NOTE 1 -
ORGANIZATION AND BASIS OF PRESENTATION
Raptor Resources Holdings Inc. (formerly Lantis Laser, Inc. (the “Company”)) was incorporated in the State of New Jersey on January 14, 1998. On November 3, 2004, the Company was acquired by Hypervelocity, Inc., a Nevada corporation.
In the transaction, the Company exchanged 100% of their stock in exchange for 127,718,500 shares of common stock of Hypervelocity, Inc. The transaction was treated for accounting purposes as a reverse merger with the Company being the accounting acquirer. Included in the 127,718,500 shares issued to the shareholders of the Company in the transaction, 6,422,500 shares were issued in the conversion of convertible notes payable the Company had entered into in 2001 and 2003. The shares represent the conversion of the original notes, the interest accrued on those notes as well as warrants that were offered and paid for by the note holders. The value of the convertible notes, interest and warrants were $259,529.
On December 9, 2004, Hypervelocity, Inc. changed its name to Lantis Laser Inc. which was domiciled in Nevada.
On June 16, 2006, the Company authorized a 1 for 2 reverse stock split for all issued shares.
On April 22, 2011, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Lantis Acquisition Corp., a Wyoming corporation and wholly-owned subsidiary of the Company (“Merger Sub”), and TAG Minerals Inc., a Wyoming corporation (“TAG”), pursuant to which the Merger Sub was merged into TAG (the “Merger”). As a result of the Merger TAG became a wholly-owned subsidiary of the Company. The transaction was completed on May 23, 2011 and the Company issued to the shareholders of TAG 165,000,000 shares of common stock which represented 50% of the total issued and outstanding shares at the time of the Merger in exchange for 100% of their shares in TAG. The Company accounted for this transaction as an acquisition.
TAG is a U.S. based mineral and natural resources acquisition, exploration and development company, with operations conducted through its operating affiliate, TAG Minerals Zimbabwe (Private) Limited (“TAG - Z”). The company’s business is managed by its directors and officers who have commercial experience in the mineral and natural resource extraction business. TAG’s strategy is to identify and acquire companies and assets to exploit land resources and mineral properties that have potential. TAG is augmented by independent financial, geological, and mining extraction and exploration professionals who advise the company on its mining, extraction and exploration projects throughout Zimbabwe, Africa.
Concurrent with the Merger Agreement, the Company’s former Chief Executive Officer and Executive Vice President Clinical Affairs and a Director of the Company resigned on May 6, 2011. The Company retained these former executives to continue to manage the dental technology subsidiary of the Company. These two executives received employment contracts dated May 23, 2011. This portion of the business was later fully divested December 17, 2012.
The President and Chief Executive Officer of TAG, Al Pietrangelo, was named the new President and Chief Executive Officer of the Company. In addition, the remaining two shareholders of TAG became directors of the Company, with one of these Directors resigning in January 2013.
At the time of the Merger, the Board of Directors approved the conversion of an outstanding note for each officer of Lantis Laser Inc., totaling $960,000 plus accrued interest of $62,466 into 14,400,000 warrants with a cashless exercise provision. The warrants have a term of five-years with an exercise price of $0.075. The Company performed a Black-Scholes calculation to determine the value of the warrants, and they were determined to have a value of $100,800. The gain on the conversion of the related party debt to warrants of $921,666 is reflected in additional paid-in capital in accordance with ASC 850.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -
ORGANIZATION AND BASIS OF PRESENTATION
(CONTINUED)
The other related party debt of $150,000 at the time of the Merger was converted to a convertible note. The note was to be repaid at the rate of 5% of any funding, whether debt or equity, received by the Company or its subsidiaries, or 5% of net revenues of the Company until repaid in full. The note holders also had the right to convert any amounts outstanding and due to them at $0.075 per share at their sole discretion. This note was subsequently forgiven in accordance with the settlement and restructuring agreement dated December 17, 2012.
In July 2011, TAG-Z, acquired 100% of the capital stock of Ontage Resources (Private) Limited (“Ontage”). Ontage holds a 10% stake in an existing operating gold mining producer, Slashwood Mining (Private) Limited (“Slashwood Mining”). Slashwood Mining is a registered percentage owner of eight custom gold milling centers across various locations in Zimbabwe, along with ownership of 30 mining claims encompassing approximately 2,000 acres.. On December 31, 2012 the Company permanently impaired the investment in Slashwood Mining, originally valued at $150,000 to $0. The July 2011 TAG-Z, acquisition of 100% of the capital stock of Ontage has been deemed to be worthless as of December 31, 2012. Ontage was a wholly owned subsidiary of TAG-Z a consolidated variable interest entity of the Company and its only activity had been the acquisition of 10% stake in an existing operating gold mining producer, Slashwood Mining.
On September 19, 2011, TAG-Z, entered into a Sale of Shares Agreement, whereby, TAG-Z agreed to pay $433,000 in installments through November 30, 2012 for 100% of the Dodge Mine blocks 1-6, located in Zimbabwe. The property consists of three hydrothermal mountains representing 123 hectares containing multiple deposits of superior grade barite, limestone and talc based on the drilling reports that management received from the previous owner of the Dodge mine blocks. Along with the purchase of the Dodge Mine blocks 1-6 from Chiroswa Syndicate, TAG-Z received 50% of the issued and outstanding shares of common stock of Chiroswa Minerals (PVT) Limited (“Chiroswa”), an inactive company originally formed to conduct mining operations on the Dodge Mine. Since Chiroswa is an inactive company, TAG-Z has canceled the Chiroswa shares it received under the Sale of Share Agreement and intends to conduct mining operations on the Dodge blocks itself. As of June 30, 2013, the entire note balance for the Dodge Mines has been paid by the Company.
Effective December 2, 2011, the Company entered into a Stock Purchase Agreement with Mabwe Minerals Inc. (f/k/a/Raptor Networks Technology, Inc.) (MBMI: OTCQB) (“Mabwe”) under which the Company issued 5,000,000 shares of its common stock to the lender of certain convertible notes of Mabwe, as incentive to convert their promissory notes into shares of common stock. As a result of this transaction, Mabwe issued 55.52% of its issued and outstanding shares of common stock to the Company, Mabwe became a majority owned subsidiary of the Company, and, under the terms of the Agreement, the officers and directors of Mabwe resigned. Al Pietrangelo, President and CEO of the Company, became President and CEO of Mabwe and became the sole member of the Board of Directors. Mabwe conducted a reverse split and issued additional shares of its common stock to allow the Company to hold 80.14% of its issued and outstanding common shares on a post-split basis.
On March 5, 2012, the Company amended its Articles of Incorporation to change its name to Raptor Resources Holdings Inc. to more clearly reflect its new focus on the holding and development of natural resources, hard assets and the mining of industrial minerals to help build a new brand identity. The name change became effective March 28, 2012.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -
ORGANIZATION AND BASIS OF PRESENTATION
(CONTINUED)
On June 1, 2012 the Company entered into a contract renegotiation with Chiroswa, the owner of Dodge Mines Blocks 1-6, related to the previous agreement for the $433,000 in installment payments for the mine blocks, located in Zimbabwe. Under the new terms of the contract, Chiroswa accepted 45,000 shares of the Company’s Preferred Convertible Series B stock (each share is convertible into 50 shares of Common Stock of Raptor Resources Holdings Inc. (RRHI) and 25 shares of common stock of majority owned Mabwe Minerals Inc. (MBMI)). The Company paid $3,000 as a down payment with $27,000 due upon the retitling of the Dodge Mine Blocks 1-6 into the name of Mabwe Minerals Zimbabwe (PVT) Limited (“MAB-Z”). An additional $30,000 was paid in five equal monthly installments beginning October 1, 2012. Under the terms of the amended contract with Chiroswa, it forgave $132,917 of the debt owed and agreed that upon completion of the retitling of the asset into the name of MAB-Z the asset of the Dodge Mine Blocks 1-6 ($433,000) and the remaining liability ($57,000) will be transferred to MAB-Z to support continuing operations and revenue generating activities. The full balance has been repaid to Dodge Mine for mine blocks 1-6 as of June 30, 2013.
On June 28, 2012 Mabwe Minerals amended its charter to increase the number of its authorized shares of common stock. Mabwe Minerals issued to the Company an additional 79,078,817 shares of its common stock (post 1:10 reverse split) giving the Company at that time ownership of 80.14% of the issued and outstanding shares of Mabwe Minerals common stock. As of March 31, 2014 the Company owns 64.18% of Mabwe Minerals.
MAB-Z is a Variable Interest Entity (VIE) with respect to guidance under ASC 810-10-5 and is therefore consolidated.
On July 18, 2012 Mabwe Minerals acquired a 49% interest in Mabwe Minerals Zimbabwe (PVT) LTD ("MAB-Z") with the issuance of 25,000 shares of Raptor Resources Holdings Inc. Series B Preferred Convertible Stock ("Series B Preferred Stock"). Each share of Series B Preferred Stock is convertible into 50 common shares of Raptor Resources Holdings Inc. and 25 common shares of Mabwe Minerals, both subject to a one year holding period. The remaining 51% ownership in MAB-Z is held by a director of the Company, Zimbabwean resident, Tapiwa Gurupira (41% ownership), with the remaining portion owned by Asswell Gurupira (10% ownership). MAB-Z will be the operating arm of Mabwe Minerals, with the Company being the primary beneficiary of all the activities of MAB-Z.
On September 30, 2012, MBMI formally appointed Tapiwa Gurupira, a 41% stakeholder of MAB-Z as a Director of Mabwe Minerals Inc.
