UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 2009
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________to ________
COMMISSION FILE NUMBER 000-52398
WESTMONT RESOURCES, INC.
(Exact name of registrant as specified in its charter)
| NEVADA | 76-0773948 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | |
155 108th Avenue NE, Suite 150 | |
| Bellevue, WA | 98004 |
| (Address of principal executive offices) | (Zip Code) |
(206) 922-2203
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] 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 (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes [ ] No [X]
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.
| Large accelerated filer [ ] | Non-accelerated filer [ ] |
Accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of January 14, 2009, the Issuer had 1,932,660 Shares of Common Stock outstanding and 90,000 Shares of Preferred Class A Stock outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Westmont Resources Inc.
(A Development Stage Consolidated Group of Companies)
November 30, 2009
Westmont Resources Inc.
(A Development Stage Company)
| | | November 30, 2009 | | | May 31, 2009 | |
| ASSETS | | | | | | |
| Current Assets | | | | | | |
| Cash | | $ | 2,541 | | | $ | 146 | |
| Prepaid Expenses | | | 10,319 | | | | 10,319 | |
| Total Current Assets | | | 12,860 | | | | 10,465 | |
| Software | | | 209,056 | | | | 209,056 | |
| TOTAL ASSETS | | $ | 221,916 | | | $ | 219,521 | |
| | | | | | | | | |
| LIABILITIES & STOCKHOLDERS’ DEFICIT | | | | | | | | |
| Accounts Payable | | $ | 151,038 | | | $ | 40,920 | |
| Convertible Notes Payable | | | 448,845 | | | | 389,256 | |
| Due to Related Parties | | | 183,117 | | | | 224,605 | |
| TOTAL LIABILITIES | | | 783,000 | | | | 654,781 | |
| STOCKHOLDERS’ DEFICIT | | | | | | | | |
| | | | | | | | | |
| Convertible preferred stock, 25,000,000 shares authorized, with par value of $0.001. 90,000 shares issued and outstanding | | | 90 | | | | 60 | |
Common stock, 775,000,000 common shares authorized with a par value of $0.001, 1,932,660 common shares issued and outstanding. | | | 1,933 | | | | 1,933 | |
| Paid-In Capital | | | 233,068 | | | | 231,598 | |
| Deficit Accumulated during the Exploration Stage | | | (796,175 | ) | | | (688.851 | ) |
| Total Stockholders’ Deficit | | | (561,084 | ) | | | (435,260 | ) |
| TOTAL LIABILITIES & STOCKHOLDERS’ DEFICIT | | $ | 221,916 | | | $ | 219,521 | |
F-2
(The accompanying notes are an integral part of these consolidated unaudited financial statements)
Westmont Resources Inc.
(A Development Stage Company)
| | | | | | | | | | | | | | | Period from | |
| | | For the three months ended | | | For the three months ended | | | For the six months ended | | | For the six months ended | | | November 16, 2004 (Inception) Through | |
| | | November 30, 2009 | | | November 30, 2008 | | | November 30, 2009 | | | November 30, 2008 | | | November 30, 2009 | |
| Expenses | | | | | | | | | | | | | | | |
| General and Administrative | | $ | 54,053 | | | $ | 454,295 | | | $ | 108,621 | | | $ | 465,247 | | | $ | 352,022 | |
| Loss on Acquisition | | | - | | | | - | | | | - | | | | - | | | | 410,396 | |
| Mining Expenses | | | - | | | | - | | | | | | | | - | | | | 15,460 | |
| Total Expenses | | | 54,053 | | | | 454,295 | | | | 108,621 | | | | 465,247 | | | | 777,878 | |
| | | | | | | | | | | | | | | | | | | | | |
| Other Expense | | | | | | | | | | | | | | | | | | | | |
| Donated Management Services | | | - | | | | - | | | | - | | | | - | | | | (14,500 | ) |
| Interest Expense | | | 9,896 | | | | - | | | | 18,703 | | | | - | | | | 32,797 | |
| Net Loss | | | (63,949 | ) | | | (454,295 | ) | | | (127,324 | ) | | | (465,247 | ) | | | (796,175 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Deemed dividend to Preferred Shareholders | | | (1,500 | ) | | | | | | | - | | | | - | | | | (4,500 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Net Loss Available to Common Shareholders | | $ | (65,449 | ) | | $ | (454,295 | ) | | $ | (128,824 | ) | | $ | (465,247 | ) | | $ | (800,675 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Net Loss Per Common Share - Basic and Diluted | | $ | (0.03 | ) | | $ | (0.51 | ) | | $ | (0.07 | ) | | $ | (0.63 | ) | | | N/A | |
| | | | | | | | | | | | | | | | | | | | | |
| Weighted Average Shares Outstanding | | | 1,932,660 | | | | 899,000 | | | | 1,932,660 | | | | 738,000 | | | | N/A | |
F-3
(The accompanying notes are an integral part of these consolidated unaudited financial statements)
Westmont Resources Inc.
