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EX-31.1 - SECTION 302 CERTIFICATION - ROYAL MINES & MINERALS CORPexhibit31-1.htm
EX-32.2 - SECTION 906 CERTIFICATION - ROYAL MINES & MINERALS CORPexhibit32-2.htm
EX-32.1 - SECTION 906 CERTIFICATION - ROYAL MINES & MINERALS CORPexhibit32-1.htm
EX-31.2 - SECTION 302 CERTIFICATION - ROYAL MINES & MINERALS CORPexhibit31-2.htm

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

FORM 10-Q

(Mark One)

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

For the quarterly period ended October 31, 2010

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

For the transition period from ________to ________

COMMISSION FILE NUMBER 000-52391

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

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

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

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

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

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

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

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

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of December 13, 2010, the Registrant had 111,785,352 shares of common stock outstanding.


PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS.

The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X, and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the three and six months ended October 31, 2010 are not necessarily indicative of the results that can be expected for the year ending April 30, 2011.

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

2


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

    As of     As of  
    October 31, 2010     April 30, 2010  
             
 ASSETS   
             
Current assets            
   Cash and cash equivalents $  35,055   $  37,559  
   Prepaid Expenses   10,000     -  
   Loan Receivable   600,000     400,000  
       Total current assets   645,055     437,559  
             
   Property and equipment, net   188,471     218,601  
   Intellectual property, net   130,000     150,000  
   Mineral properties   42,600     35,800  
   Other assets   5,500     5,500  
       Total non-current assets   366,571     409,901  
             
       Total assets $  1,011,626   $  847,460  
             
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)   
             
Current liabilities            
   Accounts payable $  38,805   $  16,937  
   Accounts payable - related party   135,000     87,000  
   NVRM payable   90,000     90,000  
   Loans payable - related party   867,200     245,277  
   Accrued interest - related party   148,720     121,123  
   Current portion of long-term debt   -     -  
       Total current liabilities   1,279,725     560,337  
             
   Long-term debt   -     -  
             
       Total liabilities   1,279,725     560,337  
             
Commitments and contingencies            
             
Stockholders' equity (deficit)            
   Common stock, $0.001 par value; 300,000,000 shares 
      authorized, 111,785,352 shares issued and outstanding
  111,785     111,785  
   Preferred stock, $0.001 par value; 100,000,000 shares 
      authorized, zero shares issued and outstanding
  -     -  
   Additional paid-in capital   9,948,337     9,770,178  
   Accumulated deficit during exploration stage   (10,328,221 )   (9,594,840 )
       Total stockholders' equity (deficit)   (268,099 )   287,123  
             
Total liabilities and stockholders' equity (deficit) $  1,011,626   $  847,460  

See Accompanying Notes to Financial Statements
F-1


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

                            For the Period  
                            July 13, 2005  
                            (Date of Inception)  
    For the Three Months Ended     For the Six Months Ended     Through  
    October 31, 2010     October 31, 2009     October 31, 2010     October 31, 2009     October 31, 2010  
                               
                               
Revenue $  620   $  1,500   $  14,905   $  43,311   $  83,904  
                               
Operating expenses                              
 Mineral exploration and evaluation expenses   114,170     154,838     238,526     418,322     2,501,268  
 Mineral exploration and evaluation expenses -
    related party
  30,000     30,000     60,000     30,000     635,500  
 General and administrative   116,446     94,348     162,936     131,381     2,636,240  
 General and administrative - related party   157,896     51,000     208,896     162,000     4,112,178  
 Depreciation and amortization   25,065     50,154     50,130     96,669     472,532  
                               
     Total operating expenses   443,577     380,340     720,488     838,372     10,357,718  
                               
Loss from operations   (442,957 )   (378,840 )   (705,583 )   (795,061 )   (10,273,814 )
                               
Other income (expense):                              
 Other income   -     -     -     -     99,115  
 Interest income   -     -     -     -     4,551  
 Interest expense   (17,330 )   (15,539 )   (27,798 )   (29,316 )   (158,073 )
                               
     Total other income (expense)   (17,330 )   (15,539 )   (27,798 )   (29,316 )   (54,407 )
                               
Loss from operations before provision for
   income taxes
  (460,287 )   (394,379 )   (733,381 )   (824,377 )   (10,328,221 )
                               
Income tax benefit   -     -     -     -     -  
                               
Net loss $  (460,287 ) $  (394,379 ) $  (733,381 ) $  (824,377 ) $  (10,328,221 )
                               
Loss per common share - basic and diluted:
  Net loss
$  (0.00 ) $  (0.00 ) $  (0.01 ) $  (0.01 )    
                               
Weighted average common shares outstanding -
  Basic and diluted
  111,785,352     80,266,374     111,785,352     76,676,917      

See Accompanying Notes to Financial Statements
F-2


ROYAL MINES AND MINERALS CORP.
(An Exploration Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited)

                      Accumulated        
                      Deficit During     Total  
    Common Stock     Additional     Exploration     Stockholders'  
    Shares     Amount     Paid-in Capital     Stage     Equity (Deficit)  
                               
Balance, July 13, 2005   -   $  -   $  -   $  -   $  -  
                               
Issuance of common stock for cash, $0.001 per share   1,000     1     -     -     1  
                               
Net loss   -     -     -     (174,500 )   (174,500 )
                               
Balance, April 30, 2006   1,000     1     -     (174,500 )   (174,499 )
                               
Issuance of common stock for cash, $0.001 per share   12,500,000     12,500     -     -     12,500  
                               
Issuance of common stock for cash, $0.01 per share   7,800,000     7,800     70,200     -     78,000  
                               
Issuance of common stock for mineral property
  options, $0.01 per share
  1,050,000     1,050     9,450     -     10,500  
                               
Issuance of common stock for cash, $0.10 per share   1,250,000     1,250     123,750     -     125,000  
                               
Issuance of common stock for cash,
  Reg. S - Private Placement, $0.10 per share
  1,800,000     1,800     178,200     -     180,000  
                               
Issuance of common stock in acquisition of
  intellectual property and equipment, $0.10 per share
  2,000,000     2,000     198,000     -     200,000  
                               
Net loss   -     -     -     (517,768 )   (517,768 )
                               
Balance, April 30, 2007   26,401,000   $  26,401   $  579,600   $  (692,268 ) $  (86,267 )
                               
Issuance of common stock for cash and subscriptions received,
  Reg. S - Private Placement, $0.25 per share
  2,482,326     2,482     618,100     -     620,582  
                               
Issuance of common stock for cash,
  Reg. D - Private Placement, $0.25 per share
  3,300,000     3,300     821,700     -     825,000  
                               
Issuance of common stock in reverse
  acquisition of Centrus Ventures Inc.
  13,968,926     13,969     (77,164 )   -     (63,195 )
                               
Issuance of stock options for 4,340,000 shares of
  common stock to three officers and five consultants.
  -     -     3,583,702     -     3,583,702  
                               
Net loss   -     -     -     (5,256,444 )   (5,256,444 )
                               
Balance, April 30, 2008   46,152,252   $  46,152   $  5,525,938   $  (5,948,712 ) $  (376,622 )
                               
Issuace of common stock for cash, Reg. S - Private Placement,
  $0.50 per share; with attached warrants exercisable at $0.75 per share
  200,000     200     99,800     -     100,000  
                               
Issuance of common stock in satisfaction of debt, $0.30 per
  share, with attached warrants exercisable at $0.50 per share.
  450,760     451     134,777     -     135,228  
                               
Issuance of stock options for 5,000,000 shares of common
  stock to two officers and nine consultants.
  -     -     342,550     -     342,550  
                               
Issuace of common stock for cash, $0.05 per share,
  with attached warrants exercisable at $0.10 per share.
  9,140,000     9,140     447,860     -     457,000  
                               
Issuance of common stock in satisfaction of loans made to the
  Company, $0.05 per share, with attached warrants exercisable
  at $0.10 per share.
  12,400,000     12,400     607,600     -     620,000  
                               
Issuance of common stock in satisfaction of debt, $0.05 per
  share, with attached warrants exercisable at $0.10 per share.
  1,336,840     1,337     65,505     -     66,842  

See Accompanying Notes to Financial Statements
F-3


ROYAL MINES AND MINERALS CORP.
(An Exploration Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited)

                      Accumulated        
                      Deficit During     Total  
    Common Stock     Additional     Exploration     Stockholders'  
    Shares     Amount     Paid-in Capital     Stage     Equity (Deficit)  
                               
