The accompanying unaudited financial statements have been
prepared in accordance with the instructions to Form 10-Q and Rule 8-03 of
Regulation S-X, and, therefore, do not include all information and footnotes
necessary for a complete presentation of financial position, results of
operations, cash flows, and stockholders' equity in conformity with generally
accepted accounting principles. In the opinion of management, all adjustments
considered necessary for a fair presentation of the results of operations and
financial position have been included and all such adjustments are of a normal
recurring nature. Operating results for the three and nine months ended January
31, 2014 are not necessarily indicative of the results that can be expected for
the year ending April 30, 2014.
As used in this Quarterly Report, the terms “we,” “us,” “our,”
“Royal Mines,” and the “Company” mean Royal Mines And Minerals Corp. and its
subsidiaries, unless otherwise indicated. All dollar amounts in this Quarterly
Report are expressed in U.S. dollars, unless otherwise indicated.
|
ROYAL MINES AND MINERALS CORP.
|
|
(An Exploration Stage Company)
|
|
STATEMENTS OF CASH FLOWS
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
For the Period
|
|
|
|
|
|
|
|
|
|
|
From Inception
|
|
|
|
|
For the nine months ended
|
|
|
(December 14, 2005)
|
|
|
|
|
January 31,
|
|
|
Through
|
|
|
|
|
2014
|
|
|
2013
|
|
|
January 31, 2014
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(1,198,999
|
)
|
$
|
(1,059,578
|
)
|
$
|
(15,548,832
|
)
|
|
Adjustments to reconcile net loss to cash
used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
78,129
|
|
|
77,950
|
|
|
699,639
|
|
|
Impairment of mineral
properties
|
|
-
|
|
|
38,400
|
|
|
63,400
|
|
|
Impairment of intellectual property
|
|
-
|
|
|
150,000
|
|
|
200,000
|
|
|
Stock-based expenses
|
|
542,487
|
|
|
-
|
|
|
5,381,034
|
|
|
Allowance for bad debt
|
|
-
|
|
|
-
|
|
|
14,041
|
|
|
Gain on sale of fixed
asset
|
|
-
|
|
|
-
|
|
|
(11,500
|
)
|
|
Gain on settlement of accounts payable
|
|
-
|
|
|
(1,613
|
)
|
|
(1,613
|
)
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
3,000
|
|
|
2,669
|
|
|
5,061
|
|
|
Other assets
|
|
(33,755
|
)
|
|
(9,814
|
)
|
|
(59,818
|
)
|
|
Accounts payable
|
|
36,315
|
|
|
47,028
|
|
|
687,348
|
|
|
Accounts payable -
related parties
|
|
43,567
|
|
|
45,000
|
|
|
425,457
|
|
|
Accrued liabilities
|
|
-
|
|
|
(5,000
|
)
|
|
(9,127
|
)
|
|
Accrued interest
|
|
16,368
|
|
|
8,084
|
|
|
50,627
|
|
|
Accrued interest - related parties
|
|
49,090
|
|
|
38,506
|
|
|
281,728
|
|
|
Deferred rent
|
|
(7,689
|
)
|
|
34,504
|
|
|
28,115
|
|
|
Net cash used in operating activities
|
|
(471,487
|
)
|
|
(633,864
|
)
|
|
(7,794,440
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Reimbursement of Golden
Anvil expenses
|
|
(16,945
|
)
|
|
-
|
|
|
(16,945
|
)
|
|
Loan receivable
|
|
-
|
|
|
-
|
|
|
(983,055
|
)
|
|
Cash paid on mineral
property claims
|
|
-
|
|
|
310
|
|
|
(38,900
|
)
|
|
Cash acquired on reverse merger
|
|
-
|
|
|
-
|
|
|
2,306
|
|
|
Proceeds from sale of
fixed assets
|
|
-
|
|
|
-
|
|
|
11,500
|
|
|
Purchase of fixed assets
|
|
-
|
|
|
-
|
|
|
(621,795
|
)
|
|
Net cash provided by (used in) investing
activities
|
|
(16,945
|
)
|
|
310
|
|
|
(1,646,889
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Proceeds from stock issuance
|
|
345,000
|
|
|
-
|
|
|
4,450,721
|
|
|
Payments on borrowing -
related party
|
|
(127
|
)
|
|
-
|
|
|
(127
|
)
|
|
Proceeds from borrowings
|
|
150,000
|
|
|
148,030
|
|
|
398,030
|
|
|
Proceeds from
borrowings - related parties
|
|
250
|
|
|
421,618
|
|
|
4,613,102
|
|
|
Net cash provided by financing activities
|
|
495,123
|
|
|
569,648
|
|
|
9,461,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH
|
|
6,691
|
|
|
(63,906
|
)
|
|
20,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AT BEGINNING OF PERIOD
|
|
13,706
|
|
|
70,678
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AT END OF PERIOD
|
$
|
20,397
|
|
$
|
6,772
|
|
$
|
20,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Acquisition of intellectual property for
stock
|
$
|
-
|
|
$
|
-
|
|
$
|
200,000
|
|
|
Acquisition of mineral property for stock
|
$
|
-
|
|
$
|
-
|
|
$
|
24,500
|
|
|
Stock issued in reverse acquisition of
Centrus Ventures Inc.