(A Development Stage Company)
| | | | | | | | | Period from | |
| | | For the six months ended | | | For the six months ended | | | November 16, 2004 (Inception) Through | |
| | | November 30, 2009 | | | November 30, 2008 | | | November 30, 2009 | |
| OPERATING ACTIVITIES | | | | | | | | | |
| Net loss | | $ | (127,324 | ) | | $ | (465,247 | ) | | $ | (796,175 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities | | | | | | | | | | | | |
| Common shares issued for services | | | - | | | | 39,500 | | | | 39,500 | |
| Preferred shares issued for service | | | 1,500 | | | | - | | | | 4,500 | |
| Note payable assumed for services | | | - | | | | 401,997 | | | | 387,896 | |
| Changes in operating assets and liabilities: | | | | | | | | | | | | |
| Accounts Payable | | | 121,279 | | | | 820 | | | | 167,890 | |
| Prepaid expenses | | | - | | | | - | | | | 57,148 | |
| Net cash used in Operating Activities | | | (4,545 | ) | | | (22,930 | ) | | | (139,241 | ) |
| | | | | | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | | | | | |
| Proceeds from issuance of common stock | | | - | | | | - | | | | 82,160 | |
| Net advance from related parties | | | 6,940 | | | | 26,064 | | | | 59,622 | |
| Net cash provided by Financing Activities | | | 6,940 | | | | 26,064 | | | | 141,782 | |
| Net change in cash for period | | | 2,395 | | | | 3,134 | | | | 2,541 | |
| Cash at beginning of period | | | 146 | | | | 33 | | | | - | |
| Cash at end of period | | $ | 2,541 | | | $ | 3,167 | | | $ | 2,541 | |
| | | | | | | | | | | | | |
| Non-cash investing and financing activities | | | | | | | | | | | | |
| Common stock for partial conversion of convertible note | | $ | - | | | $ | - | | | $ | 65,631 | |
| Net assets from Get2Networks | | $ | - | | | $ | - | | | $ | 43,300 | |
| Conversion of advances to convertible note | | $ | 48,428 | | | $ | - | | | $ | 48,428 | |
| Reverse stock split 50:1 | | $ | 97,640 | | | $ | - | | | $ | 97,640 | |
F-4
(The accompanying notes are an integral part of these consolidated unaudited financial statements)
Westmont Resources Inc.
(A Development Stage Company)
Notes to the Consolidated Unaudited Financial Statements 1. Basis of Presentation
The accompanying unaudited interim financial statements of Westmont Resources Inc. (“Westmont”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with Westmont’s audited 2009 annual financial statements and notes thereto contained in Westmont’s Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods present have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements, which would substantially duplicate the disclosure required in Westmont’s fiscal 2009 financial statements have been omitted.
On March 9, 2005, the Company formed a wholly owned subsidiary, known as Norstar Explorations Ltd. (“Norstar”), a company incorporated in British Columbia, Canada.
On November 21, 2008, the Company entered into a Share Purchase Agreement whereby the Company acquired all the issued and outstanding shares of common stock of Avalon International Inc. (“Avalon”), a Washington corporation, in exchange for 450,000 split-adjusted shares of common stock of the Company.
On March 1, 2009, the Company entered into a Share Purchase Agreement whereby the Company acquired all the issued and outstanding shares of common stock of Get2Networks, Inc. (“Get2Networks”), a Nevada corporation, in exchange for 866,000 split-adjusted shares of common stock of the Company.
These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries from the date of inception (Norstar); and from the date of acquisition (Avalon and Get2Networks). All significant inter-company balances and transactions have been eliminated on consolidation.
2. Going Concern
These financial statements have been prepared on a going concern basis, which implies Westmont will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on raising capital to fund its business plan and ultimately to attain profitable operations. As of November 30, 2009, Westmont has accumulated a loss carry over since inception. Accordingly, these factors raise substantial doubt as to the Company's ability to continue as a going concern. The Company is intending to fund its initial operations by way of issuing Founders' shares and entering into a private placement offering.
These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should Westmont be unable to continue as a going concern.
3. Capital Stock
On October 26, 2009, the Company affected a 50:1 reverse stock-split of its issued and outstanding common stock and convertible preferred stock. All per share amounts have been retroactively restated to reflect the reverse stock-split.
F-5
4. Convertible Preferred Stock
On October 18, 2009, Westmont issued 30,000 split-adjusted preferred shares to Alpha-Omega Tech Group, Inc for services provided to the Company. These preferred shares have 160 votes per share, and each share is convertible at the option of the holder at any time following the second year anniversary of the issuance into 160 shares of Common stock. Westmont estimated the fair value of the preferred shares at the date of issuance to be $1,500 and charged this amount as compensation expense in the consolidated statement of expenses. Westmont evaluated the embedded conversion option to determine if it was within the scope of ASC 815-15 “Accounting for Derivative Instruments and Hedging Activities (Embedded Derivatives)” and ASC 815-15 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a Company’s own Stock”. Westmont concluded that the conversion option should be classified as equity under ASC 815-15. Westmont also evaluated the convertible preferred shares to determine if it was within the scope of ASC 470-20 and determined there was intrinsic value of $1,500 associated with the conversion option. The $1,500 was fully amortized and has been reflected in the consolidated statement of expenses as a deemed dividend for the six-month period ending November 30, 2009, as there was no redemption period for the preferred stock.
