As filed with the Securities and ExchangeExchange Commission on January 22 , 201 8

Registration No. 333-218958

6, 2022

 

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

AMENDMENT NO. 3 TO

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

MMEX RESOURCES CORPORATION

(Exact name of registrant as specified in its charter)

  

Nevada

 

2911

 

26-1749145

(State or other jurisdiction of

(Primary Standard Industrial

 

(Primary Standard IndustrialI.R.S. Employer

Incorporation or organization)

 

(I.R.S. Employer

Incorporation or organization)Classification Code Number)

 

Classification Code Number)

Identification Number)

 

3616 Far West Blvd., #117-321

Austin, Texas 78731

(855) 880-0400

 (Address,(Address, including zip code, and telephone number, including

area code, of registrant’s principal executive offices)

 

Jack W. Hanks

President, Chief Executive Officer and Chief Financial Officer

3616 Far West Blvd., #117-321

Austin, Texas 78731

(855) 880-0400

 (Name,(Name, address, including zip code, and telephone number,

including area code, of agent for service)

 

Copies to:

Bruce H. Hallett

Hallett & Perrin, P.C.

1445 Ross Avenue, Suite 2400

Dallas, Texas 75202

Tel. No.: (214) 953-0053

 

Approximate date of commencement of proposed sale to the public:

As soon as practicable after the effective date of this registration statement

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. x

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

 

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 Securities Exchange Act of 1934.

 

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

Smaller reporting company

x

(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 account standards provided to Section 7(a)(2)(B) of the Securities Act. ¨

 

 

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities to be Registered

 

Amount to be

 Registered (1)

 

 

Proposed

Maximum

Offering

Price Per

Share (2)

 

 

Proposed

Maximum Aggregate

Offering Price

 

 

Amount of

 Registration Fee

 

Common stock, par value $0.001 per share

 

 

33,325,000

 

 

$0.2350

 

 

$7,831,375

 

 

$726

 

Title of Each Class of Securities

to be Registered

 

Amount to be

Registered (1)

 

 

Proposed

Maximum

Offering Price

Per Share (2)

 

 

Proposed

Maximum

Aggregate

Offering Price

 

 

Amount of

Registration

Fee (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A Common Stock, par value $0.001 per share

 

 

1,009,690,382

 

 

$.0066

 

 

$6,663,957

 

 

$829.67

 

__________ 

_____________ 

(1)

We are registering 300,000,00031,975,000 shares of our Class A common stock that we have the right to put to Crown Bridge Partners, L.LC. pursuant to the Equity Purchase Agreement we entered into on June 12, 2017 (as amended to date), 16,500,000 sharesare issuable upon conversion of shares of Series B Preferred Stock, Series B Warrants and Series C Warrants which were sold to an outstanding convertible note and 693,190,382institutional purchaser in a private transaction. We are also registering an additional 1,350,000 shares from other selling stockholders. Inof common stock issuable upon exercise of warrants granted to the eventplacement agent in such private transaction. Pursuant to Rule 416, the securities registered hereunder include such indeterminate number of shares being registered hereunder is insufficient to cover allwhich may become issuable as a result of stock splits, stock dividends and other adjustment provisions of the shares we put to Crown Bridge Partners, L.L.C., we will amend this registration statement Series B Preferred Stock, Series B Warrants, Series C Warrants and/or file a new registration statement to register those additional shares. Pursuant to Rule 416(a), this registration statement also cover any additional shares of our Class A common stock that will be issuable upon conversion of the outstanding convertible note by reason of any stock dividend, stock split, recapitalization or similar transaction.placement agent warrants.

(2)

The offering price has been estimated solely for the purpose of computing the amount of the registration fee in accordance with Rule 457(o) of the Securities Act on the basis of the closing bid price of the Class A common stock of the registrant as reported on the OTCQB tier of the OTC Markets Group, Inc. on January 18, 2018.Act.

(3)

$1, 421.38 previously paid

   

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

2

ii

 

 

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and it is not soliciting an offer to buy these securities, in any state where the offer or sale is not permitted.

 

PRELIMINARY PROSPECTUS

SUBJECT TO COMPLETION, DATED

JANUARY 22 , 201 86, 2022

 

1,009,690,382 33,325,000 Shares of Class A Common Stock

mmex_s1img1.jpg

MMEX RESOURCES CORPORATION

 

This prospectus relates to the offer and sale by the selling stockholders identified herein of up to 1,009,690,382 shares (the “Shares”) of Class A common stock, par value $0.001 per share (together with our Class B common stock, par value $0.001 per share, referred(referred to herein as the “common stock”) of MMEX Resources Corporation (referred to herein as “MMEX,” the “Company,” “we,” “our,” and “us”). TheseThe Shares are issuable upon the conversion of our outstanding shares consist of (i) 693,190,382Series B Convertible Preferred Stock (“Series B Preferred Stock”), the exercise of our outstanding Series B Warrants and Series C Warrants (the “Series B Warrants” and “Series C Warrants”, respectively) and the exercise of warrants issued to the placement agent (“Placement Agent Warrants”). We issued 1,500 shares of Series B Preferred Stock and Series D Warrants to purchase 15,000,000 shares of our Class A common stock that we issued to certain selling stockholders; (ii) 16,500,000 shares of our Class A common stock that are issuablestockholders pursuant to a holder of our convertible notes; and (iii) 300,000,000 shares of our Class A common stock issuable to Crown Bridge Partners, L.LC. (“Crown Bridge”) pursuant to the EquitySecurities Purchase Agreement that we entered into on June 12, 2017.December 22, 2021.  As part of that transaction, we issued to such holders Series B Warrants to purchase up to an aggregate of 14,399,500 shares at an exercise price of $0.0001 per share and Series C Warrants to purchase up to an aggregate of 2,575,500 shares at an exercise price of $0.10 per share.  We also issued the Placement Agent warrants to selling stockholders in connection with the foregoing transaction.

  

We are not offering any shares of common stock for sale under this prospectus and we will not receive any proceeds from the resale of the Shares. However, we will receive proceeds from the sale of securities to Crown Bridge pursuant to our exercise of a put right granted to us in the Equity Purchase Agreement. Crown Bridge is deemed an underwriter of our common stock.

 

The selling stockholders may offer all or portion of the Sharessecurities covered by this prospectus for resale from time to time through public or private transactions, at either prevailing market prices or at privately negotiated prices. We will bear all costs, expenses and fees in connection with the registration of the Shares,securities, including the cost of compliance with state securities or “blue sky” laws. The selling stockholders will bear all commissions, discounts and transfer taxes, if any, attributable to their sales of the Shares.securities. See “Plan of Distribution.”Distribution” beginning on page 28 of this prospectus.

 

Our Class A common stock is listed for quotation on the OTCQB tier (“OTCQB”) of the OTC Markets Group, Inc.Pink under the symbol “MMEX.” There is no established trading market for the Class B common stock. On January 19, 2018,____, 2022, the closing price of our Class A common stock was $0.0068. As of January 15, 2018, we had 1, 592,747,801 shares of Class A common stock and 1.5 billion shares of Class B common stock issued and outstanding.$_____.

 

We are a “smaller reporting company” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”) and are subject to reduced public company reporting requirements. This prospectus complies with the requirements that apply to an issuer that is a smaller reporting company.

 

Investing in our Class A common stock involves a high degree of risk. See “Risk Factors” beginning on page 4 to read about factors you should consider before investing in shares of our Class A common stock.

 

NEITHER THE SECURITIES AND EXCHANGE COMMITTEE NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

The date of this prospectus is: January ____, 2018is _____________, 2022

 

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iii

 

 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

 

 

PROSPECTUS SUMMARY

 

 

6

1

 

RISK FACTORS

 

 

8

2

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

 

21

6

 

USE OF PROCEEDS

 

 

21

7

DETERMINATION OF OFFERING PRICE

22

 

DILUTION

 

 

22

7

 

MARKET PRICE OF AND DIVIDENDS ON OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

 

23

8

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

 

25

11

INDUSTRY OVERVIEW

33

 

BUSINESS

 

 

43

17

 

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

 

51

21

 

CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS

 

 

53

22

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

 

54

27

 

SELLING STOCKHOLDERS

 

 

55

28

 

PLAN OF DISTRIBUTION

 

 

58

30

 

DESCRIPTION OF CAPITAL STOCK

 

 

59

32

 

MATERIAL U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF OUR COMMON STOCK

 

 

62

35

 

LEGAL MATTERS

 

 

66

38

 

EXPERTS

 

 

66

39

 

WHERE YOU CAN FIND MORE INFORMATION

 

 

66

39

 

 

4

iv

 

 

We have not authorized anyone to provide any information other than that contained or incorporated by reference in this prospectus, any prospectus supplement or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We and the selling stockholders have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus does not constitute an offer to sell, or solicitation of an offer to buy, these securities in any jurisdiction where such offer, sale or solicitation is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so.

 

For investors outside the United States: we have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of Class A common stock and the distribution of this prospectus outside the United States.

 

Unless otherwise indicated or the context otherwise requires, all financial data presented or incorporated by reference in this prospectus reflects the consolidated business and operations of MMEX and its consolidated subsidiaries, and has been prepared in accordance with generally accepted accounting principles in the United States of America.

 

Industry and Market Data

 

The market data and certain other statistical information used throughout this prospectus are based on independent industry publications, government publications or other published independent sources. Some data are also based on our good faith estimates. Although we believe the third-party sources are reliable as of their respective dates, neither we nor the selling stockholders have independently verified the accuracy or completeness of this information.

  

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PROSPECTUS SUMMARY

 

PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in our Class A common stock. You should carefully read the entire prospectus, including “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements before making an investment decision.

 

Business Overview

 

We are a development stage company engaged inSince 2016, 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.

MMEX Resources Corporation was formed as a Nevada corporation in 2005. The current management team lead 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. We previously unsuccessfully pursued mining and coal projects that have since been abandoned. We have never generated any revenues and have accumulated losses of $36,918,594 as of April 30, 2017.

