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EXCEL - IDEA: XBRL DOCUMENT - Fonon CorpFinancial_Report.xls
EX-32.2 - CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE - Fonon Corpex32-2.htm
EX-31.2 - CERTIFICATION OF THE CHIEF FINANCIAL OFFICER REQUIRED BY RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AS - Fonon Corpex31-2.htm
EX-31.1 - CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER REQUIRED BY RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AS - Fonon Corpex31-1.htm
EX-32.1 - CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE - Fonon Corpex32-1.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, 2014
 
[   ]
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 [ X]   No [ ]
 
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 November 10, 2014 there were 140,458,392 shares of the issuer’s common stock, $0.001 par value, outstanding.
 


 

 
 
TABLE OF CONTENTS

 
   
 
   
F-1
   
F-2
   
F-3
   
F-4
   
1
   
9
   
9
   
 
   
10
   
10
   
10
   
10
   
10
   
10
   
11
   
12
 

MABWE MINERALS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
             
             
   
September 30, 2014
 
December 31, 2013
ASSETS
 
(Unaudited)
       
CURRENT ASSETS
           
Cash
  $ 14,389     $ 55,653  
Prepaid expenses
    225,203       232,483  
       Total current assets
    239,592       288,136  
  Fixed assets, net of depreciation
    4,913       5,510  
                 
OTHER ASSETS
               
Investment - W.G.B. Kinsey & Co (Pvt) Ltd
    -       12,367  
Mineral rights
    433,000       433,000  
Mining development costs
    83,350       -  
 Total Other Assets
    516,350       445,367  
                 
 INTANGIBLE ASSETS
               
 Goodwill
    25,000       25,000  
 Total Intangible Assets
    25,000       25,000  
                 
 TOTAL ASSETS
  $ 785,855     $ 764,013  
                 
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
                 
 CURRENT LIABILITIES
               
    Unearned revenue
  $ 105,000     $ 105,000  
    Accounts payable and accrued expenses
    900,865       747,161  
    Loan overdraft - line of credit
    239,975       -  
    Related Party Payable (Receivable) (Net)
    448,980       (59,667 )
    Loan payable - related party
    51,000       40,000  
    Current portion of securitized loan - current
    140,000       385,000  
       Total current liabilities
    1,885,820       1,217,494  
                 
 LONG TERM LIABILITIES
               
     Reclamation and remediation liabilities
    83,350       -  
     Securitized Loan - Long Term
    -       35,000  
       Total long term liabilities
    83,350       35,000  
                 
 TOTAL LIABILITIES
    1,969,170       1,252,494  
                 
 COMMITMENTS AND CONTINGENCIES
               
                 
 STOCKHOLDERS' (DEFICIT)
               
    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; 140,458,392 and 140,248,392 shares issued and outstanding
    140,459       140,249  
    Additional paid-in capital
    87,006,966       86,994,876  
    Additional paid-in capital - Warrants
    177,266       177,266  
    Accumulated deficit
    (88,508,006 )     (87,800,872 )
       Total stockholders' (deficit)
    (1,183,315 )     (488,481 )
                 
 TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)
  $ 785,855     $ 764,013  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

 
MABWE MINERALS INC.
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
(UNAUDITED)
 
                         
   
For the Three Months Ended
   
For the Nine Months Ended
 
   
September 30,
   
September 30,
   
September 30,
   
September 30,
 
   
2014
   
2013
   
2014
   
2013
 
                         
Operations:
                       
OPERATING EXPENSES
                       
   Professional, consulting and marketing fees
  $ 74,924     $ 169,181       207,493     $ 333,360  
   Extraction cost
    78,500       230,578       287,790       230,578  
   Site development and reclamation cost
    17,900       379,861       64,496       458,926  
   General and administrative
    24,990       49,356       83,226       163,338  
   Depreciation and accretion
    200       -       598       -  
   Total operating expenses
    196,514       828,976       643,603       1,186,202  
Loss from operations
    (196,514 )     (828,976 )     (643,603 )     (1,186,202 )
                                 
OTHER (EXPENSE)
                               
   Interest income
    -       -       -       -  
   (Loss) on Investment - W.G.B. Kinsey - Equity Method
   Change in Fair Value of Conversion Option & Warrant Liabilities
    -       (13,923 )     (12,367 )     (213,356 )
   Interest expense
    (22,808 )     (17,750 )     (51,165 )     (23,337 )
                                 
Total other (expense)
    (22,808 )     (31,673 )     (63,532 )     (236,693 )
                                 
Loss before income taxes
    (219,322 )     (860,649 )     (707,135 )     (1,422,895 )
                                 
Income tax benefit
    -       -       -       -  
                                 
NET LOSS
  $ (219,322 )   $ (860,649 )     (707,135 )   $ (1,422,895 )
                                 
Loss per share - basic
  $ (0.00 )   $ (0.01 )     (0.01 )   $ (0.01 )
                                 
Weighted average number of shares outstanding - basic
    140,458,392       136,333,717       140,381,907       136,240,072  
                                 
Loss per share - diluted
  $ (0.00 )   $ (0.01 )     (0.01 )   $ (0.01 )
                                 
Weighted average number of shares outstanding - diluted
    177,613,392       168,627,566       170,217,846       168,400,436  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

 
MABWE MINERALS INC.
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(UNAUDITED)
 
             
   
For the Nine Months Ended September 30,
 
   
2014
   
2013
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
  $ (707,135 )   $ (1,422,895 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation and accretion expense
    598       -  
Common stock issues for services
    7,300       187,487  
Change in fair value of investment
    12,367       213,356  
Changes in operating assets and liabilities:
               
Prepaid expenses and other assets
    7,280       (196,571 )
Accounts payable and accrued liabilities
    133,704       145,525  
Net cash used in operating activities
    (545,886 )     (1,073,098 )
CASH FLOWS USED IN INVESTING ACTIVITIES:
               
Acquisitions of fixed assets, net of disposals
    -       (20,340 )
Net cash used in investing activities
    -       (20,340 )
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from notes payable
    21,000       443,458  
Proceeds from related parties, net of repayments
    518,647       (88,687 )
Proceeds from private placement, net of fees (including cash received for shares to be issued) - preferred and common stock
    5,000       860,500  
Increase in cash from loan overdraft line of credit
    239,975       -  
Repayments made on note payable
    (280,000 )     (13,500 )
Net cash provided by financing activities
    504,622       1,201,771  
Net increase (decrease) in cash and cash equivalents
    (41,264 )     108,333  
CASH - BEGINNING OF PERIOD
    55,653       17,605  
CASH - END OF PERIOD
  $ 14,389     $ 125,938  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
Cash paid for interest
  $ 71,417     $ -  
Cash paid for income taxes
  $ -     $ -  
                 
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES:
         
Accrued interest payable (prepaid interest) added (removed) to (from) principal balance
  $ 5,770     $ 26,241  
Prepaid expenses incurred as a result of issuance of common stock
  $ 3,150     $ 97,500  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

 
MABWE MINERALS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) 
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, 2014 condensed consolidated balance sheet was derived from audited financial statements as of December 31, 2013.  These financial statements should be read in conjunction with the audited financial statements at December 31, 2013 included in the Company’s most recent annual report on Form 10-K.  Results of operations for the three and nine months ended September 30, 2014 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 30, 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 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. 

