Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2015

Notes to Financial Statements

Note 2 - Summary of Significant Accounting Policies

2.    Summary of Significant Accounting Policies

Exploration Stage Company/Development 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).

The Company had adopted the provisions of ASC 810-10-5, “Consolidation of VIEs”. ASC 810-10-5 requires a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIEs residual returns. As fully described in Note 3, on December 28, 2014, the Company deconsolidated MAB-C, a VIE due to the fact that the Company no longer had the power to direct the activities that most significantly impact MAB-C’s economic performance.

As a result of the deconsolidation, the Company exited the exploration stage and became a development stage company.

Under the terms of the March 30, 2015 SPA the transfer of performing assets by Fonon Technologies into the Company valued at $10,401,030 allowing the Company to focus operational efforts in the laser material processing and consumables business.  The Company’s business of 3D Laser Metal Printing, an emerging additive metal nano powder manufacturing technology with a presence in numerous industries with diverse applications, including the manufacturing of highly complex geometrics, fast track prototyping, mold fabrication and repair, with new emerging technically driven applications in high-tech engineering and electronics.  3D Laser Metal Printing is a layered, digitally driven additive manufacturing process that uses high quality focused laser energy to fuse metal nano powders into 3D objects. Metal powder is supplied to each customer as a consumable item after acquiring a Laser 3D Metal System.

Principles of Consolidation

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 2.5 common shares (post reverse split adjusted) of Mabwe Minerals Inc. for every share of Series B Preferred Convertible Stock both subject to a one year holding period. The remaining 51% ownership in MAB-Z is held by a Director of the Company, a Zimbabwe resident, Tapiwa Gurupira (50%) with the remaining portion owned by Asswell Gurupira (1%). 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.  

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 owned 100% of MAB-Z and 25% of Kinsey, which as of October 1, 2014, was returned to Kinsey, as fully described in Note 3. The Company owned a 49% stake in MAB-C the newly formed corporation; the remaining 51% ownership in MAB-C was held by a former director of the Company, Zimbabwean resident, Tapiwa Gurupira (50% ownership), with the remaining portion owned by Asswell Gurupira (1% ownership). MAB-C up through December 28, 2014, was the operating arm of Mabwe Minerals Inc., with the Company being the primary beneficiary of all the activities of MAB-C.

MAB-C was a Variable Interest Entity (VIE) with respect to guidance under ASC 810-10-5 and was therefore consolidated.

As fully described in Note 3, on December 28, 2014, the Company deconsolidated MAB-C, a VIE due to the fact that the Company no longer has the power to direct the activities that most significantly impact MAB-C’s economic performance.

Pursuant to the March 30, 2015 SPA, (i) the Company sold its assets and liabilities to a company controlled by Al Pietrangelo, (ii) the Company acquired assets to engage in the business of 3D Metal Laser Printing and (iii) Al Pietrangelo, former President and CEO and sole director, resigned, and prior to such resignation appointed Dmitriy Nikitin to be the sole member of its Board.  There is no subsidiary-parent arrangement between that new company controlled by Al Pietrangelo and the Company. The transferred assets of Fonon Technologies valued at $10,401,030 allows the Company to focus operational efforts in the laser material processing business.

Business Combination

On March 30, 2015, the Company, entered into a Share Purchase and Asset Sale Agreement (the “SPA”) among Mabwe Minerals, Fonon Technologies, Raptor Resources Holdings Inc. and Dmitriy Nikitin pursuant to which the Company sold an aggregate of 32,524,161 shares of its common stock (post reverse split adjusted), to give Fonon Technologies 65% ownership of Mabwe’s capital stock on a fully diluted basis in exchange for certain assets of Fonon Technologies valued at $10,401,030 which Fonon Technologies used in its laser material processing and consumables business.

