Item 17. Financial Statements.
Following is a list of financial statements
filed as part of this annual report on Form 20-F.
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·
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Auditor's
Report for Royal Standard Minerals Inc. for the years ended January 31, 2016 and 2015.
Consolidated Statements of Financial Position of Royal Standard Minerals Inc. as at January
31, 2016 and January 31, 2015.
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·
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Consolidated
Statements of Operations of Royal Standard Minerals Inc. for the years ended January
31, 2016 and 2015.
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·
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Consolidated
Statements of Comprehensive Loss of Royal Standard Minerals Inc. for the years ended
January 31, 2016 and 2015.
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·
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Consolidated
Statements of Changes in Shareholders’ Equity of Royal Standard Minerals Inc. for
the years ended January 31, 2016 and 2015.
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·
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Consolidated
Statements of Cash Flows of Royal Standard Minerals Inc. for the years ended January
31, 2016 and 2015.
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·
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Notes
to the Consolidated Financial Statements of Royal Standard Minerals Inc. for the years
ended January 31, 2016 and 2015.
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·
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Management's
Discussion and Analysis for the year ended January 31, 2016.
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·
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Auditor's
Report for Royal Standard Minerals Inc. for the years ended January 31, 2015 and 2014.
Consolidated Statements of Financial Position of Royal Standard Minerals Inc. as at January
31, 2015 and, January 31, 2014.
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|
·
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Consolidated
Statements of Operations of Royal Standard Minerals Inc. for the years ended January
31, 2015 and 2014.
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·
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Consolidated
Statements of Comprehensive Loss of Royal Standard Minerals Inc. for the years ended
January 31, 2015 and 2014.
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·
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Consolidated
Statements of Shareholders' Equity of Royal Standard Minerals Inc. for the years ended
January 31, 2015 and 2014.
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·
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Consolidated
Statements of Cash Flows of Royal Standard Minerals Inc. for the years ended January
31, 2015 and 2014.
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·
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Notes
to the Consolidated Financial Statements of Royal Standard Minerals Inc. for the years
ended January 31, 2015 and 2014.
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·
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Management's
Discussion and Analysis for the year ended January 31, 2015.
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The consolidated financial statements
of Royal Standard Minerals Inc. were prepared in accordance with International Financial Reporting Standards and are expressed
in United States dollars.
Royal Standard
Minerals Inc.
(Expressed in
United States Dollars)
Financial Statements
Years Ended January
31, 2016 and 2015
Independent Auditors’
Report
To the Shareholders
of Royal Standard Minerals Inc.
We have audited
the accompanying financial statements of Royal Standard Minerals Inc., which comprise the statements of financial position as
at January 31, 2016 and 2015, and the statements of operations, comprehensive loss, changes in shareholders' deficiency and cash
flows for the years then ended, and a summary of significant accounting policies and other explanatory information.
Management's
Responsibility for the Financial Statements
Management is responsible
for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards
and for such internal control as management determines is necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.
Auditors’
Responsibility
Our responsibility
is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian
generally accepted auditing standards and with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free from material misstatement.
The Company is
not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion.
An audit involves
performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected
depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's
preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit
also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.
We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion,
the financial statements present fairly, in all material respects, the financial position of Royal Standard Minerals Inc. as at
January 31, 2016 and 2015, and its financial performance and its cash flows for the years then ended in accordance with International
Financial Reporting Standards.
Emphasis of
Matter
Without modifying
our opinion, we draw attention to Note 1 to the financial statements which highlights the existence of a material uncertainty
relating to conditions that cast significant doubt on Royal Standard Minerals Inc.'s ability to continue as a going concern.
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Chartered
Professional Accountants
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|
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Licensed
Public Accountants
|
Mississauga, Ontario
May 25, 2016
Royal Standard
Minerals Inc.
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Statements of Financial Position
|
(Expressed
in United States Dollars)
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|
|
As at
|
|
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As at
|
|
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January 31,
|
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January 31,
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2016
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2015
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|
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ASSETS
|
|
|
|
|
|
|
|
|
|
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|
|
|
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Current
|
|
|
|
|
|
|
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Cash and cash equivalents
|
|
$
|
10,413
|
|
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$
|
4,035
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|
Sundry receivables and prepaids
(Note 6)
|
|
|
3,786
|
|
|
|
1,994
|
|
|
|
|
|
|
|
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Total assets
|
|
$
|
14,199
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|
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$
|
6,029
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LIABILITIES AND SHAREHOLDERS' DEFICIENCY
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Liabilities
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Current
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|
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Accounts payable and accrued liabilities (Notes
7 and 13)
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$
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50,309
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$
|
53,794
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Notes payable (Notes 8 and
13)
|
|
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51,276
|
|
|
|
15,282
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|
|
|
|
|
|
|
|
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Total liabilities
|
|
|
101,585
|
|
|
|
69,076
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|
|
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Shareholders' Deficiency
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|
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Share capital (Note 13(b))
|
|
|
28,273,230
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|
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28,273,230
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Reserves
|
|
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10,900,438
|
|
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10,900,438
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|
Accumulated deficit
|
|
|
(39,281,602
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)
|
|
|
(39,250,301
|
)
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Accumulated other comprehensive income
|
|
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20,548
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|
|
|
13,586
|
|
|
|
|
|
|
|
|
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|
Total shareholder's deficiency
|
|
|
(87,386
|
)
|
|
|
(63,047
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)
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|
|
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|
|
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Total liabilities and shareholders'
deficiency
|
|
$
|
14,199
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|
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$
|
6,029
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The Company and Operations and Going
Concern
(Note 1)
Approved by the Board
:
"Carmelo
Marrelli"
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|
"George
Duguay"
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Director
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Director
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The accompanying
notes are an integral part of these financial statements.
Royal Standard
Minerals Inc.
|
Statements of Operations
|
(Expressed
in United States Dollars)
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|
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Years Ended
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January 31,
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|
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2016
|
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2015
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|
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Expenses
|
|
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General and administrative (Note
14)
|
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|
31,301
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|
|
|
57,174
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|
|
|
|
|
|
|
|
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Net loss for the year
|
|
|
(31,301
|
)
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|
|
57,174
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|
|
|
|
|
|
|
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Basic (loss) income per share (Note 11)
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|
$
|
(0.00
|
)
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|
$
|
(0.00
|
)
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Diluted (loss) income per share (Note 11)
|
|
$
|
(0.00
|
)
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|
$
|
(0.00
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)
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The accompanying
notes are an integral part of these financial statements.
Royal Standard
Minerals Inc.
|
Statements of Comprehensive
Loss
|
(Expressed
in United States Dollars)
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|
|
Years Ended
|
|
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January 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
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Net (loss) income
for the year
|
|
$
|
(31,301
|
)
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|
$
|
(57,174
|
)
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|
|
|
|
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Other comprehensive income
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|
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Item that will not be reclassified subsequently
to income
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|
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Foreign currency translation
|
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6,962
|
|
|
|
7,684
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|
|
|
|
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Comprehensive (loss) income
for the year
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$
|
(24,339
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)
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$
|
(49,490
|
)
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The accompanying
notes are an integral part of these financial statements.
Royal Standard
Minerals Inc.
|
Statements of Changes in Shareholders'
Deficiency
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(Expressed
in United States Dollars)
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Accumulated
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Other
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Share
|
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Accumulated
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Comprehensive
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Capital
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Reserves
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Deficit
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Income
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Total
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Balance, January 31, 2014
|
|
$
|
28,273,230
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|
|
$
|
10,900,438
|
|
|
$
|
(39,193,127
|
)
|
|
$
|
5,902
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|
|
$
|
(13,557
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)
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Foreign currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,684
|
|
|
|
7,684
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|
Net loss for the year
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|
-
|
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|
-
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|
|
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(57,174
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)
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-
|
|
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|
(57,174
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)
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
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Balance, January 31, 2015
|
|
$
|
28,273,230
|
|
|
$
|
10,900,438
|
|
|
$
|
(39,250,301
|
)
|
|
$
|
13,586
|
|
|
$
|
(63,047
|
)
|
Foreign currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,962
|
|
|
|
6,962
|
|
Net loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
(31,301
|
)
|
|
|
-
|
|
|
|
(31,301
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Balance, January 31, 2016
|
|
$
|
28,273,230
|
|
|
$
|
10,900,438
|
|
|
$
|
(39,281,602
|
)
|
|
$
|
20,548
|
|
|
$
|
(87,386
|
)
|
The accompanying
notes are an integral part of these financial statements.
Royal Standard
Minerals Inc.
|
Statements of Cash Flows
|
(Expressed
in United States Dollars)
|
|
|
Years Ended
|
|
|
|
January 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
Net loss for the year
|
|
$
|
(31,301
|
)
|
|
$
|
(57,174
|
)
|
Operating item not involving cash:
|
|
|
|
|
|
|
|
|
Foreign exchange
|
|
|
6,962
|
|
|
|
7,684
|
|
Changes in non-cash working capital:
|
|
|
|
|
|
|
|
|
Sundry receivables and prepaid
|
|
|
(1,792
|
)
|
|
|
3,559
|
|
Accounts payable and accrued liabilities
|
|
|
(3,485
|
)
|
|
|
17,877
|
|
|
|
|
|
|
|
|
|
|
Cash used in operating activities
|
|
|
(29,616
|
)
|
|
|
(28,054
|
)
|
|
|
|
|
|
|
|
|
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Financing activities
|
|
|
|
|
|
|
|
|
Notes payable
|
|
|
35,994
|
|
|
|
15,282
|
|
|
|
|
|
|
|
|
|
|
Cash provided by financing activities
|
|
|
35,994
|
|
|
|
15,282
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
6,378
|
|
|
|
(12,772
|
)
|
Cash and cash equivalents, beginning of year
|
|
|
4,035
|
|
|
|
16,807
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
$
|
10,413
|
|
|
$
|
4,035
|
|
The accompanying
notes are an integral part of these financial statements.
Royal Standard
Minerals Inc.
|
Notes to Financial Statements
|
(Expressed in United States
Dollars)
|
January
31, 2016 and 2015
|
|
1.
|
The Company and Operations
and Going Concern
|
Royal
Standard Minerals Inc. (the "Company") is a publicly held company focused on identifying suitable assets or businesses
to acquire or merge with, with a view to maximizing value for shareholders. The Company was previously engaged in the acquisition,
exploration and development of gold and precious metal properties in the United States of America but has disposed of these interests.
The Company is continued under the Canada Business Corporations Act and its common shares are quoted in the United States of America
on the Over-the-Counter ("OTC") Bulletin Board. Inception has been deemed to be June 26, 1996, the date on which the
Company acquired all of the outstanding common shares of Southeastern Resources Inc. ("SRI"), which acquisition was
accounted for as a reverse takeover of the Company by SRI. The Company's head office is located at 36 Toronto Street, Suite 1000,
Toronto, Ontario, M5C 2C5, Canada.
The
financial statements were approved by the Board of Directors on May 25, 2016.
These
financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assume that
the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities
in the normal course of operations as they come due. In assessing whether the going concern assumption is appropriate, management
takes into account all available information about the future, which is at least, but is not limited to, twelve months from the
end of the reporting period. Management is aware, in making its assessment, of material uncertainties related to events or conditions
that cast significant doubt upon the entity's ability to continue as a going concern. The Company had a loss of $31,301 during
the year ended January 31, 2016 (year ended January 31, 2015 - loss of $57,174) and has an accumulated deficit of $39,281,602
(January 31, 2015 - $39,250,301). In addition, the Company has a working capital deficiency of $87,386 at January 31, 2016 (January
31, 2015 -
$63,047).
There
is significant doubt regarding the going concern assumption and, accordingly, the ultimate appropriateness of the use of accounting
principles applicable to a going concern. These financial statements do not reflect the adjustments, to the carrying values or
classifications of assets and liabilities or to the reported expenses that would be necessary if the Company were unable to realize
its assets and settle its liabilities as a going concern in the normal course of operations for the foreseeable future. These
adjustments could be material.
|
2.
|
Significant Accounting Policies
|
Statement
of compliance
The financial statements
have been prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the International
Accounting Standards Board (“IASB”) and interpretations issued by the IFRS Interpretations Committee of the IASB.
The policies set out below have been consistently applied to all periods presented.
Royal Standard Minerals Inc.
|
Notes to Financial Statements
|
(Expressed in United States
Dollars)
|
January
31, 2016 and 2015
|
|
2.
|
Significant Accounting Policies
(Continued)
|
Share-based
payments
The fair value
of the stock options granted to directors, officers and employees is determined using the Black-Scholes option pricing model and
management's assumptions and recorded as share-based payments expense over the vesting period of the stock options, with the offsetting
credit recorded as an increase in reserves. The fair value of stock options issued to other than employees are measured at the
fair value of the goods or services received unless this cannot be reliably estimated, and are recognized over the period of service.
If the stock options are exercised, the proceeds are credited to share capital and the fair value at the date of grant is reclassified
from reserves to share capital.
Income
taxes
Tax
expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent
that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.
Current
tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively
enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred
tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the
initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting
nor taxable profit or loss, and differences relating to investments in subsidiaries and jointly controlled entities to the extent
that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable
temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected
to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by
the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax
liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different
tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities
will be realized simultaneously.
A deferred
tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable
that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting
date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Royal Standard
Minerals Inc.
|
Notes to Financial Statements
|
(Expressed in United States
Dollars)
|
January
31, 2016 and 2015
|
|
2.
|
Significant Accounting Policies
(Continued)
|
Income per common share
Basic income per share is computed by
dividing the income or loss for the year by the weighted average number of common shares outstanding during the year, including
contingently issuable shares which are included when the conditions necessary for issuance have been met. Diluted income per share
is calculated in a similar manner, except that the weighted average number of common shares outstanding is increased to include
potentially issuable common shares from the assumed exercise of common share purchase options and warrants, if dilutive. The number
of additional shares included in the calculation is based on the treasury stock method for options and warrants.
Foreign
currency translation
The
Company translates the assets and liabilities of the Company from the functional currency of Canadian Dollars to the presentation
currency at the period end rate. Revenue and expenses are translated at the average rate of exchange prevailing during the period.
The resulting unrealized gain or loss on translation is recognized as other comprehensive income or loss. Equity is translated
at historical rates.
Financial
instruments
The
Company recognizes financial assets and financial liabilities when the Company becomes a party to a contract. Financial assets
and financial liabilities, with the exception of financial assets classified at fair value through profit or loss, are measured
at fair value plus transaction costs on initial recognition. Financial assets at fair value through profit or loss are measured
at fair value on initial recognition and transaction costs are expensed when incurred. Securities are accounted for at the trade
date.
Measurement
in subsequent periods depends on the classification of the financial instrument.
|
i)
|
Financial assets at fair
value through profit or loss ("FVTPL")
|
Financial
assets are classified as FVTPL when acquired principally for the purpose of trading, if so designated by management (fair value
option), or if they are derivative assets that are not part of an effective and designated hedging relationship. Financial assets
classified as FVTPL are measured at fair value, with changes recognized in the statements of operations.
The
Company’s financial assets classified as FVTPL include cash and cash equivalents. The Company does not currently hold any
derivative instruments or apply hedge accounting.
|
ii)
|
Available-for-sale financial
assets
|
Financial
assets are classified as available-for-sale when so designated by management. Financial assets classified as available-for-sale
are measured at fair value, with changes recognized in the other comprehensive income.
The
Company did not have any financial asset classified as available-for-sale at January 31, 2016 and January 31, 2015.
Royal Standard
Minerals Inc.
|
Notes to Financial Statements
|
(Expressed in United States
Dollars)
|
January
31, 2016 and 2015
|
|
2.
|
Significant Accounting Policies
(Continued)
|
Financial
instruments (continued)
|
iii)
|
Loans
and receivables
|
Loans and receivables
are non-derivative financial assets that have fixed or determinable payments and are not quoted in an active market. Subsequent
to initial recognition, loans and receivables are carried at amortized cost using the effective interest method.
Sundry
receivables are classified as loans and receivables.
|
iv)
|
Financial liabilities at
FVTPL
|
This category comprises
derivatives, or liabilities acquired or incurred principally for the purpose of being sold or repurchased in the near term. They
are carried in the statements of financial position at fair value with changes in fair value recognized in the statements of operations.
The Company may
enter into certain financial derivative contracts in order to manage the exposure to market risks from fluctuations in commodity
prices. The Company’s policy is not to utilize derivative financial instruments for speculative purposes.
Embedded derivatives
are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract
and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would
meet the definition of a derivative, and the combined instrument is not measured at FVTPL. Changes in the fair value of separable
embedded derivatives are recognized immediately in profit or loss.
|
v)
|
Other financial liabilities
|
Other financial
liabilities are financial liabilities that are not classified as FVTPL. Subsequent to initial recognition, other financial liabilities
that are not subject to hedge accounting, are measured at amortized cost using the effective interest method.
Accounts payable
and accrued liabilities and notes payable are classified as other financial liabilities. The Company does not currently apply
hedge accounting.
The effective interest
method is a method of calculating the amortized cost of an instrument and of allocating interest income over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid
or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through
the expected life of the debt instrument to the net carrying amount on initial recognition.
Royal Standard
Minerals Inc.
|
Notes to Financial Statements
|
(Expressed in United States
Dollars)
|
January
31, 2016 and 2015
|
|
2.
|
Significant Accounting Policies (Continued)
|
Financial
instruments (continued)
|
vi)
|
Financial
instruments recorded at fair value
|
Financial instruments
recorded at fair value on the statements of financial position are classified using a fair value hierarchy that reflects the significance
of the inputs used in making the measurements. The fair value hierarchy has the following levels: Level 1 - valuation based on
quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 - valuation techniques based on inputs
other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices); and Level 3 - valuation techniques using inputs for the asset or liability that are
not based on observable market data (unobservable inputs). As of January 31, 2016 and January 31, 2015, the financial asset measured
at fair value is the Company's cash and cash equivalents.
