The following discussion should be read in conjunction with our consolidated
financial statements and notes thereto included elsewhere in this Quarterly
Report on Form 10-Q. This discussion includes forward-looking statements for
purposes of U.S. federal securities laws. See "Cautionary Note Regarding
Forward-Looking Statements".
Overview
We were incorporated in the State of Nevada on August 6, 2012 under the name
"Online Yearbook" with the principal business objective of developing and
marketing online yearbooks for schools, companies, and government agencies.
On November 17, 2014, Rocky Mountain Resource Holdings, Inc. ("RMRH") became our
majority shareholder by acquiring 5,200,000 shares of our common stock (the
"Shares"), or 69.06% of the issued and outstanding shares of our common stock,
pursuant to stock purchase agreements with Messrs. El Maraana and Salah Blal,
our former officers and directors. The Shares were acquired for an aggregate
purchase price of $357,670.
On December 8, 2014, we changed our name to "RMR Industrials, Inc." in
connection with a change in our business plan.
RMR Industrials, Inc. ("we", "us", the "Company" or "RMRI") is dedicated to
operating industrial assets in the United States which include minerals,
materials, and services. Our vision is to become a key provider of industrial
materials and services in the Rocky Mountain region. We have a strategy to own,
operate, develop, acquire and vertically integrate complementary industrial
businesses.
On February 27, 2015 (the "Closing Date"), we entered into and consummated a
merger transaction pursuant to an Agreement and Plan of Merger (the "Merger
Agreement") by and among the Company, OLYB Acquisition Corporation, a Nevada
corporation and wholly owned subsidiary of the Company ("Merger Sub"), and RMR
IP, Inc., a Nevada corporation ("RMR IP"). In accordance with the terms of
Merger Agreement, on the Closing Date, Merger Sub merged with and into RMR IP
(the "Merger"), with RMR IP surviving the Merger as our wholly owned subsidiary.
Chad Brownstein and Gregory M. Dangler are directors of the Company and
co-owners of RMRH, which was the majority shareholder of the Company prior to
the Merger. Additionally, Messrs. Brownstein and Dangler were indirect
controlling shareholders and directors of RMR IP prior to the Merger. As such,
the Merger was among entities under the common control of Messrs. Brownstein and
Dangler.
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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 primarily relating to the mining and processing of industrial minerals
for the manufacturing, construction, and agriculture sectors. These minerals
include limestone, aggregates, marble, silica, barite, and sand.
On October 12, 2016, pursuant to an Asset Purchase Agreement with CalX Minerals,
LLC, a Colorado limited liability company ("CalX"), we completed the purchase of
substantially all of the assets associated with the business of operating the
Mid-Continent Limestone Quarry on 41 BLM unpatented placer mining claims in
Garfield County, Colorado. CalX assets include the mining claims, improvements,
access rights, water rights, equipment, inventory, contracts, permits, certain
intellectual property rights, and other tangible and intangible assets
associated with the limestone mining operation. The acquisition of these CalX
assets will promote the development and implementation of the Company's
limestone mining operations in Colorado.
During January 2018, the Company formed Rail Land Company, LLC ("Rail Land
Company") as a wholly owned subsidiary to acquire and develop a rail terminal
and services facility ("Rail Park"). Rail Land Company purchased 620 acres of
real estate located in Bennett, Colorado. The Company's development of the Rail
Park is intended to expand the Company's customer base for our products by
utilizing rail freight capabilities to reach customers in the greater Denver
area and by expanding our business to include rail transportation solutions and
services.
On April 26, 2019 RMR Logistics entered into an asset Purchase agreement with
H2K, LLC, a Colorado Limited Liability Company ("the Seller") pursuant to which
RMR Logistics acquired the sellers trucking assets.
On January 1, 2020 we changed our name to "Rocky Mountain Industrials, Inc." in
connection with a change in our business plan.
Results of Operations
Comparison of the Three and Nine Months Ended December 31, 2019 and December 31,
2018
Revenues
Our revenues for the three and nine-month periods ended December 31, 2019 were
$660,170 and $1,690,327 respectively. This compares to revenue for the three and
nine-month periods ended December 31, 2018 of $308,186 and $1,964,969,
respectively.
