Fonon Corp - FORM 10-Q - November 12, 2013

Attached files

file	filename
EXCEL - IDEA: XBRL DOCUMENT - Fonon Corp	Financial_Report.xls
EX-32.1 - EXHIBIT 32.1 - Fonon Corp	v359144_ex32-1.htm
EX-31.1 - EXHIBIT 31.1 - Fonon Corp	v359144_ex31-1.htm
EX-32.2 - EXHIBIT 32.2 - Fonon Corp	v359144_ex32-2.htm
EX-31.2 - EXHIBIT 31.2 - Fonon Corp	v359144_ex31-2.htm

U. S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED, September 30, 2013

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO ___________

Commission File Number: 000-51443

MABWE MINERALS INC.

(Exact name of registrant as specified in its charter)

Wyoming		36-4739442
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

41 Howe Lane

Freehold N.J. 07728

(Address of Principal Executive Offices)

(732) 252-5146

(registrant’s telephone number)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of regulation S-T (paragraph 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerate filer ¨	Accelerated filer ¨
Non-accelerated filer ¨ ( Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of October 29, 2013, there were 140,248,392 shares of the issuer’s common stock, $0.001 par value, outstanding.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets as of September 30, 2013 (unaudited) and December 31, 2012	F-1

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2013 and 2012 (unaudited) and exploration period June 29, 2012 through September 30, 2013	F-2

Condensed Consolidated Statement of Stockholders’ Equity for the Nine Months Ended September 30, 2013 (unaudited)	F-3

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2013 and 2012 (unaudited) and exploration period June 29, 2012 through September 30, 2013	F-4

Notes to Condensed Consolidated Financial Statements (unaudited)	F-5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1

Item 3. Quantitative and Qualitative Disclosures About Market Risk	7

Item 4. Controls and Procedures	7

PART II - OTHER INFORMATION

Item 1. Legal Proceedings	8

Item 1A. Risk Factors	8

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	8

Item 3. Defaults Upon Senior Securities	8

Item 4. Mine Safety Disclosures	8

Item 5. Other Information	8

Item 6. Exhibits	9

Signatures	10

	I

MABWE MINERALS INC.

(FORMERLY RAPTOR NETWORKS TECHNOLOGY, INC.)

(AN EXPLORATION STAGE COMPANY)

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2013		December 31, 2012
	(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash	$	125,938	$	17,605
Prepaid Expenses		272,982		76,411

Total current assets		398,920		94,016

OTHER ASSETS
Investment - W.G.B. Kinsey & Co (Pvt) Ltd		341,919		555,275
Mineral Rights		453,340		433,000

Total Other Assets		795,259		988,275

INTANGIBLE ASSETS
Goodwill		25,000		25,000
Total Intangible Assets		25,000		25,000

TOTAL ASSETS	$	1,219,179	$	1,107,291

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	205,280	$	59,753
Related Party Payable (Receivable) (Net)		(86,260)		2,427
Note Payable Dodge Mines		-		13,500
Loan payable other		46,816		42,786
Liability for stock to be issued		-		20,000
Securitized Loan		439,425		-

Total current liabilities		605,261		138,466

TOTAL LIABILITIES		605,261		138,466

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Preferred stock, no par value; 5,000,000 shares authorized; no shares issued and outstanding		-		-
Common stock, $0.001 par; 500,000,000 shares authorized; 139,675,750 and 131,980,750 shares issued and outstanding		139,676		131,981
Additional paid-in capital		86,995,449		86,112,423
Additional paid-in capital - Warrants		177,266		-
Accumulated deficit (PRIOR to exploration stage)		(85,075,965)		(85,075,965)
Deficits accumulated during the exploration stage		(1,622,508)		(199,614)

Total stockholders' equity		613,918		968,825

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,219,179	$	1,107,291

The accompanying notes are an integral part of these condensed consolidated financial statements.

	F-1

MABWE MINERALS INC.

(FORMERLY RAPTOR NETWORKS TECHNOLOGY, INC.)

(AN EXPLORATION STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

									For the period
									June 29, 2012
	For the Three Months Ended				For the Nine Months Ended				through
	September 30,		September 30,		September 30,		September 30,		September 30, 2013
	2013		2012		2013		2012		(exploration stage)
Operations:
OPERATING EXPENSES
Professional, consulting and marketing fees	$	169,181	$	32,075	$	333,360	$	62,050	$	406,992
Exploration Cost		230,578		-		230,578		-		230,578
Research and development		379,861		99,219		458,926		99,219		566,962
General and administrative		49,356		20,129		163,338		24,288		233,772

Total operating expenses		828,976		151,423		1,186,202		185,557		1,438,304

Loss from Operations		(828,976)		(151,423)		(1,186,202)		(185,557)		(1,438,304)

OTHER INCOME (EXPENSE)
Interest income		-		-		-		-		-
Gain (Loss) on Investment - W.G.B. Kinsey - Equity Method		(13,923)		-		(213,356)		-		(158,081)
Change in fair value of conversion option and warrant liabilities		-		-		-		6,308,136		-
Amortization of discount on convertible debt		-		-		-		-		-
Interest expense		(17,750)		(1,608)		(23,337)		(520,361)		(26,123)
Miscellaneous Expense		-		-		-		-		-

Total other income (expense)		(31,673)		(1,608)		(236,693)		5,787,775		(184,204)

Income (loss) before income taxes		(860,649)		(153,031)		(1,422,895)		5,602,218		(1,622,508)

Income tax benefit		-		-		-		-		-

NET INCOME (LOSS)	$	(860,649)	$	(153,031)	$	(1,422,895)	$	5,602,218	$	(1,622,508)

Income (loss) per share - basic	$	(0.01)	$	(0.00)	$	(0.01)	$	0.10	$	(0.01)

Weighted average number of shares outstanding - basic		136,333,717		119,074,174		136,240,072		53,809,390		130,552,319

Income (loss) per share - diluted	$	(0.01)	$	(0.00)	$	(0.01)	$	0.09	$	(0.01)

Weighted average number of shares outstanding - diluted		168,627,566		129,467,593		168,400,436		61,924,722		157,689,907

The accompanying notes are an integral part of these condensed consolidated financial statements.

	F-2

MABWE MINERALS INC.

(FORMERLY RAPTOR NETWORKS TECHNOLOGY, INC.)

