UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORMForm 10-Q
(Mark One)
x ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JanuaryOctober 31, 20182021
¨ ☐ 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: 333-152608000-55831
MMEX RESOURCES CORPORATION |
(Exact name of Issuer as specified in its charter) |
|
Nevada |
| 26-1749145 |
(State or other Jurisdiction of Incorporation or Organization) |
| (I.R.S. 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) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x ☒ No ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x ☒ No ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
| Accelerated filer |
|
Non-accelerated filer |
| Smaller reporting company |
|
(Do not check if a 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 registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ ☐ No x☒
Applicable only to issuers involved in bankruptcy proceedings during the preceding five years:
Indicate by check mark whether the registrant filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨ ☐ No ¨☐
Applicable only to corporate issuers:
|
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of MarchDecember 9, 20182021, there were 1,733,190,04817,845,362 shares of Class A common stock, $0.001 par value, issued and outstanding and 1,500,000,000 shares of Class B common stock, $0.001 par value, issued and outstanding.
TABLE OF CONTENTS
QUARTER ENDED JANUARYOCTOBER 31, 20182021
34
2 |
Table of Contents |
PART I – FINANCIAL INFORMATION
The accompanying condensed consolidated financial statements of MMEX Resources Corporation and subsidiaries (the “Company”) are unaudited and have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions for Form 10-Q. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements.
In the opinion of management, the condensed consolidated financial statements contain all material adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial condition, results of operations, and cash flows of the Company for the interim periods presented.
Operating results and cash flows for any interim period are not necessarily indicative of the results that may be expected for other interim periods or the full fiscal year. These condensed consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended April 30, 20172021 filed with the Securities and Exchange Commission (“SEC”).
The Company amended its 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 in this report on Form 10-Q.
3 |
Table of Contents |
MMEX RESOURCES CORPORATION
Condensed Consolidated Balance Sheets
|
| January 31, 2018 |
| April 30, 2017 |
| |||||||||||
|
| (Unaudited) |
|
|
|
| October 31, |
|
| April 30, |
| |||||
Assets |
|
|
|
| (unaudited) |
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Current assets: |
|
|
|
|
|
|
|
|
|
| ||||||
Cash |
| $ | 106,690 |
| $ | 54,513 |
|
| $ | 273,686 |
| $ | 330,449 |
| ||
Prepaid expenses |
|
| 22,500 |
|
|
| - |
| ||||||||
Prepaid expenses and other current assets |
|
| 35,433 |
|
|
| 37,893 |
| ||||||||
Total current assets |
| 129,190 |
| 54,513 |
|
| 309,119 |
| 368,342 |
| ||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Property and equipment, net |
| 106,980 |
| - |
|
| 709,709 |
| 472,169 |
| ||||||
Deposit |
|
| 900 |
|
|
| - |
|
|
| 900 |
|
|
| 900 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total assets |
| $ | 237,070 |
|
| $ | 54,513 |
|
| $ | 1,019,728 |
|
| $ | 841,411 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Liabilities and Stockholders’ Deficit |
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
| ||||||
Accounts payable |
| $ | 749,673 |
| $ | 694,664 |
|
| $ | 589,201 |
| $ | 802,640 |
| ||
Accrued expenses |
| 237,124 |
| 912,870 |
|
| 816,861 |
| 807,349 |
| ||||||
Accrued expenses – related party |
| 31,633 |
| 70,670 |
| |||||||||||
Notes payable, currently in default |
| 75,001 |
| 375,001 |
| |||||||||||
Convertible notes payable, currently in default, net of discount of $0 and $0 at January 31, 2018 and April 30, 2017, respectively |
| 75,000 |
| 195,000 |
| |||||||||||
Convertible notes payable, net of discount of $354,587 and $136,284 at January 31, 2018 and April 30, 2017, respectively |
| 243,686 |
| 8,716 |
| |||||||||||
Convertible preferred stock |
| - |
| 137,500 |
| |||||||||||
Accounts payable and accrued expenses – related parties |
| 59,023 |
| 272,834 |
| |||||||||||
Note payable, currently in default |
| 75,001 |
| 75,001 |
| |||||||||||
Note payable |
| 775,000 |
| 775,000 |
| |||||||||||
Convertible notes payable, currently in default, net of discount of $0 and $0 at October 31, 2021 and April 30, 2021, respectively |
| 75,000 |
| 235,775 |
| |||||||||||
Convertible notes payable, net of discount of $0 and $133,944 at October 31, 2021 and April 30, 2021, respectively |
| 370,000 |
| 398,056 |
| |||||||||||
Convertible notes payable – related parties, net of discount of $0 and $235 at October 31, 2021 and April 30, 2021, respectively |
| 0 |
| 74,755 |
| |||||||||||
PPP loans payable |
| 0 |
| 150,000 |
| |||||||||||
SBA express bridge loan payable |
| 10,000 |
| 10,000 |
| |||||||||||
Derivative liabilities |
|
| 842,813 |
|
|
| 6,610,001 |
|
|
| 0 |
|
|
| 3,010,042 |
|
Total current liabilities |
| 2,254,930 |
| 9,004,422 |
|
|
| 2,770,086 |
|
|
| 6,611,452 |
| |||
|
|
|
|
|
| |||||||||||
Long-term liabilities: |
|
|
|
|
| |||||||||||
Convertible note payable, net of discount of $273,052 at January 31, 2018 |
|
| 63,428 |
|
|
| - |
| ||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Total liabilities |
|
| 2,318,358 |
|
|
| 9,004,422 |
|
|
| 2,770,086 |
|
|
| 6,611,452 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Stockholders’ deficit: |
|
|
|
|
|
|
|
|
|
| ||||||
Common stock; $0.001 par value: |
|
|
|
|
| |||||||||||
Class A: 3,000,000,000 shares authorized, 1,627,879,649 and 987,616,168 shares issued and outstanding at January 31, 2018 and April 30, 2017, respectively |
| 1,627,880 |
| 987,617 |
| |||||||||||
Class B: 2,000,000,000 shares authorized, 1,500,000,000 shares issued and outstanding at January 31, 2018 and April 30, 2017, respectively |
| 1,500,000 |
| 1,500,000 |
| |||||||||||
Common stock payable |
| - |
| 307,978 |
| |||||||||||
Common stock; $0.001 par value; 10,000,000 shares authorized, 17,820,362 and 3,251,641 shares issued and outstanding at October 31, 2021 and April 30, 2021, respectively |
| 17,820 |
| 3,252 |
| |||||||||||
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 |
| 28,457,391 |
| 25,551,533 |
|
| 65,067,236 |
| 62,201,528 |
| ||||||
Non-controlling interest |
| 356,429 |
| (378,443 | ) |
| 9,871 |
| 9,871 |
| ||||||
Accumulated (deficit) |
|
| (34,022,988 | ) |
|
| (36,918,594 | ) | ||||||||
Accumulated deficit |
|
| (66,845,286 | ) |
|
| (67,984,693 | ) | ||||||||
Total stockholders’ deficit |
|
| (2,081,288 | ) |
|
| (8,949,909 | ) |
|
| (1,750,358 | ) |
|
| (5,770,041 | ) |
|
|
|
|
|
|
|
|
|
|
| ||||||
Total liabilities and stockholders’ deficit |
| $ | 237,070 |
|
| $ | 54,513 |
|
| $ | 1,019,728 |
|
| $ | 841,411 |
|
See accompanying notes to condensed consolidated financial statements.
