,891)
Proceeds from issuance of common stock of consolidated subsidiary 310,000 120,000 -
Purchase of treasury stock (18,000) (18,000) -
-------------------------------------------
Net cash provided by financing activities 2,680,382 102,000 (7,891)
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Net increase (decrease) in cash $ 81,407 $ (66,081) $ (338,533)
Cash, beginning of period - 147,488 513,057
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Cash, end of period $ 81,407 $ 81,407 $ 174,524
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Supplemental disclosure of non-cash investing and financing activities:
Issuance of common stock and options for services $ 261,799 $ 21,168 $ 8,614
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Issuance of bonus stock $ 29 - -
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Issuance of employee stock options at less than fair market value $ 10,950 - -
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See accompanying summary of accounting policies and notes to consolidated 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") was incorporated in the State
of Delaware on March 13, 2000.
The Company's principal business is to seek out companies and inventors who have
developed proprietary, breakthrough technology that it believes can be developed
into unique, high quality products with broad consumer appeal and that can be
mass-marketed direct-to-the-consumer as well as through third party catalogers
or mass retailers. The Company provides selected client companies and inventors
with product development, management, marketing and capital raising services, as
needed, in exchange for cash consulting fees and stock in the client company.
Under special circumstances, where the Company locates a product or technology
that it believes has potential to create a new product category with mass
consumer appeal, it will waive its fees and provide incentives to companies or
inventors in exchange for securing certain exclusive product development,
manufacturing and marketing rights. The Company would then form a subsidiary
corporation to bring these products or technologies to the consumer market.
On September 6, 2001, the Company established a wholly owned corporate
subsidiary, MCAP Investment Banking Services, Inc., ("MCAP") under the laws of
Delaware, in expectation of obtaining a broker/dealer license through the SEC
and membership in the NASD. On March 14, 2002, the NASD approved the
broker/dealer license for MCAP, enabling it to provide private placement and
direct public offering underwritings as part of the suite of services offered to
client companies. MCAP intends to specialize in small issue Initial Public
Offerings from $1 to $5 million dollars and focus on funding companies that
offer revolutionary and patented consumer products that the Company believes
have mass appeal and sizeable national and international sales potential.
Mentor Capital formed a subsidiary corporation, AeroGrow International, Inc.,
("AeroGrow") on July 2, 2002. The Company signed an exclusive product
development and marketing agreement with AgriHouse, Inc. that transferred to
AeroGrow the rights to the design, development, manufacture and worldwide
marketing of a variety of aeroponic growing products for the consumer and
commercial marketplace. The initial product being developed is a consumer- based
aeroponic unit, which the Company believes to be the world's first aeroponic
kitchen crop appliance, named the AeroGrow Kitchen Garden(TM). In addition,
AeroGrow plans to market accessories, seeds, and other related products.
For the period March 13, 2000 (Inception) to March 31, 2003, the Company has
been in the development stage. Since inception, our operations have been focused
on market research, hiring of staff, planning our business strategy, initial
business plan implementation, screening and due diligence of 1,500 companies,
raising capital necessary to launch our business operations, product research
and development and the ongoing refinement of our business model.
From inception to March 31, 2003, the Company has revenues of $485,550 and has
accumulated a retained deficit of ($2,939,909) during the development stage.
These operations have been principally funded through fees received for services
rendered to clients, and through sales of securities, including private
placements of common stock in 2000 and 2001 and initial public offerings of
common stock and warrants during the second half of 2001 through March 31, 2003.
The Company expects to continue its public offering of common stock and warrants
in May or June of 2003.
-5-
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
Consolidated Financial Statements
The consolidated financial statements include the Company and its subsidiaries,
AeroGrow International, Inc., MCAP Investment Banking Services, Inc., Voice
Powered Products, Inc. (formerly known as IPO Investor Services, Inc.),
MentorCap Marketing Partners, Inc. (formerly known as IPO Management Group,
Inc.), and MentorCap Licensing Partners, Inc. (formerly known as IPO Marketing
Group, Inc.). Significant intercompany accounts and transactions, if any, have
been eliminated. AeroGrow International, Inc. and MCAP Investment Banking
Services, Inc. are the only active subsidiaries. The other subsidiaries are
currently inactive and have had no operating activities for the period since
inception through March 31, 2003.
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, 2002 audited
financial statements on Form 10-KSB to the Securities and Exchange Commission
filed on March 31, 2003. 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, 2003 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 - Investment and Warrant Received in Exchange for Services
On June 28, 2002 the Company, as additional compensation, 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 were 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.
