MENTOR CAPITAL, INC.

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1 CONSOLIDATED FINANCIAL STATEMENTS ( Unaudited ) INDEX TO FINANCIAL STATEMENTS Consolidated Balance Sheets... 2 Consolidated Statements of Operations... 5 Consolidated Statements of Cash Flows...7 Notes to Consolidated Financial Statements... 8

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8 1. DESCRIPTION OF BUSINESS Mentor Capital, Inc. ( the Company ) was incorporated July 29, 1994, under the laws of the State of California. On September 12, 1996, the Company s offering statement was qualified pursuant to Regulation A of the Securities Act of 1933 by the SEC, and the Company began to trade its shares publicly. On August 21, 1998, (the Petition Date ) the Company filed voluntary proceedings under Chapter 11 of the United States Code (the Bankruptcy Code ) in the United States Bankruptcy Court for the Northern District of California. On December 6, 1999, the Company s Plan of Reorganization ( the Plan ) was approved by the bankruptcy court and, on January 11, 2000, the Company emerged from Chapter 11. The Company has contracted to provide financial assistance to small businesses since its reorganization including a concentration in leading edge cancer companies beginning in In response to business decline in the cancer space, the Company was asked to look into investing in cancer related therapy in the medical marijuana space, which it is pursuing. The Company is divesting of its cancer assets in a methodical way. It is focused on becoming a pure play in the cannabis and medical marijuana sector. Since the August 2008, name change back to Mentor Capital, Inc., the Company s common stock has traded publicly under the trading symbol OTC Markets: MNTR. 2. BASIS OF PRESENTATION The accompanying financial statements have been prepared under the assumption that the Company will continue as a going concern. Such assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As shown in the financial statements as of and for the year then ended, the Company has limited cash resources and has an accumulated deficit of approximately $1.4 million through. Management's plans include increasing revenues to a level capable of supporting its operations, and raising additional capital through the sale of equity securities. While management is confident of their ability to execute these actions, there can be no assurance that it will be successful or that the Company will attain profitable operating levels in the future. These financial statements do not contain any adjustments that might result from the failure of the Company to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability of the carrying amount of recorded assets or the amount of liabilities that might result from the outcome of these uncertainties. Page 8

9 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates in the Preparation of Financial Statements The preparation of financial statements, in conformity with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the respective reporting periods. Actual results could differ from those estimates. Concentrations of Assets and Revenue The Company has acquired assets and receives or anticipates revenue from two main customers as it divests cancer assets before acquiring cannabis assets. The two customers account for 81% and 17% respectively of the Company s holdings during (See also, Section 12 Subsequent Events) Fair Value of Financial Instruments The carrying amounts of cash equivalents, accounts receivable, management fees receivable, note receivable and other current assets, accounts payables, and accrued liabilities approximate fair value due to the short maturity of these instruments. Cash and Cash Equivalents The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. At times, cash balances may be in excess of amounts insured by Federal agencies. Accounts Receivable The Company reviews its accounts receivable on a periodic basis to determine if an allowance for doubtful accounts is necessary based on its assessment of the collectability of specific customers and history of bad debts. The estimate of allowance for doubtful accounts is based on the Company's bad debt experience, market conditions, collateral available, and aging of accounts receivable, among other factors. If the financial condition of the Company's customers deteriorates resulting in the customer's inability to pay the Company's receivables as they come due, additional allowances for doubtful accounts will be required. At the Company considers its accounts receivable to be fully collectible and no allowance has been included in the accompanying financial statements. Page 9

