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EXCEL - IDEA: XBRL DOCUMENT - WESTMOUNTAIN GOLD, INC.Financial_Report.xls
EX-31.2 - EXHIBIT 31.2 - WESTMOUNTAIN GOLD, INC.exhibit31_2.htm
EX-31.1 - EXHIBIT 31.1 - WESTMOUNTAIN GOLD, INC.exhibit31_1.htm
EX-32.2 - EXHIBIT 32.2 - WESTMOUNTAIN GOLD, INC.exhibit32_2.htm
EX-21.1 - EXHIBIT 21.1 - WESTMOUNTAIN GOLD, INC.exhibit21_1.htm
EX-32.1 - EXHIBIT 32.1 - WESTMOUNTAIN GOLD, INC.exhibit32_1.htm
 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

þ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

 

For the fiscal year ended October 31, 2014

 

o TRANSACTION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

 

For the transaction period from ________ to ________

 

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)

 

Securities registered pursuant to Section 12 (b) of the Exchange Act:

 

 Common

 

 OTCBB

(Title of each class)

 

(Name of each exchange on which registered)

 

Securities registered pursuant to Section 12 (g) of the Exchange Act:

None

(Title of Class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  o  Yes     þ  No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.  o  Yes     þ  No

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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.    þ Yes     o  No

 

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ Yes   o No

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K  (§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

o

Accelerated filer

 

o

Non-accelerated filer

o

Smaller reporting company

 

þ

(Do not check if a smaller reporting company)

 

 

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     o  Yes     þ  No

 

As of April 30, 2014 (the last business day of our most recently completed second fiscal quarter), based upon the last reported trade on that date, the aggregate market value of the voting and non-voting common equity held by non-affiliates (for this purpose, all outstanding and issued common stock minus stock held by the officers, directors and known holders of 10% or more of the Company’s common stock) was $9,374,389.

 

As of February 10, 2015, the Company had 27,496,403 shares of common stock issued.

 

 


 

 

PART I

 

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

 

The following discussion, in addition to the other information contained in this report, should be considered carefully in evaluating us and our prospects. This report (including without limitation the following factors that may affect operating results) contains forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act") regarding us and our business, financial condition, results of operations and prospects. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this report. Additionally, statements concerning future matters such as revenue projections, projected profitability, growth strategies, development of new products, enhancements or technologies, possible changes in legislation and other statements regarding matters that are not historical are forward-looking statements.

 

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 and in "Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as those discussed elsewhere in this report. Readers are urged not to place undue reliance on these forward-looking statements which 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.

 

ITEM 1.    DESCRIPTION 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 TMC’s fiscal year, which is October 31.

 

TMC’s wholly owned subsidiary, Terra Gold Corporation (“TGC”), is currently focused on mineral production from mineralized material at a high-grade gold system called the TMC or Terra 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 high-grade gold vein occurrences.  All government permits and reclamation plans for continued exploration through 2013 were renewed in 2010.  The $136,730 of fees to maintain the Terra claims through 2015 were paid by us on November 20, 2014.  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.

 

 

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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 high-grade 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, WMTN and its wholly owned subsidiary, TGC, and Raven Gold Alaska, Inc. (“Raven”) signed an Exploration, Development and Mine Operating Agreement (“JV Agreement”) pertaining to the TMC Project. WMTN made payments of cash and stock to Raven pursuant to the JV Agreement.

 

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.  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.

 

We are 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 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 2015 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 February 10, 2015, we have $4,352,115 plus accrued interest of $1,436,351due to BOCO Investments LLC on three secured promissory notes that are now in default.  While the Company has been attempting to negotiate an extension or other modification as we do not have the ability to repay the amount due, such negotiations have been ongoing for over a year and accordingly, there can be no assurance that we will be able extend the notes or to renegotiate the terms of these promissory notes under terms that are favorable to the Company.  We are currently incurring interest at a default interest rate of 45% per year.  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 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 WMTN’s 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 Company’s 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 as described in this Form 10-K. 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.

 

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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-K.

 

THE COMPANY’S COMMON STOCK

 

Our common stock currently trades on the OTCQB market under the symbol "WMTN."

 

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.

 

EMPLOYEES

 

As of October 31, 2014, we had four full-time and two part-time employees.  Additionally, we use employees of Minex Exploration, an Idaho partnership affiliated with our Chief Executive Officer, as contractors for exploration of our Alaska property. Most of our employees are based in Sandpoint, ID. The Chief Executive Officer is based out of the Sandpoint, ID office and the Chief Financial Officer is based out of Denver, CO but travels to the Sandpoint, ID office on a regular basis.

 

WEBSITE ACCESS TO UNITED STATES SECURITIES AND EXCHANGE COMMISSION REPORTS

 

We file annual and quarterly reports, proxy statements and other information with the Securities and Exchange Commission ("SEC"). You may read and copy any document we file at the SEC's Public Reference Room at 100 F Street, N.E., Washington D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC maintains a website at http://www.sec.gov that contains reports, proxy and information statements and other information concerning filers. We also maintain a web site at http://www.westmountaingold.com that provides additional information about us and links to documents we file with the SEC. Our charters for the Audit, Compensation and Nominations and Governance Committees and the Code of Conduct & Ethics are also available on our website.

 

ITEM 1A. RISK FACTORS

 

There are certain inherent risks which will have an effect on the Company’s exploration in the future and the most significant risks and uncertainties known and identified by our management are described below.

 

If we do not obtain additional financing, our business will fail. 

 

For the year ended October 31, 2014, we had revenues of $1,043,571. For the year ended October 31, 2013, we had revenues of $94,000. 

 

The net loss for the year ended October 31, 2014 and 2013 was $2,550,162 and $7,609,827, respectively. The net loss included $1,528,691 and $3,446,782 of non-cash expenses for the years ended October 31, 2014 and 2013, respectively.

 

4


 
 

Our current operating funds are significantly 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 October 31, 2014, we had approximately $22,766 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 February 10, 2015, we have $4,352,115 plus accrued interest of $1,436,351due to BOCO Investments LLC on three secured promissory notes that are now in default.  While the Company has been attempting to negotiate an extension or other modification as we do not have the ability to repay the amount due, such negotiations have been ongoing for over a year and accordingly, there can be no assurance that we will be able extend the notes or to renegotiate the terms of these promissory notes under terms that are favorable to the Company.  We are currently incurring interest at a default interest rate of 45% per year.  If the Company is not successful at negotiating an extension or other modification, it may have to restructure its operations, divest all or a portion of its business, or file for bankruptcy.

 

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, in the aggregate, no less than 600 ounces of gold in bar form to the three accredited investors by September 15, 2013.  On November 1, 2013, the Company settled with one of the parties that had an agreement for 200 ounces of gold for 310,000 shares of common stock valued at $1.00 per share, plus warrants for an additional 310,000 shares at an exercise price of $1.50 per share.  The second party 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 the party whereby we paid $100,000 in cash and issued 266,667 shares of our common stock valued $0.45 per share, or $120,000 for a full satisfaction of the judgment.  The Company recorded a loss of $70,000 to settle this forward contract.

 

The Company is continuing to negotiate with the third lender, Snowmass Mining Co., LLC, who is owed $300,000 (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 twelve months ended October 31, 2014.

 

As of October 31, 2014, the value of the gold obligation to Snowmass is $300,000.  The difference between the amount received and the fair value of the obligation will be recorded as additional interest expense or income at each reporting date based on the fair value of gold.  During the twelve months ended October 31, 2014, the Company recorded additional interest expense of $270,704 for the change in  the value of gold from October 31, 2013.

 

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. 

 

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 property to a third party in exchange for cash or exploration expenditures, which is not presently contemplated. 

 

Because our secured loans are in default, our secured creditor could foreclose at any time on our assets. 

 

Our debt to BOCO Investments LLC is secured by a security interest in all of the Company’s assets and we are currently in default on these loans. BOCO has not indicated its intentions regarding its rights and remedies under the loan and security agreements with the Company, but one remedy is the ability to foreclose on all of our assets, including our primary asset, the TMC project.

