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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Royal Mines and Minerals Corp (CE) | USOTC:RYMM | OTCMarkets | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.000002 | 0.00 | 00:00:00 |
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 July 31, 2017
[ ] 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.) |
| 1080 Wigwam Pkwy. | |
| Henderson, NV | 89072 |
| (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 September 13, 2017, the Registrant had 245,199,204 shares of common stock outstanding .
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b -2 of this chapter).
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
[ ]
2
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' deficit 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 months ended July 31, 2017 are not necessarily indicative of the results that can be expected for the year ending April 30, 2018.
As used in this Quarterly Report, the terms “we,” “us,” “our,” “Royal Mines,” and the “Company” mean Royal Mines And Minerals Corp., unless otherwise indicated. All dollar amounts in this Quarterly Report are expressed in U.S. dollars, unless otherwise indicated.
3
| ROYAL MINES AND MINERALS CORP. |
| CONDENSED BALANCE SHEETS |
See accompanying notes to these condensed unaudited financial
statements.
F-1
| ROYAL MINES AND MINERALS CORP. |
| CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS |
| (Unaudited) |
| For the Three Months Ended July 31, | ||||||
| 2017 | 2016 | |||||
| Revenue | $ | - | $ | - | ||
| Operating expenses: | ||||||
| Mineral exploration and evaluation expenses | 51,039 | 57,856 | ||||
| Mineral exploration and evaluation expenses - related parties | 15,000 | 15,000 | ||||
| General and administrative | 17,038 | 30,542 | ||||
| General and administrative - related parties | 36,000 | 34,000 | ||||
| Depreciation and amortization | 4,741 | 17,441 | ||||
| Total operating expenses | 123,818 | 154,839 | ||||
| Loss from operations | (123,818 | ) | (154,839 | ) | ||
| Other expense: | ||||||
| Interest expense | (40,130 | ) | (31,156 | ) | ||
| Total other expense | (40,130 | ) | (31,156 | ) | ||
| Net loss | $ | (163,948 | ) | $ | (185,995 | ) |
| Other comprehensive gain: | ||||||
| Unrealized gain on marketable securities | - | 4,248 | ||||
| Comprehensive (loss) | $ | (163,948 | ) | $ | (181,747 | ) |
| Net loss per common share - basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) |
| Weighted average common shares outstanding - basic and diluted | 245,199,204 | 228,793,634 | ||||
See accompanying notes to these condensed unaudited financial
statements.
F-2
| ROYAL MINES AND MINERALS CORP. |
| CONDENSED STATEMENTS OF CASH FLOWS |
| (Unaudited) |
See accompanying notes to these condensed unaudited financial
statements.
F-3
| ROYAL MINES AND MINERALS CORP. |
| NOTES TO CONDENSED FINANCIAL STATEMENTS |
| JULY 31, 2017 |
| (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 (“U.S. GAAP”). Royal Mines and Minerals Corp’s (the “Company”) fiscal year-end is April 30. |
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|
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' deficit in conformity with U.S. GAAP. 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 months ended July 31, 2017 are not necessarily indicative of the results that can be expected for the year ending April 30, 2018. |
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Description of Business – The Company's primary objectives are to 1) commercially and viably extract and refine precious metals from specific coal ash (fly and bottom), ores and other leachable assets, 2) use its proprietary processes to convert specific ore bodies and coal ash landfills 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. |
F-6
| ROYAL MINES AND MINERALS CORP. |
| NOTES TO CONDENSED FINANCIAL STATEMENTS |
| JULY 31, 2017 |
| (UNAUDITED) |
Going Concern – The accompanying financial statements were prepared on a going concern basis in accordance with U.S. GAAP. The going concern basis of presentation assumes that the Company will continue in operation for the next twelve months and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business and does not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the Company’s inability to continue as a going concern. The Company’s history of losses, working capital deficit, capital deficit, minimal liquidity and other factors raise substantial doubt about the Company’s ability to continue as a going concern. In order for the Company to continue operations beyond the next twelve months and be able to discharge its liabilities and commitments in the normal course of business it must raise additional equity or debt capital and continue cost cutting measures. There can be no assurance that the Company will be able to achieve sustainable profitable operations or obtain additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to management.
