10-Q 1 form10q.htm FORM 10-Q Royal Mines And Minerals Corp.: Form 10-Q - Filed by newsfilecorp.com

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2013

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

COMMISSION FILE NUMBER 000-52391

ROYAL MINES AND MINERALS CORP.
(Exact name of registrant as specified in its charter)

NEVADA 20-4178322
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
   
2580 Anthem Village Dr.  
Henderson, NV 89052
(Address of principal executive offices) (Zip code)

(702) 588-5973
(Registrant's telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (s. 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X] No [   ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [   ] Accelerated filer [   ]
Non-accelerated filer [   ]
(Do not check if a smaller reporting company)
Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [   ] No [X]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
As of December 23, 2013, the Registrant had 185,593,141 shares of common stock outstanding.


PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X, and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the three and six months ended October 31, 2013 are not necessarily indicative of the results that can be expected for the year ending April 30, 2014.

As used in this Quarterly Report, the terms “we,” “us,” “our,” “Royal Mines,” and the “Company” mean Royal Mines And Minerals Corp. and its subsidiaries, unless otherwise indicated. All dollar amounts in this Quarterly Report are expressed in U.S. dollars, unless otherwise indicated.

2


ROYAL MINES AND MINERALS CORP.
(An Exploration Stage Company)
BALANCE SHEETS
(Unaudited)

    October 31, 2013     April 30, 2013  
ASSETS            
     Current assets:            
             Cash $  6,471   $  13,706  
             Prepaids   7,500     10,500  
             Other current assets   1,037     1,037  
                     Total current assets   15,008     25,243  
             
     Loan receivable   -     983,055  
     Investment in marketable securities   300,000     -  
     Property and equipment, net   185,711     237,801  
     Other assets   7,655     10,985  
Total assets $  508,374   $  1,257,084  
             
LIABILITIES AND STOCKHOLDERS' DEFICIT            
     Current liabilities:            
             Accounts payable $  163,614   $  140,669  
             Accounts payable - related parties   478,000     447,516  
             Accrued interest   46,404     34,259  
             Accrued interest - related parties   103,180     63,394  
             Loans payable   248,030     248,030  
             Loans payable - related parties   798,000     797,877  
                     Total current liabilities   1,837,228     1,731,745  
             
     Notes payable   50,000     50,000  
     Deferred rent   30,530     35,804  
Total liabilities   1,917,758     1,817,549  
             
     Stockholders' deficit:            
             Preferred stock, $0.00, par value; 100,000,000 shares authorized, 
                          zero shares issued and outstanding
  -     -  
             Common stock, $0.001 par value; 900,000,000 shares authorized, 
                          185,593,141 and 185,593,141 shares issued and outstanding, respectively
  185,593     185,593  
             Additional paid-in capital   14,146,262     13,603,775  
             Subscription payable   295,000     -  
             Accumulated deficit during exploration stage   (15,336,239 )   (14,349,833 )
             Accumulated other comprehensive loss   (700,000 )   -  
                     Total deficit   (1,409,384 )   (560,465 )
Total liabilities and deficit $  508,374   $  1,257,084  

The accompanying notes are an integral part of these financial statements.

F-1


ROYAL MINES AND MINERALS CORP.
(An Exploration Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)

                            For the Period  
                            From Inception  
    For the three months ended     For the six months ended     (December 14, 2005)
    October 31,     October 31,     Through  
    2013     2012     2013     2012     October 31, 2013  
Revenue $  -   $  -   $  -   $  -   $  138,537  
                               
Operating expenses:                              
     Mineral expenses   160,828     147,467     248,511     386,522     4,971,049  
     Mineral expenses - related party   15,000     2,655     30,000     7,655     854,500  
     General and administrative   128,227     23,149     176,922     87,535     3,354,808  
     General and administrative - related party   390,572     51,000     425,572     102,000     5,127,215  
     Depreciation and amortization   26,045     26,045     52,090     51,905     673,600  
     Impairment of mineral properties   -     38,710     -     38,710     63,400  
     Impairment of intellectual property   -     -     -     -     200,000  
     Bad debt expense   -     -     -     -     14,041  
     Gain on sale of fixed asset   -     -     -     -     (11,500 )
     Gain on settlement of accounts payable   -     -     -     -     (1,613 )
          Total operating expenses   720,672     289,026     933,095     674,327     15,245,500  
                               
Loss from operations   (720,672 )   (289,026 )   (933,095 )   (674,327 )   (15,106,963 )
                               
Other income (expense):                              
     Interest and other income   12     -     12     -     103,838  
     Interest expense   (26,643 )   (17,013 )   (53,323 )   (29,198 )   (333,114 )
          Total other income (expense)   (26,631 )   (17,013 )   (53,311 )   (29,198 )   (229,276 )
                               
Net loss $  (747,303 ) $  (306,039 ) $  (986,406 ) $  (703,525 ) $  (15,336,239 )
                               
Other comprehensinve loss:                              
     Unrealized loss on marketable securities   (700,000 )   -     (700,000 )   -     (700,000 )
           Total other comprehensive income loss:   (700,000 )   -     (700,000 )   -     (700,000 )
                               
Comprehensive loss $  (1,447,303 ) $  (306,039 ) $  (1,686,406 ) $  (703,525 ) $  (16,036,239 )
                               
Net loss per common share - basic $  (0.00 ) $  (0.00 ) $  (0.01 ) $  (0.00 ) $  (0.08 )
                               
Weighted average common shares outstanding - basic   185,593,141     185,593,141     185,593,141     185,593,141     185,593,141  

The accompanying notes are an integral part of these financial statements.

F-2


ROYAL MINES AND MINERALS CORP.
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)

                For the Period  
                From Inception  
    For the six months ended     (December 14, 2005)
    October 31,     Through  
    2013     2012     October 31, 2013  
CASH FLOWS FROM OPERATING ACTIVITIES                  
Net loss $  (986,406 ) $  (703,525 ) $  (15,336,239 )
Adjustments to reconcile net loss to cash used in operating activities:                  
     Depreciation and amortization   52,090     51,905     673,600  
     Impairment of mineral properties   -     38,710     63,400  
     Impairment of intellectual property   -     -     200,000  
     Stock-based expenses   542,487     -     5,381,034  
     Allowance for bad debt   -     -     14,041  
     Gain on sale of fixed asset   -     -     (11,500 )
     Gain on settlement of accounts payable   -     -     (1,613 )
     Reimbursement of Golden Anvil expenses   (16,945 )   -     (16,945 )
Changes in operating assets and liabilities:               -  
     Prepaid expenses   3,000     4,216     5,061  
     Other assets   3,330     (16,595 )   (22,733 )
     Accounts payable   22,945     22,813     673,978  
     Accounts payable - related parties   30,484     30,000     412,374  
     Accrued liabilities   -     (5,000 )   (9,127 )
     Accrued interest   12,145     4,311     46,404  
     Accrued interest - related parties   39,786     23,982     272,424  
     Deferred rent   (5,274 )   32,703     30,530  
Net cash used in operating activities   (302,358 )   (516,480 )   (7,625,311 )
                   