On July 31, 2013 the Company entered into a Master Distributer Agreement (“MDA”) with Steinbock Minerals Ltd. (“Steinbock”).  Steinbock, together with its affiliate Yasheya Ltd. (“Yasheya”) 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. Steinbock and Yasheya were granted the exclusive right to market, sell, distribute, ship and deliver Dodge Mine barite to their customer base. This agreement remains in effect until cancelled by either party upon six months written notice. 

On January 6, 2014, MAB-Z completed the process to acquire the mineral and metal rights to 110 hectares (272 acres) contiguous with Dodge Mines.

 
MABWE MINERALS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1.    General (continued)
 
Going Concern
 
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 $88,508,006. The Company had no revenues as of September 30, 2014.
 
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 when the Company engaged in a 1:10 reverse stock split.
 
Simultaneous with the reverse stock split the Company was renamed Mabwe Minerals Inc.  Former shareholders of Raptor Networks Technology, Inc. (“RPTN”) were reissued one share of Mabwe 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.
 
Being an exploration stage company, we have thus far classified all of the expenses associated with extraction as period expenses. The Company believes that until it realizes positive operational cash flow and enters the production stage that this expenditure may never be monetized by way of sale of mined minerals. The Company has yet to realize its first shipment of barite and to date has incurred significant costs relative to a startup mining company. Additionally, the incremental expense of either hiring an additional staff member or contracting with an outside party to have our lots certified and qualified in lots and specific grades of materials would be significant and cost prohibitive. No one in the Company draws a regular salary and the Company is not in the position to bring on a staff member or incur the expense of routinely contracting with a qualified geologist or any other expert in the field of classification and certification of certain grades of barite. Overall capital investment to this point has been substantial and until we are producing positive operational cash flow it is the intent of management to minimize cash outflow to only critical expenditures.
 
 
MABWE MINERALS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) 

1.    General (continued)

Going Concern (Continued)
 
Additionally, the grade of mineral that we currently have stockpiled is not the desired grade for Steinbock, our master distributer, and although we believe that the mineral in its current form to be a saleable grade of the commodity we neither have the current capacity to further refine the mineral to an acceptable grade nor the ability to find another buyer for the material.
 
The items discussed above raise substantial doubt about the Company's ability to continue as a going concern.  Management believes, however, that  as a result of its  the investment in Kinsey, commencement of  mining operations at Dodge Mines and receipt of two purchase orders from our master distributer Steinbock, the Company is 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.
 
2.    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, 2013. 
 
Exploration Stage Company
 
As of June 29, 2012 the Company moved from an Operating Stage Company to an Exploration Stage Company as a result of the execution of the change in ownership control to the majority controlling interest by Raptor Resources Holdings Inc. This transaction was deemed effective by FINRA June 28, 2012 and exploration stage activities commenced on June 29, 2012. In accordance with ASC 915 the Company will be reporting and disclosing additional information in addition to reporting and disclosure requirements otherwise prepared in accordance with U.S. generally accepted accounting principles (GAAP). In accordance with ASU 2014-10 (see Recent Accounting Pronouncements), the Company has early adopted the provisions to remove all exploration stage company disclosures and amounts effective with the period ended June 30, 2014.
 
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.

Mabwe Minerals Inc. on July 18, 2012, acquired a 49% interest in Mabwe Minerals Zimbabwe (PVT) LTD (MAB-Z) through the issuance of 25,000 shares of Raptor Resources Holdings Inc. Series B Preferred Convertible Stock.

Each share of the Series B Preferred Convertible Stock is convertible into 50 common shares of Raptor Resources Holdings Inc. and 25 common shares of Mabwe Minerals Inc. both subject to a 1 year holding period. The remaining 51% ownership in MAB-Z is held by a Director of the Company, a Zimbabwe resident, Tapiwa Gurupira (41%) with the remaining portion owned by Asswell Gurupira (10%). MAB-Z will be the operating arm of Mabwe Minerals, Inc., with the Company being the primary beneficiary of all the activities of its subsidiary, Mabwe Minerals Zimbabwe (PVT) LTD.

 
MABWE MINERALS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) 

2.    Summary of Significant Accounting Policies (Continued)

Principles of Consolidation (Continued)
 
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, 2014.
 
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”.)  Accordingly, we formed 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 with the remaining 51% ownership in MAB-C held by two individuals, one a director of the Company, Zimbabwean resident, Tapiwa Gurupira (41% ownership), and the second 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.

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.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Significant estimates made by management include the recoverability of long-lived assets, the valuation of stock-based compensation and the valuation allowance of the deferred tax asset.  Actual results could differ from those estimates.

Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation.   Depreciation is computed using the straight-line method over the assets estimated useful lives as follows:  computer equipment, furniture and fixtures and testing equipment are depreciated over three years and office equipment is depreciated over five years.  Scientific and measurement equipment is recorded with a useful life of seven years.  Repairs and maintenance of a routine nature are charged as incurred.  Significant renewals and betterments are capitalized.  At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the consolidated statements of operations.

 
MABWE MINERALS INC. AND SUBSIDIARY
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
2.    Summary of Significant Accounting Policies (Continued)
 
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.

Unearned Revenue
 
As an Exploration Stage company, the Company has yet to realize its first shipment of barite. This shipment to an agreed upon FOB point is the primary hurdle in our recognizing revenue by completing the earnings process on the purchase order that was submitted by Steinbock in the third quarter of 2013. A second purchase order was issued by Steinbock in December of 2013 for 10,000 tons of barite but has not been billed by the Company. This delay is due to the Company’s desire to refine the current mineral extraction to a sufficiently high grade of barite to obtain a higher market price. Further delaying the process and adding cost to the process is the search and testing of equipment necessary for this further refinement. Under the terms of the initial purchase order, Steinbock is to pay half of the face value upon delivery of the invoice. As of September 30, 2014, the first half of the initial purchase order was paid in the amount of $105,000, with the second half due upon a vessel being loaded in Beira. This amount will be recorded as revenue once the initial 2,000 tons of minerals are delivered to the buyer. The second purchase order requires the Company to successfully ship an additional 10,000 tons of barite to be paid in two installments, the first installment to be paid after the jigging operations have been completed and the second half of the payment to be made upon a vessel being loaded in Beira.