 

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 February 10, 2015, the price of gold was $1,233.70 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.

 

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Our management and a major shareholder and creditor have substantial influence over our company.   

 

As of February 12, 2015, Greg Schifrin, our CEO, either directly or indirectly, owns or controls 4.1 million shares as of the filing date or approximately 15.0% of our issued and outstanding common stock including shares beneficially owned within sixty days.

 

As of February 12, 2015, James Baughman, a former officer and director of the Company, either directly or indirectly, owns or controls 2,352,500 million shares as of the filing date or approximately 8.5% 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 (i) including the potential conversion of $1,852,115 of debt that was due and payable by the Company on October 31, 2013, that as of February 10, 2015, 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 each that were due on October 31, 2013 and December 31, 2013; (iv) and various warrants. See Note 7 and 8 to the Company’s Financial Statements for a more detailed description of this Secured Promissory and Promissory Notes, Series A Convertible Preferred Stock and various warrants.   We are currently attempting to negotiate an extension or other modification of these notes as we do not have the ability to repay the amount due.  If the Company is not successful in negotiating an extension or other modification, it may have to restructure its operations, divest all or a portion of its business, or file for bankruptcy.

 

As a major creditor and shareholder of the Company, BOCO has additional influence and control over the Company.  BOCO has imposed a number of loan covenants on the Company which restrict our ability to operate our business.

 

Mr. Schifrin, Mr. Baughman 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.

 

Any funds spent by us on exploration could be lost. We have not established the presence of any proven or probable mineral reserves, as defined by the SEC, at any of our properties. Under Industry Guide 7, the SEC has defined a “reserve” as that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. Any mineralized material discovered or produced by us should not be considered proven or probable reserves.

 

In order to demonstrate the existence of proven or probable reserves, it would be necessary for us to perform additional exploration to demonstrate the existence of sufficient mineralized material with satisfactory continuity and obtain a positive feasibility study which demonstrates with reasonable certainty that the deposit can be economically and legally extracted and produced. We have not completed a feasibility study with regard to all or a portion of any of our properties to date. The absence of proven or probable reserves makes it more likely that our properties may cease to be profitable and that the money we spend on exploration may never be recovered.

 

Since we have no proven or probable reserves, our investment in mineral properties is not reported as an asset in our financial statements which may cause volatility in our net earnings and have a negative impact on the price of our stock.

 

We prepare our financial statements in accordance with accounting principles generally accepted in the United States of America and report substantially all exploration and construction expenditures as expenses until such time, if ever, we are able to establish proven or probable reserves. Since it is uncertain when, if ever, we will establish proven or probable reserves, it is uncertain whether we will ever report these types of future capital expenditures as an asset. Accordingly, our financial statements report fewer assets and greater expenses than would be the case if we had proven or probable reserves, which could produce volatility in our earnings and have a negative impact on our stock price.

 

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There are differences in U.S. and Canadian practices for reporting reserves and resources.

 

Our reserve and resource estimates are not directly comparable to those made in filings subject to SEC reporting and disclosure requirements, as we generally calculate reserves and resources in accordance with Canadian practices. The Geologic Report, upon which we have based our mineralization estimates, was prepared in accordance with Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) National Instrument 43-101 (NI 43-101) and Form 43-101F1 (43-101F1). These practices are different from the practices used to report reserve and resource estimates in reports and other materials filed with the SEC. It is Canadian practice to report measured, indicated and inferred mineral resources, which are generally not permitted in disclosure filed with the SEC by United States issuers. In the United States, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. United States investors are cautioned not to assume that all or any part of measured or indicated mineral resources will ever be converted into reserves.

 

Further, “inferred mineral resources” have a great amount of uncertainty as to their existence and as to whether they can be mined legally or economically. Disclosure of “contained ounces” is permitted disclosure under Canadian regulations; however, the SEC only permits issuers to report “resources” as in place, tonnage and grade without reference to unit measures.

 

Accordingly, information concerning descriptions of mineralization, reserves and resources contained in this report, or in the documents incorporated herein by reference, may not be comparable to information made public by other United States companies subject to the reporting and disclosure requirements of the SEC.

 

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 property’s 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 audited financial statements for the period October 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 in the report result from our limited history of operations, limited assets, and operating losses since inception.  In addition, among other factors, as of October 31, 2014, we reported a net operating loss of over $20 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. 

 

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Because we have limited business operations, we face a high risk of business failure.

 

We started exploring our properties in the summer of 2011. While we have continued to explore the TMC project and have done limited mining during the summer months since then, we do not yet have sufficient information about the project 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 just acquired our mineral properties with our acquisition of TMC on February 28, 2011.  We have revenues of $1,137,804 as of the date of this Form 10-K.  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.

 

We are dependent on key personnel.

 

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, particularly Greg Schifrin, our CEO. We do not maintain key man life insurance covering certain of our officers. 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 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.

 

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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.

 

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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 may not have access to all of the supplies and materials we need to begin exploration that could cause us to delay or suspend operations. 

 

Competition and unforeseen limited sources of supplies in the industry could result in occasional spot shortages of supplies, such as explosives, and certain equipment such as bulldozers and excavators that we might need to conduct exploration. We have not attempted to locate or negotiate with any suppliers of products, equipment or materials. We will attempt to locate products, equipment and materials after we raise additional funding. If we cannot find the products and equipment we need, we will have to suspend our exploration plans until we do find the products and equipment we need. 

 

Because of the speculative nature of exploration of mineral properties, there is no assurance that our exploration activities will result in the discovery of new commercially exploitable quantities of minerals

 

We plan to continue to source exploration mineral claims. The search for valuable minerals as a business is extremely risky. We can provide investors with no assurance that additional exploration on our properties will establish that additional commercially exploitable reserves of gold exist on our properties.  Problems such as unusual or unexpected geological formations or other variable conditions are involved in exploration and often result in exploration efforts being unsuccessful. The additional potential problems include, but are not limited to, unanticipated problems relating to exploration and attendant additional costs and expenses that may exceed current estimates. These risks may result in us being unable to establish the presence of additional commercial quantities of ore on our mineral claims with the result that our ability to fund future exploration activities may be impeded. 

 

Weather and location challenges may restrict and delay our work on our property.    

 

We plan to conduct our exploration on a seasonal basis. Because of the severe Alaska winters and lack of sunlight and with current operations, we are only able to perform exploration operations for approximately five months per year. It is possible that snow or rain could restrict and delay work on the properties to a significant degree. Our property is located in a relatively remote location, which creates additional transportation and energy costs and challenges. Currently, we have drilled our test sites with helicopter-supported drill rigs, which are expensive to operate.  

 

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As we face intense competition in the mining industry, we will have to compete with our competitors for financing and for qualified managerial and technical employees. 

 

The mining industry is intensely competitive in all of its phases. Competition includes large established mining companies with substantial capabilities and with greater financial and technical resources than we have. As a result of this competition, we may be unable to acquire additional attractive mining claims or financing on terms we consider acceptable. We also compete with other mining companies in the recruitment and retention of qualified managerial and technical employees. If we are unable to successfully compete for financing or for qualified employees, our exploration programs may be slowed down or suspended.

 

Our stock is categorized as a penny stock. Trading of our stock may be restricted by the SEC's penny stock regulations which may limit a shareholder's ability to buy and sell our stock.

 

Our stock is categorized as a penny stock. The SEC has adopted Rule 15g-9 which generally defines "penny stock" to be any equity security that has a market price (as defined) less than US$ 5.00 per share or an exercise price of less than US$ 5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

 

FINRA sales practice requirements may also limit a shareholder’s 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 customer’s 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 February 12, 2014 there were 25.5 million shares of common stock and warrants issued and outstanding. 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. 

 

 

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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. 

 

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:

 

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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. 

 

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 all but certain types of conduct 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.

 

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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 Dodd–Frank 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 management’s 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 2015.

 

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.

 

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.

