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RRHI > SEC Filings for RRHI > Form 10-Q on 15-Nov-2013All Recent SEC Filings

Show all filings for RAPTOR RESOURCES HOLDINGS INC.

Form 10-Q for RAPTOR RESOURCES HOLDINGS INC.


15-Nov-2013

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATION

Forward-Looking Statements; Market Data

As used in this Quarterly Report, the terms "we", "us", "our", "Registrant" and the "Company" means Lantis Laser, Inc., a Nevada corporation, and its wholly-owned subsidiary, Lantis Laser, Inc., a New Jersey corporation. To the extent that we make any forward-looking statements in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report, we emphasize that forward-looking statements involve risks and uncertainties and our actual results may differ materially from those expressed or implied by our forward-looking statements. Our forward-looking statements in this Quarterly Report reflect our current views about future events and are based on assumptions and are subject to risks and uncertainties. Generally, forward-looking statements include phrases with words such as "expect", "anticipate", "intend", "plan", "believe", "seek", "estimate" and similar expressions to identify forward-looking statements.

Overview

We were incorporated under the laws of the State of Nevada in February 1998 under the name Beekman Enterprises, Inc. In November 2004, we acquired Lantis Laser, Inc., a New Jersey corporation formed in January 1998 ("Lantis New Jersey"), in a reverse-triangular merger and succeeded to its business as our sole line of business. In connection with the merger, we changed our name to "Lantis Laser Inc." We amended our Articles of Incorporation on March 5, 2012 to change our name to Raptor Resources Holdings Inc. to reflect our new business focus on the exploration and mining of gold and other industrial minerals.

We were developing our Optical Coherence Tomography ("OCT") Dental Imaging System as our first product but have suspended further development until we receive further funding to continue development of our light based imaging modalities. We were formed to commercialize the application of novel technologies in the dental industry. We have the exclusive rights to OCT for applications in the dental field under a license agreement with Lawrence Livermore National Laboratories and an exclusive license for dental applications of near-infrared transillumination (patent application pending) from the Regents of the University of California. Our products are subject to obtaining FDA marketing clearance before being sold to the dental market.

On April 22, 2011, we entered into an Agreement and Plan of Merger (the "Merger Agreement") to acquire TAG Minerals Inc. ("TAG"). We consummated the merger on May 23, 2011 and issued to the shareholders of TAG 165,000,000 shares of our common stock which represented 50% of our total issued and outstanding shares at the time of the merger in exchange for 100% of their shares in TAG. As a result of the merger TAG is now a wholly-owned subsidiary of Lantis Laser.

TAG is a U.S.-based mineral resource acquisition, exploration and development company, with operations conducted through its operating affiliated company, TAG Minerals Zimbabwe (Private) Limited ("TAG-Z"). The company's business is managed by its directors and officers who have mineral extraction and commercial experience. TAG's strategy is to identify, acquire and exploit mineral properties that have potential. TAG is augmented by independent financial, geological, and mining professionals who advise the company on its mining and exploration projects throughout Zimbabwe, Africa.

The President and Chief Executive Officer of TAG were named the new President and Chief Executive Officer of our Company. In addition, the remaining two shareholders of TAG became directors in our Company.

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. All of the gold milling centers and mining claims are completely outfitted with mining equipment; to include gold-ore crushers, excavators, generators and dump trucks. Slashwood Mining has 200 employees and is forging a path of expansion into mining projects.

On July 18, 2012 Mabwe Minerals Inc. 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. Each share of Stock is convertible into 50 common shares of Raptor Recourses 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, Zimbabwe 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 its subsidiary, Mabwe Minerals Zimbabwe (PVT) LTD. MAB-Z is a Variable Interest Entity (VIE) with respect to guidance under ASC 810-10-5 and is therefore consolidated.

On October 29, 2012, MBMI, MAB-C, and Kinsey entered into an Equity Exchange Agreement ("Equity Exchange Agreement"). In accordance with the Equity Exchange Agreement, the MBMI issued 5,000,000 shares of their common stock to Kinsey in exchange for a 25% ownership by MAB-C in Kinsey. Additionally, should the value of the 5,000,000 shares of common stock fail to be valued at $5,000,000 on December 31, 2013, MBMI must issue additional shares of common stock to achieve that value for Kinsey. The common shares issued have been valued at $500,000, as the price of MBMI common stock was trading at $0.10 per share, and no valuation has been provided for Kinsey at this time. Kinsey, based in Zimbabwe, 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.