(AN EXPLORATION STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(UNAUDITED)

						Additional				Defict
				Additional		Paid in				Accumulated
	Common Stock			Paid in		Capital		Accumulated		During the
	Shares	Amount		Capital		Warrants		Deficit		Exploration Stage		Total
Balance, January 1, 2011	8,808,350	$	8,808	$	66,585,639		-	$	(84,392,048)	$	-	$	(17,797,601)

Shares of stock issued to Raptor Resources Holdings Incin the acquisition of 55% ownership	10,992,831		10,993		(10,993)		-		-		-		-

Net loss	-		-		-		-		(6,439,166)		-		(6,439,166)

Balance, December 31, 2011	19,801,181	$	19,801	$	66,574,646	$	-	$	(90,831,214)	$	-	$	(24,236,767)

Conversion of convertible notes, warrants and derivative liability to common shares	13,510,752		13,511		18,434,071		-		-		-		18,447,582

Shares issued to RRHI for investment	79,078,817		79,079		(79,079)		-		-		-		-

Net income through June 28, 2012	-		-		-		-		5,755,249		-		5,755,249

Shares issued for sevices and prepaid expenses	6,590,000		6,590		145,785		-		-		-		152,375

Shares issued for cash	5,000,000		5,000		245,000		-		-		-		250,000

Shares issued for Lantis/RRHI Restructure	3,000,000		3,000		297,000		-		-		-		300,000

Shares issued for equity purchase (WGB Kinsey & Co)	5,000,000		5,000		495,000		-				-		500,000

Net loss for the period June 29, 2012 through December 31, 2012	-		-		-		-		-		(199,614)		(199,614)

Balance, December 31, 2012	131,980,750	$	131,981	$	86,112,423	$	-	$	(85,075,965)	$	(199,614)	$	968,825

Net Income (Loss)	-		-		-		-		-		(322,464)		(322,464)

Shares issued for cash	2,505,000		2,505		137,353		80,642		-		-		220,500

Shares issued for services and prepaid expenses	1,100,000		1,100		75,900		-		-		-		77,000

Balance, March 31, 2013	135,585,750	$	135,586	$	86,325,676	$	80,642	$	(85,075,965)	$	(522,078)	$	943,861

Net Income (Loss)	-		-		-		-		-		(239,781)		(239,781)

Shares issued for cash	1,600,000		1,600		61,776		96,624		-		-		160,000

Shares issued for services and prepaid expenses	95,000		95		9,892		-		-		-		9,987

Balance, June 30, 2013	137,280,750	$	137,281	$	86,397,343	$	177,267	$	(85,075,965)	$	(761,859)	$	874,067

Net Income (Loss)	-		-		-		-		-		(860,649)		(860,649)

Shares issued for cash	2,000,000		2,000		498,000		-		-		-		500,000

Shares issued for services and prepaid expenses	395,000		395		100,105		-		-		-		100,500

Balance, September 30, 2013	139,675,750	$	139,676	$	86,995,448	$	177,267	$	(85,075,965)	$	(1,622,508)	$	613,918

The accompanying notes are an integral part of these consolidated financial statements.

	F-3

MABWE MINERALS INC.

(FORMERLY RAPTOR NETWORKS TECHNOLOGY, INC.)

(AN EXPLORATION STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

					For the period
					June 29, 2012
					through
	For the Nine Months Ended September 30,				September 30, 2013
	2013		2012		(exploration stage)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(1,422,895)	$	5,602,218	$	(1,622,508)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Amortization of discount on convertible debt and debt issuance costs		-		-		-
Common Stock issues for services		187,487		23,375		269,837
Change in fair value of conversion option and warrant liabilities		-		(6,308,136)		-
Change in fair value of investment		213,356		-		158,081
Changes in operating assets and liabilities:
Prepaid expenses and other assets		(196,571)		(13,356)		(202,957)
Goodwill		-		(25,000)		-
Accounts payable and accrued liabilities		145,525		548,013		176,339
Net cash used in operating activities		(1,073,098)		(172,886)		(1,221,208)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Acquisitions of fixed assets, net of disposals		(20,340)		-		(20,340)
Net cash provided by investing activities		(20,340)		-		(20,340)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable		443,458		40,000		486,244
Proceeds from related parties, net of repayments		(88,687)		-		(192,258)
Proceeds from private placement, net of fees (including cash received for shares to be issued) - preferred and common stock		860,500		250,000		1,130,500
Repayments made on note payable for Dodge Mines		(13,500)		(27,000)		(57,000)
Net cash provided by financing activities		1,201,771		263,000		1,367,486
Net increase (decrease) in cash and cash equivalents		108,333		90,114		125,938
CASH AT BEGINNING OF YEAR		17,605		2,323		-
CASH AT END OF PERIOD	$	125,938	$	92,437	$	125,938

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	$	-	$	-	$	-
Cash paid for income taxes	$	-	$	-	$	-

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES:
Accrued interest payable added to principal balance	$	26,241	$	1,608	$	29,027
Goodwill acquired by related party payable	$	-	$	-	$	25,000
Prepaid expenses incurred as a result of issuance of common stock	$	97,500	$	-	$	242,500
Dodge Mines and related debt acquired from related party payable	$	-	$	-	$	406,000
Common stock issued for investment in Kinsey	$	-	$	-	$	500,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

	F-4

MABWE MINERALS INC. AND SUBSIDIARY

(FORMERLY RAPTOR NETWORKS TECHNOLOGY, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. General

Organization and Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared by Mabwe Minerals Inc. f/k/a Raptor Networks Technology, Inc. (the “Company”) without audit (unless otherwise indicated) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements include all of the adjustments which, in the opinion of management, are necessary for a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. The September 30, 2013 condensed consolidated balance sheet was derived from audited financial statements as of December 31, 2012. These financial statements should be read in conjunction with the audited financial statements at December 31, 2012 included in the Company’s most recent annual report on Form 10-K. Results of operations for the nine months ended September 30, 2013 are not necessarily indicative of the results of operations expected for the full year or for any other period.

Effective with the change in control and conversion of notes and liabilities to equity, the Company entered the exploration stage on June 29, 2012.

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 ("Series B Preferred Stock"). Each share of Series B Preferred Stock is convertible into 50 common shares of Raptor Resources Holdings Inc. and 25 common shares of Mabwe Minerals Inc., both subject to a one year holding period. The remaining 51% ownership in MAB-Z is held by a director of the Company, Zimbabwean 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 MAB-Z. MAB-Z is a Variable Interest Entity (VIE) with respect to guidance under ASC 810-10-5 and is therefore consolidated.

