Washington, D.C. 20549
Commission File No. 0-53030
Indicate by check mark whether the registrant: (1) 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. 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 such shorter period that the registrant was required to submit and post such files. Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “small reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer [] | Accelerated filer [] |
| Non-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]
The number of shares outstanding of the registrant's common stock, as of the latest practicable date, May 10, 2017, was 9,517,402.
PART I FINANCIAL INFORMATION
For purposes of this report, unless otherwise indicated or the context otherwise requires, all references herein to "WestMountain Company "we," "us," and "our," refer to WestMountain Company, a Colorado corporation, formerly known as WestMountain Asset Management, Inc., and our wholly-owned subsidiaries WestMountain Business Consulting, Inc., WestMountain Valuation Services, Inc., and WestMountain Allocation Analysis, Inc.
ITEM 1. CONDENSED FINANCIAL STATEMENTS
| WestMountain Company | |
| Condensed Consolidated Balance Sheets | |
| | |
| | | March 31, | | | December 31, | |
| | | 2017 | | | 2016 | |
| Assets | | (Unaudited) | | | | |
| Current Assets: | | | | | | |
| Cash and cash equivalents | | $ | 647,531 | | | $ | 685,128 | |
| Accounts receivable, related parties | | | 12,000 | | | | 6,000 | |
| Accounts receivable | | | 300 | | | | - | |
| Income tax receivable | | | 50,624 | | | | 40,501 | |
| Prepaid expenses | | | 9,695 | | | | 4,563 | |
| Total current assets | | | 720,150 | | | | 736,192 | |
| | | | | | | | | |
| Property and equipment, net of accumulated depreciation of | | | 4,117 | | | | 4,918 | |
| $5,488 and $4,687, respectively | | | | | | | | |
| Investments in nonmarketable securities, at cost | | | 1,645 | | | | 1,645 | |
| Total assets | | $ | 725,912 | | | $ | 742,755 | |
| | | | | | | | | |
| Liabilities and Shareholders' Equity | | | | | | | | |
| Current Liabilities: | | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 66,399 | | | $ | 40,385 | |
| Total current liabilities | | | 66,399 | | | | 40,385 | |
| Total liabilities | | | 66,399 | | | | 40,385 | |
| | | | | | | | | |
| Shareholders' Equity: | | | | | | | | |
| Preferred stock, $0.10 par value; 1,000,000 shares authorized, | | | - | | | | - | |
| none issued and outstanding | | | | | | | | |
| Common stock, $0.001 par value; 50,000,000 shares authorized, | | | | | | | | |
| 9,517,402 shares issued and outstanding | | | 9,518 | | | | 9,518 | |
| Additional paid-in capital | | | 927,355 | | | | 927,355 | |
| Accumulated (deficit) | | | (277,360 | ) | | | (234,503 | ) |
| Total shareholders' equity | | | 659,513 | | | | 702,370 | |
| Total liabilities and shareholders' equity | | $ | 725,912 | | | $ | 742,755 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| WestMountain Company |
| Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) |
| (Unaudited) |
| | | Three Months Ended | |
| | | March 31, | |
| | | 2017 | | | 2016 | |
| | | | | | | |
| Revenue: | | | | | | |
| Advisory/consulting fees, related parties | | $ | 38,000 | | | $ | 38,000 | |
| Advisory/consulting fees | | | 2,725 | | | | 12,225 | |
| Total revenue | | | 40,725 | | | | 50,225 | |
| | | | | | | | | |
| Operating expenses: | | | | | | | | |
| Selling, general and administrative expenses | | | 93,705 | | | | 78,679 | |
| Total operating expenses | | | 93,705 | | | | 78,679 | |
| | | | | | | | | |
| Loss from operations | | | (52,980 | ) | | | (28,454 | ) |
| | | | | | | | | |
| Net loss before income taxes | | | (52,980 | ) | | | (28,454 | ) |
| | | | | | | | | |
| Income tax benefit | | | (10,123 | ) | | | (4,520 | ) |
| Net loss | | $ | (42,857 | ) | | $ | (23,934 | ) |
| Other comprehensive loss | | | | | | | | |
| Unrealized loss on investments in marketable equity securities, net of tax | | | - | | | | (5,386 | ) |
| Comprehensive loss | | $ | (42,857 | | | $ | (29,320 | ) |
| | | | | | | | | |
| Basic and Diluted net (loss) income per share | | $ | (0.00 | ) | | $ | (0.00 | ) |
| Basic and Diluted weighted average common shares outstanding | | | 9,517,402 | | | | 9,517,402 | |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| WestMountain Company | |
| Condensed Consolidated Statements of Cash Flows | |
| (Unaudited) | |
| | | Three months ended | |
| | | March 31, | |
| | | 2017 | | | 2016 | |
| Cash flows from operating activities: | | | | | | |
Net loss | | $ | (42,857 | ) | | $ | (23,934 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | |
| Depreciation and amortization | | | 800 | | | | 514 | |
