The accompanying notes are an integral part
of these financial statements.
The accompanying notes are an integral
part of these consolidated financial statements.
During the three months ended June 30, 2017, the Company assumed
$14,348 of a new equipment loan.
The accompanying notes are an integral
part of these consolidated financial statements.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
June 30, 2017
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 complementary 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-added 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.
For financial reporting purposes, the Merger represented a “reverse
merger” rather than a business combination and RMR IP was deemed to be the accounting acquirer in the transaction. Consequently,
the assets and liabilities and the historical operations that will be reflected in the Company’s financial statements post-Merger
are those of RMR IP. The Company’s assets, liabilities and results of operations have been consolidated with the assets,
liabilities and results of operations of RMR IP after consummation of the Merger, and the historical financial statements of the
Company before the Merger were replaced with the historical financial statements of RMR IP before the Merger in all post-Merger
filings with the SEC.
On July 28, 2016, we formed RMR Aggregates, Inc., a Colorado
corporation (“RMR Aggregates”), as our wholly-owned subsidiary. RMR Aggregates was formed to hold assets whose primary
focus is the mining and processing of industrial minerals for the manufacturing, construction, and agriculture sectors. These
minerals include limestone, aggregates, marble, silica, barite, and sand.
On October 12, 2016, RMR Aggregates acquired substantially all
of the assets from CalX Minerals, LLC, a Colorado limited liability company (“CalX”) through an Asset Purchase Agreement.
Pursuant to the terms of the Asset Purchase Agreement, RMR Aggregates agreed to purchase, and CalX agreed to sell, substantially
all of the assets associated with the business of operating the Mid-Continent Limestone Quarry on 41 BLM unpatented placer mining
claims in Garfield County, Colorado, including the mining claims, improvements, access rights, water rights, equipment, inventory,
contracts, permits, certain intellectual property rights, and other tangible and intangible assets associated with the limestone
mining operation.
On January 3, 2017, we amended the Articles of Incorporation
of RMR IP, Inc. to rename the corporation to RMR Logistics, Inc. (“RMR Logistics”). RMR Logistics operates as a wholly-owned
subsidiary of the Company to provide transportation and logistics services.
Basis of Presentation and Consolidation
The
accompanying unaudited consolidated financial statements for the period ended June 30, 2017 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, RMR Logistics Inc.
as well as our majority-owned subsidiary RMR
Aggregates,
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, 2017 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.
Use of Estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates, judgments, and assumptions that impact the reported amounts of assets, liabilities, and
expenses, and disclosure of contingent assets and liabilities in the financial statements and accompanying notes. Actual results
could materially differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies
and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. Management
must apply significant judgment in this process. In addition, other factors may affect estimates, including: expected business
and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical
trends are expected to be representative of future trends. The estimation process may yield a range of potentially reasonable estimates
of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. Although
these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual
results may ultimately materially differ from those estimated amounts and assumptions used in the preparation of the financial
statements.
Revenue Recognition
Revenue for product sales are recognized
when evidence of an arrangement exists, the fee is fixed or determinable, title passes, which is generally when the product is
shipped, and collection is reasonably assured. Revenue includes product sales of limestone, aggregate materials and other transportation
charges to customers, net of discounts, allowances or taxes, as applicable.
Cost of Goods Sold
Cost of goods sold is comprised of both
fixed and variable costs, including materials and supplies, labor, delivery, repairs and maintenance, utilities and other overhead
costs associated with our product sales.
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, 2017, the Company had cash of
$320,528 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.
Inventory
Inventory, which primarily represents finished goods, packaging
and fuel are valued at the lower of cost (average) or market.
Total gross inventories at June 30, 2017 were $23,706 which
has not been adjusted since March 31, 2017.
Other noncurrent assets
Other noncurrent assets consist of two security deposits in
connection with our office leases in Denver and Los Angeles, as well as deposits made to secure a contract for a parcel of land
that may potentially be added to our future rail terminal and services facility as noted in Note H: Subsequent Events.
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:
|
•
|
Significant changes in the operational performance or manner of use of acquired assets or the strategy for our overall business,
|
|
•
|
Significant negative market conditions or economic trends, and
|
|
•
|
Significant technological changes or legal factors which may render the asset obsolete.
|
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, 2017 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
Revenue Recognition -The FASB issued ASU No. 2014-09, Revenue
from Contracts with Customers (Topic 606). ASU No. 2014-09, as subsequently amended, supersedes the revenue recognition requirements
in Revenue Recognition (Topic 605), and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally,
ASU No. 2014-09 supersedes some cost guidance included in Revenue Recognition-Construction-Type and Production-Type Contracts
(Subtopic 605-35). Under ASU No. 2014-09, an entity should recognize revenue when it transfers promised goods or services to customers
in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
ASU No. 2014-09 also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows
arising from customer contracts. This includes significant judgments and changes in judgments and assets recognized from costs
incurred to obtain or fulfill a contract. Additionally, from time to time, the Company may enter into transactions whereby it
sells certain property, plant and equipment. In these instances, certain principles of ASC 606 may apply when recognizing a gain
or loss on the transaction even though the transaction is not considered to be in the normal course of business. ASU No. 2014-09
states that entities should apply guidance related to transfer of control and measurement of the transaction price when evaluating
the timing and amount of the gain or loss to be recognized. The new guidance is effective for interim and annual periods beginning
after December 15, 2017. The adoption of this ASU is not expected to have a material impact on the consolidated financial statements.