The most significant focus of our current business plan ishas been to build crude oil distillation units and refining facilities (CDUs) in the Permian Basin in West Texas. ThroughWe revised our wholly-owned subsidiary, Pecos Refining & Transport, LLC (“Pecos Refining”), we intend initiallybusiness plan in 2021 to buildmove MMEX to clean energy use and commence operationproduction, leveraging our history, management and business relationships from the traditional energy sector. The focus of a 10,000 barrel-per-day (“bpd”) crude oil distillation unit (the “Distillation Unit”) that will produce a non-transportation grade diesel primarily for sale in the local market for drilling mud and frac fluids, along with naphtha and heavy fuel oil to be sold to other refiners. Through a separate subsidiary (together with Pecos Refining, the “Subsidiaries ”), we intend to build and commence operation of a crude oil refinery (the “Large Refinery”) with up to 100,000 bpd capacity at the same location in West Texas. In this prospectus, we often refer to the Distillation Unit and the Large Refinery collectively as the “Refinery.” These projects will be built on 476 acres located 20 miles northeast of Fort Stockton, Texas, near the Sulfur Junction spur of the South Orient Railroad (also known as the “Texas Pacifico Railroad”). The cost of the Distillation Unit with a 10,000 bpd capacityour business plan is estimated to be approximately $50 million. The cost of the Large Refinery with a 50,000 bpd capacity is estimated to be approximately $500 million and the cost of a 100,000 bpd refinery is estimated to be approximately $850 million. If successfully developed, the Refinery would connect to existing railways and pipelines to market diesel, gasoline, liquefied petroleum gas and other refined products within the U.S., with the potential to market these products and crude oil to western Mexico and South America. If completed, the Large Refinery will be one of the first full scale oil refineries built in the United States in more than 40 years.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; and

·

Develop additional megawatts of solar power for distribution to our projects in West Texas.

2021 Private Placement Financing

 

The construction of the Distillation Unit and the Large Refinery 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 possible that equity investors will require representation on the board of managers in connection with their equity investments.

2017 Equity Purchase Agreement

On June 12, 2017, we entered into an Equity Purchase Agreement with Crown Bridge Partners, LLC pursuant to which Crown Bridge committed to purchase up to $3,000,000 of our common stock for a period of up to 24 months commencing upon the effectiveness of a registration statement covering the resale of shares issuable to Crown Bridge under the Equity Purchase Agreement. We amended the Equity Purchase Agreement on October 9, 2017, in contemplation of the listing of our Class A Common Stock for quotation on the OTCQB. Based upon the trading price of our Class A Common Stock as of January 15, 2018, we would have issued an aggregate of 410,958,904 shares of Class A Common Stock under the Equity Purchase Agreement if the entire $3,000,000 amount of potential shares issuable to Crown Bridge had been drawn. Such shares would represent approximately 26 % of the outstanding shares of Class A Common Stock as of January 15, 2018 , resulting in significant ownership dilution to our existing holders of Class A Common Stock. In connection with the Equity Purchase Agreement,December 22, 2021, we entered into a Registration RightsSecurities Purchase Agreement with Crown Bridge,an institutional investor, pursuant to which we agreed to register for resale by Crown Bridgeissue and sell in a private placement 1,500 shares of our Series B Preferred Stock and Series D Warrants to purchase up to an aggregate of 15,000,000 shares of our common stock. We received gross proceeds of $1.5 million. As part of that transaction, we issued to the investor Series B Warrants to purchase up to an aggregate of 14,399,500 shares at an exercise price of $0.0001 per share and Series C Warrants to purchase up to an aggregate of 2,575,500 shares at an exercise price of $0.10 per share.  We also issued the Placement Agent Warrants, covering 1,350,000 shares of common stock, purchased by them pursuant to affiliates of the Equityplacement agent as part of such private placement.  In connection with the Securities Purchase Agreement. PursuantAgreement, we entered in a registration rights agreement and agreed to such agreement, we filedfile within 15 days a resale registration statement with the SEC, on Form S-1 within 45 days of the date of the Registration Rights Agreement covering the resale of shares to be issued under such agreementwhich this prospectus statement is a part, and have agreed to use our reasonable best efforts to cause the resale registration statement to become effective as promptly as is practicable.

In connection with the Equity Purchase Agreement, we issued to Crown Bridge, as a commitment fee, an $80,000 convertible promissory note which matured on December 12, 2017. Pursuant to the terms of the note, Crown Bridge thereafter converted the principal balance of the note plus accrued interest at the rate of 8% per annum into 19,834,823 shares of our Class A common stock, representing a conversion price equal to the lesser of (i) the closing price of our Class A common stock on the issuance date of the note or (ii) 60% of the average of the three lowest trading prices during the 25-day period prior to the notice of conversion.

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within 75 days thereafter.

   

Acquisition of Land

We do not currently own all of the land on the site near Fort Stockton, Texas at which we intend to build the Refinery. On July 28, 2017, we acquired the 126 acre parcel of the land which is the site for the planned Distillation Unit at a purchase price of $550 per acre, or $69,249. At such time, we agreed with the seller of the property to acquire the remaining 350 acre parcel, which is the site for the planned Large Refinery, on or before January 31, 2018 at a price of $550 per acre, or $192,500.

TCEQ Permit

On July 31, 2017, we filed an application with the Texas Commission on Environmental Quality (“TCEQ”) to obtain an air quality permit and obtained permit approval from the TCEQ on August 30, 2017. Accordingly, we will begin construction on the Distillation Unit on 15 acres of our 126 acre tract as soon we receive adequate financing to do so, as to which there is no assurance.  

Where You Can Find Us

 

Our principal office is located at 3616 Far West Blvd, #117-321, Austin, Texas 78731, and our project office is located at 107 S. Main Street, Fort Stockton, Texas 79735. Our telephone number is (855) 880-0400. Our website is www.mmexresources.com. Information on our website or any other website is not incorporated by reference into, and does not constitute part of, this prospectus.

 

The Offering

 

Common stock offered by Selling Stockholders

785,611,588

33,325,000 shares of Class A common stock

 

Common stock outstanding before the offering

 1,592 ,747,801 shares of Class A common stock

18,845,362 as of January 15, 2018 1,500,000,000 shares of Class B common stock as of January 15, 2018 December 31, 2021

 

Common stock outstanding after the offering

2,003,706,705 shares of Class A common stock, assuming the issuance of an additional 410,958,904 shares of Class A common stock pursuant to the Equity Purchase Agreement.

The number of outstanding shares of common stock will not otherwise be impacted by sales of the selling stockholders named herein.

 

Use of proceeds

We will not receive any proceeds from the sale of Class A common stocksecurities by the selling stockholders. However, we will receive proceeds from the sale of securities to Crown Bridge pursuant to our exercise of a put right granted to us in the Equity Purchase Agreement. Any such proceeds will be utilized first for the repayment of outstanding convertible notes and thereafter for general corporate purposes.

 

OTCQB Trading Symbol

MMEX

 

Risk Factors

The Class A common stock offered hereby involves a high degreeshares of risk and should not be purchased by investors who cannot afford the losscommon stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See “Risk Factors”.

 

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Table of Contents

RISK FACTORS

 

RISK FACTORS

An investment in the Shares involves a high degree of risk. You should carefully consider the risks described below together with all of the other information included in this prospectus before making an investment decision with regard to our Shares. The statements contained in or incorporated into this prospectus that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, the trading price of our Class A common stock could decline, and you may lose all or part of your investment.

 

The risks included in this prospectus are not the only risks we face. We may experience additional risks and uncertainties not currently known to us, or as a result of developments occurring in the future. Conditions that we currently deem to be immaterial may also materially and adversely affect our business, financial condition, cash flows and results of operations.

 

Risks Related to Ourour Business Plan

 

An investment in the Company is speculative.

 

Our business plans are highly speculative and no assurance can be given that we will operate profitably. Our lack of operating history makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance. Furthermore, the Company has pursued its proposed refineryhydrogen production business plan only for a short time, and thus our business carries both known and unknown risks. No assurance can be given that you will realize your investment objectives or realize a substantial return (if any) on your investment or that you will not lose your entire investment. An investment in the Class Aour common stock involves a high degree of risk.

 

The Company is a development stage company with a history of operating losses and expects to continue to realize losses in the near future.

 

The Company is a development stage company. We have incurred continuous losses from operations, had an accumulated deficit at April 30, 2017October 31, 2021 of almost $37more than $66 million and have reported negative cash flows from operations for more than the past five years.  The Company expectsWe expect to continue to incur net losses until such time as the Refinery enters into commercial production andwe have completed a project that generates sufficient revenues to fund continuing operations. The size of these losses will depend, in large part, on whether the Company is able to construct the Refineryfacilities, and commence operations and is thereafter able to operate the Refineryits facilities in a profitable manner. We recognize that if we are unable to generate significant revenues from our refining operations, we will not be able to earn profits or continue operations.  At this early stage of our operation, we also expect to face the risks, uncertainties, expenses, and difficulties frequently encountered by companies at the start-up stage of their business development. We cannot be sure that we will be successful in addressing these risks and uncertainties and our failure to do so could have a materially adverse effect on our financial condition.

 

We need to continue as a going concern if our business is to succeed.

 

Because of our recurring losses and negative cash flows from operations, the audit report of our independent registered public accountants on our consolidated financial statements for the year ended April 30, 20172020 contains an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern. Factors identified in the report include our historical net losses and our net capital deficiency, which raises substantial doubt about our ability to continue as a going concern. If we are not able successfully to implement our business plan and attain profitability in the near future our financial condition could deteriorate further, which would have a material adverse impact on our business and prospects and result in a significant or complete loss of your investment. Further, we may be unable to pay our debt obligations as they become due. If we are unable to continue as a going concern, we might have to liquidate our assets and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements. In addition, the inclusion of an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern and our lack of cash resources may materially adversely affect our share price and our ability to raise new capital or to enter into critical contractual relations with third parties.

