UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-Q





x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the quarterly period ended March 31, 2014





OR





 ̈ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the transition period from ___________ to __________





Commission File No.  000-27739





MINERALRITE CORPORATION


(Exact name of registrant as specified in its charter)





Nevada
90-0315909(State or other jurisdiction of
(I.R.S. Employerincorporation or organization)
Identification No.)





55 South Geneva Road


Lindon, Utah 84042


(Address of principal executive offices, zip code)




(801) 796-8944


(Registrant’s telephone number, including area code)






(Former name, former address and former fiscal year,


if changed since last report)





Indicate by check mark whether the issuer (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 the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Yes  x       No o





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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 o




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.  (check one):





Large accelerated filer
o

Accelerated filer
oNon-accelerated filer
o
(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 Exchange Act Rule 12b-2 of the Exchange Act):


Yes  o      No x








1
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY


PROCEEDINGS DURING THE PRECEDING FIVE YEARS:





Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.


Yes  o      No o





APPLICABLE ONLY TO CORPORATE ISSUERS





The number of shares of Common Stock, $0.001 par value, outstanding on July 3, 2014 was 300,147,163.






























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TABLE OFCONTENTS





PAGEPART I
FINANCIAL INFORMATION
4ITEM 1.
FINANCIAL STATEMENTS
4ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
17ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
20ITEM 4.
CONTROLS AND PROCEDURES
20PART II
OTHER INFORMATION
22ITEM 1.
LEGAL PROCEEDINGS
22ITEM 1A.
RISK FACTORS
22ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
22ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
23ITEM 4.
MINE SAFETY DISCLOSURES
23ITEM 5.
OTHER INFORMATION
23ITEM 6.
EXHIBITS
24








































3
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PART I — FINANCIAL INFORMATION





ITEM 1.     FINANCIAL STATEMENTS





MINERALRITE CORPORATION AND SUBSIDIARYUNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETSMarch 31,


December 31,2014


2013ASSETSCurrent assets:Cash and cash equivalents

$
1,514


$
52,206Accounts receivable


1,115



5,433Inventories


195,399



74,096Employee advances






100Prepaid services


959,667



966,667Total current assets


1,157,695



1,098,502Property and equipment:Equipment


102,050



102,050Furniture and fixtures


8,701



8,701Construction in progress


20,184



20,184Less: accumulated depreciation


(23,645
)


(18,538
)Total property and equipment, net


107,290



112,397Other assets:Prepaid services- long-term portion


776,911



1,016,828Website development, net


3,092



4,425Total other assets


780,003



1,021,253Total assets

$
2,044,988


$
2,232,152




The accompanying notes are an integral part of these financial statements




4
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MINERALRITE CORPORATION AND SUBSIDIARYUNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS(Continued)March 31,


December 31,2014


2013LIABILITIES & STOCKHOLDERS' DEFICITCurrent liabilities:Accounts payable

$
287,395


$
232,095Accounts payable - related party


24,000



-Accrued payroll


681



3,785Customer deposits


120,752



119,103Convertible debt, including accrued interest,net of discounts


306,038



468,450Debt and other obligations due related parties


241,928



186,800Notes payable - other


184,115



74,082Derivative liabilities


239,537



245,006Total current liabilities


1,404,446



1,329,321Long-term liabilities:Convertible debt, including accrued interest,net of discounts


-



29,825Derivative liabilities


-



113,055Total long-term liabilities


-



142,880Total liabilities


1,404,446



1,472,201Stockholders' Deficit:Preferred stock, par value $.001authorized 10,000,000 sharesno shares issued at March 31, 2014and December 31, 2013


-



-Common stock, par value $.001authorized 500,000,000 sharesIssued 146,797,278 shares at March 31, 2014and 88,739,900 shares at December 31, 2013


146,797



88,740Additional paid-in capital


10,870,690



10,467,221Accumulated deficit


(10,376,617
)


(9,795,824
)Other comprehensive gain/(loss)


(328
)


(186
)Total stockholders' deficit


640,542



759,951Total liabilities and stockholders' deficit

$
2,044,988


$
2,232,152




The accompanying notes are an integral part of these financial statements




5
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MINERALRITE CORPORATION AND SUBSIDIARYUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSFor the Three Months EndedMarch 31,2014


2013Net revenue


54,734



27,316Cost of sales


(29,776
)


(14,781
)Gross profit (loss)


24,958



12,535Operating expensesRent expense


7,200



4,740Professional fees


54,910



38,471General & administrative (including non-cashcompensation)*


402,043



198,197Total operating expenses


464,153



241,408Loss from operations


(439,195
)


(228,873
)Other income (expenses)Loss on extinguishment of debt


(210,128
)


-Other income


6,600



572Interest expense


(276,801
)


(604
)Change in fair value of derivative liabilities


338,731



-Total other income (expense)


(141,598
)


(32
)Net Income (loss) before income taxes

$
(580,793
)

$
(228,905
)Provision for income taxes


-



-Net Income (loss) from continued operation


(580,793
)


(228,905
)Discontinued operationsIncome from discontinued operations


-



4,716(Loss) on disposition of net assets of discontinued operations


-



-Net loss from discontinued operations


-



4,716Net loss

$
(580,793
)

$
(224,189
)Other comprehensive incomeForeign currency translation adjustment


(206
)


73Total comprehensive income (loss)

$
(580,999
)

$
(224,116
)Basic and diluted income (loss) per common share:Loss from continuing operations

$
(0.01
)

$
(0.00
)Loss from discontinued operations


-



0.00$
(0.01
)

$
(0.00
)Weighted average shares outstanding


99,889,906



49,504,344
  Details of stock based compensation included within:Related party consulting fees

$
-


$
-General and administrative


229,125



47,618Total

$
229,125


$
47,618







The accompanying notes are an integral part of these financial statements
  6
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MINERALRITE CORPORATION AND SUBSIDIARYUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSFor the Three Months EndedMarch 31,2014


2013CASH FLOWS FROM OPERATING ACTIVITIES:Net Income (loss)

$
(580,793
)

$
(228,905
)Gain  from discontinued operations


-



4,716Loss from continuing operations


(580,793
)


(224,189
)Adjustments to reconcile net income (loss) tonet cash provided by (used in) operating activities:


-Amortization


1,191



1,289Depreciation


5,107



1,618Loss on extinguishment of indebtedness


210,128Amortization of discounts on convertible debt charged to interest expense


228,683Stock based compensation


296,301



158,809Change in fair value of derivative liabilities


(338,731
)(Increase) decrease in accounts receivable


4,318



(5,802
)(Increase) decrease in inventories


(121,303
)


(21,220
)(Increase) decrease in other assets


100



7,104Increase (decrease) in accrued interest on notes and loans payable


27,341



417Increase (decrease) in accounts payable and accrued expenses


52,196



28,920Increase (decrease) in customer deposits


1,650Increase (decrease) in related party debt and other obligations


31,000



(22,152
)Increase in asset recovery obligationNet cash (used in) operating activities


(182,812
)


(75,206
)CASH FLOWS FROM INVESTING ACTIVITIES:Net cash provided by investing activities


-



-CASH FLOWS FROM FINANCING ACTIVITIES:Cash received in acquisition of Goldfield International, Inc.






127,056Proceeds from issuance of convertible debt


67,500



-Proceeds from unrelated third patty loans


75,088



-Principal reduction on unrelated third party loans


(37,123
)


-Proceeds from related patty loans


42,900



-Principal reduction on related party loans


(16,245
)


0Advances from officers






25,400Payment of accrued distribution due former shareholder of GoldfieldInternational, Inc.






(60,000
)Net cash provided by (used in) financing activities


132,120



92,456Effect of exchange rates on cash


-



(82
)Net increase (decrease) in cash and cash equivalents


(50,692
)


17,168Cash and cash equivalents - beginning of period


52,206



9,330Cash and cash equivalents - end of period

$
1,514


$
26,498SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the year for:Interest

$
20,777


$
-Income taxes

$
-


$
-SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTINGAND FINANCING ACTIVITIES:Value of 2,000,000 shares of common stock issued in exchange of100% interest in Goldfield  International, Inc.

$
-


$
900,000Value of 7,000,000 shares of common stock issued for consulting services

$
-


$
2,450,000Value of 10,500,000 shares of common stock issued for consulting services

$
-


$
429,000Value of 300,000 shares of common stock issued cancellation of past dueaccount and legal fees

$
15,000


$
-Value of 33,000,000 shares of common stock issued of $59,000 of indebtedness


$
525,000Discounts and fees recorded on issuance of convertible debt

$
222,207


$
-Fair value of derivative liabilities recognized on issuance ofconvertible debt (Note 7)

$
220,207


$
-Issuance of 94,504,496 common shares of common stock on conversion of debt

$
195,033






The accompanying notes are an integral part of these financial statements




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NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION





Organization, History and Business





MineralRite Corporation (“the Company”) was incorporated in Nevada on October 22, 1996 under its original name PSM Corp.  The Company changed its emphasis to the exploration and development of natural resources and on November 23, 2005 changed its name to Royal Quantum Group, Inc. On October 18, 2012, the Company again changed its name from Royal Quantum Group, Inc. to MineralRite Corporation. On August 31, 2012, the Company declared a 50-for-1 reverse stock split of its common stock. All references in the accompanying consolidated financials to the number of shares outstanding and per-share amounts have been restated to reflect this stock split.





On March 1, 2013, the Company acquired 100% of the total shares outstanding of Goldfield International, Inc. (“Goldfield”) in exchange for issuing 2,000,000 shares of its common stock. The acquisition was based on the fair value of the shares issued amounting to $900,000. The accompanying consolidated financial statements include the accounts and balances of the Company and also of Goldfield since the date of its acquisition. All material intercompany transactions have been eliminated. Goldfield is in the business of manufacturing gold mining equipment.


On April 24, 2013, the Company entered into a joint venture agreement with CSI Export and Import (“CSI”) to mine copper ore on leased acreage in Chiapas, Mexico. For $850,000, the Company acquired a 50% in the joint venture which has a 25% participation interest in the production and sale of the indicated copper ore. The Company accounts for its investment in with CSI under the equity method pursuant to ASC Topic 323-30. This amount was written off in 2013 due to impairment as CSI did not execute on their part of the joint venture and repayment is doubtful.





Pursuant to a settlement agreement and related court order, effective December 6, 2013, the Company issued 30,000,000 shares of its common stock and transferred its oil and gas operations including related assets and liabilities to Santeo Financial Corporation and other creditors in exchange for the cancelation of debt totaling $325,568. For financial statement presentation purposes, the oil and gas activities for 2012 and 2013, and assets and liabilities directly relating to the oil and gas operation, are accounted for pursuant to ASC Topic 205-20 “Discontinued Operations”.





Basis of Presentation





The accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial position of the Company as of March 31, 2014, and the results of its operations and cash flows for the three months ended March 31, 2014 and 2013. Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to rules and regulations of the U.S. Securities and Exchange Commission (the “Commission”). The Company believes that the disclosures in the unaudited condensed consolidated financial statements are adequate to make the information presented not misleading. However, the unaudited condensed consolidated financial statements included herein should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 filed with the Commission on May 21, 2014.





Going Concern





The Company’s consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the liquidation of liabilities in the ordinary course of business.  The Company has incurred substantial losses from operations and has a working capital deficit, which raise substantial doubt as to the Company’s ability to continue as a going concern. For the three month ended March 31, 2014, the Company had a net loss from continuing operations of $580,793 and accumulated deficit of $10,376,617. The Company has funded its operations through the private sale of its common shares and issuance of convertible debt. Net revenue generated from operations in not sufficient to pay Company debts currently due or to fund future operations. The Company continues to raise additional funds; however, there is no assurance that the necessary funds will be raised or even if the funds are raised, that the funds received will be to sufficient to fund future operations until such time that the Company’s operations become profitable. Until such time as funding is obtained and/or positive results from operations materialize, doubt about the Company’s ability to continue as a going concern may remain.





NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Reclassification





Certain reclassifications have been made to conform the 2013 amounts to the 2014 classifications for comparative purposes.






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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 March 31, 2014, 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 three months ended March 31, 2014 and 2013 from continuing operations amounted to amounted to $5,107 and $1,618, 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.






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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.





Of the Company’s revenue earned during the three months ended March 31, 2014, approximately 76% was generated from sales to one customer.





