Royal
Standard Minerals Inc.
Statements
of Comprehensive Loss
(Expressed
in United States Dollars)
|
|
Years
Ended
January
31,
|
|
|
|
2017
|
|
|
2016
|
|
Net
loss for the year
|
|
$
|
(42,687
|
)
|
|
$
|
(31,301
|
)
|
Other
comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item
that will not be reclassified subsequently to loss
|
|
|
|
|
|
|
|
|
Foreign
currency translation
|
|
|
(5,115
|
)
|
|
|
6,962
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss for the year
|
|
$
|
(47,802
|
)
|
|
$
|
(24,339
|
)
|
The
accompanying notes are an integral part of these financial statements.
Royal
Standard Minerals Inc.
Statements
of Changes in Shareholders’ Deficiency
(Expressed
in United States Dollars)
|
|
Share
Capital
|
|
|
Reserves
|
|
|
Accumulated
Deficit
|
|
|
Accumulated
Other
Comprehensive Income
|
|
|
Total
|
|
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
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 31, 2016
|
|
$
|
28,273,230
|
|
|
$
|
10,900,438
|
|
|
$
|
(39,281,602
|
)
|
|
$
|
20,548
|
|
|
$
|
(87,386
|
)
|
Foreign
currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,115
|
)
|
|
|
(5,115
|
)
|
Net
loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
(42,687
|
)
|
|
|
-
|
|
|
|
(42,687
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 31, 2017
|
|
$
|
28,273,230
|
|
|
$
|
10,900,438
|
|
|
$
|
(39,324,289
|
)
|
|
$
|
15,433
|
|
|
$
|
(135,188
|
)
|
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,
|
|
|
|
2017
|
|
|
2016
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
Net
loss for the year
|
|
$
|
(42,687
|
)
|
|
$
|
(31,301
|
)
|
Operating
item not involving cash:
|
|
|
|
|
|
|
|
|
Foreign
exchange
|
|
|
(5,115
|
)
|
|
|
6,962
|
|
Changes
in non-cash working capital:
|
|
|
|
|
|
|
|
|
Sundry
receivables and prepaid
|
|
|
54
|
|
|
|
(1,792
|
)
|
Accounts
payable and accrued liabilities
|
|
|
21,823
|
|
|
|
(3,485
|
)
|
|
|
|
|
|
|
|
|
|
Cash
used in operating activities
|
|
|
(25,925
|
)
|
|
|
(29,616
|
)
|
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
Notes
payable
|
|
|
20,987
|
|
|
|
35,994
|
|
|
|
|
|
|
|
|
|
|
Cash
provided by financing activities
|
|
|
20,987
|
|
|
|
35,994
|
|
|
|
|
|
|
|
|
|
|
Net
change in cash and cash equivalents
|
|
|
(4,938
|
)
|
|
|
6,378
|
|
Cash
and cash equivalents, beginning of year
|
|
|
10,413
|
|
|
|
4,035
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of year
|
|
$
|
5,475
|
|
|
$
|
10,413
|
|
The
accompanying notes are an integral part of these financial statements.
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 The Canadian Venture
Building, 82 Richmond Street East, Suite 200, Toronto, Ontario, M5C 1P1, Canada.
The
financial statements were approved by the Board of Directors on May 30, 2017.
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 $42,687
during the year ended January 31, 2017 (year ended January 31, 2016 - loss of $31,301) and has an accumulated deficit of $39,324,289
(January 31, 2016 - $39,281,602). In addition, the Company has a working capital deficiency of $135,188 at January 31, 2017 (January
31, 2016 - $87,386).
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.
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.
Loss
per common share
Basic
loss per share is computed by dividing the 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 loss 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.
2.
|
Significant
Accounting Policies (Continued)
|
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, 2017 and January 31, 2016.
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.
2.
|
Significant
Accounting Policies (Continued)
|
Financial
instruments (continued)
iv)
Financial liabilities at FVTPL (continued)
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.