On November 7, 2012 the principals of MAB-Z received approval from the government of Zimbabwe, to form a new parent holding corporation for the purpose of holding MAB-Z and the percentage investment stake in Kinsey. The new company was named Mabwe Corporation (PVT) LTD (“MAB-C”.) The new corporation owns 100% of MAB-Z and 25% of Kinsey. MBMI owns a 49% stake in MAB-C and the remaining 51% ownership in MAB-C is held by a director of the Company, Zimbabwean resident, Tapiwa Gurupira (41% ownership), with the remaining portion owned by Asswell Gurupira (10% ownership). MAB-C will be the operating arm of Mabwe Minerals, with the Mabwe being the primary beneficiary of all the activities of MAB-C. MAB-C is a Variable Interest Entity (VIE) with respect to guidance under ASC 810-10-5 and is therefore consolidated.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -
ORGANIZATION AND BASIS OF PRESENTATION
(CONTINUED)
On December 17, 2012 the Company entered into a share buyback restructuring agreement with Stanley Baron (former Chief Executive Officer of the Company) and Craig Gimbel (former Executive Vice President of the Company) where Baron and Gimbel returned all of their shares (26,847,423 and 27,511,500 respectively) along with granting exercisable option rights on their warrants to buy Company stock. The number of warrants held by Baron and Gimbel are 8,640,000 and 5,760,000, respectively with an exercise price of $.075 per share. Under the terms of this agreement Baron and Gimbel executed an option agreement simultaneously to TAG and the Company to purchase all of the shares back at $.04/share. The agreement terminated the employment agreements and all money owed to Baron and Gimbel including a $150,000 loan from the former employees. As consideration Baron and Gimbel received shares of Mabwe Minerals, a majority owned subsidiary of the Company in the amounts of 1,700,000 and 1,300,000, respectively. Additionally, Baron and Gimbel received from the Company all contracts related to the dental technology business of the Company. There were no assets recorded for this division, and no development done for the past year, as this was inactive. The Company no longer is engaged in the dental technology business. The cancellation of the Baron and Gimbel shares and issuance of the certificate in the name of the Company was executed January 30, 2013 by the Company’s transfer agent. The closing of the transaction occurred December 17, 2012, and therefore was recorded in the 2012 financial statements.
On July 31, 2013 MBMI entered into a Master Distributer Agreement (“MDA”) with Steinbock Minerals Ltd. (“Steinbock”) together with its affiliate Yasheya Ltd. (“Yasheya”.) Steinbock is engaged and specializes in the worldwide marketing, distribution and sale of industrial minerals, including but not limited to, all barite grade types and talc. Yasheya is engaged and specializes in the shipment of industrial minerals worldwide. Steinbock and Yasheya were granted the exclusive right to market, sell, distribute, ship and deliver Dodge Mine barite to their customer base. This agreement shall remain in effect in perpetuity unless cancelled by either party upon the delivery of six months written notice.
On March 28, 2014, the Company entered into a Purchase Agreement through its affiliate, TAG-Z, whereby TAG-Z acquired 100% of Wimfair Investments (Private) Limited t/a Derbyshire Stone Quarry (“Derbyshire”), a registered Zimbabwean corporation engaged in the production of 10mm stone, 20mm stone, quarry dust, crusher run, river sand (washed), pit sand and decomposed granite. Derbyshire is the largest indigenous sand and stone quarry in the Harare area, located in a prime residential growth zone within close proximity to major road projects. The total purchase price of $1,450,000 was paid in stock, notes payable and cash. Equity valued at $750,000 was paid in the form of 25 million restricted shares of the Company's treasury stock resulting in no dilution to existing shareholders. A down payment of $100,000 was made on the purchase on February 6, 2014 with the remaining $600,000 to be paid in equal monthly installments commencing at the end of the first full month after purchase. Derbyshire Stone Quarry was established March 28, 2001.
The unaudited condensed consolidated financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The condensed consolidated financial statements and notes are presented as permitted on Form 10-Q and do not contain information included in the Company’s annual consolidated financial statements and notes thereto. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the Company’s Form 10-K Annual Report at December 31, 2013, which includes audited financial statements and the accompanying notes thereto. While management believes the procedures followed in preparing these condensed consolidated financial statements are reasonable, the accuracy of the amounts are in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -
ORGANIZATION AND BASIS OF PRESENTATION
(CONTINUED)
These condensed consolidated unaudited financial statements reflect all adjustments, including normal recurring adjustments which, in the opinion of management, are necessary to present fairly the consolidated operations and cash flows for the periods presented.
Going Concern
As shown in the accompanying condensed consolidated financial statements the Company has incurred attributable recurring losses of $239,699 and $473,492 for the three months ended March 31, 2014 and 2013 respectively, and has incurred an attributable cumulative loss of $15,496,507 since inception (January 14, 1998). The Company has a working capital deficit in the amount of $2,378,061 as of March 31, 2014. With high prices for industrial minerals and the contacts for mining rights that the principals of the Company maintain in Zimbabwe as well as the purchase of an established operating quarry, the Company remains positive about the future.
There is no guarantee that the Company will be able to raise enough capital or generate sufficient revenues to sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period. Management believes that the Company’s capital requirements will depend on various factors. These factors include finding additional acquisition targets for TAG, how these targets can be acquired, i.e. cash, debt or common stock, and generating cash flow either through operations or through private placements. Additionally, the Company continues to convert its debt into equity, and as a result has reduced its working capital deficit.
The Company’s ability to continue as a going concern for a reasonable period is dependent upon management’s ability to raise additional interim capital and, ultimately, achieve profitable operations. There can be no assurance that management will be able to raise sufficient capital, under terms satisfactory to the Company, if at all.
The condensed consolidated financial statements do not include any adjustments relating to the carrying amounts of recorded assets or the carrying amounts and classification of recorded liabilities that may be required should the Company be unable to continue as a going concern.
NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Exploration Stage Company
The Company is considered to be in the exploration stage as defined in ASC 915
.
The Company had previously devoted substantially all of its efforts to the development of their OCT technology. The Company is currently devoting it’s time to the development and extraction of natural resources as well at the exploration and extraction of industrial minerals.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, majority-owned subsidiaries and variable interest entities (“VIEs”) for which the Company is the primary beneficiary. All significant intercompany accounts and transactions have been eliminated in consolidation.
The Company has adopted the provisions of ASC 810-10-5, “Consolidation of VIEs”. ASC 810-10-5 requires a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIEs residual returns.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Principles of Consolidation (Continued)
TAG Minerals Inc. on January 4, 2011, then amended on April 2, 2011, acquired a 49% interest in TAG – Z for a 33% interest in TAG. The remaining 51% ownership in TAG – Z is held by a Director of the Company, a Zimbabwe resident, Tapiwa Gurupira. TAG – Z will be the operating arm of TAG, initially, with the Company being the primary beneficiary of all the activities of its subsidiary, TAG, and their affiliate company TAG – Z.
As a result of this investment by TAG, TAG – Z has been identified by the Company as a VIE.
Mabwe Minerals Inc. on July 18, 2012, acquired a 49% interest in Mabwe Minerals Zimbabwe (PVT) LTD (MAB-Z) through the issuance of 25,000 shares of Raptor Resources Holdings Inc. Series B Preferred Convertible Stock.
Each share of the Series B Preferred Convertible Stock is convertible into 50 common shares of Raptor Resources Holdings Inc. and 25 common shares of Mabwe Minerals Inc. both subject to a 1-year holding period. The remaining 51% ownership in MAB-Z is held by a Director of the Company, a Zimbabwe resident, Tapiwa Gurupira (41%) with the remaining portion owned by Asswell Gurupira (10%). MAB-Z will be the operating arm of Mabwe Minerals Inc., with the Company being the primary beneficiary of all the activities of its subsidiary, Mabwe Minerals Zimbabwe (PVT) LTD.
As a result of this investment by Mabwe Minerals Inc. funded by Preferred Convertible Series B Stock of Raptor Resources Holdings Inc., MAB – Z has been identified by MBMI as a VIE. The value of the Series B Preferred Convertible Stock is $25,000, which is reflected as Goodwill on the Consolidated Balance Sheet at March 31, 2014.
The initial transaction was recorded at cost.
On November 7, 2012 the principals of MAB-Z received approval from the Government of Zimbabwe to form a new parent holding corporation for the purpose of holding MAB-Z and its percentage investment stake in WGB Kinsey & Company (“Kinsey”.) The new company was Mabwe Corporation (PVT) LTD (“MAB-C”.) The new corporation owns 100% of MAB-Z and 25% of Kinsey. MBMI owns a 49% stake in MAB-C the newly formed corporation; the remaining 51% ownership in MAB-C held by a director of the Company, Zimbabwean resident, Tapiwa Gurupira (41% ownership), with the remaining portion owned by Asswell Gurupira (10% ownership). MAB-C will be the operating arm of Mabwe Minerals Inc., with Mabwe being the primary beneficiary of all the activities of MAB-C. MAB-C is a Variable Interest Entity (VIE) with respect to guidance under ASC 810-10-5 and is therefore consolidated.
The Company as of March 31, 2014 owns 64.18% of Mabwe Minerals Inc. The 35.82% noncontrolling interest is reflected in the condensed consolidated financial statements. This dilution was due to the private placement sale of common stock by its subsidiary, Mabwe Minerals Inc., and stock issued for services rendered and to be rendered. Additionally Mabwe issued shares for an equity swap with WGB Kinsey and Co and the 3,000,000 shares for the Baron/Gimbel equity restructuring. Mabwe issued 27,947,642 shares of common stock diluting the interest of Raptor Resources Holdings Inc. from 80.14% at acquisition on June 29, 2012 to 64.18% as of March 31, 2014.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Principles of Consolidation (Continued)
On March 28, 2014, the Company entered into a Purchase Agreement through its affiliate, TAG-Z, whereby TAG-Z acquired 100% of Wimfair Investments (Private) Limited t/a Derbyshire Stone Quarry (“Derbyshire”), a registered Zimbabwean corporation engaged in the production of 10mm stone, 20mm stone, quarry dust, crusher run, river sand (washed), pit sand and decomposed granite. Derbyshire is the largest indigenous sand and stone quarry in the Harare area, located in a prime residential growth zone within close proximity to major road projects. The total purchase price of $1,450,000 was paid in stock, notes payable and cash. Equity valued at $750,000 was paid in the form of 25 million restricted shares of the Company's treasury stock resulting in no dilution to existing shareholders. A down payment of $100,000 was made on the purchase on February 6, 2014 with the remaining $600,000 to be paid in equal monthly installments commencing at the end of the first full month after purchase. Derbyshire Stone Quarry was established March 28, 2001.
