MMEX Resources Corp 10-K for FY2021
MMEX Resources Corp (MMEX)
About this 10-K
MMEX Resources Corp filed this 10-K on July 29, 2021, covering the fiscal year ended April 30, 2021 (FY2021).
Headline figures
Fiscal year ended April 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $0
- compared with $0 a year earlier
- Net loss
- $24.53M
- compared with a net loss of $4.39M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 2021
☐ 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 333-152608
| MMEX RESOURCES CORPORATION |
| (Exact name of registrant as specified in charter) |
| Nevada |
| 26-1749145 |
| (State or other jurisdiction of incorporation or organization) |
| (IRS Employer Identification No.) |
| 3616 Far West Blvd. #117-321 |
|
|
| Austin, Texas 78731 |
| (855) 880-0400 |
| (Address of principal executive offices, including zip code) |
| (Issuer’s telephone number, including area code) |
Securities registered under Section 12(g) of the Exchange Act: Class A Common Stock, $0.001 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 past 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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☐ | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the issuer is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at October 31, 2020 (the second quarter end date) was approximately $626,000.
As of July 29, 2021, there were 3,701,209 shares of the issuer’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None
TABLE OF CONTENTS TO ANNUAL REPORT ON FORM 10-K
YEAR ENDED APRIL 30, 2021
| 2 |
Special Note Regarding Forward-Looking Statements
This Annual Report contains certain forward-looking statements. When used in this Annual Report or in any other presentation, statements which are not historical in nature, including the words “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” “may,” “project,” “plan” or “continue,” and similar expressions are intended to identify forward-looking statements. They also include statements containing a projection of revenues, earnings or losses, capital expenditures, dividends, capital structure or other financial terms.
The forward-looking statements in this Annual Report are based upon our management’s beliefs, assumptions and expectations of our future operations and economic performance, taking into account the information currently available to them. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties, some of which are not currently known to us that may cause our actual results, performance or financial condition to be materially different from the expectations of future results, performance or financial condition we express or imply in any forward-looking statements. These forward-looking statements are based on our current plans and expectations and are subject to a number of uncertainties and risks that could significantly affect current plans and expectations and our future financial condition and results.
We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Annual Report might not occur. We qualify any and all of our forward-looking statements entirely by these cautionary factors. As a consequence, current plans, anticipated actions and future financial conditions and results may differ from those expressed in any forward-looking statements made by or on our behalf. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented herein.
Corporate Information
MMEX was formed as a Nevada corporation in 2005. The current management team led an acquisition of the Company (then named Management Energy, Inc.) through a reverse merger completed in 2010 and changed the Company’s name to MMEX Mining Corporation in 2011 and then to MMEX Resources Corporation in 2016. Our mailing address is 3616 Far West Blvd #117-321, Austin, Texas 78731. Our physical office address is 107-A S. Main Street, Fort Stockton, Texas 79735. The Company has adopted a fiscal year end of April 30.
Company Overview
Since 2016, the focus of our business has been to build crude oil distillation units and refining facilities (CDUs) in the Permian Basin in West Texas. We revised our business plan in 2021 to move MMEX to clean energy use and production, leveraging our history, management and business relationships from the traditional energy sector. The focus of our business plan is to
|
| · | Modify our planned CDU projects in Pecos County (West Texas) to produce potentially hydrogen and ultra-low sulfur fuel products combined with CO2 capture. |
|
|
|
|
|
| · | Purchase additional acreage allowing us to develop additional megawatts of solar power for distribution to our projects in West Texas. |
Our immediate plans are to pursue the following three projects:
Project 1: Ultra Fuel clean refining.
We have teamed with Polaris Engineering to develop a clean refining, 10,000 barrel per day facility at our Pecos County site to produce 87° gasoline, ultra-low sulphur diesel and low-sulphur fuel oil, utilizing the Ultra Fuels concept. The Ultra Fuels concept features small size facilities to take advantage of proximity to smaller markets and/or locate directly near crude oil production areas. Because equipment is fabricated in modular units in the USA and shipped to site, this allows for 15 to 18 months’ project completion time and more rapid implementation than traditional facilities. The smaller size and footprint, as well as lower emissions, also allows for faster permitting.
| 3 |
| Table of Contents |
Project 2: Blue Hydrogen
We have teamed with Black Tree Group to develop a facility in Pecos County to produce hydrogen with carbon capture and storage employing steam methane reformer technology with the abundant natural gas supplies in the immediate area as the feedstock.
Project 3: Green Hydrogen
This planned project will be a parallel plant in Pecos County, which plans to utilize the proprietary electrolyzer technology of a major international technology partner. The facility will utilize solar power, with water purification, to produce up to 50 tons of hydrogen production per day.
We are in various stages of negotiations with major company off-takes that range from specialty air and gas companies to international trading companies. We would expect the sales of hydrogen by these companies will be to their customer base, which are more traditional chemical end uses. The proposed distribution network of liquid hydrogen from our planned projects will be by truck and rail.
Completion of these projects is dependent upon our obtaining the necessary capital for planning, construction and start-up costs. We are in consultation with the local and state tax authorities to file for tax abatement treatment generally applicable to projects such as our H2 projects. However, neither the receipt of adequate capital or tax abatement treatment can be assured.
The New Hydrogen Economy
The energy systems both in the United States and internationally are rapidly evolving. Major energy companies, regulatory agencies and all segments of society are working toward decarbonization and preservation of natural resources. In the interim, however, we need electric power and transportation energy. Hydrogen, as the most abundant fuel in the universe, is an energy carrier that cuts across sectors and has multiple benefits.
Hydrogen is the most abundant element in the universe; however, it is rarely found in its elemental form on earth. It must be produced from a hydrogen-containing feedstock (e.g., water, biomass, fossil fuels, or waste materials) using an energy source. Once hydrogen is produced, it can be used to store, move, and deliver low- or no-carbon energy to where it is needed. Hydrogen can be stored as a liquid, gas, or chemical compound, and is converted to energy via traditional combustion methods (in engines, furnaces, or gas turbines), through electrochemical processes (in fuel cells), and through hybrid approaches such as integrated combined cycle gasification and fuel cell systems. It is also used as a feedstock or fuel in a number of industries, including petroleum refining, ammonia production, food and pharmaceutical production, and metals manufacturing. Hydrogen can be produced in large centralized production facilities or in smaller distributed production facilities, and can be transported via truck, pipeline, tanker, or other means. Hydrogen, as a versatile energy carrier and chemical feedstock, offers advantages that unite all of our nation’s energy resources—renewables, nuclear, and fossil fuels—and enables innovations in energy production and end uses that can help decarbonize three of the most energy intensive sectors of our economy: transportation, electricity generation, and manufacturing.
Supplying hydrogen to industrial users is now a major business globally. Demand for hydrogen, which has grown more than threefold since 1975, continues to rise. Demand for hydrogen in its pure form is approximately 70 million tons per year. Governments are recognizing hydrogen’s role in energy security and its ability to decarbonize sectors that are otherwise extremely difficult to abate – such as logistics, industrial heating and industry feedstock. Meanwhile, industry leaders across the automotive, chemicals, oil and gas and heating sectors look to low-carbon and renewable hydrogen as a serious alternative to reach their increasingly robust sustainability objectives.
| 4 |
| Table of Contents |
Management Expertise in Oil, Gas, Refining and Electric Power Project Development and Project Finance Development
MMEX management has over 30 years of experience in natural resource project development and project financing in North and South America and the U.K. In addition, MMEX directors and principal stockholders with oil, gas, refining and electric power experience will bring this expertise into the Company.
MMEX principals formed Maple Resources Corporation (“Maple Resources”) in 1986 to engage in the evaluation, acquisition and development of oil & gas, refining, power generation, natural gas transmission and processing energy projects in the western United States and Latin America. Maple Resources and its principals have engaged in a number of oil and gas acquisitions and dispositions and ultimately acquired assets that included 10 gas processing plants and approximately 770 miles of natural gas gathering lines and transmission infrastructure. In 1992, Maple Resources sold substantially all of its existing US-based assets and began to pursue energy projects in Latin America, particularly in Peru through its affiliate The Maple Gas Corporation del Peru Ltd (“Maple Peru”). In 1993, Maple Peru began developing the Aguaytía Project, an integrated natural gas and electric power generation and transmission project. This US$273 million project involved the first commercial development of a natural gas field in Peru, as well as the construction and operation of approximately 175 miles of hydrocarbon pipelines, a gas processing plant, a fractionation facility, a 153 MW power plant and the related 392 km of electricity transmission lines. The Aguaytía Project began commercial operation in 1998. Maple Peru also acquired a 4,000-bpd refinery in Pucallpa along with 3 producing oil fields.
Jack Hanks, our President and CEO, is no longer engaged in the active business operations of Maple Peru and is able to devote substantially all of his business time to his duties on behalf of the Company. Further, we do not anticipate that Maple Resources will present any conflicts of interest for the MMEX principals in carrying out their responsibilities on behalf of the Company.
Proposed Organizational Structure
The Company expects to operate its planned projects through subsidiaries. The construction of the planned projects will require substantial equity and debt financing, far beyond the expected resources of the Company, and we anticipate that the subsidiaries will obtain equity and debt financing to finance the cost of construction. To the extent these subsidiaries raise money through the issuance of equity securities, our ownership in the subsidiaries will be diluted and our economic ownership of such entities may be a minority interest. As such, we will be entitled to only a portion of any future distributions made by these subsidiaries. In addition, while intend to retain managerial control of the subsidiaries, it is likely that equity investors will require representation on the board of managers in connection with their equity investments.
We anticipate these subsidiaries will be able to finance a majority of the total costs of the planned projects through debt financing, and the remaining portion of the total costs would be financed through equity investments. We intend to pursue the required debt financing from banks or other large institutional investors. Traditionally, such debt financing is in the form of project financing, which among other terms will require the project subsidiary to restrict its activities to the operation of the project financed by the lender, to pledge all assets of the project to the lender and to be subject to restrictive financial covenants. Such lenders further typically require engineering, marketing and feasibility studies as a condition precedent to the financing. The Company will have to fund the cost of these reports and studies.
Regulation
Although we do not believe our planned blue hydrogen and green hydrogen projects will have any significant environmental or ecological impact, we will be subject to numerous environmental laws and regulations relating to the release of hazardous substances or solid wastes into the soil, groundwater, and surface water, and measures to control pollution of the environment. These laws generally regulate the generation, storage, treatment, transportation, and disposal of solid and hazardous waste. They also require corrective action, including investigation and remediation, at a facility where such waste may have been released or disposed. There are risks of accidental releases into the environment associated with our operations, such as releases of crude oil or hazardous substances from our pipelines or storage facilities. To the extent an event is not covered by our insurance policies, accidental releases could subject us to substantial liabilities arising from environmental cleanup and restoration costs, claims made by neighboring landowners and other third parties for personal injury and property damage, and fines or penalties for any related violations of environmental laws or regulations.
| 5 |
| Table of Contents |
We expect to file with the Texas Commission on Environmental Quality (“TCEQ”) for construction and operation permits. We expect to employ carbon capture with the clean fuels and blue hydrogen facilities. We are studying the options for sequestration for the CO2 in the various saline formations under our sites, which will require permits from the EPA or the Texas Railroad Commission (which, we understand, is in the process of seeking primacy for sequestration permitting).
Our planned operations may also be subject to the Department of Homeland Security’s Chemical Facility Anti-Terrorism Standards, which are designed to regulate the security of high-risk chemical facilities, and to the Transportation Security Administration’s Pipeline Security Guidelines and Transportation Worker Identification Credential program. If applicable, we will have to have an internal program of inspection designed to monitor and enforce compliance with all of these requirements, and we will need to develop a Facility Security Plan as required under the relevant law. We will also have to have in place procedures to monitor compliance with all applicable laws and regulations regarding the security of all our facilities.
Our planned operations will also be subject to the requirements of the Occupational Safety and Health Act (“OSHA”) and comparable state statutes that regulate the protection of the health and safety of workers. In addition, the OSHA hazard communication standard requires that information be maintained about hazardous materials used or produced in operations and that this information be provided to employees, state and local government authorities and citizens. We may also become subject to OSHA Process Safety Management regulations, which are designed to prevent or minimize the consequences of catastrophic releases of toxic, reactive, flammable or explosive chemicals. We will take measures to ensure that our operations are in substantial compliance with OSHA requirements, including general industry standards, record keeping requirements, and monitoring of occupational exposure to regulated substances.
Employees
As of April 30, 2021, we had no employees but rather to reduce costs our key management team is working under consulting agreements. We contract for all professional services when needed. Our two directors have not received any compensation for their service on the Board.
Legal Proceedings
See Item 3 of this Report.
As a smaller reporting company, we are not required to provide the information required by this Item.
Item 1B: Unresolved Staff Comments.
None.
Our executive offices for mailing purposes is 3616 Far West Blvd. #117-321, Austin, Texas 78731. Our physical office is located at 107 A South Main Street, Fort Stockton, Texas, near the site of our proposed clean fuels and hydrogen projects.
We own a 126-acre and a 323.84-acre parcel of land in Pecos County, Texas that are the sites for our planned clean fuels and hydrogen projects.
None
Item 4: Mine Safety Disclosures.
Not Applicable.
| 6 |
| Table of Contents |
Since April 10, 2018, our common stock has been listed on the OTC Pink under the symbol "MMEX". The OTC Market is a network of security dealers who buy and sell stock. The dealers are connected by a computer network that provides information on current “bids” and “asks”, as well as volume information. From November 2, 2017 through April 9, 2018, our Class A common stock was listed on the OTCQB and prior to November 2, 2017, our Class A common stock was quoted on the OTC Pink tier. The following table indicates the quarterly high and low bid price for our common stock for the fiscal years ending April 30, 2021 and 2020. Such inter-dealer quotations do not necessarily represent actual transactions and do not reflect retail mark-ups, mark-downs or commissions. The Company amended it articles of incorporation to provide for a 1 for 10,000 reverse stock split of its common shares, which was effective as of July 1, 2021. The Company has given retroactive effect to the reverse stock split for all periods presented.
|
|
| High |
|
| Low |
| ||
| Fiscal year ended April 30, 2020 |
|
|
|
|
|
| ||
| Quarter ended July 31, 2019 |
| $ | 250.00 |
|
| $ | 5.00 |
|
| Quarter ended October 31, 2019 |
| $ | 512.84 |
|
| $ | 456.16 |
|
| Quarter ended January 31, 2020 |
| $ | 509.90 |
|
| $ | 447.18 |
|
| Quarter Ended April 30, 2020 |
| $ | 458.21 |
|
| $ | 202.37 |
|
|
|
|
|
|
|
|
|
|
|
| Fiscal year ended April 30, 2021 |
|
|
|
|
|
|
|
|
| Quarter ended July 31, 2020 |
| $ | 395.57 |
|
| $ | 294.96 |
|
| Quarter ended October 31, 2020 |
| $ | 325.27 |
|
| $ | 236.94 |
|
| Quarter ended January 31, 2021 |
| $ | 374.99 |
|
| $ | 245.03 |
|
| Quarter Ended April 30, 2021 |
| $ | 452.06 |
|
| $ | 335.73 |
|
On July 23, 2021, the closing bid price of our common stock as reported on the OTC Pink was $1.16.
The number of holders of record of the Company's common stock as of April 30, 2021 was 148 as reported by our transfer agent. This number does not include an undetermined number of stockholders whose stock is held in "street" or "nominee" name.
We have not declared or paid any cash or other dividends on our common stock to date for the last two (2) fiscal years and have no intention of doing so in the foreseeable future.
We did not repurchase any of our equity securities during the fourth quarter of fiscal 2021.
Recent Sales of Unregistered Securities not previously reported in the Company's Form 10-Q
During the fourth quarter ended April 30, 2021, we issued 1,000 unregistered shares of our common stock (10,000,000 shares pre-split) each to two different individuals for consulting services. We also issued 1,504,706 shares of our common stock (15,047,057,828 shares pre-split) to multiple entities for the conversion of debt.
On June 22, 2021, the Company issued and delivered to GS Capital Partners, LLC (“GS”) a 10% convertible note in the principal amount of $82,000. On June 22, 2021 the Company executed a drawdown request of $200,000 in accordance with the terms of the February 22, 2021 promissory note with GS Capital Partners, LLC.
Subsequent to April 30, 2021, the Company issued 83,265 common shares to lenders in the conversion of debt principal of $80,000, accrued interest payable of $4,395 and conversion fees of $1,008.
| 7 |
| Table of Contents |
Outstanding Equity Awards at Fiscal Year-End
| Plan Category |
| Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) |
|
| Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (b) |
|
| Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities in Column (a) (d) |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
| Equity Compensation Plans Approved by Security Holders |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| Equity Compensation Plans Not Approved by Security Holders (1) |
|
| 44,804 |
|
| $ | 1.00 |
|
|
| 0 |
|
| Total |
|
| 44,804 |
|
| $ | 1.00 |
|
|
| 0 |
|
(1) Consists of warrants to purchase 44,604 common shares and options to purchase 200 common shares.
Penny Stock
Our stock is considered to be a penny stock. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.
Item 6: Selected Financial Data
As a smaller reporting company, we are not required to provide the information required by this Item.
| 8 |
| Table of Contents |
Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under Special Note Regarding Forward-Looking Statements and Business sections in this Annual Report. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.
The following discussion and analysis constitutes forward-looking statements for purposes of the Securities Act and the Exchange Act and as such involves known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. The words “expect”, “estimate”, “anticipate”, “predict”, “believes”, “plan”, “seek”, “objective” and similar expressions are intended to identify forward-looking statements or elsewhere in this report. Important factors that could cause our actual results, performance or achievement to differ materially from our expectations are discussed in detail in Item 1 above. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by such factors. We undertake no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Notwithstanding the foregoing, we are not entitled to rely on the safe harbor for forward looking statements under 27A of the Securities Act or 21E of the Exchange Act as long as our stock is classified as a penny stock within the meaning of Rule 3a51-1 of the Exchange Act. A penny stock is generally defined to be any equity security that has a market price (as defined in Rule 3a51-1) of less than $5.00 per share, subject to certain exceptions.
The following discussion should be read in conjunction with the Consolidated Financial Statements, including the notes thereto.
Overview
Business Overview
Since 2016, the focus of our business has been to build crude oil distillation units and refining facilities (CDUs) in the Permian Basin in West Texas. We revised our business plan in 2021 to move MMEX to clean energy use and production, leveraging our history, management and business relationships from the traditional energy sector. The focus of our business plan is to
|
| · | Modify our planned CDU projects in Pecos County (West Texas) to produce potentially hydrogen and ultra-low sulfur fuel products combined with CO2 capture. |
|
| · | Purchase additional acreage allowing us to develop additional megawatts of solar power for distribution to our projects in West Texas. |
Our immediate plans are to pursue the following three projects:
Project 1: A clean refining 10,000 barrel per day facility at our Pecos County site to produce 87° gasoline, ultra-low sulphur diesel and low-sulphur fuel oil, utilizing the Ultra Fuels concept.
Project 2: We have teamed with Black Tree Group to develop a “blue hydrogen” facility in Pecos County to produce hydrogen with carbon capture and storage employing steam methane reformer technology with the abundant natural gas supplies in the immediate area as the feedstock.
Project 3: A parallel “green hydrogen” plant in Pecos County, which plans to utilize the proprietary electrolizer technology of a major international technology partner.
We are in various stages of negotiations with major company off-takes that range from specialty air and gas companies to international trading companies. We would expect the sales of hydrogen by these companies will be to their customer base, which are more traditional chemical end uses. The proposed distribution network of liquid hydrogen from our planned projects will be by truck and rail.
| 9 |
| Table of Contents |
Completion of these projects is dependent upon our obtaining the necessary capital for planning, construction and start-up costs. We are in consultation with the local and state tax authorities to file for tax abatement treatment generally applicable to projects such as our hydrogen projects. However, neither the receipt of adequate capital or tax abatement treatment can be assured.
Through April 30, 2021, we have had no revenues and have reported continuing losses from operations.