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 Company has adopted
this ASU and it did not have a material impact on the consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-01,
Clarifying
the Definition of a Business,
which narrows the definition of a business. This ASU provides a screen to determine whether a
group of assets constitute a business. The screen requires that when substantially all of the fair value of the gross assets acquired
(or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business.
This screen reduces the number of transactions that need to be further evaluated as acquisitions. If the screen is not met, this
ASU (1) requires that to be considered a business, a set must include, at a minimum, an input and a substantive process that together
significantly contribute to the ability to create an output and (2) removes the evaluation of whether a market participant could
replace missing elements. Although outputs are not required for a set to be a business, outputs generally are a key element of
a business; therefore, the FASB has developed more stringent criteria for sets without outputs. The ASU is effective for public
companies for annual periods beginning after December 15, 2017. The adoption of this ASU is not expected to have a material
impact on the consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02,
Leases
,
which will result in lessees recognizing most leases on the balance sheet. Lessees are required to disclose more quantitative and
qualitative information about their leases than current U.S. GAAP requires. The ASU is effective for public entities for fiscal
years, and interim periods within those fiscal years, beginning after December 15, 2018. We are beginning to compile all operating
and capital leases to assess the impact of adopting this standard.
In May 2014, the FASB issued ASU No. 2014-09,
Revenue from
Contracts with Customers
, which prescribes a five-step model for revenue recognition that will replace most existing revenue
recognition guidance in U.S. GAAP. The ASU will supersede nearly all existing revenue recognition guidance under U.S. GAAP and
provides that an entity recognize revenue when it transfers promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services. This update also requires
additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts,
including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract.
In July 2015, the FASB postponed the effective date of the new revenue standard by one year to the first quarter of 2018. In applying
these ASUs, an entity is permitted to use either the full retrospective or cumulative effect transition approach. We plan to adopt
these ASUs using the cumulative effect transition approach. While we are currently evaluating the impact of adoption of these standards
on our consolidated financial statements, we expect to identify similar performance obligations compared with the deliverables
and separate units of account we have identified under existing accounting standards. As a result, we do not expect the adoption
of these ASUs to have a material impact on our consolidated statements of operations.
Management believes recently issued accounting pronouncements
will have no impact on the financial statements of the Company.
NOTE C – ACCOUNTS RECEIVABLE
Accounts Receivable at June 30, 2017 was $77,328 compared to
$56,835 at March 31, 2017. The increase is due to an increase in production and product demand. No allowance is recorded, as all
items are current.
NOTE D – INVENTORY
Inventory, which primarily represents finished goods, packaging
and fuel are valued at the lower of cost (average) or market.
|
June 30, 2017 and
March 31, 2017
|
|
|
|
|
Finished Goods
|
|
$
|
2,795
|
|
Packaging
|
|
|
16,267
|
|
Propane and Fuel
|
|
|
4,644
|
|
Total
|
|
$
|
23,706
|
|
Due to the minor amount of inventory, no adjustment was made
at June 30, 2017.
NOTE E – 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, 2017 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 F – NOTE PAYABLE
On October 3, 2016, the Company entered into a Note Purchase
Agreement (the “Note Purchase Agreement”) with RMR Aggregates, Inc., and Central Valley Administrators Inc., a Nevada
corporation (“CVA”). Pursuant to the terms of the Note Purchase Agreement, RMR Aggregates sold to CVA, and CVA purchased
from RMR Aggregates, a 10% promissory note in an aggregate principal amount of $2,250,000 (the “Note”). The Note has
a maturity date of October 3, 2018, and accrues interest at a rate of 10% per annum.
Under the terms of the Note Purchase Agreement, RMR Aggregates
also agreed to issue 20,000 shares of common stock of RMR Aggregates (the “RMRA Shares”) to CVA, which represents 20%
of RMR Aggregates’ total issued and outstanding common stock. CVA shall have the right, at any time, to convert the RMRA
Shares into shares of Class B common stock of the Company, at a ratio of 1 share of RMRA Shares being converted into 7.5 shares
of the Company’s Class B common stock. RMR Aggregates will also have the right, at any time after October 3, 2017 and after
the Note is no longer outstanding, to call the RMRA Shares in exchange for shares of Class B common stock of the Company using
the same ratio; provided, however, that the amount of RMRA Shares that may be called in exchange for shares of the Company’s
Class B common stock shall be limited to the extent necessary to ensure that, following such exercise, CVA and its affiliates will
not beneficially own in excess of 4.99% of the Company’s total issued and outstanding common stock.
