Mentor Capital Inc

Previous wording

The following discussion will assist in the understanding of our financial position at June 30, 2024 and the results of operations for the three and six months ended June 30, 2024 and 2023. The information below should be read in conjunction with the information contained in the unaudited Condensed Consolidated Financial Statements and related notes to the financial statements included within this Quarterly Report on Form 10-Q for the three and six months ended June 30, 2024 and 2023 and our Annual Report for the year ended December 31, 2023 on Form 10-K filed with the Securities and Exchange Commission on April 1, 2024.

Current wording

The following discussion will assist in the understanding of our financial position at September 30, 2024 and the results of operations for the three and nine months ended September 30, 2024 and 2023. The information below should be read in conjunction with the information contained in the unaudited Condensed Consolidated Financial Statements and related notes to the financial statements included within this Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2024 and 2023 and our Annual Report for the year ended December 31, 2023 on Form 10-K filed with the Securities and Exchange Commission on April 1, 2024.

Previous wording

On October 4, 2023, we sold and completely divested our majority controlling 51% interest in Waste Consolidators Inc. (“WCI”), our facilities operations segment, that provides waste management and disposal services, including waste consolidation, bulk item pickup, general property maintenance, and one-time clean-up services to business park owners, governmental centers, and apartment complexes in Phoenix, Austin, San Antonio, Houston, and Dallas. Following the sale, the Company received no new income from WCI and had no further involvement or continuing influence over its operations. WCI is now reported as a discontinued operation. WCI had been a long-standing investment, but it no longer aligns with the Company’s central business focus in the energy sector. The $6,000,000 proceeds from the sale of our WCI shares provided the Company with capital to seek out new business opportunities in the classic energy space.

Current wording

On October 4, 2023, we sold and completely divested our majority controlling 51% interest in Waste Consolidators Inc. (“WCI”), our facilities operations segment, that provides waste management and disposal services, including waste consolidation, bulk item pickup, general property maintenance, and one-time clean-up services to business park owners, governmental centers, and apartment complexes in Phoenix, Austin, San Antonio, Houston, and Dallas. Following the sale, the Company received no new income from WCI and had no further involvement or continuing influence over its operations. WCI is now reported as a discontinued operation. WCI had been a long-standing investment, but it no longer aligns with the Company’s central business focus in the energy sector. The $6,000,000 proceeds from the sale of our WCI shares provided the Company with seed capital to seek out new business opportunities in the classic energy space.

Previous wording

On July 11, 2023, the Court entered judgment against the G Farma Settlers in favor of the Company and Mentor Partner I, LLC in the amount of $2,539,597. The judgment also accrues post-judgment interest at the rate of 10% from July 11, 2023 until such time as the judgment is paid in full. The judgment and interest receivable of $247,002 at June 30, 2024 is fully reserved pending the outcome of the Company’s collection process. Payments from G Farma and G Farma guarantors will be recognized in Other Income as they are received. The Company has retained the full reserve on the unpaid notes receivable balance and collections of the unpaid lease receivable balance due to the long history of uncertain payments from G Farma and the G Farma Settlors. Payments from G Farma and G Farma Settlors will be recognized in Other Income as they are received. Recovery payments of $3,550 and $2,000 were included in other income in the consolidated financial statements for the year ended December 31, 2022 and 2021, respectively.

Current wording

On July 11, 2023, the Court entered judgment against the G Farma Settlers in favor of the Company and Mentor Partner I, LLC in the amount of $2,539,597. The judgment also accrues post-judgment interest at the rate of 10% from July 11, 2023 until such time as the judgment is paid in full. The judgment and interest receivable of $311,014 at September 30, 2024 is fully reserved pending the outcome of the Company’s collection process. Payments from G Farma and G Farma guarantors will be recognized in Other Income as they are received. The Company has retained the full reserve on the unpaid notes receivable balance and collections of the unpaid lease receivable balance due to the long history of uncertain payments from G Farma and the G Farma Settlors. Payments from G Farma and G Farma Settlors will be recognized in Other Income as they are received. Recovery payments of $3,550 and $2,000 were included in other income in the consolidated financial statements for the year ended December 31, 2022 and 2021, respectively.