Inventory
 
Inventories, including stockpiles and mineralized material are carried at the lower of cost or net realizable value. Cost is comprised of production costs for mineralized material produced and processed. Production costs include the costs of materials, costs of processing, refinement, extraction, direct labor, mine site and processing facility overhead costs and site development cost, depreciation, depletion and amortization.
 
In-process Inventories - In-process inventories represent mineralized materials that are currently in the process of being converted to a certifiable lot of saleable product through the extraction and/or refinement process. The value of in-process material is measured based on assays of the material fed into the process and the projected recoveries of material.  In-process inventories are valued at the average cost of the material extracted along with all other necessary cost to feed into the process attributable to the source material coming from the mines and/or stockpiles plus the in-process conversion costs, including applicable depreciation relating to the process facilities incurred to that point in the process.
 
Finished Goods Inventories - Finished goods inventories include minerals that are certified in quantifiable lots that require no further processing or capital expenditure other than loading and transport related activities from to transfer title or complete the earnings cycle. These minerals are valued per lot at the average cost of their production.
 
 
MABWE MINERALS INC. AND SUBSIDIARY
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) 
 
2.    Summary of Significant Accounting Policies (Continued)

Stockpile reserves

Stockpiles represent mineralized material that has been extracted from the mine and is available for further processing. Stockpiles are measured by estimating the number of tons added and removed from the stockpile. Stockpile tonnages are verified by periodic surveys. Costs are allocated to stockpiles based on relative values of material stockpiled and processed using current mining costs incurred up to the point of stockpiling the material, including applicable overhead, depreciation, and depletion relating to mining operations, and removed at each stockpile’s average cost per ton. As of September 30, 2014, we had approximately 5,000 tons of barite in stockpile. We believe that based on several factors that the associated extraction costs would best be reflected in the financial statements as representing no certain future net realizable value.
 
The Company is extracting API grade barite from the Dodge Mine site and as requested and desired by our master distributor we are actively in the process of trying to obtain necessary equipment whereby we may further refine the mineral to be able to attain and sell chemical grade barite. The additional process crushes and sifts the extracted barite and allows for the removal of silica. The added step involves the process of jigging which separates particles in the raw barite based on specific gravity. This additional step in the process involves a large outlay of capital to acquire additional machinery to further refine our extraction and sift out unwanted minerals.
 
Site Development Cost

Site development costs consist of labor, surveying, mapping, engineering, other site development and licensing as well as any development costs necessary to prepare site Dodge Mine Blocks 1-6 for mining operations.
 
Extraction Cost

Extraction costs consist of the direct expenses of mineral removal from the established site. These costs include drilling, blasting, the loading, hauling and management of stockpiles and waste by-product, mineral refinement and excavation. These direct costs are directly associated with the production of saleable material and the increase of stockpile reserves.
 
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, 2014 and December 31, 2013.
 
 
MABWE MINERALS INC. AND SUBSIDIARY
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) 

2.    Summary of Significant Accounting Policies (Continued)

Asset Retirement Obligations
 
The Company’s mining and exploration activities are subject to the laws and regulations of the nation of Zimbabwe in respect to governing the protection and restoration of the environment. These laws and regulations are subject to change, possibly resulting in more restrictive measures. The Company conducts its operations so as to protect the public health and environment and believes its operations are in compliance with applicable laws and regulations in all material respects. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations, but cannot predict the full amount of such future expenditures.
 
As a result of mining operations the company has recognized an Asset Retirement obligation asset and liability as prescribed by ACS 410 Asset Retirement and Environmental Obligations.  Based on reasonable estimates the Company has set up a reserve to restore the local environment based on extraction activity. Each period in which mining activities occur a portion of the current extraction cost will be recorded as an asset and a liability in the current period.
 
Estimated future reclamation costs are based principally on traditional estimates to comply with legal and regulatory requirements. At September 30, 2014 and December 31, 2013, $83,350 and $0, respectively were recognized were accrued for reclamation costs relating to currently or recently producing mineral properties in accordance with asset retirement obligation guidance. The current portions of $83,350 and $0 at September 30, 2014 and December 31, 2013, respectively, are included in Asset Retirement Obligation-Mining Rights.

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 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.
 
 
MABWE MINERALS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

2.    Summary of Significant Accounting Policies (Continued)

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, 2014 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 2011 to 2013 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.

Fair Value of Financial Instruments

Unless otherwise indicated, the fair value of all reported assets and liabilities which represent financial instruments (none of which are held for trading purposes) approximate the carrying values of such instruments.

Stock-Based Compensation

The Company accounts for stock-based compensation at fair value using the Black-Scholes Option pricing model. All stock-based compensation cost is measured at the grant date using the Black-Sholes Option Pricing Model, based on the fair value of the award.  The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company’s consolidated statements of operations.
 
Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period.  Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.  The forfeiture rate that the Company presently uses is 10%. 
 
There was no stock based compensation recognized for the three and nine months ended September 30, 2014 and 2013, respectively. The only common stock equivalents issued by the Company in 2013 were warrants issued with common stock in an equity financing. The warrants have equity classification.
 
 
MABWE MINERALS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 2.    Summary of Significant Accounting Policies (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 assesses 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 September 30, 2014, 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
 
In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements—Going Concern.” The provisions of ASU No. 2014-15 require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this ASU are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently assessing the impact of this ASU on the Company’s consolidated financial statements.
 
In June 2014, the FASB issued an Accounting Standards Update No. 2014-10, "Development Stage Entities (Topic 915) - Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation ("ASU 2014-10")".  The objective of ASU 2014-10 is to improve financial reporting by reducing the cost and complexity associated with the incremental reporting requirements for development stage entities.  ASU 2014-10 is effective for annual reporting periods beginning after December 15, 2014, and interim periods therein.  The Company has elected early implementation, as permitted by the standard, for the interim period ending June 30, 2014.  All exploration stage language disclosures and amounts have been removed as a result of the adoption of ASU 2014-10.