4 |
Table of Contents |
MMEX RESOURCES CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
|
| Three Months Ended January 31, |
| Nine Months Ended January 31, |
|
| Three Months Ended October 31, |
| Six Months Ended |
| ||||||||||||||||||||||
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Revenues |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
General and administrative expenses |
| 173,783 |
| 21,759 |
| 644,494 |
| 148,000 |
|
| 274,493 |
| 179,350 |
| 717,000 |
| 362,675 |
| ||||||||||||||
Refinery start-up costs |
| 114,616 |
| - |
| 613,147 |
| - |
| |||||||||||||||||||||||
Project costs |
| 1,006,666 |
| 51,985 |
| 1,009,726 |
| 89,685 |
| |||||||||||||||||||||||
Depreciation and amortization |
|
| 723 |
|
|
| - |
|
|
| 1,430 |
|
|
| 386 |
|
|
| 9,246 |
|
|
| 8,720 |
|
|
| 17,964 |
|
|
| 17,438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Total operating expenses |
|
| 289,122 |
|
|
| 21,759 |
|
|
| 1,259,071 |
|
|
| 148,386 |
|
|
| 1,290,405 |
|
|
| 240,055 |
|
|
| 1,744,690 |
|
|
| 469,798 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Loss from operations |
|
| (289,122 | ) |
|
| (21,759 | ) |
|
| (1,259,071 | ) |
|
| (148,386 | ) |
|
| (1,290,405 | ) |
|
| (240,055 | ) |
|
| (1,744,690 | ) |
|
| (469,798 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Interest expense |
| (617,198 | ) |
| (97,436 | ) |
| (1,343,599 | ) |
| (214,375 | ) |
| (57,645 | ) |
| (171,054 | ) |
| (262,255 | ) |
| (725,143 | ) | ||||||||
Gain (loss) on derivative liabilities |
| 714,736 |
| 222,080 |
| 4,667,290 |
| 255,188 |
|
| 0 |
| 102,341 |
| 3,010,042 |
| 1,289,693 |
| ||||||||||||||
Gain on assignment and assumption agreement |
| - |
| - |
| 1,090,271 |
| - |
| |||||||||||||||||||||||
Gain on extinguishment of debt |
|
| - |
|
|
| - |
|
|
| 475,587 |
|
|
| 207,803 |
| ||||||||||||||||
Gain (loss) on extinguishment of liabilities |
|
| 196,166 |
|
|
| 0 |
|
|
| 136,310 |
|
|
| 0 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Total other income (expense) |
|
| 97,538 |
|
|
| 332,447 |
|
|
| 4,889,549 |
|
|
| 248,616 |
|
|
| 138,521 |
|
|
| 68,713 |
|
|
| 2,884,097 |
|
|
| 564,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Income (loss) before income taxes |
| (191,584 | ) |
| 310,688 |
| 3,630,478 |
| 100,230 |
|
| (1,151,884 | ) |
| (308,768 | ) |
| 1,139,407 |
| 94,752 |
| |||||||||||
Provision for income taxes |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net income (loss) |
| (191,584 | ) |
| 310,688 |
| 3,630,478 |
| 100,230 |
|
| (1,151,884 | ) |
| (308,768 | ) |
| 1,139,407 |
| 94,752 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Non-controlling interest in (income) loss of consolidated subsidiaries |
|
| (84,213 | ) |
|
| 455 |
|
|
| (734,872 | ) |
|
| 1,370 |
| ||||||||||||||||
Non-controlling interest in income of consolidated subsidiaries |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net income (loss) attributable to the Company |
| $ | (275,797 | ) |
| $ | 311,143 |
|
| $ | 2,895,606 |
|
| $ | 101,600 |
|
| $ | (1,151,884 | ) |
| $ | (308,768 | ) |
| $ | 1,139,407 |
|
| $ | 94,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net income (loss) per common share – basic and diluted |
| $ | (0.00 | ) |
| $ | 0.00 |
|
| $ | 0.00 |
|
| $ | 0.00 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Weighted average number of common shares outstanding: |
| |||||||||||||||||||||||||||||||
Basic and diluted |
|
| 1,539,613,626 |
|
|
| 579,136,120 |
|
|
| 1,444,427,207 |
|
|
| 442,361,280 |
| ||||||||||||||||
Diluted |
|
| 1,539,613,626 |
|
|
| 636,500,120 |
|
|
| 1,639,341,862 |
|
|
| 449,531,780 |
| ||||||||||||||||
Net income (loss) per common share – basic |
| $ | (0.12 | ) |
| $ | 0.22 |
|
| $ | 0.17 |
|
| $ | 0.00 |
| ||||||||||||||||
Net income (loss) per common share – diluted |
| $ | (0.12 | ) |
| $ | 0.22 |
|
| $ | 0.10 |
|
| $ | 0.07 |
| ||||||||||||||||
Weighted average number of common shares outstanding - basic |
|
| 9,908,190 |
|
|
| 1,391,321 |
|
|
| 6,607,443 |
|
|
| 1,363,302 |
| ||||||||||||||||
Weighted average number of common shares outstanding - diluted |
|
| 9,908,190 |
|
|
| 1,391,321 |
|
|
| 13,069,133 |
|
|
| 2,500,000 |
|
See accompanying notes to condensed consolidated financial statements.
