Attached files
file | filename |
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EXCEL - IDEA: XBRL DOCUMENT - WESTMOUNTAIN GOLD, INC. | Financial_Report.xls |
EX-32.2 - EXHIBIT 32.2 - WESTMOUNTAIN GOLD, INC. | exhibit32_2.htm |
EX-32.1 - EXHIBIT 32.1 - WESTMOUNTAIN GOLD, INC. | exhibit32_1.htm |
EX-31.2 - EXHIBIT 31.2 - WESTMOUNTAIN GOLD, INC. | exhibit31_2.htm |
EX-31.1 - EXHIBIT 31.1 - WESTMOUNTAIN GOLD, INC. | exhibit31_1.htm |
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the three month period ended July 31, 2014
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-53028
WESTMOUNTAIN GOLD, INC.
(Exact Name of Issuer as specified in its charter)
Colorado |
| 26-1315498 |
(State or other jurisdiction of incorporation) |
| (IRS Employer File Number) |
120 E Lake St. Ste. 401 Sandpoint, ID |
| 83864 |
(Address of principal executive offices) |
| (zip code) |
(208)265-1717
(Registrant's telephone number, including area code)
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: þ No: o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files. Yes: þ No: o
Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or a smaller reporting Company. See definitions of large accelerated filer, accelerated filer, and small reporting Company in Rule 12b-2 of the Exchange Act.
Large accelerated filer o |
| Non accelerated filer | o |
Accelerated filer o |
| Smaller reporting company | þ |
Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act): Yes: o No: þ
The number of shares of common stock, $.001 par value, issued and outstanding as of September 18, 2014: 25,936,997 shares.
1
FORM 10-Q
TABLE OF CONTENTS
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PART I FINANCIAL INFORMATION | ||
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Item 1. | Financial Statements (unaudited except as noted) | 3 |
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| Consolidated Balance Sheets as of July 31, 2014 and October 31, 2013 (audited) | 3 |
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| Consolidated Statements of Operations for the three and nine months ended July 31, 2014 and 2013 | 4 |
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| Consolidated Statement of Cash Flows for the nine months ended July 31, 2014 and 2013 | 5 |
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| Notes to Consolidated Financial Statements | 6 |
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Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations | 21 |
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Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 27 |
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Item 4. | Controls and Procedures | 28 |
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PART II OTHER INFORMATION | ||
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Item 1. | Legal Proceedings | 29 |
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Item 1A. | Risk Factors | 29 |
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Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 39 |
Item 3. | Defaults Upon Senior Securities | 39 |
Item 4. | Mine Safety Disclosure | 39 |
Item 5. | Other Information | 39 |
Item 6. | Exhibits | 40 |
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Signatures | 41 |
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WestMountain Gold, Inc. | |||||
An Exploration Stage Company | |||||
Consolidated Balance Sheets | |||||
(unaudited) | |||||
|
July 31, 2014 |
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October 31, 2013 | ||
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ASSETS |
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Current Assets |
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Cash and cash equivalents | $ | 43,698 |
| $ | 82,376 |
Prepaid expenses |
| 22,605 |
|
| 6,355 |
Inventory |
| 252,956 |
|
| 66,485 |
Total current assets |
| 319,259 |
|
| 155,216 |
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Equipment, net |
| 412,338 |
|
| 528,973 |
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Other Assets |
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Contractual rights |
| 900,000 |
|
| 800,000 |
Mining claims |
| 1,946,458 |
|
| 11,820 |
Security deposits |
| 5,225 |
|
| 5,250 |
Total Assets | $ | 3,583,280 |
| $ | 1,501,259 |
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LIABILITIES AND STOCKHOLDERS' DEFICIT |
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Current Liabilities |
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Accounts payable | $ | 1,299,517 |
| $ | 1,315,070 |
Accounts payable - related parties |
| 523,117 |
|
| 697,127 |
Accrued expenses |
| - |
|
| 216,078 |
Accrued interest |
| 1,080,269 |
|
| 394,274 |
Accrued expenses - related parties |
| 377,681 |
|
| 57,000 |
Forward contract |
| 523,784 |
|
| 794,760 |
Derivative liability - warrants |
| 1,299,431 |
|
| 2,000,000 |
Promissory notes |
| 5,583,248 |
|
| 3,083,248 |
Total current liabilities |
| 10,687,047 |
|
| 8,557,557 |
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Commitments and Contingencies |
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STOCKHOLDERS' DEFICIT |
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Preferred stock, $0.10 par value; 987,900 shares authorized, 0 shares issued and outstanding at January 31, 2014 and October 31, 2013, respectively |
| - |
|
| - |
Preferred Series A Convertible Stock, $0.10 par value; 12,100 shares authorized, 12,100 shares authorized, 12,100 shares issued and outstanding at July 31, 2014 and October 31, 2013, respectively |
| 1,210 |
|
| 1,210 |
Common stock, $0.001 par value; 200,000,000 shares authorized, 25,936,997 and 24,659,832 shares issued and outstanding at July 31, 2014 and October 31, 2013, respectively |
| 25,937 |
|
| 24,659 |
Additional paid in capital |
| 12,265,737 |
|
| 10,608,128 |
Accumulated deficit |
| (19,396,651) |
|
| (17,690,295) |
Total stockholders' deficit |
| (7,103,767) |
|
| (7,056,298) |
Total Liabilities and Stockholders' Deficit | $ | 3,583,280 |
| $ | 1,501,259 |
|
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See notes to consolidated financial statements.
3
WestMountain Gold, Inc. | |||||||||||
An Exploration Stage Company | |||||||||||
Consolidated Statements of Operations | |||||||||||
(unaudited) | |||||||||||
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| Three Months Ended |
| Nine Months Ended | ||||||||
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July 31, 2014 |
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July 31, 2013 |
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July 31, 2014 |
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July 31, 2013 | ||||
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Revenue: |
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Sales | $ | 157,726 |
| $ | - |
| $ | 361,975 |
| $ | - |
Total revenue |
| 157,726 |
|
| - |
|
| 361,975 |
|
| - |
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Cost of sales |
| 88,092 |
|
| - |
|
| 224,867 |
|
| - |
Total cost of sales |
| 88,092 |
|
| - |
|
| 224,867 |
|
| - |
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Gross profit |
| 69,634 |
|
| - |
|
| 137,108 |
|
| - |
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Operating Expenses |
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Selling, general and administrative expenses |
| 63,968 |
|
| 1,067,037 |
|
| 793,549 |
|
| 1,767,794 |
Exploration expenses |
| 287,330 |
|
| 920,523 |
|
| 357,940 |
|
| 1,796,695 |
Total operating expenses |
| 351,298 |
|
| 1,987,560 |
|
| 1,151,489 |
|
| 3,564,489 |
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Loss from operations |
| (281,664) |
|
| (1,987,560) |
|
| (1,014,381) |
|
| (3,564,489) |
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Other income/(expense) |
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Interest income |
| 3 |
|
| - |
|
| 14 |
|
| - |
Interest expense |
| (148,265) |
|
| (6,800) |
|
| (814,541) |
|
| (433,841) |
Financing fee |
| - |
|
| (131,967) |
|
| (228,238) |
|
| (131,967) |
Gain(Loss) on change - derivative liability warrants |
| 446,319 |
|
| (2,175,000) |
|
| 700,569 |
|
| (2,175,000) |
Loss on settlement of forward contract |
| - |
|
| - |
|
| (349,779) |
|
| - |
Total other income/(expense) |
| 298,057 |
|
| (2,313,767) |
|
| (691,975) |
|
| (2,740,808) |
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Net income (loss) before income taxes |
| 16,393 |
|
| (4,301,327) |
|
| (1,706,356) |
|
| (6,305,297) |
Income tax expense (benefit) |
| - |
|
| - |
|
| - |
|
| - |
Net income (loss) | $ | 16,393 |
| $ | (4,301,327) |
| $ | (1,706,356) |
| $ | (6,305,297) |
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Basic net loss per share | $ | 0.00 |
| $ | (0.18) |
| $ | (0.07) |
| $ | (0.27) |
Diluted net loss per share | $ | 0.00 |
| $ | (0.18) |
| $ | (0.07) |
| $ | (0.27) |
Basic weighted average common shares outstanding |
| 25,936,997 |
|
| 24,241,560 |
|
| 25,565,504 |
|
| 23,468,902 |
Diluted weighted average common shares outstanding |
| 27,381,818 |
|
| 24,241,560 |
|
| 25,565,504 |
|
| 23,468,902 |
See notes to consolidated financial statements.
4
WestMountain Gold, Inc. | |||||
An Exploration Stage Company | |||||
Consolidated Statement of Cash Flows | |||||
(unaudited) | |||||
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Nine Months Ended | ||||
|
July 31,
2014 |
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July 31,
2013 | ||
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Cash flows from operating activities |
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Net loss | $ | (1,706,356) |
| $ | (6,305,297) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
| 117,997 |
|
| 105,307 |
Warrant amortization expense |
| - |
|
| 13,333 |
Issuance of common stock for fees |
| 227,977 |
|
| - |
Issuance of common stock and warrants for services and expenses |
| 347,275 |
|
| 887,000 |
(Gain) Loss on forward contract |
| 93,944 |
|
| 192,900 |
Loss on settlement of forward contract |
| 348,721 |
|
| - |
(Gain) Loss on derivative liability |
| (700,569) |
|
| 2,175,000 |
Changes in operating assets and operating liabilities: |
|
|
|
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Prepaid expenses and other current assets |
| (16,250) |
|
| 861 |
Inventory |
| (186,471) |
|
| - |
Other assets |
| 25 |
|
| (3,200) |
Accrued interest |
| 685,995 |
|
| - |
Accounts payable and accrued liabilities |
| (231,631) |
|
| 556,207 |
Accounts payable and accrued liabilities - related parties |
| 380,512 |
|
| - |
Net cash used in operating activities |
| (638,831) |
|
| (2,377,889) |
|
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Cash flows from investing activities: |
|
|
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Capital expenditures |
| - |
|
| (254,239) |
Contractual rights |
| (100,000) |
|
| (100,000) |
Cash paid for mining claims |
| (1,800,000) |
|
| - |
Net cash used in investing activities |
| (1,900,000) |
|
| (354,239) |
|
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Cash flows from financing activities: |
|
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Proceeds from promissory notes |
| 2,500,000 |
|
| 944,283 |
Forward contract |
| (100,000) |
|
| 600,000 |
Proceeds from the issuance of common stock |
| 100,153 |
|
| 1,139,752 |
Net cash provided by financing activities |
| 2,500,153 |
|
| 2,684,035 |
|
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Net increase (decrease) in cash and cash equivalents |
| (38,678) |
|
| (48,093) |
Cash and cash equivalents, beginning of period |
| 82,376 |
|
| 88,870 |
Cash and cash equivalents, end of period | $ | 43,698 |
| $ | 40,777 |
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Supplemental disclosures of cash flow information: |
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Interest paid | $ | - |
| $ | - |
Taxes paid | $ | - |
| $ | - |
Non-cash investing and financing activities: |
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Common stock issued in exchange for account payable | $ | 233,841 |
| $ | 35,300 |
Common stock and warrants issued for mining claims | $ | 136,000 |
| $ | - |
Common stock and warrants issued for settlement of forward contract | $ | 264,920 |
| $ | - |
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See notes to consolidated financial statements.
5
WESTMOUNTAIN GOLD, INC.
AN EXPLORATION STAGE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BUSINESS
WestMountain Gold, Inc. (WMTN or the Company) is an exploration stage mining company, determined in accordance with applicable Securities and Exchange Commission (SEC) guidelines, which pursues gold projects that the Company anticipates will have low operating costs and high returns on capital.
WMTNs wholly owned subsidiary, Terra Gold Corporation (TGC), was a joint venture partner with Raven Gold Alaska, Inc. (Raven) through February 12, 2014 on a gold system project (the TMC Project). On February 12, 2014, the Company, through its wholly owned subsidiary, Terra Gold Corp, acquired 100% ownership interest in the TMC Project from Raven, which is a wholly owned subsidiary of Corvus Gold Inc. (TSX:KOR, OTCQX:CORVF) for $1.8 million in cash and 200,000 shares of WMTN. The Company has budgeted expenditures for the TMC Project for the next twelve months of approximately $2,100,000, depending on additional financing, for general and administrative expenses and exploration.
The Company is currently focused on mineral production from mineralized material at the TMC Project in the state of Alaska. The TMC Project consists of 344 Alaska state mining claims plus an additional 5 unpatented lode mining claims held under lease (subject to a 3-4% net smelter return (NSR) royalty to the lessor, dependent upon the gold price) covering 223 square kilometers (22,300 hectares). The property is centered on an 8-km-long (800 hectares) trend of gold vein occurrences. All government permits and reclamation plans for continued exploration through 2014 were renewed and the fees to maintain the Terra claims through 2014 were paid by the Company. The property lies approximately 200 km (20,000 hectares) west-northwest of Anchorage and is accessible via helicopter or fixed-wing aircraft. The property has haul roads, a mill facility and adjoining camp infrastructure, a tailings pond and other infrastructure. The remote camp is powered by diesel powered generators and water is supplied to the mill by spring fed sources and year round water wells.
