Forward-Looking Statements
All statements in this report other than statements of historical fact are "forward-looking statements". Such forward-looking statements include, but are not limited to, those relating to the following: our ability to secure necessary financing; fluctuations in interest rates; our ability to continue to grow and implement growth strategies, and future cash needs and operations and our business plans.
When used in this document, the words "anticipate," "estimate," "expect," "may," "plans," "project," and similar expressions are intended to be among the statements that identify forward-looking statements. Our results may differ significantly from the results discussed in the forward-looking statements. Such statements involve risks and uncertainties, including, but not limited to, those relating to costs, delays and difficulties related to our ability to attract and retain skilled managers and other personnel; the intense competition within our industry; the uncertainty of our ability to manage and continue our growth and implement our business strategy; our vulnerability to general economic conditions; accuracy of accounting and other estimates; our future financial and operating results, cash needs and demand for services; and our ability to maintain and comply with permits and licenses; as well as other risk factors described in this Report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those projected.
Overview
We were incorporated in the
In November, 2014,
In
In February, 2015 (the "Closing Date"), we entered into and consummated a merger
transaction pursuant to an Agreement and Plan of Merger (the "Merger Agreement")
by and among the Company,
In July, 2016, we formed
In October, 2016, pursuant to an Asset Purchase Agreement with
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In
Subsequent to the financial year end, in April, 2019,
Critical Accounting Policies and 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. As of
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
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Impairment of Long-Lived Assets
The Company evaluates its long-lived assets for impairment when events or
changes in circumstances indicate that the related carrying amounts may not be
recoverable. Asset impairment is considered to exist if the total estimated
future cash flows on an undiscounted basis are less than the carrying amount of
the asset. Any impairment losses are measured and recorded based on discounted
estimated future cash flows and are charged to income on the Company's
consolidated statements of operations. In estimating future cash flows, assets
are grouped at the lowest level for which there are identifiable cash flows that
are largely independent of future cash flows from other asset groups. The
Company's estimates of future cash flows are based on numerous assumptions,
including expected commodity prices, production levels, capital requirements and
estimated salvage values. It is possible that actual future cash flows will be
significantly different than the estimates, as actual future quantities of
recoverable material, future commodity prices, production levels and costs and
capital are each subject to significant risks and uncertainties. As of
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
Revenue Recognition
The Company earns revenue from the sale of products and services, which primarily include limestone, aggregates material and freight and delivery of customer products.
Revenue for product sales is recognized when evidence of an arrangement exists, the fee is fixed or determinable, title passes, which generally is when the product is shipped, and collection is reasonably assured. Product revenue generally includes sales of limestone and aggregates, net of discounts or allowances, if any, and freight and delivery charges billed to customers. Freight and delivery charges associated with cement sales are recorded on a net basis together with freight costs within cost of sales.
Accrued Reclamation Liability
The Company incurs reclamation liabilities as part of its mining activities.
Quarry activities require the removal and relocation of significant levels of
overburden to access materials of usable quantity and quality. The same
overburden material is used to reclaim depleted mine areas, which must be sloped
to a certain gradient and seeded to prevent erosion in the future. Reclamation
methods and requirements can differ depending on the quarry and state rules and
regulations in existence for certain locations. As of
Reclamation costs resulting from the normal use of long-lived assets, either owned or leased, are recognized over the period the asset is in use. The obligation, which cannot be reduced by estimated offsetting cash flows, is recorded at fair value as a liability at the obligating event date and is accreted through charges to operating expenses. The fair value is based on our estimate for a third party to perform the legally required reclamation tasks including a reasonable profit margin. This fair value is also capitalized as part of the carrying amount of the underlying asset and depreciated over the estimated useful life of the asset.
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The mining reclamation reserve is based on management's estimate of future cost requirements to reclaim property at its operating quarry site. Costs are estimated in current dollars and inflated until the expected time of payment using a future estimated inflation rate and then discounted back to present value using a credit-adjusted, risk-free rate on obligations of similar maturity adjusted to reflect our credit rating. The Company will review reclamation liabilities at least every three years for a revision to the cost or a change in the estimated settlement date. Additionally, reclamation liabilities are reviewed in the period that a triggering event occurs that would result in either a revision to the cost or a change in the estimated settlement date. Examples of events that would trigger a change in the cost include a new reclamation law or amendment to an existing mineral lease. Examples of events that would cause a change in the estimated settlement date include the acquisition of additional reserves or early or delayed closure of a site. Any affect to earnings from cost revisions is included in cost of revenue.
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
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
In
Management believes that, other than described above in relation to ASU 2016-02
recently issued accounting pronouncements will have no impact on the financial
statements of the Company. As this standard is applicable for the Company for
the financial year commencing
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Results of Operations for the Fiscal Year Ended
For the For the year ended year ended March 31, March 31, 2019 2018 Revenue$ 1,430,338 $ 1,060,438 Cost of goods sold 1,304,256 961,809 Gross profit 126,082 98,629
Selling, general and administrative 8,835,445 5,472,254 Loss from operations
(8,709,363 ) (5,373,625 ) Loss on extinguishment of debt - (12,083,317 ) Other income 1,000,000 - Interest expense, net (516,036 ) (749,515 ) Loss before income tax provision (8,225,399 ) (18,206,457 ) Income tax expense - 5,313 Net loss (8,225,399 ) (18,211,770 ) Revenues
Revenues for the year ended
Cost of Goods Sold
Cost of goods sold for the year ended
Selling, general and administrative
Operating expenses for the year ended
Loss on extinguishment of debt
The loss on extinguishment of debt arose on the Company settling debt
outstanding with shares that had a fair value of
Other income
The increase in Other income is largely driven by
Interest expense, net
Interest decreased as a result of the extinguishment of debt and repayment of notes payable during the year.
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Liquidity and Capital Resources
As of
We do not generate adequate cash flows to support our existing operations.
Moreover, the historical and existing capital structure is not adequate to fund
our planned growth. Our current cash requirements are significant due to our
business plan, which contemplates future acquisitions, development of the
Company's
Other than as stated above, we currently do not have any arrangements for
additional financing, and we may not be able to obtain financing when required.
Our future is dependent upon our ability to obtain financing, a successful
marketing and promotion program and, further in the future, achieving a
profitable level of operations. Obtaining commercial loans, assuming those loans
would be available, will increase our liabilities and future cash commitments.
We will require additional funds to achieve and maintain compliance with
Going Concern
We have incurred net losses since our inception on
The Company is currently working through a number of opportunities to ensure the business will continue as a going concern. These include:
1. The finalization of the development of the
completion in the later part of the Company'sMarch 31, 2020 financial year. This will result in sustained annual revenues by providing transloading services, realized gains on the sale of land, and limited future capital development costs.
2. Certain public infrastructure costs that will be reimbursed through the
establishment (after the year-end) of theRocky Mountain Rail Park Metropolitan District , and
3. Expansion of the Mid-Continent Quarry, which will allow greater volume
production with limited fixed cost increases.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
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