As a result of this investment by TAG – Z, Derbyshire has been identified by the Company as a VIE.
Noncontrolling Interests
In accordance with ASC 810-10-45, noncontrolling interests in condensed consolidated financial statements, the Company classifies controlling interests as a component of equity within the balance sheets. The Company has retroactively applied the provisions in ASC 810-10-45 to the financial information for the period ended March 31, 2014. There was no activity from December 2, 2011 through June 30, 2012 in Mabwe, the Company’s majority-owned subsidiary. The Company’s controlling interest was reduced this quarter due to Mabwe’s issuance of stock for services to be rendered. The noncontrolling interest in Mabwe, on a percentage basis, increased 0.04% to 35.82%. The noncontrolling interest thus changed to a balance of ($511,552). The net loss attributable to noncontrolling interest for the three months ended March 31, 2014 was $105,010.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including, but not limited to, those related to derivative liabilities, bad debts, income taxes and contingencies. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.
Property and Equipment
Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the assets estimated useful lives as follows: computer and other testing equipment and motor vehicles is depreciated over five years; office furniture and scientific measurement equipment is depreciated over seven years, plant equipment is depreciated for fifteen years; buildings are depreciated over thirty years; land is not depreciated. Repairs and maintenance of a routine nature are charged as incurred. Significant renewals and betterments are capitalized. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the consolidated statements of operations. Assets acquired in the Derbyshire purchase were recorded at the estimated fair value with estimated useful lives at the time of the purchase.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Fair Value of Financial Instruments (other than Derivative Financial Instruments)
The carrying amounts reported in the condensed consolidated balance sheet for cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments. For the notes payable, the carrying amount reported is based upon the incremental borrowing rates otherwise available to the Company for similar borrowings.
Convertible Debenture and Beneficial Conversion Feature
If the conversion feature of conventional convertible debt provides for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount. In those circumstances, the convertible debt will be recorded net of the discount related to the BCF. The Company amortizes the discount to interest expense over the life of the debt using the straight-line method, which approximates the effective interest method.
Derivative Financial Instruments
In accounting for non-conventional convertible debt, the Company bifurcates its embedded derivative instruments. The Company’s derivative financial instruments consist of embedded derivatives related to non-conventional debentures entered into with certain investors. These embedded instruments related to the debenture include the conversion feature, liquidated damages related to registration rights and default provisions. The accounting treatment of derivative financial instruments requires that the Company record the derivatives and related warrants at their fair value as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value will be recorded as non-operating, non-cash income or expense at each reporting period. If the fair value of the derivatives is higher at the subsequent balance sheet date, the Company will record a non-operating, non-cash charge. If the fair value of the derivative is lower at the subsequent balance sheet date, the Company will record non-operating, non-cash income.
Cash
The Company considers all highly liquid debt instruments and other short-term investments with an initial maturity of three months or less to be cash equivalents. Any amounts of cash in financial institutions over FDIC insured limits, exposes the Company to cash concentration risk.
Research and Development
The Company annually incurs costs on activities that relate to research and development of new technology and products. Research and development costs are expensed as incurred. Certain of these costs would be reduced by government grants and investment tax credits where applicable.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Revenue Recognition
The Company records revenues when the following criteria were met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred; (iii) the price to the customer is fixed or determinable; and (iv) collection of the sales price is reasonably assured. Delivery occurs when goods are shipped and title and risk of loss have passed to the customer. Revenue is deferred in all instances where the earnings process is incomplete. The Company recognized revenue from distribution sales when all contingencies were satisfied and upon persuasive evidence of a sale to end users until such time that historical sell through ratios had been developed. Payments received before all of the relevant criteria for revenue recognition were satisfied were recorded as deferred revenue in the accompanying consolidated balance sheets. . All revenues were reported net of any sales discounts or taxes.
With the purchase of Derbyshire, the Company beginning in this quarter is recording revenues and expects shortly for those revenues to be significant enough to cease exploration stage as a full production stage company.
Unearned Revenue
As an Exploration Stage company, MAB-Z has yet to realize its first shipment of barite. This shipment to an agreed upon FOB point is the primary hurdle in our recognizing revenue by completing the earning process on the purchase order that was submitted by Steinbock in the third quarter of this year. A second purchase order was issued by Steinbock in December of this year for 10,000 tons of barite but has not been billed by the company. Mainly, this delay is due to MAB-Z’s desire to refine the current mineral extraction to a sufficiently high grade of Barite in order to obtain a more beneficial price at market. Further delaying the process and adding cost to the process is the search and testing of equipment necessary for further refinement. Under the terms of the initial purchase order the Steinbock is to pay half of the face value upon delivery of the invoice. As of March 31, 2014, the half of the initial purchase order was paid in the amount of $105,000, with the second half due upon a vessel being loaded in Beira. This amount will be recorded as revenue once the 2,000 tons of minerals are delivered to the buyer. The second purchase order requires MAB-Z to successfully produce the ordered quantity of 10,000 tons after the jigging operations have been completed to receive the first half of the payment, and the second half to be paid upon a vessel being loaded in Beira.
At the time of the Derbyshire purchase there was a minor amount of advance payments from customers where product risk of loss had not been transferred to the customer. These amounts have been reflected in unearned revenue.
Inventory
Inventories
, including stockpiles and mineralized material are carried at the lower of cost or net realizable value. Cost is comprised of production costs for mineralized material produced and processed. Production costs include the costs of materials, costs of processing, refinement, extraction, direct labor, mine site and processing facility overhead costs and site development cost, depreciation, depletion and amortization. The inventory currently recorded on the balance sheet is the result of the Derbyshire purchase and was recorded at net realizable value.
In-process Inventories
- In-process inventories represent mineralized materials that are currently in the process of being converted to a certifiable lot of saleable product through the extraction and/or refinement process. The value of in-process material is measured based on assays of the material fed into the process and the projected recoveries of material. In-process inventories are valued at the average cost of the material extracted along with all other necessary cost to feed into the process attributable to the source material coming from the mines and/or stockpiles plus the in-process conversion costs, including applicable depreciation relating to the process facilities incurred to that point in the process.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Inventory
Finished Goods Inventories
- Finished goods inventories include minerals that are certified in quantifiable lots or are otherwise quantified in determinable stockpiles that require no further processing or capital expenditure other than loading and transport related activities from to transfer title or complete the earnings cycle. These minerals are valued per lot at the average cost of their production.
Cost of Sales-
The current cost of sales expense that is recorded on the condensed consolidated statements of operations for the period ended March 31, 2014 is solely related to the continuing operations of Derbyshire. It is management’s assertion that the activities being performed at the Derbyshire site and at Dodge Mines though similar in nature they should be dissimilar in treatment. As previously asserted, the Dodge Mine costs incurred are in support of a segment of the business which has yet to generate any revenues and thus far all associated expenses have been expensed as incurred. As related to the Dodge Mine operation, sufficient cost models cannot be developed to determine any reasonable matching of these costs to future revenues nor surety that any revenue would be recognized in the future, though it is the strong believe of management that these revenues will be realized.
Activities that have a direct and very high correlation to the level of sales activity have been classified as cost of sales. These activities that involve the effort and expense of extracting, transporting and preparing product to salable condition to end users include the costs associated with drilling, blasting, loading, hauling, diesel fuel expense (related directly with vehicle and equipment needed to prepare product to a salable location and condition), plant maintenance and electricity (not a material amount plant expense.)
Stockpile reserves
Stockpiles represent mineralized material and other salable product that has been extracted from the mine and is available for further processing. Stockpiles are measured by estimating the number of tons added and removed from the stockpile. Stockpile tonnages are verified by periodic surveys. Costs are allocated to stockpiles based on relative values of material stockpiled and processed using current mining costs incurred up to the point of stockpiling the material, including applicable overhead, depreciation, and depletion relating to mining operations, and removed at each stockpile’s average cost per ton. As of March 31, 2014, MAB-Z had approximately 4,000 tons in stockpile. We believe that based on several factors that the associated extraction costs for MAB-Z would best be reflected in the financial statements as representing no certain future net realizable value.
MAB-Z is extracting API grade barite from the Dodge Mine site and as requested and desired by our master distributor we are actively in the process of trying to obtain necessary equipment whereby we may further refine the mineral to be able to attain and sell chemical grade barite. The additional process crushes and sifts the extracted barite and allows for the removal of silica. The added step involves the process of jigging, which separates particles in the raw barite based on specific gravity. This additional step in the process involves a large outlay of capital to acquire additional machinery to further refine our extraction and sift out unwanted minerals.
|
Consolidated Inventory Values
|
|
|
|
|
|
Valued at Balance Sheet Date March 31, 2014
|
|
|
|
|
Derbyshire
|
|
|
MAB-Z
(1)
|
|
|
Raw Materials
|
|
$
|
104,154
|
|
|
$
|
-
|
|
|
Finished Goods
|
|
|
392,868
|
|
|
|
-
|
|
|
Consumables
|
|
|
13,328
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Inventory
|
|
$
|
510,350
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) MAB-Z has no capitalized inventory for periods shown
|
|
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Extraction Cost
Extraction costs consist of the direct expenses of mineral removal from the established site. These costs include drilling, blasting, the loading, hauling and management of stockpiles and waste by-product, mineral refinement and excavation. These direct costs are directly associated with the production of saleable material and the increase of stockpile reserves.
Site Development Cost
Site development costs consist of labor, surveying, mapping, engineering, other site development and licensing as well as any development costs necessary to prepare site Dodge Mine Blocks 1-6 for mining operations.
Income Taxes
The Company accounts for income taxes in accordance with the asset and liability method
.
Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates for the periods in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company records a valuation allowance if based on the weight of available evidence, it is more likely than not that some or all of the deferred tax asset will not be realized. In determining the possible realization of deferred tax assets, the Company considers future taxable income from the following sources: (i) the reversal of taxable temporary differences, (ii) taxable income from future operations and (iii) tax planning strategies that, if necessary, would be implemented to accelerate taxable income into periods in which net operating losses might otherwise expire.
The Company also recognizes the income tax effect of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. If recognized, the tax portion of the adjustment would affect the effective tax rate.