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. The Company 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, with the Company 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.

On December 17, 2012 we entered into a settlement and restructuring agreement with PAX ORAL IMAGING INC. ("POII") and former principals Stan Baron (former Chief Executive Officer of Lantis Laser Inc.) and Craig Gimbel (former Executive Vice President of Lantis Laser Inc.) to acquire their interest in the Company (54,358,923 shares of common stock collectively), terminated their employment agreements with the Company, extinguished certain liabilities owed by the Company to Baron and Gimbel and obtained an option to purchase their 14,400,000 warrants. As a result of this agreement, all licenses, contract rights, trademarks, patents, copyrights and assets related to the Near Infrared Technology Business in which Lantis was engaged, including OCT and NIR, were transferred to POII. As further consideration, Baron and Gimbel were issued a combined 3,000,000 shares of common stock of MBMI, our majority owned subsidiary.

On December 31, 2012, the July 2011 TAG-Z acquisition of 100% of the capital stock of Ontage has been deemed to be worthless. The investment has been deemed worthless because Ontage had as its only activity the acquisition of a 10% stake in an existing operating gold mining producer, Slashwood Mining. The Company has permanently impaired the investment in Slashwood Mining, originally valued at $150,000 to $0 thus determining that it was necessary to recognize a loss of $150,000 related to the write-off of the investment.

On July 31, 2013 Mabwe Minerals 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 along with it affiliate Yasheya that is engaged and specializes in the shipment of industrial minerals worldwide. Steinbock and Yasheya are 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.

Results of Operations

Three and Nine Months Ended September 30, 2013 Compared to Three and Nine Months Ended September 30, 2012.

The following is derived from, and should be read in conjunction with, our condensed consolidated financial statements, and related notes for the three and nine months ended September 30, 2013 and 2012.

Operating revenues. We are an exploration stage company. To date, we have not generated any operating revenues, nor have we generated operating revenues since our inception in February 1998. Our wholly owned subsidiary, TAG Minerals Inc. has not yet commenced its mining activities. Our majority owned subsidiary, MBMI, is expected to recognize revenue in the fourth quarter of 2013 in accordance with the commencement of production at Dodge Mine that began late in the third quarter of 2013. On October 31, 2013 Steinbock Minerals LTD issued a purchase order for 2,000 metric tons of API crude barite ore.

The first shipment was set to be made between June 1, 2013 and August 31, 2013. The Company is discussing with Baker Hughes Oilfield Operations revised shipment dates in light of the delays the Company 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.

Net loss from operations. For the three months ended September 30, 2013, our consolidated net loss from operations prior to elimination of non-controlling interest was $1,140,010 compared to $517,835 for the same period in the prior year, representing an increased loss of $622,175. The increase in our loss from operations was mainly due to cost of pre-production site preparation and establishment, sampling, clearing overburden in the amount of $379,861 and extraction costs in the amount of $230,578 associated with the commencement of operations at the Dodge Mine. Professional, consulting and marketing fees increased to $139,061 in the three months ended September 30, 2013 as compared to $42,102 in the same period last year.

For the nine months ended September 30, 2013, our consolidated net loss from operations prior to elimination of non-controlling interest was $2,225,310 compared to $799,204 for the same period in the prior year, representing an increased loss of $1,426,106. The increase in our loss from operations was mainly due to cost of pre-production site preparation and establishment, sampling, clear location overburden in the amount of $458,926 and extraction costs in the amount of $230,578 associated with the commencement of operations at the Dodge Mine. Also increased compensation expense for key individual contributors who received Preferred Series B Convertible Stock in this quarter for services rendered resulting in compensation of $210,000 as well as the issuance of 11,000,000 shares of common stock issued to two business facilitators (USA and Zimbabwe) of the Company as compensation for such appointment valued at $220,000 based on the maket value of the stock and the time of the resolution. Professional, consulting and marketing fees increased to $321,670 in the nine months ended September 30, 2013 as compared to $181,119 in the same period last year.