5 |
Table of Contents |
MMEX RESOURCES CORPORATION
Condensed Consolidated StatementsStatement of Cash FlowsStockholders’ Deficit
Three and Six Months Ended October 31, 2020 (Unaudited)
|
| Nine Months Ended January 31, |
| |||||
|
| 2018 |
|
| 2017 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net income (loss) attributable to the Company |
| $ | 2,895,606 |
|
| $ | 101,600 |
|
Non-controlling interest in income (loss) of consolidated subsidiaries |
|
| 734,872 |
|
|
| (1,370 | ) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization expense |
|
| 1,430 |
|
|
| 386 |
|
Stock-based compensation |
|
| 227,125 |
|
|
| 47,254 |
|
Convertible note payable issued for commitment fee |
|
| 80,000 |
|
|
| - |
|
Interest expense added to convertible note principal |
|
| 73,427 |
|
|
| - |
|
Gain on derivative liabilities |
|
| (4,667,290 | ) |
|
| (255,188 | ) |
Gain on assignment and assumption agreement |
|
| (1,090,271 | ) |
|
| - |
|
Gain on extinguishment of debt |
|
| (475,587 | ) |
|
| (207,803 | ) |
Amortization of debt discount |
|
| 1,033,628 |
|
|
| 61,320 |
|
Increase in operating assets: |
|
|
|
|
|
|
|
|
Prepaid expenses |
|
| (22,500 | ) |
|
| - |
|
Deposits |
|
| (900 | ) |
|
| - |
|
Increase in operating liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
| 169,491 |
|
|
| 23,187 |
|
Accrued expenses |
|
| 90,306 |
|
|
| 106,321 |
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
| (950,663 | ) |
|
| (124,293 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
| (108,410 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
| (108,410 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from convertible notes payable |
|
| 1,111,250 |
|
|
| 84,782 |
|
Proceeds from issuance of common stock |
|
| - |
|
|
| 1,000 |
|
Proceeds from common stock payable |
|
| - |
|
|
| 37,563 |
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
| 1,111,250 |
|
|
| 123,345 |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
| 52,177 |
|
|
| (948 | ) |
Cash at the beginning of the period |
|
| 54,513 |
|
|
| 1,030 |
|
|
|
|
|
|
|
|
|
|
Cash at the end of the period |
| $ | 106,690 |
|
| $ | 82 |
|
(Continued)
|
| Common Stock |
|
| Class 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 | ) |
Net loss |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 403,520 |
|
|
| 403,520 |
|
Balance, July 31, 2020 |
|
| 1,335,283 |
|
|
| 1,335 |
|
|
| 1,000 |
|
|
| 1 |
|
|
| 37,721,639 |
|
|
| 9,871 |
|
|
| (43,054,287 | ) |
|
| (5,321,441 | ) |
Shares issued for conversion of convertible notes payable and accrued interest |
|
| 85,828 |
|
|
| 86 |
|
|
| - |
|
|
| 0 |
|
|
| 56,594 |
|
|
| 0 |
|
|
| 0 |
|
|
| 56,680 |
|
Settlement of derivative liabilities |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 18,612 |
|
|
| 0 |
|
|
| 0 |
|
|
| 18,612 |
|
Net loss |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (308,768 | ) |
|
| (308,768 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, October 31, 2020 |
|
| 1,421,111 |
|
| $ | 1,421 |
|
|
| 1,000 |
|
| $ | 1 |
|
| $ | 37,796,845 |
|
| $ | 9,871 |
|
| $ | (43,363,055 | ) |
| $ | (5,554,917 | ) |
See accompanying notes to condensed consolidated financial statements.
6 |
Table of Contents |
MMEX RESOURCES CORPORATION
Condensed Consolidated StatementsStatement of Cash Flows (continued)Stockholders’ Deficit
Three and Six Months Ended October 31, 2021 (Unaudited)
|
| Nine Months Ended January 31, |
| |||||
|
| 2018 |
|
| 2017 |
| ||
Supplemental disclosure: |
|
|
|
|
|
| ||
Interest paid |
| $ | - |
|
| $ | - |
|
Income taxes paid |
|
| - |
|
|
| - |
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
Common stock for common stock payable |
|
| 307,978 |
|
|
| 3,064,332 |
|
Settlement of convertible preferred stock and accrued interest for common stock |
|
| 200,476 |
|
|
| - |
|
Common stock for derivative liabilities in cashless exercise of warrants |
|
| 1,906,006 |
|
|
| - |
|
Common stock for accrued expenses |
|
| 4,400 |
|
|
| 208,219 |
|
Common stock for accounts payable |
|
| - |
|
|
| 5,725 |
|
Common stock issued in conversion of debt |
|
| 1,215,377 |
|
|
| 212,283 |
|
Settlement of convertible notes payable and accrued interest for common stock |
|
| 124,800 |
|
|
| - |
|
Derivative liabilities for debt discount |
|
| 1,348,460 |
|
|
| 63,914 |
|
Accrued interest payable added to convertible note principal |
|
| 8,723 |
|
|
| - |
|
Common stock payable contributed to capital |
|
| - |
|
|
| 90,000 |
|
|
| Common Stock |
|
| Series A Preferred Stock |
|
| Additional |
|
| Non-Controlling |
|
| Accumulated |
|
|
|
| ||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Interest |
|
| Deficit |
|
| Total |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance, April 30, 2021 |
|
| 3,251,641 |
|
| $ | 3,252 |
|
|
| 1,000 |
|
| $ | 1 |
|
| $ | 62,201,528 |
|
| $ | 9,871 |
|
| $ | (67,984,693 | ) |
| $ | (5,770,041 | ) |
Shares issued with prefunded warrants for cash |
|
| 170,000 |
|
|
| 170 |
|
|
| - |
|
|
| - |
|
|
| 2,999,830 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3,000,000 |
|
Shares issued for conversion of convertible notes payable and accrued interest |
|
| 11,814 |
|
|
| 11 |
|
|
| - |
|
|
| 0 |
|
|
| 42,520 |
|
|
| 0 |
|
|
| 0 |
|
|
| 42,531 |
|
Shares issued for reverse stock split |
|
| 17,754 |
|
|
| 18 |
|
|
| - |
|
|
| 0 |
|
|
| (18 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Shares issued for the exercise of prefunded warrants |
|
| 250,000 |
|
|
| 250 |
|
|
| - |
|
|
| 0 |
|
|
| (250 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Offering costs |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| (349,150 | ) |
|
| 0 |
|
|
| 0 |
|
|
| (349,150 | ) |
Net income |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 2,291,291 |
|
|
| 2,291,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, July 31, 2021 |
|
| 3,701,209 |
|
|
| 3,701 |
|
|
| 1,000 |
|
|
| 1 |
|
|
| 64,894,460 |
|
|
| 9,871 |
|
|
| (65,693,402 | ) |
|
| (785,369 | ) |
Shares issued for conversion of convertible notes payable and accrued interest |
|
| 6,421,929 |
|
|
| 6,422 |
|
|
| - |
|
|
| 0 |
|
|
| 105,484 |
|
|
| 0 |
|
|
| 0 |
|
|
| 111,906 |
|
Shares issued for conversion of related party convertible notes payable and accrued interest |
|
| 6,817,224 |
|
|
| 6,817 |
|
|
| - |
|
|
| - |
|
|
| 68,172 |
|
|
| 0 |
|
|
| 0 |
|
|
| 74,989 |
|
Shares issued for the exercise of prefunded warrants |
|
| 880,000 |
|
|
| 880 |
|
|
| - |
|
|
| 0 |
|
|
| (880 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Net (loss) |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (1,151,884 | ) |
|
| (1,151,884 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, October 31, 2021 |
|
| 17,820,362 |
|
| $ | 17,820 |
|
|
| 1,000 |
|
| $ | 1 |
|
| $ | 65,067,236 |
|
| $ | 9,871 |
|
| $ | (66,845,286 | ) |
| $ | (1,750,358 | ) |
See accompanying notes to condensed consolidated financial statements.