The Company follows ASC 740-10,
Accounting for Uncertainty in Income Taxes.
This interpretation requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. ASC 740-10 is effective for fiscal years beginning after December 15, 2006. Management has adopted ASC 740-10 for 2008, and they evaluate their tax positions on an annual basis. The Company’s policy is to recognize both interest and penalties related to unrecognized tax benefits expected to result in payment of cash within one year are classified as accrued liabilities, while those expected beyond one year are classified as other liabilities. The Company has not recorded any interest or penalties since its inception.
The Company files income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. Tax returns remain open for three years from the date the tax returns are filed. The Company is currently not under examination by any other tax jurisdictions for any tax year.
Compensated Absences
The Company does not currently have a policy concerning due to the fact that full time employee exist under a time based compensation agreement.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Impairment or Disposal of Long-Lived Assets
The Company reviews its long-lived assets and certain related intangibles for impairment periodically, and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. When necessary, impaired assets are written down to estimated fair value based on the best information available. Estimated fair value is generally based on either appraised value or measured by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates. There were no assets that were considered to be impaired as of March 31, 2014 and December 31, 2013.
Advertising Costs
The Company expenses the costs associated with advertising as incurred. The Company expenses the advertising costs in professional, consulting and marketing fees in the consolidated statements of operations. There were no such costs for the month’s ended March 31, 2014 and 2013.
Segment Information
The Company follows the provisions of ASC 280-10,
"Disclosures about Segments of an Enterprise and Related Information”.
This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making internal operating decisions. The Company operates in one reporting segment, hard asset development and sale.
Fair Value of Financial Instruments
Unless otherwise indicated, the fair value of all reported assets and liabilities which represent financial instruments (none of which are held for trading purposes) approximate the carrying values of such instruments.
Stock-Based Compensation
The Company accounts for stock-based compensation at fair value using the Black-Scholes Option pricing model. All stock-based compensation cost is measured at the grant date using the Black-Sholes Option Pricing Model, based on the fair value of the award. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company’s consolidated statements of operations.
Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The forfeiture rate that the Company presently uses is 10%.
There was no stock based compensation recognized for the three months ended March 31, 2014 and 2013, respectively. The warrants have equity classification.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
(Loss) Per Share of Common Stock
Basic net (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share ("EPS") include additional dilution from common stock equivalents, such as stock issuable pursuant to the exercise of stock options and warrants as well as stock issuable upon the conversion of preferred stock and convertible notes. Common stock equivalents were not included in the computation of diluted earnings per share on the consolidated statement of operations due to the fact that the Company reported a net loss and to do so would be anti-dilutive for the periods presented.
The following is a reconciliation of the computation for basic and diluted EPS:
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
|
|
|
|
|
|
|
Totals since
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
January 14, 1998
|
|
|
|
2014
|
|
|
2013
|
|
|
(Inception)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributed to common shares
|
|
$
|
(239,699
|
)
|
|
$
|
(473,492
|
)
|
|
$
|
(15,160,808
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares Outstanding (Basic)
|
|
|
384,206,456
|
|
|
|
384,206,456
|
|
|
|
112,471,412
|
|
|
Weighted-average common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible Notes
|
|
|
6,990,000
|
|
|
|
6,990,000
|
|
|
|
10,190,000
|
|
|
Preferred Stock (Series B) (Convertible into Common)
|
|
|
64,350,000
|
|
|
|
59,350,000
|
|
|
|
-
|
|
|
Warrants
|
|
|
30,457,900
|
|
|
|
30,457,900
|
|
|
|
28,886,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average commons shares Outstanding (Diluted)
|
|
|
486,004,356
|
|
|
|
481,004,356
|
|
|
|
151,547,478
|
|
The fair value of the equity instrument is charged directly to compensation expense and additional paid-in capital. For common stock issuances to non-employees that are fully vested and are for future periods, the Company classifies these issuances as prepaid expenses and expenses the prepaid expenses over the service period.
Equity Method Investments
Equity method investments are accounted for under ASC 323. In accordance with the ASC, these investments will be maintained at fair value, and increased or decreased based upon the net income or loss of the investee as well as any contributions made and dividends paid.
Goodwill
On March 28, 2014, the Company entered into a Purchase Agreement through its affiliate, TAG-Z, whereby TAG-Z acquired 100% of Derbyshire, a registered Zimbabwean corporation engaged in the production of 10mm stone, 20mm stone, quarry dust, crusher run, river sand (washed), pit sand and decomposed granite. The total purchase price of $1,450,000 was paid in stock, notes payable and cash. Equity valued at $750,000 was paid in the form of 25 million restricted shares of the Company's treasury stock resulting in no dilution to existing shareholders. A down payment of $100,000 was made on the purchase on February 6, 2014 with the remaining $600,000 to be paid in equal monthly installments commencing at the end of the first full month after purchase. Assets were recorded at fair value in the amount of $1,424,697, inclusive of inventory recorded at net realizable value of $523,564. Liabilities were recorded at a fair value of $362,608. The difference of the fair value of the net assets and the purchase price was recorded as goodwill in the amount of $387,911.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Goodwill(continued)
Effective July 18, 2012, MBMI acquired a 49% interest of Mabwe Minerals Zimbabwe (PVT) LTD (MAB-Z) for 25,000 shares of Series B Convertible Preferred Stock of Raptor Resources Holdings Inc. The value of this transaction was $25,000 resulted in the Company recording Goodwill as part of the purchase transaction. MAB-Z is the operating arm of MBMI and at the time of the purchase its net assets consisted chiefly of mining rights associated with the main line of business of the company. Management periodically assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. At March 31, 2014, management has determined that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount and thus no need to adjust for impairment.
Subsequent Events
In accordance with ASC 855 “Subsequent Events”, the Company is required to disclose the date through which subsequent events have been evaluated and whether that date is the date the financial statements were issued or the date the financial statements were available to be issued.
Recent Accounting Pronouncements
In July 2012, the FASB issued ASU 2012-02, “
Intangibles Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment”,
on testing for indefinite-lived intangible assets for impairment. The new guidance provides an entity to simplify the testing for a drop in value of intangible assets such as trademarks, patents, and distribution rights. The amended standard reduces the cost of accounting for indefinite-lived intangible assets, especially in cases where the likelihood of impairment is low. The changes permit businesses and other organizations to first use subjective criteria to determine if an intangible asset has lost value. The amendments to U.S. GAAP will be effective for fiscal years starting after September 15, 2012. The Company’s adoption of this accounting guidance does not have a material impact on the condensed consolidated financial statements and related disclosures.
In July 2013, the FASB issued ASU 2013-11,
"Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists."
ASU 2013-11 provides guidance on the presentation of unrecognized tax benefits related to any disallowed portion of net operating loss carryforwards, similar tax losses, or tax credit carryforwards, if they exist. ASU 2013-11 is effective for fiscal years beginning after December 15, 2013. The adoption of ASU 2013-11 is not expected to have a material impact on the Company’s condensed consolidated financial statements.
There were other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 -
FIXED ASSETS AND MINING RIGHTS
Fixed Assets:
Fixed assets as of March 31, 2014 and December 31, 2013 were as follows:
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
|
Useful Lives
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
|
(Years)
|
|
|
2014
|
|
|
2013
|
|
|
Plant Equip
|
|
|
15
|
|
|
$
|
401,015
|
|
|
$
|
-
|
|
|
Plant
|
|
|
30
|
|
|
|
233,333
|
|
|
|
-
|
|
|
Land
|
|
|
n/a
|
|
|
|
100,000
|
|
|
|
-
|
|
|
Motor Vehicles
|
|
|
5
|
|
|
|
32,675
|
|
|
|
-
|
|
|
Machinery
|
|
|
5
|
|
|
|
12,376
|
|
|
|
12,376
|
|
|
Computer Equipment
|
|
|
3-5
|
|
|
|
7,424
|
|
|
|
2,476
|
|
|
Office Furniture & Equipment
|
|
|
7
|
|
|
|
4,197
|
|
|
|
-
|
|
|
Other
|
|
|
5
|
|
|
|
311
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
791,331
|
|
|
|
14,852
|
|
|
Less: accumulated depreciation
|
|
|
|
|
|
|
(6,815
|
)
|
|
|
(5,262
|
)
|
|
Fixed assets, net
|
|
|
|
|
|
$
|
784,516
|
|
|
$
|
9,590
|
|
There was $1,553 and $711 charged to operations for depreciation expense for the three months ended March 31, 2014 and the year ended December 31, 2013, respectively. All increases in assets were the result of the purchase of Derbyshire by TAG-Z.
Mining Rights:
On January 6, 2014, MAB-Z completed the process to acquire the mineral and metal rights to 110 hectares (272 acres) contiguous with Dodge Mines. MAB-Z acquired these additional rights from the Zimbabwean Minister of Mining at no additional cost over registration fees.