| Deferred income tax (benefit) expense | | | - | | | | (4,520 | ) |
| Changes in operating assets and operating liabilities: | | | | | | | | |
| Prepaid expenses and other current assets | | | (5,132 | ) | | | (1,938 | ) |
| Accounts receivable | | | (300 | ) | | | (7,715 | ) |
| Accounts receivable, related parties | | | (6,000 | ) | | | (32,000 | ) |
| Accounts payable and accrued liabilities | | | 26,015 | | | | 5,143 | |
| Income tax receivable | | | (10,123 | ) | | | (6,979 | ) |
| Net cash used in operating activities | | | (37,597 | ) | | | (71,429 | ) |
| | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | |
| | | | | | | | |
| Purchases of investments | | | - | | | | (30,000 | ) |
| Net cash used in investing activities | | | - | | | | (30,000 | ) |
| | | | | | | | | |
| Net change in cash and cash equivalents | | | (37,597 | ) | | | (101,429 | ) |
| Cash and cash equivalents, beginning of period | | $ | 685,128 | | | $ | 579,971 | |
| Cash and cash equivalents, end of period | | $ | 647,531 | | | $ | 478,542 | |
| | | | | | | | | |
| Supplemental disclosure of cash flow information: | | | | | | | | |
| Cash paid during the period for: | | | | | | | | |
| Income taxes | | $ | - | | | $ | - | |
| Interest | | $ | - | | | $ | - | |
| | | | | | | | | |
| Non cash investing and financing activities: | | | | | | | | |
| Unrealized loss on investments in marketable equity securities, net of tax | | $ | - | | | $ | 5,386 | |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
WestMountain Company
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) Nature of Organization and Summary of Significant Accounting Policies
Nature of Organization and Basis of Presentation
WestMountain Company ("we", "our" or the "Company"), formerly known as WestMountain Asset Management, Inc. was incorporated in the state of Colorado on October 18, 2007 and on this date approved its business plan and commenced operations. The consolidated financial statements include the financial information of WestMountain Company and its wholly owned subsidiaries, WestMountain Business Consulting, Inc., WestMountain Allocation Analytics, Inc., and WestMountain Valuation Services, Inc. All significant intercompany accounts and transactions have been eliminated.
As a consultant to both public and private companies, we promote public visibility and market acceptance for our clients. We use a number of techniques to achieve these objectives for our clients, including developing public recognition of their business plans and strategic goals, managing investor relations, and engaging in website development and media production. We also utilize various social media outlets and services to deliver our client's message. We are paid fees for our services by our clients under written consulting agreements.
Unaudited Financial Information
The accompanying financial information as of March 31, 2017 and for the three months ended March 31, 2017 and 2016 is unaudited. In the opinion of management, all normal and recurring adjustments, which are necessary to provide a fair presentation of the Company's financial position at March 31, 2017 and its operating results for the three months ended March 31, 2017 and 2016, have been made. Certain information and footnote data necessary for a fair presentation of financial position and results of operations in conformity with accounting principles generally accepted in the United States of America have been condensed or omitted. It is therefore suggested that these financial statements be read in conjunction with the summary of significant accounting policies and notes to financial statements included in the Company's annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") for the year ended December 31, 2016. The results of operations for the three months ended March 31, 2017 is not necessarily an indication of operating results to be expected for the year.
Use of Estimates
The preparation of the consolidated financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Concentrations
During the three months ended March 31, 2017, two related party customers, Bohemian Asset Management, Inc. and Nexcore Healthcare Capital Corp. accounted for 93% of total revenue (49% and 44%, respectively). In addition, during the three months ended March 31, 2016, two related party customers, Bohemian Asset Management, Inc., and Nexcore Healthcare Capital Corp. accounted for 76% of total revenue (36% and 40%, respectively). At March 31, 2017 and December 31, 2016, one related party customer, Nexcore Healthcare Capital Corp. accounted for 100% of total related party accounts receivable.