5. Convertible Notes Payable
On October 9, 2009, the Company entered into a promissory note with Andrew Jarvis related to advances previously made by Andrew Jarvis for the Company in the principal amount of $48,428. Prior to this agreement, the advances were not subject to a written agreement. The note bears an annual interest rate of 5% and is due on May 31, 2010. Upon default of the note and at the option of the holder, the holder may convert the outstanding amount of the note into common shares of the borrower at a discount to market price of 50%, where market price is equal to the average closing share price over 20 day trading range immediately preceding the date of default. These advances were included in Due to Related Parties as of August 31, 2009 and were reclassified to Convertible Notes Payable on the accompanying balance sheet as a result of this amendment.
6. Related Party Balance and Transactions
As of November 30, 2009 and May 31, 2009, directors of the Company are owed for expenses they paid on behalf of the Company in the amount of $231,545 and $224,605 respectively.
| · | The advances made by Sally Vilardi and Glenn McQuiston (The Company’s President and Director) to Get2Networks Inc., are secured and bear an annual interest rate of 8% and are due on demand. |
7. Subsequent Events
The company evaluated subsequent events through the filing date and determined there was no transaction requiring disclosure.
F-6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained in this Quarterly Report constitute "forward-looking statements". These statements, identified by words such as “plan”, "anticipate", "believe", "estimate", "should", "expect" and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements reflect the current views of management with respect to future events and are subject to risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from those described in the forward-looking statements. Such risks and uncertainties include those set forth under Part II – Item 1A “Risk Factors” and elsewhere in this Quarterly Report. We advise you to carefully review the reports and documents we file from time to time with the United States Securities and Exchange Commission (the “SEC”), particularly our Annual Reports on Form 10-KSB or Form 10-K and our Current Reports on Form 8-K.
As used in this Quarterly Report, the terms "we", "us", "our", “Westmont” and the “Company” mean Westmont Resources, Inc. and its subsidiaries unless otherwise indicated. All dollar amounts in this Quarterly Report are in U.S. dollars unless otherwise stated.
Introduction
Westmont Resources, Inc. is a development stage company and was incorporated in Nevada on November 14, 2004, to historically engage in the acquisition and exploration of mineral properties. However, in the later part of 2008, the Company’s management and Board of Directors deemed it to be in the best interests of the Company and its stockholders for the Company to diversify its holdings across a broader range of industry segments. Doing so would provide greater growth potential as well as balance cyclical downturns in the mining industry. On November 21, 2008, we closed a transaction whereby we acquired all of the capital stock of Avalon International, Inc. a Washington Corporation. Additionally, on March 1, 2009, we acquired Get2Networks, Inc., a Washington corporation. As a result, of these two acquisitions, Westmont has moved into the software and technology development industry.
Technology Industry Segment
get2networks, inc., a Washington corporation, has two (2) brand lines, i.e., get2networks (“g2n”) and Your2ndVoice (“Y2V”)
g2n provides a media services platform, which delivers, automated voice calling to businesses in the health and personal care, automotive, financial, hospitality, non-profit, and relationship marketing sectors. This automated solution provides brand consistency with each message and is a cost-effective way to deliver mission critical information. The system has been effectively used by premier brands.
Marketing distribution is done through two channels. The first is an integrated solution with business management software providers and web-base CRM providers such as Salesforce.com. This solution offers one-to-one personalized voice messages compiled on-the-fly to include both customer and vendor specific information and interactivity to accept, decline or be transferred to a unique location. The second is direct self-service and enables the delivery of one voice message to an unlimited number of recipients.
g2n uses the most popular consumer messaging platforms to conveniently send interactive reminders and personalized automated notifications delivering time-sensitive information. Approximately 650,000 establishments compose the target markets. The estimated annual messages generated by these establishments approaches 15 billion.
With g2n businesses and their customers have the choice to use the communications methods that work for their unique situation and needs.
g2n messaging engine™
| | * | IVR - interactive voice response |
| | * | VOICE - fully automated interactive voice messaging |
| | * | SMS - text messaging via cell phones or pagers |
| | * | IM - instant messaging 2-way communication to PCs, PDA’s and cell phones |
| | * | E-mail - scheduled reminders, updates, news |
Market
g2n' serves a large, existing market, with significant growth fueled by major PMS (practice management) and BMS (business management software) taking their products online.
| | 1. | Banks and Credit Card Companies |
| | * | Save customers time and money through the rapid intervention of alert notifications for unauthorized debits, account activity including fraud or identity theft. |
| | 2. | Medical and Personal Care |
| | * | Improve customer satisfaction while improving productivity with customer selected reminders and treatment plan notifications for the entire family. |
| | * | Cut expenses and increase profits with automated reminders, and interactive confirmations reducing no-show spots. |
Vertical Industry Applications
Cross-Industry Applications
Products
g2n's products work with existing applications to help any business operate more efficiently. By providing more choice and convenience for both consumers and business customers, everybody benefits.