On September 19, 2011, TAG-Z, entered into a Sale of Shares Agreement, whereby, TAG-Z was to pay $433,000 in installments through November 30, 2012 for 100% of the Dodge Mine blocks 1-6, located in Zimbabwe. The property consists of three hydrothermal mountains representing 123 hectares containing multiple deposits of superior grade barite, limestone and talc based on the drilling reports that management received from the previous owner of the Dodge mine blocks. Along with the purchase of the Dodge Mine blocks 1-6 from Chiroswa Syndicate, TAG-Z received 50% of the issued and outstanding shares of common stock of Chiroswa Minerals (PVT) Limited (“Chiroswa”), an inactive company originally formed to conduct mining operations on the Dodge Mine. Since Chiroswa is an inactive company, TAG-Z has canceled the Chiroswa shares it received under the Sale of Share Agreement and intends to conduct mining operations on the Dodge blocks itself.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 -
FIXED ASSETS AND MINING RIGHTS(CONTINUED)
Mining Rights (Continued):
On June 1, 2012 the Company entered into a contract renegotiation with the owner of Dodge Mines Blocks 1-6, Chiroswa Syndicate, related to the previous agreement for the $433,000 in installment payments of the Dodge Mine blocks 1-6, located in Zimbabwe. Under amended terms of the contract Chiroswa accepted 45,000 shares of the Company's Preferred Convertible Series B stock (each share is convertible into 50 shares of Common Stock of Raptor Resources Holdings Inc. (RRHI) and 25 shares Common Stock of majority owned Mabwe Minerals Inc. (MBMI)). The deal was secured with $27,000 due upon the retitling of the Dodge Mine blocks 1-6 into the Name of Mabwe Minerals Zimbabwe (PVT) Limited (MAB-Z). The additional $30,000 will be paid in installments that commenced on October 1, 2012. This transaction resulted in the forgiveness of $132,917 of the debt owed. With the acquisition of MAB-Z the chief revenue producing asset of mining rights of the Dodge Mine Blocks 1-6 and the associated note payable were transferred from fully consolidated subsidiary of Raptor Resources Holdings Inc. TAG-Z to MAB-Z a fully consolidated variable interest entity of Mabwe Minerals Inc., a majority owned subsidiary of Raptor Resources Holdings Inc., The value transferred to MAB-Z for the Mining rights of Dodge Mine blocks 1-6 has a book value of $433,000 offset by a note payable $57,000 at the time of transfer. This value of $376,000 in related party loans is further offset by net payment of expenses incurred by and paid on behalf of consolidating parent Raptor Resources Holdings Inc. Though the balance in the related party payable is nearly identical to that of the Dodge Mine Blocks Net asset there have been several invoices flow through the account in either direction they nearly zero out. The value of the Note Payable for the Dodge Mines at December 31, 2013 was $0. Also in this related party activity is the charge for the 25,000 shares of stock that were issued by Raptor Resources Holdings Inc. to acquire MAB-Z. This transaction has also resulted in recording of Goodwill on the books of MAB-Z, as the value of the 25,000 shares of Series B Preferred Convertible Stock of RRHI has a value of $25,000.
NOTE 4 -
CONVERTIBLE NOTES
Original Noteholders
In April and May 2007, the Company issued 5% Senior Convertible three (3) year notes to investors in the amount of $2,526,500, which equaled the gross proceeds raised by the Company (the “Convertible Notes”). The Convertible Notes are convertible to shares of the Company’s common stock anytime in the three-year period at a fixed conversion price of $.15. The Convertible Notes will convert into 16,843,333 shares of the Company’s common stock. In May 2009, convertible notes of $125,000 were converted, at a fixed conversion rate of $.15 per share, into 833,334 shares of common stock. This conversion reduced the outstanding principal to a balance of $2,401,500. In an effort to reduce the liabilities of the Company, on July 1, 2010 the Company offered note holders the opportunity to convert their Notes to common stock at $0.05 per share including any and all outstanding interest that has been accrued from the original $0.15 conversion price.
In addition, the Company offered to reset the exercise price of the warrants that were issued with the Notes to $0.075 from $0.15 and $0.25 and extend the warrants for a further three years from the original date of issue for all warrant holders.
Approximately 90% of note holders have agreed to accept the terms of the conversion. Through June 30, 2010, convertible notes of $2,117,000, including $404,413 of accrued interest was converted to 42,340,000 shares of common stock. This conversion reduced the outstanding principal balance to a balance of $409,500. The Company determined that there was no material modification to the debt instrument under ASC 47-50-40, as the embedded conversion option immediately before and after the modification of the debt instrument was under the 10% threshold.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 -
CONVERTIBLE NOTES (CONTINUED)
Original Noteholders (continued)
The convertible note holders received 6,737,333 detachable warrants with their notes. The warrants were exercisable for five (5) years at an exercise price of $.25. The Placement Agent received 2,947,583 exercisable at $.25 for five (5) years. The Company separately valued the warrants at $513,132, and recorded a debt discount in that amount which is being amortized to interest expense over the three-year Convertible Notes period. The Company has recorded an additional discount of $505,300 as the value of the beneficial conversion option.
Proceeds of the $2,526,500 were allocated as follows:
i) Convertible Notes - $2,013,368; and
ii) Warrants (also Debt Discount) - $513,132
The debt discount of $1,018,432 was amortized using the effective interest method over the life of the Convertible Notes of three years. As part of the transaction, the Company incurred $292,190 of debt issuance costs.
On December 28, 2012, one of the note holders signed their notice of conversion to convert $60,000 in principal and accrued interest in the amount of $28,110 for 1,500,000 shares of common stock in the amount of $75,000 ($0.05 conversion price). The transaction resulted in a gain of $13,110 on conversion. The transaction was reflected in the financial statements for 2012 as the conversion notice was dated December 28, 2012. The share certificate was not issued until January 31, 2013.
Interest expense on the Original Note holders Convertible Notes for the years ended December 31, 2013 and 2012 was $34,950 and $40,950, respectively and $226,309 is accrued at December 31, 2013. A total of $404,413 of accrued interest was converted into common stock at the time of the note conversions in 2010 and 2011.
Additional Note Holders
On February 24, 2014, the Company borrowed $400,000 under a one-year convertible promissory note with The Arosa Mountain Trust. Under the agreement the note is convertible at the lender’s option into RRHI common shares at $.03/share. Interest of 12% will compound monthly on the unpaid principal balance and be paid out annually unless the principal amount minus all interest accrued thereon are converted. Accrued interest is computed on the basis of actual number of days elapsed in a year of 360 days from the date of this note. Any unpaid principal amount, together with any accrued interest shall be paid at the maturity date. This loan agreement may be extended, subject to an executed extension time frame by the holder of this note, and the Company. At any time prior to the maturity date the holder has the right, at the holders option, prior to the repayment of the outstanding balance under the note by the Company, to convert the unpaid outstanding principal balance only minus any accrued interest in whole or in part into common stock at a conversion price of $.03/share upon at least 10 days written notice. As of March 31, 2014, $400,000 remains outstanding on this note.
As a result of the Company’s failure to timely pay the interest in May 2009, the convertible notes are in technical default. Therefore, the Company has reclassified the debt to current liabilities.
The summary of the Convertible Notes is as follows at March 31, 2014:
|
$400,000 Convertible Note at 12% interest per annum due in Feb 2015
|
|
$
|
400,000
|
|
|
$349,500 Convertible Notes at 10% interest per annum due on demand
|
|
|
349,500
|
|
|
Total Convertible Notes
|
|
$
|
749,500
|
|
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 -
CONVERTIBLE NOTES – RELATED PARTIES
In May 2011, the Company converted two 5% interest bearing notes with the former Directors of the Company, and then officers of the dental technology subsidiary in the amount of $149,017 into new Convertible Notes totaling $150,000. The $983 variance was recorded by the Company as an expense.
The Convertible Notes were to be repaid at the rate of 5% of any funding, whether debt or equity, received by the Company or its subsidiaries, or 5% of net revenues of the Company. The noteholders had the right to convert any amounts outstanding and due to them at $0.075 per share at their sole discretion.
As of March 31, 2014, under the terms of the December 17, 2012 agreement the $150,000 balance of this note was forgiven. The forgiveness was recorded as an adjustment to additional paid in capital as the amount was due to a related party.
NOTE 6 -
LOAN PAYABLE – RELATED PARTY
Effective July 26, 2012 MAB-Z entered into a one year financing short term loan agreement with OVERSEAS TRADE AND FINANCING LIMITED (“OTF”) for an amount of $40,000 with accrued interest at an original rate of 12%. The balance with interest and fees of $46,570 ($6,570 of accrued interest which is included in accounts payable and accrued expenses) was due at December 31, 2013. Under the original terms of the contract the loan was to have been fully repaid within 360 days of the effective date. Failure to pay as prescribed or duly extend loan period will result in the accrual of late charges at a rate of 6% per annum. Extension and drawdown fees are 1% and 2% respectively. OTF is owned and controlled by a current director of MAB-Z and was recently registered with the Reserve Bank of Zimbabwe, External Loans Co-coordinating Committee. In accordance with the newly registered loan, the interest rate will now be 8% per annum, and no default rate is in place. The lender and the Company are currently negotiating terms of a new maturity date.
On April 5, 2014 the Company, through its affiliate MAB-Z, received confirmation of its registration and acceptance of terms for the loan from OTF in the amount of $40,000 and 8% per annum due in 360 days.
The Company had entered into employment agreements with its two senior officers through December 31, 2009. The agreements obligated the Company to pay these officers $200,000 per year through December 31, 2009. Total commitment for the Company was $960,000. The amount was due December 31, 2012; however, there is no prepayment penalty. Concurrent with the Merger, the former Directors who were owed the $960,000 plus $62,466 in accrued interest that remained outstanding agreed to convert these amounts into 14,400,000 warrants.
The warrants had a term of five-years, with an exercise price of $0.075. The Company performed a Black-Scholes calculation to determine the value of the warrants, and they were determined to have a value of $100,800. The gain on the conversion of the related party debt to warrants of $921,666 is reflected in additional paid-in capital. Under the terms of the December 17, 2012 restructuring agreement the two senior officers have executed option agreements which assign these warrants to TAG and the Company and allow either of them to exercise these warrants at a price of $.04 per share.
With the acquisition of MAB-Z the chief revenue producing asset of mining rights of the Dodge Mine Blocks 1-6 and the associated note payable were transferred from fully consolidated subsidiary of the Company, TAG-Z to MAB-Z a fully consolidated variable interest entity of Mabwe Minerals Inc., majority owned subsidiary of the Company. The value transferred to MAB-Z for the Mining rights of Dodge Mine blocks 1-6 has a book value of $433,000 offset by a note payable $57,000 at the time of transfer. This value of $376,000 in related party loans is further offset by net payment of expenses incurred by and paid on behalf of the Company. Though the balance in the related party payable is nearly identical to that of the Dodge Mine Blocks Net asset there have been several invoices flow through the account in either direction they nearly zero out. The value of the Note Payable for the Dodge Mines at March 31, 2014 was $0.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6 -
LOAN PAYABLE – RELATED PARTY
Also in this related party activity is the charge for the 25,000 shares of stock that were issued by the Company to acquire MAB-Z. This transaction has also resulted in recording of Goodwill on the books of MAB-Z, as the value of the 25,000 shares of Series B Preferred Convertible Stock of the Company has a value of $25,000. The Company is the ultimate beneficiary of that payment. Further consideration was exchanged but no other asset was created. Management performed an evaluation of the goodwill at March 31, 2014, and determined that no impairment adjustment was necessary at this time.