In July 2012, the FASB issued ASU 2012-02, “Intangibles Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment”, on testing for indefinite-lived intangible assets for impairment. The new guidance provides an entity to simplify the testing for a drop in value of intangible assets such as trademarks, patents, and distribution rights. The amended standard reduces the cost of accounting for indefinite-lived intangible assets, especially in cases where the likelihood of impairment is low. The changes permit businesses and other organizations to first use subjective criteria to determine if an intangible asset has lost value. The amendments to U.S. GAAP will be effective for fiscal years starting after September 15, 2012. The Company’s adoption of this accounting guidance does not have a material impact on the consolidated financial statements and related disclosures.
 
In July 2013, the FASB issued ASU 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists." ASU 2013-11 provides guidance on the presentation of unrecognized tax benefits related to any disallowed portion of net operating loss carryforwards, similar tax losses, or tax credit carryforwards, if they exist. ASU 2013-11 is effective for fiscal years beginning after December 15, 2013. The adoption of ASU 2013-11 is not expected to have a material impact on the Company’s consolidated financial statements.

There were other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
 
MABWE MINERALS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
3.        Related Party Transactions

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 TAG Minerals Zimbabwe PVT Ltd. ("TAG-Z"), a fully-consolidated subsidiary of Raptor Resources Holdings Inc., to MAB-Z, a fully-consolidated variable interest entity of the Company, which is 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 balance of $448,980 consists chiefly of a loan by Tag Minerals Inc., a wholly owned subsidiary of RRHI, to MAB-Z to fund operations in the amount of $414,000.  Additional amounts constitute payment for legal, accounting and other administrative charges paid by the Company on behalf of Raptor Resources Holdings Inc. The value of the Note Payable for the Dodge Mines at December 31, 2013 was $0. Included 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 September 30, 2014 and December 31, 2013, and determined that no impairment adjustment was necessary at this time. In addition, the Company has recorded a $5,000 liability due to an officer of the Company for an advance made to a non-related third party under a land lease agreement.

On November 27, 2013 the Company paid $30,000 as a year-end bonus to Lion Capital Group LLC (“LION”), a Wyoming LLC. Lion is equally owned by Tapiwa Gurupira, Al Pietrangelo, Dean Harrison and J. Louis Schlegel IV all of whom are directors and or officers of the Company.
 
Effective July 19, 2013 majority owner Raptor Resources Holdings Inc. issued 75,000 Preferred Series B to LION. This was awarded for the milestone achievement of obtaining the EIA license which provided for the commencement of mining operations at Dodge Mines.

 
MABWE MINERALS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
4.      Loans Payable – Related Party

Effective July 26, 2012 MAB-Z entered into a one year financing short term loan agreement with OVERSEAS TRADE AND FINANCING LIMITED (“OTF”) for an amount of $40,000 with accrued interest at an original rate of 12%. The balance with interest and fees of $48,026 ($8,026) of accrued interest which is included in accounts payable and accrued expenses) was due at December 31, 2013. Under the original terms of the contract the loan was to have been fully repaid within 360 days of the effective date. Failure to pay as prescribed or duly extend loan period will result in the accrual of late charges at a rate of 6% per annum. Extension and drawdown fees are 1% and 2% respectively. OTF is owned and controlled by a current director of MAB-Z and was recently registered with the Reserve Bank of Zimbabwe, External Loans Co-coordinating Committee. In accordance with the newly registered loan, the interest rate will now be 8% per annum, and no default rate is in place.  The lender and the Company are currently negotiating terms of a new maturity date. The lender has not informed the Company that they are in default of the loan.
 
On April 5, 2014 the Company, through its affiliate MAB-Z, received confirmation of its registration and acceptance of terms for the loan from OTF in the amount of $40,000 and 8% per annum due in 360 days. As of September 30, 2014 the balance with interest and fees was $48,184 ($8,184 of accrued interest which is included in accounts payable and accrued expenses.)

On April 28, 2014 Woolmoon Investments advanced MAB-Z $10,000 for current working capital at a rate 12% per annum.  During July, 2014 Woolmoon Investments advanced MAB-Z $1,000.  As of September 30, 2014 the balance with interest and fees was $11,526 ($526 of accrued interest which is included in accounts payable and accrued expenses.)

5.        Loan Payable –Other

On May 2, 2014 MAB-Z entered into an open ended loan agreement with Gary Booth.  The Company received an advance of $10,000 for working capital and short-term cash requirement which carries an interest rate of 12%.  As of September 30, 2014 the balance due was $10,503 reflected in Accounts payable and accrued expenses.

On July 31, 2014 MAB-Z entered into and open ended loan agreement with Antony Kinsey and Kevin Hegarty.  The Company received an advance of $20,000 for working capital and short-term cash requirement which carries an interest rate of 12%.  As of September 30, 2014 the balance due was $20,396 reflected in Accounts payable and accrued expenses.

In July 2014 advance payments were made by Graham Roberts on behalf of MAB-Z in the amount of $6,000.  This loan is currently undocumented but is expected to be formalized in Q4. The balance due without accrued interest was $6,000 reflected in Accounts payable and accrued expenses.

 
MABWE MINERALS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
 
6.        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. Originally, under the contract 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 would have issued additional shares of common stock to achieve that value for Kinsey. The Equity Exchange Agreement was later revised on December 5, 2013 to exclude this provision of the issuance of the additional shares. The common shares issued have been initially valued at $500,000, as the price of MBMI common stock was trading at $0.10 per share.
 
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 $12,367 to $0 as a result of the incremental loss of Kinsey for the nine months ended September 30, 2014 at 25% ownership by MAB-C.
 
7.        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.
 
 
MABWE MINERALS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

7.        Fair Value Disclosures (Continued)

The table below sets forth a summary of the fair values of the Company’s financial assets and liabilities as of September 30, 2014:
 
   
Total
   
Level 1
   
Level 2
   
Level 3
 
2014
                       
ASSETS:
                       
Investment-Equity Method
  $ -     $ -     $ -     $ -  
Mining Development Cost
    83,350       -       -       83,350  
 TOTAL:
    83,350       -       -       83,350  
                                 
 LIABILITIES:
                               
 Securitized Loans
    140,000       -       -       140,000  
 Loan Payable -Related Party
    51,000       -       -       51,000  
 Loan Payable -Other
    36,000       -       -       36,000  
 Asset Retirement Obligation
    83,350       -       -       83,350  
                                 
 Total
  $ 274,350     $ -     $ -     $ 274,350  

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

Warrants
   
Exercise Price
 
Date Issued
 
Term
                   
 
1,505,000
     
$0.15
 
Feb - Mar 2013
 
2 Years
 
1,600,000
     
$0.15
 
Apr - May 2013
 
2 Years
                   
 
Total: 3,105,000
               
 
On February 5, 2014, MBMI extended the expiration date of the 3,105,000 warrants issued in the first and second quarters of 2013 to expire February-March and April-May 2015.
 
