UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2014
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________to ________
COMMISSION FILE NUMBER 000-52391
ROYAL MINES AND MINERALS CORP.
(Exact name of registrant as specified in its charter)
| NEVADA | 20-4178322 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| 2580 Anthem Village Dr. | |
| Henderson, NV | 89052 |
| (Address of principal executive offices) | (Zip code) |
(702) 588-5973
(Registrant's telephone number,
including area code)
Not Applicable
(Former name, former address and
former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that 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 [ ]
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 (s. 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer [ ] | Accelerated filer [ ] |
| Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of December 10, 2014, the Registrant had 223,193,634 shares of common stock outstanding .
PART I - FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS. |
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 six months ended October 31, 2014 are not necessarily indicative of the results that can be expected for the year ending April 30, 2015.
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.
2
ROYAL MINES AND MINERALS CORP.
BALANCE
SHEETS
(UNAUDITED)
The accompanying notes are an integral part of these financial statements.
F-1
ROYAL MINES AND MINERALS CORP.
STATEMENTS OF
OPERATIONS
(UNAUDITED)
| For the Three Months Ended October 31, | For the Six Months Ended October 31, | |||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||
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Revenue |
$ | - | $ | - | $ | - | $ | - | ||||
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Operating expenses: |
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Mineral exploration and evaluation expenses |
109,565 | 160,828 | 214,606 | 248,511 | ||||||||
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Mineral exploration and evaluation expenses - related parties |
15,000 | 15,000 | 30,000 | 30,000 | ||||||||
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General and administrative |
33,825 | 128,227 | 80,473 | 176,922 | ||||||||
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General and administrative - related parties |
36,000 | 390,572 | 72,000 | 425,572 | ||||||||
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Loss on legal settlement |
19,142 | - | 19,142 | - | ||||||||
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Depreciation |
18,740 | 26,045 | 39,732 | 52,090 | ||||||||
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Total operating expenses |
232,272 | 720,672 | 455,953 | 933,095 | ||||||||
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Loss from operations |
(232,272 | ) | (720,672 | ) | (455,953 | ) | (933,095 | ) | ||||
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Other income (expense): |
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Interest and other income |
- | 12 | - | 12 | ||||||||
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Interest expense |
(16,361 | ) | (26,643 | ) | (30,753 | ) | (53,323 | ) | ||||
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Total other expense |
(16,361 | ) | (26,631 | ) | (30,753 | ) | (53,311 | ) | ||||
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Net loss |
$ | (248,633 | ) | $ | (747,303 | ) | $ | (486,706 | ) | $ | (986,406 | ) |
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Other comprehensive loss: |
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Unrealized loss on marketable securities |
(540,000 | ) | (700,000 | ) | (120,000 | ) | (700,000 | ) | ||||
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Comprehensive loss |
$ | (788,633 | ) | $ | (1,447,303 | ) | $ | (606,706 | ) | $ | (1,686,406 | ) |
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Net loss per common share - basic |
$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) |
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Weighted average common shares outstanding - basic |
220,519,614 | 185,593,141 | 216,666,377 | 185,593,141 | ||||||||
The accompanying notes are an integral part of these financial statements.
F-2
ROYAL MINES AND MINERALS CORP.
STATEMENTS OF CASH
FLOWS
(UNAUDITED)
The accompanying notes are an integral part of these financial statements.
F-3
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL
STATEMENTS
OCTOBER 31, 2014
(UNAUDITED)
| 1. |
DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES |
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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. |
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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 fly 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. |
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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. |
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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”). |
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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. |
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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. |
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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. |
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Going Concern - As of October 31, 2014, the Company has incurred cumulative net losses of $16,280,761 from operations since inception, accumulated other comprehensive loss of $620,000, and has negative working capital of $1,321,129. 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. |
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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. |
F-4
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2014
(UNAUDITED)
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.
Assets measured at fair value on a recurring basis were presented on the Company’s balance sheet as of October 31, 2014 and April 30, 2014 as follows:
F-5
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2014
(UNAUDITED)
Fair Value Measurements at October 31, 2014 Using:
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Assets: |
Total Carrying Value | Quoted Marked | Significant | Significant | |||||||||
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as of 7/31/2014 | Prices in Active | Other | Unobservable | |||||||||
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Markets (Level 1) | Observable | Inputs (Level 3) | ||||||||||
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Inputs (Level 2) | ||||||||||||
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Investments in marketable securities |
$ | 380,000 | $ | - | $ | 380,000 | $ | - | |||||
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Total |
$ | 380,000 | $ | - | $ | 380,000 | $ | - |
Fair Value Measurements at April 30, 2014 Using:
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Assets: |
Total Carrying Value | Quoted Marked | Significant | Significant | |||||||||
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as of 4/30/2014 | Prices in Active | Other | Unobservable | |||||||||
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Markets (Level 1) | Observable | Inputs (Level 3) | ||||||||||
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Inputs (Level 2) | ||||||||||||
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Investments in marketable securities |
$ | 500,000 | $ | - | $ | 500,000 | $ | - | |||||
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Total |
$ | 500,000 | $ | - | $ | 500,000 | $ | - |
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. The Company did not recognized an impairment expense for the six months ended October 31, 2014 and 2013, respectively.
