Via TRISTERO RESEARCH
“If you identify someone of questionable character, don’t do business with them. The dishonesty tax is always too high.” –
“You can’t do a good deal with a bad guy, if you perceive a character, cut your losses.”
“With a hard working, honest fellow you can do a lot.” “Carefully screen them for good character”[drizzle]
Mentor Capital (MNTR) came to my attention on Monday when I saw this press release from the company. I was interested, and decided to do a little more research into the company. The actions of Mentor Capital and CEO Chet Billingsley seem similar to what they were doing in 2003, when the SEC issued a cease and desist order against the company, which was then known as Main Street AC, Inc. Additionally, some of the companies being acquired are run by individuals who in the past have received bans from the securities industry.
Mentor Capital, Inc. is a public company that invests in medical and social use cannabis companies. Mentor takes a 10% to 100% position in the various members of our family of participating companies, but leaves operating control firmly in the hands of the cannabis company founders. Because adult social use and medical marijuana opportunities often overlap, Mentor Capital participates in the legal recreational marijuana market. However, Mentor’s preferred focus is medical and the company seeks to facilitate the application of cannabis to cancer wasting, calming seizures, Parkinson’s disease, reducing ocular pressures from glaucoma and blunting chronic pain.
The stock trades at $6 a share, and has a market cap of $70 million according to the OTC Markets website.
Source: OTC Markets
The stock has done very well recently after a series of press releases and announced acquisitions.
Source: Yahoo Finance
Recent press releases.
Source: Yahoo Finance
Mentor Capital has a long and interesting history. The company was founded in 1985 and was originally a series of gyms.
The Company was founded by the President in August 1985, and incorporated on July 29, 1994. On January 1, 1995, a small chain of athletic clubs, investment interests from Mentor Capital (a California sole proprietorship of Mr. Billingsley), investment interests from Tech Start (LP) and Mentor Investors – I, LP, plus a residual promissory note of $841,957 from the sale of Best Express Foods (All under common control of Mr.Billingsley) were contributed in the initial formation of the Company. In 1994 and 1995 the Predecessor was listed in the San Jose Business Journal as the 6th and 22nd fastest growing privately held company in Silicon Valley.
According to that same document the company encountered financial trouble in 1997 due to over expanding. It was forced to sell all of its assets and then the shell entered into a reverse merger with 15 oil companies.
The residual shell entered into a reverse merger with a group of (15) fifteen mostly oil and gas partnerships. As part of the merger process, current management of the Company uncovered that the private syndicators were defrauding the private investors. At the request of the private investors, the SEC, FBI, Postal Inspector and California Department of Corporations were alerted. Key members of the syndicating group were eventually imprisoned for (6) six years. To scrub clean any residual syndicator claims the now public group of oil and gas interests went through a bankruptcy reorganization. The oil and gas properties were sold off and proceeds were distributed. To assist in a recovery, the courts allowed the issuance of approximately $145 Million in warrants to the claimants and creditors. The warrants were in (4) four steps at $1, $3, $5 and $7 per share. The Court order serves as a registration and all the shares, warrants and shares that spring from the warrants are freely tradable (sic). An SEC “No Comment” letter was received and the Plan was confirmed January 11, 2000.
The document goes on to say,
“The Company began to acquire or invest in smaller private businesses and retains a 50% interest in a s $1.2 Million revenue service business in Phoenix. In May 2007, the Company identified a significant opportunity in funding hedge funds. 700 hedge funds were contacted and a lead hedge fund with $16.9 Million in assets under management was selected. In October 2007, the Company negotiated to receive 80% of the net management fee and performance fee of the fund in exchange for a commitment to contribute $125 Million in permanent capital to the fund. After the share price hits $8 per share for 90 days, then the percentage of the net management and performance fee for the then future incremental additions to the fund, decreases to 20%. The hedge fund agreement was effective October 1, 2007 and investment earnings to date are $238,091. The (7) seven year historic return to fund investors has been 19% and an addition 3% will come to Mentor Capital through its 80% fee sharing.”
It’s unclear how the company went from having a 50% interest in a $1.2 million revenue company to becoming a hedge fund fund of funds, but that is apparently what they did.