Issuance of common stock to one officer as compensation
   pursuant to the management consulting agreement.
  3,000,000     3,000     117,000     -     120,000  
                               
Net loss   -     -     -     (1,717,000 )   (1,717,000 )
                               
Balance, April 30, 2009   72,679,852   $  72,680   $  7,341,030   $  (7,665,712 ) $  (252,002 )
                               
Issuance of common stock in satisfaction of loans made to
  the Company, $0,05 per share, with attached warrants
  exercisable at $0.10 per share.
  2,000,000     2,000     98,000     -     100,000  
                               
Issuance of common stock in satisfaction of debt, $0.05 per
  share, with attached warrants exercisable at $0.10 per share.
  500,000     500     24,500     -     25,000  
                               
Issuance of common stock for warrants excercised, $0.10 per
  share, in satisfaction of debt for legal services.
  295,000     295     29,205     -     29,500  
                               
Issuance of common stock for options excercised, $0.05 per
  share, in satisfaction of debt for legal services.
  750,000     750     36,750     -     37,500  
                               
Issuance of common stock to investor relations services firm
  pursuant to terms of consulting agreement.
  1,500,000     1,500     -     -     1,500  
                               
Issuance of common stock in satisfaction of loans to the
  Company, $0.10 per share, with attached warrants
  excercisable at $0.20 per share.
  3,500,000     3,500     346,500     -     350,000  
                               
Issuance of stock options for 7,000,000 shares of common
  stock to two directors and nine consultants.
  -     -     391,478     -     391,478  
                               
Issuance of common stock for options excercised, $0.05 per
  share, in satisfaction of debt for legal services.
  900,000     900     44,100     -     45,000  
                               
Issuance of common stock in satisfaction of loans to the
  Company, $0.05 per share, with attached warrants exercisable
  at $0.10 per share.
  19,400,000     19,400     950,600     -     970,000  
                               
Issuace of common stock for cash, $0.05 per share, with
  attached warrants exercisable at $0.10 per share.
  8,280,000     8,280     405,720     -     414,000  
                               
Issuance of common stock in satisfaction of debt, $0.05 per
  share, with attached warrants exercisable at $0.10 per share.
  1,775,500     1,775     87,000     -     88,775  
                               
Issuance of common stock for options excercised, $0.05 per
  share, in satisfaction of debt for legal services.
  100,000     100     4,900     -     5,000  
                               
Issuance of common stock for warrants excercised, $0.10 per
   share, in satisfaction of debt for legal services.
  105,000     105     10,395     -     10,500  
                               
Net loss   -     -     -     (1,929,128 )   (1,929,128 )
                               
Balance, April 30, 2010   111,785,352   $  111,785   $  9,770,178   $  (9,594,840 ) $  287,123  
                               
Issuance of stock options for 6,000,000 shares of common
  stock to three directors and eight consultants.
  -     -     178,159     -     178,159  
                               
Net loss   -     -     -     (733,381 )   (733,381 )
                               
Balance, October 31, 2010   111,785,352   $  111,785   $  9,948,337   $  (10,328,221 ) $  (268,099 )

See Accompanying Notes to Financial Statements
F-4


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

                For the Period  
                July 13, 2005  
                (Date of Inception)  
    For the Six Months Ended     Through  
    October 31, 2010     October 31, 2009     October 31, 2010  
                   
CASH FLOWS FROM OPERATING ACTIVITIES                  
   Net loss $  (733,381 ) $  (824,377 ) $  (10,328,221 )
   Adjustments to reconcile loss from operating
      to net cash used in operating activities:
           
           Depreciation and amortization   50,130     96,669     472,532  
           Stock based expenses   71,263     -     1,166,710  
           Stock based expenses - related party   106,896     -     3,449,179  
   Changes in operating assets and liabilities:               -  
           Other current assets and liabilities   (10,000 )   (13,792 )   (22,683 )
           Other assets   -     -     (5,500 )
           Loan receivable   (200,000 )   (70,000 )   (600,000 )
           Accounts payable and accrued interest   21,868     (46,501 )   531,669  
           Accounts payable and accrued interest- related party   75,597     86,687     325,610  
                   
 Net cash used in operating activities   (617,627 )   (771,314 )   (5,010,704 )
                   
CASH FLOW FROM INVESTING ACTIVITIES                  
   Cash paid on mineral property claims   (6,800 )   (6,800 )   (32,100 )
   Cash acquired on reverse merger   -     -     2,306  
   Purchase of fixed assets   -     (97,603 )   (591,003 )
                   
   Net cash used in investing activities   (6,800 )   (104,403 )   (620,797 )
                   
CASH FLOW FROM FINANCING ACTIVITIES                  
   Proceeds from stock issuance   -     1,500     2,813,581  
   Share subscriptions   -     -     -  
   Proceeds / (Payments) on long-term debt   -     -     -  
   Proceeds / (Payments) on borrowings - related party   621,923     901,271     2,852,975  
                   
   Net cash provided by financing activities   621,923     902,771     5,666,556  
                   
NET CHANGE IN CASH   (2,504 )   27,054     35,055  
                   
CASH AT BEGINNING OF PERIOD   37,559     1,819     -  
                   
CASH AT END OF PERIOD $  35,055   $  28,873   $  35,055  
                   
                   
SUPPLEMENTAL INFORMATION                  
                   
Interest Paid $  201   $  1,093   $  2,941  
Income Taxes Paid $  -   $  -   $  -  
                   
SUPPLEMENTARY DISCLOSURE FOR NON-CASH
INVESTING AND FINANCING ACTIVITIES
           
                   
   Acquisition of intellectual property for stock $  -   $  -   $  200,000  
   Acquisition of mineral property for stock $  -   $  -   $  10,500  
   Stock issued in reverse acquisition of Centrus Ventures Inc. $  -   $  -   $  (63,195 )
   Stock issued in safisfaction of debt $  -   $  542,000   $  443,345  
   Stock issued in satisfaction of loans made to the Company $  -   $  -   $  2,040,000  
   Stock issued as compensation $  -   $  -   $  120,000  

See Accompanying Notes to Financial Statements
F-5


ROYAL MINES AND MINERALS CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
OCTOBER 31, 2010

1.

DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES

   

Basis of Presentation – The accompanying unaudited financial statements have been prepared in accordance with the Securities and Exchange Commission requirements for interim financial statements. Therefore, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The financial statements should be read in conjunction with the Form 10-K for the fiscal year ended April 30, 2010 of Royal Mines and Minerals Corp. (the “Company”).

   

The interim financial statements present the balance sheets, statements of operations, stockholders’ equity, and cash flows of the Company. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States.

   

Description of Business – The Company is considered an exploration stage company. The Company's primary objectives are to 1) commercially extract and refine precious metals from its own and others mining assets, 2) joint venture, acquire and develop projects in North America, and 3) generate ongoing revenues from the licensing of its proprietary, environmentally-friendly lixiviation process. The Company has not yet realized significant revenues from its primary objectives.

   

History – The Company was incorporated on December 14, 2005 under the laws of the State of Nevada. On June 13, 2007, the Company incorporated a wholly-owned subsidiary, Royal Mines Acquisition Corp., in the state of Nevada.

   

On October 5, 2007, Centrus Ventures Inc. (Centrus) completed the acquisition of Royal Mines Inc. (“Royal Mines”). The acquisition of Royal Mines was completed by way of a “triangular merger” pursuant to the provisions of the Agreement and Plan of Merger dated September 24, 2007 (the “First Merger Agreement”) among Centrus, Royal Mines Acquisition Corp. (“Centrus Sub”), a wholly owned subsidiary of Centrus, Royal Mines and Kevin B. Epp, the former sole executive officer and director of Centrus. On October 5, 2007, under the terms of the First Merger Agreement, Royal Mines was merged with and into Centrus Sub, with Centrus Sub continuing as the surviving corporation (the “First Merger”).

   

On October 6, 2007, a second merger was completed pursuant to an Agreement and Plan of Merger dated October 6, 2007 (the “Second Merger Agreement”) between Centrus and its wholly owned subsidiary, Centrus Sub, whereby Centrus Sub was merged with and into Centrus, with Centrus continuing as the surviving corporation (the “Second Merger”). As part of the Second Merger, Centrus changed its name from “Centrus Ventures Inc.” to “Royal Mines And Minerals Corp.”(“the Company”). Other than the name change, no amendments were made to the Articles of Incorporation.