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 March 31, 2014, two customers 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 debt to purchase common shares would have an anti-dilutive effect. Potential common shares as of March 31, 2014 that have been excluded from the computation of diluted net loss per share consist of $459,493 of convertible debt and accrue interest convertible into a 53,937,378 of common shares (See Note 8).





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 March 31, 2014, 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 March 31. 2014. 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.






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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.





Discontinued Operations





For those businesses where management has committed to a plan to divest, each business is valued at the lower of its carrying amount or estimated fair value less cost to sell. If the carrying amount of the business exceeds its estimated fair value, an impairment loss is recognized. Fair value is estimated using accepted valuation techniques such as a DCF model, valuations performed by third parties, earnings multiples, or indicative bids, when available. A number of significant estimates and assumptions are involved in the application of these techniques, including the forecasting of markets and market share, sales volumes and prices, costs and expenses, and multiple other factors. Management considers historical experience and all available information at the time the estimates are made; however, the fair value that is ultimately realized upon the divestiture of a business may differ from the estimated fair value reflected in the Consolidated Financial Statements. Depreciation, depletion, and amortization expense is not recorded on assets of a business to be divested once they are classified as held for sale. Businesses to be divested are classified in the Consolidated Financial Statements as either discontinued operations or held for sale.





For businesses classified as discontinued operations, the balance sheet amounts and results of operations are reclassified from their historical presentation to assets and liabilities of operations held for sale on the Consolidated Balance Sheet and to discontinued operations on the Consolidated Statement of Operations, respectively, for all periods presented. The gains or losses associated with these divested businesses are recorded in discontinued operations on the Consolidated Statement of Operations. The Consolidated Statement of Cash Flows is also reclassified for assets and liabilities of operations held for sale and discontinued operations for all periods presented.





Recent Accounting Pronouncements





The Company’s management has evaluated all recent accounting pronouncements since the last audit through the issuance date of these financial statements. In the Company’s opinion, none of the recent accounting pronouncements will have a material effect on the financial statements.





NOTE 3 – ACQUISITION OF GOLDFIELD INTERNATIONAL, INC.




On March 1, 2013, the Company acquired the outstanding stock of Goldfield International, Inc., a manufacture of gold mining equipment and parts located in Lindon, Utah. The acquisition was a stock purchase and therefore encompasses all of Goldfield’s business operations.





In exchange for Goldfield’s outstanding stock, the Company issued 2,000,000 shares of its common stock. The Company valued the acquisition at the fair value of the shares it issued amounting to $900,000.





In addition, the Company entered into separate agreement to acquire the personal goodwill of the seller for $100,000 (See Note 6).






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We valued the assets acquired and liabilities assumed as follows:




Current assets (including cash)

$
226,809Property and equipment


104,600Intangibles and goodwill


875,667Current liabilities, includingabove indicating $100,000 debt


(307,076
)Total purchase price

$
900,000
 
 The intangibles and goodwill of $875,667 was written off in 2013 due to impairment.





NOTE 4 – DISCONTINUED OPERATIONS





Effective December 6, 2013, the Company completed the terms of its settlement agreement with Santeo Financial Corporation and other third party creditors. Under the terms of the settlement agreement, the Company issued 30,000,000 shares of its common stock and transferred all of its oil and gas operations including the related assets and liabilities in exchange for the cancelation of $372,568 of debt.





In accordance with the provisions of ASC Topic 205-20, Discontinued Operations,the Company has reclassified its revenue and expenses of its oil and gas operations to “loss from discontinued operations” for the three months ended March 31, 2013.





NOTE 5 – PREPAID SERVICES





On February 4, 2013, the Company issued a total of 7,000,000 (post-split) shares of its common stock of to five individuals and five entities in exchange for consulting services, valued at $2,450,000. The $2,450,000 is being charged to operations over the three-year term of the respective agreement. Mr. Guy Peckham, the Company’s president, received 2,000,000 of the 7,000,000 shares issued. The 2,000,000 shares were valued at $700,000.





On October 30, 2012, the Company issued a total of 33,000,000 shares of its common stock of to five individuals and five entities in exchange for consulting services, valued at $429,000. The $429,000 is being charged to operations over the three-year term of the respective agreement. As indicated in Note 6, Mr. Guy Peckham, the Company’s president, received 11,500,000 of the 33,000,000 shares issued. The 11,500,000 shares were valued at $149,500.





Consulting fees charged to operations during the three months ended March 31, 2014 and 2013 relating to these two transactions amounted to $239,917 and $158,809, respectively. The unamortized balance at March 31, 2014 totaled $1,736,578. Amortization expense over the remaining terms of the respective consulting agreement is as follows:




March 31,2015

$
959,6672016


776,911$
1,736,578





NOTE 6 – RELATED PARTY TRANSACTIONS





The Company’s manufacturing facilities are being leased from the former sole shareholder of Goldfield on a month-to-month basis at $8,000 per month. The Company did not pay rent for the two months ended March 2014 and the Company had an outstanding balance of $16,000 due on this obligation.





On February 4, 2013, the Company issued Mr. Guy Peckham, the Company’s current president 2,000,000 shares of its common stock for services. The 2,000,000 shares were valued at $700,000, which is being charged to operations over the three year term of the underlying agreement.





As of March 31, 2014, certain shareholders have advanced the Company a total of $19,845 that is payable on demand and is non-interest bearing.





In connection with the acquisition of Goldfield, the Company entered into a consulting agreement with the former shareholder of Goldfield, whereby commencing May 1, 2013, the Company agreed to pay him a consulting fee of $5,000 per month over the 30 month term of the agreement. As of March 31, 2014, the Company had an outstanding balance of $8,000.






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As discussed in Note 3, the Company entered into an agreement to acquire the personal goodwill of the former shareholder of Goldfield for $100,000 payable in three installments of $33,000 due April 1, 2013, $33,000 due May 1, 2013 and $34,000 due June 1, 2013. Interest accrues on any payment that is not paid within 10 days of its respective due date. The Company has not made any payments toward this obligation and has accrued of interest that was charged to operations for the three months ended March 31, 2014 amounting to $1,973.  The outstanding balance including accrued interest at March 31, 2014 totaled $107,307.