If the Company continues to incur operating losses and does not raise sufficient additional capital, material adverse events may occur including, but not limited to, 1) a reduction in the nature and scope of the Company’s operations and 2) the Company’s inability to fully implement its current business plan. There can be no assurance that the Company will successfully improve its liquidity position. The accompanying financial statements do not reflect any adjustments that might be required resulting from the adverse outcome relating to this uncertainty.
As of July 31, 2017, the Company had cumulative net losses of $19,733,967 from operations since inception and had negative working capital of $1,781,095. For the three months ended July 31, 2017, the Company incurred a net loss of $163,948 and had net cash used in operating activities of $95,112. For the three months ended July 31, 2016 the Company incurred a net loss of $185,995 and had net cash used in operating activities of $139,446. The Company has not fully started its minerals processing operations, raising substantial doubt about its ability to continue as a going concern.
To address liquidity constraints, the Company will seek additional sources of capital through the issuance of equity or debt financing. Additionally, the Company has reduced expenses, elected to defer payment of certain obligations, deferred payment of our CEO’s salary and reduced staffing levels to conserve cash. The Company is focused on continuing to reduce costs and obtaining additional funding. There is no assurance that such funding will be available on terms acceptable to the Company, or at all. If the Company raises additional funds by selling additional shares of capital stock, securities convertible into shares of capital stock, or by issuing debt convertible into shares of capital stock, the ownership interest of the Company’s existing common stock holders will be diluted.
Use of Estimates - The preparation of financial statements in conformity with U.S. GAAP 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. By their nature, these estimates are subject to measurement uncertainty and the effect on the financial statements of changes in such estimates in future periods could be significant. Significant areas requiring management’s estimates and assumptions include the valuation of stock-based compensation, impairment analysis of long-lived assets, and the realizability of deferred tax assets. 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.
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 operating expenses.
F-7
| ROYAL MINES AND MINERALS CORP. |
| NOTES TO CONDENSED FINANCIAL STATEMENTS |
| JULY 31, 2017 |
| (UNAUDITED) |
Mineral Exploration and Development Costs – Exploration expenditures incurred prior to entering the development stage are expensed and included in mineral exploration and evaluation expense.
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 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.
Research and Development - All research and development expenditures are expensed as incurred.
Per Share Amounts - Basic earnings (loss) per share is computed by dividing net income (loss) 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. Potentially dilutive shares, such as stock options and warrants, are excluded from the calculation when their inclusion would be anti-dilutive, such as when the exercise price of the instrument exceeds the fair market value of the Company’s common stock and when a net loss is reported. The dilutive effect of convertible debt securities is reflected in the diluted earnings (loss) per share calculation using the if-converted method. Conversion of the debt securities is not assumed for purposes of calculating diluted earnings (loss) per share if the effect is anti-dilutive. As of July 31, 2017, and 2016, stock options and warrants outstanding were 169,325,129 and 165,785,129, respectively, but were not considered in the computation of diluted earnings per share as their inclusion would be anti-dilutive.
Income Taxes – For interim reporting periods, the Company uses the annualized effective tax rate (“AETR”) method to calculate its income tax provision. Under this method, the AETR is applied to the interim year-to-date pre-tax losses to determine the income tax benefit or expense for the year-to-date period. The income tax benefit or expense for a quarter represents the difference between the year-to-date income tax benefit or expense for the current year-to-date period less such amount for the immediately preceding year-to-date period. Management considers the impact of all known events in its estimation of the Company’s annual operating results and AETR.
The Company follows the liability method of accounting for income taxes. This method recognizes certain temporary differences between the financial reporting basis of liabilities and assets and the related income tax basis for such liabilities and assets. This method generates either a net deferred income tax liability or asset as measured by the statutory tax rates in effect. The effect of a change in tax rates is recognized in operations in the period that includes the enactment date. The Company records a valuation allowance against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more likely than not that some portion or all the deferred income tax asset will not be realized.
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. 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.