 

  

 

GLOSSARY OF TECHNICAL TERMS

 

“Base Metal” means a classification of metals usually considered to be of low value and higher chemical activity when compared with the precious metals (gold, silver, platinum, etc.).  This nonspecific term generally refers to the high-volume, low-value metals copper, lead, tin, and zinc.

 

“Claim” means a mining interest giving its holder the right to prospect, explore for and exploit minerals within a defined area.

 

“Diamond Core” means a rotary type of rock drill that cuts a core of rock and is recovered in long cylindrical sections, two centimeters or more in diameter.

 

“Deposit” means an informal term for an accumulation of mineral ores.

 

“Exploration Stage” means a prospect that is not yet in either the development or production stage

 

“Feasibility Study” means an engineering study designed to define the technical, economic, and legal viability of a mining project with a high degree of reliability.

 

“Grade” means the metal content of ore, usually expressed in troy ounces per ton (2,000 pounds) or in grams per ton or metric tons which contain 2,204.6 pounds or 1,000 kilograms.

 

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“Mineralization” means the concentration of metals within a body of rock.

 

“Mining” means the process of extraction and beneficiation of mineral reserves to produce a marketable metal or mineral product.  Exploration continues during the mining process and, in many cases, mineral reserves are expanded during the life of the mine operations as the exploration potential of the deposit is realized.

 

 “Underground” means a mine working or excavation closed to the surface.

 

“Ore” means material containing minerals that can be economically extracted.

 

“Precious Metals” means any of several relatively scarce and valuable metals, such as gold, silver, and the platinum-group metals.

 

“Probable Reserves” means reserves for which quantity and grade and/or quality are computed from information similar to that used for Proven Reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced.  The degree of assurance, although lower than that for Proven Reserves, is high enough to assume continuity between points of observation.

 

“Proven Reserves” means reserves for which quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of the reserves are well-established.

 

“Production Stage” means a project that is actively engaged in the process of extraction and beneficiation of mineral reserves to produce a marketable metal or mineral product.

 

“Reclamation” means the process of returning land to another use after mining is completed.

 

“Recovery” means that portion of the metal contained in the ore that is successfully extracted by processing, expressed as a percentage.

 

“Reserves” means that part of a mineral deposit that could be economically and legally extracted or produced at the time of reserve determination.

 

“Sampling” means selecting a fractional, but representative, pare of a mineral deposit for analysis.

 

“Vein” means a fissure, faults or crack in the rock filled by minerals that have traveled upward from some deep source.

 

ITEM 1B.     UNRESOLVED STAFF COMMENTS

 

We have no unresolved Staff comments.

 

ITEM 2.     PROPERTIES

 

The WMTN principal executive offices are located at 120 E. Lake St. Ste. 401, Sandpoint, ID 83864, and our telephone number is (208)265-1717.   On September 1, 2012, we leased our corporate office at the rate of $400 per month to August 31, 2013.   We currently lease the office on a month to month basis. On April 1, 2011, we entered into a lease at 120 Lake Street, Suite 401, Sandpoint, ID 83864.  This office is leased at the net of $1,000 per month and expired March 31, 2013. On June 4, 2013, we entered into Commercial Lease Amendment II. The office is shared with an entity affiliated with our Chief Executive Officer.

 

On June 6, 2014 we signed a one year lease for a residential property located in Anchorage, AK for $3,175 per month.  The property is used as a central office for operations in Alaska and to house personnel traveling from the mining camp during the mining season.

 

On January 1, 2015 the Company signed a three-year lease for a testing and processing facility in Anchorage, AK for $3,500 per month. The property, which includes a warehouse and storage yard, will house processing, recovery and  metallurgical testing equipment and serve as a staging area as the company  moves forward with Terra Project development

 

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Other than our mining claims, leases, and other real property interests specifically related to mining, WMTN does not own real estate nor have plans to acquire any real estate.

 

Alaska Property - The TMC Project

 

The TMC project consists of 344 Alaska state mining claims including 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 high-grade gold vein occurrences.  All government permits and reclamation plans for continued exploration through 2013 were renewed in 2010.  The $136,730 of fees to maintain the Terra claims through 2015 were paid by the Company on November 20, 2014.  The property lies approximately 200 km west-northwest of Anchorage between the Revelation and Terra Cotta mountains of the Alaska Range in southwestern Alaska 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 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 high-grade 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. 

 

TMC received geological reports in June 2010 and February 2010 from the State of Alaska Division of Mines and Geology that represented a 400m spacing aerial magnetic and resistivity survey that included the area of the TMC Project.

 

A total of 44 drill holes have been completed on the TMC property.  The TMC mineralization has been characterized as deep epithermal or mesothermal and could have significant extent down dip and along strike.  Furthermore, there is potential to develop a number of continuous high-grade veins forming a highly attractive mining target.  Gold characterization work on Bens Vein indicates a large percentage of the gold and silver reports to a gravity concentrate.

 

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Terra Property Location (from Puchner and Meyers, 2007)

 

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State Claim Groups held by the TMC Project in 2012

 

 

 

 

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TMC property illustrating target vein locations

 

In the Bens Vein zone the main vein system has a core high grade zone of around 29,893 tonnes with 29.48 g/t gold at a 10 g/t cutoff which expands significantly when the cutoff is lowered to 1 g/t.  Drilling on Bens Vein zone has outlined an open-ended mineralized zone over 350m long and 250m down dip with an average true width of ~1.3m that has around 852,942 tonnes with 15.3 g/t gold at a 5 g/t cutoff.  Drilling on the project has identified numerous veins, Environmental baseline studies were started in 2010 on the Terra property in anticipation of future development. The 2005-2013 drill results for the Ben Vein Zone are encouraging not only because they outlined a consistent and well mineralized main vein structure but also because a large number of well-mineralized hanging wall and foot wall subsidiary veins were encountered. These subsidiary veins offer significant potential for expansion of the system with intercepts such as holes TR-07-20 with new footwall zone of 0.6m @ 43.2 g/t gold and TR-07-22 with new hanging wall zone 0.8m @ 14.5 g/t gold.  From the data currently available it appears that a higher grade shoot is developing within the overall Bens Vein system which could form the nucleus for an initial mining target on the project.  

 

ITEM 3.    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 4.    MINE SAFETY DISCLOSURE

 

Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection, issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities from the Federal Mine Safety and Health Administration, or MSHA, under the Federal Mine Safety and Health Act of 1977, or the Mine Act. During the year ended October 31, 2014, the TMC project was in production and as such, we were subject to regulation by MSHA under the Mine Act.

 

The Terra project had no health and safety violations, orders or citations under the Federal Mine Safety and Health Act of 1977, during the year ended October 31, 2014, the first year the Terra project was in production. The Company had no injuries or fatalities.

 

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PART II

 

ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Common Stock

 

Our common stock is $.001 par value, 200,000,000 shares authorized and as of February 10, 2015, we had 27,496,403 issued and outstanding, held by 170 shareholders of record. The number of stockholders, including beneficial owners holding shares through nominee names is approximately 350. Each share of Common Stock entitles its holder to one vote on each matter submitted to the shareholders for a vote, and no cumulative voting for directors is permitted.  Stockholders do not have any preemptive rights to acquire additional securities issued by the Company.  As of February 10, 2015, we had 13,108,880 shares of common stock reserved for issuance upon the exercise of outstanding warrants and 1,000,000 shares of common stock reserved for the issuance upon the exercise of outstanding options.

 

Corporate Stock Transfer, Inc. is the transfer agent and registrar for our Common Stock.

 

Preferred Stock

 

Our preferred stock is $0.10 par value, 1,000,000 shares authorized and as of February 10, 2015 we had 12,100 shares issued and outstanding. On November 29, 2013, our Board of Directors of the Company approved a Certificate of Designation of Rights and Preferences of Series A Convertible Preferred Stock. The Certificate of Designation was filed with the state of Colorado on December 2, 2013. Each holder of outstanding shares of Series A Preferred shall be entitled to the number of votes equal to the number of whole shares of common stock of the Corporation into which the shares of Series A Preferred held by such holder are then convertible as of the applicable record date. We cannot amend, alter or repeal any preferences, rights, or other terms of the Series A Preferred so as to adversely affect the Series A Preferred , without the written consent or affirmative vote of the holders of at least sixty-six and two-thirds percent (66.66%) of the then outstanding shares of Series A Preferred, voting as a separate voting group, given by written consent or by vote at a meeting called for such purpose for which notice shall have been duly given to the holders of the Series A Preferred.

