Section 1145 Opinion

Re: Section 3(a)(7)/Section 1145 opinion
Issuer: Mentor Capital, Inc.
Shareholder: Blanket opinion (for shareholders and/or warrant holders as further specified
below)
Ladies and Gentlemen:
This letter shall serve as a blanket opinion letter for certain shareholders or future
shareholders of Mentor Capital, Inc. (the “Company”). Subject to the limitations of this opinion,
should you receive a request from the Company to:
(A)(1) issue shares of common stock of the Company, and such issuance is from the
conversion of either Series A, Series B, Series C or Series D warrants of the Company, which
were approved by the US Bankruptcy Court, Northern District of California, in the Company’s
prior bankruptcy, pursuant to a Disclosure Statement and a Plan of Reorganization; and (2) you
have confirmed that either: (i) the shareholder in question already holds validly issued warrants
in one of the above Series; or (ii) there are warrants remaining available in the particular series
that are being acquired, exercised and converted to common shares by the shareholder in
question; and (3) you have confirmed that either: (i) the shareholder in question already holds
validly issued warrants in one of the above Series; or (ii) the shareholder has been delegated as a
designee by the Company; and (4) the shareholder has paid to the Company the proper and
necessary funds for such conversion (in cases of existing warrant holders) or for such designation
and conversion of the warrants (in cases of warrants being issued to designees);
or
(B) confirm that a Shareholder—who holds shares of common stock or warrants of the
Company that emanate from the Northern District of California US Bankruptcy Court’s
Disclosure Statement and Plan of Reorganization from the Company’s previous bankruptcy—
holds such shares or warrants without legend or restriction;
and
(C) you have sufficient knowledge or have received sufficient confirmation that the
shareholder is not, and has not been within 90 days from the date of issuance, an officer, director,
10%+ holder of the outstanding shares of the Company, or otherwise an affiliate of the
Company,
then it is my opinion that you may issue warrants and/or shares of common stock of the
Company, as the case may be, to such a shareholder without a restrictive legend, and provide
such confirmation, all without registration under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to an exemption from registration requirements as set forth in Section
3(a)(7) of the Securities Act and Section 1145 of the U.S. Bankruptcy Code.
This letter is intended to be relied on by you, the Company, and such described
shareholders, in issuing such shares in accordance with the conditions set forth herein, and based
upon the following analysis of the exemptions set forth above.
Facts and Assumptions
In connection with rendering this opinion, I have investigated such matters and examined
such documents as I have deemed necessary. In examining the documents, I have assumed the
genuineness of signatures (both manual and conformed), the authenticity of documents submitted
as originals, the conformity with originals of all documents furnished as copies, and the
correctness of the facts set forth in such documents. Nothing came to my attention during the
course of my investigation that led me to conclude that any such documents were not genuine or
authentic or that the facts set forth therein were not true. Any opinion expressed herein relates
only to the Stock and should not be relied on by any other person or in connection with any other
transaction.
This opinion is expressed solely on the facts and assumptions set forth herein and is
specifically limited to the investigation and examinations stated and such other investigation as I
deemed necessary. After such investigation I know of no facts which lead me to conclude that
any opinion set forth below is not correct.
Pursuant to this engagement, I have examined the following specific documents or made
the following inquiries:
a) A review of a portion of the Company’s bankruptcy filings from its Chapter 11
bankruptcy in the Northern District of California, Case No. 98-56803, including a
Supplemental Memorandum in Support of Disclosure Statement and the courtapproved
Disclosure Statement, and court-confirmed Plan of Reorganization,
which specifically approved the issuance of several series of warrants with certain
exercise prices and exercise time periods, to claim and interest holders and
subsequent designees;
b) Confirmations from the Company that the warrants’ exercise prices have been repriced
and exercise time periods extended by the Company following its
emergence from bankruptcy, all as contemplated and allowed by the Disclosure
Statement and Plan of Reorganization;
c) A copy of a “No-Action” letter from the Securities and Exchange Commission,
dated November 19, 1999, regarding its position of having no further questions or
comments related to the Company’s Disclosure Statement and Plan of
Reorganization with the Bankruptcy Court;
d) A review of the Company’s filings with OTC Markets, which confirm that: (i) the
Company has never been a “shell corporation” as defined under the Securities Act
of 1933 and Securities Exchange Act of 1934, to wit: the Company was founded
by in 1994 by then and current President and CEO, Chet Billingsley, and invested
in and operated a small chain of athletic clubs, which were sold off in 1997,
followed immediately by a reverse merger with a group of 15 oil and gas
partnerships. In 1998 the Company entered a Chapter 11 bankruptcy
reorganization in the Northern District of California, during which it operated an
ATM business, and following its emergence from bankruptcy, began to acquire or
invest in smaller private businesses and acquired and retains a 50% interest in a
$1.2 Million annual revenue service business in Phoenix as part of those
investments. In 2004 the Company began to focus on cancer treatment-related
companies. In August 2013, the Company entered the medical marijuana space
and now invests in medical and social use cannabis companies; (ii) the Company
is not subject to the reporting requirements of the Securities Act of 1934, but
submits periodic reports to OTC Markets and is current with such reports as of its
quarterly report for the period ending September 30, 2013.