Income Tax Receivable
As of March 31, 2017, the Company had an income tax receivable of $50,624 that is related to estimated tax payments on deposit with federal and state taxing authorities.
Investments in Marketable and Nonmarketable Securities
The Company reported its investments in marketable securities on the consolidated balance sheet as available-for-sale. At March 31, 2017 and December 31, 2016, the Company's investments had been impaired to zero. Investments were deemed to be marketable when they were investments in public companies. Investments reflect the original cost of the investments and unrealized gain/loss amounts based on the market price as of the date of the consolidated financial statements. Any tax adjustment related to the unrealized gain/loss was reflected as a deferred tax asset or liability on the consolidated balance sheet.
The Company reports its investments in nonmarketable securities on balance sheet using the cost method. Investments are deemed to be nonmarketable when they are investments in private companies. Investments in nonmarketable securities reflect the original cost of the investment.
Other comprehensive income (OCI) is made up of the unrealized gain/loss amounts related to the available-for-sale investments of the Company. The OCI balance is recorded net of tax.
(2) Investments
Investments in Available for Sale Marketable Securities
The Company's investments in available for sale marketable securities as of December 31, 2016 and March 31, 2017 were zero.
Subsequent to December 31, 2016, the Company determined that our investments in Hangover Joe's Holding Corporation and Silver Verde May Mining Co., Inc., were other than temporarily impaired due to the fact they did not have adequate trading volume, there were no financial statements available for review, and based on the Company's understanding of the financial conditions of the entities. WestMountain Gold, Inc. filed Chapter 11 of the Bankruptcy Code on March 1, 2017. Upon a complete review and analysis of the Company's available-for-sale marketable securities on December 31, 2016, management determined to record a full impairment loss, of $147,102, to the consolidated statement of operations, on all securities at December 31, 2016.
Investments in Nonmarketable Securities
The Company's investments in nonmarketable securities accounted for under the cost method as of March 31, 2017 and December 31, 2016 are summarized below.
| | March 31, 2017 | | December 31, 2016 | |
| | | | | | Market/Cost | | | | | | Fair/Cost | |
| Company Name | Shares | | Units | | Value | | Shares | | Units | | Value | |
| Nonmarketable Securities: | | | | | | | | | | | | |
| SKRP 16, Inc. | | | 200,000 | | | | - | | | $ | - | | | | 200,000 | | | | - | | | $ | - | |
| Nexcore Real Estate LLC (Common Units) | | | - | | | | 1,645,000 | | | | 1,645 | | | | | | | | 1,645,000 | | | | 1,645 | |
| WestMountain Distressed Debt, Inc. | | | 80,000 | | | | - | | | | - | | | | 80,000 | | | | - | | | | - | |
| RavenBrick (Class C Units) | | | - | | | | 11 | | | | - | | | | | | | | 11 | | | | - | |
| Totals Shares or Units | | | 280,000 | | | | 1,645,007 | | | $ | 1,645 | | | | 280,000 | | | | 1,645,000 | | | $ | 1,645 | |
(3) Stockholders Equity
Common Stock
There were 9,517,402 shares of common stock outstanding as of March 31, 2017 and December 31, 2016.
No common shares were issued or cancelled during the three months ended March 31, 2017.
(4) Related Parties
For the three months ended March 31, 2017 and 2016, the Company recorded aggregate advisory/consulting revenue of $40,725 and $50,225, respectively. Of the $40,725 recorded in 2017, $38,000 is related party revenue for services performed on behalf of Nexcore Group LP and Bohemian Asset Management, Inc. The Company, Nexcore and Bohemian are under common principal ownership.
As of March 31, 2017 and December 31, 2016, the Company had $12,000 and $6,000, respectively, of accounts receivable from related parties.