   

Under the terms and conditions of the First Merger Agreement, each share of Royal Mines’ common stock issued and outstanding immediately prior to the completion of the First Merger was converted into one share of Centrus’ common stock. As a result, a total of 32,183,326 shares of Centrus common stock were issued to former stockholders of Royal Mines. In addition, Mr. Epp surrendered 23,500,000 shares of Centrus common stock for cancellation in consideration of payment by Centrus of $0.001 per share for an aggregate consideration of $23,500. As a result, upon completion of the First Merger, the former stockholders of Royal Mines owned approximately 69.7% of the issued and outstanding common stock.

   

As such, Royal Mines is deemed to be the acquiring enterprise for financial reporting purposes. All acquired assets and liabilities of Centrus were recorded at fair value on the date of the acquisition, as required by the purchase method of accounting, and the tangible net liabilities were debited against equity of the Company. There are no continuing operations of Centrus from the date of acquisition.

F-6


ROYAL MINES AND MINERALS CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
OCTOBER 31, 2010

1.

DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES (continued)

   

Going Concern - As of October 31, 2010, the Company has incurred cumulative net losses of approximately $10,328,221 from operations and has negative working capital of $634,670. The Company is still in the exploration stage and has not fully commenced its mining and minerals processing operations, raising substantial doubt about its ability to continue as a going concern.

   

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

   

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

   

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

   

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

   

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

   

Mineral Property Rights – Costs of acquiring mining properties are capitalized upon acquisition. Mine development costs incurred either to develop new ore deposits, to expand the capacity of mines, or to develop mine areas substantially in advance of current production are also capitalized once proven and probable reserves exist and the property is a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are charged to operations upon abandonment. The Company evaluates the carrying value of capitalized mining costs and related property and equipment costs, to determine if these costs are in excess of their recoverable amount whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Evaluation of the carrying value of capitalized costs and any related property and equipment costs would be based upon expected future cash flows and/or estimated salvage value in accordance with Accounting Standards Codification (ASC) 360-10-35-15, Impairment or Disposal of Long-Lived Assets.

   

Exploration Costs – Mineral exploration costs are expensed as incurred.

   

Impairment of Long-Lived Assets – The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under ASC 360-10-35-17, Measurement of an Impairment Loss, if events or circumstances indicate that their carrying amount might not be recoverable. As of July 31, 2010 exploration progress is on target with the Company’s exploration and evaluation plan and no events or circumstances have happened to indicate the related carrying values of the properties may not be recoverable. When the Company determines that an impairment analysis should be done, the analysis will be performed using the rules of ASC 930-360-35, Asset Impairment, and 360-10-15-3 through 15-5, Impairment or Disposal of Long-Lived Assets.

F-7


ROYAL MINES AND MINERALS CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
OCTOBER 31, 2010

1.

DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES (continued)

   

Various factors could impact our ability to achieve forecasted production schedules. Additionally, commodity prices, capital expenditure requirements and reclamation costs could differ from the assumptions the Company may use in cash flow models used to assess impairment. The ability to achieve the estimated quantities of recoverable minerals from exploration stage mineral interests involves further risks in addition to those factors applicable to mineral interests where proven and probable reserves have been identified, due to the lower level of confidence that the identified mineralized material can ultimately be mined economically.

   

Material changes to any of these factors or assumptions discussed above could result in future impairment charges to operations.

   

Asset Retirement Obligation - The Company follows ASC 410, Asset Retirement and Environmental Obligations, which requires that an asset retirement obligation (“ARO”) associated with the retirement of a tangible long-lived asset be recognized as a liability in the period in which it is incurred and becomes determinable, with an offsetting increase in the carrying amount of the associated asset. The cost of the tangible asset, including the initially recognized ARO, is depleted, such that the cost of the ARO is recognized over the useful life of the asset. The ARO is recorded at fair value, and accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value. The fair value of the ARO is measured using expected future cash flow, discounted at the Company’s credit-adjusted risk-free interest rate. To date, no significant asset retirement obligation exists due to the early stage of exploration. Accordingly, no liability has been recorded.

   

Fair Value of Financial Instruments - Fair value accounting establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:


  Level 1

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

  Level 2

Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

  Level 3

Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

The Company’s financial instruments consist of mineral property purchase obligations. These obligations are classified within Level 2 of the fair value hierarchy as their fair value is determined using interest rates which approximate market rates. The Company is not exposed to significant interest or credit risk arising from these financial instruments.

Revenue Recognition –Revenues are recognized during the period in which the revenues are earned. Revenue from licensing our technology is recognized over the term of the license agreement. Costs and expenses are recognized during the period in which they are incurred.

F-8


ROYAL MINES AND MINERALS CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
OCTOBER 31, 2010

1.

DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES (continued)

   

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

   

Earnings (Loss) Per Share - The Company follows ASC 260, Earnings Per Share, and ASC 480, Distinguishing Liabilities from Equity, which establish standards for the computation, presentation and disclosure requirements for basic and diluted earnings per share for entities with publicly held common shares and potential common stock issuances. Basic earnings (loss) per share are computed by dividing net income by the weighted average number of common shares outstanding. In computing diluted earnings per share, the weighted average number of shares outstanding is adjusted to reflect the effect of potentially dilutive securities, such as stock options and warrants. Common stock equivalent shares are excluded from the computation if their effect is antidilutive. Common stock equivalents, which include stock options and warrants to purchase common stock, on October 31, 2010 that were not included in the computation of diluted EPS because the effect would be antidilutive were 74,633,100.

   

Income Taxes - The Company accounts for its income taxes in accordance with ASC 740, Income Taxes , which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

   

For acquired properties that do not constitute a business as defined in ASC 805-10-55-4, Definition of a Business, deferred income tax liability is recorded on GAAP basis over income tax basis using statutory federal and state rates. The resulting estimated future federal and state income tax liability associated with the temporary difference between the acquisition consideration and the tax basis is computed in accordance with ASC 740-10-25-51, Acquired Temporary Differences in Certain Purchase Transactions that are Not Accounted for as Business Combinations , and is reflected as an increase to the total purchase price which is then applied to the underlying acquired assets in the absence of there being a goodwill component associated with the acquisition transactions.

   

Expenses of Offering - The Company accounts for specific incremental costs directly to a proposed or actual offering of securities as a direct charge against the gross proceeds of the offering.

   

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

   

Recent Accounting Standards – From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) that are adopted by the Company as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards did not or will not have a material impact on the Company’s financial statements upon adoption.

F-9


ROYAL MINES AND MINERALS CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
OCTOBER 31, 2010

1.

DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT POLICIES (continued)

   

In January 2010, the FASB issued ASU 2010-06, Improving Disclosures About Fair Value Measurements, which requires reporting entities to make new disclosures about recurring or nonrecurring fair value measurements including significant transfers into and out of Level 1 and Level 2 fair value measurements and information on purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair value measurements. ASU 2010-6 is effective for annual reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures which are effective for annual periods beginning after December 15, 2010. The Company does not have any assets or liabilities classified as Level 3. The Company has adopted the Level 1 and Level 2 amendments accordingly. As the update only pertained to disclosures, it had no impact on the Company’s financial position, results of operations, or cash flows upon adoption.

   

In February 2010, the FASB issued ASU 2010-09, Subsequent Events (Topic 855), Amendment to Certain Recognition and Disclosure Requirements, to remove the requirement for SEC filers to disclose the date through which an entity has evaluated subsequent events. This change removes potential conflicts with current SEC guidance and clarifies the intended scope of the reissuance disclosure provisions. The update was effective upon its date of issuance, February 24, 2010, and the Company has adopted the amendments accordingly. As the update only pertained to disclosures, it had no impact on the Company’s financial position, results of operations, or cash flows upon adoption.

   
2.

LOAN RECEIVABLE

   

As of October 31, 2010 and April 30, 2010, the Company has advanced $600,000 and $400,000, respectively, to Golden Anvil to permit Golden Anvil to complete its refurbishment and relocation of its mineral processing plant in Nayarit, Mexico. On August 25, 2010, the Company entered into a loan agreement with Golden Anvil, covering the total $600,000 advanced by the Company to Golden Anvil. The loan bears no interest, matures on December 31, 2011, and is secured by Golden Anvil’s equipment and mineral claims. The loan agreement replaces the loan provisions of the toll processing agreement dated December 3, 2009.

   
3.

PROPERTY AND EQUIPMENT

   

Property and equipment consists of the following:


      As of     As of  
      October 31, 2010     April 30, 2010  
  Process, lab and office equipment $  411,734   $  411,734  
  Site Equipment   179,269     179,269  
  Less: accumulated depreciation   (402,532 )   (372,402 )
    $  188,471   $  218,601  

4.