 

Stock Incentive Plan

 

On February 28, 2013, the 2012 Stock Incentive Plan was approved at the Annual Stockholder Meeting. We were authorized to issue options for, and have reserved for issuance, up to 4,000,000 shares of common stock under the 2012 Stock Incentive Plan. As of February 10, 2015, 2,020,000 shares of common stock remain available for grant under the 2012 Stock Incentive Plan.

 

Change in Control Provisions

 

Our articles of incorporation provide for a maximum of five directors. There is no provision for classification or staggered terms for the members of the Board of Directors.

 

Our articles of incorporation also provide that except to the extent the provisions of Colorado General Corporation Law require a greater voting requirement, any action, including the amendment of the Company’s articles or bylaws, the approval of a plan of merger or share exchange, the sale, lease, exchange or other disposition of all or substantially all of the Company’s property other than in the usual and regular course of business, shall be authorized if approved by a simple majority of stockholders, and if a separate voting group is required or entitled to vote thereon, by a simple majority of all the votes entitled to be cast by that voting group.

 

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Our bylaws provide that only the Chief Executive Officer or a majority of the Board of Directors may call a special meeting.  The bylaws do not permit the stockholders of the Company to call a special meeting of the stockholders for any purpose.

 

Amendment of Bylaws

 

Our Board of Directors has the authority to amend our bylaws; however, the stockholders, under the provisions of our articles of incorporation as well as our bylaws, have the concurrent power to amend the bylaws.

   

 

Market Price of and Dividends on Common Equity and Related Stockholder Matters

 

Our common stock trades on OTCQB Exchange under the symbol "WMTN". The following table sets forth the range of the high and low sale prices of the common stock for the periods indicated:

 

Quarter Ended

 

High

 

 

Low

 

January 31, 2014

 

$

1.14

 

 

$

0.60

 

April 30, 2014

 

$

0.92

 

 

$

0.56

 

July 31, 2014

 

$

0.74

 

 

$

0.44

 

October 31, 2014

 

$

0.56

 

 

$

0.39

 

 

 

 

 

 

 

 

 

 

January 31, 2013

 

$

1.01

 

 

$

0.58

 

April 30, 2013

 

$

1.00

 

 

$

0.52

 

July 31, 2013

 

$

1.50

 

 

$

0.74

 

October 31, 2013

 

$

1.35

 

 

$

0.83

 

 

As of February 10, 2015, the closing price of the Company's common stock was $0.35 per share. As of February 10, 2015, there were 27,496,403 shares of common stock outstanding held by 155 stockholders of record. The number of stockholders, including the beneficial owners' shares through nominee names is approximately 350.

 

Transfer Agent

 

The stock transfer agent for our securities is Corporate Stock Transfer of Denver, Colorado.  Their address is 3200 Cherry Creek Drive South, Suite 430, Denver, Colorado 80209. Their phone number is (303) 282-4800.

 

Dividends

 

We have never paid any cash dividends and intend, for the foreseeable future, to retain any future earnings for the development of our business. Our future dividend policy will be determined by the board of directors on the basis of various factors, including our results of operations, financial condition, capital requirements and investment opportunities.

 

 

RECENT SALES OF UNREGISTERED SECURITIES

 

During the three months ended October 31, 2014, there were the following sales of unregistered equity securities:

 

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. 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. 

 

22


 
 

We have compensated consultants and service providers with restricted common stock during the development of our technology and when our capital resources were not adequate to provide payment in cash.

 

All of the following transactions were to accredited investors. All issuances were structured to comply with the requirements of the safe harbor afforded by Rule 506 of Regulation D.

 

One of our 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 valued $0.45 per share, or $120,000 for a full satisfaction of the judgment.  The Company recorded a loss of $70,000 to settle this forward contract. (See Note 3)

 

On October 10, 2014 the Company issued 980,000 shares of common stock valued at $0.50 per share under the 2012 Stock Incentive Plan to ten individuals, officers, directors and employees for services to the Company. 

 

Performance Graph

Comparison of Cumulative Total Return

 

Among WestMountain Gold, Inc., Market Vectors Junior Gold Mine ETF

and SPDR Gold Trust ETF

 

 

The above assumes that $100 was invested in the common stock and each index on October 31, 2010. Although the Company has not declared a dividend on its common stock, the total return for each index assumes the reinvestment of dividends. Stockholder returns over the periods presented should not be considered indicative of future returns. The foregoing table shall not be deemed incorporated by reference by any general statement incorporating by reference the Form 10-K  into any filing under the Securities Act or the Exchange Act, except to the extent the company specifically incorporates this information by reference, and shall not otherwise be deemed filed under the acts.

 

 

EQUITY COMPENSATION PLAN INFORMATION

 

The following table provides information as of October 31, 2014 related to the equity compensation plan in effect at that time.

 

 

 

(a)

(b)

(c)

Plan Category

Number of securities to be issued upon exercise of outstanding options, warrants and rights

Weighted-average exercise price of outstanding options, warrants and rights

Number of securities remaining available for future issuance under equity compensation plan (excluding securities reflected in column (a)

Equity compensation plan approved by shareholders

1,000,000

$0.50

2,020,000

Equity compensation plan not approved by shareholders

                                        -

                                           -

                                                 -

Total

                                        -

                                           -

                                    2,020,000

 

23


 

 

ITEM 6.    SELECTED FINANCIAL DATA

 

In the following table, we provide you with our selected consolidated historical financial and other data. We have prepared the consolidated selected financial information using our consolidated financial statements for the years ended October 31, 2014 and 2013. When you read this selected consolidated historical financial and other data, it is important that you read along with it the historical financial statements and related notes in our consolidated financial statements included in this report, as well as Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

 
 

 

Years Ended

 

October 31,

2014

 

October 31,

2013

(in thousands, except for per share data)

 

 

 

 

 

STATEMENT OF OPERATIONS DATA:

 

 

 

 

 

Revenue

$

1,043,571

 

$

94,233

Net loss

 

(2,550,162)

 

 

(7,609,827)

Net loss applicable to WestMountain Gold, Inc. common shareholders

 

(2,550,162)

 

 

(7,609,827)

Net loss per share

 

(0.10)

 

 

(0.32)

 

 

 

 

 

 

BALANCE SHEET DATA:

 

 

 

 

 

Total assets

 

3,783,404

 

 

1,501,259

Stockholders' deficit

 

(7,108,796)

 

 

(7,056,298)

 

ITEM 7.    MANAGEMENT'S 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.

 

24


 
 

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 TMC’s fiscal year, which is October 31.

 

TMC’s 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 valued at $136,000. 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 2014 were renewed and the fees to maintain the Terra claims through 2015 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 14, 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  it obligations  to the othe 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.

 

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 2015 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.

 

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-K.

 

25


 

THE COMPANY’S 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.

 

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. 