The Company is considered an exploration stage company under SEC criteria because it has not demonstrated the existence of proven or probable reserves at the TMC Project. Accordingly, as required under SEC guidelines and U.S. GAAP for companies in the exploration stage, substantially all expenditures in the mining properties to date, including construction of the mill, mine facilities and exploration , have been expensed as incurred and therefore do not appear as assets on our balance sheet. The Company expects construction expenditures and underground mine exploration and capital improvements will continue during 2014 and subsequent years. The Company expects to remain as an exploration stage company for the foreseeable future. It will not exit the exploration stage until such time that it demonstrates the existence of proven or probable reserves that meet SEC guidelines. Likewise, unless mineralized material is classified as proven or probable reserves, substantially all expenditures for mine exploration and construction will continue to be expensed as incurred.
As of July 31, 2014, the Company had eight secured promissory notes with BOCO Investments, LLC, and has recorded $4,352,115 in principal plus $1,007,679 in accrued interest. The Company is in default on the promissory notes. We do not currently have the ability to repay the amount due.
The Companys principal source of liquidity for the next several years will need to be the continued raising of capital through the issuance of equity or debt. WMTN plans to raise funds for each step of the TMC Project and as each step is successfully completed, raise the capital for the next phase. WMTN believes this will reduce the cost of capital as compared to trying to raise all the anticipated capital at once up front. However, since WMTNs ability to raise additional capital will be affected by many factors, most of which are not within the Companys control (see Risk Factors), no assurance can be given that WMTN will in fact be able to raise the additional capital as it is needed.
The Company may choose to scale back operations to operate at break-even with a smaller level of business activity, while adjusting overhead depending on the availability of additional financing. In addition, the Company expects that it will need to raise additional funds if the Company decides to pursue more rapid expansion, appropriate responses to competitive pressures, or the acquisition of complementary businesses or technologies, or if it must respond to unanticipated events that require it to make additional investments. The Company cannot assure that additional financing will be available when needed on favorable terms, or at all.
6
NOTE 2. GOING CONCERN
The Companys independent registered public accounting firm has expressed substantial doubt about the Companys ability to continue as a going concern as a result of its history of net loss. The Companys ability to achieve and maintain profitability and positive cash flow is dependent upon its ability to successfully execute the plans to pursue the TMC Project as described in this Form 10-Q. The outcome of these matters cannot be predicted at this time. These consolidated financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue its business.
UNAUDITED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements of WMTN and its subsidiaries have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The financial statements for the periods July 31, 2014 and 2013 are unaudited and include all adjustments necessary to a fair statement of the results of operations for the periods then ended. All such adjustments are of a normal, recurring nature. The results of the Companys operations for any interim period are not necessarily indicative of the results of the Companys operations for a full fiscal year. For further information, refer to the financial statements and footnotes thereto included in the Companys Annual Report on Form 10-K for the fiscal year ended October 31, 2013 as filed with the Securities and Exchange Commission (the SEC) on February 13, 2014.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Accounting Method
The Companys consolidated financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.
Principles of Consolidation
These consolidated financial statements include the Companys consolidated financial position, results of operations, and cash flows. All material intercompany balances and transactions have been eliminated in the accompanying consolidated financial statements.
Foreign Currency Translation
The consolidated financial statements are presented in US dollars.
Cash and Cash Equivalents
The Company classifies highly liquid temporary investments with an original maturity of three months or less when purchased as cash equivalents. The Company maintains cash balances at various financial institutions. Balances at US banks are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risk for cash on deposit. As of July 31, 2014, the Company had no uninsured cash amounts.
Equipment
Equipment consists of machinery, furniture and fixtures and software, which are stated at cost less accumulated depreciation and amortization. Depreciation is computed by the straight-line method over the estimated useful lives or lease period of the relevant asset, generally 3 -5 years.
7
Inventories were $252,956 and $66,485 as of July 31, 2014 and October 31, 2013, respectively. Inventories include doré. All inventories are stated at the lower of cost or market, with cost being determined using a weighted average cost method. Metal inventory costs include direct labor, materials, depreciation, as well as administrative overhead costs relating to mining activities.
Mineral Properties
Costs of acquiring mineral properties are capitalized by project area upon purchase of the associated claims. Costs to maintain the mineral rights are expensed as incurred. When a property reaches the production stage, the related capitalized costs will be amortized, using the units of production method on the basis of periodic estimates of ore reserves.
Mineral properties are periodically assessed for impairment of value and any diminution in value.
The Company has access to the camp by airplane. There is road access from the camp to the project area where drilling and bulk sampling mining occurs. It is approximately 1 1/2 miles from camp to the project area. Power generation is by diesel generator at the camp. Fuel is brought in for the generators by a cargo plane to the airstrip.
Long-Lived Assets
The Company reviews its long-lived assets for impairment when changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets under certain circumstances are reported at the lower of carrying amount or fair value. Assets to be disposed of and assets not expected to provide any future service potential to the Company are recorded at the lower of carrying amount or fair value (less the projected cost associated with selling the asset). To the extent carrying values exceed fair values, an impairment loss is recognized in operating results. As of July 31, 2014, there are no impairments recognized.
Alaska Reclamation and Remediation Liabilities
The Company operates in Alaska. The State of Alaska Department of Natural Resources requires a pool of funds from all permittees with exploration and mining projects to cover reclamation. There is a $750 per acre disturbance reclamation bond that is required for disturbance of 5 acres or more and/or removal of more than 50,000 cubic yards of material. The Company exceeded the minimum requirements in 2013 and posted a reclamation bond of $22,358 on December 23, 2013. The amount was expensed as an exploration cost during the period.
Fair Value Measurements
ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy, which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entitys own assumptions (unobservable inputs). The hierarchy consists of three levels:
Level 1 Quoted prices in active markets for identical assets and liabilities; |
Level 2 Inputs other than level one inputs that are either directly or indirectly observable; and |
Level 3 Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use. |
Liabilities measured at fair value on a recurring basis are summarized as follows:
|
Fair Value Measurements Using Inputs |
|
Carrying Amount at
July 31, 2014 | ||||||||
Financial Instruments |
Level 1 |
|
Level 2 |
|
Level 3 |
| |||||
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Liabilities: |
|
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|
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|
|
Forward contract | $ | - |
| $ | 523,784 |
| $ | - |
| $ | 523,784 |
Derivative Instruments -Warrants | $ | - |
| $ | 1,299,431 |
| $ | - |
| $ | 1,299,431 |
Total | $ | - |
| $ | 1,823,215 |
| $ | - |
| $ | 1,823,215 |
|
Fair Value Measurements Using Inputs |
|
Carrying Amount at
October 31, 2013 | ||||||||
Financial Instruments |
Level 1 |
|
Level 2 |
|
Level 3 |
| |||||
|
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Liabilities: |
|
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|
|
|
|
|
|
|
|
|
Forward contract | $ | - |
| $ | 794,760 |
| $ | - |
| $ | 794,760 |
Derivative Instruments -Warrants | $ | - |
| $ | 2,000,000 |
| $ | - |
| $ | 2,000,000 |
Total | $ | - |
| $ | 2,794,760 |
| $ | - |
| $ | 2,794,760 |
8
Market price and estimated fair value of common stock used to measure the Derivative Instruments-Warrants at July 31, 2014 and October 31, 2013:
|
|
|
|
|
|
|
July 31, 2014 |
|
October 31, 2013 | ||
Market price and estimated fair value of common stock: | $ | 0.56 |
| $ | 1.06 |
Exercise price | $ | 0.45 |
| $ | 0.75 |
Expected term (years) |
| 3.75 |
|
| 4.8 |
Dividend yield |
| - |
|
| - |
Expected volatility |
| 179% |
|
| 112% |
Risk-free interest rate |
| 1.76% |
|
| 0.95% |
The risk-free rate of return reflects the interest rate for the United States Treasury Note with similar time-to-maturity to that of the warrants.
The recorded value of other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, other current assets, and accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities at July 31, 2014 and October 31, 2013 based upon the short-term nature of the assets and liabilities.
Derivative Instruments Warrants
In May and June 2013, the Company received a total of $1.0 million and entered into Promissory Notes, Security Agreement, Loan Agreement and Warrants to Purchase Stock Agreement (collectively, the Transaction Documents) with BOCO Investments LLC (BOCO).
In addition, the Company issued Warrants to BOCO to purchase 2,500,000 shares of common stock at an exercise price that is the lesser of $0.75 per share or a price per share equal to eighty percent (80%) of the lowest price at which a common share in the Company has been issued in any round of financing commenced or closed after the date of the Warrants and prior to Holders exercise of its rights under the Warrants. The Warrants expire in 2018, five years from the issuance date. There are no registration requirements. The Trans action Documents place certain operating restrictions on the Company.
9
Provision for Income Taxes
Income taxes are provided based upon the liability method of accounting. Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the more likely than not standard.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes.
Net Loss Per Share
Basic loss per common share is computed by dividing net loss available to common shareholders by the weighted average number of shares of common stock outstanding for the periods presented. Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would then share in the income of the Company, subject to anti-dilution limitations. As of July 31, 2014, the Company had (i) warrants for the purchase of 14,068,880 common shares; (ii) 2,083,248 common shares related to convertible promissory notes; and (iii) 605,000 common shares related to the conversion of Series A Convertible Preferred Stock; which were considered but were not included in the computation of loss per share at July 31, 2014 because they would have been anti-dilutive.
Use of Estimates
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 reporting period. Actual results could differ from those estimates.
Recent Accounting Pronouncements
In June 2014, the FASB issued ASU No. 2014-10, which amended Accounting Standards Codification (ASC) Topic 915 Development Stage Entities. The amendment eliminates certain financial reporting requirements surrounding development stage entities, including an amendment to the variable interest entities guidance in ASC Topic 810, Consolidation. The amendment removes the definition of a development stage entity from the ASC, thereby removing the financial reporting distinction between development stage entities and other entities from U.S. GAAP. Consequently, the amendment eliminates the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.
This amendment is effective for fiscal years beginning after December 15, 2014, and interim periods therein. Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entitys financial statements have not yet been issued. The Company has made the election to early adopt this amendment effective June 30, 2014 and, as a result, the Company is no longer presenting or disclosing the information previously required under Topic 915. The early adoption was made to reduce data maintenance by removing all incremental financial reporting requirements for development stage entities. The adoption of this amendment alters the disclosure requirements of the Company, but it does not have any material impact on the Companys financial position or results of operations for the current or any prior reporting periods.
A variety of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, management has not determined whether implementation of such proposed standards would be material to the consolidated financial statements.
11
NOTE 4. AGREEMENTS
Exploration, Development and Mine Operating Agreements
Joint Venture Agreement
On September 15, 2010, WMTN and its wholly owned subsidiary, TGC, and Raven signed an Exploration, Development and Mine Operating Agreement (JV Agreement) pertaining to the TMC Project. WMTN has made payments of cash and stock to Raven pursuant to the JV Agreement for the past three years.
On February 12, 2014, the Company, through TGC, acquired 100% ownership interest in the TMC Project from Raven for $1.8 million in cash and 200,000 shares of WMTN. No further payments are due to Raven from TGC under the JV Agreement, (including but not limited to any royalty or residual payments), and each party is fully released from its obligations to the other under the JV Agreement. As of July 31, 2014, the $1.8 million of cash paid to Raven is recorded as Mining Claims in the accompanying consolidated balance sheet along with the 200,000 shares of common stock of the Company has been issued. The shares of common stock had a fair market value of $136,000 on the date of grant.
Share Exchange Agreement with TMC
During the year ended October 31, 2010, WMTN entered into a Share Exchange Agreement with Gregory Schifrin, American Mining Corporation (AMC) and James Baughman to acquire 100% of the issued and outstanding shares of common stock of TMC in exchange for 1,500,000 shares of restricted common stock of WMTN, par value of $0.001 per share. These shares were valued at $150,000. The value of these shares were recorded as Contractual Rights because of TMCs JV agreement with Terra Gold and Raven Gold Alaska, Inc. to explore the mineral properties. On February 12, 2014, the Company acquired 100% of the Terra Gold project.
Amended Claims and Lease Agreements with Ben Porterfield
On January 7, 2011, Terra Mining Corporation (TMC) entered into an Amended Claims Agreement with Ben Porterfield related to five mining claims known as Fish Creek 1-5 (ADL-648383 through ADL-648387), which claims have been assigned to the TMC Project. As part of this Amended Claims Agreement, Ben Porterfield consented to certain conveyances, assignments, contributions and transfers related to the above five mining claims.