INTELLECTUAL PROPERTY

   

On April 2, 2007 the Company entered into a Technology and Asset Purchase Agreement (“NVRM Agreement”) with Robert H. Gunnison and New Verde River Mining Co. Inc. (“NVRM”), whereby the Company acquired equipment and the technology for lixiviation of metals from ore utilizing thiourea stabilization (“Intellectual Property”). The equipment and intellectual property were acquired with the issuance of 2,000,000 shares of the Company’s $0.10 per share common stock and a future cash payment of $300,000, for a purchase price of $500,000. The purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values at the date of acquisition. The intellectual property was valued at $200,000 and is being amortized quarterly on a straight-line basis over a 5 year period. The Company recorded $20,000 of amortization expense for the six months ended October 31, 2010 and 2009.

F-10


ROYAL MINES AND MINERALS CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
OCTOBER 31, 2010

5.

MINERAL PROPERTIES

   

As of October 31, 2010 and April 30 2010, mineral properties totaling $42,600 and $35,800, respectively, consist of twenty-one (21) mining claims located south of Searchlight, Nevada in the Piute Valley. On January 28, 2007, the Company entered into mineral option agreements to acquire an 87.5% interest in twenty-four (24) mining claims with the issuance of 1,050,000 shares of the Company’s common stock on the date of signing of the option agreement, with the provision that the Company issue an additional 420,000 and 210,000 shares on the fifth anniversary and tenth anniversary, respectively, of the signing of the option agreement if the Company wishes to acquire legal interest to the mining claims. The transaction was valued at an agreed upon price of $10,500. Annual renewal fees are capitalized. Each mining claim is comprised of 160 acres. In August 2008 the Company did not pay the renewal fee on four (4) of the mining claims after confirming title to the claims were void due to not being properly located and being subject to prior segregation.

   

On March 16, 2007 the Company entered into a lease agreement of property with one (1) mining claim, for a term of twenty years, for exploration and potential mining production on 20 acres in Searchlight, Nevada. The Company paid a one-time signing bonus of $5,000 upon execution of the agreement and pays a $4,000 rental fee each August. The Company will also pay an annual royalty equal to five (5) percent of the net profit from any mining production on the property.

   

Mining claims are capitalized as tangible assets in accordance with Emerging Issues Task Force abstract 04-02. Upon completion of a bankable feasibility study, the claims will be amortized using the unit-of-production method over the life of the claim. If the Company does not continue with exploration after the completion of the feasibility study, the claims will be expensed at that time.

   
6.

ACCOUNTS PAYABLE - RELATED PARTY

   

As of October 31, 2010 and April 30, 2010, accounts payable – related party consisted of $135,000 and $87,000, respectively, due to directors and officers of the Company for consulting fees.

   
7.

NVRM PAYABLE

   

As of October 31, 2010 and April 30, 2010, NVRM payable consists of $90,000, payable to New Verde River Mining and Robert H. Gunnison pursuant to the NVRM Agreement noted above (see Note 4). Mr. Gunnison signed an extension agreement extending the payment deadline to June 30, 2011. The payable bears 6% interest annually.

   
8.

LOANS PAYABLE AND ACCRUED INTEREST – RELATED PARTY

   

As of October 31, 2010 and April 30, 2010, loans payable – related party of $867,200 and $245,277, respectively, mainly consists of borrowings, directly and indirectly, from one director of the Company. The balances bear 10% interest, are unsecured and are due on demand. As of October 31, 2010 and April 30, 2010, accrued interest – related party was $148,720 and $121,123, respectively.

   
9.

COMMITMENTS AND CONTINGENCIES

   

Lease obligations – The Company has operating leases for its corporate office and plant facility. Future minimum lease payments under the operating leases as of October 31, 2010 are as follows:


Fiscal year ending April 30, 2011 $  34,530  
Fiscal year ending April 30, 2012 $  56,307  
Fiscal year ending April 30, 2013 $  64,740  
Thereafter $  21,972  

F-11


ROYAL MINES AND MINERALS CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
OCTOBER 31, 2010

9.

COMMITMENTS AND CONTINGENCIES (continued)

   

Legal proceedings – The Company is not a party to any legal proceeding and, to our knowledge, no other legal proceedings are pending, threatened or contemplated.

   
10.

STOCKHOLDERS’ EQUITY

   

Common and Preferred Stock:

   

As of October 31, 2010 and April 30, 2010, there were 111,785,352 shares of common stock outstanding and zero shares of preferred stock outstanding. Outstanding shares of common stock consist of the following:


  a)

On March 16, 2006, the Company issued 1,000 shares of common stock to one individual for cash at $0.001 per share.

     
  b)

On November 30, 2006, the Company issued 12,500,000 shares of common stock to three individuals for cash at $0.001 per share.

     
  c)

On December 29, 2006, the Company issued 7,800,000 shares of common stock for cash at $0.01 per share.

     
  d)

On January 10, 2007, the Company issued 1,050,000 shares of common stock for the purchase of 7/8ths interest in 24 minerals claims at $0.01 per share.

     
  e)

On February 28, 2007, the Company issued 1,250,000 shares of common stock to three individuals for cash at $0.10 per share.

     
  f)

On March 31, 2007, the Company issued 1,800,000 shares of common stock to four individuals for cash at $0.10 per share.

     
  g)

On April 2, 2007, the Company issued 2,000,000 shares of common stock to one individual, in connection with the NVRM Agreement, for the purchase of intellectual property and equipment.

     
 

h)

On May 31, 2007, the Company closed a private placement offering for proceeds of $620,582, of which $505,114 was received and recorded as share subscriptions received as of April 30, 2007. The Company issued 2,482,326 shares of common stock, at $0.25 per share, to non-U.S. investors pursuant to Regulation S of the Securities Act of 1933.

     
 

i)

On June 4, 2007, the Company closed a private placement offering for proceeds of $825,000 and issued 3,300,000 shares of common stock, at $0.25 per share, to accredited U.S. investors pursuant to Regulation D of the Securities Act of 1933.

     
  j)

On October 5, 2007, the Company issued 13,968,926 shares of common stock in the reverse acquisition of Centrus Ventures Inc.

     
  k)

On September 3, 2008, the Company completed a private placement of 200,000 units at a price of $0.50 per unit for total proceeds of $100,000. Each unit is comprised of one share of common stock and one-half of one share purchase warrant. Each whole share purchase warrant will entitle the holder to purchase one additional share of common stock at a price of $0.75 per share for a period ending September 2, 2010.

     
  l)

On November 15, 2008, under the terms of a settlement agreement, the Company issued 450,760 units at a price of $0.30 per unit, with each unit consisting of one common share and one share purchase warrant of the Company. Each warrant is exercisable to purchase an additional common share at a price of $0.50 per share for a period of two (2) years from the date of issuance. The units were issued pursuant to the provisions of Regulation S promulgated under the Securities Act of 1933.

F-12


ROYAL MINES AND MINERALS CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
OCTOBER 31, 2010

10.

STOCKHOLDERS’ EQUITY (continued)


  m)

On February 24, 2009, the Company issued 9,140,000 units for $457,000 in cash, 12,400,000 units for $620,000 ($400,000 from one director) in loans made to the Company and 1,336,840 units to retire $65,505 in corporate indebtedness under three separate private placement offerings. Each unit was comprised of one share of the Company’s common stock and one share purchase warrant, with each warrant entitling the holder to purchase an additional share of common stock for a period of two years at an exercise price of $0.10 per share. The Company also entered into a management consulting agreement with an officer of the Company, and pursuant to the terms of the agreement issued an aggregate of 3,000,000 restricted shares of its common stock.

     
  n)

On July 16, 2009, the Company issued 2,000,000 units for $100,000 in loans made to the Company and 500,000 units to retire $25,000 in corporate indebtedness for consulting services under two separate private placement offerings. Each unit was comprised of one share of the Company’s common stock and one share purchase warrant, with each warrant entitling the holder to purchase an additional share of common stock for a period of two years at an exercise price of $0.10 per share.

     
  o)

On August 4, 2009, the Company issued 295,000 shares of common stock for warrants exercised at $0.10 per share and 750,000 shares of common stock for options exercised at $0.05 per share in satisfaction of debt for legal services.

     
  p)

On August 14, 2009, the Company issued 1,500,000 shares of common stock to an investor relations services firm pursuant to the terms of the consulting agreement.

     
  q)

On August 18, 2009, the Company issued 3,500,000 units, for $350,000 in loans made to the Company by one director, at a price of $0.10 per unit, with each unit consisting of one share of common stock and one share purchase warrant, with each warrant entitling the holder to purchase one additional share of common stock at a price of $0.20 per share for a period of two years from the date of issue.

     
  r)

On December 15, 2009, the Company issued 900,000 shares of common stock for options exercised at $0.05 per share in satisfaction of debt for legal services.

     
  s)

On January 31, 2010, the Company issued 19,400,000 units for $970,000 ($900,000 from one director) in loans made to the Company, 8,280,000 units for $414,000 in cash and 1,775,500 units to retire $88,775 in corporate indebtedness, at a price of $0.05 per unit, with each unit consisting of one share of common stock and one share purchase warrant, with each warrant entitling the holder to purchase one additional share of common stock at a price of $0.10 per share for a period of two years from the date of issue.

     
  t)

On February 26, 2010, the Company issued 105,000 shares of common stock for warrants exercised at $0.10 per share and 100,000 shares of common stock for options exercised at $0.05 per share in satisfaction of debt for legal services.