Cash and cash equivalents
is considered Level 1.
Significant
accounting judgments and estimates
The preparation
of these financial statements requires management to make certain estimates, judgments and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting
period. Actual outcomes could differ from these estimates. These financial statements include estimates that, by their nature,
are uncertain. The impacts of such estimates are pervasive throughout the financial statements, and may require accounting adjustments
based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and
future periods if the revision affects both current and future periods. These estimates are based on historical experience, current
and future economic conditions and other factors, including expectations of future events that are believed to be reasonable under
the circumstances.
Critical
accounting judgments
|
·
|
the
measurement of income taxes payable and deferred income tax assets and liabilities requires
management to make judgments in the interpretation and application of the relevant tax
laws. Deferred tax assets require management to assess the likelihood that the Company
will generate taxable income in future periods in order to utilize recognized deferred
tax assets;
|
|
·
|
going
concern presentation of the financial statements which assumes that the Company will
continue in operation for the foreseeable future and will be able to realize its assets
and discharge its liabilities in the normal course of operations as they come due; and
|
|
·
|
management's
determination that the functional currency of the Company is the Canadian Dollar.
|
Royal Standard
Minerals Inc.
|
Notes to Financial Statements
|
(Expressed in United States
Dollars)
|
January
31, 2016 and 2015
|
|
2.
|
Significant Accounting Policies (Continued)
|
Adoption
of new accounting standards
The amendments
to IAS 24, issued in December 2013, clarify that a management entity, or any member of a group of which it is a part, that provides
key management services to a reporting entity, or its parent, is a related party of the reporting entity. The amendments also
require an entity to disclose amounts incurred for key management personnel services provided by a separate management entity.
This replaces the more detailed disclosure by category required for other key management personnel compensation. The amendments
will only affect disclosure and are effective for annual periods beginning on or after July 1, 2014. At February 1, 2015, the
Company adopted this pronouncement and there was no material effect on its financial statements.
New standards
not yet adopted and interpretations issued but not yet effective
IFRS 9 –
Financial instruments (“IFRS 9”) was issued by the IASB in October 2010 and will replace IAS 39 - Financial Instruments:
Recognition and Measurement (“IAS 39”). IFRS 9 uses a single approach to determine whether a financial asset is measured
at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages
its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial
assets. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged
to IFRS 9. The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in
IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2018. Earlier adoption is permitted. The Company
is in the process of assessing the impact of this pronouncement.
The Company manages
its capital with the following objectives:
|
·
|
to
ensure sufficient financial flexibility to achieve the ongoing business objectives; and
|
|
·
|
to
maximize shareholder return through enhancing the share value.
|
The Company monitors
its capital structure and makes adjustments according to market conditions in an effort to meet its objectives given the current
outlook of the business and industry in general. The Company may manage its capital structure by issuing new shares, repurchasing
outstanding shares, adjusting capital spending, or disposing of assets. The capital structure is reviewed by Management and the
Board of Directors on an ongoing basis.
The Company's equity
comprises of share capital, reserves, accumulated other comprehensive income and accumulated deficit, which at January 31, 2016
was a deficiency of $87,386 (January 31, 2015 - $63,047). Note that included in the statements of financial position presented
is a deficit of $39,281,602 as at January 31, 2016 (January 31, 2015 - $39,250,301).
The Company manages
capital through its financial and operational forecasting processes. The Company reviews its working capital and forecasts its
future cash flows based on operating expenditures, and other investing and financing activities. Selected information is provided
to the Board of Directors of the Company. The Company’s capital management objectives, policies and processes have remained
unchanged during the year ended January 31, 2016. The Company is not subject to external capital requirements.
Royal Standard
Minerals Inc.
|
Notes to Financial Statements
|
(Expressed in United States
Dollars)
|
January
31, 2016 and 2015
|
|
4.
|
Financial Risk Factors
|
|
(a)
|
Financial risk factors
|
The Company’s
activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including interest rate and
foreign currency risk).
Risk management
is carried out by the Company's management team with guidance from the Audit Committee under policies approved by the Board of
Directors. The Board of Directors also provides regular guidance for overall risk management.
(i)Credit
risk
Credit
risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations. The Company's credit
risk is primarily attributable to cash and cash equivalents. The Company has no significant concentration of credit risk arising
from operations. Cash and cash equivalents are held with reputable financial institutions, from which management believes the
risk of loss to be minimal.
(ii)Liquidity
risk
The Company's
approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due (see note
1). As at January 31, 2016, the Company had a cash balance of $10,413 (January 31, 2015 - $4,035) to settle current liabilities
of $101,585 (January 31, 2015 - $69,076). All of the Company's financial liabilities have contractual maturities of less than
60 days and are subject to normal trade terms.
(iii)Market
risk
Market risk is the risk of
loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity and equity prices.
Interest
rate risk
The Company
has cash balances and no variable interest-bearing debt. The Company's current policy is to invest excess cash in guaranteed investment
certificates, bankers' acceptance and money market deposits, with reputable financial institutions. The interest rate risk is
remote.
Foreign
currency risk
The
Company's functional currency is Canadian dollars and major purchases are transacted in Canadian dollars. The Company's reporting
currency is the United States dollar.
Royal Standard
Minerals Inc.
|
Notes to Financial Statements
|
(Expressed in United States
Dollars)
|
January
31, 2016 and 2015
|
Marketable
securities consist of 2,000,000 common shares of Sharpe Resources Corporation ("Sharpe"). Sharpe is a publicly held
Canadian company engaged in the exploration and development of coal properties in the United States. In the year ended January
31, 2014, as a result of the continued and significant decline in the market value and the delisting of the shares, the Company
has written down the investment to $nil.
|
6.
|
Sundry Receivables and Prepaid
|
|
|
As at
|
|
|
As at
|
|
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Sales tax receivables
|
|
$
|
3,786
|
|
|
$
|
1,994
|
|
|
7.
|
Accounts Payable and Accrued Liabilities
|
|
|
As at
|
|
|
As at
|
|
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2016
|
|
|
2015
|
|
Trade payables
|
|
$
|
18,680
|
|
|
$
|
27,609
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities
|
|
|
31,629
|
|
|
|
26,185
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
50,309
|
|
|
$
|
53,794
|
|
(i) The
Company entered into a series of promissory note arrangements for the purposes of covering accounting fees, whereby the Company
borrowed a total of CDN $37,861 from C. Marrelli Services Limited (the "Notes"). C. Marrelli Services Limited controls
278,960,559 common shares of the Company and is 100% owned by Carmelo Marrelli. The Notes are unsecured, bear interest at a rate
of 2% per annum and are due on demand.
(ii) On
February 12, 2015, the Company obtained separate promissory notes of CDN$4,000 from each of George Duguay, C. Marrelli Services
Limited and Lonnie Kirsh, for total promissory notes of CDN$12,000. These notes are unsecured, bear interest at an annual rate
at 2% and are due on demand.
(iii) The
Company entered into a series of promissory note arrangements of CDN$7,000 from each of George Duguay, C. Marrelli Services Limited
and Lonnie Kirsh, for total promissory notes of CDN$21,000. These notes are unsecured, bear interest at an annual rate at 2% and
are due on demand.
Royal Standard Minerals Inc.
Notes to Financial Statements
(Expressed in United States Dollars)
January 31, 2016 and 2015
The authorized capital of the
Company consists of an unlimited number of common shares and an unlimited number of preferred shares, each without par value.
|
|
Shares
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
Balance, January 31, 2014, January 31, 2015 and January 31, 2016
|
|
|
920,835,502
|
|
|
|
28,273,230
|
|
Under the Company's stock option plan (the
"Option Plan"), the directors of the Company can grant options to acquire common shares of the Company to directors,
employees and others who provide ongoing services to the Company. Exercise prices cannot be less than the closing price of the
Company's shares on the trading day preceding the grant date and the maximum term of any option cannot exceed ten years.
The number of common shares under option
at any time under the Option Plan or otherwise cannot exceed 5% of the then outstanding common shares of the Company for any optionee.
In addition, options granted to insiders of the Company cannot exceed more than 10% of the then outstanding common shares of the
Company. Options granted may be subject to vesting restrictions at the discretion of the board.
Option pricing models require the input
of highly subjective assumptions including the expected price volatility. Changes in the subjective input assumptions can materially
affect the fair value estimate, and therefore the existing models do not necessarily provide a reliable measure of the fair value
of the Company's share purchase options.
The following table reflects the continuity
of stock options for the years ended January 31, 2016 and 2015:
|
|
Number of
|
|
|
Weighted Average
|
|
|
|
Stock Options
|
|
|
Exercise Price
|
|
|
|
|
|
|
|
|
Balance, January 31, 2014
|
|
|
2,350,000
|
|
|
$
|
0.25
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(2,200,000
|
)
|
|
|
0.26
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(150,000
|
)
|
|
|
0.10
|
|
|
|
|
|
|
|
|
|
|
January 31, 2015 and January 31, 2016
|
|
|
-
|
|
|
|
-
|
|
Royal Standard Minerals Inc.
Notes to Financial Statements
(Expressed in United States Dollars)
January 31, 2016 and 2015
|
11.
|
Basic and Diluted Loss Per Share
|
The following table sets forth the computation of basic and
diluted loss per share:
|
|
Years
Ended
January 31,
|
|
|
|
2016
|
|
|
2015
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Loss for the year
|
|
$
|
(31,301
|
)
|
|
$
|
(57,174
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding for basic loss per share
|
|
|
920,835,502
|
|
|
|
920,835,502
|
|
Weighted average number of common shares outstanding for diluted loss per share
|
|
|
920,835,502
|
|
|
|
920,835,502
|
|
Basic loss per share
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
Diluted loss per share
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
The following table reconciles the expected income tax expense
(recovery) at the Canadian statutory income tax rate at 26.50% (2015 - 26.50%) to the amounts recognized in the statements of operations:
|
|
Years
Ended
January 31,
|
|
|
|
2016
|
|
|
2015
|
|
Net (loss) income before income taxes
|
|
$
|
(31,301
|
)
|
|
$
|
(57,174
|
)
|
Expected tax (recovery) expense at statutory rate
|
|
$
|
(8,295
|
)
|
|
$
|
(15,151
|
)
|
Permanent differences
|
|
|
7,676
|
|
|
|
-
|
|
Functional currency translation
|
|
|
203,136
|
|
|
|
447,091
|
|
Tax benefits not recognized
|
|
|
(202,517
|
)
|
|
|
(431,940
|
)
|
Tax provision
|
|
$
|
-
|
|
|
$
|
-
|
|
Royal Standard Minerals Inc.
Notes to Financial Statements
(Expressed in United States Dollars)
January 31, 2016 and 2015
|
12.
|
Income Taxes (continued)
|
Deferred Tax Assets and Liabilities
Unrecognized deferred tax
The following represents the deductible temporary differences
by jurisdiction which have not been recognized in the financial statements.
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Unclaimed non-capital losses
|
|
$
|
6,060,901
|
|
|
$
|
6,707,041
|
|
Excess of unclaimed resources pools over carrying value of exploration properties
|
|
|
1,095,063
|
|
|
|
1,213,136
|
|
|
|
$
|
7,155,964
|
|
|
$
|
7,920,177
|
|
The excess of unclaimed resources pools over carrying
value of exploration properties can be carried forward indefinitely. The unclaimed non-capital losses carried forward expire as
follows:
|
|
|
|
Canada
|
|
Expires
|
|
2026
|
|
$
|
610,034
|
|
|
|
2027
|
|
|
595,964
|
|
|
|
2028
|
|
|
734,667
|
|
|
|
2029
|
|
|
459,297
|
|
|
|
2030
|
|
|
814,445
|
|
|
|
2031
|
|
|
349,267
|
|
|
|
2032
|
|
|
1,291,401
|
|
|
|
2033
|
|
|
842,938
|
|
|
|
2034
|
|
|
315,642
|
|
|
|
2035
|
|
|
46,207
|
|
|
|
2036
|
|
|
1,039
|
|
|
|
|
|
$
|
6,060,901
|
|
Royal Standard Minerals Inc.
Notes to Financial Statements
(Expressed in United States Dollars)
January 31, 2016 and 2015
|
13.
|
Related Party Transactions and Balances
|
Daniel Crandall, the Chief Financial Officer,
is a senior employee of Marrelli Support Services Inc. ("Marrelli Support"), a firm providing accounting services. Marrelli
Support's President, Carmelo Marrelli, beneficially controls 278,960,559 common shares of the Company through his holding company,
C. Marrelli Services Limited. Fees for services provided by Marrelli Support totaled $15,346, for the year ended January 31, 2016
(year ended January 31, 2015 - $13,027). As at January 31, 2016, Marrelli Support was owed $4,217 and this amount was included
in accounts payable and accrued liabilities (January 31, 2015 - $1,967).
During the year ended January 31, 2016,
the Company incurred fees totaling $810 (year ended January 31, 2015 - $740) for filing services received from DSA Corporate Services
Inc. ("DSA"), an organization that Mr. Marrelli controls. Mr. Marrelli is also the corporate secretary and sole director
of DSA. As at January 31, 2016, DSA was owed $1,182 and this amount was included in accounts payable and accrued liabilities (January
31, 2015 - $15,282).
At January 31, 2016, notes payable of $51,276
(January 31, 2015 - $15,282) is made up of $35,447 (January 31, 2015 - $15,282) owed to C. Marrelli Services Limited, $7,915 (January
31, 2015 - $nil) owed to Lonnie Kirsh, the Chief Executive Officer ("CEO") of the Company and $7,914 (January 31, 2015
- $nil) owed to George Duguay, a director and shareholder of the Company. The notes payable are unsecured, bear interest at 2%
per annum and are due on demand (note 8). The interest expense pertaining to the notes payable for the year ended January 31, 2016
is $587 (year ended January 31, 2015 - $nil).
During the year ended January 31, 2016,
the Company incurred fees totaling $2,711 (year ended January 31, 2015 - $19,899) for legal services received from Kirsh Securities
Law Professional Corporation, a law firm owned by the President and CEO of the Company. An amount of $18,343 is included in accounts
payable and accrued liabilities at January 31, 2016 (January 31, 2015 - $17,446).
During the year ended January 31, 2016,
the Company incurred fees totaling $4,629 (year ended January 31, 2015 - $4,038) for consulting services received from G. Duguay
Services Inc., a firm where George Duguay, a director and shareholder of the Company, is the President. An amount of $7,497 is
included in accounts payable and accrued liabilities at January 31, 2016 (January 31, 2015 - $3,540).
To the knowledge of the directors and senior
officers of the Company, as at January 31, 2016, no person or corporation beneficially owns or exercises control over common shares
of the Company carrying more than 10% of the voting rights attached to all common shares of the Company other than as set out below:
|
|
|
|
|
Percentage of
|
|
|
|
Number of
|
|
|
outstanding
|
|
Major Shareholder
|
|
common shares
|
|
|
common shares
|
|
|
|
|
|
|
|
|
Lonnie Kirsh, Chief Executive Officer and Director
|
|
|
278,960,559
|
|
|
|
30.29
|
%
|
George Duguay, Director
|
|
|
278,960,559
|
|
|
|
30.29
|
%
|
C. Marrelli Services Limited
|
|
|
278,960,559
|
|
|
|
30.29
|
%
|
None of the Company's major shareholders have different voting
rights than other holders of the Company's common shares.
Royal Standard Minerals Inc.
Notes to Financial Statements
(Expressed in United States Dollars)
January 31, 2016 and 2015
|
14.
|
General and Administrative
|
|
|
Years Ended
January 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Corporate development (Note 13)
|
|
$
|
1,968
|
|
|
$
|
2,724
|
|
Office and general (Note 13)
|
|
|
4,047
|
|
|
|
2,418
|
|
Professional fees (Note 13)
|
|
|
20,657
|
|
|
|
47,956
|
|
Travel
|
|
|
-
|
|
|
|
38
|
|
Consulting fees (Note 13)
|
|
|
4,629
|
|
|
|
4,038
|
|
|
|
$
|
31,301
|
|
|
$
|
57,174
|
|
|
15.
|
Segmented Information
|
The Company's operations comprise
a single reporting segment which is currently inactive. As the operations comprise a single reporting segment, amounts disclosed
in the financial statements also represent segment amounts.
ROYAL STANDARD MINERALS INC.
MANAGEMENT’S DISCUSSION
AND ANALYSIS
YEAR ENDED JANUARY 31, 2016
Royal Standard Minerals Inc.
Management’s Discussion
and Analysis
Year Ended January 31, 2016
Discussion Dated May 25, 2016
This Management Discussion and Analysis
(“MD&A”) is dated May 25, 2016 and unless otherwise noted, should be read in conjunction with the Company’s
audited financial statements for the years ended January 31, 2016 and 2015 and the notes thereto. Results are reported in United
States dollars, unless otherwise noted. The Company’s financial statements have been prepared in accordance with International
Financial Reporting Standards (“IFRS”). This MD&A was written to comply with the requirements of National Instrument
51-102-Continuous Disclosure Obligations. In the opinion of management, all adjustments (which consist only of normal recurring
adjustments) considered necessary for a fair presentation have been included. The results presented for the year ended January
31, 2016 are not necessarily indicative of the results that may be expected for any future period.
