UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2018
2019
or
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to _____________
Commission file number:0-55402
Rocky Mountain Industrials, Inc. (formerly RMR Industrials, Inc.)
(Exact name of registrant as specified in its charter)
Nevada | 46-0750094 | |
(State or jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
4601 DTC Blvd., Suite 130
Denver, CO 80237
(Address of principal executive offices)
(310) 492-5010(720) 614-5213
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
N/A | N/A | N/A |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes¨ Nox
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes¨ No x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of "large accelerated filer,” “accelerated filer," “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ | Accelerated filer ¨ |
Non-accelerated filer x | Smaller reporting companyx |
Emerging growth company x |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨ Nox
As of December 11, 2018,31, 2020, the registrant had 35,785,858 shares of Class A Common Stock, and 3,027,7124,401,277 shares of Class B Common Stock outstanding and 118.5 shares of Preferred Stock outstanding.
RMRROCKY MOUNTAIN INDUSTRIALS, INC.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The statements contained in this Quarterly Report on Form 10-Q that are not historical facts are "forward-looking statements." Forward-looking statements may include our statements regarding our goals, beliefs, strategies, objectives, plan, including product and service developments, future financial conditions, results or projections or current expectations. Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as "believes," "estimates," "intends," "plan" "expects," "may," "will," "should," "predicts," "anticipates," "continues," or "potential," or the negative thereof or other variations thereon or comparable terminology, and similar expressions are intended to identify forward-looking statements. We remind readers that forward-looking statements are merely predictions and therefore inherently subject to uncertainties and other factors and involve known and unknown risks that could cause the actual results, performance, levels of activity, or our achievements, or industry results, to be materially different from any future results, performance, levels of activity, or our achievements, or industry results, expressed or implied by such forward-looking statements. Such forward-lookinguncertainties and risks include those discussed in the “Risk Factors” and similar sections of our Annual Report on Form 10-K for the year ended March 31, 2019 and our other filings with the Securities and Exchange Commission, all of which are incorporated by reference herein. Forward-looking statements appear in Item 2 - "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as elsewhere in this Quarterly Report.
Our management has included projections and estimates in this Form 10-Q, which are based primarily on management’s experience in the industry, assessments of our results of operations, discussions and negotiations with third parties and a review of information filed by our competitors with the SEC or otherwise publicly available. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.events except as otherwise required by law.
Unless otherwise specified or required by context, as used in this Quarterly Report, the terms "we," "our," "us" and the "Company" refer collectively to RMR Industrials, Inc., (“RMR”) and its wholly-ownedwholly/majority-owned subsidiaries, RMR Aggregates, Inc., RMR Logistics, Inc., RMR Industrial Minerals, Inc., and Rail Land Company, LLC, RMR Recycling, Inc., RMR Water, LLC and its majority-owned subsidiary RMR Aggregates, Inc. The term "fiscal year" refers to our fiscal year ending March 31.Ready Mix, Inc.. Unless otherwise indicated, the term "common stock" refers to shares of our Class A Common Stock and Class B Common Stock.
Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles (U.S. GAAP).
CAUTIONARY NOTE REGARDING EXPLORATION STAGE STATUS
AND USE OF CERTAIN MINING TERMS
We are considered an “exploration stage” company under the U.S. Securities and Exchange Commission (“SEC”) Industry Guide 7, Description of Property by Issuers Engaged or to be Engaged in Significant Mining Operations (“Guide 7”), because we do not have reserves as defined under Guide 7. Reserves are defined in Guide 7 as that part of a mineral deposit which can be economically and legally extracted or produced at the time of the reserve determination. The establishment of reserves under Guide 7 requires, among other things, certain spacing of exploratory drill holes to establish the required continuity of mineralization and the completion of a detailed cost or feasibility study. Since we have no reserves as defined in Guide 7, we have not exited the exploration stage and continue to report our financial information as an exploration stage entity as required under relevant accounting principles. We will remain an exploration stage company under Guide 7 until such time as we demonstrate reserves in accordance with the criteria in Guide 7.
Since we have no reserves, we will expense all mine construction costs, even though these expenditures are expected to have a future economic benefit in excess of one year. We will also expense our reclamation and remediation costs at the time the obligation is incurred. Companies that have reserves and have exited the exploration stage typically capitalize these costs, and subsequently amortize them on a units-of-production basis as reserves are mined, with the resulting depletion charge allocated to inventory, and then to cost of sales as the inventory is sold. As a result of these and other differences, our financial statements will not be comparable to the financial statements of mining companies that have established reserves and have exited the exploration stage.
We use certain terms in this report such as “production,” “mining or processing activities,” and “mine construction.” Production means the estimated quantities (tonnage) delivered or shipped to our customers, which may result in disclosure of related limestone and dolomite sales. Mining or processing activities means the process of extracting limestone and dolomite from the earth and treating that material. Mine construction means work carried out to access areas in the mine containing limestone and dolomite, which principally includes road construction, ramp construction and ancillary activities. We use these terms in this report since we believe they are necessary and helpful for the reader to understand our business and operations. However, we caution you that we do not have reserves and therefore have not exited the exploration stage as defined in Guide 7, and our use of the terminology described above is not intended to indicate that we have established reserves or have exited the exploration stage for purposes of Guide 7. Furthermore, since we do not have reserves, we cannot provide any indication or assurance as to how long we will likely continue mining activities at our mine site or whether such activities will be profitable.
RMRROCKY MOUNTAIN INDUSTRIALS, INC.
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
PART I – FINANCIAL INFORMATION
RMRROCKY MOUNTAIN INDUSTRIALS, INC.
INDEX TO UNAUDITED FINANCIAL STATEMENTS
June 30, 20182019
RMR Industrials, Inc.ROCKY MOUNTAIN INDUSTRIALS, INC.
Unaudited Condensed Consolidated Balance Sheets
June 30, 2018 | March 31, 2018 | |||||||||||||||
(Unaudited) | June 30, 2019 | March 31, 2019 | ||||||||||||||
ASSETS | ||||||||||||||||
Current assets | ||||||||||||||||
Cash | $ | 2,166,867 | $ | 814,621 | $ | 855,977 | $ | 528,417 | ||||||||
Accounts receivable | 105,974 | 79,630 | 241,273 | 102,870 | ||||||||||||
Inventory | 28,695 | 54,290 | 32,246 | 48,976 | ||||||||||||
Prepaid expenses | 46,424 | 48,844 | 134,747 | 140,223 | ||||||||||||
Restricted cash | 98,241 | 196,181 | 112,130 | 111,694 | ||||||||||||
Total current assets | 2,446,201 | 1,193,566 | 1,376,373 | 932,180 | ||||||||||||
Property, plant, and equipment, net | 3,946,899 | 3,826,512 | ||||||||||||||
Right of use asset | 450,546 | - | ||||||||||||||
Property, plant and equipment, net of accumulated depreciation | 5,250,635 | 3,260,511 | ||||||||||||||
Land under development | 3,840,759 | 3,594,928 | 5,833,024 | 5,304,374 | ||||||||||||
Asset retirement obligation, net | 40,725 | 41,283 | ||||||||||||||
Intangible assets, net | 41,000 | 41,000 | ||||||||||||||
Other noncurrent assets | 26,832 | 26,830 | ||||||||||||||
Asset retirement obligation | 26,810 | 43,323 | ||||||||||||||
Goodwill | 338,585 | 41,000 | ||||||||||||||
Deposits and other assets | 36,785 | 65,842 | ||||||||||||||
Total assets | $ | 10,342,416 | $ | 8,724,119 | $ | 13,312,758 | $ | 9,647,230 | ||||||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||||||||||
Current liabilities | ||||||||||||||||
Accounts payable | $ | 585,463 | $ | 607,635 | $ | 1,294,942 | $ | 875,465 | ||||||||
Accounts payable, related party | 201,566 | 201,566 | ||||||||||||||
Accrued liabilities | 113,319 | 114,361 | 231,868 | 182,348 | ||||||||||||
Accrued liabilities, related party | 1,925,000 | 2,290,000 | 1,190,000 | 1,315,000 | ||||||||||||
Capital lease payable, current | 37,014 | 40,045 | - | 31,101 | ||||||||||||
Note Payable | 1,059,426 | - | ||||||||||||||
Line of Credit | 664,604 | - | ||||||||||||||
Equipment loan payable, current | 169,217 | 183,545 | 304,786 | 330,230 | ||||||||||||
Total current liabilities | 3,031,579 | 3,437,152 | 4,745,626 | 2,734,144 | ||||||||||||
Note payable, net of discount | 2,478,688 | 2,247,213 | 1,424,250 | - | ||||||||||||
Capital lease payable, noncurrent | 24,270 | 31,101 | ||||||||||||||
Equipment loan payable, noncurrent | 252,043 | 283,128 | ||||||||||||||
Deferred rent | 13,574 | 14,717 | - | 39,898 | ||||||||||||
Accrued reclamation liability | 52,664 | 51,409 | 62,478 | 60,990 | ||||||||||||
Preferred Shares Debt | 203,814 | - | ||||||||||||||
Lease Liability | 450,546 | - | ||||||||||||||
Total liabilities | 5,852,818 | 6,064,720 | 6,886,714 | 2,835,032 | ||||||||||||
Stockholders' Deficit | ||||||||||||||||
Preferred Stock, $0.001 par value, 50,000,000 shares authorized; none issued and outstanding | - | - | ||||||||||||||
Class A Common Stock, $0.001 par value; 2,000,000,000 shares authorized; 35,785,858 shares issued and outstanding | 35,786 | 35,786 | ||||||||||||||
Class B Common Stock, $0.001 par value; 100,000,000 shares authorized; 3,223,007 and 2,868,967 shares issued and 2,913,007 and 2,703,967 outstanding on June 30, 2018 and March 31, 2018, respectively | 3,223 | 2,869 | ||||||||||||||
Preferred Stock, $0.001 par value, 50,000,000 shares authorized: none issued and outstanding | - | - | ||||||||||||||
Class A Common Stock, $0.001 par value; 2,000,000,000 shares authorized; 35,785,858 shares issued and outstanding on June 30, 2019 and March 31, 2019, respectively. | 35,786 | 35,786 | ||||||||||||||
Class B Common Stock, $0.001 par value; 100,000,000 shares authorized, 4,103,252 and 4,032,752 shares issued outstanding on June 30, 2019 and March 31, 2019, respectively. | 4,539 | 4,033 | ||||||||||||||
Additional paid-in capital | 33,705,677 | 30,237,968 | 44,651,787 | 42,102,105 | ||||||||||||
Accumulated deficit | (38,217,961 | ) | (35,428,938 | ) | ||||||||||||
Total Rocky Mountain Industrials, Inc stockholders’ deficit | 6,474,151 | 6,712,986 | ||||||||||||||
Noncontrolling interest | (262,713 | ) | (188,207 | ) | (48,107 | ) | 99,212 | |||||||||
Accumulated deficit | (28,992,375 | ) | (27,429,017 | ) | ||||||||||||
Total stockholders’ deficit | $ | 4,489,598 | $ | 2,659,399 | ||||||||||||
Total liabilities and stockholders’ deficit | $ | 10,342,416 | $ | 8,724,119 | ||||||||||||
Total stockholders’ equity (deficit) | $ | 6,426,044 | $ | 6,812,198 | ||||||||||||
Total liabilities and stockholders’ equity (deficit) | $ | 13,312,758 | $ | 9,647,230 |
The accompanying notes are an integral part of these financial statements.
