The accompanying notes are an integral part
of these condensed consolidated financial statements.
The accompanying notes are an integral part
of these condensed consolidated financial statements.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
September 30, 2019
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 Inc., a Nevada Corporation (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.”
RMR Industrials,
Inc. (the “Company”, “RMI”, “we”, “our”, “us”) seeks to acquire and
consolidate complementary industrial assets. RMI’s consolidation strategy is to assemble a portfolio of mature and value-add
industrial commodities businesses to generate scalable enterprises with a broad portfolio of products and services addressing a
common and 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 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 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 Mid-Continent 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 (the “Rail Park”). Rail Land Company purchased an approximately 470-acre parcel of real property
located in Bennett, Colorado on February 1, 2018. During July 2018, we exercised our option to acquire an additional approximately
150 acres for a total of 620 acres.
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.
Basis of Presentation and Consolidation
The accompanying consolidated financial statements
for the period ended September 30, 2019 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) 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
Company 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 balance sheets, is amortized as an increase to rental income on a straight-line basis over the remaining 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 due 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 abandonment. Costs associated with a business combination are expensed to acquisition and due diligence costs as
incurred.
In the
event of a business combination, using information available at the time of business combination, the Company allocates the total
consideration to tangible assets and liabilities and identified intangible assets and liabilities. During the measurement period,
which may be up to one year from the acquisition date, the Company may adjust the preliminary purchase price allocations after
obtaining more information about assets acquired and liabilities assumed at the date of 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.
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 results of operations of our wholly-owned subsidiaries, where
intercompany balances and 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
As of January 1, 2018, we adopted ASU
NO. 2014-09, “Revenue from Contracts with Customers” Topic 606. The Company recognizes revenue upon delivery of
goods to the customer at which time the Company’s performance obligation is satisfied 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 (or as)
performance obligations are satisfied.
Revenue includes product sales of limestone,
aggregate materials and other transportation charges to customers net of discounts, allowance or taxes, as applicable.
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. As of September 30, 2019, the Company
views its operations and manages its business as three operating 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 September
30, 2019, the Company had cash of $1,047,906 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.
Restricted Cash
The Company has $184,494
in restricted cash held as cash collateral for a reclamation bond for the Bureau of Land Management and Colorado Division of
Reclamation, Mining, 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 September 30, 2019, the Company
had one large customer that accounted for approximately 27% of our accounts receivable balance and 48% 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
Inventories are valued at the lower of cost or market.
Cost is determined by the weighted average method.
Property, 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 September 30, 2019
and 2018, depletion of mineral properties was approximately $7,000 and $10,100
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
On 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.
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 a security
deposit in connection with various office leases.
Impairment of Long-Lived Assets
The Company evaluates its
long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be
recoverable. Asset impairment is considered 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 September 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 future. Reclamation methods and requirements can differ
depending on the quarry and state rules and regulations in existence for certain locations. As of September 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 long-lived assets, either owned or leased, are recognized over the period the asset is in use. The obligation,
which cannot be reduced by estimated offsetting cash flows, is recorded at fair value as a liability at the obligating event date
and is accreted through charges to selling, general and administrative costs, inclusive of depreciation, depletion and amortization.
The fair value is based on our estimate of the cost required for a third party to perform the legally required reclamation tasks
including a reasonable profit margin. This fair value is also capitalized as part of the carrying amount of the underlying asset
and depreciated over the estimated useful life of the asset.
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
|
|
|
2,976
|
|
Balance at September 30, 2019
|
|
$
|
63,966
|
|
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
|
The fair value of notes payable was $1,122,268 and
$0 as at September 30, 2019 and 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 September 30, 2019 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.
NOTE C – 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. 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 and 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. 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,
the 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 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 company generates enough revenues through the operations as stated above.
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 September 30, 2019 was $249,841
compared to $102,870 at March 31, 2019. The increase is due to an 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.