|
$
|
-
|
|
$
|
-
|
|
$
|
(63,195
|
)
|
|
Stock issued in satisfaction of accounts payable
|
$
|
-
|
|
$
|
5,000
|
|
$
|
(224,004
|
)
|
|
Stock issued in satisfaction of accounts
payable - related parties
|
$
|
(310,000
|
)
|
$
|
-
|
|
$
|
(675,228
|
)
|
|
Stock issued in satisfaction of accrued interest - related
parties
|
$
|
(5,000
|
)
|
$
|
-
|
|
$
|
(139,000
|
)
|
|
Stock issued in satisfaction of accrued
interest
|
$
|
(11,000
|
)
|
$
|
-
|
|
$
|
(11,000
|
)
|
|
Stock issued in satisfaction of accrued liabilities
|
$
|
-
|
|
$
|
-
|
|
$
|
(50,000
|
)
|
|
Stock issued in satisfaction of notes
payable
|
$
|
-
|
|
$
|
-
|
|
$
|
(40,000
|
)
|
|
Stock issued in satisfaction of loans payable, including
related party
|
$
|
(690,000
|
)
|
$
|
-
|
|
$
|
(4,548,000
|
)
|
|
Unrealized loss on marketable securities
|
$
|
(620,000
|
)
|
$
|
-
|
|
$
|
(620,000
|
)
|
|
Marketable securities received as payment on loan
receivable
|
$
|
893,055
|
|
$
|
-
|
|
$
|
893,055
|
|
The accompanying notes are an integral part of these financial
statements.
F-3
|
ROYAL MINES AND MINERALS CORP.
|
|
(An Exploration Stage Company)
|
|
NOTES TO FINANCIAL STATEMENTS
|
|
JANUARY 31, 2014
|
|
(Unaudited)
|
|
1.
|
DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF
SIGNIFICANT POLICIES
|
Basis of Presentation
– The
accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America. Royal
Mines and Minerals Corp’s (the “Company”) fiscal year-end is April 30.
Description of Business
– The
Company is considered an exploration stage company. The Company's primary
objectives are to 1) commercially extract and refine precious metals from its
own and other’s leachable assets, 2) use its lixiviation processes to convert
specific ore bodies and coal ash landfills/monofills into valuable assets, and
3) joint venture, acquire and develop mining projects in North America. The
Company has not yet realized significant revenues from its primary
objectives.
History
– The Company was
incorporated on December 14, 2005 under the laws of the State of Nevada. On June
13, 2007, the Company incorporated a wholly-owned subsidiary, Royal Mines
Acquisition Corp., in the state of Nevada.
On October 5, 2007, Centrus Ventures
Inc. (Centrus) completed the acquisition of Royal Mines Inc. (“Royal Mines”).
The acquisition of Royal Mines was completed by way of a “triangular merger”
pursuant to the provisions of the Agreement and Plan of Merger dated September
24, 2007 (the “First Merger Agreement”) among Centrus, Royal Mines Acquisition
Corp. (“Centrus Sub”), a wholly owned subsidiary of Centrus, Royal Mines and
Kevin B. Epp, the former sole executive officer and director of Centrus. On
October 5, 2007, under the terms of the First Merger Agreement, Royal Mines was
merged with and into Centrus Sub, with Centrus Sub continuing as the surviving
corporation (the “First Merger”).
On October 6, 2007, a second merger was
completed pursuant to an Agreement and Plan of Merger dated October 6, 2007 (the
“Second Merger Agreement”) between Centrus and its wholly owned subsidiary,
Centrus Sub, whereby Centrus Sub was merged with and into Centrus, with Centrus
continuing as the surviving corporation (the “Second Merger”). As part of the
Second Merger, Centrus changed its name from “Centrus Ventures Inc.” to “Royal
Mines And Minerals Corp.”(“the Company”). Other than the name change, no
amendments were made to the Articles of Incorporation.