The Company formally, on September 28, 2012, appointed Tapiwa Gurupira, a 41% stakeholder of MAB-Z, as a Director of Mabwe Minerals Inc.

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 its percentage investment stake in WGB Kinsey & Company (“Kinsey”.) The new company was 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 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.

	F-5

MABWE MINERALS INC. AND SUBSIDIARY

(FORMERLY RAPTOR NETWORKS TECHNOLOGY, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. General (continued)

Going Concern

In September 2008, the Company shifted its principal operating model from product sales to licensing enabling a reduction in headcount, footprint and infrastructure that reduced operating expense run rates substantially. Since this shift in business model was not successful the Company entered into an agreement with California Capital Equity, LLC (“CCE”) granting CCE an exclusive license in its intellectual property, leaving the Company without any continuing rights in or to its intellectual property.

On August 1, 2011 CCE exercised its right as a secured lender against the Company’s assets since the Company was unable to pay its outstanding notes that were due and payable and held a public foreclosure sale of substantially all of the Company’s assets. CCE acquired all of these assets at a price of $100,000, which price was credited against the outstanding notes. As a result of the public sale on August 1, 2011, the Company retained no material assets with which to continue its operations. The Company sought companies or businesses with an interest in utilizing the Company as a public shell vehicle and in August 2011 signed a non-binding Letter of Intent with Raptor Resources Holdings Inc. (formerly Lantis Laser Inc. (OTCQB: RRHI) which on June 28, 2012 consummated the acquisition of an 80.14% controlling equity interest in the Company. Raptor Resources Holdings Inc. issued 5,000,000 shares of their common stock to CCE and itself received 10,992,831 (post reverse split adjusted) shares in the Company to attain a 55.52% ownership as of June 28, 2012. The Company filed a Schedule 14C that was effective June 28, 2012 to amend its charter to increase the authorized shares of common stock of the Company to 500,000,000 shares. The Company issued 79,078,817 additional shares of common stock to Raptor Resources Holdings Inc. to bring the total percentage equity owned by Raptor Resources Holdings Inc. to 80.14%, and issued 13,510,752 shares of stock to CCE in consideration of the conversion of the convertible notes outstanding to CCE. The convertible notes previously issued by Raptor Networks Technology, Inc. were converted and the Company engaged in a 1:10 reverse stock split.

Simultaneous with the reverse stock split the company was renamed Mabwe Minerals Inc. (“Mabwe” or “the Company”.) Former shareholders of Raptor Networks Technology, Inc. (“RPTN”) were reissued one share of Mabwe Minerals Inc. for each 10 shares of RPTN. No fractional shares were issued resulting in a negligible increase to the total outstanding shares on a post-split basis. All shares herein are reflected post-split in accordance with the Staff Accounting Bulletin.

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 production anticipated to commence in the third quarter of 2013 on the Dodge Mines, the Company will be well positioned to succeed.

The financial statements do not include any adjustments relating to the recoverability and reclassification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

	F-6

MABWE MINERALS INC. AND SUBSIDIARY

(FORMERLY RAPTOR NETWORKS TECHNOLOGY, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. General (continued)

Summary of Significant Accounting Policies

For a complete discussion of the Company’s significant accounting policies, please refer to the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2012.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its variable interest entities (“VIEs”) for which the Company is the primary beneficiary. All significant intercompany accounts and transactions have been eliminated in consolidation.

The Company has adopted the provisions of ASC 810-10-5, “Consolidation of VIEs”. ASC 810-10-5 requires a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIEs residual returns.

As a result of the investment by Mabwe Minerals Inc. funded by Preferred Convertible Series B Stock of Raptor Resources Holdings Inc., MAB – Z has been identified by the Company as a VIE. The value of the Series B Preferred Convertible Stock is $25,000, which is reflected as Goodwill on the condensed consolidated balance sheet at September 30, 2013.

In addition, as the result of the investment by Mabwe Minerals Inc., 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.

Noncontrolling Interests

In accordance with ASC 810-10-45, Noncontrolling Interests in Consolidated Financial Statements, the Company classifies controlling interests as a component of equity within the balance sheets. The Company has retroactively applied the provisions in ASC 810-10-45 to the financial information for the period ended September 30, 2013. There was no activity from December 2, 2011 through June 28, 2012 in MAB-Z, the Company’s majority-owned subsidiary.

Revenue Recognition

Prior to the change in business, the Company recorded revenues when the following criteria were met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred; (iii) the price to the customer is fixed or determinable; and (iv) collection of the sales price is reasonably assured. Delivery occurs when goods are shipped and title and risk of loss have passed to the customer. Revenue is deferred in all instances where the earnings process is incomplete. The Company will recognize revenue from sales when all contingencies contained in agreements are satisfied and risk of loss is transferred to shipper or other agent of consignee. Payments received before all of the relevant criteria for revenue recognition are satisfied will be recorded as deferred revenue in the accompanying condensed consolidated balance sheets. Revenues and costs of revenues from contracts are recognized during the period in which the service was performed.

Since the Company entered the Exploration Stage, no revenues have been recorded.

	F-7

MABWE MINERALS INC. AND SUBSIDIARY

(FORMERLY RAPTOR NETWORKS TECHNOLOGY, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. General (continued)

Impairment or Disposal of Long-Lived Assets

The Company reviews its long-lived assets and certain related intangibles for impairment periodically, and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. When necessary, impaired assets are written down to estimated fair value based on the best information available. Estimated fair value is generally based on either appraised value or measured by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates. There were no assets that were considered to be impaired as of September 30, 2013 and December 31, 2012.

Income Taxes

The Company accounts for income taxes in accordance with the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the condensed consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates for the periods in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company records a valuation allowance if based on the weight of available evidence, it is more likely than not that some or all of the deferred tax asset will not be realized. In determining the possible realization of deferred tax assets, the Company considers future taxable income from the following sources: (i) the reversal of taxable temporary differences, (ii) taxable income from future operations and (iii) tax planning strategies that, if necessary, would be implemented to accelerate taxable income into periods in which net operating losses might otherwise expire.

The Company also recognizes the income tax effect of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. If recognized, the tax portion of the adjustment would affect the effective tax rate.

Earnings or Loss per Common Share

Basic earnings or loss per share is computed by dividing the net income or loss available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded when there is a loss as the effect is anti-dilutive. As a result, for the three and nine months ended September 30, 2013 basic and diluted earnings per share were the same.