CASH FLOW FROM INVESTING ACTIVITIES                  
     Loan receivable   -     -     (983,055 )
     Cash paid on mineral property claims   -     -     (38,900 )
     Cash acquired on reverse merger   -     -     2,306  
     Proceeds from sale of fixed assets   -     -     11,500  
     Purchase of fixed assets   -     -     (621,795 )
Net cash used in investing activities   -     -     (1,629,944 )
                   
CASH FLOW FROM FINANCING ACTIVITIES                  
     Proceeds from stock issuance   295,000     -     4,400,721  
     Payments on borrowing - related party   (127 )   -     (127 )
     Proceeds on borrowings   -     148,030     248,030  
     Proceeds on borrowings - related parties   250     311,618     4,613,102  
Net cash provided by financing activities   295,123     459,648     9,261,726  
                   
Net change in cash   (7,235 )   (56,832 )   6,471  
Cash, beginning   13,706     70,678     -  
Cash, end   6,471     13,846     6,471  
                   
NON-CASH INVESTING AND FINANCING ACTIVITIES                  
Acquisition of intellectual property for stock $  -   $  -   $  200,000  
Acquisition of mineral property for stock $  -   $  -   $  24,500  
Stock issued in reverse acquisition of Centrus Ventures Inc. $  -   $  -   $  (63,195 )
Stock and warrants issued in satisfaction of accounts payable $  -   $  -   $  (224,004 )
Stock issued in satisfaction of accounts payable - related parties $  -   $  -   $  (365,228 )
Stock issued in satisfaction of accrued interest - related parties $  -   $  -   $  (134,000 )
Stock issued in satisfaction of accrued liabilities $  -   $  -   $  (50,000 )
Stock issued in satisfaction of notes payable $  -   $  -   $  (40,000 )
Stock issued in satisfaction of loans made to the Company $  -   $  -   $  (3,858,000 )
Shares received for settlement of loans receivable $  1,000,000   $  -   $  1,000,000  

F-3


ROYAL MINES AND MINERALS CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2013
(Unaudited)

1.

DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES

   

Basis of Presentation – The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Royal Mines and Minerals Corp’s (the “Company”) fiscal year-end is April 30.

Description of Business – The Company is considered an exploration stage company. The Company's primary objectives are to 1) commercially extract and refine precious metals from its own and other’s leachable assets, 2) use its lixiviation processes to convert specific ore bodies and ash landfills/monofills into valuable assets, and 3) joint venture, acquire and develop mining projects in North America. The Company has not yet realized significant revenues from its primary objectives.

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 - As of October 31, 2013, the Company has incurred cumulative net losses of $15,336,239 from operations and has negative working capital of $1,822,220. The Company is still in the exploration stage and has not fully commenced its mining and minerals processing operations, raising substantial doubt about its ability to continue as a going concern.

The ability of the Company to continue as a going concern is dependent on the Company raising additional sources of capital and the successful execution of the Company’s objectives. The Company will seek additional sources of capital through the issuance of debt or equity financing, but there can be no assurance the Company will be successful in accomplishing its objectives. The financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

F-4


ROYAL MINES AND MINERALS CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2013
(Unaudited)

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents - The Company considers all investments with an original maturity of three months or less to be a cash equivalent.

Fair Value - ASC 825, Financial Instruments requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 825 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data of the fair value of the assets or liabilities.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

Pursuant to ASC 825, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company's financial instruments consist of cash, prepaid expenses, other assets, accounts payable, accrued liabilities, and loans payable. The carrying amount of these financial instruments approximates fair value due to either length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

Assets measured at fair value on a recurring basis were presented on the Company’s balance sheet as of October 31, 2013 as follows:

F-5


ROYAL MINES AND MINERALS CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2013
(Unaudited)

 Fair Value Measurements at October 31, 2013 Using:   
                           
  Assets:   Total Carrying Value     Quoted Marked     Significant     Significant  
      as of 10/31/2013     Prices in Active     Other     Unobservable  
            Markets (Level     Observable     Inputs (Level 3)
            1)   Inputs (Level 2)      
  Investments in marketable securities $  300,000   $  0   $  300,000   $  0  
   Total $  300,000   $  0   $  300,000   $  0  

The Company did not have any investments in marketable securities at April 30, 2013.

Property and Equipment - Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided principally on the straight-line method over the estimated useful lives of the assets, which are generally 3 to 10 years. The cost of repairs and maintenance is charged to expense as incurred. Expenditures for property betterments and renewals are capitalized. Upon sale or other disposition of a depreciable asset, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statement of operations.

The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful life of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability.

Exploration Costs – Exploration costs incurred in locating areas of potential mineralization or evaluating properties or working interests with specific areas of potential mineralization are expensed as incurred. Development costs of proven mining properties not yet producing are capitalized at cost and classified as capitalized exploration costs under property, plant and equipment. Property holding costs are charged to operations during the period if no significant exploration or development activities are being conducted on the related properties. Upon commencement of production, capitalized exploration and development costs would be amortized based on the estimated proven and probable reserves benefited. Properties determined to be impaired or that are abandoned are written-down to the estimated fair value. Carrying values do not necessarily reflect present or future values.

Impairment of Long-Lived Assets – The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under ASC 360-10-35-17, Measurement of an Impairment Loss, if events or circumstances indicate that their carrying amount might not be recoverable.

Various factors could impact our ability to achieve forecasted production schedules. Additionally, commodity prices, capital expenditure requirements and reclamation costs could differ from the assumptions the Company may use in cash flow models used to assess impairment. The ability to achieve the estimated quantities of recoverable minerals from exploration stage mineral interests involves further risks in addition to those factors applicable to mineral interests where proven and probable reserves have been identified, due to the lower level of confidence that the identified mineralized material can ultimately be mined economically. As of April 30, 2013, the Company did not pay the renewal fee on the 20 acre claim and the BLM claims due in August 2012 and allowed those claims to lapse. The Company recognized an impairment expense of zero and $38,710 for the six months ended October 31, 2013 and 2012, respectively.

Revenue Recognition – The Company recognizes revenues and the related costs when persuasive evidence of an arrangement exists, delivery and acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured. Revenue from licensing our technology is recognized over the term of the license agreement. Costs and expenses are recognized during the period in which they are incurred.

F-6


ROYAL MINES AND MINERALS CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2013
(Unaudited)

Research and Development - All research and development expenditures are expensed as incurred.