 

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The completion of our proposed business plan is subject to great uncertainty.

 

Our proposedThe pursuit of our business plan contemplates building one of the first refineries in the United States in the past 40 years. The successful completion of this plan depends, among other factors, upon the receipt of required governmental permits and substantial debt and equity financing. There is no assurance that this business plan can be successfully completed.

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We will require significant additional capital to fund our business plan.

substantial financial resources.  We do not currently generate any revenue and do not have the cash resources to meetimplement our operating commitments for the next twelve months. We have not yet commenced commercial production, as such, have not generated positive cash flows to date and have no reasonable prospects of doing so unless successful commercial production can be achieved at the Refinery. We expect to continue to incur negative investing and operating cash flows until such time as we enter into successful commercial production.

In addition, we will be required to make substantial capital expenditures and expend significant funds to construct and operate the Refinery. To the extent that the Refinery project proceeds, we anticipate that we will incur substantially increased expenses without realizing revenues from operations for a sustained period. We therefore expect to incur significant losses in the foreseeable future.business plan.  If we are unable to obtain additional financing from outside sources and eventually produce enough revenues, we may be forced to curtail or cease our planned operations. If this happens, you could lose all or part of your investment.

 

Our ability to obtain necessary funding for these purposes depends upon a number of factors, including the status of the national and worldwide economy and the pricehealth of crude oil and petroleum products.the energy sector. There is no assurance that any such financing sources will be available or sufficient to meet our requirements. There is no assurance that we will be able to continue to raise equity capital or to secure additional debt financing. We may not be successful in obtaining the required financing or, if we can obtain such financing, such financing may not be on terms that are favorable to us. Our inability to access sufficient capital for our operations could have a material adverse effect on our financial condition, results of operations, or prospects.

 

Even after the Refinery is operational, we will have working capital needs for which our internally generated cash flows and other sources of liquidity may not be adequate.

The refining business is characterized by high fixed costs resulting from the significant capital outlays associated with the construction, operation and maintenance of the Refinery and related facilities. If the Refinery is completed, we will be dependent on the production and sale of quantities of refined products at refined product margins sufficient to cover operating costs, including any increases in costs resulting from future inflationary pressures or market conditions and increases in costs of fuel and power necessary in operating our planned facilities. After completion of the Refinery, our short-term working capital needs will be primarily crude oil purchase requirements that fluctuate with the pricing and sourcing of crude oil. We will also have significant long-term needs for cash, including those to support ongoing capital expenditures and other regulatory compliance. Furthermore, future regulatory requirements or competitive pressures could result in additional capital expenditures that may not produce a return on investment.

We expect to rely on borrowings to purchase crude oil. Changes in our credit profile could affect the way crude oil suppliers view our ability to make payments and induce them to shorten the payment terms of their invoices with us or require additional support such as letters of credit. Any imposition by our creditors of burdensome payment terms on us may have a material effect on our liquidity and our ability to make payments to our suppliers that could hinder our ability to purchase sufficient quantities of crude oil to operate the Refinery at planned rates. In addition, if the price of crude oil increases significantly, we may not have sufficient capacity under the credit agreements or sufficient cash on hand, to purchase enough crude oil to operate the Refinery at planned rates. A failure to operate the Refinery at planned rates could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Even if the Company begins to generate revenues from operations, the Company may not become profitable or be able to sustain profitability.

Refining is a competitive business and our profitability will be dependent upon our ability to source crude oil at competitive prices and to operate the Refinery efficiently in order to protect profit margins. Because the Company does not yet have a revenue stream resulting from sales or other operations, there can be no assurance that the Company will achieve material revenues in the future. Should the Company achieve a level of revenues that make it profitable, there is no assurance the Company can maintain or increase profitability levels in the future.

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The substantial amount of debt and equity financing we will need in order to construct the Refinery may dilute the Company’s ownership of the Refinery.

The Company expects to operate the Distillation Unit through its subsidiary, Pecos Refining, and to operate the Large Refinery through another subsidiary set up for such purpose (collectively, the “Subsidiaries”). The construction of the Distillation Unit and the Large Refinery will require substantial equity and debt financing, far beyond the expected resources of the Company, and we anticipate that most of the equity and debt financing will be issued by these Subsidiaries. To the extent these Subsidiaries raise money through the issuance of equity securities, our ownership will be diluted. We intend to retain managerial control of the Subsidiaries; however, 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, sales of substantial amounts of our securities may have a highly dilutive effect on our ownership or share structure. Sales of a significant number of shares of our common stock in the public markets, or the potential for such sales, could decrease the trading price of our common stock and could impair our ability to raise capital through future sales of common stock.

The insurance policies for our planned operations will not cover all losses, costs or liabilities that we may experience.

Our insurance coverage will not be expected to cover all potential losses, costs or liabilities. Our ability to obtain and maintain adequate insurance may be adversely affected by conditions in the insurance market over which we have no control. The occurrence of an event that is not fully covered by insurance or the loss of insurance coverage could have a material adverse effect on our planned business, financial condition, results of operations and cash flows.

Two of our stockholders collectively have the ability to determine any matter to be decided by the stockholders, which may prevent or delay a change in control of our company.

Jack W. Hanks, our CEO, and Bruce N. Lemons, one of the two members of our Board of Directors, currently beneficially own approximately 432,872,748 shares of our Class A common stock, which have one vote per share, and 1.5 billion shares of Class B common stock, which have ten votes per share. Through such beneficial ownership, at July 31, 2017, they controlled approximately 92. 8% of the voting power of the common stock on a combined basis. As a result, they can determine the outcome of any corporate matter submitted to our stockholders for approval, including the election of directors and any transaction that might cause a change in control, such as a merger or acquisition.

The loss of Mr. Hanks could adversely affect our business.

Since Mr. Hanks is our principal executive officer devoting substantially all of his business time to the activities of the Company, if he were to die, become disabled, or leave our company, we would be forced to retain individuals to replace him. There is no assurance that we can find suitable persons to replace him if that becomes necessary. We have no key man life insurance at this time.

If we are unable to recruit or retain qualified personnel, our business and operations could be harmed.

We must identify, recruit, hire, train, retain and motivate highly skilled technical, managerial, sales and marketing and administrative personnel. We may not be able to locate or employ such qualified personnel on acceptable terms, or at all. In addition, competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retain sufficiently qualified personnel. The failure to recruit and retain necessary technical, managerial, sales, marketing and administrative personnel could harm our business and our ability to construct and operate the Refinery.

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Our business plan to distribute refined products into Mexico and to export refined product to Latin America may be subject to adverse political, economic, regulatory or market conditions beyond our control.

We plan on marketing and distributing refined products in the Western area of Mexico and we may export product to Latin America. Many of the market conditions in Mexico are not entirely known at this time as a result of the recent deregulation of the fuel supply market in Mexico. Many factors such as the U.S. tax policy for exports, the U.S. policy toward immigration, and the economy of Mexico may all impact negatively our business plan of exporting refined products to Mexico. In addition, we do not have an off-take agreement with a buyer or distributor in Mexico and any failure to secure an off-take agreement for sale of refined product in Mexico may alter or adversely impact our business plan. Additionally, we currently do not have an off-take agreement with a buyer or distributor in Latin America and our failure to secure an off-take agreement for sale of refined product in Latin America may alter or adversely impact our business plan. Our proposed foreign sales could be adversely affected as a result of:

·nationalization of private enterprises and assets;

·political or economic instability in certain countries and regions, such as the ongoing instability throughout the Middle East and/or portions of the former Soviet Union;

·political relationships between the U.S. and certain countries and regions;

·differences in foreign laws, including increased difficulties in protecting intellectual property and uncertainty in enforcement of contract rights;

·the possibility that foreign governments may adopt regulations or take other actions that could directly or indirectly harm our business and growth strategy;

·credit risks;

·currency fluctuations;

·tariff and tax increases;

·export and import restrictions and restrictive regulations of foreign governments;

·shipping products during times of crisis or wars;

·our failure to comply with U.S. laws regarding doing business in foreign jurisdictions, such as the Foreign Corrupt Practices Act; or

·other factors inherent in maintaining foreign operations.

We may not be able to obtain or renew all required permits and licenses to place any of our properties into production.

 

Our current and future operations, including construction activities and commencement of production at the Refineryproposed projects will require permits from governmental authorities and such operations are, and will be governed by laws and regulations governing oil and gas development, construction and production as well as exports, taxes, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, refineryemployee safety, and other matters.  We may experience increased costs, as well as delays in construction or operation as a result of the need to comply with applicable laws, regulations, and permits. We cannot predict if all permits that we may require for the construction and operation of the Refinery or the export of refined products and crude oil will be obtainable or renewable on reasonable terms, if at all. Costs related to applying for and obtaining permits and licenses may be prohibitive and could delay our planned construction and the operation of the Refinery.prohibitive.  Failure to comply with applicable laws, regulations, and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions.

 

Future indebtedness may limit our ability to obtain additional financing, and we also may face difficulties complying with the terms of any credit agreements.

 

As previously discussed, weWe anticipate we will use significant amounts of debt, if available, to fund theproject construction of the Refinery and its operations once construction is finished. Our level of future indebtedness will have a direct impact on our business. Among other things, it may:

 

 

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limit our ability to use our cash flows, or obtain additional financing, for future working capital, capital expenditures, acquisitions or other general corporate purposes;

 

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restrict our ability to pay dividends;

 

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require a substantial portion of our cash flows from operations to make debt service payments;

 

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limit our flexibility to plan for, or react to, changes in our business and industry conditions;

 

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place us at a competitive disadvantage compared to our less leveraged competitors; and

 

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increase our vulnerability to the impact of adverse economic and industry conditions.