|
|
September 30,
2019
|
|
|
March 31,
2019
|
|
Blasted Rock
|
|
$
|
23,077
|
|
|
$
|
41,021
|
|
Finished Goods
|
|
$
|
-
|
|
|
$
|
923
|
|
Packaging
|
|
$
|
-
|
|
|
$
|
2,450
|
|
Propane and Fuel
|
|
$
|
-
|
|
|
$
|
4,582
|
|
Total
|
|
$
|
23,077
|
|
|
$
|
48,976
|
|
NOTE F – PROPERTY, PLANT AND EQUIPMENT
The following summarizes the Company’s assets
at September 30, 2019 and March 31, 2019 respectively:
|
|
September
30,
2019
|
|
|
March 31,
2019
|
|
Recoverable Limestone
|
|
$
|
1,477,469
|
|
|
$
|
1,477,469
|
|
Mill Equipment
|
|
|
1,287,743
|
|
|
|
1,287,743
|
|
Mining Equipment
|
|
|
336,934
|
|
|
|
336,934
|
|
Mobile Equipment
|
|
|
849,627
|
|
|
|
849,627
|
|
Property improvements
|
|
|
65,637
|
|
|
|
65,637
|
|
Office Equipment
|
|
|
1,630
|
|
|
|
1,630
|
|
Total Fixed Assets
|
|
|
4,019,040
|
|
|
|
4,019,040
|
|
Less Accumulated Depreciation
|
|
|
(758,529
|
)
|
|
|
(758,529
|
)
|
Property, plant and equipment, net of accumulated depreciation
|
|
$
|
5,743,168
|
|
|
$
|
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%
|
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 3.79% 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 $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 less 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
|
|
$
|
10,471
|
|
2021
|
|
|
-
|
|
Total future minimum lease payments
|
|
$
|
10,471
|
|
NOTE I – TRANSACTIONS WITH RELATED PARTIES
The Company has accrued $1,185,000
for unpaid officers’ compensation expense in accordance with consulting agreements with our Non-executive Board Chairman
and Chief Executive 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 J – SHAREHOLDERS’ DEFICIT
Preferred Stock
The Company has authorized 50,000,000
shares of preferred stock for issuance. At September 30, 2019, 7.5 shares of preferred stock were 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 September 30, 2019 and March 31, 2019, the Company had 35,785,858 Class A shares issued
and outstanding. On September 30, 2019 and March 31, 2019, the Company had 4,288,252 and 4,032,752 Class B Common Stock
issued and outstanding.
The holders of Class A Common
Stock have the right to vote on all matters on which stockholders have the right to vote. The holders of Class B Common Stock 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 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 are entitled to receive identical per-share consideration upon a merger, conversion or exchange of the Company with
another entity, and have equal rights upon a dissolution, liquidation or winding-up of the Company.
During the six month
period ended September 30, 2019, the company entered into subscription agreements with accredited investors (“the
purchasers“) to offer and sell preferred stock for which the company received $950,000 in gross proceeds. During the
same period purchasers exercised warrants to purchase $175,000 shares of class B common stock for which the company received
$3,125,000 in gross proceeds.
NOTE K – SHARE-BASED COMPENSATION
The Rocky Mountain 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 September 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.
NOTE L–SELLING GENERAL AND ADMINISTRATIVE COSTS
Selling general and administrative
costs for the six month period ended September 30, 2019 were $5,949,590 compared to $3,152,278 in the prior year. Increases in
salaries, employee benefits, and consulting fees were primarily responsible for the increase.
NOTE M– INTEREST EXPENSE
The interest expense for the six
month period ended September 30, 2019 was $190,657 compared to the prior year of $497,735. The decrease is the result of a note
payable of $2,250,000 that was repaid on October 1, 2018.
NOTE N– SEGMENT REPORTING
Rocky Mountain
Industrials, Inc (RMI) has three reportable segments: aggregates, logistics, and Rail Park. 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 expects 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 the West Elk Mine for the period ended September 30, 2019. The sales to the West Elk Mine
contributed 48% of revenue to this segment.
The accounting policies
of the segments are the same as those described in the summary of significant accounting policies. RMI evaluates performance based
on profit or loss from operations before income taxes not including nonrecurring gains and losses.
RMI accounts for intersegment
sales and transfers as if the sales or transfers were to third parties, that is, at current market prices.
RMI’s reportable
segments are strategic business units that offer different products and 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
|
|
|
501,525
|
|
|
|
813,572
|
|
|
|
-
|
|
|
|
(182,037
|
)
|
|
|
1,133,059
|
|
Intersegment revenues
|
|
|
(182.037
|
)
|
|
|
182.037
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Interest revenue
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Interest expense
|
|
|
2,367
|
|
|
|
50,821
|
|
|
|
-
|
|
|
|
137,468
|
|
|
|
190,656
|
|
Depreciation, depletion and amortization
|
|
|
143,931
|
|
|
|
158,909
|
|
|
|
-
|
|
|
|
1,278
|
|
|
|
304,118
|
|
Segment loss
|
|
|
944,390
|
|
|
|
334,357
|
|
|
|
21,604
|
|
|
|
4,756,925
|
|
|
|
6,057,276
|
|
Segment assets
|
|
|
3,599,439
|
|
|
|
3,175,151
|
|
|
|
6,036,901
|
|
|
|
1,564,995
|
|
|
|
14,376,486
|
|
Expenditure for segment assets
|
|
|
-
|
|
|
|
2,704,124
|
|
|
|
|
|
|
|
|
|
|
|
2,704,124
|
|