7 |
Table of Contents |
MMEX RESOURCES CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| Six Months Ended |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net income (loss) |
| $ | 1,139,407 |
|
| $ | 94,752 |
|
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization expense |
|
| 17,964 |
|
|
| 17,438 |
|
(Gain) loss on derivative liabilities |
|
| (3,010,042 | ) |
|
| (1,289,693 | ) |
Amortization of debt discount |
|
| 77,822 |
|
|
| 134,959 |
|
Interest expense added to convertible note payable principal |
|
| 0 |
|
|
| 35,000 |
|
(Gain) loss on extinguishment of liabilities |
|
| (136,310 | ) |
|
| 0 |
|
(Increase) decrease in prepaid expenses and other current assets |
|
| 2,460 |
|
| 16,187 |
| |
Increase (decrease) in liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
| (171,857 | ) |
|
| 140,431 |
|
Accrued expenses |
|
| 19,089 |
|
|
| 524,196 |
|
Accounts payable and accrued expenses – related party |
|
| (213,811 | ) |
|
| 229,950 |
|
Net cash used in operating activities |
|
| (2,275,278 | ) |
|
| (96,780 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
| (255,504 | ) |
|
| 0 |
|
Net cash used in investing activities |
|
| (255,504 | ) |
|
| 0 |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from notes payable |
|
| 200,000 |
|
|
| 0 |
|
Proceeds from convertible notes payable |
|
| 78,500 |
|
|
| 0 |
|
Proceeds from convertible notes payable – related party |
|
| 0 |
|
|
| 20,000 |
|
Proceeds from SBA express bridge loan payable |
|
| 0 |
|
|
| 10,000 |
|
Repayments of notes payable |
|
| (200,000 | ) |
|
| 0 |
|
Repayments of convertible notes payable |
|
| (255,331 | ) |
|
| 0 |
|
Proceeds from the sale of common stock and prefunded warrants |
|
| 3,000,000 |
|
|
| 0 |
|
Offering costs |
|
| (349,150 | ) |
|
| 0 |
|
Net cash provided by financing activities |
|
| 2,474,019 |
|
|
| 30,000 |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
| (56,763 | ) |
|
| (66,780 | ) |
Cash at the beginning of the period |
|
| 330,449 |
|
|
| 66,830 |
|
Cash at the end of the period |
| $ | 273,686 |
|
| $ | 50 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure: |
|
|
|
|
|
| ||
Interest paid |
| $ | 116,374 |
|
| $ | 0 |
|
Income taxes paid |
| $ | 0 |
|
| $ | 0 |
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
Common stock issued in conversion of debt |
| $ | 154,437 |
|
| $ | 56,680 |
|
Common stock issued in conversion of related party debt |
| $ | 74,989 |
|
| $ | 0 |
|
Settlement of derivative liabilities |
| $ | 0 |
|
| $ | 18,612 |
|
Derivative liabilities for related party debt discount |
| $ | 0 |
|
| $ | 7,101 |
|
Convertible notes payable – related party for accrued expenses |
| $ | 0 |
|
| $ | 76,266 |
|
Reverse split |
| $ | 18 |
|
| $ | 0 |
|
Exercise of prefunded warrants |
| $ | 1,130 |
|
| $ | 0 |
|
See accompanying notes to condensed consolidated financial statements.
8 |
Table of Contents |
MMEX RESOURCES CORPORATION
Notes to Condensed Consolidated Financial Statements
NineSix Months Ended JanuaryOctober 31, 2018
2021
(Unaudited)
NOTE 1 – BACKGROUND, ORGANIZATION AND BASIS OF PRESENTATION
MMEX Resources Corporation (the “Company” or “MMEX”) is a company engaged in the exploration, extraction, refining and distribution of oil, gas, petroleum products and electric power. We plan to focus on the acquisition, development and financing of oil, gas, refining and electric power projects in Texas, Peru, and other countries in Latin America using the expertise of our principals to identify, finance and acquire these projects. On August 30, 2017, the Company announced it has secured permit approval from the Texas Commission on Environmental Quality (TCEQ) to build a 10,000 barrel-per-day (BPD) crude distillation unit near Fort Stockton, Texas.
MMEX was formed as a Nevada corporation in 2005. The current management team ledlead 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, 20162016.
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 condensed 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:
|
| Form | State of |
| ||||
|
|
|
|
|
|
| ||
|
| |||||||
MMEX Resources Corporation (“MMEX”) |
| - |
| Corporation |
| Nevada |
| Parent |
|
| 100% |
|
|
|
|
|
|
|
| 100% |
|
|
|
|
| Subsidiary |
|
|
|
| LLC |
|
|
| Subsidiary |
|
|
|
| LLC |
|
|
| Subsidiary |
|
| 100% |
|
|
|
|
| Subsidiary |
|
|
|
|
|
|
| Subsidiary |
[1] | Pecos Refining & Transport, LLC was formed in June 2017 with the Company as its sole member. Effective September 22, 2021 Pecos Refining & Transport, LLC changed its name to Pecos Clean Fuels & Transport, LLC. Pecos owns the land on which the Company’s planned hydrogen projects are to be developed. | |
|
|
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 for all periods presented due to the common ownership. AMC through the Trust controls the Hunza coal interest previously owned by MMEX.
