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EX-32.2 - EXHIBIT 32.2 - ROYAL MINES & MINERALS CORP | exhibit32-2.htm |
EX-32.1 - EXHIBIT 32.1 - ROYAL MINES & MINERALS CORP | exhibit32-1.htm |
EX-31.2 - EXHIBIT 31.2 - ROYAL MINES & MINERALS CORP | exhibit31-2.htm |
EX-31.1 - EXHIBIT 31.1 - ROYAL MINES & MINERALS CORP | exhibit31-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 2016
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____to _____
COMMISSION FILE 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) |
Registrant's telephone number, including area code: | (702) 588-5973 |
Securities registered pursuant to Section 12(b) of the Act: | NONE. |
Securities registered pursuant to Section 12(g) of the Act: | Common Stock, $0.001 Par Value Per Share. |
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined by Rule 405 of the Securities Act.
Yes
[ ] No [ X ]
Indicate by check mark if the registrant is not required to
file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
[ ] No [ X ]
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (s229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
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 Act).
Yes [
] No [ X ]
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrants most recently completed second fiscal quarter: $2,095,402.14 as of October 31, 2015, based on $0.016, the price at which the common equity was last sold.
Indicate the number of shares outstanding of each of the registrants classes of common stock, as of the latest practicable date. As of July 26, 2016, the Registrant had 228,793,634 shares of common stock outstanding.
EXPLANATORY NOTE
Our Board of Directors, in consultation with management, determined that our Balance Sheet as of April 30, 2015 contained in our annual report on Form 10-K for the year ended April 30, 2015 should be restated due to default of payment on equipment leased in our Scottsdale Facility.
With this report we are filing to restate our financial statements for the year ended April 30, 2015 because of changes in the presentation of the Financial Statements for the default of payment on equipment leased in our Scottsdale Facility. This restatement had an impact on our Balance Sheet, Statement of Operations and Comprehensive Loss, Statement of Cash Flows and Statement of Stockholders' Deficit for the applicable period. This restatement led our management to conclude that an additional material weakness was present in our disclosure controls and procedures as of April 30, 2015. For additional background on the restatement, please see Note 16 to our Financial Statements.
Effects of the Restatement Due to Default of Payment of Leased Equipment
The following table provides a summary of selected line items from our consolidated balance sheet, statement of operation and comprehensive loss and cash flows as of April 30, 2015 affected by this restatement.
As Previously | Restatement | |||||||||
Reported | Adjustments | As Restated | ||||||||
Balance Sheet April 30, 2015 | ||||||||||
Accounts payable | $ | 254,938 | $ | 128,032 | $ | 382,970 | ||||
Total current liabilities | $ | 1,405,399 | $ | 128,032 | $ | 1,533,431 | ||||
Deferred rent | $ | 12,518 | $ | (12,518 | ) | $ | - | |||
Total non-current liabilities | $ | 12,518 | $ | (12,518 | ) | $ | - | |||
Total liabilities | $ | 1,417,917 | $ | 115,514 | $ | 1,533,431 | ||||
Statement of Operations and Comprehensive Loss | ||||||||||
For the Year Ended April 30, 2015 | ||||||||||
Mineral exploration and evaluation expenses | $ | 423,731 | $ | 115,514 | $ | 539,245 | ||||
Total operating expenses | $ | 1,744,012 | $ | 115,514 | $ | 1,859,526 | ||||
Loss from operations | $ | 1,744,012 | $ | 115,514 | $ | 1,859,526 | ||||
Net loss | $ | 1,805,005 | $ | 115,514 | $ | 1,920,519 | ||||
Comprehensive loss | $ | 1,305,005 | $ | 115,514 | $ | 1,420,519 | ||||
Statement of Cash Flows For the Year Ended April 30, 2015 | ||||||||||
Net loss | $ | 1,805,005 | $ | 115,514 | $ | 1,920,519 | ||||
Accounts payable | $ | 54,081 | $ | 128,032 | $ | 182,113 | ||||
Deferred rent | $ | (12,881 | ) | $ | (12,518 | ) | $ | (25,399 | ) |
Except for certain updated information in the items listed above, there have been no changes to the financial statements filed in our annual report on Form 10-K for the year ended April 30, 2015.
Page 2 of 26
ROYAL MINES AND MINERALS CORP.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED APRIL 30, 2016
TABLE OF CONTENTS
Page 3 of 26
PART I
The information in this discussion contains forward-looking statements. These forward-looking statements involve risks and uncertainties, including statements regarding the Company's capital needs, business strategy and expectations. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "intend," "anticipate," "believe," "estimate, "predict," "potential" or "continue," the negative of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider various factors, including the risks described below, and, from time to time, in other reports the Company files with the United States Securities and Exchange Commission (the SEC). These factors may cause the Company's actual results to differ materially from any forward-looking statement. The Company disclaims any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements.
As used in this Annual 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 Annual Report are expressed in U.S. dollars, unless otherwise indicated.
ITEM 1. | BUSINESS. |
Overview
We were incorporated on December 14, 2005 under the laws of the State of Nevada. We are focused on the development of mining technologies for the proficient extraction of precious metals, and 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 mining 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, traditional assay methods can effectively measure value. In November 2012, we shut down our Phoenix Facility and we have no plans to continue that operation.
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.
Facilities and Technologies
Our Scottsdale Facility is an industrial building of approximately 4,550 square feet located in Scottsdale, Arizona. The Scottsdale Facility is designed specifically for processing coal ash using our licensed technology. We have yet to realize significant revenue using our licensed technology.
Compliance with Government Regulation
Our activities are subject to extensive federal, state, and local regulations in the United States. These statutes regulate the mining of and exploration for mineral properties, and also the possible effects of such activities upon the environment. Future legislation and regulations could cause additional expense, capital expenditures, restrictions and delays, the extent of which cannot be predicted.
Other regulatory requirements monitor the following:
(a) |
Explosives and explosives handling. | |
(b) |
Use and occupancy of site structures associated with mining. | |
(c) |
Hazardous materials and waste disposal. |
(d) |
State Historic site preservation. | |
(e) |
Archaeological and paleontological finds associated with mining. | |
(f) |
Wildlife preservation. |
The State of Nevada adopted the Mined Land Reclamation Act (the Nevada Act) in 1989 that established design, operation, monitoring and closure requirements for all mining facilities. The Nevada Act has increased the cost of designing, operating, monitoring and closing new mining facilities and could affect the cost of operating, monitoring and closing existing mining facilities. The State of Nevada has also adopted reclamation regulations. The Nevada Act also requires reclamation plans and permits for exploration projects that will result in more than five acres of surface disturbance.
In the context of environmental permitting, we must comply with known standards, existing laws and regulations that may entail greater or lesser costs and delays, depending on the nature of the activity to be permitted and how stringently the regulations are implemented by the permitting authority. We are not presently aware of any specific material environmental constraints affecting our property that would preclude the economic development or operation of any specific property.
Competition
We compete with other mineral resource exploration and development companies for financing and for the acquisition of new mineral properties. Many of the mineral resource exploration and development companies with whom we compete have greater financial and technical resources than we do. Accordingly, these competitors may be able to spend greater amounts on acquisitions of mineral properties of merit, on exploration of their mineral properties and on development of their mineral properties. In addition, they may be able to afford greater geological expertise in the targeting and exploration of mineral properties. This competition could result in competitors having mineral properties of greater quality and interest to prospective investors who may finance additional exploration and development. This competition could adversely impact our ability to finance further exploration and to achieve the financing necessary for us to develop our mineral properties.
We will also compete with other junior mineral exploration companies for financing from a limited number of investors that are prepared to make investments in junior mineral exploration companies. The presence of competing junior mineral exploration companies may impact our ability to raise additional capital in order to fund our exploration programs if investors are of the view that investments in competitors are more attractive based on the merit of the mineral properties under investigation and the price of the investment offered to investors. We will also compete with other junior and senior mineral companies for available resources, including, but not limited to, professional geologists, camp staff, helicopter or float planes, mineral exploration supplies and drill rigs.
Patents and Trademarks
We do not own, either legally or beneficially, any patent or trademark.
Research and Development Expenditures
During our fiscal year ended April 30, 2016, we spent approximately $352,771 on mineral exploration and evaluation costs. During our fiscal year ended April 30, 2015, we spent approximately $627,219 on mineral exploration and evaluation costs.
Employees
Other than our executive officers, we do not have any employees at the time of this Annual Report.
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 April 30, 2016, we had cash on hand of $60 and accumulated net loss of $18,554,347 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 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.
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.
ITEM 2. | PROPERTIES. |
Our principal office is at 2580 Anthem Village Dr., Henderson, NV 89052, consisting of approximately 150 square feet, which we rent at a cost of $875 per month. We entered into a lease agreement through December 31, 2013, and thereafter the lease continues on a month-to-month basis.
We also rent premises located at 7815 E. Thunderbird Rd., Scottsdale, AZ 85260, for use as corporate housing, at a cost of $2,600 per month. We entered into a lease agreement through May 31, 2016, and thereafter the lease continues on a month-to-month basis.
We also lease our Scottsdale Facility located at 14325 N. 79th St., Scottsdale, AZ 85260. The Scottsdale Facility is leased pursuant to a Lease Agreement dated June 6, 2011 with Cimarron Industrial Partners, LLC at a cost of $3,486 per month. The Scottsdale Facility consists of office and warehouse space of approximately 4,550 square feet. This lease agreement is month-to-month.
ITEM 3. | 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 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; 2) $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 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 (amount has been paid); six payments of $7,000 due every 90 days thereafter (two payments of $7,000 has been paid); 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 April 30, 2016, we have a liability in the amount of $32,000 recorded in accounts payable related to this matter.
On May 1, 2015, we 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, we 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 us. A hearing took place on March 17, 2016. On June 16, 2016 the Application was dismissed against us.
ITEM 4. | MINE SAFETY DISCLOSURES. |
None.
