The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part
of these consolidated financial statements.
The accompanying notes are an integral part
of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
NOTE A – FORMATION, CORPORATE CHANGES AND MATERIAL
MERGERS AND ACQUISITIONS
Online Yearbook was incorporated in the State of Nevada on August
6, 2012. Online Yearbook was a development stage company with the principal business objective of developing and marketing an online
yearbook.
On November 17, 2014, Rocky Mountain Resource Holdings LLC,
a Nevada limited liability company (the “Purchaser”) became the majority shareholder of Online Yearbook, by acquiring
5,200,000 shares of common stock of Online Yearbook (the “Shares”), or 69.06% of the issued and outstanding shares
of common stock, pursuant to stock purchase agreements with Messrs. El Maraana and Salah Blal. The Shares were acquired for an
aggregate purchase price of $357,670. The Purchaser was the source of the funds used to acquire the Shares. In connection with
Online Yearbook’s receipt of approval from the Financial Industry Regulatory Authority (“FINRA”), effective December
8, 2014, Online Yearbook amended its Articles of Incorporation to change its name from “Online Yearbook” to “RMR
Industrials, Inc.”
RMR Industrials, Inc. (the “Company” or “RMRI”)
seeks to acquire and consolidate complimentary industrial assets. Typically these small to mid-sized assets are the core manufacturer
and supplier of specific bulk commodity minerals and chemicals distributed to the global manufacturer industry. RMRI’s consolidation
strategy is to assemble a portfolio of mature and value-add industrial commodities businesses to generate scalable enterprises
with a vast portfolio of products and services addressing a common and stable customer base.
On February 27, 2015 (the “Closing Date”), the Company
entered into and consummated a merger transaction pursuant to an Agreement and Plan of Merger (the “Merger Agreement”)
by and among the Company, OLYB Acquisition Corporation, a Nevada corporation and wholly owned subsidiary of the Company (“Merger
Sub”) and RMR IP, Inc., a Nevada corporation (“RMR IP”). In accordance with the terms of Merger Agreement, on
the Closing Date, Merger Sub merged with and into RMR IP (the “Merger”), with RMR IP surviving the Merger as our wholly
owned subsidiary.
RMR IP was formed to acquire and consolidate complimentary industrial
commodity assets through capitalizing on the volatile oil markets, down cycles in commodity markets, and other ancillary opportunities.
RMR IP is focused on managing the supply chain in order to offer a large and diverse set of products and services.
The Merger Agreement includes customary representations, warranties
and covenants made by the Company, Merger Sub and RMR IP as of specific dates. The assertions embodied in those representations
and warranties were made solely for purposes of the Merger Agreement and are not intended to provide factual, business, or financial
information about the Company, Merger Sub and RMR IP. Moreover, some of those representations and warranties (i) may not be accurate
or complete as of any specified date, (ii) may be subject to a contractual standard of materiality different from those generally
applicable to shareholders or different from what a shareholder might view as material, (iii) may have been used for purposes of
allocating risk among the Company, Merger Sub and RMR IP, rather than establishing matters as facts, and/or (iv) may have been
qualified by certain disclosures not reflected in the Merger Agreement that were made to the other party in connection with the
negotiation of the Merger Agreement and generally were solely for the benefit of the parties to the Merger Agreement.
For financial reporting purposes, the Merger represents a “reverse
merger” rather than a business combination and RMR IP is deemed to be the accounting acquirer in the transaction. Consequently,
the assets and liabilities and the historical operations that will be reflected in the Company’s future financial statements
will be those of RMR IP. The Company’s assets, liabilities and results of operations will be consolidated with the assets,
liabilities and results of operations of RMR IP after consummation of the Merger, and the historical financial statements of the
Company before the Merger will be replaced with the historical financial statements of RMR IP before the Merger in all future filings
with the SEC.
On March 10, 2015, we formed United States Talc and Minerals
Inc. (“US Talc and Minerals”), incorporated in the State of Nevada as a wholly-owned subsidiary of the Company for
the purpose of facilitating future acquisitions.
Basis of Presentation and Consolidation
The accompanying unaudited consolidated financial statements
for the period ended June 30, 2016 have been prepared in accordance with accounting principles generally accepted in the United
States for interim financial information in accordance with Securities and Exchange Commission (SEC) Regulation S-X rule 8-03.
The unaudited consolidated financial statements include the financial condition and results of operations of our wholly-owned subsidiary,
US Talc and Minerals, where intercompany balances and transactions have been eliminated in consolidation. In the opinion of management,
the unaudited consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect
all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position as of June
30, 2016 and the results of operations and cash flows for the periods then ended. The financial data and other information disclosed
in these notes to the interim consolidated financial statements related to the period are unaudited.
NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
A summary of significant accounting policies of the Company
is presented to assist in understanding the Company’s consolidated financial statements. The accounting policies presented
in these footnotes conform to accounting principles generally accepted in the United States of America (“GAAP”) and
have been consistently applied in the preparation of the accompanying consolidated financial statements. These consolidated financial
statements and notes are representations of the Company’s management who are responsible for their integrity and objectivity.
Consolidation
The consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United States (“GAAP”). The unaudited consolidated
financial statements include the financial condition and results of operations of our wholly-owned subsidiary, US Talc and Minerals,
where intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates, judgments, and assumptions that impact the reported amounts of assets, liabilities, and
expenses, and disclosure of contingent assets and liabilities in the financial statements and accompanying notes. Actual results
could materially differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies
and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. Management
must apply significant judgment in this process. In addition, other factors may affect estimates, including: expected business
and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical
trends are expected to be representative of future trends. The estimation process may yield a range of potentially reasonable estimates
of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. Although
these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual
results may ultimately materially differ from those estimated amounts and assumptions used in the preparation of the financial
statements.
Segment Reporting
Operating segments are identified as components of an enterprise
about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making
decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business as
one operating segment.
Cash and Cash Equivalents
The Company considers all highly liquid securities with original
maturities of three months or less at the date of purchase to be cash equivalents. As of June 30, 2016, the Company had cash of
$258,836 and no cash equivalents. The Company may occasionally maintain cash balances in excess of amounts insured by the Federal
Deposit Insurance Corporation (“FDIC”). The amounts are held with major financial institutions and are monitored by
management to mitigate credit risk.
Deposits
Deposits consist of a security deposit in connection with an
office lease.
Other Assets
Other assets consist of a deposit towards the acquisition of
certain intellectual property rights.
Impairment of Long-Lived Assets
The Company evaluates long-lived assets for impairment whenever
events or changes in circumstances indicate the carrying value may not be recoverable. Factors considered include:
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Significant changes in the operational performance or manner of use of acquired assets or the strategy for our overall business,
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Significant negative market conditions or economic trends, and
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Significant technological changes or legal factors which may render the asset obsolete.
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The Company evaluated long-lived assets based upon an estimate
of future undiscounted cash flows. Recoverability of these assets is measured by comparing the carrying value to the future net
undiscounted cash flows expected to be generated by the asset. An impairment loss is recognized when the carrying value exceeds
the undiscounted future cash flows estimated to result from the use and eventual disposition of the asset. Future net undiscounted
cash flows include estimates of future revenues and expenses which are based on projected growth rates. The Company continually
uses judgment when applying these impairment rules to determine the timing of the impairment tests, the undiscounted cash flows
used to assess impairments and the fair value of a potentially impaired asset.
Fair Value Measurements
The fair value of a financial instrument is the amount that
could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair
value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability
of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level
of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:
- Level 1: Quoted market prices in active markets for identical
assets or liabilities
- Level 2: Observable market-based inputs or inputs that are
corroborated by market data
- Level 3: Unobservable inputs that are not corroborated by
market data
Net Loss per Common Share
Basic net loss per common share is calculated by dividing the
net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period, without
consideration for the potentially dilutive effects of converting stock options or restricted stock purchase rights outstanding.
Diluted net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted average
number of common shares outstanding during the period and the potential dilutive effects of stock options or restricted stock purchase
rights outstanding during the period determined using the treasury stock method. There are no such anti-dilutive common share equivalents
outstanding as June 30, 2016 which were excluded from the calculation of diluted loss per common share.
Income Taxes
The Company accounts for income taxes under the asset and liability
method, which requires, among other things, that deferred income taxes be provided for temporary differences between the tax bases
of the Company's assets and liabilities and their financial statement reported amounts. Under this method, deferred tax assets
and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities
using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax
rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
A valuation allowance is recorded by the Company when it is
more likely than not that some portion or all of a deferred tax asset will not be realized. In making such a determination, management
considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected
future taxable income, and ongoing prudent and feasible tax planning strategies in assessing the amount of the valuation allowance.
When the Company establishes or reduces the valuation allowance against its deferred tax assets, its provision for income taxes
will increase or decrease, respectively, in the period such determination is made.
Additionally, the Company recognizes the tax benefit from an
uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing
authorities based on the technical merits of the position. The tax benefit recognized in the financial statements for a particular
tax position is based on the largest benefit that is more likely than not to be realized upon settlement. Accordingly, the Company
establishes reserves for uncertain tax positions. The Company has not recognized interest or penalties in its statement of operations
and comprehensive loss since inception.