In addition, the former shareholder of Goldfield has also advanced the Company $80.000, which is unsecured, non-interest bearing and due on demand.





NOTE 7 – NOTES PAYABLE





On December 17, 2013, the Company borrowed $10,000 from an unrelated third party. The loan is assessed interest at an annual rate of 15% and matures on March 1, 2014, when the principal and accrued interest becomes fully due. Interest accrued and charged to interest expense for the three months ended March 31, 2014 amounted to $370. The balance of the note at March 31, 2014, including accrued interest amounted to $10,427.





On December 31 2013, the Company borrowed $40,000 from an unrelated third party. The loan is secured by the Company’s accounts receivable. The terms of the loan includes a loan fee of $400, which is being amortized and charged to operations over the term of the loan. Under the terms of the loan, the Company is required to pay back a total of $57,600 at a rate of $$444 per day (excluding weekends and bank holidays). The effective interest rate on this loan is in excess of 32% per annum. Interest accrued and charged to operations for three months ended March 31, 2014 amounted to $8,817. During the three month period, the Company made principal payments totaling $26,723. The balance of the note at March 31, 2014, including accrued interest and fees, net of the discounts amounted to $11,171.





On February 14 2014, the Company borrowed an additional $75,088 from same unrelated third party indicated above. The loan is secured by the Company’s accounts receivable. The Company is required to pay back a total of $111,750 at a rate of $$860 per day (excluding weekends and bank holidays). The effective interest rate on this loan is in excess of 50% per annum. Interest accrued and charged to interest expense for three months ended March 31, 2014 amounted to $11,960. During the three month period, the Company made principal payments totaling $10,400. The balance of the note at March 31, 2104, including accrued interest amounted to $64,688.





NOTE 8 – CONVERTIBLE DEBT





a.
The Company entered into an agreement with an unrelated third party to borrow up to a maximum of $315,000. On February 20, 2014, the Company received a $30,000 advance. In consideration for the funds borrowed, the Company is assessed a loan fee equal to 10% of the funds advanced and a closing and due diligence fee equal to 8% of the amount advanced. The outstanding balance including principal, accrued interest, and fees are convertible in the Company’s common shares at a conversion price equal to the lessor of a) $0.05 per share; or b) 60% of the lowest trade price in the 25 trading days prior to conversion. There is no interest charged for the first ninety days; however, if the amounts due under this obligation is not fully paid with the ninety days, the total amount outstanding including accrued interest and fees will be assessed a one-time interest charge  of 12%.



The Company accounted for the financing under ASC Topic 470-20 “Debt with Conversion and Other Options.” The proceeds of the financing are required to be bifurcated based upon the fair value of the convertible note using a relative fair value approach based upon the total amount of the $35,400 debt ($30,000 advances plus fees totaling $5,400). As the outstanding balance of the note is convertible into a number of variable common shares, the conversion feature accounted for under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation was initially valued at $30,000 (the fair value cannot initially exceed the amount of the advance) and classified as a derivative liability with an offset to discounts on convertible debt. Discounts along with loan fees are being amortized to interest expense over the respective one-year term of the advance. In determining the indicated values, the Company used the Black Scholes Option Model with a risk-free interest rate of 0.12%, volatility of 304%, a trading price of $0.007, and a conversion price of $0.0063 per share.



Amortization of the discounts for the three months ended March 31, 2014 totaled $7,281, which was charged to interest expense. The balance of the convertible note at March 31, 2104, including fees, net of the discounts amounted to $7,281.




b.
On March 17, 2014, the Company borrowed $37,500 through the issuance of a convertible note to an unrelated third party.  Under the terms of the note, the loan is assessed interest at a rate of 8% per annum and matures on March 14, 2015, when principal and accrued interest becomes fully due and payable. The terms of the loan includes a loan fee of $2,000, which is being amortized and charged to operations over the term of the loan. The terms of the note does not permit any prepayments.  Commencing on September 10, 2014, the note holder has the right to convert the outstanding balance including principal and accrued interest into the Company’s common shares at a conversion price equal to 50% of the lowest market price for the 10 day trading period prior to the date that is one day prior to date that the conversion notice is sent to the Company. The Company plans to account for the conversion feature on effective date of the conversion right under ASC Topic 815-15 “Embedded Derivative.”



Accrued interest and amortization of the loan fee charged to operations for the three months ended March 31, 2014 totaled $239. The balance of the convertible note at March 31, 2014, including fees, net of discounts amounted to $37,740.






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c.
Throughout 2013, the Company raised a total $505.000 through the issuance of convertible debt. As the outstanding balance of these notes are convertible into a number of variable common shares, the conversion features were accounted for under ASC Topic 815-15 “Embedded Derivative.  During the three months ended March 31, 2014, the Company issued 53,937,378 of its common shares to various noteholders on the conversion of $195,033 of indebtedness. The Company recognized a $210,128 loss on the debt extinguishment.



Accrued interest on these notes that was charged to operations for the three months ended March 31, 2014 totaled $26,732. Amortization of the discounts for the three months ended March 31, 2014 totaled $221,402, which was charged to interest expense. The balance of the convertible notes at March 31, 2014 including accrued interest and net of the discount amounted to $261,019.





A recap of the balance of outstanding convertible debt at March 31, 2014 is as follows:




Principal balance

$
425,519Accrued interest


33,974Less discounts andFees, net of accumulatedamortization


(153,455
)$
306,038Balance maturing for the period ending:March 31, 2015

$
306,038





The Company valued the derivative liabilities at Mach 31, 2014 at $239,537 and recognized a change in the fair value of derivative liabilities for the three months ended March 31, 2014 of $338,731 which was credited to operations.  In determining the indicated values at March 31, 2014, the Company used the Black Scholes Option Model with risk-free interest rates ranging from 0.03% to 0.13%, volatility ranging from 159.12% to 541.02%, a trading price of $.0034, and conversion prices ranging from $0.0018 to $0.0064 per share.





NOTE 9 – INCOME TAXES





Deferred income tax assets and liabilities are computed for differences between financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.





The Company’s net operating loss for income tax reporting purposes was significantly impacted by the change in control which occurred on October 30, 2012. The Company has a net operating loss carryover at March 31, 2014 of approximately $1,416,000 that is available to offset future income for income tax reporting purposes, which will expire in various years through 2034, if not previously utilized.