Total other expenses(income). Other expense was $40,489 and $262,833 for the three and nine months ended September 30, 2013, respectively, compared to other expense of $11,901 and other income of $100,658 for the three and nine months ended September 30, 2012. The increased expense for the nine months ended September was attributable to the pro rata share of the loss in the investment in Kinsey by the majority owned subsidiary MAB-C. The share of the loss in Kinsey was mainly due to their company's fulfillment of some large contract as they prepare to support MAB-Z once in production along with increased depreciation cost of new equipment. The other income from the 2012 in the amount of $132,917 was realized under the terms of the amended contract with Chrioswa, for debt forgiveness of the debt owed of MAB-Z for the asset of the Dodge Mine Blocks 1-6 which supports the continuing operations and revenue generating activities. For the three and nine months ended September 30, 2013 there was an increase in accrued interest due to the secured note obtained by MAB-Z compared with the same period in the prior year.

Net loss. We had a net loss attributable to common shares of $834,392 and $1,728,977 or $0.00 per share, for the three and nine months ended September 30, 2013, compared to a net loss attributable to common shares of $476,517 and $757,886 or $0.00 per share, for the same period in the prior year. The increase in the net loss is mainly related to the fact we have commenced operations and the expenses are accelerating ahead of and during commencement of operations at the Dodge Mine. Research and Development cost for the three and nine months ended September 30, 2013 were $379,861 and $458,926. Professional, consulting and marketing fees increased to $139,061 and $321,670 for the three and nine months ended September 30, 2013 as compared to $42,102 and $181,119 in the same period last year. Wages and wage related expense increased to $295,000 and $767,023 as compared to $312,300 and $476,700 in the same period last year. This increase was due to the amortization of compensation expense in the form of Preferred Series B stock in the amount of $420,000 combined with the expensing of the issuance of stock to two business facilitators of the Company (USA and Zimbabwe) with a value of $220,000 in the form of common stock previously held in treasury by the Company .

Liquidity and Capital Resources

Total assets. On September 30, 2013, we had total assets of $1,246,551, compared to $1,118,766 on December 31, 2012. We had cash and cash equivalents of $126,390 on September 30, 2013 compared to $22,897 at December 31, 2012. Our fixed assets (net of depreciation), which did not change significantly, were $4,420 on September 30, 2013, compared to $6,183 on December 31, 2012. Prepaid expense increased to $295,482 on September 30, 2013 from $76,411 on December 31, 2012. This change was largely due to prepayment for services to be provided to MAB-Z in conjunction with mining site preparation. Goodwill was recorded as a result of related party activity and the charge for the 25,000 shares of stock we issued to acquire interest in 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 our Series B Preferred Convertible Stock has a value of $25,000.

Total liabilities. We had total liabilities of $1,747,455, on September 30, 2013 compared to $1,197,346 for the period ended December 31, 2012, due primarily to the secured loan and proceeds thereof entered into on May 16, 2013 MAB-Z as a one year securitized financing short term agreement with CBZ Bank Limited in the amount of $420,000.

Accrued interest on convertible notes on September 30, 2013 was $217,500 compared to $191,359 at December 31, 2012. At September 30, 2013, we had a negative working capital of $1,325,583 compared to a negative working capital of $1,098,038 on December 31, 2012. These conditions raise substantial doubt about our ability to continue as a going concern within the next 12 months.

Going Concern. The items discussed above raise substantial doubts about the Company's ability to continue as a going concern. In light of these factors, management believes that with the investment in Kinsey and the commencement of production in the third quarter of 2013 on the Dodge Mines, the Company will be well positioned to succeed. The Company 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.

Cash flow from operations. During the nine months ended September 30, 2013, we had a negative cash flow from operations of $1,186,621 compared to negative cash flow from operations of $313,983 during the same period in the prior year. Our higher negative cash flow from operations was mainly due to increased outlay of cash as we incur exploration, pre-production site preparation development, start-up, extraction, and legal fees costs in our majority owned subsidiary.

Cash flow from investing activities. The sole investing activity was for the purchase of small adjacent or nearby land use or rights options during the nine month period ended September 30, 2013.

Cash flow from financing activities. During the nine months ended September 30, 2013, we received $1,310,454 net cash from financing activities compared to $396,925 in the same period in 2012. We received $880,500 proceeds from a private placement of the common stock of MBMI, net of fees, compared to $457,500 received in the same period in 2012. Payments for the liability associated with Dodge Mine Blocks 1-6 in the current were made in the amount of $13,500 compared to $75,083 paid in the same period in the prior year. The Company 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.

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