For the purposes of preparing this MD&A,
management, in conjunction with the Board of Directors, considers the materiality of information. Information is considered material
if (1) such information is a change or a fact that has or would reasonably be expected to have, a significant effect on the market
price or value of the Company’s common shares; or (2) there is a substantial likelihood that a reasonable investor would
consider it important in making an investment decision; or (3) if it would significantly alter the total mix of information available
to investors. Management, in conjunction with the Board of Directors, evaluates materiality with reference to all relevant circumstances,
including potential market sensitivity.
Additional information relating to the
Company can be found on SEDAR at www.sedar.com.
The Company’s common shares are quoted
in the United States of America on the Over the Counter Bulletin Board “OTC:BB”, under the symbol RYSMF.
DISCLOSURE REGARDING FORWARD-LOOKING
STATEMENTS
This MD&A contains certain forward-looking
information and forward-looking statements, as defined in applicable securities laws (collectively referred to herein as “forward-looking
statements”). These statements relate to future events or the Company’s future performance. All statements other than
statements of historical fact are forward-looking statements. Often, but not always, forward-looking statements can be identified
by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”,
“estimates”, “continues”, “forecasts”, “projects”, “predicts”, “intends”,
“anticipates” or “believes”, or variations of, or the negatives of, such words and phrases, or state that
certain actions, events or results “may”, “could”, “would”, “should”, “might”
or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause actual results to differ materially from those anticipated in such forward-looking statements.
The forward-looking statements in this MD&A speak only as of the date of this MD&A or as of the date specified in such
statement. The following table outlines certain significant forward-looking statements contained in this MD&A and provides
the material assumptions used to develop such forward-looking statements and material risk factors that could cause actual results
to differ materially from the forward-looking statements.
Royal Standard Minerals Inc.
Management’s Discussion
and Analysis
Year Ended January 31, 2016
Discussion Dated May 25, 2016
Forward-looking statements
|
|
Assumptions
|
|
Risk factors
|
The Company will be able to continue its business activities.
|
|
The Company has anticipated all material costs and the operating activities of the Company, and such costs and activities will be consistent with the Company’s current expectations; the Company will be able to obtain shareholder loans or equity funding when required.
|
|
Unforeseen costs to the Company will arise; any particular operating cost increase or decrease from the date of the estimation; and capital markets not being favourable for funding and/or related parties discontinue funding the Company resulting in the Company not being able to obtain financing when required or on acceptable terms.
|
|
|
|
|
|
The Company will be able to carry out anticipated business plans.
|
|
The operating activities of the Company for the twelve months ending January 31, 2017, will be consistent with the Company’s current expectations.
|
|
Sufficient funds not being available; increases in costs; the Company may be unable to retain key personnel.
|
Inherent in forward-looking statements
are risks, uncertainties and other factors beyond the Company’s ability to predict or control. Please also make reference
to those risk factors referenced in the “Risk Factors” section below. Readers are cautioned that the above chart does
not contain an exhaustive list of the factors or assumptions that may affect the forward-looking statements, and that the assumptions
underlying such statements may prove to be incorrect. Actual results and developments are likely to differ, and may differ materially,
from those expressed or implied by the forward-looking statements contained in this MD&A.
Royal Standard Minerals Inc.
Management’s Discussion
and Analysis
Year Ended January 31, 2016
Discussion Dated May 25, 2016
Forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance or achievements
to be materially different from any of its future results, performance or achievements expressed or implied by forward-looking
statements. All forward-looking statements herein are qualified by this cautionary statement. Accordingly, readers should not place
undue reliance on forward-looking statements. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking
statements whether as a result of new information or future events or otherwise, except as may be required by law. If the Company
does update one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect
to those or other forward-looking statements, unless required by law.
DESCRIPTION OF BUSINESS AND GOING CONCERN
The Company’s business activities
are currently restricted to funding ongoing operations as a reporting issuer and to repaying existing creditors and is currently
seeking new business opportunities. Success in identifying a suitable new asset or business for the Company is uncertain. Unless
the Company can identify a suitable asset or business opportunity and/or obtain additional financing in the near term, there is
significant doubt on the ability of the Company to continue as a going concern. Without a suitable asset or business opportunity
and/or additional financing, the Company will be required to consider the basis on which it will continue as an entity. The Company
has no operating revenues and therefore it must utilize current cash and cash equivalents to satisfy outstanding liabilities.
The Company’s financial statements
have been prepared on the basis of accounting principles applicable to a going concern, which assume that the Company will continue
in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course
of operations as they come due. In assessing whether the going concern assumption is appropriate, management takes into account
all available information about the future, which is at least, but is not limited to, twelve months from the end of the reporting
period. Management is aware, in making its assessment, of material uncertainties related to events or conditions that cast significant
doubt upon the entity's ability to continue as a going concern. The Company had a loss of $31,301 during the year ended January
31, 2016 (year ended January 31, 2015 - $57,174) and has an accumulated deficit of $39,281,602 (January 31, 2015 - accumulated
deficit of $39,250,301). In addition, the Company has a working capital deficiency of $87,386 at January 31, 2016 (January 31,
2015 - working capital deficiency of $63,047).
Royal Standard Minerals Inc.
Management’s Discussion
and Analysis
Year Ended January 31, 2016
Discussion Dated May 25, 2016
The Company’s ability to continue
to meet its obligations is uncertain and, as a result, there is significant doubt regarding the going concern assumption and, accordingly,
the ultimate appropriateness of the use of accounting principles applicable to a going concern. The Company has no remaining mineral
property interests and its business activities are currently restricted to funding ongoing operations as a reporting issuer and
to repaying existing creditors and is currently focused on identifying suitable assets or businesses to acquire or merge with.
Success in identifying a suitable new asset or business for the Company is uncertain. Furthermore, the Company has limited working
capital to pursue such opportunities. Unless the Company can identify a suitable asset or business opportunity and/or obtain additional
financing in the near term, there is significant doubt on the ability of the Company to repay its outstanding liabilities. If the
Company is unable to extinguish all of its outstanding liabilities, the going concern assumption will not be valid. The financial
statements do not reflect the adjustments to the carrying values or classifications of assets and liabilities or to the reported
expenses that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern
in the normal course of operations for the foreseeable future. These adjustments could be material.
OVERALL PERFORMANCE
The Company’s net loss for the year
ended January 31, 2016 was $31,301 ($0.00 loss per share) compared to a loss of $57,174 ($0.00 loss per share) for the year ended
January 31, 2015, a decrease in net loss of $25,873. The decrease in net loss relates mainly to a reduction in professional fees
of $27,299 from the year ended January 31, 2015 period which included costs related to the completion of the reorganization of
the Company.
FINANCIAL PERFORMANCE
Three months ended January 31, 2016,
compared with three months ended January 31, 2015
The Company’s net loss for the three
months ended January 31, 2016 was $8,885 ($0.00 loss per share) compared to a net loss $13,985 ($0.00 loss per share) for the three
months ended January 31, 2015. No revenue was received in either period. The decrease in loss of $5,100 was principally the result
of:
Royal Standard Minerals Inc.
Management’s Discussion
and Analysis
Year Ended January 31, 2016
Discussion Dated May 25, 2016
|
·
|
Corporate development expenses decreased
$1,513 for the three months ended January 31, 2016, compared to the same period in 2015. The decrease was the result of decreased
transfer agent fees in the current period.
|
|
·
|
Professional fees decreased to $6,862
for the three months ended January 31, 2016, compared to $10,480 for the same period in 2015. The decrease from 2015 was the result
of decreased audit fees in the current period.
|
Year ended January 31, 2016, compared
with year ended January 31, 2015
The Company’s net loss for the year
ended January 31, 2016 was $31,301 ($0.00 loss per share) compared to a net loss $57,174 ($0.00 loss per share) for the year ended
January 31, 2015. No revenue was received in either period. The decrease in loss of $25,873 was principally the result of:
|
·
|
Office and general expenses increased
$1,629 for the year ended January 31, 2016, compared to the same period in 2015. The increase was the result of a reversal of certain
accrued expenses in 2015.
|
|
·
|
Professional fees decreased to $20,657
for the year ended January 31, 2016, compared to $47,956 for the same period in 2015. The decrease from 2015 was the result of
external professional services required in connection with the reorganization and financing of the Company in 2015 which were not
required in 2016.
|
SELECTED ANNUAL FINANCIAL INFORMATION
The following is selected financial data
derived from the audited financial statements of the Company as at January 31, 2016, 2015 and 2014 and for the years then ended.
Royal Standard Minerals Inc.
Management’s Discussion
and Analysis
Year Ended January 31, 2016
Discussion Dated May 25, 2016
|
|
Year ended
January 31,
2016
|
|
|
Year ended
January 31,
2015
|
|
|
Year ended
January 31,
2014
|
|
Net (loss) income
|
|
$
|
(31,301
|
)
|
|
$
|
(57,174
|
)
|
|
$
|
69,225
|
|
Net (loss) income per share - basic and diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
0.00
|
|
|
|
As at
January 31,
2016
|
|
|
As at
January 31,
2015
|
|
|
As at
January 31,
2014
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
14,199
|
|
|
$
|
6,029
|
|
|
$
|
22,360
|
|
Long-term financial liabilities
|
|
$
|
nil
|
|
|
$
|
nil
|
|
|
$
|
nil
|
|
Royal Standard Minerals Inc.
Management’s Discussion
and Analysis
Year Ended January 31, 2016
Discussion Dated May 25, 2016
SUMMARY OF QUARTERLY RESULTS
The following is a summary of selected
financial information of the Company for the quarterly periods indicated.
Three Months Ended
|
|
Net
Revenues
($)
|
|
Net Income (Loss)
($)
|
|
January 31, 2016
|
|
nil
|
|
|
(8,885
|
)
|
|
|
(0.00
|
)
|
October 31, 2015
|
|
nil
|
|
|
(4,041
|
)
|
|
|
(0.00
|
)
|
July 31, 2015
|
|
nil
|
|
|
(9,795
|
)
|
|
|
(0.00
|
)
|
April 30, 2015
|
|
nil
|
|
|
(8,580
|
)
|
|
|
(0.00
|
)
|
January 31, 2015
|
|
nil
|
|
|
(13,985
|
)
|
|
|
(0.00
|
)
|
October 31, 2014
|
|
nil
|
|
|
(2,550
|
)
|
|
|
(0.00
|
)
|
July 31, 2014
|
|
nil
|
|
|
(11,700
|
)
|
|
|
(0.00
|
)
|
April 30, 2014
|
|
nil
|
|
|
(28,939
|
)
|
|
|
(0.00
|
)
|
LIQUIDITY AND CAPITAL RESOURCES
The Company currently has no positive operating
cash flow and has, to date, financed its activities and its ongoing expenditures primarily through equity transactions such as
equity offerings, the exercise of warrants and other financing arrangements. The Company believes that additional financing will
be required to fund its operating expenses as it searches for suitable assets and businesses to merge with or acquire.
Royal Standard Minerals Inc.
Management’s Discussion
and Analysis
Year Ended January 31, 2016
Discussion Dated May 25, 2016
As at January 31, 2016, the Company had
cash and cash equivalents of $10,413. Cash used in operating activities was $29,616 for the year ended January 31, 2016. During
the year ended January 31, 2016, the Company experienced a net decrease of $5,277 in non-cash working capital items, which was
due to an increase in sundry receivables and prepaid of $1,792 and decrease in accounts payable and accrued liabilities of $3,485.
Cash provided by financing activities was $35,994 for the year ended January 31, 2016 due to notes payable advanced from related
parties.
The Company's approach to managing liquidity
risk has been to ensure that it will have sufficient liquidity to meet liabilities when due. As at January 31, 2016, the Company
had cash and cash equivalents of $10,413 compared to $4,035 as at January 31, 2015, to settle current liabilities of $101,585 compared
to $69,076 as at January 31, 2015. The Company currently does not have sufficient cash and cash equivalents to settle current liabilities
although creditors who are related to the Company have agreed to defer payment. All of the Company's financial liabilities have
contractual maturities of less than 60 days and are subject to normal trade terms. The Company regularly evaluates its cash position
in an effort to maintain its liquidity.
There is no assurance that future equity
or debt capital will be available to the Company in the amounts or at the times desired, or on terms that are acceptable to the
Company, if at all. See “Risk Factors” below.
As at January 31, 2016 and the date of
this MD&A, the Company had 920,835,502 common shares issued and outstanding and no stock options outstanding. The Company’s
liquidity risk with financial instruments is minimal as any excess cash, when present, is deposited with a Schedule I Canadian
bank.
RELATED PARTY TRANSACTIONS
Daniel Crandall, the Chief Financial Officer,
is a senior employee of Marrelli Support Services Inc. ("Marrelli Support"), a firm providing accounting services. Marrelli
Support's President, Carmelo Marrelli, beneficially controls 278,960,559 common shares of the Company through his holding company,
C. Marrelli Services Limited. Fees for services provided by Marrelli Support totaled $15,346, for the year ended January 31, 2016
(year ended January 31, 2015 - $13,027). As at January 31, 2016, Marrelli Support was owed $4,217 and this amount was included
in accounts payable and accrued liabilities (January 31, 2015 - $1,967).
Royal Standard Minerals Inc.
Management’s Discussion
and Analysis
Year Ended January 31, 2016
Discussion Dated May 25, 2016
During the year ended January 31, 2016,
the Company incurred fees totaling $810 (year ended January 31, 2015 - $740) for filing services received from DSA Corporate Services
Inc. ("DSA"), an organization that Mr. Marrelli controls. Mr. Marrelli is also the corporate secretary and sole director
of DSA. As at January 31, 2016, DSA was owed $1,182 and this amount was included in accounts payable and accrued liabilities (January
31, 2015 - $15,282).
At January 31, 2016, notes payable of $51,276
(January 31, 2015 - $15,282) is made up of $35,447 (January 31, 2015 - $15,282) owed to C. Marrelli Services Limited, $7,915 (January
31, 2015 - $nil) owed to Lonnie Kirsh, the Chief Executive Officer ("CEO") of the Company and $7,914 (January 31, 2015
- $nil) owed to George Duguay, a director and shareholder of the Company. The notes payable are unsecured, bear interest at 2%
per annum and are due on demand. The interest expense pertaining to the notes payable for the year ended January 31, 2016 is $587
(year ended January 31, 2015 - $nil).
During the year ended January 31, 2016,
the Company incurred fees totaling $2,711 (year ended January 31, 2015 - $19,899) for legal services received from Kirsh Securities
Law Professional Corporation, a law firm owned by the President and CEO of the Company. An amount of $18,343 is included in accounts
payable and accrued liabilities at January 31, 2016 (January 31, 2015 - $17,446).
During the year ended January 31, 2016,
the Company incurred fees totaling $4,629 (year ended January 31, 2015 - $4,038) for consulting services received from G. Duguay
Services Inc., a firm where George Duguay, a director and shareholder of the Company, is the President. An amount of $7,497 is
included in accounts payable and accrued liabilities at January 31, 2016 (January 31, 2015 - $3,540).
To the knowledge of the directors and senior
officers of the Company, as at January 31, 2016, no person or corporation beneficially owns or exercises control over common shares
of the Company carrying more than 10% of the voting rights attached to all common shares of the Company other than as set out below:
Royal Standard Minerals Inc.
Management’s Discussion
and Analysis
Year Ended January 31, 2016
Discussion Dated May 25, 2016
Major Shareholder
|
|
Number of
common shares
|
|
|
Percentage of
outstanding
common
shares
|
|
Lonnie Kirsh, Chief Executive Officer and Director
|
|
|
278,960,559
|
|
|
|
30.29
|
%
|
George Duguay, Director
|
|
|
278,960,559
|
|
|
|
30.29
|
%
|
C. Marrelli Services Limited
|
|
|
278,960,559
|
|
|
|
30.29
|
%
|
None of the Company's major shareholders
have different voting rights than other holders of the Company's common shares.
SHARE CAPITAL
The Company is authorized to issue an unlimited
number of common shares and preferred shares. As of the date of this MD&A, the Company had 920,835,502 common shares outstanding.
OFF BALANCE SHEET ARRANGEMENTS
As of the date hereof, management believes
the Company does not have any off balance sheet arrangements that have, or are reasonably likely to have, a current or future effect
on the results of operations or financial condition of the Company, including, and without limitation, such considerations as liquidity
and capital resources.
CHANGE IN ACCOUNTING POLICIES
The amendments to IAS 24, issued in December
2013, clarify that a management entity, or any member of a group of which it is a part, that provides key management services to
a reporting entity, or its parent, is a related party of the reporting entity. The amendments also require an entity to disclose
amounts incurred for key management personnel services provided by a separate management entity. This replaces the more detailed disclosure by
category required for other key management personnel compensation. The amendments will only affect disclosure and are effective
for annual periods beginning on or after July 1, 2014. At February 1, 2015, the Company adopted this pronouncement and there was
no material effect on its financial statements.
Royal Standard Minerals Inc.
Management’s Discussion
and Analysis
Year Ended January 31, 2016
Discussion Dated May 25, 2016
NEW ACCOUNTING PRONOUNCEMENTS
IFRS 9 – Financial instruments (“IFRS
9”) was issued by the IASB in October 2010 and will replace IAS 39 - Financial Instruments: Recognition and Measurement (“IAS
39”). IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing
the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context
of its business model and the contractual cash flow characteristics of the financial assets. Most of the requirements in IAS 39
for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9. The new standard also requires
a single impairment method to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods
beginning on or after January 1, 2018. Earlier adoption is permitted. The Company is in the process of assessing the impact of
this pronouncement.