As of March 31, 2017 and December 31, 2016, the following investments in marketable and nonmarketable securities were held in related parties due to common principal ownership:
| | | March 31, 2017 | | December 31, 2016 | |
| | | | | | | | | Fair/Cost | | | | | | | | | Fair/Cost | |
| Company Name | | Shares | | | Units | | | Value | | | Shares | | | Units | | | Value | |
| Marketable Securities: | | | | | | | | | | | | | | | | | | |
| Hangover Joe's Holding Corporation | | | 868,463 | | | | - | | | $ | - | | | | 868,463 | | | | - | | | $ | - | |
| WestMountain Gold, Inc. | | | 918,000 | | | | - | | | | - | | | | 918,000 | | | | - | | | | - | |
| Total Shares or Units | | | 1,786,463 | | | | - | | | $ | - | | | | 1,786,463 | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Nonmarketable Securities: | | | | | | | | | | | | | | | | | | | | | | | | |
| Nexcore Companies LLC (Common Units) | | | - | | | | 1,645,000 | | | $ | 1,645 | | | | - | | | | 1,645,000 | | | $ | 1,645 | |
| WestMountain Distressed Debt, Inc. | | | 80,000 | | | | - | | | | - | | | | 80,000 | | | | - | | | | - | |
| Totals Shares or Units | | | 1,866,463 | | | | 1,645,000 | | | $ | 1,645 | | | | 1,866,463 | | | | 1,645,000 | | | $ | 1,645 | |
(5) Commitments and Contingencies
In the normal course of business, the Company is party to litigation from time to time. The Company maintains insurance to cover certain actions and believes that resolution of any such litigation will not have a material adverse effect on the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
The following discussion of our financial condition and results of operations should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and notes thereto included in, Item 1 in this Quarterly Report on Form 10-Q. This item contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those indicated in such forward-looking statements.
Forward-Looking Statements
This Quarterly Report on Form 10-Q and the documents incorporated herein by reference contain forward-looking statements. Such forward-looking statements are based on current expectations, estimates, and projections about our industry, management beliefs, and certain assumptions made by our management. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," variations of such words, and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. However, readers should carefully review the risk factors set forth herein and in other reports and documents that we file from time to time with the Securities and Exchange Commission, particularly Annual Reports on Form 10-K, Quarterly reports on Form 10-Q and any Current Reports on Form 8-K.
General
As a consultant to both public and private companies, we promote public visibility and market acceptance for our clients. We use a number of techniques to achieve these objectives for our clients, including developing public recognition of their business plans and strategic goals, managing investor relations, and engaging in website development and media production. We also utilize various social media outlets and services to deliver our client's message. We are paid fees for our services by our clients under written consulting agreements.
Operations
As a consultant, we provide investor relations, website development, video production, and associated marketing and media services to clients. We are paid fees for our services by our clients under written consulting agreements.
Currently, we believe that we have sufficient capital to implement our business operations or to sustain them indefinitely. We have been profitable in the past. If we can maintain our profitability, we could operate at our present level indefinitely.
Our principal executive office located at 1001-A E. Harmony Road, #366, Fort Collins, Colorado 80525. Our telephone number is (970) 223-4499.
We have not been subject to any bankruptcy, receivership or similar proceeding.
Results of Operations
The following discussion involves our results of operations for the three months ended March 31, 2017 and 2016.
For the three months ended March 31, 2017 we had advisory/consulting revenues of $40,725 compared to $50,225 for the three months ended March 31, 2016. Of the advisory/consulting fee revenue, $38,000 and $38,000, respectively, were from related parties for services performed for Nexcore Group LP and Bohemian Asset Management, Inc. The Company, Nexcore and Bohemian are under common principal ownership.
Our revenue remains subject to greater uncertainty than if we had revenue commitments from a number of clients not under common principal ownership. We could be materially impacted if the current arrangement does not continue, and we cannot replace our current clients with other clients.
Operating expenses were $93,705 and $78,679 for the three months ended March 31, 2017 and 2016, respectively. Most of the expenses are related to payroll and contract services.
For the three months ended March 31, 2017 we had a net loss of $42,857. In comparison, for the three months ended March 31, 2016 we had a net loss of $23,934. Most of the increase in net loss was a result of additional outside services recorded for filing our public SEC documents.
In 2016, the Company wrote off three of its marketable securities and two of its nonmarketable securities. As of March 31, 2017 and December 31, 2016, we hold one nonmarketable security that has not been permanently impaired , Nexcore Companies LLC with 1,645,000 units. We have recorded other than temporary impairment on the other marketable and non-marketable securities. An investment summary as of March 31, 2017 and December 31, 2016 is as follows:
| Company Name | | Shares | | | Units | |
| Marketable Securities: | | | | | | |
| Hangover Joe's Holding Corporation | | | 868,463 | | | | - | |
| Silver Verde May Mining Co., Inc. | | | 246,294 | | | | - | |
| WestMountain Gold, Inc. | | | 918,000 | | | | - | |
| Total Shares or Units | | | 2,032,757 | | | | - | |
| | | | | | | | | |
| Nonmarketable Securities: | | | | | | | | |
| SKRP 16, Inc. | | | 200,000 | | | | - | |
| Nexcore Real Estate LLC Common Units | | | - | | | | 1,645,000 | |
| WestMountain Distressed Debt, Inc. | | | 80,000 | | | | - | |
| RavenBrick Class C Units | | | - | | | | 11 | |
| Total Shares or Units | | | 280,000 | | | | 1,645,011 | |
| Total | | | 2,312,757 | | | | 1,645,011 | |
Liquidity and Capital Resources
As of March 31, 2017, we had cash of $647,531.