Uncertainty in Income Taxes

The Company follows ASC 740-10, Accounting for Uncertainty in Income Taxes. This interpretation requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. ASC 740-10 is effective for fiscal years beginning after December 15, 2006. Management has adopted ASC 740-10 for 2008, and they evaluate their tax positions on an annual basis. The Company’s policy is to recognize both interest and penalties related to unrecognized tax benefits expected to result in payment of cash within one year are classified as accrued liabilities, while those expected beyond one year are classified as other liabilities. The Company has not recorded any interest or penalties since its inception.

The Company files income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. The tax years for 2009 to 2011 remain open for examination by federal and/or state tax jurisdictions. The Company is currently not under examination by any other tax jurisdictions for any tax year.

	F-8

MABWE MINERALS INC. AND SUBSIDIARY

(FORMERLY RAPTOR NETWORKS TECHNOLOGY, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. General (continued)

Goodwill

Effective July 18, 2012, the Company’s acquired a 49% interest of Mabwe Minerals Zimbabwe (PVT) LTD (MAB-Z) for 25,000 shares of Series B Convertible Preferred Stock of Raptor Resources Holdings Inc. The value of this transaction was $25,000 resulted in the Company recording Goodwill as part of the purchase transaction. MAB-Z is the operating arm of the Company and at the time of the purchase its net assets consisted chiefly of mining rights associated with the main line of business of the company. Management periodically assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. At December 31, 2012, management has determined that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount and thus no need to adjust for impairment.

Subsequent Events

In accordance with ASC 855 “Subsequent Events”, the Company is required to disclose the date through which subsequent events have been evaluated and whether that date is the date the financial statements were issued or the date the financial statements were available to be issued.

Recent Accounting Pronouncements

There have been no recent accounting pronouncements or changes in accounting pronouncements during the nine months ended September 30, 2013, as compared to the recent accounting pronouncements disclosed in the Company’s Annual Report on Form 10-K that are of material significance, or have potential material significance, to the Company.

2. Related Party Loans

With the acquisition of MAB-Z, the chief revenue producing asset (the mining rights of the Dodge Mine Blocks 1-6 and the associated note payable) was transferred from a fully-consolidated subsidiary of Raptor Resources Holdings Inc. TAG-Z to MAB-Z, a fully-consolidated variable interest entity of the Company, a majority-owned subsidiary of Raptor Resources Holdings Inc. The value transferred to MAB-Z for the mining rights has a book value of $433,000 offset by a note payable of $57,000 at the time of transfer. This value of $376,000 in related party loans is further offset by net payment of expenses incurred by and paid on behalf of consolidating parent Raptor Resources Holdings Inc. Though the balance in the related party payable is nearly identical to that of the Dodge Mine Blocks Net asset there have been several invoices flow through the account in either direction. The balance of related party payable contra balance of $86,260 consists of Company stock issued on behalf of Raptor Resources Holdings Inc. as payment for an advisory agreement in the amount of $70,000 along with the payment of other bills on behalf of Raptor Resources Holdings Inc., consisting of mainly administrative costs and legal and accounting fees. The value of the Note Payable for the Dodge Mines at September 30, 2013 was $0. Also in this related party activity is the charge for the 25,000 shares of stock that were issued by Raptor Resources Holdings Inc. to acquire MAB-Z. This transaction resulted in the recording of Goodwill on the books of MAB-Z, as the value of the 25,000 shares of Series B Preferred Convertible Stock of Raptor Resources Holdings Inc. has a value of $25,000. The Company is the ultimate beneficiary of that payment. Further consideration was exchanged but no other asset was created. Management performed an evaluation of the goodwill at December 31, 2012, and determined that no impairment adjustment was necessary at this time. In addition, the Company has recorded a $5,000 liability due to a director of the Company for an advance made to a non-related third party under a land lease agreement.

	F-9

MABWE MINERALS INC. AND SUBSIDIARY

(FORMERLY RAPTOR NETWORKS TECHNOLOGY, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3. Loans Payable – Other

Effective July 26, 2012 MAB-Z entered into a one year financing short term loan agreement with Overseas Trade and Financing Limited for an amount of $40,000 with accrued interest at the rate of 12% . The balance with interest and fees is $46,816 at September 30, 2013. Since the loan was not fully repaid within 360 days of the effective date late fees are now accruing at a rate of 6% per annum. Extension and drawdown fees are 1% and 2% respectively.

4. Investment

On October 29, 2012, the Company, MAB-C, and WGB Kinsey & Company (“Kinsey”) entered into an Equity Exchange Agreement (“Equity Exchange Agreement”). In accordance with the Equity Exchange Agreement, the Company issued 5,000,000 shares of their common stock to Kinsey in exchange for a 25% ownership for 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, the Company 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.

The investment has been accounted for as an equity investment under ASC 323. In accordance with the ASC, the investment will be maintained at fair value, and increased or decreased based upon the net income or loss of Kinsey as well as any contributions made and dividends paid. The Company’s investment decreased $213,356 as a result of the incremental loss of Kinsey for the nine months ended September 30, 2013 at 25% ownership by MAB-C.

	F-10

MABWE MINERALS INC. AND SUBSIDIARY

(FORMERLY RAPTOR NETWORKS TECHNOLOGY, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5. Fair Value Disclosures

ASC 820-10 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820-10 are described below:

	Level 1	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
	Level 2	Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
	Level 3	Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

The following tables set forth the Company’s financial assets and liabilities measured at fair value by level within the fair value hierarchy. As required by ASC 820-10, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The table below sets forth a summary of the fair values of the Company’s financial assets as of September 30, 2013:

	Total		Level 1		Level 2		Level 3
ASSETS:
Investment, equity method	$	341,919	$	-	$	341,919	$	-

	$	341,919	$	-	$	341,919	$	-

6. Warrants

Warrants granted to investors, brokers and other service providers are summarized as follows:

Warrants	Exercise Price		Date Issued	Term
60,071	$	4.40	1/17/2007	7 Years
1,505,000	$	0.15	3/4/2013	1 Years
1,600,000	$	0.15	Apr - Jun 2013	1 Years

Total: 3,165,071

	F-11

MABWE MINERALS INC. AND SUBSIDIARY

(FORMERLY RAPTOR NETWORKS TECHNOLOGY, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7. Acquisition

Effective July 18, 2012, the Company acquired a 49% interest of Mabwe Minerals Zimbabwe (PVT) LTD (MAB-Z) for 25,000 shares of Series B Convertible Preferred Stock of Raptor Resources Holdings Inc. The value of this transaction was $25,000. Management performed an evaluation of the goodwill at December 31, 2012, and determined that no impairment adjustment was necessary at this time.

