RITE 10-K & 10-Q changes, risk factors and insider trading

Investing in the Company’s common stock involves a high degree of risk. Any potential investor should carefully consider the risks and uncertainties described below before purchasing any shares of the Company’s common stock. The risks described below are those that Company management currently believes may materially affect the Company.

The Company derives revenues from companies in the mining industry, which is a historically cyclical industry with levels of activity that are significantly affected by the levels and volatility of precious metals and gem stone prices.

Any prolonged reduction in the overall level of exploration and development activities, whether resulting from changes in commodity prices or otherwise, could adversely impact the Company in many ways by negatively affecting its sales and results of operations. Likewise volatility in precious metals and gem stone prices are likely to continue. Depending on the market prices of gold, silver, platinum, palladium and gem stones, mining companies may cancel or curtail their mining projects, thereby reducing demand for the Company’s alluvial mining equipment and services. Many factors beyond the Company’s control affect precious metal and gem prices and the resultant demand for our equipment and services, including but not limited to:Any prolonged reduction in the overall level of exploration and development activities, whether resulting from changes in commodity prices or otherwise, could adversely impact the Company in many ways by negatively affecting its sales and results of operations. Likewise volatility in precious metals and gem stone prices are likely to continue. Depending on the market prices of gold, silver, platinum, palladium and gem stones, mining companies may cancel or curtail their mining projects, thereby reducing demand for the Company’s alluvial mining equipment and services. Many factors beyond the Company’s control affect precious metal and gem prices and the resultant demand for our equipment and services, including but not limited to:

■ exploration and production costs;

■ the discovery rate of new precious metal and gem stone deposits;

■ the rate of depletion of existing and new precious metal and gem stone deposits;

■ the ability of mining companies to raise capital;

■ political instability in precious metal and gem stone producing regions;

■ economic conditions in the United States and elsewhere;

■ governmental regulations, both domestic and foreign;

■ domestic and foreign tax policy;

■ weather conditions in the United States and elsewhere; and ■ the overall supply and demand for commodities.

Any prolonged reduction in the overall level of mining activities, whether resulting from changes in precious metal or gem prices, could adversely impact the Company in many ways by negatively affecting its sales and results of operations.

The Company has a limited operating history upon which an evaluation of the Company’s prospects can be made.

The Company adopted its current business plan in 2012. The Company’s lack of operating history in its current and changing line of business makes an evaluation of the Company’s business and prospects very difficult. The Company's prospects must be considered speculative, considering the risks, expenses, and difficulties frequently encountered in the establishment of a new business. Company management cannot be certain that the Company’s business will be successful or that the Company will generate significant revenues and become profitable.

The Company is essentially beginning a new venture, with a limited operating history.

The Company’s planned venture into precious metal extraction is a start-up enterprise with very limited operating and no meaningful financial history on which prospective investors might attempt to predict future performance. To date, the Company’s activities have consisted solely of acquiring an alluvial mining equipment manufacturer and applying certain proprietary features to a process long known and utilized in the industry, selecting manufacturing facility sites for the commercial production of such processes, commencing certain initial test marketing efforts and seeking financing for its proposed activities. Except for limited test marketing and sales of its manufactured mining equipment, the Company has not sold this service to any customers. The likelihood of success of the proposed new business of the Company must be viewed in light of the foregoing factors, as well as the delays, expenses, problems and difficulties frequently encountered by new enterprises in the development or start-up stage, many of which factors are beyond the Company’s control. The Company is subject to all of the risks inherent in the creation and development of a new business and the marketing of new and innovative products. The Company has entered into select mining joint ventures but like its entry into the mining business in general, it has a limited operating history and experience to evaluate these joint ventures.

The Company has only limited marketing experience with the precious metal extraction service.

To date, the Company’s marketing efforts have consisted principally of discussions with mining companies to determine their possible interest in the planned precious metal extraction service. In order to market the precious metal extraction service on a commercial basis, the Company must develop a sales and marketing effort. As the Company proceeds with this portion of its business plan, it intends to hire or contract with qualified, experienced salespeople as needed. There can be no assurance that any of these marketing efforts will be successful or that the proceeds from this Offering will be sufficient to conduct the planned marketing program and to purchase the necessary quantities of inventory.

The Company will be relying on one process for its proposed extraction service.

To date, the Company has generated no revenues from its sale of the precious metal extraction service. Accordingly, any factor that adversely affects the promotion or sale of precious metal extraction service will have a material adverse effect on that aspect of the Company’s business.