The Amended Lease Agreement, which incorporates the Lease dated March 22, 2005 and the September 27, 2010 Consent between Ben Porterfield and AngloGold Ashanti (USA) Exploration Inc., has a term of ten years, which can be extended for an additional ten years with thirty days written notice. The Amended Lease Agreement defines terms and conditions and requires the following minimum royalties:
| ● | Payment of $100,000 annually on March 22, 2011 (paid). |
| ● | Payment of $100,000 annually on March 22, 2012 (paid), 2013 (paid), (2014) paid,through March 22, 2015. |
| ● | Payment of $125,000 annually on March 22, 2016 through the termination of the Amended Claims Agreement. |
The Company can terminate the Amended Lease Agreement with the payment of $875,000, less $75,000 paid during the years 2006-2011. The payment may be paid over three annual payments.
TMC has paid in total $400,000 to Ben Porterfield and WMTN issued 500,000 shares of WMTN restricted common stock on March 23, 2011. The common stock was recorded as Contractual Rights at $250,000 or $0.50 per share. Mr. Porterfield is to receive 200 tons of Bens Vein materials over the next two years. The investment in the exclusive rights to the mineral properties is accounted for at cost. As of July 31, 2014, the Company has capitalized $750,000 related to this Claims Agreement.
The Amended Claims Agreement, which incorporates the Lease dated March 22, 2005, provides for a production royalty of 4% of the net smelter return for all minerals produced or sold. The Company may repurchase 1% of the production royalty right for $1,000,000 and an additional 1% for $3,000,000.
The failure to operate in accordance with the Amended Claims or Lease Agreements could result in the Lease being terminated. On May 23, 2014, the Company paid the $100,000 payment to Ben Porterfield that was due on March 22, 2014 to cure the late payment default on the lease agreement.
12
NOTE 7. PROMISSORY NOTES
As of July 31, 2014 and October 31, 2013, the Company has the following promissory notes outstanding:
|
July 31, 2014 |
|
October 31, 2013 | ||
BOCO September 17, 2012 Promissory Note | $ | 1,852,115 |
| $ | 1,852,115 |
BOCO May 14, 2013 Promissory Note |
| 500,000 |
|
| 500,000 |
BOCO June 27, 2013 Promissory Note |
| 500,000 |
|
| 500,000 |
BOCO December 31, 2013 Promissory Note |
| 1,000,000 |
|
| - |
BOCO May 23, 2014 Promissory Note |
| 100,000 |
|
| - |
BOCO June 2, 2104 Promissory Note |
| 200,000 |
|
| - |
BOCO June 9, 2014 Promissory Note |
| 100,000 |
|
| - |
BOCO June 30, 2014 Promissory Note |
| 100,000 |
|
| - |
Dessi December 17, 2013 Promissory Note |
| 1,000,000 |
|
| - |
Andres Promissory Notes |
| 200,000 |
|
| 200,000 |
Silver Verde May Promissory Notes |
| 31,133 |
|
| 31,113 |
Total | $ | 5,583,248 |
| $ | 3,083,228 |
Secured Promissory Notes dated September 17, 2012 in Default
On September 17, 2012, the Company entered into an Amended and Restated Revolving Credit Loan and Security and Secured Convertible Promissory Note Agreements with BOCO, an existing lender to and shareholder in the Company. On October 1, 2012, the Company entered into a Warrant to Purchase Stock Agreement with BOCO related to this financing (such Agreements and Warrant, the Transaction Documents). This transaction consolidated previously issued promissory note agreements and warrants purchase agreements into one amended agreement.
Under the Transaction Documents, the Company issued an Amended and Restated Secured Convertible Promissory Note (the September 2012 Note) in the principal amount of $1,852,115. The September 2012 Note was due July 31, 2013 and provided for interest at 18% payable in arrears. The Note and accrued interest are convertible into common stock at the lesser of $3.00 or the lowest price at which common shares in the Company are issued in any round of financing commencing after the date of this Note and prior to the conversion, at the discretion of BOCO. The September 2012 Note is secured by a security interest in the Companys assets to secure the Companys performance under the Note. In addition, the Company issued a Warrant to purchase 1,852,115 shares of common stock at the lesser of $1.50 or the lowest price at which common shares in the Company are issued in any round of financing commencing after the date of this Note. The Warrant expires September 30, 2017. There are no registration requirements. The Transaction Documents place certain operating restrictions on the Company. As of July 31, 2014, the principal and accrued interest due on the note is $2,413,534.
14
The Transaction Documents also contain certain representations and warranties of the Company and BOCO, including customary investment-related representations provided by BOCO, as well as acknowledgements by BOCO that it has reviewed certain disclosures of the Company (including the periodic reports that the Company has filed with the SEC) and that the Companys issuance of the shares has not been registered with the SEC or qualified under any state securities laws. The Company provided customary representations regarding, among other things, its organization, subsidiaries, disclosure reports, absence of certain legal or governmental proceedings, financial statements, tax matters, insurance matters, real property and other assets, and compliance with applicable laws and regulations. The representations and warranties made to BOCO are qualified in their entirety (to the extent applicable) by the Companys disclosures in the reports it files with the SEC. The Company also delivered confidential disclosure schedules qualifying certain of its representations and warranties in connection with executing and delivering the Transaction Documents.
In addition to the Transaction Documents described above, on September 11, 2012, the Company entered into a Warrant to Purchase Stock Agreement with BOCO. The Company issued a Warrant to purchase 1,250,000 shares of common stock at $0.25 per share. The Warrant expires September 30, 2017. There are no registration requirements.
On August 29, 2013, the Company entered into the First Amendment to the Amended and Restated Secured Convertible Promissory Note with BOCO. The First Amendment was effective August 1, 2013 and extended the due date under for the September 2012 Note from July 31, 2013 to October 31, 2013. This note is in default.
Promissory Note with BOCO dated May 14, 2013 in Default
In May 2013, the Company entered into a Promissory Note, a Security Agreement and warrants to Purchase Stock Agreement and a Loan Agreement (collectively the May 2013 Transaction Documents) with BOCO. Under the May 2013 Transaction Documents, the Company issued a Promissory Note (the May 2013 Note) to BOCO in the principal amount of $500,000. The May 2013 Note was due October 31, 2013 and provides for interest at 15%, payable in arrears. The May 2013 Note is secured by a security interest in the Companys assets to secure the Companys performance. As of July 31, 2014, the principal and accrued interest due on the note is $704,863. This note is in default. The default interest rate in effect is 45% at July 31, 2014.
In addition, the Company issued a Warrant to purchase 1,250,000 shares of common stock at an exercise price that is the lesser of $0.75 per share or a price per share equal to eighty percent (80%) of the lowest price at which a common share in the Company has been issued in any round of financing commenced or closed after the date of this Warrant and prior to Holders exercise of its rights under the Warrant. The Warrant expires May 17, 2018. There are no registration requirements. The May 2013 Transaction Documents place certain operating restrictions on the Company.
The May 2013 Transaction Documents also contain certain representations and warranties of the Company and BOCO, including customary investment-related representations provided by BOCO, as well as acknowledgements by BOCO that it has reviewed certain disclosures of the Company (including the periodic reports that the Company has filed with the SEC) and that the Companys issuance of the shares has not been registered with the SEC or qualified under any state securities laws. The Company provided customary representations regarding, among other things, its organization, subsidiaries, disclosure reports, absence of certain legal or governmental proceedings, financial statements, tax matters, insurance matters, real property and other assets, and compliance with applicable laws and regulations. The representations and warranties made to BOCO are qualified in their entirety (to the extent applicable) by the Companys disclosures in the reports it files with the SEC. The Company also delivered confidential disclosure schedules qualifying certain of its representations and warranties in connection with executing and delivering the May 2013 Transaction Documents.
Promissory Note with BOCO dated June 27, 2013 in Default
On June 27, 2013, the Company entered into a Promissory Note, a Security Agreement and a Loan Agreement with BOCO. On June 27, 2013, the Company entered into a Warrant to Purchase Stock Agreement with BOCO related to this financing. All Agreements and the Warrant are the (June 2013 Transaction Documents).
15
Under the June 2013 Transaction Documents, the Company issued a Promissory Note (June 2013 Note) in the principal amount of $500,000. The June 2013 Note was due December 31, 2013 and provides for interest at 15%, payable in arrears. The June 2013 Note is secured by a security interest in the Companys assets to secure the Companys performance under the June 2013 Note. As of July 31, 2014, the principal and accrued interest due on the note is $669,315. This note is in default. The default interest rate in effect is 45% at July 31, 2014.
In addition, the Company issued a Warrant to purchase 1,250,000 shares of common stock at an exercise price that is the lesser of $0.75 per share or a price per share equal to eighty percent (80%) of the lowest price at which a common share in the Company has been issued in any round of financing commenced or closed after the date of this Warrant and prior to Holders exercise of its rights under the Warrant. The Warrant expires June 27, 2018. There are no registration requirements. The June 2013 Transaction Documents place certain operating restrictions on the Company.
The June 2013 Transaction Documents also contain certain representations and warranties of the Company and BOCO, including customary investment-related representations provided by BOCO, as well as acknowledgements by BOCO that it has reviewed certain disclosures of the Company (including the periodic reports that the Company has filed with the SEC) and that the Companys issuance of the shares has not been registered with the SEC or qualified under any state securities laws. The Company provided customary representations regarding, among other things, its organization, subsidiaries, disclosure reports, absence of certain legal or governmental proceedings, financial statements, tax matters, insurance matters, real property and other assets, and compliance with applicable laws and regulations. The representations and warranties made to BOCO are qualified in their entirety (to the extent applicable) by the Companys disclosures in the reports it files with the SEC. The Company also delivered confidential disclosure schedules qualifying certain of its representations and warranties in connection with executing and delivering the June 2013 Transaction Documents.
Promissory Note with BOCO dated December 31, 2013 in default
On December 31, 2013, the Company signed a Promissory Note with BOCO for an aggregate loan amount of $1,000,000 (the BOCO Bridge Loan). Repayment of the BOCO Bridge Loan is due December 16, 2014 by repayment in cash. The note bears interest at 8% per annum until paid in full. As of July 31, 2014, the principal and accrued interest due on the note is $1,060,219. This note currently is in default. $800,000 of the proceeds from this loan were used for the acquisition of 100% interest in the TMC project from Raven Gold Alaska, Inc.
Promissory Note with BOCO dated May 23, 2014 in default
On May 23, 2014, the Company entered into a Convertible Promissory Note Agreement with BOCO Investments, LLC in the amount of $100,000. The note bears interest at 15% per annum until paid in full. Repayment of the note was due August 22, 2014. This note is in default. As of July 31, 2014, the principal and accrued interest due on the note is $102,877.
Promissory Note with BOCO dated June 2, 2014 in default
On June 2, 2014, the Company entered into a Convertible Promissory Note Agreement with BOCO Investments, LLC in the amount of $200,000. The note bears interest at 15% per annum until paid in full. Repayment of the note was due August 22, 2014. This note is in default. As of July 31, 2014, the principal and accrued interest due on the note is $204,932.
Promissory Note with BOCO dated June 9, 2014 in default
On June 9, 2014, the Company entered into a Convertible Promissory Note Agreement with BOCO Investments, LLC in the amount of $100,000. The note bears interest at 15% per annum until paid in full. Repayment of the note was due August 22, 2014. This note is in default. As of July 31, 2014, the principal and accrued interest due on the note is $102,178.
16
On June 9, 2014, the Company entered into a Convertible Promissory Note Agreement with BOCO Investments, LLC in the amount of $100,000. The note bears interest at 15% per annum until paid in full. Repayment of the note was due August 22, 2014. This note is in default. As of July 31, 2014, the principal and accrued interest due on the note is $101,315.
Promissory Note with Giuseppe Dessi dated December 17, 2013
On December 17, 2013, the Company signed a Promissory Note with an accredited investor, Giuseppe Dessi, for an aggregate loan amount of $1,000,000 (the Dessi Bridge Loan). Repayment of the Dessi Bridge Loan is due December 16, 2014 by repayment in cash. The note bears interest at 8% per annum until paid in full. As of July 31, 2014, the principal and accrued interest due on the note is $1,049,534. All of the proceeds from this loan were used to acquire 100% interest in the TMC project from Raven Gold Alaska, Inc.
Andres Unsecured Promissory Notes
On March 21, 2012 the Company entered into Promissory Note Documents with Fabin Andres and Bill Andres, existing shareholders in the Company. Under the Promissory Note Documents, the Company issued a Convertible Promissory Note to each of Fabin Andres and Bill Andres in the principal amount of $100,000 and $100,000, respectively (the Andres Notes). The Andres Notes were due in twelve months and provide for interest at 5% payable in arrears. The Andres Notes are convertible into common stock as $1.00 per share. In addition, the Company issued 50,000 shares of restricted common stock to each party that was expensed to interest at $1.00 per share or $100,000 during the three months ended April 30, 2012. On May 29, 2013, the Company entered into an Amendment to Convertible Promissory Note extending the due date to October 31, 2013. As of July 31, 2014 the principal and accrued interest due on the Notes is $223,616. On October 31, 2013, the Company entered into the Second Amendment to Convertible Promissory Notes extending the due date to October 31, 2014.