NOTE 7 -
SECURITIZED LOAN
Effective May 16, 2013 MAB-Z entered into a one year securitized financing short term agreement with CBZ Bank Limited in the amount of $420,000. As security under this agreement Kinsey pledged two Bell HD2045 Hydraulic Excavators appraised at a combined value of $739,000. The loan originally was to be paid in monthly installments commencing in December 2013 in the amount of $35,000 plus interest expiring on June 30, 2014 upon which time all monies were due and payable in full. The interest rate on the loan is 15% per year. Upon funding of this loan a 3% establishment fee was charged and deducted from the proceeds. Mabwe may in the future obtain funding through securitizations and other attempts to raise capital until cash flow operations are self-sustaining in the support of continuing operations.
This agreement was subsequently modified in January 2014 to adjust the payment schedule whereby payments of $35,000 per month plus full to date interest is due and payable commencing February 2014 and will continue each month there after including interest with the last payment due January 31, 2015. At March 31, 2014 this loan had a balance of $385,000.
As of March 31, 2014, the entire amount is reflected in current liabilities. Mabwe has expensed $52,138 in interest expense on this loan including $16,613 in the three months ended March 31, 2014. Mabwe paid $57,613 in interest during the three months ended March 31, 2014, leaving a prepaid interest of $5,475 which is included in prepaid expenses.
NOTE 8 -
INVESTMENT – EQUITY METHOD
On October 29, 2012, Mabwe, MAB-C, and WGB Kinsey & Company (“Kinsey”) entered into an Equity Exchange Agreement (“Equity Exchange Agreement”). In accordance with the Equity Exchange Agreement, Mabwe issued 5,000,000 shares of their common stock to Kinsey in exchange for a 25% ownership for MAB-C in Kinsey. Originally, under the contract should the value of the 5,000,000 shares of common stock fail to be valued at $5,000,000 on December 31, 2013, Mabwe would have issued additional shares of common stock to achieve that value for Kinsey. The Equity Exchange Agreement was later revised on December 5, 2013 to exclude this provision of the issuance of the additional shares. The common shares issued have been initially valued at $500,000, as the price of MBMI common stock was trading at $0.10 per share.
Kinsey, based in Zimbabwe, Africa, has operated since 1955 in the mining and construction industry. They own their own mining equipment, including a fleet of articulated dump trucks, front and wheeled loaders, excavators, dozers and graders. With both open pit and open cast mining experience ranging from chrome to platinum to gold, they possess all the experience necessary to efficiently perform all the mining operations at the Dodge Mines.
The investment has been accounted for as an equity investment under ASC 323. In accordance with the ASC, the investment will be maintained at fair value, and increased or decreased based upon the net income or loss of Kinsey as well as any contributions made and dividends paid. The Company’s investment decreased $12,367 to $0 as a result of the incremental loss of Kinsey for the three months ended March 31, 2014 at 25% ownership by MAB-C.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 9 - ACQUISITIONS
Mab-Z Acquisition
Effective July 18, 2012, Mabwe Minerals Inc. acquired a 49% interest of Mabwe Minerals Zimbabwe (PVT) LTD (MAB-Z) for 25,000 shares of Preferred Convertible Series B Stock of the Company. The value of this transaction was $25,000.
MAB – Z was essentially a newly formed entity. The $25,000 was recorded as Goodwill.
Derbyshire Acquisition
On March 28, 2014, the Company entered into a Purchase Agreement through its affiliate, TAG-Z, whereby TAG-Z acquired 100% of Wimfair Investments (Private) Limited t/a Derbyshire Stone Quarry (“Derbyshire”). The total purchase price of $1,450,000 was paid in stock, notes payable and cash. Equity valued at $750,000 was paid in the form of 25 million restricted shares of the Company's treasury stock resulting in no dilution to existing shareholders. A down payment of $100,000 was made on the purchase on February 6, 2014 with the remaining $600,000 to be paid in equal monthly installments commencing at the end of the first full month after purchase.
|
|
|
Acquisition
|
|
|
|
|
Derbyshire
|
|
|
MAB-Z
|
|
|
Cash
|
|
$
|
11,421
|
|
|
$
|
-
|
|
|
Accounts receivable
|
|
|
94,925
|
|
|
|
-
|
|
|
Inventory
|
|
|
523,564
|
|
|
|
-
|
|
|
Prepaid expenses
|
|
|
13,308
|
|
|
|
-
|
|
|
Fixed assets
|
|
|
781,479
|
|
|
|
-
|
|
|
Unearned revenue
|
|
|
(16,237
|
)
|
|
|
-
|
|
|
Accounts payable/accrued expenses
|
|
|
(346,371
|
)
|
|
|
-
|
|
|
Fair value of Assets and Liabilities acquired
|
|
|
1,062,089
|
|
|
|
-
|
|
|
Consideration given:
|
|
|
|
|
|
|
|
|
|
Acquisition Note Payable
|
|
|
600,000
|
|
|
|
-
|
|
|
Cash paid in the acquisition
|
|
|
100,000
|
|
|
|
-
|
|
|
Treasury stock/Preferred Stock
|
|
|
750,000
|
|
|
|
25,000
|
|
|
Goodwill on acquisition
|
|
$
|
387,911
|
|
|
$
|
25,000
|
|
The total amount of goodwill recorded on the Company’s books is $412,911.
Proforma Results
The following unaudited pro-forma chart below show what the results from operations would have been if fully consolidated for the entire periods of the comparative financials. As of the effective purchase date of March 28, 2014 the Company has recorded in the condensed consolidated financial statements revenues of $25,238, operating expense in the amount of $25,874 and other expense of ($174) with an attributable net loss of $462.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 9 – ACQUISITIONS(CONTINUED)
Proforma Results(continued)
|
|
|
For the Three Months Ended
|
|
|
For the Three Months Ended
|
|
|
|
|
March 31, 2014
|
|
|
March 31, 2013
|
|
|
|
|
(UNAUDITED)
|
|
|
(UNAUDITED)
|
|
|
|
|
As Reported
|
|
|
Pro Forma
|
|
|
As Reported
|
|
|
Pro Forma
|
|
|
Net Revenues
|
|
$
|
25,238
|
|
|
$
|
571,676
|
|
|
$
|
-
|
|
|
$
|
531,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Profit (Loss) from operations
|
|
|
(303,814
|
)
|
|
|
38,934
|
|
|
|
(411,668
|
)
|
|
|
(524,963
|
)
|
|
Attributable Net Profit (Loss)
|
|
|
(239,699
|
)
|
|
|
27,648
|
|
|
|
(473,492
|
)
|
|
|
(557,614
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.00
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
Diluted
|
|
$
|
(0.00
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
NOTE 10 -
COMMITMENTS
CURRENT LITIGATION
From time to time, we may be involved in various claims, lawsuits, and disputes with third parties, actions involving allegations of discrimination or breach of contract actions incidental to the operation of our business. However, we are not currently involved in any litigation which we believe could have a materially adverse effect on our financial condition or results of operations.
Mabwe Minerals v. Base Minerals
(case HC1549/14) – We filed suit against three defendants and have just received a judgment on request of order of spoliation due to defendants blocking mine access to Dodge Mine Blocks 1-6. The defendants have been ordered by the Court to not block the mine from access by our mine workers.
Mabwe Minerals v. Base Minerals & The Mining Commissioner
(case HC1414/14) – On February 13, 2014 a tribute agreement was filed by Base Mineral Zimbabwe against Chiroswa Syndicate. This agreement expired in 2011 and Chiroswa had since sold the underlying Mine Blocks 1-6 at Dodge Mines to MAB-Z. We believe that MAB-Z is the rightful owner of these mine blocks on the basis that they were purchased under a lawful sale and for which we hold the actual certificates of ownership. We believe that this is a nuisance claim and are seeking to nullify the filing of this agreement. We further believe that no impairment is necessary as of March 31, 2014.
The State v. Tapiwa Gurupira
– This is a criminal complaint accusing the defendant of perjury in connection with the cases described above. On April 9, 2014 Mr. Gurupira was acquitted of this charge.
Peter Valentine v. Mabwe Minerals
(case HC 4112/13) - Mr. Valentine has filed a claim relative to rights under a tribute agreement (case HC1414/14) seeking damages and a share of rights under an irregular sale of the Dodge mining rights. The tribute agreement expired in 2011 and we believe that MAB-Z is the lawful, free and clear owner of Dodge Mine Blocks 1-6. We are currently in pretrial and are vigorously asserting our defense as the rightful owner of these mine blocks which we believe were purchased under a lawful sale and for which we hold the actual certificates of ownership. We believe that this is a nuisance claims and are seeking to nullify it. We further believe that no impairment is necessary as of March 31, 2014.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 10 -
COMMITMENTS (CONTINUED)
LAND LEASE AGREEMENT
On May 13, 2013, MAB-Z entered into a 20 year agreement with Ettie Magadzire, owner of Palm Grove Farm whereby rights of unrestricted access to claims of MAB-Z were granted (“Land Lease Agreement”). Magadzire possessing surface rights to the property on which the claims were located under this agreement conveyed the right of use for MAB-Z to explore, test, sample, verify, assess the full nature and extent of the deposit, and to develop the mineral resources of aforesaid claims. In consideration for those rights MAB-Z agreed to pay to Magadzire $70,000 payable quarterly in arrears after the first annual installment is paid in the following manner: (a) $17,500 payable in $5,000 cash (paid), $5,000 for a vehicle (paid by officer of MAB-Z and included in related party payable) and $7,500 in fuel (paid); (b) $17,500 payable six months after commencement of mining operations at the Claims; (c) $17,500 payable nine months after commencement of mining operations; and (d) $17,500 payable one-year after commencement of mining operations. Then payments by MAB-Z will be made in quarterly installments of $17,500 (or $70,000 per year). The agreement has a total value of $1,400,000.