Fast forward to 2009 and Mentor Capital is doing something like private equity for biotechs that promised to cure cancer. A Seeking Alpha article in 2009 said:
On 7/8/09, in the first of four steps leading to an anticipated merger and name change, MENTOR CAPITAL, INC. (OTCMKTS:MNTR) acquired a 20% ownership stake in an innovative clinical stage cancer immunotherapy company,Quantum Immunologics, Inc. (QI). QI is a privately held company with a goal of initially marketing its active immunotherapy for the treatment of breast cancer in the U.S., in addition to planning for new studies in other types of cancer and a new cancer screening tool. Mentor Capital is providing funding for QI to complete its ongoing, FDA-authorized Phase I/II trials for its experimental metastatic breast cancer treatment, in addition to possible acquisitions and additional clinical trials.
So what happened to Quantum Immunologics? Well, their website has turned into a blog of sorts that covers some topics on how to deal with cancer as well as a few posts on how to recover data from hard drives. I tried to find what happened to Quantum Immunologics, but the last thing on the internet from them was this press release announcing that they were starting Phase I trials. That was almost five years ago and not a word since. This is what the company website looked like as recently as October 2013.
(click to enlarge)
Source: WayBack Machine
This is what the website looks like today.
(click to enlarge)
So in just 6 months it had completely changed from funding “leading edge cancer companies” to “public market funding for cannabis.”
In this letter to shareholders Mentor Capital CEO Chet Billingsley wrote about the company’s goals and funding mechanisms:
MNTR ACTS FIRST & LOCKS UP BEST COMPANIES: Since August 29, 2013, MNTR has met with fifty-one (51) Cannabis related companies and entered into negotiations with what we think are the top eighteen (18) CEO’s for funding. These companies are variously described in writing by their fellow CEO’s as “cream of the crop,” “the best,” “Cannabis Cup awards,” “pioneers,” “very much on to something” and “the best… I have ever seen.” While not every one of the CEO’s in negotiations will finally join what we refer to as Leading Cannabis Brands for funding, at this point, the offers are generally just what management has verbally agreed to.
FUNDING MECHANISM: MNTR looks to place a mix of $140 Million (at cost) in Cannabis assets (10% to 60% MNTR ownership) into its portfolio. MNTR is currently just oversubscribed on an offer basis. MNTR shareholders hold $140 Million in freely tradable (sic) warrants to exercise and buy shares that are immediately freely trading. If the public market value of the assets is greater than the private market value the step-up may attract warrant holders to exercise and buy shares at the calculated discount. The Leading Cannabis Brand portfolio members split the proceeds pro rata to their price.
On the website Mentor Capital provides a list of its “portfolio companies”er
Let’s break those down.
Galena Pharmaceutical (GALE) has had serious accusations of fraud related to Dream Team. You can read excellent articles from Adam Feurstein. SA contributor Richard Pearson wrote one of the best investigative articles I have read on GALE and CytRx Corporation (NASDAQ:CYTR) (CYTR) and how Dream Team worked with management to promote the stock through articles which were apparently written by 3rd parties, but were in fact edited by company management. Research group Infitialis wrote about GW Pharmaceutical plc (LON:GWP) suggesting that shares were vastly overvalued as the company was a serial equity issuer and that it would not benefit from states legalizing marijuana. Medical Marijuana Inc (OTCMKTS:MJNA) (MJNA) is probably one of the more controversial marijuana stocks. You can make up your mind about that one, but I will point you in the direction of this article.
Recent Acquisition Is Questionable
In a recent press release Mentor Capital announced that they had acquired a 51% stake in MicroCannaBiz, LLC. If you Google “MicroCannaBiz, LLC” all you find is press releases related to the acquisition from Mentor Capital.
“February 19, 2014 – SAN DIEGO, Mentor Capital, Inc. (OTC Markets: MNTR) announced today that it has acquired a 51% equity interest in MicroCannaBiz, LLC, which was recently formed to address the legal cannabis market by Financial Research Solutions, Inc., a media, microcap investment research and educational training company. According to David W. Dube, Chairman of the new venture, “In addition to media products and marijuana investment publications, MicroCannaBiz, LLC will be issuing cannabis industry financial research studies, publishing an online business magazine, and releasing its searchable national directory of all private and public cannabis and marijuana – related companies. Internally, we target to deliver the 1st Annual MicroCannaBiz Publicly-Traded Conference and Expo, perhaps co-located with another money related show, as early as Fall, 2014.”
According to BusinessWeek the company was founded in 2014.