The Company adopted the provisions of ASC 740-10-50, formerly FIN 48, “Accounting for Uncertainty in Income Taxes.” The Company had no material unrecognized income tax assets or liabilities for the three months ended March 31, 2014 and 2013.





The Company’s policy regarding income tax interest and penalties is to expense those items as general and administrative expense but to identify them for tax purposes. During the three months ended March 31, 2014 and 2013, there were no income taxes, or related interest and penalty items in the income statement, or liability on the balance sheet. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company is no longer subject to U.S. federal or state income tax examination by tax authorities for years before 2009. The Company is not currently involved in any income tax examinations.






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NOTE 10 – COMMON STOCK AND WARRANTS





As indicated in Note 1, the Company declared a 50-for-1 reverse stock split of its common stock on August 31, 2012.  All references in the accompanying financials to the number of shares outstanding and per-share amounts have been restated to reflect this stock split.





For the three months ended March 31, 2014





As discussed in Note 8, during the three months period ended March 31, 2014, the Company issued 53,937,378 of its common shares to various note holders on the conversion of $195,033 of indebtedness. The Company recognized a $210,128 loss on the debt extinguishment.





During the three months ended March 31, 2014, the Company issued a total of 4,120,000 shares of its common stock in consideration for consulting and professional services valued at $56,384.





For the three months ended March 31, 2013





As discussed in Note 5, the Company issued on February 4, 2013 a total of 7,000,000 shares of its common stock of to five individuals and five entities in exchange for consulting services, valued at $2,450,000. The $2,450,000 is being charged to operations over the three-year term of the respective agreement. As indicated in Note 5, Mr. Guy Peckham, the Company’s president, received 2,000,000 of the 7,000,000 shares issued. The 2,000,000 shares were valued at $700,000.





As discussed more fully in Note 3, the Company on March 1, 2013 issued 2,000,000 shares of its common stock in exchange all of the outstanding shares of Goldfield International, Inc. The 2,000,000 shares were valued at $900,000.




NOTE 11 – FAIR VALUE





The Company’s financial instruments at March 31, 2014 consist principally of convertible debentures and derivative liabilities. Convertible debentures are financial liabilities with carrying values that approximate fair value.  The Company determines the fair value of convertible debentures based on the effective yields of similar obligations.




The Company believes all other financial instruments’ recorded values at March 31, 2014 and December 31, 2013 approximate fair market value because of their nature and respective durations.




The Company complies with the provisions of ASC No. 820-10 (“ASC 820-10”), “Fair Value Measurements and Disclosures.”  ASC 820-10 relates to financial assets and financial liabilities. ASC 820-10 defines fair value, establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (“GAAP”), and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that require or permit fair value measurements and are to be applied prospectively with limited exceptions.




ASC 820-10 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. ASC 820-10 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions, about market participant assumptions, which  are developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC 820-10 are described below:




Level 1. Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access.




Level 2. Valuations based on quoted prices for similar assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.




Level 3. Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.








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The Company utilizes the best available information in measuring fair value. The following table summarizes, by level within the fair value hierarchy, the financial assets and liabilities recorded at fair value on a recurring basis as follows:




March 31, 2014Fair Value MeasurementsLevel 1


Level 2


Level 3


Total Fair ValueLiabilitiesNotes payable


-


$
184,115



-


$
184,115Debt and other obligationsdue related parties


-


$
241,928



-


$
241,928Convertible debentures


-


$
425,519



-


$
425,519Derivative liabilities


-


$
239,537



-


$
239,537





NOTE 12 – SUBSEQUENT EVENTS





For the period April 1, 2014 through July 3,  2014, the Company issued 153,349,885 shares of its common stock of which 144,349,885 was issued through the conversion and cancellation of $150,391 of convertible notes, 7,000,000 common shares were issued thorugh the cancellation of $5,000 of other debt, and 2,000,000 common shares were issued to three individuals in exchange for consulting services valued at $6,000. Of the 2,000,000 shares issued, 1,000,000 shares was issue to Mr. Lloyd McEwan, the former shareholder of Goldfield.






































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ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION





The following Management's Discussion and Analysis should be read in conjunction with MineralRite Corporation’s financial statements and the related notes thereto. The Management's Discussion and Analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Report on Form 10-Q. The Company’s actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Report on Form 10-Q.





The following discussion should be read in conjunction with our unaudited consolidated financial statements and related notes and other financial data included elsewhere in this report. See also the notes to our consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2013.





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 condensed 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 us 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.





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 three months ended March 31, 2014 and 2013 from continuing operations amounted to amounted to $5,107 and $1,618, respectively.





Discontinued Operations





Discontinued Operations





For those businesses where management has committed to a plan to divest, each business is valued at the lower of its carrying amount or estimated fair value less cost to sell. If the carrying amount of the business exceeds its estimated fair value, an impairment loss is recognized. Fair value is estimated using accepted valuation techniques such as a DCF model, valuations performed by third parties, earnings multiples, or indicative bids, when available. A number of significant estimates and assumptions are involved in the application of these techniques, including the forecasting of markets and market share, sales volumes and prices, costs and expenses, and multiple other factors. Management considers historical experience and all available information at the time the estimates are made; however, the fair value that is ultimately realized upon the divestiture of a business may differ from the estimated fair value reflected in the Consolidated Financial Statements. Depreciation, depletion, and amortization expense is not recorded on assets of a business to be divested once they are classified as held for sale. Businesses to be divested are classified in the Consolidated Financial Statements as either discontinued operations or held for sale.





For businesses classified as discontinued operations, the balance sheet amounts and results of operations are reclassified from their historical presentation to assets and liabilities of operations held for sale on the Consolidated Balance Sheet and to discontinued operations on the Consolidated Statement of Operations, respectively, for all periods presented. The gains or losses associated with these divested businesses are recorded in discontinued operations on the Consolidated Statement of Operations. The Consolidated Statement of Cash Flows is also reclassified for assets and liabilities of operations held for sale and discontinued operations for all periods presented.






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Effective December 6, 2013, the Company completed the terms of its settlement agreement with Santeo Financial Corporation and other third party creditors. Under the terms of the settlement agreement, the Company issued 30,000,000 shares of its common stock and transferred all of its oil and gas operations including the related assets and liabilities in exchange for the cancelation of $372,568 of debt.