10 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Investment The Company s investment in cancer companies is recorded under the cost-method as the fair market value is not readily determinable. Under this method, the Company s share of the earnings or losses of such investee company is not included in the Company s financial statements. The Company reviews the carrying value of its cost-method investment for impairment each reporting period. Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation has been computed using the straight-line method over the estimated useful lives as follows: Office furniture and equipment 3-5 years Betterment and large renewals which extend the life of the asset are capitalized. Costs for repairs and maintenance are expensed as incurred. Revenue Recognition The Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition. The Company records revenue under each contact once persuasive evidence of an agreement exists, delivery has occurred or services have been rendered, the fee is fixed or determinable and collectability is reasonably assured. Fees are based on monthly contractual terms and some based on performance of the client. Service is presumed to be rendered as of the end of each monthly period. Income (loss) per common share Basic income (loss) per common share is calculated by dividing net income (loss) by the weighted-average number of shares of common stock outstanding. For the year ended, the diluted earnings per common share includes the components of basic earnings per common share and also gives effect to dilutive common stock equivalents such as potentially dilutive common stock purchase warrants. No dilutive effect was calculated for the year ended, as the Company reported a net loss in the period and the effect would have been anti-dilutive. Page 10

11 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Income Taxes Income taxes are accounted for on an asset and liability method. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets if it is more likely than not that the Company will not realize deferred tax assets in future operations. 4. NOTE RECEIVABLE At, note receivable consists of a note for $1,080,000 from one of the Company's customers who is also a minority stockholder in the Company. The note is payable on demand and the minority shareholder may utilize any of his remaining shares and/or warrants as currency to partially repay the loan at a rate of approximately $0.45 per warrant. The note accrues interest at 0.42% per annum with annual interest only payments due and is current. 5. PROPERTY AND EQUIPMENT Property and equipment, net, consist of the following as of December 31: 2013 Computer equipment $ 12,120 Office equipment 14,946 Furniture and fixtures 3,966 Property and equipment, gross 31,032 Less: accumulated depreciation (26,731) Property and equipment, net $ 4,300 Deprecation expense was $2,230 for the year ended. Page 11

12 6. FUNDING AGREEMENT The Company previously entered into Funding Agreement ( Funding Agreement ) with a Brighter Day Health, LLC (the "Cancer Company") and has initiated $33,333 investment into Brighter Day Health. However, the Company is moving to be a pure play in the cannabis and medical marijuana space and is divesting its cancer related assets. Based on terms of the Funding Agreements, the Company had agreed to invest $5.0 million in the Cancer Company with proceeds derived from the exercise of the Company's outstanding warrants. The Company expects to completely divest its interest in the Cancer Company as it has successfully done with AGI earlier in the year, with no residual liability or impairment reflected in these financial reports. 7. COMMON STOCK WARRANTS The Company's Plan of Reorganization provided for the creditors and claimants to receive new warrants in settlement of their claims. The term of the warrants, initially sixteen months, has been extended each year and were to expire on May 11, The expiration date of the warrants was extended until May 11, 2038, by the Company on August 1, Each warrant is callable by the Company if the share price exceeds the exercise price by the lesser of $1 or 100%. The warrant holders have 30 to 90 calendar days during which to exercise their warrants once they are called. If the warrants are not exercised, the Company has the right to designate the warrants to a new holder in return for a $0.10 per share redemption fee payable to the original warrant holder as discussed further in Note 8. At November 8, 2009, the Company entered into an Investment Banking agreement with Network One Securities, LLC and a related Strategic Advisory Agreements with Lenox Hill Partners, LP with regard to a potential merger with a cancer development company. In conjunction with those related agreements, the Compnay issued 81,699 Series E ($1) Warrants, 369,037 Series F ($3) Warrants, 85,579 Series G ($0.65) Warrants and 689,159 Series H ($7) Warrants, all with a 30 year life. The warrants are subject to cashless exercise based upon the ten day trailing closing bid price preceding the exercise as interpreted by the Company. For the year ended the weighted average warrant contractual life was 25 years. For the year ended the weighted average warrant exercise price was $4.89 per share. During the year ended total of 503,808 warrants were exercised. During the year ended a total of 0 warrants were issued. During the year ended the total intrinsic value of outstanding warrants was $1,515,370. Page 12