On September 1, 2016, the Company entered into a stock assignment agreement with LatAm Services, LLC (“LatAm”), whose members are officers and directors of the Company, pursuant to which LatAm acquired MCCH, a wholly owned subsidiary of the Company, and MCC and CC, majority owned subsidiaries of MCCH. On September 18, 2017, the Company, the members of LatAm and William B. Short (“Short”), an unrelated individual, entered into an Assignment and Assumption Agreement pursuant to which Short acquired MCCH, MCC and CC from LatAm (Note 11). The accounts of MCCH, MCC and CC are included in the consolidated financial statements through September 18, 2017 due to the common ownership of LatAm. With the acquisition of these subsidiaries by LatAm, and subsequently by Short, MMEX has exited the Hunza coal project to focus on energy related projects under its new business plan.
[2] | This subsidiary is currently inactive. | |
[3] | This entity was formed on September 21, 2021 | |
All significant inter-company transactions have been eliminated in the preparation of the consolidated financial statements.
These condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for a fair presentation of the information contained therein.
The Company has adopted a fiscal year end of April 30.
Special Purpose Entity
On March 19,2021, the Company entered into a Project Agreement with a third party whereby a limited liability entity was to be formed to construct, operate, maintain, and finance a hydrogen and gas-to-liquids plant in Texas. Under the terms of the Project Agreement, WT Blue Fuels, LLC (“WT”) was formed on October 7, 2021, with the Company obtaining a 40% ownership of WT. To date, no operations or activities have taken place within WT and the Company has paid no consideration for WT, has not contributed any funds to WT, or paid any expenses on behalf of WT. As such, as of September 30, 2021 there is no activity or investment for WT recorded on the Company’s books.
9 |
Table of Contents |
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Our significant accounting policies are described in our Annual Report on Form 10-K for the year ended April 30, 20172021 filed with the SEC on July 28, 2017.29, 2021.
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.
Derivative liabilities
In a series of subscription agreements, we have issued warrants that contain certain anti-dilution provisions that we have identified as derivatives. We have also identified the conversion feature of certain of our convertible notes payable as derivatives. 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.
Property and equipment
Property and equipment is recorded at the lower of cost or estimated net recoverable amount, and is depreciated using the straight-line method over the estimated useful life of the related asset as follows:
Office furniture and equipment | 10 years |
Computer equipment and software | 5 years |
Land improvements | 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.
10 |
Table of Contents |
Derivative liabilities
The Company has issued warrants and stock options, certain of which contain anti-dilution provisions were previously identified as derivatives. In addition, the Company has previously identified the conversion feature of convertible notes payable as derivatives. The number of warrants or common shares to be issued under these agreements is indeterminate; therefore, through April 30, 2021 the Company concluded that the equity environment was tainted and all warrants, stock options and convertible debt were included in the value of the derivatives. During the six months ended October 31, 2021 it was determined that the Company could increase their authorized common shares at any time, therefore the environment was no longer deemed to be tainted and all derivative liabilities were written off the books.
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 consolidated financial statements as reflected herein. The carrying amounts of cash, prepaid expense and other current assets, accounts payable, accrued expenses and notes payable 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:
January 31, 2018 |
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||||||||||||||||||
October 31, 2021 |
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Derivative liabilities |
| $ | 842,813 |
| $ | - |
| $ | - |
| $ | 842,813 |
|
| $ | 0 |
| $ | 0 |
| $ | 0 |
| $ | 0 |
|
April 30, 2017 |
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||||||||||||||||||
April 30, 2021 |
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Derivative liabilities |
| $ | 6,610,001 |
| $ | - |
| $ | - |
| $ | 6,610,001 |
|
| $ | 3,010,042 |
| $ | 0 |
| $ | 0 |
| $ | 3,010,042 |
|
Table of Contents |
Revenue Recognition
Refinery start-up costsThe Company has adopted ASC 606, Revenue from Contracts with Customers, as amended, using the modified retrospective method, which requires the cumulative effect of adoption to be recognized as an adjustment to opening retained earnings in the period of adoption. To date, the Company has no operating revenues; therefore, there was no cumulative effect of adopting the new standard and no impact on our consolidated financial statements. The new standard 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.
CostsProject costs
All project costs incurred, prior to opening the Company’s proposed crude oil refinery in Pecos County, Texas, including acquisition of refinery rights, planning, design and permitting, arehave been recorded as start-upproject costs and expensed as incurred.
Basic and diluted lossincome (loss) per share
Basic net income or loss per 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 threesix months ended JanuaryOctober 31, 2018, potential2021 and 2020 the dilutive shares had an anti-dilutive effect of options, warrants, and were not includedconvertible notes payable was 6,461,690 and 1,136,698, respectively.
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 calculationconsolidated statement of diluted net loss per common shares; therefore, basic net loss per share is the same as diluted net loss per share.operations based on their fair values. For the threesix months ended JanuaryOctober 31, 20172021 and 2020, the nine months ended January 31, 2018 and 2017, potential dilutive securities included 57,364,000, 194,914,655 and 7,170,500 shares issuable for in-the-money warrants and shares issuable for convertible debt, respectively, using the treasury stock method.Company had no stock-based compensation to employees.
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.
12 |
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Reclassifications
Certain amounts in the consolidated financial statements for prior year periodsthe prior-year period have been reclassified to conform with the current year periodscurrent-year period presentation.
Recently Issued Accounting Pronouncements
In July 2017,August 2020, the FASBFinancial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-11, “Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480)(ASU) No. ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging (Topic 815)Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): I. Accounting for Certain FinancialConvertible Instruments with Down Round Features; II. Replacement ofand Contracts in an Entity’s Own Equity, which simplifies the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Non-controlling Interests with a Scope Exception.” Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round featurescharacteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. Under current GAAP, there are featuresfive 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 certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants andaccount), unless (1) a convertible instruments) with down roundinstrument 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 measurementamount and the level of fair value hierarchy of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, “Distinguishing Liabilities from Equity,” because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublicfor public business entities and certain mandatorily redeemable non-controlling interests. The amendments in Part II of this update do not have an accounting effect. This(2) the premium amount recorded as paid-in capital. ASU is2020-06 will be effective for fiscal years,public business entities that meet the definition of a Securities and interim periods within thoseExchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2018.2021, 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 unable to determineevaluating the potential impact on its consolidated financial statements of the adoption of this new accounting pronouncement.pronouncement to its consolidated 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.