   

Earnings (Loss) Per Share - The Company follows ASC 260, Earnings Per Share, and ASC 480, Distinguishing Liabilities from Equity, which establish standards for the computation, presentation and disclosure requirements for basic and diluted earnings per share for entities with publicly held common shares and potential common stock issuances. Basic earnings (loss) per share are computed by dividing net income by the weighted average number of common shares outstanding. In computing diluted earnings per share, the weighted average number of shares outstanding is adjusted to reflect the effect of potentially dilutive securities, such as stock options and warrants. Common stock equivalent shares are excluded from the computation if their effect is antidilutive. Common stock equivalents, which include stock options and warrants to purchase common stock, on October 31, 2013 and 2012 that were not included in the computation of diluted earnings per share because the effect would be antidilutive were 127,295,129 and 109,095,129, respectively.

   

Stock-Based Compensation – The Company accounts for share based payments in accordance with ASC 718, Compensation - Stock Compensation, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant date fair value of the award. In accordance with ASC 718-10-30-9, Measurement Objective – Fair Value at Grant Date, the Company estimates the fair value of the award using a valuation technique. For this purpose, the Company uses the Black-Scholes option pricing model. The Company believes this model provides the best estimate of fair value due to its ability to incorporate inputs that change over time, such as volatility and interest rates, and to allow for actual exercise behavior of option holders. Compensation cost is recognized over the requisite service period which is generally equal to the vesting period. Upon exercise, shares issued will be newly issued shares from authorized common stock.

   

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 Company’s financial position, results of operations, or cash flows upon adoption.

   

In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”), which provides guidance on the presentation of unrecognized tax benefits when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. The amendments in this update are effective for fiscal years (and interim periods within those years) beginning after December 15, 2013. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The Company does not expect ASU 2013-11 to have a material effect on its financial condition, results of operation, or cash flows.

   
2.

LOAN RECEIVABLE

   

As of October 31, 2013 and April 30, 2013, loan receivable consisted of zero and $983,055, respectively.

   

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 USD$983,055 in secured indebtedness. In exchange for the release, Golden Anvil had 2,000,000 common shares of Gainey Capital Corp. (“Gainey”) issued to the Company as part of an asset purchase agreement between Golden Anvil and Gainey.

F-7


ROYAL MINES AND MINERALS CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2013
(Unaudited)

The now-settled loan receivable originated when the Company had advanced $970,000 to Golden Anvil to permit Golden Anvil to complete its refurbishment and relocation of its mineral processing plant in Nayarit, Mexico, and had paid $13,055 in expenses on behalf of Golden Anvil, which is included in the total loan amount of $983,055. The settlement resulted in a loss on settlement of $683,055.

   
3.

INVESTMENTS IN OTHER COMPANIES

   

As of October 31, 2013 and April 30, 2013, investments in other companies consisted of $300,000 and zero, respectively. The market value was $0.15 per Gainey Share on October 31, 2013.

   

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 USD$983,055 in secured indebtedness. In exchange for the release, Golden Anvil had 2,000,000 common shares of Gainey Capital Corp. (“Gainey”) issued to the Company as part of an asset purchase agreement between Golden Anvil and Gainey.

   

The Asset Purchase was completed on September 30, 2013 and will serve as Gainey’s qualifying transaction under TSX Venture Exchange rules for capital pool companies. As such, the Gainey Shares will be released pursuant to the terms of a surplus escrow agreement as follows:


% of Shares to be Released Date of Release
5% October 2, 2013
5% April 2, 2014
10% October 2, 2014
10% April 2, 2015
15% October 2, 2015
15% April 2, 2016
40% October 2, 2016

In addition, the Gainey Shares are subject to a voluntary pooling agreement, which provides that none of the Gainey Shares may be traded before October 2, 2014.

Marketable securities are held for an indefinite period of time and thus are classified as available-for-sale securities. Realized investment gains and losses are included in the statement of operations, as are provisions for other than temporary declines in the market value of available-for-sale securities. Unrealized gains and unrealized losses deemed to be temporary are excluded from earnings (losses), net of applicable taxes, as a component of other comprehensive income. Factors considered in judging whether an impairment is other than temporary include the financial condition, business prospects and creditworthiness of the issuer, the length of time that fair value has been less than cost, the relative amount of decline, and the Company’s ability and intent to hold the investment until the fair value recovers.

At October 31, 2013, the Company recorded an unrealized loss of $700,000 regarding its investment in marketable securities because, based on management’s evaluation of the circumstances, management believed that the decline in fair value below the cost of certain of the Company’s marketable securities was temporary.

F-8


ROYAL MINES AND MINERALS CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2013
(Unaudited)

The following is a summary of available-for-sale marketable securities as of October 31, 2013:

    Cost     Unrealized     Unrealized     Market or  
          Gain     (Losses)     Fair Value  
Equity securities $  1,000,000   $  --   $  (700,000 ) $  300,000  
                   Total $  1,000,000   $  --   $  (700,000 ) $  300,000  

The Company had no investments in marketable securities at April 30, 2013.

   
4.

PROPERTY AND EQUIPMENT

   

Property and equipment consists of the following:


      As of     As of  
      October 31, 2013     April 30, 2013  
  Process, lab and office equipment $  680,042   $  680,042  
  Site equipment   167,769     167,769  
  Total property and equipment   847,811     847,811  
  Less: accumulated depreciation   (662,100 )   (610,010 )
    $  185,711   $  237,801  

Depreciation expense was $52,090 and $51,905 for the six months ended October 31, 2013 and 2012, respectively.

   
5.

ACCOUNTS PAYABLE - RELATED PARTIES

   

As of October 31, 2013 and April 30, 2013, accounts payable – related parties consisted of $478,000 and $447,516, respectively, due to directors and officers of the Company for consulting fees, and $235,000 for the acquisition of an extraction processing system in January 2012.

   
6.

LOANS PAYABLE

   

As of October 31, 2013 and April 30, 2013, loans payable of $248,030 consists of borrowings payable to two unrelated third parties. The loans bear 6% to 12% interest, are unsecured and are due on demand.

   
7.

LOANS PAYABLE AND ACCRUED INTEREST – RELATED PARTIES

   

As of October 31, 2013 and April 30, 2013, loans payable – related parties of $798,000 and $797,877, respectively, mainly consists of borrowings, directly and indirectly, from one director of the Company. The balances bear 10% interest, are unsecured and are due on demand. As of October 31, 2013 and April 30, 2013, accrued interest – related party was $103,180 and $63,394 respectively. Interest expense for the three months ended October 31, 2013 and 2012 was $26,643 and $17,013 respectively. Interest expense for the six months ended October 31, 2013 and 2012 was $53,323 and $29,198, respectively.

   
8.