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We cannot assure you that we will generate sufficient cash flows or that we will be able to borrow funds under certain credit agreements in amounts sufficient to enable us to service our debt or meet our expected working capital and capital expenditure requirements.  Our ability to generate sufficient cash flows from our operating activities are expected to be primarily dependent on raising cash through issuances of equity, and, when the Refinery is constructed, on producing or purchasing and selling sufficient quantities of refined products at margins sufficient to cover fixed and variable expenses. If we are unable to raise sufficient cash through equity issuances, or, if after the Refinery isour planned projects are in operation and our marginscash flows were to deteriorate significantly, or if our earnings and cash flows when the Refinery is completed, were to suffer for any other reason,be adversely impacted, we may be unable to obtain the debt financing we expect to require for our expected working capital needs. To the extent that we are unable to generate sufficient cash flows from issuances of equity or operations, or if we are unable to obtain additional debt financing, we might be required to sell assets or reduce necessary capital expenditures. We cannot assure you that we would be able to refinance our debt, sell assets or obtain additional financing on terms acceptable to us, if at all.

 

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Covenants and events of default in our future debt instruments could limit our ability to undertake certain types of transactions and adversely affect our liquidity.

 

We expect that any debt financing agreements that we may enter will contain covenants and events of default that may limit our financial flexibility and ability to undertake certain types of transactions. Typically, these covenants would restrict our business activities, including restrictions on:

 

 

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creating liens;

 

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engaging in mergers, consolidations and sales of assets;

 

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incurring additional indebtedness;

 

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providing guarantees;

incurring additional indebtedness;

 

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engaging in different businesses;

 

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making investments;

providing guarantees;

 

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engaging in different businesses;

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making investments;

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making certain dividend, debt and other restricted payments;

 

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engaging in certain transactions with affiliates; and

 

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entering into certain contractual obligations.

 

Our ability to comply with these expected covenants may depend on factors outside our control. We cannot assure you that we will be able to satisfy these covenants. If we fail to satisfy the covenants established in these facilities or an event of default occurs under the applicable debt agreement, the maturity of the debt instruments could be accelerated or we could be prohibited from future borrowing. If our obligations under the debt instruments are accelerated and we do not have sufficient cash on hand to pay all amounts due, we could be required to sell assets, to refinance all or a portion of our indebtedness or to obtain additional financing through equity or debt financings. Refinancing may not be possible and additional financing may not be available on commercially acceptable terms, or at all. If we cannot obtain such financing, we would need to curtail our planned operations.

 

Our business, financial condition, results of operations and cash flows may be materially adversely affected by an economic downturn.

 

The energy sector and the petroleum industry in particular, areis highly cyclical and have historically experienced severe downturns. We are currently in such a downturn, which was sudden when it started and has not shown signs of near term recovery. The dramatic decline in global oil prices which began in calendar year 2014 translated into an abrupt contraction in orders in the energy markets and is the most recent example of the cyclical nature of our markets. We believe that over the long-term, demand for petroleum products will expand, however, the current decline and volatility in oil prices confirms that cyclical downturns will occur periodically.  A sustained deterioration or economic downturn would materially harm our business and operating results. A cyclical downturn can occur suddenly and result in extremely different financial performance sequentially from quarter to quarter or on an annual comparative basis due to an inability to rapidly adjust costs.

 

In addition, the domestic economy, economic slowdowns and the scarcity of credit can lead to lack of consumer confidence, increased market volatility and widespread reduction of business activity generally in the United States and abroad. An economic downturn may adversely affect the liquidity, businesses and/or financial conditions of our future customers that may result in decreased demand for our products. Disruptions in the financial markets could also lead to a reduction in available trade credit due to counterparties’ liquidity concerns. If we are unable to obtain borrowings or letters of credit under our future credit agreements, our business, financial condition, results of operations and cash flows could be materially adversely affected.

 

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We must rely on third parties, including the Texas Department of Transportation, to make infrastructure improvements and repairs necessary for the implementation of our business plan.

Although we intend to ship through existing pipeline systems some of our refined product production to the Phoenix, Arizona market and ship some of our heavy oil (sometimes referred to as “atmospheric tower bottoms” or “ATBs”) and naphtha to refineries located in Corpus Christi, we plan to transport a significant portion of our high-value refined product on the Texas Pacifico Railroad. Significant investments are required to upgrade this railroad. The Texas Department of Transportation (“TxDOT”) owns the Texas Pacifico Railroad, which runs from the San Angelo Junction, near Coleman, Texas, to the Texas-Mexico border at Presidio. There are two significant infrastructure improvement projects that TxDOT must be complete before we will be able to use the Texas Pacifico Railroad to transport our high-value products to Mexico as we have planned.

The international railroad bridge, located at the southwestern end of the rail line connecting Presidio, TX to Ojinaga, Mexico burned on two separate occasions, February 29, 2008 and March 1, 2009. TxDOT and Texas Pacifico Transportation LTD, the company that operates the Texas Pacifico Railroad, plan to rebuild the bridge allowing access to Mexico and increased business potential. On August 4, 2017, TxDOT announced a $7 million federal grant from The U.S. Department of Transportation to strengthen existing rail infrastructure in Permian Basin. As announced on August 4, the funds are expected to help rebuild the Presidio-Ojinaga International Rail Bridge and 72 miles of track on the South Orient Rail Line that run from the Mexico border to near Coleman, Texas owned by the state of Texas but maintained and operated by Texas Pacifico Transportation, Ltd. under a lease with TxDOT. A recent project schedule estimates the completion date to be in 2018.

In addition, the railroad track between Alpine and Presidio may be upgraded as traffic requires through the area. The upgrade capital improvements required on the Texas Pacifico Railroad to transport significant volumes of traffic are estimated by TxDOT to be in the range of $100 million to $150 million. Our business plan to market refined products into Western Mexico and to export refined products to Latin America will depend on the completion of the international bridge at Presidio/Ojinaga and the capital investment on the Texas Pacifico Railroad railroad. There is no assurance that these capital improvements will be made. If these capital improvements are not made, our business prospects and results of operations could be materially negatively impacted.

A material decrease in the supply of crude oil available to the Refinery could significantly reduce our future production levels.

We expect to contract with third-party crude oil suppliers to maintain a sufficient supply of crude oil for production at our planned Refinery. A material decrease in crude oil production from the fields that are expected to supply the Refinery as a result of economic, regulatory, or natural influences, availability of equipment, facilities, personnel or services, plant closures for scheduled maintenance, or transportation problems, or an increase in crude oil transport capacities, could result in a decline in the volume of crude oil available to the Refinery. If we are unable to secure sufficient crude oil supplies, we may not be able to take full advantage of current and future expansion of our production capacities. A decline in available crude oil or an inability to secure additional crude oil supplies to meet the needs of current or future refinery expansions could result in an overall decline in volumes of refined products produced by the Refinery and could have a material adverse effect on our business, financial condition, results of operations and cash flows.

The assets comprising the Refinery may experience physical damage as a result of an accident or natural disaster.

These hazards can also cause personal injury and loss of life, severe damage to and destruction of property and equipment, pollution or environmental damage, and suspension of operations. We will have to have in place appropriate property, liability and business interruption policies, subject to the deductibles and limits under available policies. In addition, such insurance policies do not cover every potential risk associated with our operating facilities, and we cannot ensure that such insurance will be adequate to protect us from all material expenses related to potential future claims for personal and property damage, or that these levels of insurance will be available in the future at commercially reasonable prices.

We could incur substantial costs or disruptions in our business if we cannot obtain or maintain necessary permits and authorizations.

The construction of the Refinery and any subsequent planned operations will require numerous permits and authorizations under various laws and regulations, including environmental and health and safety laws. These authorizations and permits will be subject to revocation, renewal or modification and can require operational changes that may involve significant costs, to limit impacts or potential impacts on the environment, health and safety. A violation of these authorization or permit conditions or other legal or regulatory requirements could result in substantial fines, criminal sanctions, permit revocations, injunctions and/or refinery shutdowns.

We expect to face substantial competition from other refining companies.

The refining industry is highly competitive. Our expected competitors will include large, integrated, major or independent oil companies that, because of their more diverse geographic operations, larger refinery capacities or stronger capitalization, are likely to be better positioned than we are to withstand volatile industry conditions, including shortages or excesses of crude oil or refined products or intense price competition at the wholesale level. Some of our present and potential competitors may have substantially greater financial, marketing, technical or manufacturing resources. Our competitors may also be able to respond more quickly to new technologies or processes and changes in customer demands. Certain of our competitors may also have a cost advantage compared to us due to their geography or changes in relative currency values and may compete against us based on price. This may affect our ability to secure new business and maintain our level of profitability. If we are unable to compete effectively, we may lose customers or fail to acquire new customers. If we cannot compete successfully against current or future competitors, our business will be materially adversely affected.

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Risks Related to the Industry

The completion of our proposed Refinery project and ultimate operations of a petroleum refinery are subject to great uncertainty. Should we be successful in completing this project, our business would thereafter be subject to the following risks:

The price volatility of crude oil, other feedstocks, refined products and fuel and utility services will have a material adverse effect on our potential earnings and cash flows.

Our potential for earnings and cash flows from operations will depend on the margin above fixed and variable expenses (including the cost of refinery feedstocks such as crude oil) at which we are able to sell refined products. Refining margins historically have been volatile and are likely to continue to be volatile, as a result of a variety of factors, including fluctuations in the prices of crude oil, other feedstocks, refined products and fuel and utility services.

