Item 1. DESCRIPTION OF BUSINESS.
Narrative Description of the Business
We are a fee-based marketing and media consultant to public companies and an investment asset manager.
Our principal business address is 123 North College Avenue, Suite 200, Fort Collins, Colorado 80524. We operate out of one office in Colorado. We have no specific plans at this point for additional offices.
On January 1, 2008, we entered into a Service Agreement with Bohemian Companies, LLC to provide us with certain defined services. These services include financial, bookkeeping, accounting, legal and tax matters, as well as cash management, custody of assets, preparation of financial documents, including tax returns and checks, and coordination of professional service providers as may be necessary to carry out the matters covered by the Service Agreement. We will compensate Bohemian Companies, LLC by reimbursing this entity for the allocable portion of the direct and indirect costs of each employee of Bohemian Companies, LLC that performs services on our behalf. We will receive invoices not less than quarterly from Bohemian Companies, LLC. This Service Agreement is for the term of one year, ending December 31, 2012.
Operations
We act primarily as a fee-based marketing and media consultant to public companies and, secondarily, as an investment asset manager. We are currently generating revenues.
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.
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.
Currently, we believe that we have sufficient capital to implement our business operations or to sustain them through December 31, 2012. We have been profitable in the past, although not in the most recent fiscal quarter. If we can maintain our profitability, we could operate at our present level indefinitely. To date, we have never had any discussions with any possible acquisition candidate nor have we any intention of doing so.
Markets
We believe that the primary reason that clients would work with us rather than competitors would be the existing relationships that we can develop. We believe that client loyalty and satisfaction can be the basis for success in this business. Therefore, we believe that we have developed and expanded on already existing relationships to develop a competitive edge. We utilize the expertise of our principal officer to develop our business.
Raw Materials
The use of raw materials is not a material factor in our operations at the present time. The use of raw materials may become a material factor in the future as we develop operations.
Customers and Competition
Our business involves acting as a fee-based marketing and media consultant and, secondarily, as an asset manager for private equity and direct investment funds. Both businesses are 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 develop our business plan in this highly competitive environment. We cannot guarantee that we will be able to continue to do so successfully.
Backlog
At December 31, 2011, we had no backlogs.
Employees
We have one full-time employee: Mr. Steve Anderson, our President. We also have a part-time employee, Ms. Joni Troska, our corporate Secretary; however, we reimburse our employees for all necessary and customary business related expenses. We have no plans or agreements which provide health care, insurance or compensation on the event of termination of employment or change in our control. We do not pay our Director for any Board meeting he attends.
Proprietary Information
We have a proprietary investment screening process to make our investments. Otherwise, we own no proprietary information.
Government Regulation
We are not currently subject to any material government regulation. We do not expect government regulations to have any material impact on us.
Research and Development
We have never spent any amount in research and development activities.
Environmental Compliance
We believe that we are not subject to any material costs for compliance with any environmental laws.
How to Obtain our SEC Filings
We file annual, quarterly, and special reports, proxy statements, and other information with the Securities Exchange Commission (SEC). Reports, proxy statements and other information filed with the SEC can be inspected and copied at the public reference facilities of the SEC at 100 F Street N.E., Washington, DC 20549. Such material may also be accessed electronically by means of the SEC's website at www.sec.gov.
We also have a corporate website, www.westmountainam.com on which we post our regulatory filings.
Our investor relations department can be contacted at our principal executive office located at our principal office, 123 North College Avenue, Ste 200, Fort Collins, Colorado 80524. Our telephone number is (970) 212-4770.
Item 1A.
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 result. 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 been profitable for our two most recent fiscal years, we may never continue to be profitable, and, as a result, we could go out of business.
We were formed as a Colorado business entity in October, 2007. At the present time, we have been profitable at our two most recent fiscal years. We cannot guarantee that we will continue to be profitable, and, as a result, we could go out of business.
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 becoming profitable.
If we do not continue to generate adequate revenues to finance our operations, our business may fail.
As of December 31, 2011, we had a cash position of $118,566 and an additional $11,811 in Certificates of Deposit. We anticipate that operating costs will range between $60,000 and $100,000, for the fiscal year ending December 31, 2012. These operating costs include insurance, taxes, utilities, maintenance, contract services and all other costs of operations. We will use contract employees who will be paid on an hourly basis as each investment transaction is evaluated. 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 making investments and receiving fees for the placement of capital. 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 the investment industry is intense.
Our business plan involves acting as a fee-based marketing and media consultant to public companies and an investment asset manager. Both businesses are 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 revenue and profitability fluctuate, particularly inasmuch as we cannot predict the timing of realization events in our business, which may make it difficult for us to achieve steady earnings growth on a quarterly basis and may cause volatility in the price of our shares.
We may experience significant variations in revenues and profitability during the year and among years because we are paid incentive income from certain funds only when investments are realized, rather than periodically on the basis of increases in the funds’ net asset values. The timing and receipt of incentive income generated by our funds is event driven and thus highly variable, which contributes to the volatility of our revenue, and our ability to realize incentive income from our funds may be limited. We cannot predict when, or if, any realization of investments will occur. If we were to have a realization event in a particular quarter, it may have a significant impact on our revenues and profits for that particular quarter which may not be replicated in subsequent quarters. In addition, our investments are adjusted for accounting purposes to fair value at the end of each quarter, resulting in revenue attributable to our principal investments, even though we receive no cash distributions from our funds, which could increase the volatility of our quarterly earnings.
Difficult market conditions can adversely affect our funds in many ways, including by reducing the value or performance of the investments made by our funds and reducing the ability of our funds to raise or deploy capital, which could materially reduce our revenue and results of operations.
If economic conditions are unfavorable our funds may not perform well and we may not be able to raise money in existing or new funds. Our funds are materially affected by conditions in the global financial markets and economic conditions throughout the world. The global market and economic climate may deteriorate because of many factors beyond our control, including rising interest rates or inflation, terrorism or political uncertainty. In the event of a market downturn, our businesses could be affected in different ways. Our funds may face reduced opportunities to sell and realize value from their existing investments, and a lack of suitable investments for the funds to make. In addition, adverse market or economic conditions as well as a slowdown of activities in a particular sector in which portfolio companies of these funds operate could have an adverse effect on the earnings of those portfolio companies, and therefore, our earnings.