NOTE 8. EQUITY TRANSACTIONS
Unless otherwise indicated, all of the following sales or issuances of Company securities were conducted under the exemption from registration as provided under Section 4(2) of the Securities Act of 1933 (and also qualified for exemption under 4(5), formerly 4(6) of the Securities Act of 1933, except as noted below). All of the shares issued were issued in transactions not involving a public offering, are considered to be restricted stock as defined in Rule 144 promulgated under the Securities Act of 1933 and stock certificates issued with respect thereto bear legends to that effect.
We have compensated consultants and service providers with restricted common stock during the Companys development stage or when our capital resources were not adequate to provide payment in cash.
All of the following transactions were to accredited investors. All were structured to comply with the requirements of the safe harbor afforded by Rule 506 of Regulation D.
During the nine months ended July 31, 2014, the Company had the following unregistered sales of equity securities:
Lincoln Park Transaction.
On November 20, 2013, we entered into a purchase agreement (the Purchase Agreement), together with a registration rights agreement (the Registration Rights Agreement), with Lincoln Park Capital Fund, LLC (Lincoln Park).
Under the terms and subject to the conditions of the Purchase Agreement, Lincoln Park purchased 113,636 shares of our common stock (Common Stock) for $100,101 and we have the right to sell to and Lincoln Park is obligated to purchase up to an additional $10 million in shares of Common Stock, subject to certain limitations, from time to time, over the 24-month period commencing on the date that a registration statement, which we agreed to file with the Securities and Exchange Commission (the SEC) pursuant to the Registration Rights Agreement, is declared effective by the SEC and a final prospectus in connection therewith is filed.
17
Other Transactions.
On November 1, 2013, the Company issued 310,000 shares of common stock valued at $1.08, or $334,800, and 310,000 warrants with an exercise price of $1.50 to settle a forward sale and loan agreement with an accredited investor. The warrants were valued at $279,899. The Company recorded $349,779 as loss on settlement of forward contract.
On November 23, 2013, pursuant to the terms of a separation agreement, the Company issued 159,000 shares of common stock valued at $1.00 to an officer of the Company. The $159,000 of expense was recorded as stock compensation expense during the period.
On January 17, 2014 WASM exercised warrants with an exercise price of $0.001 per share to purchase 52,000 shares of common stock and the Company received cash proceeds of $52.
On March 20, 2014, the Company entered into an agreement to reduce our payable for legal services by $75,000 in exchange for 150,000 shares of restricted common stock at a price of $0.50 per share along with a five year warrant for the purchase of 150,000 shares of our common stock at $0.50 per share. The Company recognized an expense for the warrants of $123,995 after calculating their value using the Black-Scholes pricing model. On the date of grant, utilizing the Black-Scholes model, the following assumptions were used: expected life of the options of 5 years, expected volatility of 180.81%, risk-free interest rate of 1.76% and no dividend yield.
On April 25, 2014 the Company issued 50,000 shares of common stock and a five year warrant to purchase 50,000 shares of our common stock at $0.50 per share. The Company recognized an expense of $33,500 for the issuance of the shares and an expense of $30,780 for the options after calculating their value using the Black-Scholes pricing model. On the date of grant, utilizing the Black-Scholes model, the following assumptions were used: expected life of the options of 5 years, expected volatility of 140.61%, risk-free interest rate of 1.72% and no dividend yield.
During the quarter ended July 31, 2014 the Company issued a five year warrant to purchase 180,000 of our common stock at $0.25 per share. The Company recognized an expense of $149,988 for the warrants after calculating their value using the Black-Scholes pricing model. On the date of grant, utilizing the Black-Scholes model, the following assumptions were used: expected life of the options of 5 years, expected volatility of 184.2%, risk-free interest rate of 1.79% and no dividend yield. The Company also issued a three year warrant to purchase 10,000 of our common stock at $0.88 per share. The Company recognized an expense of $7,795 for the warrants after calculating their value using the Black-Scholes pricing model. On the date of grant, utilizing the Black-Scholes model, the following assumptions were used: expected life of the options of 3 years, expected volatility of 187.43%, risk-free interest rate of 0.69% and no dividend yield.
18
A summary of the warrants issued as of July 31, 2014 is as follows:
| July 31, 2014 | |||
|
|
Weighted Average
Exercise Price | ||
| Shares | |||
Outstanding at beginning of period | 16,511,975 | $ | 1.062 | |
Issued | 700,000 | $ | 0.884 | |
Exercised | (52,000) |
| 0.001 | |
Forfeited | - |
| - | |
Expired | (2,901,095) |
| 0.804 | |
Outstanding at end of period | 14,258,880 | $ | 1.138 | |
Exercisable at end of period | 14,258,880 |
|
|
| |
July 31, 2014 | |||||
| Weighted Average Remaining Life |
Weighted
Average
Exercise
Price |
| ||||
|
| ||||||
Number of Warrents | Shares Exercisable | ||||||
1,430,000 | 3.36 | $ | 0.25 | 1,430,000 | |||
450,000 | 2.08 | $ | 0.50 | 450,000 | |||
3,850,000 | 3.11 | $ | 0.75 | 3,850,000 | |||
10,000 | 2.58 | $ | 0.88 | 10,000 | |||
1,626,746 | 0.81 | $ | 1.00 | 1,626,746 | |||
6,437,967 | 1.96 | $ | 1.50 | 6,437,967 | |||
254,167 | 0.53 | $ | 2.00 | 254,167 | |||
200,000 | 7.30 | $ | 4.00 | 200,000 | |||
14,258,880 |
| $ | 1.127 | 14,258,880 |
The intrinsic value of the outstanding warrants at July 31, 2014 was $16,070,831
NOTE 9. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS
Except as disclosed, there are no pending legal proceedings against us that are expected to have a material adverse effect on our cash flows, financial condition or results of operations.
EMPLOYMENT AGREEMENTS
On October 1, 2010, TMC signed an Employment Agreement with Gregory Schifrin, which was assumed by WMTN as a result of the acquisition of TMC in February 2011. Under the terms of the agreement, Mr. Schifrin was appointed Chief Executive Officer for an indefinite period at a salary of $120,000 per year. Mr. Schifrin is eligible for annual bonuses and incentive plans as determined by the Companys Compensation Committee. Mr. Schifrin is also eligible for employee benefit programs, including 4 weeks of vacation per year, medical benefits and $500 per day spent on the Companys project sites. Mr. Schifrin may resign with 60 days notice. If Mr. Schifrin is terminated without cause, including a change in control (after six months), he is to receive in a lump sum, two times his annual salary, two times his targeted annual bonus, two times his last years bonus and any accrued vacation.
On November 1, 2013, the Company signed an Employment Agreement with Loni Knepper, and on January 6, 2014, she was appointed Chief Financial Officer. Under the terms of the agreement, Ms. Kneppers salary was $105,000 per year and is eligible for annual bonuses and incentive plans determined by the Companys Compensation Committee. On May 23, 2014 Ms. Knepper tendered notice of her resignation to the Company, effective May 26, 2014.
19
LEASES
The Company is obligated under various non-cancelable operating leases for their various facilities and certain equipment and claims agreements.
The aggregate unaudited future minimum lease payments, to the extent the leases have early cancellation options and excluding escalation charges, are as follows:
Years ended October 31, |
Total | |
Three months 2014 | $ | 139,500 |
2015 | $ | 100,000 |
2016 | $ | 125,000 |
2017 | $ | 125,000 |
2018 | $ | 125,000 |
Beyond | $ | 125,000 |
Total | $ | 739,500 |
NOTE 10. SUBSEQUENT EVENTS
During the nine months ended July 31, 2014, the Company entered into a forward sales agreement for 48.563 oz. of gold bullion at $1,305 per oz. The Company has delivered 30 oz, of the gold bullion and has recorded the fair value of the remaining 18.563 oz. of gold as a forward contract in the amount of $23,785. The spot price of gold was $1,294.90 on July 31, 2014. On August 12, 2014, the Company delivered another 18 oz of gold bullion leaving a balance due of 0.563 oz. (See Note 3).
On March 20, 2013, the Company entered into forward sale and loan agreements with three accredited investors for an aggregate loan of $600,000. The Company was required to tender no less than 600 ounces of gold in bar form to the three accredited investors by September 15, 2013, but defaulted on this obligation. One of the lenders, URenergy, LLC, obtained a judgment against the Company on March 31, 2014 for the amount of $204,143 plus attorneys fees and costs. On August 25, 2014 the Company reached a settlement agreement with URenergy LLC whereby we paid $100,000 in cash and issued 266,667 shares of our common stock for a full satisfaction of the judgment (See Note 3)
On September 15, 2014, the Company signed an Employment Agreement with James W. Creamer III and appointed him as Chief Financial Officer. Under the terms of the agreement, Mr. Creamers salary will be $96,000 per year and is eligible for annual bonuses and incentive plans determined by the Companys Compensation Committee. Mr. Creamer was also granted 1,000,000 options to purchase the Companys common stock for $0.50 per share for a period of seven years. 250,000 of the options vested immediately and 250,000 options shall vest on each of the first, second and third anniversaries of employment.
20
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-looking statements in this report reflect the good-faith judgment of our management and the statements are based on facts and factors as we currently know them. Forward-looking statements are subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, but are not limited to, those discussed below as well as those discussed elsewhere in this report (including in Part II, Item 1A (Risk Factors)). Readers are urged not to place undue reliance on these forward-looking statements because they speak only as of the date of this report. We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report.
GENERAL DEVELOPMENT OF BUSINESS
THE COMPANY AND OUR BUSINESS
WestMountain Gold, Inc. (WMTN or the Company) is an exploration stage mining company, in accordance with applicable guidelines of the SEC, which pursues gold projects that are anticipated to have low operating costs and high returns on capital.
We acquired Terra Mining Corporation (TMC) on February 28, 2011 and accounted for the transaction as a reverse acquisition using the purchase method of accounting, whereby TMC is deemed to be the accounting acquirer (legal acquiree) and WMTN to be the accounting acquiree (legal acquirer). Our financial statements before the date of the acquisition are those of TMC with the results of WMTN being consolidated from the date of the acquisition. The equity section and earnings per share have been retroactively restated to reflect the reverse acquisition and no goodwill has been recorded. We adopted TMCs fiscal year, which is October 31.
TMCs wholly owned subsidiary, Terra Gold Corporation (TGC), was a joint venture partner with Raven Gold Alaska, Inc. (Raven) on a gold system called the TMC Project until February 12, 2014. On February 12, 2014, the Company, through its wholly owned subsidiary, Terra Gold Corp, acquired 100% ownership interest in the TMC Project from Raven, which is a wholly owned subsidiary of Corvus Gold Inc. (TSX:KOR, OTCQX:CORVF) for $1.8 million in cash and 200,000 shares of WMTN. We are currently focused on mineral production from mineralized material at the TMC Project in the state of Alaska. The TMC Project consists of 344 Alaska state mining claims including 5 unpatented lode mining claims held under lease (subject to a 3-4% NSR royalty to the lessor, dependent upon the gold price) covering 223 square kilometers (22,300 hectares). The property is centered on an 8-km-long (800 hectares) trend of gold vein occurrences. All government permits and reclamation plans for continued exploration through 2013 were renewed and the fees to maintain the Terra claims through 2014 were paid by the Company. The property lies approximately 200 km (20,000 hectares) west-northwest of Anchorage and is accessible via helicopter or fixed-wing aircraft. The property has haul roads, a mill facility and adjoining camp infrastructure, a tailings pond and other infrastructure. The remote camp is powered by diesel powered generators and water is supplied to the mill by spring fed sources and year round water wells.
Outcropping gold veins were first discovered at Terra in the late 1990's by Kennecott Exploration. The claims were transferred to Mr. Ben Porterfield in 2000. AngloGold Ashanti (USA) Exploration Inc. optioned these claims in 2004 and staked additional claims in the vicinity. Initial detailed soil and rock surveys were conducted at Terra that same year with results leading to the definition of an initial zone of gold veins over a 2.5 km (250 hectares) strike length. AngloGold followed up with a discovery drill program of 12 holes in 2005 and drilled three additional holes in 2006. A total of 587 rock samples were collected on the property. The Terra Project was joint-ventured to International Tower Hill Mines Ltd. (ITH) in August of 2006.
On September 15, 2010, TMC and its wholly owned subsidiary, TGC, and Raven signed an Exploration, Development and Mine Operating Agreement (JV Agreement) pertaining to the TMC Project.
On February 12, 2014, the Company, through TGC, acquired 100% ownership interest in the TMC Project from Raven for $1.8 million cash and 200,000 shares of WMTN. No further payments are due to Raven from TGC under the JV Agreement (including but not limited to any royalty or residual payments), and each party is fully released from its obligations to the other under the JV Agreement.
We have budgeted expenditures for the TMC Project for the next twelve months of approximately $2,100,000, depending on additional financing, for general and administrative expenses and exploration.