Results of Operations
We recorded a net loss of $24,526,886 or $(14.23) per share, for fiscal year ended April 30, 2021, compared to a net loss of $4,393,689 or $(6.57) per share, for the fiscal year ended April 30, 2020. As discussed below, the net income or loss for any fiscal year fluctuates materially due to non-operating gains and losses.
Revenues
We have not yet begun to generate revenues.
General and Administrative Expenses
Our general and administrative expenses decreased $36,835 to $867,471 for the year ended April 30, 2021 from $904,306 for the year ended April 30, 2020. The decrease resulted from lower salaries, travel and other expenses associated with securing debt financing and administrative activities of our development activities due to limitations on funding during the current fiscal year.
Refinery Start-Up Costs
During the year ended April 30, 2021, the expenditures for the development of our CDU project in Pecos County, Texas decreased from the prior fiscal year due to financing constraints. We have expensed all costs incurred, including acquisition of refinery rights, planning, design and permitting. Such costs totaled $179,133 and $214,439 for the years ended April 30, 2021 and 2020, respectively.
Depreciation and Amortization Expense
Our depreciation and amortization expenses remained constant, totaling $34,875 and $34,663 for the years ended April 30, 2021 and 2020, respectively. The expense results from the depreciation of land improvements and amortization of land easements.
Other Income (Expense)
Our interest expense decreased $703,108 to $1,143,495 for the year ended April 30, 2021 from $1,846,603 for the year ended April 30, 2020. We entered into fewer convertible debt arrangements in the current fiscal year, resulting in less amortization of debt discount to interest expense, which was partially offset by the increase in loan penalties and default interest.
For the years ended April 30, 2021 and 2020, we reported losses on derivative liabilities of $22,906,922 and $1,402,233, respectively. In a series of subscription agreements, we issued warrants in prior years that contain certain anti-dilution provisions that we have identified as derivatives. We also identified the variable conversion feature of certain convertible notes payable as derivatives. We estimate the fair value of the derivatives using multinomial lattice models that value the warrants based on a probability weighted cash flow model using projections of the various potential outcomes. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility and management’s estimates of various potential equity financing transactions. These inputs are subject to significant changes from period to period and to management's judgment; therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material.
We reported a gain on extinguishment of debt of $605,010 for the year ended April 30, 2021 compared to a gain on extinguishment of debt of $8,555 for the year ended April 30, 2020. The gain on extinguishment of debt generally results from the settlement and extinguishment of convertible notes payable and certain accounts payable and accrued expenses. During the year ended April 30, 2021 we settled certain notes which resulted in principal and accrued interest being written off for a gain of $242,102. We also recorded a gain of $194,008 for the write off of the derivative liabilities associated with the settlement of the notes and we recorded a gain of $167,900 when the United States Small Business Administration forgave our loan issued under the Paycheck Protection Program.
| 10 |
| Table of Contents |
Net Income (Loss)
As a result of the above, we reported net losses of $24,526,886 and $4,393,689 for the years ended April 30, 2020 and 2019, respectively.
Liquidity and Capital Resources
Working Capital
As of April 30, 2021, we had current assets of $368,342, comprised of cash of $330,449 and prepaid expenses and other current assets of $37,893, and current liabilities of $6,611,452, resulting in a working capital deficit of $6,243,110. Included in our current liabilities as of April 30, 2021 are derivative liabilities of $3,010,042, which we do not anticipate will require the payment of cash.
Sources and Uses of Cash
Our sources and uses of cash for the years ended April 30, 2021 and 2020 were as follows:
|
|
| 2020 |
|
| 2019 |
| ||
|
|
|
|
|
|
|
| ||
| Cash, Beginning of Year |
| $ | 66,830 |
|
| $ | 55,188 |
|
| Net Cash Used in Operating Activities |
|
| (805,683 | ) |
|
| (734,518 | ) |
| Net Cash Used in Investing Activities |
|
| - |
|
|
| (10,540 | ) |
| Net Cash Provided by Financing Activities |
|
| 1,069,302 |
|
|
| 756,700 |
|
|
|
|
|
|
|
|
|
|
|
| Cash, End of Year |
| $ | 330,449 |
|
| $ | 66,830 |
|
We used net cash of $805,683 in operating activities for the year ended April 30, 2021 as a result of our net loss of $24,526,886, our non-cash gain of $605,010 and our increase in prepaid expenses and other current assets of $14,748, partially offset by non-cash expenses totaling $23,402,206, and increases in accounts payable of $3,695, accrued expenses of $756,839 and accounts payable and accrued expenses – related parties of $178,221.
In comparison, we used net cash of $734,518 in operating activities for the year ended April 30, 2020 as a result of our net loss of $4,393,689 and non-cash gain of $8,555, partially offset by non-cash expenses totaling $3,020,499, decrease in prepaid expenses and other current assets of $15,804, and increases in accounts payable of $58,753, accrued expenses of $375,732 and accounts payable and accrued expenses – related parties of $196,938.
Net cash used in investing activities was $0, and $10,540 for the years ended April 30, 2021 and 2020, respectively, comprised on the purchase of property and equipment.
Net cash provided by financing activities was $1,069,302 for the year ended April 30, 2021, comprised of proceeds from notes payable of $775,000, proceeds from convertible notes payable of $10,000, proceeds from convertible notes payable – related parties of $163,500, proceeds from SBA bridge loan of $10,000, and proceeds from a PPP loan payable of $150,000, partially offset by repayments of convertible notes payable of $39,198.
By comparison, net cash provided by financing activities was $756,700 for the year ended April 30, 2020, comprised of proceeds from convertible notes payable of $365,300, proceeds from convertible notes payable – related parties of $323,500 and proceeds from PPP loan payable of $167,900, partially offset by repayments of convertible notes payable of $100,000.
| 11 |
| Table of Contents |
Going Concern Uncertainty
Our financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. We have incurred continuous losses from operations, have an accumulated deficit of $67,984,693 and a total stockholders’ deficit of $5,770,041 at April 30, 2021, and have reported negative cash flows from operations since inception. In addition, as of April 30, 2021 we did not have the cash resources to meet our operating commitments for the next twelve months. We require capital investments to implement our business plan, including the development of our planned hydrogen projects. On July 15, 2021, we entered into a Securities Purchase Agreement (“SPA”) which closed on July 20, 2021, pursuant to which we issued and sold to an institutional investor in a registered direct offering 170,000 shares of our common stock, 2,575,000 warrants, and 3,580,000 pre-funded warrants. We received proceeds of $2,650,850 after deducting placement agent fees and related offering expenses. We have subsequently utilized approximately $560,000 of the proceeds to reduce indebtedness and intend to utilize the remaining amount for working capital purposes. Nevertheless, our ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered by entrance into established markets and the competitive environment in which we operate.
In addition to the SPA, we expect to continue to seek additional funding through private or public equity and debt financing.
Our ability to continue as a going concern is dependent on our ability to generate sufficient cash from operations to meet our cash needs and/or to raise funds to finance ongoing operations and repay debt. However, there can be no assurance that we will be successful in our efforts to raise additional debt or equity capital and/or that our cash generated by our operations will be adequate to meet our needs. These factors, among others, raise substantial doubt that we will be able to continue as a going concern for a reasonable period of time.
The financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company's ability to continue as a going concern. The financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a material 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 are material to investors.
Critical Accounting Policies
Our results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to inventories, investments, intangible assets, income taxes, financing operations, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
For further information on our significant accounting policies see the notes to our consolidated financial statements included in this Annual Report. There were no material changes to our significant accounting policies during the year ended April 30, 2021. The following is a description of those significant accounting policies that involve estimates and judgment by management.
| 12 |
| Table of Contents |
Derivative liabilities
In a series of subscription agreements, the Company issued warrants in prior years that contain certain anti-dilution provisions that have been identified as derivatives. In addition, the Company identified the conversion feature of certain convertible notes payable and convertible preferred stock as derivatives. As of April 30, 2021, the number of warrants or common shares to be issued under these agreements is indeterminate; therefore, the Company concluded that the equity environment is tainted and all additional warrants, stock options and convertible debt are included in the value of the derivative. We estimate the fair value of the derivatives using multinomial lattice models that value the derivative liabilities based on a probability weighted cash flow model using projections of the various potential outcomes. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility and management’s estimates of various potential equity financing transactions. These inputs are subject to significant changes from period to period and to management's judgment; therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material.
Fair value of financial instruments
Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, and ASC 825, Financial Instruments, the FASB establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company's financial statements as reflected herein. The carrying amounts of cash, accounts payable, accrued expenses and notes reported on the accompanying consolidated balance sheets are estimated by management to approximate fair value primarily due to the short-term nature of the instruments.
An entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value using a hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy prioritized the inputs into three levels that may be used to measure fair value:
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in markets that are not active.
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
Our derivative liabilities are measured at fair value on a recurring basis and estimated as follows:
| April 30, 2021 |
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Derivative liabilities |
| $ | 3,010,042 |
|
| $ | - |
|
| $ | - |
|
| $ | 3,010,042 |
|
| April 30, 2020 |
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Derivative liabilities |
| $ | 2,607,433 |
|
| $ | - |
|
| $ | - |
|
| $ | 2,607,433 |
|
Item 7A: Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide the information required by this item.
Item 8: Financial Statements and Supplementary Data
The following financial statements are being filed with this report and are located immediately following the signature page.
| Index to Consolidated Financial Statements |
|
|
|
|
| F-1 |
| |
|
| F-2 |
| |
| Consolidated Statements of Operations for the years ended April 30, 2021 and 2020 |
| F-3 |
|
| Consolidated Statements of Stockholders’ Deficit for the years ended April 30, 2021 and 2020 |
| F-4 |
|
| Consolidated Statements of Cash Flows for the years ended April 30, 2021 and 2020 |
| F-6 |
|
|
| F-7 |
|
| 13 |
| Table of Contents |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There have been no changes in or disagreements with our accountants on accounting and financial disclosures.
Item 9A(T): Controls and Procedures
Evaluation of disclosure controls and procedures.
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.
Management's Annual Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act, as amended. Our management assessed the effectiveness of our internal control over financial reporting as of April 30, 2021. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. We have identified the following material weaknesses:
|
| 1. | As of April 30, 2021, we did not maintain effective controls over the control environment. Specifically, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-B. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness. |
|
| 2. | As of April 30, 2021, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness. |
|
| ||
|
| 3. | As of April 30, 2021, we did not establish a formal written policy for the approval, identification and authorization of related party transactions. |
|
|
| |
|
| 4. | As of April 30, 2021, we had no full-time employees with the requisite expertise in the key functional areas of finance and accounting. As a result, there is a lack of proper segregation of duties necessary to ensure that all transactions are accounted for accurately and in a timely manner |
| 14 |
| Table of Contents |
Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of April 30, 2021, based on the criteria established in "2013 Internal Control-Integrated Framework" issued by the COSO.
Changes in Internal Control Over Financial Reporting.
There have been no changes in the Company's internal control over financial reporting through the date of this report or during the quarter ended April 30, 2021, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
Independent Registered Accountant's Internal Control Attestation.
This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.
Corrective Action.
Subject to availability of funds and progress with the Company’s business plan, management plans to address the structure of the Board of Directors and discuss adding an audit committee during fiscal year 2022.
None.
| 15 |
| Table of Contents |
Item 10. Directors, Executive Officers and Corporate Governance
Directors and Executive Officers
The Board of Directors currently consists of two persons. Directors serve until the next annual meeting and until their successors are elected and qualified. The following table sets forth information about our directors and executive officers:
| Name |
| Age |
|
| Office |
| Year First Elected Director | ||
|
|
|
|
|
|
|
|
| ||
| Jack W. Hanks |
|
| 74 |
|
| Director, Chief Executive Officer, President and Chief Financial Officer |
| 2010 | |
| Bruce N. Lemons |
|
| 66 |
|
| Director |
| 2010 | |
________________________
Mr. Hanks has served as Director, Chief Executive Officer and President of the Company since the merger of Maple Carpenter Creek, LLC with the Company in September 2010. Mr. Hanks founded Maple Resources Corporation in 1986 and has been President or Chairman of the Board of Maple Resources since its inception. Mr. Hanks has also been the Executive Chairman of Maple Energy plc, a publicly listed company on the London Stock Exchange AIM and the Lima Bolsa. Prior to founding Maple Resources Corporation, Mr. Hanks was a partner in the Washington D.C. office of the law firm of Akin Gump Strauss Hauer & Feld LLP. Mr. Hanks graduated from the University of Texas at Austin with a law degree in 1971 and a petroleum land management degree in 1968. We believe that Mr. Hanks’ business, finance and management experience qualifies him to serve as a member of our board of directors.
Mr. Lemons has been a practicing lawyer in the mineral area for over 25 years. He has been a private investor in oil and gas and coal projects in the last several years, including in Maple Carpenter Creek, LLC and Maple Energy, plc and predecessor entities. Since 2002, Mr. Lemons has served as a director of Ansen, an electronics manufacturing company based in upstate New York. Mr. Lemons was a partner in the law firms of Holme Roberts & Owen and in Holland & Hart. Mr. Lemons graduated law school from Brigham Young University in 1980, where he was a member of law review, and holds undergraduate degrees in Economics and Political Science from Utah State University. We believe that Mr. Lemons’ business, finance and management experience qualifies him to serve as a member of our board of directors.
We are not aware of any “family relationships” (as defined in Item 401(d) of Regulation S-K promulgated by the SEC) among directors, executive officers, or persons nominated or chosen by us to become directors or executive officers.
The Board of Directors has determined that neither director is “independent” as such term is defined by the listing standards of Nasdaq and the rules of the SEC. Mr. Lemons is not “independent” due to his significant beneficial ownership of our common stock. Mr. Hanks is not “independent” due to his significant beneficial ownership of our common stock and his role as an executive officer of the Company.
Audit, Nominating and Compensation Committees
Because we are not listed on a securities exchange, we are not required to establish audit, nominating or compensation committees of the Board of Directors and we have not done so. In the event we elect to seek listing on a securities exchange, we will meet the corporate governance requirements imposed by a national securities exchange, including the appointment of an audit committee, nominating committee and compensation committee, the adoption of charters for each such committee and the appointment of independent directors to such committees as required by the requirements of such securities exchange.
| 16 |
| Table of Contents |
Compensation of Directors
We do not currently pay any compensation to our directors, but we pay their expenses to attend our board meetings. During the fiscal year ended April 30, 2021, no director expenses were incurred.
No option awards were granted to our non-executive directors during the year ended April 30, 2021. There were no stock option awards outstanding at April 30, 2021 to our non-executive directors.
Item 11. Executive Compensation
The following table sets forth the compensation paid or earned by our executive officers during the fiscal years ended April 30, 2021 and 2020.
Summary Compensation Table
| Name and Principal Position |
| Year |
| Salary |
|
| Bonus |
|
| Stock Awards |
|
| Option Awards |
|
| Non-Equity Incentive Plan Compensation |
|
| All Other Compensation |
|
| Total |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
| Jack W. Hanks |
| 2020 |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| Chief Executive Officer, President and Chief Financial Officer (1) |
| 2019 |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
(1) Mr. Hanks has served as Chief Executive Officer since September 21, 2010.
There are no employment agreements in place and no severance benefits are currently in place. During the years ended April 30, 2021 and 2020, we incurred consulting fees and expense reimbursement related to business development, financing and other corporate activities to Maple Resources Corporation (“Maple Resources”), a related party controlled by our President and CEO, totaling $218,970 and $275,713, respectively. Amounts included in accounts payable due to Maple Resources totaled $118,540 and $101,012 as of April 30, 2021 and 2020, respectively.
Outstanding Equity Awards at Fiscal Year-End
We have not granted any stock awards other than stock options. At April 30, 2021, we had no outstanding stock options or other equity awards issued to our executive officers.
The following table sets forth as of July 29, 2021, the name and number of shares of the Company’s common stock beneficially owned by (i) each of the directors and named executive officers of the Company, (ii) beneficial owners of 5% or more of our common stock; and (iii) all the officers and directors as a group. Pursuant to the rules and regulations of the SEC, shares of common stock that an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purposes of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purposes of computing the percentage ownership of any other person shown in the table.
SEC rules provide that, for purposes hereof, a person is considered the “beneficial owner” of shares with respect to which the person, directly or indirectly, has or shares the voting or investment power, irrespective of his/her/its economic interest in the shares. Unless otherwise noted, each person identified possesses sole voting and investment power over the shares listed, subject to community property laws.
The percentages in the table below are based on 3,701,209 shares of common stock outstanding on July 29, 2021. Shares of common stock subject to options and warrants that are exercisable within 60 days of July 29, 2021 are deemed beneficially owned by the person holding such options for the purposes of calculating the percentage of ownership of such person but are not treated as outstanding for the purpose of computing the percentage of any other person.
| 17 |
| Table of Contents |
| Name and Address of Beneficial Owners (1) |
| Shares |
|
| Percentage Ownership of Class |
|
| Voting Power (4) |
| |||
| Jack W. Hanks (2)(4) |
|
| 552,981 |
|
|
| 14.94 | % |
|
| 58.32 | % |
| Bruce N. Lemons (3) |
|
| 64,784 |
|
|
| 1.725 | % |
|
| 0.86 | % |
| All directors and officers as a group (two persons) |
|
| 617,665 |
|
|
| 16.69 | % |
|
| 59.18 | % |
_______________
| (1) | Unless otherwise noted, the business address for each of the individuals set forth in the table is c/o MMEX Resources Corporation, 3616 Far West Blvd, #117-321, Austin, Texas 78731. |
| (2) | Common shares for Mr. Hanks include: (i) 43 shares held by The Maple Gas Corporation, (ii) 136 shares held by Maple Structure Holdings, LLC, and (iii) 552,802 shares held by Maple Resources Corporation. This number excludes 150,061 shares owned by Leslie Doheny Hanks, the wife of Mr. Hanks, as to which Mr. Hanks disclaims any beneficial ownership. |
| (3) | Common shares for Mr. Lemons include: (i) 64,648 shares held by BNL Family Trust and (ii) 36 shares held by AAM Investments, LLC. Mr. Lemons and his family are the beneficiaries of BNL Family Trust. AAM Investments, LLC is indirectly owned by BNL Family Trust, a trust established for the benefit of Mr. Lemons and his family. |
| (4) | The holders of Series A Preferred Stock have 51% of the voting power of the outstanding shares of capital stock of the Company. |
| 18 |
| Table of Contents |
Item 13. Certain Relationships and Related Transactions and Director Independence
Unless otherwise indicated, the terms of the following transactions between related parties were not determined as a result of arm’s length negotiations.
Contractual Agreements
Maple Resources granted BNL Family Trust (“BNL”), a related party to Mr. Lemons, an option to purchase 1,000,000 shares of common stock from Maple Resources at a price of $0.20 per share. The option expires in March 2022. Beneficial ownership of Messrs. Hanks and. Lemons give effect to the exercise of such option.
As a condition for entering into an October 9, 2018 convertible debenture, the lender required Maple Resources and BNL, affiliates of Jack W. Hanks and Bruce Lemons, respectively, our directors (the “Affiliates”), to pledge their shares of Class B Common Stock (constituting 100% of the outstanding shares of Class B Common Stock) to the lender to secure the repayment of the debenture by the Company. The pledge agreement was later amended to substitute 1,000 shares of Series A preferred stock (constituting 100% of the outstanding shares of Series A Preferred stock) for the Class B Common Stock. As consideration to the Affiliates for entering into the pledge agreement, the Company granted a ten-year option, effective as of December 11, 2018, to the Affiliates to purchase 2,000,000 shares of the Company’s common stock at $0.08 per share. Effective November 30, 2020, the option agreement was amended to cancel the 2,000,000 options.
Accounts Payable and Accrued Expenses – Related Parties
Accounts payable and accrued expenses to related parties, consisting primarily of consulting fees and expense reimbursements payable, totaled $272,834 and $170,881 as of April 30, 2021 and 2020, respectively.