A general market downturn, or a specific market dislocation, may cause our revenue and results of operations to decline by causing:
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the net asset value of the assets under management to decrease, lowering management fees;
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lower investment returns, reducing incentive income;
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material reductions in the value of our fund investments in portfolio companies which reduce our ‘‘surplus’’ and, therefore, our ability to realize incentive income from these investments; and
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investor redemptions, resulting in lower fees.
Furthermore, while difficult market conditions may increase opportunities to make certain distressed asset investments, such conditions also increase the risk of default with respect to investments held by our funds with debt investments.
The success of our business depends, in large part, upon the proper selection of investments, which may be difficult to find, acquire and develop.
We believe that the identification, acquisition and development of appropriate investments are key drivers of our business. Our success depends, in part, on our ability to obtain these investments under favorable terms and conditions and have them increase in value. We cannot assure you that we will be successful in our attempts to find, acquire, and/or develop appropriate investments, will not be challenged by competitors which may put us at a disadvantage. Further, we cannot assure you that others will not independently develop similar or superior programs or investments, which may imperil our profitability.
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 your 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 involves 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 ha 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:
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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 December 31, 2011, a total of 8,755,652, or approximately 91.9%, 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 our 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.
The shares being offered 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.
ITEM 2. DESCRIPTION OF PROPERTY.
Our principal executive offices are located at 123 North College Avenue, Ste 200, Fort Collins, Colorado 80524, and our telephone number is (970) 212-4770. Our office is leased from an unaffiliated third party under a monthly lease at the rate of $575 per month. We own no real estate nor have plans to acquire any real estate.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
We are not a party to any material legal proceedings, nor is our property the subject of any material legal proceeding.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
We held a special shareholders meeting in the fourth quarter of our fiscal year on November 17, 2011. A total of 8,805,652 shares out of an aggregate of 9,517,402 shares eligible to vote at a meeting of stockholders, representing approximately 92.52%, voted for the following actions, with no negative votes or abstensions:
1.
The reelection of Brian L. Klemsz to our Board of Directors, to hold office until the 2012 Annual Meeting and until his successor is elected and qualified;
2.
The approval and ratification of our 2011 Equity Compensation Plan; and
3.
The approval and ratification of MaloneBailey, LLP. as our independent auditors for the fiscal years ending December 31, 2010 and 2011.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Holders
As of December 31, 2011, there were seventy-one record holders of our common stock and there were 9,517,402 shares of our common stock outstanding.
Market Information
A limited public market currently exists for shares of our common stock. We began trading on the Over-the-Counter Bulletin Board under the trading symbol WASM in January, 2009.
The following table sets forth the high and low closing bid prices of our common stock on for the period indicated in 2011 and 2010.
On April 9, 2012, the closing bid price of our common stock in the OTC Bulletin Board was $0.60 per share, volume was zero shares, and the number of shares issued and outstanding was 9,517,402.
The Securities Enforcement and Penny Stock Reform Act of 1990
The Securities and Exchange Commission has also adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system).
A purchaser is purchasing penny stock, which limits the ability to sell the stock. Our shares constitute penny stock under the Securities and Exchange Act. The shares will remain penny stock for the foreseeable future. The classification of penny stock makes it more difficult for a broker-dealer to sell the stock into a secondary market, which makes it more difficult for a purchaser to liquidate his/her investment. Any broker-dealer engaged by the purchaser for the purpose of selling his or her shares in us will be subject to Rules 15g-1 through 15g-10 of the Securities and Exchange Act. Rather than creating a need to comply with those rules, some broker-dealers will refuse to attempt to sell penny stock.
The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the Commission, which:
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contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;
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contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of the Securities Act of 1934, as amended;
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contains a brief, clear, narrative description of a dealer market, including "bid" and "ask" prices for penny stocks and the significance of the spread between the bid and ask price;
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contains a toll-free telephone number for inquiries on disciplinary actions;
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defines significant terms in the disclosure document or in the conduct of trading penny stocks; and
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contains such other information and is in such form (including language, type, size and format) as the Securities and Exchange Commission shall require by rule or regulation;
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, to the customer:
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the bid and offer quotations for the penny stock;
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the compensation of the broker-dealer and its salesperson in the transaction;
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the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and
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monthly account statements showing the market value of each penny stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements will have the effect of reducing the trading activity in the secondary market for our stock because it will be subject to these penny stock rules. Therefore, stockholders may have difficulty selling their securities.
Equity Compensation Plan Information
On August 15, 2011, the Company approved the employee compensation plan and granted a total of 200,000 common stock options to our employees. As stated in the compensation plan, these options have a four year term. Fifty percent of the options will become vested and exercisable immediately, 25% on the first anniversary date of August15, 2012. The options have an exercise price of $0.27 per share, which was the fair value of the stock on the day of the grant. Given a risk free rate of 0.99% a volatility input of 99.96% and using the simplified method, the maturity time used in the calculation is 2.375 years. As of December 31, 2011, $20.519 was expensed to the income statement. The remaining $20,519 will be expensed as stated above.
Stock Transfer Agent
The stock transfer agent for our securities is Corporate Stock Transfer of Denver, Colorado. Their address is 3200 Cherry Creek Drive South, Suite 430, Denver, Colorado 80209. Their phone number is (303)282-4800.
Dividend Policy
We have not previously declared or paid any dividends on our common stock and do not anticipate declaring any dividends in the foreseeable future. The payment of dividends on our common stock is within the discretion of our board of directors. We intend to retain any earnings for use in our operations and the expansion of our business. Payment of dividends in the future will depend on our future earnings, future capital needs and our operating and financial condition, among other factors that our board of directors may deem relevant. We are not under any contractual restriction as to our present or future ability to pay dividends.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
A smaller reporting company is not required to provide the information in this Item.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis or Plan of Operation contains forward-looking statements that involve future events, our future performance and our expected future operations and actions. In some cases, you can identify forward-looking statements by the use of words such as “may”, “will”, “should”, “anticipate”, “believe”, “expect”, “plan”, “future”, “intend”, “could”, “estimate”, “predict”, “hope”, “potential”, “continue”, or the negative of these terms or other similar expressions. These forward-looking statements are only our predictions and involve numerous assumptions, risks and uncertainties. Our actual results or actions may differ materially from these forward-looking statements for many reasons, including, but not limited to, the matters discussed in this report under the caption “Risk Factors”. We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update any forward looking-statements, whether as a result of new information, future events or otherwise.