F-1 |
RMR Industrials, Inc.ROCKY MOUNTAIN INDUSTRIALS, INC.
Condensed Consolidated Statements of Operations (Unaudited)
For the three months ended June 30, 2018 | For the three months ended June 30, 2017 | For the three | For the three | |||||||||||||
(Unaudited) | (Unaudited) | months ended | months ended | |||||||||||||
June 30, 2019 | June 30, 2018 | |||||||||||||||
Revenue | $ | 329,614 | $ | 228,679 | $ | 477,724 | $ | 329,614 | ||||||||
Cost of goods sold | 319,854 | 191,020 | 421,300 | 319,854 | ||||||||||||
Gross profit | 9,760 | 37,659 | 56,424 | 9,760 | ||||||||||||
Selling, general and administrative | 1,411,849 | 1,148,988 | ||||||||||||||
Selling, general and administrative (includes depreciation, depletion and amortization) | 2,927,187 | 1,411,849 | ||||||||||||||
Loss from operations | (1,402,089 | ) | (1,111,329 | ) | (2,870,763 | ) | (1,402,089 | ) | ||||||||
Interest (expense) income, net | (235,775 | ) | (163,809 | ) | ||||||||||||
Gain on sale of assets | 18,000 | - | ||||||||||||||
Interest income (expense), net | (83,579 | ) | (235,775 | ) | ||||||||||||
Loss before income tax provision | (1,637,864 | ) | (1,275,138 | ) | (2,936,342 | ) | (1,637,864 | ) | ||||||||
Income tax expense | - | (1,600 | ) | - | - | |||||||||||
Net loss | (1,637,864 | ) | (1,276,738 | ) | (2,936,342 | ) | (1,637,864 | ) | ||||||||
Add: Net loss attributed to noncontrolling interest | (74,506 | ) | (50,454 | ) | (147,319 | ) | (74,506 | ) | ||||||||
Net loss attributable to RMR Industrials, Inc. | $ | (1,563,358 | ) | $ | (1,226,284 | ) | ||||||||||
Net loss attributable to Rocky Mountain Industrials, Inc. | (2,789,023 | ) | (1,563,358 | ) | ||||||||||||
Basic and diluted loss attributable to RMR Industrials, Inc. per common share | $ | (.35 | ) | $ | (.41 | ) | ||||||||||
Basic and diluted loss attributable to Rocky Mountain Industrials, Inc. per common share | $ | (0.53 | ) | $ | (0.35 | ) | ||||||||||
Weighted average shares outstanding | 4,555,817 | 3,003,418 | 5,185,212 | 4,555,817 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-2 |
RMR Industrials, Inc.
ROCKY MOUNTAIN INDUSTRIALS, INC.
Consolidated StatementsStatement of Cash FlowsChanges in Stockholder Equity (Unaudited)(Continued)
Three months ended June 30, 2018 | Three months ended June 30, 2017 | |||||||
(Unaudited) | (Unaudited) | |||||||
Cash flow from operating activities | ||||||||
Net loss | $ | (1,637,864 | ) | $ | (1,276,738 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
Depreciation and amortization expense | 85,806 | 75,696 | ||||||
Stock-based compensation | 344,594 | 68,876 | ||||||
Amortization of debt discount | 165,671 | 96,652 | ||||||
Deferred rent | (1,143 | ) | 7,862 | |||||
Paid-in-kind interest | 65,804 | 59,566 | ||||||
Changes in operating assets and liabilities | ||||||||
Accounts receivable | (26,343 | ) | (20,493 | ) | ||||
Prepaid expenses | 2,420 | (21,596 | ) | |||||
Inventory | 25,595 | - | ||||||
Restricted cash | 97,940 | - | ||||||
Deposits | (2 | ) | (25,000 | ) | ||||
Accounts payable | (22,172 | ) | 119,156 | |||||
Accounts payable, related parties | - | 250,000 | ||||||
Accrued liabilities | (1,042 | ) | (4,771 | ) | ||||
Accrued liabilities, related parties | (365,000 | ) | 297,500 | |||||
Net cash used in operating activities | (1,265,736 | ) | (373,290 | ) | ||||
Purchase of property, plant and equipment | (450,211 | ) | - | |||||
Purchase of intangibles and other assets | - | (152,102 | ) | |||||
Net cash used in investing activities | (450,211 | ) | (152,102 | ) | ||||
Payments on equipment loan | (45,413 | ) | (50,016 | ) | ||||
Payments on capital leases | (9,862 | ) | (12,158 | ) | ||||
Proceeds from shareholder deposit | - | (1,400,000 | ) | |||||
Proceeds from issuance of Class B common stock | 3,123,468 | 700,000 | ||||||
Net cash provided by (used in) financing activities | 3,068,193 | (762,174 | ) | |||||
Net increase (decrease) in cash | 1,352,246 | (1,287,566 | ) | |||||
Cash at beginning of period | 814,621 | 1,608,094 | ||||||
Cash at end of period | $ | 2,166,867 | $ | 320,528 | ||||
Supplemental cash flow information | ||||||||
Cash paid for interest | $ | 4,452 | $ | 585 | ||||
Cash paid for income taxes | $ | - | $ | 1,600 |
Common Stock Class A | Common Stock Class B | Additional Paid-In | Accumulated | Noncontrolling | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Interest | Total | |||||||||||||||||||||||||
Balance, March 31, 2018 | 35,785,858 | $ | 35,786 | 2,868,967 | $ | 2,869 | $ | 30,237,968 | $ | (27,429,017 | ) | $ | (188,207 | ) | $ | 2,659,399 | ||||||||||||||||
Issuance of common stock for exercise of a warrant | — | — | 209,040 | 209 | 3,123,468 | — | — | 3,123,677 | ||||||||||||||||||||||||
Issuance of restricted common shares for compensation | — | — | 145,000 | 145 | (145 | ) | — | — | — | |||||||||||||||||||||||
Stock-based compensation from stock options | — | — | — | — | 344,386 | — | — | 344,386 | ||||||||||||||||||||||||
Net loss for the three months ended June 30, 2018 | — | — | — | — | — | (1,563,358 | ) | (74,506 | ) | (1,637,864 | ) | |||||||||||||||||||||
Balance, June 30, 2018 | 35,785,858 | 35,786 | 3,223,007 | 3,223 | 33,705,677 | (28,992,375 | ) | (262,713 | ) | 4,489,598 |
Common Stock Class A | Common Stock Class B | Additional Paid-In | Accumulated | Noncontrolling | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Interest | Total | |||||||||||||||||||||||||
Balance, March 31, 2019 | 35,785,858 | $ | 35,786 | 4,032,752 | $ | 4,033 | $ | 42,102,105 | $ | (35,428,938 | ) | $ | 99,212 | $ | 6,812,198 | |||||||||||||||||
Issuance of warrant for services | - | - | - | 436 | 299,723 | - | - | 300,159 | ||||||||||||||||||||||||
Issuance of common shares for subscription | - | - | 75,000 | 75 | 1,499,925 | - | - | 1,500,000 | ||||||||||||||||||||||||
Issuance of restricted common shares for compensation | - | - | 37,000 | 37 | (37 | ) | - | - | - | |||||||||||||||||||||||
Issuance of common stock for services | - | - | 12,000 | 12 | (12 | ) | - | - | - | |||||||||||||||||||||||
Stock-based compensation from stock options | - | - | - | - | 750,029 | - | - | 750,029 | ||||||||||||||||||||||||
Forfeiture of common stock | - | - | (53,500 | ) | (54 | ) | 54 | - | - | - | ||||||||||||||||||||||
Net loss for the three months ended June 30, 2019 | - | - | - | - | - | (2,789,023 | ) | (147,319 | ) | (2,936,342 | ) | |||||||||||||||||||||
Balance, June 30, 2019 | 35,785,858 | 35,786 | 4,103,252 | 4,539 | 44,651,787 | (38,217,961 | ) | (48,107 | ) | 6,426,044 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-3 |
RMRROCKY MOUNTAIN INDUSTRIALS, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three months ended June 30, 2019 | Three months ended June 30, 2018 | |||||||
Cash flow from operating activities | ||||||||
Net loss | $ | (2,936,342 | ) | $ | (1,637,864 | ) | ||
Depreciation and amortization expense | 102,011 | 85,806 | ||||||
Stock-based compensation | 1,050,189 | 344,594 | ||||||
Amortization of debt discount | - | 165,671 | ||||||
Paid-in-kind interest | - | 65,804 | ||||||
Accretion expense | 16,513 | - | ||||||
Deferred rent | (39,898 | ) | - | |||||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