NOTE 3 – GOING CONCERN
Our consolidated 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 $34,022,988$66,845,286 and a total stockholders’ deficit of $2,081,288$1,750,358 at JanuaryOctober 31, 2018,2021, and have reported negative cash flows from operations since inception. In addition,While we dohave received debt and equity funding during the period and have cash on hand of $273,686 at October 31, 2021, we still have a working capital deficit of $2,460,967, therefore there is a question of whether or not currentlywe have the cash resources to meet our operating commitments for the next twelve months and we expect to have, ongoing requirements foror will obtain, sufficient capital investmentinvestments to implement our business plan. Finally, 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 and emerging markets and the competitive environment in which we operate.
13 |
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Since inception, our operations have primarily been funded through private debt and equity financing, as well as capital contributions by our subsidiaries' partners, and 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, indicateraise substantial doubt that we maywill be unableable to continue as a going concern for a reasonable period of time.
The consolidated 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 consolidated 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 (see Note 7) to related parties, consisting primarily of consulting fees and expense reimbursements payable, totaled $31,633$59,023 and $70,670$272,834 as of JanuaryOctober 31, 20182021 and April 30, 2017,2021, 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 six months ended October 31, 2021 and 2020, we incurred consulting fees and expense reimbursement to Maple Resources totaling $120,800 and $107,382, respectively. During the six months ended October 31, 2021 we made payments to Maple Resources of $125,899.
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 September 2021 we made a payment of $110,00 to pay for the consulting fees accrued through August 2021 under the consulting agreement, therefore $10,000 was still owed as of October 31, 2021.
Amounts included in accounts payable and accrued expenses – related parties due to Maple Resources totaled $30,000 ($10,000 payable in stock) and $118,540 ($90,000 payable in stock) as of October 31, 2021 and April 30, 2021, respectively, which was inclusive of accrued interest due under the convertible notes described below.
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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 six months ended October 31, 2021 we recorded $15,000 for the amount payable in stock under the consulting agreement and recorded expense reimbursements owed to Mrs. Hanks of $16,561. In September 2021 we made a payment of $55,000 to pay for the consulting fees accrued through August 2021 under the consulting agreement and made repayments of $28,602 for reimbursable expenses. Amounts included in accounts payable and accrued expenses – related parties due to Mrs. Hanks totaled $11,017 ($5,000 payable in stock) and $63,058 ($45,000 payable in stock) as of October 31, 2021 and April 30, 2021, respectively.
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 six months ended October 31, 2021 we incurred $61,515 for fees and expense reimbursements to the children and paid $140,015. Amounts included in accounts payable and accrued expenses – related parties due to the children totaled $12,000 and $90,500 as of October 31, 2021 and April 30, 2021, respectively.
Effective September 1, 2021, we entered into a consulting agreement with BNL Family Trust, owned by Bruce Lemons, Director, 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. During the six months ended October 31, 2021 we recorded $5,000 for the amount payable in stock under the consulting agreement and made no payments, therefore the $5,000 was included in accounts payable and accrued expenses – related parties as of October 31, 2021.
Convertible Notes Payable – Related Parties
Convertible notes payable – related parties consist of the following:
|
| October 31, 2021 |
|
| April 30, 2021 |
| ||
Convertible note payable with Maple Resources Corporation, matured December 27, 2020, with interest at 5%, convertible into common shares of the Company [1] |
| $ | 0 |
|
| $ | 7,033 |
|
Convertible note payable with BNL Family Trust, matured December 27, 2020, with interest at 5%, convertible into common shares of the Company [2] |
|
| 0 |
|
|
| 10,691 |
|
Convertible note payable with Maple Resources Corporation, matured February 12, 2021, with interest at 5%, convertible into common shares of the Company [3] |
|
| 0 |
|
|
| 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] |
|
| 0 |
|
|
| 800 |
|
Convertible note payable with Maple Resources Corporation, matured May 12, 2021, with interest at 5%, convertible into common shares of the Company [5] |
|
| 0 |
|
|
| 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] |
|
| 0 |
|
|
| 10,000 |
|
|
|
|
|
|
|
|
|
|
|
|
| 0 |
|
|
| 74,990 |
|
Less discount |
|
| 0 |
|
|
| (235 | ) |
|
|
|
|
|
|
|
|
|
Total |
| $ | 0 |
|
| $ | 74,755 |
|
15 |
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[1] | This convertible note was entered into on December 27, 2019 in exchange for cash of $5,500and financing fees of $5,500and 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. 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 were issued to extinguish $3,967 of the principal balance. During the six months ended October 31, 2021 the Company issued 639,318 shares of common stock to extinguish the full principal balance of $7,033 and paid $853 in cash to extinguish all of the accrued interest due under the note. The Company continued to accrue interest on the convertible note until the debt was paid in full, therefore they recorded interest expense of $135 during the six months ended October 31, 2021. As of October 31, 2021 and April 30, 2021 accrued interest on the convertible note was $0 and $718, respectively. | |
[2] | This convertible note was entered into on December 27, 2019 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. 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 28,094common shares were issued to extinguish $309 of the principal balance. During the six months ended October 31, 2021 the Company issued 971,906 shares of common stock to extinguish the full principal balance of $10,691. The Company continued to accrue interest on the convertible note until the debt was paid in full, therefore they recorded interest expense of $269during the six months ended October 31, 2021. As of October 31, 2021 and April 30, 2021 accrued interest on the convertible note was $1,006 and $737, respectively. | |
[3] | This convertible note was entered into on February 12, 2020 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. 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 six months ended October 31, 2021 the Company issued 454,545 shares of common stock to extinguish the full principal balance of $5,000 and paid $399 in cash to extinguish all of the accrued interest due under the note. The Company continued to accrue interest on the convertible note until the debt was paid in full, therefore they recorded interest expense of $96 during the six months ended October 31, 2021. As of October 31, 2021 and April 30, 2021 accrued interest on the convertible note was $0 and $303, respectively. |
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[4] | This convertible note was entered into on March 2, 2020 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. 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 six months ended October 31, 2021 the Company issued 72,727 shares of common stock to extinguish the full principal balance of $800 and paid $55 in cash to extinguish all of the accrued interest due under the note. The Company continued to accrue interest on the convertible note until the debt was paid in full, therefore they recorded interest expense of $15 during the six months ended October 31, 2021. As of October 31, 2021 and April 30, 2021 accrued interest on the convertible note was $0and $40, respectively. | |
[5] | This convertible note was entered into on May 12, 2020 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. 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 six months ended October 31, 2021 the Company issued 3,769,636 shares of common stock to extinguish the full principal balance of $41,466 and paid $2,800 in cash to extinguish all of the accrued interest due under the note. The Company continued to accrue interest on the convertible note until the debt was paid in full, therefore they recorded interest expense of $795 during the six months ended October 31, 2021. As of October 31, 2021 and April 30, 2021 accrued interest on the convertible note was $0 and $2,005, respectively. | |
[6] | This convertible note was entered into on July 31, 2020 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. 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 six months ended October 31, 2021 the Company issued 909,091 shares of common stock to extinguish the full principal balance of $10,000 and paid $566 in cash to extinguish all of the accrued interest due under the note. The Company continued to accrue interest on the convertible note until the debt was paid in full, therefore they recorded interest expense of $192 during the six months ended October 31, 2021. As of October 31, 2021 and April 30, 2021 accrued interest on the convertible note was $0 and $374, 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.