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, 2017 and January 31, 2016, the only financial
instrument measured at fair value is the Company’s cash and cash equivalents.
Cash
and cash equivalents is considered Level 1.
2.
|
Significant
Accounting Policies (Continued)
|
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 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.
|
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
.
|
3.
|
Capital
Management (Continued)
|
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, 2017 was a deficiency of $135,188 (January 31, 2016 - $87,386). Note that included in the statements of financial
position presented is a deficit of $39,324,289 as at January 31, 2017 (January 31, 2016 - $39,281,602).
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, 2017. The Company is not subject to external capital requirements.
4.
|
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, 2017, the Company had a cash balance of $5,475 (January 31, 2016 - $10,413) to settle current
liabilities of $144,395 (January 31, 2016 - $101,585). All of the Company’s financial liabilities have contractual maturities
of less than 60 days and are subject to normal trade terms.
4.
|
Financial
Risk Factors (Continued)
|
(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.
5.
|
Accounts
Payable and Accrued Liabilities
|
|
|
As
at
January
31, 2017
|
|
|
As
at
January
31, 2016
|
|
Trade
payables
|
|
$
|
24,756
|
|
|
$
|
18,680
|
|
Accrued
liabilities
|
|
|
47,376
|
|
|
|
31,629
|
|
|
|
$
|
72,132
|
|
|
$
|
50,309
|
|
(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 $55,179 from C. Marrelli Services Limited (assigned to DSA Capital Limited at December 31, 2016) and CDN
$4,186 from DSA Capital Limited (the “Notes”). DSA Capital Limited controlled 278,960,559 common shares of the Company
and is beneficially controlled 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.
(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, 2015, January 31, 2016 and January 31, 2017
|
|
|
920,835,502
|
|
|
$
|
28,273,230
|
|
8.
|
Basic
and Diluted Loss Per Share
|
The
following table sets forth the computation of basic and diluted loss per share:
|
|
Years
Ended
January
31,
|
|
|
|
2017
|
|
|
2016
|
|
Numerator:
|
|
|
|
|
|
|
Loss
for the year
|
|
$
|
(42,687
|
)
|
|
$
|
(31,301
|
)
|
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% (2016
- 26.50%) to the amounts recognized in the statements of operations:
|
|
Years
Ended
January
31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Net
(loss) income before income taxes
|
|
$
|
(42,687
|
)
|
|
$
|
(31,301
|
)
|
Expected
tax (recovery) expense at statutory rate
|
|
$
|
(11,312
|
)
|
|
$
|
(8,295
|
)
|
Permanent
differences
|
|
|
-
|
|
|
|
7,676
|
|
Functional
currency translation
|
|
|
(151,258
|
)
|
|
|
203,136
|
|
Tax
benefits not recognized
|
|
|
162,570
|
|
|
|
(202,517
|
)
|
Tax
provision
|
|
$
|
-
|
|
|
$
|
-
|
|
9.
|
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.
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Unclaimed
non-capital losses
|
|
$
|
6,587,089
|
|
|
$
|
6,060,901
|
|
Excess
of unclaimed resources pools over
|
|
|
|
|
|
|
|
|
carrying
value of exploration properties
|
|
|
1,182,347
|
|
|
|
1,095,063
|
|
|
|
$
|
7,769,436
|
|
|
$
|
7,155,964
|
|
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
|
|
|
$
|
658,657
|
|
|
|
|
2027
|
|
|
|
643,466
|
|
|
|
|
2028
|
|
|
|
793,225
|
|
|
|
|
2029
|
|
|
|
495,906
|
|
|
|
|
2030
|
|
|
|
879,362
|
|
|
|
|
2031
|
|
|
|
377,106
|
|
|
|
|
2032
|
|
|
|
1,394,334
|
|
|
|
|
2033
|
|
|
|
910,126
|
|
|
|
|
2034
|
|
|
|
340,800
|
|
|
|
|
2035
|
|
|
|
49,890
|
|
|
|
|
2036
|
|
|
|
1,122
|
|
|
|
|
2037
|
|
|
|
43,095
|
|
|
|
|
|
|
|
$
|
6,587,089
|
|
10.
|
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, DSA Capital Limited. Fees for services provided by Marrelli Support
totaled $12,380, for the year ended January 31, 2017 (year ended January 31, 2016 - $15,346). As at January 31, 2017, Marrelli
Support was owed $5,322 and this amount was included in accounts payable and accrued liabilities (January 31, 2016 - $4,217).