Company management anticipates that the Company will need to raise additional capital to continue the Company’s operations. The Company’s failure to raise additional capital will significantly affect the Company’s ability to fund proposed activities.

To pursue its strategy of becoming a value-added provider of environmentally friendly mining products services, the Company will be required to raise additional funds. Company management does not know if the Company will be able to acquire additional financing and anticipates the need to spend significant funds in acquiring the equipment and facilities needed to complete its business plan. The Company’s failure to obtain additional funds would significantly limit or eliminate the Company’s ability to fund those activities. Specifically, the Company needs additional capital to meet its obligations under the Goldfield acquisition. As of the date of this filing on Form 10-K, the Company has not made the first payment under its agreement with Goldfield’s sole shareholder and is therefore not in compliance with the terms of the acquisition. Although the Company believes that Goldfield shareholder will be flexible in the timing of receipt of the installments due under its acquisition of Goldfield, no assurances can be made that this will continue. If the shareholder were to insist on immediate payment, the Company is not currently in a position to make such payment and Goldfield’s shareholder could seek rescission of the acquisition and share exchange. This would have a material adverse affect on the Company and its planned operations.

The Company has incurred a net loss since inception and expects to incur net losses for the foreseeable future.

Company management expects to incur significant operating and capital expenditures and, as a result, expects significant net losses in the future. The Company will need to generate significant revenues to achieve and maintain profitability and may not be able to generate sufficient revenues to achieve profitable operations.

The Company’s success in its newly acquired alluvial mining equipment business is highly dependent on the ability of management to locate and acquire suitable customers for its products and services.

The nature of the Company’s newly acquired alluvial mining equipment business is highly speculative and there is a consequent risk of loss of your investment. The success of the Company’s plan of operation with respect to this business will depend to a great extent on customers it is able to secure to purchase its products and services as well as the mining industry as a whole. Company management cannot assure investors that the Company will be successful in continuing this business or that such continuation will be profitable.

We may not be able to keep pace with competition in our industry.

The precious metal extraction industry in the U.S. and international markets is very competitive and fragmented. Our business, of which Goldfield is a part, is subject to risks associated with competition from new or existing industry participants who may have more resources and better access to capital. Many of our competitors and potential competitors may have substantially greater financial and government support, technical and marketing resources, larger customer bases, longer operating histories, greater name recognition and more established relationships in the industry than we do. Among other things, these industry participants compete with us based upon price, quality, style, functionality and availability. We cannot be sure we will have the resources or expertise to compete successfully in the future. Some of our competitors may also be able to provide customers with additional benefits at lower overall costs to increase market share. We cannot be sure we will be able to match cost reductions by our competitors or that we will be able to succeed in the face of current or future competition. Also, due to the large number of competitors and their wide range of product offerings, we may not be able to continue to differentiate our products through value, styling or functionality from those of our competitors. In addition, some of our customers are also performing more manufacturing services themselves. We may face competition from our customers as they seek to become more vertically integrated. As a result, we are continually subject to the risk of losing market share, which may lower our sales and earnings. We will face different market dynamics and competition as we develop new products to expand our presence in our target markets. In some markets, our future competitors may have greater brand recognition and broader distribution than we currently enjoy. We may not be as successful as our competitors in generating revenues in those markets due to the lack of recognition of our brands, lack of customer acceptance, lack of product quality history and other factors. As a result, any new expansion efforts could be more costly and less profitable than our efforts in our existing markets. If we are not as successful as our competitors are in our target markets, our sales could decline, our margins could be impacted negatively and we could lose market share, any of which could materially harm our business.

Failure to anticipate or timely respond to changes in market acceptance of our process and products could adversely impact our business.

There can be no assurance that the alluvial mining equipment or the precious metal extraction service we intend to provide as part of our business plan can be conducted at a cost, or sold in quantities necessary to achieve profitability. It is possible that following the initial introduction of the precious metal extraction process, it may not perform properly or that customers may object to certain features of the process’ output and modifications to its design may be required to achieve greater customer acceptance. These changes would require additional expense and could cause production delays, which would adversely affect the Company’s business.

Fluctuations in the price, availability or quality of raw materials for our products could cause manufacturing delays, adversely affect our ability to provide goods to our customers or increase costs, any of which could decrease our sales or earnings.