IVR - interactive voice response
VOICE - fully automated voice messaging
SMS - text messaging via cell phones or pagers
IM - instant messaging 2-way communication to PCs, PDAs and cell phones
E-mail - scheduled reminders, updates, news
| | · | get2appointments - Real-time reminders for customers and patients |
| | · | get2markets - Instant access to target market |
| | · | get2members - Up-to-the-minute communication with special-interest group |
Solutions
g2n solutions are ideal for small- to medium-sized personal service businesses, including automotive, community projects, education, entertainment, health and fitness, medical, real estate, retail, salons and spas, travel, wellness, and all public and private organizations, clubs, committees and special interest groups.
g2n - - Messaging Engine
For professional practices or business management software companies serving firms that supply professional services, we offer Web-based add-on solutions for existing product lines. These solutions are designed for rapid deployment and integrate with all industry standard platforms. Our solutions can be private-labeled, co-branded, or sold under the g2n brand as an ASP solution.
IVR - interactive voice response
VOICE - fully automated voice messaging
SMS - text messaging via cell phones or pagers
IM - instant messaging 2-way communication to PCs, PDAs and cell phones
E-mail - scheduled reminders, updates, news
Competition
Other companies who offer fee-based automated voice broadcast services targeted at businesses are Vontoo, Varolii, Televox and VoiceShot. Others like IPing, GotVoice, and Pinger and SnapVine offer voice broadcasting services to consumers.
Your2ndVoice (Y2V) provides a media services platform, which delivers automated voice calling and enables the delivery of one voice message to an unlimited number of recipients. Y2V is an advertiser supported service free to consumers which enable brands to leverage user-generated content in one-on-one interactions with consumers.
A number of developments, tapping the advertising potential of both the phone and personalized audio, have enabled the adoption of Y2V. There is a push among the major players, Google, Microsoft, News Corp, and now Facebook to name a few, to capture the digital advertising opportunities in both audio and mobile. This developing infrastructure will accelerate the adoption of Y2V.
Google has revealed plans for a free phone service, supported entirely through ad revenue along with an audio component to their existing Ad Network. Other industry initiatives include audio watermarking to track audio ads digitally and the increased interest in both speech recognition and text-to-speech to expand advertising. Meanwhile, global spending on mobile phone advertising is growing at a feverish pace and is projected to top online paid-search advertising within five years.
The Problem
Consumer brands need additional ways and means to reach their target markets, particularly women. They need more advertising real-estate, to increase response rates and build brand loyalty. They are constantly seeking new ways to connect with women in meaningful and relevant dialogues. Brands know that if they acquire a customer at a key life-stage she will stay loyal forever. Women want relationships with brands and are increasingly embracing technology but little is tailored to meet their specific needs. Most of the available solutions are too impersonal, ineffective, inconvenient, or costly.
Solution
Y2V is an audio advertising - -medium which acquires subscribers with a free voice-calling service in exchange for personal information. Consumers have demonstrated a willingness to accept ads in exchange for a free service. Each solution provides unique caller ID, interactivity to accept or decline, and results are tracked in real-time online providing easy access to data which can be integrated into other media management systems.
A voice message is an immediate in-the-moment, and personal channel for brands to communicate with their entire target audience. Voice calling and receiving is ubiquitous allowing brands to reach 100% of their customers at the same time. Interactivity provides a direct connection to call-centers and pre-qualification for offers. Results can be tracked and delivered back to advertisers within twenty-four hours of campaign deployment.
Y2V delivers relevant voice content, based on a woman’s life stages, directly to her personal phone. Three types of content are made available; user-generated, editorial and advertising. For the user-generated content a woman will be able to send a personal message in her own voice about her engagement, upcoming wedding, new baby, job or home to any number of friends’ phones at the push of a button. The editorial content will be short helpful voice tips and alerts from partner sites such as, beauty, fashion or lifestyle. The advertiser content will be delivered in two ways, the first will be short promotions appended to the editorial content messages. The second will be independent advertiser communications uniquely personalized and sent directly to consumers.
Women will sign-up at partner sites and receive the free calling service, tips, and special offers. They can record personal voice messages online or on the go, send them, track responses, easily manage their calendars and contacts, and add a widget to their social network pages. They will also be able to create their own online message library from which they can retrieve and forward any messages, including helpful tips and offers, to friends and families providing a rich viral opportunity.
The web-based platform is designed to be easily plugged into existing media management tools providing advertisers with the ROI accountability they require. The product road map includes user content search, advertiser matching, reporting, and tracking. Technology developments include VOIP and VoiceXML, SMS and mobile WAP.
The company’s affiliate in the United Kingdom, in conjunction with Life Cycle Marketing, has successfully deployed like offers with content via the phone to women. The response rates to these offers through this method were consistently in the range of 20%. While this may not translate directly to the same success rate in the US, these results do provide a positive indicator and are encouraging.
The Market
The market is the $200 billion now spent by brands to acquire access to women, 25 to 65, who control $2.0 trillion in spending. Y2V harnesses for these brands the power of the human voice to communicate in-the-moment and personally with their target audience.
The target is women, ages 25 to 65, experiencing major life cycle events. The immediate addressable markets are the 2.3 million prospective brides, 4.25 million expectant mothers, and 40 million homemakers with children and/or aging parents. They make 77% of household buying decisions and control $2 trillion in purchasing power, 80% are online. They will be acquired through sign-ups on relevant product and community sites targeted to these life stages and events.