During
the year ended January 31, 2017, the Company incurred fees totaling $627 (year ended January 31, 2016 - $810) 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, 2017, DSA was owed $176 and this amount was included in accounts
payable and accrued liabilities (January 31, 2016 - $1,182).
10.
|
Related
Party Transactions and Balances (Continued)
|
At
January 31, 2017, notes payable of $72,263 (January 31, 2016 - $51,276) is made up of $55,043 (January 31, 2016 - $35,447) owed
to DSA Capital Limited, $8,610 (January 31, 2016 - $7,915) owed to Lonnie Kirsh, the Chief Executive Officer (“CEO”)
of the Company and $8,610 (January 31, 2016 - $7,914) 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 6). The interest expense pertaining to the notes
payable for the year ended January 31, 2017 is $1,204 (year ended January 31, 2016 - $587).
During
the year ended January 31, 2017, the Company incurred fees totaling $6,858 (year ended January 31, 2016 - $2,711) 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 $26,437 is included in accounts payable and accrued liabilities at January 31, 2017 (January 31, 2016 - $18,343).
During
the year ended January 31, 2017, the Company incurred fees totaling $4,557 (year ended January 31, 2016 - $4,629) 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 $12,564 is included in accounts payable and accrued liabilities at January 31, 2017 (January 31, 2016
- $7,497).
To
the knowledge of the directors and senior officers of the Company, as at January 31, 2017, 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
|
%
|
DSA
Capital 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.
11.
|
General
and Administrative
|
|
|
Years
Ended January 31,
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Corporate
development (Note 10)
|
|
$
|
2,542
|
|
|
$
|
1,968
|
|
Office
and general (Note 10)
|
|
|
5,879
|
|
|
|
4,047
|
|
Professional
fees (Note 10)
|
|
|
29,709
|
|
|
|
20,657
|
|
Consulting
fees (Note 10)
|
|
|
4,557
|
|
|
|
4,629
|
|
|
|
$
|
42,687
|
|
|
$
|
31,301
|
|
Subsequent
to January 31, 2017, the Company obtained separate promissory notes of CDN$5,400 from each of George Duguay, DSA Capital Limited
and Lonnie Kirsh, for total promissory notes of CDN$16,200. 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 JANAURY 31, 2018
Royal
Standard Minerals Inc.
Management’s
Discussion and Analysis
Year
Ended January 31, 2018
Discussion
dated April 20, 2018
This
Management’s Discussion and Analysis (“MD&A”) is dated April 20, 2018 and unless otherwise noted, should
be read in conjunction with the Company’s audited financial statements for the years ended January 31, 2018 and 2017 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, 2018 are not necessarily indicative of the results that may be expected for
any future period.
The
Company’s head office is located at The Canadian Venture Building, 82 Richmond Street East, Toronto, Ontario, M5C 1P1, Canada.
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, 2018
Discussion
dated April 20, 2018
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, 2019, 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.
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.
Royal
Standard Minerals Inc.
Management’s
Discussion and Analysis
Year
Ended January 31, 2018
Discussion
dated April 20, 2018
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 $37,653 during the year ended January 31, 2018 (year ended January 31, 2017 - $42,687) and has an accumulated deficit of $39,361,942
(January 31, 2017 - accumulated deficit of $39,324,289). In addition, the Company has a working capital deficiency of $182,473
at January 31, 2018 (January 31, 2017 - working capital deficiency of $135,188).