F-6
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 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.
Other Current Assets - Other current assets are comprised of other receivables, which do not bear interest and are recorded at cost. The Company extends credit to its consultants, which receivables can be offset against commissions payable to the respective consultants.
The allowance for doubtful accounts represents the Company’s best estimate of the amount of probable credit losses in the Company’s existing other receivables. The Company determines the allowance based on specific customer information, historical write-off experience and current industry and economic data. Account balances are charged off against the allowance when the Company believes it is probable the receivable will not be recovered. Management believes that there are no concentrations of credit risk for which an allowance has not been established. Although management believes that the allowance is adequate, it is possible that the estimated amount of cash collections with respect to accounts receivable could change. As of October 31, 2014 and April 30, 2014, the Company has recorded an allowance for doubtful accounts of $14,761 and $14,041, respectively.
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 October 31, 2014 and April 30, 2014 that were not included in the computation of diluted earnings per share because the effect would be antidilutive were 147,685,129 and 154,985,129, respectively.
Income Taxes - The Company accounts for its income taxes in accordance with ASC 740, Income Taxes , which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry-forwards. 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 income in the period that includes the enactment date.
For acquired properties that do not constitute a business as defined in ASC 805-10-55-4, Definition of a Business , deferred income tax liability is recorded on GAAP basis over income tax basis using statutory federal and state rates. The resulting estimated future federal and state income tax liability associated with the temporary difference between the acquisition consideration and the tax basis is computed in accordance with ASC 740-10-25-51, Acquired Temporary Differences in Certain Purchase Transactions that are Not Accounted for as Business Combinations , and is reflected as an increase to the total purchase price which is then applied to the underlying acquired assets in the absence of there being a goodwill component associated with the acquisition transactions.
F-7
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2014
(UNAUDITED)
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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. |
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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. |
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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. |
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In August 2014, the FASB issued Accounting Standard Update (“ASU”) 2014-15, Presentation of Financial Statements – Going Concern. The new standard requires management of public and private companies to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern and, if so, disclose that fact. Management will also be required to evaluate and disclose whether its plans alleviate that doubt. The new standard is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Adoption of the new guidance is not expected to have an impact on the financial position, results of operations or cash flows. |
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In June 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-10, Development Stage Entities (Topic 915) Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. This ASU does the following, among other things: a) eliminates the requirement to present inception-to-date information on the statements of income, cash flows, and shareholders’ equity, b) eliminates the need to label the financial statements as those of a development stage entity, c) eliminates the need to disclose a description of the development stage activities in which the entity is engaged, and d) amends FASB ASC 275, Risks and Uncertainties, to clarify that information on risks and uncertainties for entities that have not commenced planned principal operations is required. The amendments in ASU No. 2014-10 are effective for public companies for annual and interim reporting periods beginning after December 15, 2014. Early adoption is permitted. The Company has elected early adoption of the new standard applied retrospectively. Adoption of the new guidance had no impact on the financial position, results of operations or cash flows. |
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| 2. |
SCOTTSDALE FACILITY AGREEMENT |
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On April 16, 2014, the Company entered into an agreement with GJS Capital Corp. (the "Creditor"). Under the terms of the Agreement, the Creditor has agreed to loan the Company $150,000 (the “Principal”), which has already been advanced. The loan bears interest at a rate of 6% per annum, compounded annually and has a maturity date of December 31, 2014 (the “Maturity Date"). |
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At any time prior to the Maturity Date, the Creditor may elect to receive units (each a “Unit") in exchange for any portion of the Principal outstanding on the basis of one Unit for each $0.05 of indebtedness converted (the “Unit Conversion Option"). Each Unit consists of one share of our common stock and one warrant to purchase an additional share of our common stock at a price of $0.10 per share for a period of two years from the date of issuance. If the Creditor exercises the Unit Conversion Option, any interest that accrued on the portion of the Principal that was converted shall be forgiven. |
F-8
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2014
(UNAUDITED)