This non-cash revenue is included with other consulting revenues on the
statement of operations. The warrants were recorded at fair value as determined
in accordance with the Black-Scholes valuation model and in accordance with
Emerging Issues Task Force No. 00-8, "Accounting by a Grantee for an Equity
Instrument Received in Conjunction with Providing Goods or Services".
Immediately thereafter, the Company provided 240,000 of the warrants received
from JOMY to certain of the investors who invested in the Company assisted
direct public offering of JOMY. The warrants provided to the Company's investor
network were recorded as a cost of the Company's revenues at a fair value equal
to that of the warrants received, or a total of $237,600 as of June 30, 2002.
The Company provided 40,500 of the warrants received from JOMY as compensation
to certain of the Company's employees and consultants who assisted in the JOMY
offering. The warrants provided to these employees and consultants were recorded
at fair value equal to $40,095.
As a result of the JOMY transactions, the Company as of March 31, 2003 retains
an investment equal to $93,555 representing the fair value of the Company's
warrant rights in JOMY. The Company is accounting for
-6-
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
Note 2 - Investment and Warrant Received in Exchange for Services (continued)
this investment at cost in accordance with Accounting Principles Board No. 18,
"The Equity Method of Accounting for Investments in Common Stock". The Company
does not record any increases in fair value since the warrants are not a
marketable security nor currently traded on an active exchange. Under the cost
method, impairments are recorded for permanent declines in fair value. The
Company has evaluated the investment in JOMY for permanent impairment and as of
March 31, 2003 has determined that none exists.
Note 3 - Shareholders' Equity
During the three months ended March 31, 2003, no shares, options or warrants
were issued by the Company. However, 20,000 shares of common stock were
repurchased from an investor of an earlier public offering due to a financial
hardship experienced by that investor. The shares have been retired and recorded
as treasury stock.
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, 2003, no shares of preferred stock have been issued.
Note 4 - Minority Interest and Common Stock Issuances by Subsidiary
On July 2, 2002, the Company incorporated AeroGrow. The Company received 6
million shares of AeroGrow common stock for investing $6,000 in cash, providing
a $300,000 credit line, and turning over an exclusive product development and
marketing agreement it negotiated with AgriHouse, Inc.
On October 15, 2002, the Company's principal shareholder and chief executive
officer exchanged 1 million of his outstanding shares in Mentor Capital for 3
million common shares of AeroGrow. AeroGrow valued this transaction at $10,000,
which was the shareholder's cost basis. The 1 million shares of Mentor Capital
held by AeroGrow have been treated as treasury stock in the consolidated
financial statements and excluded from the total number of common shares
outstanding. In December 2002, AeroGrow raised $190,000 through the sale of 1.9
million common shares to private investors at a price of $0.10 per share. Also,
in December 2002, AeroGrow issued 135,000 shares to several consultants and
employees who have assisted with AeroGrow's research and development activities
to date, and 15,000 shares as compensation to its three directors. AeroGrow
recorded these shares as compensation expense at a fair value of $36,000.
During the three months ended March 31, 2003, AeroGrow raised $120,000 through
the sale of 716,000 common shares to private investors at prices of $0.10 and
$0.25 per share.
During the quarter ended March 31, 2003, AeroGrow issued 235,257 stock options
to several consultants who have assisted with AeroGrow's research and
development activities to date. The fair value of the stock options were
expensed at $21,168 as determined in accordance with the Black-Scholes valuation
model.
The Company's ownership in AeroGrow as of March 31, 2003 is 51%. Since all of
the minority shares were issued at values greater than the subsidiary's negative
net book value per share, the minority issuances have been recorded as
additional paid-in capital of the consolidated Company.
-7-
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
Note 5 - Segment information
Operating segments are defined as components of an enterprise about which
separate financial information is available and that is evaluated regularly by
management in deciding how to allocate resources and assess performance. As of
March 31, 2003, the Company has three operating segments: MCAP Investment
Banking Services, Inc. (a broker-dealer), AeroGrow International, Inc. and
corporate functions.