9.          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, 2013, 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
 
 
 
MABWE MINERALS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


10.  Mining Rights
 
As of September 30, 2014 and December 31, 2013, the Company had the following in Mining Rights:

   
September 30, 2014
   
December 31, 2013
 
Dodge Mines
  $ 433,000     $ 433,000  
Mining Development Cost
    83,350          
Less amortization and accretion expense
    -       -  
Total Mining Rights
  $ 516,350     $ 433,000  

As an exploration stage company which has yet to receive any revenue it is the assertion of management that to deplete the value of the mining rights or the recognize accretion cost as well as the amortization of the mining development cost would not fairly match the associated cost with revenue streams.  These costs will be matched pro-rata with sales using the unit-of-production method.
 
On January 6, 2014, MAB-Z completed the process to acquire the mineral and metal rights to 110 hectares (272 acres) contiguous with Dodge Mines.
 
11.        Asset Retirement Obligations
 
As of September 30, 2014 and December 31, 2013, the Company had the following asset and liability position recorded for reclamation relative to mining activities at the Dodge Mine:
 
Following is a reconciliation of the aggregate reclamation liability associated with our reclamation plan for our mining projects:
 
Long-Term Reclamation Liability and Retirement Obligation Asset
 
Following is a reconciliation of the aggregate reclamation liability associated with our reclamation plan for our mining projects:
 
   
September 30,
   
December 31,
 
   
2014
   
2013
 
Long-term reclamation liability — beginning of period
  $ -     $ -  
Additional obligations incurred
    83,350       -  
Accretion of reclamation liability
    -       -  
Long-term reclamation liability — end of period
  $ 83,350     $ -  
 
Following is a reconciliation of the aggregate retirement obligation asset associated with our reclamation plan for our mining projects:
 
   
September 30,
   
December 31,
 
   
2014
   
2013
 
Retirement obligation asset — beginning of period
  $ -     $ -  
Additional obligations incurred
    83,350       -  
Amortization of retirement obligation asset
    -       -  
Retirement obligation asset — end of period
  $ 83,350     $ -  
 
 
MABWE MINERALS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

12.          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, 2014, no common stock was issued by the Company.

During the three months ended June 30, 2014, the Company issued 20,000 shares of common stock for accounting services rendered at a value of $1,000 ($.05/share.)  The Company also sold through private placement 100,000 common shares for a cash price of $5,000 ($.05/share.)  The controlling interest of Raptor Resources Holdings Inc. was diluted to 64.13% based on new issuances of common stock that quarter.
 
During the three months ended March 31, 2014, the Company issued 90,000 shares of common stock for services to be rendered at a value of $6,300 ($.07/share.) The controlling interest of Raptor Resources Holdings Inc. was diluted to 64.18% based on new issuances of common stock that quarter.
 
During the year ended December 31, 2013, the Company issued 6,677,642 shares of stock through private placements for cash in the amount of $880,500. 3,105,000 warrants were issued with these placements, exercisable for 1 year at a price of $.15 per share. The Company also issued 1,590,000 shares of its common stock for accounting, promotional and public relation services rendered and to be rendered at a value of $187,487. The controlling interest of Raptor Resources Holdings Inc. was diluted to 64.22% based on new issuances of common stock that year. 

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 were 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 13,510,752shares 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, 2014, the Company has 140,458,392 shares issued and outstanding.

 
MABWE MINERALS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 

13.    Income Taxes
 
The Company computes and records taxes payable based upon determination of taxable income which is different from pre-tax financial statement income.  Such differences arise from the reporting of financial statement amounts in different periods for tax purposes.  The timing differences are a result of different accounting methods being used for financial and tax reporting.
 
The Company’s total deferred tax assets and deferred tax liabilities were as follows at September 30, 2014 and December 31, 2013:
 
   
September 30, 2014
   
December 31, 2013
 
Deferred tax assets:
           
Non-benefited  tax losses and credits
  $ 27,964,283     $ 27,738,000  
Total deferred tax assets
    27,964,283       27,738,000  
Deferred tax liabilities
    -       -  
Net book value of assets
    -       -  
Total deferred tax liabilities
    -       -  
Total net deferred tax assets
    27,964,283       27,738,000  
Valuation allowance
    (27,964,283 )     (27,738,000 )
Net deferred tax assets
  $ -     $ -  

A valuation allowance has been established against the realization of the deferred tax assets since the Company has determined that the operating loss carryforwards may not be realized.
 
The Company has federal and state net operating loss carryforwards of approximately $46,137,134 and $45,430,000, respectively expiring between 2033 and 2026, respectively for September 30, 2014 and December 31, 2013. 
 
Internal Revenue Code Section 382 imposes limitations on our ability to utilize net operating losses if we experience an ownership change and for the NOL’s acquired in the acquisitions of subsidiaries.  An ownership change may result from transactions increasing the ownership percentage of 5% or greater stockholders in the stock of the corporation by more than 50 percentage points over a three-year period.  The value of the stock at the time of an ownership change is multiplied by the applicable long-term tax exempt interest rate to calculate the annual limitation.  Any unused annual limitation may be carried over to later years. The Company in June 2012, experienced a greater than 50% ownership change, so the rules of IRC section 382 apply.
 
At September 30, 2014 and December 31, 2013, the amount of gross unrecognized tax benefits before valuation allowances and the amount that would favorably affect the effective income tax rate in future periods after valuation allowances were zero.
 
The Company files income tax returns in U.S. federal and various state jurisdictions.  The Company is beyond the statute of limitations subjecting it to U.S. federal and state income tax examinations by tax authorities for years before 2011.  The Company is not currently subject to any income tax examinations by any tax authority.  Should a tax examination be opened, management does not anticipate any tax adjustments, if accepted, that would result in a material change to its financial position.  
 
 
MABWE MINERALS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
14.   Commitments
 
Current Litigation
 
From time to time, we may be involved in various claims, lawsuits, and disputes with third parties, actions involving allegations of discrimination or breach of contract actions incidental to the operation of our business. However, 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.
 
Mabwe Minerals v Base Minerals (case HC1549/14) – We filed suit against three defendants and have just received a judgment on request of order of spoliation due to defendants blocking mine access to Dodge Mine Blocks 1-6.  The defendants have been ordered by the Court to not block the mine from access by our mine workers.  On July 15, 2014 this case was brought before the Supreme Court of Zimbabwe where the court issued a perpetual interdict against the defendant to cease and desist all activities related to the blockage of the Dodge Mines as well as the dismissal of all related claims and appeals of Base Minerals under this case were dismissed.
 