MAB – Z was essentially a newly formed entity. The $25,000 was recorded as Goodwill.

Net Assets Purchased
Goodwill		25,000

Purchase Price	$	25,000

8. Stockholders’ Equity

The Company’s authorized capital consists of 500,000,000 shares of common stock, par value $0.001 per share and 5,000,000 shares of preferred stock, no par value per share.

During the three months ended September 30, 2013, the Company issued 2,000,000 shares of stock through private placement for cash in the amount of $500,000. No warrants were issued with this placement. The Company also issued 305,000 shares of its common stock for services to be rendered under a one year advisory agreement with DES Consulting at a value of $91,500 ($.30/share.) The Company also issued 90,000 shares for accounting services rendered and to be rendered in 2013 at a value of $9,000 ($.10/share.) The controlling interest of Raptor Resources Holdings Inc. was diluted to 64.49% based on new issuances of common stock that quarter.

During the three months ended June 30, 2013, the Company issued 1,600,000 shares of stock through a private placement for cash in the amount of $160,000. The stock was issued with 1,600,000 warrants which are exercisable for one year at $.15 per share. The Company also issued 25,000 shares as payment for accounting services rendered valued at $2,500 and 70,000 shares as payment for promotional services rendered valued at $7,848. The controlling interest of Raptor Resources Holdings Inc. was diluted to 65.61% based on new issuances of common stock that quarter.

During the three months ended March 31, 2013, the Company issued 1,000,000 shares for $70,000 ($.07/share) through a private placement without warrants. The Company also issued 1,000,000 shares at a value of $70,000 ($.07/share) on behalf of Raptor Resources Holdings Inc. as payment for an advisory agreement in lieu of cash. 100,000 shares were issued for public relations services to be provided over the first six months of 2013 at a value of $7,000. During this period 1,505,000 shares were issued through private placement for cash along with 1,505,000 warrants that are exercisable for one year at $.15/share. The total number of shares issued for cash for the three months ended March 31, 2013 was 2,505,000 for $220,500. The controlling interest of Raptor Resources Holdings Inc. was diluted to 66.43% based on new issuances of common stock that quarter.

	F-12

MABWE MINERALS INC. AND SUBSIDIARY

(FORMERLY RAPTOR NETWORKS TECHNOLOGY, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8. Stockholders’ Equity (continued)

During the year ended December 31, 2012, Mabwe Minerals Inc. issued the following shares: 5,000,000 shares of common stock valued at $500,000 to purchase for MAB-C (variable interest entity of Mabwe Minerals Inc.), a 25% ownership in Kinsey per the Equity Exchange Agreement;

5,000,000 shares of common stock were issued for cash of $250,000;

6,590,000 shares of common stock valued at $152,375 were issued for services rendered and to be rendered;

3,000,000 shares of common stock to two former officers of Raptor Resources Holdings Inc. to offset the related party debt outstanding with Raptor Resources Holdings Inc.;

During 2012, the Company executed a 1:10 reverse stock split where every ten (10) shares of stock was converted to one (1) share. No fractional shares were issued resulting in a negligible increase to the total outstanding shares on a post-split basis. All shares are reflected on a post-split basis unless indicated; and

On June 28, 2012, the Company successfully amended its charter which enabled it to increase the authorized shares to 500,000,000 and then the Company issued 79,078,817 shares of common stock to Raptor Resources Holdings Inc. to bring the total percentage equity owned by Raptor Resources Holdings Inc. to 80.14%, and simultaneously issued 13,510,752 shares of the Company stock to CCE in consideration for the conversion of the convertible notes outstanding to common stock. During 2011, the Company issued 10,992,831 shares of common stock (on a post-split basis) to Raptor Resources Holdings Inc.(f/k/a Lantis Laser Inc.) representing 55.52% of the Company. The transaction was treated as an equity transaction, and Raptor Resources Holdings Inc. issued 5,000,000 shares of their stock to CCE in exchange for the conversion of their debt to common stock of the Company.

There were no shares of common stock issued during 2011.

As of September, 30, 2013, the Company has 139,675,750 shares issued and outstanding.

Commitments

Land Lease Agreement

On May 13, 2013, MAB-Z entered into a 20 year agreement with Ettie Magadzire, owner of Palm Grove Farm whereby rights of unrestricted access to claims of MAB-Z were granted (“Land Lease Agreement”). Magadzire possessing surface rights to the property on which the claims were located under this agreement conveyed the right of use for MAB-Z to explore, test, sample, verify, assess the full nature and extent of the deposit, and to develop the mineral resources of aforesaid claims. In consideration for those rights the Company agreed to pay to Magadzire $70,000 payable quarterly in arrears after the first annual installment is paid in the following manner: (a) $17,500 payable in $5,000 cash (paid), $5,000 for a vehicle (paid by a director of the Company and included in related party payable) and $7,500 in fuel (paid); (b) $17,500 payable six months after commencement of mining operations at the Claims; (c) $17,500 payable nine months after commencement of mining operations; and (d) $17,500 payable one-year after commencement of mining operations. Then payments by MAB-Z will be made in quarterly installments of $17,500 (or $70,000 per year). The agreement has a total value of $1,400,000.

	F-13

MABWE MINERALS INC. AND SUBSIDIARY
(FORMERLY RAPTOR NETWORKS TECHNOLOGY, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Letter of Credit

On February 8, 2013, MAB-Z was issued as beneficiary an irrevocable documentary letter of credit from Baker Hughes Oilfield Operations, Inc. in the documentary credit amount of $3,000,000 per lot of crude barite (or a total of $9,000,000) to pay for shipments from Beira, Mozambique to any U.S. Gulf port of three lots of barite meeting the specifications set forth in the letter of credit. The first shipment was to be made between June 1, 2013 and August 31, 2013, the second shipment was to be made between September 1, 2013 and November 30, 2013 and the third shipment must be made between December 1, 2013 and March 1, 2014. 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.

10.

Securitized Loans

Effective May 16, 2013 MAB-Z entered into a one year securitized financing short term agreement with CBZ Bank Limited in the amount of $420,000. As security under this agreement Kinsey pledged two Bell HD2045 Hydraulic Excavators appraised at a combined value of $739,000. The loan is to be paid in monthly installments beginning in December 2013 in the amount of $35,000 plus interest expiring on June 30, 2014 upon which time all monies are due and payable and must be repaid in full. The interest rate on the loan is 15% per year. Upon funding of this loan a 3% establishment fee was charged and deducted from the proceeds. 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.