NOTES PAYABLE

   

As of October 31, 2013 and April 30, 2013, notes payable consists of an unsecured $50,000 payable to New Verde River Mining and Robert H. Gunnison pursuant to the NVRM Agreement noted above (see Note 4). Mr. Gunnison signed an extension agreement extending the payment deadline to June 30, 2014. The note payable bears 6% interest annually.

F-9


ROYAL MINES AND MINERALS CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2013
(Unaudited)

9.

COMMITMENTS AND CONTINGENCIES

   

Lease obligations – The Company has operating leases for its corporate office, corporate housing and plant facilities. Future minimum lease payments under the operating leases as of October 31, 2013 are as follows:


Fiscal year ending April 30, 2014 $  47,800  
Fiscal year ending April 30, 2015 $  66,100  
Fiscal year ending April 30, 2016 $  54,008  
Fiscal year ending April 30, 2017 $  42,016  
Fiscal year ending April 30, 2018 $  21,008  
Thereafter $  21,008  

Lease expense was $86,650 and $151,792 for the six months ended October 31, 2013 and 2012, respectively.

   

Legal proceedings – The Company received of 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 seeks to recover damages of at least $108,581, including, but not limited to: (1) $56,358 rent; (ii) $52,223 for maintenance, clean-up costs and construction; and (3) undetermined damages for additional repair, clean up and legal fees. The Company is vigorously defending this lawsuit. There is no assurance that the Company will be able to successfully defend the lawsuit. The Company is currently evaluating the merits of the lawsuit and the probability of a favorable outcome. Rent expense of $50,858 is recorded as an account payable as at October 31, 2013. In the event of an unfavorable outcome, the Company will be required to record additional liability.

   

No other legal proceedings are pending, threatened or contemplated.

   
10.

STOCKHOLDERS’ EQUITY

   

Common and Preferred Stock:

   

On August 26, 2013, Royal Mines and Minerals Corp. (the “Company”) filed a certificate of amendment with the Nevada Secretary of State, amending the Company’s Articles of Incorporation to increase the number of authorized shares of common stock from 300,000,000 shares to 900,000,000 shares. The Amendment to the Articles of Incorporation was approved at the Company’s Annual General Meeting and Special Meeting on August 22, 2013.

   

As of October 31, 2013 and April 30, 2013, there were 185,593,141 shares of common stock outstanding and zero shares of preferred stock outstanding.

   

Share Subscriptions Payable:

   

As of October 31, 2013, the Company received $295,000 in a private offering for 5,900,000 units, with each unit consisting of one share of common stock and one share purchase warrant, with each warrant entitling the holder to purchase one additional share of common stock at a price of $0.10 per share for a period of two years from the date of issue. Additionally, each subscription agreement included a good faith representation by the Company to enter into definitive agreements to grant a net profits interest to each cash subscriber on the basis of 1% for each $10,000 invested. The profit payout will be net of operational and financing costs and an agreed upon management fee, from the Company's interest in its first joint venture, license or its own production facility using its coal ash process. The maximum payout will be 8 times original cash investment by each subscriber.

F-10


ROYAL MINES AND MINERALS CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2013
(Unaudited)

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. A total of 27,800,000 shares of the Company’s common stock are available for issuance under the 2010 Plan. However, the Company may increase the maximum aggregate number of shares of the Company’s 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 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. As of October 31, 2013, zero options under the 2013 Plan have been exercised.

From the date of inception through October 31, 2013, compensation expense related to the granting of stock options under the 2013 Plan was $542,487, of which $90,000 was recorded in minerals exploration and evaluation expenses, $99,000 was recorded in general and administrative and $354,000 was recorded in general and administrative – related parties. The Company calculated the value of the options using the Black-Scholes option pricing model using the following assumptions: a bond equivalent yield of 0.75%, volatility of 436%, estimated life of 5 years and closing stock price of $0.03 per share on the date of grant.

Effective June 20, 2013, the Company suspended the 2011 Plan. No new options may be granted under the 2011 Plan and the 2011 Plan will be terminated once all outstanding options granted under the 2011 Plan have been exercised, expired or otherwise terminated. There are presently 6,000,000 options outstanding under the 2011 Plan.

Extension of Warrants – On July 2, 2013, we extended the expiration dates of the following warrants:

  I.

23,020,000 warrants previously issued on July 13, 2011 from an expiration date of July 12, 2013 to July 12, 2014. Each warrant entitles the holder to purchase an additional share of our common stock at a price of $0.10 per share; and

  II.

1,000,000 warrants previously issued on September 26, 2011, from an expiration date of September 25, 2013 to September 25, 2014. Each warrant entitles the holder to purchase an additional share of our common stock at a price of $0.10 per share.


11.

RELATED PARTY TRANSACTIONS

   

For the six months ended October 31, 2013, the Company incurred $102,000, in consulting fees expense from companies with a common director or officer, zero in compensation expense for the issuance of common stock to directors and officers of the Company, and $354,000 in compensation expense for the issuance of stock options to directors and officers of the Company.

   

For the six months ended October 31, 2012, the Company incurred $109,655 in consulting fees expense from companies with a common director o\r officer, zero in compensation expense for the issuance of common stock to directors and officers of the Company, and zero in compensation expense for the issuance of stock options to directors and officers of the Company.

   
12.

SUBSEQUENT EVENTS

   

On November 18, 2013 and November 19, 2013, the Company issued 6,900,000 units for $345,000 in cash (of which $295,000 is recorded as share subscriptions payable at October 31, 2013), 9,260,000 units for $463,000 in loans made to the Company, and 11,060,000 units to retire $553,000 in corporate indebtedness, an aggregate of 27,220,000 units, at a price of $0.05 per unit in two separate concurrent private placement offerings. Each Unit is comprised of one share of the Company’s 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-11


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Quarterly Report constitute "forward-looking statements.” These statements, identified by words such as “plan,” "anticipate," "believe," "estimate," "should," "expect" and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements reflect the current views of management with respect to future events and are subject to risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from those described in the forward-looking statements. Such risks and uncertainties include those set forth under the caption "Part II –Item 1A. Risk Factors" and elsewhere in this Quarterly Report. We do not intend to update the forward-looking information to reflect actual results or changes in the factors affecting such forward-looking information. We advise you to carefully review the reports and documents, particularly our Annual Reports, Quarterly Reports and Current Reports, that we file from time to time with the United States Securities and Exchange Commission (the “SEC”).

OVERVIEW

We were incorporated on December 14, 2005 under the laws of the State of Nevada. We are an exploration stage company and our primary objectives are to: (i) commercially extract and refine precious metals from our own and others mineralized materials; (ii) use our leaching process (Cholla) to recover precious metals from specific ore bearing materials; and (iii) joint venture, acquire and develop mining projects in North America.