11.

STOCK INCENTIVE PLANS

   

2011 Stock Incentive Plan - Effective September 7, 2010, the Company adopted the 2011 Stock Incentive Plan (the “2011 Plan"). The 2011 Plan allows the Company to grant certain options to its directors, officers, employees and eligible consultants. A total of 16,700,000 shares of the Company’s common stock are available for issuance under the 2011 Plan. However, the Company may increase the maximum aggregate number of shares of the Company’s common stock that may be optioned and sold under the 2011 Plan provided the maximum aggregate number of shares of common stock that may be optioned and sold under the 2011 Plan shall at no time be greater than 15.0% of the total number of shares of common stock outstanding.

F-13


ROYAL MINES AND MINERALS CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
OCTOBER 31, 2010

11.

STOCK INCENTIVE PLANS (continued)

   

On September 7, 2010, the Company granted non-qualified stock options under the 2011 Plan for the purchase of 6,000,000 shares of common stock at $0.02 per share. The nonqualified stock options were granted to various officers, directors and consultants, are fully vested and expire September 6, 2014. As of October 31, 2010, zero options under the 2011 Plan have been exercised.

   

From the date of inception through October 31, 2010, compensation expense related to the granting of stock options under the 2011 Plan was $178,159 and is included in general and administrative expense. The Company calculated the value of the options using the Black-Scholes option pricing model using the following assumptions: a bond equivalent yield of 12.50%, volatility of 240%, estimated life of 4 years and closing stock price of $0.03 per share on the date of grant.

   

2010 Stock Incentive Plan - Effective December 7, 2009, the Company adopted the 2010 Stock Incentive Plan (the “2010 Plan"). The 2010 Plan allows the Company to grant certain options to its directors, officers, employees and eligible consultants. A total of 10,000,000 shares of the Company’s common stock are available for issuance under the 2010 Plan. However, the Company may increase the maximum aggregate number of shares of the Company’s common stock that may be optioned and sold under the 2010 Plan provided the maximum aggregate number of shares of common stock that may be optioned and sold under the 2010 Plan shall at no time be greater than 12.5% of the total number of shares of common stock outstanding.

   

On December 8, 2009, the Company granted non-qualified stock options under the 2010 Plan for the purchase of 7,000,000 shares of common stock at $0.05 per share. The nonqualified stock options were granted to various officers, directors and consultants, are fully vested and expire December 7, 2011. As of July 31, 2010, 1,000,000 options under the 2010 Plan have been exercised.

   

From the date of inception through July 31, 2010, compensation expense related to the granting of stock options under the 2010 Plan was $391,478 and is included in general and administrative expense. The Company calculated the value of the options using the Black-Scholes option pricing model using the following assumptions: a risk-free rate of 1.00%, volatility of 252%, estimated life of 2 years and closing stock price of $0.06 per share on the date of grant.

   

Effective September 7, 2010, the Company suspended the 2010 Plan. No new options may be granted under the 2010 Plan and the 2010 Plan will be terminated once all outstanding options granted under the 2010 Plan have been exercised, expired or otherwise terminated.

   

2009 Stock Incentive Plan - Effective January 12, 2009, the Company adopted the 2009 Stock Incentive Plan (the “2009 Plan"). The 2009 Plan allows the Company to grant certain options to its directors, officers, employees and eligible consultants. A total of 5,000,000 shares of the Company’s common stock are available for issuance under the 2009 Plan.

   

On January 16, 2009, the Company granted non-qualified stock options under the 2009 Plan for the purchase of 5,000,000 shares of common stock at $0.05 per share. The nonqualified stock options were granted to various officers, directors and consultants, are fully vested and expire January 15, 2011. As of July 31, 2010, 750,000 options under the 2009 Plan have been exercised.

   

From the date of inception through July 31, 2010, compensation expense related to the granting of stock options under the 2009 Plan was $342,550 and is included in general and administrative expense. The Company calculated the value of the options using the Black-Scholes option pricing model using the following assumptions: a risk-free rate of 1.00%, volatility of 316%, estimated life of 2 years and closing stock price of $0.07 per share on the date of grant.

F-14


ROYAL MINES AND MINERALS CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
OCTOBER 31, 2010

11.

STOCK INCENTIVE PLANS (continued)

   

Effective December 7, 2009, the Company suspended the 2009 Plan. No new options may be granted under the 2009 Plan and the 2009 Plan will be terminated once all outstanding options granted under the 2009 Plan have been exercised, expired or otherwise terminated.

   

2008 Stock Incentive Plan - Effective February 1, 2008, the Company adopted the 2008 Stock Incentive Plan (the “2008 Plan"). The 2008 Plan allowed the Company to grant certain options to its directors, officers, employees and eligible consultants. A total of 4,600,000 shares of the Company’s common stock were available for issuance under the 2008 Plan.

   

On February 1, 2008, the Company granted non-qualified stock options under the 2008 Plan for the purchase of 4,340,000 shares of common stock at $0.74 per share. The nonqualified stock options were granted to various officers, directors and consultants, were fully vested and expired January 31, 2010. All 4,340,000 stock options expired without exercise.

   

Compensation expense related to the granting of stock options under the 2008 Plan was $3,583,702 and is included in general and administrative expense. The Company calculated the value of the options using the Black-Scholes option pricing model using the following assumptions: a risk-free rate of 4.50%, volatility of 107%, estimated life of 2 years and closing stock price of $1.22 per share on the date of grant.

   
12.

RELATED PARTY TRANSACTIONS

   

For the six months ended October 31, 2010 and 2009, the Company incurred $162,000 and $192,000, respectively, in consulting fees expense from companies with a common director or officer. In addition, for the six months ended October 31, 2010, the Company incurred $106,896 in compensation expense for the issuance of stock options to directors and officers of the Company.

   
13.

SUBSEQUENT EVENTS

   

Between November 1, 2010 and December 8, 2010, the Company has loaned Golden Anvil an additional $200,000 for working capital in accordance with the terms of the Memorandum of Understanding executed on October 19, 2010. As of December 8, 2010, Loan Receivable due from Golden Anvil totals $800,000.

   

Between November 1, 2010 and December 8, 2010, the Company has raised $535,000 through its private placement offering announced on October 29, 2010. As of December 8, 2010, the $535,000 is recorded as Share Subscriptions Received under Other Current Liabilities.

   

On November 9, 2010, the Company issued 1,700,000 shares of common stock for options exercised by one director and one consultant in satisfaction of debt owed by the Company.

F-15



ITEM 2.

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

OVERVIEW

We were incorporated on December 14, 2005 under the laws of the State of Nevada. We are an exploration stage company and our primary objectives are to: (i) commercially extract and refine precious metals from mined ore at our Phoenix Facility; (ii) joint venture, acquire and develop mining projects in North America, including the Golden Anvil Mine; and (iii) generate ongoing revenues from the licensing of our proprietary, environmentally-friendly lixiviation.

We are focusing our business on toll processing mined ore for third party mining companies at our processing and refining plant located in Phoenix, Arizona (the “Phoenix Facility”). Our Phoenix Facility is a compact, modular, cost efficient, turn-key operation, with a capacity to process up to 10 tons per day. In processing ore at our Phoenix Facility, we utilize our environmentally friendly proprietary technology for the lixiviation of minerals using thiourea stabilization (the “Lixiviation Technology”). The use of thiourea stabilization is more environmentally friendly than cyanide or sulfuric acid, which have traditionally been used for this purpose. See “Phoenix Facility and Lixiviation Technology” below.