Effective July 1, 2019, we entered into a consulting agreement with Maple Resources Corporation (“Maple Resources”), a related party controlled by our President and CEO, that provides for payment of consulting fees and expense reimbursement related to business development, financing and other corporate activities. Effective January 1, 2020, the Maple Resources consulting agreement was amended to provide for monthly consulting fees of $17,897 and effective March 1, 2021 the Maple Resources consulting agreement was amended to provide for monthly consulting fees of $20,000. During the years ended April 30, 2021 and 2020, we incurred consulting fees and expense reimbursement to Maple Resources totaling $218,970 and $275,713, respectively.
In addition, the consulting agreement provides for the issuance to Maple Resources of shares of our common stock each month with a value of $5,000, with the number of shares issued based on the average closing price of the stock during the prior month. In November 2019, 7,628 shares of our common stock (76,282,091 shares pre-split) were issued to Maple Resources in payment of $20,000 of consulting fees for July through October 2019. No shares were issued to Maple Resources in payment of consulting fees for November 2019 through April 2020 or during the year ended April 30, 2021 under the consulting agreement.
Amounts included in accounts payable and accrued expenses – related parties due to Maple Resources totaled $118,540 and $101,012 as of April 30, 2021 and 2020, respectively, which was inclusive of accrued interest due under the convertible notes described below.
Effective October 1, 2018, we entered into a consulting agreement with Leslie Doheny-Hanks, the wife of our President and CEO, to issue shares of our common stock each month with a value of $2,500, with the number of shares issued based on the average closing price of the stock during the prior month. The related party consultant provides certain administrative and accounting services and is reimbursed for expenses paid on behalf of the Company. During the year ended April 30, 2020, we issued a total of 3,876 common shares (38,761,580 shares pre-split) valued at $15,009 to the related party, with the shares valued at the market price on the date of issuance, in payment of accrued consulting fees totaling $17,500. A gain on extinguishment of debt of $2,491 related to this compensation arrangement was recorded as a contribution to capital. As of April 30, 2020, consulting fees of $15,000 were payable in stock, and the related party had also advanced the Company $18,179, for a total of $33,179 included in accounts payable and accrued expenses – related parties. As of April 30, 2021, consulting fees of $45,000 were payable in stock, and the related party was due $18,058 for compensation and reimbursable expenses.
| 19 |
| Table of Contents |
Effective February 1, 2021 the Company entered into consulting agreements with three children of our President and CEO. The consulting agreements can be terminated 15 days after written notice of termination by either party subject to the agreement or December 31, 2021, whichever occurs first. During the year ended April 30, 2021 we paid $25,500 in consulting fees due under the agreements. As of April 30, 2021, no amounts were due or owing under the three consulting agreements, however, the Company had an accounts payable balance of $90,500 due to one of the children as a result of consulting fees and expense reimbursements payable that were incurred prior to the execution of the February 1, 2021 consulting agreement.
Series A Preferred Stock
Effective August 1, 2019, the Company issued 1,000 shares of Series A preferred stock to Maple Resources for services rendered. The shares were valued by an independent valuation firm at $23,900.
Convertible Notes Payable – Related Parties
Convertible notes payable – related parties consist of the following at April 30:
|
|
| 2021 |
|
| 2020 |
| ||
| Convertible note payable with Maple Resources Corporation, matured December 27, 2020, with interest at 5%, convertible into common shares of the Company [1] |
| $ | 7,033 |
|
| $ | 11,000 |
|
| Convertible note payable with BNL Family Trust, matured December 27, 2020, with interest at 5%, convertible into common shares of the Company [2] |
|
| 10,691 |
|
|
| 11,000 |
|
| Convertible note payable with Maple Resources Corporation, matured February 12, 2021, with interest at 5%, convertible into common shares of the Company [3] |
|
| 5,000 |
|
|
| 5,000 |
|
| Convertible note payable with Maple Resources Corporation, matured March 2, 2021, with interest at 5%, convertible into common shares of the Company [4] |
|
| 800 |
|
|
| - |
|
| Convertible note payable with Maple Resources Corporation, matured May 12, 2021, with interest at 5%, convertible into common shares of the Company [5] |
|
| 41,466 |
|
|
| - |
|
| Convertible note payable with Maple Resources Corporation, matured July 31, 2021, with interest at 5%, convertible into common shares of the Company [6] |
|
| 10,000 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 74,990 |
|
|
| 27,000 |
|
| Less discount |
|
| (235 | ) |
|
| (1,377 | ) |
|
|
|
|
|
|
|
|
|
|
| Total |
| $ | 74,755 |
|
| $ | 25,623 |
|
|
| [1] | This convertible note was entered into on 12/27/19 in exchange for cash of $5,500 and financing fees of $5,500 and was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. At inception the Company identified the conversion feature of the convertible note as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and assuming the existence of a tainted equity environment (see Note 10). On the effective date of the convertible note, the related party lender simultaneously submitted a notice to convert the total note principal into 1,000,000 shares of the Company’s common stock (10,000,000,000 shares pre-split). The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. During the year ended April 30, 2021 shares became available to affect a partial conversion, therefore 360,682 common shares (1,579,982,678 pre-split shares) were issued to extinguish $3,967 of the principal balance. The Company continues to accrue interest on the convertible note until they can issue all shares to satisfy the conversion request and recorded interest expense of $171 during the year ended April 30, 2021. As of April 30, 2021 and 2020 accrued interest on the convertible note was $718 and $547, respectively. |
| 20 |
| Table of Contents |
|
| [2] | This convertible note was entered into on 12/27/19 in exchange for cash of $11,000 and was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. At inception the Company identified the conversion feature of the convertible note as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and assuming the existence of a tainted equity environment (see Note 10). On the effective date of the convertible note, the related party lender simultaneously submitted a notice to convert the total note principal into 1,000,000 shares of the Company’s common stock (10,000,000,000 shares pre-split). The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. During the year ended April 30, 2021 shares became available to affect a partial conversion, therefore 28,094 common shares (280,936,972 pre-split shares) were issued to extinguish $309 of the principal balance. The Company continues to accrue interest on the convertible note until they can issue all shares to satisfy the conversion request and recorded interest expense of $190 during the year ended April 30, 2021. As of April 30, 2021 and 2020 accrued interest on the convertible note was $737 and $547, respectively. |
|
|
|
|
|
| [3] | This convertible note was entered into on 2/12/20 in exchange for cash of $5,000 and was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. At inception the Company identified the conversion feature of the convertible note as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and assuming the existence of a tainted equity environment (see Note 10). On the effective date of the convertible note, the related party lender simultaneously submitted a notice to convert the total note principal into 454,545 shares of the Company’s common stock (4,545,454,545 shares pre-split). The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. The Company continues to accrue interest on the convertible note until they can issue all shares to satisfy the conversion request and recorded interest expense of $20 during the year ended April 30, 2021. As of April 30, 2021 and 2020 accrued interest on the convertible note was $303 and $283, respectively. |
|
|
|
|
|
| [4] | This convertible note was entered into on 3/2/20 in exchange for cash of $800 and was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. At inception the Company identified the conversion feature of the convertible note as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and assuming the existence of a tainted equity environment (see Note 10). On the effective date of the convertible note, the related party lender simultaneously submitted a notice to convert the total note principal into 72,727 shares of the Company’s common stock (727,272,727 shares pre-split). The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. The Company continues to accrue interest on the convertible note until they can issue all shares to satisfy the conversion request and recorded interest expense of $40 during the year ended April 30, 2021. As of April 30, 2021 and 2020 accrued interest on the convertible note was $40 and $0, respectively. |
| 21 |
| Table of Contents |
|
| [5] | This convertible note was entered into on 5/12/20 in exchange for accrued consulting fees worth $41,466 and was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. At inception the Company identified the conversion feature of the convertible note as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and assuming the existence of a tainted equity environment (see Note 10). On the effective date of the convertible note, the related party lender simultaneously submitted a notice to convert the total note principal into 3,769,636 shares of the Company’s common stock (37,696,363,636 shares pre-split). The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. The Company continues to accrue interest on the convertible note until they can issue all shares to satisfy the conversion request and recorded interest expense of $2,005 during the year ended April 30, 2021. As of April 30, 2021 and 2020 accrued interest on the convertible note was $2,005 and $0, respectively. |
|
|
|
|
|
| [6] | This convertible note was entered into on 7/31/20 in exchange for cash of $10,000 and was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. At inception the Company identified the conversion feature of the convertible note as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and assuming the existence of a tainted equity environment (see Note 10). On the effective date of the convertible note, the related party lender simultaneously submitted a notice to convert the total note principal into 909,091 shares of the Company’s common stock (9,090,909,091 shares pre-split). The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. The Company continues to accrue interest on the convertible note until they can issue all shares to satisfy the conversion request and recorded interest expense of $374 during the year ended April 30, 2021. As of April 30, 2021 and 2020 accrued interest on the convertible note was $374 and $0, respectively. |
Item 14: Principal Accounting Fees and Services
Our independent auditors, M&K CPAs, PLLC ("M&K"), have no direct or indirect interest in the Company and have been the Company's Independent Registered Public Accounting Firm since 2009. The following table sets forth the fees billed and estimated fees for professional audit services provided by such firm for the fiscal years ended April 30, 2021 and 2020:
|
|
| 2020 |
|
| 2019 |
| ||
|
|
|
|
|
|
|
| ||
| Audit Fees (a) |
| $ | 24,400 |
|
| $ | 24,400 |
|
|
|
|
|
|
|
|
|
|
|
| Audit-Related Fees (b) |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
| Tax Fees (c) |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
| All Other Fees |
| $ | - |
|
| $ | - |
|
|
| (a) | Includes fees for services related to the audits of our annual financial statements and the reviews of our interim financial statements and assistance with SEC filings. |
|
| (b) | Includes fees for services related to transaction due diligence and consultations with respect to compliance with Section 404 of the Sarbanes-Oxley Act. |
|
| (c) | Includes fees for services related to tax compliance, preparation and planning services (including U.S. federal, state and local returns) and tax examination assistance. |
Our Board of Directors established a policy whereby the outside auditors are required to seek pre-approval on an annual basis of all audit, audit-related, tax and other services by providing a prior description of the services to be performed. For the year ended April 30, 2021, 100% of all audit-related services were pre-approved by the Board of Directors, which concluded that the provision of such services by M&K was compatible with the maintenance of that firm's independence in the conduct of its auditing functions.
| 22 |
| Table of Contents |
(a) (3) Exhibits
| Exhibit No. |
| Description | |
|
|
|
| |
|
| |||
|
| |||
|
| Amendment to Amended and Restated Articles of Incorporation (4) | ||
|
| |||
|
| |||
|
| 10% Convertible Note due January 31, 2020, payable to Auctus Fund, LLC (6) | ||
|
| 10% Convertible Note due February 20, 2020, payable to GS Capital Partners LLC(8) | ||
|
| |||
|
| |||
|
| 10% Promissory Note due December 31, 2021, payable to GS Capital Partners, LLC (9) | ||
|
| 10% Promissory Note due March 26, 2021, payable to GS Capital Partners, LLC* | ||
|
| 10% Promissory Note due June 22, 2022, payable to GS Capital Partners, LLC* | ||
|
| |||
|
| |||
|
| |||
|
| |||
|
| |||
|
| |||
|
| |||
|
| |||
|
| |||
|
|
|
| |
| 101.INS* |
| XBRL Instance Document. | |
| 101.SCH* |
| XBRL Taxonomy Extension Schema. | |
| 101.CAL* |
| XBRL Taxonomy Extension Calculation Linkbase. | |
| 101.DEF* |
| XBRL Taxonomy Extension Definition Linkbase. | |
| 101.LAB* |
| XBRL Taxonomy Extension Label Linkbase. | |
| 101.PRE* |
| XBRL Taxonomy Extension Presentation Linkbase. | |
________
| * | Filed herewith. |
| (1) | Filed as exhibit to Report on Form 8-K filed on April 3, 2017. |
| (2) | Filed as exhibit to Report on Form 10-K filed on August 11, 2011. |
| (3) | Filed as exhibit to Form S-1 Registration Statement No. 333-218958. |
| (4) | Filed as exhibit to Report on Form 8-K filed on October 12, 2018. |
| (5) | Filed as exhibit to Report on Form 8-K filed on July 19, 2021. |
| (6) | Filed as exhibit to Report on Form 10-Q filed on March 12, 2019. |
| (7) | Filed as exhibit to Report on Form 8-K filed on March 10, 2017. |
| (8) | Filed as exhibit to Report on Form 10-K filed on July 26, 2019. |
| (9) | Filed as exhibit to Report on Form 10-Q filed on March 15, 2021. |
| (10) | Filed as exhibit to Report on Form 10-K filed on August 13, 2020. |
| 23 |
| Table of Contents |
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this annual report on Form 10-K to be signed on its behalf by the undersigned thereto duly authorized.
|
| MMEX Resources Corporation (Registrant) | ||
|
|
|
|
|
| Date: July 29, 2021 | By: | /s/ Jack W. Hanks | |
|
|
| Jack W. Hanks, Chairman |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| SIGNATURE |
| TITLE |
| DATE |
| /s/ Jack W. Hanks | Chairman and Chief Executive Officer | July 29, 2021 | ||
| Jack W. Hanks | (Principal Executive Officer) President. Chief Financial Officer and Director | |||
|
|
| (Principal Financial and Accounting Officer) |
|
|
|
|
|
|
| |
| /s/ Bruce N. Lemons | Director | July 29, 2021 | ||
| Bruce N. Lemons |
| 24 |
| Table of Contents |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| 25 |
| Table of Contents |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
MMEX Resources Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of MMEX Resources Corporation (the Company) as of April 30, 2021 and 2020, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the company suffered a net loss for the year ended April 30, 2021 and had a working capital deficit and a stockholders’ deficit as of April 30, 2021, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB .
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Derivative Liabilities
As discussed in Note 10, the Company has a derivative liability due to a tainted equity environment.
Auditing a specialist’s calculation of the value of derivatives can be a significant judgment given the fact that the Company uses the specialist’s estimates on various inputs to the calculation.
To evaluate the appropriateness of the derivative fair value determined by management, we examined and evaluated the inputs management used in calculating the fair value of the derivatives. To evaluate the appropriateness of the estimates used by the derivative specialist, we examined and evaluated the inputs the specialist used in calculating the value of the derivatives.
/s/ M&K CPAS, PLLC
M&K CPAS, PLLC
We have served as the Company’s auditor since 2013
Houston, TX
| July 29, 2021 |
| F-1 |
| Table of Contents |
Consolidated Balance Sheets
|
|
| April 30, |
| |||||
|
|
| 2021 |
|
| 2020 |
| ||
| Assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
| ||
| Current assets: |
|
|
|
|
|
| ||
| Cash |
| $ | 330,449 |
|
| $ | 66,830 |
|
| Prepaid expenses and other current assets |
|
| 37,893 |
|
|
| 23,145 |
|
| Total current assets |
|
| 368,342 |
|
|
| 89,975 |
|
|
|
|
|
|
|
|
|
|
|
| Property and equipment, net |
|
| 472,169 |
|
|
| 507,044 |
|
| Deposit |
|
| 900 |
|
|
| 900 |
|
|
|
|
|
|
|
|
|
|
|
| Total assets |
| $ | 841,411 |
|
| $ | 597,919 |
|
|
|
|
|
|
|
|
|
|
|
| Liabilities and Stockholders’ Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
| Accounts payable |
| $ | 802,640 |
|
| $ | 798,945 |
|
| Accrued expenses |
|
| 807,349 |
|
|
| 551,080 |
|
| Accounts payable and accrued expenses – related parties |
|
| 272,834 |
|
|
| 170,881 |
|
| Notes payable |
|
| 775,000 |
|
|
| - |
|
| Note payable, currently in default |
|
| 75,001 |
|
|
| 75,001 |
|
| Convertible notes payable, currently in default, net of discount of $0 and $0 at April 30, 2021 and 2020, respectively |
|
| 235,775 |
|
|
| 338,778 |
|
| Convertible notes payable, net of discount of $133,944 and $140,941 at April 30, 2021 and 2020, respectively |
|
| 398,056 |
|
|
| 1,587,239 |
|
| Convertible notes payable – related parties, net of discount of $235 and $1,377 at April 30, 2021 and 2020, respectively |
|
| 74,755 |
|
|
| 25,623 |
|
| PPP loan payable |
|
| 150,000 |
|
|
| 167,900 |
|
| SBA express bridge loan |
|
| 10,000 |
|
|
| - |
|
| Derivative liabilities |
|
| 3,010,042 |
|
|
| 2,607,433 |
|
| Total current liabilities |
|
| 6,611,452 |
|
|
| 6,322,880 |
|
|
|
|
|
|
|
|
|
|
|
| Long-term liabilities |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| Total liabilities |
|
| 6,611,452 |
|
|
| 6,322,880 |
|
|
|
|
|
|
|
|
|
|
|
| Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stockholders’ deficit: |
|
|
|
|
|
|
|
|
| Common stock; $0.001 par value; 10,000,000 shares authorized, 3,251,641 and 1,335,283 shares issued and outstanding at April 30, 2021 and 2020, respectively |
|
| 3,252 |
|
|
| 1,335 |
|
| Series A preferred stock; $0.001 par value; 1,000,000 shares authorized, 1,000 Series A shares issued and outstanding |
|
| 1 |
|
|
| 1 |
|
| Additional paid-in capital |
|
| 62,201,528 |
|
|
| 37,721,639 |
|
| Non-controlling interest |
|
| 9,871 |
|
|
| 9,871 |
|
| Accumulated (deficit) |
|
| (67,984,693 | ) |
|
| (43,457,807 | ) |
| Total stockholders’ deficit |
|
| (5,770,041 | ) |
|
| (5,724,961 | ) |
|
|
|
|
|
|
|
|
|
|
| Total liabilities and stockholders’ deficit |
| $ | 841,411 |
|
| $ | 597,919 |
|
See accompanying notes to consolidated financial statements.
| F-2 |
| Table of Contents |
Consolidated Statements of Operations
|
|
| Years Ended |
| |||||
|
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
|
| ||
| Revenues |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses: |
|
|
|
|
|
|
|
|
| General and administrative expenses |
|
| 867,471 |
|
|
| 904,306 |
|
| Refinery start-up costs |
|
| 179,133 |
|
|
| 214,439 |
|
| Depreciation and amortization |
|
| 34,875 |
|
|
| 34,663 |
|
|
|
|
|
|
|
|
|
|
|
| Total operating expenses |
|
| 1,081,479 |
|
|
| 1,153,408 |
|
|
|
|
|
|
|
|
|
|
|
| Loss from operations |
|
| (1,081,479 | ) |
|
| (1,153,408 | ) |
|
|
|
|
|
|
|
|
|
|
| Other income (expense): |
|
|
|
|
|
|
|
|
| Interest expense |
|
| (1,143,495 | ) |
|
| (1,846,603 | ) |
| Loss on derivative liabilities |
|
| (22,906,922 | ) |
|
| (1,402,233 | ) |
| Gain on extinguishment of liabilities |
|
| 605,010 |
|
|
| 8,555 |
|
| Loss on conversion of debt |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| Total other income (expense) |
|
| (23,445,407 | ) |
|
| (3,240,281 | ) |
|
|
|
|
|
|
|
|
|
|
| Loss before income taxes |
|
| (24,526,886 | ) |
|
| (4,393,689 | ) |
| Provision for income taxes |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
| $ | (24,526,886 | ) |
| $ | (4,393,689 | ) |
|
|
|
|
|
|
|
|
|
|
| Net loss per common share – basic and diluted |
| $ | (14.23 | ) |
| $ | (6.57 | ) |
|
|
|
|
|
|
|
|
|
|
| Weighted average number of common shares outstanding – basic and diluted |
|
| 1,723,476 |
|
|
| 669,210 |
|
See accompanying notes to consolidated financial statements.