In recent years, the prices of crude oil, other feedstocks and refined products have fluctuated. It is possible that this volatility in crude oil pricing and crack spreads (the difference between the purchase price of crude oil and the selling price of the refined finished products, such as gasoline and distillate fuel) may continue for prolonged periods of time due to numerous factors beyond our control. Prolonged periods of low crude oil prices could impact production growth of inland crude oil, which could reduce the amount of advantaged crude oil available and/or the discount of such crude oil and thereby impacting the profitability of the Refinery. Prices of crude oil, other feedstocks and refined products depend on numerous factors beyond our control, including the supply of and demand for crude oil, other feedstocks, gasoline and other refined products. Such supply and demand are affected by, among other things:

·changes in global and local economic and political conditions;

·domestic and foreign demand for crude oil and refined products, especially in the U.S., China and India;

·worldwide political conditions, particularly in significant oil producing regions such as the Middle East, West Africa, Russia and Latin America;

·political and geopolitical instability or armed conflict in oil producing regions;

·the level of foreign and domestic production of crude oil and refined products and the level of crude oil, feedstocks and refined products imported into the U.S. that can be impacted by accidents, interruptions in transportation, inclement weather or other events affecting producers and suppliers;

·U.S. government regulations, including legislation affecting the exportation of domestic crude oil;

·utilization rates of U.S. refineries;

·changes in fuel specifications required by environmental and other laws;

·the ability of the members of the Organization of Petroleum Exporting Countries to influence oil price and production controls;

·commodities speculation;

·development and marketing of alternative and competing fuels;

·pricing and other actions taken by competitors that impact the market;

·accidents, interruptions in transportation and inclement weather; and

·federal and state government regulations and taxes.

Volatility may have a negative effect on our future results of operations to the extent that the margin between refined product prices and feedstock prices narrows.

The nature of the refining business will require us to maintain substantial quantities of crude oil and refined product inventories. Crude oil and refined products are commodities. As a result, we will have no control over the changing market value of these inventories. In addition, the volatility in costs of fuel, principally natural gas and other utility services, principally electricity, used by the Refinery will impact our planned operating costs. Fuel and utility prices will continue to be affected by factors outside our control, such as supply and demand for fuel and utility services in both local and regional markets. Natural gas prices have historically been volatile. Typically, electricity prices fluctuate with natural gas prices. Future increases in fuel and utility prices may have a material adverse effect on our planned business, financial condition, results of operations and cash flows.

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Our planned operations will be subject to significant hazards and risks inherent in refining operations and in transporting and storing crude oil, intermediate products and refined products.

Failure to identify and manage the hazards and risks inherent in refining operations could result in explosions, fires, refinery or pipeline releases of crude oil or refined products or other incidents resulting in personal injury, loss of life, environmental damage, property damage, legal liability, loss of revenue and substantial fines by government authorities. These hazards and risks include, but are not limited to, the following:

·natural disasters;

·weather-related disruptions;

·fires;

·explosions;

·pipeline ruptures and spills;

·third-party interference;

·disruption of natural gas deliveries;

·disruptions of electricity deliveries; and

·mechanical failure of equipment.

Any of the foregoing could result in production and distribution difficulties and disruptions, environmental pollution, personal injury or wrongful death claims and other damage to our properties and the properties of others. There is also risk of mechanical failure and equipment shutdowns both in general and following unforeseen events.

In addition, we expect to rely on a variety of logistics assets including but not limited to: rail, pipelines, product terminals, storage tanks and trucks to facilitate the movement of crude oil, feedstocks and refined products. We could experience an interruption of supply or an increased cost to deliver refined products to market if the ability to utilize these logistics assets is disrupted. Any sustained disruption is likely to have a material adverse effect on our business, financial condition, results of operations and cash flows.

Weather conditions and natural disasters could materially and adversely affect our business and operating results, including the supply of our feedstocks.

The effects of weather conditions and natural disasters can lead to volatility in the costs and availability of crude oil and other feedstocks and/or negatively impact our operations or those of our customers and suppliers, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. An interruption to our supply of feedstocks could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our planned operations involve environmental risks that could give rise to material liabilities.

Our planned operations could result in spills, discharges, or other releases of petroleum or hazardous substances into the environment. Such spills related to any of our planned operations may give rise to liability (including strict liability, or liability without fault, and clean-up responsibility) to governmental entities or private parties under federal, state, or local environmental laws, as well as under common law. In addition, we may face liability for alleged personal injury or property damage due to exposure to chemicals or other hazardous substances located at or released from our facilities or otherwise related to our planned operations. We may also face liability for personal injury, property damage, natural resource damage, or for clean-up costs for the alleged migration of contamination or other hazardous substances from our facilities to adjacent and other nearby properties.

We may incur significant costs to comply with environmental, health and safety laws and regulations.

Our planned operations are subject to extensive federal, state and local environmental, health and safety regulations governing, among other things, the generation, storage, handling, use and transportation of petroleum and hazardous substances, the emission and discharge of materials into the environment, waste management, characteristics and composition of gasoline, diesel and other fuels and the monitoring, reporting and control of greenhouse gas emissions. If we fail to comply with these regulations, we may be subject to administrative, civil and criminal proceedings by governmental authorities, as well as civil proceedings by environmental groups and other entities and individuals. A failure to comply, and any related proceedings, including lawsuits, could result in significant costs and liabilities, penalties, judgments against us or governmental or court orders that could alter, limit or stop our planned operations. In addition, new environmental laws and regulations, including new regulations relating to alternative energy sources and increased vehicle fuel economy, new state regulations relating to fuel quality, and the risk of global climate change regulation, as well as new interpretations of existing laws and regulations, increased governmental enforcement, or other developments could require us to make additional unforeseen expenditures. Many of these laws and regulations are becoming increasingly stringent, and the cost of compliance with these requirements can be expected to increase over time. We are not able to predict the impact of new or changed laws or regulations or changes in the ways that such laws or regulations are administered, interpreted, or enforced. The requirements to be met, as well as the technology and length of time available to meet those requirements, continue to develop and change. To the extent that the costs associated with meeting any or all of these requirements are substantial and not adequately provided for, there could be a material adverse effect on our business, financial condition, results of operations and cash flows.

 

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The market for hydrogen is nascent and the market may not develop as quickly as the Company projects

 

The Environmental Protection Agency (the “EPA”) has issued rules pursuantWhile we plan to implement hydrogen off-take agreements with financially viable purchasers, the Water Pollution Control Acthydrogen market today is relatively limited as to purchasers and widespread penetration of 1972 (“Clean Water Act”) that require refiners to reduce the sulfur content of gasoline and dieselmarket as a transportation fuel and reduce the benzene content of gasoline by various specified dates. We may incur substantial costs to comply with the EPA’s low sulfur and low benzene rules. Failure to meet the EPA’s clean fuels mandates could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Various states have proposed and/or enacted low carbon fuel standards intended to reduce carbon intensity in transportation fuels. In addition, in 2010 the EPA issued social cost of carbon estimates used by the EPA and other federal agencies in regulatory cost-benefit analyses to take into account alleged broad economic consequences associated with emissions of greenhouse gases. These estimates were increased in 2013. While the impacts of low carbon fuel standards and higher social cost of carbon in future regulations is not knowndeveloped. In the event any such hydrogen off-take agreements are terminated before their terms, other alternative markets may not be available readily at this time, eithercomparable prices which could impact the Company’s potential results of these may result in increased costs to our planned operations.

 

Renewable fuels mandates may reduce demand for the petroleum fuels we intend to produce, which could haveCarbon capture technology and sequestration is not currently deployed on a material adverse effect on our business, financial condition, results of operations and cash flows.

Pursuant to the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007, the EPA has promulgated the Renewable Fuel Standard (“RFS”) implementing mandates to blend renewable fuels into petroleum fuels produced and sold in the United States. We are subject to the RFS, which requires obligated parties to blend renewable fuels, such as ethanol, into petroleum fuels sold in the United States. A Renewable Identification Number (a “RIN”) is generated for each gallon of renewable fuel produced under the RFS. At the end of each year, obligated parties must surrender sufficient RINs to meet their renewable fuel obligations under the RFS. The obligated volume increases annually over time until 2022. Uncertainty surrounding RFS requirements in recent years has resulted in increased volatility in RIN prices. We cannot predict the future prices of RINs or waiver credits for cellulosic biofuels from the EPA, but the costs to obtain the necessary number of RINs and waiver credits could be material.

In 2010 and 2011, the EPA issued partial waivers with conditions allowing a maximum of 15% ethanol to be used in certain vehicles. Future changes to existing laws and regulations could increase the minimum volumes of renewable fuels that must be blended with refined petroleum fuels. Because we do not plan to produce renewable fuels, increasing the volume of renewable fuels that must be blended into our products could displace an increasing volume of the Refinery’s product pool, potentially resulting in lower earnings and materially adversely affecting our business, financial condition and results of operations and cash flows.

During 2013, the price of RINs was very volatile as the EPA’s proposed renewable fuel volume mandates approached the “blend wall.” The blend wall refers to the point at which refiners are required to blend more ethanol into the transportation fuel supply than can be supported by the demand for E10 gasoline (gasoline containing 10 percent ethanol by volume). In November 2013, the EPA published the annual renewable fuel percentage standards for 2014, which acknowledged the blend wall and were generally lower than the volumes for 2013 and lower than statutory mandates. The price of RINs decreased significantly after the 2014 percentage standards were published; however, RIN prices remained volatile and increased subsequently in 2014. In November 2015, the EPA published final notice for RFS obligated volumes for 2014, 2015 and 2016 and Biomass-Based Diesel for 2017. The current standard may cause the blend wall to again become an issue affecting the overall supply of RINs.

We cannot predict the future prices of RINs or waiver credits. The cost of RINs is dependent upon a variety of factors, which include EPA regulations, the availability of RINs for purchase, the price at which RINs can be purchased, transportation fuel production levels, the mix of our petroleum products, as well as the fuel blending performed at the Refinery, all of which can vary significantly from quarter to quarter. Additionally, because we do not expect to produce renewable fuels, increasing the volume of renewable fuels that must be blended into our products could displace an increasing volume of the Refinery’s product pool, potentially resulting in lower earnings. If sufficient RINs are unavailable for purchase or if we have to pay a significantly higher price for RINs, or if we are otherwise unable to meet the EPA’s RFS mandates, our business, financial condition, results of operations and cash flows could be materially adversely affected.