 

 

RESULTS OF OPERATIONS

 

The following table presents certain consolidated statement of operations information and presentation of that data as a percentage of change from year-to-year:

 

 

 

For the Years Ended October31,

 

 

 

 

 

 

2014

 

2013

 

$ Variance

 

% Variance

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

1,043,571

 

$

94,233

 

$

949,338

 

91.0%

Cost of sales

 

656,794

 

 

49,000

 

 

607,794

 

92.5%

Gross profit

 

386,777

 

 

45,233

 

 

341,544

 

88.3%

Selling, general and administrative expenses

 

1,051,388

 

 

1,993,995

 

 

(942,607)

 

-47.3%

Exploration expenses

 

872,726

 

 

2,965,309

 

 

(2,092,583)

 

-70.6%

Operating loss

 

(1,537,337)

 

 

(4,914,071)

 

 

3,376,734

 

-68.7%

Other income (expense):

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(1,272,211)

 

 

(546,767)

 

 

(725,444)

 

-132.7%

Financing fee

 

(228,238)

 

 

(148,989)

 

 

(79,249)

 

-53.2%

Gain(Loss) on derivative liability

 

837,403

 

 

(2,000,000)

 

 

2,837,403

 

141.9%

Gain on settlement of forward contract

 

(349,779)

 

 

-

 

 

(349,779)

 

-100.0%

Total other expense

 

(1,012,825)

 

 

(2,695,756)

 

 

1,682,931

 

-62.4%

Net loss

$

(2,550,162)

 

$

(7,609,827)

 

$

5,059,665

 

-66.5%

 

26


 
 

YEAR ENDED OCTOBER 31, 2014 COMPARED TO THE YEAR ENDED OCTOBER 31, 2013

 

REVENUE

 

Revenue for the year ended October 31, 2014 increased $949,338 to $1,043,571 as compared to $94,233 for the year ended October 31, 2013. The revenue increase resulted from our ability to run production through our pilot mill for approximately 60 days in the 2014 season.  The Company also ended the year with gold and silver inventory valued at $459,461 as of October 31, 2014, which we anticipate being able to convert to into revenues during the first quarter of 2015.   In addition, we anticipate being able to run production through the pilot mill for the full 2015 season which should result in another substantial increase in revenue for the Company.

 

COST OF SALES

 

Cost of sales for the year ended October 31, 2014 increased $607,794 to $656,794 as compared to $49,000 for the year ended October 31, 2013.  This increase was directly attributable to the increased production for the 2014 season and the Company expects cost of sales to continue to increase proportionally as we grow production.  The per ounce cost of sales remained consistent year over year and should remain fairly stable as we maintain our pilot mill production during the 2015 season and then should decrease in the future as we scale into full production.

 

EXPENSES

 

Selling, general and administrative expenses for the year ended October 31, 2014 decreased $942,607 to $1,051,388 as compared to $1,993,995 for the year ended October 31, 2013.  Such expenses for the year ended October 31, 2014 and 2013 consisted primarily of employee and independent contractor expenses, expenses related to share and warrant issuances, rent, audit, overhead, amortization and depreciation, professional and consulting fees, sales and marketing costs, investor relations, legal, and other general and administrative costs.  The Company actively controlled these expenses over the last year which resulted in the substantial decrease from the prior year.  Management intends to maintain the current level of selling, general and administrative expenses through 2015.

 

Exploration expenses for the year ended October 31, 2014 decreased $2,092,583 to $872,726 as compared to $2,965,309 for the year ended October 31, 2013. The decrease in exploration expenses was due to higher expenditures requirement for the 2013 mining season and a greater focus on proving out the pilot mill during the 2014 season.  Exploration expenses will likely increase going forward as we work to expand our claims.

 

NET LOSS

 

Net loss for the year ended October 31, 2014 was $2,550,162 as compared to a net loss of $7,609,827 for the year ended October 31, 2013. The net loss for the year ended October 31, 2013 included $3,446,782 of non-cash expenses, including $1,093,988 in expenses related to the issuance of common stock and warrants related to services; loss on settlement of a forward contract of $2,000,000; loss on forward contracts and loan agreements of $194,760; and other expense totaling $158,034 during the year ended October 31, 2013. The net loss for the year ended October 31, 2014 included $1,353,691 of non-cash expenses, including $1,223,721 in expenses related to the issuance of common stock and warrants related to services; gain on derivative liability of $907,403; loss on forward sale contracts and loan agreements of $70,000; loss on the settlement of forward contracts of $349,779; and other expense totaling $617,594 during the year ended October 31, 2014.

 

The substantial decrease in net loss was due to a combination of increasing revenues in addition to a significant decrease in our operating expenses.  While operating expenses should remain fairly stable for the next year, management believes that it can continue to grow revenues during 2015 and should be able to see a further decrease in our net loss.

 

LIQUIDITY AND CAPITAL RESOURCES

 

We had cash of 22,766, a working capital deficit of approximately $9,308,444.  We had derivative liability that included warrants of $1,092,597 and forward contract of $300,659 as of October 31, 2014.

 

As of October 31, 2014, we have $4,352,115 plus accrued interest of $1,436,350 due to BOCO Investments LLC on eight secured promissory notes that are now in default.   We are currently attempting to negotiate an extension or other modification of these notes as we do not have the ability to repay the amount due.  There can be no assurance that we will be able to extend these promissory notes or renegotiate these promissory notes on terms that are favorable to the Company.  If we are not successful in negotiating an extension or other modification of these notes, the Company may have to restructure its operations, divest all or a portion of its business, or file for bankruptcy.

 

27


 
 

 

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.

 

Although we are beginning to produce revenue which is providing capital and liquidity for the Company, we will need to continue raising of capital through the issuance of equity or debt to fund our growth.  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 WMTN’s 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 the following expenditures for the next twelve months of approximately $2,100,000, depending on additional financing, for general and administrative expenses and exploration to implement the business plan as described above.

 

 
 

Expenditures

 

$

 

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

 

OPERATING ACTIVITIES

 

Net cash used in operating activities for the year ended October 31, 2014 was $589,693. This amount was primarily related to a net loss of $2,550,162, inventory of $392,976 and prepaid expenses of $2,577, accounts payable of $57,575, accounts payable related parties of $84,021; offset by an increase in accrued interest of $1,143,902, depreciation and amortization and other non-cash expenses of $1,353,691 of non-cash expenses. Non-cash expenses included $1,223,721 in expenses related to the issuance of common stock and warrants related to services; gain on derivative liability of $907,403; loss on forward sale contracts and loan agreements of $70,000; loss on the settlement of forward contracts of $349,779; and other expense totaling $617,594 during the year ended October 31, 2014. 

 

INVESTING ACTIVITIES

 

Net cash used in investing activities for the year ended October 31, 2014 was $1,970,069. This amount was primarily related to capital expenditures of $70,069, contractual rights of $100,000 and cash paid for mining claims of 1,800,000.

 

FINANCING ACTIVITIES

 

Net cash provided by financing activities for the year ended October 31, 2014 was $2,500,152. This amount was primarily related to the proceeds from promissory notes of $2,500,000.

 

28


 

 

Our unaudited contractual cash obligations as of October 31, 2014 are summarized in the table below:

 
 

Contractual Cash Obligations

 

Total

 

Less Than 1 Year

 

1-3 Years

 

3-5 Years

Greater Than 5 Years

Operating leases

 

$

776,032

 

$

160,275

 

$

341,757

 

$

274,000

$

-

Capital lease obligations

 

 

-

 

 

-

 

 

-

 

 

-

 

-

Note payable

 

 

5,583,248

 

 

5,583,248

 

 

-

 

 

-

 

-

Mining expenditures

 

 

2,100,000

 

 

2,100,000

 

 

-

 

 

-

 

-

Forward contracts

 

 

300,659

 

 

300,659

 

 

-

 

 

-

 

-

 

 

$

8,759,939

 

$

8,144,182

 

$

341,757

 

$

274,000

$

-

 

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

 

Use of 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 October 31, 2013, we 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. 

 

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.

 

We have access to the camp by airplane. The property has haul roads, a mill facility and adjoining camp infrastructure, a tailings pond and other infrastructure. 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 October 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 the 50,000 cubic yards of material.

 

29


 

We expect to record reclamation bond as a liability in the period in which we are required to pay a reclamation bond. A corresponding asset is also recorded and depreciated over the life of the asset. After the initial measurement of the asset retirement obligation, the liability will be adjusted at the end of each reporting period to reflect changes in reclamation bond.

 

Mineral Exploration 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. 