Changes in operating assets and liabilities | ||||||||
Accounts receivable | (138,403 | ) | (26,343 | ) | ||||
Prepaid expenses | 5,476 | 2,420 | ||||||
Inventory | 16,730 | 25,595 | ||||||
Restricted cash | (436 | ) | 97,940 | |||||
Deposits | 29,057 | (2 | ) | |||||
Accounts payable | 419,477 | (22,172 | ) | |||||
Accounts payable, related party | - | - | ||||||
Accrued liabilities | (8,418 | ) | (1,042 | ) | ||||
Accrued liabilities, related party | (125,000 | ) | (365,000 | ) | ||||
Deferred rent | - | (1,143 | ) | |||||
Net cash used in operating activities | (1,609,044 | ) | (1,265,736 | ) | ||||
Acquisition of H2K | (2,120,000 | ) | - | |||||
Acquisition of land for development | (528,650 | ) | - | |||||
Acquisition of new accounting system | - | - | ||||||
Purchase of property, plant and equipment | (269,719 | ) | (450,211 | ) | ||||
Net cash used in investing activities | (2,918,369 | ) | (450,211 | ) | ||||
Payments on equipment loan | (56,547 | ) | (45,413 | ) | ||||
Payments on capital leases | - | (9,862 | ) | |||||
Proceeds from note payable | 1,424,250 | - | ||||||
Repayment of debt | - | - | ||||||
Proceeds from issuance of Class B common stock | 1,500,000 | 3,123,468 | ||||||
Proceeds from issuance of unsecured note | 1,000,000 | - | ||||||
Proceeds from short term debt | 783,456 | - | ||||||
Proceeds from issuance OF PREFERRED SHARES | 203,814 | - | ||||||
Net cash provided by financing activities | 4,854,973 | 3,068,193 | ||||||
Net increase in cash | 327,560 | 1,352,246 | ||||||
Cash at beginning of period | 528,417 | 814,621 | ||||||
Cash at end of period | $ | 855,977 | $ | 2,166,867 | ||||
Supplemental cash flow information | ||||||||
Cash paid for interest | $ | 22,511 | $ | 4,452 | ||||
Cash paid for income taxes | - | - | ||||||
Right of use asset | 450,546 | - | ||||||
Lease liability | (450,546 | ) | - |
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-4 |
ROCKY MOUNTAIN INDUSTRIALS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018
NOTE A – FORMATION, CORPORATE CHANGES, AND MATERIAL MERGERS AND ACQUISITIONS
Online Yearbook was incorporated in the State of Nevada on August 6, 2012. Online Yearbook was a development stage company with the principal business objective of developing and marketing an online yearbook.
On November 17, 2014, Rocky Mountain Resource Holdings LLC,Inc., a Nevada limited liability companyCorporation (the “Purchaser”) became the majority shareholder of Online Yearbook, by acquiring 5,200,000 shares of common stock of Online Yearbook (the “Shares”), or 69.06% of the issued and outstanding shares of common stock, pursuant to stock purchase agreements with Messrs. El Maraana and Salah Blal. The Shares were acquired for an aggregate purchase price of $357,670. The Purchaser was the source of the funds used to acquire the Shares. In connection with Online Yearbook’s receipt of approval from the Financial Industry Regulatory Authority (“FINRA”), effective December 8, 2014, Online Yearbook amended its Articles of Incorporation to change its name from “Online Yearbook” to “RMR Industrials, Inc.INDUSTRIALS, INC.”
RMR Industrials, Inc. (the “Company” or “RMRI”, “RMR”, “we”, “our”, “us”.) is dedicatedseeks to operatingacquire and consolidate complementary industrial assets in the United States which include minerals, materials, and services. Our visionassets. RMI’s consolidation strategy is to becomeassemble a key providerportfolio of mature and value-add industrial materialscommodities businesses to generate scalable enterprises with a broad portfolio of products and services in the Rocky Mountain region. We haveaddressing a strategy to own operate, develop, acquirecommon and vertically integrate complementary industrial businesses.stable customer base.
On February 27, 2015 (the “Closing Date”), the Company entered into and consummated a merger transaction pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, OLYB Acquisition Corporation, a Nevada corporation and wholly owned subsidiary of the Company (“Merger Sub”), and RMR IP, Inc., a Nevada corporation (“RMR IP”). In accordance with the terms of Merger Agreement, on the Closing Date, Merger Sub merged with and into RMR IP (the “Merger”), with RMR IP surviving the Merger as our wholly owned subsidiary.
RMR IP was formed to acquire and consolidate complementary industrial commodity assets through capitalizing on the volatile oil markets, down cycles in commodity markets, and other ancillary opportunities. RMR IP is focused on managing the supply chain in order to offer a large and diverse set of products and services.
For financial reporting purposes, the Merger represented a “reverse merger” rather than a business combination and RMR IP was deemed to be the accounting acquirer in the transaction. Consequently, the assets and liabilities and the historical operations that will be reflected in the Company’s financial statements post-Merger are those of RMR IP. The Company’s assets, liabilities and results of operations have been consolidated with the assets, liabilities and results of operations of RMR IP after consummation of the Merger, and the historical financial statements of the Company before the Merger were replaced with the historical financial statements of RMR IP before the Merger in all post-Merger filings with the SEC.
On July 28, 2016, we formed RMR Aggregates, Inc., a Colorado corporation (“RMR Aggregates”), as our wholly-ownedwholly owned subsidiary. RMR Aggregates was formed to hold assets whose primary focus is the mining and processing of industrial minerals for the manufacturing, construction and agriculture sectors. These minerals include limestone, aggregates, marble, silica, barite and sand.
On October 12, 2016, RMR Aggregates acquired substantially all of the assets from CalX Minerals, LLC, a Colorado limited liability company (“CalX”) through an Asset Purchase Agreement. Pursuant to the terms of the Asset Purchase Agreement, RMR Aggregates agreed to purchase, and CalX agreed to sell, substantially all of the assets associated with the business of operating the Mid-Continent Limestone Quarry on 41 BLM unpatented placer mining claims in Garfield County, Colorado, including the mining claims, improvements, access rights, water rights, equipment, inventory, contracts, permits, certain intellectual property rights, and other tangible and intangible assets associated with the limestone mining operation.
On January 3, 2017, we amended the Articles of Incorporation of RMR IP, Inc. to rename the corporation to RMR Logistics, Inc. (“RMR Logistics”). RMR Logistics operates as a wholly-owned subsidiary of the Company to provide transportation and logistics services.
During January 2018, the Company formed Rail Land Company, LLC (“Rail Land Company”) as a wholly-owned subsidiary to acquire and develop a rail terminal and services facility (“Rail(the “Rail Park”). Rail Land Company purchased aan approximately 470-acre parcel of real property located in Bennett, Colorado on February 1, 2018. The acreage is in the processDuring July 2018, we exercised our option to acquire an additional approximately 150 acres for a total of being entitled and rezoned for the development of the Rail Park.620 acres.