The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes included in this report.
Results of Operations
For the year ended December 31, 2011 we had revenue of $97,607. In comparison for the year ended December 31, 2010 we had revenue of $99,702. We started recording consulting fees of $23,000 in the fourth quarter 2011 of which $18,000 was a related party and $74,607 was recorded in management fees. In 2010 we recorded $10,000 in advisory fees and $89,702 in management fees.
Operating expenses, which consisted solely of general and administrative expenses, were $360,254 and $93,283 respectively for the years ended December 31, 2011 and 2010. The increase in operational expenses in 2011 was primarily associated with the hiring of a full-time President and part-time accountant, change in audit firms, and equipment and supplies purchased to support our consulting services for marketing and social media.
For the year ended December 31, 2011 we had net loss of $217,853. In comparison for the year ended December 31, 2010 we had net loss of $19,538.
As of December 31, 2011, we hold six investment positions. All the companies are publicly traded and listed on the OTC Bulletin Board. The table below lists the investments and total shares owned by us as of December 31, 2011.
Our sixth position involves Marine Exploration, Inc. As of December 31, 2011, we own a total of 175,000,000 common shares, which we have written down to zero value.
Liquidity and Capital Resources.
As of December 31, 2011, we had cash or cash equivalents of $118,566.
For the fiscal year ended December 31, 2011 net cash used in operating activities was $229,093 compared to net cash provided by operating activities for the fiscal year ended December 31, 2010 of $ 8,165.
For the fiscal year ended December 31, 2011 net cash used in investing activities was $54,494 compared to net cash used in investing activities for the fiscal year ended December 31, 2010 of $128,365. We purchased several investments during these time periods that have been recorded on the financials using Level 1fair value measurements, as defined under Critical Accounting Policies below. In 2010 we recorded $90,000 in notes receivable of which $60,000 was written off in 2011.
For the fiscal year ended December 31, 2011 net cash flows provided by financing activities was $-0- compared to net cash flows provided by financing activities for the fiscal year ended December 31, 2010 of $350,000.
Over the next twelve months we do not expect any material our capital costs to develop operations.
On June 29, 2011, we entered into a Conversion and Termination Agreement with BOCO Investments, LLC. (BOCO) to convert the outstanding principal and interest on a promissory note owed by us to BOCO. As of June 29, 2011, we owed BOCO a total of $524,520 in principal and accrued interest on the promissory note. We converted the entire outstanding principal and interest on the promissory note into a total of 455,652 common shares and terminated the obligation.
Our expenses have increased over last year as we are paying salaries for our President and part-time accountant hired in 2011. We have also increased our marketing and social media expenses to raise awareness of our Company through our website, Facebook, and YouTube. Our accounting fees also increased in the fourth quarter of 2011 due to a 2010 audit that will be performed by our new auditors.
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 have we any intention of doing so.
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 and 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
ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. ASC 820 also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows:
Level 1:
Quoted prices in active markets for identical assets or liabilities;
Level 2:
Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability; or
Level 3:
Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.
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.
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).
Recently Issued Accounting Pronouncements
Management believes there were various other accounting standards and interpretations issued during 2011 and 2010, none of which are expected to have a material impact on the Company’s consolidated financial position, operations, or cash flows.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
A smaller reporting company is not required to provide the information in this Item.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
WestMountain Asset Management, Inc.
\
CONSOLIDATED FINANCIAL STATEMENTS
With
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
WestMountain Asset Management, Inc.
Fort Collins, Colorado
We have audited the accompanying consolidated balance sheets of WestMountain Asset Management, Inc. and its subsidiaries (collectively, the “Company”) as of December 31, 2011 and 2010 and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of WestMountain Asset Management, Inc., and its subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
/s/ MaloneBailey, LLP
www.malone-bailey.com
Houston, Texas
April 16, 2012
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The accompanying notes are an integral part of these consolidated financial statements.
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The accompanying notes are an integral part of these consolidated financial statements.
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WestMountain Asset Management, Inc.
Consolidated Statement of Shareholders' Equity
Years Ended December 31, 2011 and 2010
(Year Ended December 31, 2010 Restated)
The accompanying notes are an integral part of these consolidated financial statements.
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The accompanying notes are an integral part of these consolidated financial statements.
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WestMountain Asset Management, Inc.
Notes to Consolidated Financial Statements
(1) Nature of Organization and Summary of Significant Accounting Policies
Nature of Organization and Basis of Presentation
WestMountain Asset Management, Inc. (“we”,”our” or the “Company”)was incorporated in the state of Colorado on October 18, 2007 and on this date approved its business plan and commenced operations.
Principles of Consolidation
Property holding entities and other subsidiaries of which we own 100% of the equity or have a controlling financial interest evidenced by ownership of a majority voting interest are consolidated. All inter-company balances and transactions are eliminated.
The accompanying consolidated financial statements include the accounts of WestMountain Asset Management, Inc. and the following 100% owned subsidiaries, which were active at December 31, 2011:
WestMountain Business Consulting, Inc.
WestMountain Allocation Analytics, Inc.
WestMountain Valuation Services, Inc.
Correction of Prior Year Information
We have restated our 2010 results in this Form 10K for the fiscal year ended December 31, 2010 (the “2010 Form 10-K information”) originally filed on April 15, 2011. This amendment to the fiscal year ended December 31, 2010 is being filed to correct an error in and restate our Consolidated Financial Statements. This Form 10-K which includes the 2010 financial statements only amends and restates the items described below to reflect the effects of the restatement and no attempt has been made to modify or update other disclosures presented in the 2010 Form 10-K information.
During the year ended December 31, 2011, we transitioned to a new independent registered public accounting firm. During the audit of our 2010 consolidated financial statements, we determined that the valuation of our investments recorded on the Balance Sheet required an adjustment to better represent the investments at fair value. The following is a summary of the corrections:
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Except for the inclusion of the information described above, this Form 10-K does not reflect events occurring subsequent to the filing of our Form 10-K filed April 15, 2011 or modify or update other information or exhibits to our Form 10-K filed April 15, 2011. The filing of this Form 10-K shall not be deemed to be an admission that the 2010 Form 10-K information, when filed, included any untrue statement of a material fact or omitted to state a material fact necessary to make a statement not misleading.
