Item
1. DESCRIPTION OF BUSINESS.
(a) 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
are recently formed, have no operating history, and have never been
profitable. As a result, we may never become 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
are recently formed and have never been profitable. There can be no
guarantee that we will ever be profitable. We cannot guarantee we will ever
develop revenue. Even if we develop revenue, there is no assurance that we will
become a profitable company. We may never become profitable, and, as a result,
we could go out of business.
Because
we had incurred a loss and have no current operations, our accountants have
expressed doubts about our ability to continue as a going concern.
For our audit dated December 31, 2007, our accountants have expressed doubt
about our ability to continue as a going concern as a result of lack of history
of operations, limited assets, and operating losses since inception. Our ability
to achieve and maintain profitability and positive cash flow is dependent
upon:
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our
ability to find suitable investments;
and
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our
ability to generate revenues.
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Based upon current plans, we expect to incur operating losses in future periods
because we will be incurring expenses and not generating sufficient
revenues. We expect our operating costs to range between $60,000 and
$100,000 for the fiscal year ending December 31, 2008. We cannot guarantee
that we will be successful in generating sufficient revenues or other funds in
the future to cover these operating costs. Failure to generate sufficient
revenues will cause us to 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
no 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 generate adequate revenues to finance our operations, our business may
fail.
We
have not generated revenues from our inception. As of December 31, 2007, we had
a cash position of $53,405 and an additional $300,000 in Certificates of
Deposit. We anticipate that operating costs will range between $60,000 and
$100,000, for the fiscal year ending December 31, 2008. 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
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 an investment manager. This business is
highly competitive. There are numerous similar companies providing such services
in the United States of America. Our competitors will have greater financial
resources and more expertise in this business. Our ability to develop our
business will depend on our ability to successfully market our services in this
highly competitive environment. We cannot guarantee that we will be able to do
so successfully.
The
share control position of WestMountain Blue, LLC will limit the ability of other
shareholders to influence corporate actions.
Our largest shareholder, WestMountain Blue, LLC, of which Mr. Klemsz is a
16.8% member, owns 8,050,000 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 our Secretary-Treasurer and the continued financing of WestMountain Blue,
LLC.
We depend almost entirely on the efforts and continued employment of Mr. Klemsz,
our President and Secretary-Treasurer. Mr. Klemsz is our primary executive
officer, and we will depend on him for nearly all aspects of our operations. In
addition, WestMountain Blue, LLC, is our only source of financing. We do not
have an employment contract with Mr. Klemsz, and we do not carry key person
insurance on his life. The loss of the services of 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 Mr.
Klemsz and a financing source to replace WestMountain Blue,
LLC.
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.
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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 no experience as a public company.
We have
never operated as a public company. We have no 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 no public trading market and there is no guarantee a trading market
will ever develop for our securities.
There has
been, and continues to be, no 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:
* actual
or anticipated fluctuations in our operating results;
* changes
in financial estimates by securities analysts or our failure to perform in line
with such estimates;
* changes
in market valuations of other companies, particularly those that market services
such as ours;
* announcements
by us or our competitors of significant innovations, acquisitions,
strategic partnerships, joint ventures or capital commitments;
* introduction
of product enhancements that reduce the need for the products our projects may
develop;
* departures
of key personnel.
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Of our total outstanding shares as of December 31, 2007, a total of
8,325,000, 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 not quoted in any market. If our common stock becomes
quoted, we anticipate that it will trade 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 a 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.
(b)
NARRATIVE DESCRIPTION OF THE BUSINESS
Our plan
for the twelve months beginning January 1, 2008 is to make a profit by December
31, 2008. Our company has no prior history of operating as an asset
manager.
We are a
development stage company. We plan to act as an investment asset manager by
raising, investing and managing private equity and direct investment funds for
third parties including high net worth individuals and institutions. As is the
industry practice, we plan to 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 plan to focus on any particular industry but will look at any
and all opportunities. We will screen investments with emphasis towards finding
opportunities with long term potential.