We are focusing our business on commercially processing specific fly ash and other mineable materials, using a leach process that exposes extractable gold (the “Cholla Process”) at our processing and refining plant located in Scottsdale, Arizona (the “Scottsdale Facility”). In November 2012, we shut down our Phoenix Facility and we have no plans to continue that operation.

In August 2012, we did not pay the renewal fee on our interest a gold project that consisted of a mineral lease covering 20.61 acres of patented claims and an option to acquire a 100% interest in 20 unpatented claims located near the mineral lease.

In September 2013, we released Golden Anvil S.A. de C.V. (“Golden Anvil”) from loan agreements pursuant to which, Golden Anvil owed us USD$983,055 in secured indebtedness. In exchange for the release, Golden Anvil had 2,000,000 common shares of Gainey Capital Corp. (“Gainey”) issued to us as part of an asset purchase agreement between Golden Anvil and Gainey.

We are actively seeking to enter into joint ventures with third parties who have legal rights to fly ash resources, including landfills/monofills. There is no assurance that we will be able to commercially extract precious metals from fly ash or other mineable ores using our Cholla process or that we will be able to enter into joint ventures for the exploration and development of additional mining projects.

RECENT CORPORATE DEVELOPMENTS

The following corporate developments occurred since our fiscal quarter ended July 31, 2013:

Amendment to Articles of Incorporation

On August 26, 2013, we filed a certificate of change with the Nevada Secretary of State, amending our Articles of Incorporation to increase the number of authorized shares of common stock from 300,000,000 shares to 900,000,000 shares. The Amendment to the Articles of Incorporation was approved at our Annual General Meeting and Special Meeting on August 22, 2013, as described under the heading “Annual General Meeting and Special Meeting” below.

3


Annual General Meeting and Special Meeting

On August 22, 2013, we held our Annual General Meeting and Special Meeting (the “Meeting”). There were 23,931,000 shares represented in person and 105,040,875 shares represented by proxy, for a total of 131,190,875 shares or 71.8% of the issued and outstanding shares of our common stock represented at the Meeting.

At the Meeting the stockholders voted: (1) to approve the election of Jason S. Mitchell, K. Ian Matheson and Michael C. Boyko as members our Board of Directors; (2) to ratify the appointment the De Joya Griffith, LLC as our independent registered public accounting firm for the fiscal year ended April 30, 2014; (3) to approve our 2013 stock option plan; (4) to approve the amendment to our Articles of Incorporation to increase the number of authorized shares of common stock to 900,000,000 shares; (5) to approve, on a advisory basis, the compensation of our named executive officers; and (6) to approve, on advisory basis that an advisory vote on executive compensation take place every three years.

Settlement Agreement

On September 27, 2013, we entered into a settlement and security release agreement (the “Release Agreement”) with Golden Anvil S.A. de C.V. (“Golden Anvil”). Under the terms of the Release Agreement, we agreed to release Golden Anvil S.A. de C.V. from loan agreements pursuant to which, Golden Anvil owed us USD$983,055 in secured indebtedness (the “Indebtedness”). In exchange for the release, Golden Anvil had 2,000,000 common shares (the “Gainey Shares”) of Gainey Capital Corp. (“Gainey”) issued to us as part of an asset purchase agreement (the “Asset Purchase”) between Golden Anvil and Gainey.

The Asset Purchase was completed on September 30, 2013 and will serve as Gainey’s qualifying transaction under TSX Venture Exchange rules for capital pool companies. As such, the Gainey Shares will be released pursuant to the terms of a surplus escrow agreement as follows:

Percentage of the Gainey Approximate Date of
Shares be Released Release
5% October 2, 2013
5% April 2, 2014
10% October 2, 2014
10% April 2, 2015
15% October 2, 2015
15% April 2, 2016
40% October 2, 2016

In addition, the Gainey Shares are subject to a voluntary pooling agreement, which provides that none of the Gainey Shares may be traded before October 2, 2014.

Grant of Options to Executive Officers under the 2013 Stock Incentive Plan

Effective October 29, 2013, we granted to our directors and officers, non-qualified stock options to acquire an aggregate of 10,800,000 shares of our common stock under our 2013 Stock Incentive Plan (the “2013 Plan”).

4



  Total Number of    
  Shares Subject to Exercise Price  
Name Options Per Share Expiration Date
K. Ian Matheson
CEO, President and Director
4,500,000 $0.03 October 29, 2018
Jason S. Mitchell
CFO, Treasurer, Secretary and Director
4,500,000 $0.03 October 29, 2018
Michael C. Boyko
Director
1,800,000 $0.03 October 29, 2018

In addition to the options we granted to our directors and executive officers, we granted options to acquire an additional 3,300,000 shares of our common stock to various consultants pursuant to the 2013 Plan. We also granted 4,000,000 options to E-Ore Holdings LLC, pursuant to the provisions of Section 4(2) of the United States Securities Act of 1933, as amended (the “Act”). All of the above options are exercisable immediately at a price of $0.03 per share, and expire five years after the grant date.

Private Placement Offering

On November 18, 2013 and November 19, 2013, we issued an aggregate of 27,220,000 Units (the "Units") at a price of $0.05 per Unit in separate concurrent private placement offerings (the “Offerings”) for aggregate cash proceeds of $345,000 and to settle outstanding indebtedness of $1,016,000, as set forth below. Each Unit is comprised of one share of our common stock and one share purchase warrant, with each warrant entitling the holder to purchase an additional share of our common stock at an exercise price of $0.10 for a two year period from the date of issuance. The Offerings were completed as follows.

US Private Placement - We issued 3,420,000 Units for cash proceeds of $10,000 and to settle outstanding indebtedness of $161,000. The issuances were completed pursuant to the provisions of Rule 506 of Regulation D of the Act. Each subscriber represented that they were an accredited investor as defined under Regulation D of the Act. All 3,420,000 Units were issued on November 18, 2013.

Foreign Private Placement - We issued 5,700,000 Units for cash proceeds of $285,000. The issuances were completed pursuant to the provisions of Regulation S of the Act. We did not engage in a distribution of this offering in the United States. Each of the subscribers represented that they were not “US persons” as defined in Regulation S of the Act and that they were not acquiring the shares for the account or benefit of a US person. 5,200,000 Units were issued on November 18, 2013 and 500,000 Units were issued on November 19, 2013.

Section 4(2) Private Placement – We issued 18,100,000 Units for cash proceeds of $50,000 and to settle outstanding indebtedness of $855,000. The issuances were completed pursuant to the provisions of Section 4(2) of the Act. Each of the subscribers were directors or executive officers or close personal friends, relatives or business associates of a director or executive officer. 17,600,000 Units were issued on November 18, 2013 and 500,000 Units were issued on November 19, 2013.