| F-3 |
| Table of Contents |
Consolidated Statements of Stockholders’ Deficit
Years Ended April 30, 2021 and 2020
|
|
| Class A Common Stock |
|
| Series A Preferred Stock |
|
| Additional |
|
| Non-Controlling |
|
| Accumulated |
|
|
| |||||||||||||||
|
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Interest |
|
| Deficit |
|
| Total |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
| Balance, April 30, 2019 |
|
| 6,818 |
|
| $ | 6 |
|
|
| - |
|
| $ | - |
|
| $ | 35,690,566 |
|
| $ | 9,871 |
|
| $ | (39,064,118 | ) |
| $ | (3,363,675 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common shares issued for: Services |
|
| 3 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 84 |
|
|
| - |
|
|
| - |
|
|
| 84 |
|
| Accrued expenses |
|
| 16,991 |
|
|
| 17 |
|
|
| - |
|
|
| - |
|
|
| 28,370 |
|
|
| - |
|
|
| - |
|
|
| 28,387 |
|
| Conversion of convertible notes payable |
|
| 667,835 |
|
|
| 668 |
|
|
| - |
|
|
| - |
|
|
| 811,008 |
|
|
| - |
|
|
| - |
|
|
| 811,676 |
|
| Conversion of convertible notes payable - related parties |
|
| 643,636 |
|
|
| 644 |
|
|
| - |
|
|
| - |
|
|
| 354,816 |
|
|
| - |
|
|
| - |
|
|
| 355,460 |
|
| Preferred shares issued for services to related party |
|
| - |
|
|
| - |
|
|
| 1,000 |
|
|
| 1 |
|
|
| 23,899 |
|
|
| - |
|
|
| - |
|
|
| 23,900 |
|
| Settlement of derivative liabilities |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 812,896 |
|
|
| - |
|
|
| - |
|
|
| 812,896 |
|
| Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (4,393,689 | ) |
|
| (4,393,689 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, April 30, 2020 |
|
| 1,335,283 |
|
| $ | 1,335 |
|
|
| 1,000 |
|
| $ | 1 |
|
| $ | 37,721,639 |
|
| $ | 9,871 |
|
| $ | (43,457,807 | ) |
| $ | (5,724,961 | ) |
See accompanying notes to consolidated financial statements.
| F-4 |
| Table of Contents |
MMEX RESOURCES CORPORATION
Consolidated Statements of Stockholders’ Deficit
Years Ended April 30, 2021 and 2020 (continued)
|
|
| Class A Common Stock |
|
| Series A Preferred Stock |
|
|
|
|
|
|
|
| Accumulated |
|
|
|
| ||||||||||||||
|
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Interest |
|
| Deficit |
|
| Total |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
| Balance, April 30, 2020 |
|
| 1,335,283 |
|
| $ | 1,335 |
|
|
| 1,000 |
|
| $ | 1 |
|
| $ | 37,721,639 |
|
| $ | 9,871 |
|
| $ | (43,457,807 | ) |
| $ | (5,724,961 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common shares issued for: Services |
|
| 2,000 |
|
|
| 2 |
|
|
| - |
|
|
| - |
|
|
| 33,998 |
|
|
| - |
|
|
| - |
|
|
| 34,000 |
|
| Conversion of convertible notes payable |
|
| 1,525,583 |
|
|
| 1,526 |
|
|
| - |
|
|
| - |
|
|
| 1,930,839 |
|
|
| - |
|
|
| - |
|
|
| 1,932,365 |
|
| Conversion of convertible notes payable - related parties |
|
| 388,775 |
|
|
| 389 |
|
|
| - |
|
|
| - |
|
|
| 3,888 |
|
|
| - |
|
|
| - |
|
|
| 4,277 |
|
| Settlement of derivative liabilities |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 22,511,164 |
|
|
| - |
|
|
| - |
|
|
| 22,511,164 |
|
| Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (24,526,886 | ) |
|
| (24,526,886 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, April 30, 2021 |
|
| 3,251,641 |
|
| $ | 3,252 |
|
|
| 1,000 |
|
| $ | 1 |
|
| $ | 62,201,528 |
|
| $ | 9,871 |
|
| $ | (67,984,693 | ) |
| $ | (5,770,041 | ) |
See accompanying notes to consolidated financial statements.
| F-5 |
| Table of Contents |
Consolidated Statements of Cash Flows
|
|
| Years Ended |
| |||||
|
|
| 2021 |
|
| 2020 |
| ||
| Cash flows from operating activities: |
|
|
|
|
|
| ||
| Net loss |
| $ | (24,526,886 | ) |
| $ | (4,393,689 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
| Depreciation and amortization expense |
|
| 34,875 |
|
|
| 34,663 |
|
| Stock-based compensation |
|
| 34,000 |
|
|
| 84 |
|
| Preferred shares issued to related party for services |
|
| - |
|
|
| 23,900 |
|
| Loan fees and penalties added to convertible note principal |
|
| 208,055 |
|
|
| 335,700 |
|
| Loss on derivative liabilities |
|
| 22,906,922 |
|
|
| 1,402,233 |
|
| Gain on extinguishment of liabilities |
|
| (605,010 | ) |
|
| (8,555 | ) |
| Amortization of debt discount |
|
| 218,354 |
|
|
| 1,223,919 |
|
| (Increase) decrease in prepaid expenses and other current assets |
|
| (14,748 | ) |
|
| 15,804 |
|
| Increase (decrease) in liabilities: |
|
|
|
|
|
|
|
|
| Accounts payable |
|
| 3,695 |
|
|
| 58,753 |
|
| Accrued expenses |
|
| 756,839 |
|
|
| 375,732 |
|
| Accounts payable and accrued expenses – related parties |
|
| 178,221 |
|
|
| 196,938 |
|
| Net cash used in operating activities |
|
| (805,683 | ) |
|
| (734,518 | ) |
|
|
|
|
|
|
|
|
|
|
| Cash flows from investing activities: |
|
|
|
|
|
|
|
|
| Purchase of property and equipment |
|
| - |
|
|
| (10,540 | ) |
| Net cash used in investing activities |
|
| - |
|
|
| (10,540 | ) |
|
|
|
|
|
|
|
|
|
|
| Cash flows from financing activities: |
|
|
|
|
|
|
|
|
| Proceeds from notes payable |
|
| 775,000 |
|
|
| - |
|
| Proceeds from convertible notes payable |
|
| 163,500 |
|
|
| 365,300 |
|
| Proceeds from convertible notes payable – related parties |
|
| 10,000 |
|
|
| 323,500 |
|
| Proceeds from PPP loan payable |
|
| 150,000 |
|
|
| 167,900 |
|
| Proceeds from SBA express bridge loan payable |
|
| 10,000 |
|
|
| - |
|
| Repayments of convertible notes payable |
|
| (39,198 | ) |
|
| (100,000 | ) |
| Net cash provided by financing activities |
|
| 1,069,302 |
|
|
| 756,700 |
|
|
|
|
|
|
|
|
|
|
|
| Net increase (decrease) in cash |
|
| 263,619 |
|
|
| 11,642 |
|
| Cash at the beginning of the period |
|
| 66,830 |
|
|
| 55,188 |
|
| Cash at the end of the period |
| $ | 330,449 |
|
| $ | 66,830 |
|
|
|
|
|
|
|
|
| ||
| Supplemental disclosure: |
|
|
|
|
|
| ||
| Interest paid |
| $ | 14,784 |
|
| $ | 10,402 |
|
| Income taxes paid |
|
| - |
|
|
| - |
|
| Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
| Common stock issued in conversion of debt |
|
| 1,932,365 |
|
|
| 811,676 |
|
| Common stock issued in conversion of related party debt |
|
| 4,277 |
|
|
| 355,460 |
|
| Common stock issued for accrued expenses |
|
| - |
|
|
| 46,945 |
|
| Settlement of derivative liabilities |
|
| 22,511,164 |
|
|
| 812,896 |
|
| Derivative liabilities for debt discount |
|
| 200,859 |
|
|
| 192,500 |
|
| Convertible notes payable for accrued expenses |
|
| 34,000 |
|
|
| 10,000 |
|
| Convertible notes payable – related parties for accrued expenses |
|
| 42,268 |
|
|
| 74,000 |
|
See accompanying notes to consolidated financial statements.
| F-6 |
| Table of Contents |
Notes to Consolidated Financial Statements
Years Ended April 30, 2021 and 2020
NOTE 1 – BACKGROUND, ORGANIZATION AND BASIS OF PRESENTATION
MMEX was formed as a Nevada corporation in 2005. The current management team led an acquisition of the Company (then named Management Energy, Inc.) through a reverse merger completed on September 23, 2010 and changed the Company’s name to MMEX Mining Corporation on February 11, 2011 and to MMEX Resources Corporation on April 6, 2016.
The Company is a development-stage company focusing on the acquisition, development and financing of oil, gas, refining and infrastructure projects in Texas and South America, recently announcing it intends to develop solar energy to power multiple planned projects producing hydrogen and ultra-low sulfur fuels combined with carbon dioxide (CO2) capture in Texas.
The accompanying consolidated financial statements include the accounts of the following entities, all of which the Company maintains control through a majority ownership or through common ownership:
| Name of Entity |
|
|
|
| Form |
| State of |
|
| ||
|
|
|
|
|
|
|
|
|
|
| ||
| MMEX Resources Corporation (“MMEX”) |
|
| - |
|
| Corporation |
| Nevada |
| Parent | |
| Pecos Refining & Transport, LLC (“PRT”) |
|
| 100 | % |
| LLC |
| Texas |
| Subsidiary | |
| Armadillo Holdings Group Corp. |
|
| 100 | % |
| Corporation |
| British Virgin Isles |
| Subsidiary | |
| Armadillo Mining Corp. (“AMC”) |
|
| 98.6 | % |
| Corporation |
| British Virgin Isles |
| Subsidiary | |
| MMEX Solar Resources, LLC |
|
| 100 | % |
| LLC |
| Texas |
| Subsidiary | |
| Texas Gulf Refining & Trading, LLC |
|
| 100 | % |
| LLC |
| Texas |
| Subsidiary | |
| Louisiana Gulf Refining & Trading, LLC |
|
| 100 | % |
| LLC |
| Louisiana |
| Subsidiary | |
| Rolling Stock Marine, LLC |
|
| 100 | % |
| LLC |
| Texas |
| Subsidiary | |
PRT was formed in June 2017 with the Company as its sole member. PRT owns the land on which the Company’s planned hydrogen projects are to be developed. The Company’s other subsidiaries are currently inactive.
As of April 13, 2016, the Company assigned AMC to an irrevocable trust (the “Trust”), whose beneficiaries are the existing shareholders of MMEX. The accounts of AMC are included in the consolidated financial statements due to the common ownership. AMC through the Trust controls the Hunza coal interest previously owned by MMEX.
All significant inter-company transactions have been eliminated in the preparation of the consolidated financial statements.
The Company has adopted a fiscal year end of April 30.
| F-7 |
| Table of Contents |
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its aforementioned subsidiaries and entities under common ownership. All significant intercompany accounts and transactions have been eliminated in consolidation. The ownership interests in subsidiaries that are held by owners other than the Company are recorded as non-controlling interest and reported in our consolidated balance sheets within stockholders’ deficit. Losses attributed to the non-controlling interest and to the Company are reported separately in our consolidated statements of operations.
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 the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Property and equipment
Property and equipment is recorded at the lower of cost or estimated net recoverable amount, and is depreciated or amortized using the straight-line method over the estimated useful life or legal life of the related asset as follows:
| Office furniture and equipment | 10 years |
| Computer equipment and software | 5 years |
| Land improvement | 15 years |
| Land easements | 10 years |
The land easements owned by the Company have a legal life of 10 years.
Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments will be capitalized. At the time of retirement or other disposition of equipment, the cost and accumulated depreciation will be removed from the accounts and the resulting gain or loss, if any, will be reflected in operations.
The Company will assess the recoverability of property and equipment by determining whether the depreciation and amortization of these assets over their remaining life can be recovered through projected undiscounted future cash flows. The amount of equipment impairment, if any, will be measured based on fair value and is charged to operations in the period in which such impairment is determined by management.
Derivative liabilities
In a series of subscription agreements, the Company issued warrants in prior years that contain certain anti-dilution provisions that have been identified as derivatives. In addition, the Company identified the conversion feature of certain convertible notes payable and convertible preferred stock as derivatives. As of April 30, 2021, the number of warrants or common shares to be issued under these agreements is indeterminate; therefore, the Company concluded that the equity environment is tainted and all additional warrants, stock options and convertible debt are included in the value of the derivative. We estimate the fair value of the derivatives using multinomial lattice models that value the derivative liabilities based on a probability weighted cash flow model using projections of the various potential outcomes. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility and management’s estimates of various potential equity financing transactions. These inputs are subject to significant changes from period to period and to management's judgment; therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material.
| F-8 |
| Table of Contents |
Fair value of financial instruments
Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, and ASC 825, Financial Instruments, the FASB establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company's financial statements as reflected herein. The carrying amounts of cash, accounts payable, accrued expenses and notes reported on the accompanying consolidated balance sheets are estimated by management to approximate fair value primarily due to the short-term nature of the instruments.
An entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value using a hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy prioritized the inputs into three levels that may be used to measure fair value:
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in markets that are not active.
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
Our derivative liabilities are measured at fair value on a recurring basis and estimated as follows:
| April 30, 2021 |
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Derivative liabilities |
| $ | 3,010,042 |
|
| $ | - |
|
| $ | - |
|
| $ | 3,010,042 |
|
| April 30, 2020 |
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Derivative liabilities |
| $ | 2,607,433 |
|
| $ | - |
|
| $ | - |
|
| $ | 2,607,433 |
|
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”), as amended. ASC 606 provides a single comprehensive model to be used in the accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific guidance. The standard’s stated core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, ASC 606 includes provisions within a five-step model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when, or as, an entity satisfies a performance obligation.
| F-9 |
| Table of Contents |
Refinery start-up costs
Costs incurred prior to opening the Company’s then proposed crude oil refinery in Pecos County, Texas, including acquisition of refinery rights, planning, design and permitting, are recorded as start-up costs and expensed as incurred.
Advertising and promotion
All costs associated with advertising and promoting products are expensed as incurred. For the year ended April 30, 2021 and 2020, $10,000 and $0 were recorded, respectively.
Income taxes
The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.
Uncertain tax positions
The Company has adopted FASB standards for accounting for uncertainty in income taxes. These standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
Various taxing authorities periodically audit the Company's income tax returns. These audits include questions regarding the Company's tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established, is audited and fully resolved. The Company has not yet undergone an examination by any taxing authorities and has not identified any uncertain tax positions requiring recognition in its consolidated financial statements.
The assessment of the Company's tax position relies on the judgment of management to estimate the exposures associated with the Company's various filing positions.
Basic and diluted income (loss) per share
Basic net income or loss per common share is calculated by dividing net income or loss (available to common stockholders) by the weighted average number of common shares outstanding for the period. Diluted income or loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as stock options, warrants, convertible debt and convertible preferred stock, were exercised or converted into common stock. For the years ended April 30, 2021 and 2020, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share; therefore, basic net loss per common share is the same as diluted net loss per share.
Employee Stock-based compensation
Pursuant to FASB ASC 718, all share-based payments to employees, including grants of employee stock options, are recognized in the statement of operations based on their fair values. For the years ended April 30, 2021 and 2020, the Company recorded share-based compensation to employees of $0 and $0, respectively.
| F-10 |
| Table of Contents |
Issuance of shares for non-cash consideration
The Company accounts for the issuance of equity instruments to acquire goods and/or services based on the fair value of the goods and services or the fair value of the equity instrument at the time of issuance, whichever is more reliably determinable. The Company's accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of the standards issued by the FASB. The measurement date for the fair value of the equity instruments issued is determined as the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor's performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.
Reclassifications
Certain amounts in the consolidated financial statements for the prior year have been reclassified to conform with the current year presentation.
Recently Issued Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) No. ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. Under current GAAP, there are five accounting models for convertible debt instruments. ASU 2020-06 removes from U.S. GAAP the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, after adopting the ASU’s guidance, entities will not separately present in equity an embedded conversion feature in such debt. Instead, they will account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock (i.e., as a single unit of account), unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC 815 or (2) a convertible debt instrument was issued at a substantial premium. Additionally, for convertible debt instruments with substantial premiums accounted for as paid-in capital, the FASB decided to add disclosures about (1) the fair value amount and the level of fair value hierarchy of the entire instrument for public business entities and (2) the premium amount recorded as paid-in capital. ASU 2020-06 will be effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the potential impact of the adoption of this accounting pronouncement to its financial statements.
Although there are several other new accounting pronouncements issued or proposed by the FASB, which the Company has adopted or will adopt, as applicable, the Company does not believe any of these accounting pronouncements has had or will have a material impact on its consolidated financial position or results of operations.
| F-11 |
| Table of Contents |
NOTE 3 – GOING CONCERN
Our financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. We have incurred continuous losses from operations, have an accumulated deficit of $67,984,693 and a total stockholders’ deficit of $5,770,041 at April 30, 2021, and have reported negative cash flows from operations since inception. In addition, as of April 30, 2021 we did not have the cash resources to meet our operating commitments for the next twelve months. We require capital investments to implement our business plan, including the development of our planned hydrogen projects. On July 15, 2021, we entered into a Securities Purchase Agreement (“SPA”) which closed on July 20, 2021, pursuant to which we issued and sold to an institutional investor in a registered direct offering 170,000 shares of our common stock, 2,575,000 warrants, and 3,580,000 pre-funded warrants. We received proceeds of $2,650,850 after deducting placement agent fees and related offering expenses, see Note 14. We have subsequently utilized approximately $560,000 of the proceeds to reduce indebtedness and intent to utilize the remaining amount for working capital purposes. Nevertheless, our ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered by entrance into established markets and the competitive environment in which we operate.
In addition to the SPA, we expect to continue to seek additional funding through private or public equity and debt financing.
Our ability to continue as a going concern is dependent on our ability to generate sufficient cash from operations to meet our cash needs and/or to raise funds to finance ongoing operations and repay debt. However, there can be no assurance that we will be successful in our efforts to raise additional debt or equity capital and/or that our cash generated by our operations will be adequate to meet our needs. These factors, among others, raise substantial doubt that we will be able to continue as a going concern for a reasonable period of time.
The financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company's ability to continue as a going concern. The financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 4 – RELATED PARTY TRANSACTIONS
Accounts Payable and Accrued Expenses – Related Parties
Accounts payable and accrued expenses to related parties, consisting primarily of consulting fees and expense reimbursements payable, totaled $272,834 and $170,881 as of April 30, 2021 and 2020, respectively.
Effective July 1, 2019, we entered into a consulting agreement with Maple Resources Corporation (“Maple Resources”), a related party controlled by our President and CEO, that provides for payment of consulting fees and expense reimbursement related to business development, financing and other corporate activities. Effective January 1, 2020, the Maple Resources consulting agreement was amended to provide for monthly consulting fees of $17,897 and effective March 1, 2021 the Maple Resources consulting agreement was amended to provide for monthly consulting fees of $20,000. During the years ended April 30, 2021 and 2020, we incurred consulting fees and expense reimbursement to Maple Resources totaling $218,970 and $275,713, respectively.
In addition, the consulting agreement provides for the issuance to Maple Resources of shares of our common stock each month with a value of $5,000, with the number of shares issued based on the average closing price of the stock during the prior month. In November 2019, 7,628 shares of our common stock (76,282,091 shares pre-split) were issued to Maple Resources in payment of $20,000 of consulting fees for July through October 2019. No shares were issued to Maple Resources in payment of consulting fees for November 2019 through April 2020 or during the year ended April 30, 2021 under the consulting agreement.
| F-12 |
| Table of Contents |
Amounts included in accounts payable and accrued expenses – related parties due to Maple Resources totaled $118,540 and $101,012 as of April 30, 2021 and 2020, respectively, which was inclusive of accrued interest due under the convertible notes described below.