Recent Accounting Pronouncements
The Financial Accounting Standards Board recently issued Accounting
Standards Update (ASU) 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties
about an Entity’s Ability to Continue as a Going Concern. The amendments require management to assess an entity’s ability
to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards.
Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting
period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4)
require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5)
require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for
a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this
Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter.
Management believes recently issued accounting
pronouncements will have no impact on the financial statements of the Company.
NOTE C – GOING CONCERN
The Company's financial statements are prepared using accounting
principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization
of assets and liquidation of liabilities in the normal course of business. However, the Company does not have significant cash
or other current assets, nor does it have an established source of revenues sufficient to cover its operating costs and to allow
it to continue as a going concern.
The Company’s net
loss and working capital deficit raise substantial doubt about the Company’s ability to continue as a going concern. The
accompanying financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business. The financial statements for the three months ended June 30,
2016 do not include any adjustments to reflect the possible future effects of the recoverability and classification of assets or
the amounts and classification of liabilities that may result from uncertainty related to the Company’s ability to continue
as a going concern. The Company may never become profitable, or if it does, it may not be able to sustain profitability on a recurring
basis.
Under the going concern assumption, an entity is ordinarily
viewed as continuing in business for the foreseeable future with neither the intention nor the necessity of liquidation, ceasing
trading, or seeking protection from creditors pursuant to laws or regulations. Accordingly, assets and liabilities are recorded
on the basis that the entity will be able to realize its assets and discharge its liabilities in the normal course of business.
The ability of the Company to continue as a going concern is
dependent upon its ability to successfully accomplish the business plan and eventually attain profitable operations. The accompanying
financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.
During the next year, the Company’s foreseeable cash requirements
will relate to continual development of the operations of its business, maintaining its good standing and making the requisite
filings with the Securities and Exchange Commission, and the payment of expenses associated with research and development. The
Company may experience a cash shortfall and be required to raise additional capital.
Historically, it has mostly relied upon funds from the sale
of shares of stock and from acquiring loans to finance its operations and growth. Management may raise additional capital through
future public or private offerings of the Company’s stock or through loans from private investors, although there can be
no assurance that it will be able to obtain such financing. The Company’s failure to do so could have a material and adverse
effect upon it and its shareholders.
In the past year, the Company funded operations by using cash
proceeds received through the issuance of common stock and proceeds from related party debt. For the coming year, the Company plans
to continue to fund the Company through debt and securities sales and issuances until the company generates enough revenues through
the operations as stated above.
NOTE D – TRANSACTIONS WITH RELATED PARTIES
Since inception, the Company accrued $1,618,233 in amounts owed
to related parties for services performed or reimbursement of costs on behalf of the Company. In addition, the Company has accrued
$1,285,000 for unpaid officers’ compensation expense in accordance with consulting agreements with our Chief Executive Officer
and President. Under the terms of each consulting agreement, each consultant shall serve as an executive officer to the Company
and receive monthly compensation of $35,000. The consulting agreements may be terminated by either party for breach or upon thirty
days prior written notice.
On February 1, 2015, RMR, IP entered into a management services
agreement with Industrial Management LLC (“IM”), to provide services to RMR, IP and affiliated entities, which include
assistance in operational and administrative matters, identifying, analyzing, and structuring growth initiatives, and potential
strategic acquisitions. As compensation for these services, RMR, IP will pay to IM an annual cash management fee in an amount equal
to the greater of 2% of the Company’s annual gross revenues or $1,000,000, and a development fee with respect to any capital
project incurred by RMR IP equal to 2% of total project costs. In addition, IM has the option to be assigned all available royalties
from RMR IP’s mineral holdings, leases or interests greater than 75% of net revenue interests for all mineral rights or production
of minerals. At IM’s sole discretion, it may choose to accept a preferred convertible security with a 15% dividend accruing
quarterly in lieu of cash for some or all of the annual management fee, development fee and royalty assignments. Such preferred
convertible securities shall be convertible into either Class A Common Stock or Class B Common Stock (as applicable) at a conversion
price equal to fifty percent of the market price of the applicable Class B Common Stock on the day prior to the date of issuance.