PART II
ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. |
MARKET INFORMATION
Our common shares are currently quoted on the OTC Bulletin Board under the symbol RYMM." The following table indicates the high and low prices of the common shares obtained during the periods indicated:
2016 | 2015 | |||||||||||
High | Low | High | Low | |||||||||
First Quarter ended July 31 | $ | 0.022 | $ | 0.015 | $ | 0.019 | $ | 0.011 | ||||
Second Quarter ended October 31 | $ | 0.020 | $ | 0.014 | $ | 0.035 | $ | 0.009 | ||||
Third Quarter ended January 31 | $ | 0.015 | $ | 0.003 | $ | 0.036 | $ | 0.012 | ||||
Fourth Quarter ended April 30 | $ | 0.008 | $ | 0.004 | $ | 0.031 | $ | 0.012 |
REGISTERED HOLDERS OF OUR COMMON STOCK
As of July 29, 2016, there were 137 registered holders of record of our common stock. A larger number of stockholders hold stock on deposit with their brokers or investment bankers registered in the name of stock depositories.
DIVIDENDS
We have neither declared nor paid any cash dividends on our capital stock since our inception and do not contemplate paying cash dividends in the foreseeable future. It is anticipated that earnings, if any, will be retained for the operation of our business. Our board of directors will determine future dividend declarations and payments, if any, in light of the then-current conditions they deem relevant and in accordance with the Nevada Revised Statutes.
There are no restrictions in our articles of incorporation or in our bylaws which prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where, after giving effect to the distribution of a dividend:
(a) |
We would not be able to pay our debts as they become due in the usual course of business; or | |
(b) |
Our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving distributions. |
RECENT SALES OF UNREGISTERED SECURITIES
No unregistered sales of our equity securities were made during the year ended April 30, 2016.
ITEM 7. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
RESULTS OF OPERATIONS
Summary of Year End Results
Years Ended April 30, | Percentage | ||||||||
2016 | 2015 | Increase / (Decrease) | |||||||
Revenue | $ | - | $ | - | n/a | ||||
Operating Expenses | (748,292 | ) | (1,859,526 | ) | (59.8 | )% | |||
Other Items | (91,481 | ) | (60,993 | ) | 50.0% | ||||
Net Loss | $ | (839,773 | ) | $ | (1,920,519 | ) | (56.3 | )% |
Revenues
During the years ended April 30, 2016 and 2015, we earned no revenues. 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 coal ash.
Operating Expenses
The major components of our operating expenses for the years ended April 30, 2016 and 2015 are outlined in the table below:
Percentage | |||||||||
Year Ended | Year Ended | Increase / | |||||||
April 30, 2016 | April 30, 2015 | (Decrease) | |||||||
Mineral exploration and evaluation expenses | $ | 282,968 | $ | 539,245 | (47.5 | )% | |||
Mineral exploration and evaluation expenses related party | 69,803 | 87,974 | (20.7 | )% | |||||
General and administrative | 115,113 | 129,133 | (10.9 | )% | |||||
General and administrative related party | 154,254 | 176,967 | (12.8 | )% | |||||
Depreciation and amortization | 69,765 | 74,615 | (6.5 | )% | |||||
Impairment of intellectual property | - | 159,610 | (100.0 | )% | |||||
Other than temporary loss of marketable securities | 55,352 | 528,000 | (89.5 | )% | |||||
Loss on sale of marketable securities | - | 150,253 | (100.0 | )% | |||||
Loss on legal settlement | - | 19,142 | (100.0 | )% | |||||
Bad debt expense | 1,037 | 720 | 44.0% | ||||||
Gain on forgiveness of accrued interest | - | (6,133 | ) | (100.0 | )% | ||||
Total operating expenses | $ | 748,292 | $ | 1,859,526 | (59.8 | )% |
Our operating expenses for the year ended April 30, 2016 decreased as compared to the year ended April 30, 2015. The decrease in our operating expenses primarily related to a significant decrease in other than temporary loss on marketable securities and a decrease in mineral exploration and evaluation expenses. In addition, the decrease related to our recorded impairment of intellectual property and loss on sale of marketable securities during the prior fiscal year.
Mineral exploration and evaluation expenses primarily consist of contracted labor, rent, consulting fees, leased equipment, and stock option compensation in connection with our Scottsdale Facility.
Impairment of intellectual property relates to an impairment expense recognized due to the unpredictable timing of estimated future cash flows expected to be generated from the intellectual property.
Impairment of marketable securities relates to an impairment expense recognized for the continued decline in stock price of our Gainey Capital Corp shares.
Loss on sale of marketable securities relates to the sale of shares of Gainey Capital Corp. that were held by the Company.
Loss on legal settlement relates to payments from a previous lawsuit.
Gain on forgiveness of accrued interest relates to accrued interest forgiven on debt converted into common stock.
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) compensation expense for stock options issued to our executives and directors.
We anticipate that our operating expenses will increase significantly as we implement our plan of operation for our Scottsdale Facility.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows | Years Ended April 30 | |||||
2016 | 2015 | |||||
Net Cash Used In Operating Activities | $ | (515,800 | ) | $ | (624,878 | ) |
Net Cash Provided By Investing Activities | - | 49,747 | ||||
Net Cash Provided By Financing Activities | 505,000 | 518,000 | ||||
Net (Decrease) in Cash During Period | $ | (10,800 | ) | $ | (57,131 | ) |
Working Capital | |||||||||
Percentage | |||||||||
At April 30, 2016 | At April 30, 2015 | Increase / (Decrease) | |||||||
Current Assets | $ | 60 | $ | 11,897 | (99.5)% | ||||
Current Liabilities | (2,206,841 | ) | (1,533,431 | ) | 43.9% | ||||
Working Capital Deficit | $ | (2,206,781 | ) | $ | (1,521,534 | ) | 45.0% |
As at April 30, 2016, we had a working capital deficit of $2,206,781 as compared to a working capital deficit of $1,521,534 as at our year ended April 30, 2015. The increase in our working capital deficit is primarily due to an increase in loans payable-related parties, accounts payablerelated parties and accrued interest-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.
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
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 audited financial statements included in this Annual Report.
Use of Estimates - The preparation of financial statements in conformity with GAAP requires us 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 estimates and assumptions include the valuation of stock-based compensation, impairment analysis of long-lived assets, and realizability of deferred tax assets. Actual results could differ from those estimates
Research and Development - All research and development expenditures are expensed as incurred.
Property and Equipment - Property and equipment is stated at cost less accumulated depreciation. Depreciation is principally provided 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.
Impairment of Long-Lived Assets - We review and evaluate 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.
Stock-Based Compensation – We account 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, we estimate the fair value of the award using a valuation technique. For this purpose, we use the Black-Scholes option pricing model. We believe this model provides the best estimate of fair value due to its ability to incorporate inputs that change over time, such as volatility and interest rates, and to allow for actual exercise behavior of option holders. Compensation cost is recognized over the requisite service period which is generally equal to the vesting period. Upon exercise, shares issued will be newly issued shares from authorized common stock.
ASC 505, "Compensation-Stock Compensation", establishes standards for the accounting for transactions in which an entity exchanges its equity instruments to non-employees for goods or services. Under this transition method, stock compensation expense includes compensation expense for all stock-based compensation awards granted on or after January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of ASC 505.
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. |
1. |
Report of Independent Registered Public Accounting Firm (RBSM); |
2. |
Audited Financial Statements for the Years Ended April 30, 2016 and 2015, including: |
3. |
Balance Sheets at April 30, 2016 and 2015; |
4. |
Statements of Operations and Comprehensive Loss for the years ended April 30, 2016 and 2015; |
5. |
Statement of Stockholders Deficit for the years ended April 30, 2016 and 2015; |
6. |
Statements of Cash Flows for the years ended April 30, 2016 and 2015; and |
7. |
Notes to Financial Statements. |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Royal Mines and Minerals Corp
2580 Anthem Village Dr.
Henderson, NV 89052
We have audited the accompanying balance sheets of Royal Mines and Minerals Corp (the “Company”) as of April 30, 2016, and 2015, and the related statements of operations, comprehensive loss, stockholders’ deficit, and cash flows for each of the years in the two-year period ended April 30, 2016. Royal Mines and Minerals Corp’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Royal Mines and Minerals Corp. as of April 30, 2016 and 2015, and the results of its operations and its cash flows for each of the years in the two-year period ended April 30, 2016, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered losses from operations, which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ RBSM LLP
RBSM LLP
Henderson, Nevada
July 28, 2016
ROYAL MINES AND MINERALS CORP.
BALANCE SHEETS
April 30, 2016 | April 30, 2015 | |||||
(Restated) | ||||||
ASSETS | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 60 | $ | 10,860 | ||
Other current assets | - | 1,037 | ||||
Total current assets | 60 | 11,897 | ||||
Non-current assets | ||||||
Investment in marketable securities | 216,648 | 272,000 | ||||
Property and equipment, net | 97,059 | 166,824 | ||||
Other assets | 7,655 | 7,655 | ||||
Total non-current assets | 321,362 | 446,479 | ||||
Total assets | $ | 321,422 | $ | 458,376 | ||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||
Current liabilities | ||||||
Accounts payable | $ | 356,561 | $ | 382,970 | ||
Accounts payable - related parties | 375,465 | 266,734 | ||||
Accrued interest | 92,204 | 70,762 | ||||
Accrued interest - related parties | 206,581 | 141,935 | ||||
Loans payable | 248,030 | 248,030 | ||||
Loans payable - related parties | 878,000 | 373,000 | ||||
Notes payable | 50,000 | 50,000 | ||||
Total current liabilities | 2,206,841 | 1,533,431 | ||||
Total liabilities | 2,206,841 | 1,533,431 | ||||
Commitments and contingencies | ||||||
Stockholders' deficit | ||||||
Preferred stock,
$0.001 par value; 100,000,000 shares authorized, zero shares issued and outstanding |
- | - | ||||
Common stock, $0.001 par value;
900,000,000 shares authorized, 228,793,634 shares issued and outstanding |
228,794 | 228,794 | ||||
Additional paid-in capital | 16,430,134 | 16,400,725 | ||||
Subscriptions payable | 10,000 | 10,000 | ||||
Accumulated deficit | (18,554,347 | ) | (17,714,574 | ) | ||
Total stockholders' deficit | (1,885,419 | ) | (1,075,055 | ) | ||
Total liabilities and stockholders' deficit | $ | 321,422 | $ | 458,376 |
See accompanying notes to these financial statements.
F-1
ROYAL MINES AND MINERALS CORP.
STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS
For the Years Ended | ||||||
April 30, 2016 | April 30, 2015 | |||||
(Restated) | ||||||
Revenue | $ | - | $ | - | ||
Operating expenses: | ||||||
Mineral exploration and evaluation expenses | 282,968 | 539,245 | ||||
Mineral exploration and evaluation expenses - related parties | 69,803 | 87,974 | ||||
General and administrative | 115,113 | 129,133 | ||||
General and administrative - related parties | 154,254 | 176,967 | ||||
Depreciation and amortization | 69,765 | 74,615 | ||||
Impairment of intellectual property | - | 159,610 | ||||
Other than temporary loss on marketable securities | 55,352 | 528,000 | ||||
Loss on sale of marketable securities | - | 150,253 | ||||
Loss on legal settlement | - | 19,142 | ||||
Bad debt expense | 1,037 | 720 | ||||
Gain on forgiveness of accrued interest | - | (6,133 | ) | |||
Total operating expenses |
748,292 | 1,859,526 | ||||
Loss from operations | (748,292 | ) | (1,859,526 | ) | ||
Other income (expense): | ||||||
Interest expense | (26,835 | ) | (32,921 | ) | ||
Interest expense - related parties | (64,646 | ) | (28,072 | ) | ||
Total other income (expense) | (91,481 | ) | (60,993 | ) | ||
Net loss | $ | (839,773 | ) | $ | (1,920,519 | ) |
Other comprehensive gain (loss): | ||||||
Amount reclassified from accumulated other comprehensive income | - | 500,000 | ||||
Comprehensive loss | $ | (839,773 | ) | $ | (1,420,519 | ) |
Net loss per common share - basic and diluted | $ | (0.00 | ) | $ | (0.01 | ) |
Weighted average common shares outstanding - basic and diluted | 228,793,634 | 220,363,455 |
See accompanying notes to these financial statements.
F-2
ROYAL MINES AND MINERALS CORP.
STATEMENTS OF STOCKHOLDERS'
DEFICIT
Accumulated | |||||||||||||||||||||
Other | Total | ||||||||||||||||||||
Common Stock | Additional | Subscriptions | Accumulated | Comprehensive | Stockholders' | ||||||||||||||||
Shares | Amount | Paid-in Capital | Payable | Deficit | Loss | (Deficit) | |||||||||||||||
Balance, April 30, 2014 | 212,813,141 | $ | 212,813 | $ | 15,673,181 | $ | - | $ | (15,794,055 | ) | $ | (500,000 | ) | $ | (408,061 | ) | |||||
Issuance of common stock in
acquisition of intellectual property, $0.02 per share |
7,980,493 | 7,981 | 151,629 | - | - | - | 159,610 | ||||||||||||||
Issuance of common stock for
options excercised, $0.02 per share, in satisfaction of debt. |
2,400,000 | 2,400 | 45,600 | - | - | - | 48,000 | ||||||||||||||
Contribution on 50% of future
profits from Scottsdale facility |
- | - | 165,000 | - | - | 165,000 | |||||||||||||||
Issuance of stock options for
6,500,000 shares of common stock to three directors and four consultants. |
- | - | 90,915 | - | - | - | 90,915 | ||||||||||||||
Issuance of common stock in
satisfaction of debt, $0.05 per share, with attached warrants exercisable at $0.10 per share. |
2,200,000 | 2,200 | 107,800 | - | - | - | 110,000 | ||||||||||||||
Issuance of common stock for
cash, $0.05 per share, with attached warrants exercisable at $0.10 per share. |
3,400,000 | 3,400 | 166,600 | - | - | - | 170,000 | ||||||||||||||
Received funds for common
stock, $0.05 per share, with attached warrants exercisable at $0.10 per share. |
- | - | - | 10,000 | - | - | 10,000 | ||||||||||||||
Net loss | - | - | - | (1,920,519 | ) | - | (1,920,519 | ) | |||||||||||||
Amount reclassified from
accumulated other comprehensive income |
- | - | - | - | - | 500,000 | 500,000 | ||||||||||||||
Balance, April 30, 2015 (Restated) | 228,793,634 | 228,794 | 16,400,725 | 10,000 | (17,714,574 | ) | - | (1,075,055 | ) | ||||||||||||
Issuance of stock options for
6,000,000 shares of common stock to three directors and three consultants. |
- | - | 29,409 | - | - | - | 29,409 | ||||||||||||||
Net loss | - | - | - | - | (839,773 | ) | - | (839,773 | ) | ||||||||||||
Balance, April 30, 2016 | 228,793,634 | $ | 228,794 | $ | 16,430,134 | $ | 10,000 | $ | (18,554,347 | ) | $ | - | $ | (1,885,419 | ) |
See accompanying notes to these financials statements.
F-3
ROYAL MINES AND MINERALS CORP.
STATEMENTS OF CASH FLOWS
For the Years Ended | ||||||
April 30, 2016 | April 30, 2015 | |||||
(Restated) | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||
Net loss | $ | (839,773 | ) | $ | (1,920,519 | ) |
Adjustments to reconcile net
loss to net cash used in operating activities: |
||||||
Depreciation and amortization | 69,765 | 74,615 | ||||
Impairment of intellectual property | - | 159,610 | ||||
Stock-based expenses | 7,352 | 27,974 | ||||
Stock-based expenses - related parties | 22,057 | 62,941 | ||||
Allowance for bad debt | 1,037 | 720 | ||||
Loss on sale of marketable securities | - | 150,253 | ||||
Other than temporary loss on marketable securities | 55,352 | 528,000 | ||||
Gain on forgiveness of accrued interest | - | (6,133 | ) | |||
Changes in operating assets and liabilities: | ||||||
Prepaid expenses | - | 7,500 | ||||
Other assets | - | 7,587 | ||||
Accounts payable | (26,409 | ) | 182,113 | |||
Accounts payable - related parties | 108,731 | 70,651 | ||||
Other current liabilities | - | (2,540 | ) | |||
Accrued interest | 21,442 | 23,544 | ||||
Accrued interest - related parties | 64,646 | 34,205 | ||||
Deferred rent | - | (25,399 | ) | |||
Net cash used in operating activities | (515,800 | ) | (624,878 | ) | ||
CASH FLOW FROM INVESTING ACTIVITIES | ||||||
Proceeds from sale of marketable securities | - | 49,747 | ||||
Net cash provided by investing activities | - | 49,747 | ||||
CASH FLOW FROM FINANCING ACTIVITIES | ||||||
Proceeds from contribution on Scottsdale facility | - | 165,000 | ||||
Proceeds from stock issuance | - | 170,000 | ||||
Proceeds from subscriptions payable | - | 10,000 | ||||
Proceeds from borrowings | - | 10,000 | ||||
Proceeds from borrowings - related parties | 505,000 | 163,000 | ||||
Net cash provided by financing activities | 505,000 | 518,000 | ||||
NET CHANGE IN CASH | (10,800 | ) | (57,131 | ) | ||
CASH AT BEGINNING OF PERIOD | 10,860 | 67,991 | ||||
CASH AT END OF PERIOD | $ | 60 | $ | 10,860 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||
Interest paid | $ | 714 | $ | 954 | ||
Income taxes paid | $ | - | $ | - | ||
NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||
Acquisition of intellectual property for stock | $ | - | $ | 159,610 | ||
Stock issued in satisfaction of loans payable, including related party | $ | - | $ | 158,000 |
See accompanying notes to these financial statements.
F-4
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2016 AND 2015
(AUDITED)
1. |
DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES |
Basis of Presentation The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Royal Mines and Minerals Corps (the Company) fiscal year-end is April 30.
Description of Business The Company is focused on the development of mining technologies for the proficient extraction of precious metals. 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.
History The Company was incorporated on December 14, 2005 under the laws of the State of Nevada. On June 13, 2007, the Company incorporated a wholly-owned subsidiary, Royal Mines Acquisition Corp., in the state of Nevada.
On October 5, 2007, Centrus Ventures Inc. (Centrus) completed the acquisition of Royal Mines Inc. (Royal Mines). The acquisition of Royal Mines was completed by way of a triangular merger pursuant to the provisions of the Agreement and Plan of Merger dated September 24, 2007 (the First Merger Agreement) among Centrus, Royal Mines Acquisition Corp. (Centrus Sub), a wholly owned subsidiary of Centrus, Royal Mines and Kevin B. Epp, the former sole executive officer and director of Centrus. On October 5, 2007, under the terms of the First Merger Agreement, Royal Mines was merged with and into Centrus Sub, with Centrus Sub continuing as the surviving corporation (the First Merger).
On October 6, 2007, a second merger was completed pursuant to an Agreement and Plan of Merger dated October 6, 2007 (the Second Merger Agreement) between Centrus and its wholly owned subsidiary, Centrus Sub, whereby Centrus Sub was merged with and into Centrus, with Centrus continuing as the surviving corporation (the Second Merger). As part of the Second Merger, Centrus changed its name from Centrus Ventures Inc. to Royal Mines And Minerals Corp.(the Company). Other than the name change, no amendments were made to the Articles of Incorporation.
Under the terms and conditions of the First Merger Agreement, each share of Royal Mines common stock issued and outstanding immediately prior to the completion of the First Merger was converted into one share of Centrus common stock. As a result, a total of 32,183,326 shares of Centrus common stock were issued to former stockholders of Royal Mines. In addition, Mr. Epp surrendered 23,500,000 shares of Centrus common stock for cancellation in consideration of payment by Centrus of $0.001 per share for an aggregate consideration of $23,500. As a result, upon completion of the First Merger, the former stockholders of Royal Mines owned approximately 69.7% of the issued and outstanding common stock.
As such, Royal Mines is deemed to be the acquiring enterprise for financial reporting purposes. All acquired assets and liabilities of Centrus were recorded at fair value on the date of the acquisition, as required by the purchase method of accounting, and the tangible net liabilities were debited against equity of the Company. There are no continuing operations of Centrus from the date of acquisition.
Going Concern The accompanying financial statements were prepared on a going concern basis in accordance with accounting principles generally accepted in the United States of America (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 Companys inability to continue as a going concern. The Companys history of losses, working capital deficit, capital deficit, minimal liquidity and other factors raise substantial doubt about the Companys 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.