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If the Creditor exercises the Unit Conversion Option, the Creditor will receive a net profits interest (the “Net Profits Interest”) an any future profits received by Company that are derived from our process for the recovery of precious metals from coal ash and other materials (the “Technology”) at a basis of 1% of our net profits for every $10,000 of converted Principal. The Net Profits Interest will terminate when the Creditor receives eight times the amount of converted Principal. |
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In addition, if the Creditor exercises the Unit Conversion Option, the Company will use best efforts to ensure that a director nominated by the Creditor is appointed to the Company’s Board of Directors. If the Creditor does nominate such director, the Company will be allowed to nominate and appoint an additional director to the Company’s Board of Directors. |
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The Creditor has agreed to form a joint venture with the Company for the purpose of constructing and operating a processing plant at the Scottsdale facility, an existing facility, utilizing the Company’s licensed Technology. Under the agreement, the Creditor and the Company shall form a limited liability company (“Newco”) to operate the Joint Venture, and ownership of Newco would be split equally between the Creditor and the Company. In addition, the Creditor would advance $250,000 plus up to 15% for contingencies, a total of $287,500, to Newco to fund the initial construction and operation costs of the Newco. These advances are not expected to be paid back to the Creditor. |
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The Company has been operating in the Scottsdale facility in prior years using the same technology licensed by the Company. As of October 31, 2014 and through the filing date of the Form 10-Q the Company and the Creditor have not established a limited liability corporation in accordance with the agreement. The equipment used in the Scottsdale facility, lease agreements for the Scottsdale facility, and other supplies purchased and costs incurred by the Scottsdale facility were incurred by the Company and are the legal obligation of the Company. As of October 31, 2014, no bank account has been established for the joint venture and as a result the Company has paid all expenses related to the Scottsdale facility directly via the Company’s bank accounts. Funding under the joint venture has been deposited by the Company into bank accounts owned by the Company. As of October 31, 2014, the Creditor has funded a total of $329,000. As of October 31, 2014 and through the date of the filing date of the Form 10-Q, the Company has not agreed to contribute any of the assets related to the Scottsdale facility to the joint venture. Based upon the aforementioned, the Company has accounted for the funds received totaling $329,000 as contributed capital since in substance, the Creditor has secured future revenue of the Scottsdale facility operations with such funds. For the six months ended October 31, 2014, the Company has received contributions totaling $165,000 on Scottsdale facility. |
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| 3. |
INVESTMENT IN MARKETABLE SECURITIES |
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As of October 31, 2014 and April 30, 2014, investment in marketable securities consisted of $380,000 and $500,000, respectively. The market value was $0.19 and $0.25 per Gainey share on October 31, 2014 and April 30, 2014, respectively, traded on the Vancouver exchange, under the stock symbol GNC.V. |
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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 $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. |
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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: |
F-9
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2014
(UNAUDITED)
| % 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.
As of October 31, 2014 and April 30, 2014, the Company has recorded an accumulated other comprehensive loss of $620,000 and $500,000, respectively, 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 October 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 following is a summary of available-for-sale marketable securities as of April 30, 2014:
| Cost | Unrealized | Unrealized | Market or | ||||||||||
| Gain | (Losses) | Fair Value | |||||||||||
| Equity securities | $ | 1,000,000 | $ | -- | $ | (500,000 | ) | $ | 500,000 | ||||
| Total | $ | 1,000,000 | $ | -- | $ | (500,000 | ) | $ | 500,000 |
| 4. |
PROPERTY AND EQUIPMENT |
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Property and equipment consists of the following: |
| As of | As of | ||||||
| October 31, 2014 | April 30, 2014 | ||||||
| Process, lab and office equipment | $ | 406,316 | $ | 456,335 | |||
| Site equipment | - | 22,369 | |||||
| Total property and equipment | 406,316 | 478,704 | |||||
| Less: accumulated depreciation | (204,609 | ) | (237,265 | ) | |||
| $ | 201,707 | $ | 241,439 |
F-10
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2014
(UNAUDITED)
| Fiscal year ending April 30, 2015 | $ | 48,600 | |
| Fiscal year ending April 30, 2016 | $ | 56,608 | |
| Fiscal year ending April 30, 2017 | $ | 42,016 | |
| Fiscal year ending April 30, 2018 | $ | 21,008 |
F-11
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2014
(UNAUDITED)
|
Lease expense was $69,421 and $86,650 for the six months ended October 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 sought 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. |
|
|
On October 22, 2014, the Company reached a settlement with the Landlord to pay $70,000 as follows: $5,000 on or before November 24, 2014 (amount has been paid); $5,000 payable 90 days thereafter; six payments of $7,000 due every 90 days thereafter; and two $9,000 payments due every 90 days thereafter. Each payment has a 3 day cure/grace period. Any later payment will trigger a default and immediate recordation/enforcement of a judgment. Payment is secured by a judgment for $78,969 plus attorney fees incurred by Landlord to date, plus any further attorney fees incurred in relation to the judgment. The judgment will not be executed unless the Company defaults on its payment obligations noted above. As of October 31, 2014, the Company has a liability in the amount of $70,000 recorded in accounts payable related to this matter, |