MANAGEMENT OF CAPITAL
The Company manages its capital with the
following objectives:
|
·
|
to ensure sufficient financial flexibility
to achieve the ongoing business objectives; and
|
|
·
|
to maximize shareholder return through
enhancing the share value.
|
The Company monitors its capital structure
and makes adjustments according to market conditions in an effort to meet its objectives given the current outlook of the business
and industry in general. The Company may manage its capital structure by issuing new shares, repurchasing outstanding shares, adjusting
capital spending, or disposing of assets. The capital structure is reviewed by Management and the Board of Directors on an ongoing
basis.
The Company's equity comprises of share
capital, reserves, accumulated other comprehensive income and accumulated deficit, which at January 31, 2016 was a deficiency of
$87,386 (January 31, 2015 – deficiency of $63,047). Note that included
in the statements of financial position presented is a deficit of $39,281,602 as January 31, 2016 (January 31, 2015 - $39,250,301).
Royal Standard Minerals Inc.
Management’s Discussion
and Analysis
Year Ended January 31, 2016
Discussion Dated May 25, 2016
The Company manages capital through its
financial and operational forecasting processes. The Company reviews its working capital and forecasts its future cash flows based
on operating expenditures, and other investing and financing activities. Selected information is provided to the Board of Directors
of the Company. The Company’s capital management objectives, policies and processes have remained unchanged during the year
ended January 31, 2016. The Company is not subject to external capital requirements.
FINANCIAL RISK FACTORS
The Company's financial instruments, consisting
of cash and cash equivalents, sundry receivables, notes payable and accounts payable and accrued liabilities, approximate fair
values due to the relatively short-term maturities of the instruments. It is management’s opinion that the Company is not
exposed to significant interest, currency or credit risks arising from these financial instruments.
Risk management is carried out by the Company's
management team with guidance from the Audit Committee under policies approved by the Board of Directors. The Board of Directors
also provides regular guidance for overall risk management.
Credit risk
Credit risk is the risk of loss associated
with a counterparty’s inability to fulfill its payment obligations. The Company's credit risk is primarily attributable to
cash and cash equivalents. The Company has no significant concentration of credit risk arising from operations. Cash and cash equivalents
are held with reputable financial institutions, from which management believes the risk of loss to be minimal.
Liquidity risk
The Company's approach to managing liquidity
risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at January 31, 2016, the Company had
a cash balance of $10,413 (January 31, 2015 - $4,035) to settle current liabilities of $101,585 (January 31, 2015 - $69,076). All
of the Company’s financial liabilities have contractual maturities of less than 60 days and are subject to normal trade terms.
Royal Standard Minerals Inc.
Management’s Discussion
and Analysis
Year Ended January 31, 2016
Discussion Dated May 25, 2016
It is expected the Company will be funded
by shareholder loans or private placements from related parties until the Company finds an asset or business to incorporate into
the Company.
Market risk
Market risk is the risk of loss that may
arise from changes in market factors such as interest rates and foreign exchange rates.
Interest rate risk
The Company has cash balances
and no variable interest-bearing debt. The Company's current policy is to invest excess cash in guaranteed investment certificates,
bankers’ acceptance and money market deposits, with reputable financial institutions. The interest rate risk is remote.
Foreign currency risk
The Company's functional currency
is Canadian dollars and major purchases are transacted in Canadian dollars. The Company's reporting currency is the United States
dollar.
RISK FACTORS
At the present time, the Company does not
hold any interest in an active operating business or asset. The Company's viability and potential success lie in its
ability to develop, exploit and generate revenue from a future asset or business acquisition. Revenues, profitability and cash
flow from any future asset or business acquisition involving the Company are difficult to predict and will be influenced by factors
unknown to management at the present time. The Company has limited financial resources and there is no assurance that it will be
able to obtain adequate financing in the future or that the terms of any such financing will be favourable. Failure to obtain such
additional financing could result in delay or indefinite postponement of future business activities of the Company with the possible
dilution or loss of such business activities.
Royal Standard Minerals Inc.
Management’s Discussion
and Analysis
Year Ended January 31, 2016
Discussion Dated May 25, 2016
The Company’s ability to continue
as a going concern is uncertain and is dependent upon its ability to identify assets or business opportunities to acquire or merge
with. Success in identifying a new assets or business is uncertain. Furthermore, the Company has limited working capital to pursue
such opportunities. Unless the Company can identify a suitable assets or business opportunity and/or obtain additional financing
in the near term, there is significant doubt on the ability of the Company to continue as a going concern. Any material delays,
or failure of, identifying a suitable business opportunity and/or obtaining additional financing in the near term is likely to
have a material adverse impact on the business, operations and prospects of the Company and the ability of the Company to raise
adequate financing and re-commence business operations, which in turn is likely to have a material adverse impact on the Company's
business, assets and financial condition.
Additionally, certain of the directors
and officers of the Company may also serve as directors and officers of other companies and consequently, the possibility of conflict
exists. Any decisions made by such directors involving the Company will be made in accordance with the duties and obligations of
directors to deal fairly and in good faith with the Company and such other companies. In addition, such directors declare, and
refrain from voting on, any matters in which such directors may have a conflict of interest.
Consequently, such directors and officers
will be dividing their time between their duties to the Company and their duties to their other reporting issuers.
RISK MANAGEMENT
Risk management is carried out by the Company's
management team with guidance from the Audit Committee under policies approved by the Board of Directors. The Board of Directors
provides regular guidance for overall risk management.
DISCLOSURE OF INTERNAL CONTROLS
Management has established processes to
provide it with sufficient knowledge to support representations that it has exercised reasonable diligence to ensure that (i) the
financial statements do not contain any untrue statement of material fact or omit to state a material fact required to be stated
or that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the date of
and for the periods presented by the financial statements, and (ii) the financial statements fairly present in all material respects the financial condition,
results of operations and cash flow of the Company, as of the date of and for the periods presented.
Royal Standard Minerals Inc.
Management’s Discussion
and Analysis
Year Ended January 31, 2016
Discussion Dated May 25, 2016
In contrast to the certificate required
for non-venture issuers under National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings
(“NI 52-109”), the Venture Issuer Basic Certificate filed by the Company does not include representations relating
to the establishment and maintenance of disclosure controls and procedures (“DC&P”) and internal control over financial
reporting (“ICFR”), as defined in NI 52-109. In particular, the certifying officers filing such certificate are not
making any representations relating to the establishment and maintenance of:
|
(i)
|
controls and other procedures designed to provide reasonable assurance that information required
to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation
is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
|
|
(ii)
|
a process to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with the issuer’s generally accepted accounting
principles (IFRS).
|
The Company’s certifying officers
are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations
they are making in such certificate.
Investors should be aware that inherent
limitations on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P
and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim
and annual filings and other reports provided under securities legislation.
ADDITIONAL DISCLOSURE FOR VENTURE ISSUERS WITHOUT SIGNIFICANT
REVENUE
The following tables set forth a breakdown
of the components of general and administrative for the Company, for the year ended January 31, 2016 and 2015.
Royal Standard Minerals Inc.
Management’s Discussion
and Analysis
Year Ended January 31, 2016
Discussion Dated May 25, 2016
General and Administrative:
|
|
Year Ended
January 31,
|
|
|
|
2016
($)
|
|
|
2015
($)
|
|
Corporate development
|
|
|
1,968
|
|
|
|
2,724
|
|
Office and general
|
|
|
4,047
|
|
|
|
2,418
|
|
Professional fees
|
|
|
20,657
|
|
|
|
47,956
|
|
Travel
|
|
|
-
|
|
|
|
38
|
|
Consulting fees
|
|
|
4,629
|
|
|
|
4,038
|
|
Total
|
|
|
31,301
|
|
|
|
57,174
|
|
Royal Standard Minerals Inc.
(Expressed in United States Dollars)
Consolidated Financial Statements
Years Ended January 31, 2015 and 2014
Independent Auditor's Report
To the Shareholders of Royal Standard Minerals
Inc.
We have audited the accompanying consolidated
financial statements of Royal Standard Minerals Inc., which comprise the consolidated statements of financial position as at January
31, 2015 and 2014, and the consolidated statements of operations, comprehensive (loss) income, changes in shareholders' deficiency
and cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information.
Management's Responsibility for the
Financial Statements
Management is responsible for the preparation
and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards
and for such internal control as management determines is necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted
auditing standards and with the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.
The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly,
we express no such opinion.
An audit involves performing procedures
to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's
judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation
of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of Royal Standard Minerals Inc. as at January 31, 2015
and 2014, and its financial performance and its cash flows for the years then ended in accordance with International Financial
Reporting Standards.
Emphasis of Matter
Without modifying our opinion, we draw
attention to Note 1 to the consolidated financial statements which highlights the existence of a material uncertainty relating
to conditions that cast significant doubt on Royal Standard Minerals Inc.'s ability to continue as a going concern.
Mississauga, Ontario
May 22, 2015
Royal Standard Minerals Inc.
Consolidated Statements of Financial Position
(Expressed in United States
Dollars)
|
|
As at
|
|
|
As at
|
|
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4,035
|
|
|
$
|
16,807
|
|
Sundry receivables and prepaids (Note 7)
|
|
|
1,994
|
|
|
|
5,553
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
6,029
|
|
|
$
|
22,360
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities (Note 10)
|
|
$
|
53,794
|
|
|
$
|
35,917
|
|
Notes payable (Notes 11 and 17)
|
|
|
15,282
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
69,076
|
|
|
|
35,917
|
|
|
|
|
|
|
|
|
|
|
Shareholders' Deficiency
|
|
|
|
|
|
|
|
|
Share capital (Note 13(b))
|
|
|
28,273,230
|
|
|
|
28,273,230
|
|
Reserves
|
|
|
10,900,438
|
|
|
|
10,900,438
|
|
Accumulated deficit
|
|
|
(39,250,301
|
)
|
|
|
(39,193,127
|
)
|
Accumulated other comprehensive income
|
|
|
13,586
|
|
|
|
5,902
|
|
|
|
|
|
|
|
|
|
|
Total shareholder's deficiency
|
|
|
(63,047
|
)
|
|
|
(13,557
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' deficiency
|
|
$
|
6,029
|
|
|
$
|
22,360
|
|
The Company and Operations and Going Concern
(Note 1)
Contingencies
(Note 18)
Subsequent event
(Note 21)
Approved by the Board
:
"Carmelo Marrelli"
|
|
"George Duguay"
|
|
Director
|
|
Director
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
Royal Standard Minerals Inc.
Consolidated Statements of Operations
(Expressed in United States
Dollars)
|
|
Years Ended
|
|
|
|
January 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
Exploration and evaluation expenditures (Note 8)
|
|
$
|
-
|
|
|
$
|
87,233
|
|
General and administrative (Note 19)
|
|
|
57,174
|
|
|
|
387,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,174
|
|
|
|
474,925
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(57,174
|
)
|
|
|
(474,925
|
)
|
|
|
|
|
|
|
|
|
|
Finance income
|
|
|
-
|
|
|
|
9,138
|
|
Impairment of marketable securities (Note 6)
|
|
|
-
|
|
|
|
(30,000
|
)
|
Gain on sale of property interests and related assets (Note 8(a))
|
|
|
-
|
|
|
|
123,228
|
|
Gain on dissolution of subsidiary (Note 3)
|
|
|
-
|
|
|
|
402,782
|
|
Write-off of accounts payable and accrued liabilities
|
|
|
-
|
|
|
|
22,197
|
|
Gain on settlement and release (Note 8(b))
|
|
|
-
|
|
|
|
48,091
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
(31,286
|
)
|
|
|
|
|
|
|
|
|
|
Net (loss) income for the year
|
|
$
|
(57,174
|
)
|
|
$
|
69,225
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) income per share (Note 15)
|
|
$
|
(0.00
|
)
|
|
$
|
0.00
|
|
Diluted (loss) income per share (Note 15)
|
|
$
|
(0.00
|
)
|
|
$
|
0.00
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
Royal Standard Minerals Inc.
Consolidated Statements of Comprehensive (Loss) Income
(Expressed in United States
Dollars)
|
|
Years Ended
|
|
|
|
January 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
Net (loss) income for the year
|
|
$
|
(57,174
|
)
|
|
$
|
69,225
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
Item that will not be reclassified subsequently to income
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
7,684
|
|
|
|
5,902
|
|
|
|
|
|
|
|
|
|
|
Comprehensive (loss) income for the year
|
|
$
|
(49,490
|
)
|
|
$
|
75,127
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
Royal Standard Minerals Inc.
Consolidated Statements of Changes in Shareholders' Deficiency
(Expressed in United States
Dollars)
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Share
|
|
|
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
|
|
|
|
Capital
|
|
|
Reserves
|
|
|
Deficit
|
|
|
Income
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 31, 2013
|
|
$
|
28,104,264
|
|
|
$
|
11,010,304
|
|
|
$
|
(39,262,352
|
)
|
|
$
|
-
|
|
|
$
|
(147,784
|
)
|
Private placement - common shares
|
|
|
16,400
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,400
|
|
Shares issued for settlement of accounts payable and accrued liabilities
|
|
|
152,566
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
152,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,902
|
|
|
|
5,902
|
|
Share-based payments
|
|
|
-
|
|
|
|
(109,866
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(109,866
|
)
|
Net income for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
69,225
|
|
|
|
-
|
|
|
|
69,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 31, 2014
|
|
|
28,273,230
|
|
|
|
10,900,438
|
|
|
|
(39,193,127
|
)
|
|
|
5,902
|
|
|
|
(13,557
|
)
|
Foreign currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,684
|
|
|
|
7,684
|
|
Net (loss) for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
(57,174
|
)
|
|
|
-
|
|
|
|
(57,174
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 31, 2015
|
|
$
|
28,273,230
|
|
|
$
|
10,900,438
|
|
|
$
|
(39,250,301
|
)
|
|
$
|
13,586
|
|
|
$
|
(63,047
|
)
|
The accompanying notes are an integral part
of these consolidated financial statements.
Royal Standard Minerals Inc.
Consolidated Statements of Cash Flows
(Expressed in United States
Dollars)
|
|
Years Ended
|
|
|
|
January 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
Net (loss) income for the year
|
|
$
|
(57,174
|
)
|
|
$
|
69,225
|
|
Operating items not involving cash:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
-
|
|
|
|
3,558
|
|
Accretion in asset retirement obligations
|
|
|
-
|
|
|
|
5,280
|
|
Share-based payments
|
|
|
-
|
|
|
|
(109,866
|
)
|
Shares issued for settlement of accounts payable and accrued liabilities
|
|
|
-
|
|
|
|
152,566
|
|
Impairment of marketable securities
|
|
|
-
|
|
|
|
30,000
|
|
Gain on sale of property interests
|
|
|
-
|
|
|
|
(123,228
|
)
|
Gain on dissolution of subsidiary
|
|
|
-
|
|
|
|
(402,782
|
)
|
Lawsuit settlement
|
|
|
-
|
|
|
|
(8,000
|
)
|
Gain on settlement and release
|
|
|
-
|
|
|
|
(48,091
|
)
|
Write-off of accounts payable and accrued liabilities
|
|
|
-
|
|
|
|
(22,197
|
)
|
Foreign exchange
|
|
|
7,684
|
|
|
|
5,902
|
|
Changes in non-cash working capital:
|
|
|
|
|
|
|
|
|
Sundry receivables and prepaids
|
|
|
3,559
|
|
|
|
2,706,451
|
|
Accounts payable and accrued liabilities
|
|
|
17,877
|
|
|
|
(1,983,204
|
)
|
|
|
|
|
|
|
|
|
|
Cash (used in) provided by operating activities
|
|
|
(28,054
|
)
|
|
|
275,614
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
Private placement - common shares
|
|
|
-
|
|
|
|
16,400
|
|
Notes payable
|
|
|
15,282
|
|
|
|
-
|
|
Other repayments
|
|
|
-
|
|
|
|
(600,000
|
)
|
Proceeds from sale of property interests and related assets, net of transaction costs
|
|
|
-
|
|
|
|
123,228
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) financing activities
|
|
|
15,282
|
|
|
|
(460,372
|
)
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
(12,772
|
)
|
|
|
(184,758
|
)
|
Cash and cash equivalents, beginning of year
|
|
|
16,807
|
|
|
|
201,565
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
$
|
4,035
|
|
|
$
|
16,807
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
Royal Standard Minerals Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
January 31, 2015 and 2014
1. The Company and Operations
and Going Concern
Royal Standard Minerals Inc. (the "Company")
is a publicly held company focused on identifying suitable assets or businesses to acquire or merge with, with a view to maximizing
value for shareholders. The Company was previously engaged in the acquisition, exploration and development of gold and precious
metal properties in the United States of America but has disposed of these interests. The Company is continued under the Canada
Business Corporations Act and its common shares are quoted in the United States of America on the Over-the-Counter ("OTC")
Bulletin Board. Inception has been deemed to be June 26, 1996, the date on which the Company acquired all of the outstanding common
shares of Southeastern Resources Inc. ("SRI"), which acquisition was accounted for as a reverse takeover of the Company
by SRI. The Company's head office is located at 36 Toronto Street, Suite 1000, Toronto, Ontario, M5C 2C5, Canada.
The consolidated financial statements were
approved by the Board of Directors on May 22, 2015.
These consolidated financial statements
have been prepared on the basis of accounting principles applicable to a going concern, which assume that the Company will continue
in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course
of operations as they come due. In assessing whether the going concern assumption is appropriate, management takes into account
all available information about the future, which is at least, but is not limited to, twelve months from the end of the reporting
period. Management is aware, in making its assessment, of material uncertainties related to events or conditions that cast significant
doubt upon the entity's ability to continue as a going concern. The Company had a loss of $57,174 during the year ended January
31, 2015 (year ended January 31, 2014 - income of $69,225) and has an accumulated deficit of $39,250,301 (January 31, 2014 - $39,193,127).