Net cash used in operating activities were $37,597 for the three months ended March 31, 2017, compared to net cash used in operating activities of $71,429 for the three months ended March 31, 2016. The decrease of $33,832 is mainly related to the increase in net loss of $18,923; increase of $3,194 in prepaid expenses; decrease of $7,415 in accounts receivable; decrease of $26,000 in accounts receivable, related parties; increase of $20,872 in accounts payable and accrued liabilities; and an increase of $3,144 in income tax receivable. Most of the increase in accounts payable and accrued liabilities is related to the recording of additional expense for our SEC filings.
Net cash used in investing activities was $0 for the three months ended March 31, 2017, compared to $30,000 for the three months ended March 31, 2016. The Company invested $30,000 in a non-public company in 2016.
Over the next twelve months we do not expect any material capital costs for our operations.
Currently, we believe that we have sufficient capital to implement our business operations or to sustain them at our present level indefinitely. To date, we have never had any discussions with any possible acquisition candidate nor do we have any intention of doing so. Our current monthly spending is approximately $27,000.
We operate out of one office in Colorado. We have no specific plans at this point for additional offices.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements with any party.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, or GAAP, requires management to use judgment in the application of accounting policies, including making estimates and assumptions. We base our estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances. These judgments affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied resulting in a different presentation of our financial statements. From time to time, we evaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current information. Below is a discussion of accounting policies that we consider critical in that they may require complex judgment in their application or require estimates about matters that are inherently uncertain.
Fair Value Measurements
The Company's estimates of fair value for financial assets and financial liabilities are based on the framework established in ASC 820. The framework is based on the inputs used in valuation and gives the highest priority to quoted prices in active markets and requires that observable inputs be used in the valuations when available. The disclosure of fair value estimates in the ASC 820 hierarchy is based on whether the significant inputs into the valuation are observable. In determining the level of the hierarchy in which the estimate is disclosed, the highest priority is given to unadjusted quoted prices in active markets and the lowest priority to unobservable inputs that reflect the Company's significant market assumptions. The three levels of the hierarchy are as follows:
| · | Level 1: Unadjusted quoted market prices for identical assets or liabilities in active markets that the Company has the ability to access. |
| · | Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets in inactive markets; or valuations based on models where the significant inputs are observable (e.g., interest rates, yield curves, default rates, etc.) or can be corroborated by observable market data. |
| · | Level 3: Valuations based on models where significant inputs are not observable. The unobservable inputs reflect the Company's own assumptions about the assumptions that market participants would use. |
The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The carrying amounts of financial assets are required to be measured at fair value on a recurring basis, including our major assets that approximates fair value as determined by using the future expected net cash flows on the sale of the investments.
Revenue Recognition
We provide investor relations, website development, video production, and associated marketing and media services to clients. We are paid fees for our services by our clients under written consulting agreements. As a secondary source of revenue, we raise, invest and manage private equity and direct investment funds for third parties including high net worth individuals and institutions. We earn management fees based on the size of the funds that we manage and incentive income based on the performance of these funds. We do not focus on any particular industry but look at any and all opportunities. We will screen investments with emphasis towards finding opportunities with long term potential.
Revenue is recognized under the full accrual method. Under the full accrual method, profit may be realized in full when funds are invested and managed, provided (1) the profit is determinable and (2) the earnings process is virtually complete (the Company is not obligated to perform significant activities).
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
None.
ITEM 4. CONTROLS AND PROCEDURES
Not applicable.
ITEM 4T. CONTROLS AND PROCEDURES
Management assessed the effectiveness of the Company's internal control over financial reporting as of March 31, 2017. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Management has concluded that our internal control over financial reporting was not effective as March 31, 2017 due to the following material weaknesses:
(1) we have not segregated duties as our accountant can initiate and complete transactions in the general ledger system,
(2) we have not implemented measures that would prevent the accountant from overriding the internal control system and
(3) the chief financial officer is responsible for complex accounting issues without additional review from within the Company.