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On April 26, 2019, RMR Logistics entered into an asset purchase agreement with H2K, LLC, a Colorado limited liability company (“the Seller”) pursuant to which RMR Logistics acquired the Seller’s trucking assets.
On January 1, 2020, the Company changed its name from RMR Industrials, Inc. to Rocky Mountain Industrials, Inc., (RMI).
Basis of Presentation and Consolidation
The accompanying unaudited consolidated financial statements for the period ended June 30, 20182019 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information in accordance with Securities and Exchange Commission (SEC) Regulation S-X rule 8-03. regulations.
Business Acquisitions
When the Company acquires businesses where substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets it is not considered a business. As such, the Company accounts for these types of acquisitions as asset acquisitions. When substantially all of the fair value of the gross assets acquired is not concentrated in a single identifiable asset or a group of similar assets and contains acquired inputs and processes which have the ability to contribute to the creation of outputs, these acquisitions are accounted for as business combinations.
The unauditedCompany considers single identifiable assets as tangible assets that are attached to and cannot be physically removed and used separately from another tangible asset without incurring significant cost or significant diminution in utility or fair value. The Company considers similar assets as assets that have a similar nature and risk characteristics.
Whether the Company’s acquisitions are treated as an asset acquisition under ASC 360 or a business combination under ASC 805, the fair value of the purchase price is allocated among the assets acquired and any liabilities assumed by valuing the property as if it was vacant. The “as-if-vacant” value is allocated to land, buildings, improvements and any liabilities, based on management’s determination of the relative fair values of such assets and liabilities as of the date of acquisition.
Upon acquisition, the Company allocates the purchase price based upon the fair value of the assets and liabilities acquired. The Company allocates the purchase price to the fair value of the tangible assets. The Company values improvements at replacement cost, adjusted for depreciation.
Management’s estimates of value are made using a comparable sales analysis of similar businesses. Factors considered by management in its analysis of include equipment types and the sales prices of comparable assets. The Company includes an estimate of property taxes in the purchase price allocation of acquisitions to account for the expected liability that was assumed.
When above or below market leases are acquired, the Company values the intangible assets based on the present value of the difference between prevailing market rates and the in-place rates measured over a period equal to the remaining term of the lease for above market leases and the initial term plus the term of any below market fixed rate renewal options for below market leases that are considered bargain renewal options. The above market lease values are amortized as a reduction of rental income over the remaining term of the respective leases. The fair value of acquired below market leases, included in deferred revenue on the accompanying consolidated financial statements includebalance sheets, is amortized as an increase to rental income on a straight-line basis over the financial conditionremaining non-cancelable terms of the respective leases, plus the terms of any below market fixed rate renewal options that are considered bargain renewal options of the respective leases.
The Company capitalizes acquisition costs and resultsdue diligence costs if the asset is expected to qualify as an asset acquisition. If the asset acquisition is abandoned, the capitalized asset acquisition costs are expensed to acquisition and due diligence costs in the period of operations of our wholly-owned subsidiary, RMR Logistics Inc.abandonment. Costs associated with a business combination are expensed to acquisition and Rail Land Company, LLCdue diligence costs as well as our majority-owned subsidiary RMR Aggregates, where intercompany balances and transactions have been eliminated in consolidation. incurred.
In the opinionevent of management,a business combination, using information available at the unaudited consolidated financial statements have been prepared ontime of business combination, the same basis asCompany allocates the annual financial statementstotal consideration to tangible assets and reflect all adjustments,liabilities and identified intangible assets and liabilities. During the measurement period, which include only normal recurring adjustments, necessarymay be up to present fairlyone year from the financial position asacquisition date, the Company may adjust the preliminary purchase price allocations after obtaining more information about assets acquired and liabilities assumed at the date of June 30, 2018 and the results of operations and cash flows for the periods then ended. The financial data and other information disclosed in these notes to the interim consolidated financial statements related to the period are unaudited.acquisition.
NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies of the Company is presented to assist in understanding the Company’s consolidated financial statements. The accounting policies presented in these footnotes conform to accounting principles generally accepted in the United States of America (“GAAP”) and have been consistently applied in the preparation of the accompanying consolidated financial statements. These
Consolidation
The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The audited consolidated financial statements include the financial condition and notes are representationsresults of the Company’s management who are responsible for their integrityoperations of our wholly-owned subsidiaries, where intercompany balances and objectivity.transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates, judgments, and assumptions that impact the reported amounts of assets, liabilities, and expenses, and disclosure of contingent assets and liabilities in the financial statements and accompanying notes. Actual results could materially differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including: expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from those estimated amounts and assumptions used in the preparation of the financial statements.
Revenue Recognition
Performance obligations are contractual promises to transfer or provide a distinct good or service for a stated price.As of January 1,2018, we adopted ASU NO. 2014-09, “Revenue from Contracts with Customers” (Topic 606). The Company’s product sales agreements are single-performance obligations that are satisfied at a point in time. Revenue from product sales are recognized when controlCompany recognizes revenues, upon delivery of the promised good is transferredgoods to the customer and– at which time the Company’s performance obligation is met, typicallysatisfied at an amount that the Company expects to be entitled to in exchange for those goods in accordance with the five step analysis outlined in Topic 606: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when the product is shipped. (or as) performance obligations are satisfied.
Revenue includes product sales of limestone, aggregate materials and other transportation charges to customers, net of discounts, allowances or taxes, as applicable.
Cost of Goods Sold
Cost of goods sold is comprised of both fixed and variable costs, including materials and supplies, labor, delivery, repairs and maintenance, utilities and other overhead costs associated with our product sales.
Segment Reporting
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. TheAs of June 30, 2019, the Company views its operations and manages its business as onethree operating segment.segments, Aggregates mining, Logistics and Rail Park.
Cash and Cash Equivalents
The Company considers all highly liquid securities with original maturities of three months or less at the date of purchase to be cash equivalents. As of June 30, 2018,2019, the Company had cash of $2,166,867$855,977 and no cash equivalents. The Company may occasionally maintain cash balances in excess of amounts insured by the Federal Deposit Insurance Corporation (“FDIC”). The amounts are held with major financial institutions and are monitored by management to mitigate credit risk.
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Restricted Cash
The Company has $112,130 in restricted cash held as cash collateral for a reclamation bond for the Bureau of Land Management and Colorado Division of Reclamation, Mining and Safety, to be held for the rehabilitation costs of the Mid-Continent Quarry and conclusion of the mining at this location.
Accounts Receivable
Accounts receivables are recorded at the invoiced amount and do not bear interest. The Company analyzes collectability based on historical payment patterns and macroeconomic factors which may affect the customers’ industry. Past due balances over 90 days based on payment terms are reviewed individually for collectability. The Company does not have any off-balance sheet credit exposure related to its customers. Concentration of credit risk is limited to certain customers to whom we make substantial sales. As of June 30, 2019, the Company had one large customer that accounted for approximately 34% of our accounts receivable balance and 69% of our revenue. To reduce risk, we routinely assess the financial strength of our most significant customers, using standard credit risk evaluation methods with reference to publicly available and customer supplied information, and monitor the amounts owed and take appropriate action when necessary. As a result, we believe that accounts receivable credit risk exposure is limited.
Inventory
Inventory, which primarily represents finished goods, packaging and fuelInventories are valued at the lower of cost (average) or market. Total gross inventories at June 30, 2018 were $28,695.Cost is determined by the weighted average method.
Other noncurrentProperty, Plant and Equipment
Property, plant and equipment are recorded at cost. Significant improvements are capitalized, while maintenance and repair expenses are charged to operations as incurred. The straight-line method of depreciation is used for substantially all of the assets for financial reporting purposes.
Depletion of acquired mineral properties is determined pursuant to a unit-of-extraction method which provides for depletion of such costs over the productive life of the mineral properties. The unit-of-extraction rate is determined by computing the production for the period as a percentage of total estimated and recoverable limestone as of that period. Significant judgement is involved in the determination of the estimate of total recoverable limestone in the unit-of-extraction method. Our internal engineering estimates of total estimated and recoverable limestone is a key component in determination of the unit-of-extraction rate. Our estimates of the recoverable limestone may change, possibly in the near term, resulting in changes to depletion rates in future periods. During the years ended June 30, 2019 and 2018, depletion of mineral properties was approximately $7,992 and $10,618
We are considered an “exploration stage” company under the U.S. Securities and Exchange Commission (“SEC”) Industry Guide 7 as such the Company expenses any development costs as incurred.
Land Under Development
Land under development is recorded at cost. Significant improvements are capitalized, while maintenance and repair expenses are charged to operations as incurred. These costs relate to the ongoing development of the Rail Park.
Lease Obligations
Other noncurrentOn April 1, 2019, we adopted FASB ASU 2016-02, Leases: (Topic 842) (“ASU 2016-02”), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases.