Cost of Goods Sold
Our cost of goods sold for the three and nine-month period ended December 31,
2019 were $546,964 and $1,502,044 respectively. This compares to cost of goods
sold for the three and nine-month ended December 31, 2018 of $287,901 and
$840,410, respectively. The increase in costs related to increased production
during the year.
Operating Expenses
Our operating expenses for the three and nine-month period ended December 31,
2019 were $2,841,512 and $8,791,101, respectively. This compares to operating
expenses for the three and nine-month ended December 31, 2018 of $3,115,163 and
$6,267,829. Operating expenses consisted of overhead costs related to mining
operations, consulting services from related parties, public company costs,
salaries and wages, and depreciation and amortization. The increase was due to
increased head count coupled with costs incurred by the Company in relation to
the Company's rail park development.
Interest Expense (Income), net
Our interest expense, net for the three and nine-month period ended December 31,
2019 was $131,188 and $322,544, respectively, compared to $13,049 and $510,234
of interest expense for the three and nine-month ended December 31, 2018,
respectively. The $2,250,000 note payable, issued to an accredited investor in
October 2016, was paid off on October 3, 2018.
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Net Loss Attributable to Rocky Mountain Industrials, Inc.
Our net loss for the three and nine-month period ended December 31, 2019 was
$2,860,193 and $8,917,469, respectively. This compares to a net loss for the
three and nine-month period ended December 31, 2018 of $3,070,206 and
$5,482,512, respectively.
Liquidity and Capital Resources
As of December 31, 2019, we had current assets of $1,170,372, total current
liabilities of $5,522,643 and working capital deficiency of $4,352,271. We have
incurred an accumulated loss of $44,247,195 since inception. Our independent
auditors issued an audit opinion for our financial statements for the fiscal
year ended March 31, 2019 which includes a statement expressing substantial
doubt as to our ability to continue as a going concern due to our limited
liquidity and our lack of revenues.
We will be seeking additional capital to execute our business plan and reach
positive cash flow from operations. Our base monthly expenses are approximately
$200,000 per month. As evidenced by approximately $1.0 million of our current
liabilities being owed to related parties, we have relied historically on
related parties to sustain the Company's operations. In order to successfully
execute our business plan, the net proceeds of a $10-20 million offering will be
required to finance our planned acquisition and for general working capital
purposes.
We do not generate adequate cash flows to support our existing operations.
Moreover, the historical and existing capital structure is not adequate to fund
our planned growth. Our current cash requirements are significant due to our
business plan which contemplates future acquisitions. We anticipate generating
losses at least through the 2020 fiscal year. We anticipate that we will be able
to raise sufficient amounts of working capital in the near term through debt or
equity offerings as may be required to meet short-term obligations.
Other than as stated above, we currently do not have any arrangements for
additional financing, and we may not be able to obtain financing when required.
Our future is dependent upon our ability to obtain financing, a successful
marketing and promotion program, and, further in the future, achieving a
profitable level of operations. Obtaining commercial loans, assuming those loans
would be available, will increase our liabilities and future cash commitments.
We will require additional funds to maintain our reporting status with the SEC
and remain in good standing with the state of Nevada. There are no assurances
that we will be able to raise the required working capital on favorable terms,
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 October 15, 2014 through
December 31, 2019 totaling $44,247,195 and have completed the preliminary stages
of our business plan. We anticipate incurring additional losses before realizing
any revenues and will depend on additional financing in order to meet our
continuing obligations and ultimately to attain profitability. Our ability to
obtain additional financing, whether through the issuance of additional equity
or through the assumption of debt, is uncertain. Accordingly, our independent
auditors' report on our financial statements for the fiscal year ended March 31,
2019 includes an explanatory paragraph regarding concerns about our ability to
continue as a going concern, including additional information contained in the
notes to our financial statements describing the circumstances leading to this
disclosure. The financial statements do not include any adjustments that might
result from the uncertainty about our ability to continue our business.
Recently Issued Accounting Pronouncements
We do not expect the adoption of any recently issued accounting pronouncements
to have a significant impact on our net results of operations, financial
position, or cash flows.
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Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
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