We will
develop a proprietary investment screening process to make our
investments. This process will be based upon the experience of Mr.
Klemsz and outside consultants as we develop our company. This
process has not been developed at this time.
If we are
not successful in our operations we will be faced with several
options:
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Cease
operations and go out of business;
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Continue
to seek alternative and acceptable sources of capital;
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Bring
in additional capital that may result in a change of control;
or
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Identify
a candidate for acquisition that seeks access to the public marketplace
and its financing sources
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Currently,
we believe that we have sufficient capital to implement our proposed business
operations or to sustain them through December 31, 2008. If we can become
profitable, 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.
(c)
PROPOSED OPERATIONS
Our plan
is to act as an asset manager by raising, investing and managing private equity
and direct investment funds. We plan to earn management fees based on the size
of the funds that we oversee and incentive income based on the performance of
these funds. Our company has no prior history of operating as an asset
management advisory firm.
Our
initial office is leased from a member of the limited liability company,
WestMountain Blue, LLC, which owns a majority of our shares. Currently, we pay
no rent for this office space. We plan to occupy separate office facilities and
obtain office furniture and equipment at some future date, depending upon the
development of our business plan. We also plan to develop a proprietary
investment screening process to make our investments. This process
will be based upon the experience of our management team and outside
consultants. This process has not been developed at this
time.
Private
equity and direct investment funds generally refer to portfolios of non-actively
traded common equity, preferred stock or mezzanine or distressed debt securities
of private companies, but such funds may include investments in such equity or
debt securities of public companies. Private equity funds also may include
investments that constitute either control or minority positions in private
companies or investments in an array of real estate securities or assets,
including those made through special purpose funds that have risk-return
characteristics similar to those of other private equity investments and venture
capital investments. Private equity fund managers often seek to exploit
dislocations in the market when other investors do not recognize the value of a
certain company or security. These investments may include significant changes
to a company’s capital structure through the use of borrowed capital, a strategy
referred to as a ‘‘leveraged buyout’’. In certain cases, private equity funds
engage in the acquisition and delisting of public companies.
Private
equity and direct investment funds are typically structured as unregistered
limited partnership funds that obtain commitments from certain qualified
investors to invest a specified amount of equity capital on their behalf. These
funds are typically ten year fixed-lived vehicles with provisions to extend if
appropriate. Investors’ capital is typically called by the fund as investments
are made over the first three to six years of the fund’s term. Investors’
capital is returned through distributions and when those investments are
subsequently liquidated. Liquidation typically occurs within five to eight
years. Typical private equity fund investors are high net worth individuals and
institutions. Private equity fund managers typically earn fees as follows: (i)
management fees on committed or contributed capital, (ii) transaction and
monitoring fees as capital is invested and (iii) fees based on the net profits
of the fund, often subject to a preferred return for investors and contingent
repayment based on actual realized performance of the fund at the time of
liquidation. Private equity fund managers may from time to time commit a portion
of their own capital to the funds they manage.
According
to Thomson Venture Economics, there are currently over 1,800 private equity
funds in existence globally. Private equity funds have experienced significant
inflows recently, with over $400 billion of capital raised in the U.S. since the
beginning of 2002, according to Thomson Financial.
We
plan to act as an investment asset manager by raising, investing and managing
private equity and direct investment funds for third parties including high net
worth individuals and institutions. As is the industry practice, we plan to 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 plan to focus on any
particular industry but will look at any and all opportunities.
When
making investments, we will primarily focus on working with small companies that
require expansion or growth capital. We will screen investments
with emphasis towards finding opportunities with long term potential based upon
technology, first mover, or market value add business plans.
We are
presently planning to develop and implement a web site based operation to gather
additional potential investment opportunities beyond what we can generate
through our network of contacts. We also plan to utilize the most current
technology to analyze investments. We believe the technology will assist in the
analysis of each opportunity.
We
plan to 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 who
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, 2008.