To the extent that we export gasoline and diesel, the EPA’s RFS mandates do not apply, increasing the Company’s profitability dramatically. The Company cannot predict the amount of export volumes and how exports of gasoline and diesel may impact the earnings of the Company.

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We could incur significant costs to comply with greenhouse gas emissions regulation or legislation.

The EPA has adopted and implemented regulations to restrict emissions of greenhouse gases under certain provisions of the Clean Air Act. For example, the EPA requires, in certain circumstances, permitting of certain emissions of greenhouse gases from large stationary sources, such as refineries. The EPA has also adopted rules requiring refiners to report greenhouse gas emissions on an annualwide-spread basis, for emissions occurring after January 1, 2010.

To the extent that future legislation, rules and regulations are enacted, our operating costs, including capital expenditures, may increase and additional operating restrictions could be imposed on our business, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. Finally, some scientists have concluded that increasing concentrations of greenhouse gases in the earth’s atmosphere may produce climate changes that may have significant physical effects, such as increased frequency and severity of storms, droughts, floods and other climatic events, which if any such event were to occur, it may have a material adverse effect on our business, financial condition, results of operations and cash flows.not developed.

 

Increased regulationCarbon capture and sequestration of hydraulic fracturing could resultthe CO2 is an emerging technology. While the technology to capture CO2 from refining is available, it is not in reductions or delayswide-spread use.  Sequestering the CO2 after it is captured in crude oil production in our existing areas of operation, which could impact our crude oil supplyunderground formations is a new technology and the regulations and legal framework is evolving.  Today the technical, legal and regulatory framework for injecting CO2 may change dramatically over time and may adversely impact our business.business model.

 

A significant percentageThe loss of the crude oil production in our existing areas of operation is being developed from unconventional sources, such as shale, using hydraulic fracturing. Hydraulic fracturing involves the injection of water, sand and chemicals under pressure into the formation to stimulate production. A number of federal agencies, including the EPA and the U.S. Department of Energy, are analyzing, or have been requested to review, a variety of environmental issues associated with shale development, including hydraulic fracturing. In addition, the EPA has asserted federal regulatory authority over hydraulic fracturing activities under the Safe Drinking Water Act’s Underground Injection Control Program and under the Toxic Substances Control Act of 1976 and in September 2015 issued proposed rules regulating methane emissions from oil and natural gas completion operations. The rules were finalized in June 2016 and became effective in August 2016. Further, some states and municipalities have adopted and other states and municipalities are considering adopting, regulations prohibiting hydraulic fracturing in certain areas or imposing more stringent disclosure. At the same time, certain environmental groups have suggested that additional laws may be needed to more closely and uniformly regulate the hydraulic fracturing process and legislation has been proposed by some members of Congress to provide for such regulation. We cannot predict whether any such legislation will ever be enacted and if so, what its provisions would be. If additional levels of regulation are imposed at the federal, state or local level, this could result in corresponding delays, increased operating costs and process prohibitions for crude oil producers and potentially negatively impact our crude oil supply, whichMr. Hanks could adversely affect our business, financial condition, results of operations and cash flows.business.

 

Since Mr. Hanks is our principal executive officer devoting substantially all of his business time to the activities of the Company, if he were to die, become disabled, or leave our company, we would be forced to retain individuals to replace him. There is no assurance that we can find suitable persons to replace him if that becomes necessary. We could experience business interruptions caused by pipeline shutdowns.have no key man life insurance at this time.

 

Assuming completionRisks Related to our Common Stock and the Offering

Two of our stockholders collectively have the ability to determine any matter to be decided by the stockholders, which may prevent or delay a change in control of our company.

Jack W. Hanks, our CEO, and Bruce N. Lemons, one of the Refinery, we may distribute its products by pipelinetwo members of our Board of Directors, beneficially owned approximately 2,731,676 shares of our common stock as wellof December 31, 2021, which constituted approximately 1.5% of our common stock outstanding as by rail. Certainof such date.  In addition, Mr. Hanks beneficially owns all of our outstanding Series A preferred stock, which represents the right to vote 50.1% of the pipelines we may utilize are subject tovotes presented for the vote of stockholders.  Through such beneficial ownership, Messrs. Hanks and Lemons control approximately 57.3% of the voting power of the common carrier regulatory obligations applicable to interstate oil pipelines that require that capacity must be prorated among shippers in an equitable manner in accordance with the tariff then in effect in the event there are nominations in excessstock on a combined basis as of capacity. Nominations by new shippers or increased nominations by existing shippers may reduce the capacity available to us. Any extended, non-excused downtime at the Refinery could, under certain circumstances, cause us to lose line space on the refined products pipelines used by the Refinery, if we cannot otherwise utilize our pipeline allocations.

December 31, 2021. As a result, we could experience an interruptionthey can determine the outcome of supplyany corporate matter submitted to our stockholders for approval, including the election of directors and any transaction that might cause a change in control, such as a merger or delivery, or an increased cost of receiving crude oil and delivering refined products to market, if the ability of these pipelines to transport crude oil, blended stocks or refined products is disrupted because of accidents, weather interruption, governmental regulation, terrorism, other third-party action, or any other events beyond our control. A prolonged inability to receive crude oil or transport refined products on pipelines that we currently utilize could have a material adverse effect on our business, financial condition, results of operations and cash flows.acquisition.

 

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The relative costs of oil, natural gas, nuclear power, hydropower and numerous forms of alternative energy production may have a material adverse impact on our business and operating results.

 

Global and regional energy supply comes from many sources, including oil, natural gas, coal, hydro, nuclear, solar, wind, geothermal and biomass, among others. A cost or supply shift among these sources could negatively impact our business opportunities going forward and the profitability of those opportunities. A demand shift, where technological advances favor the utilization of one or a few sources of energy may also impact the demand for our products. If demand shifts in a manner that increases energy utilization outside of our traditional customer base or expertise, our business and financial results could be materially adversely affected. In addition, governmental policy can affect the relative importance of various forms of energy sources. For example, non-fossil based sources may require and often receive government tax incentives to foster investment. If these incentives become more prominent, our business and results of operations could suffer.

Terrorist attacks, cyber-attacks, threats of war or actual war may negatively affect our future operations, financial condition, results of operations, cash flows and prospects.

Terrorist attacks in the U.S. as well as events occurring in response to or in connection with them, may adversely affect our planned operations, financial condition, results of operations, cash flows and prospects. Energy-related assets may be at greater risk of future terrorist attacks than other possible targets. A direct attack on assets to be used in our planned operations could have a material adverse effect on our operations, financial condition, results of operations, cash flows and prospects. In addition, any terrorist attack could have an adverse impact on energy prices, including prices for crude oil and refined products and an adverse impact on the margins from our future operations. In addition, disruption or significant increases in energy prices could result in government imposed price controls.

Any disruption of, or our inability to access, our information technology systems could adversely impact our business.

Our planned operations are likely to be dependent on technology infrastructure and to maintain and rely upon certain critical information systems. These information systems are expected to include data network and telecommunications, internet access and our websites and various computer hardware equipment and software applications. These information systems will be subject to damage or interruption from a number of potential sources including natural disasters, software viruses or other malware, power failures, cyber-attacks and other events. To the extent that these information systems are under our control, we expect to implement measures such as virus protection software and emergency recovery processes to address the outlined risks. However, security measures for information systems cannot be guaranteed. Breaches to our networks could lead to such information being accessed, publicly disclosed, lost or stolen, and could result in legal claims or proceedings, liability under laws that protect the privacy of customer information, disrupt the services we expect to provide and damage our reputation, any of which could have a material adverse effect on our planned business, financial condition, results of operations and cash flows. Any compromise of our data security or our inability to use or access these information systems at critical points in time could unfavorably impact the timely and efficient operation of our business and subject us to additional costs and liabilities.

Risks Related to Our Common Stock

We have conducted highly dilutive equity related offerings during 2017 and may conduct furtherAdditional stock offerings in the future may dilute then existing stockholders’ percentage ownership of our company.

Given our plans and expectations that we will need additional capital, we anticipate that we will need to issue additional shares of common stock or securities convertible or exercisable for shares of common stock, including convertible preferred stock, convertible notes, stock options or warrants. The issuance of additional securities in the future will dilute the shareholdingspercentage ownership of investors.

Since our inception, we have relied on sales of equity and equity related securities to fund our activities. During 2017, we have conducted convertible note offerings that are highly dilutive to ourthen existing stockholders and, due to the original issue discount of the notes and significant redemption premiums, have a high cost of capital. In addition, we entered into an Equity Purchase Agreement with Crown Bridge pursuant to which we have the right to put up to $3,000,000 of our Class A common stock to Crown Bridge. The purchase price of shares issued in connection with each put notice is 80% of the lowest traded price of our Class A common stock in the seven trading days immediately following the clearing date of the put shares for the respective put notice. We expect to conduct further equity offerings in the future to continue as a going concern. As additional equity securities are issued, investors’ percentage interests in our equity ownership will be diluted. The result of this could reduce the value of current investors’ stock. Further, if common stock is issued in return for additional funds, the price per share could be lower than that paid by our current stockholders.

 

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We are subject to penny stock regulations and restrictions and you may have difficulty selling shares of our Class A common stock.

Our Class A common stock is subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934 (the “Exchange Act”), commonly referred to as the “penny stock rule.” Section 15(g) sets forth certain requirements for transactions in penny stock, and Rule 15g-9(d) incorporates the definition of “penny stock” that is found in Rule 3a51-1 of the Exchange Act. The Securities and Exchange Commission (the “SEC”) generally defines a penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. We are subject to the SEC’s penny stock rules.