Previous wording

On October 4, 2023, in connection with the sale of the Company’s 51% ownership interest in WCI, in addition to a $5,000,000 cash payment, the Company received a one-year unsecured, subordinated, promissory note in initial principal face amount of $1,000,000 from Ally Waste Services, LLC (“Ally”) at 6% per annum. The note is recorded at the principal face amount of $1,000,000 plus accrued interest of $45,000 and $15,000 at June 30, 2024 and December 31, 2023, respectively. The note is unsecured, subordinated, and junior in right of payment of the indebtedness of borrowed money and obligations of Ally owed to senior lenders. Subject to the terms of agreements with senior lenders, the note principal plus accrued interest is payable on October 4, 2024. Ally’s failure to pay the principal and accrued interest on October 4, 2024, among other enumerated events of default, will result in the interest rate retroactively increasing to 12% per annum. The note may be set off against any indemnification obligations owed by the Company to Ally, which indemnification obligations are secondary to indemnification obligations owed by the other WCI selling shareholder to Ally. The Company has continued to receive assurances from Ally that the purchased business is performing well, and the note will be paid, so management has not impaired the note receivable. If management is given any indication from Ally or the other WCI selling shareholder that collection is uncertain, the Company will impair the note receivable at such time.

Current wording

On October 4, 2023, in connection with the sale of the Company’s 51% ownership interest in WCI, in addition to a $5,000,000 cash payment, the Company received a one-year unsecured, subordinated, promissory note in initial principal face amount of $1,000,000 from Ally Waste Services, LLC (“Ally”) at 6% per annum. The note is recorded at the principal face amount of $1,000,000 plus accrued interest of $60,000 and $15,000 at September 30, 2024 and December 31, 2023, respectively. The note is unsecured, subordinated, and junior in right of payment of the indebtedness of borrowed money and obligations of Ally owed to senior lenders. Subject to the terms of agreements with senior lenders, the note principal plus accrued interest is payable on October 4, 2024. Ally’s failure to pay the principal and accrued interest on October 4, 2024, among other enumerated events of default, will result in the interest rate retroactively increasing to 12% per annum. The note may be set off against any indemnification obligations owed by the Company to Ally, which indemnification obligations are secondary to indemnification obligations owed by the other WCI selling shareholder to Ally. The Company has continued to receive assurances from Ally that the purchased business is performing well, and the note will be paid, so management has not impaired the note receivable. If management is given any indication from Ally or the other WCI selling shareholder that collection is uncertain, the Company will impair the note receivable at such time.

Previous wording

On October 4, 2023, the Company sold its majority ownership interest in WCI for $6,000,000, resulting in the elimination of the Company’s facilities operations segment at the time of such sale. Following the sale, the Company received no new income from WCI and had no further involvement or continuing influence over its operations. Accordingly, the results of operations for this segment are not applicable to the Company’s continuing operations at June 30, 2024 and the results of operations related to our facilities operations segment are excluded from the three and six months ended June 30, 2023, the prior period of comparison, and such financial results are presented as a discontinued operation. See Note 3 to the consolidated financial statements.

Current wording

On October 4, 2023, the Company sold its majority ownership interest in WCI for $6,000,000, resulting in the elimination of the Company’s facilities operations segment at the time of such sale. Following the sale, the Company received no new income from WCI and had no further involvement or continuing influence over its operations. Accordingly, the results of operations for this segment are not applicable to the Company’s continuing operations at September 30, 2024 and the results of operations related to our facilities operations segment are excluded from the three and nine months ended September 30, 2023, the prior period of comparison, and such financial results are presented as a discontinued operation. See Note 3 to the consolidated financial statements.

Previous wording

Pending the application of sale proceeds to operating energy businesses, revenue for the three months ended June 30, 2024 was $0 compared to ($291) for the three months ended June 30, 2023 (“the prior year period”).

Current wording

Pending the application of sale proceeds to operating energy businesses, revenue for the three months ended September 30, 2024 was $0 compared to $0 for the three months ended September 30, 2023 (“the prior year period”).

Previous wording

The lack of revenue is due to the deconsolidation of our discontinued operation, WCI, which the Company sold for $6,000,000 on October 4, 2023. At the three months ended June 30, 2023, our discontinued operation had $2,105,961 in quarterly revenue, which was reported in our consolidated financials in the prior reporting period.

Current wording

The lack of revenue is due to the deconsolidation of our discontinued operation, WCI, which the Company sold for $6,000,000 on October 4, 2023. At the three months ended September 30, 2023, our discontinued operation had $2,151,811 in quarterly revenue, which was reported in our consolidated financials in the prior reporting period.