If we are
not successful in our operations we will be faced with several
options:
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1.
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Cease
operations and go out of business;
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2.
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Continue
to seek alternative and acceptable sources of
capital;
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3.
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Bring
in additional capital that may result in a change of control;
or
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4.
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Identify
a candidate for acquisition that seeks access to the public marketplace
and its financing sources
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Currently,
we believe that we have sufficient capital to implement our proposed business
operations or to sustain them through December 31, 2008. If we can become
profitable, 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.
(d)
MARKETS
We
believe that the primary reason that clients would buy from 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
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Therefore, we plan to develop and expand on already existing
relationships to develop a competitive edge. We plan to utilize the expertise of
its principal officer to develop our business.
(e) 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.
(f)
CUSTOMERS AND COMPETITION
Our
business plan involves acting as an asset manager for private equity and direct
investment funds. This business is highly competitive. There are numerous
similar companies providing such services in the United States of America. Our
competitors will have greater financial resources and more expertise in this
business. Our ability to develop our business will depend on our ability to
successfully identify investments as well as raise capital through partnership
structures in this highly competitive environment. We cannot guarantee that we
will be able to do so successfully.
Over the
past several years, the size and number of companies such as ours has continued
to increase. If this trend continues, it is possible that it will become
increasingly difficult for us to raise funds to manage. More significantly, the
allocation of increasing amounts of capital to alternative investment strategies
by institutional and individual investors may lead to a reduction in profitable
investment opportunities, including by driving prices for investments higher and
increasing the difficulty of achieving targeted returns. In addition, if
interest rates were to rise or there were to be a prolonged bull market in
equities, the attractiveness of our funds relative to investments in other
investment products could decrease. Competition is based on a variety of
factors, including:
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investment
performance;
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investor
perception of investment managers’ drive, focus and alignment of
interest;
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quality
of service provided to and duration of relationship with
investors;
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business
reputation; and
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level
of fees and expenses charged for
services.
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We
compete in all aspects of our business with a large number of investment
management firms, private equity fund sponsors, hedge fund sponsors and other
financial institutions. A number of factors serve to increase our competitive
risks:
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investors
may develop concerns that we will allow a business to grow to the
detriment of its
performance;
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some
of our competitors have greater capital, lower targeted returns or greater
sector or investment strategy specific expertise than we do, which creates
competitive disadvantages with respect to investment opportunities; some
of our competitors may perceive risk differently than we do which could
allow them either to outbid us for investments in particular sectors or,
generally, to consider a wider variety of
investments;
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there
are relatively few barriers to entry impeding new private equity and hedge
fund management firms, and the successful efforts of new entrants into our
various lines of business, including former ‘‘star’’ portfolio managers at
large diversified financial institutions as well as such institutions
themselves, will continue to result in increased competition;
and
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other
industry participants continuously seek to recruit our best and brightest
investment professionals away from
us.
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These and
other factors could reduce our earnings and revenues and materially adversely
affect our business.
(g)
BACKLOG
At
December 31, 2007, we had no backlogs.
(h)
EMPLOYEES
We
have one full-time employee: Mr. Brian Klemsz, our President. Mr. Klemsz does
not draw a salary or receive any other kind of compensation. However, we
reimburse our employee 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 Directors separately for any Board
meeting they attend.
(i)
PROPRIETARY INFORMATION
We
own no proprietary information.
(j)
GOVERNMENT REGULATION
At some
point, we may be required to file to become a registered investment advisor, but
we do not expect government regulations or environmental laws to have any
material impact on us.
(k)
RESEARCH AND DEVELOPMENT
We have
never spent any amount in research and development activities.
(l)
ENVIRONMENTAL COMPLIANCE
We
believe that we are not subject to any material costs for compliance with any
environmental laws.
(m) 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.
Our investor relations
department can be contacted at our principal executive office located at our
principal office, 103 West Mountain, Fort Collins, Colorado
80524. Our telephone number is (970) 530-0325
.