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, 2018
Discussion
dated April 20, 2018
OVERALL
PERFORMANCE
The
Company’s net loss for the year ended January 31, 2018 was $37,653 ($0.00 loss per share) compared to a loss of $42,687
($0.00 loss per share) for the year ended January 31, 2017, a decrease in net loss of $5,034. The decrease in net loss relates
mainly to a decrease in office and general expenses and professional fees of $804 and $4,186, respectively, due to costs incurred
in the prior period that were not incurred in the present period related to the Company filing its Form 20-F Annual Report for
the fiscal years ended January 31, 2014, 2015 and 2016 in the US.
FINANCIAL
PERFORMANCE
Three
months ended January 31, 2018, compared with three months ended January 31, 2017
The
Company’s net loss for the three months ended January 31, 2018 was $13,822 ($0.00 loss per share) compared to a net loss
$10,067 ($0.00 loss per share) for the three months ended January 31, 2017. No revenue was received in either period. The decrease
in loss of $3,755 was principally the result of:
|
●
|
Professional
fees increased $3,169 for the three months ended January 31, 2018, compared to the same
period in 2017. The increase was the result of costs accrued in the current period for
the fiscal 2018 audit and increased legal fees.
|
Year
ended January 31, 2018, compared with year ended January 31, 2017
The
Company’s net loss for the year ended January 31, 2018 was $37,653 ($0.00 loss per share) compared to a net loss $42,687
($0.00 loss per share) for the year ended January 31, 2017. No revenue was received in either period. The decrease in loss of
$5,034 was principally the result of:
|
●
|
Professional
fees decreased $4,186 for the year ended January 31, 2018, compared to the same period in 2017. The decrease was the result
of costs incurred in the prior period that were not incurred in the present period related to the Company filing its Form
20-F Annual Report for the fiscal years ended January 31, 2014, 2015 and 2016 in the US.
|
|
|
|
|
●
|
Office
and general expenses decreased $804 for the year ended January 31, 2018, compared to the same period in 2017. The decrease
was the result of costs incurred in the prior period related to the Company filing its Form 20-F Annual Report for the fiscal
years ended January 31, 2014, 2015 and 2016 in the US versus for the fiscal year ended January 31, 2017 in the current period.
|
Royal
Standard Minerals Inc.
Management’s
Discussion and Analysis
Year
Ended January 31, 2018
Discussion
dated April 20, 2018
SELECTED
ANNUAL FINANCIAL INFORMATION
The
following is selected financial data derived from the audited financial statements of the Company as at January 31, 2018, 2017
and 2016 and for the years then ended.
|
|
Year
ended January 31,
2018
|
|
Year
ended January 31,
2017
|
|
Year
ended January 31,
2016
|
|
|
|
|
|
|
|
Net
(loss) income
|
|
$
|
(37,653
|
)
|
|
$
|
(42,687
|
)
|
|
$
|
(31,301
|
)
|
Net
(loss) income per share - basic and diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
As
at
January 31,
2018
|
|
As
at
January 31,
2017
|
|
As
at
January 31,
2016
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
2,471
|
|
|
$
|
9,207
|
|
|
$
|
14,199
|
|
Long-term
financial liabilities
|
|
$
|
nil
|
|
|
$
|
nil
|
|
|
$
|
nil
|
|
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
($)
|
|
Net
Loss
($)
|
January
31, 2018
|
|
|
nil
|
|
|
|
(3,755
|
)
|
|
|
(0.00
|
)
|
October 31,
2017
|
|
|
nil
|
|
|
|
(8,553
|
)
|
|
|
(0.00
|
)
|
July 31, 2017
|
|
|
nil
|
|
|
|
(9,318
|
)
|
|
|
(0.00
|
)
|
April 30,
2017
|
|
|
nil
|
|
|
|
(5,960
|
)
|
|
|
(0.00
|
)
|
January 31,
2017
|
|
|
nil
|
|
|
|
(10,067
|
)
|
|
|
(0.00
|
)
|
October 31,
2016
|
|
|
nil
|
|
|
|
(7,078
|
)
|
|
|
(0.00
|
)
|
July 31, 2016
|
|
|
nil
|
|
|
|
(10,483
|
)
|
|
|
(0.00
|
)
|
April 30,
2016
|
|
|
nil
|
|
|
|
(15,059
|
)
|
|
|
(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, 2018
Discussion
dated April 20, 2018
As
at January 31, 2018, the Company had cash and cash equivalents of $1,646. Cash used in operating activities was $16,371 for the