|
|
No other legal proceedings are pending, threatened or contemplated. |
|
| 11. |
STOCKHOLDERS’ EQUITY |
|
Common and Preferred Stock: |
|
|
On August 20, 2014, the Company entered an Amended and Restated License Agreement with Alvin C. Johnson, Jr. (“Licensor”), whereby the Licensor was granted 7,980,493 shares of common stock as consideration for the cancellation by the Licensor of a 3.75% gross royalty on the proceeds from any commercial use of our license on the process for the recovery of precious metals from coal ash and other materials. |
|
|
On September 5, 2014, the Company issued 2,400,000 shares of common stock to two officers for options exercised at $0.02 per share in satisfaction of debt. |
|
|
As of October 31, 2014 and April 30, 2014, there were 223,193,634 and 212,813,141 shares of common stock outstanding, respectively and zero shares of preferred stock outstanding. |
|
| 11. |
STOCK OPTIONS AND WARRANTS |
|
As of October 31, 2014 and April 30, 2014, there were 19,600,000 and 25,600,000 stock options and 129,085,129 and 129,385,129 stock warrants, respectively, outstanding and exercisable. |
|
|
Extension of Warrants |
|
|
On July 10, 2014, the Company extended the expiration dates of 23,020,000 warrants previously issued on July 13, 2011, from an expiration date of July 12, 2014 to July 12, 2015. Each warrant entitles the holder to purchase an additional share of our common stock at a price of $0.10 per share. |
F-12
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2014
(UNAUDITED)
| 12. |
RELATED PARTY TRANSACTIONS |
|
For the six months ended October 31, 2014, the Company incurred $102,000 in consulting fees expense from companies with a common director or officer, and zero in compensation expense for the issuance of stock options to directors and officers of the Company. |
|
|
For the six months ended October 31, 2013, the Company incurred $102,000 in consulting fees expense from companies with a common director or officer, and $354,000 in compensation expense for the issuance of stock options to directors and officers of the Company. |
|
| 13. |
SUBSEQUENT EVENTS |
|
Between November 3, 2014 and November 21, 2014, the Company received $170,000 in share subscriptions payable in a private offering for 3,400,000 units, with each unit consisting of one share of common stock and one share purchase warrant, with each warrant entitling the holder to purchase one additional share of common stock at a price of $0.10 per share for a period of two years from the date of issue. |
F-13
| ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report constitute "forward-looking statements.” These statements, identified by words such as “plan,” "anticipate," "believe," "estimate," "should," "expect" and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements reflect the current views of management with respect to future events and are subject to risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from those described in the forward-looking statements. Such risks and uncertainties include those set forth under the caption "Part II – Item 1A. Risk Factors" and elsewhere in this Quarterly Report. We do not intend to update the forward-looking information to reflect actual results or changes in the factors affecting such forward-looking information. We advise you to carefully review the reports and documents, particularly our Annual Reports, Quarterly Reports and Current Reports, that we file from time to time with the United States Securities and Exchange Commission (the “SEC”).
OVERVIEW
We were incorporated on December 14, 2005 under the laws of the State of Nevada. We are an exploration stage company and our primary objectives are to: (i) commercially extract and refine precious metals from our own and others mineralized materials; (ii) use our leaching process (Cholla) to recover precious metals from specific ore bearing materials; and (iii) joint venture, acquire and develop mining projects in North America.
We are focusing our business on commercially processing specific fly ash and other mineable materials, using a leach process that exposes extractable gold (the “Cholla Process”) at our processing and refining plant located in Scottsdale, Arizona (the “Scottsdale Facility”). In November 2012, we shut down our Phoenix Facility and we have no plans to continue that operation.
In September 2013, we released Golden Anvil S.A. de C.V. (“Golden Anvil”) from loan agreements pursuant to which, Golden Anvil owed us 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 us as part of an asset purchase agreement between Golden Anvil and Gainey.
We are actively seeking to enter into joint ventures with third parties who have legal rights to fly ash resources, including landfills/monofills. There is no assurance that we will be able to commercially extract precious metals from fly ash or other mineable ores using our Cholla process or that we will be able to enter into joint ventures for the exploration and development of additional mining projects.
3
RESULTS OF OPERATIONS
Three Months and Six Months Summary
| Three Months Ended | Percentage | Six Months Ended | Percentage | |||||||||||||||
| October 31, | October 31, | Increase / | October 31, | October 31, | Increase / | |||||||||||||
| 2014 | 2013 | (Decrease) | 2014 | 2013 | (Decrease) | |||||||||||||
| Revenue | $ | - | $ | - | n/a | $ | - | $ | - | n/a | ||||||||
| Expenses | (232,272 | ) | (720,672 | ) | (67.8 | )% | (455,953 | ) | (933,095 | ) | (51.1 | )% | ||||||
| Other Items | (16,361 | ) | (26,631 | ) | (38.6 | )% | (30,753 | ) | (53,311 | ) | (42.3 | )% | ||||||
| Net Loss | $ | (248,633 | ) | $ | (747,303 | ) | (66.7 | )% | $ | (486,706 | ) | $ | (986,406 | ) | (50.7 | )% | ||
Revenues
We earned no revenues during the six months ended October 31, 2014 and 2013. We are currently in the exploration stage of our business. We can provide no assurances that we will be able to develop a commercially viable process or earn significant revenue from the processing of fly ash.