Under the terms and conditions of the
First Merger Agreement, each share of Royal Mines’ common stock issued and
outstanding immediately prior to the completion of the First Merger was
converted into one share of Centrus’ common stock. As a result, a total of
32,183,326 shares of Centrus common stock were issued to former stockholders of
Royal Mines. In addition, Mr. Epp surrendered 23,500,000 shares of Centrus
common stock for cancellation in consideration of payment by Centrus of $0.001
per share for an aggregate consideration of $23,500. As a result, upon
completion of the First Merger, the former stockholders of Royal Mines owned
approximately 69.7% of the issued and outstanding common stock.
As such, Royal Mines is deemed to be
the acquiring enterprise for financial reporting purposes. All acquired assets
and liabilities of Centrus were recorded at fair value on the date of the
acquisition, as required by the purchase method of accounting, and the tangible
net liabilities were debited against equity of the Company. There are no
continuing operations of Centrus from the date of acquisition.
Going Concern
- As of January
31, 2014, the Company has incurred cumulative net losses of $15,548,832 from
operations, accumulated other comprehensive loss of $620,000 since inception,
and has negative working capital of $953,774. The Company is still in the
exploration stage and has not fully commenced its mining and minerals processing
operations, raising substantial doubt about its ability to continue as a going
concern.
F-4
|
ROYAL MINES AND MINERALS CORP.
|
|
(An Exploration Stage Company)
|
|
NOTES TO FINANCIAL STATEMENTS
|
|
JANUARY 31, 2014
|
|
(Unaudited)
|
The ability of the Company to continue
as a going concern is dependent on the Company raising additional sources of
capital and the successful execution of the Company’s objectives. The Company
will seek additional sources of capital through the issuance of debt or equity
financing, but there can be no assurance the Company will be successful in
accomplishing its objectives. The financial statements do not include any
adjustments relating to the recoverability and classification of assets and
liabilities that might be necessary should the Company be unable to continue as
a going concern.
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 disclosure 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.
Cash and Cash Equivalents
- The
Company considers all investments with an original maturity of three months or
less to be a cash equivalent.
Fair Value
- ASC 825, Financial
Instruments requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value. ASC 825
establishes a fair value hierarchy based on the level of independent, objective
evidence surrounding the inputs used to measure fair value. A financial
instrument’s categorization within the fair value hierarchy is based upon the
lowest level of input that is significant to the fair value measurement. ASC 825
prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or
liabilities for which there are quoted prices in active markets for identical
assets or liabilities.
Level 2
Level 2 applies to assets or
liabilities for which there are inputs other than quoted prices that are
observable for the asset or liability such as quoted prices for similar assets
or liabilities in active markets; quoted prices for identical assets or
liabilities in markets with insufficient volume or infrequent transactions (less
active markets); or model-derived valuations in which significant inputs are
observable or can be derived principally from, or corroborated by, observable
market data of the fair value of the assets or liabilities.
Level 3
Level 3 applies to assets or
liabilities for which there are unobservable inputs to the valuation methodology
that are significant to the measurement of the fair value of the assets or
liabilities.
Pursuant to ASC 825, the fair value of
cash is determined based on “Level 1” inputs, which consist of quoted prices in
active markets for identical assets. The Company's financial instruments consist
of cash, prepaid expenses, other assets, accounts payable, accrued liabilities,
and loans payable. The carrying amount of these financial instruments
approximates fair value due to either length of maturity or interest rates that
approximate prevailing market rates unless otherwise disclosed in these
financial statements.
F-5
|
ROYAL MINES AND MINERALS CORP.
|
|
(An Exploration Stage Company)
|
|
NOTES TO FINANCIAL STATEMENTS
|
|
JANUARY 31, 2014
|
|
(Unaudited)
|
Assets measured at fair value on a
recurring basis were presented on the Company’s balance sheet as of January 31,
2014 as follows:
Fair Value Measurements at January
31, 2014 Using:
|
|
Assets:
|
|
Total Carrying Value
|
|
|
Quoted Marked
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
as of 1/31/2014
|
|
|
Prices in Active
|
|
|
Other
|
|
|
Unobservable
|
|
|
|
|
|
|
|
|
Markets (Level
|
|
|
Observable
|
|
|
Inputs (Level 3)
|
|
|
|
|
|
|
|
|
1)
|
|
|
Inputs (Level 2)
|
|
|
|
|
|
|
Investments in marketable securities
|
$
|
380,000
|
|
$
|
-
|
|
$
|
380,000
|
|
$
|
-
|
|
|
|
Total
|
$
|
380,000
|
|
$
|
-
|
|
$
|
380,000
|
|
$
|
-
|
|
The Company did not have any
investments in marketable securities at April 30, 2013.