Marketing & Distribution
To build consumer awareness and critical mass, we are developing partnerships with targeted women’s sites and key agencies who manage brand dollars. The initial sites are those who rely on advertising for revenue and who focus on new brides, expectant mothers or fashion, such as The Knot, Baby Center and Glam. The advantages for these partner sites are; a free useful tool for consumers designed to bolster member acquisition and retention, an additional advertising medium or real-estate, online campaign tracking in real-time and easy access to data which can be integrated into other media management systems.
Our client brands, which have used recorded voice messages as part of their marketing campaigns, have seen increased response rates. One client, Autism Speaks, reported an up to three-fold increase in online traffic and donations from a voice campaign. The response to a personal voice message from the CEO of another client to thousands of independent distributors has dramatically increased event attendance and resulting sales.
Mining Industry Segment
We currently own a 100% undivided interest in one mineral property, the “GB 1 (Tenure #601482), GB 2 (Tenure #601483) and GB 3 (Tenure #601484) Claims”, located in the Province of British Columbia, Canada, that we have previously called the “JB 1 Claim” and the “JB 2 Claim”. During the year ended May 31, 2009, the Company restaked the JB 1 Claim and the JB 2 Claim into the GB 1, GB 2 and GB 3 mineral properties, (collectively the “GB Claims”). The GB Claims are located in northwestern British Columbia, approximately 31 miles south of the town of Atlin. Due to restrictions set by the Province of British Columbia on the ownership of mineral claims, title to the GB Claims is currently held by our wholly owned subsidiary, Norstar Explorations Ltd., a British Columbia company.
Over the next twelve months, it is the intention of the management and Board of Directors to sell the NorthStar Explorations Ltd operations to a natural resource company that can best develop the operations to its fullest intent. During this transaction period, management will continue to conduct further mineral exploration activities on the GB1, GB2 and GB3 claims (formerly known as the JB1 claim) in order to assess whether the property contains mineral reserves capable of commercial extraction. Currently, there are no known mineral reserves on the GB1, GB2 and GB3 claims. Our exploration program is designed to explore for commercially viable mineral deposits, particularly gold, copper and silver. We have not, nor have any predecessors, identified any commercially exploitable reserves of these minerals on the GB1, GB2 and GB3 claims.
We have not earned any revenues to date. We do not anticipate earning revenues until such time as we enter into commercial production of our mineral properties. We are presently in the exploration stage of our business and we can provide no assurance that we will discover commercially exploitable levels of mineral resources on our properties, or if such deposits are discovered, that we will enter into further substantial exploration programs.
Compliance with Government Regulations
We will be required to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the exploration of minerals in the Province of British Columbia. The main agency that governs the exploration of minerals in the Province of British Columbia is the British Columbia Ministry of Energy, Mines and Petroleum Resources (“Ministry of Mines”).
The Ministry of Mines manages the development of British Columbia's mineral resources, and implements policies and programs respecting their development while protecting the environment. In addition, the Ministry of Mines regulates and inspects the exploration and mineral production industries in British Columbia to protect workers, the public and the environment.
The material legislation applicable to our mineral exploration and development activities are the British Columbia Mineral Tenure Act, and the British Columbia Mines Act, as well as the Health, Safety and Reclamation Code, promulgated under the Mines Act.
The Mineral Tenure Act and its regulations govern the procedures involved in the location, recording and maintenance of mineral titles in British Columbia. The Mineral Tenure Act also governs the issuance of leases, which are long-term entitlements to minerals.
All mineral exploration activities carried out on a mineral claim or mining lease in British Columbia must be done in compliance with the Mines Act. The Mines Act applies to all mines during exploration, development, construction, production, closure, reclamation and abandonment. It outlines the powers of the Chief Inspector of Mines, to inspect mines, the procedures for obtaining permits to commence work in, on or about a mine and other procedures to be observed at a mine. Additionally, the provisions of the Health, Safety and Reclamation Code for mines in British Columbia contain standards for employment, occupational health and safety, accident investigation, work place conditions, protective equipment, training programs, and site supervision.
Additional approvals and authorizations may be required from other government agencies, depending upon the nature and scope of the proposed exploration program. If the exploration activities require the falling of timber, then the Ministry of Forests must issue either a free use permit or a license to cut. Items such as waste approvals may be required from the Ministry of Environment, Lands and Parks if the proposed exploration activities are significantly large enough to warrant them. Waste approvals refer to the disposal of rock materials removed from the earth, which must be reclaimed. An environmental impact statement may be required.
We have not budgeted for regulatory compliance costs in the proposed work program recommended by our geological report on the GB Claims entitled “Report and Recommendations JB 1 Claim Tenure No. 530766, Atlin Mining District Northwestern British Columbia Canada” prepared by our consulting geologist on April 23, 2006.
The Mineral Tenure Act requires that a holder of title to mineral claims must spend at least $4.00 CDN (approximately $3.84 US) per hectare per year in order to keep the property in good standing. The GB Claims consist of an area of approximately 1211.62 hectares. As such, our annual fee with respect to the GB Claims is expected to be $4,846CDN in the coming three years (approximately $4,648US) and thereafter $9,692 CDN (approximately $9,230 US) each year. The GB Claims are currently in good standing until March 22, 2010.