F-5
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2016 AND 2015
(AUDITED)
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 Companys operations and 2) the Companys 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 April 30, 2016, the Company had cumulative net losses of $18,554,347 from operations since inception and had a working capital deficit of $2,206,781. For the year ended April 30, 2016, the Company incurred a net loss of $839,773 and had net cash used in operating activities of $515,800. For the year ended April 30, 2015 the Company incurred a net loss of $1,920,519 and had net cash used in operating activities of $624,878. 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 CEOs 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 Companys 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 managements 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.
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 Companys best estimate of the amount of probable credit losses in the Companys 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 April 30, 2016 and 2015, the Company has recorded an allowance for doubtful account of $15,798 and $14,761, respectively.
F-6
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2016 AND 2015
(AUDITED)
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 instruments 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, 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 Companys balance sheet as of April 30, 2016 and 2015 as follows:
Fair Value Measurements at April 30, 2016 Using:
Assets: | Total Carrying | Quoted Marked | Significant Other | Significant | |||||||||
Value as of | Prices in Active | Observable Inputs | Unobservable | ||||||||||
4/30/2016 | Markets (Level 1) | (Level 2) | Inputs (Level 3) | ||||||||||
Investments in marketable securities |
$ | 216,648 | $ | - | $ | 216,648 | $ | - | |||||
Total | $ | 216,648 | $ | - | $ | 216,648 | $ | - |
Fair Value Measurements at April 30, 2015 Using:
F-7
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2016 AND 2015
(AUDITED)
Assets | Total
Carrying Value as of 4/30/2015 |
Quoted
Marked Prices inActive Markets (Level 1) |
Significant
Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||
Investments
in marketable securities |
$ | 272,000 | $ | - | $ | 272,000 | $ | - | |||||
Total | $ | 272,000 | $ | - | $ | 272,000 | $ | - |
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 operating expenses.
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.
The Company's policy is to record an impairment loss in the period when it is determined that the carrying amount of the asset may not be recoverable either by impairment or by abandonment of the property. The impairment loss is calculated as the amount by which the carrying amount of the assets exceeds its fair value. Impairment expense of zero and $159,610 was recognized for the years ended April 30, 2016 and 2015, respectively.
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 Companys 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 April 30, 2016 and 2015, stock options and warrants outstanding were 165,785,129 and 159,785,129 respectively, but were not considered in the computation of diluted earnings per share as their inclusion would be anti-dilutive.
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.
F-8
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2016 AND 2015
(AUDITED)
For acquired properties that do not constitute a business a 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.
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.
ASC 505, "Compensation-Stock Compensation", establishes standards for the accounting for transactions in which an entity exchanges its equity instruments to non-employees for goods or services. Under this transition method, stock compensation expense includes compensation expense for all stock-based compensation awards granted on or after January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of ASC 505.
Recent Accounting Standards From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) that are adopted by the Company as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards did not or will not have a material impact on the Companys financial position, results of operations, or cash flows upon adoption.
In February 2016, the FASB issued Accounting Standard (ASU) 2016-02, Leases. The standard requires that a lessee recognize on the balance sheet assets and liabilities for leases with lease terms of more than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease have not significantly changed from the previous GAAP. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within such fiscal year, with early adoption permitted. The ASU requires a modified retrospective transition method with the option to elect a package of practical expedients. Adoption of the new guidance is not expected to have an impact on the financial position, results of operations or cash flows.
In November 2015, the FASB issued ASU 2015-17 which simplifies income tax accounting. The update requires that all deferred tax assets and liabilities be classified as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. This update is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, and early adoption is permitted. Adoption of the new guidance is not expected to have an impact on the financial position, results of operations or cash flows.
In April 2015, the FASB issued ASU 2015-03, Interest Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This update simplifies the presentation of debt issuance costs by requiring debt issuance costs to be presented as a deduction from the corresponding debt liability. The update is effective in fiscal years, including interim periods, beginning after December 15, 2015, and early adoption is permitted. The Company is currently assessing the impact, if any, of implementing this guidance on its financial position, results of operations and liquidity.
F-9
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2016 AND 2015
(AUDITED)
In August 2014, the FASB issued 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 entitys 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.
In June 2014, the FASB issued ASU 2014-12, Compensation - Stock Compensation - Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period, which is effective for financial statements issued for interim and annual periods beginning on or after December 15, 2015. The guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition and should not be reflected in the estimate of the grant-date fair value of the award. Adoption of the new guidance is not expected to have an impact on the financial position, results of operations or cash flows.
2. |
SCOTTSDALE FACILITY AGREEMENT |
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, 2016 (the Maturity Date").
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.
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 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.
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 Companys Board of Directors. If the Creditor does nominate such director, the Company will be allowed to nominate and appoint an additional director to the Companys Board of Directors.
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 Companys 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.
F-10
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2016 AND 2015
(AUDITED)
The Company has been operating in the Scottsdale facility in prior years using the same technology licensed by the Company. As of April 30, 2016 and through the filing date of the Form 10-K, 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 April 30, 2016, 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 Companys bank accounts. Funding under the joint venture has been deposited by the Company into bank accounts owned by the Company. As of April 30, 2016, the Creditor funded a total of $329,000. As of April 30, 2016 and through the date of the filing date of the Form 10-K, 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 year ended April 30, 2016 and 2015, the Company received contributions totaling zero and $165,000, respectively.
3. |
INVESTMENT IN MARKETABLE SECURITIES |
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.
The Asset Purchase was completed on September 30, 2013. The Gainey shares are held in escrow and will be released pursuant to the terms of a surplus escrow agreement as follows. The company cannot enter into any sales transaction of the Gainey shares prior to their release.
% 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 |
On March 30, 2015, the Company sold 400,000 Gainey shares to the Creditor (see Note 2) for $49,747 cash, net of currency exchange and other banking fees. The cost of the 400,000 Gainey shares was $200,000. The Company recorded a loss on sale of marketable securities of $150,253.
As of April 30, 2016 and 2015, investment in marketable securities consisted of $216,648 and $272,000, respectively. The Company held 1,600,000 Gainey Capital Corp. (Gainey) common shares, and the market value was $0.135 and $0.17 per share, on April 30, 2016 and 2015, respectively. As of April 30, 2016, 60% of the shares have been released, of which 20% were sold on March 30, 2015. Gainey shares are traded on the Vancouver exchange under the stock symbol GNC.V and on the OTC Pink marketplace under the stock symbol GNYPF. 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 Companys ability and intent to hold the investment until the fair value recovers.
F-11
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2016 AND 2015
(AUDITED)
Based on managements evaluation of the circumstances, management believes that the decline in fair value below the cost of certain of the Companys marketable securities is other-than-temporary.
The following is a summary of available-for-sale marketable securities as of April 30, 2016:
Cost | Unrealized Gain | Realized (Losses) | Market or Fair Value | ||||||||||
Equity | |||||||||||||
securities | $ | 800,000 | $ | -- | $ | (583,352 | ) | $ | 216,648 | ||||
Total | $ | 800,000 | $ | -- | $ | (583,352 | ) | $ | 216,648 |
The following is a summary of available-for-sale marketable securities as of April 30, 2015:
Cost | Unrealized Gain | Realized (Losses) | Market or Fair Value | ||||||||||
Equity | |||||||||||||
securities | $ | 800,000 | $ | -- | $ | (528,000 | ) | $ | 272,000 | ||||
Total | $ | 800,000 | $ | -- | $ | (528,000 | ) | $ | 272,000 |
4. |
PROPERTY AND EQUIPMENT |
Property and equipment consists of the following:
As of | As of | ||||||
April 30, 2016 | April 30, 2015 | ||||||
Process, lab and office equipment | $ | 406,316 | $ | 406,316 | |||
Less: accumulated depreciation | (309,257 | ) | (239,492 | ) | |||
$ | 97,059 | $ | 166,824 |
Depreciation expense was $69,765 and $74,615 for the years ended April 30, 2016 and 2015, respectively.
5. |
INTELLECTUAL PROPERTY |
On August 20, 2014, the Company entered an Amended and Restated License Agreement with Alvin C. Johnson, Jr. (Licensor), whereby the Licensor has been 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. The intellectual property was valued at $159,610 or $0.02 per share of common stock. The Companys market price on August 20, 2014, and has been capitalized as intellectual property. Based on the unpredictable timing of estimated future cash flows expected to be generated from the intellectual property, the Company recognized an impairment expense of $159,610 during the year ended April 30, 2015.
6. |
ACCOUNTS PAYABLE - RELATED PARTIES |
As of April 30, 2016 and 2015, accounts payable related parties of $375,465 and $266,734, respectively, mainly consisted of expenses paid by and consulting fees due to the CEO of the Company.
7. |
LOANS PAYABLE AND ACCRUED INTEREST |
As of April 30, 2016 and 2015, loans payable of $248,030, consists of borrowings payable to unrelated third parties. A loan of $98,030 bears 12% interest, is unsecured and is due on demand. A loan of $150,000 (see Note 2) bears interest at a rate of 6% per annum, compounded annually and has a maturity date of December 31, 2016.
F-12
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2016 AND 2015
(AUDITED)
As of April 30, 2016 and 2015, accrued interest was $92,204 and $70,762, respectively.
8. |
LOANS PAYABLE AND ACCRUED INTEREST RELATED PARTIES |
As of April 30, 2016 and 2015, loans payable related parties of $878,000 and $373,000, respectively, consists of borrowings, directly and indirectly, from the CEO of the Company. The balances bear 10% interest, are unsecured and are due on demand.
As of April 30, 2016 and 2015, accrued interest related parties was $206,581 and $141,935, respectively. Related parties interest expense was $64,646 and $28,072 for the years ended April 30, 2016 and 2015, respectively.
9. |
NOTES PAYABLE |
As of April 30, 2016 and 2015, notes payable consists of an unsecured $50,000 payable to New Verde River Mining and Robert H. Gunnison. The note payable bears 6% interest annually, is unsecured and is due on demand.
