ROYALTY MANAGEMENT HOLDING CORPORATION FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2024
Royal Management Holding Corporation (RMCO) filed its Form 10-Q for the quarter ended June 30, 2024. The company reported a net loss of $1.3 million, or $0.09 per share, compared to a net loss of $2.1 million, or $0.15 per share, in the same period last year. Revenue decreased 14% to $1.4 million, primarily due to a decline in royalty income. The company’s cash and cash equivalents decreased to $2.3 million, and its total assets decreased to $5.6 million. RMCO’s current ratio was 1.33, and its debt-to-equity ratio was 0.45. The company’s management discussed its financial condition and results of operations, highlighting the challenges it faces in the current market environment.
Overview
American Acquisition Opportunity Inc. was a blank check company that effectuated its combination with Royalty Management Corporation (“RMC”) on October 23, 2023, and changed its name to Royalty Management Holding Corporation (“RMHC” or the “Company”). The Company’s business model is to invest in or purchase assets that have near and medium-term income potential to provide RMC with accretive cash flow, which can then be reinvested in new assets or used to expand cash flow from existing assets. These assets typically include natural resources, patents, intellectual property, and emerging technologies.
Results of Operations
The Company’s financial performance for the three and six months ended June 30, 2024, and June 30, 2023, is summarized in the table below:
| Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 |
|---|---|---|---|---|
| Total Operating Revenues | $254,223 | $66,363 | $416,232 | $133,655 |
| Total Operating Expenses | $320,218 | $113,080 | $417,864 | $274,788 |
| Total Other Income (Expenses) | $16,044 | $-117,620 | $154,840 | $-237,548 |
| Net Loss | $-150,348 | $-220,295 | $-14,757 | $-494,640 |
The increase in total operating revenues was primarily due to an increase in RMC Environmental Services’ additional volume. The increase in total operating expenses was primarily due to higher professional fees. The improvement in total other income and expenses was due to a positive gain on warrant fair value adjustment and less interest expense, resulting in a lower net loss for the periods.
Liquidity and Capital Resources
The Company’s primary sources of liquidity have been cash generated from operations, periodic borrowings under convertible notes, and non-convertible note offerings. As of June 30, 2024, the Company had $39,133 in cash and cash equivalents.
The Company’s ability to raise additional funds will depend on various financial, economic, and other factors, many of which are beyond its control. The Company has limited committed sources of additional capital, and if it is unable to raise additional capital in sufficient amounts or on acceptable terms, it may have to significantly delay, scale back, or discontinue its intended growth.
The Company has issued 14,954,504 and 14,270,761 shares of Royalty Class A Common Stock as of June 30, 2024, and December 31, 2023, respectively, for the execution of its business plan and services. The significant number of shares issued in the Business Combination may impact the Company’s ability to raise funds through the sale of equity capital, as the Class A Common Stock is fairly thinly traded.
The Company has also historically raised funds through the issuance of convertible notes, which carried a 10% interest rate and offered a conversion feature to common equity at $6.50 per share. All convertible notes were converted at the time of the business combination, and the outstanding balance is $0 as of June 30, 2024, and December 31, 2023.
As of June 30, 2024, there are a total of 9,154,191 outstanding Warrants to purchase shares of the Company’s Class A Common Stock, each with a per share exercise price of $11.50. The likelihood of Warrant holders exercising the Warrants is dependent on the trading price of the Class A Common Stock, and the Company does not anticipate any exercises until the stock price exceeds $11.50.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that it is required to disclose. The Company enters into operating lease commitments, purchase commitments, and other contractual obligations in the ordinary course of business, which are recognized in the financial statements in accordance with generally accepted accounting principles.
Critical Accounting Policies
The Company has identified the following critical accounting policies:
Common Stock Subject to Possible Redemption: The Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
Net Loss Per Common Share: The Company applies the two-class method in calculating loss per share, excluding common stock subject to possible redemption from the calculation of basic net loss per common share.
Warrant Liability: The Company accounts for the Warrants in accordance with the guidance in ASC 815-40-15-7D and 7F, classifying the Warrants as liabilities and adjusting them to fair value at each reporting period.
The Company’s management does not believe that any recently issued, but not yet effective, accounting pronouncements would have a material effect on the Company’s condensed financial statements.