year ended January 31, 2018. During the year ended January 31, 2018, the Company experienced a net increase of $30,914 in non-cash
working capital items. Cash provided by financing activities was $12,542 for the year ended January 31, 2018 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, 2018, the Company had cash and cash equivalents of $1,646 compared to $5,475 as at January 31, 2017,
to settle current liabilities of $184,944 compared to $144,395 as at January 31, 2017. 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 current 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, 2018 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, Marrelli Capital. Fees for services provided
by Marrelli Support totaled
$10,870, for the year ended January 31, 2018 (year ended January 31, 2017 - $12,380). As
at January 31, 2018, Marrelli Support was owed $5,702 and this amount was included in accounts payable and accrued
liabilities (January 31, 2017 - $5,322).
During
the year ended January 31, 2018, the Company incurred fees totaling $592 (year ended January 31, 2017 - $627) 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, 2018, DSA was owed $nil and this amount was included in accounts
payable and accrued liabilities (January 31, 2017 - $176).
At
January 31, 2018, notes payable of $106,952 (January 31, 2017 - $72,263) is made up of $79,374 (January 31, 2017 - $55,043) owed
to Marrelli Capital, $13,787 (January 31, 2017 - $8,610) owed to Lonnie Kirsh, the former President and Chief Executive Officer
(“CEO”) of the Company and $13,791 (January 31, 2017 - $8,610) 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, 2018 is $1,774 (year ended January 31, 2017 - $1,204).
Royal
Standard Minerals Inc.
Management’s
Discussion and Analysis
Year
Ended January 31, 2018
Discussion
dated April 20, 2018
During
the year ended January 31, 2018, the Company incurred fees totaling $7,496 (year ended January 31, 2017 - $6,858) for legal services
received from Kirsh Securities Law Professional Corporation, a law firm owned by the former President and CEO of the Company.
An amount of $35,988 is included in accounts payable and accrued liabilities at January 31, 2018 (January 31, 2017 - $26,437).
During
the year ended January 31, 2018, the Company incurred fees totaling $4,645 (year ended January 31, 2017 - $4,557) 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 $18,236 is included in accounts payable and accrued liabilities at January 31, 2018 (January 31, 2017
- $12,564).
To
the knowledge of the directors and senior officers of the Company, as at January 31, 2018, 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
|
%
|
Marrelli Capital
|
|
|
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.
Royal
Standard Minerals Inc.
Management’s
Discussion and Analysis
Year
Ended January 31, 2018
Discussion
dated April 20, 2018
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. The Company has assessed the
impact of adoption and there will be no significant impact on the financial statements.
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 is comprised of share capital, reserves, accumulated other comprehensive income and accumulated deficit,
which at January 31, 2018 was a deficiency of $182,473 (January 31, 2017 - deficiency of $135,188). Note that included in the
statements of financial position presented is a deficit of $39,361,942 as at January 31, 2018 (January 31, 2017 - $39,324,289).
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, 2018. The Company is not subject to external capital requirements.
Royal
Standard Minerals Inc.
Management’s
Discussion and Analysis
Year
Ended January 31, 2018
Discussion
dated April 20, 2018
SUBSEQUENT
EVENTS
Subsequent
to January 31, 2018, the Company announced that Lonnie Kirsh resigned as a director, Chief Executive Officer and President of
the Company. As a result of Mr. Kirsh’s resignation, the Company has appointed Carmelo Marrelli as President and Chief Executive
Officer of the Company and has appointed Lisa McCormack to the board of directors of the Company.