In addition, the Company has a working capital deficiency of $63,047 at January 31, 2015 (January 31, 2014 - $13,557).
There is significant doubt regarding the
going concern assumption and, accordingly, the ultimate appropriateness of the use of accounting principles applicable to a going
concern. These consolidated financial statements do not reflect the adjustments, to the carrying values or classifications of assets
and liabilities or to the reported expenses that would be necessary if the Company were unable to realize its assets and settle
its liabilities as a going concern in the normal course of operations for the foreseeable future. These adjustments could be material.
2. Significant Accounting Policies
Statement of compliance
The consolidated financial statements have
been prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the International Accounting
Standards Board (“IASB”) and interpretations issued by the IFRS Interpretations Committee of the IASB. The policies
set out below have been consistently applied to all periods presented.
Principles of consolidation
These consolidated financial statements
include the accounts of the Company and its previously wholly-owned subsidiaries up to the date of their dissolution, Kentucky
Standard Energy Company, Inc. ("Kentucky") and Manhattan Mining Co. ("Manhattan"), both United States companies
(see note 3). All intercompany transactions and balances have been eliminated upon consolidation.
Royal Standard Minerals Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
January 31, 2015 and 2014
2. Significant Accounting Policies
(Continued)
Equipment
Equipment is recorded at cost less accumulated
depreciation. Depreciation is provided using the declining balance method using the following rates:
Exploration equipment - 25%
to 30%
At the end of each reporting period, the
Company reviews the carrying amounts of its equipment to determine whether there is any indication that the equipment has suffered
an impairment loss. Where such an indication exists, the recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss. The recoverable amount is the higher of the equipment's fair value less cost to sell or its value
in use.
Exploration and evaluation expenditures
The Company expenses exploration and evaluation
expenditures as incurred. Exploration and evaluation expenditures include acquisition costs of mineral properties, property option
payments and evaluation activity.
Once a project has been established as
commercially viable and technically feasible, related development expenditure is capitalized. This includes costs incurred in preparing
the site for mining operations. Capitalization ceases when the mine is capable of commercial production, with the exception of
development costs that give rise to a future benefit.
Restoration, rehabilitation and environmental obligations
A legal or constructive obligation to incur
restoration, rehabilitation and environmental costs may arise when environmental disturbance is caused by the exploration, development
or ongoing production of a mineral property interest. Such costs arising from the decommissioning of plant and other site preparation
work, discounted to their net present value, are provided for and recorded in the exploration and evaluation expenditures, as soon
as the obligation to incur such costs arises. Discount rates using a pretax rate that reflects the time value of money are used
to calculate the net present value. These costs are charged against profit or loss over the economic life of the related asset,
through amortization using either a unit-of production or the straight-line method as appropriate. The related liability is adjusted
for each period for the unwinding of the discount rate and for changes to the current market-based discount rate, amount or timing
of the underlying cash flows needed to settle the obligation.
Share-based payments
The fair value of the stock options granted
to directors, officers and employees is determined using the Black-Scholes option pricing model and management's assumptions as
disclosed in note 14 and recorded as share-based payments expense over the vesting period of the stock options, with the offsetting
credit recorded as an increase in reserves. The fair value of stock options issued to other than employees are measured at the
fair value of the goods or services received unless this cannot be reliably estimated, and are recognized over the period of service.
If the stock options are exercised, the proceeds are credited to share capital and the fair value at the date of grant is reclassified
from reserves to share capital.
Royal Standard Minerals Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
January 31, 2015 and 2014
2. Significant Accounting Policies
(Continued)
Income taxes
Tax expense comprises current and deferred
tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination,
or items recognized directly in equity or in other comprehensive income.
Current tax is the expected tax payable
or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date,
and any adjustment to tax payable in respect of previous years.
Deferred tax is recognized in respect of
temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used
for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets
or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss,
and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that
they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences
arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary
differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred
tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and
they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they
intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
A deferred tax asset is recognized for
unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits
will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to
the extent that it is no longer probable that the related tax benefit will be realized.
Income per common share
Basic income per share is computed by dividing
the income or loss for the year by the weighted average number of common shares outstanding during the year, including contingently
issuable shares which are included when the conditions necessary for issuance have been met. Diluted income per share is calculated
in a similar manner, except that the weighted average number of common shares outstanding is increased to include potentially issuable
common shares from the assumed exercise of common share purchase options and warrants, if dilutive. The number of additional shares
included in the calculation is based on the treasury stock method for options and warrants.
Royal Standard Minerals Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
January 31, 2015 and 2014
2. Significant Accounting Policies
(Continued)
Foreign currency translation
Effective November 7, 2013, the functional
currency of the Company changed to Canadian dollars as a significant portion of the Company's expenses are denominated in Canadian
dollars, the dissolution of Manhattan ended all of the Company's United States operations (see note 3) and future sources of financing
are anticipated to be denominated in Canadian dollars. Prior to that time, the functional currency was the United States dollar.
The change to the Company's functional currency has been accounted for in accordance with IAS 21 - The Effects of Changes in Foreign
Exchange Rates. All amounts in these financial statements are presented in US dollars ("presentation currency") since
the United States dollar provides a more useful point of reference for investors.
Subsequent to the change in functional
currency described above, the Company translates the assets and liabilities of the Company from the functional currency to the
presentation currency at the period end rate. Revenue and expenses are translated at the average rate of exchange prevailing during
the period. The resulting unrealized gain or loss on translation is recognized as other comprehensive income or loss. Equity is
translated at historical rates.
Financial instruments
The Company recognizes financial assets
and financial liabilities when the Company becomes a party to a contract. Financial assets and financial liabilities, with the
exception of financial assets classified at fair value through profit or loss, are measured at fair value plus transaction costs
on initial recognition. Financial assets at fair value through profit or loss are measured at fair value on initial recognition
and transaction costs are expensed when incurred. Securities are accounted for at the trade date.
Measurement in subsequent periods depends
on the classification of the financial instrument.
i) Financial assets at fair value through
profit or loss ("FVTPL")
Financial assets are classified as FVTPL
when acquired principally for the purpose of trading, if so designated by management (fair value option), or if they are derivative
assets that are not part of an effective and designated hedging relationship. Financial assets classified as FVTPL are measured
at fair value, with changes recognized in the consolidated statements of operations.
The Company’s financial assets classified
as FVTPL include cash and cash equivalents. The Company does not currently hold any derivative instruments or apply hedge accounting.
ii) Available-for-sale financial assets
Financial assets are classified as available-for-sale
when so designated by management. Financial assets classified as available-for-sale are measured at fair value, with changes recognized
in the other comprehensive income.
The Company did not have any financial
asset classified as available-for-sale at January 31, 2015.
Royal Standard Minerals Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
January 31, 2015 and 2014
2. Significant Accounting Policies
(Continued)
Financial instruments (continued)
iii) Loans and receivables
Loans and receivables are non-derivative
financial assets that have fixed or determinable payments and are not quoted in an active market. Subsequent to initial recognition,
loans and receivables are carried at amortized cost using the effective interest method.
Sundry receivables are classified as loans
and receivables.
iv) Financial liabilities at FVTPL
This category comprises derivatives, or
liabilities acquired or incurred principally for the purpose of being sold or repurchased in the near term. They are carried in
the consolidated statements of financial position at fair value with changes in fair value recognized in the consolidated statements
of operations.
The Company may enter into certain financial
derivative contracts in order to manage the exposure to market risks from fluctuations in commodity prices. The Company’s
policy is not to utilize derivative financial instruments for speculative purposes.
Embedded derivatives are separated from
the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded
derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition
of a derivative, and the combined instrument is not measured at FVTPL. Changes in the fair value of separable embedded derivatives
are recognized immediately in profit or loss.
v) Other financial liabilities
Other financial liabilities are financial
liabilities that are not classified as FVTPL. Subsequent to initial recognition, other financial liabilities that are not subject
to hedge accounting, are measured at amortized cost using the effective interest method.
Accounts payable and accrued liabilities
and note payable are classified as other financial liabilities. The Company does not currently apply hedge accounting.
The effective interest method is a method
of calculating the amortized cost of an instrument and of allocating interest income over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form
an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of
the debt instrument to the net carrying amount on initial recognition.
Royal Standard Minerals Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
January 31, 2015 and 2014
2. Significant Accounting Policies
(Continued)
Financial instruments (continued)
vi) Financial instruments recorded at
fair value
Financial instruments recorded at fair
value on the consolidated statements of financial position are classified using a fair value hierarchy that reflects the significance
of the inputs used in making the measurements. The fair value hierarchy has the following levels: Level 1 - valuation based on
quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 - valuation techniques based on inputs
other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and Level 3 - valuation techniques using inputs for the asset or liability that are not
based on observable market data (unobservable inputs). As of January 31, 2015 and 2014, the financial asset measured at fair value
is the Company's cash and cash equivalents.
Cash and cash equivalents is considered
Level 1.
Significant accounting judgments
and estimates
The preparation of these consolidated financial
statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual outcomes
could differ from these estimates. These consolidated financial statements include estimates that, by their nature, are uncertain.
The impacts of such estimates are pervasive throughout the consolidated financial statements, and may require accounting adjustments
based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and
future periods if the revision affects both current and future periods. These estimates are based on historical experience, current
and future economic conditions and other factors, including expectations of future events that are believed to be reasonable under
the circumstances.
Critical accounting estimates
Significant assumptions about the future
that management has made that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event
that actual results differ from assumptions made, relate to, but are not limited to, the following:
|
·
|
the inputs used in accounting for share based payment transactions in the consolidated statements
of operations.
|
Royal Standard Minerals Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
January 31, 2015 and 2014
2. Significant Accounting Policies
(Continued)
Critical accounting estimates (continued)
Critical accounting judgments
|
·
|
the categorization of financial assets and liabilities is an accounting policy that requires management
to make judgments or assessments;
|
|
·
|
the measurement of income taxes payable and deferred income tax assets and liabilities requires
management to make judgments in the interpretation and application of the relevant tax laws. Deferred tax assets require management
to assess the likelihood that the Company will generate taxable income in future periods in order to utilize recognized deferred
tax assets;
|
|
·
|
going concern presentation of the consolidated financial statements which assumes that the Company
will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the
normal course of operations as they come due; and
|
|
·
|
management's determination that the functional currency of the Company is the Canadian Dollar.
|
Adoption of new accounting standards
IAS 32 – Financial Instruments: Presentation
(“IAS 32”) was amended by the IASB in December 2011 to clarify certain aspects of the requirements on offsetting. The
amendments focus on the criterion that an entity currently has a legally enforceable right to set off the recognized amounts and
the criterion that an entity intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
At February 1, 2014, the Company adopted this pronouncement and there was no material impact on the Company's consolidated financial
statements.
New standards not yet adopted and interpretations issued
but not yet effective
IFRS 9 – Financial instruments (“IFRS
9”) was issued by the IASB in October 2010 and will replace IAS 39 - Financial Instruments: Recognition and Measurement (“IAS
39”). IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing
the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context
of its business model and the contractual cash flow characteristics of the financial assets. Most of the requirements in IAS 39
for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9. The new standard also requires
a single impairment method to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods
beginning on or after January 1, 2018. Earlier adoption is permitted. The Company is in the process of assessing the impact of
this pronouncement.
Royal Standard Minerals Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
January 31, 2015 and 2014
3. Dissolution of Subsidiaries
(a) On September 5, 2013, the Kentucky
Secretary of State accepted the articles of dissolution for Kentucky Kentucky and Kentucky has been dissolved. As a result, a gain
on dissolution of subsidiary of $30,100 was recorded as a result of accounts payable and accrued liabilities dissolved.
(b) On November 7, 2013, the Nevada Secretary
of State accepted the articles of dissolution for Manhattan and Manhattan has been dissolved. As a result, a gain on dissolution
of subsidiary of $372,682 was recorded.
Net liabilities dissolved
|
|
|
|
|
Reclamation bonds
|
|
$
|
9,550
|
|
Accounts payable and accrued liabilities
|
|
|
(379,254
|
)
|
Asset retirement obligation
|
|
|
(2,978
|
)
|
|
|
|
|
|
Total net liabilities dissolved
|
|
|
(372,682
|
)
|
|
|
|
|
|
Total gain on sale
|
|
$
|
372,682
|
|
4. Capital Management
The Company manages its capital with the
following objectives:
|
·
|
to ensure sufficient financial flexibility to achieve the
ongoing business objectives; and
|
|
·
|
to maximize shareholder return through enhancing the share
value.
|
The Company monitors its capital structure
and makes adjustments according to market conditions in an effort to meet its objectives given the current outlook of the business
and industry in general. The Company may manage its capital structure by issuing new shares, repurchasing outstanding shares, adjusting
capital spending, or disposing of assets. The capital structure is reviewed by Management and the Board of Directors on an ongoing
basis.
The Company's equity comprises of share
capital, reserves, accumulated other comprehensive income and accumulated deficit, which at January 31, 2015 was a deficiency of
$63,047 (January 31, 2014 - $13,557). Note that included in the consolidated statements of financial position presented is a deficit
of $39,250,301 as at January 31, 2015 (January 31, 2014 - $39,193,127).
The Company manages capital through its
financial and operational forecasting processes. The Company reviews its working capital and forecasts its future cash flows based
on operating expenditures, and other investing and financing activities. Selected information is provided to the Board of Directors
of the Company. The Company’s capital management objectives, policies and processes have remained unchanged during the year
ended January 31, 2015. The Company is not subject to external capital requirements.
Royal Standard Minerals Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
January 31, 2015 and 2014
5. Financial Risk Factors
(a) Financial risk factors
The Company’s activities expose it
to a variety of financial risks: credit risk, liquidity risk and market risk (including interest rate and foreign currency risk).
Risk management is carried out by the Company's
management team with guidance from the Audit Committee under policies approved by the Board of Directors. The Board of Directors
also provides regular guidance for overall risk management.
(i) Credit risk
Credit risk is the risk of loss associated
with a counterparty’s inability to fulfill its payment obligations. The Company's credit risk is primarily attributable to
cash and cash equivalents. The Company has no significant concentration of credit risk arising from operations. Cash and cash equivalents
are held with reputable financial institutions, from which management believes the risk of loss to be minimal.
(ii) Liquidity risk
The Company's approach to managing liquidity
risk is to ensure that it will have sufficient liquidity to meet liabilities when due (see note 1). As at January 31, 2015, the
Company had a cash balance of $4,035 (January 31, 2014 - $16,807) to settle current liabilities of $69,076 (January 31, 2014 -
$35,917). All of the Company's financial liabilities have contractual maturities of less than 60 days and are subject to normal
trade terms.
(iii) Market risk
Market risk is the risk of loss that may
arise from changes in market factors such as interest rates, foreign exchange rates, and commodity and equity prices.
Interest rate risk
The Company has cash balances and no variable
interest-bearing debt. The Company's current policy is to invest excess cash in guaranteed investment certificates, bankers acceptance
and money market deposits, with reputable financial institutions. The interest rate risk is remote.
Foreign currency risk
The Company's functional and reporting
currency was previously the United States dollar and major purchases were transacted in United States dollars. Subsequent to the
dissolution of Manhattan (see note 3), the functional currency of the Company changed to Canadian dollars and major purchases are
transacted in Canadian dollars.
Royal Standard Minerals Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
January 31, 2015 and 2014
6. Marketable Securities
Marketable securities consist of 2,000,000
common shares of Sharpe Resources Corporation ("Sharpe"). Sharpe is a publicly held Canadian company engaged in the exploration
and development of coal properties in the United States. In the year ended January 31, 2014, as a result of the continued and significant
decline in the market value and the delisting of the shares, the Company has taken a provision of loss of $30,000 and written down
the investment to $nil.
7. Sundry Receivables and Prepaids
|
|
As at
|
|
|
As at
|
|
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
Sales tax receivables
|
|
$
|
1,994
|
|
|
$
|
5,193
|
|
Prepaid expenses
|
|
|
-
|
|
|
|
360
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,994
|
|
|
$
|
5,553
|
|
8. Exploration and Evaluation
Expenditures on Mineral Properties
(a) Fondaway Canyon and Dixie-Comstock
Projects
On August 9, 2013, the Company completed
its transaction with American Innovative Minerals LLC (“AIMLLC”) to sell its interests in the Fondaway Canyon and Dixie-Comstock
properties (the “Transaction”) for cash consideration of $144,000. As a result, the Company recorded a gain on sale
of property interests of $123,228, net of transaction costs.
In addition, as a condition to the closing
of the Transaction, Hale Capital Management, LP and Hale Capital Partners, LP (together, “Hale Capital”) delivered
to the Company a full and final release and settlement agreement relating to the legal action commenced by Hale Capital on September
27, 2011. A stipulation of dismissal with prejudice was filed with the Supreme Court of the State of New York dismissing all claims
against the Company and Manhattan in connection with that litigation.
Cash
|
|
$
|
144,000
|
|
Less: Transaction costs
|
|
|
(20,772
|
)
|
|
|
|
|
|
Total gain on sale
|
|
$
|
123,228
|
|
Royal Standard Minerals Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
January 31, 2015 and 2014
8. Exploration and Evaluation
Expenditures on Mineral Properties (Continued)
(b) Kentucky Project
Kentucky entered into a settlement and
release agreement on August 27, 2013 with Pick & Shovel Mining ("Pick & Shovel") and Roger and Jacqueline Stacy
pursuant to which in consideration of a cash settlement payment and transfer of certain equipment by Kentucky to Pick & Shovel,
the parties resolved to waive and release any claims relating to a prior claim between the parties. In addition, Kentucky relinquished
any interest in a bond posted on Permit No. 919-0066 and Pick & Shovel agreed to be solely responsible for such Permit and
all related claims and issues asserted by the Kentucky Energy and Environment Cabinet.