Expenses
The major components of our operating expenses for the three and six months ended October 31, 2014 and 2013 are outlined in the table below:
| Three Months Ended | Percentage | Six Months Ended | Percentage | |||||||||||||||
| October 31, | October | Increase / | October | October 31, | Increase / | |||||||||||||
| 2014 | 31, 2013 | (Decrease) | 31, 2014 | 2013 | (Decrease) | |||||||||||||
| Mineral exploration and evaluation expenses | $ | 124,565 | $ | 175,828 | (29.2)% | $ | 244,606 | $ | 278,511 | (12.2)% | ||||||||
| General and administrative | 69,825 | 518,799 | (86.5)% | 152,473 | 602,494 | (74.7)% | ||||||||||||
| Loss on legal settlement | 19,142 | - | 100.0% | 19,142 | - | 100.0% | ||||||||||||
| Depreciation | 18,740 | 26,045 | (28.0)% | 39,732 | 52,090 | (23.7)% | ||||||||||||
| Total Operating Expenses | $ | 232,272 | $ | 720,672 | (67.8)% | $ | 455,953 | $ | 933,095 | (51.1)% | ||||||||
Our operating expenses for the three months ended October 31, 2014 decreased as compared to the three months ended October 31, 2013. The decrease in our operating expenses primarily relates to a $542,487 stock-based compensation expense for stock options issued during the three months ended October 31, 2013. No stock options were issued during the three months ended October 31, 2014.
Our operating expenses for the six months ended October 31, 2014 decreased as compared to the six months ended October 31, 2013. The decrease in our operating expenses primarily relates to a $542,487 stock-based compensation expense for stock options issued during the six months ended October 31, 2013. No stock options were issued during the six months ended October 31, 2014.
Mineral exploration and evaluation expenses primarily consist of contract labor, rent, leased equipment, extraction-processing costs and utilities in connection with our Scottsdale Facility. The decrease in mineral exploration and evaluation expenses during the three and six months ended October 31, 2014, was primarily due to a $89,915 stock-based compensation expense for stock options issued in October 2013, offset by an increase in contract labor, leased equipment and utilities.
4
During the three and six months ended October 31, 2014, our general and administrative expenses primarily consisted of: (i) monthly consulting fees paid to our Chief Financial Officer, Mr. Mitchell; and (ii) legal and audit fees in connection with meeting our reporting requirements under the Exchange Act.
Loss on legal settlement relates to additional expenses incurred with respect to our lease of our Phoenix facility, which we closed in November 2012. See Item 1. Legal Proceedings below for additional details.
We anticipate that our operating expenses will increase significantly as we implement our plan of operation for our Scottsdale Facility.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital
| Percentage | |||||||||
| At October 31, 2014 | At April 30, 2014 | Increase / (Decrease) | |||||||
| Current Assets | $ | 9,249 | $ | 76,250 | (87.9 | )% | |||
| Current Liabilities | (1,330,378 | ) | (1,166,591 | ) | 14.0% | ||||
| Working Capital Deficit | $ | (1,321,129 | ) | $ | (1,090,341 | ) | 21.2% |
Cash Flows
| Six Months Ended | ||||||
| October 31, 2014 | October 31, 2013 | |||||
| Net Cash Used in Operating Activities | $ | (326,779 | ) | $ | (302,358 | ) |
| Net Cash Used In Investing Activities | - | - | ||||
| Net Cash Provided By Financing Activities | 267,000 | 295,123 | ||||
| Net Decrease in Cash During Period | $ | (59,779 | ) | $ | (7,235 | ) |
As of October 31, 2014, we had a working capital deficit of $1,321,129 as compared to a working capital deficit of $1,090,341 at our year ended April 30, 2014. The increase in our working capital deficit is primarily due to a decrease in cash and an increase in accounts payable, accounts payable-related parties and loans payable-related parties.
FINANCING REQUIREMENTS
Currently, we do not have sufficient financial resources to complete our plan of operation for the next twelve months. As such, our ability to complete our plan of operation is dependent upon our ability to obtain additional financing in the near term.
We anticipate continuing to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned mining, development and exploration activities.
Subsequent to October 31, 2014, the Company received $170,000 in stock subscriptions payable. Such securities have not been issued as at the date of this filing.
OFF-BALANCE SHEET ARRANGEMENTS
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to stockholders.
5
CRITICAL ACCOUNTING POLICIES
We have identified certain accounting policies, described below, that are most important to the portrayal of our current financial condition and results of operations. Our significant accounting policies are disclosed in Note 1 to our interim financial statements included in this Quarterly Report.
| ITEM 4. | CONTROLS AND PROCEDURES. |
Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of October 31, 2014 (the “Evaluation Date”). This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the Evaluation Date.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended October 31, 2014 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
6
PART II - OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS. |
We 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 us, as amended (the “Lease Agreement”). The Complaint seeks to recover damages of at least $108,581.18, including, but not limited to: (1) $56,358 rent owing; (ii) $52,223 for maintenance, clean up costs and construction; and (3) undetermined damages for additional repair, clean up and legal fees,
On October 22, 2014, we entered into a memorandum of settlement with the Landlord. Under the terms of the memorandum, we are required to pay a total of $70,000 to the Landlord as follows: $5,000 on or before November 24, 2014 (which has been paid); $5,000 payable 90 days thereafter; six payments of $7,000 due every 90 days thereafter; and two $9,000 payments due every 90 days thereafter. Each payment has a 3 day cure/grace period. Any later payment will trigger a default and immediate recordation/enforcement of a judgment. Payment is secured by a judgment for $78,969 plus attorney fees incurred by Landlord to date, plus any further attorney fees incurred in relation to the judgment. The judgment will not be executed unless we default on our payment obligations noted above. As of October 31, 2014, the Company has a liability in the amount of $70,000 recorded in accounts payable related to this matter.
| ITEM 1A. | RISK FACTORS. |
The following are some of the important factors that could affect our financial performance or could cause actual results to differ materially from estimates contained in our forward-looking statements. We may encounter risks in addition to those described below. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may also impair or adversely affect our business, financial condition or results of operation.