21
We are considered an exploration stage company under SEC criteria because we have not demonstrated the existence of proven or probable reserves at the TMC Project. Accordingly, as required under SEC guidelines and U.S. GAAP for companies in the exploration stage, substantially all of our investment in mining properties to date, including construction of the mill, mine facilities and exploration expenditures, have been expensed as incurred and therefore do not appear as assets on our balance sheet. We expect construction expenditures and underground mine exploration and capital improvements will continue during 2014 and subsequent years. We expect to remain as an exploration stage company for the foreseeable future. We do not exit the exploration stage until such time that we demonstrate the existence of proven or probable reserves that meet SEC guidelines. Likewise, unless mineralized material is classified as proven or probable reserves, substantially all expenditures for mine exploration and construction will continue to be expensed as incurred.
As of July 31, 2014, we have $4,352,115 plus accrued interest of $1,007,679 due to BOCO Investments LLC on eight secured promissory notes, all of which are in default. See Note 7 in the notes to the consolidated financial statements.
Our principal source of liquidity for the next several years will need to be the continued raising of capital through the issuance of equity or debt. WMTN plans to raise funds for each step of the project and as each step is successfully completed, raise the capital for the next phase. WMTN believes this will reduce the cost of capital as compared to trying to raise all the anticipated capital at once up front. However, since WMTNs ability to raise additional capital will be affected by many factors, most of which are not within our control (see Risk Factors), no assurance can be given that WMTN will in fact be able to raise the additional capital as it is needed.
We may choose to scale back operations to operate at break-even with a smaller level of business activity, while adjusting overhead depending on the availability of additional financing. In addition, we expect that we will need to raise additional funds if we decide to pursue more rapid expansion, appropriate responses to competitive pressures, or the acquisition of complementary businesses or technologies, or if we must respond to unanticipated events that require us to make additional investments. We cannot assure that additional financing will be available when needed on favorable terms, or at all.
Our independent registered accounting firm has expressed substantial doubt about our ability to continue as a going concern as a result of the Companys history of net loss. Our ability to achieve and maintain profitability and positive cash flow is dependent upon our ability to successfully execute the plans to pursue the TMC Project. The outcome of these matters cannot be predicted at this time. These consolidated financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should we be unable to continue our business.
CORPORATE INFORMATION
We were incorporated in the state of Colorado on October 18, 2007. Our principal executive office is located at 120 E. Lake St. Ste., 401, Sandpoint, ID 83864, and our telephone number is (208)265-1717. Our principal website address is located at www.westmountaingold.com. The information on our website is not incorporated as a part of this Form 10-Q.
THE COMPANYS COMMON STOCK
Our common stock currently trades on the OTCQB Exchange ("OTCQB") under the symbol "WMTN."
KEY MARKET PRIORITIES
Our primary key market priority will be to proceed with the TMC Project and other mining opportunities that may present themselves from time to time. We cannot guarantee that the TMC Project will be successful or that any project that we embark upon will be successful. Our goal is to build our Company into a successful mineral exploration and development company.
PRIMARY RISKS AND UNCERTAINTIES
We are exposed to various risks related to the volatility of the price of gold, our need for additional financing, our joint venture agreements, our reserve estimates, operating as a going concern, unique difficulties and uncertainties in mining exploration ventures, and a volatile market price for our common stock. These risks and uncertainties are discussed in more detail below in this item.
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RESULTS OF OPERATIONS
The following table presents certain consolidated statement of operations information and presentation of that data as a percentage of change from period-to-period.
THREE MONTHS ENDED JULY 31, 2014 COMPARED TO THE THREE MONTHS ENDED JULY 31, 2013
|
Three Months Ended July 31, | |||||||||
|
2014 |
2013 |
$ Variance | % Variance | ||||||
|
|
|
|
|
|
|
| |||
Revenue | $ | 157,726 | $ | - | $ | 157,726 | 100.0% | |||
Cost of sales |
| 88,092 |
| - | $ | 88,092 | -100.0% | |||
Gross profit |
| 69,634 |
| - | $ | 69,634 | 100.0% | |||
Selling, general and administrative expenses |
| 63,968 |
| 1,067,037 | $ | (1,003,069) | 94.0% | |||
Exploration expenses |
| 287,330 |
| 920,523 | $ | (633,193) | -68.8% | |||
Operating loss |
| (281,664) |
| (1,987,560) | $ | 1,705,896 | -85.8% | |||
Other income (expense): |
|
|
|
|
|
|
| |||
Interest income (expense) |
| (148,262) |
| (6,800) | $ | (141,462) | -2080.3% | |||
Financing fee |
| - |
| (131,967) | $ | 131,967 | 100.0% | |||
Gain(Loss) on derivative liability |
| 446,319 |
| (2,175,000) | $ | 2,621,319 | 120.5% | |||
Loss on settlement of forward contract |
| - |
| - | $ | - | -100.0% | |||
Total other expense |
| 298,057 |
| (2,313,767) | $ | 2,611,824 | 112.9% | |||
Net income (loss) | $ | 16,393 | $ | (4,301,327) | $ | 4,317,720 | 100.4% |
EXPENSES
Revenue for the three months ended July 31, 2014 increased by $157,726 from $0 for the three months ended July 31, 2013. The increase in revenues is due to the commencement of operations at the mine during the current period. Management anticipates revenues to grow as mining operations continue to increase in scale. Cost of goods sold during the three months ended July 31, 2014 increased by $88,092 from $0 for the three months ended July 31, 2013, which correlates to our gold production.
Selling, general and administrative expenses for the three months ended July 31, 2014 decreased $1,003,069 to $63,968 as compared to $1,067,037 for the three months ended July 31, 2013. In 2014 we had a decrease in payroll, adjustment of inventory and consulting which was offset by increases in interest and outside services. Exploration expenses for the three months ended July 31, 2014 decreased $633,193 to $287,330 as compared to $920,523 for the three months ended July 31, 2013. The decrease is due to the Companys focus on starting production during the period rather than exploration. As the Company deploys more resources toward production and exploration going forward, exploration expenses will likely increase.
23
NET INCOME (LOSS)
Net income for the three months ended July 31, 2014 was $16,393 as compared to a net loss of $4,301,327 for the three months ended July 31, 2013. The net income for the three months ended July 31, 2014 included a gross profit of $69,634, exploration expenses of $287,330, adjustment to inventory of (287,030), consulting and professional fees of $60,684, payroll and benefits of $240,489, company insurance of $20,626, interest expense of $148,262 and gain on the change in value of the derivative of $446,319.
NINE MONTHS ENDED JULY 31, 2014 COMPARED TO THE NINE MONTHS ENDED JULY 31, 2014
|
Nine Months Ended July 31, | |||||||||
|
2014 |
|
2013 |
|
$ Variance |
| % Variance | |||
|
|
|
|
|
|
|
|
|
|
|
Revenue | $ | 361,975 |
| $ | - |
| $ | 361,975 |
| 100.0% |
Cost of sales |
| 224,867 |
|
| - |
| $ | 224,867 |
| -100.0% |
Gross profit |
| 137,108 |
|
| - |
| $ | 137,108 |
| 100.0% |
Selling, general and administrative expenses |
| 793,549 |
|
| 1,767,794 |
| $ | (974,245) |
| 55.1% |
Exploration expenses |
| 357,940 |
|
| 1,796,695 |
| $ | (1,438,755) |
| -80.1% |
Operating loss |
| (1,014,381) |
|
| (3,564,489) |
| $ | 2,550,108 |
| -71.5% |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
Interest income (expense) |
| (814,527) |
|
| (433,841) |
| $ | (380,686) |
| -87.7% |
Financing fee |
| (228,238) |
|
| (131,967) |
| $ | (96,271) |
| -73.0% |
Loss on derivative liability |
| 700,569 |
|
| (2,175,000) |
| $ | 2,875,569 |
| 132.2% |
Gain on settlement of forward contract |
| (349,779) |
|
| - |
| $ | (349,779) |
| -100.0% |
Total other expense |
| (691,975) |
|
| (2,740,808) |
| $ | 2,048,833 |
| 74.8% |
Net loss | $ | (1,706,356) |
| $ | (6,305,297) |
| $ | 4,598,941 |
| 72.9% |
Revenue for the nine months ended July 31, 2014 increased by $361,975 from $0 for the nine months ended July 31, 2013. The increase in revenues is due to the commencement of operations at the mine during the current period. Management anticipates revenues to grow as mining operations continue to increase in scale. Cost of goods sold during the nine months ended July 31, 2014 increased by $224,867 from $0 for the nine months ended July 31, 2013, which correlates to our gold production.
Selling, general and administrative expenses for the nine months ended July 31, 2014 decreased $974,245 to $793,549 as compared to $1,767,794 for the nine months ended July 31, 2013. Exploration expenses for the nine months ended July 31, 2014 decreased $1,438,755 to $357,940 as compared to $1,796,695 for the nine months ended July 31, 2013. The decrease is due to the Companys focus on starting production during the period rather than exploration. As the Company deploys more resources toward production and exploration going forward, exploration expenses will likely increase.
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NET LOSS
Net loss for the nine months ended July 31, 2014 was $1,706,356 as compared to a net loss of $6,305,297 for the nine months ended July 31, 2013. The net loss for the nine months ended July 31, 2014 included $435,345 of non-cash expenses, including $347,275 for issuances of common stock and warrants for services and expenses, a gain of $700,569 for the change in the value of a derivative liability, a loss of $348,721 related to the issuance of stock and warrants for the settlement of the forward contract, a loss of $93,944 on the change in value of the forward contract, $227,977 for issuances of common stock for fees, and $117,997 of depreciation and amortization expense.
LIQUIDITY AND CAPITAL RESOURCES
We had cash of $43,698, a working capital deficit of $9,068,357, (excluding the derivative liability- warrants of $1,299,431) as of July 31, 2014. In addition, we have $739,500 due under operating leases in 2014 and future years. Further, we have $2,100,000 in mining expenditures planned by October 31, 2014.
We will have to raise substantial additional capital in order to fully implement the business plan. If economic reserves of gold and/or other minerals are proven, additional capital will be needed to actually develop and mine those reserves.
Our principal source of liquidity for the next several years will need to be the continued raising of capital through the issuance of equity or debt. WMTN plans to raise funds for each step of the TMC Project and as each step is successfully completed, raise the capital for the next phase. WMTN believes this will reduce the cost of capital as compared to trying to raise all the anticipated capital at once up front. However, since WMTNs ability to raise additional capital will be affected by many factors, most of which are not within our control (see Risk Factors), no assurance can be given that WMTN will in fact be able to raise the additional capital as it is needed.
Our primary activity will be to proceed with the TMC Project and other mining opportunities that may present themselves from time to time. We cannot guarantee that the TMC Project will be successful or that any project that we embark upon will be successful. Our goal is to build our Company into a successful mineral exploration and development company.
We have budgeted expenditures for the next twelve months of approximately $2,100,000 depending on additional financing, for general and administrative expenses and exploration and development to implement the business plan as described above. Mining costs are detailed below:
Expenditures |
Amout | |
Drilling costs | $ | 250,000 |
Camp and labor costs |
| 500,000 |
Claims payments |
| 100,000 |
Mining and milling |
| 500,000 |
Underground portal |
| 475,000 |
Property payments |
| 275,000 |
Total mining | $ | 2,100,000 |
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Net cash used in operating activities for the nine months ended July 31, 2014 was $638,831. This amount was primarily related to a net loss of $1,706,356, $435,345 of non-cash expenses, that included $347,275 for issuances of common stock and warrants for services and expenses, a gain of $700,569 for the change in value of a derivative liability, a loss of $348,721 related to the issuance of stock and warrants for the settlement of the forward contract, a loss of $93,944 on the change in value of the forward contracts, $227,977 for issuances of common stock for fees, and $117,997 of depreciation and amortization expense.
INVESTING ACTIVITIES
There was $1,900,000 used in investing activities during the nine months ended July 31, 2014 related to $1,800,000 cash paid for the purchase of the balance of the interest in the TMC Project and a $100,000 payment to Ben Porterfield for contractual rights.
FINANCING ACTIVITIES
Net cash provided by financing activities for the nine months ended July 31, 2014 was $2,500,153. This amount was primarily related to the proceeds from promissory notes of $2,500,000.
Our unaudited contractual cash obligations as of July 31, 2014 are summarized in the table below:
Contractual Cash Obligations |
Total |
|
Less Than 1 Year |
|
1-2 Years |
|
3-4 Years |
|
Greater Than 4 Years | |||||
Operating leases | $ | 739,500 |
| $ | 139,500 |
| $ | 225,000 |
| $ | 250,000 |
| $ | 125,000 |
Capital lease obligations |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
Note payable |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
Mining expenditures |
| 2,100,000 |
|
| 2,100,000 |
|
| - |
|
| - |
|
| - |
Forward contracts |
| 523,920 |
|
| 523,920 |
|
| - |
|
| - |
|
| - |
| $ | 3,363,420 |
| $ | 2,763,420 |
| $ | 225,000 |
| $ | 250,000 |
| $ | 125,000 |
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The application of GAAP involves the exercise of varying degrees of judgment. On an ongoing basis, we evaluate our estimates and judgments based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe that of our significant accounting policies (see summary of significant accounting policies more fully described in Note 2 to the financial statements set forth in this report), the following policies involve a higher degree of judgment and/or complexity:
Cash and Cash Equivalents
We classify highly liquid temporary investments with an original maturity of three months or less when purchased as cash equivalents. The Company maintains cash balances at various financial institutions. Balances at US banks are insured by the Federal Deposit Insurance Corporation up to $250,000. We have not experienced any losses in such accounts and believe it is not exposed to any significant risk for cash on deposit. As of July 31, 2014, we had no uninsured cash amounts.