F-8
| ROYAL MINES AND MINERALS CORP. |
| NOTES TO CONDENSED FINANCIAL STATEMENTS |
| JULY 31, 2017 |
| (UNAUDITED) |
|
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 February 2016, the FASB issued Accounting Standard (“ASU”) 2016-02, “Leases,” which requires lessees to put most leases on their balance sheets, but recognize the expenses on their income statements in a manner like current practice. ASU 2016-02 states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term. The new standard is effective for annual periods beginning after December 15, 2018 and interim periods within those years. Early adoption is permitted. The standard will be effective for the Company beginning May 1, 2019. The Company is currently evaluating the impact to its condensed financial statements. |
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| 2. |
SCOTTSDALE FACILITY AGREEMENT |
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On April 16, 2014, the Company entered into a loan and joint venture agreement (the “Agreement”) with GJS Capital Corp. (the "Creditor"). Under the terms of the Agreement, the Creditor loaned the Company $150,000 convertible note (the “Principal”) and agreed to form a joint venture with the Company for constructing and operating a processing plant at the Scottsdale facility, an existing facility, utilizing the Company’s licensed Technology. In addition, the Creditor was to advance $250,000 plus up to 15% for contingencies, a total of $287,500, to fund the initial construction and operation costs of the joint venture. The advances were not expected to be paid back to the Creditor. The Company received a total of $329,000 towards the joint venture and treated the funds as contributed capital, since in substance the Creditor secured future revenue of the Scottsdale facility operations with such funds. |
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On September 23, 2016, the Company entered into an amended and restated loan and joint venture agreement (the “Amendment Agreement”) with the Creditor and Gregg Sedun (the “Consultant”). The Amendment Agreement replaces in its entirety the Agreement, between the Company and the Creditor. |
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Under the terms of the Amendment Agreement, the Creditor has agreed to extend the Principal. The loan bears interest at a rate of 6% per annum, compounded annually and is due on demand. The Company settled the $329,000 joint venture advance in exchange for 15,065,570 shares of common stock of the Company, along with 1,400,000 of the Company’s common shares of Gainey Capital Corp. |
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At any time prior to the Principal being paid back in full, the Creditor may elect to receive units (each a “Unit") of the Company in exchange for any portion of the Principal outstanding based on one Unit for each $0.05 of indebtedness converted (the “Unit Conversion Option"). Each Unit consists of one share of the Company’s common stock and one warrant to purchase an additional share of the Company's common stock at a price of $0.10 per share for two years from the date of issuance. If the Creditor exercises the Unit Conversion Option, the Creditor will forgive the interest that accrued on the converted portion of the Principal. |
F-9
| ROYAL MINES AND MINERALS CORP. |
| NOTES TO CONDENSED FINANCIAL STATEMENTS |
| JULY 31, 2017 |
| (UNAUDITED) |
| As of | As of | |||||
| July 31, 2017 | April 30, 2017 | |||||
| Process, lab and office equipment | $ | 406,316 | $ | 406,316 | ||
| Less: accumulated depreciation | (358,364 | ) | (353,623 | ) | ||
| $ | 47,952 | $ | 52,693 |
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Depreciation expense was $4,741 and $17,441 for the three months ended July 31, 2017 and 2016, respectively. |
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| 4. |
ACCOUNTS PAYABLE - RELATED PARTIES |
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As of July 31, 2017 and April 30, 2017, accounts payable – related parties of $445,705 and $446,258, respectively, mainly consisted of expenses paid by and consulting fees due to the CEO of the Company. |
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| 5. |
CONVERTIBLE LOANS PAYABLE AND ACCRUED INTEREST |
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As of July 31, 2017 and April 30, 2017, convertible loans payable of $268,030 and $258,030, respectively, mainly consists of borrowings payable to unrelated third parties. Convertible loans were assessed for the beneficial conversion feature (“BCF”), but none. As of July 31, 2017 and April 30, 2017, accrued interest on these loans was $92,530 and $87,224, respectively. |
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On April 16, 2014, the Company entered into a loan and joint venture agreement (the “Agreement”) with GJS Capital Corp. (the "Creditor"). Under the terms of the Agreement, the Creditor loaned the Company $150,000 convertible note (the “Principal”). |
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On September 23, 2016, the Company entered into an amended and restated loan and joint venture agreement (the “Amendment Agreement”) with the Creditor and Gregg Sedun (the “Consultant”). The Amendment Agreement replaces in its entirety the Agreement, between the Company and the Creditor. |