Effective October 1, 2018, we entered into a consulting agreement with Leslie Doheny-Hanks, the wife of our President and CEO, to issue shares of our common stock each month with a value of $2,500, with the number of shares issued based on the average closing price of the stock during the prior month. The related party consultant provides certain administrative and accounting services and is reimbursed for expenses paid on behalf of the Company. During the year ended April 30, 2020, we issued a total of 3,876 common shares (38,761,580 shares pre-split) valued at $15,009 to the related party, with the shares valued at the market price on the date of issuance, in payment of accrued consulting fees totaling $17,500. A gain on extinguishment of debt of $2,491 related to this compensation arrangement was recorded as a contribution to capital. As of April 30, 2020, consulting fees of $15,000 were payable in stock, and the related party had also advanced the Company $18,179, for a total of $33,179 included in accounts payable and accrued expenses – related parties. As of April 30, 2021, consulting fees of $45,000 were payable in stock, and the related party was due $18,058 for compensation and reimbursable expenses.
Effective February 1, 2021 the Company entered into consulting agreements with three children of our President and CEO. The consulting agreements can be terminated 15 days after written notice of termination by either party subject to the agreement or December 31, 2021, whichever occurs first. During the year ended April 30, 2021 we paid $25,500 in consulting fees due under the agreements. As of April 30, 2021, no amounts were due or owing under the three consulting agreements, however, the Company had an accounts payable balance of $90,500 due to one of the children as a result of consulting fees and expense reimbursements payable that were incurred prior to the execution of the February 1, 2021 consulting agreement.
Series A Preferred Stock
Effective August 1, 2019, the Company issued 1,000 shares of Series A preferred stock to Maple Resources for services rendered. The shares were valued by an independent valuation firm at $23,900. See Note 12.
Convertible Notes Payable – Related Parties
Convertible notes payable – related parties consist of the following at April 30:
|
|
| 2021 |
|
| 2020 |
| ||
| Convertible note payable with Maple Resources Corporation, matured December 27, 2020, with interest at 5%, convertible into common shares of the Company [1] |
| $ | 7,033 |
|
| $ | 11,000 |
|
| Convertible note payable with BNL Family Trust, matured December 27, 2020, with interest at 5%, convertible into common shares of the Company [2] |
|
| 10,691 |
|
|
| 11,000 |
|
| Convertible note payable with Maple Resources Corporation, matured February 12, 2021, with interest at 5%, convertible into common shares of the Company [3] |
|
| 5,000 |
|
|
| 5,000 |
|
| Convertible note payable with Maple Resources Corporation, matured March 2, 2021, with interest at 5%, convertible into common shares of the Company [4] |
|
| 800 |
|
|
| - |
|
| Convertible note payable with Maple Resources Corporation, matured May 12, 2021, with interest at 5%, convertible into common shares of the Company [5] |
|
| 41,466 |
|
|
| - |
|
| Convertible note payable with Maple Resources Corporation, matured July 31, 2021, with interest at 5%, convertible into common shares of the Company [6] |
|
| 10,000 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 74,990 |
|
|
| 27,000 |
|
| Less discount |
|
| (235 | ) |
|
| (1,377 | ) |
|
|
|
|
|
|
|
|
|
|
| Total |
| $ | 74,755 |
|
| $ | 25,623 |
|
| F-13 |
| Table of Contents |
|
| [1] | This convertible note was entered into on 12/27/19 in exchange for cash of $5,500 and financing fees of $5,500 and was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. At inception the Company identified the conversion feature of the convertible note as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and assuming the existence of a tainted equity environment (see Note 10). On the effective date of the convertible note, the related party lender simultaneously submitted a notice to convert the total note principal into 1,000,000 shares of the Company’s common stock (10,000,000,000 shares pre-split). The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. During the year ended April 30, 2021 shares became available to affect a partial conversion, therefore 360,682 common shares (1,579,982,678 pre-split shares) were issued to extinguish $3,967 of the principal balance. The Company continues to accrue interest on the convertible note until they can issue all shares to satisfy the conversion request and recorded interest expense of $171 during the year ended April 30, 2021. As of April 30, 2021 and 2020 accrued interest on the convertible note was $718 and $547, respectively. |
|
|
|
|
|
| [2] | This convertible note was entered into on 12/27/19 in exchange for cash of $11,000 and was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. At inception the Company identified the conversion feature of the convertible note as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and assuming the existence of a tainted equity environment (see Note 10). On the effective date of the convertible note, the related party lender simultaneously submitted a notice to convert the total note principal into 1,000,000 shares of the Company’s common stock (10,000,000,000 shares pre-split). The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. During the year ended April 30, 2021 shares became available to affect a partial conversion, therefore 28,094 common shares (280,936,972 pre-split shares) were issued to extinguish $309 of the principal balance. The Company continues to accrue interest on the convertible note until they can issue all shares to satisfy the conversion request and recorded interest expense of $190 during the year ended April 30, 2021. As of April 30, 2021 and 2020 accrued interest on the convertible note was $737 and $547, respectively. |
|
|
|
|
|
| [3] | This convertible note was entered into on 2/12/20 in exchange for cash of $5,000 and was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. At inception the Company identified the conversion feature of the convertible note as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and assuming the existence of a tainted equity environment (see Note 10). On the effective date of the convertible note, the related party lender simultaneously submitted a notice to convert the total note principal into 454,545 shares of the Company’s common stock (4,545,454,545 shares pre-split). The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. The Company continues to accrue interest on the convertible note until they can issue all shares to satisfy the conversion request and recorded interest expense of $20 during the year ended April 30, 2021. As of April 30, 2021 and 2020 accrued interest on the convertible note was $303 and $283, respectively. |
| F-14 |
| Table of Contents |
|
| [4] | This convertible note was entered into on 3/2/20 in exchange for cash of $800 and was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. At inception the Company identified the conversion feature of the convertible note as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and assuming the existence of a tainted equity environment (see Note 10). On the effective date of the convertible note, the related party lender simultaneously submitted a notice to convert the total note principal into 72,727 shares of the Company’s common stock (727,272,727 shares pre-split). The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. The Company continues to accrue interest on the convertible note until they can issue all shares to satisfy the conversion request and recorded interest expense of $40 during the year ended April 30, 2021. As of April 30, 2021 and 2020 accrued interest on the convertible note was $40 and $0, respectively. |
|
|
|
|
|
| [5] | This convertible note was entered into on 5/12/20 in exchange for accrued consulting fees worth $41,466 and was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. At inception the Company identified the conversion feature of the convertible note as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and assuming the existence of a tainted equity environment (see Note 10). On the effective date of the convertible note, the related party lender simultaneously submitted a notice to convert the total note principal into 3,769,636 shares of the Company’s common stock (37,696,363,636 shares pre-split). The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. The Company continues to accrue interest on the convertible note until they can issue all shares to satisfy the conversion request and recorded interest expense of $2,005 during the year ended April 30, 2021. As of April 30, 2021 and 2020 accrued interest on the convertible note was $2,005 and $0, respectively. |
|
|
|
|
|
| [6] | This convertible note was entered into on 7/31/20 in exchange for cash of $10,000 and was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. At inception the Company identified the conversion feature of the convertible note as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and assuming the existence of a tainted equity environment (see Note 10). On the effective date of the convertible note, the related party lender simultaneously submitted a notice to convert the total note principal into 909,091 shares of the Company’s common stock (9,090,909,091 shares pre-split). The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. The Company continues to accrue interest on the convertible note until they can issue all shares to satisfy the conversion request and recorded interest expense of $374 during the year ended April 30, 2021. As of April 30, 2021 and 2020 accrued interest on the convertible note was $374 and $0, respectively. |
Other Contractual Agreements
Maple Resources granted BNL Family Trust (“BNL”), a related party to Mr. Lemons, an option to purchase 1,000,000 shares of common stock from Maple Resources at a price of $0.20 per share. The option expires in March 2022. Beneficial ownership of Messrs. Hanks and. Lemons give effect to the exercise of such option.
| F-15 |
| Table of Contents |
As a condition for entering into an October 9, 2018 convertible debenture, the lender required Maple Resources and BNL, affiliates of Jack W. Hanks and Bruce Lemons, respectively, our directors (the “Affiliates”), to pledge their shares of Class B Common Stock (constituting 100% of the outstanding shares of Class B Common Stock) to the lender to secure the repayment of the debenture by the Company. The pledge agreement was later amended to substitute 1,000 shares of Series A preferred stock (constituting 100% of the outstanding shares of Series A Preferred stock) for the Class B Common Stock. As consideration to the Affiliates for entering into the pledge agreement, the Company granted a ten-year option, effective as of December 11, 2018, to the Affiliates to purchase 2,000,000 shares of the Company’s common stock at $0.08 per share. Effective November 30, 2020, the option agreement was amended to cancel the 2,000,000 options, see Note 11.
NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at April 30:
|
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
|
| ||
| Office furniture and equipment |
| $ | 13,864 |
|
| $ | 13,864 |
|
| Computer equipment and software |
|
| 10,962 |
|
|
| 10,962 |
|
| Land |
|
| 67,088 |
|
|
| 67,088 |
|
| Land improvements |
|
| 452,005 |
|
|
| 452,005 |
|
| Land easements |
|
| 37,015 |
|
|
| 37,015 |
|
|
|
|
| 580,934 |
|
|
| 580,934 |
|
| Less accumulated depreciation and amortization |
|
| (108,765 | ) |
|
| (73,890 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 472,169 |
|
| $ | 507,044 |
|
Depreciation and amortization expense totaled $34,875 and $34,663 for the years ended April 30, 2021 and 2020, respectively.
NOTE 6 – ACCRUED EXPENSES
Accrued expenses consisted of the following at April 30:
|
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
|
| ||
| Accrued payroll |
| $ | 30,090 |
|
| $ | 30,090 |
|
| Accrued consulting |
|
| 60,000 |
|
|
| 24,000 |
|
| Accrued interest and penalties |
|
| 623,085 |
|
|
| 402,816 |
|
| Other |
|
| 94,174 |
|
|
| 94,174 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 807,349 |
|
| $ | 551,080 |
|
| F-16 |
| Table of Contents |
NOTE 7 – NOTES PAYABLE
Notes Payable
Notes payable consist of the following at April 30:
|
|
| 2021 |
|
| 2020 |
| ||
| Note payable to an unrelated party with an issue date of February 22, 2021 with interest at 10% |
|
|
|
|
|
| ||
| $250,000 draw on March 5, 2021 |
| $ | 250,000 |
|
| $ | - |
|
| $200,000 draw on March 26, 2021 [1] |
|
| 200,000 |
|
|
| - |
|
| Note payable to an unrelated party with an issue date of March 8, 2021 with interest at 10% [2] |
|
| 75,000 |
|
|
| - |
|
| Note payable to an unrelated party with an issue date of March 11, 2021 with interest at 10% [3] |
|
| 250,000 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| Total |
| $ | 775,000 |
|
| $ | - |
|
|
| [1] | Effective February 22, 2021 the Company entered into a promissory note with GS Capital Partners, LLC, with a principal amount of $1,000,000, which is subject to drawdown requests by the Company. The maturity date of the note is the earlier of (i) December 31, 2021 or (ii) the consummation by the Company of an equity or equity-based financing providing net proceeds to the Company sufficient to retire the outstanding indebtedness under the note. The note has an interest rate of ten percent per annum from the date of each drawdown. |
|
|
|
|
|
| [2] | Effective March 8, 2021 the Company entered into a promissory note with JSJ Investments, Inc with a principal amount of $75,000. The maturity date of the note is March 8, 2022 and the note has an interest rate of 10% per annum from the date of funding. |
|
|
|
|
|
| [3] | Effective March 11, 2021 the Company entered into a promissory note with Vista Capital Investments, Inc with a principal amount of $250,000. The maturity date of the note is March 11, 2022 and the note has an interest rate of 10% per annum from the date of funding. |
Note Payable, Currently in Default
Note payable, currently in default, consists of the following at April 30:
|
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
|
| ||
| Note payable to an unrelated party, maturing March 18, 2014, with interest at 10% |
| $ | 75,001 |
|
| $ | 75,001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 75,001 |
|
| $ | 75,001 |
|
| F-17 |
| Table of Contents |
Convertible Notes Payable, Currently in Default
Convertible notes payable, currently in default, consist of the following at April 30:
|
|
| 2021 |
|
| 2020 |
| ||
| Note payable to an unrelated party, matured December 31, 2010, with interest at 10%, convertible into common shares of the Company [1] |
| $ | 50,000 |
|
| $ | 50,000 |
|
| Note payable to an unrelated party, matured January 27, 2012, with interest at 25%, convertible into common shares of the Company [2] |
|
| 25,000 |
|
|
| 25,000 |
|
| Note payable to an accredited investor, matured January 11, 2020, with interest at 10%, convertible into common shares of the Company at a defined variable exercise price [3] |
|
| - |
|
|
| 59,400 |
|
| Note payable to an accredited investor, matured January 17, 2020, with interest at 12%, convertible into common shares of the Company at a defined variable exercise price [4] |
|
| - |
|
|
| 53,028 |
|
| Note payable to an accredited investor, matured January 24, 2020, with interest at 10%, convertible into common shares of the Company at a defined variable exercise price [5] |
|
| - |
|
|
| 42,365 |
|
| Note payable to an accredited investor, maturing January 31, 2020, with interest at 10%, convertible into common shares of the Company at a defined variable exercise price [6] |
|
| 91,331 |
|
|
| 91,331 |
|
| Note payable to an accredited investor, maturing February 27, 2020, with interest at 10%, convertible into common shares of the Company at a defined variable exercise price [7] |
|
| - |
|
|
| 2,009 |
|
| Note payable to an individual, maturing December 27, 2020, with interest at 5%, convertible into common shares of the Company at a defined variable exercise price [8]** |
|
| 10,000 |
|
|
| 10,000 |
|
| Note payable to an individual, maturing December 27, 2020, with interest at 5%, convertible into common shares of the Company at a defined variable exercise price [9] |
|
| 9,719 |
|
|
| 10,000 |
|
| Note payable to an individual, maturing January 22, 2021, with interest at 5%, convertible into common shares of the Company at a defined variable exercise price [10]** |
|
| 6,500 |
|
|
| 6,500 |
|
| Note payable to an individual, maturing May 14, 2021, with interest at 5%, convertible into common shares of the Company at a defined variable exercise price [11] |
|
| 34,000 |
|
|
| - |
|
| Note payable to an individual, maturing September 9, 2021, with interest at 5%, convertible into common shares of the Company at a defined variable exercise price [12] |
|
| 9,225 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 235,775 |
|
|
| 323,133 |
|
| Less discount |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| Total |
| $ | 235,775 |
|
| $ | 323,133 |
|
** Balance as of April 30, 2020 were previously presented as related party notes but reclassified to conform with current year presentation.