LETTER OF CREDIT
On February 8, 2013, MAB-Z was issued as beneficiary an irrevocable documentary letter of credit from Baker Hughes Oilfield Operations, Inc. in the documentary credit amount of $3,000,000 per lot of crude barite (or a total of $9,000,000) to pay for shipments from Beira, Mozambique to any U.S. Gulf port of three lots of barite meeting the specifications set forth in the letter of credit. The first shipment was to be made between June 1, 2013 and August 31, 2013, the second shipment was to be made between September 1, 2013 and November 30, 2013 and the third shipment must be made between December 1, 2013 and March 1, 2014. MAB-Z is discussing with Baker Hughes Oilfield Operations revised shipment dates in light of the delays MAB-Z experienced in obtaining the Environmental Impact Assessment Certificate dated July 4, 2013 from the Environmental Management Agency of Zimbabwe to allow it to commence mining operations for barite.
NOTE 11 -
STOCKHOLDERS’ EQUITY (DEFICIT)
Series A Preferred Stock
The Company on January 23, 2007 removed 1,000,000 shares of preferred stock from its charter, and amended its articles of incorporation to create a class of preferred stock, and authorized the issuance of 10,000,000 shares of preferred stock at $.001 par value. On January 24, 2012, the Company amended its articles of incorporation to authorize the issuance of 3,000,000 shares of Series A preferred stock, par value $.001. Each share of Series A preferred stock has 300 votes and votes with the holders of common stock on all matters which require a vote of the shareholders.
During the three months ended March 31, 2014 no shares of Series A preferred stock had been issued.
During the year ended December 31, 2013 no shares of Series A preferred stock had been issued.
During the year ended December 31, 2012, 1,000,000 shares of Series A preferred stock had been issued for services rendered at par value of $1,000. The total issued and outstanding Series A Preferred Stock at December 31, 2013 is the 1,000,000 shares.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 11 -
STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)
Preferred Convertible Series B Stock
As of March 31, 2014, the Company has authorized 2,500,000 shares of Preferred Convertible Series B Stock. Each share of Preferred Convertible Series B Stock is convertible into 50 shares of the Company’s common stock and 25 shares of the Company’s majority owned subsidiary, Mabwe Minerals Inc.
During the three months ended March 31, 2014, 25,000 shares of Preferred Convertible Series B Stock were sold through a private placement cash sale at the value of $2.00 per share or $50,000.
During the year ended December 31, 2013, the Company issued the following Preferred Convertible Series B Stock at the value of $1.00 per share:
75,000 shares were issued to Lion Capital Group LLC for the milestone achievement of obtaining the EIA license which provided for the commencement of mining operations at Dodge Mines at a cost of $75,000.
20,000 shares were issued to for services rendered at a cost of $20,000.
During the year ended December 31, 2012, the Company issued the following Preferred Convertible Series B Stock at the value of $1.00 per share:
182,000 shares of stock for cash in the amount of $182,000.
Preferred Convertible Series B Stock (Continued)
45,000 shares of stock for the conversion of $45,000 of debt related to the loan outstanding for the Dodge Mines.
25,000 shares of stock for the acquisition of the Company’s majority owned subsidiary Mabwe Minerals Inc’s purchase of their subsidiary MAB-Z valued at $25,000.
915,000 shares of stock for services rendered or to be rendered to the Company valued at $915,000.Of this amount $840,000 was deferred compensation for the period July 1, 2012 through June 30, 2013.
As of December 31, 2013, the Company has 1,262,000 Preferred Convertible Series B Stock issued and outstanding.
Common Stock
As of March 31, 2014, the Company has 990,000,000 shares of common stock authorized with a par value of $.001. On December 9, 2004, the Company increased the authorized shares from 250,000,000 to 990,000,000.
During the three months ended March 31, 2014, no new common stock was issued other than from shares held in treasury (see below “Treasury Stock”).
During the year ended December 31, 2013, no new common stock was issued other than from shares held in treasury (see below “Treasury Stock”).
During the year ended December 31, 2012, the Company issued the following:
3,400,856 shares of common stock for cash of $95,500 at prices ranging between $0.022 and $0.03 for an average of $.028 per share. In addition to these shares, the Company issued 1,571,834 warrants to these investors.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 11 -
STOCKHOLDERS’ EQUITY (DEFICIT)
(CONTINUED)
Common Stock (continued)
The Company determined the value attributable to the warrants under an implied fair value calculation to be $25,560, and the value of the common shares to be $69,940. Additionally, 1,100,000 shares of common stock for services rendered were valued at $23,122.
1,500,000 shares of common stock for the conversion of $60,000 in principal and accrued interest in the amount of $28,110. The conversion price was $0.05 as stipulated in the agreement, which amounted to $75,000, and the Company recognized a gain of $13,110 on conversion. The transaction was reflected in the financial statements for 2012 as the conversion notice was dated December 28, 2012. The share certificate was not issued until January 31, 2013.
Two former executives of the Company surrendered 54,358,923 shares of the Company’s common stock which is now held in treasury by the Company. This transaction resulted in the Company’s recognition of treasury stock in the amount of $300,000. This surrendering of the stock by the two former officers, and reissuance of the certificate in the name of the Company occurred on January 30, 2013, however, is reflected in the 2012 financials as the closing occurred on December 17, 2012.
During the year ended December 31, 2011, the Company issued:
16,440,977 shares of common stock in conversion of $50,000 in convertible notes to Asher Enterprises, and 689,655 shares of common stock to convert $2,000 of accrued interest to Asher Enterprises.
165,000,000 shares of common stock for 100% of the shares of TAG Minerals Inc., in a reverse merger.
16,071,432 shares of common stock to convert $80,000 of convertible note payables.
11,150,000 shares of common stock for services rendered in the amount of $193,218.
2,333,333 shares of common stock to convert $50,000 of convertible notes to old noteholders and convert $17,726 in accrued interest.
16,645,298 shares of common stock for $340,000 cash.
5,000,000 shares of common stock as a deposit for an acquisition for TAG Z valued at $150,000.
5,000,000 shares of common stock to a certain lender of Raptor as incentive to convert their notes into common shares of Raptor valued at $155,000.
During the year ended December 31, 2010, the Company issued:
500,000 shares to Agoracom for consulting services. These shares were valued at $.04 per share or $20,000.
The Company also converted $1,942,000 of convertible notes, at a fixed conversion rate of $0.05 per share, less discount, net of accrued interest, into 39,173,333 shares of common stock at a fixed conversion price of $0.05 per share. The Company also converted $386,687 of accrued interest on these converted notes to additional paid in capital.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 11 -
STOCKHOLDERS’ EQUITY (DEFICIT)
(CONTINUED)
Common Stock (continued)
During the year ended December 31, 2009: The Company issued 2,000,000 shares to various consultants for administrative services and public and investor relation services. These shares were valued at various prices between $.10 and $.04 per share or $150,000. In addition, the Company issued 250,000 shares to convert a payable to a consultant ($12,500).
The Company converted $125,000 of convertible notes, at a fixed conversion rate of $.15 per share, less discount, beneficial conversion feature and issuance costs net of accrued interest, into 833,334 shares of common stock at a fixed conversion price of $.15 per share. The Company incurred additional charges to interest expense and amortization of debt issuance costs to reflect the conversion of these notes. This resulted in a reduction of additional paid in capital in the amount of $13,118.
The Company received 3,000,000 shares of stock in settlement of its complaints against Ice Cold Stocks, LLC and DC International Consulting LLC. These shares were returned to the Treasury and retired.
During the year ended December 31, 2008, the Company issued 575,000 shares to various consulting companies for public and investor relation services and 500,000 shares to a vendor in connection with a strategic supply agreement related to an Optical Coherence Tomography (OCT) engine for use in future products. These shares were valued between $.21 and $.26 per share or $229,500. In addition, a former note holder who received warrants in 2006 exercised his warrants at $.15 per share for 69,850 shares of common stock for a cash value paid to the Company of $10,478.
In addition, two former note holders who received warrants in 2006 exercised their warrants at $.15 per share in 2007 for a cash value paid to the Company of $24,506.
During the year ended December 31, 2006, the Company completed a private placement resulting in the sale of 5,850,000 shares of its common stock at a price per share of $.10. For every 1.8 share of common stock purchased, the investors received 1 warrant. The Company valued each component in accordance with APB 14. The Company
received, net of fees, $521,500 through December 31, 2006. The Company also issued 1,500,000 to a consulting company for public and investor relation services. These shares were valued at $.10 per share or $150,000.
On June 16, 2006, the Company authorized a reverse 1 for 2 stock split on all issued shares. All shares herein have been reflected retroactive to the stock split.
For the year ended December 31, 2005, the Company issued no shares of common stock.
During 2004, the only shares issued were in connection with the reverse merger between Lantis Laser, Inc. and Hypervelocity, Inc. The total shares issued were 127,718,500 which included the 6,422,500 shares issued for the conversion of the notes, done simultaneously with the merger.
As of December 31, 2013, the Company has 384,206,456 shares issued and 340,847,533 outstanding.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 11 -
STOCKHOLDERS’ EQUITY (DEFICIT)
(CONTINUED)
Treasury Stock
On December 17, 2012, two former executives of the Company surrendered 54,358,923 shares of the Company’s common stock which is now held as treasury stock by the Company. This transaction resulted in the Company’s recognition of treasury stock in the amount of $300,000. This surrendering of the stock by the two former officers, and reissuance of the certificate in the name of the Company occurred on January 30, 2013, however, is reflected in the 2012 financials as the closing occurred on December 17, 2012.
The number of shares held in treasury by the Company at March 31, 2014 was 11,168,923.
During the three months ended March 31, 2014, the Company issued 25,000,000 shares of common stock that it held in treasury in conjunction with the purchase of Derbyshire. This stock issued in this transaction was valued at $.03/share or $750,000. The Company also issued 190,000 shares that it held in treasury at a value of $5,700 or $.03/share for accounting services to be rendered. Additionally, the Company issued through private placement 7,000,000 that it held in treasury at $.03/share raising $210,000 through a cash sale.