Property and Equipment
-
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided principally on the straight-line method over the
estimated useful lives of the assets, which are generally 3 to 10 years. The
cost of repairs and maintenance is charged to expense as incurred. Expenditures
for property betterments and renewals are capitalized. Upon sale or other
disposition of a depreciable asset, cost and accumulated depreciation are
removed from the accounts and any gain or loss is reflected in the statement of
operations.
The Company periodically evaluates
whether events and circumstances have occurred that may warrant revision of the
estimated useful life of fixed assets or whether the remaining balance of fixed
assets should be evaluated for possible impairment. The Company uses an estimate
of the related undiscounted cash flows over the remaining life of the fixed
assets in measuring their recoverability.
Exploration Costs
– Exploration
costs incurred in locating areas of potential mineralization or evaluating
properties or working interests with specific areas of potential mineralization
are expensed as incurred. Development costs of proven mining properties not yet
producing are capitalized at cost and classified as capitalized exploration
costs under property, plant and equipment. Property holding costs are charged to
operations during the period if no significant exploration or development
activities are being conducted on the related properties. Upon commencement of
production, capitalized exploration and development costs would be amortized
based on the estimated proven and probable reserves benefited. Properties
determined to be impaired or that are abandoned are written-down to the
estimated fair value. Carrying values do not necessarily reflect present or
future values.
Impairment of Long-Lived Assets
– The Company reviews and evaluates long-lived assets for impairment when events
or changes in circumstances indicate the related carrying amounts may not be
recoverable. The assets are subject to impairment consideration under ASC
360-10-35-17,
Measurement of an Impairment Loss
, if events or
circumstances indicate that their carrying amount might not be recoverable.
Various factors could impact our
ability to achieve forecasted production schedules. Additionally, commodity
prices, capital expenditure requirements and reclamation costs could differ from
the assumptions the Company may use in cash flow models used to assess
impairment. The ability to achieve the estimated quantities of recoverable
minerals from exploration stage mineral interests involves further risks in
addition to those factors applicable to mineral interests where proven and
probable reserves have been identified, due to the lower level of confidence
that the identified mineralized material can ultimately be mined economically.
As of April 30, 2013, the Company did not pay the renewal fee on the 20 acre
claim and the BLM claims due in August 2012 and allowed those claims to lapse.
The Company recognized an impairment expense of zero and $38,400 for the nine
months ended January 31, 2014 and 2013, respectively.
F-6
|
ROYAL MINES AND MINERALS CORP.
|
|
(An Exploration Stage Company)
|
|
NOTES TO FINANCIAL STATEMENTS
|
|
JANUARY 31, 2014
|
|
(Unaudited)
|
Revenue Recognition
– The
Company recognizes revenues and the related costs when persuasive evidence of an
arrangement exists, delivery and acceptance has occurred or service has been
rendered, the price is fixed or determinable, and collection of the resulting
receivable is reasonably assured. Revenue from licensing our technology is
recognized over the term of the license agreement. Costs and expenses are
recognized during the period in which they are incurred.
Research and Development
- All
research and development expenditures are expensed as incurred.
Earnings (Loss) Per Share
- The
Company follows ASC 260,
Earnings Per Share,
and ASC 480,
Distinguishing Liabilities from Equity,
which establish standards for the
computation, presentation and disclosure requirements for basic and diluted
earnings per share for entities with publicly held common shares and potential
common stock issuances. Basic earnings (loss) per share are computed by dividing
net income by the weighted average number of common shares outstanding. In
computing diluted earnings per share, the weighted average number of shares
outstanding is adjusted to reflect the effect of potentially dilutive
securities, such as stock options and warrants. Common stock equivalent shares
are excluded from the computation if their effect is antidilutive. Common stock
equivalents, which include stock options and warrants to purchase common stock,
on January 31, 2014 and 2013 that were not included in the computation of
diluted earnings per share because the effect would be antidilutive were
153,455,129 and 109,195,129, respectively.
