| DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES [Text Block] | 1.
DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES
Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X, and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' deficit in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the three months ended July 31, 2016 are not necessarily indicative of the results that can be expected for the year ending April 30, 2017.
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 July 31, 2016, the Company had cumulative net losses of $18,740,342
from operations since inception and had negative working capital of $2,375,334. For the three months ended July 31, 2016, the Company incurred a net loss of $185,995
and had net cash used in operating activities of $139,446. For the three months ended July 31, 2015 the Company incurred a net loss of $213,653
and had net cash used in operating activities of $136,065. The Company has not fully started its minerals processing operations, raising substantial doubt about its ability to continue as a going concern.
To address liquidity constraints, the Company will seek additional sources of capital through the issuance of equity or debt financing. Additionally, the Company has reduced expenses, elected to defer payment of certain obligations, deferred payment of our CEO’s salary and reduced staffing levels to conserve cash. The Company is focused on continuing to reduce costs and obtaining additional funding. There is no assurance that such funding will be available on terms acceptable to the Company, or at all. If the Company raises additional funds by selling additional shares of capital stock, securities convertible into shares of capital stock, or by issuing debt convertible into shares of capital stock, the ownership interest of the Company’s existing common stock holders will be diluted.
Use of Estimates
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 July 31, 2016 and April 30, 2016, the Company has recorded an allowance for doubtful account of $15,798.
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 July 31, 2016 and April 30, 2016 as follows:
Fair Value Measurements at July 31, 2016 Using:
Assets:
Total Carrying
Quoted Marked
Significant Other
Significant
Value as of
Prices in Active
Observable Inputs
Unobservable
7/31/2016
Markets (Level 1)
(Level 2)
Inputs (Level 3)
Investments in marketable securities $
220,896
$
-
$
220,896
$
-
Total $
220,896
$
-
$
220,896
$
-
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
$
-
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 three months ended July 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 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 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. |