Use of Estimates
The preparation of 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid securities with original maturities of three months or less when acquired to be cash equivalents. As of December 31, 2011and 2010, the Company we had a three month certificate of deposit in the amount of $12,780 and $102,571 respectively.
Accounts Receivable
Accounts receivable consists of amounts due from the management fees and consulting fees associated with marketing and media consulting. The Company considers accounts more than 30 days old to be past due. The Company uses the allowance method for recognizing bad debts. When an account is deemed uncollectible, it is written off against the allowance. Management records reasonable allowances to fairly represent accounts receivable amounts that are collectible. For the years ended December 31, 2011 and 2010, the company did not record any allowance against our accounts receivable balance.
Notes Receivable
Notes receivable consist of secured loans to unrelated third parties and are reported at the outstanding principal balance. As of December 31, 2011 our principal balance was $30,000, net of an allowance of $60,000. We had a balance of $90,000 as of December 31, 2010.
Allowance for Loss on Note Receivable
The allowance for loss on note receivable is the amount that, in the opinion of management, is necessary to absorb probable losses inherent in the note receivable. The allowance is determined based upon numerous considerations including local economic conditions, a review of the value of collateral supporting the note receivable and the collectability of the note receivable. As a result of the test of adequacy, required adjustments to the allowance for loan losses are made periodically by changes to the provision for loss on note receivable. As of December 31, 2011, the allowance for loss on note receivable was $60,000.
Revenue
We act primarily as a fee-based marketing and media consultant to public companies. 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.
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The Company generates additional revenue by raising, investing and managing private equity and direct investment funds for high net worth individuals and institutions. Revenue is recognized through management fees based on the size of the funds that are managed and incentive income based on the performance of these funds.
The Company recognizes revenue for its products generally when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable and collectability is reasonably assured.
In the general course of business, we receive stock-based compensation for our services. In many cases, the underlying stock is thinly traded and determining the value of revenue requires substantial judgment. If the underlying stock is traded in an active market, the value used to record revenue is based on the quoted market value of the stock. If there is not an active market, then the value is determined using other inputs.
Fair Value of Financial Instruments
On January 1, 2008, the Company adopted ASC 820 Fair Value Measures. ASC820 defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measures required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. The Company’s estimates of fair value for financial assets and financial liabilitiesare based on the framework established in SFAS 157. 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 require 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. The valuations of the majority of the assets are considered Level 2 fair value measures under ASC 820.
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We adopted the remaining provisions of ASC-820 for non-financial assets and liabilities beginning January 1, 2009. Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) FAS 157-2 deferred the effective date of ASC-820 for one year relative to nonfinancial assets and liabilities that are measured at fair value, but are recognized or disclosed at fair value on a nonrecurring basis. This deferral applied to such items as indefinite-lived intangible assets and nonfinancial long-lived asset groups measured at fair value for impairment assessments. The adoption of the remaining provisions of ASC-820 did not have a material impact on our consolidated results of operations or financial condition.
The following methods and assumptions were used to estimate the fair value of the Company’s available-for-sale securities:
Available-for-sale securities are recorded at fair value. We primarily own securities in smaller public companies that are thinly traded. Determining fair value requires substantial judgment. For common stock securities, we first determine whether or not the stock is traded in an active market. Securities traded in an active market are marked-to-market using the quoted market price of the stock and are classified as Level 1 inputs. Securities that do not have an active market are measured using unobservable inputs, and are classified as Level 3 inputs.
Unrealized holding gains and losses on available-for-sale securities are excluded from earnings and are reported as a separate component of other comprehensive income (loss) until realized. Realized gains and losses from the sale of available-for-sale securities are determined on a specific identification basis.
A decline in the market value of any available-for-sale security below cost that is deemed to be other than temporary results in a reduction in carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. Premiums and discounts are amortized or accreted over the life of the related available-for-sale security as an adjustment to yield using the effective interest method. Dividend and interest income are recognized when earned.
Available-for-sale securities are accounted for on a specific identification basis. As of December 31, 2011 and 2010, the Company held available-for-sale securities with an aggregate fair value of $5,848,129 and $8,353,515, respectively. As of December 31, 2011 and 2010, all of our available-for-sale securities were invested in publically traded equity holdings. Available-for-sale securities were classified as current based on the percentage of the equity controlled by the Company as well as our intended use the assets. The Company recognized unrealized losses net of tax in accumulated other comprehensive income as of December 31, 2011 and 2010 in the amounts of $1,606,127 and $7,759,067, respectively. (See Note 2 for details of available for sale investments).
The Company’s assets measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 at December 31, 2011, were as follows:
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The Company’s assets measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 at December 31, 2010, were as follows:
There were changes to the valuation techniques used during the period.
Property and equipment and intangibles
Computers and intangibles are stated at cost. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the related assets, ranging from three to seven years. Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments, which extend the useful lives of existing computers and intangibles, are capitalized and depreciated or amortized. Upon retirement or disposition of computers and intangibles, the cost and related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is recognized in the statements of operations.
Long-Lived Assets
All long-lived assets are reviewed when events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable. An impairment loss is recognized when estimated undiscounted cash flows that can be generated by those assets are less than the carrying value of the assets. When an impairment loss is recognized, the carrying amount is reduced to its estimated fair value based on appraisals or other reasonable methods to estimate fair value. There was no impairment of long-lived assets as of December 31, 2011 and 2010.
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Available for Sale Investments
The Company reports all of its investments on the balance sheet as available for sale. Some of the investments reflect the original cost of the investment due to low volume of trading of the investment, and other investments reflect the original cost of the investments and unrealized gain/loss amounts based on the market price as of the date of the financial statements. Any tax adjustment related to the unrealized gain/loss is reflected as a deferred tax asset or liability on the balance sheet.
