WESTMOUNTAIN INDEX ADVISOR INC - 10-K - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Edgar Glimpses Via Acquire Media NewsEdge) Overview WMTN is an exploration and development company that explores, acquires, and develops advanced stage properties. We have a high-grade gold system in the resource definition phase with 168,000 ounces of inferred gold which in total offers potential of 1,000,000 or more ounces that is owned by our wholly owned subsidiary, TMC. The property consists of 344 Alaska state mining claims covering approximately 85 square miles. All government permits and reclamation plans for continued exploration through 2014 were renewed in 2010. We refer to this project as the "TMC project".

We have budgeted expenditures for the next twelve months of approximately $2,425,000, depending on additional financing, for general and administrative expenses and exploration and development to implement the business plan as described below. For further details see "Liquidity and Capital Resources" below.

WMTN believes we will have to raise substantial additional capital in order to fully implement the business plan. If economic reserves of gold and/or other minerals are proven, additional capital will be needed to actually develop and mine those reserves. As discussed under "Liquidity and Capital Resources" below, we must expend $4.5 million over the next two years as our "earn in" on the TMC project to own rights to 80% of the project. Even if economic reserves are found, if we are unable to raise this capital, we will not be able to complete our earn in on this project.

Our principal source of liquidity for the next several years will need to be the continued raising of capital through the issuance of equity or debt. WMTN plans to raise funds for each step of the project and as each step is successfully completed, raise the capital for the next phase. WMTN believes this will reduce the cost of capital as compared to trying to raise all the anticipated capital at once up front. However, since WMTN's ability to raise additional capital will be affected by many factors, most of which are not within our control (see "Risk Factors"), no assurance can be given that WMTN will in fact be able to raise the additional capital as it is needed.

Our primary activity will be to proceed with the Terra Mining Corporation ("TMC") project and other mining opportunities that may present themselves from time to time. We cannot guarantee that the TMC project will be successful or that any project that we embark upon will be successful. Our goal is to build our Company into a successful mineral exploration and development Company.

15 --------------------------------------------------------------------------------RESULTS OF OPERATIONS The following table presents certain consolidated statement of operations information and presentation of that data as a percentage of change from year-to-year.

(dollars in thousands) Year Ended October 31, 2012 2011 $ Variance % Variance Revenue $ - $ - $ - Cost of sales - - - Gross profit - - - Selling, general and administrative expenses 2,039 1,710 329 -19.2 % Exploration expenses 2,167 1,461 706 -100.0 % Operating loss (4,206 ) (3,171 ) (1,035 ) -32.6 % Other income (expense): Interest expense (1,344 ) - (1,344 ) -100.0 % Consulting income - Terra Mining Corporation - 50 (50 ) 100.0 % Finance fee - (14 ) 14 -100.0 % Merger expense - (900 ) 900 -100.0 % Total other expense (1,344 ) (864 ) (480 ) -55.6 % Net loss $ (5,550 ) $ (4,035 ) $ (1,515 ) -37.5 % YEAR ENDED OCTOBER 31, 2012 COMPARED TO THE YEAR ENDED OCTOBER 31, 2011 EXPENSES Selling, general and administrative expenses for the year ended October 31, 2012 increased $329,000 to $2,039,000 as compared to $1,710,000 for the year ended October 31, 2011. Exploration expenses for the year ended October 31, 2012 increased $706,000 to $2,167,000 as compared to $1,461,000 for the year ended October 31, 2011. We acquired TMC on February 28, 2011 and expanded mining and business development activities in 2012.

Such expenses for the years ended October 31, 2012 and 2011 consisted primarily of employee and independent contractor expenses, expenses related to share issuances, rent, audit, overhead, amortization and depreciation, professional and consulting fees, sales and marketing costs, investor relations, legal, and other general and administrative costs and exploration expenses.

NET LOSS Net loss for the year ended October 31, 2012 was $5,550,000 as compared to a net loss of $4,035,000 for the year ended October 31, 2011. The net loss for the year ended October 31, 2012 included $1,993,000 of non-cash expenses. We acquired TMC on February 28, 2011 and expanded mining and business development activities in 2012.

LIQUIDITY AND CAPITAL RESOURCES We had cash of $89,000, a working capital deficit of approximately $3,517,000 as of October 31, 2012. In addition, we have $1,109,000 due under operating leases in 2013 and future years. Further, we have $4,450,000 in mining expenditures planned in 2013 and future years.

With the acquisition of TMC, we expect that compared to the historic expenses incurred by TMC and, subject to raising additional capital, expenditures will ramp up for exploration and development. We have budgeted expenditures for the next twelve months of approximately $2,450,000, depending on additional financing, for general and administrative expenses and exploration and development. We may choose to scale back operations to operate at break-even with a smaller level of business activity, while adjusting overhead depending on the availability of additional financing. In addition, we expect that we will need to raise additional funds if it decides to pursue more rapid expansion, the development of new or enhanced services or products, appropriate responses to competitive pressures, or the acquisition of complementary businesses or technologies, or if it must respond to unanticipated events that require it to make additional investments. We cannot assure that additional financing will be available when needed on favorable terms, or at all.