Subsequent
to January 31, 2018, the Company entered into a promissory note of CDN$25,000 with a third party. The note is unsecured, non-interest
bearing and due on demand.
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, 2018, the Company had a cash balance of $1,646 (January 31, 2017 - $5,475) to settle current liabilities
of $184,944 (January 31, 2017 -
$144,395).
All of the Company’s current 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.
Royal
Standard Minerals Inc.
Management’s
Discussion and Analysis
Year
Ended January 31, 2018
Discussion
dated April 20, 2018
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. Foreign currency risk is not considered significant.
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.
Royal
Standard Minerals Inc.
Management’s
Discussion and Analysis
Year
Ended January 31, 2018
Discussion
dated April 20, 2018
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.
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).
|
Royal
Standard Minerals Inc.
Management’s
Discussion and Analysis
Year
Ended January 31, 2018
Discussion
dated April 20, 2018
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, 2018 and 2017.
General
and Administrative:
|
|
Year
Ended January 31,
|
|
|
2018
($)
|
|
2017
($)
|
Corporate
development
|
|
|
2,410
|
|
|
|
2,542
|
|
Office
and general
|
|
|
5,075
|
|
|
|
5,879
|
|
Professional
fees
|
|
|
25,523
|
|
|
|
29,709
|
|
Consulting
fees
|
|
|
4,645
|
|
|
|
4,557
|
|
Total
|
|
|
37,653
|
|
|
|
42,687
|
|
ROYAL
STANDARD MINERALS INC.
MANAGEMENT’S
DISCUSSION
AND
ANALYSIS
YEAR
ENDED JANAURY 31, 2017
Royal
Standard Minerals Inc.
Management’s
Discussion and Analysis
Year
Ended January 31, 2017
Discussion
Dated May 30, 2017
This
Management Discussion and Analysis (“MD&A”) is dated May 30, 2017 and unless otherwise noted, should be read in
conjunction with the Company’s audited financial statements for the years ended January 31, 2017 and 2016 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, 2017 are not necessarily indicative of the results that may be expected for
any future period.
The
Company’s head office is located at The Canadian Venture Building, 82 Richmond Street East, Suite 200, Toronto, Ontario,
M5C 1P1, Canada.
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, 2017
Discussion
Dated May 30, 2017
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, 2018, 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.
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.
Royal
Standard Minerals Inc.
Management’s
Discussion and Analysis
Year
Ended January 31, 2017
Discussion
Dated May 30, 2017
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 $42,687 during the year ended January 31, 2017 (year ended January 31, 2016 - $31,301) and has an accumulated deficit of $39,324,289
(January 31, 2016 - accumulated deficit of $39,281,602). In addition, the Company has a working capital deficiency of $135,188
at January 31, 2017 (January 31, 2016 - working capital deficiency of $87,386).
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, 2017
Discussion
Dated May 30, 2017
OVERALL
PERFORMANCE
The
Company’s net loss for the year ended January 31, 2017 was $42,687 ($0.00 loss per share) compared to a loss of $31,301
($0.00 loss per share) for the year ended January 31, 2016, an increase in net loss of $11,386. The increase in net loss relates
mainly to an increase in office and general expenses and professional fees of $1,832 and $9,052, respectively, due to costs related
to the Company filing its Form 20-F Annual Report for the fiscal years ended January 31, 2014, 2015 and 2016 in the US.