If we do not obtain additional financing, we may not be able to continue our operations at our Scottsdale Facility or enter into any potential joint venture or licensing agreements.
As of October 31, 2014, we had cash on hand of $8,212 and accumulated net loss of $16,280,761 and accumulated other comprehensive loss of $620,000 since inception. Our plan of operation calls for significant expenses in connection with the operation of our Scottsdale Facility and the entry of any potential joint ventures. If we are unable to raise sufficient financing there is a substantial risk that we will be unable to meet payments of principal and interest to our creditors and pay our consultants and employees. In November 2012, we shut down our Phoenix Facility and we have no plans to continue that operation. In addition, we will require substantial financing in order to implement our plan of operation over the next twelve months. There is no assurance that this will satisfy all of our working capital requirements for the next twelve months or that these funds will be sufficient to complete our planned exploration and development programs.
Because we are an exploration stage company, we face a high risk of business failure.
We have earned minimal revenues from the processing of ore at our Phoenix and Scottsdale Facilities. Our primary business activities have involved the exploration and development on the Piute Valley Property and the commencement of operations at our Phoenix Facility and Scottsdale Facility. In August 2012, we did not pay the renewal fee on the Piute Valley Property and the BLM Claims, allowing those claims to lapse. In November 2012, we shut down our Phoenix Facility and we have no plans to continue that operation. Potential investors should be aware of the difficulties normally encountered by exploration stage companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates.
7
Because we anticipate our operating expenses will increase prior to our earning significant revenues, we may never achieve profitability.
Prior to completion of our exploration stage, we anticipate that we will incur increased operating expenses prior to realizing any significant revenues. We therefore expect to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from the operation of our Scottsdale Facility or the exploration and development of our mineral property and the production of minerals thereon, if any, we will not be able to earn profits or continue operations. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we may not be able to ever generate any operating revenues or achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail.
Because of the speculative nature of exploration of mining properties, there is substantial risk that no commercially exploitable minerals will be found and our business will fail.
The search for valuable minerals as a business is extremely risky. We may not find commercially exploitable reserves of precious metals on our mineral claims. Exploration for minerals is a speculative venture, necessarily involving substantial risk. The expenditures to be made by us in the upcoming exploration of the mineral claims may not result in the discovery of commercial quantities of ore. Problems such as unusual or unexpected formations and other conditions are involved in mineral exploration and often result in unsuccessful exploration efforts. In such a case, we would be unable to complete our business plan.
Because of the inherent dangers involved in mineral exploration, there is a risk that we may incur liability or damages if and when we conduct mineral exploration activities.
The search for valuable minerals involves numerous hazards. As a result, if and when we conduct exploration activities we may become subject to liability for such hazards, including pollution, cave-ins and other hazards against which we cannot insure or against which we may elect not to insure. The payment of such liabilities may have a material adverse effect on our financial position.
Certain work to be performed at our facilities may require us to apply for permits from federal, state or local regulatory bodies.
If our applications for permits from the relevant regulatory bodies are denied, we may not be able to proceed with our exploration and development programs as disclosed above, which could have a negative effect on our business.
If we are unable to hire and retain key personnel, we may not be able to implement our business plan and our business will fail.
Our success will largely depend on our ability to hire highly qualified personnel with experience in geological exploration. These individuals may be in high demand and we may not be able to attract the staff we need. In addition, we may not be able to afford the high salaries and fees demanded by qualified personnel, or may lose such employees after they are hired. Our failure to hire key personnel when needed could have a significant negative effect on our business.
If we complete additional financings through the sale of shares of our common stock, our existing stockholders will experience dilution.
The most likely source of future financing presently available to us is through the issuance of our common stock. The only other anticipated alternative for the financing of further exploration would be the offering by us of an interest in our properties to be earned by another party or parties carrying out further exploration thereof, which is not presently contemplated. Issuing shares of our common stock, for financing purposes or otherwise, will dilute the interests of our existing stockholders.
Because our stock is a penny stock, stockholders will be more limited in their ability to sell their stock.
8
Our common stock is considered to be a “penny stock” since it does not qualify for one of the exemptions from the definition of “penny stock” under Section 3a51-1 of the Exchange Act. Our common stock is a “penny stock” because it meets one or more of the following conditions (i) the stock trades at a price less than $5.00 per share; (ii) it is not traded on a “recognized” national exchange; (iii) it is not quoted on the Nasdaq Stock Market, or even if so, has a price less than $5.00 per share; or (iv) is issued by a company that has been in business less than three years with net tangible assets less than $5 million.