In accordance with the provisions of ASC Topic 205-20, Discontinued Operations, the Company has reclassified its revenue and expenses of its oil and gas operations to “loss from discontinued operations” for the three months ended March 31, 2013.





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 to the Footnotes to the Company’s Financial Statements in Item 1 of this Current Report).  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.





Of the Company’s revenue earned during the three months ended March 31, 2014, approximately 76% was generated from sales to one customer.





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 March 31, 2014, two customers accounted for 100% of the Company’s net accounts receivable balance, respectively.





Fair Value Measurement





The Company’s financial instruments at March 31, 2014 consist principally of convertible debentures and derivative liabilities. Convertible debentures are financial liabilities with carrying values that approximate fair value.  The Company determines the fair value of convertible debentures based on the effective yields of similar obligations.





The Company believes all other financial instruments’ recorded values at March 31, 2014 and December 31, 2013 approximate fair market value because of their nature and respective durations.





The Company complies with the provisions of ASC No. 820-10 (“ASC 820-10”), “Fair Value Measurements and Disclosures.”  ASC 820-10 relates to financial assets and financial liabilities. ASC 820-10 defines fair value, establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (“GAAP”), and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that require or permit fair value measurements and are to be applied prospectively with limited exceptions.






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ASC 820-10 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. ASC 820-10 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions, about market participant assumptions, which  are developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC 820-10 are described below:





Level 1. Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access.





Level 2. Valuations based on quoted prices for similar assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.





Level 3. Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.





The Company utilizes the best available information in measuring fair value.





Liquidity and Capital Resources.





For the Three-Month Period Ended March 31, 2014 versus March 31, 2013





During the three months ended March 31, 2104, net cash used in the Company’s operating activities totaled $(182,812) compared to $(75,206) during the three months ended March 31, 2013. During the three months ended March 31, 2014, net cash provided by investing activities totaled $nil compared to $nil during the three months ended March 31, 2013. During the three months ended March 31, 2014, net cash flow provided by financing activities totaled $132,120 compared to $92,456 during the three months ended March 31, 2013.During the three months ended March 31, 2014, net cash decreased $50,692 as compared to an increase of $17,168 during the three months ended March 31, 2013.





At March 31, 2014, the Company had cash of $1,514, accounts receivable of $1,115, inventories of $195,399 and prepaid services of $959,666 that comprised the Company’s total current assets totaling $1,157,695. The Company’s property and equipment at March 31, 2014 had a net book value of $107,290 consisting of equipment, furniture, fixtures and construction in process net of $23,645 in accumulated depreciation. The Company also had the long term portion of prepaid services of $776,911, website development of $3,092 totaling $780,003 at March 31, 2014, while the Company’s total assets at March 31, 2014 were $2,044,988.





At March 31, 2014, the Company had total current liabilities totaling $1,404,446 consisting of $287,395 in accounts payable, $24,000 in related party accounts payable, $681 in accrued payroll, $120,752 in customer deposits, $306,038 in convertible debt, $241,928 in debt and other obligations to related parties, $184,115 in notes payable and $239,537 in derivative liabilities.  Additionally, the Company’s long-term debt at March 31, 2014 was $nil due to the elimination of the Company’s accrued asset recovery obligations from the discontinuation of its operations related to its oil and gas properties.





Therefore, at March 31, 2014, the Company had total liabilities of $$1,404,446. The Company had no other long-term liabilities, commitments or contingencies. Other than anticipated exploration costs associated with the precious metals and mineral interests that the Company anticipates acquiring, and the anticipated increases in the legal and accounting costs associated with being a public company, Company management is not aware of any other known trends, events or uncertainties which may affect the Company’s future liquidity.





At March 31, 2014, the Company had a stockholders’ deficit totaling $640,542 compared to $759,951 at the period ending March 31, 2013.





RESULTS OF OPERATIONS





For the Three Months Ended March 31, 2014 versus March 31, 2013





The Company’s revenue for the three months ended March 31, 2014 was $54,734 with associated cost of sales of $29,776 as compared to March 31, 2013 revenue totaling $27,316 and with costs of sales of $14,781 for the three months ended. The Company incurred general and administrative expenses for the three months ended March 31, 2014 totaling $402,043 that included non-cash fees of $229,125, rent of $7,200, and professional fees of $54,910.  General and administrative expense for the three months ended March 31, 2013 totaled $198,197 that included non cash fees of $47,618, related party rent of $4,740,  and professional fees of $38,741.








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The Company’s Plan of Operation for the Next Twelve Months.





The Company’s recent business focus has been to enter the business of mineral processing, certification, equipment manufacturing and sales. The CEO expects to engage a management team experienced in creating and operating mining companies and intends to focus on the identification, certification and sale of undervalued assets. The Company plans to engage in the extraction of precious metals from ore bodies and reclaimed tailings. The Company intends to continue to raise additional capital for this new line of business although no assurances can be made that it will be successful in doing so or that if it is, that the terms of such additional financing will be favorable to the Company and its existing shareholders.





The Company’s forecast for the period for which the Company’s financial resources will be adequate to support operations involves risks and uncertainties and actual results could differ as a result of a number of factors. The Company plans to enter into the mineral extraction service industry and anticipates significant increases in its cash needs in order to execute its business plan.  The Company no longer has its oil and gas business because it discontinued operations via a “spin-off” to its largest creditor as part of its plan to decrease its liabilities and focus on its new line of business.  However the oil and gas operations were never expected to provide sufficient working capital to pursue this new line of business; therefore discontinuing the oil and gas operations furthered its objectives by reducing the associated liabilities.





Additionally, as part of its business plan and the acquisition of Goldfield International, Inc. the Company is obligated to pay $100,000 to its former shareholder in 2013, the Company is in the process of negotiating the conversion of this obligation into equity.  The Company intends to designate certain classes of its currently undesignated preferred stock in the near term in order to facilitate the access to capital that it needs to pursue its business plan.





Collectively the forgoing are significant additional expenses which the Company will continue to incur in the future.  Other than anticipated costs associated with the precious metal and mineral interests that the Company intends to acquire and the anticipated increases in the legal and accounting costs associated with being a public company, management is not aware of any other known trends, events or uncertainties which may affect the Company’s future liquidity.