Under our planed precious metal extraction service we intend to pursue as part of our business strategy, our major raw material purchases will include ore bodies and reclaimed mine tailings. If implemented, we will depend on outside suppliers for these raw materials and must obtain sufficient quantities of quality raw materials from these suppliers at acceptable prices and in a timely manner. We may not maintain fixed supply contracts with our suppliers. Unfavorable fluctuations in the price, quality or availability of required raw materials could negatively affect our ability to meet the demands of our customers. Our inability to meet customers’ demands could result in the loss of future sales. The profitability of our products and service offerings will depend in part upon the margin between the cost to us of certain raw materials and our fabrication costs associated with converting such raw materials into assembled products, as compared to the selling price of our products. We intend to continue to base the selling prices of our products and services in part upon their associated raw material costs. However, we may not be able to pass all increases in raw material cost or increases in the costs associated with taking possession of raw materials through to our customers in the future. The inability to offset price increases of raw materials by sufficient product price increases would have a material adverse effect on our consolidated financial condition, results of operations and cash flows. We do not plan to engage in hedging transactions to protect against raw material fluctuations, but anticipate mitigating the short-term risks of price swings by purchasing raw materials in advance based on forecasted production needs or reaching agreements with some of our suppliers to keep the cost of raw materials stable.

This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause the Company’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. The reader can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, the reader should consider various factors which may cause the Company’s actual results to differ materially from any forward-looking statements. Although Company management believes that the exceptions reflected in the forward-looking statements are reasonable, management cannot guarantee future results, levels of activity, performance or achievements. Therefore, our actual results may differ materially from those anticipated in these forward-looking statements as a result of many important factors, including those set forth in our “Risk Factors.” The Company’s management undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

Critical Accounting Policies and Estimates

The discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. In consultation with the Company’s Board of Directors, management has identified the following accounting policies that it believes are key to an understanding of its financial statements. These are important accounting policies that require management’s most difficult, subjective judgments.

Reclassification

Certain reclassifications have been made to conform the 2012 amounts to the 2013 classifications for comparative purposes.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of MineralRite Corporation and its wholly-owned subsidiary, Goldfield International, Inc. (acquired on March 1, 2013. see Note 3) Intercompany transactions and balances have been eliminated in consolidation.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes.

Management’s Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Accounts Receivable

Accounts receivable are reported at the customer’s outstanding balances less any allowance for doubtful accounts. Interest is not accrued on overdue accounts receivable.

Allowance for Doubtful Accounts

An allowance for doubtful accounts on accounts receivable is charged to operations in amounts sufficient to maintain the allowance for uncollectible accounts at a level management believes is adequate to cover any probable losses. Management determines the adequacy of the allowance based on historical write-off percentages and information collected from individual customers. Accounts receivable are charged off against the allowance when collectability is determined to be permanently impaired. Management has determined that as of December 31, 2013, no allowances were required.

Revenue Recognition

Sales and related costs are recognized when the title passes to the customer since the risks and rewards of ownership has transferred, persuasive evidence of an arrangement exists, the services have been performed and all required milestones achieved, the selling price is fixed, determinable, and collection is reasonable assured.

Property and Equipment

Property and equipment are stated at cost. Depreciation and any amortization are computed using the straight-line method for financial reporting over the estimated useful lives. The estimated useful lives of assets range from 5 to 7 years.

Gains and losses resulting from sales and dispositions of property and equipment are included in current operations. Maintenance and repairs are charged to operations as incurred. Depreciation expense for the year ended December 31, 2013 and 2012 from continuing operations amounted to amounted to $14,906 and $585, respectively.

Foreign Currency Translation

The Company's primary functional currency is the U.S. dollar. For foreign operations whose functional currency is the local foreign currency, balance sheet accounts are translated at exchange rates in effect at the end of the period and income statement accounts are translated at average exchange rates for the period. Translation gains and losses are included as a separate component of stockholders’ deficit.

Convertible Debentures

If the conversion features of conventional convertible debt provides for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and the Company amortizes the discount to interest expense, over the life of the debt using the effective interest method.

Derivative Financial Instruments

In the case of non-conventional convertible debt, the Company bifurcates its embedded derivative instruments and records them under the provisions of ASC Topic 815-15 “Embedded Derivatives.” The Company’s derivative financial instruments consist of embedded derivatives related to non-conventional convertible notes (see Note 8). The embedded derivative includes the conversion feature of the notes. The accounting treatment of derivative financial instruments requires that the Company record the derivatives at their fair values as of the inception date of the respective agreement and at fair value as of each subsequent balance sheet date. Any change in fair value will be recorded as non-operating, non-cash income or expense at each reporting date. If the fair value of the derivatives is higher at the subsequent balance sheet date, the Company will record a non-operating, non-cash charge. If the fair value of the derivatives is lower at the subsequent balance sheet date, the Company will record non-operating, non-cash income.