Mabwe Minerals v. Base Minerals & The Mining Commissioner (case HC1414/14) – On February 13, 2014 a tribute agreement was filed by Base Mineral Zimbabwe against Chiroswa Syndicate.  This agreement expired in 2011 and Chiroswa had since sold the underlying Mine Blocks 1-6 at Dodge Mines to MAB-Z.  We believe that MAB-Z is the rightful owner of these mine blocks on the basis that they were purchased under a lawful sale and for which we hold the actual certificates of ownership.  We believe that this is a nuisance claim and are seeking to nullify the filing of this agreement.  We further believe that no impairment is necessary as of September 30, 2014.
 
Peter Valentine v. Mabwe Minerals (case HC 4112/13) - Mr. Valentine has filed a claim relative to rights under a tribute agreement (case HC1414/14) seeking damages and a share of rights under an irregular sale of the Dodge mining rights. The tribute agreement expired in 2011 and we believe that MAB-Z is the lawful, free and clear owner of Dodge Mine Blocks 1-6.  This case was heard before the High Court of Zimbabwe and was dismissed with cost as of October 16, 2014.  As we believed this suit to be a nuisance claim from the beginning we still maintain that the facts of the case were rightly determined.  This case is under appeal with the Supreme Court under case SC/517-14 with a hearing date of November 24, 2014.  We believe this appeal to be baseless and that no impairment is necessary as of September 30, 2014.
  
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 possessed surface rights to the property on which the claims were located under this agreement and 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 officer 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. As of September 30, 2014 the quarterly payments that were not paid but were accrued totals $30,615.  The Company is currently in discussions to renegotiate this contractual obligation.

 
MABWE MINERALS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

14.   Commitments

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 was to 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.
  
15.        Securitized Loan
 
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 originally was to be paid in monthly installments commencing in December 2013 in the amount of $35,000 plus interest expiring on June 30, 2014 upon which time all monies were due and payable 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.
 
This agreement was subsequently modified in January 2014 to adjust the payment schedule whereby payments of $35,000 per month plus full to date interest is due and payable commencing February 2014 and will continue each month there after including interest with the last payment due January 31, 2015.
 
Subsequent to the restructuring, the account was over-drafted due to withdrawal of timely interest and principal payments as well as miscellaneous bank fees. The overdraft position as provided for in the agreement carries the banks minimum lending rate plus a 12% margin agreed to on the original loan upon acceptance.  Additionally, as provided in our agreement this overdraft position not being previously agreed and authorized carries a penalty interest rate of an additional 10%.  Additionally the bank reserves the right to increase or change the minimum rate during the term of this line at its sole discretion.  Currently the bank has assigned an additional premium of 3%.  This rate is a floating rate and is assigned at the discretion of the bank. The Company is currently trying to renegotiate the terms of this loan.
 
As of September 30, 2014, the entire amount is reflected in current liabilities. The Company has expensed $84,359 for interest on this loan and the associated overdraft line of credit including $18,932 and $50,888 in the three and nine months ended September 30, 2014, respectively. The interest charged on the loan in the amount of $84,359 consists of $70,204 of standard loan interest and $14,155 of overdraft interest.  The Company paid $71,417 in interest during the nine months ended September 30, 2014, leaving an interest payable balance of $12,942.
 
At September 30, 2014 this loan had a balance of $140,000 and the accompanying overdraft line of credit had a balance of $239,975.
 
16.        Subsequent Events

On October 16, 2014 the High Court of Zimbabwe ruled in favor of the defendant in Peter Valentine v. Mabwe Minerals (case HC 4112/13) ruling that that MAB-Z is the lawful, free and clear owner of Dodge Mine Blocks 1-6.  This case was dismissed with cost.  This case is under appeal with the Supreme Court under case SC/517-14 with a hearing date of November 24, 2014.  We believe this appeal to be baseless and that no impairment is necessary as of September 30, 2014.
 
 
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.

 
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 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. 
 
 
On July 31, 2013 the Company entered into a Master Distributer Agreement (“MDA”) with Steinbock Minerals Ltd. (“Steinbock”).  Steinbock, together with its affiliate Yasheya Ltd. (“Yasheya”), 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. Steinbock and Yasheya were granted the exclusive right to market, sell, distribute, ship and deliver Dodge Mine barite to their customer base. This agreement remains in effect until cancelled by either party upon six months written notice. 
 
On January 6, 2014, MAB-Z completed the process to acquire the mineral and metal rights to 110 hectares (272 acres) contiguous with Dodge Mines.
 
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.  There is an accumulated deficit of $88,508,006.  The Company has no revenues as of September 30, 2014. 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, 2013. 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 U.S. generally accepted accounting principles (“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.

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.

 
Exploration Stage Company
 
       As of June 29, 2012 the Company moved from an Operating Stage Company to an Exploration Stage Company as a result of the execution of the change in ownership control to the majority controlling interest by Raptor Resources Holdings Inc. This transaction was deemed effective June 28, 2012, by FINRA and exploration stage activities commenced on June 29, 2012. In accordance with ASC 915 the Company will be reporting and disclosing additional information in addition to reporting and disclosure requirements otherwise prepared in accordance with U.S. generally accepted accounting principles (GAAP.)
 
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.  
 
Inventory
 
       Inventories, including stockpiles and mineralized material are carried at the lower of cost or net realizable value. Cost is comprised of production costs for mineralized material produced and processed. Production costs include the costs of materials, costs of processing, refinement, extraction, direct labor, mine site and processing facility overhead costs and site development cost, depreciation, depletion and amortization.
 
       In-process Inventories - In-process inventories represent mineralized materials that are currently in the process of being converted to a certifiable lot of saleable product through the extraction and/or refinement process. The value of in-process material is measured based on assays of the material fed into the process and the projected recoveries of material.  In-process inventories are valued at the average cost of the material extracted along with all other necessary cost to feed into the process attributable to the source material coming from the mines and/or stockpiles plus the in-process conversion costs, including applicable depreciation relating to the process facilities incurred to that point in the process.
 
       Finished Goods Inventories - Finished goods inventories include minerals that are certified in quantifiable lots that require no further processing or capital expenditure other than loading and transport related activities from to transfer title or complete the earnings cycle. These minerals are valued per lot at the average cost of their production.
 
Stockpile reserves
 
       Stockpiles represent mineralized material that has been extracted from the mine and is available for further processing. Stockpiles are measured by estimating the number of tons added and removed from the stockpile. Stockpile tonnages are verified by periodic surveys. Costs are allocated to stockpiles based on relative values of material stockpiled and processed using current mining costs incurred up to the point of stockpiling the material, including applicable overhead, depreciation, and depletion relating to mining operations, and removed at each stockpile’s average cost per ton.
 