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The Creditor has agreed to extend the Principal. The loan bears interest at a rate of 6% per annum, compounded annually and is due on demand. As of July 31, 2017 and April 30, 2017, accrued interest on this loan was $33,092 and $30,792, respectively. Interest expense on this loan was $2,300 for the three months ended July 31, 2017 and 2016. |
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The Creditor may elect to receive units (each a “Unit") of the Company in exchange for any portion of the Principal outstanding based on one Unit for each $0.05 of indebtedness converted (the “Unit Conversion Option"). Each Unit consists of one share of the Company’s common stock and one warrant to purchase an additional share of the Company's common stock at a price of $0.10 per share for two years from the date of issuance. If the Creditor exercises the Unit Conversion Option, the Creditor will forgive the interest that accrued on the converted portion of the Principal. |
F-10
| ROYAL MINES AND MINERALS CORP. |
| NOTES TO CONDENSED FINANCIAL STATEMENTS |
| JULY 31, 2017 |
| (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”) on any future profits received by the Company that are derived from the Company’s Technology based on 1% of the Company’s 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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A separate loan from another unrelated party bears 12% interest, is unsecured and is due on demand. As of July 31, 2017 and April 30, 2017, accrued interest on this loan was $59,438 and $56,432, respectively. Interest expense was $3,006 for the three months ended July 31, 2017 and 2016. |
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The creditor may elect to receive units (each a “Unit") of the Company in exchange for any portion of their loan outstanding based on one Unit for each $0.05 of indebtedness converted. Each Unit consists of one share of the Company’s common stock and one warrant to purchase an additional share of the Company's common stock at a price of $0.10 per share for two years from the date of issuance. |
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| 6. |
CONVERTIBLE LOANS PAYABLE AND ACCRUED INTEREST – RELATED PARTIES |
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As of July 31, 2017 and April 30, 2017, convertible loans payable – related parties of $1,353,000 and $1,277,000, respectively, mainly consists of borrowings, directly and indirectly, from the CEO of the Company. Convertible loans – related parties were assessed for the beneficial conversion feature (“BCF”), but none. The balance bears 10% interest, is secured by the equipment in the Scottsdale plant and is due December 31, 2018. The creditor may elect to receive units (each a “Unit") of the Company in exchange for any portion of the loan outstanding based on one Unit for each $0.05 of indebtedness converted. Each Unit consists of one share of the Company’s common stock and one warrant to purchase an additional share of the Company's common stock at a price of $0.10 per share for two years from the date of issuance. |
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As of July 31, 2017 and April 30, 2017, accrued interest – related party was $350,598 and $316,861, respectively. Related parties – interest expense was $33,737 and $24,351 for the three months ended July 31, 2017 and 2016, respectively. |
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| 7. |
CONVERTIBLE NOTES PAYABLE |
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As of July 31, 2017 and April 30, 2017, convertible notes payable consists of an unsecured $50,000 payable to New Verde River Mining and Robert H. Gunnison. Convertible notes payable was amended in the prior year and assessed for BCF, but none. The note payable bears 6% interest annually, is unsecured and is due on demand. As of July 31, 2017 and April 30, 2017, accrued interest was $29,842 and $29,075, respectively. Interest expense was $766 for the three months ended July 31, 2017 and 2016, respectively. |
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The Creditor may elect to receive units (each a “Unit") of the Company in exchange for any portion of the note outstanding based on one Unit for each $0.05 of indebtedness converted. Each Unit consists of one share of the Company’s common stock and one warrant to purchase an additional share of the Company's common stock at a price of $0.10 per share for two years from the date of issuance. |
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| 8. |
COMMITMENTS AND CONTINGENCIES |
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Lease obligations – The Company has operating leases for its corporate office, corporate housing and plant facilities. All operating leases are month-to-month. Future minimum lease payments under the operating leases as of July 31, 2017 are as follows: |
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| Fiscal year ending April 30, 2018 | $ | 6,486 | |
| Fiscal year ending April 30, 2019 | $ | - |
F-11
| ROYAL MINES AND MINERALS CORP. |
| NOTES TO CONDENSED FINANCIAL STATEMENTS |
| JULY 31, 2017 |
| (UNAUDITED) |
| Fiscal year ending April 30, 2020 | $ | - | |
| Fiscal year ending April 30, 2021 | $ | - | |
| Fiscal year ending April 30, 2022 | $ | - |
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Lease expense was $19,458 and $20,883 for the three months ended July 31, 2017 and 2016, respectively. |