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Equipment
Equipment consists of machinery, furniture and fixtures and software, which are stated at cost less accumulated depreciation and amortization. Depreciation is computed by the straight-line method over the estimated useful lives or lease period of the relevant asset, generally 3-5 years.
Metal and Other Inventory
Inventories were $252,956 and $66,485 as of July 31, 2014 and October 31, 2013, respectively. Inventories include doré. All inventories are stated at the lower of cost or market, with cost being determined using a weighted average cost method. Metal inventory costs include direct labor, materials, depreciation, as well as administrative overhead costs relating to mining activities.
Mineral Properties
Costs of acquiring mineral properties are capitalized by project area upon purchase of the associated claims. Costs to maintain the mineral rights and leases are expensed as incurred. When a property reaches the production stage, the related capitalized costs will be amortized, using the units of production method on the basis of periodic estimates of ore reserves.
The Company has access to the camp by airplane. There is road access from the camp to the project area where drilling and bulk sampling mining occurs. It is approximately 1 1/2 miles from camp to the project area. Power generation is by diesel generator at the camp. Fuel is brought in for the generators by a cargo plane to the airstrip.
Long-Lived Assets
We review our long-lived assets for impairment annually or when changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets under certain circumstances are reported at the lower of carrying amount or fair value. Assets to be disposed of and assets not expected to provide any future service potential to the Company are recorded at the lower of carrying amount or fair value (less the projected cost associated with selling the asset). To the extent carrying values exceed fair values, an impairment loss is recognized in operating results. As of July 31, 2014, there are no impairments recognized.
Alaska Reclamation and Remediation Liabilities
TMC operates in Alaska. The State of Alaska Department of Natural Resources requires a pool of funds from all permittees with exploration and mining projects to cover reclamation. There is a $750 per acre disturbance reclamation bond that is required for disturbance of 5 acres or more and/or removal of more than 50,000 cubic yards of material. The Company has exceeded the minimum requirements in 2014 and was required to file a reclamation bond.
Mineral Exploration and Development Costs
All exploration expenditures are expensed as incurred. Significant property acquisition payments for active exploration properties are capitalized. If no minable ore body is discovered, previously capitalized costs are expensed in the period the property is abandoned. Expenditures to develop new mines, to define further mineralization in existing ore bodies, and to expand the capacity of operating mines, are capitalized and amortized on a unit of production basis over proven and probable reserves.
Should a property be abandoned, its capitalized costs are charged to operations. We charge to operations the allocable portion of capitalized costs attributable to properties sold. Capitalized costs are allocated to properties sold based on the proportion of claims sold to the claims remaining within the project area.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Risk
We are not exposed to foreign currency risks. We do not trade in hedging instruments or "other than trading" instruments.
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Interest Rate Risk
We are not exposed to interest rate risks. We do not trade in hedging instruments or "other than trading" instruments and is not exposed to interest rate risks. We believe that the impact of a 10% increase or decline in interest rates would not be material to our financial condition and results of operations.
Commodity Price Risk
We are exposed to commodity price risks based on our Forward Exchange Agreements dated March 20, 2013. We believe that the impact of a 10% increase or decline in commodity prices would not be material to our financial condition and results of operations.
ITEM 4. CONTROLS AND PROCEDURES
a) Evaluation of Disclosure Controls and Procedures
We conducted an evaluation under the supervision and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures as of July 31, 2014. The term disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (Exchange Act), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive and principal financial officers concluded as of July 31, 2014 that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses in our internal controls over financial reporting discussed immediately below.
Identified Material Weaknesses
A material weakness in our internal control over financial reporting is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected.
Management identified the following material weaknesses during its assessment of internal controls over financial reporting:
Lack of Segregation of Duties over Treasury Management: The Company currently lacks appropriate segregation of duties over treasury management due to the scale of our operations. We intend to revise our procedures as we expand the company.
We formed an audit committee on October 26, 2012 which consists of two independent directors. An audit committee is expected to improve oversight in the establishment and monitoring of required internal controls and procedures. We expect to expand the audit committee as we grow the company.
b) Changes In Internal Control Over Financial Reporting
During the quarter ended July 31, 2014, there were no changes in our internal controls over financial reporting during this fiscal quarter that materially affected, or is reasonably likely to have a materially affect, on our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no pending legal proceedings against us that are expected to have a material adverse effect on our cash flows, financial condition or results of operations.
ITEM 1A. RISK FACTORS
In addition to other information in this report, the following risk factors should be carefully considered in evaluating our business because such factors may have a significant impact on our business, operating results, liquidity and financial condition. As a result of the risk factors set forth below, actual results could differ materially from those projected in any forward-looking statements. Additional risks and uncertainties not presently known to us, or that we currently consider to be immaterial, may also impact our business, operating results, liquidity and financial condition. If any such risks occur, our business, operating results, liquidity and financial condition could be materially affected in an adverse manner. Under such circumstances, the trading price of our securities could decline, and you may lose all or part of your investment.
If we do not obtain additional financing, our business will fail.
Our current operating funds are less than necessary to complete all intended exploration of the property, and therefore we will need to obtain additional financing in order to complete our business plan. As of July 31, 2014, we had approximately $43,698 in cash.
We have budgeted expenditures for the TMC Project for the next twelve months of approximately $2,100,000, depending on additional financing, for general and administrative expenses and exploration.
Our business plan calls for significant expenses in connection with the exploration of the property. We do not currently have sufficient funds to conduct continued exploration on the property and require additional financing in order to determine whether the property contains economic mineralization. We will also require additional financing if the costs of the exploration of the property are greater than anticipated.
As of July 31, 2014, we have eight secured promissory notes with BOCO Investments, LLC, and have recorded $4,352,115 in principal plus $1,007,679 in accrued interest. We are in default. We do not currently have the ability to repay the amount due.
On March 20, 2013, the Company entered into forward sale and loan agreements with three accredited investors for an aggregate loan of $600,000. The Company was required to tender no less than 600 ounces of gold in bar form to the three accredited investors by September 15, 2013, but defaulted on this obligation. On November 1, 2013, the Company settled with one of the parties that had a forward sale and loan agreement for 200 ounces of gold; the Company issued 310,000 shares of common stock valued at $1.08 per share at the time of issuance, or $334,800 and warrants for an additional 310,000 shares of common stock with an exercise price of $1.50 per share valued at $279,899, using the Black-Scholes method, in full settlement of all claims. The Company recorded a loss of $349,779 to settle this forward contract. The second of the three lenders, URenergy, LLC, obtained a judgment against the Company on March 31, 2014 for the amount of $204,143 plus attorneys fees and costs. On August 25, 2014 the Company reached a settlement agreement with URenergy LLC whereby we paid $100,000 in cash and issued 266,667 shares of our common stock for a full satisfaction of the judgment (See Note 10) The Company is continuing to negotiate with the third lender, Snowmass Mining Co., LLC, who is owed $450,000 (payable in cash or gold), together with interest thereon from September 15, 2013. The Company has paid Snowmass the sum of $100,000 during the nine months ended July 31, 2014.
We will require additional financing to sustain our business operations if we are not successful in earning revenues once exploration is complete. We do not currently have any arrangements for financing and we can provide no assurance to investors that we will be able to find such financing if required. Obtaining additional financing would be subject to a number of factors, including the market prices for copper, silver and gold, investor acceptance of our property and general market conditions. These factors may make the timing, amount, terms or conditions of additional financing unavailable to us.
29
The most likely source of future funds presently available to us is through the sale of equity capital. Any sale of share capital will result in dilution to existing shareholders. The only other anticipated alternative for the financing of further exploration would be our sale of a partial interest in the TMC Project to a third party in exchange for cash or exploration expenditures, which is not presently contemplated.
The volatility of the price of gold could adversely affect our future operations and our ability to develop our properties.
The potential for profitability of our operations, the value of our properties and our ability to raise funding to conduct continued exploration, if warranted, are directly related to the market price of gold and other precious metals. The price of gold may also have a significant influence on the market price of our common stock and the value of our properties. Our decision to put a mine into production and to commit the funds necessary for that purpose must be made long before the first revenue from production would be received. A decrease in the price of gold may prevent our property from being economically mined or result in the write-off of assets whose value is impaired as a result of lower gold prices.
As of September 17, 2014, the price of gold was $1,236.00 per ounce, based on the daily London PM fix on that date. The volatility of mineral prices represents a substantial risk which no amount of planning or technical expertise can fully eliminate. In the event gold prices decline or remain low for prolonged periods of time, we might be unable to develop our properties, which may adversely affect our results of operations, financial performance and cash flows.
Our Amended Claim Agreement is critical to our operations and are subject to cancellation.
On January 7, 2011, TMC entered into an Amended Claims Agreement with Ben Porterfield related to five mining claims known as Fish Creek 1-5 (ADL-648383 through ADL-648387), which claims have been assigned to the TMC project. As part of this Amended Claims Agreement, Ben Porterfield consented to certain conveyances, assignments, contributions and transfers related to the above five mining claims.
The failure to operate in accordance with the Amended Claims Lease or Agreement could result in the lease pertaining to the mining claims that are the subject of the Amended Claims Agreement being terminated. See Note 4 to the Consolidated Financial Statements for a discussion of this critical agreement.
Our management and a major shareholder and creditor have substantial influence over our company.
As of the filing date, Greg Schifrin, our CEO, either directly or indirectly, owns or controls 3.97 million shares or approximately 15.6% of our issued and outstanding common stock, including shares beneficially owned within sixty days.
BOCO owns or controls 11.2 million shares as of the filing date or approximately 34.3% of our issued and outstanding common stock, including shares beneficially owned within sixty days, and including (i) the potential conversion of $1,852,115 of debt that is due and payable by the Company on October 31, 2013, that as of February 11, 2014, is convertible along with accrued interest into Company common stock at a rate of $0.75 per share; (ii) the potential conversion of $250,000 of Series A Convertible Preferred Stock; (iii) Promissory Notes totaling $500,000 that were due on October 31, 2013 and December 31, 2013; (iv) and various warrants. See Note 8 and 9 to the Companys Financial Statements for a more detailed description of this Secured Promissory and Promissory Notes, Series A Convertible Preferred Stock and various warrants.
As a major creditor and shareholder of the Company, BOCO has additional influence and control over the Company.
Mr. Schifrin and BOCO, in combination with other large shareholders, could cause a change of control of our board of directors, approve or disapprove any matter requiring stockholder approval, cause, delay or prevent a change in control or sale of the Company, which in turn could adversely affect the market price of our common stock.
We have no proven or probable reserves and our decision to continue further exploration is not based on a study demonstrating economic recovery of any mineral reserves and is therefore inherently risky.
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Estimates of mineralized material are based on interpretation and assumptions and may yield less mineral production under actual conditions than is currently estimated.
Unless otherwise indicated, estimates of mineralized material presented in our press releases and regulatory filings are based upon estimates made by us and our consultants. When making determinations about whether to advance any of our projects to development, we must rely upon such estimated calculations as to the mineralized material on our properties. Until mineralized material is actually mined and processed, it must be considered an estimate only. These estimates are imprecise and depend on geological interpretation and statistical inferences drawn from drilling and sampling analysis, which may prove to be unreliable. We cannot assure you that these mineralized material estimates will be accurate or that this mineralized material can be mined or processed profitably. Any material changes in estimates of mineralized material will affect the economic viability of placing a property into production and such propertys return on capital. There can be no assurance that minerals recovered in small scale metallurgical tests will be recovered at production scale.
The mineralized material estimates have been determined and valued based on assumed future prices, cut-off grades and operating costs that may prove inaccurate. Extended declines in market prices for gold and silver may render portions of our mineralized material uneconomic and adversely affect the commercial viability of one or more of our properties and could have a material adverse effect on our results of operations or financial condition.
There is substantial doubt about our ability to continue as a going concern.
Our financial statements for the period from inception (March 25, 2010) to July 31, 2014 indicate that there are a number of factors that raise substantial doubt about our ability to continue as a going concern. Such factors identified are a result of our limited history of operations, limited assets, and operating losses since inception. In addition, among other factors, as of July 31, 2014, we reported a net operating loss of over $19 million. If we are not able to continue as a going concern, it is likely investors will lose their investments.
Because of the unique difficulties and uncertainties inherent in mineral exploration ventures, we face a high risk of business failure.