In addition, we have agreed to enter into definitive agreements with each of the cash subscribers (each a “Cash Subscriber”) to provide each Cash Subscriber a “Net Profits Interest” in any future profits we receive that are derived from the exploitation of our leaching technology, whether through our own activities, a joint venture agreement or a license agreement. Each Net Profits Interest will be granted to each Cash Subscriber a rate of one percent (1.0%) for every $10,000 of cash proceeds received from each Cash Subscriber under the Offerings. Each provision of a Net Profits Interest is subject to our entry into a definitive agreement with each Cash Subscriber.

5


RESULTS OF OPERATIONS

Three Months and Six Months Summary

    Three Months Ended     Percentage     Six Months Ended     Percentage  
    October 31,     October 31,     Increase /     October 31,     October 31,     Increase /  
    2013     2012     (Decrease)     2013     2012     (Decrease)  
Revenue $  -   $  -     n/a   $  -   $  -     n/a  
Expenses   (720,672 )   (289,026 )   149.3%     (933,095 )   (674,327 )   38.4%  
Other Items   (26,631 )   (17,013 )   56.5%     (53,311 )   (29,198 )   82.6%  
Net Loss $  (747,303 ) $  (306,039 )   141.8%   $  (986,406 ) $  (703,525 )   40.2%  

Revenues

We earned no revenues during the three and six months ended October 31, 2013 and 2012. 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 mineable ore or coal ash.

Expenses

The major components of our operating expenses for the three and six months ended October 31, 2013 and 2012 are outlined in the table below:

    Three Months Ended     Percentage     Six Months Ended     Percentage  
    October 31,     October     Increase /     October     October 31,     Increase /  
    2013     31, 2012     (Decrease)     31, 2013     2012     (Decrease)  
Mineral exploration and evaluation expenses $  175,828   $  150,122     17.1%   $  278,511   $  394,177     (29.3 )%
General and administrative   518,799     74,149     599.7%     602,494     189,535     217.9%  
Depreciation and amortization   26,045     26,045     0.0%     52,090     51,905     0.4%  
Impairment of mineral claims   -     38,710     (100.0 )%   -     38,710     (100.0 )%
Total Operating Expenses $  720,672   $  289,026     149.3%   $ 933,095   $  674,327     38.4%  

Our operating expenses for the three months ended October 31, 2013 increased as compared to the three months ended October 31, 2012. The increase in our operating expenses primarily relates to increases in both mineral exploration and evaluation expenses and general and administrative expenses. The increase was partially offset by the fact that we recorded an impairment of mineral claims during the three months ended October 31, 2012.

Our operating expenses for the six months ended October 31, 2013 increased as compared to the six months ended October 31, 2012. The increase in our operating expenses primarily relates an increase in general and administrative expenses. The increase was partially offset by a decrease in mineral exploration evaluation expenses and the fact that we recorded an impairment of mineral claims during the three months ended October 31, 2012.

Mineral exploration and evaluation expenses primarily consisted of stock option compensation, rent, leased equipment, extraction-processing costs, consulting fees and labor expenses in connection with our Phoenix Facility and Scottsdale Facility. The increase in mineral exploration and evaluation expenses during the three months ended October 31, 2013 was primarily due to $89,915 in stock option compensation expense, offset by a decrease in consulting fees, contract labor, rent and extraction processing costs due to reduced activities at our Scottsdale Facility and the fact that we shut down our Phoenix Facility in November 2012. The decrease in mineral exploration and evaluation expenses during the six months ended October 31, 2013 was primarily due to a decrease in consulting fees, contract labor and extraction processing costs due to reduced activities at our Scottsdale Facility and the fact that we shut down our Phoenix Facility in November 2012, offset by $89,915 in stock option compensation expense in October 2013.

6


During the three months ended October 31, 2013, our general and administrative and general and administrative related party expenses primarily consisted of: (i) $443,487 in stock option compensation expense; (ii) monthly consulting fees paid to our Chief Financial Officer, Mr. Mitchell; and (iii) legal and audit fees in connection with meeting our reporting requirements under the Exchange Act. We anticipate that our operating expenses will increase significantly as we implement our plan of operation for our Scottsdale Facility.

Impairment of mineral claims relates to the fact that we did not pay the renewal fee on our interest in a gold project that consisted of a mineral lease covering 20.61 acres of patented claims and an option to acquire a 100% interest in 20 unpatented claims located near the mineral lease.

LIQUIDITY AND CAPITAL RESOURCES

Working Capital                  
                Percentage  
    At October 31, 2013     At April 30, 2013     Increase / (Decrease)  
Current Assets $  15,008   $  25,243     (40.5 )%
Current Liabilities   (1,837,228 )   (1,731,745 )   6.1%  
Working Capital Deficit $  (1,822,220 ) $  (1,706,502 )   6.8%  

Cash Flows            
    Six Months Ended  
    October 31, 2013     October 31, 2012  
Net Cash Used in Operating Activities $  (302,358 ) $  (516,480 )
Net Cash Provided By Financing Activities   295,123     459,648  
Net Decrease in Cash During Period $  (7,235 ) $  (56,832 )

As of October 31, 2013, we had a working capital deficit of $1,822,220 as compared to a working capital deficit of $1,706,502 at our year ended April 30, 2013. The increase in our working capital deficit is primarily due to an increase in accounts payable, accounts payable – related 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.

7


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 interim financial statements included in this Quarterly Report.

ITEM 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

We carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of October 31, 2013 (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

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended October 31, 2013 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

8


PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We received a verified complaint (the “Complaint”), dated September 12, 2013, that was filed in Arizona Superior Court, Maricopa County, by McKendry Enterprises, Inc. Profit Sharing Plan and Retirement Trust (the “Landlord”), alleging breach of contract and breach of covenant of good faith and fair dealing in relation to the lease agreement dated June 6, 2007, between the Landlord and us, as amended (the “Lease Agreement”). The Complaint seeks to recover damages of at least $108,581, including, but not limited to: (1) $56,358 in rent; (ii) $52,223 for maintenance, clean up costs and construction; and (3) undetermined damages for additional repair, clean up and legal fees. We intend to vigorously defend this lawsuit. There is no assurance that we will be able to successfully defend the lawsuit. We are currently evaluating the merits of the lawsuit and the probability of a favorable outcome. Rent expense of $50,858 is recorded in accounts payable as at October 31, 2013. In the event of an unfavorable outcome, we will be required to record additional liability.

ITEM 1A. RISK FACTORS.

The following are some of the important factors that could affect our financial performance or could cause actual results to differ materially from estimates contained in our forward-looking statements. We may encounter risks in addition to those described below. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may also impair or adversely affect our business, financial condition or results of operation.

If we do not obtain additional financing, we may not be able to continue our operations at our Scottsdale Facility or enter into any potential joint venture or licensing agreements.

As of October 31, 2013, we had cash on hand of $6,471 and accumulated net loss of $15,353,184 and accumulated other comprehensive loss of $683,055 since inception. Our plan of operation calls for significant expenses in connection with the operation of our Scottsdale Facility, and the entry any potential joint venture of licensing agreements. 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.