We do not believe that these control weaknesses have resulted in deficient financial reporting because the chief financial officer is aware of his responsibilities under the SEC reporting requirement and personally certifies the financial reports.
Inherent Limitations Over Internal Controls
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations, including the possibility of human error and circumvention by collusion or overriding of controls. Accordingly, even an effective internal control system may not prevent or detect material misstatements on a timely basis. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control Over Financial Reporting
We have made no change in our internal control over financial reporting during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
This report does not include an attestation report by our independent registered public accounting firm regarding internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings, to which we are a party, which could have a material adverse effect on our business, financial condition or operating results.
ITEM 1A. RISK FACTORS
You should carefully consider the risks and uncertainties described below and the other information in this document before deciding to invest in shares of our common stock.
The occurrence of any of the following risks could materially and adversely affect our business, financial condition and operating results. In this case, the trading price of our common stock could decline and you might lose all or part of your investment.
Risks Related to Our Business and Industry
We have a limited operating history. While we have not been profitable for our most recent fiscal quarter ended March 31, 2017, we have been profitable in the past. However, if we never achieve sustained profitability, we could go out of business.
We were formed as a Colorado business entity in October, 2007. In the past, we have been profitable. While we have not been profitable for our most recent fiscal quarter ended March 31, 2017, we were profitable for the fiscal year ended December 31, 2014 and prior to 2013. We recognize that we must achieve ongoing profitability to be viable over the long term. If we never achieve sustained profitability, we could go out of business.
We currently rely upon clients under common principal control of our majority shareholder for approximately 93.3% of our revenues, which means that we could be severally impacted if the current arrangement does not continue and we cannot replace our current clients with other clients.
Approximately 93.3% of the revenues of our clients in the first quarter of 2017 came from entities which were under common principal ownership with our majority shareholder. This was down from 100% in the first quarter in 2016. Our revenue projections are subject to greater uncertainty than if we had revenue commitments from a number of clients not under common principal ownership. We could be materially impacted if the current arrangement does not continue, and we cannot replace our current clients with other clients. While we have no basis to believe that we will not continue to generate revenue from this arrangement, we cannot assure you that these clients, or any of our clients, will continue to purchase our products or services in significant volume, or at all.
Our lack of operating history makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance. An investor could lose his entire investment.
We have a limited operating history. An investor has no frame of reference to evaluate our future business prospects. This makes it difficult, if not impossible, to evaluate us as an investment. An investor could lose his entire investment if our future business prospects do not result in our ever sustaining profitability.
If we do not continue to generate adequate revenues to finance our operations, our business may fail.
As of March 31, 2017, we had a cash position of $647,531. We anticipate that operating costs will range between $300,000 and $400,000, for the fiscal year ending December 31, 2017. These operating costs include payroll, contract services, marketing costs, and all other costs of operations. We will use contract employees who will be paid on an hourly or monthly fee basis. However, the operating costs and expected revenue generation are difficult to predict. We expect to continue to generate revenues in the next twelve months from our fee-based marketing, media and investor relations consulting services. Since there can be no assurances that revenues will be sufficient to cover operating costs for the foreseeable future, it may be necessary to raise additional funds. Due to our lack of operating history, raising additional funds may be difficult.
Competition in our industry is intense.
Our business plan involves acting as a fee-based marketing and media consultant to public and private companies. This business is highly competitive. There are numerous similar companies providing such services in the United States of America. Our competitors will have greater financial resources and more expertise in this business. Our ability to develop our business will depend on our ability to successfully market our services in this highly competitive environment. We cannot guarantee that we will be able to do so successfully.
The share control position of WestMountain Blue, LLC will limit the ability of other shareholders to influence corporate actions.
Our largest shareholder, WestMountain Blue, LLC, of which Mr. Klemsz is a 16.8% member, owns 8,505,652 shares and thereby controls approximately 90% of our outstanding shares. Because WestMountain Blue, LLC individually beneficially controls more than a majority of the outstanding shares, other shareholders, individually or as a group, will be limited in their ability to effectively influence the election or removal of our directors, the supervision and management of our business or a change in control of or sale of our company, even if they believed such changes were in the best interest of our shareholders generally.
Our future success depends, in large part, on the continued service of our President and Treasurer.