The Company has reviewed the SPA for consideration as a business combination and for the application of pushdown accounting, In is review of this transaction the Company considered ASU No. 2014-17, “Business Combination”  and ASC 805-50 “Business Combinations: Related Issues” sections 25 “Recognition” and 30 “Initial Management”.  As prescribed in ASC 805-50-25-1 initial recognition of the purchase of assets for equity interest consideration shall be measured at the date of acquisition. The entities of the transaction were not under common control.      

The Company has considered ASC 805-50-30 “Business Combinations: Related Issues - Initial Management” assets purchased rather than a business.  Under this provision the assets purchased are recognized at the cost to the acquiring entity.  In this case, the consideration of non-cash equity interest which was given in exchange for the assets is based upon the fair value of the assets acquired because it is more reliability measured.  This reliability is based on the uncertainty of true stock value subsequent to planned reverse spilt and the issuance of an additional 65,000,000 post-split shares of common stock to Fonon Technologies, Inc. 

In November 2014, the FASB issued ASU No. 2014-17, “Business Combination.” The provisions of ASU No. 2014-17 require management to determining whether and at what threshold an acquiree (acquired entity) can reflect the acquirer’s accounting and reporting basis (pushdown accounting) in its separate financial statements.  Under the SPA the acquirees’ acquisition was of a group of performing assets and not a disparate company.  As a result of the deconsolidation on December 28, 2014, the basis of account prior to and subsequently are not materially different.  As result of the SPA, the Company, Fonon Corporation will focus on the business of 3D Laser Metal Printing.  The Company has not elected to apply pushdown accounting in its separate financial statements upon occurrence of this event.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when acquired to be cash equivalents. The Company places its cash with a high credit quality financial institution. The Company’s accounts at this institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000.

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 fair value at the time of the SPA and are presented less accumulated depreciation.   Depreciation is computed using the straight-line method over the assets estimated useful lives. 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 statements of operations.

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 recognized revenue from distribution sales when all contingencies were satisfied and upon persuasive evidence of a sale to end users until such time that historical sell through ratios had been developed.  Payments received before all of the relevant criteria for revenue recognition were satisfied were recorded as deferred revenue in the accompanying balance sheets.  Revenues and costs of revenues from consulting contracts were recognized during the period in which the service was performed.  All revenues were reported net of any sales discounts or taxes.

Since the Company entered the Exploration Stage and most recently, the Development Stage, no revenues have been recorded. 

Unearned Revenue

Prior to deconsolidation as discussed in Note 3, when the Company was in the Exploration Stage, MAB-Z had 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 earning 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 MAB-Z. This delay was due to MAB-Z’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 was the search and testing of equipment necessary for this further refinement. Under the terms of the initial purchase order, Steinbock agreed to pay half of the face value upon delivery of the invoice. As of December 31, 2013, 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 was expected to be recorded in MAB-Z as revenue once the initial 2,000 tons of minerals were delivered to the buyer. The second purchase order required MAB-Z to successfully produce the ordered quantity of an additional 10,000 tons after the jigging operations were to have been completed to receive the first half of the payment, and the second half to be paid upon a vessel being loaded in Beira. In addition, MAB-Z had recorded $3,740 of unearned revenue in December 2014 for stockpile inventory yet to be delivered to the customer.

Inventory

Prior to deconsolidation as discussed in Note 3, of MAB-C, inventories, including stockpiles and mineralized material were carried at the lower of cost or net realizable value. Cost was comprised of production costs for mineralized material produced and processed. Production costs included 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.

Work in process inventory (Fonon Corporation) - Work in process inventory consists of inventory purchased under the SPA that was partially manufactured or not fully assembled as of the report date.  This equipment, machines, parts, frames, lasers or assemblies are items not ready for use or resale.  Costs are accumulated as work in process until sales ready items are compete when it is moved to finished goods inventory.  Amounts in this account represent items at various stages of completion at the report date.

Finished goods inventory (Fonon Corporation) - Finished goods inventory consists of inventory purchased under the SPA that were fully manufactured, assembled or in salable condition, Finished good inventory is comprised of items that are complete and ready for commercial application without further cost other that delivery and setup. Finished goods inventory includes solar and other equipment, lasers, software, machines, parts or assemblies.