Environmental Regulations
We will also have to sustain the cost of reclamation and environmental remediation for all exploration work undertaken. Both reclamation and environmental remediation refer to putting disturbed ground back as close to its original state as possible. Other potential pollution or damage must be cleaned-up and renewed along standard guidelines outlined in the usual permits. Reclamation is the process of bringing the land back to its natural state after completion of exploration activities. Environmental remediation refers to the physical activity of taking steps to remediate, or remedy, any environmental damage caused. The amount of these costs is not known at this time as we do not know the extent of the exploration program that will be undertaken beyond completion of the recommended work program. Because there is presently no information on the size, tenor, or quality of any resource or reserve at this time, it is impossible to assess the impact of any capital expenditures on earnings, our competitive position or on us in the event a potentially economic deposit is discovered.
If we anticipate disturbing ground during our mineral exploration activities, we will be required to make an application under the Mines Act for a permit. A permit is issued within 45 days of a complete and satisfactory application. We do not anticipate any difficulties in obtaining a permit, if needed. The initial exploration activities on the GB Claims (grid establishment, geological mapping, soil sampling, geophysical surveys) do not involve ground disturbance and as a result do not, at this time, require a work permit. Any follow-up trenching and/or drilling will require permits, applications for which will be submitted well in advance of the planned work.
If we enter the production phase, of which there is no assurance, the cost of complying with permit and regulatory environment laws will be greater because the impact on the project area is greater. Permits and regulations will control all aspects of the production program if the project continues to that stage. The regulatory requirements that we will have to meet will likely include:
| (i) | Ensuring that any water discharge meets drinking water standards; |
| (ii) | Dust generation will have to be minimal or otherwise re-mediated; |
| (iii) | Dumping of material on the surface will have to be re-contoured and re-vegetated with natural vegetation; |
| (iv) | All material to be left on the surface will need to be environmentally benign; |
| (v) | Ground water will have to be monitored for any potential contaminants; |
| (vi) | The socio-economic impact of the project will have to be evaluated and if deemed negative, will have to be re-mediated; and |
| (vii) | There will have to be an impact report of the work on the local fauna and flora including a study of potentially endangered species. |
Competition
We are an exploration stage company. We compete with other mineral resource exploration and development companies for financing and for the acquisition of new mineral properties. Many of the mineral resource exploration and development companies with whom we compete have greater financial and technical resources than us. Accordingly, these competitors may be able to spend greater amounts on acquisitions of mineral properties of merit, on exploration of their mineral properties and on development of their mineral properties. In addition, they may be able to afford greater geological expertise in the targeting and exploration of mineral properties. This competition could result in competitors having mineral properties of greater quality and interest to prospective investors who may finance additional exploration and development. This competition could adversely impact on our ability to finance further exploration and to achieve the financing necessary for us to develop our mineral properties.
Overview
The following discussion and analysis summarizes our plan of operation for the next twelve months, our results for the three months ended November 30, 2009 and changes in financial condition from May 31, 2009. The following discussion should be read in conjunction with Management’s Discussion and Analysis or Plan of Operation included in our Annual Report on Form 10-K filed in October, 2009.
We are a company with several subsidiaries diversified across a broad range of industry segments. Our original subsidiary, Norstar Explorations Ltd., is in the business of the acquisition and exploration of mineral properties.
Get2Networks is in the business of developing communication software and technology and is in the final beta testing of its software and technology known as Get2Networks and Your2ndVoice. The Avalon International subsidiary is in the business of developing natural resource projects on an international basis.
PLAN OF OPERATION
Over the next twelve months, it is the intention of the management and Board of Directors to focus all efforts and financial resources in the final development of the Get2Networks and Your2ndVoice product lines associated with our wholly owned subsidiary Get2Networks Inc. Furthermore to this end result, the management and Board of Directors and made the decision to sell the NorthStar Explorations Ltd operations and to completely merge the assets and liabilities of Avalon International Inc into Westmont Resources Inc and to terminate future operations under this subsidiary.
In order to best value the assets for sale and obtain the highest value for them, the management and Board of Directors has targeted the sale of NorthStar Exploration Ltd. to a natural resource company that can best develop the operations and claims to their fullest intent. During this transaction period, management will continue to conduct further mineral exploration activities on the GB1, GB2 and GB3 claims (formerly known as the JB1 claim) in order to assess whether the property contains mineral reserves capable of commercial extraction. The Board of Directors has identified Domestic Energy Corporation as a potential purchaser and has begun negotiations for the same.
Avalon International, Inc. assets and liabilites will be merged completely into Westmont Resources and the subsidiary will be legally struck off the State Records.
Get2Networks, Inc. plans to further develop its customer base and sales volume, as well as continue to build upon its line of products and services with capital needs of $500,000 over the next 12 months.