Stock-Based Compensation
– The
Company accounts for share based payments in accordance with ASC 718,
Compensation - Stock Compensation
, which requires all share-based
payments to employees, including grants of employee stock options, to be
recognized in the financial statements based on the grant date fair value of the
award. In accordance with ASC 718-10-30-9,
Measurement Objective – Fair Value
at Grant Date
, the Company estimates the fair value of the award using a
valuation technique. For this purpose, the Company uses the Black-Scholes option
pricing model. The Company believes this model provides the best estimate of
fair value due to its ability to incorporate inputs that change over time, such
as volatility and interest rates, and to allow for actual exercise behavior of
option holders. Compensation cost is recognized over the requisite service
period which is generally equal to the vesting period. Upon exercise, shares
issued will be newly issued shares from authorized common stock.
ASC 505, "Compensation-Stock
Compensation", establishes standards for the accounting for transactions in
which an entity exchanges its equity instruments to non-employees for goods or
services. Under this transition method, stock compensation expense includes
compensation expense for all stock-based compensation awards granted on or after
January 1, 2006, based on the grant-date fair value estimated in accordance with
the provisions of ASC 505.
Recent Accounting Standards
–
From time to time, new accounting pronouncements are issued by the Financial
Accounting Standards Board (FASB) that are adopted by the Company as of the
specified effective date. Unless otherwise discussed, management believes that
the impact of recently issued standards did not or will not have a material
impact on the Company’s financial position, results of operations, or cash flows
upon adoption.
In January 2014, the Financial
Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")
2014-05,
Service Concession Arrangements (Topic 853), a consensus of the FASB
Emerging Issues Task Force
. The objective of the update is to specify that
an operating entity should not account for a service concession arrangement
within the scope of this update as a lease in accordance with Topic 840, Leases.
It is effective for fiscal years beginning after December 15, 2014. The Company
does not expect ASU 2014-05 to have a material effect on its financial
condition, results of operation, or cash flows.
In July 2013, the FASB issued ASU
2013-11–
Income Taxes (Topic 740), Presentation of an Unrecognized Tax Benefit
When a Net Operating loss Carryforward, a Similar Tax Loss, or a Tax Credit
Carryforward Exists.
The standard provides updated guidance on the financial
statement presentation of an unrecognized tax benefit when a net operating loss
carryforward, a similar tax loss, or a tax credit carryforward exists. It
becomes effective for fiscal years beginning
after December 15, 2013, and the impact to the consolidated financial statements
will not be material.
F-7
|
ROYAL MINES AND MINERALS CORP.
|
|
(An Exploration Stage Company)
|
|
NOTES TO FINANCIAL STATEMENTS
|
|
JANUARY 31, 2014
|
|
(Unaudited)
|
As of January 31, 2013 and April 30,
2013, loan receivable consisted of zero and $983,055, respectively.
On September 27, 2013, the Company
entered into a settlement and security release agreement with Golden Anvil.
Under the terms of the Release Agreement, the Company agreed to release Golden
Anvil from loan agreements pursuant to which, Golden Anvil owed the Company
USD$983,055 in secured indebtedness. In exchange for the release, Golden Anvil
had 2,000,000 common shares of Gainey Capital Corp. (“Gainey”) issued to the
Company as part of an asset purchase agreement between Golden Anvil and
Gainey.
The now-settled loan receivable
originated when the Company had advanced $970,000 to Golden Anvil to permit
Golden Anvil to complete its refurbishment and relocation of its mineral
processing plant in Nayarit, Mexico, and had paid $13,055 in expenses on behalf
of Golden Anvil, which is included in the total loan amount of $983,055.
|
3.
|
INVESTMENT IN MARKETABLE SECURITIES
|
|
|
|
|
|
As of January 31, 2014 and April 30, 2013, investment in
marketable securities consisted of $380,000 and zero, respectively. The
market value was $0.19 per Gainey share on January 31, 2014 traded on
Vancouver exchange, symbol GNCV.
|
|
|
|
|
|
On September 27, 2013, the Company entered into a
settlement and security release agreement with Golden Anvil. Under the
terms of the Release Agreement, the Company agreed to release Golden Anvil
from loan agreements pursuant to which, Golden Anvil owed the Company
USD$983,055 in secured indebtedness. In exchange for the release, Golden
Anvil had 2,000,000 common shares of Gainey issued to the Company as part
of an asset purchase agreement between Golden Anvil and Gainey.
|
|
|
|
|
|
The Asset Purchase was completed on September 30, 2013
and will serve as Gainey’s qualifying transaction under TSX Venture
Exchange rules for capital pool companies. As such, the Gainey Shares will
be released pursuant to the terms of a surplus escrow agreement as
follows:
|
|
% of Shares to be Released
|
Date of Release
|
|
5%
|
October 2, 2013
|
|
5%
|
April 2, 2014
|
|
10%
|
October 2, 2014
|
|
10%
|
April 2, 2015
|
|
15%
|
October 2, 2015
|
|
15%
|
April 2, 2016
|
|
40%
|
October 2, 2016
|
In addition, the Gainey Shares are
subject to a voluntary pooling agreement, which provides that none of the Gainey
Shares may be traded before October 2, 2014.