Potential investors should be aware of the difficulties normally encountered by new mineral exploration companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates. The expenditures to be made by us in the exploration of the mineral claim may not result in the discovery of mineral deposits. Problems such as unusual or unexpected formations and other conditions are involved in mineral exploration and often result in unsuccessful exploration efforts. If the results of our exploration do not reveal viable commercial mineralization, we may decide to abandon our claim and acquire new claims for new exploration. The acquisition of additional claims will be dependent upon us possessing capital resources at the time in order to purchase such claims. If no funding is available, we may be forced to abandon our operations.
Because we have limited business operations, we face a high risk of business failure.
We started exploring our properties in the summer of 2011. Accordingly, we have no way to evaluate the likelihood that our business will be successful. Although we were incorporated in the state of Colorado on October 18, 2007, the Company only acquired our mineral properties with our acquisition of TMC on February 28, 2011. We have reported revenues of $361,975 as of the date of this Form 10-Q. TMC itself has only been in existence since March 25, 2010.
Prior to completion of our exploration stage, we anticipate that we will incur increased operating expenses without realizing any significant revenues. We therefore expect to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from exploration of the mineral claims and the production of minerals from the claims, we will not be able to earn profits or continue operations.
There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we can provide investors with no assurance that we will generate any operating revenues or ever achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail.
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Our success depends to a significant degree upon the continued contributions of key management and other personnel, some of whom could be difficult to replace. We do not maintain key man life insurance covering any of our officers or key personnel. Our success will depend on the performance of our officers, our ability to retain and motivate our officers, our ability to integrate new officers into our operations and the ability of all personnel to work together effectively as a team. Our failure to retain and recruit officers and other key personnel could have a material adverse effect on our business, financial condition and results of operations.
We lack an operating history and we expect to have losses in the future.
Except for our initial exploration efforts as described above, we have not started our proposed business operations or realized any significant revenues. We have no operating history upon which an evaluation of our future success or failure can be made. Our ability to achieve and maintain profitability and positive cash flow is dependent upon the following:
| ● | Our ability to locate a profitable mineral property; |
| ● | Our ability to generate revenues; and |
| ● | Our ability to reduce exploration costs. |
Based upon current plans, we expect to incur operating losses in foreseeable future periods. This will happen because there are expenses associated with the research and exploration of our mineral properties. We cannot guarantee that we will be successful in generating significant revenues in the future. Failure to generate significant revenues will cause us to go out of business.
Because of the inherent dangers involved in mineral exploration, there is a risk that we may incur liability or damages as we conduct our business.
The search for valuable minerals involves numerous hazards. As a result, we may become subject to liability for such hazards, including pollution, cave-ins and other hazards against which we cannot insure or against which we may elect not to insure. Although we conducted a due diligence investigation prior to entering into the acquisition of TMC, risk remains regarding any undisclosed or unknown liabilities associated with this project. The payment of such liabilities may have a material adverse effect on our financial position.
Because we are small and do not have sufficient capital, we may have to cease operation even if we have found mineralized material.
Because we are small and do not have sufficient capital, we must limit our exploration. Because we may have to limit our exploration, we may be unable to mine mineralized material, even if our mineral claims contain mineralized material. If we cannot mine mineralized material, we may have to cease operations.
If we become subject to onerous government regulation or other legal uncertainties as we move to production, our business will be negatively affected. Governmental regulations impose material restrictions on mineral property exploration. Under Alaska mining law, to engage in exploration will require permits, the posting of bonds, and the performance of remediation work for any physical disturbance to the land. If we proceed to commence drilling operations on the mineral claims, we will incur additional regulatory compliance costs.
In addition, the legal and regulatory environment that pertains to mineral exploration is uncertain and may change. Uncertainty and new regulations could increase our costs of doing business and prevent us from exploring for ore deposits. The growth of demand for ore may also be significantly slowed. This could delay growth in potential demand for and limit our ability to generate revenues. In addition to new laws and regulations being adopted, existing laws may be applied to limit or restrict mining that have not as yet been applied. These new laws may increase our cost of doing business with the result that our financial condition and operating results may be harmed.
We are subject to governmental regulations, which affect our operations and costs of conducting our business.
Our current and future operations are and will be governed by laws and regulations, including:
· laws and regulations governing mineral concession acquisition, prospecting, exploration, mining and production;
· laws and regulations related to exports, taxes and fees;
· labor standards and regulations related to occupational health and mine safety;
· environmental standards and regulations related to clean water, waste disposal, toxic substances, land use and environmental protection; and other matters.
Companies engaged in mining exploration activities often experience increased costs and delays in production and other schedules as a result of the need to comply with applicable laws, regulations and permits. Failure to comply with applicable laws, regulations and permits may result in enforcement actions, including the forfeiture of claims, orders issued by regulatory or judicial authorities requiring operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment or costly remedial actions. We may be required to compensate those suffering loss or damage by reason of our mineral exploration activities and may have civil or criminal fines or penalties imposed for violations of such laws, regulations and permits.
Existing and possible future laws, regulations and permits governing operations and activities of exploration companies, or more stringent implementation, could have a material adverse impact on our business and cause increases in capital expenditures or require abandonment or delays in exploration.
Our activities are subject to environmental laws and regulations that may increase our costs of doing business and restrict our operations.
All phases of our operations are subject to environmental regulation. Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. These laws address emissions into the air, discharges into water, management of waste, management of hazardous substances, protection of natural resources, antiquities and endangered species and reclamation of lands disturbed by mining operations. Compliance with environmental laws and regulations and future changes in these laws and regulations may require significant capital outlays and may cause material changes or delays in our operations and future activities. It is possible that future changes in these laws or regulations could have a significant adverse impact on our properties or some portion of our business, causing us to re-evaluate those activities at that time.
U.S. Federal Laws. The Comprehensive Environmental, Response, Compensation, and Liability Act (CERCLA), and comparable state statutes, impose strict, joint and several liability on current and former owners and operators of sites and on persons who disposed of or arranged for the disposal of hazardous substances found at such sites. It is not uncommon for the government to file claims requiring cleanup actions, demands for reimbursement for government-incurred cleanup costs, or natural resource damages, or for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by hazardous substances released into the environment. The Federal Resource Conservation and Recovery Act (RCRA), and comparable state statutes, govern the disposal of solid waste and hazardous waste and authorize the imposition of substantial fines and penalties for noncompliance, as well as requirements for corrective actions. CERCLA, RCRA and comparable state statutes can impose liability for clean-up of sites and disposal of substances found on exploration, mining and processing sites long after activities on such sites have been completed.
We may also be subject to compliance with other federal environmental laws, including the Clean Air Act, National Environmental Policy Act (NEPA) and other environmental laws and regulations.
The State of Alaska Department of Natural Resources requires a pool of funds from all permittees with exploration and mining projects to cover reclamation. There is a $750 per acre disturbance reclamation bond that is required for disturbance of 5 acres or more and/or removal of more the 50,000 cubic yards of material. We exceeded the minimum requirements in 2013 and posted a reclamation bond of approximately $23,000 on December 23, 2013. The amount was expensed as exploration expense during the period.
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FINRA sales practice requirements may also limit a shareholders ability to buy and sell our stock.
In addition to the penny stock rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customers financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
The sale of a significant number of our shares of common stock could depress the price of our common stock.
Sales or issuances of a large number of shares of common stock in the public market or the perception that sales may occur could cause the market price of our common stock to decline. As of September 18, 2014 there were 25,936,997 shares of common stock issued and outstanding. Therefore, the amount of shares that have been registered by the Company for resale by certain investors (up to 6,707,715 shares of common stock) constitutes a significant percentage of the issued and outstanding shares and the sale of all or a portion of these shares could have a negative effect on the market price of our common stock. Significant shares of common stock are held by our principal shareholders, other Company insiders and other large shareholders. As affiliates (as defined under Rule 144 of the Securities Act (Rule 144)) of the Company, our principal shareholders, other Company insiders and other large shareholders may only sell their shares of common stock in the public market pursuant to an effective registration statement or in compliance with Rule 144.
The market price of our common stock may be volatile.
The market price of our common stock has been and is likely in the future to be volatile. Our common stock price may fluctuate in response to factors such as:
| ● | Announcements by us regarding resources, liquidity, significant acquisitions, equity investments and divestitures, strategic relationships, addition or loss of significant customers and contracts, capital expenditure commitments, loan, note payable and agreement defaults, loss of our subsidiaries and impairment of assets, |
| ● | Issuance or repayment of debt, accounts payable or convertible debt for general or merger and acquisition purposes, |
| ● | Sale of a significant number of shares of our common stock by shareholders, |
| ● | General market and economic conditions, |
| ● | Quarterly variations in our operating results, |
| ● | Investor relation activities, |
| ● | Announcements of technological innovations, |
| ● | New product introductions by us or our competitors, |
| ● | Competitive activities, and |
| ● | Additions or departures of key personnel. |
These broad market and industry factors may have a material adverse effect on the market price of our common stock, regardless of our actual operating performance. These factors could have a material adverse effect on our business, financial condition and results of operations.
We may engage in acquisitions, mergers, strategic alliances, joint ventures and divestitures that could result in financial results that are different than expected.
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In the normal course of business, we may engage in discussions relating to possible acquisitions, equity investments, mergers, strategic alliances, joint ventures and divestitures. All such transactions are accompanied by a number of risks, including:
| ● | Use of significant amounts of cash, |
| ● | Potentially dilutive issuances of equity securities on potentially unfavorable terms, |
| ● | Incurrence of debt on potentially unfavorable terms as well as impairment expenses related to goodwill and amortization expenses related to other intangible assets, |
| ● | The possibility that we may pay too much cash or issue too many of our shares as the purchase price for an acquisition relative to the economic benefits that we ultimately derive from such acquisition. |
| ● | The process of integrating any acquisition may create unforeseen operating difficulties and expenditures. The areas where we may face difficulties in the foreseeable include: |
| ● | Diversion of management time, during the period of negotiation through closing and after closing, from its focus on operating the businesses to issues of integration, |
| ● | The need to integrate each company's accounting, management information, human resource and other administrative systems to permit effective management, and the lack of control if such integration is delayed or not implemented, |
| ● | The need to implement controls, procedures and policies appropriate for a public company that may not have been in place in private companies, prior to acquisition, |
| ● | The need to incorporate acquired technology, content or rights into our products and any expenses related to such integration, and |
| ● | The need to successfully develop any acquired in-process technology to realize any value capitalized as intangible assets. |
From time to time, we may engage in discussions with candidates regarding potential divestures. If a divestiture does occur, we cannot be certain that our business, operating results and financial condition will not be materially and adversely affected. A successful divestiture depends on various factors, including our ability to:
| ● | Effectively transfer liabilities, contracts, facilities and employees to any purchaser, |
| ● | Identify and separate the intellectual property to be divested from the intellectual property that we wish to retain, |
| ● | Reduce fixed costs previously associated with the divested assets or business, and |
| ● | Collect the proceeds from any divestitures. |
In addition, if customers of the divested business do not receive the same level of service from the new owners, this may adversely affect our other businesses to the extent that these customers also purchase other products offered by us. All of these efforts require varying levels of management resources, which may divert our attention from other business operations.
If we do not realize the expected benefits or synergies of any divestiture transaction, our consolidated financial position, results of operations, cash flows and stock price could be negatively impacted.
Our directors and officers may have conflicts of interest with the Company as a result of their relationships with other companies.
Some of our officers and directors are also directors and officers of other companies, and conflicts of interest may arise between their duties as our officers and directors and as directors and officers of other companies. In addition, the Company has entered into supplier, financing and consulting arrangements with entities controlled by directors of the Company. These factors could have a material adverse effect on our business, financial condition and results of operations.
We do not currently have a shareholder rights plan or any anti-takeover provisions in our By-laws.
Without any anti-takeover provisions, there are limited deterrents for a take-over of our Company, which may result in a change in our management and directors.
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The laws of the State of Colorado and our Articles of Incorporation and Bylaws may protect our directors from certain types of lawsuits.
The laws of the State of Colorado provide that our directors will not be liable to us or our shareholders for monetary damages for their conduct (with certain limited exceptions) as directors of the company. Our Articles of Incorporation and Bylaws permit us to indemnify our directors and officers against all damages incurred in connection with our business to the fullest extent provided or allowed by law. The exculpation provisions may have the effect of preventing shareholders from recovering damages against our directors caused by their negligence, poor judgment or other circumstances. The indemnification provisions may require us to use our limited assets to defend our directors and officers against claims, including claims arising out of their negligence, poor judgment, or other circumstances.
Because our executive officers and directors have other business interests, they may not be able or willing to devote a sufficient amount of time to our business operations, causing our business to fail.
Our officers have other business interests. While each officer spends more than 40 hours per week on our business, if the demands on our executive officers from their other obligations increase, they may no longer be able to devote sufficient time to the management of our business. This could negatively impact our business exploration and could cause our business to fail.
Transfer of our securities may be restricted by virtue of state securities blue sky laws which prohibit trading absent compliance with individual state laws. These restrictions may make it difficult or impossible to sell shares in those states.