We anticipate that we will incur the following expenses over the next twelve months:
| Category | | Planned Expenditures Next 12 Months (US$) | |
| Legal and Accounting Fees | | $ | 25,000 | |
| Office Expenses | | $ | 125,000 | |
| Mineral Property Exploration Expenses | | $ | 1,000 | |
| Get2Networks Marketing | | $ | 250,000 | |
| Get2Networks Beta Testing and Development | | $ | 75,000 | |
| TOTAL | | $ | 476,000 | |
Revenue
We have not earned any revenues to date in our mineral exploration business. We do not anticipate earning revenues until such time as we enter into commercial production of our mineral properties or the project is sold. We are presently in negotiations for the sale of the wholly owned subsidiary NorthStar Exploration Ltd.
Get2Networks, Inc., our most recent acquisition, is in the final beta testing of its technology and software and will begin marketing its services to the general public in 3rd Qtr and 4th Qtr Fiscal Year 2010 with generation of some revenue in Fiscal Year 2010.
Avalon International, Inc. has not earned any revenues since being acquired by the Company in late, 2008. The management and Board of Directors has determined that this subsidiary will be best merged directly with Westmont Resources and legally struck off the Washington State Corporate records.
Operating Expenses
Our general and administrative expenses during the three months ended November 30, 2009 were $54,053. This is a decrease from previous years but does not represent a substantial change in operations as the loss carry over from the acquisition of Avalon International Inc. was reflected in the previous years comparative numbers skewing the comparison. We anticipate our operating expenses will increase significantly over the next twelve months as we proceed with our expansion of the marketing and development of the Get2Network software and technology.
LIQUIDITY AND CAPITAL RESOURCES
| Working Capital | | 30-Nov-09 | | | 30-Nov-08 | | | Increase/ (Decrease) | |
| Current Assets | | | 12,860 | | | | 3,167 | | | | 9,693 | |
| Current Liabilities | | | 783,000 | | | | 446,860 | | | | 336,140 | |
| Working Deficit | | | (770,140 | ) | | | (443,693 | ) | | | (326,447 | ) |
| | | Fiscal YTD | | | Previous YTD | | | Inception through | |
| Cash Flow | | 30-Nov-09 | | | 30-Nov-08 | | | 30-Nov-09 | |
| Net cash provided by Operating Activities | | | (4,545 | ) | | | (22,930 | ) | | | (139,241 | ) |
| Net cash provided by Financing Activities | | | 6,940 | | | | 26,064 | | | | 141,782 | |
| Net change in cash for period | | | 2,395 | | | | 3,134 | | | | 2,541 | |
The decrease in our working deficit at November 30, 2009 from our previous year is primarily a result of the investments and funding from the Avalon Group Ltd.
Since our inception, we have used funding from our Directors, Officers and our capital stock and debt funding to raise money for our operations. We have not attained profitable operations and are dependent upon obtaining financing to pursue our plan of operation.
We anticipate continuing to rely on debt and equity funding to continue our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any of additional sales of our equity securities or debt funding. There are no assurances that we will be able to arrange for other debt or other financing to fund our planned business activities.
OFF-BALANCE SHEET ARRANGEMENTS
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
CRITICAL ACCOUNTING POLICIES
We have identified certain accounting policies, described below, that are most important to the portrayal of our current financial condition and results of operations. Our significant accounting policies are disclosed in the notes to the audited financial statements included in our Annual Report on Form 10-K.
Exploration Expenditures
We follow a policy of capitalizing mineral property acquisition costs and expensing mineral property exploration expenditures until a production decision in respect of the project and until we are reasonably assured that it will receive regulatory approval to permit mining operations, which may include the receipt of a legally binding project approval certificate.
Management periodically reviews the carrying value of its investments in mineral leases and claims with internal and external mining related professionals. A decision to abandon, reduce or expand a specific project is based upon many factors including general and specific assessments of mineral deposits, anticipated future mineral prices, anticipated future costs of exploring, developing and operating a production mine, the expiration term and ongoing expenses of maintaining mineral properties and the general likelihood that we will continue exploration on such project. We do not set a pre-determined holding period for properties with unproven deposits; however, properties which have not demonstrated suitable metal concentrations at the conclusion of each phase of an exploration program are re-evaluated to determine if future exploration is warranted, whether there has been any impairment in value and that their carrying values are appropriate.
If an area of interest is abandoned or it is determined that its carrying value cannot be supported by future production or sale, the related costs are charged against operations in the year of abandonment or determination of value. The amounts recorded as mineral leases and claims represent costs to date and do not necessarily reflect present or future values.
Our exploration activities and proposed mine development are subject to various laws and regulations governing the protection of the environment. These laws are continually changing, generally becoming more restrictive. We have made, and expect to make in the future, expenditures to comply with such laws and regulations.
The accumulated costs of properties that are developed on the stage of commercial production will be amortized to operations through unit-of-production depletion.
Donated Capital
In accordance with ASC 720-25, “Accounting for Contributions Made”, we reflect donated capital, such as outright gifts to us by way of donated management services provided, in the Statement of Operations.
Donated management services are recognized if the services received (a) create or enhance non-financial assets, or (b) require specialized skills, are provided by individuals possessing these skills, and would typically need to be purchased if not provided by donation.