We are currently, party to a lawsuit that may be expensive and time consuming, and, if resolved adversely, could have a significant impact on our business and financial condition.

We received a verified complaint (the “Complaint”), dated September 12, 2013, that was be filed in Arizona Superior Court, Maricopa County, by McKendry Enterprises, Inc. Profit Sharing Plan and Retirement Trust (the “Landlord”), alleging breach of contract and breach of covenant of good faith and fair dealing in relation to the lease agreement dated June 6, 2007, between the Landlord and us, as amended (the “Lease Agreement”). The Complaint seeks to recover damages of at least $108,581, including, but not limited to: (1) $56,358 in rent; (ii) $52,223 for maintenance, clean up costs and construction; and (3) undetermined damages for additional repair, clean up and legal fees. We intend to vigorously defend this lawsuit. There is no assurance that we will be able to successfully defend the lawsuit. If the lawsuit is resolved unfavorably it will have a significant impact on our business operations and will limit our ability to continue our operations.

Because we are an exploration stage company, we face a high risk of business failure.

We have earned minimal revenues from the processing of ore at our Phoenix and Scottsdale Facilities. Our primary business activities have involved the exploration and development on the Piute Valley Property and the commencement of operations at our Phoenix Facility and Scottsdale Facility. In November 2012, we shut down our Phoenix Facility and we have no plans to continue that operation. Potential investors should be aware of the difficulties normally encountered by exploration stage companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates.

9


Because we anticipate our operating expenses will increase prior to our earning significant revenues, we may never achieve profitability.

Prior to completion of our exploration stage, we anticipate that we will incur increased operating expenses prior to realizing any significant revenues. We therefore expect to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from the operation of our Scottsdale Facility or the exploration and development of our mineral property and the production of minerals thereon, if any, we will not be able to earn profits or continue operations. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we may not be able to ever generate any operating revenues or achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail.

Because of the speculative nature of exploration of mining properties, there is substantial risk that no commercially exploitable minerals will be found and our business will fail.

The search for valuable minerals as a business is extremely risky. We may not find commercially exploitable reserves of precious metals on our mineral claims. Exploration for minerals is a speculative venture, necessarily involving substantial risk. The expenditures to be made by us in the upcoming exploration of the mineral claims may not result in the discovery of commercial quantities of ore. Problems such as unusual or unexpected formations and other conditions are involved in mineral exploration and often result in unsuccessful exploration efforts. In such a case, we would be unable to complete our business plan.

Because of the inherent dangers involved in mineral exploration, there is a risk that we may incur liability or damages if and when we conduct mineral exploration activities.

The search for valuable minerals involves numerous hazards. As a result, if and when we conduct exploration activities we may become subject to liability for such hazards, including pollution, cave-ins and other hazards against which we cannot insure or against which we may elect not to insure. The payment of such liabilities may have a material adverse effect on our financial position.

Certain work to be performed at our facilities may require us to apply for permits from federal, state or local regulatory bodies.

If our applications for permits from the relevant regulatory bodies are denied, we may not be able to proceed with our exploration and development programs as disclosed above, which could have a negative effect on our business.

If we are unable to hire and retain key personnel, we may not be able to implement our business plan and our business will fail.

Our success will largely depend on our ability to hire highly qualified personnel with experience in geological exploration. These individuals may be in high demand and we may not be able to attract the staff we need. In addition, we may not be able to afford the high salaries and fees demanded by qualified personnel, or may lose such employees after they are hired. Our failure to hire key personnel when needed could have a significant negative effect on our business.

If we complete additional financings through the sale of shares of our common stock, our existing stockholders will experience dilution.

The most likely source of future financing presently available to us is through the issuance of our common stock. The only other anticipated alternative for the financing of further exploration would be the offering by us of an interest in our properties to be earned by another party or parties carrying out further exploration thereof, which is not presently contemplated. Issuing shares of our common stock, for financing purposes or otherwise, will dilute the interests of our existing stockholders.

10


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. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

None.

ITEM 5. OTHER INFORMATION.

None.

11


ITEM 6. EXHIBITS.

Exhibit  
Number Description of Exhibits
2.1

Agreement and Plan of Merger dated September 24, 2007 among the Company, Royal Mines Acquisition Corp., Royal Mines Inc. and Kevin B. Epp. (4)

2.2

Agreement and Plan of Merger dated October 6, 2007 between the Company and Royal Mines Acquisition Corp. (5)

3.1

Articles of Incorporation. (1)

3.2

Certificate of Change Pursuant to NRS 78.209 increasing the authorized capital of common stock to 300,000,000 shares, par value $0.001 per share. (2)

3.3

Certificate of Amendment Pursuant increasing the authorized capital of common stock to 900,000,000 shares, par value $0.001 per share.(27)

3.4

Bylaws. (1)

3.5

Articles of Merger between the Company and Royal Mines Acquisition Corp. (5)

4.1

Form of Share Certificate. (1)

10.1

Mineral Property Option Agreement dated January 28, 2007 between Eugene E. Phebus and Royal Mines Inc. (5)

10.2

Mineral Property Option Agreement dated January 28, 2007 between Charles G. Moore and Royal Mines Inc. (5)

10.3

Mineral Property Option Agreement dated January 10, 2007 between James E. Sharp and Royal Mines Inc. (5)

10.4

Mineral Property Option Agreement dated January 28, 2007 between Ben Barnes and Royal Mines Inc. (5)

10.5

Mineral Property Option Agreement dated January 28, 2007 between Walter Simmons II and Royal Mines Inc. (5)

10.6

Mineral Property Option Agreement dated January 28, 2007 between Leo Corbet and Royal Mines Inc. (5)

10.7

Mineral Property Option Agreement dated January 28, 2007 between William Tao and Royal Mines Inc. (5)

10.8

Mineral Property Option Agreement dated January 28, 2007 between Dr. Wilbur J. Guay and Royal Mines Inc. (5)

10.9

Mineral Property Option Agreement dated January 28, 2007 between Olivia Tearnan and Royal Mines Inc. (5)

10.10

Mineral Property Option Agreement dated January 28, 2007 between Jim Mack and Royal Mines Inc. (5)

10.11

Mineral Property Option Agreement dated January 28, 2007 between Ron Manarey and Royal Mines Inc. (5)

10.12

Mineral Property Option Agreement dated January 28, 2007 between William Lintz and Royal Mines Inc. (5)

10.13

Technology and Asset Purchase Agreement dated April 2, 2007 among New Verde River Mining Co., Inc., Robert H. Gunnison and Royal Mines Inc. (5)