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
Equity Method Investments
For investments that represent significant influence in the investee, the Company follows ASC 323 Investments-Equity Method and Joint Ventures when recognizing these investments in the financial statements. Under this method, any net income or net loss must be recorded against the Company’s investment, not to exceed the original investment and recognized as additional income or loss on the Company’s income statement. In 2008 the Company acquired 39% of the outstanding shares of Marine Exploration, Inc. for $50,000 and accounted for this investment under the Equity Method. As of December 31, 2011 and 2010, the Company’s investment in Marine Exploration is zero due to significant losses of the investee.
Income Taxes
Deferred income tax assets and liabilities are recognized for the expected future income tax consequences of events that have been included in the consolidated financial statements or income tax returns. Deferred income tax assets and liabilities are determined based on differences between the financial statement and tax bases of assets and liabilities using tax rates in effect for the years in which the differences are expected to reverse.
In evaluating the ultimate realization of deferred income tax assets, management considers whether it is more likely than not that the deferred income tax assets will be realized. Management establishes a valuation allowance if it is more likely than not that all or a portion of the deferred income tax assets will not be utilized. The ultimate realization of deferred income tax assets is dependent on the generation of future taxable income, which must occur prior to the expiration of the net operating loss carry forwards.
The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The Company has identified its federal tax return and its state tax return in Colorado as “major” tax jurisdictions, as defined. The Company is not currently under examination by the Internal Revenue Service or any other jurisdiction. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Company’s financial condition, results of operations, or cash flow. Therefore, no reserves for uncertain income tax positions have been recorded.
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Earnings per Share
Basic income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding. Diluted income per share is determined by dividing the net income by the sum of (1) the weighted average number of common shares outstanding and (2) if not anti-dilutive, the effect of stock awards determined utilizing the treasury stock method. The dilutive effect of the outstanding awards for the years ended December 31, 2011 and 2010 was -0- shares.
Recently Issued Accounting Pronouncements
There were various other accounting standards and interpretations issued during 2011 and 2010. However, management does not expect any of these to have a material impact on the Company’s consolidated financial position, operations, or cash flows.
(2) Investments
During the year ended December 31, 2011, the Company transitioned to a new independent registered public accounting firm. During the audit of the 2010 consolidated financial statements, the Company determined that the valuation of the investments recorded on the balance sheet required an adjustment to better represent the investments at fair value. Each investment has been evaluated for 2011 and 2010 and a determination has been made as to whether or not the individual investments will be marked to market with a related unrealized gain or loss being recognized.
In 2008 the Company invested $50,000 for 175,000,000 shares of common stock in Marine Exploration, which represented 39% of the outstanding common stock of Marine Exploration. The Company recorded this long-term investment using the equity method of accounting for investments. Any net income or net loss must be recorded against the Company’s investment, not to exceed the original investment of $50,000. Marine Exploration incurred significant losses during 2008, and the investment was reduced to zero. On August 24, 2010, Marine Exploration authorized a reverse split of 1 new share for 500 old shares of their common stock. As of this date, the Company has less than 20% ownership in Marine Exploration.
In the year 2008 the Company’s other investment was in Omni, formerly Across America Financial Services, Inc., that is recorded at the cost of the original investment plus the exercise price of the option from GDBA Investments, Inc. The ownership in Omni continues to be less than 20%. The original cost of $6,072, is a noncash transaction that represents the fair value of services performed by the Company in exchange for shares of common stock of Omni. In 2009 an additional noncash transaction in the amount of $27,713 was recorded as part of the investment. This cost represents the fair value of services performed by the Company in exchange for shares of common stock of Omni. As of December 31, 2011 and 2010, the market price per share was $2.99 and $4.00, respectively. As part of our newly established process, this investment has been marked to market for 2011 and 2010.
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On February 25, 2010 Across America Real Estate Exchange merged with AMI. During this reverse merger, the Company provided advisory services and in exchange, received 329,463 shares of stock. As of that date, the Company determined that there was no active market for these shares; and therefore, these shares were valued at $0. On March 11, 2010, after the merger, the Company exercised warrants for 200,000 shares of AMI common stock. The total cash paid upon exercise was $2,000. On June 29, 2010, the Company exercised options purchased in 2008 from GDBA Investments, LLLP, for cash of $70,155. These options were exercised for 1,163,250 shares of AMI common stock. The total cash paid upon exercise was $122,771. As of December 31, 2011 and 2010, the Company determined that an active market for this stock had been created. The Company marked these shares to the quoted market price as of December 31, 2011 and 2010 using the market prices per share of $0.38 and $0.90, respectively.
On September 29, 2010 CapTerra Financial Group, Inc. merged with Nexcore Group LP. The Company provided advisory services related to the transaction and for those services received 1,645,000 warrants. The Company determined that on the date of that this consideration was received, there was no active market for these warrants or the underlying shares. The value of these warrants were recorded at $0 as a result of this determination and no revenue was recorded. On December 29, 2010, the warrants were exercised by the Company for $1,645 in cash. The equity securities have been restricted and cannot be sold for two years. As of the years ended December 31, 2011 and 2010, the Company determined that no active market exists and thus this investment is recorded at the original cost basis of $1,645.
In January 2011, the Company purchased 113,910 Silver Verde May Mining shares for $0.35 per share. In April 2011, we purchased an additional 132,384 shares for $0.05 per share. As of December 31, 2011, the Company determined that an active market for these shares existed and used the market price per share $0.40 to value these securities.
On February 18, 2011, the Company received warrants to purchase 866,000 shares of WestMountain Index Advisor, Inc common stock as a result of advisory services performed by the Company. As of this date, the company determined that there is no active market for these shares. The value of these warrants on this acquisition date is, therefore, $0. On August 10, 2011 these warrants were exercised for $866 As of December 31, 2011, the Company concluded that there is still no active market for these shares and so the securities remain on the balance sheet at the original cost and are not marked to market.
The Company’s investments as of December 31, 2011 and 2010 are summarized below.
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(3) Related Parties
Bohemian Companies, LLC and BOCO Investments, LLC are two companies under common control. Mr. Klemsz, our President, has been the Chief Investment Officer of BOCO Investments, LLC since March 2007. Since there is common control between the two companies and a relationship with our Company President, we are considering all transactions with Bohemian Companies, LLC and BOCO Investments, LLC, related party transactions.