Based on the foregoing, I find that, as of the date of this opinion letter:
(A) Certain warrants and warrants series were approved by the
bankruptcy court pursuant to a Disclosure Statement and Plan of Reorganization
approved by the court, which warrants have been repriced and their exercise
periods extended, and which warrants may be delegated by the Company to
designees of the Company’s choice;
(B) The Company is current with its filings with the OTC Markets and
does not file periodic reports with the Securities & Exchange Commission;
(C) The company has never been a “shell corporation” as defined
under federal securities laws.
Discussion
Non-Shell Status of the Company
Securities Act Rule 405, Rule 144, and Exchange Act Rule 12b-2 define a “shell
company” as a company “with no or nominal operations and either no or nominal assets, assets
consisting solely of cash and cash equivalents, or assets consisting of any amount of cash and
cash equivalents and nominal other assets.” Based on the founding and operation of the
Company since inception by Chet Billingsley, and the continual business in various market
segments and industries since that time to the present as set forth above, I find that the Company
is not and has never been a “shell company” as defined by federal securities law.
Section 3(a)(7) and Section 1145
Section 3(a)(7) of the Securities Act provides for an exemption from registration under
the Securities Act for offers and sales of any security “issued … in a case under title 11 of the
United States Code, with the approval of the court.” Title 11 refers to the U.S Bankruptcy Code,
and Section 1145 of the Bankruptcy Code similarly provides an exemption from securities
registration: “[S]ection 5 of the Securities Act of 1933 and any State or local law requiring
registration for offer or sale of a security or registration or licensing of an issuer of, underwriter
of, or broker or dealer in, a security do not apply to the offer or sale under a plan of a security of
the debtor [including] any warrant, option, right to subscribe, or conversion privilege that was
sold in the manner specified in paragraph (1) of this subsection, or the sale of a security upon the
exercise of such a warrant, option, right, or privilege….”
The Company filed a Chapter 11 bankruptcy in the Northern District of California, Case
No. 98-56803, and as part of its bankruptcy filings submitted a Disclosure Statement and Plan of
Reorganization, which were approved by the Bankruptcy Court, and which Plan included the
ability to issue stock and warrants. The court-approved documents included specific language
that the securities issued under the Plan would not have to be “registered with the Securities &
Exchange Commission or registered or qualified with any state or local securities regulator….”
More specifically, the court-approved documents state: “Each and every security issued under
the Debtor’s Plan is exempt from registration under the Securities Act on account of the
exemption provided under Section 1145 of the Bankruptcy Code…” and “all securities issued in
exchange therefor or on conversion thereof shall be exempt from the registration requirements of
the Securities Act of 1933.”
Although the shareholders that are the subject of this opinion were not specifically named
as interest or claim holders at the time of the Company’s bankruptcy reorganization, the ability
of such shareholders and those similarly situated to receive court-approved warrants and shares
under the Plan, was specifically contemplated by the Disclosure Statement and Plan of
Reorganization, which state: “After the notice period expires the Debtor intends to allow
designees to redeem and exercise the Warrants; if done, the Debtor will send the $.10 per
Warrant proceeds to the holders when the entire class has been redeemed” and “Warrant holders
may exercise their Warrants at any time before the close of the specified redemption date … and
unexercised Warrants may be redeemed by the Debtor or its designee. ”
The warrants being redeemed by the shareholders that are the subject of this opinion are
such heretofore unexercised warrants, and the Company may designate such shareholders as
designees, pursuant to the Plan. Although the warrants at the time of the Company’s
reorganization were originally set at higher strike/exercise prices than those being paid by the
contemplated shareholders, such warrants were reset by the Company to the prices being paid by
such shareholders, also as contemplated by the bankruptcy court: “After the Effective Date, the
Debtor may reset all of the outstanding Warrants in one or more series to a lower price.”
CONCLUSIONS
Based on my examination of the above-described documents and relevant law and subject
to the limitations expressed herein, and my inquiries, I am of the opinion that the Company is not
and has never been a “shell company” as defined by federal securities law. I am further of the
opinion that based upon the U.S. Bankruptcy Court’s approval of the Company’s Plan of
Reorganization and Disclosure Statement, as well as Section 3(a)(7) of the Securities Act and
Section 1145 of the U.S. Bankruptcy Code, the warrants from which any shares subject to this
opinion will be converted, as well as the shares themselves, and any previously issued shares or
warrants issued pursuant to the bankruptcy documents referenced above, will be issued and are
issued pursuant to an exemption from the registration requirements of the Securities Act, and
may be freely sold without restriction.
This opinion is given only with respect to the Securities to which this opinion relates as
set forth above, is valid as of the date of this opinion and I make no representation or
commitment to update this opinion if any of the above-stated representations should change
following the issuance of this opinion. This opinion may not be relied on by any person other
than the Company’s transfer agent, the Company, the shareholders/warrant holders described
above, and their broker-dealers. No other use of this opinion is authorized without the written
consent of the undersigned.