16 -------------------------------------------------------------------------------- If economic reserves of gold and/or other minerals are proven, additional capital will be needed to actually develop and mine those reserves. We must expend $4,450,000 over the next three years as our "earn in" on the TMC project to own rights to 80% of the project. Even if economic reserves are found, if we are unable to raise this capital, we will not be able to complete our earn in on this project.

We have budgeted the following expenditures for the next twelve months of approximately $2,450,000, depending on additional financing, for general and administrative expenses and exploration and development to implement the business plan as described above.

OPERATING ACTIVITIES Net cash used in operating activities for the year ended October 31, 2012 was $3,180,000. This amount was primarily related to a net loss of $5,550,000, offset by depreciation and amortization and other non-cash expenses of $1,993,000.

INVESTING ACTIVITIES Net cash used in investing activities for the year ended October 31, 2012 was $204,000. This amount was primarily related to capital expenditures of $204,000.

FINANCING ACTIVITIES Net cash provided by financing activities for the year ended October 31, 2012 was $3,463,000. This amount was primarily related to the issuance of promissory notes of $2,183,000 and common stock of $1,280,000.

Our unaudited contractual cash obligations as of October 31, 2012 are summarized in the table below: Less Than Greater Than Contractual Cash Obligations Total 1 Year 1-3 Years 3-5 Years 5 Years Operating leases $ 1,109,000 $ 384,000 $ 350,000 $ 250,000 $ 125,000 Capital lease obligations 0 0 0 0 0 Note payable 2,138,965 2,138,965 0 0 0 Mining expenditures 4,450,000 1,450,000 3,000,000 0 0 Acquisitions 0 0 0 0 0 $ 7,697,965 $ 3,972,965 $ 3,350,000 $ 250,000 $ 125,000 CRITICAL ACCOUNTING POLICIES AND ESTIMATES The application of GAAP involves the exercise of varying degrees of judgment. On an ongoing basis, we evaluate our estimates and judgments based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe that of our significant accounting policies (see summary of significant accounting policies more fully described in Note 2 to the financial statements set forth in this report), the following policies involve a higher degree of judgment and/or complexity: Cash and Cash Equivalents We classify highly liquid temporary investments with an original maturity of three months or less when purchased as cash equivalents. The Company maintains cash balances at various financial institutions. Balances at US banks are insured by the Federal Deposit Insurance Corporation up to $250,000. Beginning December 31, 2010, through December 31, 2012, all noninterest-bearing transaction accounts are fully insured, regardless of the balance of the account, at all FDIC-insured institutions. We have not experienced any losses in such accounts and believe it is not exposed to any significant risk for cash on deposit. As of October 31, 2012, we had no uninsured cash amounts.

Equipment Equipment consists of machinery, furniture and fixtures and software, which are stated at cost less accumulated depreciation and amortization. Depreciation is computed by the straight-line method over the estimated useful lives or lease period of the relevant asset, generally 3-5 years.

17-------------------------------------------------------------------------------- Mineral Properties Costs of acquiring mineral properties are capitalized by project area upon purchase of the associated claims. Costs to maintain the mineral rights and leases are expensed as incurred. When a property reaches the production stage, the related capitalized costs will be amortized, using the units of production method on the basis of periodic estimates of ore reserves.

We have access to the camp by airplane. There is no road access from camp to the project area where drilling and bulk sampling mining occurs. It is approximately 1 1/2 miles from camp to the project area. Power generation is by diesel generator at the camp. Fuel is brought in for the generators by a cargo plane to the airstrip.

Long-Lived Assets We review our long-lived assets for impairment annually or when changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets under certain circumstances are reported at the lower of carrying amount or fair value. Assets to be disposed of and assets not expected to provide any future service potential to the Company are recorded at the lower of carrying amount or fair value (less the projected cost associated with selling the asset). To the extent carrying values exceed fair values, an impairment loss is recognized in operating results. As of October 31, 2012 there are no impairments recognized.

Alaska Reclamation and Remediation Liabilities TMC operates in Alaska. The State of Alaska Department of Natural Resources requires a pool of funds from all permittees with exploration and mining projects to cover reclamation. There is a $750 per acre disturbance reclamation bond that is required for disturbance of 5 acres or more and/or removal of more the 50,000 cubic yards of material. TMC does not expect to exceed the minimum requirements and is not expected to be required to file a reclamation bond. As the project advances and feasibility justifies expansion, TMC may exceed the minimums outlined and may be required to file a reclamation plan and bond.

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

Mineral Exploration and Development Costs All exploration expenditures are expensed as incurred. Significant property acquisition payments for active exploration properties are capitalized. If no minable ore body is discovered, previously capitalized costs are expensed in the period the property is abandoned. Expenditures to develop new mines, to define further mineralization in existing ore bodies, and to expand the capacity of operating mines, are capitalized and amortized on a unit of production basis over proven and probable reserves.

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

[ Back To Technology News's Homepage ]