11.

Subsequent Events

On October 24, 2013 the Company issued 572,642 of common stock as the result of an adjustment under an anti-dilutive provision agreement of private placement previously issued August 16, 2012 to The French Quarter Trust and The Arosa Mountain Trust. No additional common shares will be issued as this agreement has been completely satisfied.

On October 31, 2013 Steinbock Minerals LTD issued a purchase order to Mabwe Minerals Zimbabwe (PVT) LTD for 2,000 metric tons of API crude barite ore.

	F-14

2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: this report contains forward-looking statements, including statements concerning future conditions in the network switching industry, our future business, financial condition, operating strategies and operational and legal risks. These forward-looking statements generally include the plans and objectives of management for future operations, including plans and objectives relating to our future economic performance, and can generally be identified by the use of the words “plan,” “estimate,” “expect,” “believe,” “should,” “would,” “could,” “anticipate,” “may,” “forecast,” “project,” “pro forma,” “goal,” “continues,” “intend,” “seek” or variations of those terms and other similar expressions, including their use in the negative. The forward-looking statements and associated risks may include, relate to or be qualified by other important factors, including, without limitation:

	·	our inability to continue as a going concern,
	·	our inability to raise additional capital,
	·	lower sales and revenues than forecast,
	·	our inability to carry out our marketing and sales plans,
	·	unexpected costs and operating deficits,
	·	our failure to establish relationships with and capitalize upon access to new customers,
	·	litigation and administrative proceedings involving us or our products,
	·	adverse publicity and news coverage,
	·	adverse economic conditions,
	·	entry of new and stronger competitors,
	·	changes in interest rates and inflationary factors, and
	·	other specific risks that may be referred to in this report or in other reports that we have issued.

These forward-looking statements necessarily depend upon assumptions and estimates that may prove to be incorrect. Although we believe that the assumptions and estimates reflected in the forward-looking statements are reasonable, we cannot guarantee that we will achieve our plans, intentions or expectations. The forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ in significant ways from any future results expressed or implied by the forward-looking statements. Except as required by law, we undertake no duty to update any forward-looking statement after the date of this report, either to conform any statement to reflect actual results or to reflect the occurrence of unanticipated events.

Any of the factors described above, elsewhere in this report, or in the “Risk Factors” section of our most recent annual report on Form 10-K could cause our financial results, including our net income (loss) or growth in net income (loss) to differ materially from prior results, which in turn could, among other things, cause the price of our common stock to fluctuate substantially.

Overview

We were organized under the laws of the State of Colorado on January 22, 2001 under the name Pacific InterMedia, Inc. We originally were engaged in the business of offering EDGAR filing services to companies outsourcing the formatting and electronic filing of registration statements, periodic reports and other forms with the U. S. Securities and Exchange Commission (“SEC” or the “Commission”), but generated minimal revenues from these operations. On October 17, 2003, we completed a business combination transaction with Raptor Networks Technology, Inc., a California corporation (“Raptor”), whereby we acquired all of the issued and outstanding capital stock of Raptor in a cashless common stock share-for-share exchange in which Raptor became our wholly-owned subsidiary. Upon the completion of this acquisition transaction, we changed our name to Raptor Networks Technology, Inc. (the “Company”), terminated our EDGAR filing services operations and, by and through our subsidiary Raptor, became engaged in the data network switching industry.

	1

As of July 31, 2011, all of our convertible notes payable fully matured, representing a total principal amount outstanding of $11,012,854 and accrued interest of $1,560,682 as of June 28, 2012. As of June 28, 2012 all notes and accrued interest were converted to common stock. When the Company originally did not repay these amounts the note holders exercised their right as a secured lender against substantially all of the Company’s assets and held a public foreclosure sale of substantially all of the Company’s assets and acquired all of these assets at a price of $100,000, which was credited against the outstanding notes on August 1, 2011. As a result of the public sale on August 1, 2011, the Company retained no material assets with which to continue its former operations.

On December 5, 2011, the Company entered into a Stock Purchase Agreement, dated December 2, 2011 (“Stock Purchase Agreement”), with Raptor Resources Holdings Inc. ("Raptor Resources") (RRHI:QB) (formerly Lantis Laser Inc. (LLSR:QB)) pursuant to which we agreed to issue Raptor Resources 109,928,311 shares of our common stock or 55.52% of our issued and outstanding shares of common stock in exchange for 5,000,000 shares of unregistered Raptor Resources common stock. All officers and directors of Raptor Networks Technology, Inc. (“Raptor Networks”) resigned at the time of execution of the Stock Purchase Agreement. Raptor Networks effected a 1:10 reverse stock split, with Raptor Resources receiving 80.14% of the fully diluted shares of Raptor Networks common stock on a post-split basis and the Company engaged in the exploration and mining of industrial minerals and metals thereon ceasing any involvement with the historical business of Raptor Networks. We are now a majority owned subsidiary of Raptor Resources. The name change to Mabwe Minerals Inc. (formerly Raptor Networks) and the 1:10 reverse split were effective upon approval by FINRA on June 28, 2012. In accordance with the Stock Purchase Agreement all our former outstanding convertible notes that were acquired by California Capital Equity, LLC ("CCE"), were converted to our shares of common stock in exchange for 5,000,000 shares of Raptor Resources Common Stock prior to our 1:10 reverse split and 13,510,752 shares of common stock of Mabwe Minerals Inc. on a post-split basis.

As of June 28, 2012, we have transitioned to an "exploration stage company" and will accordingly report and disclose information prescribed in ASC 915 and in accordance with accounting principles generally accepted in the United States of America (“GAAP”.) Following the shift of control to Raptor Resources Holdings under the terms of the Stock Purchase Agreement the Company intends to have as its core operations the mining and distribution of non-gold metals and minerals.

On July 18, 2012 we acquired a 49% stake in Mabwe Minerals Zimbabwe (PVT) Limited in exchange for 25,000 shares of Raptor Resources Holdings Inc. (RRHI) Preferred Convertible Series B Stock. This stock is convertible into 50 shares of RRHI common stock and 25 shares of Mabwe Minerals Inc. common stock following a one year holding period.

Effective August 1, 2012 Dodge Mine Blocks 1-6 and associated debt was transferred from TAG Minerals – Zimbabwe to Mabwe Minerals Zimbabwe (PVT) Limited in support core operations and expected future revenue streams resultant from industrial mineral mining.