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NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at:
|
| January 31, 2018 |
|
| April 30, 2017 |
|
| October 31, 2021 |
|
| April 30, |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Office furniture and equipment |
| $ | 19,863 |
| $ | 454 |
|
| $ | 13,864 |
| $ | 13,864 |
| ||
Computer equipment and software |
| 10,962 |
| 24,569 |
|
| 10,962 |
| 10,962 |
| ||||||
Refinery land |
| 312,485 |
| 67,088 |
| |||||||||||
Refinery land improvements |
| 462,112 |
| 452,005 |
| |||||||||||
Refinery land easements |
|
| 37,015 |
|
|
| 37,015 |
| ||||||||
|
| 836,438 |
| 580,934 |
| |||||||||||
Less accumulated depreciation and amortization |
|
| (7,891 | ) |
|
| (25,023 | ) |
|
| (126,729 | ) |
|
| (108,765 | ) |
|
| 22,934 |
|
| - |
|
|
|
|
|
| |||||
Land |
|
| 84,046 |
|
|
| - |
| ||||||||
|
|
|
|
|
|
| $ | 709,709 |
|
| $ | 472,169 |
| |||
|
| $ | 106,980 |
|
| $ | - |
|
On July 28, 2017, the Company acquired 126May 20, 2021, we entered into a Purchase and Sale Agreement to acquire 323.841 acres of land locatedin, or near, Fort Stockton,Pecos County, Texas, which closed on July 27, 2021. We paid a total of $245,397 for $67,088. This 126 acre parcel is part of the 476 acre tract on which the Company intends to build a crude oil refinery. The Company also subsequently acquired certain easements related to the land parcel for $16,958.acquisition.
Depreciation and amortization expense totaled $723$17,964 and $0$17,438 for the threesix months ended JanuaryOctober 31, 20182021 and 2017, respectively, and $1,430 and $386 for the nine months ended January 31, 2018 and 2017,2020, respectively.
NOTE 6 – REFINERY PROJECT
On March 4, 2017, the Company entered into an agreement with Maple Resources Corporation (“Maple”), a related party, to acquire all of Maple’s right, title and interest (the “Rights”) in plans to build a $450 million, 50,000 barrels per day capacity crude oil refinery in Pecos County, Texas (the “Refinery Transaction” or the “Refinery Project”). Pursuant to the Refinery Transaction, the Company agreed to acquire the Rights in exchange for the issuance of 1,500,000,000 Class B common shares. The 1,500,000,000 Class B common stock issued for the Rights were valued at $150,000 by an independent valuation firm, with the $150,000 expensed to refinery start-up costs.
Completion of the Refinery Project is subject to the receipt of required governmental permits and completion of required debt and equity financing.
NOTE 7 – ACCRUED EXPENSES
Accrued expenses consisted of the following at:
|
| January 31, 2018 |
| April 30, 2017 |
|
| October 31, 2021 |
|
| April 30, |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Accrued payroll |
| $ | 30,090 |
| $ | 30,090 |
|
| $ | 30,090 |
| $ | 30,090 |
| ||
Accrued consulting |
| 31,633 |
| 75,633 |
|
| 9,000 |
| 60,000 |
| ||||||
Accrued interest |
| 144,493 |
| 815,276 |
| |||||||||||
Accrued interest and penalties |
| 683,597 |
| 623,085 |
| |||||||||||
Other |
|
| 62,541 |
|
|
| 62,541 |
|
|
| 94,174 |
|
|
| 94,174 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| $ | 268,757 |
|
| $ | 983,540 |
|
| $ | 816,861 |
|
| $ | 807,349 |
|
NOTE 7 – NOTES PAYABLE
Note Payable, Currently in Default
Note payable, currently in default, consists of the following at:
|
| October 31, 2021 |
|
| April 30, |
| ||
|
|
|
|
|
|
| ||
Note payable to an unrelated party, matured March 18, 2014, with interest at 10% |
| $ | 75,001 |
|
| $ | 75,001 |
|
|
|
|
|
|
|
|
|
|
|
| $ | 75,001 |
|
| $ | 75,001 |
|
Table of Contents |
NOTE 8 – NOTES PAYABLE
Notes Payable Currently in Default
Notes payable currently in default, consist of the following at:
|
| January 31, 2018 |
|
| April 30, 2017 |
| ||
|
|
|
|
|
|
| ||
Note payable to an unrelated party, maturing March 18, 2014, with interest at 10% |
| $ | 75,001 |
|
| $ | 75,001 |
|
Note payable to an unrelated party, maturing July 15, 2010, with interest at 10%, extinguished pursuant to Assignment and Assumption Agreement (Note 11) |
| - |
|
|
| 300,000 |
| |
|
|
|
|
|
|
|
|
|
|
| $ | 75,001 |
|
| $ | 375,001 |
|
|
| October 31, 2021 |
|
| April 30, 2021 |
| ||
Note payable to an unrelated party with an issue date of February 22, 2021 with interest at 10% [1] |
|
|
|
|
|
|
|
|
$250,000 draw on March 5, 2021 |
| $ | 250,000 |
|
| $ | 250,000 |
|
$200,000 draw on March 26, 2021 |
|
| 200,000 |
|
|
| 200,000 |
|
Note payable to an unrelated party with an issue date of March 8, 2021 with interest at 10% [2] |
|
| 75,000 |
|
|
| 75,000 |
|
Note payable to an unrelated party with an issue date of March 11, 2021 with interest at 10% [3] |
|
| 250,000 |
|
|
| 250,000 |
|
|
|
|
|
|
|
|
|
|
Total |
| $ | 775,000 |
|
| $ | 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. During the six months ended October 31, 2021 the Company received $200,0*900 from a draw on June 21, 2021, however, repaid the amount in full on July 20, 2021. | |
[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. |
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Accrued interest payable on notes payable, currently in default, totaled $36,509 and $273,870 at January 31, 2018 and April 30, 2017, respectively.