The following table summarizes the Company's segment financial information:
Quarter ended Quarter ended
March 31, 2003 March 31, 2002
---------------------------------------
Corporate:
Revenues $ - $ 43,100
Income (loss) from operations (15,758) (317,580)
Depreciation expense 6,028 5,972
Assets 179,608 319,766
Capital Expenditures - 8,804
MCAP Investment Banking
Services, Inc.:
Revenues $ - $ -
Income (loss) from operations (4,580) -
Depreciation expense - -
Assets 6,000 -
Capital Expenditures - -
AeroGrow International, Inc.:
Revenues $ - $ -
Income (loss) from operations (213,802) -
Depreciation expense - -
Assets 77,841 -
Capital Expenditures - -
Totals:
Revenues $ - $ 43,100
Income/(loss) from operations (234,140) (317,580)
Depreciation expense 6,028 5,972
Assets 263,449 319,766
Capital Expenditures - 8,804
Note 6 - Related Party Transactions
For the three month period ended March 31, 2003, a director of the Company, who
is a partner in the law firm of Kranitz and Philipp, was paid legal fees of
$7,000. In addition, for the three month period ended March 31, 2003, the
Company's subsidiary, AeroGrow International, Inc., retained several consultants
who received common stock options and fees for services provided totaling
$85,410.
-8-
MENTOR CAPITAL CONSULTANTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
Note 7 - Subsequent Events
The Company, in March 2003, filed a post-effective amendment to its registration
statement on Form SB-2 that it believes will become effective in May or June
2003. The Company's subsidiary, AeroGrow International, Inc., has raised an
additional $215,000 from private investors at a price of $0.25 per share.
-9-
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, 2003, and 2002, we had revenue
of $0 and $43,100, respectively. During the three months ended March 31, 2003,
the Company's management has focused on designing and developing AeroGrow's
aeroponic products and planning its marketing strategy and public relations
campaign.
Operating Expenses
Operating expenses overall decreased by $97,774 or 29.5% in the three
months ended March 31, 2003 compared to the three month period ended March 31,
2002.
The decrease in selling, general and administrative expenses of
$182,723 or 56.1% in the three months ended March 31, 2003 compared to the three
month period ended March 31, 2002, reflect the results of the Company's
implementation of an austerity program in the second half of 2002 whereby it
reduced overhead thru employee layoffs, reduction in employee hours worked, and
reduced advertising, consulting and legal expenses. Research and development
costs were $84,893 in the three months ended March 31, 2003 compared to $0 in
the three month period ended March 31, 2002. This reflects the Company's focus
on designing and developing AeroGrow's aeroponic products.
For the three months ended March 31, 2003, and 2002, other income
(expense) net, was $1 and $733, respectively. The net decrease in 2003 versus
2002 was due to a reduction of interest income.
Net Income (Loss)
For the three months ended March 31, 2003, we incurred a net (loss)
of ($234,139) compared with a net (loss) of ($317,966) for the same period ended
March 31, 2002. We have had a net (loss) from operations for each quarterly
period since inception. From inception to March 31, 2003, we incurred a net
(loss) of ($2,939,909).
The losses continued due to legal and accounting costs associated
with being a public company, the financial support of our broker/dealer
operation, and research and development costs related to new product
development.
We have 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. The second utilizes our wholly-owned subsidiary,
MentorCap Marketing Partners, Inc., to identify companies or inventors with
proprietary, breakthrough consumer products. We then form strategic product
development and marketing alliances, protected by exclusive worldwide marketing
rights, for the purpose of marketing our branded products.
To date, we have researched and analyzed over 1,500 companies that
have responded to our radio campaigns, seeking our services. From those, we
selected three companies that best met the criteria of our two core business
strategies. They are JOMY Safety Products, Inc., AgriHouse, LLC, and VPT, LLC.
The relationship with JOMY Safety Products, Inc. has ended, but not before we
assisted them with raising approximately $1.2 million through a direct public
offering in 2002.
In March 2002, we formed a subsidiary, AeroGrow International, Inc.,
to develop and direct market a state-of-the-art consumer-targeted aeroponic
vegetable, herb and flower kitchen crop appliance. On June 25, 2002, we 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
-10-
Results of Operations (Continued)
- ---------------------------------
commercial product, to bring its patented technology, knowledge and expertise to
work with us to develop a low cost consumer aeroponic unit, called the
"Vegetable Herb and Flower Garden". Our intent is to market the product and
additional accessories direct to the consumer 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, we intend to market the product in Europe
and Japan through joint ventures. The ten year agreement gives us exclusive
worldwide marketing rights to consumers using direct mail, print advertising,
web solicitation, radio and television commercials and infomercials. In
addition, we 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, we 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 us 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. Our intent is to market the product direct to the
consumer in the U.S. and Canada. Upon a successful North American launch, we
intend to market the product in Europe and Japan through joint ventures. The
ten-year agreement gives MentorCap exclusive worldwide marketing rights to
consumers, using direct mail, print advertising, web solicitation, radio and
television commercials and infomercials. Members of our management were
originally responsible for the design, development and marketing of the IQ Voice
Organizer in a previous association with another company.
