The accompanying notes are an integral part
of these condensed consolidated financial statements.
he 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
December 31, 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 December 31, 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. These consolidated
financial statements and notes are representations of the Company’s management who are responsible for their integrity and
objectivity.
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 December 31, 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 December 31,
2019, the Company had cash of $251,016 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 $206,365 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
December 31, 2019, the Company had one large customer that accounted for approximately 15% of our accounts receivable
balance and 45% 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 December 31,
2019 and 2018, depletion of mineral properties was approximately $7,000 and $9,300.
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 December 31, 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 December 31, 2019, the Company’s
undiscounted reclamation obligations totaled approximately $222,081. 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
|
|
|
4,463
|
|
Accretion expense
|
|
|
2,976
|
|
Balance at December 31, 2019
|
|
$
|
65,453
|
|
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 $2,496,142 and $0 as at
December 31, 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 December 31, 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. On December 3, 2019, an accredited investor owning 5,263 shares of RMR Aggregates
common stock elected to convert its common stock of RMR Aggregates in to 166,667 shares of RMRI Class B common stock,
pursuant to an Equity Conversion Agreement between the accredited investor, RMR Aggregates and RMRI. Upon conversion, RMR
Aggregates became a wholly owned subsidiary of RMRI.
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 December 31, 2019 was $221,150 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.
|
|
December 31,
2019
|
|
|
March 31,
2019
|
|
Blasted Rock
|
|
$
|
10,338
|
|
|
$
|
41,021
|
|
Finished Goods
|
|
$
|
-
|
|
|
$
|
923
|
|
Packaging
|
|
$
|
-
|
|
|
$
|
2,450
|
|
Propane and Fuel
|
|
$
|
-
|
|
|
$
|
4,582
|
|
Total
|
|
$
|
10,338
|
|
|
$
|
48,976
|
|
NOTE F – PROPERTY, PLANT AND EQUIPMENT
The following summarizes the Company’s assets at December 31,
2019 and March 31, 2019 respectively:
|
|
December 31,
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
|
|
|
3,544,138
|
|
|
|
849,627
|
|
Property improvements
|
|
|
69,263
|
|
|
|
65,637
|
|
Office Equipment
|
|
|
9,710
|
|
|
|
1,630
|
|
Total Fixed Assets
|
|
|
6,725,257
|
|
|
|
4,019,040
|
|
Less Accumulated Depreciation
|
|
|
(1,126,112
|
)
|
|
|
(758,529
|
)
|
Property, plant and equipment, net of accumulated depreciation
|
|
$
|
5,599,145
|
|
|
$
|
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 Beinville 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 $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 $1,005,000
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 December 31, 2019, 27.52 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 December 31, 2019 and March 31, 2019, the Company had
35,785,858 Class A shares issued and outstanding. As of December 31, 2019 and March 31, 2019 the Company had 4,448,919 and
4,032,752 Class B Common Stock issued and outstanding, respectively.
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 nine month period ended December
31, 2019, the Company entered into subscription agreements with accredited investors (“the Purchasers”) to offer and
sell 16.02 shares of Preferred Stock for which the Company received $2,552,000 in gross proceeds. During the same period, Purchasers
exercised warrants to purchase 4.0 shares of Preferred Stock and 175,000 shares of Class B Common Stock for which the Company
received $3,525,000 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 December 31, 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 nine month period ended December 31, 2019 were $8,791,101 compared to $6,267,829 in the period ended
December 31, 2018. Increases in salaries, employee benefits, and consulting fees were primarily responsible for the
increase.
NOTE M – INTEREST EXPENSE
The interest expense for the nine month
period ended December 31, 2019 was $322,544 compared to the prior year of $510,234. 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 rental 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 December 31, 2019. The sales to the West Elk Mine contributed 45% 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
|
|
|
842,221
|
|
|
|
1,133,046
|
|
|
|
|
|
|
|
(284,939
|
)
|
|
|
1,690,328
|
|
Intersegment revenues
|
|
|
(284,939
|
)
|
|
|
284,939
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Interest expense
|
|
|
3,302
|
|
|
|
83,435
|
|
|
|
|
|
|
|
235,807
|
|
|
|
322,544
|
|
Depreciation, depletion and amortization
|
|
|
215,100
|
|
|
|
250,240
|
|
|
|
|
|
|
|
2,253
|
|
|
|
467,593
|
|
Segment loss
|
|
|
1,204,340
|
|
|
|
577,496
|
|
|
|
22,274
|
|
|
|
7,113,359
|
|
|
|
8,917,469
|
|
Segment assets
|
|
|
3,495,461
|
|
|
|
3,101,843
|
|
|
|
6,528,984
|
|
|
|
862,011
|
|
|
|
13,988,299
|
|
Expenditure for segment assets
|
|
|
|
|
|
|
2,629,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
M – Subsequent Events
Effective January 1, 2021, Gregory M. Dangler has retired from
his position of Chief Executive Officer of Rocky Mountain Industrials, Inc.. He does so with no disagreement with the Company.
Mr. Dangler will continue in his position as Executive Board Director and will remain an employee of the Company for the near term.
Effective January 1, 2021 Brian Fallin was appointed as Chief Executive Officer (“CEO”) of Rocky Mountain Industrials
Inc. Prior to being appointed as CEO, Mr. Fallin was the Vice President of Sales of the Company.
Effective January 1, 2021 Andrew Peltz retired from his
position as Board Director. He does so without disagreement with the Company. Mr. Peltz will continue on as a shareholder. On
January 1, 2021 Adrian Fairbourn was appointed as Board Director. Mr. Fairbourn currently manages an institutional
multi-family office direct investment and real asset portfolio.
Effective October 9, 2020, John Anderson, President of Rocky
Mountain Industrials Inc., resigned from the Company. He does so without disagreement with the Company. The Role of President
will not be replaced at this time.
Subsequent to December 31, 2019 the company issued 25.25
Preferred Shares and received 2,525,000 in gross proceeds. During the same time period accredited investors exercised
warrants to purchase 60,000 shares of Class B Common Stock at an exercise price of $12.50 per share.