Stockpile reserves

Prior to deconsolidation as discussed in Note 3, for MAB-C, Stockpiles represented mineralized material that had been extracted from the mine and is available for further processing. Stockpiles were measured by estimating the number of tons added and removed from the stockpile. Stockpile tonnages were verified by periodic surveys. Costs were 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. Through December 28, 2014, MAB-Z, had approximately 4,000 tons of barite in stockpile. We believed 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. 

MAB-Z was extracting API grade barite from the Dodge Mine site and as requested and desired by our master distributor. MAB-Z was actively in the process of trying to obtain necessary equipment to further refine the mineral to be able to attain and sell chemical grade barite. The additional process was to crush and sift the extracted barite and allow for the removal of silica. The added step involved the process of jigging which separated particles in the raw barite based on specific gravity. This additional step in the process involved a large outlay of capital to acquire additional machinery to further refine the extraction and sift out unwanted minerals.

Site Development Cost

Prior to deconsolidation as discussed in Note 3, for MAB-C, site development costs consisted 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

Prior to deconsolidation as discussed in Note 3, for MAB-C, extraction costs consisted of the direct expenses of mineral removal from the established site. These costs included drilling, blasting, the loading, hauling and management of stockpiles and waste by-product, mineral refinement and excavation. These direct costs were directly associated with the production of saleable material and the increase of stockpile reserves.

Compensated Absences

The Company does not currently have a policy concerning due to the fact that no full time employees exist under a time based compensation agreement.

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 June 30, 2015.

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 financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates for the periods in which the differences are expected to reverse.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

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

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

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.

Fair Value of Financial Instruments

The Company adopted ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements establishes a framework for measuring fair value and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results, but did expand certain disclosures.

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

These inputs are prioritized below:

Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data

Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

The Company analyzes all financial instruments with features of both liabilities and equity under the FASB’s accounting standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

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 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 six months ended June 30, 2015 and 2014, respectively.

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 as their effect is anti-dilutive.  For the three and six months ended June 30, 2015 and 2014 basic and diluted earnings per share were the same as the Company has a loss. 

Goodwill

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 resulted in the Company recording Goodwill as part of the purchase transaction. MAB-Z is the operating arm of the Company and at the time of the purchase its net assets consisted chiefly of mining rights associated with the main line of business of the company. Management periodically assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

As fully described in Note 3, on December 28, 2014, the Company deconsolidated MAB-C, a VIE due to the fact that the Company no longer has the power to direct the activities that most significantly impact MAB-C’s economic performance.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation. The reclassifications had no effect on the net loss or cash flows of the Company.

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 November 2014, the FASB issued ASU No. 2014-17, “Business Combination.” The provisions of ASU No. 2014-17 require management to determining whether and at what threshold an acquiree (acquired entity) can reflect the acquirer’s accounting and reporting basis (pushdown accounting) in its separate financial statements. This update provides an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity in the reporting period in which the change-in-control event occurs. An acquired entity should determine whether to elect to apply pushdown accounting for each individual change-in-control event in which an acquirer obtains control of the acquired entity. If pushdown accounting is not applied in the reporting period in which the change-in-control event occurs, an acquired entity will have the option to elect to apply pushdown accounting in a subsequent reporting period to the acquired entity’s most recent change-in-control event. An election to apply 2 pushdown accounting in a reporting period after the reporting period in which the change-in-control event occurred should be considered a change in accounting principle in accordance with Topic 250, Accounting Changes and Error Corrections. If pushdown accounting is applied to an individual change-in-control event, that election is irrevocable. If an acquired entity elects the option to apply pushdown accounting in its separate financial statements, it should disclose information in the current reporting period that enables users of financial statements to evaluate the effect of pushdown accounting. The Company is currently assessing the impact of this ASU on the Company’s financial statements. 

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 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.