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Legal proceedings – On May 1, 2015, the Company received an amended notice of civil claim (the “Claim”), dated April 1, 2015 (original filed on December 31, 2014), that was filed in the Supreme Court of British Columbia, by 1254859 Ontario Inc. (the “Plaintiff”), alleging breach of specific performance and breach of contract in relation to the Golden Anvil Asset Purchase by Gainey (see Note 3). The Plaintiff seeks to recover damages of including, but not limited to: 1) 1,000,000 shares of Gainey stock; 2) damages in lieu of specific performance; and 3) damages for breach of contract. |
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On June 1, 2015, the Company filed a response to the Claim, denying: 1) entering into any oral agreement; 2) that the Plaintiff presented a potential transaction with Gainey; 3) that there was any fee payable to Plaintiff upon completion of a transaction with Gainey; 4) any existence of an agreement with Plaintiff and as such, the Gainey transaction was not related to any agreement with Plaintiff; and 5) any obligation to pay a fee to Plaintiff, contractually or otherwise. While the Company intends to vigorously defend the lawsuit, there is no assurance that the Company will be able to successfully defend the lawsuit. |
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On January 29, 2016, the Plaintiff filed a Notice of Application (the “Application”) in the Supreme Court of British Columbia, seeking an injunction to prohibit the distribution of shares of Gainey Capital Corp. held by the Company. A hearing took place on March 17, 2016. On June 16, 2016, the Application was dismissed against the Company. |
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No other legal proceedings are pending, threatened or contemplated. |
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| 9. |
STOCKHOLDERS’ EQUITY |
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Common and Preferred Stock: |
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As of July 31, 2017 and April 30, 2017, there were 245,199,204 shares of common stock outstanding and zero shares of preferred stock outstanding. |
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| 10. |
STOCK OPTIONS AND WARRANTS |
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As of July 31, 2017 and April 30, 2017, there were 34,300,000 stock options and 135,025,129 stock warrants outstanding and exercisable. |
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| 11. |
RELATED PARTY TRANSACTIONS |
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For the three months ended July 31, 2017 and 2016, the Company incurred $51,000 and $49,000, respectively, in consulting fees expense from companies with a common director or officer. |
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| 12. |
SUBSEQUENT EVENTS |
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None |
F-12
| 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. Our primary objectives are to: (i) commercially and viably extract and refine precious metals from specific coal (fly and bottom) ash and other leachable assets; (ii) use our proprietary processes to convert specific ore bodies and coal ash landfills into valuable assets; and (iii) joint venture, acquire and develop mineable projects in North America.
We are focusing our business on commercially processing specific coal ash through a process of mechanical attrition, chemical treatments and thermal sintering that exposes extractable gold (the “Cholla Process”) at our processing and refining plant located in Scottsdale, Arizona (the “Scottsdale Facility”). This process agglomerates metal atoms into larger nanoparticles, before forming bulk gold metal. Once in bulk gold metal, all traditional assay methods can effectively measure value.
We are actively seeking to enter into joint ventures with third parties who have legal rights to fly ash resources, including landfills. 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.
RESULTS OF OPERATIONS
| Three Months Summary | ||||||||
| Three Months Ended | ||||||||
| July 31, 2017 | July 31, 2016 | Percentage | ||||||
| Increase / (Decrease) | ||||||||
| Revenue | $ | - | $ | - | n/a | |||
| Operating Expenses | (123,818 | ) | (154,839 | ) | (20.0 )% | |||
| Interest Expense | (40,130 | ) | (31,156 | ) | 28.8% | |||
| Net Loss | $ | (163,948 | ) | $ | (185,995 | ) | (11.9 )% | |
Revenues
We earned no revenues during the three months ended July 31, 2017 and 2016. We are currently in the development 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 or other materials.
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Expenses
The major components of our operating expenses for the three months ended July 31, 2017 and 2016 are outlined in the table below:
| Three Months Ended | Percentage | |||||||
| July 31, 2017 | July 31, 2016 | Increase / | ||||||
| (Decrease) | ||||||||
| Mineral exploration and evaluation expenses | $ | 51,039 | $ | 57,856 | (11.8 )% | |||
| Mineral exploration and evaluation expenses – related parties | 15,000 | 15,000 | 0.0% | |||||
| General and administrative | 17,038 | 30,542 | (44.2 )% | |||||
| General and administrative – related parties | 36,000 | 34,000 | 5.9% | |||||
| Depreciation | 4,741 | 17,441 | (72.8 )% | |||||
| Total Expenses | $ | 123,818 | $ | 154,839 | (20.0 )% | |||
Our operating expenses for the three months ended July 31, 2017 decreased as compared to the three months ended July 31, 2016. The decrease in our operating expenses primarily relates to the decrease in general and administrative expenses and depreciation expense.