For leases in which the Company is the lessee, the Company determined that the guidance has a material impact as the Company has three operating leases for office space. Two of these leases have greater than 12 months remaining on the term of these leases at the date of the adoption of this guidance and as such the Company recorded a right of use asset and a lease liability of $491,111 at the date of adoption. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. The Company also is committed to a lease for a portable office space and for the use of a Dozer within the Company’s aggregates operation, on adoption of the new lease accounting standard the Company recorded a right of use asset and lease liability of $35,625 for these leases.
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Equipment Loan
The Company has bought certain specialized mining and trucking equipment under finance terms. The financed equipment is recorded at cost at acquisition date. The straight-line method of depreciation is used for financial reporting purposes.
Goodwill
Goodwill represents the excess of a purchase price over the fair value of net tangible and identifiable intangible assets of the businesses acquired by the Company. Goodwill is tested for impairment annually or more often if impairment indicators are present at the reporting unit level. The Company has elected January 1st as its annual goodwill impairment assessment date. If the existence of events or circumstances indicates that it is more likely than not that fair values of the reporting units are below their carrying values, the Company performs additional impairment tests during interim periods to evaluate goodwill for impairment.
Deposits
Deposits consist of twoa security depositsdeposit in connection with ourvarious office leases in Denver and Los Angeles.leases.
Impairment of Long-Lived Assets
The Company evaluates its long-lived assets for impairment wheneverwhen events or changes in circumstances indicate that the related carrying valueamounts may not be recoverable. FactorsAsset impairment is considered include:to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the asset. Any impairment losses are measured and recorded based on discounted estimated future cash flows and are charged to income on the Company’s consolidated statements of operations. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of future cash flows from other asset groups. The Company’s estimates of future cash flows are based on numerous assumptions, including expected commodity prices, production levels, capital requirements and estimated salvage values. It is possible that actual future cash flows will be significantly different than the estimates, as actual future quantities of recoverable material, future commodity prices, production levels and costs and capital are each subject to significant risks and uncertainties. As of June 30, 2019, the Company’s mineral resources do not meet the definition of proven or probable reserves or value beyond proven or probable reserves and any potential revenue has been excluded from the cash flow assumptions. Accordingly, recoverability of the long-lived assets’ capitalized cost is based primarily on estimated salvage values or alternative future uses.
Accrued Reclamation Liability
The Company incurs reclamation liabilities as part of its mining activities. Quarry activities require the removal and relocation of significant levels of overburden to access materials of usable quantity and quality. The same overburden material is used to reclaim depleted mine areas, which must be sloped to a certain gradient and seeded to prevent erosion in the operational performance or mannerfuture. Reclamation methods and requirements can differ depending on the quarry and state rules and regulations in existence for certain locations. As of June 30, 2019, the Company’s undiscounted reclamation obligations totaled approximately $221,081. This obligation is expected to be settled within the next 20 years.
Reclamation costs resulting from the normal use of acquiredlong-lived assets, either owned or leased, are recognized over the strategy for our overall business,
The mining reclamation reserve is based on management’s estimate of future cost requirements to reclaim property at its operating quarry site. Costs are estimated in current dollars and inflated until the expected time of payment using a future estimated inflation rate and then discounted back to present value using a credit-adjusted, risk-free rate on obligations of similar maturity adjusted to reflect our credit rating. The Company will review reclamation liabilities at least every three years for a revision to the cost or a change in the estimated settlement date. Additionally, reclamation liabilities are reviewed in the period in which a triggering event occurs that would result in either a revision to the cost or a change in the estimated settlement date. Examples of events that would trigger a change in the cost include a new reclamation law or amendment to an existing mineral lease. Examples of events that would cause a change in the estimated settlement date include the acquisition of additional reserves or early or delayed closure of a site. Any affect to earnings from cost revisions is included in cost of revenue.
A reconciliation of the carrying amount of our accrued reclamation liabilities is as follows:
Balance at April 1, 2019 | $ | 60,990 | ||
Liabilities incurred | - | |||
Accretion expense | 1,488 | |||
Balance at June 30, 2019 | $ | 62,478 |
The Company evaluated long-lived assets based upon an estimate of future undiscounted cash flows. Recoverability of these assets is measured by comparing the carrying value to the future net undiscounted cash flows expected to be generated by the asset. An impairment loss is recognized when the carrying value exceeds the undiscounted future cash flows estimated to result from the use and eventual disposition of the asset. Future net undiscounted cash flows include estimates of future revenues and expenses which are based on projected growth rates. The Company continually uses judgment when applying these impairment rules to determine the timing of the impairment tests, the undiscounted cash flows used to assess impairments and the fair value of a potentially impaired asset.
Fair Value Measurements
The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:
- Level 1: Quoted market prices in active markets for identical assets or liabilities
- Level 2: Observable market-based inputs or inputs that are corroborated by market data
- Level 3: Unobservable inputs that are not corroborated by market data
Accounting for Asset Retirement Obligations and Accrued Reclamation Liability
The Company provides for obligations associated with the retirement of long-lived assets and the associated asset retirement costs. The fair value of a liability for an asset retirement obligation is recognized in the period in which it is identified, if a reasonable estimate of fair value can be made. The associated fair value of asset retirement costs are capitalizednotes payable was $1,059,466 and $0 as part of the carrying amount of the long-lived asset. Costs are estimated in current dollars, inflated until the expected time of payment, using an inflation rate of 2.15%,at June 30, 2019 and then discounted back to present value using a credit-adjusted rate of reflect the Company’s credit rating.March 31, 2019 respectively.
Net Loss per Common Share
Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period, without consideration for the potentially dilutive effects of converting stock options or restricted stock purchase rights outstanding. Diluted net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period and the potential dilutive effects of stock options or restricted stock purchase rights outstanding during the period determined using the treasury stock method. There are no such anti-dilutive common share equivalents outstanding as June 30, 20182019 which were excluded from the calculation of diluted loss per common share.
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires, among other things, that deferred income taxes be provided for temporary differences between the tax bases of the Company's assets and liabilities and their financial statement reported amounts. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
A valuation allowance is recorded by the Company when it is more likely than not that some portion or all of a deferred tax asset will not be realized. In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, and ongoing prudent and feasible tax planning strategies in assessing the amount of the valuation allowance. When the Company establishes or reduces the valuation allowance against its deferred tax assets, its provision for income taxes will increase or decrease, respectively, in the period such determination is made.
Additionally, the Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefit recognized in the financial statements for a particular tax position is based on the largest benefit that is more likely than not to be realized upon settlement. Accordingly, the Company establishes reserves for uncertain tax positions. The Company has not recognized interest or penalties in its statement of operations and comprehensive loss since inception.
Non-controlling Interests
The Company’s non-controlling interests are interests in RMR Aggregates, Inc. not owned by the Company. The Company evaluates whether non-controlling interests are subject to redemption features outside of its control. The amounts reported for non-controlling interests on the Company’s Consolidated Statements of Operations represent the portion of income or losses not attributable to the Company.
Recent Accounting Pronouncements
In January 2017, the FASB issued ASU No. 2017-01,Clarifying the Definition of a Business, which narrows the definition of a business. This ASU provides a screen to determine whether a group of assets constitute a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated as acquisitions. If the screen is not met, this ASU (1) requires that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create an output and (2) removes the evaluation of whether a market participant could replace missing elements. Although outputs are not required for a set to be a business, outputs generally are a key element of a business; therefore, the FASB has developed more stringent criteria for sets without outputs. The ASU is effective for public companies for annual periods beginning after December 15, 2017. The adoption of this ASU is not expected to have a material impact on the consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02,Leases, which will result in lessees recognizing most leases on the balance sheet. Lessees are required to disclose more quantitative and qualitative information about their leases than current U.S. GAAP requires. The ASU is effective for public entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We are beginning to compile all operating and capital leases to assess the impact of adopting this standard.
Management believes recently issued accounting pronouncements will have no impact on the financial statements of the Company.
NOTE C – ACCOUNTS RECEIVABLE
Accounts Receivable at June 30, 2018 was $105,974 compared to $79,630 at March 31, 2018. The increase is due to an increase in production and product demand. No allowance is recorded, as all items are current.
NOTE D – INVENTORY
Inventory, which primarily represents finished goods, packaging and fuel are valued at the lower of cost (average) or net realizable value.
June 30, 2018 | March 31, 2018 | |||||||
Blasted Rock | $ | 20,162 | $ | 37,157 | ||||
Finished Goods | 2,048 | 3,180 | ||||||
Packaging | 4,895 | 9,614 | ||||||
Propane and Fuel | 1,590 | 4,339 | ||||||
Total | $ | 28,695 | $ | 54,290 |
NOTE E – GOING CONCERN
The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company does not have significant cash or other current assets, nor does it have an established source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern.
The Company’s net loss and working capital deficit raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The financial statements for the three months ended June 30, 2018 do not include any adjustments to reflect the possible future effects of the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern. The Company may never become profitable, or if it does, it may not be able to sustain profitability on a recurring basis.
Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future with neither the intention nor the necessity of liquidation, ceasing trading, or seeking protection from creditors pursuant to applicable laws orand regulations. Accordingly, assets and liabilities are recorded on the basis that the entity will be able to realize its assets and discharge its liabilities in the normal course of business. However, the Company does not have sufficient cash or other current assets, nor does it have an established and adequate source of revenues, to cover its operating costs and to allow it to continue as a going concern. As a result, the Company’s auditors issued a going concern opinion for the financial statements at March 31, 2019.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the business plan and eventually attain profitable operations. The accompanying financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.
During the next year, the Company’s foreseeable cash requirements will relate to continual development of the operations of its business, maintaining its good standing and making the requisite filings with the Securities and Exchange Commission, and the payment of expenses associated with research and development. The Company may experience a cash shortfall and be required to raise additional capital.
Historically, itthe Company has mostly relied upon funds from the sale of shares of stock and from acquiring loans to finance its operations and growth. Management may raise additional capital through future public or private offerings of the Company’s stock or through loans from private investors, although there can be no assurance that it will be able to obtain such financing. The Company’s failure to do so could have a material and adverse effect upon it and its shareholders.
In the past year, the Company funded operations by using cash proceeds received through the issuance of common stock.and preferred stock and proceeds from debt financing. For the coming year, the Company plans to continue to fund the Company through debt and securities sales and issuances until the Companycompany generates enough revenues through the operations as stated above.
NOTE F – NOTE PAYABLE
On October 3, 2016, the Company entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with RMR Aggregates, Inc., and Central Valley Administrators Inc., a Nevada corporation (“CVA”). Pursuant to the terms of the Note Purchase Agreement, RMR Aggregates sold to CVA, and CVA purchased from RMR Aggregates, a 10% promissory note in an aggregate principal amount of $2,250,000 (the “Note”). The Note has a maturity date of October 3, 2018, and accrues interest at a rate of 10% per annum.
Under the terms of the Note Purchase Agreement, RMR Aggregates also agreed to issue 20,000 shares of common stock of RMR Aggregates (the “RMRA Shares”) to CVA, which represents 20% of RMR Aggregates’ total issued and outstanding common stock. CVA shall have the right, at any time, to convert the RMRA Shares into shares of Class B common stock of the Company, at a ratio of 1 share of RMRA Shares being converted into 7.5 shares of the Company’s Class B common stock. RMR Aggregates will also have the right, at any time after October 3, 2017 and after the Note is no longer outstanding, to call the RMRA Shares in exchange for shares of Class B common stock of the Company using the same ratio; provided, however, that the amount of RMRA Shares that may be called in exchange for shares of the Company’s Class B common stock shall be limited to the extent necessary to ensure that, following such exercise, CVA and its affiliates will not beneficially own in excess of 4.99% of the Company’s total issued and outstanding common stock.
The Note Purchase Agreement provides, among other things, that CVA shall have a liquidation right upon an event of default arising from the failure by RMR Aggregates to repay the outstanding principal amount of the Note on the maturity date, meaning CVA can cause RMR Aggregates to sell its assets until it repays the outstanding amount due under the Note. RMR Aggregates shall have the right to call the Note at any time at par plus accrued interest thereunder.
The conversion feature in the Note Purchase Agreement was valued at $769,000 and recorded as a discount to the CVA Note. The carrying value of the CVA Note at June 30, 2018:
Principal value | $ | 2,250,000 | ||
Accrued interest | 426,148 | |||
Unamortized debt discount | (197,460 | ) | ||
Note payable, net | $ | 2,478,688 |
The Company is currently working through a number of opportunities to ensure the business will continue as a going concern. These include:
1. | The development of the Rail Park will generate sustained annual revenues by providing transloading services and realized gains on the sale of land while limiting future capital development costs. |
2. | Expansion of the Mid-Continent Quarry, which will allow greater volume production with limited fixed cost increases. |
NOTE D – ACCOUNTS RECEIVABLE
Accounts Receivable at June 30, 2019 was $241,273 compared to $102,870 at March 31, 2019. The increase is due to a increase in production and product demand. No allowance is recorded, as all items are current.
NOTE E – INVENTORY
Inventory, which primarily represents finished goods, packaging and fuel, are valued at the lower of cost (average) or market.
June 30, 2019 | March 31, 2019 | |||||||
Blasted Rock | $ | 32,246 | $ | 41,021 | ||||
Finished Goods | $ | - | $ | 923 | ||||
Packaging | $ | - | $ | 2,450 | ||||
Propane and Fuel | $ | - | $ | 4,582 | ||||
Total | $ | 32,246 | $ | 48,976 |
NOTE F – PROPERTY, PLANT AND EQUIPMENT
The following summarizes the Company’s assets at June 30, 2019 and March 31, 2019 respectively:
June 30, 2019 | March 31, 2019 | |||||||
Recoverable Limestone | $ | 1,477,469 | $ | 1,477,469 | ||||
Mill Equipment | 1,273,395 | 1,287,743 | ||||||
Mining Equipment | 336,934 | 336,934 | ||||||
Mobile Equipment | 2,923,782 | 849,627 | ||||||
Property improvements | 69,263 | 65,637 | ||||||
Office Equipment | 9,710 | 1,630 | ||||||
Total Fixed Assets | 6,090,553 | 4,019,040 | ||||||
Less Accumulated Depreciation | (839,918 | ) | (758,529 | ) | ||||
Property, plant and equipment, net of accumulated depreciation | $ | 5,250,635 | $ | 3,260,511 |
Years | Depreciation rate | |||||
Mill Equipment | 3 – 15 | 6.7% - 33.3% | ||||
Mining Equipment | 2 – 15 | 6.7% - 50.0% | ||||
Mobile Equipment | 5 – 12 | 8.3% - 20.0% | ||||
Office Equipment | 2 – 3 | 33.3% - 50.0% |
F-12 |
NOTE G – NOTE PAYABLE
On April 4, 2019, RMI entered into a Senior Unsecured Promissory Note with Bienville Capital Partners, LP, a New York based investment firm for $1,000,000. The note accrued to $1,250,000 at maturity on April 4, 2020. Subsequent to the date of this filing, the note was paid off with proceeds from an issuance of preferred stock.
On April 26, 2019, RMR Logistics entered into an asset purchase agreement with H2K, LLC, a Colorado Limited liability company (“the seller”). Pursuant to the agreement which RMR Logistics acquired the sellers trucking assets. As a result of this acquisition RMR Logistics entered into a Term loan for $1,800,000. The loan matures on April 26th, 2026 and accrues interest of 5.64% and is classified under long term liabilities, note payable, net of discount. Subsequent to the date of this filing, certain assets acquired in the sale were sold and used to pay down the term loan.
NOTE H – EQUIPMENT LOAN AND CAPITAL LEASE PAYABLE
The Company has entered into various equipment loans with an equipment manufacturer in connection with the CalX acquisition, pursuant to which we acquired equipment with an aggregate principal value of approximately $582,709.$528,593. The equipment loans require payments over 12 months at a fixed interest rate from 1.99% to 4.78%. The Company’s obligations under these contracts are collateralized by the equipment purchased.
The Company also has a capital lease agreement, which was assumed in connection with the CalX acquisition. The capital lease has a remaining term of 18less than 12 months for mining equipment, which is included as part of property, plant and equipment. Depreciation related to capital lease assets is included in depreciation expense.
Future payments on capital lease obligations are as follows:
Fiscal year ended March 31: | ||||
2020 | $ | 20,837 | ||
2021 | - | |||
Total future minimum lease payments | $ | 20,837 |
Fiscal year ended June 30:
2019 | $ | 40,446 | ||
2020 | 20,838 | |||
Total future minimum lease payments | $ | 61,284 |
F-13 |
NOTE HI – TRANSACTIONS WITH RELATED PARTIES
Since inception, the Company accrued $201,566 in amounts owed to related parties for services performed or reimbursement of costs on behalf of the Company. In addition, theThe Company has accrued $1,925,000$1,190,000 for unpaid officers’ compensation expense in accordance with consulting agreements with our Non-executive Board Chairman and Chief Executive Officer and President.Officer. Under the terms of each consulting agreement, each consultant shall serve as an executive officer to the Company and receive monthly compensation of $35,000. The consulting agreements may be terminated by either party for breach or upon thirty days prior written notice.
NOTE IJ – SHAREHOLDERS’ DEFICIT
Reverse Stock Split
On September 4, 2015, the Company implemented a reverse stock split of all of its authorized and issued and outstanding shares of Class B Common Stock in ratio of one-for-twenty. All historical and per share amounts have been adjusted to reflect the reverse stock split.
Preferred Stock
The Company has authorized 50,000,000 shares of preferred stock for issuance. At June 30, 2018,2019, no shares of preferred stock waswere issued and outstanding.