We entered into a Memorandum of Understanding dated October 19, 2010 with Golden Anvil, SA de CV (“Golden Anvil”) with respect to the proposed formation and funding of a proposed joint venture for the exploration and development of mineral concessions owned by Golden Anvil in the State of Nayarit, Mexico (the “Golden Anvil Mine”). We had previously entered into a Letter of Intent and a Toll Processing Agreement in connection with the proposed Joint Venture and the processing of concentrates at our Phoenix Facility. See “Golden Anvil” below.

We also plan to engage in the exploration and development of our Piute Valley Property located in Clark County, Nevada. Our Piute Valley Property is a potential gold project that consists of a mineral lease covering 20.61 acres of patented claims (the “Smith Lease”) and an option to acquire a 7/8th interest in 20 unpatented claims (the “BLM Claims”) located near the Smith Lease. Each BLM Claim is comprised of 160 acres. See “The Piute Valley Property” below.

We are actively seeking to enter into agreements to license our Lixiviation Technology to third parties and we are also seeking to enter into joint ventures with third parties to explore and develop additional mining projects. There are no assurances that we will be able to license our Lixiviation Technology or enter into joint ventures for the exploration and development of additional mining projects.

3


RECENT CORPORATE DEVELOPMENTS

The following corporate developments occurred since the completion of our fiscal quarter ended October 31, 2010:

1.

Loan to Golden Anvil

   

We have loaned Golden Anvil an additional $200,000 for working capital in accordance with the terms of the Memorandum of Understanding signed on October 19, 2010. This brings the total advanced to Golden Anvil to $800,000. We anticipate advancing an additional $100,000 before the end of 2010.

   
2.

Private Placement Offering

   

Under our previously announced U.S. Private Placement and Foreign Private Placement offerings, as describe in detail below, we have raised an aggregate of $535,000. To date, we have not issued any securities under these offerings. There is no assurance that these private placement offerings will be completed.

   
3.

Stock Options Exercised

   

On November 9, 2010, we issued 1,700,000 shares of common stock for options exercised by a director and a consultant of Royal Mines. The shares were issued at a deemed price of $0.05 per share and settled total indebtedness of $85,000.

PHOENIX FACILITY AND LIXIVIATION TECHNOLOGY

Our Phoenix Facility is an industrial building of approximately 9,800 square feet located in Phoenix, Arizona. The Phoenix Facility is designed as a compact, modular, cost efficient, turn-key operation, with a capacity of processing 10 tons of ore per day. In processing ore at our Phoenix Facility, we utilize our Lixiviation Technology, being a closed loop, zero liquid discharge, leach extraction process. Below is a basic diagram on the processing of ore at our Phoenix Facility.

4


We acquired our interest in the Lixiviation Technology and our Phoenix Facility on April 2, 2007 under the terms of a Technology and Asset Purchase Agreement (the “Technology Agreement”) with New Verde River Mining Co., Inc. (“New Verde”) and Robert H. Gunnison. In consideration of the Lixiviation Technology and the Phoenix Facility, we paid and issued the following:

  (a)

$300,000 to New Verde for the purchase of the equipment within the Phoenix Facility as follows:

       
  (i)

$175,000 upon execution of the Technology Agreement (which amount has been paid); and

       
  (ii)

$125,000 of which $90,000 is outstanding.

       
  (b)

issued 2,000,000 shares to Mr. Gunnison for the Lixiviation Technology.

Concurrent with the acquisition of the Lixiviation Technology and the Phoenix Facility, we entered into an Employment Agreement dated April 2, 2007 (the “Employment Agreement”) with Robert H. Gunnison whereby Mr. Gunnison agreed to act as our Production Manager commencing on April 2, 2008. In consideration of Mr. Gunnison’s services, we pay Mr. Gunnison a salary of $120,000 per annum.

On March 13, 2009, we entered into the Payment Extension and License Agreement with New Verde and Mr. Gunnison whereby New Verde and Mr. Gunnison agreed to extend the deadline for the balance owed to New Verde to June 30, 2010. In consideration of the extension, we agreed to pay interest at 6% per annum on the balance owing to New Verde. We also agreed to grant New Verde and Mr. Gunnison a non-exclusive worldwide license on the Technology (the “License”). The License will only take effect in the event of the termination of the employment agreement between Mr. Gunnison and the Company. New Verde and Mr. Gunnison will not be permitted to assign or sub-license without our prior written approval. On July 22, 2010, we entered into a payment extension with New Verde and Mr. Gunnison whereby New Verde and Mr. Gunnison agreed to extend the deadline for the balance owed to New Verde to June 30, 2011. In consideration of the extension, we agreed to extend the accrual of interest at 6% per annum on the balance owing to New Verde.

GOLDEN ANVIL

On October 19, 2010, we executed a Memorandum of Understanding with Golden Anvil, SA de CV (“Golden Anvil”) with respect to the formation of a proposed Joint Venture for the exploration, development and production of mineral concessions owned by Golden Anvil in the State of Nayarit, Mexico (the “Golden Anvil Mine”). The Memorandum of Understanding further defines the terms of the proposed Joint Venture as contemplated in a Letter of Intent dated October 21, 2009.

Previous, we loaned to Golden Anvil a total of $600,000 (the “Loan”) to permit Golden Anvil to establish a new facility (the “Processing Plant”) in Mexico for the purposes of concentrating ore mined from the Golden Anvil Mine. We also toll processes concentrates from the Golden Anvil Mine at our Phoenix Plant under the terms of the Toll Processing Agreement.

Under the terms of the Memorandum of Understanding, we have formed a Nevada corporation called Golden Anvil Inc. (the “Joint Venture Company”). We will contribute funding to the Joint Venture Company totaling $3,000,000 (the “Funding Amount”) including the amount of the Loan. Upon our providing the Funding Amount, Golden Anvil will transfer 100% of the Golden Anvil Mine and the Processing Plant (the “Golden Anvil Assets”) to the Joint Venture Company. The additional $2,400,000 is to be funded as follows:

  (a)

$300,000 within 45 days of the date of the Memorandum of Understanding (of which $200,000 has been paid); and

     
  (b)

The balance of $2,100,000 within 180 days of the date that Golden Anvil delivers to the Phoenix Plant the first 20 tons of concentrate generated from the Processing Plant.

If we are able to complete the funding, of which there is no assurance, and Golden Anvil transfer the assets in the Joint Venture Company, the Joint Venture Company will be owned 50% by us and 50% by Golden Anvil.

5


In the event that we are unable to raise the Funding Amount in the time required, we will forfeit our right to proceed with the Joint Venture and the Loan will be payable in 12 months with interest at 18% from the dates of advancement and secured by the Golden Anvil Assets.

The final terms of the Joint Venture will be set out in a formal agreement currently being prepared by legal counsel for the parties. There is no assurance that we will enter into a formal agreement.

We have hired a professional mining engineer to evaluate the progress of the Golden Anvil concentration plant and to review the mine site and related historic data. The concentration plant expects to begin operations within 15 days at a projected production rate of 100 tons of head ore per day, resulting in 30 tons of concentrate per month.

THE PIUTE VALLEY PROPERTY

The Piute Valley Property is a potential gold project consisting of the Smith Lease and the BLM Claims. We intend to focus our operations on the Smith Lease based on its development and status.

The Smith Lease is a leased patented mineral claim covering approximately 20.61 acres located in Clark County, Nevada. We acquired our interest in the Smith Lease upon entering into a Restatement and Amendment to Lease Agreement dated April 12, 2007 (the “Lease Agreement”) with Erline Y. Smith, Trustee, Erline Y. Smith Trust and Lawana Hooper (collectively referred to as the “Lessors”). Under the terms of the Lease Agreement, we were granted the right to explore, and if proved feasible, develop the Smith Lease. These rights were granted as a lease for a term of 20 years. As consideration for the Smith Lease, we agreed to do the following:

  (a)

pay $5,000 to the Lessors upon execution of the Lease Agreement (which amount has been paid);

     
  (b)

pay an annual rental fee of $1,000 to the Lessors per each five acre parcel of the Smith Lease (we have paid the annual rental fee through August 13, 2011); and

     
  (c)

pay an annual royalty equal to five percent of “net smelting profit” from production. Net smelting profit is defined as the net profit derived from the sale of metals and minerals produced from the Smith Lease.

