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RRHI > SEC Filings for RRHI > Form 10-Q on 20-May-2014All Recent SEC Filings

Show all filings for RAPTOR RESOURCES HOLDINGS INC.

Form 10-Q for RAPTOR RESOURCES HOLDINGS INC.


20-May-2014

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 holding and development of natural resources, hard assets and the exploration and mining of gold and other industrial minerals.

The former management's focus was to develop Optical Coherence Tomography ("OCT") Dental Imaging System as our first product but suspended further development until they receive further funding to continue development of our light based imaging modalities. Originally formed to commercialize the application of novel technologies in the dental industry, the Company had 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. Pursuant to the December 17, 2013 restructuring 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.

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 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.

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"). 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.

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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, Inc, 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, 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.

On November 7, 2012 the principals of MAB-Z received approval from the government of Zimbabwe, Africa to form a new parent holding corporation for the purpose of holding MAB-Z and the percentage investment stake in Kinsey. The new company will be called Mabwe Corporation (PVT) LTD ("MAB-C".) The new corporation will own 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 Inc., 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 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 along with it affiliate Yasheya who 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 until cancelled by either party upon intent with six months written notice.

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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.

Results of Operations

Three Months Ended March 31, 2014 and Three Months Ended March 31, 2013.

The following is derived from, and should be read in conjunction with, our condensed consolidated financial statements, and related notes for the three months ended March 31, 2014 and 2013.

Operating revenues. With the purchase of Derbyshire this quarter we have recorded revenues. This is the first quarter we have generated operating revenues since our inception in February 1998. Revenues from the Derbyshire purchase through TAG-Z our fully consolidated subsidiary were the results of 4 days of activity effective from the purchase date of March 28, 2014 until the end of the quarter for sales of stones, sand and dust. Revenues from commencement of production are expected to be recognized in the second quarter of 2014 as a result of operations of majority owned Mabwe Minerals Inc. receiving its first purchase order issued on October 31, 2013 by Steinbock Minerals LTD issued a for 2,000 metric tons of API crude barite ore and a second purchase order of 10,000 in December 2013.

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 ended March 31, 2014, our consolidated net loss from operations prior to elimination of non-controlling interest was $344,709 compared to $581,748 for the same period in the prior year, representing a decreased loss of $237,039. The decrease in our loss from operations was mainly due to an expense from stock award compensation for Company principals in the quarterly amount of $210,000 that was fully amortized by the end of the second quarter of last year. Additionally, site establishment costs were much higher last year at this time now that the current site is primarily built out with this year being one third less with a decrease to $17,689.

Total other expenses(income). Other expense was $40,895 and $170,080 for the three and ended March 31, 2014 and 2013, respectively. The increased expense for the three months ended March 31, 2013 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 loss on the investment for the three months ended March 31, 2014 was $12,367 compared to a decrease of $160,391 for the same period last year. Also interest expense almost increased 194% for the period ended March 31, 2014 compared to the same period last year. Current period interest expense in the amount of $28,529 is the result of new securitized loans and convertible notes issued recently.

Net loss. We had a net loss attributable to common shares of $239,699 and $473,492 or $0.00 per share, for the three months ended March 31, 2014 and 2013, respectively. The decrease in our loss was mainly due to an expense from stock award compensation for Company principals in the quarterly amount of $210,000 that was fully amortized by the end of the second quarter of last year, lower site establishment, a smaller loss on investment in WGB Kinsey offset by an increase in the company's interest expense.

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Liquidity and Capital Resources

Total assets. On March 31, 2014, we had total assets of $2,558,164, compared to $769,530 on December 31, 2013. We had cash and cash equivalents of $44,578 on March 31, 2014 compared to $57,090 at December 31, 2013. Our fixed assets (net of depreciation), which changed significantly due to the Derbyshire purchase, were $784,516 on March 31, 2014, compared to $9,590 on December 31, 2013. Prepaid expense increased to $272,308 on March 31, 2014 from $232,438 on December 31, 2013. This change was largely due to prepaid tax in the form of VAT that we will be able to start recouping once MAB-Z begins to take in taxable revenue from its customers. Inventory and goodwill were recorded as a result of Derbyshire purchase for $510,350 and $387,911, respectively.

Total liabilities. We had total liabilities of $3,355,798, on March 31, 2014 compared to $2,244,455 for the period ended December 31, 2013, due primarily to the purchase note in the amount of $600,000 given to Derbyshire former principals and a $400,000 convertible note issuance. Additionally, a value of $357,608 were assumed in the Derbyshire purchase exclusive of the $600,000 mentioned above.

Accrued interest on convertible notes on March 31, 2014 was $239,734 compared to $226,309 at December 31, 2013. At March 31, 2014, we had a negative working capital of $2,378,061 compared to a negative working capital of $1,919,882 on December 31, 2013. 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 purchase of Derbyshire, 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 three months ended March 31, 2014, we had a negative cash flow from operations of $547,478 compared to negative cash flow from operations of $191,143 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 down payment on the purchase of Derbyshire net of bank cash held by the company in the amount of $88,579 three month period ended March 31, 2014.

Cash flow from financing activities. During the three months ended March 31, 2014, we received $400,000 from the issuance of a note payable, plus $260,000 net cash from private placement issuance of the Company's Preferred Series B Convertible and common stack offset by a payment of $35,000 on the secured loan.

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