10.14

Restatement and Amendment to Lease Agreement dated April 12, 2007 among Erline Y. Smith, Trustee, Erline Y. Smith Trust, Lawana Hooper and Royal Mines Inc. (5)

10.15

AV Executive Suites Service Agreement dated September 13, 2007 between Royal Mines Inc. and Anthem Village Executive Suites, LLC. (5)

10.16

Residential Lease Agreement of La Cienega Office. (5)

10.17

Lease Agreement dated June 6, 2007 among McKendry Enterprises Inc., Profit Sharing Plan and Retirement Trust and Royal Mines Inc. (5)

12



Exhibit  
Number Description of Exhibits
10.18

2008 Stock Incentive Plan. (6)

10.19

Non-Qualified Stock Option Agreement between the Company and William C. Tao. (6)

10.20

Non-Qualified Stock Option Agreement between the Company and Jason S. Mitchell. (6)

10.21

Extension Agreement between the Company and Robert H. Gunnison.(7)

10.22

Settlement Agreement and Mutual Release dated effective November 15, 2008 between the Company and William C. Tao. (8)

10.23

Extension Agreement dated November 18, 2008 between the Company and Robert H. Gunnison. (9)

10.24

2009 Stock Incentive Plan. (10)

10.25

Form of Non-Qualified Stock Option Agreement for Directors and Executive Officers. (10)

10.26

Management Consulting Agreement dated February 24, 2009 between the Company and Jason S. Mitchell. (11)

10.27

Payment Extension and License Agreement dated March 13, 2009 between New Verde River Mining Co., Inc., Robert H. Gunnison and the Company. (12)

10.28

Proprietary Intellectual Property License Agreement dated March 24, 2009 between the Company and Greene Lyon Group, LLC. (13)

10.29

Consulting Agreement dated August 14, 2009 between the Company and Mirador Consulting, Inc. (14)

10.30

Brecheisen License Agreement dated August 12, 2009 between Brecheisen Company, Inc., Keith D. Brecheisen, Lorna J. Brecheisen and the Company. (15)

10.31

Letter of Intent dated October 21, 2009 between the Company and Golden Anvil, SA de CV. (16)

10.32

First Amendment of Lease Agreement dated November 20, 2009 among McKendry Enterprises Inc., Profit Sharing Plan and Retirement Trust and Royal Mines Inc. (5)

10.33

Toll Processing Agreement dated December 3, 2009 between the Company and Golden Anvil, SA de CV. (17)

10.34

2010 Stock Incentive Plan. (17)

10.35

Form of Non-Qualified Stock Option Agreement for Directors and Executive Officers. (17)

10.36

Extension Agreement dated for reference February 15, 2010 between the Company and Golden Anvil, SA de CV. (18)

10.37

Loan Agreement between Royal Mines And Minerals Corp. (Lender) and Golden Anvil, SA de CV (Borrower). (19)

10.38

Extension Agreement dated July 22, 2010, between Robert H. Gunnison (Lender) and Royal Mines and Minerals Corp (Borrower).(20)

10.39

2011 Stock Incentive Plan.(20)

10.40

Consulting Agreement dated for reference March 10, 2011 between the Company and Complete Advisory Partners, LLC.(21)

10.41

Form of Compensation Stock Award Agreement.(22)

10.42

Consulting Agreement dated for reference September 8, 2011 between the Company and James Mack.(23)

10.45

Consulting Services Agreement dated February 1, 2012 between the Company and Alvin A. Snaper.(24)

10.46

Agreement dated June 14, 2012 between the Company and Phoenix PMX LLC.(25)

10.47

2013 Stock Incentive Plan.(26)

10.48

Settlement and Security Release Agreement dated September 27, 2013 between the Company and Golden Anvil S.A. de C.V.(28)

10.49

Form of Non-Qualified Option Agreement. (29)

13



Exhibit  
Number Description of Exhibits
14.1

Code of Ethics. (3)

31.1

Certification of Chief Executive Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Chief Financial Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of Chief Executive Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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 5, 2008.

(7)

Filed with the SEC as an exhibit to our Quarterly Report on Form 10-Q filed September 15, 2008.

(8)

Filed with the SEC as an exhibit to our Current Report on Form 8-K filed November 18, 2008.

(9)

Filed with the SEC as an exhibit to our Quarterly Report on Form 10-Q filed December 15, 2008.

(10)

Filed with the SEC as an exhibit to our Current Report on Form 8-K filed January 16, 2009.

(11)

Filed with the SEC as an exhibit to our Current Report on Form 8-K filed February 26, 2009.

(12)

Filed with the SEC as an exhibit to our Quarterly Report on Form 10-Q filed March 17, 2009.

(13)

Filed with the SEC as an exhibit to our Current Report on Form 8-K filed March 26, 2009.

(14)

Filed with the SEC as an exhibit to our Current Report on Form 8-K filed August 17, 2009.

(15)

Filed with the SEC as an exhibit to our Quarterly Report on Form 10-Q filed September 14, 2009.

(16)

Filed with the SEC as an exhibit to our Current Report on Form 8-K filed November 3, 2009.

(17)

Filed with the SEC as an exhibit to our Current Report on Form 8-K filed December 10, 2009.

(18)

Filed with the SEC as an exhibit to our Quarterly Report on Form 10-Q filed March 16, 2010.

(19)

Filed with the SEC as an exhibit to our Current Report on Form 8-K filed August 31, 2010.

(20)

Filed with the SEC as an exhibit to our Quarterly Report on Form 10-Q filed September 15, 2010.

(21)

Filed with the SEC as an exhibit to our Quarterly Report on Form 10-Q filed March 17, 2011.

(22)

Filed with the SEC as an exhibit to our Current Report on Form 8-K filed April 1, 2011.

(23)

Filed with the SEC as an exhibit to our Current Report on Form 8-K filed September 14, 2011.

(24)

Filed with the SEC as an exhibit to our Current Report on Form 8-K filed February 1, 2012.

(25)

Filed with the SEC as an exhibit to our Current Report on Form 8-K filed June 20, 2012.

(26)

Filed with the SEC as an exhibit to our Current Report on Form 8-K filed June 24, 2013.

(27)

Filed with the SEC as an exhibit to our Current Report on Form 8-K filed August 28, 2013.

(28)

Filed with the SEC as an exhibit to our Current Report on Form 8-K filed October 2, 2013.

(29)

Filed with the SEC as an exhibit to our Current Report on Form 8-K filed November 1, 2013

14


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

               ROYAL MINES AND MINERALS CORP.
   
   
   
Date: December 23, 2013 By:       /s/ K. Ian Matheson
               K. IAN MATHESON
               Chief Executive Officer
               (Principal Executive Officer)
   
   
   
   
Date: December 23, 2013 By:       /s/ Jason S. Mitchell
               JASON S. MITCHELL
               Chief Financial Officer
               (Principal Accounting Officer)