Convertible NotesNote Payable, Currently in Default
Convertible notes payable, currently in default, consist of the following at:
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| January 31, 2018 |
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| April 30, 2017 |
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Note payable to an unrelated party, maturing January 27, 2012, with interest at 25%, convertible into common shares of the Company at $3.70 per share |
| $ | 50,000 |
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| $ | 50,000 |
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Note payable to an unrelated party, maturing December 31, 2010, with interest at 10%, convertible into common shares of the Company at $1.00 per share |
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| 25,000 |
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| 25,000 |
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Note payable to an unrelated party, maturing March 1, 2013, with interest at 1.87% per month, convertible into common shares of the Company at $0.20 per share, repaid in June 2017 |
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| - |
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| 120,000 |
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Total |
| $ | 75,000 |
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| $ | 195,000 |
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|
| October 31, 2021 |
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| April 30, 2021 |
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Note payable to an unrelated party, matured December 31, 2010, with interest at 10%, convertible into common shares of the Company [1] |
| $ | 50,000 |
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| $ | 50,000 |
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Note payable to an unrelated party, matured January 27, 2012, with interest at 25%, convertible into common shares of the Company [2] |
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| 25,000 |
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| 25,000 |
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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 [3] |
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| 0 |
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| 91,331 |
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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 [4] |
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| 0 |
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| 10,000 |
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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 [5] |
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| 0 |
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| 9,719 |
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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 [6] |
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| 0 |
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| 6,500 |
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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 [7] |
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| 0 |
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| 34,000 |
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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 [8] |
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| 0 |
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| 9,225 |
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|
|
|
|
|
|
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|
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| 75,000 |
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| 235,775 |
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Less discount |
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| 0 |
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| 0 |
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Total |
| $ | 75,000 |
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| $ | 235,775 |
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Effective June 20, 2017, the Company entered into an agreement to extinguish the $120,000 convertible note payable and $119,365 accrued interest payable through the issuance of 16,000,000 shares of the Company’s Class A common stock, recognizing a gain on extinguishment of debt of $114,565.
Accrued interest payable on convertible notes payable, currently in default, totaled $83,179 and $190,343 at January 31, 2018 and April 30, 2017, respectively.
Current convertible notes payable
NOTE 9 – SBA BRIDGE LOAN PAYABLE
On July 14, 2020, the Company received $10,000pursuant 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 had applied for an Economic Injury Disaster Loan (“EIDL”). The loan had a balance of $10,000as of October 31, 2021. 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 previously been identified as derivatives. In addition, the Company previously identified the conversion feature of certain convertible notes payable and convertible preferred stock as derivatives.
The Company
During the
NOTE 11 –
As of April 30, 2021, the Company
Common Stock Issuances
During the
Series A
During the six months ended October 31, 2021 and 2020 the Company
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 previously identified as derivatives.
A summary of warrant activity during the
NOTE
Legal
NOTE
In accordance with ASC 855-10, all subsequent events
Subsequent to
ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis
The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements, including the notes thereto.
Overview
Business Plan
The Company is a development-stage company focusing on the acquisition, development and financing of oil, gas, refining and
Since 2016, the focus of our
Our immediate plans are to pursue the following three projects powered by solar energy: Project 1: A clean fuels 10,000 barrel per day facility at our Pecos 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 We are in various stages of negotiations with major company off-takes that
Revenues
We have not yet begun to generate revenues.
General and Administrative Expenses
Our general and administrative expenses increased
Our project costs increased to $1,006,666 for the three months ended October 31, 2021 from $51,985 for the three months ended October 31, 2020 and increased to $1,009,726 for the six months ended October 31, 2021 from $89,685 for the six months ended October 31, 2020. We expense the direct costs incurred Depreciation and Amortization Expense Our depreciation and amortization expense results from the depreciation of land improvements and amortization of land easements and totaled
Other Income (Expense)
We reported
We reported a
Net Income (Loss) As a result of the above, we reported net income (loss) of $(1,151,884) and $(308,768) for the three months ended
Non-Controlling Interest in
Currently, we have no activity in our consolidated subsidiaries. Non-controlling interest in income of consolidated subsidiaries was Net Income (Loss) Attributable to the Because we had no non-controlling interest in income of consolidated subsidiaries,
Liquidity and Capital Resources
Working Capital
As of
Sources and Uses of Cash
Our sources and uses of cash for the
We used net cash of We used net cash of $96,780 in operating activities for the six months ended October 31, 2020 as a result of our net income of $94,752, non-cash expenses totaling $187,397, decrease in prepaid expenses and other current assets of $16,187, and increases in accounts payable of
Net cash used in investing activities for the
Net cash provided by financing activities
Net cash provided by financing activities for the six months ended October 31, 2020 was $30,000, comprised of proceeds from convertible notes payable - related party of $20,000 and proceeds from an SBA express bridge loan of $10,000. 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 $66,845,286 and a total stockholders’ deficit of $1,750,358 at October 31, 2021, and have reported negative cash flows from operations since inception. While we have received debt and equity funding during the period and have cash on hand of $273,686 at October 31, 2021, we still have a working capital deficit of $2,460,967. Therefore, there is a question of whether or not we have the cash resources to meet our operating commitments for the next twelve months and have, or will obtain, sufficient capital investments to implement our business plan. Finally, 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 and emerging markets and the competitive environment in which we operate.
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
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that 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 our Annual Report on Form 10-K for the year ended April 30,
ITEM 3 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 4 Controls and Procedures
(a) 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(c) 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 (“Securities Exchange Act”) 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 condensed consolidated financial statements included in this quarterly report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the consolidated 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.
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
Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of
(b) Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds
During the
ITEM 3 Defaults Upon Senior Securities
There is no information required to be disclosed by this Item.
ITEM 4 Mine Safety Disclosures
There is no information required to be disclosed by this Item.
There is no information required to be disclosed by this Item.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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