Common Stock
The Company has authorized 2,100,000,000 shares of common stock for issuance, including 2,000,000,000 shares of Class A Common Stock and 100,000,000 shares of Class B Common Stock. At June 30, 2018,2019 and March 31, 2019, the Company had 35,785,858 shares issued and outstanding of Class A Common Stock outstanding. On June 30, 2019 and 3,223,007March 31, 2019, the Company had 4,103,252 and 2,913,0074,032,752 shares issued and outstanding, of Class B Common Stock, respectively.
The holders of Class A Common Stock will have the right to vote on all matters on which stockholders have the right to vote. The holders of Class B Common Stock will have the right to vote solely on matters where the vote of such holders is explicitly required under Nevada law. The holders of Class A Common Stock and Class B Common stock willStock have equal distribution rights, provided that distributions in securities shall be made in either identical securities or securities with similar voting characteristics. The holders of Class A Common Stock and Class B Common Stock will beare entitled to receive identical per-share consideration upon a merger, conversion or exchange of the Company with another entity, and will have equal rights upon dissolutions,a dissolution, liquidation or winding-up. winding-up of the Company.
During the three monthsperiod ended June 30, 2018,2019, an accredited investorsinvestor exercised warrantsa warrant to purchase 209,040 shares of Class B Common Stock at exercise prices of $14.00-$17.00 for which the Company received $3,123,681$1,500,000 in gross proceeds.
NOTE JK – SHARE-BASED COMPENSATION
The RMR Industrials, Inc. 2015 Equity Incentive Plan (the "2015 Plan"), authorizes the issuance of up to 30% of the outstanding shares of Common Stock at any time pursuant to awards made by the Company’s board of directors. As of June 30, 2019, there were shares still available for future issuance under the 2015 Plan.
Stock Options
The Company grants stock options to certain employees that give them the right to acquire our Class B common stock under the 2015 Plan. The exercise price of options granted is equal to the closing price per share of our stock at the date of grant. The nonqualified options vest at a rate of 33% on each of the first three anniversaries of the grant date provided that the award recipient continues to be employed by us through each of those vesting dates and expire ten years from the date of grant.
F-14 |
NOTE L – SELLING GENERAL AND ADMINISTRATIVE COSTS
Selling general and administrative costs for the three month period increased from $1,148,988 inended June of 201730, 2019 were $2,927,187 compared to $1,411,849 in June of 2018.the prior year. Increases in salaries, employee benefits, and consulting fees were primarily responsible for thisthe increase.
NOTE KM – INTEREST EXPENSE
The interest expense for the three monthsmonth period ended June 30, 20182019 was $83,579 compared to the prior year of $235,775 the decrease is the result of a note payable of $2,250,000 entered intothat was repaid on October 3, 2016. 1, 2018.
NOTE LN – SUBSEQUENT EVENTSSEGMENT REPORTING
In July 2018,Rocky Mountain Industrials, Inc (RMI) has three reportable segments: aggregates, logistics and Rail LandPark. The aggregates segment produces chemical grade lime for use in the aggregates market. The logistics segment is in the process of developing a rail access delivery location and will generate sales through a combination of land sales as well as lease income and Rail services. The Rail Park segment will require significant future capital injections before the segment will start generating recurring revenue. The Company exercised an optionexpects that the rail park development will conclude late in the Company’s 2021 financial year or early in the Company’s 2022 financial year. The aggregates segment relied significantly on sales to purchase a 150 acre parcelthe West Elk Mine for the period ended June 30, 2019. The sales to the West Elk Mine contributed 69% of real property located in Bennett, Colorado. Rail Land Company completed the purchaserevenue to this segment.
The accounting policies of the land parcel on July 20, 2018. The acreage is being includedsegments are the same as those described in the entitlementsummary of significant accounting policies. RMI evaluates performance based on profit or loss from operations before income taxes not including nonrecurring gains and rezoning process for the development of the Rail Park. In July 2018, Rail Land Company entered into a Right of Way Agreement with a midstream Oil & Gas Company, granting a non-exclusive easement and right of way to construct and operate natural gas and oil pipelines under the Rail Park property.losses.
SubsequentRMI accounts for intersegment sales and transfers as if the sales or transfers were to June 30, 2018, accredited investors purchasers exercised warrants to purchase 114,705 shares of the Company’s Class B common stockthird parties, that is, at an exercise price of $10.00-$17.00. During the same period, RMR Aggregates entered into a subscription agreement with an accredited investor to issue and sell RMR Aggregates common stock. The Company used proceeds from the sale and available cash for the repayment of outstanding indebtedness.current market prices.
On October 3, 2018, RMR Aggregates used proceeds from the sale of common stockRMI’s reportable segments are strategic business units that offer different products and available cash for the repayment of CVA’s Note principal outstanding balance.services. They are managed separately because each business requires different technology and marketing strategies.
Description | Aggregates | Logistics | Rail Park | Other | Total | |||||||||||||||
Revenues from external customers | 233,950 | 325,461 | - | (81,687 | ) | 477,724 | ||||||||||||||
Intersegment revenues | (81,689 | ) | 81,689 | - | - | - | ||||||||||||||
Interest revenue | - | - | - | - | - | |||||||||||||||
Interest expense | 1,254 | 18,996 | - | 63,329 | 83,579 | |||||||||||||||
Depreciation, depletion and amortization | 73,179 | 58,178 | - | 302 | 131,659 | |||||||||||||||
Segment loss | 483,321 | 51,949 | 6,773 | 2,404,334 | 2,936,342 | |||||||||||||||
Segment assets | 3,595,281 | 2,732,450 | 5,823,125 | 1,161,902 | 13,312,758 | |||||||||||||||
Expenditure for segment assets | - | 2,271,025 | 2,271,025 |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward-looking statements are based upon estimates, forecasts, and assumptions that are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in anyThis discussion includes forward-looking statements made by us, or on our behalf. We disclaim any obligation to update forward-looking statements.for purposes of U.S. federal securities laws. See “Cautionary Note Regarding Forward-Looking Statements”.
Overview
We were incorporated in the State of Nevada on August 6, 2012 under the name “Online Yearbook” with the principal business objective of developing and marketing online yearbooks for schools, companies, and government agencies.
On November 17, 2014, Rocky Mountain Resource Holdings, Inc. (“RMRH”RMR”) became our majority shareholder by acquiring 5,200,000 shares of our common stock (the “Shares”), or 69.06% of the issued and outstanding shares of our common stock, pursuant to stock purchase agreements with Messrs. El Maraana and Salah Blal, our former officers and directors. The Shares were acquired for an aggregate purchase price of $357,670.
On December 8, 2014, we changed our name to “RMR Industrials, Inc.” in connection with thea change in our business plan.
RMR Industrials, Inc. (the(“we”, “us”, the “Company” or “RMRI”“RMR”) is dedicated to operating industrial assets in the United States which include minerals, materials, and services. Our vision is to become a key provider of industrial materials and services in the Rocky Mountain region. We have a strategy to own, operate, develop, acquire and vertically integrate complementary industrial businesses.
On February 27, 2015 (the “Closing Date”), we entered into and consummated a merger transaction pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, OLYB Acquisition Corporation, a Nevada corporation and wholly owned subsidiary of the Company (“Merger Sub”), and RMR IP, Inc., a Nevada corporation (“RMR IP”). In accordance with the terms of Merger Agreement, on the Closing Date, Merger Sub merged with and into RMR IP (the “Merger”), with RMR IP surviving the Merger as our wholly-ownedwholly owned subsidiary. Chad Brownstein and Gregory M. Dangler are directors of the Company and co-owners of RMRH, which was the majority shareholder of the Company prior to the Merger. Additionally, Messrs. Brownstein and Dangler were indirect controlling shareholders and directors of RMR IP prior to the Merger. As such, the Merger was among entities under the common control of Messrs. Brownstein and Dangler.
On July 28, 2016, we formed RMR Aggregates, Inc., a Colorado corporation (“RMR Aggregates”), as our wholly-ownedwholly owned subsidiary. RMR Aggregates was formed to hold assets whose primary focus isprimarily relating to the mining and processing of industrial minerals for the manufacturing, construction, and agriculture sectors. These minerals include limestone, aggregates, marble, silica, barite, and sand.
On October 12, 2016, pursuant to an Asset Purchase Agreement with CalX Minerals, LLC, a Colorado limited liability company (“CalX”), we completed the purchase of substantially all of the assets associated with the business of operating the Mid-Continent Limestone Quarry on 41 BLM unpatented placer mining claims in Garfield County, Colorado. CalX assets include the mining claims, improvements, access rights, water rights, equipment, inventory, contracts, permits, certain intellectual property rights, and other tangible and intangible assets associated with the limestone mining operation. The acquisition of these CalX assets will promote the development and implementation of the Company’s limestone mining operations in Colorado.