Concentrations of Credit Risk

The Company primarily transacts its business with one financial institution. The amount on deposit in that one institution may from time to time exceed the federally-insured limit.

The Company’s accounts receivable are typically unsecured and are derived from U.S. customers in different industries. The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses. Historically, such losses have been within management’s expectations. As of December 31, 2013, one customer accounted for 100% of the Company’s net accounts receivable balance, respectively.

Loss per Share of Common Stock

The Company reports earnings (loss) per share in accordance with Accounting Standards Codification “ASC” Topic 260-10, "Earnings per Share." Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted average number of common shares available. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted earnings (loss) per share has not been presented since the effect of the assumed conversion of warrants and debt to purchase common shares would have an anti-dilutive effect. Potential common shares as of December 31, 2013 that have been excluded from the computation of diluted net loss per share consist of $356,681 of convertible debt and accrue interest convertible into a variable number of common shares (See Note 8). The number of common shares that the convertible debt and accrued interest were convertible into at December 31, 2013 amounted to 22,973,950. . Potential common shares as of December 31, 2012 that have been excluded from the computation of diluted net loss per share consist of (a) warrants to purchase 5,720 shares of the Company’s common stock and (b) Unit holders’ options to convert their respective oil revenue interests into a total 24,030 shares of the Company’s common stock.

Long-Lived Assets

The Company accounts for its long-lived assets in accordance with ASC No. 360, “Property, Plant and Equipment.” ASC No. 360 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and fair value or disposable value. As of December 31, 2013, the Company believed there was an impairment of its long-lived assets and write off goodwill and investment in unconsolidated subsidiary.

Fair Value of Financial Instruments

Pursuant to ASC No. 820, “Fair Value Measurements and Disclosures,” the Company is required to estimate the fair value of all financial instruments included on its balance sheet as of December 31. 2013. The Company’s financial instruments consist of cash, accounts receivables, payables, convertible debt and other obligations. The Company considers the carrying value of such amounts in the financial statements to approximate their fair value due to the short-term nature of the respective instrument.

Income Taxes

The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

Risk and Uncertainties

The Company is subject to risks common to companies in the manufacturing of gold mining equipment industry, including, but not limited to, litigation, development of new technological innovations and dependence on key personnel.

Commitments and Contingencies

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

Related Party Transactions

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

Pursuant to Section 850-10-20 the Related parties include: a). affiliates of the Company; b). entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c). trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d). principal owners of the Company; e). management of the Company; f). other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g). other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a). the nature of the relationship(s) involved; b). a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c). the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d). amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

The Company continued to advance its Form 10 registration process with the Securities and Exchange Commission and, subsequent to prior periods, has made further progress toward completion of the Staff review process.

The Company continues to monitor and engage in the process associated with FINRA Rule 15c2-11, which is expected to progress in conjunction with the completion of the Company’s Form 10 registration process.

The Company continues to defer potential future capital raising activities, including a Regulation A+ offering or other financing alternatives, until key milestones are achieved. These milestones include progress toward completion of the Company’s Form 10 registration process, resolution of regulatory matters affecting trading, and further advancement of the Company’s mineral projects.

The Company continues to evaluate potential strategic partnerships and joint venture arrangements intended to support the development and monetization of its mineral assets. These discussions remain ongoing and are at various stages of development.

The Company began evaluating potential environmental and sustainability-related attributes associated with its mineral recovery and remediation activities, including the potential for carbon or other environmental credits. These efforts are in the early evaluation stage and are expected to involve third-party technical analysis to determine feasibility and potential applicability under existing methodologies. There can be no assurance as to the timing or economic impact of such initiatives.

The Company reported no operating revenue for the quarterly reporting period. The Company reported a net loss of approximately $146,895 for the quarter, compared to a net loss of approximately $81,688 for the same period in the prior year. Net loss attributable to common stockholders differs from net loss due to the deduction of accrued dividends on the Company’s cumulative preferred stock.

Operating expenses for the quarter primarily consisted of legal and professional fees, insurance costs, and general corporate expenses associated with regulatory compliance, capital markets activities, and ongoing business development.

For the comparable period in the prior year, the Company’s results included lower operating expenses and did not reflect the same level of ongoing corporate, regulatory, and development-related activities present in the current period.

The Company continues to have working capital constraints and limited operating cash flow. The Company holds previously processed mine tailings and related mineral interests, which are not currently generating revenue.