During the year ended December 31, 2013 the Company issued 11,000,000 shares of common stock that it held in treasury to J. Louis Schlegel (5,000,000) and Dean Harrison (6,000,000) as compensation to act as facilitator of business opportunities for the Company in the USA and Zimbabwe, Africa respectively. These transactions were recorded at a value of $220,000 ($0.02 per share). Treasury stock was reduced at cost of $60,500, with the remaining $159,500 being applied to additional paid in capital.
The Company has 43,358,923 shares of common stock held in treasury as of December 31, 2013, and accounts for treasury stock using the cost method.
Stockholders Equity – Issued by consolidated majority owned subsidiary MBMI
MBMI authorized capital consists of 500,000,000 shares of common stock, par value $0.001 per share and 5,000,000 shares of preferred stock, no par value per share.
Preferred Stock – MBMI
MBMI has no issued and outstanding preferred stock as of March 31, 2014.
Common Stock – MBMI
During the three months ended March 31, 2014, MBMI issued 90,000 shares of common stock for services to be rendered at a value of $6,300 ($.07/share.) The controlling interest of Raptor Resources Holdings Inc. was diluted to 64.18% based on new issuances of common stock for the quarter ended March 31, 2014.
During the year ended December 31, 2013, MBMI issued 6,677,642 shares of stock through private placement for cash in the amount of $880,500. MBMI also issued 1,590,000 shares of its common stock for accounting, promotional and public relation services rendered and to be rendered at a value of $187,487. The controlling interest of Raptor Resources Holdings Inc. was diluted to 64.22% based on new issuances of common stock that year.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 11 -
STOCKHOLDERS’ EQUITY (DEFICIT)
(CONTINUED)
Stockholders Equity – Issued by consolidated majority owned subsidiary MBMI(continued)
During the year ended December 31, 2012, MBMI issued: 5,000,000 shares of common stock through private placement for cash in the amount of $250,000; 5,000,000 shares of common stock valued at $500,000 to purchase for MAB-C, a 25% ownership in Kinsey per the Equity Exchange Agreement; 6,590,000 shares of common stock valued at $152,375 for services rendered; and 3,000,000 shares of common stock to two former officers of Raptor
Resources Holdings Inc. to offset the related party debt outstanding with Raptor Resources Holdings Inc. The controlling interest percentage of Raptor Resources Holdings Inc, was 68.25%.
During the year ended December 31, 2012, Mabwe Minerals issued: 5,000,000 shares of common stock valued at $500,000 to purchase for MAB-C (variable interest entity of Mabwe Minerals), a 25% ownership in Kinsey per the Equity Exchange Agreement.
5,000,000 shares of common stock were issued for cash of $250,000;
6,590,000 shares of common stock valued at $152,375 were issued for services rendered and to be rendered; and
3,000,000 shares of common stock to two former officers of Raptor Resources Holdings Inc. to offset the related party debt outstanding with Raptor Resources Holdings Inc.
As of December 31, 2013, Mabwe Minerals Inc. has issued and outstanding of 140,248,392.
Warrants – MBMI
During the year ended December 31, 2013, Mabwe Minerals issued 3,105,000 warrants were issued in association with the placements, exercisable for 1 year at a price of $.15 per share. These warrants were subsequently extended by one additional year.
Warrants
The Company granted 3,250,000 warrants to the investors who took part in the private placement of $585,000 based on a 1: 1.8 conversion ratio. The warrants were valued in accordance with APB 14 at a value of $208,143 utilizing the Black-Scholes method.
The Company granted 1,605,625 warrants to former note holders that had previously converted their notes into shares of common stock in 2004. The Company valued these warrants utilizing the Black-Scholes method and expensed them in their consolidated statements of operations. The warrants have a fair value of $159,610. Two of these former note holders who received these warrants exercised their warrants at $.15 per share in 2008 and 2007 for a cash value paid to the Company of $34,984.
The Company granted 178,750 warrants to a consultant who assisted the Company in their private placement. The Company valued these warrants utilizing the Black-Scholes method and expensed them in their consolidated statements of operations. The warrants have a fair value of $17,769.
The Company granted 6,737,333 warrants to the convertible note holder investors who took part in the debt offering based on a 4:10 conversion ratio. The warrants were valued in accordance with APB 14 at a value of $513,132 utilizing the Black-Scholes method.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 11 -
STOCKHOLDERS’ EQUITY (DEFICIT)
(CONTINUED)
Warrants (continued)
The Company granted 2,947,583 warrants to the placement agent who managed the issuance of the 5% Senior Convertible Note. The Company valued these warrants utilizing the Black-Scholes method and expensed them in their consolidated statements of operations. The warrants have a fair value of $292,518. In September 2010, the Company agreed to reset the warrant exercise price to $0.075 per share and extend the maturity of the warrant an additional three years.
In May 2011, the Company converted $1,022,466 in related party notes and accrued interest into 14,400,000 warrants. The warrants have a term of five-years, with an exercise price of $0.075. The Company performed a Black-Scholes calculation to determine the value of the warrants, and it was determined to have a value of $100,800. The gain on the conversion of the related party debt to warrants of $921,666 is reflected in additional paid-in capital.
In February 2012, the Company granted a total of 1,088,000 warrants along with shares of common stock in exchange for cash, and in April 2012, the Company granted 483,834 warrants along with shares of common stock in exchange for cash.
The following is a breakdown of the warrants:
|
Warrants
|
|
|
|
Issued
|
|
Term
|
|
|
|
|
|
|
|
|
|
|
3,250,000
|
|
$
|
0.075
|
|
9/28/2006
|
|
8 Years
|
|
1,372,400
|
|
$
|
0.075
|
|
9/28/2006
|
|
8 Years
|
|
178,750
|
|
$
|
0.075
|
|
9/28/2006
|
|
8 Years
|
|
6,737,333
|
|
$
|
0.075
|
|
5/1/2007
|
|
8 Years
|
|
2,947,583
|
|
$
|
0.075
|
|
5/17/2007
|
|
8 Years
|
|
14,400,000
|
|
$
|
0.04
|
|
5/23/2011
|
|
5 Years
|
|
1,088,000
|
|
$
|
0.075
|
|
2/7/2012
|
|
5 Years
|
|
483,834
|
|
$
|
0.075
|
|
4/10/2012
|
|
2 Years
|
|
30,457,900
|
|
|
|
|
|
|
|
The warrant agreements contain no clauses regarding adjustments to exercise price, net settlement provisions, registration rights or liquidated damages clauses. The above chart does not reflect total warrants outstanding of the Company’s majority owned subsidiary, Mabwe Minerals Inc.
NOTE 12 -
PROVISION FOR INCOME TAXES
Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 12 -
PROVISION FOR INCOME TAXES (CONTINUED)
|
|
|
March 31,
2014
|
|
|
December 31,
2013
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
Non-benefited tax losses and credits
|
|
|
5,164,986
|
|
|
|
5,086,250
|
|
|
Total deferred tax assets
|
|
|
5,164,986
|
|
|
|
5,086,250
|
|
|
Deferred tax liabilities
|
|
|
-
|
|
|
|
-
|
|
|
Net book value of assets
|
|
|
-
|
|
|
|
-
|
|
|
Total deferred tax liabilities
|
|
|
-
|
|
|
|
-
|
|
|
Total net deferred tax assets
|
|
|
5,164,986
|
|
|
|
5,086,250
|
|
|
Valuation allowance
|
|
|
(5,164,986
|
)
|
|
|
(5,086,250
|
)
|
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
At March 31, 2014, the Company had a net operating loss carryforward in the amount of $14,984,955 available to offset future taxable income through 2034. The Company established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods.
At March 31, 2014, the amount of gross unrecognized tax benefits before valuation allowances and the amount that would favorably affect the effective income tax rate in future periods after valuation allowances were zero.
The Company files income tax returns in U.S. federal and various state jurisdictions. The Company is not currently subject to any income tax examinations by any tax authority. Should a tax examination be opened, management does not anticipate any tax adjustments, if accepted, that would result in a material change to its financial position.
A reconciliation of the Company’s effective tax rate as a percentage of income before taxes and federal statutory rate for the periods ended March 31, 2014 and December 31, 2013 is summarized as follows:
|
|
|
March 2014
|
|
December 2013
|
|
|
Federal Statutory Rate
|
|
|
(34.0
|
)%
|
(34.0
|
)%
|
|
Valuation allowance
|
|
|
34.0
|
|
34.0
|
|
|
|
|
|
0
|
%
|
0
|
%
|
NOTE 13 -
FAIR VALUE MEASUREMENTS
The Company adopted certain provisions of ASC Topic 820. ASC 820 defines fair value, provides a consistent framework for measuring fair value under generally accepted accounting principles and expands fair value financial statement disclosure requirements. ASC 820’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. The Company determines the fair value of its liabilities, on a recurring basis using significant observable inputs. The fair value measurement of these liabilities is consistent with ASC 820, "Fair Value Measurements" ASC 820 did not have an impact on the consolidated financial position or results of operations; however, the required disclosure for the periods ended March 31, 2014 and December 31, 2013 is as follows:
RAPTOR RESOURCES HOLDINGS INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 13 -
FAIR VALUE MEASUREMENTS(CONTINUED)
ASC 820 classifies these inputs into the following hierarchy:
Level 1 inputs: Quoted prices for identical instruments in active markets.
Level 2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 inputs: Instruments with primarily unobservable value drivers.
The following table represents the fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2014 and December 31, 2013:
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitized Loans
|
|
$
|
385,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
385,000
|
|
|
Loan Payable -Related Party
|
|
|
40,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
40,000
|
|
|
Convertible notes
|
|
|
749,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
749,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,174,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,174,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment-Equity Method
|
|
|
12,367
|
|
|
|
-
|
|
|
|
12,367
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL:
|
|
|
12,367
|
|
|
|
-
|
|
|
|
12,367
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitized Loans
|
|
|
420,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
420,000
|
|
|
Loan Payable -Related Party
|
|
|
40,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
40,000
|
|
|
Convertible notes
|
|
|
349,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
349,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
809,500
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
809,500
|
|