During January 2018, the Company formed Rail Land Company, LLC (“Rail Land Company”) as a wholly-ownedwholly owned subsidiary to acquire and develop a rail terminal and services facility (“Rail Park”). Rail Land Company purchased a 470-acre parcel620 acres of real propertyestate located in Bennett, Colorado on February 1, 2018. Additionally, Rail Land Company entered into Option Agreements to purchase 150 acres of real property and a total of 250 acres of mineral rights in Bennett, Colorado. The acreage is in the process of being entitled and rezoned for the development of the Rail Park. The Company’s development of the Rail Park is intended to expand the Company’s customer base for our products by utilizing rail freight capabilities to reach customers in the greater Denver area and by expanding our business to include rail transportation solutions and services.
On April 26, 2019 RMR Logistics entered into an asset Purchase agreement with H2K, LLC, a Colorado Limited Liability Company (“the Seller”) pursuant to which RMR Logistics acquired the sellers trucking assets.
On January 1, 2020 we changed our name to “Rocky Mountain Industrials, Inc.” in connection with a change in our business plan.
Results of Operations
Comparison of the Three-Month PeriodsThree Months Ended June 30, 20182019 and June 30, 20172018
Revenues
Our revenues for the three-month period ended June 30, 2019 were $477,724. This compares to revenue for the same period ended June 30, 2018 of $329,614. The increase in revenues were $329,614 compared to $228,679 indriven by the prior year.increased tons sold from the Company’s Glenwood Springs mine.
Cost of Goods Sold
Our cost of goods sold for the three-month period ended June 30, 2019 were $421,300 This compares to cost of goods sold for the same period ended June 30, 2018 was $319,854 comparedof $319,854. The increase in costs related to $191,020 inincreased production during the prior year.
Operating Expenses
Our operating expenses for the three-month period ended June 30, 20182019 were $1,411,849.$2,927,187. This compares to operating expenses for the three-month periodsame periods ended June 30, 20172018 of $1,148,988.$1,411,849. Operating expenses consisted of overhead costs related to mining operations, consulting services from related parties, public company costs, salaries and wages, and depreciation and amortization. The increase was due to increased head count coupled with costs incurred by the Company in relation to the Company’s rail park development.
Interest Expense (Income), net
Our interest expense, net for the three-month period ended June 30, 20182019 was $235,775,$83,579, compared to $163,809$235,775 of interest expense for the three-monthsame period ended June 30, 2017.2019. The increase in interest expense was attributed to a $2,250,000 note payable issued to an accredited investor in October 2016. This note payable2016 was paid off on October 3, 2018.
Net Loss Attributable to RMRRocky Mountain Industrials, Inc.
Our net loss for the three-month period ended June 30, 20182019 was $1,563,358.$2,936,342. This compares to a net loss for the three-monthsame period ended June 30, 20172018 of $1,226,284. The comparative increases in net loss were due to increases in our operating and interest expenses, as described above.$1,637,864.
Liquidity and Capital Resources
As of June 30, 2018,2019, we had current assets of $2,446,201,$1,376,373, total current liabilities of $3,031,579$4,745,626 and a working capital deficitdeficiency of $585,378.$3,369,253. We have incurred an accumulated loss of $28,992,375$38,217,961 since inception. Our independent auditors issued an audit opinion for our financial statements for the fiscal year ended March 31, 2018,2019 which includes a statement expressing substantial doubt as to our ability to continue as a going concern due to our limited liquidity and our lack of revenues.
We will be seeking additional capital to execute our business plan and reach positive cash flow from operations. Our base monthly expenses are $100,000approximately $200,000 per month. As evidenceevidenced by approximately $2.1$1.2 million of our current liabilities being owed to related parties, we have relied historically on related parties to sustain the Company’s operations. In order to successfully execute our business plan, the net proceeds of a $10-20 million offering will be required to finance our planned acquisition and for general working capital purposes.
We do not generate adequate cash flows to support our existing operations. Moreover, the historical and existing capital structure is not adequate to fund our planned growth. Our current cash requirements are significant due to our business plan which will depend oncontemplates future acquisitions. We anticipate generating losses at least through 2018.the 2020 fiscal year. We anticipate that we will be able to raise sufficient amounts of working capital in the near term through debt or equity offerings as may be required to meet short-term obligations.
Other than as stated above, we currently do not have any arrangements for additional financing, and we may not be able to obtain financing when required. Our future is dependent upon our ability to obtain financing, a successful marketing and promotion program, and, further in the future, achieving a profitable level of operations. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. We will require additional funds to maintain our reporting status with the SEC and remain in good standing with the state of Nevada. There are no assurances that we will be able to raise the required working capital on favorable terms, favorable,in a timely manner or that such working capital will be available on any terms when needed.at all. Any failure to secure additional financing may force us to modify our business plan. In addition, we cannot be assured of profitability in the future.
Going Concern
We have incurred net losses since our inception on October 15, 2014 through June 30, 20182019 totaling $28,992,375$38,217,961 and have completed the preliminary stages of our business plan. We anticipate incurring additional losses before realizing any revenues and will depend on additional financing in order to meet our continuing obligations and ultimately to attain profitability. Our ability to obtain additional financing, whether through the issuance of additional equity or through the assumption of debt, is uncertain. Accordingly, our independent auditors’ report on our financial statements for the fiscal year ended March 31, 20182019 includes an explanatory paragraph regarding concerns about our ability to continue as a going concern, including additional information contained in the notes to our financial statements describing the circumstances leading to this disclosure. The financial statements do not include any adjustments that might result from the uncertainty about our ability to continue our business.
Recently Issued Accounting Pronouncements
We do not expect the adoption of any recently issued accounting pronouncements to have a significant impact on our net results of operations, financial position, or cash flows.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Required
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Vice President of AccountingChief Financial Officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our Chief Executive Officer and Vice President of AccountingChief Financial Officer concluded that our disclosure controls and procedures were not effective due to the material weakness described below.
In light of the material weaknessesweakness described below, we performed additional analysis and other post-closing procedures to ensure that our condensed consolidated financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the condensed consolidated financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.
Material Weakness and Related Remediation Initiatives
Set forth below is a summary of the various significant deficiencies that caused management to conclude that we had the material weakness in our disclosure controlsOur Chief Executive Officer and procedures. Through the efforts of management, external consultants, and our directors, weChief Financial Officer have developed a specific action plan to remediate the material weaknesses. We expect to implement these various action plans during the next fiscal year. If we are able to complete these action plans in a timely manner, we anticipate that all control deficiencies and material weaknesses will be remediated by March 31, 2019.
Our principal executive officer and principal financial officer concluded that as of June 30, 2018,2019, there was a material weakness in our internal control over financial reporting in that, due to budget constraints, the following material weaknesses existed:Company’s accounting department does not have sufficient accounting personnel (either in-house or external) necessary to ensure that complete and effective financial reporting controls are designed and implemented. Accordingly, we did not perform timely and sufficient internal or external review of our current fiscal year financial reporting, which resulted in untimely financial statement filings.
Remediation of Internal Control Deficiencies and Expenditures
It is reasonably possible that, if not remediated, one or more of the material weaknesses described above could result in a material misstatement in our reported financial statements that might result in a material misstatement in a future annual or interim period. We are developing specific action plans fora plan to address this material weakness, which includeincludes hiring qualified accounting personnel and establishing a formal audit committee. We are uncertain at this time of the costs necessary to remediate all of the above listed material weakness.
Through these steps, we believe that we are addressing the deficiencies that affected our internal control over financial reporting as of June 30, 2018. Because the Once implemented, remedial actions may require hiring of additional personnel, and relying extensively on manual review and approval, the successful operation of these controls will have to be in place for at least several quarters may be required before management may beis able to conclude that the material weaknesses haveweakness has been remediated. We intend to continue to evaluate and strengthen our internal control over financial reporting systems. These efforts require significant time and resources. If we are unable to establish adequate internal control over financial reporting systems, we may encounter difficulties in the audit or review of our financial statements by our independent registered public accounting firm, which in turn may have a material adverse effect on our ability to prepare financial statements in accordance with GAAP and to comply with our SEC reporting obligations.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act, during the fiscal quarter ended June 30, 20182019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
None.
Not required.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended June 30, 2018,2019, we sold to accredited investors exercised warrants to purchase 209,040two shares of Class B Common Stock at exercise pricespreferred stock for gross proceeds of $14.00-$17.00 for which the Company received $3,123,681 in gross proceeds. $200,000.
In September 2018, RMR Aggregates entered into a subscription agreement with an accredited investor to issue and sell RMR Aggregates common stock. The Company used the proceeds from the sale and available cash for the repayment of outstanding indebtedness. The sale and issuance of shares was exempt from the registration requirements of the Securities Act pursuant to the exemption for transactions by an issuer not involved in any public offerings under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Information regarding mine safety violations is included in Exhibit 95 to this quarterly report.
None.
* Filed herewith |
SIGNATURES
Pursuant to the requirements 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.
By: | /s/ | |
(Principal Executive Officer) | ||
Date: December 31, 2020 | By: | /s/ William M. Brown |
William M. Brown | ||
Chief Financial Officer | ||
(Principal Financial Officer and Principal Accounting Officer) |