|
| [1] | On March 8, 2010, the Company closed a note purchase agreement with an accredited investor pursuant to which the Company sold a $50,000 convertible note in a private placement transaction. In the transaction, the Company received proceeds of $35,000 and the investor also paid $15,000 of consulting expense on behalf of the Company. The convertible note was due and payable on December 31, 2010 with an interest rate of 10% per annum. The note is convertible at the option of the holder into our common stock at a fixed conversion price of $3.70, subject to adjustment for stock splits and combinations. |
|
|
|
|
|
| [2] | On January 28, 2011 and February 1, 2011, the Company closed a Convertible Note Agreement totaling $514,900 in principal amount of 25% Convertible Note (the "Notes") due on the first anniversary of the date of the Note, to a group of institutional and high net worth investors. The Notes are convertible into the Company's common stock at the holders' option at $1.00 per common share. All but $25,000 of the promissory notes plus interest were paid in full on March 23, 2011. |
| F-18 |
| Table of Contents |
|
| [3] | Effective January 11, 2019, the Company issued and delivered to One44 Capital LLC (“One44”) a 10% convertible note in the principal amount of $120,000. The Company received net proceeds of $114,000 after payment of $6,000 of the fees and expenses of the lender and its counsel. One44, at any time at its option, could convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock at a 40% discount from the lowest trading price during the 20 days prior to and including the day the notice of conversion is received by the Company, with a floor of $0.03 per share. The note matured on January 11, 2020 and was in default as of April 30, 2020. The Company could redeem the note at redemption prices ranging from 130% to 140% during the first 180 days after issuance. The Company could not redeem the note after 180 days from the issuance date. The note had a principal balance of $120,000 as of April 30, 2019. During the year ended April 30, 2020, One44 converted principal of $60,600 and accrued interest of $3,720 into common shares of the Company, resulting in a principal balance of $59,400 as of April 30, 2020. During the year ended April 30, 2021, One44 converted principal of $54,400 and accrued interest of $11,601 into common shares of the Company which paid the note in full and resulted in a gain on settlement of debt being recorded for $6,170. |
|
|
|
|
|
| [4] | Effective January 17, 2019, the Company issued and delivered to JSJ Investments, Inc. (“JSJ”) a 12% convertible note in the principal amount of $125,000. The Company received net proceeds of $122,000 after payment of $3,000 of the fees and expenses of the lender and its counsel. JSJ, at any time at its option, could convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock at $0.03 per share or, upon the occurrence of certain defined defaults, at a 42% discount to the lowest trading price during the 20 days prior to the date the notice of conversion is received by the Company. The note matured on January 17, 2020 and was in default as of April 30, 2020. The Company could redeem the note at redemption prices ranging from 135% to 150% during the first 180 days after issuance. The note had a principal balance of $125,000 as of April 30, 2019. During the year ended April 30, 2020, JSJ converted principal of $82,672 into common shares of the Company and the principal was increased by $10,700 for a penalty, resulting in a principal balance of $53,028 as of April 30, 2020. During the year ended April 30, 2021, JSJ converted principal of $53,028 and accrued interest of $20,658 into common shares of the Company to pay the obligation in full. |
|
|
|
|
|
| [5] | Effective April 24, 2019, the Company issued and delivered to EMA Financial, LLC (“EMA”) a 10% convertible note in the principal amount of $55,000. The note was issued at a discount and the Company received net proceeds of $50,000 after payment of $3,750 of the fees and expenses of the lender and its counsel. EMA, at any time at its option, could convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock at a 40% discount from the lowest trading price during the 20 days prior to the day the notice of conversion is received by the Company. The note matured on January 24, 2020 and was in default as of April 30, 2020. During the first 180 days the Note was in effect, the Company could redeem the note at redemption prices ranging from 120% to $140%. The Company could not redeem the note after 180 days from the issuance date. The note had a principal balance of $55,000 as of April 30, 2019. In November 2019, a penalty of $25,000 was added to the principal of the note. During the year ended April 30, 2020, EMA converted principal of $37,635 into common shares of the Company, resulting in a principal balance of $42,365 as of April 30, 2020. In February 2021, a penalty of $93,055 was added to the principal of the note. During the year ended April 30, 2021, EMA converted principal of $131,958 into common shares of the Company and paid cash of $3,462 which paid the note in full and resulted in a gain on settlement of debt being recorded for $15,076. |
|
|
|
|
|
| [6] | Effective January 31, 2019, the Company issued and delivered to Auctus Fund, LLC (“Auctus”) a 10% convertible note in the principal amount of $125,000. The Company received net proceeds $112,250 after payment of $12,750 of the fees and expenses of the lender and its counsel. Auctus, on or following the 180th calendar day after the issuance date of the note, may convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock a 40% discount to the lowest trading price during the 20 days prior to the date the notice of conversion is received by the Company. The note matured on January 31, 2020 and was in default as of April 30, 2020. The Company could redeem the note at redemption prices ranging from 120% to 135% during the first 180 days after issuance. The Company could not redeem the note after 180 days from the issuance date. The note had a principal balance of $125,000 as of April 30, 2019. During year ended April 30, 2020, Auctus converted principal of $33,669 into common shares of the Company, resulting in a principal balance of $91,331 as of April 30, 2020. During the year ended April 30, 2021 there was no activity on the note so the balance remained unchanged. Subsequent to April 30, 2021 this note was paid in full, see Note 14. |
| F-19 |
| Table of Contents |
|
| [7] | Effective February 27, 2019, the Company issued and delivered to Coventry Enterprises, LLC (“Coventry”) a 10% convertible note in the principal amount of $55,000. The Company received net proceeds of $52,500 after payment of $2,500 of the fees and expenses of the lender and its counsel. Coventry, at any time at its option, could convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock at a 40% discount from the lowest trading price during the 20 days prior to and including the day the notice of conversion is received by the Company. The note matured on February 27, 2020 and was in default as of April 30, 2020. During the first 150 days the Note is in effect, the Company could redeem the note at a redemption price of 135%. The note had a principal balance of $55,000 as of April 30, 2019. During the year ended April 30, 2020, Coventry converted principal of $52,991 and accrued interest of $3,669 into common shares of the Company, resulting in a principal balance of $2,009 as of April 30, 2020. During the year ended April 30, 2021, Coventry converted principal of $2,009 and accrued interest of $717 into common shares of the Company which paid off the note in full. |
|
|
|
|
|
| [8] | Effective December 27, 2019 the Company issued and delivered to a consultant a 5% convertible note in the principal amount of $10,000 in payment of accrued fees of $10,000 that was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. On the effective date of the convertible note, the lender simultaneously submitted a notice to convert the total note principal into shares of the Company’s common stock. The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. The Company continues to accrue interest on the convertible note until they can issue all shares to satisfy the conversion request. |
|
|
|
|
|
| [9] | Effective December 27, 2019 the Company issued and delivered to a consultant a 5% convertible note in the principal amount of $10,000 in payment of accrued fees of $10,000 that was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. On the effective date of the convertible note, the lender simultaneously submitted a notice to convert the total note principal into shares of the Company’s common stock. The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. During the year ended April 30, 2021 shares became available to affect a partial conversion, therefore common shares were issued to extinguish $281 of the principal balance. The Company continues to accrue interest on the convertible note until they can issue all shares to satisfy the conversion request. |
|
|
|
|
|
| [10] | Effective January 22, 2020 the Company issued and delivered to a consultant a 5% convertible note in the principal amount of $6,500 in exchange for cash. The note was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. On the effective date of the convertible note, the lender simultaneously submitted a notice to convert the total note principal into shares of the Company’s common stock. The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. The Company continues to accrue interest on the convertible note until they can issue all shares to satisfy the conversion request. |
|
|
|
|
|
| [11] | Effective May 14, 2020 the Company issued and delivered to a consultant a 5% convertible note in the principal amount of $34,000 in payment of accrued fees of $34,000 that was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. On the effective date of the convertible note, the lender simultaneously submitted a notice to convert the total note principal into shares of the Company’s common stock. The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. The Company continues to accrue interest on the convertible note until they can issue all shares to satisfy the conversion request. |
|
|
|
|
|
| [12] | Effective September 9, 2020 the Company issued and delivered to a consultant a 5% convertible note in the principal amount of $10,000 in exchange for cash. The note was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. On the effective date of the convertible note, the lender simultaneously submitted a notice to convert the total note principal into shares of the Company’s common stock. The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. During the year ended April 30, 2021 shares became available to affect a partial conversion, therefore common shares were issued to extinguish $775 of the principal balance. The Company continues to accrue interest on the convertible note until they can issue all shares to satisfy the conversion request. |
| F-20 |
| Table of Contents |
Current Convertible Notes Payable
Current convertible notes payable consisted of the following at April 30:
|
|
| 2021 |
|
| 2020 |
| ||
| Note payable to an accredited investor, maturing December 31, 2021 (as amended), with interest at 18%, convertible into common shares of the Company at a defined variable exercise price [1] |
| $ | - |
|
| $ | 24,700 |
|
| Note payable to an accredited investor, maturing December 31, 2021 (as amended), with interest at 18%, convertible into common shares of the Company at a defined variable exercise price [2] |
|
| - |
|
|
| 70,000 |
|
| Original issue discount convertible debenture to an accredited investor, maturing December 31, 2021 (as amended), with interest at 18%, convertible into common shares of the Company at a defined variable exercise price [3] |
|
| - |
|
|
| 600,000 |
|
| Note payable to an accredited investor issued for extension fees, maturing November 20, 2020 with interest at 18%, convertible into common shares of the Company at a defined variable exercise price [4] |
|
| 200,000 |
|
|
| 200,000 |
|
| Note payable to an accredited investor issued for extension fees, maturing November 20, 2020 with interest at 18%, convertible into common shares of the Company at a defined variable exercise price [5] |
|
| 90,000 |
|
|
| 90,000 |
|
| Note payable to an accredited investor, maturing May 7, 2020, with interest at 12%, convertible into common shares of the Company at a defined variable exercise price (long-term at April 30, 2020) [6] |
|
| - |
|
|
| 35,900 |
|
| Note payable to an accredited investor, maturing December 31, 2021 (as amended), with interest at 18%, convertible into common shares of the Company at a defined variable exercise price [7] |
|
| - |
|
|
| 110,000 |
|
| Note payable to an accredited investor, maturing May 7, 2020, with interest at 10%, convertible into common shares of the Company at a defined variable exercise price [8] |
|
| - |
|
|
| 100,000 |
|
| Note payable to an accredited investor, maturing June 19, 2020, with interest at 10%, convertible into common shares of the Company at a defined variable exercise price [11] |
|
| - |
|
|
| 250,000 |
|
| Note payable to an accredited investor, maturing June 25, 2020, with interest at 9%, convertible into common shares of the Company at a defined variable exercise price (long-term at April 30, 2019) [9] |
|
| - |
|
|
| 56,500 |
|
| Note payable to an accredited investor, maturing September 4, 2020, with interest at 9%, convertible into common shares of the Company at a defined variable exercise price [10] |
|
| - |
|
|
| 56,500 |
|
| Note payable to an accredited investor, maturing two years from each advance, with an original issue discount equal to 10% and a one-time interest charge of 12% added to principal, convertible into common shares of the Company at a defined variable exercise price [12]: |
|
|
|
|
|
|
|
|
| Advance dated September 13, 2018, maturing September 13, 2020 |
|
| - |
|
|
| 1,380 |
|
| Advance dated October 16, 2018, maturing October 16, 2020 |
|
| - |
|
|
| 123,200 |
|
| Note payable to an accredited investor, maturing December 31, 2020 with interest at 18%, convertible into common shares of the Company at a defined variable exercise price [13] |
|
| 80,000 |
|
|
| - |
|
| Note payable to an accredited investor issued for extension fees, maturing August 31, 2020 with interest at 18%, convertible into common shares of the Company at a defined variable exercise price [14] |
|
| 80,000 |
|
|
| - |
|
| Note payable to an accredited investor issued for extension fees, maturing March 26, 2022 with interest at 10%, convertible into common shares of the Company at a defined variable exercise price [15] |
|
| 82,000 |
|
|
| - |
|
| Total |
|
| 532,000 |
|
|
| 1,728,180 |
|
| Less discount |
|
| (133,944 | ) |
|
| (140,941 | ) |
|
|
|
|
|
|
|
|
|
|
| Net |
| $ | 398,056 |
|
| $ | 1,587,239 |
|
| F-21 |
| Table of Contents |
|
| [1] | Effective September 13, 2018, the Company issued and delivered to GS Capital Partners, LLC (“GS”) a 10% convertible note in the principal amount of $110,000. The note was issued at a discount, resulting in the Company’s receipt of $100,000 after an original issue discount of $4,500 and payment of $5,500 of the fees and expenses of the lender and its counsel. GS, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock (i) during the first 180 days, at a price of $3.00 per share of common stock and (ii) thereafter at a 40% discount from the lowest trading price during the 20 days prior to conversion. The maturity date of the note has been extended to December 31, 2021 and the interest rate increased to 18%. The Company may redeem the note at redemption prices ranging from 115% to 135% during the first 180 days after issuance. The note had a principal balance of $110,000 as of April 30, 2019. During the year ended April 30, 2020, GS converted principal of $85,300 and $7,226 of accrued interest into common shares of the Company, resulting in a principal balance of $24,700 as of April 30, 2020. During the year ended April 30, 2021, GS converted principal of $24,700 and $5,788 of accrued interest into common shares of the Company to pay off the debt in full. |
|
|
|
|
|
| [2] | Effective September 18, 2018, the Company issued and delivered to GS a 10% convertible note in the principal amount of $70,000. The note was issued at a discount and the Company received no net proceeds. GS paid $56,589 on behalf of the Company to a prior lender in settlement of a dispute and $9,101 was paid for fees and expenses of GS and its counsel. GS, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock at a 40% discount from the lowest trading price during the 20 days prior to conversion (with a floor of $3.00 per share during the first six months after issuance.) The maturity date of the note has been extended to December 31, 2021 and the interest rate raised to 18%. The Company may redeem the note at redemption prices ranging from 130% to 145% during the first 180 days after issuance. The note had a principal balance of $70,000 as of April 30, 2020. During the year ended April 30, 2021, GS converted principal of $70,000 and $17,797 of accrued interest into common shares of the Company which paid the note in full and resulted in a gain on settlement of debt being recorded for $6,379. |
|
|
|
|
|
| [3] | Effective October 9, 2018, the Company issued and delivered to GS a 10% convertible debenture in the principal amount of $600,000. The debenture was issued with an original issue discount of $50,000, resulting in the Company’s receipt of $550,000 of net proceeds. The debenture was issued pursuant to a securities purchase agreement, which allows for the issuance of additional debentures to one or more holders on substantially identical terms. GS, at its option on and after the six-month anniversary of the date of issuance, may convert the unpaid principal balance of, and accrued interest on, the debentures into shares of common stock thereafter at a 40% discount from the average of the three lowest trading price during the 25 days prior to conversion. The maturity date of the debenture has been extended to December 31, 2021 and the interest rate raised to 18%. The Company may redeem the debenture at redemption prices ranging from 112% to 137% during the first 180 days after issuance. Affiliates of Jack W. Hanks and Bruce Lemons, our directors, pledged their shares of Series A preferred stock (constituting 100% of the outstanding shares of Series A preferred stock) to GS to secure the repayment of the debenture by the Company. The debenture had a principal balance of $600,000 as of April 30, 2020. During the year ended April 30, 2021, GS converted principal of $600,000 and $144,782 of accrued interest into common shares of the Company which paid the note in full and resulted in a gain on settlement of debt being recorded for $52,211. |
|
|
|
|
|
| [4] | Effective March 31, 2020, the Company issued and delivered to GS an 18% convertible note in the principal amount of $200,000. The note was issued to GS in consideration for GS extending the maturity date of other convertible notes payable to GS to November 30, 2020. The extension fee is payable in cash at the earlier of (1) in connection with, and at the time of repayment of the Notes, or (2) on November 20, 2020. GS, at its option, may convert the unpaid principal balance and accrued interest into shares of common stock at the same terms as the September GS convertible notes payable. The note had a principal balance of $200,000 as of April 30, 2020 and 2021. |
|
|
|
|
|
| [5] | Effective February 4, 2020, the Company issued and delivered to GS an 18% convertible note in the principal amount of $90,000. The note was issued to GS in consideration for GS extending the maturity date of other convertible notes payable to GS to February 4, 2020. The extension fee is payable in cash at the earlier of (1) in connection with, and at the time of repayment of the Notes, or (2) on November 20, 2020. GS, at its option, may convert the unpaid principal balance and accrued interest into shares of common stock at the same terms as the September GS convertible notes payable. The note had a principal balance of $90,000 as of April 30, 2020 and 2021. |
| F-22 |
| Table of Contents |
|
| [6] | Effective February 7, 2019, the Company issued and delivered to Geneva Roth Remark Holdings, Inc. (“Geneva”) a 12% convertible note in the principal amount of $56,500. The note was issued at a discount, resulting in the Company’s receipt of $50,000 after payment of $3,000 of the fees and expenses of the lender and its counsel and an original issue discount of $3,500. Geneva, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock beginning 180 days following the date of the note at a 29% discount from the lowest trading price during the 20 days prior to conversion. The note matures on May 7, 2020. The Company may redeem the note at redemption prices ranging from 105% to 130% during the first 180 days after issuance. The note had a principal balance of $56,500 as of April 30, 2019. During the year ended April 30, 2020, Geneva converted principal of $20,600 into common shares of the Company, resulting in a principal balance of $35,900 as of April 30, 2020. During the year ended April 30, 2021, Geneva converted principal of $35,900 and $3,180 of accrued interest into common shares of the Company to pay off the debt in full. |
|
|
|
|
|
| [7] | Effective February 20, 2019, the Company issued and delivered to GS a 10% convertible note in the principal amount of $110,000. The note was issued at a discount and the Company received net proceeds of $100,000 after an original issue discount of $4,500 and payment of $5,500 of the fees and expenses of the lender and its counsel. During the first 180 days, GS, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock at a price of $0.08 per share and thereafter at 40% discount from the lowest trading price during the 20 days prior to conversion. The maturity date of the note has been extended to December 31, 2021 and the interest rate increased to 18%. The Company may redeem the note at redemption prices ranging from 115% to 135% during the first 180 days after issuance. The note had a principal balance of $110,000 as of April 30, 2020. During the year ended April 30, 2021, GS converted principal of $110,000 and $24,019 of accrued interest into common shares of the Company which paid the note in full and resulted in a gain on settlement of debt being recorded for $5,774. |
|
|
|
|
|
| [8] | Effective May 7, 2019, the Company issued and delivered to Odyssey Capital Funding LLC (“Odyssey”) a 10% convertible note in the principal amount of $100,000. The Company received $95,000 after payment of $5,000 of fees and expenses of the lender and its counsel. Odyssey, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock at a 40% discount from the lowest trading price during the 20 days prior to and including the conversion date (with a floor of $0.03 per share for the six months following the date of the note). The note matures on May 7, 2020. The Company may redeem the note at redemption prices ranging from 130% to 140% during the first 120 days after issuance. The Company may not redeem the note after the first 120 days after issuance. The note had a principal balance of $100,000 as of April 30, 2020. During the year ended April 30, 2021, Odyssey converted principal of $97,100 and $17,574 of accrued interest into common shares of the Company which paid the note in full and resulted in a gain on settlement of debt being recorded for $26,851. |
|
|
|
|
|
| [9] | Effective March 25, 2019, the Company issued and delivered to Geneva a 9% convertible note in the principal amount of $56,500. The note was issued at a discount, resulting in the Company’s receipt of $50,000 after payment of $3,000 of the fees and expenses of the lender and its counsel and an original issue discount of $3,500. Geneva, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock beginning 180 days following the date of the note at a 29% discount from the lowest trading price during the 20 days prior to conversion. The note matures on June 25, 2020. The Company may redeem the note at redemption prices ranging from 105% to 130% during the first 180 days after issuance. The note had a principal balance of $56,500 as of April 30, 2020. During the year ended April 30, 2021, Geneva converted principal of $56,287 into common shares of the Company which paid the note in full and resulted in a gain on settlement of debt being recorded for $11,372. |
|
|
|
|
|
| [10] | Effective June 4, 2019, the Company issued and delivered to Geneva a 9% convertible note in the principal amount of $56,500. The note was issued at a discount and the Company received $50,000 after an original issue discount of $3,500 and payment of $3,000 of fees and expenses of the lender and its counsel. Geneva, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock at a 29% discount from the lowest trading price during the 20 days prior to conversion. The note matures on September 4, 2020. The Company may redeem the note at redemption prices ranging from 105% to 130% during the first 180 days after issuance. The Company may not redeem the note after the first 180 days after issuance. The note had a principal balance of $56,500 as of April 30, 2020. During the year ended April 30, 2021, Geneva converted principal of $55,015 into common shares of the Company which paid the note in full and resulted in a gain on settlement of debt being recorded for $12,097. |
|
|
|
|
|
| [11] | Effective June 19, 2019, the Company issued and delivered to Odyssey a 10% convertible note in the principal amount of $250,000. Of the note proceeds, $144,296 was paid to One44 to redeem its February 27, 2019 convertible note and the Company received $80,704 after payment of $25,000 of legal and brokerage fees. Odyssey, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock at a 40% discount from the lowest trading price during the 20 days prior to and including the date of conversion (with a floor of $0.03 per share for the six months following the date of the note). The note matures on June 19, 2020. The Company may redeem the note at redemption prices ranging from 130% to 140% during the first 120 days after issuance. The Company may not redeem the note after the first 120 days after issuance. The note had a principal balance of $250,000 as of April 30, 2020. During the year ended April 30, 2021, Geneva converted principal of $220,500 and accrued interest of $37,454 into common shares of the Company and the Company paid $35,736 in cash to pay the note in full, which resulted in a gain on settlement of debt being recorded for $53,129. |
| F-23 |
| Table of Contents |
|
| [12] | Effective September 13, 2018, the Company issued and delivered to Vista Capital Investments, LLC (“Vista”) a convertible note in the original maximum principal amount of $550,000 (consisting of an initial advance of $100,000 on such date and possible future advances). An original issue discount equal to 10% of each advance will be added to principal. The maturity date of advances under the convertible note is two years from the date of each advance. Terms of the convertible note include certain penalties for additional principal and changes in conversion prices when the trading price of the Company’s common stock decreases to defined levels. An original issue discount of $10,000 and a one-time 12% interest charge of $13,200 was added to the $100,000 advance at inception, resulting in total initial principal of $123,200. Through April 30, 2019, the note was partially converted into shares of the Company’s common stock resulting in a principal balance of $80,700 as of April 30, 2019. During the year ended, 2020, Vista converted principal of $79,320 into common shares of the Company, resulting in a principal balance of $1,380 as of April 30, 2020. During the year ended April 30, 2021, Vista confirmed that there were no amounts owing on the debt, therefore a gain on settlement of debt was recorded for $1,380. |
|
|
|
|
|
|
| On October 16, 2018, the Company received proceeds of $200,000 from a second advance under the Vista long-term convertible note. An original issue discount of $20,000 and a one-time 12% interest charge of $26,400 was added to the note principal, resulting in total principal of $246,400, which balance was outstanding as of April 30, 2019. Effective May 14, 2019, Vista assigned $123,200 of this note, resulting in a principal balance of $123,200 as of April 30, 2020. During the year ended April 30, 2021, Vista converted principal of $106,440 into common shares of the Company to pay the note in full, which resulted in a gain on settlement of debt being recorded for $16,760. |
|
| [13] | Effective December 15, 2020, the Company entered into a fourth amendment to certain convertible notes with GS ($110,000 note dated September 13, 2018 – see notation [1], $70,000 note dated September 18, 2018 – see notation [2], $$600,000 note dated October 5, 2018 – see notation [3], and $110,000 note dated February 20, 2019 – see notation [7]) to extend the notes due dates from December 20, 2020 to December 31, 2020. In conjunction with the extension, the Company entered into an 18% convertible note in the principal amount of $80,000. The note was issued at a discount and the Company received net proceeds of $75,000 after an original issue discount of $5,000. The note had a principal balance of $80,000 as of April 30, 2021. |
|
|
|
|
|
| [14] | Effective December 31, 2020, the Company entered into a fifth amendment to certain convertible notes with GS ($110,000 note dated September 13, 2018 – see notation [1], $70,000 note dated September 18, 2018 – see notation [2], $$600,000 note dated October 5, 2018 – see notation [3], and $110,000 note dated February 20, 2019 – see notation [7]) to extend the notes due dates from December 31, 2020 to August 31, 2021. In exchange for the extension, the aggregate principal amounts of the notes increased by $80,000. |
|
|
|
|
|
| [15] | Effective March 26, 2021, the Company issued and delivered to GS a 10% convertible note in the principal amount of $82,000. The note was issued at a discount and the Company received net proceeds of $78,500 after payment of $3,500 of fees and expenses of the lender and its counsel. During the first 180 days, GS, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock at a price of $0.015 per share and thereafter at 34% discount from the lowest trading price during the 15 days prior to conversion. The Company may redeem the note at redemption prices ranging from 110% to 118% during the first 180 days after issuance. The note had a principal balance of $82,000 as of April 30, 2021. Subsequent to April 30, 2021 this note was paid in full, see Note 14. |
NOTE 8 – PPP LOANS PAYABLE
With an effective date of April 20, 2020, a loan to the Company was approved under the terms and conditions of the Paycheck Protection Program of the United States Small Business Administration (“SBA”) and the CARES Act (2020) (H.R. 748) (15 U.S.C. 636 et seq.) in the amount of $167,900 and was funded on April 21, 2020. Effective April 20, 2021 the Company was notified that the loan had been forgiven and paid in full.