Consideration paid
|
|
|
|
Cash
|
|
$
|
8,000
|
|
|
|
|
|
|
Net liabilities settled
|
|
|
|
|
Reclamation bond
|
|
|
178,700
|
|
Equipment
|
|
|
20,158
|
|
Accounts payable and accrued liabilities
|
|
|
(145,000
|
)
|
Asset retirement obligation
|
|
|
(109,949
|
)
|
|
|
|
|
|
Total net liabilities settled
|
|
|
(56,091
|
)
|
|
|
|
|
|
Total gain on settlement
|
|
$
|
48,091
|
|
During the years ended January 31, 2015
and 2014, the Company's exploration and evaluation expenditures were as follows:
|
|
Years Ended
|
|
|
|
January 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
Fondaway Canyon and Dixie-Comstock Projects
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property acquisition costs
|
|
$
|
-
|
|
|
$
|
35,000
|
|
Consulting, wages and salaries
|
|
|
-
|
|
|
|
19,711
|
|
Travel
|
|
|
-
|
|
|
|
5,714
|
|
Office and general
|
|
|
-
|
|
|
|
3,148
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
63,573
|
|
|
|
|
|
|
|
|
|
|
Kentucky Project
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office and general
|
|
$
|
-
|
|
|
$
|
20,102
|
|
Depreciation
|
|
|
-
|
|
|
|
3,558
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
23,660
|
|
|
|
|
|
|
|
|
|
|
Total exploration activities
|
|
$
|
-
|
|
|
$
|
87,233
|
|
Royal Standard Minerals Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
January 31, 2015 and 2014
9. Equipment
|
|
Exploration
|
|
|
|
|
COST
|
|
equipment
|
|
|
Total
|
|
|
|
|
|
|
|
|
Balance, January 31, 2013
|
|
$
|
89,000
|
|
|
$
|
89,000
|
|
Sale of equipment (Note 8(b))
|
|
|
(89,000
|
)
|
|
|
(89,000
|
)
|
|
|
|
|
|
|
|
|
|
Balance, January 31, 2014 and 2015
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
Exploration
|
|
|
|
|
ACCUMULATED DEPRECIATION
|
|
equipment
|
|
|
Total
|
|
|
|
|
|
|
|
|
Balance, January 31, 2013
|
|
$
|
65,284
|
|
|
$
|
65,284
|
|
Depreciation for the year
|
|
|
3,558
|
|
|
|
3,558
|
|
Sale of equipment (Note 8(b))
|
|
|
(68,842
|
)
|
|
|
(68,842
|
)
|
|
|
|
|
|
|
|
|
|
Balance, January 31, 2014 and 2015
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
Exploration
|
|
|
|
|
|
CARRYING AMOUNT
|
|
|
equipment
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Balance, January 31, 2014
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Balance, January 31, 2015
|
|
$
|
-
|
|
|
$
|
-
|
|
Depreciation of exploration equipment is
expensed to exploration and evaluation expenditures on the consolidated statements of operations.
10. Accounts Payable and Accrued
Liabilities
|
|
As at
|
|
|
As at
|
|
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
Trade payables
|
|
$
|
27,609
|
|
|
$
|
18,375
|
|
Accrued liabilities
|
|
|
26,185
|
|
|
|
17,542
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
53,794
|
|
|
$
|
35,917
|
|
11. Notes Payable
On September 30, 2014, December 12, 2014
and January 31, 2015, the Company entered into promissory note arrangements for the purposes of covering accounting fees, whereby
the Company borrowed CDN $13,452, CDN $3,912 and CDN $1,870, respectively, from C. Marrelli Services Limited (together the "Notes").
C. Marrelli Services Limited controls 278,960,559 common shares of the Company and is 100% owned by Carmelo Marrelli. The Notes
are unsecured, bear interest at a rate of 2% per annum and are due on demand.
Royal Standard Minerals Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
January 31, 2015 and 2014
12. Asset Retirement Obligations
The Company is required to recognize a
liability for a legal and constructive obligation to perform asset retirement activities, including decommissioning, reclamation
and environmental monitoring activities once any of its projects are permanently closed. Although these activities are conditional
upon future events, the Company is required to make a reasonable estimate of the fair value of the liability. As at January 31,
2014, the Company had disposed of all of its mineral properties and transferred all obligations to the purchasers.
Determination of the undiscounted AROs
and the timing of these obligations was based on internal estimates using information currently available, existing regulations,
and estimates of closure costs.
|
|
Year Ended
|
|
|
|
January 31,
|
|
|
|
2014
|
|
|
|
|
|
|
Balance, beginning of
|
|
$
|
107,647
|
|
Reversal on dissolution of Manhattan (Note 3(b))
|
|
|
(2,978
|
)
|
Accretion cost
|
|
|
5,280
|
|
Sale of AROs (Note 8(b))
|
|
|
(109,949
|
)
|
|
|
|
|
|
Balance, end of year
|
|
$
|
-
|
|
13. Share Capital
(a) Authorized
The authorized capital of the Company consists
of an unlimited number of common shares and an unlimited number of preferred shares, each without par value.
(b) Issued
|
|
Shares
|
|
|
Amount
|
|
|
|
|
|
|
|
|
Balance, January 31, 2013
|
|
|
83,953,825
|
|
|
$
|
28,104,264
|
|
Private placement - common shares (i)
|
|
|
81,227,436
|
|
|
|
16,400
|
|
Shares issued for settlement of accounts payable and accrued liabilities (ii)
|
|
|
755,654,241
|
|
|
|
152,566
|
|
|
|
|
|
|
|
|
|
|
Balance, January 31, 2014 and 2015
|
|
|
920,835,502
|
|
|
$
|
28,273,230
|
|
(i) On January 17, 2014, the Company closed
a non-brokered private placement of 81,227,436 common shares at CDN $0.0002216 per share for gross proceeds of CDN $18,000 ($16,400).
(ii) On January 17, 2014, the Company issued
755,654,241 shares at CDN $0.0002216 per share as settlement of accounts payable due to a trade creditor.
(iii) The issuance of shares on January
17, 2014 (Note 13(b)(i), (ii)) resulted in a change in the Company's major shareholders. See Note 17.
Royal Standard Minerals Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
January 31, 2015 and 2014
14. Stock Options
Under the Company's stock option plan (the
"Option Plan"), the directors of the Company can grant options to acquire common shares of the Company to directors,
employees and others who provide ongoing services to the Company. Exercise prices cannot be less than the closing price of the
Company's shares on the trading day preceding the grant date and the maximum term of any option cannot exceed ten years.
The number of common shares under option
at any time under the Option Plan or otherwise cannot exceed 5% of the then outstanding common shares of the Company for any optionee.
In addition, options granted to insiders of the Company cannot exceed more than 10% of the then outstanding common shares of the
Company. Options granted may be subject to vesting restrictions in the discretion of the board.
Option pricing models require the input
of highly subjective assumptions including the expected price volatility. Changes in the subjective input assumptions can materially
affect the fair value estimate, and therefore the existing models do not necessarily provide a reliable measure of the fair value
of the Company's share purchase options.
The following table reflects the continuity
of stock options for the years ended January 31, 2015 and 2014:
|
|
Number of
|
|
|
Weighted Average
|
|
|
|
Stock Options
|
|
|
Exercise Price
|
|
|
|
|
|
|
|
|
Balance, January 31, 2013
|
|
|
3,800,000
|
|
|
$
|
0.27
|
|
Forfeited
|
|
|
(1,450,000
|
)
|
|
$
|
0.29
|
|
|
|
|
|
|
|
|
|
|
Balance, January 31, 2014
|
|
|
2,350,000
|
|
|
$
|
0.25
|
|
Forfeited
|
|
|
(2,200,000
|
)
|
|
$
|
0.26
|
|
Expired
|
|
|
(150,000
|
)
|
|
$
|
0.10
|
|
|
|
|
|
|
|
|
|
|
Balance, January 31, 2015
|
|
|
-
|
|
|
$
|
-
|
|
Royal Standard Minerals Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
January 31, 2015 and 2014
15. Basic and Diluted Loss Per
Share
The following table sets forth the computation
of basic and diluted loss per share:
|
|
Years Ended
|
|
|
|
January 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
(Loss) income for the year
|
|
$
|
(57,174
|
)
|
|
$
|
69,225
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding for basic (loss) income per share
|
|
|
920,835,502
|
|
|
|
116,053,396
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding for diluted (loss) income per share
|
|
|
920,835,502
|
|
|
|
116,053,396
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) income per share
|
|
$
|
(0.00
|
)
|
|
$
|
0.00
|
|
Diluted (loss) income per share
|
|
$
|
(0.00
|
)
|
|
$
|
0.00
|
|
The stock options were not included in
the computation of diluted (loss) income per share on January 31, 2014 as their inclusion would be anti-dilutive.
16. Income Taxes
The following table reconciles the expected
income tax expense (recovery) at the Canadian statutory income tax rate at 26.50% (2014 - 26.50%) to the amounts recognized in
the consolidated statements of operations:
|
|
Years Ended
|
|
|
|
January 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income before income taxes
|
|
$
|
(57,174
|
)
|
|
$
|
69,225
|
|
|
|
|
|
|
|
|
|
|
Expected tax (recovery) expense at statutory rate
|
|
$
|
(15,151
|
)
|
|
$
|
18,345
|
|
Permanent differences
|
|
|
-
|
|
|
|
(110,016
|
)
|
Functional currency translation
|
|
|
447,091
|
|
|
|
332,059
|
|
Difference between Canadian and foreign tax rates
|
|
|
-
|
|
|
|
10,291
|
|
Tax effect of dissolution of US subsidiaries
|
|
|
-
|
|
|
|
10,549,174
|
|
Utilization of tax benefits not previously recognized
|
|
|
-
|
|
|
|
(42,375
|
)
|
Tax benefits not recognized
|
|
|
(431,940
|
)
|
|
|
(10,757,478
|
)
|
|
|
|
|
|
|
|
|
|
Tax provision
|
|
$
|
-
|
|
|
$
|
-
|
|
Royal Standard Minerals Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
January 31, 2015 and 2014
16. Income Taxes (Continued)
Deferred Tax Assets and Liabilities
Unrecognized deferred tax assets
Deferred tax assets are recognized for
the carry-forward or unused tax losses and unused tax credits to the extent that it is probable that taxable profits will be available
against which the unused tax losses/credits can be utilized. The following represents the deductible temporary differences by jurisdiction
which have not been recognized in the consolidated financial statements.
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
Unclaimed non-capital losses
|
|
$
|
6,707,041
|
|
|
$
|
8,165,674
|
|
Excess of unclaimed resources pools over carrying value of exploration properties
|
|
|
1,213,136
|
|
|
|
1,384,465
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,920,177
|
|
|
$
|
9,550,139
|
|
The excess of unclaimed resources pools
over carrying value of exploration properties can be carried forward indefinitely. The unclaimed non-capital losses carried forward
by expiry date:
|
|
Canada
|
|
|
|
|
|
|
Expires 2026
|
|
$
|
675,809
|
|
2027
|
|
|
660,222
|
|
2028
|
|
|
813,881
|
|
2029
|
|
|
508,819
|
|
2030
|
|
|
902,261
|
|
2031
|
|
|
386,926
|
|
2032
|
|
|
1,430,643
|
|
2033
|
|
|
933,825
|
|
2034
|
|
|
349,675
|
|
|
|
|
|
|
|
|
$
|
6,707,041
|
|
Royal Standard Minerals Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
January 31, 2015 and 2014
17. Related Party Transactions
and Balances
Remuneration of Directors and key management
personnel of the Company was as follows:
|
|
Years Ended
|
|
|
|
January 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits paid to directors and officers
(2)
|
|
$
|
-
|
|
|
$
|
442,925
|
|
Share-based payments
(1)
|
|
$
|
-
|
|
|
$
|
(109,866
|
)
|
(1)
Negative amount is the result
of the reversal of previously recorded share-based payments on forfeited unvested options.
(2)
Salaries and benefits include
director fees. The Board of Directors do not have employment or service contracts with the Company. Also included above are the
fees for the previous Interim President and Chief Executive Officer and previous Chief Financial Officer whose fees for services
for the year ended January 31, 2014 were $330,000 and $91,985, respectively.
Paul G. Smith, a former director and Chairman
of the Board, was the President and Chief Executive Officer of Equity Financial Holdings Inc. ("Equity"), a company that
provided financial services to the Company until April 5, 2013. Fees for services provided by Equity totaled $nil for the year
ended January 31, 2015 (year ended January 31, 2014 - $4,822).
Daniel Crandall, the Chief Financial Officer,
is a senior employee of Marrelli Support Services Inc. ("Marrelli Support"), a firm providing accounting services. Marrelli
Support's President, Carmelo Marrelli, beneficially controls 278,960,559 common shares of the Company through his holding company,
C. Marrelli Services Limited. Fees for services provided by Marrelli Support totaled $13,027, for the year ended January 31, 2015
(year ended January 31, 2014 - $750). As at January 31, 2015, Marrelli Support was owed $1,967 and this amount was included in
accounts payable and accrued liabilities (January 31, 2014 - $nil).
During the year ended January 31, 2015,
the Company incurred fees totaling $740, (year ended January 31, 2014 - $nil) for filing services received from DSA Filing Services
("DSA"). Carmelo Marrelli is an officer and shareholder of DSA. As at January 31, 2015, DSA was owed $370 and this amount
was included in accounts payable and accrued liabilities (January 31, 2014 - $nil).
At January 31, 2015, notes payable of $15,282
(CDN $19,234) (January 31, 2014 - $nil) are owed to C. Marrelli Services Limited for advances to cover accounting fees. The notes
payable are unsecured, bear interest at 2% per annum and are due on demand (note 11). The interest expense pertaining to the notes
payable for the year ended January 31, 2015 is $173 (year ended January 31, 2014 - $nil).
During the year ended January 31, 2015,
the Company incurred fees totaling $19,899, (year ended January 31, 2014 - $nil) for legal services received from Kirsh Securities
Law Professional Corporation, a law firm owned by the President and Chief Executive Officer of the Company. An amount of $17,446
is included in accounts payable and accrued liabilities at January 31, 2015 (January 31, 2014 - $nil).
Royal Standard Minerals Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
January 31, 2015 and 2014
17. Related Party Transactions
and Balances (Continued)
During the year ended January 31, 2015,
the Company incurred fees totaling $4,038 (year ended January 31, 2014 - $nil) for consulting services received from G. Duguay
Services Inc., a firm where George Duguay, a director and shareholder of the Company, is the President. An amount of $3,540 is
included in accounts payable and accrued liabilities at January 31, 2015 (January 31, 2014 - $nil).
To the knowledge of the directors and senior
officers of the Company, as at January 31, 2015, no person or corporation beneficially owns or exercises control over common shares
of the Company carrying more than 10% of the voting rights attached to all common shares of the Company other than as set out below:
|
|
|
|
|
Percentage of
|
|
|
|
Number of
|
|
|
outstanding
|
|
Major Shareholder
|
|
common shares
|
|
|
common shares
|
|
|
|
|
|
|
|
|
|
|
Lonnie Kirsh, Chief Executive Officer and Director
|
|
|
278,960,559
|
|
|
|
30.29
|
%
|
George Duguay, Director
|
|
|
278,960,559
|
|
|
|
30.29
|
%
|
C. Marrelli Services Limited
|
|
|
278,960,559
|
|
|
|
30.29
|
%
|
None of the Company's major shareholders
have different voting rights than other holders of the Company's common shares.
18. Contingencies
The Company’s previous wholly-owned
subsidiary, Manhattan, received several documents filed in various district courts, one in Shelby County Chancery Court, Memphis,
Tennessee and one in Elko County District Court, Elko, Nevada, from certain suppliers seeking payment of unpaid services provided
to Manhattan and where applicable, interest and court costs. In addition, one of the suppliers is seeking compensation for unjust
enrichment. Management of Manhattan attempted to settle both claims on several occasions, but was unsuccessful.
Manhattan has been dissolved and the Company
is not liable to settle these claims.
19. General and Administrative
|
|
Years Ended
|
|
|
|
January 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
Corporate development
|
|
$
|
2,724
|
|
|
$
|
12,803
|
|
Insurance
|
|
|
-
|
|
|
|
25,795
|
|
Office and general
|
|
|
2,418
|
|
|
|
35,530
|
|
Professional fees (Note 17)
|
|
|
47,956
|
|
|
|
(45,439
|
)
|
Wages and salaries (Note 17)
|
|
|
-
|
|
|
|
443,194
|
|
Share-based payments (Note 17)
|
|
|
-
|
|
|
|
(109,866
|
)
|
Travel
|
|
|
38
|
|
|
|
25,675
|
|
Consulting fees (Note 17)
|
|
|
4,038
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
57,174
|
|
|
$
|
387,692
|
|
Royal Standard Minerals Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
January 31, 2015 and 2014
20. Segmented Information
The Company's operations comprise a single
reporting segment which is currently inactive. As the operations comprise a single reporting segment, amounts disclosed in the
consolidated financial statements also represent segment amounts.
21. Subsequent Event
Subsequent to January 31, 2015, the Company
obtained separate promissory notes of CDN$4,000 from each of George Duguay, C. Marrelli Services Inc. and Lonnie Kirsh, for total
promissory notes of CDN$12,000. These notes are unsecured, bear interest at an annual rate at 2% and are due on demand.
ROYAL STANDARD MINERALS INC.