FINANCIAL
PERFORMANCE
Three
months ended January 31, 2017, compared with three months ended January 31, 2016
The
Company’s net loss for the three months ended January 31, 2017 was $10,067 ($0.00 loss per share) compared to a net loss
$8,885 ($0.00 loss per share) for the three months ended January 31, 2016. No revenue was received in either period. The increase
in loss of $1,182 was principally the result of:
|
●
|
Professional
fees increased $559 for the three months ended January 31, 2017, compared to the same period in 2016. The increase was the
result of increased accounting fees in the current period.
|
|
|
|
|
●
|
Corporate
development expenses increased $722 for the three months ended January 31, 2017, compared to the same period in 2016. The
increase was the result of increased transfer agent fees in the current period.
|
Year
ended January 31, 2017, compared with year ended January 31, 2016
The
Company’s net loss for the year ended January 31, 2017 was $42,687 ($0.00 loss per share) compared to a net loss $31,301
($0.00 loss per share) for the year ended January 31, 2016. No revenue was received in either period. The increase in loss of
$11,386 was principally the result of:
|
●
|
Office
and general expenses increased $1,832 for the year ended January 31, 2017, compared to the same period in 2016. The increase
was mainly the result of preparation and filing fees for the Company’s Form 20-F Annual Report for the fiscal years
ended January 31, 2014, 2015 and 2016 in the US.
|
|
|
|
|
●
|
Professional
fees increased $9,052 for the year ended January 31, 2017, compared to the same period in 2016. The increase was mainly the
result of the Company filing its Form 20-F Annual Report for the fiscal years ended January 31, 2014, 2015 and 2016 in the
US.
|
Royal
Standard Minerals Inc.
Management’s
Discussion and Analysis
Year
Ended January 31, 2017
Discussion
Dated May 30, 2017
SELECTED
ANNUAL FINANCIAL INFORMATION
The
following is selected financial data derived from the audited financial statements of the Company as at January 31, 2017, 2016
and 2015 and for the years then ended.
|
|
Year
ended
January
31,
2017
|
|
Year
ended
January
31,
2016
|
|
Year
ended
January
31,
2015
|
|
|
|
|
|
|
|
Net
(loss) income
|
|
$
|
(42,687
|
)
|
|
$
|
(31,301
|
)
|
|
$
|
(57,174
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) income per share - basic and diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
As
at
January
31,
2017
|
|
As
at
January
31,
2016
|
|
As
at
January
31,
2015
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
9,207
|
|
|
$
|
14,199
|
|
|
$
|
6,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
financial liabilities
|
|
$
|
nil
|
|
|
$
|
nil
|
|
|
$
|
nil
|
|
Royal
Standard Minerals Inc.
Management’s
Discussion and Analysis
Year
Ended January 31, 2017
Discussion
Dated May 30, 2017
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
($)
|
|
Net
Loss
($)
|
January
31, 2017
|
|
|
nil
|
|
|
|
(10,067
|
)
|
|
|
(0.00
|
)
|
October
31, 2016
|
|
|
nil
|
|
|
|
(7,078
|
)
|
|
|
(0.00
|
)
|
July
31, 2016
|
|
|
nil
|
|
|
|
(10,483
|
)
|
|
|
(0.00
|
)
|
April
30, 2016
|
|
|
nil
|
|
|
|
(15,059
|
)
|
|
|
(0.00
|
)
|
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
|
)
|
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, 2017, the Company had cash and cash equivalents of $5,475. Cash used in operating activities was $25,925 for the
year ended January 31, 2017. During the year ended January 31, 2017, the Company experienced a net increase of $21,877 in non-cash
working capital items, which was mainly due to an increase in accounts payable and accrued liabilities of $21,823. Cash provided
by financing activities was $20,987 for the year ended January 31, 2017 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, 2017, the Company had cash and cash equivalents of $5,475 compared to $10,413 as at January 31, 2016,
to settle current liabilities of $144,395 compared to $101,585 as at January 31, 2016. 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. See also “Subsequent Event” below for funds received subsequent to January 31, 2017. 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.
Royal
Standard Minerals Inc.
Management’s
Discussion and Analysis
Year
Ended January 31, 2017
Discussion
Dated May 30, 2017
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, 2017 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, DSA Capital Limited. Fees for services provided by Marrelli Support
totaled $12,380, for the year ended January 31, 2017 (year ended January 31, 2016 - $15,346). As at January 31, 2017, Marrelli
Support was owed $5,322 and this amount was included in accounts payable and accrued liabilities (January 31, 2016 - $4,217).