Previous wording

Gross profit for the three months ended June 30, 2024 was $0 compared to ($291) for the prior year period. The Company’s cost of goods sold for the three months ended June 30, 2024 were $0 and $0 for the prior year period.

Current wording

Gross profit for the three months ended September 30, 2024 was $0 compared to $0 for the prior year period. The Company’s cost of goods sold for the three months ended September 30, 2024 were $0 and $0 for the prior year period.

Previous wording

Gross profit amounts of zero are due to the deconsolidation of our discontinued operation, WCI. At the three months ended June 30, 2023, gross profit for our discontinued operation was $691,840. WCI gross profit was included in our consolidated financials in the prior reporting period. Cost of goods sold of $1,414,121 at the three months ended June 30, 2023 were related to WCI.

Current wording

Gross profit amounts of zero are due to the deconsolidation of our discontinued operation, WCI. At the three months ended September 30, 2023, gross profit for our discontinued operation was $675,134. WCI gross profit was included in our consolidated financials in the prior reporting period. Cost of goods sold of $1,476,677 at the three months ended September 30, 2023 were related to WCI.

Previous wording

Our selling, general and administrative expenses for the six months ended June 30, 2024 was $483,290 compared to $289,937 for the prior year period, an increase of $193,353. We experienced a $75,195 increase in professional audit, tax, and accounting expenses, a $18,939 increase in legal fees, a $54,219 increase in officer salary, a $9,248 increase in officer accrued benefits, a $3,882 increase in employee salary, a $9,788 increase in payroll taxes, a $31,750 increase in board fees, and a $1,595 increase in general expenses offset by a ($7,498) decrease in employee accrued benefits, and a ($1,466) decrease in shareholder services expenses, a ($1,096) decrease in travel related expenses, and a ($1,203) decrease in miscellaneous and other expenses, resulting in an increase in other selling, general and administrative expenses of 66.69%, for the six months ended June 30, 2024 as compared to the prior year period.

Current wording

Our selling, general and administrative expenses for the three months ended September 30, 2024 was $154,279 compared to $145,054 for the prior year period, an increase of $9,225. We experienced a $26,800 increase in officer salary, a $4,009 increase in officer accrued benefits, a $3,462 increase in employee salary, a $2,315 increase in payroll taxes, and a $2,750 increase in board fees, offset by a ($21,148) decrease in legal fees, a ($7,802) decrease in professional audit, tax, and accounting expenses, a ($810) decrease in net administrative expenses, a ($138) decrease in insurance expense, and a ($158) decrease in depreciation, resulting in an increase in other selling, general and administrative expenses of 6.36%, for the three months ended September 30, 2024 as compared to the prior year period.

Previous wording

At the three months ended June 30, 2023 selling, general and administrative expenses for our discontinued operation, WCI, was $709,365. WCI selling, general and administrative expenses were included in our consolidated financials in the prior reporting period.

Current wording

At the three months ended September 30, 2023 selling, general and administrative expenses for our discontinued operation, WCI, was $722,809. WCI selling, general and administrative expenses were included in our consolidated financials in the prior reporting period.

Previous wording

At the three months ended June 30, 2023 other income and expense, net for our discontinued operation, WCI, was ($14,664). WCI other income and expense, net was included in our consolidated financials in the prior reporting period.

Current wording

At the three months ended September 30, 2023 other income and expense, net for our discontinued operation, WCI, was ($24,004). WCI other income and expense, net was included in our consolidated financials in the prior reporting period.

Previous wording

The net result for the three months ended June 30, 2024 was a net loss attributable to Mentor of ($421,676) or ($0.017) per Mentor common share compared to a net loss attributable to Mentor in the prior year period of ($129,246) or ($0.006) per Mentor common share. Management will continue to make an effort to lower operating expenses and increase revenue and gross margin. The Company will continue to look for acquisition opportunities to expand its portfolio in companies that are positive for operating revenue or have significant potential to become positive for operating revenue.

Current wording

The net result for the three months ended September 30, 2024 was a net loss attributable to Mentor of ($157,215) or ($0.007) per Mentor common share compared to a net loss attributable to Mentor in the prior year period of ($173,163) or ($0.008) per Mentor common share. Management will continue to make an effort to lower operating expenses and increase revenue and gross margin. The Company will continue to look for acquisition opportunities to expand its portfolio in companies that are positive for operating revenue or have significant potential to become positive for operating revenue.