During the last six months of 2002 through the three months ended March
31, 2003, the Company focused its business efforts on the product development
and design of its new product, the AeroGrow Kitchen Garden. First of all, we
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. We
filed for a comprehensive utility patent for a proprietary and core aeroponic
nutrient delivery engine to be used in the AeroGrow Kitchen Garden. This
technology enables us to build an aeroponic unit which is small enough for the
kitchen counter, attractive, quiet, low-cost and low-maintenance. In addition,
we assembled an International Scientific Advisory Board of the authorities in
the science, technology and business of aeroponics. We also have negotiated and
secured a Chinese manufacturer for low cost, high-volume production runs for
consumer products. A comprehensive website for AeroGrow was developed to aid in
(1) securing and educating customers, including potential retailers,
distributors and catalogers, (2) advertising and selling the AeroGrow product
line, and (3) establishing a network of beta-testers for the product. We use the
website as one of our marketing tools to sell the product direct to the
consumer. The site provides product information and sales presentation
materials, as well as an online, direct-order "shopping cart" system. We expect
to continue to grow our company through new products developed and marketed by
us in the years ahead.
-11-
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 private placements of common stock during 2000 and the first half of
2001 and from proceeds generated from our ongoing self-directed public offering
during the last quarter of 2001 and from May, 2002 through March of 2003. In
light of the difficult economic and investing climate during the last six months
of 2002 through the first quarter of 2003, we temporarily slowed down our
self-underwritten public offering. The Company has filed a post-effective
amendment to its registration statement that it believes will become effective
in May or June 2003 so that it can resume its public offering. 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.
Changes in Assets and Liabilities
As of March 31, 2003 our cash balance was $81,407 as compared with
$147,488 at December 31, 2002. Cash was used primarily to formulate and operate
its broker/dealer operation, business development, marketing and product
development as we continue to refine and implement our business plan. As a
result of the slow down of funds raised in our direct public offering, an
austerity program was instituted during the second half of 2002 and continued
through the first quarter of 2003. Overhead expenses were reduced through salary
reductions, deferments and layoffs, negotiated rent deferment, and reduced
advertising, consulting and legal expenses. As a result of this effort, the
Company continues to sustain itself. We continue to develop our prototype for
the aeroponic kitchen appliance with the intention of launching the product for
sale in late fall of 2003. Management believes these actions, if successful,
will enable it to develop its products and increase revenues to the level
necessary to generate positive cash flow from operations. The outcome cannot be
determined at this time.
Fixed asset balances are consistent with those reported at December 31,
2002.
Common stock, treasury stock and additional paid-in capital increased 4.4%
from December 31, 2002 to March 31, 2003, from $2,829,963 to $2,953,131,
respectively. The increase was a result of additional investments in our private
placement for common stock in our subsidiary, AeroGrow International, Inc., as
well as the issuance of common stock options for services rendered to several
consultants of AeroGrow's. Our (deficit) accumulated during the development
stage increased by 8.7% from December 31, 2002 to March 31, 2003 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 31, 2003. 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
-12-
Critical Accounting Policies (Continued)
- ----------------------------------------
and the associated Black-Scholes valuation model. The valuation of the options
issued to employees is in accordance with APB No. 25.
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
Schedule of Contractual Obligations
- -----------------------------------
The following table summarizes the Company's obligations and commitments to make
future payments under its operating leases, employment contracts and consulting
agreements for the periods specified as of March 31, 2003.
Payments due by Period
------------------------------------------------------
Contractual 4-5 After 5
Obligations Total 1 year 2-3 years years years
----- ------ --------- ----- -----
Operating Lease - office space $ 22,301 $ 22,301 $ - $ - $ -
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.
-13-
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 From 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: May 14, 2003 By: /s/ W. Michael Bissonnette
------------------------------
W. Michael Bissonnette
President (Principal Executive Officer)
Dated: May 14, 2003 By: /s/ Jerry L. Gutterman
--------------------------
Jerry L. Gutterman
Treasurer (Principal Financial Officer)
-14-
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 known 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 identified 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: May 14, 2003 By: /s/ W. Michael Bissonnette
------------------------------
W. Michael Bissonnette
President (Principal Executive Officer)
-15-
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");
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 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 identified 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;
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: May 14, 2003 By: /s/ Jerry L. Gutterman
--------------------------
Jerry L. Gutterman
Treasurer (Principal Financial Officer)
-16-
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.
-17-
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 March 31, 2003, 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)
May 14, 2003