ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 4. CONTROLS AND PROCEDURES
Management assessed the effectiveness of the Company's internal control over financial reporting as of June 30, 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 June 30, 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 June 30, 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 June 30, 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 97.9% of our revenues, which means that we could be severely impacted if the current arrangement does not continue and we cannot replace our current clients with other clients.
Approximately 97.9% of the revenues of our clients in the second quarter of 2017 came from entities which were under common principal ownership with our majority shareholder. This was down from 100% in the second 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 our current arrangement does not continue, we cannot grow or diversify our current arrangement, 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 June 30, 2017, we had a cash position of $577,165. 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; |
| | | |
| | * | changes in financial estimates by securities analysts or our failure to perform in line with such estimates; |
| | | |
| | * | changes in market valuations of other companies, particularly those that market services such as ours; |
| | | |
| | * | announcements by us or our competitors of significant innovations, acquisitions, strategic partnerships, joint ventures or capital commitments; |
| | | |
| | * | introduction of product enhancements that reduce the need for the products our projects may develop; |
| | | |
| | * | departures of key personnel. |
Of our total outstanding shares as of June 30, 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.
*** Previously filed under cover of Form 8K, February 27, 2014.
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 August 14, 2017.
