Item 1.01 Entry into a Material Definitive Agreement.
Equity Investment
On June 17, 2016, the WestMountain Gold, Inc. (the
Company
) entered into and closed an equity investment in the Company pursuant to certain Common Stock and Warrant Purchase Agreements (the
Purchase Agreements
) with certain accredited investors listed below (collectively, the
Investors
). Pursuant to the Purchase Agreements, the Company sold twelve million (12,000,000) shares of its common stock, par value $0.001 (each a
Share
and, collectively, the
Shares
). The Shares were sold at a purchase price of three cents ($0.03) per Share, for an aggregate purchase price of three hundred sixty thousand dollars ($360,000).
Each Share purchased also includes 3.25 warrants, each for the purchase of an additional Share at a purchase price of seven cents ($0.07) per Share (each a
Warrant
and, collectively, the
Warrants
), exercisable on or before the date that is seven (7) years from the date of issuance thereof pursuant to those certain Warrant for the Purchase of Common Stock of WestMountain Gold, Inc. (the
Warrant Forms
). A total of thirty-nine million (39,000,000) Warrants were sold by the Company as a result of this transaction.
As a condition to the investment, the Company is required to indemnify each of the Investors with respect to certain events and to release all claims that may be brought by or on behalf of the Company against each of the Investors, as described more fully in the Purchase Agreements. The Purchase Agreements and Warrant Forms otherwise include customary terms for a transaction of this nature, including registration rights related to the underlying Shares.
The Shares and Warrants were purchased by the respective Investors as follows:
Investor Name
|
Purchase Price Paid
|
|
Shares Purchased
|
|
Warrants Purchased
|
Richard Bloom
|
$
|
57,000
|
|
1,900,000
|
|
6,175,000
|
Bloom Family Investments Limited Partnership
|
$
|
57,000
|
|
1,900,000
|
|
6,175,000
|
Patrick J. Kanouff
|
$
|
18,000
|
|
600,000
|
|
1,950,000
|
Brian Klemsz
|
$
|
114,000
|
|
3,800,000
|
|
12,350,000
|
Joseph C. Zimlich
|
$
|
114,000
|
|
3,800,000
|
|
12,350,000
|
As
a result of the transaction, each of Richard Bloom (directly and indirectly through Bloom Family Investments Limited Partnership), Brian Klemsz, and Joseph C. Zimlich is, or has rights to become, the beneficial owner of greater than 10% of the issued and outstanding shares of the Company
s common stock.
Joseph C. Zimlich is the President of the Managing Member of BOCO Investments, LLC (
BOCO
). As of the date of this Quarterly Report, BOCO is, or has rights to become, the beneficial owner of approximately 54.2% of the issued and outstanding shares of the Company
s common stock and is the primary creditor of the Company (as discussed above, the Company is currently in default on all loans made by BOCO to the Company).
The preceding descriptions of the Purchase Agreements and the Warrant Forms are incomplete and qualified in their entirety by reference to the complete text of the Purchase Agreements and the Warrant Forms, respectively, forms of which were attached as Exhibits to Quarterly Report of the Company filed with the Securities and Exchange Commission on June 20, 2016. The Purchase Agreements and the Warrant Forms for each of the Investors are substantially identical but for the amounts of the investment and number of Shares and Warrants issued.
2
BOCO Debt Restructure
As previously disclosed, since December 15, 2015, the Company has been in default under all promissory notes made by the Company in favor of BOCO (listed below, collectively, the
Notes
) due to non-payment on certain of the Notes:
·
September 17, 2012, Amended and Restated Secured Convertible Promissory Note in the principal amount of $1,852,115 (the
September 2012 Note
);
·
May 7, 2013, Promissory Note in the principal amount of $500,000 (the
May 2013 Note
);
·
June 27, 2013, Promissory Note in the principal amount of $500,000 (the
June 2013 Note
);
·
February 14, 2014, Secured Promissory Note in the principal amount of $1,000,000 (the
February 2014 Note
);
·
May 23, 2014, Secured Convertible Promissory Note in the principal amount of $100,000 (the
May 2014 Note
);
·
June 9, 2014, Secured Convertible Promissory Note in the principal amount of $100,000 (the
June 2014 Note
);
·
May 1, 2015, Promissory Note in the principal amount of $100,000 (the
May 2015 Note
);
·
June 26, 2015, Secured Promissory Note in the principal amount of $109,346.31 (the
June 2015 Note
);
·
March 22, 2016, Secured Promissory Note in the principal amount of $125,000 (the
March 2016 Note
); and
·
April 12, 2016, Secured Promissory Note in the principal amount of $531,317 (the
April 2016 Note
).