MANAGEMENT’S DISCUSSION
AND ANALYSIS
YEAR ENDED JANUARY 31, 2015
Royal Standard Minerals Inc.
Management’s Discussion and Analysis
Year Ended January 31, 2015
Discussion Dated May 22, 2015
This Management Discussion and Analysis
(“MD&A”) is dated May 22, 2015 and unless otherwise noted, should be read in conjunction with the Company’s
audited consolidated financial statements for the years ended January 31, 2015 and 2014 and the notes thereto. Results are reported
in United States dollars, unless otherwise noted. The Company’s consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards (“IFRS”). This MD&A was written to comply with the requirements
of National Instrument 51-102-Continuous Disclosure Obligations. In the opinion of management, all adjustments (which consist only
of normal recurring adjustments) considered necessary for a fair presentation have been included. The results presented for the
year ended January 31, 2015 are not necessarily indicative of the results that may be expected for any future period.
For the purposes of preparing this MD&A,
management, in conjunction with the Board of Directors, considers the materiality of information. Information is considered material
if (1) such information is a change or a fact that has or would reasonably be expected to have, a significant effect on the market
price or value of the Company’s common shares; or (2) there is a substantial likelihood that a reasonable investor would
consider it important in making an investment decision; or (3) if it would significantly alter the total mix of information available
to investors. Management, in conjunction with the Board of Directors, evaluates materiality with reference to all relevant circumstances,
including potential market sensitivity.
Additional information relating to the
Company can be found on SEDAR at www.sedar.com.
The Company’s common shares are quoted
in the United States of America on the Over the Counter Bulletin Board “OTC:BB”, under the symbol RYSMF. The Company’s
is currently considered delinquent in its SEC filings until such time as it files a Form 20-F Annual Report for the fiscal year
ended January 31, 2014.
Royal Standard Minerals Inc.
Management’s Discussion and Analysis
Year Ended January 31, 2015
Discussion Dated May 22, 2015
DISCLOSURE REGARDING FORWARD-LOOKING
STATEMENTS
This MD&A contains certain forward-looking
information and forward-looking statements, as defined in applicable securities laws (collectively referred to herein as “forward-looking
statements”). These statements relate to future events or the Company’s future performance. All statements other than
statements of historical fact are forward-looking statements. Often, but not always, forward-looking statements can be identified
by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”,
“estimates”, “continues”, “forecasts”, “projects”, “predicts”, “intends”,
“anticipates” or “believes”, or variations of, or the negatives of, such words and phrases, or state that
certain actions, events or results “may”, “could”, “would”, “should”, “might”
or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause actual results to differ materially from those anticipated in such forward-looking statements.
The forward-looking statements in this MD&A speak only as of the date of this MD&A or as of the date specified in such
statement. The following table outlines certain significant forward-looking statements contained in this MD&A and provides
the material assumptions used to develop such forward-looking statements and material risk factors that could cause actual results
to differ materially from the forward-looking statements.
Forward-looking statements
|
|
Assumptions
|
|
Risk factors
|
The Company will be able to continue its business activities.
|
|
The Company has anticipated all material costs and the operating activities of the Company, and such costs and activities will be consistent with the Company’s current expectations; the Company will be able to obtain shareholder loans or equity funding when required.
|
|
Unforeseen costs to the Company will arise; any particular operating cost increase or decrease from the date of the estimation; and capital markets not being favourable for funding and/or related parties discontinue funding the Company resulting in the Company not being able to obtain financing when required or on acceptable terms.
|
|
|
|
|
|
The Company will be able to carry out anticipated business plans.
|
|
The operating activities of the Company for the twelve months ending January 31, 2016, will be consistent with the Company’s current expectations.
|
|
Sufficient funds not being available; increases in costs; the Company may be unable to retain key personnel.
|
Royal Standard Minerals Inc.
Management’s Discussion and Analysis
Year Ended January 31, 2015
Discussion Dated May 22, 2015
Inherent in forward-looking statements
are risks, uncertainties and other factors beyond the Company’s ability to predict or control. Please also make reference
to those risk factors referenced in the “Risk Factors” section below. Readers are cautioned that the above chart does
not contain an exhaustive list of the factors or assumptions that may affect the forward-looking statements, and that the assumptions
underlying such statements may prove to be incorrect. Actual results and developments are likely to differ, and may differ materially,
from those expressed or implied by the forward-looking statements contained in this MD&A.
Forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance or achievements
to be materially different from any of its future results, performance or achievements expressed or implied by forward-looking
statements. All forward-looking statements herein are qualified by this cautionary statement. Accordingly, readers should not place
undue reliance on forward-looking statements. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking
statements whether as a result of new information or future events or otherwise, except as may be required by law. If the Company
does update one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect
to those or other forward-looking statements, unless required by law.
DESCRIPTION OF BUSINESS AND GOING CONCERN
The Company’s business activities
are currently restricted to funding ongoing operations as a reporting issuer and to repaying existing creditors and is currently
seeking new business opportunities. Success in identifying a suitable new asset or business for the Company is uncertain. Unless
the Company can identify a suitable asset or business opportunity and/or obtain additional financing in the near term, there is
significant doubt on the ability of the Company to continue as a going concern. Without a suitable asset or business opportunity
and/or additional financing, the Company will be required to consider the basis on which it will continue as an entity. The Company
has no operating revenues and therefore it must utilize current cash and cash equivalents to satisfy outstanding liabilities.
The Company’s financial statements
have been prepared on the basis of accounting principles applicable to a going concern, which assume that the Company will continue
in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course
of operations as they come due. In assessing whether the going concern assumption is appropriate, management takes into account
all available information about the future, which is at least, but is not limited to, twelve months from the end of the reporting
period. Management is aware, in making its assessment, of material uncertainties related to events or conditions that cast significant
doubt upon the entity's ability to continue as a going concern. The Company had a loss of $57,174 during the year ended January
31, 2015 (year ended January 31, 2014 - income of $69,225) and has an accumulated deficit of $39,250,301 (January 31, 2014 - accumulated
deficit of $39,193,127). In addition, the Company has a working capital deficiency of $63,047 at January 31, 2015 (January 31,
2014 - working capital deficiency of $13,557).
Royal Standard Minerals Inc.
Management’s Discussion and Analysis
Year Ended January 31, 2015
Discussion Dated May 22, 2015
The Company’s ability to continue
to meet its obligations is uncertain and, as a result, there is significant doubt regarding the going concern assumption and, accordingly,
the ultimate appropriateness of the use of accounting principles applicable to a going concern. The Company has no remaining mineral
property interests and its business activities are currently restricted to funding ongoing operations as a reporting issuer and
to repaying existing creditors and is currently focused on identifying suitable assets or businesses to acquire or merge with.
Success in identifying a suitable new asset or business for the Company is uncertain. Furthermore, the Company has limited working
capital to pursue such opportunities. Unless the Company can identify a suitable asset or business opportunity and/or obtain additional
financing in the near term, there is significant doubt on the ability of the Company to repay its outstanding liabilities. If the
Company is unable to extinguish all of its outstanding liabilities, the going concern assumption will not be valid. The financial
statements do not reflect the adjustments to the carrying values or classifications of assets and liabilities or to the reported
expenses that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern
in the normal course of operations for the foreseeable future. These adjustments could be material.
Royal Standard Minerals Inc.
Management’s Discussion and Analysis
Year Ended January 31, 2015
Discussion Dated May 22, 2015
OVERALL PERFORMANCE
The Company’s net loss for the year
ended January 31, 2015 was $57,174 ($0.00 loss per share) and for the year ended January 31, 2014 was an income of $69,225 ($0.00
income per share), an increase in net loss of $126,399. The increase in net loss relates mainly to a reduction of gain on dissolution
of subsidiary from $402,782 in the year ended January 31, 2014 to $nil in 2015 and reduction in gain on sale of property interests
and related assets from $123,228 in the year ended January 31, 2014 to $nil in 2015. The reduced gain is offset by a lower general
and administrative expense of $57,174 for the year ended January 31, 2015 compared to $387,692 for the year ended January 31, 2014.
The decrease in general and administrative expenses of $330,518 was primarily a result of lower office and general expenses, wages
and salaries, insurance, travel and share-based payments as a result of the Company no longer having any active mineral exploration
business operations. As a result of the sale of all property interests in the prior year the Company’s exploration and evaluation
expenditures for the year ended January 31, 2015 was $nil, compared to $87,233 for the year ended January 31, 2014.
SELECTED ANNUAL FINANCIAL INFORMATION
The following is selected financial data
derived from the audited consolidated financial statements of the Company as at January 31, 2015, 2014 and 2013 and for the years
then ended.
|
|
Year ended
January 31,
2015
|
|
|
Year ended
January 31,
2014
|
|
|
Year ended
January 31,
2013
|
|
Net (loss) income
|
|
$
|
(57,174
|
)
|
|
$
|
69,225
|
|
|
$
|
5,291,142
|
|
Net (loss) income per share - basic and diluted
|
|
$
|
(0.00
|
)
|
|
$
|
0.00
|
|
|
$
|
0.06
|
|
|
|
As at
January 31,
2015
|
|
|
As at
January 31,
2014
|
|
|
As at
January 31,
2013
|
|
Total assets
|
|
$
|
6,029
|
|
|
$
|
22,360
|
|
|
$
|
3,155,535
|
|
Long-term financial liabilities
|
|
$
|
nil
|
|
|
$
|
nil
|
|
|
$
|
107,647
|
|
FINANCIAL PERFORMANCE
Year ended January 31, 2015, compared
with year ended January 31, 2014
The Company’s net loss for the year
ended January 31, 2015 was $57,174 ($0.00 loss per share) compared to a net income $69,225 ($0.00 income per share) for the year
ended January 31, 2014, on no revenue. The increase in loss of $126,399 was principally the result of:
Royal Standard Minerals Inc.
Management’s Discussion and Analysis
Year Ended January 31, 2015
Discussion Dated May 22, 2015
|
·
|
Exploration and evaluation expenditures
decreased by $87,233 to $nil for the year ended January 31, 2015, compared to the same period in 2014. The decrease was the result
of the sale of all property interests in the prior year.
|
|
·
|
Office and general expense decreased by
$33,112 to $2,418 for the year ended January 31, 2015, compared to the same period in 2014. The decrease was the result of the
Company no longer having any active mineral exploration business operations.
|
|
·
|
Wages and salaries decreased by $443,194
to $nil for the year ended January 31, 2015, compared to the same period in 2014. The decrease was the result of the Company no
longer having any mineral exploration operations.
|
|
·
|
Professional fees increased to $47,956
for the year ended January 31, 2015, compared to a recovery of $45,439 for the same period in 2014. The recovery for 2014 was the
result of the reversal of certain accrued legal expenses arising from full and final settlement of certain legal action.
|
|
·
|
Share-based payments was $nil for the
year ended January 31, 2015, compared to a recovery of $109,866 for the same period in 2014. The negative amount is the result
of the reversal of previously recorded share-based payments on forfeited unvested options. No share-based payments were made in
2015.
|
|
·
|
Impairment of marketable securities decreased
by $30,000 to $nil for the year ended January 31, 2015, compared to the same period in 2014. The decrease was the result of the
Company impairing all marketable securities to $nil in the prior year.
|
|
·
|
Gain on sale of property interests and
related assets decreased by $123,228 to $nil for the year ended January 31, 2015, compared to the same period in 2014. The decrease
was the result of the sale of all mineral property interests in the prior year.
|
|
·
|
Gain on dissolution of subsidiaries decreased
by $402,782 and gain on settlement and release decreased by $48,091, to $nil for the year ended January 31, 2015, compared to the
same period in 2014. The decrease is a result of these being one-time events.
|
|
·
|
Foreign currency translation adjustment
decreased by $31,286 to $nil for the year ended January 31, 2015, compared to the same period in 2014. The decrease is the result
of the change in functional currency in the prior year resulting in the foreign currency translation adjustment being recorded
in comprehensive loss.
|
Royal Standard Minerals Inc.
Management’s Discussion and Analysis
Year Ended January 31, 2015
Discussion Dated May 22, 2015
Three months ended January 31, 2015,
compared with three months ended January 31, 2014
The Company’s net loss for the three
months ended January 31, 2015 was $13,985 ($0.00 loss per share) compared to net income of $270,714 ($0.00 income per share) for
the three months ended January 31, 2014, on no revenue. The increase in net loss of $284,699 was principally the result of:
|
·
|
Professional fees increased to $10,480
for the three months ended January 31, 2015, compared to a recovery of $10,638 for the same period in 2014. The recovery for 2014
was the result of the reversal of certain accrued legal expenses arising from full and final settlement of certain legal action.
|
|
·
|
Wages and salaries decreased by $240,679
to $nil for the three months ended January 31, 2015, compared to the same period in 2014. The decrease was the result of the Company
no longer having any active mineral exploration business operations.
|
|
·
|
Share-based payments was $nil for the
three months ended January 31, 2015 compared to a recovery of $126,266 for the same period ended 2014. The negative amount is the
result of the reversal of previously recorded share-based payments on forfeited unvested options. No share-based payments were
made during the three months ended January 31, 2015.
|
|
·
|
Gain on dissolution of subsidiaries decreased
by $372,682 to $nil for the three months ended January 31, 2015, compared to the same period in 2014. The decrease is a result
of this being a one-time event.
|
SUMMARY OF QUARTERLY RESULTS
The following is a summary of selected
financial information of the Company for the quarterly periods indicated.
Three Months Ended
|
|
Net Revenues
($)
|
|
Net Income (Loss)
($)
|
|
January 31, 2015
|
|
nil
|
|
|
(13,985
|
)
|
|
|
(0.00
|
)
|
October 31, 2014
|
|
nil
|
|
|
(2,550
|
)
|
|
|
(0.00
|
)
|
July 31, 2014
|
|
nil
|
|
|
(11,700
|
)
|
|
|
(0.00
|
)
|
April 30, 2014
|
|
nil
|
|
|
(28,939
|
)
|
|
|
(0.00
|
)
|
January 31, 2014
|
|
nil
|
|
|
270,714
|
|
|
|
0.00
|
|
October 31, 2013
|
|
nil
|
|
|
40,418
|
|
|
|
0.00
|
|
July 31, 2013
|
|
nil
|
|
|
(49,485
|
)
|
|
|
(0.00
|
)
|
April 30, 2013
|
|
nil
|
|
|
(192,422
|
)
|
|
|
(0.00
|
)
|
Royal Standard Minerals Inc.
Management’s Discussion and Analysis
Year Ended January 31, 2015
Discussion Dated May 22, 2015
LIQUIDITY AND CAPITAL RESOURCES
The Company currently has no positive
operating cash flow and has, to date, financed its activities and its ongoing expenditures primarily through equity transactions
such as equity offerings, the exercise of warrants and other financing arrangements. The Company believes that additional financing
will be required to fund its operating expenses as it searches for suitable assets and businesses to merge with or acquire.
As at January 31, 2015, the Company had
cash and cash equivalents of $4,035. Cash used in operating activities was $28,054 for the year ended January 31, 2015. During
the year ended January 31, 2015, the Company experienced a net increase of $21,436 in non-cash working capital items, which was
due to a decrease in sundry receivables and prepaid of $3,559 and increase in accounts payable and accrued liabilities of $17,877.
Cash provided by financing activities was $15,282 for the year ended January 31, 2015 due to notes payable advanced from a shareholder.
The Company's approach to managing liquidity
risk has been to ensure that it will have sufficient liquidity to meet liabilities when due. As at January 31, 2015, the Company
had cash and cash equivalents of $4,035 compared to $16,807 as at January 31, 2014, to settle current liabilities of $69,076 compared
to $35,917 as at January 31, 2014. The Company currently does not have sufficient cash and cash equivalents to settle current
liabilities although creditors who are related to the Company have agreed to defer payment. All of the Company's financial liabilities
have contractual maturities of less than 60 days and are subject to normal trade terms. The Company regularly evaluates its cash
position in an effort to maintain its liquidity.
There is no assurance that future equity
or debt capital will be available to the Company in the amounts or at the times desired, or on terms that are acceptable to the
Company, if at all. See “Risk Factors” below.
As at January 31, 2015 and the date of
this MD&A, the Company had 920,835,502 common shares issued and outstanding and no stock options outstanding. The Company’s
liquidity risk with financial instruments is minimal as any excess cash, when present, is deposited with a Schedule I Canadian
bank.
Royal Standard Minerals Inc.
Management’s Discussion and Analysis
Year Ended January 31, 2015
Discussion Dated May 22, 2015
RELATED PARTY TRANSACTIONS
Remuneration of Directors and key management
personnel of the Company was as follows:
|
|
Year Ended January
31,
|
|
|
|
2015
($)
|
|
|
2014
($)
|
|
Salaries and benefits paid to directors and officers
(2)
|
|
|
nil
|
|
|
|
442,925
|
|
Share-based payments
(1)
|
|
|
nil
|
|
|
|
(109,866
|
)
|
|
(1)
|
Negative amount is the result of the reversal of previously recorded share-based payments on forfeited
unvested options.
|
|
(2)
|
Salaries and benefits include director fees. The Board of Directors do not have employment or service
contracts with the Company. Also included above are the fees for the previous Interim President and Chief Executive Officer and
previous Chief Financial Officer whose fees for services for the year ended January 31, 2014 were $330,000 and $91,985, respectively.
|
Paul G. Smith, a former director and Chairman
of the Board, was the President and Chief Executive Officer of Equity Financial Holdings Inc. ("Equity"), a company that
provided financial services to the Company until April 5, 2013. Fees for services provided by Equity totaled $nil for the year
ended January 31, 2015 (year ended January 31, 2014 - $4,822).