In addition to the Smith Lease, our BLM Claims consist of an option to acquire a 7/8th undivided interest in 20 mineral claims, covering approximately 3,200 acres located in Clark County, Nevada. Readers are cautioned that eight of the BLM Claims appear to be invalid due to conflicts with patented claims or more senior claims. We are investigating this further in order to determine the exact extent of the conflict with these claims

Under the terms of various option agreements entered into in January 2007 (the “Option Agreements”) with certain optionors (the “Optionors”), we are required to issue to the Optionors the following consideration in order to maintain and exercise our option on the BLM Claims:

  (a)

1,050,000 shares of common stock on execution of the Option Agreements (which shares have been issued);

     
  (b)

an additional 420,000 shares of common stock on the fifth anniversary of the Option Agreements; and

     
  (c)

an additional 210,000 shares of common stock on the tenth anniversary of the Option Agreements.

6


PLAN OF OPERATION

Our plan of operation over the next twelve months is to focus our financial resources on the formation of the proposed Joint Venture with Golden Anvil. In order to proceed with the proposed Joint Venture, we will need to enter into a formal Joint Venture agreement and provide funding in the amount of $2,100,000 to the Joint Venture Company. There is no assurance that we will be able to raise sufficient financing to fund the Joint Venture.

We also anticipate that over the next twelve months our plan of operation for our Phoenix Facility and the Piute Valley Property will consist of:

1.

Upgrading our Phoenix Facility by installing another vibratory drum mill and filter press to increase the process rate at the Phoenix Facility to 2,000 lbs per hour. We anticipate that we will require $400,000 in order to implement these upgrades at our Phoenix Facility.

   
2.

Implementing our drilling program of prime targets on the Smith Lease. The implementation of this drilling program may require the filing of a Notice with the Federal Bureau of Land Management. We anticipate that this drilling program will cost approximately $500,000. The completion of this drilling program will depend on obtaining sufficient funds for the drilling and mineral analysis.

   
3.

Exploring strategic partnerships for the exploration of additional Piute Valley Property.

As of October 31, 2010, we had cash in the amount of $35,055. Accordingly, we do not have sufficient resources to meet the ongoing costs of our Phoenix Facility, the anticipated costs of completing our plan of operation for our Phoenix Facility, the Smith Lease or meeting the administrative costs of operating our business for the next twelve months. In order to complete our plan of operation, we will be required to obtain substantial financing from the sale of our common stock, of which there is no assurance.

RESULTS OF OPERATIONS

Three Months and Six Months Summary

    Three Months Ended     Percentage     Six Months Ended     Percentage  
    October 31,     October 31,     Increase /     October 31,     October 31,     Increase /  
    2010     2009     (Decrease)     2010     2009     (Decrease)  
Revenue $  620   $  1,500     (58.7)%   $  14,905   $ 43,311     (65.6)%  
Expenses   (433,577 )   (380,340 )   14.0%     (720,448 )   (838,372 )   (14.1)%  
Other Items   (17,330 )   (15,539 )   11.5%     (27,798 )   (29,316 )   (5.2)%  
Net Loss $  (460,287 ) $  (394,379 )   16.7%   $  (733,381 ) $  (824,377 )   (11.0)%  

Revenues

During the six months ended October 31, 2010, we earned revenues of $14,905. These revenues consisted of $14,285 from the refining of ore at our Phoenix Facility and $620 from a licensing fee. We are currently in the exploration stage of our business. We have begun to process ore at our Phoenix Facility; however, our initial income from the use of our Phoenix Facility has been minimal. We can provide no assurances that we will earn significant revenue from the processing of ore at our Phoenix Facility or that we will discover commercially exploitable levels of mineral resources on our Piute Valley Property, or if such resources are discovered, that we will be able to enter into commercial production of our Piute Valley Property.

7


Expenses

The major components of our operating expenses for the three and six months ended October 31, 2010 and 2009 are outlined in the table below:

    Three Months Ended     Percentage     Six Months Ended     Percentage  
    October 31,     October     Increase /     October     October 31,     Increase /  
    2010     31, 2009     (Decrease)     31, 2010     2009     (Decrease)  
Mineral exploration and evaluation expenses $  144,170   $  184,838     (22.0)% $  298,526   $  448,322     (33.4)%  
General and administrative   274,342     145,348     88.7%     371,832     293,381     26.7%  
Depreciation and amortization   25,065     50,154     (50.0)%     50,130     96,669     (48.1)%
Total Operating Expenses $  433,577   $  380,340     14.0%   $  720,448   $  838,372     (14.1)%  

Operating expenses increased from $380,340, during the three months ended October 31, 2009, to $433,577, during the three months ended October 31, 2010. The increase in our operating expenses primarily relates to $178,159 in compensation expense recorded for the issuance of stock options in general and administrative expenses. This was partially offset by decreases in mineral exploration and evaluation expenses and depreciation and amortization expenses.

Operating expenses decreased from $838,372, during the six months ended October 31, 2009, to $720,448, during the six months ended October 31, 2010. The decrease in our operating expenses relates to decreases in depreciation and amortization expenses and mineral exploration and evaluation expenses. This decrease was partially offset by the compensation expense recorded for the issuance of stock options in general and administrative expenses.

Mineral exploration and evaluation expenses primarily consisted of rent, processing extraction costs, consulting fees and labor expenses in connection with our Phoenix Facility, as well as subcontractor costs with our exploration program on the Smith Lease.

Our general and administrative expenses primarily consisted of: (i) compensation expense recorded for the issuance of stock options; (ii) monthly consulting fees paid to our Chief Executive Officer, Mr. Matheson and to our Chief Financial Officer, Mr. Mitchell; and (iii) legal and accounting fees in connection with meeting our reporting requirements under the Exchange Act. The increase in general and administrative expenses during the six months ended October 31, 2010 was primarily due to stock based expenses of $178,159.

We anticipate that our operating expenses will increase significantly as we implement our plan of operation for our Phoenix Facility, the proposed Joint Venture with Golden Anvil and our Piute Valley Property.

LIQUIDITY AND CAPITAL RESOURCES

Working Capital                  
                Percentage  
    At October 31, 2010     At April 30, 2010     Increase / (Decrease)  
Current Assets $  645,055   $  437,559     47.4%  
Current Liabilities   (1,279,725 )   (560,337 )   128.4%  
Working Capital Deficit $  (634,670 ) $  (122,778 )   416.9%  

8



Cash Flows            
    Six Months Ended  
    October 31, 2010     October 31, 2009  
Net Cash Used in Operating Activities $  (617,627 ) $  (771,314 )
Net Cash Used In Investing Activities   (6,800 )   (104,403 )
Net Cash Provided By Financing Activities   621,923     902,771  
Net Increase (Decrease) in Cash During Period $  (2,504 ) $  27,054  

As at October 31, 2010, we had a working capital deficit of $634,670 as compared to a working capital deficit of $122,778 as at our year ended April 30, 2010. Our working capital deficit increased due to the lack of capital to meet our ongoing expenditures, causing an increase in our short term loans to fund our ongoing operations. During the six months ended October 31, 2010, we received short term loans totaling $621,923. These loans bear interest at a rate of 10% per annum, are unsecured and due on demand.

FINANCING REQUIREMENTS

Currently, we do not have sufficient financial resources to complete our plan of operation for the next twelve months. As such, our ability to complete our plan of operation is dependent upon our ability to obtain additional financing in the near term.

Our Board of Directors has approved the following separate private placement offerings:

(a)

U.S. Private Placement: On October 29, 2010, our Board of Directors approved a private placement offering of up to 20,000,000 units (the “Units”) at a price of $0.05 US per Unit, with each Unit consisting of one share of our common stock and one share purchase warrant. Each warrant entitles the holder to purchase an additional share of common stock exercisable for a period of one year at a price of $0.10 US per share. The offering will be made in the United States to persons who are accredited investors as defined in Regulation D of the Securities Act of 1933.

   
(b)

Foreign Private Placement: On November 4, 2010, our Board of Directors approved a private placement offering of up to 20,000,000 units (the “Units”) at a price of $0.05 US per Unit, with each Unit consisting of one share of our common stock and one share purchase warrant. Each warrant entitles the holder to purchase an additional share of common stock exercisable for a period of one year at a price of $0.10 US per share. The offering will be made to persons who are not residents of the United States and are otherwise not “U.S Persons” as that term is defined in Rule 902(k) of Regulation S of the Securities Act of 1933.

Subsequent to the quarter ended October 31, 2010, we received proceeds of $535,000 under these private placement offerings. To date, we have not yet issued any securities to subscribers under this offering. There is no assurance that the private placement offerings or any part of them will be completed.

We anticipate continuing to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned mining, development and exploration activities.