Effective September 28, 2012, Tapiwa Gurupira, 41% stakeholder of Mabwe Minerals Zimbabwe (PVT) LTD was appointed as a Director board member to Mabwe Minerals Inc.

On November 7, 2012 the principals of Mabwe Minerals Zimbabwe (PVT) LTD ("MAB-Z") received approval from the Government of Zimbabwe to form a new parent holding corporation for the purpose of holding Mabwe Minerals Zimbabwe (PVT) LTD ("MAB-Z") and the percentage investment stake in WGB Kinsey & Company (“Kinsey”.) The new company is 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 and the remaining 51% ownership in MAB-C is 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 is 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.

	2

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.

Going Concern Qualification

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has entered a new line of business as an exploration stage company. There is an accumulated deficit of $85,075,965 resultant from discontinued operations and an exploration stage deficit of $1,622,508. The Company has no revenues as of September 30, 2013. The Company entered the exploration stage on June 29, 2012. In light of these factors, management believes that with the investment in Kinsey and production commencement 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, private placement stock issuances and/or other attempts to raise capital until cash flow operations are self-sustaining in the support of continuing operations.

These conditions, among others, raise substantial doubt about our ability to continue as a going concern and our independent registered public accounting firm has qualified their opinions with respect to our condensed consolidated financial statements to include an explanatory paragraph related to our ability to continue as a going concern in their report for the year ended December 31, 2012. The accompanying financial statements do not reflect any adjustments which might be necessary if we are unable to continue as a going concern.

CRITICAL ACCOUNTING POLICIES

Critical Accounting Estimates and Judgments

Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of our financial statements requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The significant accounting policies that are believed to be the most critical to aid in fully understanding and evaluating the reported financial results include the valuation of derivative financial instruments and stock-based compensation and the recoverability of deferred income tax assets.

	3

Derivative Financial Instruments

Our senior convertible notes are classified as non-conventional convertible debt. In the case of non-conventional convertible debt, we bifurcate our embedded derivative instruments and record them at their fair value as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any prior change in fair value will be recorded as non-operating, non-cash income or expense at each reporting date. If the fair value of the derivatives is higher at the subsequent balance sheet date, we will record a non-operating, non-cash charge. If the fair value of the derivative is lower at the subsequent balance sheet date, we will record non-operating, non-cash income. As of June 28, 2012 all derivative instruments and associated liabilities were converted to equity.

To determine the fair value of the derivative instruments, we make certain assumptions regarding the expected term of exercise. Because the expected term of the warrants impacts the volatility and risk-free interest rates used in the Black-Scholes calculations, these must be selected for the same time period as the expected term of the warrants.

Deferred Income Taxes

We record a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized. We have considered estimated future taxable income an ongoing tax planning strategies in assessing the amount needed for the valuation allowance.

RESULTS OF OPERATIONS

Comparison of Results of Operations for the Three and Nine Months Ended September 30, 2013 and 2012

The following table sets forth selected financial data regarding our financial position and operating results for the three months and nine months ended September 30, 2013 and 2012. This data should be read in conjunction with our condensed consolidated financial statements and related notes thereto beginning on page F-1 of this report.

MABWE MINERALS INC.

(FORMERLY RAPTOR NETWORKS TECHNOLOGY, INC.)

(AN EXPLORATION STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF CONTINUING OPERATIONS

(UNAUDITED)

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2013	2012	Change ($)	Change (%)		2013	2012	Change ($)	Change (%)
REVENUE, NET	-	-	-	0	%	-	-	-	0	%
COST OF SALES	-	-	-	0	%	-	-	-	0	%
GROSS PROFIT	-	-	-	0	%	-	-	-	0	%
OPERATING EXPENSES
Salary expense and salary related costs	-	-	-	0	%	-	-	-	0	%
Professional, consulting and marketing fees	169,181	32,075	137,106	427	%	333,360	62,050	271,310	437	%
Exploration Cost	230,578	-	230,578	0	%	230,578	-	230,578	0	%
Research and development	379,861	99,219	280,642	283	%	458,926	99,219	359,707	363	%
Selling, General and administrative	49,356	20,129	29,227	145	%	163,338	24,288	139,050	573	%
Total operating expenses	828,976	151,423	677,553	447	%	1,186,202	185,557	1,000,645	539	%
Loss from operations	(828,976)	(151,423)	(677,553)	447	%	(1,186,202)	(185,557)	(1,000,645)	539	%
OTHER INCOME (EXPENSE)
Interest Income (Expense)	(17,750)	(1,608)	(16,142)	1004	%	(23,337)	(520,361)	497,024	-96	%
Gain on Investment - W.G.B. Kinsey - Equity Method	(13,923)	-	(13,923)	0	%	(213,356)	-	(213,356)	0	%
Change in Fair Value of Conversion option and warrant liabilities	-	-	-	0	%	-	6,308,136	(6,308,136)	-100	%
Miscellaneous Expense	-	-	-	0	%			-	0	%
Total other income (expense)	(31,673)	(1,608)	(30,065)	1870	%	(236,693)	5,787,775	(6,024,468)	-104	%
Income (loss) before income taxes	(860,649)	(153,031)	(707,618)	462	%	(1,422,895)	5,602,218	(7,025,113)	-125	%
Income tax benefit	-	-	-	0	%	-	-	-	0	%
NET INCOME (LOSS)	(860,649)	(153,031)	(707,618)	462	%	(1,422,895)	5,602,218	(7,025,113)	-125	%

	4

Net Revenues

There were no net revenues from continuing operations for the three and nine months ended September 30, 2013 and 2012. The Company has commenced mining operations in the third quarter of 2013. The Company remains in the exploration stage and will continue until such time that it achieves significant revenue from mining operations,

Gross Profit

There was $0 gross profit from continuing operations for the three and nine months ended September 30, 2013 and 2012.

Operating Expenses

The increase in operating expenses for the nine months ended September 30, 2013 compared to the same period of 2012 was $1,000,645. The increase in operating expenses for the three months ended September 30, 2013 was $677,553 compared to the same period of 2012. The increased expenses resulted from the Company increasing operations after entering the exploration stage and commencing a new business line of continuing operations. As the Company prepares to enter the production stage costs increase as broken down as follows:

Salary Expenses

There were no salary and salary-related expenses from continuing operations for the three and nine months ended September 30, 2013 and 2012.