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On January 1, 2008, we entered into a Service Agreement with Bohemian Companies, LLC to provide us with certain defined services. These services include financial, bookkeeping, accounting, legal and tax matters, as well as cash management, custody of assets, preparation of financial documents, including tax returns and checks, and coordination of professional service providers as may be necessary to carry out the matters covered by the Service Agreement. We compensate Bohemian Companies, LLC by reimbursing this entity for the allocable portion of the direct and indirect costs of each employee of Bohemian Companies, LLC that performs services on our behalf. We receive invoices monthly from Bohemian Companies, LLC. This Service Agreement matures on December 31, 2012. Total expenses incurred with Bohemian Companies were $12,000 for the years ending December 31, 2011 and 2010. As of December 31, 2011 the Company had a balance due to Bohemian Companies, LLC of $3,000.
For the year ended December 31, 2011 and 2010 the Company recorded management fee revenues of $74,607 and $89,702, respectively, for asset management services performed on behalf of WestMountain Prime, LLC, a related party. The Company and WestMountain Prime, LLC are under common principal ownership. The Company earns management fees based on the size of the funds managed, and incentive income based on the performance of the funds.
For the year ended December 31, 2011 and 2010 the Company recorded $-0- and $10,000 respectively, in revenue for advisory fees charged to Accredited Members, Inc. (“AMI”), formerly Across America Real Estate Exchange, Inc.
For the year ended December 31, 2011 and 2010, the Company recorded social media revenue of $23,000 and $0, respectively. Of the $23,000 recorded in 2011, $18,000 is related party revenue for services performed on behalf of Nexcore Group LP. The company and Nexcore are under common principal ownership.
As of December 31, 2011 and 2010, the Company recorded $16,673 and $22,417, respectively, as accounts receivable related party. These amounts represent fourth quarter management fees that were due from WestMountain Prime, LLC. Both amounts were paid off in the following respective quarters. Additionally in the fourth quarter of 2011, the Company provided Nexcore consulting services for marketing and social media in the amount of $18,000. This amount is included in the related party accounts receivable balance presented on the balance sheet.
On September 15, 2009 the Company signed a promissory note with BOCO Investments, Inc. (BOCO), a related party, in the amount of $150,000. The note matured in March 2010 and was extended to March 2011. On June 30, 2010 the Company entered into a new note for $500,000 with an interest rate of 10% and a maturity date of June 30, 2011. The September 15, 2009 note for $150,000 was canceled and the principal and interest was rolled into the new note. On June 29, 2011 the full amount of the note and related accrued interest, in the amount of $524,520, was converted to 455,652 of common shares at a price of $1.15. The closing stock price of the Company’s common stock on the date of conversion was $0.27 resulting in a gain on the conversion of $401,495. The gain was accounted for as a capital transaction due to BOCO being a related party.
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The Company entered into an agreement with SP Business Solutions (“SP”) to provide accounting and related services for the Company. The owner, Joni Troska, was appointed Secretary of WestMountain Asset Management, Inc. on March 19, 2010, and is considered to be a related party. As of December 31, 2010 an accrual of $525 has been recorded for unpaid services.
In December 2009 the Company formed three new companies, WestMountain Business Consulting, Inc., WestMountain Allocation Analytics, Inc. and WestMountain Valuation Services, Inc. that are included in our consolidated financial statements.
On September 29, 2010 CapTerra Financial Group, Inc. merged with Nexcore Group LP (“Nexcore”). The Company provided advisory services related to the transaction and for those services received 1,645,000 warrants. In December 2010, these warrants were exercised for common stock of Nexcore Group LP. As of December 31, 2010, no active market existed for these securities and so the company kept the value of this investment on the books at the aggregate exercise price of $1,645. The equity securities have been restricted and cannot be sold for two years.
(4) Stockholders Equity
Common stock
No common shares were issued or retired during the year ended December 31, 2010.
During the year ended December 31, 2011, the Company issued 455,652 common shares for the conversion of related party debt and interest totaling $524,520.
Stock options
On August 15, 2011, the Company approved the employee compensation plan and granted a total of 200,000 common stock options, to our employees. As stated in the compensation plan, these options have a four year term. Fifty percent of the options will become vested and exercisable immediately, 25% on the first anniversary date of August 15, 2011, and 25% on the second anniversary date of August 15, 2012. The options have an exercise price of $0.27 per share, which was the fair value of the stock on the day of the grant. Given a risk free rate of 0.99%, a volatility input of 99.96% and using the simplified method, the maturity time used in the calculation is 2.375 years. As of December 31, 2011 $20,519 was expensed to the income statement. The remaining $20,519 will be expensed as stated above.
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The following table presents the activity for options granted:
The weighted average remaining life of these 200,000 options as of December 31, 2011 was 3.6 years.
The following table presents the composition of options outstanding and exercisable. The exercisable options have an intrinsic value of $24,000.
(5) Income Taxes
The Company records deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
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The provision of income taxes consists of the following for the years ended December 31, 2011 and 2010:
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The expense or benefit for income taxes differs from the amount computed by applying the U.S. federal
income tax rate of 35% to income or loss before income taxes as follows for the years ended:
(6) Subsequent Events
During February 2012, the Company converted its $30,000 convertible note receivable into 200,000 common shares of common stock of SRKP 16, Inc.
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ITEM 9.
ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
We did not have any disagreements on accounting and financial disclosures with our present accounting firm during the reporting period.
ITEM 9A(T).
ITEM 9A(T). CONTROLS AND PROCEDURES.
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act. As a result of this evaluation, we identified a material weaknesses in our internal control over financial reporting as of December 31, 2011. Accordingly, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of December 31, 2011.
Management’s Annual Report on Internal Control Over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-(f) under the Exchange Act. Our internal control over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U. S. generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:
i. pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
ii. provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our consolidated financial statements in accordance with U. S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
iii. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2011. 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 December 31, 2011 due to a material weakness that was identified. The material weakness identified relates to insufficient control procedures related to determining the fair value of the company's investments.
In order to remedy the material weakness, we have established new policies and procedures to record our investments at fair value. The new policy outlines the basic procedures to following when recording the original investment and the valuation thereafter. On a quarterly basis, management will review and approve the original valuations and fair value assessments.
We have significant changes in our internal control over financial reporting during the last fiscal quarter as a result of our business combination with NexCore on September 29, 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Primarily, we had changes in key personnel and policy and procedures as we integrate the results of this new entity. We continue to develop controls, procedures, and plans to implement controls and procedures which we anticipate will be sufficient to accurately report our financial performance in the foreseeable future.