Since that time, the Notes have accrued interest at the respective default rates set forth in the Notes (ranging from 18% to 45% per annum) and the Company has been working with BOCO to resolve the default issues. On May 25, 2016, the Company received from BOCO a formal demand for immediate payment of all amounts due under the Notes.
On June 22, 2016 (the
Effective Date
), the Company and BOCO entered into and closed a Loan and Note Modification Agreement (the
Modification Agreement
) to resolve the default and restructure the debt due under the Notes. The total amount due under the Notes immediately prior to entering into the Modification Agreement was approximately, $5,879,797.
Pursuant to the Modification Agreement, BOCO waived all current defaults and default interest due on the Notes. Additionally, BOCO converted all outstanding principal and interest due under the May 2014 Note and June 2014 Note, totaling $217,956, into 1,816,296 shares of the Company
s common stock, par value $0.001, at a conversion rate of $0.12 per share. As a result of the conversion, the May 2014 Note and June 2014 Note have been canceled.
Furthermore, pursuant to the Modification Agreement, the base interest rate was decreased from 8% to 5% as of the Effective Date on the following Notes: the May 2013 Note, the June 2013 Note, the February 2014 Note, the May 2015 Note, the June 2015 Note, the March 2016 Note, and the April 2016 Note. The base interest rate of the September 2012 Note (collectively with the May 2013 Note, the June 2013 Note, the February 2014 Note, the May 2015 Note, the June 2015 Note, the March 2016 Note, and the April 2016 Note, the
Remaining Notes
) remains at 8% per annum. With respect to the Remaining Notes, in the event of a default under the Modification Agreement, any of the Remaining Notes or agreements related thereto, the default interest rate was adjusted to the maximum interest rate allowable under Colorado law. As of the Effective Date, the Remaining Notes will accrue interest at their respective base interest rates.
3
Additionally, the Modification Agreement extends the maturity date of the following Notes to December 15, 2018: the May 2013 Note, the June 2013 Note, the May 2015 Note, the June 2015 Note, and the March 2016 Note. The maturity date for the other Remaining Notes remains unchanged, as follows: the September 2012 Note due on November 15, 2017, the February 2014 Note due on November 15, 2016, and the April 2016 Note due on October 31, 2018.
The Remaining Notes continue to be secured by the assets of the Company pursuant to the Security Agreement entered into by the Company and BOCO dated June 27, 2013, and the Security and Inter-Creditor Agreement entered into by the Company and BOCO dated May 15, 2015 (collectively, the
Security Agreements
). Furthermore, BOCO retains certain protective and oversight rights over Company operations and requires the Company to maintain covenants that are substantially similar to the protective and oversight rights and covenants contained in the prior Loan and Note Modification Agreement entered into by and Between the Company and BOCO on May 15, 2015, in connection with certain of the Notes.
As part of the Modification Agreement, the Company agreed to appoint Richard Bloom and Brian Klemsz as directors of the Company to serve until the next election of directors.
As of the date of this Current Report, BOCO is, or has rights to become, the beneficial owner of approximately 54.2% of the issued and outstanding shares of the Company
s common stock.
The preceding descriptions of the Modification Agreement, the Notes and the Security Agreements are incomplete and qualified in their entirety by reference to the complete text of the Modification Agreement, the Notes and the Security Agreements, respectively, which, in the case of the Modification Agreement, is attached as an Exhibit to this Current Report, and, in the case of the Notes and Security Agreements, were attached as Exhibits to previously filed reporting documents of the Company.