Marketable securities are held for an
indefinite period of time and thus are classified as available-for-sale
securities. Realized investment gains and losses are included in the statement
of operations, as are provisions for other than temporary declines in the market
value of available-for-sale securities. Unrealized gains and unrealized losses
deemed to be temporary are excluded from earnings (losses), net of applicable
taxes, as a component of other comprehensive income. Factors considered in
judging whether an impairment is other than temporary include the financial
condition, business prospects and creditworthiness of the issuer, the length of time that fair value has been less than
cost, the relative amount of decline, and the Company’s ability and intent to
hold the investment until the fair value recovers.
F-8
|
ROYAL MINES AND MINERALS CORP.
|
|
(An Exploration Stage Company)
|
|
NOTES TO FINANCIAL STATEMENTS
|
|
JANUARY 31, 2014
|
|
(Unaudited)
|
As of January 31, 2014, the Company has
recorded an accumulated other comprehensive loss of $620,000 regarding its
investment in marketable securities. Based on management’s evaluation of the
circumstances, management believes that the decline in fair value below the cost
of certain of the Company’s marketable securities is temporary.
The following is a summary of
available-for-sale marketable securities as of January 31, 2014:
|
|
|
Cost
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Market or
|
|
|
|
|
|
|
|
Gain
|
|
|
(Losses)
|
|
|
Fair Value
|
|
|
Equity securities
|
$
|
1,000,000
|
|
$
|
--
|
|
$
|
(620,000
|
)
|
$
|
380,000
|
|
|
Total
|
$
|
1,000,000
|
|
$
|
--
|
|
$
|
(620,000
|
)
|
$
|
380,000
|
|
The Company had no investments in
marketable securities at April 30, 2013.
|
4.
|
PROPERTY AND EQUIPMENT
|
|
|
|
|
|
Property and equipment consists of the
following:
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
|
|
January 31, 2014
|
|
|
April 30, 2013
|
|
|
|
Process, lab and office equipment
|
$
|
352,802
|
|
$
|
680,042
|
|
|
|
Site equipment
|
|
22,369
|
|
|
167,769
|
|
|
|
Total property and equipment
|
|
375,171
|
|
|
847,811
|
|
|
|
Less: accumulated depreciation
|
|
(215,499
|
)
|
|
(610,010
|
)
|
|
|
|
$
|
159,672
|
|
$
|
237,801
|
|
Depreciation expense was $78,129 and
$77,950 for the nine months ended January 31, 2014 and 2013, respectively. At
January 31, 2014, the Company removed $327,240 in process, lab and office
equipment and $145,400 in site equipment that was fully depreciated and disposed
of through retirement.
|
5.
|
ACCOUNTS PAYABLE - RELATED PARTIES
|
|
|
|
|
|
As of January 31, 2014 and April 30, 2013, accounts
payable – related parties consisted of $181,083 and $447,516,
respectively, due to directors and officers of the Company for consulting
fees, and $235,000 for the acquisition of an extraction processing system
in January 2012. On November 18, 2013, $310,000 of accounts payable –
related parties was converted into common stock and warrants of the
Company (see Note 10 - Stockholders Equity).
|
|
6.
|
LOANS PAYABLE
|
|
|
|
|
|
As of January 31, 2014 and April 30, 2013, loans payable
of $248,030 consists of borrowings payable to two unrelated third parties.
The loans bear 6% to 12% interest, are unsecured and are due on
demand.
|
|
7.
|
LOANS PAYABLE AND ACCRUED INTEREST – RELATED
PARTIES
|
|
|
|
|
|
As of January 31, 2014 and April 30, 2013, loans payable
– related parties of $258,000 and $797,877, respectively, mainly consists
of borrowings, directly and indirectly, from one director of the Company.
The balances bear 10% interest, are unsecured and are due on demand. On
November 18, 2013, $540,000 of loanspayable – related parties was converted
into common stock and warrants of the Company (see Note 10 - Stockholders
Equity).
|
F-9
|
ROYAL MINES AND MINERALS CORP.
|
|
(An Exploration Stage Company)
|
|
NOTES TO FINANCIAL STATEMENTS
|
|
JANUARY 31, 2014
|
|
(Unaudited)
|
As of January 31, 2014 and April 30,
2013, accrued interest – related party was $107,484 and $63,394 respectively.