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.
Attestation Report of the Registered Public Accounting Firm.
This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management's report in this annual report on Form 10-K.
ITEM 9B.
ITEM 9B. OTHER INFORMATION.
Nothing to report.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Set forth below is the name of the sole director and officer of the Company, all positions and offices with the Company held, the period during which he has served as such, and the business experience during at least the last five years:
Mr. Anderson has been our President since May, 2011. He was director of Marketing and Development for EnviroPest, a large privately owned pest control company from June 2009 to May 2011. From June 2008 to June 2009 he served as Marketing Director for Pillar Capital, LLC and from December 1996 to May 2007 was Pastor of Media Ministries at Resurrection Fellowship church in Loveland, Colorado. He also served as radio play-by-play announcer for Colorado State University football and basketball from 1989 to 1997. Mr. Anderson received his Bachelor of Science in Communications from Oral Roberts University in 1983.
Mr. Klemsz has been our Treasurer and sole Director since our inception and President from inception until May, 2011. Since March, 2007, he has been the Chief Investment Officer of BOCO Investments, LLC. He was President and Chief Investment Officer for GDBA Investments, LLLP, a private investment partnership from May 2000 until February 2007. He is currently also the President, Treasurer, and sole Director of WestMountain Distressed Debt, Inc., and WestMountain Alternative Energy, Inc., which are public companies. He is also a member of the Board of Directors of NexCore Healthcare Capital Corp., a public company formerly known as CapTerra Financial Group, Inc. and is Chairman of their Board’s audit committee. Mr. Klemsz received a Masters of Science in Accounting and Taxation in 1993 and a Masters of Science in Finance in 1990 from Colorado State University. He received his Bachelor of Science degree from the University of Colorado in 1981.
Ms. Troska has been our corporate Secretary since March 2010. She was corporate Secretary of CapTerra Financial Group, Inc.(“CPTA”), a public company, now known as NexCore Healthcare Capital Corp.,from January 20, 2009. As of August 2009 she was appointed Treasurer and Chief Financial Officer of CPTA. Prior to 2009 she was Secretary-Treasurer from its inception in April, 2003 until 2005. She is no longer either an officer or director of CPTA as of October, 2010. She currently serves as corporate Secretary of WestMountain Alternative Energy, Inc. and WestMountain Distressed Debt, Inc., both public companies. She started SP Business Solutions, a business consulting service, in April, 2002. Prior to that period, she was employed for fourteen years as the General Accounting Manager and financial liaison for software implementations and acquisition integration by Advanced Energy Industries, Inc., a public international electronics manufacturing company, in Fort Collins, Colorado. While employed by Advanced Energy, she obtained her business degree in July 2001.
Family Relationships
There are no family relationships among our directors and executive officers. No director or executive officer has been a director or executive officer of any business which has filed a bankruptcy petition or had a bankruptcy petition filed against it. No director or executive officer has been convicted of a criminal offense within the past five years or is the subject of a pending criminal proceeding. No director or executive officer has been the subject of any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities. No director or officer has been found by a court to have violated a federal or state securities or commodities law.
Committees of the Board of Directors
There are no committees of the Board of Directors.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the “34 Act”) requires our officers and directors and persons owning more than ten percent of the Common Stock, to file initial reports of ownership and changes in ownership with the Securities and Exchange Commission (“SEC”). Additionally, Item 405 of Regulation S-K under the 34 Act requires us to identify in its Form 10-K and proxy statement those individuals for whom one of the above referenced reports was not filed on a timely basis during the most recent year or prior years. We have nothing to report in this regard.
Code of Ethics
Our board of directors has not adopted a code of ethics but plans to do so in the future.
Options/SAR Grants and Fiscal Year End Option Exercises and Values
Effective August 15, 2011, our board of directors adopted and approved a new Equity Compensation Plan.(the 2011 Plan) . Our shareholders approved this Plan in December, 2011. A total of 500,000 common shares have been reserved under the 2011 Plan.
The purpose of the 2011 Plan is to provide a means for us and our subsidiaries and other designated affiliates, which we refer to as Related Entities, to attract key personnel to provide services to our company and the Related Entities, as well as, to provide a means whereby those key persons can acquire and maintain stock ownership, thereby strengthening their commitment to the welfare of our company and its Related Entities and promoting the mutuality of interests between participants and our shareholders. A further purpose of the 2011 Plan is to provide participants with additional incentive and reward opportunities designed to enhance the profitable growth of our company and its Related Entities, and provide participants with annual and long term performance incentives to expend their maximum efforts in the creation of shareholder value.
The terms of the 2011 Plan provide for grants of stock options and restricted stock awards and performance awards that may be settled in cash, stock or other property. As of September 1, 2011, two awards have been granted under the 2011 Plan. Mr. Steve Anderson received an option to acquire a total of 160,000 common shares of the Company, all at a price of $ 0.27 per share. Ms Joni Troska received an option to acquire a total of 40,000 common shares of the Company, all at a price of $ 0.27 per share.
Otherwise, we have not had a stock option plan or other similar incentive compensation plan for officers, directors and employees, and no stock options, restricted stock or SAR grants were granted or were outstanding at any time.
Item 11.
Item 11. EXECUTIVE COMPENSATION
Beginning in May, 2011, our President, Mr. Anderson receives a salary of $120,000 per annum, plus a stock option to acquire a total of 160,000 common shares of the Company, all at a price of $ 0.27 per share . We reimburse Mr. Anderson for all necessary and customary business related expenses. We have no plans or agreements which provide health care, insurance or compensation on the event of termination of employment or change in our control.
Ms. Joni Troska, was appointed our corporate Secretary on March 19, 2009. In May 2011, she was hired as a part-time accountant and receives a salary of $48,000. Ms Troska also received an option to acquire a total of 40,000 common shares of the Company, all at a price of $ 0.27 per share.
Otherwise, our officers and director are not accruing any compensation pursuant to any agreement with us.
