ROCKY MOUNTAIN INDUSTRIALS, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations. (form 10-K)
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Forward-Looking Statements
All statements in this report other than statements of historical fact are
“forward-looking statements”. Such forward-looking statements include, but are
not limited to, those relating to the following: our ability to secure necessary
financing; fluctuations in interest rates; our ability to continue to grow and
implement growth strategies, and future cash needs and operations and our
business plans.
When used in this document, the words “anticipate,” “estimate,” “expect,” “may,”
“plans,” “project,” and similar expressions are intended to be among the
statements that identify forward-looking statements. Our results may differ
significantly from the results discussed in the forward-looking statements. Such
statements involve risks and uncertainties, including, but not limited to, those
relating to costs, delays and difficulties related to our ability to attract and
retain skilled managers and other personnel; the intense competition within our
industry; the uncertainty of our ability to manage and continue our growth and
implement our business strategy; our vulnerability to general economic
conditions; accuracy of accounting and other estimates; our future financial and
operating results, cash needs and demand for services; and our ability to
maintain and comply with permits and licenses; as well as other risk factors
described in this Report. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual outcomes
may vary materially from those projected.
Overview
We were incorporated in the
“Online Yearbook” with the principal business objective of developing and
marketing online yearbooks for schools, companies and government agencies.
In November, 2014,
majority shareholder by acquiring 5,200,000 shares of our common stock (the
“Shares”), or 69.06% of the then issued and outstanding shares, 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
In
with the change in our business plan.
In February, 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,
wholly owned subsidiary of the Company (“Merger Sub”) and
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.
M. Dangler
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.
In July, 2016, we formed
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.
In October, 2016, pursuant to an Asset Purchase Agreement with
LLC
purchase of substantially all of the assets associated with the Mid-Continent
Quarry on 41 BLM unpatented placer mining claims in
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.
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In
as a wholly-owned subsidiary to acquire and develop a rail terminal and services
facility (the “
470-acre parcel of real property located in
In
acres for a total of 620 acres. The Company’s development of the
intended to expand the customer base for our products by utilizing rail freight
capabilities to reach customers in the greater
business to include rail transportation solutions and services.
On
RMR Logistics acquired the Seller’s trucking assets.
On
Critical Accounting Policies and 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.
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
and manages its business as three operating segments, Aggregates mining,
Logistics and
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
31, 2020
may occasionally maintain cash balances in excess of amounts insured by the
institutions and are monitored by management to mitigate credit risk.
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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
2020
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.
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 as follows:
– 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
Revenue Recognition
As of
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.
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
Company’s undiscounted reclamation obligations totaled approximately
which 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 operating expenses. The fair value is based on our
estimate 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.
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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 that 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.
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 of 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
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.
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Recent Accounting Pronouncements
Refer to Note B – Summary of Significant Accounting Policies of the Notes to
Consolidated Financial Statements (Part IV, Item 15 of this Form 10-K) for
further discussion.
Results of Operations for the Fiscal Year Ended
Fiscal Year Ended
For the For the
year ended year ended
March 31, March 31,
2020 2019
Revenue $ 2,090,791 $ 1,430,338
Cost of goods sold 1,878,156 1,304,256
Gross profit 212,635 126,082
Selling, general and administrative 12,337,492 8,835,445
Loss from operations
(12,124,857 ) (8,709,363 ) Loss on sale of assets (60,176) - Other income - 1,000,000 Interest expense, net (368,212 ) (516,036 ) Loss before income tax provision (12,552,384 ) (8,225,399 ) Income tax expense 861 (11,087) Net loss (12,552,384 ) (8,214,312 ) Revenues
Revenues for the year ended
due to an increase in trucking sales.
Cost of Goods Sold
Cost of goods sold for the year ended
to
sold is largely due to the increase in labor, repairs and fuel.
Selling, general and administrative
Operating expenses for the year ended
to operating expenses for the year ended
general and administrative expenses consisted of overhead costs related to
mining operations, consulting services from related parties, public company
costs and amortization of intangible assets. The main increases consist of
Company’s mine expansion project and the development of the Company’s
project. Salaries and wages increased
staffing largely in relation to the Company’s
Other income
The Other income in fiscal 2019 is related to
the sale of an easement on the Company’s
Interest expense, net
Interest decreased as a result of the extinguishment of debt and repayment of
notes payable during the year.
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Liquidity and Capital Resources
As of
liabilities of
incurred an accumulated loss of
auditors have issued an audit opinion for our financial statements for the year
ended
to our ability to continue as a going concern due to our limited liquidity and
our lack of revenues.
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 contemplates future acquisitions, development of the
Company’s
anticipate generating losses through fiscal 2020 and into fiscal 2021. 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, although this cannot be guaranteed. In addition, our
entitled, giving us the ability to sell land enhancing our own internal revenue
generating platform. In
.
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 prospects are 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 achieve and maintain compliance
with
working capital on favorable terms, in a timely manner or 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
our business plan. We anticipate incurring additional losses 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
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.
The Company is currently working through a number of opportunities to ensure the
business will continue as a going concern. These include:
1. Rail Park FDP and Final Plat were unanimously approved by the
Board of County Commissioners onSeptember 1, 2020 , paving the way for lot sales and construction. OnJanuary 14th, 2021 , we sold an 83-acre lot to a Fortune 500 company. This user was the first of twelve available lots in the property. Lot sales will be a primary revenue driver for us with significant interest from many potential light and heavy industrial tenants. Construction will begin inApril 2020 and will follow a phased approach from the south parcels to the rail served north parcels.
2. Construction commencement will include certain public infrastructure costs
that will be reimbursed through the establishment of the Rocky Mountain Rail
Park Metropolitan District. Reimbursement will be phased as specific
infrastructure components are completed and worked through the process.. The
RMRP Metro District bond offering closed on April 15th, 2021 raising total
proceeds of $65,209,784 , of which, $51,234,881 (project fund) will be directly
used for public infrastructure construction at the Rail Park .
3. Potential expansion of the Mid-Continent Quarry, following the proper BLM
process will allow for increased production volumes. Current operations are
additionally being enhanced to provide for short term revenue and operational
sustainability.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
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