Exploration Cost

The Company commenced mining operations in the three months ended September 30, 2013 incurring extraction cost of $230,578. These extraction costs represent costs for a partial quarter and are not necessarily representative of future periods. These quarterly costs will vary based on several factors including location of drilling, stage of drilling at a specific area as well as type, quality and accessibility of material being mined.

Research and Development

Research and development expenses from continuing operations increased to $379,861 and $458,926 from $99,219 for the three and nine months ended September 30, 2013. This increase was due to the Company preparing to enter into the production phase from the exploration stage. The costs are related to new business line start-up costs involving site preparation and development, land surveys, environmental impact studies, work plans, assay costs, sampling and related costs as well as inspections fees and casual labor related to the core business of industrial mineral mining. As well as the costs noted above the company expensed a $35,000 payment that was made in the form of 1,000,000 shares of MBMI stock as a prepayment to secure future services.

Selling, General and Administrative

Selling, general and administrative expenses (SG&A) from continuing operations increased for the three months ended September 30, 2013 from $20,129 to $49,356. This is an increase of $29,227 over the same period in the prior year. SG&A costs increased to $163,338 from $24,288 for the nine months ended September 30, 2013 over the same period in the prior year. This is an increase of $139,050. The increase was due to the Company increasing activity as it transitions to a production stage company. The increased costs were due to significantly higher travel, meals and entertainment costs as well as increased developmental activity, financing cost, web development and other office expense.

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Net Other Income (Expense)

Net other expense in 2013 was $31,673 and $236,693 to the three and nine months ended September 30, 2013 compared to a net other income of ($1,608) and $5,787,775 for the same periods in 2012. This change resulted from the following:

For the three and nine months ended September 30, 2013, the loss was primarily due to the decrease in the fair value of our investment in WGB Kinsey & Co. The net other income for the same period in 2012 was due to a beneficial Change in fair value of conversion option and warrant liabilities in the amount of $0 and $6,308,136 for the three and nine months ended September 30, 2012. As June 28, 2012 all such notes and correspondent liabilities we converted to equity.

Liquidity and Capital Resources

Our independent registered public accounting firm has qualified their opinion with respect to our condensed consolidated financial statements to include an explanatory paragraph related to our ability to continue as a going concern in their report for the year ended December 31, 2012. Reports of independent registered public accounting firms questioning a company's ability to continue as a going concern generally are viewed very unfavorably by analysts and investors. There are a number of risks and challenges associated with such a qualified report including, but not limited to, a significant impediment to our ability to raise additional capital or seek financing from entities that will not conduct such transactions in the face of such increased level of risk of insolvency and loss, increased difficulty in attracting talent and the diversion of the attention of executive officers and other key employees to raising capital or financing rather than devoting time to the day-to-day operations of our business. We urge potential investors to review the report of our independent registered public accounting firm included in the Company’s annual report on Form 10-K for the year ended December 31, 2012 and our condensed consolidated financial statements and related notes beginning on page F-1 of this Report, the cautionary statements included in the “Risk Factors” section under Item 1A of this Report and to seek independent advice concerning the substantial risks related thereto before making a decision to invest in us, or to maintain an investment in us.

Since our inception, including the year ended December 31, 2012, we have realized negligible revenues and have financed our operations almost exclusively from cash on hand raised through the sale of our securities and borrowings. As of September 30, 2013 , we had a deficit in working capital of $206,341.

Effective July 26, 2012 Mabwe Minerals Zimbabwe (PVT) LTD entered into a one year financing short term loans agreement with Overseas Trade And Financing Limited for a line of $40,000 with accrued interest at the rate of 12% . The balance with interest and fees was $46,816 at September 30, 2013. Since the loan was not fully repaid within 360 days of the effective date late fees are now accruing at a rate of 6% per annum. Extension and drawdown fees are 1% and 2% respectively.

Effective May 16, 2013 MAB-Z entered into a one year securitized financing short term agreement with CBZ Bank Limited in the amount of $420,000. As security under this agreement Kinsey pledged two Bell HD2045 Hydraulic Excavators appraised at a combined value of $739,000. The loan is to be paid in monthly installments beginning in December in the amount of $35,000 plus interest expiring on June 30, 2014 upon which time all monies are due and payable and must be repaid in full. The interest rate on the loan is 15% per year. Upon funding of this loan a 3% establishment fee was charged and taken out of the proceeds.

We had a cash balance of $125,938 at September 30, 2013 compared to $17,605 at December 31, 2012.

We expect to recognize revenues from our mining operations in the fourth quarter of 2013 as we have commenced mining operations as of September 30, 2013. We will seek financing to support our operations until we are revenue neutral as a result of continuing operations. There is no certainty that revenues will be generated sufficient to fund operations or that we will be able to raise the necessary debt or equity financing to sustain our operations.

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Item 3. Quantitative and Qualitative Disclosures About Market Risks.

None

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and our Chief Financial Officer (currently the same person), after evaluating the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 (Exchange Act) Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by this quarterly report, have concluded that our disclosure controls and procedures are not effective based on their evaluation of these controls and procedures required by paragraph (b) of the Exchange Act Rules 13a-15 or 15d-15 on the basis that we have not been funded sufficiently for us to employ an additional person to serve as our Chief Financial Officer.

Changes in Internal Control over Financial Reporting. During the quarter ended September 30, 2013, there were no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Inherent Limitations on Effectiveness of Controls. Our management, including our Chief Executive Officer and our Chief Financial Officer (who are the same person, Al Pietrangelo) does not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may be involved in various claims, lawsuits, disputes with third parties, actions involving allegations of discrimination or breach of contract actions incidental to the operation of our business. We are not currently involved in any litigation which we believe could have a materially adverse effect on our financial condition or results of operations.

Item 1a. Risk Factors.

Not applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

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Item 6. Exhibits.

Exhibit Number	Description

31.1*		Certification of the Chief Executive Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of the Chief Financial Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*		Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*		Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase

101.DEF*		XBRL Taxonomy Extension Definition Linkbase

101.LAB*		XBRL Taxonomy Extension Label Linkbase

101 PRE*		XBRL Taxonomy Extension Presentation Linkbase

* Filed Herewith

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	MABWE MINERALS INC.

Date November 12, 2013	By:	/s/ Al Pietrangelo
		Al Pietrangelo, Chief Executive Officer, (principal executive officer), Chief Financial Officer (principal financial and accounting officer)

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Fonon Corp - FORM 10-Q - November 12, 2013

Attached files

Fonon Corp Reports