10. |
COMMITMENTS AND CONTINGENCIES |
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 April 30, 2016 are as follows:
Fiscal year ending April 30, 2017 | $ | 6,961 | |
Fiscal year ending April 30, 2018 | $ | - | |
Fiscal year ending April 30, 2019 | $ | - | |
Fiscal year ending April 30, 2020 | $ | - | |
Fiscal year ending April 30, 2021 | $ | - |
Lease expense was $84,597 and $248,720 for the years ended April 30, 2016 and 2015, 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; 2) $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 (amount has been paid); six payments of $7,000 due every 90 days thereafter (four payments of $7,000 have been paid as of April 30, 2016); 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 April 30, 2016, the Company has a liability in the amount of $32,000 recorded in accounts payable related to this matter.
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.
F-13
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2016 AND 2015
(AUDITED)
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.
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.
No other legal proceedings are pending, threatened or contemplated.
11. |
STOCKHOLDERS EQUITY |
Common and Preferred Stock:
As of April 30, 2016 and 2015, there were 228,793,634 shares of common stock issued and outstanding and zero shares of preferred stock issued and outstanding.
During the year ended April 30, 2016, there was no stock issued.
During the year ended April 30, 2015, the Companys stockholders equity activity consisted of the following:
a) |
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, fair valued at $159,610, 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. | |
b) |
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 totaling $48,000. | |
c) |
On March 31, 2015, the Company issued an aggregate of 3,400,000 units at a price of $0.05 per unit in separate concurrent private placement offerings for aggregate cash proceeds of $170,000. Each unit was comprised of one share of the Companys common stock and one share purchase warrant, with each warrant entitling the holder to purchase an additional share of the Company's common stock at an exercise price of $0.10 for a two-year period from the date of issuance. | |
d) |
On March 31, 2015, the Company issued an aggregate of 2,200,000 units at a price of $0.05 per unit in separate concurrent private placement offerings to settle outstanding indebtedness of $110,000 in principle and $6,133 in accrued interest. The Company recorded a gain on the settlement of $6,133. Each unit was comprised of one share of the Companys common stock and one share purchase warrant, with each warrant entitling the holder to purchase an additional share of the Company's common stock at an exercise price of $0.10 for a two-year period from the date of issuance. |
F-14
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2016 AND 2015
(AUDITED)
e) |
During the year ended April 30, 2015, the Company received $10,000 in subscription payable in a private offering for 200,000 units. |
12. |
STOCK OPTIONS AND WARRANTS |
At April 30, 2016, the Company had the following stock option plans available:
2013 Stock Incentive Plan - Effective June 20, 2013, the Company adopted the 2013 Stock Incentive Plan (the 2013 Plan"). The 2013 Plan allows the Company to grant certain options to its directors, officers, employees and eligible consultants. At April 30, 2016, the Company had 2,219,045 shares of the Companys common stock available for issuance under the 2013 Plan. However, the Company may increase the maximum aggregate number of shares of the Companys common stock that may be optioned and sold under the 2013 Plan provided the maximum aggregate number of shares of common stock that may be optioned and sold under the 2013 Plan shall at no time be greater than 15.0% of the total number of shares of common stock outstanding.
On December 25, 2015, the Company granted non-qualified stock options under the 2013 Plan for the purchase of 6,000,000 shares of common stock at $0.005 per share. The nonqualified stock options were granted to various officers, directors and consultants, are fully vested and expire December 29, 2020. The Company calculated the value of the options using the Black-Scholes option pricing model using the following assumptions: a bond equivalent yield of 1.25%, volatility of 268%, estimated life of 5 years and closing stock price of $0.005 per share on the date of grant. The value for the 6,000,000 stock options is $29,409.
On March 25, 2015, the Company granted non-qualified stock options under the 2013 Plan for the purchase of 6,500,000 shares of common stock at $0.01 per share. The nonqualified stock options were granted to various officers, directors and consultants, are fully vested and expire March 25, 2020. The Company calculated the value of the options using the Black-Scholes option pricing model using the following assumptions: a bond equivalent yield of 1.41%, volatility of 291%, estimated life of 5 years and closing stock price of $0.01 per share on the date of grant. The value for the 6,500,000 stock options is $90,915.
On April 16, 2014, the Company granted non-qualified stock options under the 2013 Plan for the purchase of 1,500,000 shares of common stock at $0.05 per share. The nonqualified stock options were granted to one consultant, are fully vested and expire April 16, 2019. The Company calculated the value of the options using the Black-Scholes option pricing model using the following assumptions: a bond equivalent yield of 1.67%, volatility of 290%, estimated life of 5 years and closing stock price of $0.05 per share on the date of grant. The value for the 1,500,000 stock options is $29,485.
On October 29, 2013, the Company granted non-qualified stock options under the 2013 Plan for the purchase of 18,100,000 shares of common stock at $0.03 per share. The nonqualified stock options were granted to various officers, directors and consultants, are fully vested and expire October 29, 2018. The Company calculated the value of the options using the Black-Scholes option pricing model using the following assumptions: a bond equivalent yield of 1.29%, volatility of 298%, estimated life of 5 years and closing stock price of $0.03 per share on the date of grant. The value for the 18,100,000 stock options is $542,487.
From the date of inception through April 30, 2016, compensation expense related to the granting of stock options under the 2013 Plan was $665,857, of which $117,106 was recorded in minerals exploration and evaluation expenses, $29,642 was recorded in minerals exploration and evaluation expenses related parties, $128,391 was recorded in general and administrative and $390,718 was recorded in general and administrative related parties. The Company calculated the value of the options using the Black-Scholes option pricing model. As of April 30, 2016, 32,100,000 of the options granted were outstanding.
The following is a summary of option activity during the years ended April 30, 2016 and 2015:
F-15
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2016 AND 2015
(AUDITED)
Weighted Average | |||||||
Number of Shares | Exercise Price | ||||||
Balance, April 30, 2014 | 25,600,000 | $ | 0.03 | ||||
Options granted and assumed | 6,500,000 | 0.01 | |||||
Options expired | (3,600,000 | ) | 0.02 | ||||
Options exercised | (2,400,000 | ) | 0.02 | ||||
Balance, April 30, 2015 | 26,100,000 | 0.03 | |||||
Options granted and assumed | 6,000,000 | 0.005 | |||||
Options expired | - | 0.00 | |||||
Options exercised | - | 0.00 | |||||
Balance, April 30, 2016 | 32,100,000 | $ | 0.03 |
As of April 30, 2016, all stock options outstanding are 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.
On January 15, 2015, the Company extended the expiration dates of the following warrants:
a) |
22,476,840 warrants previously issued on February 24, 2009, from an expiration date of February 23, 2015 to February 23, 2016. Each warrant entitles the holder to purchase an additional share of our common stock at a price of $0.10 per share; | |
b) |
11,455,500 warrants previously issued on January 31, 2010, from an expiration date of January 30, 2015 to January 30, 2016. Each warrant entitles the holder to purchase an additional share of our common stock at a price of $0.10 per share; | |
c) |
32,070,000 warrants previously issued on January 18, 2011, from an expiration date of January 17, 2015 to January 17, 2016. Each warrant entitles the holder to purchase an additional share of our common stock at a price of $0.10 per share; and | |
d) |
11,742,789 warrants previously issued on January 30, 2012, from an expiration date of January 29, 2015 to January 29, 2016. Each warrant entitles the holder to purchase an additional share of our common stock at a price of $0.10 per share. |
On July 10, 2015, the Company extended the expiration dates of 23,020,000 warrants previously issued on July 13, 2011, from an expiration date of July 12, 2015 to July 12, 2016. Each warrant entitles the holder to purchase an additional share of the Companys common stock at a price of $0.10 per share.
On November 2, 2015, the Company extended the expiration dates of the following warrants:
(a) |
100,000 warrants previously issued on November 20, 2012, from an expiration date of November 19, 2015 to November 19, 2017; |
F-16
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2016 AND 2015
(AUDITED)
(b) |
26,220,000 warrants previously issued on November 18, 2013, from an expiration date of November 18, 2015 to November 18, 2017; and | |
(c) |
1,000,000 warrants previously issued on November 19, 2013, from an expiration date of November 19, 2015 to November 19, 2017. |
Each of the above warrants entitles the holder to purchase an additional share of the Companys common stock at a price of $0.10 per share.
On January 14, 2016, the Company extended the expiration dates of the following warrants:
(a) |
22,476,840 warrants previously issued on February 24, 2009, from an expiration date of February 23, 2016 to February 23, 2018; | |
(b) |
11,455,500 warrants previously issued on January 31, 2010, from an expiration date of January 30, 2016 to January 30, 2018; | |
(c) |
32,070,000 warrants previously issued on January 18, 2011, from an expiration date of January 17, 2016 to January 17, 2018; and | |
(d) |
11,742,789 warrants previously issued on January 30, 2012, from an expiration date of January 29, 2016 to January 29, 2018. |
Each of the above warrants entitles the holder to purchase an additional share of the Companys common stock at a price of $0.10 per share.
The following is a summary of warrants activity during the years ended April 30, 2016 and 2015:
Weighted Average | |||||||
Number of Shares | Exercise Price | ||||||
Balance, April 30, 2014 | 129,385,129 | $ | 0.10 | ||||
Warrants granted and assumed | 5,600,000 | 0.10 | |||||
Warrants canceled | - | 0.00 | |||||
Warrants expired | (1,300,000 | ) | 0.10 | ||||
Balance, April 30, 2015 | 133,685,129 | 0.10 | |||||
Warrants granted and assumed | - | 0.00 | |||||
Warrants canceled | - | 0.00 | |||||
Warrants expired | - | 0.00 | |||||
Balance, April 30, 2016 | 133,685,129 | $ | 0.10 |
All warrants outstanding as of April 30, 2016 are exercisable.
13. |
RELATED PARTY TRANSACTIONS |
For the year ended April 30, 2016, the Company incurred $202,000, in consulting fees expense from companies with a common director or officer, and $22,057 in compensation expense for the issuance of stock options to directors and officers of the Company.
F-17
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2016 AND 2015
(AUDITED)
For the year ended April 30, 2015, the Company incurred $200,000, in consulting fees expense from companies with a common director or officer, and $62,941 in compensation expense for the issuance of stock options to directors and officers of the Company.
14. |
INCOME TAXES |
FASB ASC 740 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect currently.