Interest expense for the three months ended January 31, 2014 and 2013 was
$13,731 and $19,312 respectively. Interest expense for the nine months ended
January 31, 2014 and 2013 was $67,054 and $48,510, respectively.
|
8.
|
NOTES PAYABLE
|
|
|
|
|
|
As of January 31, 2014 and April 30, 2013, notes payable
consists of an unsecured $50,000 payable to New Verde River Mining and
Robert H. Gunnison pursuant to the NVRM Agreement noted above. Mr.
Gunnison signed an extension agreement extending the payment deadline to
June 30, 2014. The note payable bears 6% interest
annually.
|
|
9.
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
Lease obligations
– The Company has operating
leases for its corporate office, corporate housing and plant facility.
Future minimum lease payments under the operating leases as of January 31,
2014 are as follows:
|
|
Fiscal year ending April 30, 2014
|
$
|
23,050
|
|
|
Fiscal year ending April 30, 2015
|
$
|
66,100
|
|
|
Fiscal year ending April 30, 2016
|
$
|
54,008
|
|
|
Fiscal year ending April 30, 2017
|
$
|
42,016
|
|
|
Fiscal year ending April 30, 2018
|
$
|
21,008
|
|
|
Thereafter
|
$
|
21,008
|
|
Lease expense was $99,225 and $196,480
for the nine months ended January 31, 2014 and 2013, respectively.
Legal proceedings
– The Company
received a verified complaint (the “Complaint”), dated September 12, 2013, that
was filed in Arizona Superior Court, Maricopa County, by McKendry Enterprises,
Inc. Profit Sharing Plan and Retirement Trust (the “Landlord”), alleging breach
of contract and breach of covenant of good faith and fair dealing in relation to
the lease agreement dated June 6, 2007, between the Landlord and the Company, as
amended (the “Lease Agreement”). The Complaint seeks to recover damages of at
least $108,581, including, but not limited to: (1) $56,358 rent; (ii) $52,223
for maintenance, clean-up costs and construction; and (3) undetermined damages
for additional repair, clean up and legal fees. The Company is vigorously
defending this lawsuit. There is no assurance that the Company will be able to
successfully defend the lawsuit. The Company is currently evaluating the merits
of the lawsuit and the probability of a favorable outcome. Rent expense of
$50,858 is recorded as an account payable as of January 31, 2014. In the event
of an unfavorable outcome, the Company will be required to record additional
liability.
No other legal proceedings are pending,
threatened or contemplated.
|
10.
|
STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
Common and Preferred Stock:
|
|
|
|
|
|
On August 26, 2013, Royal Mines and Minerals Corp. (the
“Company”) filed a certificate of amendment with the Nevada Secretary of
State, amending the Company’s Articles of Incorporation to increase the
number of authorized shares of common stock from 300,000,000 shares to
900,000,000 shares. The Amendment to the Articles of Incorporation was
approved at the Company’s Annual General Meeting and Special Meeting on
August 22, 2013.
|
F-10
|
ROYAL MINES AND MINERALS CORP.
|
|
(An Exploration Stage Company)
|
|
NOTES TO FINANCIAL STATEMENTS
|
|
JANUARY 31, 2014
|
|
(Unaudited)
|
As of January 31, 2014 and April 30,
2013, there were 212,813,141 and 185,593,141 shares of common stock outstanding,
respectively and zero shares of preferred stock outstanding.
On November 18, 2013 and November 19,
2013, the Company issued 6,900,000 units for $345,000 in cash, 13,800,000 units
for $690,000 in loans made to the Company, of which $540,000 were loans from
related parties, and 6,520,000 units to retire $326,000 in corporate
indebtedness, of which $315,000 were to related parties, an aggregate of
27,220,000 units, at a price of $0.05 per unit in two separate concurrent
private placement offerings. Each Unit is comprised of one share of the
Company’s common stock and one share purchase warrant, with each warrant
entitling the holder to purchase an additional share of the Company's common
stock at an exercise price of $0.10 for a two year period from the date of
issuance.
Additionally, each cash subscriber
executed a subscription agreement which included a good faith representation by
the Company to enter into definitive agreements to grant a net profits interest
on the basis of 1% for each $10,000 invested. The profit payout will be net of
operating and financing costs and an agreed upon management fee, from the
Company's interest in its first joint venture, license or its own production
facility using its coal ash process. The maximum payout will be 8 times original
cash investment by each subscriber.
