| DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES [Text Block] | 1.
DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
Basis of Presentation
These condensed financial statements have been prepared without audit in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments and disclosures necessary for the fair presentation of these interim statements have been included. All such adjustments are, in the opinion of management, of a normal recurring nature. The results reported in these interim condensed financial statements are not necessarily indicative of the results that may be reported for the entire year. These interim condensed financial statements should be read in conjunction with the financial statements included in our Annual Report on Form 10-K for the fiscal year ended April 30, 2015, filed with the SEC on July 30, 2015.
Description of Business
History
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 If the Company continues to incur operating losses and does not raise sufficient additional capital, material adverse events may occur including, but not limited to, 1) a reduction in the nature and scope of the Company’s operations and 2) the Company’s inability to fully implement its current business plan. There can be no assurance that the Company will successfully improve its liquidity position. The accompanying financial statements do not reflect any adjustments that might be required resulting from the adverse outcome relating to this uncertainty.
As of January 31, 2016, the Company had cumulative net losses of $18,329,808
from operations since inception and had a working capital deficit of $1,947,835. For the nine months ended January 31, 2016, the Company incurred a net loss of $730,748
and had net cash used in operating activities of $382,413. For the nine months ended January 31, 2015 the Company incurred a net loss of $689,065
and had net cash used in operating activities of $494,524. The Company has not fully commenced its mining and minerals processing operations, raising substantial doubt about its ability to continue as a going concern.
To address liquidity constraints, the Company will seek additional sources of capital through the issuance of equity or debt financing. Additionally, the Company has reduced expenses, elected to defer payment of certain obligations, deferred payment of our CEO’s salary and reduced staffing levels to conserve cash. The Company is focused on continuing to reduce costs and obtaining additional funding. There is no assurance that such funding will be available on terms acceptable to the Company, or at all. If the Company raises additional funds by selling additional shares of capital stock, securities convertible into shares of capital stock, or by issuing debt convertible into shares of capital stock, the ownership interest of the Company’s existing common stock holders will be diluted.
Use of Estimates
Cash and Cash Equivalents
Other Current Assets
The allowance for doubtful accounts represents the Company’s best estimate of the amount of probable credit losses in the Company’s existing other receivables. The Company determines the allowance based on specific customer information, historical write-off experience and current industry and economic data. Account balances are charged off against the allowance when the Company believes it is probable the receivable will not be recovered. Management believes that there are no concentrations of credit risk for which an allowance has not been established. Although management believes that the allowance is adequate, it is possible that the estimated amount of cash collections with respect to accounts receivable could change. As of January 31, 2016 and April 30, 2015, the Company has recorded an allowance for doubtful account of $15,798
and $14,761, respectively.
Fair Value Level 1 Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2 Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data of the fair value of the assets or liabilities. Level 3 Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. Pursuant to ASC 825, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company's financial instruments consist of cash, prepaid expenses, other assets, accounts payable, accrued liabilities, and loans payable. The carrying amount of these financial instruments approximates fair value due to either length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements. Assets measured at fair value on a recurring basis were presented on the Company’s balance sheet as of January 31, 2016 and April 30, 2015 as follows:
Fair Value Measurements at January 31, 2016 Using:
Assets:
Total Carrying Value as of 1/31/2016
Quoted Marked Prices in Active Markets (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
Investments in marketable securities $
164,800
$
-
$
164,800
$
-
Total $
164,800
$
-
$
164,800
$
-
Fair Value Measurements at April 30, 2015 Using:
Assets:
Total Carrying
Quoted Marked
Significant Other
Significant
Value as of
Prices in Active
Observable Inputs
Unobservable
4/30/2015
Markets (Level 1)
(Level 2)
Inputs (Level 3)
Investments in marketable securities $
272,000
$
-
$
272,000
$
-
Total $
272,000
$
-
$
272,000
$
-
Property and Equipment
Mineral Exploration and Development Costs
Impairment of Long-Lived Assets Measurement of an Impairment Loss 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. No impairment expense was recognized for the nine months ended January 31, 2016 and 2015.
Research and Development
Per Share Amounts
Income Taxes Income Taxes
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
Stock-Based Compensation Compensation - Stock Compensation Measurement Objective – Fair Value at Grant Date 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 In April 2015, the FASB issued Accounting Standard Update (“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. 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 entity’s ability to continue as a going concern and, if so, disclose that fact. Management will also be required to evaluate and disclose whether its plans alleviate that doubt. The new standard is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Adoption of the new guidance is not expected to have an impact on the financial position, results of operations or cash flows.
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. |