FASB ASC 740 requires the reduction of deferred tax assets by a valuation allowance, if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. In the Companys opinion, it is uncertain whether they will generate sufficient taxable income in the future to fully utilize the net deferred tax asset. Accordingly, a valuation allowance equal to the deferred tax asset has been recorded. The total deferred tax asset is $4,163,135 which is calculated by multiplying a 35% estimated tax rate by the cumulative net operating loss (NOL) adjusted for the following items:
For the period ended April 30, | 2016 | 2015 | ||||
Book loss for the year | $ | (839,773 | ) | $ | (1,920,519 | ) |
Adjustments: | ||||||
Impairment expenses | 55,352 | 687,610 | ||||
Loss on sale of marketable securities | - | 150,253 | ||||
Gain on forgiveness of accrued interest | - | (6,133 | ) | |||
Bad debt expense | 1,037 | 720 | ||||
Non-deductible stock compensation | 29,409 | 90,915 | ||||
Tax loss for the year | $ | (753,975 | ) | $ | (997,154 | ) |
Estimated effective tax rate | 35% | 35% | ||||
Deferred tax asset | $ | 263,891 | $ | 349,004 |
The total valuation allowance is $4,163,135. Details for the last two periods are as follows:
For the period ended April 30, | 2016 | 2015 | ||||
Deferred tax asset | $ | 4,163,135 | $ | 3,899,244 | ||
Valuation allowance | (4,163,135 | ) | (3,899,244 | ) | ||
Current taxes payable | - | - | ||||
Income tax expense | $ | - | $ | - |
Below is a chart showing the estimated corporate federal net operating loss (NOL) and the year in which it will expire.
Year | Amount | Expiration | ||||
2016 | $ | 753,975 | 2036 | |||
2015 | $ | 997,154 | 2035 |
15. |
SUBSEQUENT EVENTS |
On June 16, 2016, the Supreme Court of British Columbia ruled in favor of the Company, dismissing the Application filed by the Plaintiff on January 29, 2016, seeking an injunction to prohibit the distribution of shares of Gainey Capital Corp. held by the Company.
F-18
ROYAL MINES AND MINERALS CORP.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2016 AND 2015
(AUDITED)
On July 7, 2016, the Company extended the expiration dates of 23,020,000 warrants previously issued on July 13, 2011, from an expiration date of July 12, 2016 to July 12, 2018. Each warrant entitles the holder to purchase an additional share of the Companys common stock at a price of $0.10 per share.
16. |
RESTATEMENT |
Due to default of payment on equipment leased in the Companys Scottsdale Facility, the Company has restated its balance sheet, statement of operations, statement of stockholders deficit and statement of cash flows for the year ended April 30, 2015 to account for the following:
1) | Increase of accounts payable by $128,032; | |
2) | Reduction of deferred rent by $12,518; and | |
3) | Increase in mineral exploration and evaluation expenses. | |
A summary of the effect of the restatements is as follows: |
As Previously | Restatement | ||||||||||
Reported | Adjustments | As Restated | |||||||||
Balance Sheet April 30, 2015 | |||||||||||
Accounts payable | $ | 254,938 | $ | 128,032 | $ | 382,970 | |||||
Total current liabilities | $ | 1,405,399 | $ | 128,032 | $ | 1,533,431 | |||||
Deferred rent | $ | 12,518 | $ | (12,518 | ) | $ | - | ||||
Total non-current liabilities | $ | 12,518 | $ | (12,518 | ) | $ | - | ||||
Total liabilities | $ | 1,417,917 | $ | 115,514 | $ | 1,533,431 | |||||
Statement of Operations and Comprehensive Loss | |||||||||||
For the Year Ended April 30, 2015 | |||||||||||
Mineral exploration and evaluation expenses | $ | 423,731 | $ | 115,514 | $ | 539,245 | |||||
Total operating expenses | $ | 1,744,012 | $ | 115,514 | $ | 1,859,526 | |||||
Loss from operations | $ | 1,744,012 | $ | 115,514 | $ | 1,859,526 | |||||
Net loss | $ | 1,805,005 | $ | 115,514 | $ | 1,920,519 | |||||
Comprehensive loss | $ | 1,305,005 | $ | 115,514 | $ | 1,420,519 | |||||
Statement of Cash Flows For the Year Ended April | |||||||||||
30, 2015 | |||||||||||
Net loss | $ | 1,805,005 | $ | 115,514 | $ | 1,920,519 | |||||
Accounts payable | $ | 54,081 | $ | 128,032 | $ | 182,113 | |||||
Deferred rent | $ | (12,881 | ) | $ | (12,518 | ) | $ | (25,399 | ) |
F-19
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. |
On August 5, 2015, our Board of Directors approved of the dismissal of De Joya Griffith, LLC as our independent registered public accounting firm.
The reports of De Joya Griffith, LLC on our financial statements for the years ended April 30, 2015 and 2014 did not contain an adverse opinion or disclaimer of opinion, and such reports were not qualified or modified as to uncertainty, audit scope, or accounting principle.
During the years ended April 30, 2015 and 2014 and through July 28, 2015, we had no disagreements with De Joya Griffith, LLC on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to De Joya Griffith's, LLC's satisfaction, would have caused them to make reference thereto in their reports on our financial statements for such periods.
During the years ended April 30, 2015 and 2014 and through August 5, 2015, there were no reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K.
On August 5, 2015, our Board of Directors approved the appointment of and engaged RBSM, LLP, 2580 Anthem Village Dr., Henderson, Nevada 89052, as our independent registered public accounting firm. During the Registrant's two most recent fiscal years, the subsequent interim periods thereto, and through the Engagement Date, neither we nor anyone on our behalf consulted the Current Accountants regarding either (1) the application of accounting principles to a specified transaction regarding us, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements; or (2) any matter regarding us that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and related instructions to Item 304 of Regulation S-K) or a reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).
ITEM 9A. | CONTROLS AND PROCEDURES. |
Disclosure Controls and Procedures
We carried out an assessment of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of April 30, 2016 (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 not effective as of the Evaluation Date.
Managements Annual Report on Internal Control Over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for us, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control system was designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements.
Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting, as of the Evaluation Date, based on the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its assessment, management concluded that its internal control over financial reporting was effective as of the Evaluation Date.
This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by our registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide only managements report in this annual report.
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 April 30, 2016 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Internal Controls
Our management does not expect that its disclosure controls and procedures, nor its internal control over financial reporting, will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving its objectives and our Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective at a reasonable, but not absolute, assurance level. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to the costs.
Because of the inherent limitations in all control systems, no
assessment of controls can provide absolute assurance that all control issues
and instances of fraud, if any, will be detected. Inherent limitations include
the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of a simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of internal control.
The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions. Over time the degree of compliance with the policies or
procedures may deteriorate or the controls may become inadequate due to changes
in conditions.
ITEM 9B. | OTHER INFORMATION. |
None.
PART III
ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. |
The following table sets forth the names and positions of our officers and directors:
Name | Age | Positions |
K. Ian Matheson | 75 | Chief Executive Officer, President and Director |
Jason S. Mitchell | 46 | Chief Financial Officer, Treasurer, Secretary and Director |
Michael C. Boyko | 44 | Director |
Set forth below is a brief description of the background and business experience of our executive officers and directors:
K. Ian Matheson was appointed a member of our Board of Directors on June 25, 2008 and our Chief Executive Officer and President on November 19, 2008. Mr. Matheson earned a Bachelor of Commerce degree from the University of British Columbia in 1963. In 1964 and 1965 he attended McGill University in Montreal, Quebec where he earned a degree as a Chartered Accountant at the Quebec Institute of Chartered Accountants. He was admitted into the British Columbia Institute of Chartered Accountants in 1965. From 1965 to 1967 he worked as a Chartered Accountant with Coopers and Lybrand in Vancouver, BC. He is presently a member of the British Columbia Institute of Chartered Accountants and the Canadian Institute of Chartered Accountants. Mr. Matheson was a member of the board of directors of Searchlight Minerals Corp. (OTCBB) from February 10, 2005 to February 16, 2007. Mr. Matheson has also been a director and officer of numerous private companies that have been involved in the research and development of precious metals in the southern Nevada area.
Jason S. Mitchell was appointed our Chief Financial Officer and Treasurer on February 1, 2008, our Secretary on November 19, 2008, and a member of our Board of Directors on May 28, 2008. Mr. Mitchell earned a Masters of Accountancy degree from Southern Utah University in 1994. He is a Certified Public Accountant, who has, since April, 2005, been a self-employed financial consultant, providing consulting services and preparing financial statements for numerous companies. From October 1998 to October 2004, Mr. Mitchell was a corporate controller, principal accounting officer, vice president and manager of merger and acquisitions for USI Holdings Corporation, a Nasdaq listed insurance brokerage firm where Mr. Mitchell oversaw financial reporting responsibilities, prepared SEC annual and quarterly filings, generated financial models and assisted in its October 2002 $90 million initial public offering. From October 1994 to September 1998, Mr. Mitchell worked as an auditor for Arthur Andersen LLP and KPMG Peat Marwick.
Michael C. Boyko was appointed a member of our Board of Directors on April 2, 2009. Mr. Boyko obtained his Bachelor of Science in Finance from Arizona State University and is a member of the AMIGOS Arizona Mining Association and the Arizona Society for Mining Engineers. From March 2014 to August 2015, Mr. Boyko served as the president, CEO and director of America Greener Technologies, Inc. (OTCBB: AGRN). Since 2003, Mr. Boyko has been the president and owner of Advanced Integrated Resource, LLC, a private company that markets process equipment to the mining and power industry. From 2001 to 2003, Mr. Boyko was employed at T.A. Caid Industries, a private company, where he developed a new business segment focused on equipment representation and sales to mines and power plants. From 1998 to 2001, Mr. Boyko was the managing partner and vice president of business development of BME Engineering, a private company that focused on industrial process equipment for mines and power plants, where he managed sales, marketing and manufacturing. Mr. Boyko is also Mine Safety and Health Administration (MSHA) certified.
COMMITTEES OF THE BOARD OF DIRECTORS
Our board of directors does not maintain a separately-designated standing audit committee. As a result, all of our directors act as our audit committee. K. Ian Matheson, our Chief Executive Officer and President, and Jason S. Mitchell, our Chief Financial Officer, each meet the definition of an audit committee financial expert. Mr. Matheson and Mr. Mitchell are not independent as they act as executive officers.
