Royalty Management Holding Corporation — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; comparative figures are for 2022. This is an annual, not standalone fourth-quarter, filing. The October 31, 2023 business combination transformed the former SPAC into the successor company, with Legacy Royalty’s operating businesses and investments included in the consolidated group.
Business context and financial performance
The company describes an investment model focused on assets with near- and medium-term income potential, including natural resources, royalties, leases, environmental services, patents and emerging technologies. Revenue comes from environmental services, fee income and rental income.
- Revenue: $361,624, up from $172,686 in 2022. Environmental-services revenue was $202,723; fee income $71,402; rental income $87,500.
- Operating results: Operating expenses were $2,048,531, down from $3,647,578. Operating loss narrowed to $1,686,907 from $2,253,243.
- Net result: Net loss was $2,067,223, versus net income of $1,199,503 in 2022. The prior-year result included a $5,087,628 gain from warrant fair-value changes; 2023 recorded a $63,014 warrant fair-value loss. Interest income was $256,749 in 2023.
- Cash flow: Net cash used in operating activities was $1,913,533, compared with $265,014 provided in 2022. Investing activities provided $6,861,858, primarily reflecting release of trust-account funds; financing activities used $5,263,205.
- Assets and equity: Total assets were $13,610,731, down from $20,257,417, largely reflecting trust redemptions and withdrawal of trust funds at the combination. Total liabilities were $3,990,542, down from $8,542,465. Shareholders’ equity was $9,620,190.
- Debt and leases: At year-end, the balance sheet lists $1,681,755 in related-party notes payable and $270,000 in notes payable; convertible notes payable were zero after conversion at the business combination. Operating lease liabilities totaled about $452,585. The related-party note bears 10% interest; $310,507 of accrued interest was disclosed.
- Liquidity: The company reports only $77,023 of unrestricted cash in MD&A. The balance sheet, cash-flow statement and cash reconciliation show different cash figures; the filing does not provide a clear, consistent year-end cash value. Restricted cash of $176,800 secures a mining-permit performance bond.
Material changes and unusual items
- Revenue more than doubled, while operating expenses fell; however, the company remained loss-making and used cash in operations.
- The shift from 2022 net income to a 2023 net loss primarily reflects the prior-year noncash warrant revaluation gain, alongside continuing operating losses and convertible-debt interest expense.
- The business combination ended the SPAC trust account and converted outstanding convertible debt into common shares. Shares issued and outstanding increased to 14,270,761 at December 31, 2023, from 729,817 Class A shares and 2,975,000 Class B shares reported at year-end 2022.
- Investments in corporations and LLCs were $10,112,852, including $9,498,705 associated with MaxPro/Ferrox. Convertible notes receivable rose to $1,150,000. The company also wrote its 250,000 LBX tokens down to zero because no market existed; the related-party convertible note issued as consideration remains a separate disclosed obligation.
Outlook, risks and contingencies
- Going concern: The auditor’s report highlights substantial doubt about the company’s ability to continue as a going concern, citing significant operating losses. Management says additional capital is needed and expects to seek support from management and significant stockholders, but gives no assurance it will obtain funding or achieve profitability.
- Risks and outlook: The filing provides no quantified revenue, earnings or cash-flow guidance. Management cites general economic, financial and business conditions, tax-law changes and legal costs as factors that could affect results.
- Related parties: The company has leases and other arrangements with affiliated entities, including LRR, Land Betterment Corporation and American Resources Corporation. The Land Betterment services contract uses a cost-plus 12.5% margin. These relationships merit attention when assessing costs, governance and cash requirements.
- Contingencies and controls: Management says it knows of no pending or contemplated litigation in the business section; the notes separately describe normal-course claims whose potential losses cannot be reasonably estimated, but which management does not expect to have a material adverse effect. Management reported disclosure controls effective at a reasonable-assurance level; the auditor did not attest to internal-control effectiveness.
- Subsequent events: In February 2024, the company agreed to advance up to $100,000 to T.R. Mining in exchange for an overriding royalty; $20,000 had been advanced by the filing date. The filing also reports additional share issuances on note conversions, a $42,000 related-party promissory note, and further investment in Advanced Magnetic Lab.
Important facts for investors to verify
- Reconcile year-end cash and cash equivalents across MD&A, the balance sheet, cash-flow statement and cash-reconciliation note; confirm immediately available liquidity and expected funding needs.
- Assess the auditor’s going-concern warning, the feasibility and terms of proposed financing, and the company’s operating cash burn.
- Review the recoverability, valuation and income potential of significant investments, notes receivable and royalty assets, including MaxPro/Ferrox, Heart Water, Advanced Magnetic Lab and LBX tokens.
- Examine related-party balances, transactions, leases and service arrangements, including the accrued interest on the related-party note and its disclosed maturity.
- Confirm how the business-combination share issuances, warrant liabilities and potential future conversions or exercises affect ownership and dilution.