Daniel Crandall, the Chief Financial Officer,
is a senior employee of Marrelli Support Services Inc. ("Marrelli Support"), a firm providing accounting services. Marrelli
Support's President, Carmelo Marrelli, beneficially controls 278,960,559 common shares of the Company through his holding company,
C. Marrelli Services Limited Fees for services provided by Marrelli Support totaled $13,027, for the year ended January 31, 2015
(year ended January 31, 2014 - $750). As at January 31, 2015, Marrelli Support was owed $1,967 and this amount was included in
accounts payable and accrued liabilities (January 31, 2014 - $nil).
During the year ended January 31, 2015,
the Company incurred fees totaling $740, (year ended January 31, 2014 - $nil) for filing services received from DSA Filing Services
("DSA"). Carmelo Marrelli is an officer and shareholder of DSA. As at January 31, 2015, DSA was owed $370 and this amount
was included in accounts payable and accrued liabilities (January 31, 2014 - $nil).
Royal Standard Minerals Inc.
Management’s Discussion and Analysis
Year Ended January 31, 2015
Discussion Dated May 22, 2015
At January 31, 2015, notes payable of $15,282
(CDN $19,234) (January 31, 2014 - $nil) are owed to C. Marrelli Services Limited for advances to cover accounting fees. The notes
payable are unsecured, bear interest at 2% per annum and are due on demand. The interest expense pertaining to the notes payable
for the year ended January 31, 2015 is $173 (year ended January 31, 2014 - $nil).
During the year ended January 31, 2015,
the Company incurred fees totaling $19,899, (year ended January 31, 2014 - $nil) for legal services received from Kirsh Securities
Law Professional Corporation, a law firm owned by the President and Chief Executive Officer of the Company. An amount of $17,446
is included in accounts payable and accrued liabilities at January 31, 2015 (January 31, 2014 - $nil).
During the year ended January 31, 2015,
the Company incurred fees totaling $4,038 (year ended January 31, 2014 - $nil) for consulting services received from G. Duguay
Services Inc., a firm where George Duguay, a director and shareholder of the Company, is the President. An amount of $3,540 is
included in accounts payable and accrued liabilities at January 31, 2015 (January 31, 2014 - $nil).
To the knowledge of the directors and senior
officers of the Company, as at January 31, 2015, no person or corporation beneficially owns or exercises control over common shares
of the Company carrying more than 10% of the voting rights attached to all common shares of the Company other than as set out below:
Major Shareholder
|
|
Number of
common shares
|
|
|
Percentage of
outstanding
common shares
|
|
Lonnie Kirsh, Chief Executive Officer and Director
|
|
|
278,960,559
|
|
|
|
30.29
|
%
|
George Duguay, Director
|
|
|
278,960,559
|
|
|
|
30.29
|
%
|
C. Marrelli Services Limited
|
|
|
278,960,559
|
|
|
|
30.29
|
%
|
None of the Company's major shareholders
have different voting rights than other holders of the Company's common shares.
SHARE CAPITAL
The Company is authorized to issue an unlimited
number of common shares and preferred shares. As of the date of this MD&A, the Company had 920,835,502 common shares outstanding.
Royal Standard Minerals Inc.
Management’s Discussion and Analysis
Year Ended January 31, 2015
Discussion Dated May 22, 2015
CONTINGENCIES
The Company’s previous wholly-owned
subsidiary, Manhattan Mining Co. ("Manhattan"), received several documents filed in various district courts, one in Shelby
County Chancery Court, Memphis, Tennessee and one in Elko County District Court, Elko, Nevada, from certain suppliers seeking payment
of unpaid services provided to Manhattan and where applicable, interest and court costs. In addition, one of the suppliers is seeking
compensation for unjust enrichment. Management attempted to settle both claims on several occasions, but was unsuccessful.
Manhattan has been dissolved and the Company
is not liable to settle these claims.
OFF BALANCE SHEET ARRANGEMENTS
As of the date hereof, management believes
the Company does not have any off balance sheet arrangements that have, or are reasonably likely to have, a current or future effect
on the results of operations or financial condition of the Company, including, and without limitation, such considerations as liquidity
and capital resources.
SIGNIFICANT ACCOUNTING ESTIMATES AND
JUDGMENTS
The preparation of the Company’s
consolidated financial statements requires management to make certain estimates, judgments and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting
period. Actual outcomes could differ from those estimates. The Financial Statements for the years ended January 31, 2015 and 2014
include estimates that, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the Financial Statements
for the years ended January 31, 2015 and 2014 and may require accounting adjustments based on future occurrences. Revisions to
accounting estimates are recognized in the period in which the estimate is revised and future periods if the revision affects both
current and future periods. These estimates are based on historical experience, current and future economic conditions and other
factors, including expectations of future events that are believed to be reasonable under the circumstances.
Significant assumptions about the future
that management has made that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event
that actual results differ from assumptions made, relate to, but are not limited to, the following:
Royal Standard Minerals Inc.
Management’s Discussion and Analysis
Year Ended January 31, 2015
Discussion Dated May 22, 2015
Critical accounting estimates
|
·
|
the inputs used in accounting for share
based payment transactions in the consolidated statements of operations.
|
Critical accounting judgments
|
·
|
the categorization of financial assets
and liabilities is an accounting policy that requires management to make judgments or assessments;
|
|
·
|
the measurement of income taxes payable
and deferred income tax assets and liabilities requires management to make judgments in the interpretation and application of the
relevant tax laws. Deferred tax assets require management to assess the likelihood that the Company will generate taxable income
in future periods in order to utilize recognized deferred tax assets;
|
|
·
|
going concern presentation of the consolidated
financial statements which assumes that the Company will continue in operation for the foreseeable future and will be able to realize
its assets and discharge its liabilities in the normal course of operations as they come due; and
|
|
·
|
management's determination that the functional
currency of the Company is the Canadian Dollar.
|
NEW ACCOUNTING PRONOUNCEMENTS
IFRS 9 – Financial instruments (“IFRS
9”) was issued by the IASB in October 2010 and will replace IAS 39 - Financial Instruments: Recognition and Measurement (“IAS
39”). IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing
the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context
of its business model and the contractual cash flow characteristics of the financial assets. Most of the requirements in IAS 39
for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9. The new standard also requires
a single impairment method to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods
beginning on or after January 1, 2018. Earlier adoption is permitted. The Company is in the process of assessing the impact of
this pronouncement.
CHANGE IN ACCOUNTING POLICIES
IAS 32 – Financial Instruments: Presentation
(“IAS 32”) was amended by the IASB in December 2011 to clarify certain aspects of the requirements on offsetting. The
amendments focus on the criterion that an entity currently has a legally enforceable right to set off the recognized amounts and
the criterion that an entity intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
At February 1, 2014, the Company adopted this pronouncement and there was no material impact on the Company's consolidated financial
statements.
Royal Standard Minerals Inc.
Management’s Discussion and Analysis
Year Ended January 31, 2015
Discussion Dated May 22, 2015
MANAGEMENT OF CAPITAL
The Company manages its capital with the
following objectives:
|
·
|
to ensure sufficient financial flexibility
to achieve the ongoing business objectives; and
|
|
·
|
to maximize shareholder return through
enhancing the share value.
|
The Company monitors its capital structure
and makes adjustments according to market conditions in an effort to meet its objectives given the current outlook of the business
and industry in general. The Company may manage its capital structure by issuing new shares, repurchasing outstanding shares, adjusting
capital spending, or disposing of assets. The capital structure is reviewed by Management and the Board of Directors on an ongoing
basis.
The Company's equity comprises of share
capital, reserves, accumulated other comprehensive income and accumulated deficit, which at January 31, 2015 was a deficiency of
$63,047 (January 31, 2014 - deficiency of $13,557). Note that included in the consolidated statements of financial position presented
is a deficit of $39,250,301 as January 31, 2015 (January 31, 2014 - $39,193,127).
The Company manages capital through its
financial and operational forecasting processes. The Company reviews its working capital and forecasts its future cash flows based
on operating expenditures, and other investing and financing activities. Selected information is provided to the Board of Directors
of the Company. The Company’s capital management objectives, policies and processes have remained unchanged during the year
ended January 31, 2015. The Company is not subject to external capital requirements.
FINANCIAL RISK FACTORS
The Company's financial instruments, consisting
of cash and cash equivalents, sundry receivables and accounts payable and accrued liabilities, approximate fair values due to the
relatively short-term maturities of the instruments. It is management’s opinion that the Company is not exposed to significant
interest, currency or credit risks arising from these financial instruments.
Risk management is carried out by the Company's
management team with guidance from the Audit Committee under policies approved by the Board of Directors. The Board of Directors
also provides regular guidance for overall risk management.
Royal Standard Minerals Inc.
Management’s Discussion and Analysis
Year Ended January 31, 2015
Discussion Dated May 22, 2015
Credit risk
Credit risk is the risk of loss associated
with a counterparty’s inability to fulfill its payment obligations. The Company's credit risk is primarily attributable to
cash and cash equivalents. The Company has no significant concentration of credit risk arising from operations. Cash and cash equivalents
are held with reputable financial institutions, from which management believes the risk of loss to be minimal.
Liquidity risk
The Company's approach to managing liquidity
risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at January 31, 2015, the Company had
a cash balance of $4,035 (January 31, 2014 - $16,807) to settle current liabilities of $69,076 (January 31, 2014 - $35,917). All
of the Company's financial liabilities have contractual maturities of less than 60 days and are subject to normal trade terms.
It is expected the Company will be funded
by shareholder loans or private placements from related parties until the Company finds an asset or business to incorporate into
the Company.
Market risk
Market risk is the risk of loss that may
arise from changes in market factors such as interest rates, foreign exchange rates, and commodity and equity prices.
Interest rate risk
The Company has cash balances
and no interest-bearing debt. The Company's current policy is to invest excess cash in guaranteed investment certificates, bankers
acceptance and money market deposits, with reputable financial institutions. The interest rate risk is remote.
Foreign currency risk
The Company's functional and
reporting currency was previously the United States dollar and major purchases were transacted in United States dollars. Subsequent
to the dissolution of Manhattan, the functional currency of the Company changed to Canadian dollars and major purchases are transacted
in Canadian dollars.
Royal Standard Minerals Inc.
Management’s Discussion and Analysis
Year Ended January 31, 2015
Discussion Dated May 22, 2015
RISK FACTORS
At the present time, the Company does not
hold any interest in an active operating business or asset. The Company's viability and potential success lie in its
ability to develop, exploit and generate revenue from a future asset or business acquisition. Revenues, profitability and cash
flow from any future asset or business acquisition involving the Company are difficult to predict and will be influenced by factors
unknown to management at the present time. The Company has limited financial resources and there is no assurance that it will be
able to obtain adequate financing in the future or that the terms of any such financing will be favourable. Failure to obtain such
additional financing could result in delay or indefinite postponement of future business activities of the Company with the possible
dilution or loss of such business activities.
The Company’s ability to continue
as a going concern is uncertain and is dependent upon its ability to identify assets or business opportunities to acquire or merge
with. Success in identifying a new assets or business is uncertain. Furthermore, the Company has limited working capital to pursue
such opportunities. Unless the Company can identify a suitable assets or business opportunity and/or obtain additional financing
in the near term, there is significant doubt on the ability of the Company to continue as a going concern. Any material delays,
or failure of, identifying a suitable business opportunity and/or obtaining additional financing in the near term is likely to
have a material adverse impact on the business, operations and prospects of the Company and the ability of the Company to raise
adequate financing and re-commence business operations, which in turn is likely to have a material adverse impact on the Company's
business, assets and financial condition.
Additionally, Certain of the directors
and officers of the Company may also serve as directors and officers of other companies and consequently, the possibility of conflict
exists. Any decisions made by such directors involving the Company will be made in accordance with the duties and obligations of
directors to deal fairly and in good faith with the Company and such other companies. In addition, such directors declare, and
refrain from voting on, any matters in which such directors may have a conflict of interest.
Consequently, such directors and officers
will be dividing their time between their duties to the Company and their duties to their other reporting issuers.
RISK MANAGEMENT
Risk management is carried out by the Company's
management team with guidance from the Audit Committee under policies approved by the Board of Directors. The Board of Directors
provides regular guidance for overall risk management.
Royal Standard Minerals Inc.
Management’s Discussion and Analysis
Year Ended January 31, 2015
Discussion Dated May 22, 2015
DISCLOSURE OF INTERNAL CONTROLS
Management has established processes to
provide it with sufficient knowledge to support representations that it has exercised reasonable diligence to ensure that (i) the
consolidated financial statements do not contain any untrue statement of material fact or omit to state a material fact required
to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of
the date of and for the periods presented by the consolidated financial statements, and (ii) the consolidated financial statements
fairly present in all material respects the financial condition, results of operations and cash flow of the Company, as of the
date of and for the periods presented.
In contrast to the certificate required
for non-venture issuers under National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings
(“NI 52-109”), the Venture Issuer Basic Certificate filed by the Company does not include representations relating
to the establishment and maintenance of disclosure controls and procedures (“DC&P”) and internal control over financial
reporting (“ICFR”), as defined in NI 52-109. In particular, the certifying officers filing such certificate are not
making any representations relating to the establishment and maintenance of:
|
(iii)
|
controls and other procedures designed to provide reasonable assurance that information required
to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation
is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
|
|
(iv)
|
a process to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with the issuer’s generally accepted accounting
principles (IFRS).
|
The Company’s certifying officers
are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations
they are making in such certificate.
Investors should be aware that inherent
limitations on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P
and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim
and annual filings and other reports provided under securities legislation.
Royal Standard Minerals Inc.
Management’s Discussion and Analysis
Year Ended January 31, 2015
Discussion Dated May 22, 2015
ADDITIONAL DISCLOSURE FOR VENTURE ISSUERS WITHOUT SIGNIFICANT
REVENUE
The following tables set forth a breakdown
of the components of general and administrative expenditures and exploration and evaluation expenditures on mineral properties
for the Company, for the year ended January 31, 2015 and 2014.
General and Administrative:
|
|
Year Ended January 31,
|
|
|
|
2015
($)
|
|
|
2014
($)
|
|
Corporate development
|
|
|
2,724
|
|
|
|
12,803
|
|
Insurance
|
|
|
-
|
|
|
|
25,795
|
|
Office and general
|
|
|
2,418
|
|
|
|
35,530
|
|
Professional fees
|
|
|
47,956
|
|
|
|
(45,439
|
)
|
Wages and salaries
|
|
|
-
|
|
|
|
443,194
|
|
Share-based payments
|
|
|
-
|
|
|
|
(109,866
|
)
|
Travel
|
|
|
38
|
|
|
|
25,675
|
|
Consulting fees
|
|
|
4,038
|
|
|
|
-
|
|
Total
|
|
|
57,174
|
|
|
|
387,692
|
|
Royal Standard Minerals Inc.
Management’s Discussion and Analysis
Year Ended January 31, 2015
Discussion Dated May 22, 2015
Exploration and Evaluation Expenditures on Mineral Properties:
|
|
Year Ended January 31,
|
|
|
|
2015
($)
|
|
|
2014
($)
|
|
Fondaway Canyon and Dixie-Comstock Projects
|
|
|
|
|
|
|
|
|
Property acquisition costs
|
|
|
-
|
|
|
|
35,000
|
|
Consulting, wages and salaries
|
|
|
-
|
|
|
|
19,711
|
|
Travel
|
|
|
-
|
|
|
|
5,714
|
|
Office and general
|
|
|
-
|
|
|
|
3,148
|
|
Total Fondaway Canyon and Dixie-Comstock Projects
|
|
|
-
|
|
|
|
63,573
|
|
Kentucky Project
|
|
|
|
|
|
|
|
|
Office and general
|
|
|
-
|
|
|
|
20,102
|
|
Depreciation
|
|
|
-
|
|
|
|
3,558
|
|
Total Kentucky Project
|
|
|
-
|
|
|
|
23,660
|
|
Total exploration activities
|
|
|
-
|
|
|
|
87,233
|
|
Item 18. Exhibits.
Exhibit
No.
|
|
Description of Exhibit
|
|
|
|
1.1
|
|
Articles of Incorporation of the Company, as amended. (incorporated by reference to Exhibit 1.1 to Form 20-F filed with the SEC on June 14, 2012).
|
|
|
|
1.2
|
|
By-law No. 2 of the Company (incorporated by reference to Exhibit 99.1 to Form 6-K filed with the SEC on January 12, 2012).
|
|
|
|
2.1
|
|
Shareholder Rights Plan Agreement dated December 23, 2010 between the Company and Equity Financial Trust Company (incorporated by reference to Exhibit 2.1 to the Company’s Amendment to Annual Report on Form 20-F/A for the fiscal year ended January 31, 2012 filed with the SEC on June 14, 2012).
|
|
|
|
2.2
|
|
Amendment to Shareholder Rights Plan Agreement dated January 8, 2014 between the Company and Equity Financial Trust Company (incorporated by reference to Exhibit 99.9 to Form 6-K filed with the SEC on February 3, 2014).
|
|
|
|
12.1
|
|
Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a).*
|
|
|
|
12.2
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a).*
|
|
|
|
13.1
|
|
Certification of the President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
|
|
13.2
|
|
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
|
|
15.1
|
|
Consent of MNP LLP.*
|
SIGNATURES
The registrant hereby certifies that it meets all of the requirements
for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
|
ROYAL STANDARD MINERALS INC.
|
|
(Registrant)
|
|
|
|
/s/ Lonnie Kirsh
|
|
Name: Lonnie Kirsh
|
|
Title: President and Chief Executive Officer
|
|
|
Dated: June 14, 2016
|
|
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