We presently do not have a compensation committee, nominating committee, an executive committee of our board of directors, stock plan committee or any other committees.
TERMS OF OFFICE
Our directors are elected to hold office until the next annual meeting of the shareholders and until their respective successors have been elected and qualified. Our executive officers are appointed by our board of directors and hold office until removed by our board of directors, or until their successors are appointed.
CODE OF ETHICS
We adopted a Code of Ethics applicable to our executive officers and directors, which is a code of ethics as defined by applicable rules of the SEC. Our Code of Ethics was attached as an exhibit to our Annual Report on Form 10-KSB for the fiscal year ended April 30, 2007, filed on July 30, 2007. If we make any amendments to our Code of Ethics other than technical, administrative, or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of our Code of Ethics to our Chief Executive Officer, Chief Financial Officer or certain other finance executives, we will disclose the nature of the amendment or waiver, its effective date and to whom it applies in a Current Report on Form 8-K filed with the SEC.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than 10% of a registered class of our securities (Reporting Persons), to file reports of ownership and changes in ownership with the SEC. Reporting Persons are required by SEC regulations to furnish us with copies of all forms they file pursuant to Section 16(a). Based solely on our review of such reports received by the Company, the Company has determined that the following persons have failed to file, on a timely basis, the identified reports required by Section 16(a) of the Exchange Act:
Number of Late | Transactions Not | Known Failures to | |
Name and Principal Position | Insider Reports | Timely Reported | File a Required Form |
K. Ian Matheson | |||
Chief Executive Officer, President | None | None | None |
and Director | |||
Jason S. Mitchell | |||
Chief Financial Officer, Treasurer, | None | None | None |
Secretary and Director | |||
Michael C. Boyko | |||
Director | One | One | None |
E-Ore Holdings LLC | |||
10% Holder | None | None | None |
Debra Matheson | |||
10% Holder | None | None | None |
PPI Holdings LLC | |||
10% Holder | None | None | None |
ITEM 11. | EXECUTIVE COMPENSATION. |
SUMMARY COMPENSATION TABLE
The following table sets forth total compensation paid to or earned by our named executive officers, as that term is defined in Item 402(m)(2) of Regulation S-K, during the fiscal years ended April 30, 2016 and 2015.
SUMMARY COMPENSATION TABLE | |||||||||
Non- Nonqualified | |||||||||
Equity | Deferred | ||||||||
Incentive | Compen- | All Other | |||||||
Year | Stock | Option | Plan | sation | Compen- | ||||
Name & Principal | End | Salary | Bonus | Awards | Awards | Compen- | Earnings | sation | Total |
Position | April 30, | ($) | ($) | ($) | ($) | sation ($) | ($) | ($) | ($) |
K. Ian Matheson(1) | 2016 | $60,000 | $0 | $0 | $ 9,803 | $0 | $0 | $0 | $69,803 |
CEO, President & | 2015 | $60,000 | $0 | $0 | $19,839 | $0 | $0 | $0 | $79,839 |
Director | |||||||||
Jason S. Mitchell(2) | 2016 | $144,000 | $0 | $0 | $ 9,803 | $0 | $0 | $0 | $153,803 |
Treasurer, |
2015 | $144,000 | $0 | $0 | $19,839 | $0 | $0 | $0 | $163,839 |
Secretary& Director |
|||||||||
Michael C. Boyko | 2016 | $0 | $0 | $0 | $2,451 | $0 | $0 | $0 | $2,451 |
Director of Operations | 2015 | $0 | $0 | $0 | $4,959 | $0 | $0 | $0 | $4,959 |
& Director |
Notes: | |
(1) | Under the terms of a verbal agreement, we agreed to pay Mr. Matheson $5,000 per month for consulting services provided by Mr. Matheson. |
(2) | Effective February 24, 2009, we entered into a management consulting agreement with Mr. Mitchell whereby Mr. Mitchell receives a consulting fee of $12,000 per month. The amounts paid to Mr. Mitchell during the fiscal years ended April 30, 2016 and 2015 were paid to Cedar Financial Inc., a company controlled by Mr. Mitchell. |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table provides information concerning unexercised options for each our named executive officers, as that term is defined in Item 402(m)(2) of Regulation S-K, as of our fiscal year ended April 30, 2016:
Equity Incentive Plan | |||||
Number of Securities | Number of Securities | Awards: Number of | |||
Underlying | Underlying | Securities Underlying | Option | Option | |
Name and Principal | Unexercised Options | Unexercised Options | Unexercised Unearned | Exercise | Expiration |
Position | (#) Exercisable | (#) Unexercisable | Options | Price | Date |
K. Ian Matheson | 4,500,000 | -- | -- | $0.03 | 10/29/18 |
CEO, President & Director | 2,000,000 | -- | -- | $0.01 | 03/25/20 |
2,000,000 | -- | -- | $0.005 | 12/29/20 | |
Jason S. Mitchell | 4,500,000 | -- | -- | $0.03 | 10/29/18 |
CFO, Treasurer, Secretary | 2,000,000 | -- | -- | $0.01 | 03/25/20 |
& Director | 2,000,000 | -- | -- | $0.005 | 12/29/20 |
Michael C. Boyko | 1,800,000 | -- | -- | $0.03 | 10/29/18 |
Director | 500,000 | -- | -- | $0.01 | 03/25/20 |
500,000 | -- | -- | $0.005 | 12/29/15 |
DIRECTOR COMPENSATION TABLE
During the year ended April 30, 2016, we did not pay or accrue any compensation to our Board of Directors.
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. |
EQUITY COMPENSATION PLANS
The following table sets forth certain information concerning all equity compensation plans previously approved by stockholders and all previous equity compensation plans not previously approved by stockholders, as of the most recently completed fiscal year.
Equity Compensation Plan Information
Number of Securities | Weighted-Average | Number of Securities | |
to be Issued Upon | Exercise Price of | Remaining Available for | |
Exercise of | Outstanding | Future Issuance Under | |
Outstanding | Options, | Equity Compensation | |
Options, Warrants | Warrants and | Plans (Excluding Securities | |
and Rights | Rights | Reflected in column (a)) | |
Plan Category | (a) | (b) | (c) |
Equity Compensation Plans | 32,100,000 | $0.022 | 2,219,045 |
Approved By Security Holders | |||
Equity Compensation Plans Not | 0 | 0 | 0 |
Approved By Security Holders |
2013 Stock Option Plan
Effective June 20, 2013, we adopted the 2013 Stock Incentive Plan (the 2013 Plan"). The 2013 Plan allows us to grant certain options to our directors, officers, employees, and eligible consultants. The purpose of the 2013 Plan is to enhance our long-term stockholder value by offering opportunities to our directors, officers, employees, and eligible consultants to acquire and maintain stock ownership in us in order to give these persons the opportunity to participate in our growth and success, and to encourage them to remain in our service.
The 2013 Plan allows us to grant options to our officers, directors, and employees. In addition, we may grant options to individuals who act as our consultants, so long as those consultants do not provide services connected to the offer or sale of our securities in capital raising transactions and do not directly or indirectly promote or maintain a market for our securities.
A total of 34,319,045 shares of our common stock are available for issuance under the 2013 Plan. We may increase the maximum aggregate number of shares that may be optioned and sold under the 2013 Plan provided the maximum aggregate number of shares that may be optioned and sold under the 2013 Plan shall at no time be greater than 15% of the total number of shares of common stock outstanding less any other outstanding options issued under previous stock option plans.
The 2013 Plan provides for the grant of incentive stock options and non-qualified stock options. Incentive stock options granted under the 2013 Plan are those intended to qualify as incentive stock options as defined under Section 422 of the Internal Revenue Code. However, in order to qualify as incentive stock options under Section 422 of the Internal Revenue Code, the 2013 Plan must be approved by our stockholders within 12 months of its adoption. The 2013 Plan has not been approved by our stockholders. Non-qualified stock options granted under the 2013 Plan are option grants that do not qualify as incentive stock options under Section 422 of the Internal Revenue Code.
Options granted under the 2013 Plan are non-transferable, other than by will or the laws of descent and distribution.
The 2013 Plan terminates on June 20, 2023, unless sooner terminated by action of our Board of Directors. No option is exercisable by any person after such expiration. If an award expires, terminates, or is canceled, the shares of our common stock not purchased thereunder shall again be available for issuance under the 2013 Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the number of shares of our common stock owned beneficially as of July 26, 2016 by: (i) each person (including any group) known to us to own more than five percent (5%) of any class of our voting securities, (ii) each of our directors and each of our named executive officers (as defined under Item 402(m)(2) of Regulation S-K), and (iii) officers and directors as a group. Unless otherwise indicated, the shareholders listed possess sole voting and investment power with respect to the shares shown.