 

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 entity’s 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

October 31,
2014

 

 

 

 

 

 

 

 

 

 

Financial Instruments

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Forward contract

$

-

 

$

300,659

 

$

-

 

$

300,659

Derivative Instruments -Warrants

$

-

 

$

1,092,597

 

$

-

 

$

1,092,597

Total

$

-

 

$

1,393,256

 

$

-

 

$

1,393,256

 
30

 
 
 
 

 

 

 

 

 

 

 

 

 

 

Carrying

Amount at

October 31,

2013

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements Using Inputs

 

Financial Instruments

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Forward contract

$

-

 

$

794,760

 

$

-

 

$

794,760

Derivative Instruments -Warrants

$

-

 

$

2,000,000

 

$

-

 

$

2,000,000

Total

$

-

 

$

2,794,760

 

$

-

 

$

2,794,760

 

Stock-Based Compensation 

FASB ASC 718 establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services, but primarily focuses on transactions whereby an entity obtains employee services for share-based payments. FASB ASC 718 requires that the compensation cost relating to share-based payment transactions be recognized in the consolidated financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.

 

The Company’s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of FASB ASC 505-50The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement. Stock-based compensation related to non-employees is accounted for based on the fair value of the related stock or options or the fair value of the services, whichever is more readily determinable in accordance with FASB ASC 718.

 

Income Tax/Deferred Tax 

FASB ASC 740 requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on differing treatment of items for financial reporting and income tax reporting purposes. The deferred tax balances are adjusted to reflect tax rates by tax jurisdiction, based on currently enacted tax laws, which will be in effect in the years in which the temporary differences are expected to reverse. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operationsWestMountain Inc. has recognized deferred income tax benefits on net operating loss carry-forwards to the extent WestMountain Inc. believes it will be able to utilize them in future tax filings. The difference between the statutory income tax expense and the accounting tax expense is primarily attributable to non-deductible expenses representing permanent timing differences between book income and taxable income during the three months ended October 31, 2014.

 

The Board of Directors and Shareholders

WestMountain Gold, Inc.:

We have audited the accompanying consolidated balance sheets of WestMountain Gold, Inc. (the “Company”) as of October 31, 2014 and 2013, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the years ended October 31, 2014 and 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of WestMountain Gold, Inc. as of October 31, 2014 and 2013, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the years ended October 31, 2014 and 2013, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has sustained a net loss from operations and has an accumulated deficit. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in this regard are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/PMB Helin Donovan, LLP

PMB Helin Donovan, LLP

February 13, 2015

Seattle, WA

 

31


 
 
 
 

WestMountain Gold, Inc.

An Exploration Stage Company

Consolidated Balance Sheets

 

 

 

 

 

 

 

October 31,
2014

 

October 31,
2013

 

 

ASSETS

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash and cash equivalents

$

22,766

 

$

82,376

Prepaid expenses

 

8,932

 

 

6,355

Inventory

 

459,461

 

 

66,485

Total current assets

 

491,159

 

 

155,216

 

 

 

 

 

 

Equipment, net

 

440,562

 

 

528,973

 

 

 

 

 

 

Other Assets

 

 

 

 

 

Contractual rights

 

900,000

 

 

800,000

Mining claims

 

1,946,458

 

 

11,820

Security deposits

 

5,225

 

 

5,250

 

 

 

 

 

 

Total Assets

$

3,783,404

 

$

1,501,259

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Accounts payable

$

1,444,060

 

$

1,315,070

Accounts payable - related parties

 

670,106

 

 

697,127

Accrued expenses

 

263,354

 

 

216,078

Accrued interest

 

1,538,176

 

 

394,274

Accrued expenses - related parties

 

-

 

 

57,000

Forward contract

 

300,659

 

 

794,760

Derivative liability - warrants

 

1,092,597

 

 

2,000,000

Promissory notes

 

5,583,248

 

 

3,083,248

Total current liabilities

 

10,892,200

 

 

8,557,557

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' DEFICIT

 

 

 

 

 

Preferred stock, $0.10 par value; 987,900 shares authorized, 0 shares issued and outstanding at October 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 October 31, 2014 and October 31, 2013, respectively

 

1,210

 

 

1,210

Common stock, $0.001 par value; 200,000,000 shares authorized, 27,296,403 and 24,659,832 shares issued and outstanding at October 31, 2014 and October 31, 2013, respectively

 

27,296

 

 

24,659

Additional paid in capital

 

13,163,655

 

 

10,608,128

Accumulated deficit - stock dividends

 

(60,500)

 

 

 

Accumulated deficit

 

(20,240,457)

 

 

(17,690,295)

Total stockholders' deficit

 

(7,108,796)

 

 

(7,056,298)

Total Liabilities and Stockholders' Deficit

$

3,783,404

 

$

1,501,259

 

The accompanying notes are an integral part of these consolidated financial statements.

32


 
 

 

 

 

WestMountain Gold, Inc.

An Exploration Stage Company

Consolidated Statements of Operations

 

 

 

 

 

 

 

Twelve Months Ended

 

October 31,

2014

 

October 31,

2013

 

 

Revenue:

 

 

 

 

 

Sales

$

1,043,571

 

$

94,233

Total revenue

 

1,043,571

 

 

94,233

 

 

 

 

 

 

Cost of sales

 

656,794

 

 

49,000

Total cost of sales

 

656,794

 

 

49,000

 

 

 

 

 

 

Gross profit

 

386,777

 

 

45,233

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

Selling, general and administrative expenses

 

1,051,388

 

 

1,993,995

Exploration expenses

 

872,726

 

 

2,965,309

Total operating expenses

 

2,924,114

 

 

4,959,304

 

 

 

 

 

 

Loss from operations

 

(1,537,337)

 

 

(4,914,071)

 

 

 

 

 

 

Other income/(expense)

 

 

 

 

 

Interest income

 

14

 

 

-

Interest expense

 

(1,272,225)

 

 

(546,767)

Financing fee

 

(228,238)

 

 

(148,989)

Loss on change in forward contract

 

(70,000)

 

 

-

Gain(Loss) on change - derivative liability warrants

 

907,403

 

 

(2,000,000)

Loss on settlement of forward contract

 

(349,779)

 

 

-

Total other income/(expense)

 

(1,012,825)

 

 

(2,695,756)

 

 

 

 

 

 

Net income (loss) before income taxes

 

(2,550,162)

 

 

(7,609,827)

Income tax expense (benefit)

 

-

 

 

-

Net income (loss)

$

(2,550,162)

 

$

(7,609,827)

 

 

 

 

 

 

Basic net loss per share

$

(0.10)

 

$

(0.32)

Diluted net loss per share

$

(0.10)

 

$

(0.32)

Basic weighted average common shares outstanding

 

25,738,942

 

 

23,737,492

Diluted weighted average common shares outstanding

 

25,738,942

 

 

23,737,492

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

33


 
 

 

 

WestMountain Gold, Inc.
Consolidated Statement of Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

Stockholders'

Deficit

 

Preferred Stock

 

Common Stock

 

Additional

Paid

In Capital

 

Accumulated

Deficit

 

 

Shares

 

Amount

 

Shares

 

Amount

 

 

 

Balance as of October 31, 2012

-

 

$

-

 

21,382,776

 

$

21,383

 

$

7,675,241

 

$

(10,080,468)

 

$

(2,383,844)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock and warrants for services

 

 

 

 

 

1,129,155

 

 

1,128

 

 

1,178,160

 

 

 

 

 

1,179,288

Issuance of common stock for offering reprice

 

 

 

 

 

628,233

 

 

628

 

 

(628)

 

 

 

 

 

-

Issuance of common stock related to the exercise of warrants

 

 

 

 

 

1,519,668

 

 

1,520

 

 

1,138,232

 

 

 

 

 

1,139,752

Issuance of common stock related to convertible debentures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

Warrant amortization expense

 

 

 

 

 

 

 

 

 

 

 

13,333

 

 

 

 

 

13,333

Issuance of preferred stock

12,100

 

 

1,210

 

 

 

 

 

 

 

603,790

 

 

 

 

 

605,000

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,609,827)

 

 

(7,609,827)