Site Development Cost
 
       Site development costs consist of labor, surveying, mapping, engineering, other site development and licensing as well as any development costs necessary to prepare site Dodge Mine Blocks 1-6 for mining operations.

 
Extraction Cost
 
Extraction costs consist of the direct expenses of mineral removal from the established site. These costs include drilling, blasting, the loading, hauling and management of stockpiles and waste by-product, mineral refinement and excavation. These direct costs are directly associated with the production of saleable material and the increase of stockpile reserves.
 
Asset Retirement Obligation
 
The Company’s mining and exploration activities are subject to the laws and regulations of the nation of Zimbabwe in respect to governing the protection and restoration of the environment. These laws and regulations are subject to change, possibly resulting in more restrictive measures. The Company conducts its operations so as to protect the public health and environment and believes its operations are in compliance with applicable laws and regulations in all material respects. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations, but cannot predict the full amount of such future expenditures.
 
As a result of mining operations the company has recognized an Asset Retirement obligation asset and liability as prescribed by ACS 410 Asset Retirement and Environmental Obligations.  Based on reasonable estimates the Company has set up a reserve to restore the local environment based on extraction activity. Each period in which mining activities occur a portion of the current extraction cost will be recorded as an asset and a liability in the current period.
 
Estimated future reclamation costs are based principally on traditional estimates to comply with legal and regulatory requirements. At September 30, 2014 and December 31, 2013, $83,350 and $0, respectively were recognized were accrued for reclamation costs relating to currently or recently producing mineral properties in accordance with asset retirement obligation guidance. The current portions of $83,350 and $0 at September 30, 2014 and December 31, 2013, respectively, are included in Asset Retirement Obligation-Mining Rights.
 
RESULTS OF OPERATIONS
 
Comparison of Results of Operations for the Three and Nine Months Ended September 30, 2014 and 2013
 
The following table sets forth selected financial data regarding our financial position and operating results for the three and nine months ended September 30, 2014 and 2013.  This data should be read in conjunction with our condensed consolidated financial statements and related notes thereto included in this report.

MABWE MINERALS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
    For the Three Months Ended September 30,     For the Nine Months Ended September 30,  
   
2014
   
2013
   
Change ($)
   
Change (%)
    2014     2013    
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
    74,924       169,181       (94,257 )     -56 %     207,493       333,360       (125,867 )     -38 %
Extraction Cost
    78,500       230,578       (152,078 )     -66 %     287,790       230,578       57,212       25 %
Site Development Cost
    17,900       379,861       (361,961 )     -95 %     64,496       458,926       (394,430 )     -86 %
Selling, General and administrative
    24,990       49,356       (24,366 )     -49 %     83,226       163,338       (80,112 )     -49 %
Depreciation
    200       -       200       0 %     598       -       598       0 %
Total operating expenses
    196,514       828,976       (632,462 )     -76 %     643,603       1,186,202       (542,599 )     -46 %
Loss from operations
    (196,514 )     (828,976 )     632,462       -76 %     (643,603 )     (1,186,202 )     542,599       -46 %
OTHER INCOME (EXPENSE)
                                                               
Interest Income (Expense)
    (22,808 )     (17,750 )     (5,058 )     28 %     (51,165 )     (23,337 )     (27,828 )     119 %
   Gain on Investment - W.G.B. Kinsey - Equity Method
    -       (13,923 )     13,923       -100 %     (12,367 )     (213,356 )     200,989       -94 %
Total other income (expense)
    (22,808 )     (31,673 )     8,865       -28 %     (63,532 )     (236,693 )     173,161       -73 %
Income (loss) before income taxes
    (219,322 )     (860,649 )     641,327       -75 %     (707,135 )     (1,422,895 )     715,760       -50 %
Income tax benefit
    -       -       -       0 %     -       -       -       0 %
NET INCOME (LOSS)
  $ (219,322 )     (860,649 )     641,327       -75 %   $ (707,135 )     (1,422,895 )     715,760       -50 %
 
 
Net Revenues
 
 There were no revenues from operations for the three and nine ended September 30, 2014 and 2013. 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 no gross profit from operations for the three and nine months ended September 30, 2014 and 2013.
 
Operating Expenses
 
The decrease in operating expenses for the three months ended September 30, 2014 compared to the same period of 2013 was $632,462. The decreased expense resulted from lower professional, administrative and site development and extraction costs with the site having minimal costs in the current year where the same period in the prior year marked the commencement of mining activities.
 
The decrease in operating expenses for the nine months ended September 30, 2014 compared to the same period of 2013 was $542,599. The decreased expense resulted from minimal site development and extraction costs for the current year where the same period in the prior year was marked by the commencement of mining activities as well as lower professional, administrative costs as compared to the same period last year.
 
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, 2014 and 2013.
 
Extraction Cost
 
The Company incurred extraction costs of $78,500 and $287,790 in the three and nine months ended September 30, 2014 versus $230,578 for the same periods in the prior year.  These extraction costs represent costs for prior periods 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.
    
Site Development Cost
 
Site development expenses from continuing operations decreased to $17,900 and $64,496 from $379,861 and $458,926 for the three and nine months ended September 30, 2014 and 2013, respectively. This decrease was primarily due to the inactivity at the mine as well as the site being largely developed at the current site of extraction. The Company has not recognized an expense for reclamation for the three and nine months ended September 30, 2014.  This expense will be recognized in accordance with the matching principle once revenue is recognized based on the unit of production method.  As the commencement of operations at Dodge Mines has begun site development should remain constant where ongoing extraction remains in effect.

 
Selling, General and Administrative
 
 Selling, general and administrative expenses (SG&A) from operations decreased $24,366 to $24,990 from $49,356 due largely to a reduction of travel and meals expense, web development and expense control with inactivity at Dodge Mine.  The nine months ended September 30, 2014 decrease $80,112 to $83,226 from $163,338 due largely to a reduction of travel and meals expense, web development and expense control with inactivity at Dodge Mine.

Net Other Expense
 
Net other expense in 2014 was $22,808 and $63,532 for the three and nine months ended September 30, 2014 compared to a net other expense of $31,673 and $236,693 respectively for the same periods in 2013. This change resulted from the following:
 
 
For the three and nine months ended September 30, 2014, the loss was primarily due to the interest cost which increased from $17,750 to $22,808 for the three months ended September 30, 2014 and increased from $23,337 to $51,165 for the nine months ended September 30, 2014. The marginal increase for the three months ended September 30, 2014 was due to the higher interest rate on the overdraft balance of the CBZ line of credit and the increase for the nine months ended September 30, 2014 was due to the CBZ secured loan was established in the second quarter of 2013 where 2014 had a full nine months of interest expense. Additionally, the decrease in fair value of our investment in WGB Kinsey & Co was reduced to $0 with a realized expense of $0 and $12,367 for the three and nine months ended September 30, 2014 compared to an expense of $13,923 and $213,356 for the prior year.
 