Finally, no retirement, pension, profit sharing, or insurance programs or other similar programs have been adopted by us for the benefit of our employees.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following sets forth the number of shares of our $0.001 par value common stock beneficially owned by (i) each person who, as of December 31, 2011, was known by us to own beneficially more than five percent (5%) of its common stock; (ii) our individual Directors and (iii) our Officers and Directors as a group. A total of 9,517,402 common shares were issued and outstanding as of December 31, 2011.
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(1) All ownership is beneficial and of record, unless indicated otherwise.
(2) The Beneficial owner has sole voting and investment power with respect to the shares shown.
(3) Mr. Klemsz owns 16.8% of WestMountain Blue, LLC.
(4) Anderson has an option to acquire a total of 160,000 common shares of the Company, all at a price of $ 0.27 per share.
(5) Ms. Troska has a stock option to acquire a total of 40,000 common shares of the Company, all at a price of $ 0.27 per share.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Bohemian Companies, LLC and BOCO Investments, LLC are two companies under common control. Mr. Klemsz, our President, has been the Chief Investment Officer of BOCO Investments, LLC since March 2007. Since there is common control between the two companies and a relationship with our Company President, we are considering all transactions with Bohemian Companies, LLC and BOCO Investments, LLC, related party transactions.
On January 1, 2008, we entered into a Service Agreement with Bohemian Companies, LLC to provide us with certain defined services. These services include financial, bookkeeping, accounting, legal and tax matters, as well as cash management, custody of assets, preparation of financial documents, including tax returns and checks, and coordination of professional service providers as may be necessary to carry out the matters covered by the Service Agreement. We compensate Bohemian Companies, LLC by reimbursing this entity for the allocable portion of the direct and indirect costs of each employee of Bohemian Companies, LLC that performs services on our behalf. We receive invoices monthly from Bohemian Companies, LLC. This Service Agreement matures on December 31, 2012. Total expenses incurred with Bohemian Companies were $12,000 for the years ending December 31, 2011 and 2010. As of December 31, 2011 the Company had a balance due to Bohemian Companies, LLC of $3,000.
For the year ended December 31, 2011 and 2010 the Company recorded management fee revenues of $74,607 and $89,702, respectively, for asset management services performed on behalf of WestMountain Prime, LLC, a related party. The Company and WestMountain Prime, LLC are under common principal ownership. The Company earns management fees based on the size of the funds managed, and incentive income based on the performance of the funds.
For the year ended December 31, 2011 and 2010 the Company recorded $-0- and $10,000 respectively, in revenue for advisory fees charged to Accredited Members, Inc. (“AMI”), formerly Across America Real Estate Exchange, Inc.
For the year ended December 31, 2011 and 2010, the Company recorded social media revenue of $23,000 and $0, respectively. Of the $23,000 recorded in 2011, $18,000 is related party revenue for services performed on behalf of Nexcore Group LP. The company and Nexcore are under common principal ownership.
As of December 31, 2011 and 2010, the Company recorded $16,673 and $22,417, respectively, as accounts receivable related party. These amounts represent fourth quarter management fees that were due from WestMountain Prime, LLC. Both amounts were paid off in the following respective quarters. Additionally in the fourth quarter of 2011, the Company provided Nexcore consulting services for marketing and social media in the amount of $18,000. This amount is included in the related party accounts receivable balance presented on the balance sheet.
On September 15, 2009 the Company signed a promissory note with BOCO Investments, Inc. (BOCO), a related party, in the amount of $150,000. The note matured in March 2010 and was extended to March 2011. On June 30, 2010 the Company entered into a new note for $500,000 with an interest rate of 10% and a maturity date of June 30, 2011. The September 15, 2009 note for $150,000 was canceled and the principal and interest was rolled into the new note. On June 29, 2011 the full amount of the note and related accrued interest, in the amount of $524,520, was converted to 455,652 of common shares at a price of $1.15. The closing stock price of the Company’s common stock on the date of conversion was $0.27 resulting in a gain on the conversion of $401,495. The gain was accounted for as a capital transaction due to BOCO being a related party.
The Company entered into an agreement with SP Business Solutions (“SP”) to provide accounting and related services for the Company. The owner, Joni Troska, was appointed Secretary of WestMountain Asset Management, Inc. on March 19, 2010, and is considered to be a related party. As of December 31, 2010 an accrual of $525 has been recorded for unpaid services.
In December 2009 the Company formed three new companies, WestMountain Business Consulting, Inc., WestMountain Allocation Analytics, Inc. and WestMountain Valuation Services, Inc. that are included in our consolidated financial statements.
On September 29, 2010 CapTerra Financial Group, Inc. merged with Nexcore Group LP (“Nexcore”). The Company provided advisory services related to the transaction and for those services received 1,645,000 warrants. In December 2010, these warrants were exercised for common stock of Nexcore Group LP. As of December 31, 2010, no active market existed for these securities and so the company kept the value of this investment on the books at the aggregate exercise price of $1,645. The equity securities have been restricted and cannot be sold for two years.
ITEM 14:
ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES
Our independent auditor, MaloneBailey, LLP, Certified Public Accountants billed an aggregate of $5,000 for the year ended December 31, 2011 and for professional services rendered for the audit of the Company's annual financial statements and review of the financial statements included in our quarterly reports. Our former independent auditor, Cordovano and Honeck LLP, Certified Public Accountants, billed an aggregate of $18,947 for for the year ended December 31, 2010 and for professional services rendered for the audit of the Company's annual financial statements and review of the financial statements included in our quarterly reports.
We do not have an audit committee and as a result our board of directors performs the duties of an audit committee. Our board of directors evaluates the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services.
ITEM 15.
ITEM 15. EXHIBITS FINANCIAL STATEMENT SCHEDULES.
The following financial information is filed as part of this report:
(a) (1) FINANCIAL STATEMENTS
(2) SCHEDULES
(3) EXHIBITS. The following exhibits required by Item 601 to be filed herewith are incorporated by reference to previously filed documents:
* Previously filed with Form SB-2 Registration Statement, January 2, 2008
** Previously filed with Form 10-KSB Registration Statement, February 29, 2008
SIGNATURES
In accordance with Section 12 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 on April 16, 2012.
WESTMOUNTAIN ASSET MANAGEMENT, INC.
By:
/s/ Brian L. Klemsz
Brian L. Klemsz,
Chief Executive Officer and Chief Financial Officer
(principal executive officer and principal financial and accounting officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacity and on the date indicated.