We depend almost entirely on the efforts and continued employment of Mr. Anderson, our President, and Mr. Klemsz, our Treasurer. Mr. Anderson is our primary executive officer, and we will depend on him for nearly all aspects of our operations. We do not have an employment contract with either Mr. Anderson or Mr. Klemsz, and we do not carry key person insurance on the life of either gentleman. The loss of the services of either Mr. Anderson or Mr. Klemsz through incapacity or otherwise, would have a material adverse effect on our business. It would be very difficult to find and retain qualified personnel such as either Mr. Anderson or Mr. Klemsz.
Our success also depends upon our ability to develop relationships with our clients. If we cannot develop sufficient relationships, we may never become profitable. An investor could lose his entire investment.
We now have one line of business. We operate as a fee-based marketing and media consultant to client companies, which include both public and private entities. Our success now depends, in large part, on our ability to develop relationships with potential consulting services clients. We have no long-term contracts or other contractual assurances of consulting services. We may never develop sufficient consulting services clients, which would negatively impact our proposed operations. As a result, we may never become profitable or be able to sustain profitability. An investor could lose his or her entire investment.
Risks Related to an Investment in Our Common Stock
The lack of a broker or dealer to create or maintain a market in our stock could adversely impact the price and liquidity of our securities.
We have no agreement with any broker or dealer to act as a market maker for our securities and there is no assurance that we will be successful in obtaining any market makers. Thus, no broker or dealer will have an incentive to make a market for our stock. The lack of a market maker for our securities could adversely influence the market for and price of our securities, as well as your ability to dispose of, or to obtain accurate information about, and/or quotations as to the price of, our securities.
We have limited experience as a public company.
We have only operated as a public company since January, 2009. We trade on the OTC Bulletin Board under the trading symbol WASM. Thus, we have limited experience in complying with the various rules and regulations which are required of a public company. As a result, we may not be able to operate successfully as a public company, even if our operations are successful. We plan to comply with all of the various rules and regulations which are required of a public company. However, if we cannot operate successfully as a public company, your investment may be materially adversely affected. Our inability to operate as a public company could be the basis of you losing your entire investment in us.
We may be required to register under the Investment Company Act of 1940, or the Investment Advisors Act, which could increase the regulatory burden on us and could negatively affect the price and trading of our securities.
Because our proposed business may involve the identification, acquisition and development of investments, we may be required to register as an investment company under the Investment Company Act of 1940 or the Investment Advisors Act and analogous state law. While we believe that we are currently either not an investment company or an investment advisor or are exempt from registration as an investment company under the Investment Company Act of 1940 or the Investment Advisors Act and analogous state law, either the SEC or state regulators, or both, may disagree and could require registration either immediately or at some point in the future. As a result, there could be an increased regulatory burden on us, which could negatively affect the price and trading of our securities.
Our stock has a limited public trading market and there is no guarantee an active trading market will ever develop for our securities.
There has been, and continues to be, a limited public market for our common stock. An active trading market for our shares has not, and may never develop or be sustained. If you purchase shares of common stock, you may not be able to resell those shares at or above the initial price you paid. The market price of our common stock may fluctuate significantly in response to numerous factors, some of which are beyond our control, including the following:
| | * | actual or anticipated fluctuations in our operating results; |
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| | * | changes in financial estimates by securities analysts or our failure to perform in line with such estimates; |
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| | * | changes in market valuations of other companies, particularly those that market services such as ours; |
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| | * | announcements by us or our competitors of significant innovations, acquisitions, strategic partnerships, joint ventures or capital commitments; |
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| | * | introduction of product enhancements that reduce the need for the products our projects may develop; |
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| | * | departures of key personnel. |
Of our total outstanding shares as of March 31, 2017, a total of 8,755,652, or approximately 91.99%, will be restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our common stock to drop significantly, even if our business is doing well.
As restrictions on resale end, the market price of our stock could drop significantly if the holders of restricted shares sell them or are perceived by the market as intending to sell them.
Applicable SEC rules governing the trading of "Penny Stocks" limit the liquidity of our common stock, which may affect the trading price of our common stock.
Our common stock is currently quoted on the Over-the-Counter Bulletin Board and trades well below $5.00 per share. As a result, our common stock is considered a "penny stock" and is subject to SEC rules and regulations that impose limitations upon the manner in which our shares can be publicly traded. These regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock and the associated risks. Under these regulations, certain brokers who recommend such securities to persons other than established customers or certain accredited investors must make a special written suitability determination for the purchaser and receive the written purchaser's agreement to a transaction prior to purchase. These regulations have the effect of limiting the trading activity of our common stock and reducing the liquidity of an investment in our common stock.