Since our Class A common stock is deemed to be penny stock, trading in the shares of our Class A common stock is subject to additional sales practice requirements on broker-dealers who sell penny stock to persons other than established customers and accredited investors. “Accredited investors” are persons with assets in excess of $1,000,000 (excluding the value of such person’s primary residence) or annual income exceeding $200,000 or $300,000 together with their spouse. For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such security and must have the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, except in certain circumstances, the rules require the delivery, prior to the first transaction of a risk disclosure document, prepared by the SEC, relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information for the penny stocks held in an account and information to the limited market in penny stocks. Consequently, these rules may restrict the ability of broker-dealer to trade and/or maintain a market in our Class A common stock and may affect the ability of the Company’s stockholders to sell their shares of Class A common stock.

There can be no assurance that our shares of Class A common stock will qualify for exemption from the “penny stock rule”. In any event, even if our Class A common stock was exempt from the “penny stock rule”, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock if the SEC finds that such a restriction would be in the public interest.

We do not expect to pay dividends in the foreseeable future.

 

We do not intend to declare dividends for the foreseeable future, as we anticipate that we will reinvest any future earnings in the development and growth of our business. Therefore, our stockholders will not receive any funds unless they sell their Class A common stock, and stockholders may be unable to sell their shares on favorable terms or at all.

 

Our Class A common stock is subject to price volatility unrelated to our operations.

 

The market price of our Class A common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of other companies in the same industry, trading volume in our Class A common stock, changes in general conditions in the economy and the financial markets or other developments affecting the Company’s competitors or the Company itself. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our Class A common stock.

 

Trading inBecause our Class A common stock on the OTCQB is limited and sporadic making it difficult for our stockholders to sell their shares or liquidate theirinvestments.

Our Class A common stock is currently listed for public trading onsubject to the OTCQB tier of the OTC Markets Group, Inc. penny stock rules, it may be more difficult to sell our common stock.

The tradingSEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of our Class A common stock has been subject to wide fluctuations. Trading prices of our Class A common stock may fluctuate in response to a number of factors, many of which will be beyond our control. The stock market has generally experienced extremeless than $5.00 (other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume fluctuations that have often been unrelatedinformation with respect to transactions in such securities is provided by the exchange or disproportionate to the operating performance of companies with no current business operation. There can be no assurance that trading prices and price earnings ratios previously experienced by our Class A common stock will be matched or maintained. These broad market and industry factors may adversely affect the market price of our Class A common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs for us and a diversion of management’s attention and resources. Further, on January 8, 2018, we received a letter from OTC Markets that the bid price of our Class A common stock had closed below $0.01 for more than 30 consecutive calendar days and no longer meets the Standards for Continued Eligibility for OTCQB. Per Section 4.1 of the OTCQB Standards, we have been granted a cure period of 90 calendar days during which the minimum closing bid price for our Class A common stock must be $.01 or greater for ten consecutive trading days in order to continue trading on the OTCQB marketplace.system).  If this requirement is not met by April 8, 2018, the listing of our Class A common stock will be removed from the OTCQB marketplace.

Our Articles of Incorporation provide indemnification for officers, directors and employees.

Our governing instruments provide that officers, directors, employees and other agents and their affiliates shall only be liable to our Company for losses, judgments, liabilities and expenses that result from matters involving intentional misconduct, fraud or a knowing violation of law. Thus certain alleged errors or omissions might not be actionable by us. The governing instruments also provide that, under the broadest circumstances allowed under law, we must indemnify our officers, directors, employees and other agents and their affiliates for losses, judgments, liabilities, expenses and amounts paid in settlement of any claims sustained by them in connection with our Company, including liabilities under applicable securities laws.

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Crown Bridge will pay less than the then-prevailing market price for our Class A common stock.

The shares of Class A common stock to be issued to Crown Bridge pursuant to the Equity Purchase Agreement will be purchased at 80% of the lowest traded price of our Class A common stock in the seven trading days immediately following the clearing date of the put shares for the respective put notice. Because the put price and the conversion rate are lower than the prevailing market price of our Class A common stock, Crown Bridge has a financial incentive to sell our Class A common stock immediately upon receiving the shares to realize the profit equal to the difference between the discounted price and the market price. If Crown Bridge sells the shares, the price of our Class A common stock could decrease. If our stock price decreases, Crown Bridge may have a further incentive to sell its shares of the Class A common stock that it holds. These sales may have a further impact on our stock price.

The sale of a substantial number of shares of our common stock, or the perception that such sales could occur, could adversely affect prevailing market prices for our common stock.

The market price of our common stock could decline as a result of issuances and sales by us, including pursuant to the Equity Purchase Agreement, or sales by our existing shareholders, of common stock, or the perception that these issuances and sales could occur. Sales by our shareholders might also make it more difficult for us to issue and sell common stock at a time and price that we deem appropriate. It is likely that the sale of shares by Crown Bridge will depress the market price of our common stock.

The issue and sale of the shares under the Equity Purchase Agreement may also have an adverse effect on the market price of the common shares. Crown Bridge may resell some, if not all, of the shares that we issue to it under the Equity Purchase Agreement and such sales could cause the market price of the common stock to decline significantly. To the extent of any such decline, any subsequent puts would require us to issue and sell a greater number of shares to Crown Bridge in exchange for each dollar of the put amount. Under these circumstances, the existing shareholders of our company will experience greater dilution. The effect of this dilution may, in turn, cause the price of our common stock to decrease further, both because of the downward pressure on the stock price that would be caused by a large number of sales of our shares into the public market by Crown Bridge,remains less than $5.00 and because our existing stockholders may disagree with a decision to sell shares to Crown Bridge at a time when our stock price is low, and may in response decide to sell additional shares, further decreasing our stock price. If we draw down amounts under the Equity Purchase Agreement when our share price is decreasing, we will need to issue more shares to raise the same amount of funding.

Any shares of our common stock we issueis not listed on a national securities exchange such as OTCQB, our stock may be deemed a penny stock. The penny stock rules require a broker-dealer, at least two business days prior to a transaction in connection witha penny stock not otherwise exempt from those rules, to deliver to the put option undercustomer a standardized risk disclosure document containing specified information and to obtain from the Equity Purchase Agreement, orcustomer a signed and date acknowledgment of receipt of that document. In addition, the conversion option underpenny stock rules require that prior to effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive: (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our convertible notes, will cause your ownership interest to be diluted.common stock, and therefore stockholders may have difficulty selling their shares.

 

Crown Bridge has committed to purchase up to $3,000,000 worth of shares of our Class A common stock. From time to time during the term of the Equity Purchase Agreement, and at our sole discretion, we may present Crown Bridge with a put notice requiring Crown Bridge to purchase shares of our Class A common stock. The purchase price to be paid by Crown Bridge will be 80% of the lowest traded price of our Class A common stock in the seven trading days immediately following the clearing date of the put shares for the respective put notice. As a result, our existing shareholders will experience immediate dilution upon the purchase of any of the shares by Crown Bridge. In addition, because the shares that will be issued in connection with the exercise of our put right or upon the conversion of any of our convertible notes may be sold or converted at a price less than the prevailing market value, the value of your aggregate shareholdings in the Company will be diluted.

We may not have access to the full amount available under the Equity Purchase Agreement.

There is no guarantee that we will satisfy the conditions to the Equity Purchase Agreement. Although the Equity Purchase Agreement provides that we can require Crown Bridge to purchase, at our discretion, up to $3,000,000 worth of shares of our Class A common stock in the aggregate, there can be no assurances that we will be able to satisfy the closing conditions applicable for each put. For example, our ability to draw down funds and sell shares under the Equity Purchase Agreement requires that this resale registration statement be declared effective and continue to be effective. This registration statement registers the resale of 300,000,000 shares issuable under the Equity Purchase Agreement, and our ability to sell any remaining shares issuable under the Equity Purchase Agreement is subject to our ability to prepare and file one or more additional registration statements registering the resale of these shares. These registration statements may be subject to review and comment by the staff of the SEC, and will require the consent of our independent registered public accounting firm. Therefore, the timing of effectiveness of these registration statements cannot be assured and may affect our ability to put shares to Crown Bridge. If we fail to satisfy the applicable closing conditions, we will not be able to sell the put shares to Crown Bridge. There is no guarantee that we will be able to fully utilize the Equity Purchase Agreement. This description is qualified in its entirety by reference to the Equity Purchase Agreement, which is incorporated by reference as an exhibit to the Registration Statement of which this prospectus forms a part.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains certain forward-looking statements. When used in this prospectus 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 prospectus 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.

 

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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 prospectus 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.

 

USE OF PROCEEDS

 

We will not receive any proceeds from the sale of Shares by the selling stockholders. All proceeds from the sale of the Shares will be for the account of the selling security holder. However, we will receive proceeds from the sale of securities to Crown Bridge pursuant to our exercise of a put right granted to us in the Equity Purchase Agreement. Crown Bridge is deemed an underwriter of our common stock.stockholders.

 

Our business plan contemplates that we will draw upon the entire $3,000,000 worth of Class A Common Stock under the Equity Purchase Agreement. However, there is no guarantee that we will continue to satisfy all of the conditions precedent to each draw under the Equity Purchase Agreement. See “Risk Factors-- We may not have access to the full amount available under the Equity Purchase Agreement .