The principal result or effect of being designated a “penny stock” is that securities broker-dealers participating in sales of our common stock will be subject to the “penny stock” regulations set forth in Rules 15-2 through 15g-9 promulgated under the Exchange Act. For example, Rule 15g-2 requires broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document at least two business days before effecting any transaction in a penny stock for the investor's account. Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor's financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult and time consuming for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. |
None.
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES. |
None.
| ITEM 4. | MINE SAFETY DISCLOSURES. |
None.
| ITEM 5. | OTHER INFORMATION. |
None.
9
| ITEM 6. | EXHIBITS. |
| Exhibit | |
| Number | Description of Exhibits |
| 2.1 | Agreement and Plan of Merger dated September 24, 2007 among the Company, Royal Mines Acquisition Corp., Royal Mines Inc. and Kevin B. Epp. (4) |
| 2.2 | Agreement and Plan of Merger dated October 6, 2007 between the Company and Royal Mines Acquisition Corp. (5) |
| 3.1 | Articles of Incorporation. (1) |
| 3.2 | Certificate of Change Pursuant to NRS 78.209 increasing the authorized capital of common stock to 300,000,000 shares, par value $0.001 per share. (2) |
| 3.3 | Certificate of Amendment Pursuant increasing the authorized capital of common stock to 900,000,000 shares, par value $0.001 per share. (11) |
| 3.4 | Bylaws. (1) |
| 3.5 | Articles of Merger between the Company and Royal Mines Acquisition Corp. (5) |
| 4.1 | Form of Share Certificate. (1) |
| 10.1 | Mineral Property Option Agreement dated January 28, 2007 between Eugene E. Phebus and Royal Mines Inc. (5) |
| 10.2 | Mineral Property Option Agreement dated January 28, 2007 between Charles G. Moore and Royal Mines Inc. (5) |
| 10.3 | Mineral Property Option Agreement dated January 10, 2007 between James E. Sharp and Royal Mines Inc. (5) |
| 10.4 | Mineral Property Option Agreement dated January 28, 2007 between Ben Barnes and Royal Mines Inc. (5) |
| 10.5 | Mineral Property Option Agreement dated January 28, 2007 between Walter Simmons II and Royal Mines Inc. (5) |
| 10.6 | Mineral Property Option Agreement dated January 28, 2007 between Leo Corbet and Royal Mines Inc. (5) |
| 10.7 | Mineral Property Option Agreement dated January 28, 2007 between William Tao and Royal Mines Inc. (5) |
| 10.8 | Mineral Property Option Agreement dated January 28, 2007 between Dr. Wilbur J. Guay and Royal Mines Inc. (5) |
| 10.9 | Mineral Property Option Agreement dated January 28, 2007 between Olivia Tearnan and Royal Mines Inc. (5) |
| 10.10 | Mineral Property Option Agreement dated January 28, 2007 between Jim Mack and Royal Mines Inc. (5) |
| 10.11 | Mineral Property Option Agreement dated January 28, 2007 between Ron Manarey and Royal Mines Inc. (5) |
| 10.12 | Mineral Property Option Agreement dated January 28, 2007 between William Lintz and Royal Mines Inc. (5) |
| 10.13 | Technology and Asset Purchase Agreement dated April 2, 2007 among New Verde River Mining Co., Inc., Robert H. Gunnison and Royal Mines Inc. (5) |
| 10.14 | Lease Agreement dated June 6, 2007 among McKendry Enterprises Inc., Profit Sharing Plan and Retirement Trust and Royal Mines Inc. (5) |
| 10.15 | Management Consulting Agreement dated February 24, 2009 between the Company and Jason S. Mitchell. (6) |
| 10.16 | First Amendment of Lease Agreement dated November 20, 2009 among McKendry Enterprises Inc., Profit Sharing Plan and Retirement Trust and Royal Mines Inc. (5) |
| 10.17 | 2011 Stock Incentive Plan. (7) |
10
| Exhibit | |
| Number | Description of Exhibits |
| 10.18 |
Consulting Services Agreement dated February 1, 2012 between the Company and Alvin A. Snaper. (8) |
| 10.19 |
Agreement dated June 14, 2012 between the Company and Phoenix PMX LLC. (9) |
| 10.20 |
2013 Stock Incentive Plan. (10) |
| 10.21 |
Settlement and Security Release Agreement dated September 27, 2013 between the Company and Golden Anvil S.A. de C.V. (12) |
| 10.22 |
Form of Non-Qualified Option Agreement. (13) |
| 10.23 |
Convertible Loan Agreement dated April 16, 2014, between the Company and Bruce Matheson. (14) |
| 10.24 |
Loan and Joint Venture Agreement dated April 16, 2014, between the Company and GJS Capital Corp. (15) |
| 10.25 |
Letter of Intent dated for reference July 7, 2014, between the Company and Lafarge North America Inc. (16) |
| 10.26 |
Amended and Restated License Agreement dated August 20, 2014 between the Company and Alvin C. Johnson Jr. (17) |
| 10.27 | |
| 14.1 |
Code of Ethics. (3) |
| 31.1 | |
| 31.2 | |
| 32.1 | |
| 32.2 | |
| 101. |
INS XBRL Instance Document. |
| 101. |
SCH XBRL Taxonomy Extension Schema. |
| 101. |
CAL XBRL Taxonomy Extension Calculation Linkbase. |
| 101. |
DEF XBRL Taxonomy Extension Definition Linkbase. |
| 101. |
LAB XBRL Taxonomy Extension Label Linkbase. |
| 101. |
PRE XBRL Taxonomy Extension Presentation Linkbase. |
Notes:
| (1) |
Filed with the SEC as an exhibit to our Registration Statement on Form SB-2 originally filed on August 17, 2006, as amended. |
| (2) |