Name and Address | Number of Shares | Percentage of | |
Title of Class | of Beneficial Owner | of Common Stock(1) | Common Stock(1) |
DIRECTORS AND OFFICERS | |||
Common Stock | K. Ian Matheson | 121,421,000 Shares | 43.1% |
CEO, President & Director | (direct & indirect)(2) | ||
Common Stock | Jason S. Mitchell | 100,140,000 Shares | 37.0% |
CFO, Treasurer, Secretary & Director | (direct & indirect)(3) | ||
Common Stock | Michael C. Boyko | 8,900,000 Shares | 3.8% |
Director | (direct & indirect)(4) | ||
Common Stock | All Officers and Directors | 174,171,000 Shares | 56.5% |
as a Group (3 persons) | (direct & indirect) | ||
5% SHAREHOLDERS | |||
Common Stock | K. Ian Matheson | 121,421,000 Shares | 43.1% |
CEO, President & Director | (direct & indirect)(2) | ||
2215 Lucerne Circle | |||
Henderson, NV 89014 | |||
Common Stock | Jason S. Mitchell | 100,140,000 Shares | 37.0% |
CFO, Treasurer, Secretary & Director | (direct & indirect)(3) | ||
87 Fountainhead Circle (Street) | |||
Henderson, NV 89052 | |||
Common Stock | E-Ore Holdings LLC | 41,610,000 Shares | 17.2% |
2580 Anthem Village Dr. | (direct)(5) | ||
Henderson, NV 89052 | |||
Common Stock | Debra Matheson | 27,350,000 Shares | 11.3% |
2215 Lucerne Circle | (direct)(6) | ||
Henderson, NV 89014 | |||
Common Stock | PPI Holdings LLC | 24,800,000 Shares | 10.3% |
2580 Anthem Village Dr. | (direct)(7) | ||
Henderson, NV 89052 | |||
Common Stock | The Roles Living Trust | 20,300,000 Shares | 8.5% |
P.O. Box 74767 | (direct)(8) | ||
Phoenix, AZ 85087 | |||
Common Stock | Gold Crown Holdings LLC | 14,680,000 Shares | 6.2% |
2580 Anthem Village Dr. | (direct)(9) | ||
Henderson, NV 89052 |
Name and Address | Number of Shares | Percentage of | |
Title of Class | of Beneficial Owner | of Common Stock(1) | Common Stock(1) |
Common Stock | Valeurs Mobilieres Banque Laurentienne | 14,000,000 Shares | 5.9% |
ITF: Robocheyne Consulting Ltd | (direct)(10) | ||
1981, Rue McGill College-Bur 100 | |||
Montreal, QC H3A 3K3 | |||
Common Stock | Bruce Matheson | 18,000,000 Shares | 7.5% |
1658 Beach Grove Road | (direct)(11) | ||
Delta, BC V4L 1P3 |
Notes: | |
(1) |
Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the persons actual ownership or voting power with respect to the number of common shares actually outstanding on July 26, 2016. As of July 26, 2016, there were 228,793,634 common shares issued and outstanding. |
(2) |
The number of shares listed as beneficially owned by Mr. Matheson consists of: (i) 32,251,000 shares, 180,000 shares held in trust, options to purchase 6,500,000 shares and warrants to acquire 26,200,000 shares held directly by Mr. Matheson; and (ii) 35,950,000 shares, options to acquire 4,000,000 shares and warrants to acquire 16,340,000 shares held indirectly by Mr. Matheson through E-Ore Holdings LLC and Gold Crown Holdings LLC, companies controlled by Mr. Matheson. |
(3) |
The number of shares listed as beneficially owned by Mr. Mitchell consists of: (i) 9,350,000 shares, options to purchase 6,500,000 shares and warrants to acquire 2,200,000 shares held directly by Mr. Mitchell; and (ii) 48,850,000 shares, options to acquire 4,000,000 shares and warrants to acquire 29,240,000 shares held indirectly by Mr. Mitchell through E-Ore Holdings LLC, PPI Holdings LLC, Gold Crown Holdings LLC and Cedar Financial Inc., companies controlled by Mr. Mitchell. |
(4) |
The number of shares listed as beneficially owned by Mr. Boyko consists of: (i) 2,500,00 shares, options to acquire 2,300,000 shares and warrants to acquire 1,100,000 shares held directly by Mr. Boyko; and (ii) 1,500,000 shares and warrants to acquire 1,500,000 shares held indirectly by Mr. Boyko through Advanced Integrated Resource LLC, a company controlled by Mr. Boyko. |
(5) |
The number of shares listed as beneficially owned by E-Ore Holdings LLC, consists of 28,110,000 shares, options to acquire 4,000,000 shares and warrants to acquire 9,500,000 shares held directly by E-Ore Holdings LLC. |
(6) |
The number of shares listed as beneficially owned by Mrs. Matheson consists of 14,250,000 shares, and warrants to acquire 13,100,000 shares held directly by Mrs. Matheson. |
(7) |
The number of shares listed as beneficially owned by PPI Holdings LLC consists of 12,400,000 shares and warrants to acquire 12,400,000 shares held directly by PPI Holdings LLC. |
(8) |
The number of shares listed as beneficially owned by The Roles Living Trust consists of 10,000,000 shares, and warrants to acquire 10,300,000 shares held directly by The Roles Living Trust. |
(9) |
The number of shares listed as beneficially owned by Gold Crown Holdings LLC consists of 7,840,000 shares and warrants to acquire 6,840,000 shares held directly by Gold Crown Holdings LLC. |
(10) |
The number of shares listed as beneficially owned by Robocheyne Consulting Ltd. consists of 7,000,000 shares and warrants to acquire 7,000,000 shares held directly by Robocheyne Consulting Ltd. |
(11) |
The number of shares listed as beneficially owned by Mr. B. Matheson consists of 7,500,000 shares and warrants to acquire 10,500,000 shares held directly by Mr. B. Matheson. |
CHANGES IN CONTROL
We are not aware of any arrangement that might result in a change in control in the future.
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. |
RELATED TRANSACTIONS
Except as described below, none of the following parties has, during the last two fiscal years, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us, other than noted in this section:
(i) |
Any of our directors or officers; | |
(ii) |
Any person proposed as a nominee for election as a director; | |
(iii) |
Any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our outstanding shares of common stock; | |
(iv) |
Any of our promoters; and | |
(v) |
Any relative or spouse of any of the foregoing persons who has the same house as such person. |
Indebtedness
We have received a number of short-term loans from our directors, officers and companies controlled by our directors and officers. The funds received from these loans have been used by us as general working capital as we pursue our plan of operation. A summary of the amounts owed to related parties is provided below:
(a) |
As at April 30, 2016 and 2015, we were indebted to Mr. Matheson for principal amounts totaling $869,000 and $364,000, respectively. The amounts bear interest at a rate of 10% per annum, are unsecured and due on demand. Accrued Interest at April 30, 2016 and 2015 totaled $205,345 and $141,514, respectively. As at April 30, 2016 and 2015 we are indebted to Mr. Matheson for $315,000 and $255,000, respectively, in accrued compensation. |
(b) |
As at April 30, 2016 and 2015, we were indebted to PPI Holdings LLC, a company controlled by Mr. Mitchell, for principal amount totaling $1,000. |
(c) |
As at April 30, 2016 and 2015, we were indebted to E-Ore Holdings LLC, a company controlled by Mr. Matheson and Mr. Mitchell, in the principal amount of $8,000. The amount bears interest at a rate of 10% per annum, is unsecured and due on demand. Accrued Interest at April 30, 2016 and 2015 totaled $1,236 and $422, respectively. |
DIRECTOR INDEPENDENCE
Our common stock is quoted on the OTC Bulletin Board inter-dealer quotation system, which does not have director independence requirements. Under NASDAQ Rule 5605(a)(2), a director is not considered to be independent if he or she is also an executive officer or employee of the corporation. All of our directors are considered executive officers under Rule 3b-7 of the Exchange Act. Therefore, none of our directors are independent.
As a result of our limited operating history and minimal resources, our management believes that it will have difficulty in attracting independent directors. In addition, we would likely be required to obtain directors and officers insurance coverage in order to attract and retain independent directors. Our management believes that the costs associated with maintaining such insurance is prohibitive at this time.
ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES. |
The aggregate fees billed for the fiscal years ended April 30, 2016 and 2015 for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:
Year Ended April, 2016 | Year Ended April 30, 2015 | |||||
Audit Fees | $ | 26,382 | $ | 33,186 | ||
Audit-Related Fees | - | - | ||||
Tax Fees | - | - | ||||
All Other Fees | - | - | ||||
Total | $ | 26,382 | $ | 33,186 |
PART IV
ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES. |
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 |
Technology and Asset Purchase Agreement dated April 2, 2007 among New Verde River Mining Co., Inc., Robert H. Gunnison and Royal Mines Inc. (5) |
10.2 |
Lease Agreement dated June 6, 2007 among McKendry Enterprises Inc., Profit Sharing Plan and Retirement Trust and Royal Mines Inc. (5) |
10.3 |
Management Consulting Agreement dated February 24, 2009 between the Company and Jason S. Mitchell. (6) |
10.4 |
First Amendment of Lease Agreement dated November 20, 2009 among McKendry Enterprises Inc., Profit Sharing Plan and Retirement Trust and Royal Mines Inc. (5) |
10.5 |
2011 Stock Incentive Plan.(7) |
10.6 |
Consulting Services Agreement dated February 1, 2012 between the Company and Alvin A. Snaper.(8) |
10.7 |
Agreement dated June 14, 2012 between the Company and Phoenix PMX LLC.(9) |
10.8 |
2013 Stock Incentive Plan.(10) |
10.9 |
Settlement and Security Release Agreement dated September 27, 2013 between the Company and Golden Anvil S.A. de C.V.(12) |
10.10 |
Form of Non-Qualified Option Agreement.(13) |
10.11 |
Convertible Loan Agreement dated April 16, 2014, between the Company and Bruce Matheson.(14) |
10.12 |
Loan and Joint Venture Agreement dated April 16, 2014, between the Company and GJS Capital Corp.(15) |
10.13 |
Letter of Intent dated for reference July 7, 2014, between the Company and Lafarge North America Inc.(16) |
10.14 |
Amended and Restated License Agreement dated August 20, 2014 between the Company and Alvin C. Johnson Jr.(17) |
10.15 |
Settlement Agreement dated October 22, 2014, between the Company and McKendry Enterprises, Inc. Profit Sharing Plan and Retirement Trust. (18) |
14.1 |
Code of Ethics. (3) |
31.1 | |
31.2 | |
32.1 |
Exhibit | |
Number | Description of Exhibits |
32.2 | Certification of Chief Financial Officer as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. |
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 form 10-Q filed on September 22, 2014. |
(18) | Filed with the SEC as an exhibit to our Quarterly Report on form 10-Q filed on December 16, 2014. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: July 28, 2016 |
By: |
/s/ K. Ian Matheson |
K. IAN MATHESON | ||
Chief Executive Officer, President and Secretary | ||
(Principal Executive Officer) | ||
Date: July 28, 2016 |
By: |
/s/ Jason S. Mitchell |
JASON S. MITCHELL | ||
Chief Financial Officer and Treasurer | ||
(Principal Accounting Officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. | ||
Date: July 28, 2016 |
By: |
/s/ K. Ian Matheson |
K. IAN MATHESON | ||
Director | ||
Date: July 28, 2016 |
By: |
/s/ Jason S. Mitchell |
JASON S. MITCHELL | ||
Director | ||
Date: July 28, 2016 |
By: |
/s/ Michael C. Boyko |
MICHAEL C. BOYKO | ||
Director |