OFF-BALANCE SHEET ARRANGEMENTS

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

9


CRITICAL ACCOUNTING POLICIES

We have identified certain accounting policies, described below, that are most important to the portrayal of our current financial condition and results of operations. Our significant accounting policies are disclosed in Note 1 to our interim financial statements included in this Quarterly Report.

Mineral Property Rights – We capitalize acquisition and option costs of mineral property rights. The amount capitalized represents the fair value at the time the mineral rights were acquired. The accumulated costs of acquisition for properties that are developed to the stage of commercial production will be amortized using the unit-of-production method.

Exploration Costs – Mineral exploration costs are expensed as incurred.

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

ITEM 4T.   CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

We carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of October 31, 2010 (the “Evaluation Date”). This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the Evaluation Date.

Disclosure controls and procedures are those controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended October 31, 2010 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

10


PART II - OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS.

We are not a party to any other legal proceedings and, to our knowledge, no other legal proceedings are pending, threatened or contemplated.

ITEM 1A.   RISK FACTORS.

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

If we do not obtain additional financing, we may not be able to continue our operations at our Phoenix Facility, enter into the proposed Joint Venture with Golden Anvil or complete our exploration and development programs on the Piute Valley Property.

As at October 31, 2010, we had cash on hand of $35,055 and accumulated net loss of $10,328,221 since inception. Our plan of operation calls for significant expenses in connection with the operation of our Phoenix Facility, the entry into the proposed Joint Venture with Golden Anvil and the exploration and development of our Piute Valley Property. If we are unable to raise sufficient financing, there is a substantial risk that we will be unable to meet payments of principal and interest to our creditors and pay our employees. In addition, we will require substantial financing in order to implement our plan of operation over the next twelve months.

Our Board of Directors has approved the U.S. Private Placement and the Foreign Private Placement offerings. To date, we have received proceeds of $535,000 under these private placement offerings, but have not yet issued any securities. However, there is no assurance that we will be able to complete the sale of any additional securities under these private placement offerings. Even if we complete the sale of all of the securities offered under these private placement offerings, there is no assurance that this will satisfy all of our working capital requirements for the next twelve months or that these funds will be sufficient to complete our planned exploration and development programs.

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

We have commenced earning revenues, although minimal, from the processing of ore at our Phoenix Facility. Our primary business activities have involved the acquisition of the Piute Valley Property, the exploration and development on the Piute Valley Property and the commencement of operations at our Phoenix Facility. Potential investors should be aware of the difficulties normally encountered by exploration stage companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates.

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

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

11


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

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

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

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

There is no assurance that our due diligence requirements will be satisfied or that we will be able to reach a joint venture agreement with Golden Anvil under the terms of the Memorandum of Understanding.

There is no assurance that the proposed transaction with Golden Anvil will be completed as planned or at all. If we decide to proceed with the joint venture, there is no assurance that we will be able to reach an agreement or that we will have sufficient financing to fund the proposed Joint Venture.

Even if we discover commercial reserves of precious metals on our Piute Valley Property, we may not be able to successfully obtain commercial production.

Our Piute Valley Property does not contain any known bodies of ore. If our exploration programs are successful in discovering ore of commercial tonnage and grade, we will require additional funds in order to place those mineral claims into commercial production. At this time, there is a risk that we will not be able to obtain such financing as and when needed.

In order to maintain our rights to the Piute Valley Property, we will be required to make annual filings with federal and state regulatory agencies and/or be required to complete assessment work on those properties.

In order to maintain our rights to the Piute Valley Property, we will be required to make annual filings with federal and state regulatory authorities. Currently the amount of these fees is minimal; however, these maintenance fees are subject to adjustment. In addition, we may be required by federal and/or state legislation or regulations to complete minimum annual amounts of mineral exploration work on the Piute Valley Property. A failure by us to meet the annual maintenance requirements under federal and state laws could result in the loss of our rights to the Piute Valley Property.

As we undertake exploration of our Piute Valley Property, we will be subject to compliance with government regulation that may increase the anticipated cost of our exploration program.

There are several government regulations that materially restrict the exploration of minerals. We may be required to obtain work permits, post bonds and perform remediation work for any physical disturbance to the land in order to comply with these laws. While our planned exploration program budgets for regulatory compliance, there is a risk that new regulations could increase our costs of doing business and prevent us from carrying out our exploration program.

12


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

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

If we receive positive results from our exploration program and we decide to pursue commercial production, we may be subject to an environmental review process that may delay or prohibit commercial production.

If the results of our geological exploration program indicate commercially exploitable reserves, and we decide to pursue commercial production of our mineral property, we may be subject to an environmental review process under environmental assessment legislation. Compliance with an environmental review process may be costly and may delay commercial production. Furthermore, there is the possibility that we would not be able to proceed with commercial production upon completion of the environmental review process if government authorities did not approve our mine or if the costs of compliance with government regulation adversely affected the commercial viability of the proposed mine.

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

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

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

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

Because our stock is a penny stock, stockholders will be more limited in their ability to sell their stock.

Our common stock is considered to be a “penny stock” since it does not qualify for one of the exemptions from the definition of “penny stock” under Section 3a51-1 of the Exchange Act. Our common stock is a “penny stock” because it meets one or more of the following conditions (i) the stock trades at a price less than $5.00 per share; (ii) it is not traded on a “recognized” national exchange; (iii) it is not quoted on the Nasdaq Stock Market, or even if so, has a price less than $5.00 per share; or (iv) is issued by a company that has been in business less than three years with net tangible assets less than $5 million.

The principal result or effect of being designated a “penny stock” is that securities broker-dealers participating in sales of our common stock will be subject to the “penny stock” regulations set forth in Rules 15-2 through 15g-9 promulgated under the Exchange Act. For example, Rule 15g-2 requires broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document at least two business days before effecting any transaction in a penny stock for the investor's account. Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor's financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult and time consuming for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.

13


ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On November 9, 2010, we issued 1,700,000 shares of common stock for options exercised by one director and one consultant in satisfaction of debt owed by the Company. Total indebtedness of $85,000 was applied to exercise the options at $0.05 per share.

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 5.     OTHER INFORMATION.

None.

ITEM 6.     EXHIBITS.

Exhibit  
Number Description of Exhibits
2.1

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

2.2

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

3.1

Articles of Incorporation. (1)

3.2

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

3.3

Bylaws. (1)

3.4

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

4.1

Form of Share Certificate. (1)

10.1

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

10.2

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

10.3

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

10.4

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

10.5

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

10.6

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

14



Exhibit  
Number Description of Exhibits
10.7

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

10.8

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

10.9

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

10.10

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

10.11

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

10.12

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

10.13

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

10.14

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

10.15

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

10.16

Residential Lease Agreement of La Cienega Office. (5)

10.17

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

10.18

2008 Stock Incentive Plan. (6)

10.19

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

10.20

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

10.21

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

10.22

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

10.23

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

10.24

2009 Stock Incentive Plan. (10)

10.25

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

10.26

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

10.27

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

10.28

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

10.29

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

10.30

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

10.31

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

10.32

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

10.33

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

10.34

2010 Stock Incentive Plan. (17)

10.35

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

10.36

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

15



Exhibit  
Number Description of Exhibits
10.37

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

10.38

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

10.39

2011 Stock Incentive Plan(20)

14.1

Code of Ethics. (3)

31.1

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

31.2

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

32.1

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

32.2

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

Notes:

(1)

Filed with the SEC as an exhibit to our Registration Statement on Form SB-2 originally filed on August 17, 2006, as amended.

(2)

Filed with the SEC as an exhibit to our Current Report on Form 8-K filed June 12, 2007.

(3)

Filed with the SEC as an exhibit to our Annual Report on Form 10-KSB filed July 30, 2007.

(4)

Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on September 28, 2007

(5)

Filed with the SEC as an exhibit to our Current Report on Form 8-K filed October 12, 2007.

(6)

Filed with the SEC as an exhibit to our Current Report on Form 8-K filed February 5, 2008.

(7)

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

(8)

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

(9)

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

(10)

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

(11)

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

(12)

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

(13)

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

(14)

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

(15)

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

(16)

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

(17)

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

(18)

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

(19)

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

(20)

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

16


SIGNATURES

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

        ROYAL MINES AND MINERALS CORP.
         
         
         
Date: December 14, 2010   By: /s/ K. Ian Matheson
        K. IAN MATHESON
        Chief Executive Officer
        (Principal Executive Officer)
         
         
         
         
Date: December 14, 2010   By: /s/ Jason S. Mitchell
        JASON S. MITCHELL
        Chief Financial Officer
        (Principal Accounting Officer)