Potential Sale of Subsidiary
On December 14, 2009, the Company entered into negotiations with Domestic Energy Corporation for the subsequent sale of the wholly owned subsidiary NorthStar Exploration Ltd. The transaction if completed between the parties will also require a related party disclosure, as Domestic Energy Corporation is current controlled by The Avalon Group Ltd who directly owns 85% of the issued and outstanding shares of Domestic Energy Corporation. The Avalon Group Ltd currently controls indirectly 33.32% of the Company’s Common Stock and 40% of the Company’s Preferred Class A Stock giving them a combined indirect voting control of 39.32% in the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable to a small reporting Company.
ITEM 4. CONTROLS AND PROCEDURES.
(A) Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the "Act") is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
As of the end of the period covered by this Quarterly Report, we carried out an evaluation, under the supervision and with the participation of our President and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our President and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective.
(B) Changes in Internal Controls over Financial Reporting
In connection with the evaluation of the Company's internal controls during the Company's last fiscal quarter covered by this report required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, the Company has determined that the addition of a new President and a new Chief Financial Officer have had a material effect, and will have an ongoing material affect, on the quality and effectiveness of the Company's internal controls over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On October 26, 2009, Westmont issued One Million Five Hundred Thousand (30,000) split-adjusted shares of Series A Preferred Stock to Alpha-Omega Tech Group Inc for services provided to the Company. These shares of Preferred Stock have 160 votes per share, and each share of Preferred Stock converts into 160 shares of Common Stock. Westmont estimated the fair value to total $1,500 and charged this amount as compensation expense.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
By Written Consent of Stockholders dated October 26, 2009, a super majority of issued and outstanding shares of Common Stock (72.75%) and Preferred Stock (66.67%), were voted to approve two resolutions of the Board of Directors.
| (i) | The approval of a 1 – for – 50 reverse split of the issued and outstanding shares of Common Stock such that each fifty (50) shares of Common Stock, $0.001 par value, issued and outstanding immediately prior to the effective date (the “Old Common Stock”) shall be recombined, reclassified and changed into one (1) share of the corporation's Common Stock, $0.001 par value (the “New Common Stock”), with any fractional interest rounded up to the nearest whole share; |
| (ii) | The approval of a 1 – for – 50 reverse split of the issued and outstanding shares of Class A Preferred Stock such that each fifty (50) shares of Class A Preferred Stock, $0.001 par value, issued and outstanding immediately prior to the effective date (the “Old Class A Preferred Stock”) shall be recombined, reclassified and changed into one (1) share of the corporation's Class A Preferred Stock, $0.001 par value (the “New Class A Preferred Stock”), with any fractional interest rounded up to the nearest whole share; and |
| (iii) | To ratify the actions of the Board of Directors who voted to remove Peter Lindhout as a Director. |
For further information, reference is made to the Definitive Information Statement on Schedule 14-C, which was filed with the Securities and Exchange Commission on January 12, 2010.
ITEM 5. OTHER INFORMATION.
| | 1. | August 20, 2009: Westmont Resources, Inc., has relocated its offices. The Company’s new address is 155 – 108th Avenue NE, Suite 150, Bellevue, WA 98004. The Company’s new telephone number is (206) 922-2203 and its fax number is 425-491-2838. |
| | 2. | October 13, 2009: Andrew Jarvis our Secretary and Director resigned from both positions as well as his management and Directorship in our wholly owned subsidiary NorthStar Exploration Ltd. Mr. Glenn McQuiston our Chief Financial Officer was appointed the Company Secretary. Dr. Fischer our Chief Executive Officer was appointed President, Secretary and Director of NorthStar Exploration Ltd. |
| | 3. | October 16, 2009: Peter Lindhout our President resigned from his position as President. Mr. Glenn McQuiston our Chief Financial Officer was appointed as President. |
ITEM 6. EXHIBITS.
| Exhibit | |
| Number | Description of Exhibits |
| 3.1 | Articles of Incorporation. (1) |
| 3.2 | Bylaws, as amended.(1) |
| 4.1 | Form of Share Certificate.(1) |
| 10.1 | Purchase Agreement dated March 21, 2005 between Andrew Jarvis and Norstar Explorations Ltd. (1) |
| 10.2 | Share Purchase Agreement dated November 21, 2008 between Westmont Resources, Inc. and the Shareholders of Avalon International, Inc. (3) |
| 14.1 | Code of Ethics.(2) |
| 21.1 | List of Subsidiaries. |
| 31.1 | Certification of Chief Executive Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 31.2 | Certification of Chief Financial Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 32.1 | Certification of Chief Executive Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 32.2 | Certification of Chief Financial Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| (1) | Filed with the Securities and Exchange Commission on October 13, 2006 as an exhibit to our Registration Statement on Form SB-2. |
| | |
| (2) | Filed with the Securities and Exchange Commissions on September 11, 2007 as an exhibit to our Annual Report on Form 10-KSB. |
| | |
| (3) | Filed with the Securities and Exchange Commission on November 26, 2008 as an exhibit to our Current Report on Form 8-K. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 under Section 13 or 15(d), the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Dated: January 12, 2010 | WESTMONT RESOURCES, INC. |
| | |
| | |
| | By: /s/ Bruce E. Fischer |
| | Bruce E. Fischer, Chief Executive Officer |