With an effective date of January 25, 2021, a second loan to the Company was approved under the terms and conditions of the Paycheck Protection Program of the SBA and the CARES Act (2020) (H.R. 748) (15 U.S.C. 636 et seq.) (“the Act”) in the amount of $150,000 and was funded on January 26, 2020. The Company has applied for loan forgiveness pursuant to the provisions of the Act.
| F-24 |
| Table of Contents |
NOTE 9 – SBA BRIDGE LOAN PAYABLE
On July 14, 2020, the Company received $10,000 pursuant to the SBA’s Express Bridge Loan Pilot Program. This program allows small businesses who have a business relationship with an SBA Express Lender to access up to $25,000 quickly. The funds were advanced to the Company since it has applied for an Economic Injury Disaster Loan (“EIDL”). The loan had a balance of $10,000 as of January 31, 2021 and is to be repaid in full by proceeds from the EIDL.
NOTE 10 – DERIVATIVE LIABILITIES
In a series of subscription agreements, the Company issued warrants in prior years that contain certain anti-dilution provisions that have been identified as derivatives. In addition, the Company identified the conversion feature of certain convertible notes payable and convertible preferred stock as derivatives. As of April 30, 2021 and 2020, the number of warrants or common shares to be issued under these agreements is indeterminate; therefore, the Company concluded that the equity environment is tainted and all additional warrants, stock options and convertible debt are included in the value of the derivative.
The Company estimates the fair value of the derivative liabilities at the issuance date and at each subsequent reporting date, using a multinomial lattice model simulation. The model is based on a probability weighted discounted cash flow model using projections of the various potential outcomes.
During the years ended April 30, 2021 and 2020, we had the following activity in our derivative liabilities:
|
|
| Options and |
|
| Convertible |
|
|
|
| |||
|
|
| Warrants |
|
| Notes |
|
| Total |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
| Balance, April 30, 2019 |
| $ | 18,063 |
|
| $ | 1,807,533 |
|
| $ | 1,825,596 |
|
| New issuances of debt |
|
| - |
|
|
| 192,500 |
|
|
| 192,500 |
|
| Debt conversions and repayments |
|
| - |
|
|
| (812,896 | ) |
|
| (812,896 | ) |
| Change in fair value of derivative liabilities |
|
| (18,048 | ) |
|
| 1,420,281 |
|
|
| 1,402,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, April 30, 2020 |
|
| 15 |
|
|
| 2,607,418 |
|
|
| 2,607,433 |
|
| New issuances of options, warrants and debt |
|
| - |
|
|
| 200,859 |
|
|
| 200,859 |
|
| Debt conversions and repayments |
|
| - |
|
|
| (22,705,172 | ) |
|
| (22,705,172 | ) |
| Change in fair value of derivative liabilities |
|
| 235,887 |
|
|
| 22,671,035 |
|
|
| 22,906,922 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, April 30, 2021 |
| $ | 235,902 |
|
| $ | 2,774,140 |
|
| $ | 3,010,042 |
|
Key inputs and assumptions used in valuing the Company’s derivative liabilities as of April 30, 2021 are as follows:
|
| · | Stock prices on all measurement dates were based on the fair market value |
|
| · | Risk-free interest rate of 0.03% to 0.70% |
|
| · | The probability of future financing was estimated at 100% |
|
| · | Computed volatility ranging from 412.7% to 1556.1% |
These inputs are subject to significant changes from period to period and to management's judgment; therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material.
| F-25 |
| Table of Contents |
NOTE 11 – STOCKHOLDERS’ DEFICIT
Authorized Shares
As of April 30, 2021, the Company had authorized 11,000,000 shares consisting of 10,000,000 shares of common stock and 1,000,000 shares of preferred stock.
Effective February 16, 2021, the Company amended its Articles of Incorporation to increase the number of its authorized shares from 25,010,000,000 to 37,010,000,000 shares, comprised of 37,000,000,000 common shares and 10,000,000 preferred shares. Effective July 1, 2021, the Company amended its Articles of Incorporation to decrease the number of its authorized shares from 37,010,000,000 to 11,000,000 shares, comprised of 10,000,000 common shares and 1,000,000 preferred shares.
Effective July 1, 2021, the Company amended its articles of incorporation to provide for a 1 for 10,000 reverse stock split of our common shares. Shareholders owning in excess of 50.1% of the outstanding shares of voting common stock of the Company executed a written consent approving such amendment. The amendment was also approved by the Company’s Board of Directors. The Company has given retroactive effect to the reverse stock split for all periods presented. See Note 14.
Common Stock Issuances
During the year ended April 30, 2021, the Company issued a total of 1,916,358 shares of its common stock: 2,000 shares for consulting services valued at $34,000; 1,525,583 shares valued at $1,932,365 in conversion of convertible notes principal of $1,618,394, accrued interest payable of $301,943 and payment of fees of $12,028; and 388,775 shares valued at $4,277 in conversion of convertible notes payable – related party principal of $4,277. Settlement of derivative liabilities in debt conversions and repayments totaled $22,511,164.
During the year ended April 30, 2020, the Company issued a total of 1,328,465 shares of its common stock: 3 shares for consulting services valued at $84; 16,991 shares valued at $28,387 in payment of accrued expenses of $36,942 resulting in a gain on extinguishment of debt of $8,555; 667,835 shares valued at $811,676 in conversion of convertible notes principal of $769,255, accrued interest payable of $33,671 and payment of fees of $8,750; and 643,636 shares valued at $355,460 in conversion of convertible notes payable – related party principal of $354,000 and accrued interest payable of $1,460. Settlement of derivative liabilities in debt conversions and repayments totaled $812,896.
Series A Preferred Stock
The Series A preferred stock has no redemption, conversion or dividend rights; however, the holders of the Series A preferred stock, voting separately as a class, has the right to vote on all shareholder matters equal to 51% of the total vote.
During the year ended April 30, 2021 no preferred shares were issued. Effective August 1, 2019, the Company issued 1,000 shares of Series A preferred stock to Maple Resources for services rendered. The shares were valued at $23,900 by an independent valuation firm.
Warrants
The Company has issued warrants in prior years to investors in a series of subscription agreements in equity financings or for other stock-based compensation. Certain of the warrants contain anti-dilution provisions that the Company has identified as derivatives. We estimate the fair value of the derivatives using multinomial lattice models that value the warrants based on a probability weighted cash flow model using projections of the various potential outcomes and considering the existence of a tainted equity environment (see Note 10).
| F-26 |
| Table of Contents |
A summary of warrant activity during the years ended April 30, 2021 and 2020 is presented below:
|
|
| Shares |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contractual Life (Years) |
| |||
|
|
|
|
|
|
| |||||||
| Outstanding, April 30, 2019 |
|
| 1,789,291 |
|
| $ | 1.00 |
|
|
| 2.91 |
|
| Granted |
|
| 444,248,462 |
|
| $ | 1.00 |
|
|
|
|
|
| Canceled / Expired |
|
| - |
|
|
|
|
|
|
|
|
|
| Exercised |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Outstanding, April 30, 2020 |
|
| 446,037,753 |
|
| $ | 1.00 |
|
|
| 1.91 |
|
| Granted |
|
| 633,880,117 |
|
| $ | 1.00 |
|
|
|
|
|
| Canceled / Expired |
|
| (8,000 | ) |
| $ | 0.58 |
|
|
|
|
|
| Exercised |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Outstanding, April 30, 2021 |
|
| 1,079,909,872 |
|
| $ | 1.00 |
|
|
| 0.91 |
|
The warrant shares granted during the years ended April 30, 2021 and 2020 are comprised of warrant shares issued to warrant holders pursuant to anti-dilution provisions.
Stock Options
As a condition for entering into the October 5, 2018 GS convertible debenture (see Note 7), GS required affiliates of Jack W. Hanks and Bruce Lemons, our directors (the “Affiliates”), to pledge their shares of Class B Common Stock (constituting 100% of the then outstanding shares of Class B Common Stock) to GS to secure the repayment of the debenture by the Company. As consideration to the Affiliates for entering into the GS pledge agreement, the Company granted a ten-year option, effective as of December 11, 2018, to the Affiliates to purchase 2,000,000 common shares of the Company at $0.08 per share. Effective November 30, 2020, the option agreement was amended to cancel the 2,000,000 options.
A summary of stock option activity during the years ended April 30, 2021 and 2020 is presented below:
|
|
| Shares |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contractual Life (Years) |
| |||
|
|
|
|
|
|
| |||||||
| Outstanding, April 30, 2019 |
|
| 2,000,000 |
|
| $ | 0.08 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Granted |
|
| - |
|
|
|
|
|
|
|
| |
| Canceled / Expired |
|
| - |
|
|
|
|
|
|
|
| |
| Exercised |
|
| - |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Outstanding, April 30, 2020 |
|
| 2,000,000 |
|
| $ | 0.08 |
|
|
| 8.62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Granted |
|
| - |
|
|
|
|
|
|
|
|
|
| Canceled / Expired |
|
| (2,000,000 | ) |
|
|
|
|
|
|
|
|
| Exercised |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Outstanding, April 30, 2021 |
|
| - |
|
| $ | - |
|
|
| - |
|
| F-27 |
| Table of Contents |
Common Stock Reserved
Combined with the 3,251,641 common shares outstanding at April 30, 2021, all authorized common shares have been issued or reserved for issuance of outstanding warrants, stock options, and convertible notes payable and no common shares are available for share issuances other than those shares included in the reserves.
NOTE 12 – INCOME TAXES
The Company accounts for income taxes in accordance with standards of disclosure propounded by the FASB, and any related interpretations of those standards sanctioned by the FASB. Accordingly, deferred tax assets and liabilities are determined based on differences between the financial statement and tax bases of assets and liabilities, as well as a consideration of net operating loss and credit carry forwards, using enacted tax rates in effect for the period in which the differences are expected to impact taxable income. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized.
No provision for income taxes has been recorded due to the net operating loss carryforwards totaling approximately $16,274,000 as of April 30, 2021 that will be available to offset future taxable income. The available net operating loss carry forwards expire in various years through 2041. No tax benefit has been reported in the financial statements because the Company believes there is a 50% or greater chance the carry forwards will expire unused. There were no uncertain tax positions taken by the Company.
The deferred tax asset and valuation account is as follows at April 30:
|
|
| 2021 |
|
| 2020 |
| ||
| Deferred tax asset: |
|
|
|
|
|
| ||
| Net operating loss carryforward |
| $ | 3,417,552 |
|
| $ | 3,026,640 |
|
| Valuation allowance |
|
| (3,417,552 | ) |
|
| (3,026,640 | ) |
|
|
|
|
|
|
|
|
|
|
| Total |
| $ | - |
|
| $ | - |
|
The components of income tax expense are as follows for the years ended April 30:
|
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
|
| ||
| Change in net operating loss benefit |
| $ | 390,912 |
|
| $ | 327,930 |
|
| Change in valuation allowance |
|
| (390,912 | ) |
|
| (327,930 | ) |
|
|
|
|
|
|
|
|
|
|
| Total |
| $ | - |
|
| $ | - |
|
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cut and Jobs Act (the “Tax Act”). The Tax Act established new tax laws that affect 2018 and future years, including a reduction in the U.S. federal corporate income tax rate to 21%, effective January 1, 2018. The reduction in the federal corporate income tax rate is reflected in the above tables.
| F-28 |
| Table of Contents |
NOTE 13 – COMMITMENTS AND CONTINGENCIES
Legal
On July 14, 2020, a consultant for rail services to the Company filed a complaint against the Company and its CEO Jack W Hanks, an individual, for payment of $100,000 of consulting fees. The Court Action is filed as CRU Trading Co, (“CRU”) Plaintiff, v. MMEX Resources Corp and Jack W. Hanks in the District Court of Harris, County Texas Cause No. 2020-41853/Court;165. The Company, based on consultation with legal counsel, believed the complaint was without merit and filed a verified denial and a motion to dismiss the litigation. In April of 2021 the parties agreed to settle the matter, therefore in exchange for a nonsuit of certain claims and a stay of litigation the Company agreed to pay $60,000 over a 6-month period. After paying the amount in full all parties will fully release each other from any claims related to the matter and CRU will dismiss the lawsuit.
NOTE 14 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, all subsequent events have been reported through the filing date as set forth below.
On May 20, 2021, we entered into a Purchase and Sale Agreement to acquire 323.841 acres of land in, or near, Pecos County, Texas, in exchange for $242,881. Per the terms of the agreement, we remitted a non-refundable earnest money payment of $10,000 and committed to close on or before the thirtieth day after the title company issued a title commitment, or on a date mutually agreed upon. On July 8, 2021 we entered into the first amendment to the Purchase and Sale Agreement which provided for an extension of the closing date, which was to occur on or before September 15, 2021. In exchange for the extension, we remitted a non-refundable extension payment of $10,000 which is applicable to the purchase price at closing. We closed on this land purchase on July 27, 2021.
On June 22, 2021, the Company issued and delivered to GS Capital Partners, LLC (“GS”) a 10% convertible note in the principal amount of $82,000. The note was issued at a discount and the Company received net proceeds of $78,500 after payment of $3,500 of fees and expenses of the lender and its counsel. During the first 180 days, GS, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock at a price of $0.015 per share and thereafter at 34% discount from the average of the two lowest trading prices of the Company’s common stock during the 15 prior trading days including the day upon which a notice of conversion is received by the Company. The Company may redeem the note at redemption prices ranging from 110% to 118% during the first 180 days after issuance.
On June 22, 2021 the Company executed a drawdown request of $200,000 in accordance with the terms of the February 22, 2021 promissory note with GS Capital Partners, LLC. The maturity date of the note is the earlier of (i) December 31, 2021 or (ii) the consummation by the Company of an equity or equity-based financing providing net proceeds to the Company sufficient to retire the outstanding indebtedness under the note. The note has an interest rate of ten percent per annum from the date of the drawdown.
Effective July 1, 2021, the Company amended its articles of incorporation to provide for a 1 for 10,000 reverse stock split of our common shares. As a result of the stock split the Company issued an additional 17,754 shares of common stock to account for rounding issues. The Company has given retroactive effect to the reverse stock split for all periods presented. See Note 14.
On July 15, 2021, we entered into a Securities Purchase Agreement (“SPA”) with an institutional investor, pursuant to which we agreed to issue and sell, in a registered direct offering 170,000 shares of our common stock and warrants exercisable for an aggregate of 2,575,000 shares of our common stock at a combined offering price of $0.80 per share. The warrants have an exercise price of $0.80 per share. Each warrant is immediately exercisable and will expire on the fifth anniversary from the issuance date. We also offered and sold to the institutional investor pre-funded warrants to purchase an aggregate of 3,580,000 shares of common stock, in lieu of shares of common stock. Each pre-funded warrant is exercisable for one share of our common stock. The purchase price of each pre-funded warrant is equal to $0.80 per share price at which common stock is sold in the offering, minus $0.0001, and the exercise price of each pre-funded warrant is $0.0001 per share. Subject to certain ownership limits, the pre-funded warrants are immediately exercisable and may be exercised at any time until all of the pre-funded warrants are exercised in full. As a result of the SPA, the Company received proceeds of $2,650,850 after deducting placement agent fees and related offering expenses.
Subsequent to April 30, 2021, the Company made a payment to its lender to extinguish a January 31, 2019 convertible notes payable with a principal balance of $91,331 that had been in default, see Note 7. The Company also made a payment to another lender to extinguish a March 26, 2021 convertible note payable with a principal balance of $82,000, see Note 7, and to extinguish a June 22, 2021 convertible note payable with a principal balance of $82,000, see above, and to repay the June 22, 2021 drawdown of $200,000 on a February 22, 2021 promissory note, see above.
Subsequent to April 30, 2021, the Company issued 11,814 common shares to lenders in the conversion of debt principal of $40,000, accrued interest payable of $2,027 and conversion fees of $504. The Company also issued 250,000 shares for the exercise of the pre-funded warrants granted in conjunction with the July 15, 2021 SPA.
| F-29 |
EXHIBIT 3.4
Text of second amendment to Amended and Restated
Articles of Incorporation of MMEX Resources Corporation
===========
Filed July 1, 2021
===========
ARTICLE IV
CAPITAL STOCK
The total number of shares of stock which the Corporation shall have authority to issue is Eleven Million (11,000,000) shares, which shall consist of (i) Ten Million (10,000,000) shares of common stock, par value $0.001 per share (the “Common Stock”), and (ii) One Million (1,000,000) shares of preferred stock, par value $0.001 per share (the “Preferred Stock”). The voting powers, designations, preferences, privileges and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions of each class or series of capital stock of the Corporation, shall be as provided in this Article IV.
A. PREFERRED STOCK.
The Preferred Stock may be issued from time to time by the Board of Directors as shares of one or more classes or series. The designations, powers, preferences and relative, optional, conversion and other special rights, and the qualifications, limitations and restrictions thereof, of Preferred Stock of each class or series shall be such as are stated and expressed herein and, to the extent not stated and expressed herein, shall be such as may be fixed by the Board of Directors (authority so to do being hereby expressly granted) and stated and expressed in a resolution or resolutions adopted by the Board of Directors providing for the issue of Preferred Stock of such class or series. Such resolution or resolutions shall (a) specify the class or series to which such Preferred Stock shall belong, (b) fix the dividend rate therefor, (c) fix the amount which the holders of Preferred Stock of such class or series shall be entitled to be paid in the event of a voluntary liquidation, dissolution or winding up of the Corporation, (d) state whether or not Preferred Stock of such class or series shall be redeemable and at what times and under what conditions and the amount or amounts payable thereon in the event of redemption, (e) fix the voting powers of the holders of Preferred Stock of such class or series, whether full or limited, or without voting powers, but in no event shall the holders of Preferred Stock of such class or series be entitled to more than one vote for each share held at all meetings of the shareholders of the Corporation; and may, in a manner not inconsistent with the provisions of this Article 4, (i) limit the number of shares of such class or series which may be issued, (ii) provide for a sinking or purchase fund for the redemption or purchase of shares of such class or series and the terms and provisions governing the operation of any such fund and the status as to reissuance of shares of Preferred Stock purchased or otherwise reacquired or redeemed or retired through the operation thereof, (iii) impose conditions or restrictions upon the creation of indebtedness of the Corporation or upon the issue of additional Preferred Stock or other capital stock ranking equally therewith or prior thereto as to dividends or distribution of assets on liquidation, and (iv) grant such other special rights to the holders of Preferred Stock of such class or series as the Board of Directors may determine and which are not inconsistent with the provisions of this Article 4. The term “fix for such class or series” and similar terms shall mean stated and expressed in a resolution or resolutions adopted by the Board of Directors providing for the issue of Preferred Stock of the class or series referred to therein. No further action or vote of the shareholders shall be required for any action taken by the Board of Directors pursuant to this Article 4.
The Board of Directors has previously designated the Series A Preferred Stock, consisting of 1,000 shares and having the rights and preferences set forth in the Certificate of Designations of the Series A Preferred Stock.
| 1 |
B. COMMON STOCK.
The holder of each share of Common Stock shall be entitled to one vote for each such share as determined on the record date for the vote or consent of shareholders and shall vote together with the holders of Series A Preferred Stock of the Company as a single class upon any items submitted to a vote of shareholders, except with respect to matters requiring a separate series or class vote.