2013 Stock Incentive Plan
-
Effective June 20, 2013, the Company adopted the 2013 Stock Incentive Plan (the
“2013 Plan"). The 2013 Plan allows the Company to grant certain options to its
directors, officers, employees and eligible consultants. A total of 27,800,000
shares of the Company’s common stock are available for issuance under the 2010
Plan. However, the Company may increase the maximum aggregate number of shares
of the Company’s common stock that may be optioned and sold under the 2013 Plan
provided the maximum aggregate number of shares of common stock that may be
optioned and sold under the 2013 Plan shall at no time be greater than 15.0% of
the total number of shares of common stock outstanding.
On October 29, 2013, the Company
granted non-qualified stock options under the 2013 Plan for the purchase of
18,100,000 shares of common stock at $0.03 per share. The nonqualified stock
options were granted to various officers, directors and consultants, are fully
vested and expire October 29, 2018. As of January 31, 2014, zero options under
the 2013 Plan have been exercised.
From the date of inception through
January 31, 2014, compensation expense related to the granting of stock options
under the 2013 Plan was $542,487, of which $90,000 was recorded in minerals
exploration and evaluation expenses, $99,000 was recorded in general and
administrative and $354,000 was recorded in general and administrative – related
parties. The Company calculated the value of the options using the Black-Scholes
option pricing model using the following assumptions: a bond equivalent yield of
0.75%, volatility of 436%, estimated life of 5 years and closing stock price of
$0.03 per share on the date of grant.
Effective June 20, 2013, the Company
suspended the 2011 Plan. No new options may be granted under the 2011 Plan and
the 2011 Plan will be terminated once all outstanding options granted under the
2011 Plan have been exercised, expired or otherwise terminated. There are
presently 6,000,000 options outstanding under the 2011 Plan.
Extension of Warrants Expiry
Dates
|
|
On July 2, 2013, we extended the expiration
dates of the following warrants:
|
|
|
|
a)
|
23,020,000 warrants previously issued on July 13, 2011
from an expiration date of July 12, 2013 to July 12, 2014. Each warrant
entitles the holder to purchase an additional share of our common stock at
a price of $0.10 per share; and
|
|
|
|
b)
|
1,000,000 warrants previously issued on September 26,
2011, from an expiration date of September 25, 2013 to September 25, 2014.
Each warrant entitles the holder to purchase an additional share of our
common stock at a price of $0.10 per share.
|
F-11
|
ROYAL MINES AND MINERALS CORP.
|
|
(An Exploration Stage Company)
|
|
NOTES TO FINANCIAL STATEMENTS
|
|
JANUARY 31, 2014
|
|
(Unaudited)
|
|
|
On January 16, 2014, we extended
the expiration dates of the following warrants:
|
|
|
a)
|
22,476,840 warrants previously issued on February 24
2009, from an expiration date of February 23, 2014 to February 23, 2015.
Each warrant entitles the holder to purchase an additional share of our
common stock at a price of $0.10 per share;
|
|
|
b)
|
11,455,500 warrants previously issued on January 31,
2010, from an expiration date of January 30, 2014 to January 30, 2015.
Each warrant entitles the holder to purchase an additional share of our
common stock at a price of $0.10 per share;
|
|
|
c)
|
32,070,000 warrants previously issued on January 18,
2011, from an expiration date of January 17, 2014 to January 17, 2015.
Each warrant entitles the holder to purchase an additional share of our
common stock at a price of $0.10 per share; and
|
|
|
d)
|
11,742,789 warrants previously issued on January 30,
2012, from an expiration date of January 29, 2014 to January 29, 2015.
Each warrant entitles the holder to purchase an additional share of our
common stock at a price of $0.10 per share.
|
|
11.
|
RELATED PARTY TRANSACTIONS
|
|
|
|
|
|
For the nine months ended January 31, 2014, the Company
incurred $153,000, in consulting fees expense from companies with a common
director or officer, zero in compensation expense for the issuance of
common stock to directors and officers of the Company, and $354,000 in
compensation expense for the issuance of stock options to directors and
officers of the Company.
|
|
|
|
|
|
For the nine months ended January 31, 2013, the Company
incurred $158,000 in consulting fees expense from companies with a common
director or officer, zero in compensation expense for the issuance of
common stock to directors and officers of the Company, and zero in
compensation expense for the issuance of stock options to directors and
officers of the Company.
|
F-12