Transfers of our common stock may be restricted under the securities or securities regulations laws promulgated by various states and foreign jurisdictions, commonly referred to as "blue sky" laws. Absent compliance with such individual state laws, our common stock may not be traded in such jurisdictions. Because the securities held by many of our stockholders have not been registered for resale under the blue sky laws of any state, the holders of such shares and persons who desire to purchase them should be aware that there may be significant state blue sky law restrictions upon the ability of investors to sell the securities and of purchasers to purchase the securities. These restrictions may prohibit the secondary trading of our common stock. Investors should consider the secondary market for our securities to be a limited one.
We are subject to corporate governance and internal control reporting requirements, and our costs related to compliance with, or our failure to comply with existing and future requirements, could adversely affect our business.
We must comply with corporate governance requirements under the Sarbanes-Oxley Act of 2002 and the DoddFrank Wall Street Reform and Consumer Protection Act of 2010, as well as additional rules and regulations currently in place and that may be subsequently adopted by the SEC and the Public Company Accounting Oversight Board. These laws, rules, and regulations continue to evolve and may become increasingly stringent in the future. We are required to include managements report on internal controls as part of our annual report pursuant to Section 404 of the Sarbanes-Oxley Act. We strive to continuously evaluate and improve our control structure to help ensure that we comply with Section 404 of the Sarbanes-Oxley Act. The financial cost of compliance with these laws, rules, and regulations is expected to remain substantial.
Our management has concluded that our disclosure controls and procedures were not effective due to the presence of the following material weaknesses in internal control over financial reporting:
We currently lack appropriate segregation of duties over treasury management. We expect to revise our procedures before the end of 2014.
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We formed an audit committee on October 26, 2012 which consists of two independent directors with significant financial expertise. An audit committee is expected to improve oversight in the establishment and monitoring of required internal controls and procedures. We expect to expand the audit committee as we grow the company.
Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated. We cannot assure you that we will be able to fully comply with these laws, rules, and regulations that address corporate governance, internal control reporting, and similar matters. Failure to comply with these laws, rules and regulations could materially adversely affect our reputation, financial condition, and the value of our securities.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
This item is not applicable.
ITEM 4. MINE SAFETY DISCLOSURE
This item is not applicable.
ITEM 5. OTHER INFORMATION
This item is not applicable.
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ITEM 6. EXHIBITS
Exhibit No. | Description |
3.1 | Articles of Incorporation (Previously filed with Form SB-2 Registration Statement, January 2, 2008 (in the case of the Articles of Incorporation, as amended per the 8-K filed on Oct. 12, 2010). |
3.2 | Articles of Amendment dated February 28, 2013 (Attached as an exhibit to the Companys Form 8-K dated March 8, 2013 and filed with the SEC on March 12, 2013). |
3.3 | Bylaws (Previously filed with Form SB-2 Registration Statement, January 2, 2008 (in the case of the Articles of Incorporation, as amended per the 8-K filed on Oct. 12, 2010). |
3.4 | Certificate of Designation of Rights, Preferences and Privileges of Series A Convertible Preferred Stock (Attached as an exhibit to the Companys Form 8-K dated December 3, 2013 and filed with the SEC on December 6, 2013). |
4.1 | WestMountain Gold, Inc. 2012 Stock Incentive Plan (Filed as an Exhibit to the Companys Definitive Proxy Statement on Schedule 14A filed with the SEC on December 31, 2013, and hereby incorporated by reference). |
10.1 | Exploration, Development and Mine Operating Agreement dated September 15, 2010 by and between Raven Gold Alaska Inc., International Tower Hills Mines, Terra Gold Corporation and Terra Mining Corporation. (Attached as an exhibit to the Companys Form 8-K dated February 28, 2011 and filed with the SEC on March 4, 2011). |
10.2 | Amended Porterfield Lease dated February 18, 2011 by and between Terra Gold Corp and Ben Porterfield (Attached as an Exhibit to the Companys Form 10-K dated October 31, 2011 and filed with the SEC on December 20, 2011). |
10.3 | Amended and Restated Revolving Credit Loan and Security Agreement dated September 17, 2012 by and between WestMountain Index Advisor, Inc. and BOCO (Filed as exhibits on Form 8-K/A dated September 11, 2012 and filed with the SEC on October 10, 2012. Investments, LLC). |
10.4 | Amended and Restated Secured Convertible Promissory Note dated September 17, 2012 by and between WestMountain Index Advisor, Inc. and BOCO (Filed as exhibits on Form 8-K/A dated September 11, 2012 and filed with the SEC on October 10, 2012. Investments, LLC). |
10.5 | Consulting Agreement dated September 11, 2012 by and between WestMountain Index Advisor, Inc. and BOCO Investments, LLC. (Filed as exhibits on Form 8-K/A dated September 11, 2012 and filed with the SEC on October 10, 2012. Investments, LLC). |
10.6 | Warrant to Purchase Stock dated October 1, 2012 by and between WestMountain Index Advisor, Inc. and BOCO Investments, LLC. (Filed as exhibits on Form 8-K/A dated September 11, 2012 and filed with the SEC on October 10, 2012. Investments, LLC). |
10.7 | Warrant to Purchase Stock dated October 1, 2012 by and between WestMountain Index Advisor, Inc. and BOCO Investments, LLC. (Filed as exhibits on Form 8-K/A dated September 11, 2012 and filed with the SEC on October 10, 2012. Investments, LLC). |
10.8 | Letter of Intent dated February 19, 2013 by and between Terra Gold Corporation and Raven Gold Alaska, Inc. (Attached as an exhibit to the Companys Form 8-K dated February 19, 2013 and filed with the SEC on February 26, 2013). |
10.9 | Loan Agreement dated May 7, 2013 by and between WestMountain Gold, Inc. and BOCO Investments, LLC. (Attached as an exhibit to the Companys Form 8-K/A dated May 14, 2013 and filed with the SEC on June 6, 2013). |
10.10 | Promissory Note dated May 7, 2013 by and between WestMountain Gold, Inc. and BOCO Investments, LLC. (Attached as an exhibit to the Companys Form 8-K/A dated May 14, 2013 and filed with the SEC on June 6, 2013). |
10.11 | Security Agreement dated May 7, 2013 by and between WestMountain Gold, Inc. and BOCO Investments, LLC. (Attached as an exhibit to the Companys Form 8-K/A dated May 14, 2013 and filed with the SEC on June 6, 2013). |
10.12 | Warrant for the Purchase of Common Stock dated May 7, 2013 by and between WestMountain Gold, Inc. and BOCO Investments, LLC. (Attached as an exhibit to the Companys Form 8-K/A dated May 14, 2013 and filed with the SEC on June 6, 2013). |
10.13 | Loan Agreement dated June 27, 2013 by and between WestMountain Gold, Inc. and BOCO Investments, LLC. (Attached as an exhibit to the Companys Form 8-K dated June 27, 2013 and filed with the SEC on July 1, 2013). |
10.14 | Promissory Note dated June 27, 2013 by and between WestMountain Gold, Inc. and BOCO Investments, LLC. (Attached as an exhibit to the Companys Form 8-K dated June 27, 2013 and filed with the SEC on July 1, 2013). |
10.15 | Security Agreement dated June 27, 2013 by and between WestMountain Gold, Inc. and BOCO Investments, LLC. (Attached as an exhibit to the Companys Form 8-K dated June 27, 2013 and filed with the SEC on July 1, 2013). |
10.16 | Warrant for the Purchase of Common Stock dated June 27, 2013 by and between WestMountain Gold, Inc. and BOCO Investments, LLC. (Attached as an exhibit to the Companys Form 8-K dated June 27, 2013 and filed with the SEC on July 1, 2013). |
10.17 | First Amendment to Amended and Restated Secured Convertible Promissory Note dated August 1, 2013 by and between WestMountain Gold, Inc. and BOCO Investments, LLC. Attached as an exhibit to the Companys Form 8-K dated August 29, 2013 and filed with the SEC on August 30, 2013. |
10.18 | Form of Warrant for the Purchase of Preferred Stock. (Attached as an exhibit to the Companys Form 10-K dated October 31, 2013 and filed with the SEC on February 12, 2014). |
10.19 | Form of Warrant for the Purchase of Common Stock (Attached as an exhibit to the Companys Form 10-K dated October 31, 2013 and filed with the SEC on February 12, 2014). |
10.20 | Form of Subscription Agreement for the Purchase of Preferred Stock (Attached as an exhibit to the Companys Form 10-K dated October 31, 2013 and filed with the SEC on February 12, 2014). |
10.21 | 2186 S. Holly Commercial Lease Agreement signed September 3, 2012 by and between James Baughman and 2186 S. Holly LLC. (Attached as an exhibit to the Companys Form 10-K dated October 31, 2013 and filed with the SEC on February 12, 2014). |
10.22 | Commercial Lease Amendment II signed June 5, 2013 by and between WestMountain Index Advisor, Inc. and Waterfront Property Management LLC. (Attached as an exhibit to the Companys Form 10-K dated October 31, 2013 and filed with the SEC on February 12, 2014). |
10.23 | Commercial Lease April 1, 2011 by and between WestMountain Index Advisor, Inc. and Waterfront Property Management LLC. (Attached as an exhibit to the Companys Form 10-K dated October 31, 2013 and filed with the SEC on February 12, 2014). |
10.24 | Secured Promissory Note between WestMountain Gold, Inc. and BOCO dated February 14, 2014 (Attached as an exhibit to the Company's Form 10-Q/A dated January 31, 2014 and filed with the SEC on March 26, 2014) |
10.25 | Letter Agreement between Raven Gold Alaska, Inc. and Terra Gold Corporation dated February 12, 2014 (Attached as an exhibit to the Company's Form 10-Q/A dated January 31, 2014 and filed with the SEC on March 26, 2014) |
10.26 | Convertible Promissory Note between WestMountain Gold, Inc. and Dessi dated December 17, 2013 (Attached as an exhibit to the Company's Form 10-Q/A dated January 31, 2014 and filed with the SEC on March 26, 2014) |
10.27 | Purchase Agreement between WestMountain Gold, Inc. and Lincoln Park Capital, LLC dated November 20, 2013 (Attached as an exhibit to the Company's Form 10-Q/A dated January 31, 2014 and filed with the SEC on March 26, 2014) |
10.28 | Registration Rights Agreement between WestMountain Gold, Inc. and Lincoln Park Capital, LLC dated November 20,2013 (Attached as an exhibit to the Company's Form 10-Q/A datedJanuary 31, 2014 and filed with the SEC on March 26, 2014) |
10.29 | Separation and Full Release of Claims Agreement between WestMountain Gold, Inc. and Mark Scott dated November 15, 2013 (Attached as an exhibit to the Company's Form 10-Q/A datedJanuary 31, 2014 and filed with the SEC on March 26, 2014) |
10.30 | Loan and Note Modification Agreement beween WestMountain Gold, Inc and BOCO Investments, LLC dated April 15, 2014 (Attached as an exhibit to the Company's Form 8-K dated April 23, 2014 and file with the SEC on April 24, 2014) |
10.31 | Amendment to Loan and Note Modification Agreement dated May 27, 2014 between WestMountain Gold, Inc. and BOCO Investments, LLC (Attached as an exhibit to the Company's Form 8-K dated June 2, 2014 and filed with the SEC on June 6, 2014) |
10.32 | Employment Agreement between WestMountain Gold, Inc. and James W. Creamer III effective September 8, 2014, executed and formally excepted on September 15, 2014 (Attached as an exhibit to the Company's Form 8-K dated September 15, 2014 and filed with the SEC on September 19, 2014) |
14.1 | Code of Conduct & Ethics dated November 30, 2012. (Attached as an exhibit to the Companys Form 8-K dated November 26, 2012 and filed with the SEC on November 30, 2012). |
21.1 | Subsidiaries (Attached as an exhibit to the Companys Form 10-K dated October 31, 2013 and filed with the SEC on February 12, 2014). |
31.1 | Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer. |
31.2 | Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer. |
32.1 and 32.2 | Section 906 Certifications. |
99.1 | Audit Committee Charter dated November 30, 2012. (Attached as an exhibit to the Companys Form 8-K dated November 26, 2012 and filed with the SEC on November 30, 2012). |
99.2 | Compensation Committee Charter dated November 30, 2012. (Attached as an exhibit to the Companys Form 8-K dated November 26, 2012 and filed with the SEC on November 30, 2012). |
99.3 | Nominations and Governance Committee Charter dated November 30, 2012. (Attached as an exhibit to the Companys Form 8-K dated November 26, 2012 and filed with the SEC on November 30, 2012). |
101 | Interactive data files pursuant to Rule 405 of Regulation S-T. (1) |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: September 22, 2014 |
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WESTMOUNTAIN GOLD, INC. | |
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(Registrant) | |
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| By: | /s/ Gregory Schifrin |
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| Gregory Schifrin |
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| Chief Executive Officer |
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| (Principal Executive Officer) |
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| By: | /s/ James W. Creamer III |
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| James W. Creamer III |
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| Chief Financial Officer |
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| (Principal Financial Officer) |
41