13 7. COMMON STOCK WARRANTS (continued) The following table summarizes common stock warrants as of : Series A Series B Series C Series D $0.09 $0.11 $0.09 $7 Exercise Exercise Exercise Exercise Total* price price price price Warrants Outstanding at December 31, ,198,973 5,883, ,797 15,315,627 23,814,236 Issued Exercised (503,808) Outstanding at 1,198,973 5,379, ,797 15,315,627 23,310,428 *The 1,228,474 Series E, F, G and H Warrants issued with regard to Investment Banking and Advisory Services are unchanged from there issuance described preceding. 8. WARRANT REDEMPTION LIABILTY The Plan of Reorganization provides the right for the Company to call, and the Company or its designee to redeem warrants that are not exercised timely, as specified in the Plan, by transferring a $0.10 redemption fee to the former holders. Certain individuals desiring to acquire warrants or increase existing warrant holdings have deposited redemption fees with the Company that, when warrants are redeemed, will be forwarded to the former warrant holders at their last known address 30 days after the last warrant of any class is exercised, or earlier at the discretion of the Company. The Company has arranged for a service to process the redemption fees in offset to an equal amount of liability. 9. STOCKHOLDERS EQUITY Common Stock The Company has a total of 400,000,000 shares of Common Stock, no par value authorized at. The holders of Common Stock are entitled to one vote per share on all matters submitted to a vote of the stockholders and may accumulate their votes for the election of directors. Page 13

14 9. STOCKHOLDERS DEFICIT (continued) Common Stock (continued) During 2007, the Company effected a 1,000 to 1 reverse stock split on its outstanding common stock, under the authority of the Plan and subsequent to receiving 84% shareholder approval and Board of Director approval. During September 2008, the Company announced a stock repurchase plan which allowed for a total of 12.5% of the Company s shares to be repurchased during future periods. During 2013, 79,850 shares were repurchased by the Company for total payments of $25,500 based on the current market price of the shares outstanding at the time of repurchase. 10. INCOME TAXES In June 2006, the FASB issued FASB Interpretation Number 48 ( FIN 48 ), Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109, which clarifies the accounting for uncertainty in income taxes recognized in an entity s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes, and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position that an entity takes or expects to take in a tax return. Under FIN 48, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is, more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, FIN 48 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. There were no changes in the Company s unrecognized tax benefits during Due to the existence of the valuation allowance, future changes in our unrecognized tax benefits will not impact the Company s effective tax rate. The Company is subject to taxation in the U.S. and state jurisdictions. The Company s tax years for 2002 and forward are subject to examination by the U.S. and California tax authorities due to the carryforward of unutilized net operating losses. The Company is currently not under examination by any taxing authorities. Page 14

15 10. INCOME TAXES (continued) The provision for income tax on earnings subject to income taxes differs from the statutory federal income tax rate at : 2013 Expected federal income tax expense (benefit) $ 0 Change in valuation allowance, net of removal of deferred assets and net operating losses State income taxes 800 Provision for income taxes $ COMMITMENTS AND CONTINGENCIES Operating Leases The Company currently rents approximately 2,000 square feet of office space on a month-to-month basis in Ramona, California in San Diego County. Rent expense for the year ended was $22, RELATED PARTY TRANSACTIONS As of the Company has an outstanding liability to its Chief Executive Officer ("CEO") for accrued salaries/benefit liability in the amount of $1,331,325 that have accrued variably over the preceding 28 years. 12. SUBSEQUENT EVENTS On February 28, 2014 the Company entered into a purchase agreement to acquire 60% of Bhang Chocolate Company, Inc. for $39 Million. On March 15, 2014 Symbian Bank announced in a press release that it had closed a $35 Million M&A facility with Mentor Capital, Inc. Best estimate of funds delivery to the Company account in the USA is March 28 to April 14, The Company has already secured credit default insurance by paying $621,000 to guarantee repayment of the loan and the loan is personally secured by 100% of the shares of the company CEO. The bridge loan terms are based upon LIBOR plus fees and equal approximately 8.75% interest, 10 year ammitorization, three year balloon without prepayment penalty and with no dilutive aspects or security component. Page 15