Previous wording

Pending the application of sale proceeds to operating energy businesses, revenue for the six months ended June 30, 2024 was $0 compared to ($291) for the three months ended June 30, 2023 (“the prior year period”).

Current wording

Pending the application of sale proceeds to operating energy businesses, revenue for the nine months ended September 30, 2024 was $0 compared to ($291) for the nine months ended September 30, 2023 (“the prior year period”).

Previous wording

The lack of revenue is due to the deconsolidation of our discontinued operation, WCI, which the Company sold for $6,000,000 on October 4, 2023. At the six months ended June 30, 2023, our discontinued operation had $4,281,096 in revenue year to date, which was reported in our consolidated financials in the prior reporting period.

Current wording

The lack of revenue is due to the deconsolidation of our discontinued operation, WCI, which the Company sold for $6,000,000 on October 4, 2023. At the nine months ended September 30, 2023, our discontinued operation had $ $6,432,907 in revenue year to date, which was reported in our consolidated financials in the prior reporting period.

Previous wording

Gross profit for the six months ended June 30, 2024 was $0 compared to ($291) for the prior year period. The Company’s cost of goods sold for the six months ended June 30, 2024 were $0 and $0 for the prior year period.

Current wording

Gross profit for the nine months ended September 30, 2024 was $0 compared to ($291) for the prior year period. The Company’s cost of goods sold for the nine months ended September 30, 2024 were $0 and $0 for the prior year period.

Previous wording

Gross profit amounts of zero are due to the deconsolidation of our discontinued operation, WCI. At the six months ended June 30, 2023, gross profit for our discontinued operation was $1,606,373. WCI gross profit was included in our consolidated financials in the prior reporting period. Cost of goods sold of $2,674,723 at the six months ended June 30, 2023 were related to WCI.

Current wording

Gross profit amounts of zero are due to the deconsolidation of our discontinued operation, WCI. At the nine months ended September 30, 2023, gross profit for our discontinued operation was $2,281,507. WCI gross profit was included in our consolidated financials in the prior reporting period. Cost of goods sold of $4,151,400 at the nine months ended September 30, 2023 were related to WCI.

Previous wording

Our selling, general and administrative expenses for the three months ended June 30, 2024 was $212,027 compared to $118,496 for the prior year period, an increase of $93,531. We experienced a $21,413 increase in professional audit, tax, and accounting expenses, a $11,939 increase in legal fees, a $28,153 increase in officer salary, a $3,619 increase in officer accrued benefits, a $847 increase in employee salary, a $840 increase in employee accrued benefits, a $2,288 increase in payroll taxes, and a $25,500 increase in board fees, offset by a ($1,177) decrease in miscellaneous and other expenses, resulting in an increase in other selling, general and administrative expenses of 78.93%, for the three months ended June 30, 2024 as compared to the prior year period.

Current wording

Our selling, general and administrative expenses for the nine months ended September 30, 2024 was $637,571 compared to $434,991 for the prior year period, an increase of $202,580. We experienced a $67,393 increase in professional audit, tax, and accounting expenses, a $81,019 increase in officer salary, a $13,258 increase in officer accrued benefits, a $7,343 increase in employee salary, a $12,103 increase in payroll taxes, and a $34,500 increase in board fees, offset by a ($1,438) decrease in net administrative expenses, a ($2,209) decrease in legal fees, a ($1,096) decrease in travel related expenses, and ($8,307) decrease in employee accrued benefits, resulting in an increase in other selling, general and administrative expenses of 46.57%, for the nine months ended September 30, 2024 as compared to the prior year period.

Previous wording

At the six months ended June 30, 2023 selling, general and administrative expenses for our discontinued operation, WCI, was $1,379,844. WCI selling, general and administrative expenses were included in our consolidated financials in the prior reporting period.

Current wording

At the nine months ended September 30, 2023 selling, general and administrative expenses for our discontinued operation, WCI, was $2,102,653. WCI selling, general and administrative expenses were included in our consolidated financials in the prior reporting period.