Filed with the SEC as an exhibit to our Current Report on Form 8-K filed June 12, 2007. |
| (3) |
Filed with the SEC as an exhibit to our Annual Report on Form 10-KSB filed July 30, 2007. |
| (4) |
Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on September 28, 2007 |
| (5) |
Filed with the SEC as an exhibit to our Current Report on Form 8-K filed October 12, 2007. |
| (6) |
Filed with the SEC as an exhibit to our Current Report on Form 8-K filed February 26, 2009. |
| (7) |
Filed with the SEC as an exhibit to our Quarterly Report on Form 10-Q filed September 15, 2010. |
| (8) |
Filed with the SEC as an exhibit to our Current Report on Form 8-K filed February 1, 2012. |
| (9) |
Filed with the SEC as an exhibit to our Current Report on Form 8-K filed June 20, 2012. |
| (10) |
Filed with the SEC as an exhibit to our Current Report on Form 8-K filed June 24, 2013. |
| (11) |
Filed with the SEC as an exhibit to our Current Report on Form 8-K filed August 28, 2013. |
| (12) |
Filed with the SEC as an exhibit to our Current Report on Form 8-K filed October 2, 2013. |
| (13) |
Filed with the SEC as an exhibit to our Current Report on Form 8-K filed November 1, 2013. |
| (14) |
Filed with the SEC as an exhibit to our Current Report on Form 8-K filed April 21, 2014. |
| (15) |
Filed with the SEC as an exhibit to our Current Report on Form 8-K filed April 21, 2014. |
| (16) |
Filed with the SEC as an exhibit to our Current Report on Form 8-K filed July 16, 2014. |
| (17) |
Filed with the SEC as an exhibit to our Quarterly Report on From 10-Q filed on September 22, 2014. |
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ROYAL MINES AND MINERALS CORP. | ||||
| Date: | December 15, 2014 | By: | /s/ K. Ian Matheson | |
| K. IAN MATHESON | ||||
| Chief Executive Officer | ||||
| (Principal Executive Officer) | ||||
| Date: | December 15, 2014 | By: | /s/ Jason S. Mitchell | |
| JASON S. MITCHELL | ||||
| Chief Financial Officer | ||||
| (Principal Accounting Officer) | ||||
CERTIFICATIONS
I, K. Ian Matheson, certify that;
| (1) |
I have reviewed this Quarterly Report on Form 10-Q of Royal Mines And Minerals Corp.; |
|
| (2) |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
| (3) |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
| (4) |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
| a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
| b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
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| c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
| (5) |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
| a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Date: December 15, 2014
/s/ K. Ian Matheson
_____________________________
By: K. Ian Matheson
Title:
Chief Executive Officer and President
CERTIFICATIONS
I, Jason S. Mitchell, certify that;
| (1) |
I have reviewed this Quarterly Report on Form 10-Q of Royal Mines And Minerals Corp.; |
|
| (2) |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
| (3) |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
| (4) |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
| a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
| b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
|
| c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
| d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
| (5) |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
| a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
| b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
Date: December 15, 2014
/s/ Jason S. Mitchell
_______________________________
By: Jason S. Mitchell
Title: Chief Financial Officer, Treasurer and Secretary
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT
TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, K. Ian Matheson, the Chief Executive Officer of Royal Mines And Minerals Corp. (the “Company”), hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
| (i) |
the Quarterly Report on Form 10-Q of the Company, for the fiscal quarter ended October 31, 2014, and to which this certification is attached as Exhibit 32.1 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
|
| (ii) |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By:
/s/ K. Ian Matheson
Name: K. IAN MATHESON
Title: Chief Executive Officer and President
Date: December 15, 2014
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934 (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT
TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
I, Jason S. Mitchell, the Chief Financial Officer of Royal Mines And Minerals Corp. (the “Company”), hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
| (i) |
the Quarterly Report on Form 10-Q of the Company, for the fiscal quarter ended October 31, 2014, and to which this certification is attached as Exhibit 32.2 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
|
| (ii) |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By:
/s/ Jason S. Mitchell
Name: JASON S. MITCHELL
Title: Chief Financial Officer, Treasurer
& Secretary
Date: December 15, 2014
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934 (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.