The Note Purchase Agreement provides, among other things, that
CVA shall have a liquidation right upon an event of default arising from the failure by RMR Aggregates to repay the outstanding
principal amount of the Note on the maturity date, meaning CVA can cause RMR Aggregates to sell its assets until it repays the
outstanding amount due under the Note. RMR Aggregates shall have the right to call the Note at any time at par plus accrued interest
thereunder.
The conversion feature in the Note Purchase Agreement was valued
at $769,000 and recorded as a discount to the CVA Note. The carrying value of the CVA Note at June 30, 2017:
Principal value
|
|
$
|
2,250,000
|
|
Accrued interest
|
|
|
172,482
|
|
Unamortized debt discount
|
|
|
(749,649
|
)
|
Note payable, net
|
|
$
|
1,672,833
|
|
NOTE G – EQUIPMENT LOAN AND CAPITAL LEASE PAYABLE
The Company has entered into various equipment loans with an
equipment manufacturer in connection with the CalX acquisition, pursuant to which we acquired equipment with an aggregate principal
value of approximately $582,709. The equipment loans require payments over 37-60 months at a fixed interest rate from 1.99% to
5.75%. The Company’s obligations under these contracts are collateralized by the equipment purchased.
The Company also has a capital lease agreement, which was assumed
in connection with the CalX acquisition. The capital lease has a remaining term of 30 months for mining equipment, which is included
as part of property, plant and equipment. Depreciation related to capital lease assets is included in depreciation expense.
Future payments on capital lease obligations are as follows:
Fiscal year ended March 31:
2019
|
|
$
|
50,634,
|
|
2020
|
|
|
27,005
|
|
Total future minimum lease payments
|
|
$
|
77,639
|
|
NOTE
H – TRANSACTIONS WITH RELATED PARTIES
Since inception, the Company accrued $2,618,233 in amounts owed
to related parties for services performed or reimbursement of costs on behalf of the Company. In addition, the Company has accrued
$2,102,500 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 piggyback registration rights, and require 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.
NOTE I – 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 June 30, 2017, 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, 2017,
the Company had 35,785,858 and 1,262,623 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.
During the three months ended June 30, 2017, the Company entered
into subscription agreements with accredited investors (the "Purchasers") to offer and sell 20,000 units of the Company’s
securities (the “Units”) at $15.00 per Unit for which the Company received $300,000 in gross proceeds. Each Unit entitles
the Purchaser to one share of Class B Common Stock of the Company and a warrant to purchase one or more shares of Class B Common
Stock at an exercise price of $15.00. During the same period, a Purchaser exercised warrants to purchase 40,000 shares of Class
B Common Stock at an exercise price of $10.00 for which the Company received $400,000 in gross proceeds.
NOTE J – SELLING GENERAL AND ADMINISTRATIVE COSTS
Selling general and administrative costs for the three month
period increased from $773,825 in June of 2016 to $1,148,988 in June of 2017. Increases in salaries, employee benefits and consulting
fees were primarily responsible for this increase.
NOTE K – INTEREST EXPENSE
The interest expense for the three months ended June 30, 2017
is the result of a note payable of $2,250,000 entered into October 3, 2016.
NOTE L – SUBSEQUENT EVENTS
On January 30, 2018, the Company entered into an Asset Purchase
Agreement with IM and consummated the purchase of all the assets of IM (NOTE H), including any accrued payments payable to IM,
for a total consideration of 882,352 shares of the Company’s Class B Common Stock. The share consideration represents an
estimated fair value of $15,000,000. Following the closing of the transaction, the Company had no remaining liabilities or accrued
payments owed to IM.
During January 2018, the Company formed Rail Land Company, LLC
(“Rail Land Company”) as a wholly-owned subsidiary to develop a rail terminal and services facility (“Rail Park”).
Rail Land Company purchased a 470-acre parcel of real property located in Bennett, Colorado on February 1, 2018 for $3.4M. Additionally,
Rail Land Company entered into Option Agreements to purchase 150 acres of real property and a total of 250 acres of mineral rights
in Bennett, Colorado. The acreage is in the process of being entitled and rezoned for the development of the Rail Park. The Company’s
development of the Rail Park is intended to expand the Company’s customer base for our products by utilizing rail freight
capabilities to reach customers in the greater Denver area and by expanding our business to include rail transportation solutions
and services.
From June 30, 2017 to June 2018, the Company issued and sold
729,532 shares of Class B common stock and received $10,848,736 in gross proceeds. The Company entered into subscription agreements
with Purchasers to offer and sell 363,825 units of the Company’s securities (the “Units”) at $15.00-$17.00 per
Unit. Each Unit entitles the Purchaser to one share of Class B Common Stock of the Company and a warrant to purchase one or more
shares of Class B Common Stock at an exercise price of $15.00-$17.00. During the same period, Purchasers exercised warrants to
purchase 365,707 shares of Class B Common Stock at an exercise price of $10.00-$17.00.