In the event that the Company experiences a shortfall in capital, the Company intends to pursue opportunities to raise funds through public or private financing as well as through borrowings and via other resources, such as the Company’s officers, directors and principal shareholders. The Company cannot guaranty that additional funding will be available on favorable terms, if at all. If adequate funds are not available, then the Company’s ability meet its obligations and to expand operations may be significantly hindered. If adequate funds are not available, the Company believes that the Company’s officers, directors and principal shareholders will contribute funds to pay for the Company’s expenses to achieve the Company’s objectives over the next twelve months.





The Company’s belief that the Company’s officers, directors and principal shareholders will pay the Company’s expenses is based on the fact that the Company’s officers, directors and principal shareholders collectively own approximately a significant amount of the Company’s outstanding common stock and will likely continue paying the Company’s expenses as long as they maintain their ownership of the Company’s common stock and so long as they do not incur financial hardship.





The Company is not currently conducting any research and development activities and management does not anticipate conducting such activities in the near future. In the event that the Company’s customer base expands, then management may need to hire additional employees or independent contractors as well as purchase or lease additional equipment.





ITEM 3.     QUANTITATIVE AND QUALITATATIVE DISCLOSURES ABOUT MARKET RISK





We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.





ITEM 4.     CONTROLS AND PROCEDURES





Disclosure Controls and Procedures





(a) Evaluation of disclosure controls and procedures. Company management maintains controls and procedures designed to ensure that information required to be disclosed in the reports that is filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon their evaluation of those controls and procedures performed as of March 31, 2014, the date of this report, the Company’s chief executive officer and the principal financial officer concluded that the Company’s disclosure controls and procedures were effective subject to the limitations set forth below.





(b) Changes in internal controls. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation of those controls by the chief executive officer and principal financial officer.






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The Company’s Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:





■
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company’s assets;■
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of management and the Company’s directors; and■
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.





Because of its inherent limitations, the Company’s internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.





As part of the Company’s compliance efforts relative to Section 404 of the Sarbanes-Oxley Act of 2002, the Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2014. In making this assessment, management used the criteria set forth in the Internal Control - Integrated Framework by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Company management evaluated control deficiencies identified through the Company’s test of the design and operating effectiveness of controls over financial reporting to determine whether the deficiencies, individually or in combination, are significant deficiencies or material weaknesses. In performing the assessment, the Company’s management has identified material weaknesses in internal control over financial reporting existing as of March 31, 2014. The Company’s evaluation of the significance of each deficiency included both quantitative and qualitative factors. Based on that evaluation, the Company’s management concluded that as of March 31, 2014, and as of the date that the evaluation of the effectiveness of the Company’s internal controls and procedures was completed, the Company’s internal controls are not effective, for the reason discussed below:





1.   Company management does not yet have written documentation of the Company’s internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement Section 404 of the Sarbanes-Oxley Act and may be applicable to the Company in future years.





2.   Company management does not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to the Company’s extremely small size and the fact that the Company has only had one management employee, whom is also an executive officer and director, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals.





3.   The Company currently does not employ any full-time accounting personnel, which means the Company lacks the requisite expertise in the key functional areas of finance and accounting. In addition, this means that the Company does not have available personnel to properly implement control procedures.





4.   The Company does not have a functioning audit committee or outside independent directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures.




5.   Company management has not established adequate financial reporting monitoring activities to mitigate the risk of management override, specifically because there are no employees and only one officer and director with management functions and therefore there the Company lacks segregation of duties.





6.   There is a strong reliance on the external auditors and contract accountants to review and adjust the annual and quarterly financial statements, to monitor new accounting principles, and to ensure compliance with GAAP and SEC disclosure requirements.





7.   There is a strong reliance on the external attorneys to review and edit the annual and quarterly filings and to ensure compliance with SEC disclosure requirements.





In light of the material weaknesses described above, Company management performed additional analysis and other procedures to ensure the Company’s financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, Company management believes that the financial statements included in this Current Report fairly present, in all material respects, the Company’s financial condition, results of operations and cash flows for the periods presented.






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In addition, although the Company’s controls are not effective, these significant weaknesses did not result in any material misstatements in the Company’s financial statements. The Company’s management is committed to improving its internal controls and will (1) continue to use third party specialists to address shortfalls in staffing and to assist the Company with accounting and finance responsibilities, (2) increase the frequency of independent reconciliations of significant accounts which is intended to mitigate the lack of segregation of duties until there are sufficient personnel and (3) has, subsequent to the evaluation period, appointed outside directors and will establish an audit committee in the future.





Changes in Internal Control and Financial Reporting





Other than the weaknesses identified above, there were no other changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.





PART II — OTHER INFORMATION





ITEM 1.     LEGAL PROCEEDINGS





From time to time, the Company may become subject to various legal proceedings that are incidental to the ordinary conduct of its business. Although the Company cannot accurately predict the amount of any liability that may ultimately arise with respect to any of these matters, it makes provision for potential liabilities when it deems them probable and reasonably estimable. These provisions are based on current information and legal advice and may be adjusted from time to time according to developments.





During 2013, Egbert & Barnes, PC (“E&B”), our former counsel brought suit against the Company to collect on past due invoices in the amount of approximately $62,753.00.  Effective as of November 30, 2013, the Company entered into a convertible promissory note with E&B in full settlement of the debt (the “E&B Note”).  The E&B Note bears interest at 6% per annum, matures on September 10, 2015 and is convertible into the Company’s common stock at a price equal to a 10% discount from the 30 day volume weighted average price. The E&B Note was subsequently assigned to a third party.  There continues to be an unresolved issue with E&B but the Company is confident that it will be able to resolve any and all outstanding issues.  The additional expenses associated with this is not known at this time





Other than the foregoing, Company management knows of no material, existing or pending legal proceedings against the Company’s company, nor is the Company involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which the Company’s director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to the Company’s interest.





ITEM 1A.  RISK FACTORS





We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.





ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS





(a) Sale of Notes Payable





On December 17, 2013, the Company borrowed $10,000 from an unrelated third party. The loan is assessed interest at an annual rate of 15% and matures on March 1, 2014, when the principal and accrued interest becomes fully due. Interest accrued and charged to interest expense for the three months ended March 31, 2014 amounted to $370. The balance of the note at March 31, 2014, including accrued interest amounted to $10,427.