Balance as of October 31, 2013

12,100

 

$

1,210

 

24,659,832

 

$

24,659

 

$

10,608,128

 

$

(17,690,295)

 

$

(7,056,298)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for services

 

 

 

 

 

1,073,989

 

 

1,074

 

 

765,859

 

 

 

 

 

766,933

Stock issued for cash

 

 

 

 

 

113,636

 

 

114

 

 

99,988

 

 

 

 

 

100,102

Exercise of warrants

 

 

 

 

 

52,000 

 

 

52 

 

 

 

 

 

 

 

 

52

Issuance of stock options

 

 

 

 

 

 

 

 

 

 

 

143,125

 

 

 

 

 

143,125

Issuance of common stock for fees

 

 

 

 

 

399,529 

 

 

400 

 

 

457,352

 

 

 

 

 

457,752

Issuance of common stock and warrants for forward contract settlement

 

 

 

 

 

728,667

 

 

728 

 

 

892,972

 

 

 

 

 

893,700

Acquisition of mining claims

 

 

 

 

 

200,000

 

 

200

 

 

135,800

 

 

 

 

 

136,000 

Preferred stock dividend paid in common stock

 

 

 

 

 

68,750

 

 

69

 

 

60,431

 

 

(60,500)

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,550,162)

 

 

(2,550,162)

Balance as of October 31, 2014

12,100

 

$

1,210

 

27,296,403

 

$

27,296

 

$

13,163,655

 

$

(20,300,957)

 

$

(7,108,796)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

34


 
 

 

 
 

WestMountain Gold, Inc.

An Exploration Stage Company
Consolidated Statement of Cash Flows

 

 

 

 

 

 

 

Years ended

October 31,

 

 

 

2014

 

2013

Cash flows from operating activities

 

 

 

 

 

Net loss

$

(2,550,162)

 

$

(7,609,827)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

Depreciation and amortization

 

159,842

 

 

144,701

Warrant amortization expense

 

-

 

 

13,333

Issuance of common stock for fees

 

457,752

 

 

-

Issuance of common stock and warrants for services and expenses

 

1,223,721

 

 

1,093,988

Loss on forward contract

 

70,000

 

 

194,760

Loss on settlement of forward contract

 

349,779

 

 

2,000,000

(Gain) Loss on derivative liability

 

(907,403)

 

 

-

 

 

 

 

 

 

Changes in operating assets and operating liabilities:

 

 

 

 

 

Prepaid expenses and other current assets

 

(2,577)

 

 

662

Inventory

 

(392,976)

 

 

(66,485)

Other assets

 

25

 

 

(3,200)

Accrued interest

 

1,143,902

 

 

351,693

Accounts payable and accrued liabilities

 

(57,575)

 

 

939,085

Accounts payable and accrued liabilities - related parties

 

(84,021)

 

 

-

Net cash used in operating activities

 

(589,693)

 

 

(2,941,290)

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Capital expenditures

 

(70,069)

 

 

(254,239)

Contractual rights

 

(100,000) 

 

 

(100,000)

Cash paid for mining claims

 

(1,800,000)

 

 

-

 

 

 

 

 

 

Net cash used in investing activities

 

(1,970,069)

 

 

(354,239)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from promissory notes

 

2,500,000

 

 

944,283

Forward contract

 

(100,000)

 

 

600,000

Proceeds from the issuance of preferred stock

 

-

 

 

605,000

Proceeds from the issuance of common stock

 

100,152

 

 

1,139,752

Net cash provided by financing activities

 

2,500,152

 

 

3,289,035

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

(59,610)

 

 

(6,494)

Cash and cash equivalents, beginning of period

 

82,376

 

 

88,870

Cash and cash equivalents, end of period

$

22,766

 

$

82,376

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

Interest paid

$

-

 

$

-

Taxes paid

$

-

 

$

-

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

Common stock issued in exchange for account payable

$

233,841

 

$

85,300

Common stock and warrants issued for mining claims

$

136,000

 

$

-

Common stock and warrants issued for settlement of forward contract

$

345,140

 

$

-

 

The accompanying notes are an integral part of these consolidated financial statements.

 

35


 
 

 

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.

 

WMTN’s 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 2015 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, 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 October 31, 2014, the Company had eight secured promissory notes with BOCO Investments, LLC, and has recorded $4,352,115 in principal plus $1,436,351 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 Company’s 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 WMTN’s ability to raise additional capital will be affected by many factors, most of which are not within the Company’s 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.

 

36


 

 

NOTE 2.  GOING CONCERN

 

The Company’s independent registered public accounting firm has expressed substantial doubt about the Company’s ability to continue as a going concern as a result of its history of net loss. The Company’s 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-K. 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.

 

 

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

 

Accounting Method

The Company’s 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 Company’s 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 October 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.

 

Prepaid expenses

Prepaid expenses were $8,932 and $6,355 as of October 31, 2014 and 2013, respectively. The prepaid expenses primarily reflect expenses that are being amortized over the life of the service agreements.

 

 Metal and Other Inventory

Inventories were $459,461 and $66,485 as of October 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.

 

37


 

 

 

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 October 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.

 

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 entity’s 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

October 31,

2014 

Financial Instruments

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Forward contract

$

-

 

$

300,659

 

$

-

 

$

300,659

Derivative Instruments -Warrants

$

-

 

$

1,092,597

 

$

-

 

$

1,092,597

Total

$

-

 

$

1,393,256

 

$

-

 

$

1,393,256

 

38


 

 

 

 

 

Fair Value Measurements Using Inputs

 

Carrying Amount at

Financial Instruments

Level 1

 

Level 2

 

Level 3

 

October 31,

2013

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Forward contract

$

-

 

$

794,760

 

$

-

 

$

794,760

Derivative Instruments -Warrants

$

-

 

$

2,000,000

 

$

-

 

$

2,000,000

Total

$

-

 

$

2,794,760

 

$

-

 

$

2,794,760

 

 

 

Market price and estimated fair value of common stock used to measure the Derivative Instruments-Warrants at October 31, 2014 and October 31, 2013:

 

 

 

October 31,

2014

 

October 31,

2013

 

 

Market price and estimated fair value of common stock:

$

0.48

 

$

1.06

Exercise price

$

0.38

 

$

0.75

Expected term (years)

 

3.50

 

 

4.8

Dividend yield

 

-

 

 

-

Expected volatility

 

174.2%

 

 

112%

Risk-free interest rate

 

1.62%

 

 

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 October 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”).

 

39


 

 

In addition, the Company issued Warrants to BOCO to purchase 2,500,000 shares of common stock at $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.  The Warrants expire in 2018, five years from the issuance date.  There are no registration requirements.  The Transaction Documents place certain operating restrictions on the Company.

  

These warrants were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation.  Therefore, the fair value of these warrants were recorded as a liability in the consolidated balance sheet and are marked to market each reporting period until they are exercised or expire or otherwise extinguished.

 

During the year ended October 31, 2014, the Company recognized $907,403 of other income resulting from the decrease in the fair value of the warrant liability at October 31, 2014, as the value changed from the prior quarter.

 

Forward Sale and Loan Agreements

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. (See Note 8) 

 

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, which was advanced by Minex, and issued 266,667 shares of our common stock valued $0.45 per share, or $120,000 for a full satisfaction of the judgment.  The Company recorded a loss of $70,000 to settle this forward contract. (See Note 8).

 

The Company is continuing to negotiate with the third lender, Snowmass Mining Co., LLC, who is owed $300,000 (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 twelve months ended October 31, 2014.

 

As of October 31, 2014, the value of the gold obligation to Snowmass is $300,000.  The difference between the amount received and the fair value of the obligation will be recorded as additional interest expense or income at each reporting date based on the fair value of gold.  During the twelve months ended October 31, 2014, the Company recorded additional interest expense of $270,704 for the change in the value of gold from October 31, 2013.

 

During the twelve months ended October 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 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 leaving a balance due of 0.563 oz. 