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, 2013.  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, 2013 and our condensed consolidated financial statements and related notes included in this Report, the cautionary statements included in the “Risk Factors” section under Item 1A of our Form 10-K for the year ended December 31, 2013 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 we have realized no 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, 2014, we had a deficit in working capital of $1,646,228.
 
Effective July 26, 2012 MAB-Z entered into a one year financing short term loan agreement with OVERSEAS TRADE AND FINANCING LIMITED (“OTF”) for an amount of $40,000 with accrued interest at an original rate of 12%. The balance with interest and fees of $48,026 ($8,026 of accrued interest which is included in accounts payable and accrued expenses) was due at December 31, 2013.  Under the original terms of the contract the loan was to have been fully repaid within 360 days of the effective date. Failure to pay as prescribed or duly extend the loan period will result in the accrual of late charges at a rate of 6% per annum. Extension and drawdown fees are 1% and 2% respectively. OTF is owned and controlled by a current director of MAB-Z and was recently registered with the Reserve Bank of Zimbabwe, External Loans Co-coordinating Committee. In accordance with the newly registered loan, the interest rate will now be 8% per annum, and no default rate is in place. The lender and the Company are currently negotiating terms of a new maturity date. The lender has not informed the Company that the lender is in default of the loan.
 
On April 5, 2014 the Company, through its affiliate MAB-Z, received confirmation of its registration and acceptance of terms for the loan from OTF in the amount of $40,000 and 8% per annum due in 360 days.
 
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 originally was to be paid in monthly installments commencing in December 2013 in the amount of $35,000 plus interest expiring on June 30, 2014 upon which time all monies were due and payable 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.
 
This agreement was subsequently modified in January 2014 to adjust the payment schedule whereby payments of $35,000 per month plus full to date interest is due and payable commencing February 2014 and will continue each month there after including interest with the last payment due January 31, 2015.  At September 30, 2014 this loan had a balance of $140,000.

On May 2, 2014 MAB-Z entered into an open ended loan agreement with Gary Booth.  The Company received an advance of $10,000 for working capital and short-term cash requirement which carries an interest rate of 12%.  As of September 30, 2014 the balance due was $10,503 reflected in Accounts payable and accrued expenses.

On July 31, 2014 MAB-Z entered into an open ended loan agreement with Antony Kinsey and Kevin Hegarty.  The Company was advanced $20,000 for working capital and short-term cash requirements which carries an interest rate of 12%.  As of September 30, 2014 the balance due was $20,396 reflected in Accounts payable and accrued expenses.

In July 2014 advance payments were made by Graham Roberts on behalf of MAB-Z in the amount of $6,000.  This loan is currently undocumented but is expected to be formalized in Q4.  The balance due without accrued interest was $6,000 reflected in Accounts payable and accrued expenses.
 
We had a cash balance of $14,389 at September 30, 2014 compared to $55,563 at December 31, 2013.
 
Our cash used in operating activities significantly decreased to $545,886 for the nine months ended September 30, 2014 from $1,073,098 for the same period in 2013. The major offsetting variances related to the decrease in cash used in operating activities are: a decreased net loss of $728,144 for the period  as well as $175,187 less in common stock issued as compensation in 2013, offset by a decrease in the depletion of prepaid items of $203,851 and a $200,989 lesser fair value reduction adjustment in 2014.
 
We had no cash flows from investing activities for the nine months ended September 30, 2014 compared to $20,340 for the acquisition of fixed assets for the same period in the prior year.
 
Our cash flows provided by financing activities for the nine months ended September 30, 2014 were $504,622 compared to $1,201,771 for the same period in 2013, largely the result of proceeds from private placement common stock issuance in the prior year of $860,500.
 
We expect to recognize revenues from our mining operations in 2014 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.
 
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 nine months ended September 30, 2014, 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.
 
 
PART II - OTHER INFORMATION
 
Item 1. Legal Proceedings.
 
From time to time, we may be involved in various claims, lawsuits, and disputes with third parties, actions involving allegations of discrimination or breach of contract actions incidental to the operation of our business. However, 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.
 
Mabwe Minerals v Base Minerals (case HC1549/14) – We filed suit against three defendants and have just received a judgment on request of order of spoliation due to defendants blocking mine access to Dodge Mine Blocks 1-6. The defendants have been ordered by the Court to not block the mine from access by our mine workers. On July 15, 2014 this case was brought before the Supreme Court of Zimbabwe where the court issued a perpetual interdict against the defendant to cease and desist all activities related to the blockage of the Dodge Mines as well as the dismissal of all related claims and appeals of Base Minerals under this case were dismissed.
 
       Mabwe Minerals v. Base Minerals & The Mining Commissioner (case HC1414/14) – On February 13, 2014 a tribute agreement was filed by Base Mineral Zimbabwe against Chiroswa Syndicate.  This agreement expired in 2011 and Chiroswa had since sold the underlying Mine Blocks 1-6 at Dodge Mines to MAB-Z.  We believe that MAB-Z is the rightful owner of these mine blocks on the basis that they were purchased under a lawful sale and for which we hold the actual certificates of ownership.  We believe that this is a nuisance claim and are seeking to nullify the filing of this agreement.  We further believe that no impairment is necessary as of September 30, 2014.
 
       Peter Valentine v. Mabwe Minerals (case HC 4112/13) - Mr. Valentine has filed a claim relative to rights under a tribute agreement (case HC1414/14) seeking damages and a share of rights under an irregular sale of the Dodge mining rights. The tribute agreement expired in 2011 and we believe that MAB-Z is the lawful, free and clear owner of Dodge Mine Blocks 1-6.  This case was heard before the High Court of Zimbabwe and was dismissed with cost as of October 16, 2014.  As we believed this suit to be a nuisance claim from the beginning we still maintain that the facts of the case were rightly determined.  This case is under appeal with the Supreme Court under case SC/517-14 with a hearing date of November 24, 2014.  We believe this appeal to be baseless and that no impairment is necessary as of September 30, 2014.

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.

 
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

 
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 14, 2014
By:
/s/ Al Pietrangelo
 
   
Al Pietrangelo, Chief Executive Officer, (principal executive officer), Chief Financial Officer (principal financial and accounting officer)
 

 
 
 
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