On December 31 2013, the Company borrowed $40,000 from an unrelated third party. The loan is secured by the Company’s accounts receivable. The terms of the loan includes a loan fee of $400, which is being amortized and charged to operations over the term of the loan. Under the terms of the loan, the Company is required to pay back a total of $57,600 at a rate of $444 per day (excluding weekends and bank holidays). The effective interest rate on this loan is in excess of 32% per annum. Interest accrued and charged to operations for three months ended March 31, 2014 amounted to $8,817. During the three month period, the Company made principal payments totaling $26,723. The balance of the note at March 31, 2014, including accrued interest and fees, net of the discounts amounted to $11,171.





On February 14 2014, the Company borrowed an additional $75,088 from same unrelated third party indicated above. The loan is secured by the Company’s accounts receivable. The Company is required to pay back a total of $111,750 at a rate of $860 per day (excluding weekends and bank holidays). The effective interest rate on this loan is in excess of 50% per annum. Interest accrued and charged to interest expense for three months ended March 31, 2014 amounted to $11,960. During the three month period, the Company made principal payments totaling $10,400. The balance of the note at March 31, 2104, including accrued interest amounted to $64,688.






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(b) Sale of Convertible Notes





The Company entered into an agreement with an unrelated third party to borrow up to a maximum of $315,000. On February 20, 2014, the Company received a $30,000 advance. In consideration for the funds borrowed, the Company is assessed a loan fee equal to 10% of the funds advanced and a closing and due diligence fee equal to 8% of the amount advanced. The outstanding balance including principal, accrued interest, and fees are convertible in the Company’s common shares at a conversion price equal to the lesser of a) $0.05 per share; or b) 60% of the lowest trade price in the 25 trading days prior to conversion. There is no interest charged for the first ninety days; however, if the amounts due under this obligation is not fully paid with the ninety days, the total amount outstanding including accrued interest and fees will be assessed a one-time interest charge  of 12%.   Amortization of the discounts for the three months ended March 31, 2014 totaled $7,281, which was charged to interest expense. The balance of the convertible note at March 31, 2104, including fees, net of the discounts amounted to $7,281.





On March 17, 2014, the Company borrowed $37,500 through the issuance of a convertible note to an unrelated third party.  Under the terms of the note, the loan is assessed interest at a rate of 8% per annum and matures on March 14, 2015, when principal and accrued interest becomes fully due and payable. The terms of the loan includes a loan fee of $2,000, which is being amortized and charged to operations over the term of the loan. The terms of the note does not permit any prepayments.  Commencing on September 10, 2014, the note holder has the right to convert the outstanding balance including principal and accrued interest into the Company’s common shares at a conversion price equal to 50% of the lowest market price for the 10 day trading period prior to the date that is one day prior to date that the conversion notice is sent to the Company. The Company plans to account for the conversion feature on effective date of the conversion right under ASC Topic 815-15 “Embedded Derivative.”  Accrued interest and amortization of the loan fee charged to operations for the three months ended March 31, 2014 totaled $239. The balance of the convertible note at March 31, 2014, including fees, net of discounts amounted to $37,740.





(c) Issuance of Common Stock Upon Conversion of Notes.





Throughout 2013, the Company raised a total $505.000 through the issuance of convertible debt. As the outstanding balance of these notes are convertible into a number of variable common shares, the conversion features were accounted for under ASC Topic 815-15 “Embedded Derivative.  During the three months ended March 31, 2014, the Company issued 53,937,378 of its common shares to various noteholders on the conversion of $195,033 of indebtedness. The Company recognized a $210,128 loss on the debt extinguishment.





Exemptions From Registration. The securities sold and the shares of Common Stock referenced herein were issued in reliance upon the exemption from securities registration afforded by the provisions of Section 4(2) of the Securities Act, and/or Regulation D, as promulgated by the U.S. Securities and Exchange Commission under the Securities Act, based upon the following: (a) each of the persons to whom the shares of Common Stock were issued (each such person, an “Investor”) confirmed to the Company that it or he is an “accredited investor,” as defined in Rule 501 of Regulation D promulgated under the Securities Act and has such background, education and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the securities, (b) there was no public offering or general solicitation with respect to the offering of such shares, (c) each Investor was provided with certain disclosure materials and all other information requested with respect to the Company, (d) each Investor acknowledged that all securities being purchased were being purchased for investment intent and were “restricted securities” for purposes of the Securities Act, and agreed to transfer such securities only in a transaction registered under the Securities Act or exempt from registration under the Securities Act and (e) a legend has been, or will be, placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequently registered under the Securities Act or transferred in a transaction exempt from registration under the Securities Act; or in the case of notes converted into shares of the Company’s Common Stock, the converting note holder had held the note for the period required under Rule 144 and the converting note holder otherwise qualified for the exemption afforded by Rule 144 of Regulation D promulgated under the Securities Act.





There are no outstanding shares of the Company’s Common Stock that Company management has agreed to register under the Securities Act for sale by security holders.





(d) Use of Proceeds.





The proceeds from sale of the securities referenced above were used for working capital  including but not limited to payment of the Company’s obligations to vendors and service providers, filing fees, audit fees etc. and the conversion of the notes allowd the company to extinguish the debt associated with the converted notes.





ITEM 3.     DEFAULTS UPON SENIOR SECURITIES





None.





ITEM 4.     MINE SAFETY DISCLOSURES





None.





ITEM 5.     OTHER INFORMATION





None.






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ITEM 6.     EXHIBITS





ExhibitNumber

DescriptionExhibits filed herewith:31.1

Certification of Chief Executive Officer and President Pursuant to Rule 13a-1431.2

Certification of Chief Financial Officer Pursuant to Rule 13a-1432.1

Certification of Chief Executive Officer and President Pursuant to Section 906 of the Sarbanes-Oxley Act32.2

Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act101*

Interactive Data Files


*to be filed by exhibit






SIGNATURES




Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.







MINERALRITE CORPORATIONDated: July 7, 2014
By:
/s/ GuyPeckhamGuy PeckhamChief Executive Officer and PresidentChief Financial Officer