Previous wording

Other income and expense, net, totaled ($209,649) for the three months ended June 30, 2024 compared to $4,987 for the prior year period, an increase of $214,636. The increase is due to our $250,208 impairment of investment in account receivable resulting in a ($249,984) loss on investments compared to the prior period, plus a ($8,850) decrease in unrealized gain on investment offset by a $39,235 increase in interest income for the three months ended June 30, 2024.

Current wording

Other income and expense, net, totaled ($133,997) for the nine months ended September 30, 2024 compared to $15,989 for the prior year period, an increase of ($149,986). The increase is due to our June 11, 2024 $250,208 impairment of investment in account receivable resulting in a ($250,208) loss on investments net, plus a ($20,640) decrease in unrealized gain on investment, offset by a $13,580 decrease in interest expense plus a $108,572 increase in interest income for the nine months ended September 30, 2024.

Previous wording

At the six months ended June 30, 2023 other income and expense, net for our discontinued operation, WCI, was ($18,707). WCI other income and expense, net was included in our consolidated financials in the prior reporting period.

Current wording

At the nine months ended September 30, 2023 other income and expense, net for our discontinued operation, WCI, was ($42,709). WCI other income and expense, net was included in our consolidated financials in the prior reporting period.

Previous wording

The net result for the six months ended June 30, 2024 was a net loss attributable to Mentor of ($629,681) or ($0.017) per Mentor common share compared to a net loss attributable to Mentor in the prior year period of ($178,658) or ($0.008) per Mentor common share. Management will continue to make an effort to lower operating expenses and increase revenue and gross margin. The Company will continue to look for acquisition opportunities to expand its portfolio in companies that are positive for operating revenue or have the potential to become positive for operating revenue.

Current wording

The net result for the nine months ended September 30, 2024 was a net loss attributable to Mentor of ($786,897) or ($0.033) per Mentor common share compared to a net loss attributable to Mentor in the prior year period of ($351,821) or ($0.015) per Mentor common share. Management will continue to make an effort to lower operating expenses and increase revenue and gross margin. The Company will continue to look for acquisition opportunities to expand its portfolio in companies that are positive for operating revenue or have the potential to become positive for operating revenue.

Previous wording

Since our reorganization, we have raised capital through warrant holder exercise of warrants to purchase shares of Common Stock. At June 30, 2024 we had cash and cash equivalents of $1,881,108 and working capital of $3,558,539.

Current wording

Since our reorganization, we have raised capital through warrant holder exercise of warrants to purchase shares of Common Stock. At September 30, 2024 we had cash and cash equivalents of $1,682,845 and working capital of $3,316,615.

Previous wording

Operating cash inflows in the six months ended June 30, 2024 was ($471,465), including ($629,681) of net income (loss), increased by non-cash depreciation and amortization of $538, gain (loss) on investments at fair value of ($22,637), a decrease in operating assets of ($35,854), a decrease in operating liabilities of ($24,479), non-cash amortization of discount on investment in account receivable of ($9,559), and a $250,208 loss on long-term investments.

Current wording

Operating cash inflows in the nine months ended September 30, 2024 was ($574,818), including ($786,897) of net income (loss), increased by non-cash depreciation and amortization of $807, gain (loss) on investments at fair value of ($19,925), a decrease in operating assets of ($50,781), a decrease in operating liabilities of $1,479, non-cash amortization of discount on investment in account receivable of ($9,559), and a $250,208 loss on long-term investments.

Previous wording

Net cash outflows for the six months ended June 30, 2024 were ($550,191) consisting of cash outflows in the six months ended June 30, 2024 of ($471,465) plus ($141) paid in capital for Company common stock repurchases and ($78,585) in payments on repurchases of the Company’s common stock.

Current wording

Net change in cash for the nine months ended September 30, 2024 were ($748,454) consisting of cash outflows from operations in the nine months ended September 30, 2024 of ($574,818) plus cash outflows from financing activities including ($286) paid in capital for Company common stock repurchases and ($173,350) in payments on repurchases of the Company’s common stock.

Previous wording

For the three and six months ended June 30, 2024, there were no redemptions of Series D Warrants. There were no redemptions of Series D Warrants in 2023. We believe that if warrants are redeemed and exercised, partial warrant redemptions will provide monthly cash for monthly operations.

Current wording

For the three and nine months ended September 30, 2024, there were no redemptions of Series D Warrants. There were no redemptions of Series D Warrants in 2023. We believe that if warrants are redeemed and exercised, partial warrant redemptions will provide monthly cash for monthly operations.