The over-the-counter market for stock such as ours is subject to extreme price and volume fluctuations.
The securities of companies such as ours have historically experienced extreme price and volume fluctuations during certain periods. These broad market fluctuations and other factors, such as new product developments and trends in the industry and in the investment markets generally, as well as economic conditions and quarterly variations in our operational results, may have a negative effect on the market price of our common stock.
Buying low-priced penny stocks is very risky and speculative.
Our common shares are defined as a penny stock under the Securities and Exchange Act of 1934, and rules of the Commission. The Exchange Act and such penny stock rules generally impose additional sales practice and disclosure requirements on broker-dealers who sell our securities to persons other than certain accredited investors who are, generally, institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 jointly with spouse, or in transactions not recommended by the broker-dealer. For transactions covered by the penny stock rules, a broker-dealer must make a suitability determination for each purchaser and receive the purchaser's written agreement prior to the sale. In addition, the broker-dealer must make certain mandated disclosures in penny stock transactions, including the actual sale or purchase price and actual bid and offer quotations, the compensation to be received by the broker-dealer and certain associated persons, and deliver certain disclosures required by the Commission. Consequently, the penny stock rules may affect the ability of broker-dealers to make a market in or trade our common stock and may also affect your ability to resell any shares you may purchase in the public markets.
Issuances of our stock could dilute current shareholders and adversely affect the market price of our common stock, if an active public trading market develops.
We have the authority to issue up to 50,000,000 shares of common stock, 1,000,000 shares of preferred stock, and to issue options and warrants to purchase shares of our common stock without stockholder approval. Although no financing is planned currently, we may need to raise additional capital to fund operating losses. If we raise funds by issuing equity securities, our existing stockholders may experience substantial dilution. In addition, we could issue large blocks of our common stock to fend off unwanted tender offers or hostile takeovers without further stockholder approval.
The issuance of preferred stock by our board of directors could adversely affect the rights of the holders of our common stock. An issuance of preferred stock could result in a class of outstanding securities that would have preferences with respect to voting rights and dividends and in liquidation over the common stock and could, upon conversion or otherwise, have all of the rights of our common stock. Our board of directors' authority to issue preferred stock could discourage potential takeover attempts or could delay or prevent a change in control through merger, tender offer, proxy contest or otherwise by making these attempts more difficult or costly to achieve.
Colorado law and our Articles of Incorporation protect our directors from certain types of lawsuits, which could make it difficult for us to recover damages from them in the event of a lawsuit.
Colorado law provides that our directors will not be liable to our company or to our stockholders for monetary damages for all but certain types of conduct as directors. Our Articles of Incorporation require 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 stockholders from recovering damages against our directors caused by their negligence, poor judgment or other circumstances. The indemnification provisions may require our company to use our assets to defend our directors and officers against claims, including claims arising out of their negligence, poor judgment, or other circumstances.
We do not expect to pay dividends on common stock.
We have not paid any cash dividends with respect to our common stock, and it is unlikely that we will pay any dividends on our common stock in the foreseeable future. Earnings, if any, that we may realize will be retained in the business for further development and expansion.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
Exhibit Number | | Description |
| | | |
| 3.1* | | |
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| 3.2* | | |
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| 3.3 *** | | |
| | | |
| 10.1** | | |
| | | |
| 31.1 | | |
| | | |
| 32.1 | | |
| 101.INS | | XBRL Instance Document |
| | | |
| 101SCH | | XBRL Taxonomy Extension Schema Document |
| | | |
| 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document |
| | | |
| 101.LAB | | XBRL Taxonomy Extension Label Linkbase Document |
| | | |
| 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document |
| | | |
| 101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document |
* Previously filed with Form SB-2 Registration Statement, January 2, 2008
** Previously filed with Form 10-KSB Registration Statement, February 29, 2008
*** Previously filed under cover of Form 8K, February 27, 2014.
Reports on Form 8-K
No reports were filed under cover of Form 8-K for the fiscal quarter ended March 31, 2017.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized May 15, 2017.
| | WEST MOUNTAIN COMPANY a Colorado corporation | |
| | | | |
| | By: | /s/ Brian L. Klemsz | |
| | | Brian L. Klemsz, President, Chief Executive Officer, Chief Financial Officer and Director (Principal Executive, Accounting and Financial Officer) | |