Mineral exploration and evaluation expenses primarily consist of rent, consulting fees and labor expenses relating to the Scottsdale Facility.
Our general and administrative expenses primarily consist of: (i) monthly consulting fees to our Chief Financial Officer, Mr. Mitchell; (ii) legal and audit fees in connection with meeting our reporting requirements under the Exchange Act; and (iii) travel expense for our executives.
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 July 31, 2017 | At April 30, 2017 | Increase / (Decrease) | ||||||
| Current Assets | $ | 2,975 | $ | 18,173 | (83.6 )% | |||
| Current Liabilities | (1,784,070 | ) | (1,640,061 | ) | 8.8% | |||
| Working Capital Deficit | $ | (1,781,095 | ) | $ | (1,621,888 | ) | 9.8% |
| Cash Flows | ||||||
| Three Months Ended | ||||||
| July 31, 2017 | July 31, 2016 | |||||
| Net Cash Used in Operating Activities | $ | (95,112 | ) | $ | (139,446 | ) |
| Net Cash Provided by Financing Activities | 86,000 | 145,000 | ||||
| Net (Decrease) Increase in Cash During Period | $ | (9,112 | ) | $ | 5,554 | |
As at July 31, 2017, we had a working capital deficit of $1,781,095 as compared to a working capital deficit of $1,621,888 as at April 30, 2017. The increase in our working capital deficit is primarily due to an increase in convertible loans payable-related parties and accrued interest-related parties.
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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 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.
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.
CRITICAL ACCOUNTING POLICIES
Our significant accounting policies are disclosed in Note 1 to our annual financial statements included in our Annual Report on Form 10-K for our fiscal year ended April 30, 2017, filed with the SEC on July 27, 2017.
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
Not Applicable.
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| 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 July 31, 2017 (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 deemed effective as of the Evaluation Date.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting that occurred during the fiscal quarter ended July 31, 2017 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II - OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS. |
On May 1, 2015, the Company received an amended Notice of Civil Claim (the “Claim”), dated April 1, 2015 (original filed on December 31, 2014), that was filed in the Supreme Court of British Columbia, by 1254859 Ontario Inc. (the “Plaintiff”), alleging breach of specific performance and breach of contract in relation to the Golden Anvil Asset Purchase by Gainey (see Note 3). The Plaintiff seeks to recover damages of including, but not limited to: 1) 1,000,000 shares of Gainey stock; 2) damages in lieu of specific performance; and 3) damages for breach of contract.
On June 1, 2015, the Company filed a Response to Civil Claim, denying: 1) entering into any oral agreement; 2) that the Plaintiff presented a potential transaction with Gainey; 3) that there was any fee payable to Plaintiff upon completion of a transaction with Gainey; 4) any existence of an agreement with Plaintiff and as such, the Gainey transaction was not related to any agreement with Plaintiff; and 5) any obligation to pay a fee to Plaintiff, contractually or otherwise. While the Company intends to vigorously defend the lawsuit, there is no assurance that the Company will be able to successfully defend the lawsuit.
On January 29, 2016, the Plaintiff filed a Notice of Application (the “Application”) in the Supreme Court of British Columbia, seeking an injunction to prohibit the distribution of shares of Gainey Capital Corp. held by the Company. A hearing took place on March 17, 2016. On June 16, 2016, the Application was dismissed against the Company.
| 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 July 31, 2017, we had cash on hand of $2,975 and accumulated net loss of $19,733,967 since inception. Our plan of operation calls for significant expenses relating to 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 addition, we will require substantial financing to implement our plan of operation over the next twelve months. There is no assurance that this will satisfy all our working capital requirements for the next twelve months or that these funds will be sufficient to complete our planned development program.
Because we are a development 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 and development 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 mineral properties. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates.
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Because we anticipate our operating expenses will increase prior to our earning significant revenues, we may never achieve profitability.
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, 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.
Certain work to be performed at our facility 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 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 the geological field. 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. 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.
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.
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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: | September 13, 2017 | By: | /s/ K. Ian Matheson | |
| K. IAN MATHESON | ||||
| Chief Executive Officer | ||||
| (Principal Executive Officer) | ||||
| Date: | September 13, 2017 | By: | /s/ Jason S. Mitchell | |
| JASON S. MITCHELL | ||||
| Chief Financial Officer | ||||
| (Principal Accounting Officer) |
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