In addition, these preferred convertible securities are callable for a cash, for a period of six months following the date of issuance;
provided, however, that if called, IM shall have the option to convert the called preferred stock into either Class A Common Stock
or Class B Common Stock (as applicable) at a conversion price equal to sixty-six and two thirds percent of the market price of
the applicable Class B Common Stock on the business day immediately preceding the issuance date of preferred stock, and will include
a blocker provision. In connection with the management services agreement with IM, RMR IP entered into a registration rights agreement
which requires RMR IP to register for resale any securities issued as consideration under the management services agreement. The
registration rights agreements provide for both demand and piggy back registration rights, and requires that IM not transfer any
shares of RMR IP during a 90 day period following the effective date of a registration statement. The registration rights agreement
terminates when the shares held by IM become eligible for resale pursuant to Rule 144.
On June 15, 2016, Rocky Mountain Resource Holdings Inc., entered
into a Standard Office Lease agreement (the “Lease Agreement”) for its principal headquarters located in Beverly Hills,
California, with a commencement date of July 1, 2016. Although the Company is not a party to the Lease Agreement, the security
deposit and monthly rent payments will be funded by the Company in exchange for use of office space. Future rent payments by the
Company will be recorded as a period cost in its operating expenses.
NOTE E – INTANGIBLE ASSETS
The Company obtained an Option Agreement (“Option Agreement”)
from RMR Holdings, Inc. with the Colorado School of Mines (“CSM”), which grants the Company an exclusive nine month
option period to obtain an exclusive license for any patent rights owned by CSM. On August 25, 2014, CSM entered into the Option
Agreement with the Company for a non-refundable fee of $30,000. Since the Company was in the process of formation, RMR Holdings,
Inc. countersigned the Option Agreement with CSM on behalf of the Company. On October 15, 2014, the Company was incorporated in
Nevada (Note 1) and RMR Holdings, Inc. assigned the Option Agreement to the Company. RMR Holdings, Inc. recorded amortization expense
of $5,625 through October 15, 2014, which represented the elapsed time of holding the option since it was executed. The Company
owed RMR Holdings, Inc. $24,375 which represented the approximate carrying value of RMR Holdings, Inc. at October 15, 2014, for
an exclusive period which was initially set to expire on May 25, 2015, to evaluate CSM’s existing patent rights, technology
and market potential. The Option Agreement was amended to extend the evaluation period until September 1, 2016, in exchange for
an advance payment of $2,500 creditable towards a licensing fee. The Company may extend the Option Agreement for two (2) three
month periods in exchange for a $3,000 extension fee per each patent or patent application. The value of the Option Agreement has
been fully amortized over the term of the exclusivity period. The advance payments towards a licensing fee was capitalized as a
progress payment towards the purchase of an intangible asset.
NOTE F – SHAREHOLDERS’ DEFICIT
Reverse Stock Split
On September 4, 2015, the Company implemented a reverse
stock split of all of its authorized and issued and outstanding shares of Class B Common Stock in ratio of one-for-twenty. All
historical and per share amounts have been adjusted to reflect the reverse stock split.
Preferred Stock
The Company has authorized 50,000,000 shares of preferred stock
for issuance. At March 31, 2016, no preferred stock was issued and outstanding.
Common Stock
The Company has authorized 2,100,000,000 shares of common stock
for issuance, including 2,000,000,000 shares of Class A Common Stock, 100,000,000 shares of Class B Common Stock. At June 30, 2016,
the Company had 35,785,858 and 1,030,957 shares issued and outstanding of Class A Common Stock and Class B Common Stock, respectively.
The holders of Class A Common Stock will have the right to vote
on all matters on which stockholders have the right to vote. The holders of Class B Common Stock will have the right to vote solely
on matters where the vote of such holders is explicitly required under Nevada law. The holders of Class A Common Stock and
Class B Common stock will have equal distribution rights, provided that distributions in securities shall be made in either identical
securities or securities with similar voting characteristics. The holders of Class A Common Stock and Class B Common Stock
will be entitled to receive identical per-share consideration upon a merger, conversion or exchange of the Company with another
entity, and will have equal rights upon dissolutions, liquidation or winding-up.
On June 30, 2016 the Company entered into a
subscription agreement with an accredited investor (the "Purchaser") to offer and sell 40,000 units of the
Company’s securities (the “Units”) at $10.00 per Unit for which the Company received $299,897 in initial
proceeds and $100,000 in common stock subscribed. Each Unit entitles the Purchaser to one share of Class B Common Stock of
the Company and a warrant to purchase one share of Class B Common Stock at an exercise price of $10.00 with a term of two
years. In the event the Company’s Class B Common Stock is not quoted or listed on a qualified national stock exchange
by November 1, 2016, the Company will issue an additional warrant to purchase one share of Class B Common Stock at an
exercise price of $10.00 with a term of two years.
NOTE G – SUBSEQUENT EVENT
On July 28, 2016, the Company formed RMR Aggregates, Inc., a
Colorado corporation, as its wholly owned subsidiary.