C. REVERSE SPLIT
The Corporation does, by Amendment to these Amended and Restated Articles of Incorporation effective July 1, 2021 (the “Effective Date”), does effect a reverse split of its outstanding shares of Common Stock (“Old Common Stock”). Each 10,000 shares of Old Common Stock outstanding immediately before the Effective Date, and each 10,000 shares of Old Common Stock issuable pursuant to an instrument exercisable for shares of Old Common Stock, shall, on the Effective Date, be reclassified and converted into, and become a right to receive, and the holders of the outstanding Old Common Stock or instruments exercisable for such Old Common Stock shall be entitled to receive therefore upon surrender of the certificates representing such shares of Old Common Stock to the Corporation, or upon exercise of such instrument, one share of Common Stock, $0.001 par value of the Corporation, subject to the treatment of fraction shares set forth herein.
No scrip or fraction certificates will be issued. Fractional shares will be rounded up, so that a holder of shares of Old Common Stock will receive, in lieu of any fraction of a post-split share to which the holder would otherwise be entitled, an entire post-split share of Common Stock. No cash payment will be made to reduce or eliminate any fractional share interest.
| 2 |
EXHIBIT 4.7
|
| THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT”) |
|
US $82,000.00
MMEX RESOURCES CORPORATION
10% CONVERTIBLE REDEEMABLE NOTE
DUE MARCH 26, 2022
FOR VALUE RECEIVED, MMEX Resources Corporation. (the “Company”) promises to pay to the order of GS CAPITAL PARTNERS, LLC and its authorized successors and Permitted Assigns, defined below, (“Holder”), the aggregate principal face amount Eighty Two Thousand Dollars exactly (U.S. $82,000.00) on March 26, 2022 (“Maturity Date”) and to pay interest on the principal amount outstanding hereunder at the rate of 10% per annum commencing on March 26, 2021 (“Issuance Date”). The Company acknowledges this Note was issued with a $3,500 original issue discount and as such the purchase price was $78,500.00. The interest will be paid to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note. The principal of, and interest on, this Note are payable at 30 Washington Street, Suite 5L, Brooklyn, NY 11201, initially, and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein. Permitted Assigns means any Holder assignment, transfer or sale of all or a portion of this Note accompanied by an Opinion of Counsel as provided for in Section 2(f) of the Securities Purchase Agreement.
____
Initials
| 1 |
This Note is subject to the following additional provisions:
1. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder shall pay any tax or other governmental charges payable in connection therewith. To the extent that Holder subsequently transfers, assigns, sells or exchanges any of the multiple lesser denomination notes, Holder acknowledges that it will provide the Company with Opinions of Counsel as provided for in Section 2(f) of the Securities Purchase Agreement.
2. The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”) and applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prequalified prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date. All notices of conversion will be accompanied by an Opinion of Counsel.
4. (a) During the first 180 days this Note is in effect, the Holder of this Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s common stock (the “Common Stock”) at a price for each share of Common Stock equal to $0.015 per share. Beginning the 180th daily anniversary of the Issuance Date of the Note, the Holder of this Note is entitled, at its option, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s common stock (the “Common Stock”) at a price (“Conversion Price”) for each share of Common Stock equal to 66% of the average of the two lowest trading prices of the Common Stock as reported on the Exchange, for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company (provided such Notice of Conversion is delivered together with an Opinion of Counsel, by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Accrued, but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. To the extent the Conversion Price of the Company’s Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this increase. In the event the Company experiences a DTC “Chill” on its shares, the Conversion Price shall be decreased to 56% instead of 66% while that “Chill” is in effect. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 4.99% of the outstanding shares of the Common Stock of the Company (which may be increased up to 9.9% upon 60 days’ prior written notice by the Holder). All the terms set forth herein, including but not limited to interest rate, prepayment terms, conversion discount or lookback period will be adjusted downward (i.e. for the benefit of the Holder) if the Company offers a more favorable conversion discount (whether via interest rate, original issue discount, or otherwise) or lookback period to another party or otherwise grants any more favorable terms to any third party than those contained herein while this note is in effect.
____
Initials
| 2 |
(b) Interest on any unpaid principal balance of this Note shall be paid at the rate of 10% per annum. Interest shall be paid by the Company in Common Stock (“Interest Shares”). Holder may, at any time, send in a Notice of Conversion to the Company for Interest Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
(c) Provided that no portion of this Note may be prepaid until the entire outstanding balance under the certain $1,000,000 note dated February 22, 2021 has been repaid to the Holder, the then outstanding principal balance of this Note may be prepaid at the following prices:
| Time Period | Payment Premium |
| <=60 days after note issuance | 110% of the sum of principal plus accrued interest |
| >60 days <= 120 days after note issuance | 114% of the sum of principal plus accrued interest |
| >120 days <=180 days after note issuance | 118% of the sum of principal plus accrued interest |
This Note may not be prepaid after the 180th day. Such redemption must be closed and funded within 3 days of giving notice of redemption of the right to redeem shall be null and void.
(d) Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related transactions, (ii) a reclassification, capital reorganization (excluding an increase in authorized capital) or other change or exchange of outstanding shares of the Common Stock, other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.
____
Initials
| 3 |
(e) In case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.
5. No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7. The Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by the Holder in collecting any amount due under this Note.
8. If one or more of the following described “Events of Default” shall occur:
(a) The Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company; or
(b) Any of the representations or warranties made by the Company herein or in any agreement entered into by the Company in connection with the execution and delivery of this Note, shall be false or misleading in any respect; or
(c) The Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of the Company under this Note or any other note issued to the Holder; or
(d) The Company shall (1) become insolvent (which does not include a “going concern opinion); (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal or state laws as applicable; or
____
Initials
| 4 |
(e) A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged within sixty (60) days after such appointment; or
(f) Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company; or
(g) One or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of any proposed sale thereunder; or
(h) Defaulted on or breached any term of any other note of similar debt instrument in excess of $50,000 into which the Company has entered and failed to cure such default within the appropriate grace period; or
(i) The Company shall have its Common Stock delisted from an exchange (including the OTC Markets exchange) or, if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days or ceases to file its 1934 act reports with the SEC;
(j) If a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;
(k) The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business days of its receipt of a Notice of Conversion which includes an Opinion of Counsel expressing an opinion which supports the removal of a restrictive legend; or
(l) The Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder.
(m) The Company shall be delinquent in its periodic report filings with the Securities and Exchange Commission; or
(n) The Company shall cause to lose the “bid” price for its stock in a market (including the OTC marketplace or other exchange).
____
Initials
| 5 |
Then, or at any time thereafter, unless cured within 5 days, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of grace, enforce any and all of the Holder’s rights and remedies provided herein or any other rights or remedies afforded by law. Upon an Event of Default, interest shall accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. In the event of a breach of Section 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th day after the conversion notice was delivered to the Company. This penalty shall increase to $500 per day beginning on the 10th day. The penalty for a breach of Section 8(n) shall be an increase of the outstanding principal amounts by 20%. In case of a breach of Section 8(i), the outstanding principal due under this Note shall increase by 50%. If this Note is not paid at maturity, the outstanding principal due under this Note shall increase by 10%. Further, if a breach of Section 8(m) occurs or is continuing after the 6 month anniversary of the Note, then the Holder shall be entitled to use the lowest closing bid price during the delinquency period as a base price for the conversion. For example, if the lowest closing bid price during the delinquency period is $0.01 per share and the conversion discount is 50% the Holder may elect to convert future conversions at $0.005 per share.
If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
Make-Whole for Failure to Deliver Loss. At the Holder’s election, if the Company fails for any reason to deliver to the Holder the conversion shares by the by the 3rd business day following the delivery of a Notice of Conversion to the Company and if the Holder incurs a Failure to Deliver Loss, then at any time the Holder may provide the Company written notice indicating the amounts payable to the Holder in respect of the Failure to Deliver Loss and the Company must make the Holder whole as follows:
Failure to Deliver Loss = [(Highest VWAP price for the 30 trading days on or after the day of exercise) x (Number of conversion shares)]
The Company must pay the Failure to Deliver Loss by cash payment, and any such cash payment must be made by the third business day from the time of the Holder’s written notice to the Company.
9. In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
10. Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Company and the Holder.
____
Initials
| 6 |
11. The Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information indicating it is no longer a “shell” issuer. Further. The Company will instruct its counsel to either (i) write a 144 opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.
12. The Company shall issue irrevocable transfer agent instructions reserving 138,047,000 shares of its Common Stock for conversions under this Note (the “Share Reserve”). Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled. The Company shall pay all transfer agent costs associated with issuing and delivering the share certificates to Holder. If such amounts are to be paid by the Holder, it may deduct such amounts from the Conversion Price. The Company should at all times reserve a minimum of two times the amount of shares required if the note would be fully converted. The Holder may reasonably request increases from time to time to reserve such amounts. The Company will instruct its transfer agent to provide the outstanding share information to the Holder in connection with its conversions.
13. The Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits, recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.
14. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable provision shall automatically be revised to equal the maximum rate of interest or other amount deemed interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it will not seek to claim or take advantage of any law that would prohibit or forgive the Company from paying all or a portion of the principal or interest on this Note.
15. This Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York or in the Federal courts sitting in the county or city of New York. This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be effective as an original.
____
Initials
| 7 |
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.
Dated: March 26, 2021
| MMEX RESOURCES CORPORATION | |||
| By: | /s/ JACK W. HANKS | ||
|
| Title: | President and CEO | |
____
Initials
| 8 |
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Note)
The undersigned hereby irrevocably elects to convert $___________ of the above Note into _________ Shares of Common Stock of MMEX Resources Corporation. (“Shares”) according to the conditions set forth in such Note, as of the date written below.
If Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.
Date of Conversion: _______________________________________________________
Applicable Conversion Price: ________________________________________________
Signature: ______________________________________________________________
[Print Name of Holder and Title of Signer]
Address: _______________________________________________________________
SSN or EIN: _____________________________________________________________
Shares are to be registered in the following name: _________________________________
Name: ___________________________________________
Address: _________________________________________
Tel: _____________________________________________
Fax: _____________________________________________
SSN or EIN: _______________________________________
Shares are to be sent or delivered to the following account:
Account Name: _____________________________________________________
Address: __________________________________________________________
____
Initials
| 9 |
EXHIBIT 4.8
|
| THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT”) |
|
US $82,000.00
MMEX RESOURCES CORPORATION
10% CONVERTIBLE REDEEMABLE NOTE
DUE JUNE 22, 2022
FOR VALUE RECEIVED, MMEX Resources Corporation. (the “Company”) promises to pay to the order of GS CAPITAL PARTNERS, LLC and its authorized successors and Permitted Assigns, defined below, (“Holder”), the aggregate principal face amount Eighty Two Thousand Dollars exactly (U.S. $82,000.00) on June 22, 2022 (“Maturity Date”) and to pay interest on the principal amount outstanding hereunder at the rate of 10% per annum commencing on June 22, 2021 (“Issuance Date”). The Company acknowledges this Note was issued with a $3,500 original issue discount and as such the purchase price was $78,500.00. The interest will be paid to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note. The principal of, and interest on, this Note are payable at 30 Washington Street, Suite 5L, Brooklyn, NY 11201, initially, and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein. Permitted Assigns means any Holder assignment, transfer or sale of all or a portion of this Note accompanied by an Opinion of Counsel as provided for in Section 2(f) of the Securities Purchase Agreement.
This Note is subject to the following additional provisions:
1. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder shall pay any tax or other governmental charges payable in connection therewith. To the extent that Holder subsequently transfers, assigns, sells or exchanges any of the multiple lesser denomination notes, Holder acknowledges that it will provide the Company with Opinions of Counsel as provided for in Section 2(f) of the Securities Purchase Agreement.
____
Initials
| 1 |
2. The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”) and applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prequalified prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date. All notices of conversion will be accompanied by an Opinion of Counsel.
4. (a) During the first 180 days this Note is in effect, the Holder of this Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s common stock (the “Common Stock”) at a price for each share of Common Stock equal to $0.015 per share. Beginning the 180th daily anniversary of the Issuance Date of the Note, the Holder of this Note is entitled, at its option, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s common stock (the “Common Stock”) at a price (“Conversion Price”) for each share of Common Stock equal to 66% of the average of the two lowest trading prices of the Common Stock as reported on the Exchange, for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company (provided such Notice of Conversion is delivered together with an Opinion of Counsel, by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Accrued, but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. To the extent the Conversion Price of the Company’s Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this increase. In the event the Company experiences a DTC “Chill” on its shares, the Conversion Price shall be decreased to 56% instead of 66% while that “Chill” is in effect. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 4.99% of the outstanding shares of the Common Stock of the Company (which may be increased up to 9.9% upon 60 days’ prior written notice by the Investor). The conversion discount, look back period and other terms will be adjusted on a ratchet basis if the Company offers a more favorable conversion discount, prepayment rate, interest rate, (whether through a straight discount or in combination with an original issue discount), look back period or other more favorable term to another party for any financings while this Note is in effect, including but not limited to defaults, penalties and the remedy for such defaults or penalties.
____
Initials
| 2 |
(b) Interest on any unpaid principal balance of this Note shall be paid at the rate of 10% per annum. Interest shall be paid by the Company in Common Stock (“Interest Shares”). Holder may, at any time, send in a Notice of Conversion to the Company for Interest Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
(c) Provided that the entire outstanding balance under the certain $1,000,000 note dated February 22, 2021 has been repaid to the Holder, then and only then the outstanding principal balance of this Note may be prepaid at the following prices:
| Time Period | Payment Premium |
| <=60 days after note issuance | 110% of the sum of principal plus accrued interest |
| >60 days <= 120 days after note issuance | 114% of the sum of principal plus accrued interest |
| >120 days <=180 days after note issuance | 118% of the sum of principal plus accrued interest |
This Note may not be prepaid after the 180th day. Such redemption must be closed and funded within 3 days of giving notice of redemption of the right to redeem shall be null and void.
(d) Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related transactions, (ii) a reclassification, capital reorganization (excluding an increase in authorized capital) or other change or exchange of outstanding shares of the Common Stock, other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.
____
Initials
| 3 |
(e) In case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.
5. No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7. The Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by the Holder in collecting any amount due under this Note.
8. If one or more of the following described “Events of Default” shall occur:
(a) The Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company; or
(b) Any of the representations or warranties made by the Company herein or in any agreement entered into by the Company in connection with the execution and delivery of this Note, shall be false or misleading in any respect; or
(c) The Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of the Company under this Note or any other note issued to the Holder; or
(d) The Company shall (1) become insolvent (which does not include a “going concern opinion); (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal or state laws as applicable; or
____
Initials
| 4 |
(e) A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged within sixty (60) days after such appointment; or
(f) Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company; or
(g) One or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of any proposed sale thereunder; or
(h) Defaulted on or breached any term of any other purchase agreement or note or similar debt instrument into which the Company has entered and failed to cure such default within the appropriate grace period; or
(i) The Company shall have its Common Stock delisted from an exchange (including the OTC Markets exchange) or, if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days or ceases to file its 1934 act reports with the SEC;
(j) If a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;
(k) The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business days of its receipt of a Notice of Conversion which includes an Opinion of Counsel expressing an opinion which supports the removal of a restrictive legend; or
(l) The Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder.
(m) The Company shall be delinquent in its periodic report filings with the Securities and Exchange Commission; or
(n) The Company shall cause to lose the “bid” price for its stock in a market (including the OTC marketplace or other exchange).
____
Initials
| 5 |
Then, or at any time thereafter, unless cured within 5 days, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of grace, enforce any and all of the Holder’s rights and remedies provided herein or any other rights or remedies afforded by law. Upon an Event of Default, interest shall accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. In the event of a breach of Section 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th day after the conversion notice was delivered to the Company. This penalty shall increase to $500 per day beginning on the 10th day. In an event of a breach of Section 8(h) the Holder may elect to utilize the same remedy available under the defaulted interest and such remedy shall be incorporated by reference into the terms of this Note. The penalty for a breach of Section 8(n) shall be an increase of the outstanding principal amounts by 20%. Further, if a breach of Section 8(m) occurs or is continuing after the 6 month anniversary of the Note, then the Holder shall be entitled to use the lowest closing bid price during the delinquency period as a base price for the conversion. For example, if the lowest closing bid price during the delinquency period is $0.01 per share and the conversion discount is 50% the Holder may elect to convert future conversions at $0.005 per share.
If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
The Company must pay the Failure to Deliver Loss by cash payment, and any such cash payment must be made by the third business day from the time of the Holder’s written notice to the Company.
9. In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
10. Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Company and the Holder.
11. The Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information indicating it is no longer a “shell” issuer. Further. The Company will instruct its counsel to either (i) write a 144 opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.
12. The Company shall issue irrevocable transfer agent instructions reserving 414,141,000 shares of its Common Stock for conversions under this Note (the “Share Reserve”). Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled. The Company shall pay all transfer agent costs associated with issuing and delivering the share certificates to Holder. If such amounts are to be paid by the Holder, it may deduct such amounts from the Conversion Price. The Company should at all times reserve a minimum of two times the amount of shares required if the note would be fully converted. The Holder may reasonably request increases from time to time to reserve such amounts. The Company will instruct its transfer agent to provide the outstanding share information to the Holder in connection with its conversions.
____
Initials
| 6 |
13. The Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits, recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.
14. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable provision shall automatically be revised to equal the maximum rate of interest or other amount deemed interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it will not seek to claim or take advantage of any law that would prohibit or forgive the Company from paying all or a portion of the principal or interest on this Note.
15. This Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York or in the Federal courts sitting in the county or city of New York. This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be effective as an original.
____
Initials
| 7 |
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.
Dated: June 22, 2021
| MMEX RESOURCES CORPORATION | |||
| By: | /s/ JACK W. HANKS | ||
|
| Title: | President and CEO | |
____
Initials
| 8 |
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Note)
The undersigned hereby irrevocably elects to convert $___________ of the above Note into _________ Shares of Common Stock of MMEX Resources Corporation. (“Shares”) according to the conditions set forth in such Note, as of the date written below.
If Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.
Date of Conversion: ____________________________________________________________
Applicable Conversion Price: ______________________________________________________
Signature: ____________________________________________________________________
[Print Name of Holder and Title of Signer]
Address: ____________________________________________________________________
____________________________________________________________________
SSN or EIN: ______________________________
Shares are to be registered in the following name: ___________________________________
Name: ________________________________________
Address: _____________________________________
Tel: _________________________________________
Fax: _________________________________________
SSN or EIN: ___________________________________
Shares are to be sent or delivered to the following account:
Account Name: ____________________________________________
Address: _________________________________________________
____
Initials
| 9 |
EXHIBIT 31.1
CERTIFICATION BY CHIEF EXECUTIVE OFFICER
AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Jack W. Hanks, Chief Executive Officer and Chief Financial Officer of MMEX Resources Corporation, certify that:
| 1. | I have reviewed this annual report on Form 10-K of MMEX Resources Corporation; |
|
|
|
| 2. | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; |
|
|
|
| 3. | Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report. |
|
|
|
| 4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
|
| (a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report on Form 10-K is being prepared; |
|
|
|
|
|
| (b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
|
|
|
| (c) | evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
|
|
|
| (d) | disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. |
| 5. | I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons fulfilling the equivalent function): |
|
| (a) | all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and |
|
|
|
|
|
| (b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls over financial reporting. |
| Date: July 29, 2021 | By: | /s/ Jack W. Hanks |
|
| Jack W. Hanks |
| ||
| Chief Executive Officer |
| ||
| (Principal Executive Officer and Principal Financial Officer) |
|
EXHIBIT 32.1
CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER
AND CHIEF FINANCIAL OFFICER
OF MMEX Resources Corporation (REGISTRANT)
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350):
I, Jack W. Hanks, Chief Executive Officer and Chief Financial Officer of the Registrant, certify to the best of my knowledge and belief pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (18 U.S.C.ss. 1350) that:
|
| 1. | The Annual Report on Form 10-K for the period ended April 30, 2021, which this statement accompanies, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
|
|
|
|
| 2. | The information contained in the Annual Report on Form 10-K fairly presents, in all material respects, the financial condition and result of operations of the Registrant. |
| Date: July 29, 2021 | By: | /s/ Jack W. Hanks |
|
| Jack W. Hanks |
| ||
| Chief Executive Officer |
| ||
| (Principal Executive Officer and Principal Financial Officer) |
|