 

Revenue Recognition:  Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, no obligations remain and collection is probable. The passing of title to the customer is based on the terms of the sales contract. Product pricing is determined at the point revenue is recognized by reference to active and freely traded commodity markets, for example the London Bullion Market for both gold and silver, in an identical form to the product sold.

 

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.

 

40


 

 

Should a property be abandoned, its capitalized costs are charged to operations.  The Company charges to operations the allocable portion of capitalized costs attributable to properties abandoned.  Capitalized costs are allocated to properties sold based on the proportion of claims sold to the claims remaining within the project area.

 

Income Tax/Deferred Tax 

FASB ASC 740 requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on differing treatment of items for financial reporting and income tax reporting purposes. The deferred tax balances are adjusted to reflect tax rates by tax jurisdiction, based on currently enacted tax laws, which will be in effect in the years in which the temporary differences are expected to reverse. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. WestMountain Gold, Inc.has recognized deferred income tax benefits on net operating loss carry-forwards to the extent WestMountain Gold, Inc.believes it will be able to utilize them in future tax filings. The difference between the statutory income tax expense and the accounting tax expense is primarily attributable to non-deductible expenses representing permanent timing differences between book income and taxable income during the three months ended October 31, 2014.

 

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 October 31, 2014, the Company had (i) warrants for the purchase of 13,108,880 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 (iv) options for the purchase of 1,000,000 common shares; which were considered but were not included in the computation of loss per share at October 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.

 

Stock-Based Compensation 

FASB ASC 718 establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services, but primarily focuses on transactions whereby an entity obtains employee services for share-based payments. FASB ASC 718 requires that the compensation cost relating to share-based payment transactions be recognized in the consolidated financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.

 

The Company’s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of FASB ASC 505-50The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement. Stock-based compensation related to non-employees is accounted for based on the fair value of the related stock or options or the fair value of the services, whichever is more readily determinable in accordance with FASB ASC 718.

 

41


 

 

Recent Accounting Pronouncements

 

On April 10, 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. This standard was effective for the Company on January 1, 2015. The Company does not expect significant impact to the financial statements upon implementation of ASU No. 2014-08.

 

On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU No. 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard will be effective for the Company on November 1, 2017. Early application is not permitted. The Company is currently evaluating the impact of ASU No. 2014-09.

 

On August 27, 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which is intended to define management’s responsibility to evaluate whether there is substantial doubt about the Company’s ability to continue as a going concern and to provide related footnote disclosures. This standard will be effective for the Company for the year ending on October 31, 2016. Early application is permitted. The Company is currently evaluating the impact of ASU No. 2014-15.

 

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 entity’s 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 Company’s 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.

 

 

 

42

 


 

 

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 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 $100,000 due March 22, 2015.

  

Payment of $125,000 annually beginning 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 $500,000 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.

 

43


 

 

NOTE 5. EQUIPMENT, NET

 

Equipment, net consists of the following: 

 

 

 

Estamated

Useful

Lives

 

 

 

 

 

 

 

 

October 31,

2014

 

October 31,

2013

 

 

 

 

 

 

 

 

 

 

 

Mining and other equipment

3-5 years

 

$

842,487

 

$

772,418

Less: accumulated depreciation

 

 

 

(401,925)

 

 

(243,445)

 

 

 

$

440,562

 

$

528,973

 

Depreciation expense for the twelve months ended October 31, 2014 and 2013 was $159,842 and $144,701 respectively.

 

NOTE 6. CERTAIN RELATIONS AND RELATED PARTY TRANSACTIONS

 

The following relationships are material or are related as indicated.

 

Related Party Transactions

 

WMTN entered into a Consulting Agreement with WestMountain Asset Management, Inc. (“WASM and WASM Agreement”), a WMTN shareholder. Under the terms of the WASM Agreement, WASM agreed to advise WMTN on the acquisition of TMC, funding of WMTN and strengthening the WMTN balance sheet during the period ending December 31, 2011. WASM received a Warrant for 925,000 shares at $0.001 per share.   During the year ended October 31, 2011 WASM exercised 873,000 of the 925,000 warrants.  WMTN agreed to file a registration statement with the SEC with regard to the shares issuable upon exercise of the warrant within ninety days on a best efforts basis. As of January 21, 2014, WASM had exercised the remaining 52,000 warrants.

 

The Company has four full-time and part-time employees. The Company shares offices with Minex Exploration LLP (“Minex”), an Idaho partnership affiliated with the Company’s Chief Executive Officer. Also, the Company utilizes Minex contractors for exploration and development of the Alaska property. The Company has recorded accounts payable and accrued payable for related party of $670,106 and $754,127 as of October 31, 2014 and October 31, 2013, respectively.

 

Secured Promissory and Promissory Notes with BOCO

 

From time to time, the Company entered into promissory notes and other agreements with BOCO related to loans from BOCO to the Company.  The current status of BOCO loans to the Company and their terms are described in Note 7, Promissory Notes.

 

Promissory Notes with Silver Verde May Mining Company, Inc.

 

On April 30, 2012 the Company entered into Promissory Note Documents with Silver Verde May Mining Company Inc. (“SVM”), a party related to an existing shareholder and a Director of the Company. Under the Promissory Note Documents, the Company issued Convertible Promissory Notes (“SVM Notes”) in the principal amounts totaling $85,000. The Notes were due November 6, 2012 and provide for interest at 5% payable in arrears. The SVM Notes are convertible into common stock at $1.00 per share. In addition, the Company issued 42,500 shares of restricted common stock to SVM in connection with the issuance of the SVM Notes that was expensed to interest at $1.00 per share or $42,500 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 July 31, 2013. As of October 31, 2014, the principal and accrued interest due on the notes is $37,123.  As of October 31, 2014, the Company has repaid $53,867 to SVM. On October 31, 2013, the Company entered into the Second Amendment to Convertible Promissory Note extending the due date to October 31, 2014.  We are currently in negotiations with the lender to extend the note.

 

44


 

 

 

 

NOTE 7. PROMISSORY NOTES

 

As of October 31, 2014 and October 31, 2013, the Company has the following promissory notes outstanding:

 

 

 
 

 

October 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

 

 

31,133

Total

$

5,583,248

 

$

3,083,248

 

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 Company’s assets to secure the Company’s 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 October 31, 2014, the principal and accrued interest due on the note is $2,497,564. 

 

45


 

 

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 Company’s 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 Company’s 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 Company’s assets to secure the Company’s performance.   As of October 31, 2014, the principal and accrued interest due on the note is $761,575.  This note is in default.  The default interest rate in effect is 45% at October 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 Holder’s 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 Company’s 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 Company’s 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.

 

 

46


 

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”).

 

 

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 Company’s assets to secure the Company’s performance under the June 2013 Note.  As of October 31, 2014, the principal and accrued interest due on the note is $726,027.  This note is in default. The default interest rate in effect is 45% at October 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 Holder’s 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 Company’s 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 Company’s 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 October 31, 2014, the principal and accrued interest due on the note is $1,243,507.  This note currently is in default.  The default interest rate in effect is 45% at October 31, 2014. $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. The default interest rate in effect is 45%. As of October 31, 2014, the principal and accrued interest due on the note is $112,583.

 

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. The default interest rate in effect is 45%. As of October 31, 2014, the principal and accrued interest due on the note is $224,333.

 

 

47


 

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. The default interest rate in effect is 45%. As of October 31, 2014, the principal and accrued interest due on the note is $111,875.

 

 Promissory Note with BOCO dated June 30, 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. The default interest rate in effect is 45%. As of October 31, 2014, the principal and accrued interest due on the note is $111,000.

 

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 was due December 16, 2014 by repayment in cash.  The note bears interest at 8% per annum until paid in full.  As of October 31, 2014, the principal and accrued interest due on the note is $1,069,699.  All of the proceeds from this loan were used to acquire 100% interest in the TMC project from Raven Gold Alaska, Inc.  We are currently in negotiations with the lender to extend the note.

Andres Unsecured Promissory Notes

 

On March 21, 2012 the Company entered into Promissory Note Documents wit