We are an exploration stage mining company, in accordance with applicable guidelines of the
We acquired TMC on
February 28, 2011and accounted for the transaction as a reverse acquisition using the purchase method of accounting, whereby TMC is deemed to be the accounting acquirer (legal acquiree) and WMTN to be the accounting acquiree (legal acquirer). Our financial statements before the date of the acquisition are those of TMC with the results of WMTN being consolidated from the date of the acquisition. The equity section and earnings per share have been retroactively restated to reflect the reverse acquisition and no goodwill has been recorded. We adopted TMC's fiscal year, which is October 31. 22 --------------------------------------------------------------------------------
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: Years Ended October 31, 2013 2012 $ Variance % Variance Revenue
$ 94$ - $ 94 100.0 % Cost of sales 49 - $ 49 -100.0 % Gross profit 45 - $ 45 100.0 % Selling, general and administrative expenses 1,994 2,039 $ (45 )2.2 % Exploration expenses 2,965 2,167 $ 79836.8 % Operating loss (4,914 ) (4,206 ) $ (708 )16.8 % Other income (expense): Interest expense (547 ) (1,344 ) $ 79759.3 % Financing fee (149 ) - $ (149 )-100.0 % Loss on derivative liability (2,000 ) - $ (2,000 )-100.0 % Total other expense (2,696 ) (1,344 ) $ (1,352 )-100.6 % Net loss $ (7,610 ) $ (5,550 ) $ (2,060 )-37.1 %
Revenue for the year ended
COST OF SALES
Cost of sales for the year ended
Selling, general and administrative expenses for the year ended
October 31, 2013decreased $45,000to $1,994,000as compared to $2,039,000for the year ended October 31, 2012. The decrease in selling, general and administrative expenses was due to reduced consulting expenses Such expenses for the year ended October 31, 2013and 2012 consisted primarily of employee and independent contractor expenses, expenses related to share and warrant 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. Exploration expenses for the year ended October 31, 2013increased $798,000to $2,965,000as compared to $2,167,000for the year ended October 31, 2012. The increase in exploration expenses was due to expenditures for the 2013 mining season. These expenditures included an upgrade of the pilot mill facility, construction of a C-130 aircraft capable runway, road construction and mine portal construction.
Net loss for the year ended
October 31, 2013was $7,610,000as compared to a net loss of $5,550,000for the year ended October 31, 2012. The net loss for the year ended October 31, 2013included $3,447,000of non-cash expenses, including (i) $1,094,000in expenses related to the issuance of common stock and warrants related to services; (ii) loss on derivative liability of $2,000,000; (iii) loss on forward sale contracts and loan agreements of $194,760(See NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES for detail on forward sale contracts and loan agreements); and (iv) other expense totaling $158,000during the year ended October 31, 2013. The net loss for the year ended October 31, 2012included $1,993,000in non-cash expenses, including (i) $628,000in expenses related to the issuance of common stock and warrants related to services; (ii) $1,266,000in warrant amortization expense; and (iii) other expense totaling $99,000during the year ended October 31, 2012. 23 --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
We had cash of 82,000, a working capital deficit of approximately
February 12, 2014, we have $2,852,115plus accrued interest of $478,357due to BOCO Investments LLCon two secured promissory notes that are now in default. BOCO has demanded payment in full of all amounts due under these notes. We are currently attempting to negotiate an extension or other modification of these notes as we do not have the ability to repay the amount due. There can be no assurance that we will be able to renegotiate these promissory notes on terms that are favorable to the Company. If we are not successful in negotiating an extension or other modification of these notes, the Company may have to restructure its operations, divest all or a portion of its business, or file for bankruptcy. We have budgeted expenditures for the TMC project for the next twelve months of approximately $2,900,000, depending on additional financing, for general and administrative expenses and exploration. We must expend an additional $2,100,000for a total of $9,050,000plus option payments of $450,000by December 31, 2014as an "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 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. We must expend an additional $2.1 millionby December 31, 2014(subject to approval by Corvus of total expenditures) to achieve 80% earn in on the TMC project. If we are unable to raise this capital, we will not be able to complete the 80% earn in interest in the JV. 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 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. We have budgeted the following expenditures for the next twelve months of approximately $2,900,000, depending on additional financing, for general and administrative expenses and exploration to implement the business plan as described above. Expenditures $ Drilling costs $ 250,000Camp and labor costs 500,000 Claims payments 100,000 Mining and milling 500,000 Underground portal 475,000 Property payments 275,000 Total mining $ 2,100,00024
Net cash used in operating activities for the year ended
October 31, 2013was $2,941,000. This amount was primarily related to a net loss of $7,610,000, offset by an increase in accounts payable of $1,291,000by depreciation and amortization and other non-cash expenses of $3,447,000of non-cash expenses, including (i) $1,094,000in expenses related to the issuance of common stock and warrants related to services; (ii) loss on derivative liability of $2,000,000; (iii) loss on forward contract of $195,000; and (iv) other expense totaling $158,000during the year ended October 31, 2013.
Net cash used in investing activities for the year ended
October 31, 2013was $354,000. This amount was primarily related to capital expenditures of $254,000and contractual rights of $100,000.
Net cash provided by financing activities for the year ended
October 31, 2013was $3,289,000. This amount was primarily related to the proceeds from the issuance of common stock of $1,140,000, proceeds from the forward contract of $600,000, net proceeds from promissory notes of $944,000and the issuance of preferred stock of $605,000. Our unaudited contractual cash obligations as of October 31, 2013are summarized in the table below: Greater Less Than 1 Than 5 Contractual Cash Obligations Total Year 1-3 Years 3-5 Years Years Operating leases $ 855,000 $ 280,000 $ 200,000 $ 250,000 $ 125,000Capital lease obligations - - - - - Note payable 3,083,248 3,083,248 - - - Mining expenditures 2,100,000 2,100,000 - - - Forward contracts 794,760 794,760 - - - $ 6,833,008 $ 6,258,008 $ 200,000 $ 250,000 $ 125,000
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Use of 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 Corporationup to $250,000. 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, 2013, we had no uninsured cash amounts.
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.
Mineral PropertiesCosts 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. 25 --------------------------------------------------------------------------------
We have access to the camp by airplane. The property has haul roads, a mill facility and adjoining camp infrastructure, a tailings pond and other infrastructure. 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, 2013, there are no impairments recognized. Alaska Reclamation and Remediation Liabilities TMC operates in Alaska. The State of Alaska Department of Natural Resourcesrequires a pool of funds from all permittees with exploration and mining projects to cover reclamation. There is a $750per 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. We exceeded the minimum requirements in 2013 and posted a reclamation bond of approximately $22,358on December 20, 2013. 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 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.