During
the year ended January 31, 2017, the Company incurred fees totaling $627 (year ended January 31, 2016 - $810) 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, 2017, DSA was owed $176 and this amount was included in accounts
payable and accrued liabilities (January 31, 2016 - $1,182).
At
January 31, 2017, notes payable of $72,263 (January 31, 2016 - $51,276) is made up of $55,043 (January 31, 2016 - $35,447) owed
to DSA Capital Limited, $8,610 (January 31, 2016 - $7,915) owed to Lonnie Kirsh, the Chief Executive Officer (“CEO”)
of the Company and $8,610 (January 31, 2016 - $7,914) 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 6). The interest expense pertaining to the notes
payable for the year ended January 31, 2017 is $1,204 (year ended January 31, 2016 - $587).
During
the year ended January 31, 2017, the Company incurred fees totaling $6,858 (year ended January 31, 2016 - $2,711) 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 $26,437 is included in accounts payable and accrued liabilities at January 31, 2017 (January 31, 2016 - $18,343).
During
the year ended January 31, 2017, the Company incurred fees totaling $4,557 (year ended January 31, 2016 - $4,629) 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 $12,564 is included in accounts payable and accrued liabilities at January 31, 2017 (January 31, 2016
- $7,497).
Royal
Standard Minerals Inc.
Management’s
Discussion and Analysis
Year
Ended January 31, 2017
Discussion
Dated May 30, 2017
To
the knowledge of the directors and senior officers of the Company, as at January 31, 2017, 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
|
%
|
DSA Capital 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.
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.
Royal
Standard Minerals Inc.
Management’s
Discussion and Analysis
Year
Ended January 31, 2017
Discussion
Dated May 30, 2017
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, 2017 was a deficiency of $135,188 (January 31, 2016 - deficiency of $87,386). Note that included in the statements
of financial position presented is a deficit of $39,324,289 as January 31, 2017 (January 31, 2016 - $39,281,602).
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, 2017. The Company is not subject to external capital requirements.
SUBSEQUENT
EVENT
Subsequent
to January 31, 2017, the Company obtained separate promissory notes of CDN$5,400 from each of George Duguay, DSA Capital Limited
and Lonnie Kirsh, for total promissory notes of CDN$16,200. These notes are unsecured, bear interest at an annual rate at 2% and
are due on demand.
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.
Royal
Standard Minerals Inc.
Management’s
Discussion and Analysis
Year
Ended January 31, 2017
Discussion
Dated May 30, 2017
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, 2017, the Company had a cash balance of $5,475 (January 31, 2016 - $10,413) to settle current liabilities
of $144,395 (January 31, 2016 - $101,585). 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 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, 2017
Discussion
Dated May 30, 2017
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.
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:
Royal
Standard Minerals Inc.
Management’s
Discussion and Analysis
Year
Ended January 31, 2017
Discussion
Dated May 30, 2017
|
(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, 2017 and 2016.
General
and Administrative:
|
|
Year
Ended January 31,
|
|
|
2017
($)
|
|
2016
($)
|
Corporate
development
|
|
|
2,542
|
|
|
|
1,968
|
|
|
|
|
|
|
|
|
|
|
Office
and general
|
|
|
5,879
|
|
|
|
4,047
|
|
|
|
|
|
|
|
|
|
|
Professional
fees
|
|
|
29,709
|
|
|
|
20,657
|
|
|
|
|
|
|
|
|
|
|
Consulting
fees
|
|
|
4,557
|
|
|
|
4,629
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
42,687
|
|
|
|
31,301
|
|
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.*
|
*
|
Filed
herewith.
|
#
|
Confidential
treatment has been requested for the redacted portions of this agreement. A complete copy of the agreement, including the
redacted portions, has been filed separately with the SEC.
|