From April through December 2017, we issued an aggregate of approximately $1,382,000 principal amount of convertible notes resulting in net proceeds to us of approximately $990,000. As of January 15, 2018, the aggregate principal amount of these convertible notes, including accrued interest and net of conversions into our Class A common stock, was approximately $797,000. We incurred the indebtedness under the convertible notes in order to provide working capital for the Company since April 2017, given that we have yet to generate any revenues from operations. We intend to utilize the net proceeds from any puts tendered to Crown Bridge under the Equity Purchase Agreement for the repayment of our indebtedness under then outstanding convertible notes until we have retired all such notes. The table below sets forth the payee, principal balance, maturity dates, interest rates and maximum redemption premium for each of the convertible notes so issued that remained outstanding at January 15, 2018:

 

 

Principal

 

 

Maturity

 

Maximum

 

 

 Redemption

 

Payee

 

Balance

 

 

Date

 

Interest Rate

 

 

Price

 

 

 

 

 

 

 

 

 

 

 

 

 

GS Capital Partners

 

$50,000

 

 

5/24/18

 

 

8%

 

 

147%

JSJ Investments

 

$100,000

 

 

3/30/18

 

 

12%

 

 

150%

Auctus Fund

 

$115,000

 

 

6/1/18

 

 

12%

 

 

135%

Power Up Lending

 

$123,500

 

 

6/20/18

 

 

12%

 

 

145%

 

 

$111,773

 

 

11/14/18

 

 

12%

 

 

133%

Vista Capital

 

$184,800

 

 

10/19/19

 

 

12%

 

 

145%

 

 

$112,000

 

 

12/14/19

 

 

12%

 

 

145%

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If planned draws under the Equity Purchase Agreement are not sufficient to retire the outstanding convertible notes, we will be required to obtain alternative sources of capital to refinance or retire the convertible notes when they mature, unless the holders thereof convert the outstanding balance into our Class A common stock pursuant to the terms of the convertible notes.

After the assumed repayment of our outstanding convertible notes, the amount of net proceeds received from any additional puts tendered to Crown Bridge under the Equity Purchase Agreement will be used for general corporate and working capital purposes and acquisitions or assets, businesses or operations or for other purposes that the Board of Directors, in its good faith deem to be in the best interest of the Company. The net proceeds of the Equity Purchase Agreement, even if fully drawn, are not sufficient to commence construction of the Company’s planned Refinery facilities. The Company will require substantial additional equity and debt financing to accomplish such objective. See “Business—Proposed Organizational Structure.”

DETERMINATION OF OFFERING PRICEDILUTION

 

The actual offering priceselling stockholders may offer all or portion of the selling stockholdersshares of the Sharescommon stock covered by this prospectus will be determined byfor resale from time to time through public or private transactions, at either prevailing market prices or at the time of sale, by private transactionsprivately negotiated by the selling stockholders or as otherwise describedprices. If you invest in the section entitled “Plan of Distribution.” The offering price of our common stock does not necessarily bear any relationshipin this offering at the closing price of $0.2350 per share in effect on December 31, 2021, your ownership interest will be diluted immediately to ourthe extent of the difference between such price per share and the net tangible book value assets, past operating results, financial condition or any other established criteriaper share of value. Our common stock may not trade at market prices in excessimmediately after this offering.

Our net tangible book value deficit is the amount of the offering priceour total tangible assets less our total liabilities. Our net tangible book value deficit as prices forof October 31, 2021 was $1,750,358, or $.0928 per share of common stock (based on shares outstanding at December 31, 2021). This represents an immediate dilution in any public market will be determinednet tangible book value of $0.1421 per share to new investors participating in the marketplace and may be influenced by many factors.this offering.

 

DILUTION

Under the Equity Purchase Agreement, the purchase price of the shares to be sold to Crown Bridge will be at a price equal to 80% of the lowest traded price of our Class A common stock in the seven trading days immediately following the clearing date of the put shares for the respective put notice. The table below illustrates an issuancenumber of shares of Class A common stock to Crown Bridge underthat will be outstanding after this offering is based on 18,845,362 shares of common stock outstanding as of December 31, 2021 and excludes 35,730,684 shares of common stock issuable upon the Equity Purchase Agreement for a hypothetical draw down amountexercise of $25,000 at an assumed trading priceoptions and warrants or the conversion of $0.01:shares of Series B Preferred Stock outstanding as of such date.

 

Draw Down Amount

 

 

Price to be paid by Crown Bridge

 

 

Number of Shares
to be Issued

 

$25,000

 

 

$0.008

 

 

 

3,125,000

 

By comparison, if the trading price of our Class A common stock was $0.0075, the number of shares that we would be required to issue in order to have the same draw down amount of $25,000 would be greater, as shown by the following table:

Draw Down Amount

 

 

Price to be paid by Crown Bridge

 

 

Number of Shares
to be Issued

 

$25,000

 

 

$0.006

 

 

 

4,166,667

 

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Accordingly, there would be dilution of an additional 1,041,667 shares issued due to the lower stock price of $0.0075 per share. In effect, if we are interested in receiving a fixed funding amount, a lower price per share of our common stock means a higher number of shares to be issued to Crown Bridge in order to receive that fixed funding amount, which equates to greater dilution of existing stockholders. The effect of this dilution may, in turn, cause the price of our Class A common stock to decrease further, both because of the downward pressure on the stock price that would be caused by a large number of sales of our shares into the public market by Crown Bridge, and because our existing stockholders may disagree with a decision to sell shares to Crown Bridge at a time when our stock price is low, and may in response decide to sell additional numbers of shares, further decreasing our stock price.

The actual number of shares that will be issued to Crown Bridge under the Equity Purchase Agreement will depend upon the market price of our common stock at the time of our puts to Crown Bridge and shortly thereafter.

MARKET PRICE OF AND DIVIDENDS ON OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

Public Market for Common Stock

 

Commencing on November 2, 2017,Since April 10, 2018, our Class A common stock has been listed on the OTCQBOTC Pink under the symbol “MMEX”"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. Prior toFrom November 2, 2017 through April 9, 2018, our common stock (then known as Class A common stockCommon Stock) was quotedlisted on the OTC Pink tier.OTCQB. The following table indicates the quarterly high and low bid price for our Class A common stock for the fiscal years ending April 30, 20162021 and April 30, 2017 and for the current fiscal year through January 19, 2018.2020. Such inter-dealer quotations do not necessarily represent actual transactions and do not reflect retail mark-ups, mark-downs or commissions. The Company amended 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.

 

 

 

High

 

 

Low

 

Fiscal year ended April 30, 2016

 

 

 

 

 

 

Quarter ended July 31, 2015

 

$0.02

 

 

$0.01

 

Quarter ended October 31, 2015

 

$0.02

 

 

$0.02

 

Quarter ended January 31, 2016

 

$0.02

 

 

$0.0041

 

Quarter ended April 30, 2016

 

$0.0063

 

 

$0.0041

 

 

 

 

 

 

 

 

 

 

Fiscal year ended April 30, 2017

 

 

 

 

 

 

 

 

Quarter ended July 31, 2016

 

$0.0063

 

 

$0.0049

 

Quarter ended October 31, 2016

 

$0.0104

 

 

$0.0049

 

Quarter ended January 31, 2017

 

$0.0049

 

 

$0.0001

 

Quarter ended April 30, 2017

 

$0.0563

 

 

$0.0001

 

 

 

 

 

 

 

 

 

 

Fiscal year ended April 30, 2018

 

 

 

 

 

 

 

 

Quarter ended July 31, 2017

 

$0.0097

 

 

$0.0066

 

Quarter ended October 31, 2017

 

$0.0249

 

 

$0.0076

 

Quarter ending January 31, 2018 (through January 19, 2018)  

 

$0.0182

 

 

$0.0061

 

 

 

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

 

 

 

 

 

 

 

 

 

 

Fiscal year ending April 30, 2022

 

 

 

 

 

 

 

 

Quarter ended July 31, 2021

 

$17.00

 

 

$1.00

 

Quarter ended October 31, 2021

 

$1.10

 

 

$0.48

 

Quarter ending January 31, 2022 (through January 4, 2022)

 

$0.59

 

 

$0.19

 

 

On January 19, 2018,4, 2022, the closing bid price of the Class Aour common stock as reported on the OTCQBOTC Pink was $0.0068. We have not repurchased any of our equity securities.$0.23 per share.

   

On January 8, 2018, we received a letter from OTC Markets thatThe number of holders of record of the bid price of our Class ACompany's common stock had closed below $0.01 for more than 30 consecutive calendar days and no longer meets the Standards for Continued Eligibility for OTCQB. Per Section 4.1as of the OTCQB Standards, we have been granted a cure period of 90 calendar days during which the minimum closing bid price for our Class A common stock must be $.01 or greater for ten consecutive trading days in order to continue trading on the OTCQB marketplace. If this requirement is not metDecember 31, 2021 was 148, as reported by April 8, 2018, the listing of our Class A common stock will be removed from the OTCQB marketplace.

We intend to maintain compliance with the OTCQB Standards. To the extent that market conditions do not otherwise result in our Class A common stock exceeding the minimum closing bid price requirements, we would expect to effect a reverse split of our Class A common stock in order to achieve compliance with the OTCQB Standards.

Holders

As of January 15, 2018 , 2017, we had 143 record holders of our Class A common stock and one record holder of our Class B common stock, according to the books of our transfer agent. TheThis number of our stockholders of record excludesdoes not include an undetermined number of stockholders whose shares arestock is held in “street”"street" or “nominee”"nominee" name.

Dividends

 

We have not declared or paid any cash or other dividends on theour common stock to date for the last two fiscal years and have no intention of doing so in the foreseeable future. See “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

23
 
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Equity Compensation Plans

As of April 30, 2017, the following securities were issuable under the Company’s equity compensation plans. As set forth in the table below, none of these transactions were approved by shareholders.

 

 

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) (c)

 

 

 

 

 

 

 

 

 

 

 

Equity Compensation Plans Approved by Security Holders

 

 

0

 

 

 

0

 

 

 

0

 

Equity Compensation Plans Not Approved by Security Holders (1)(2)(3)

 

 

397,261,211

 

 

$0.09

 

 

 

0

 

Total

 

 

397,261,211

 

 

$0.09

 

 

 

0

 

______________

(1)

Consists of options to purchase 2,000,000 shares of Class A common stock and warrant to purchase 395,261,211 shares of Class A common stock.

(2)

During the year ended April 30, 2014, the Company issued options to the three persons then serving as directors (in lieu of cash compensation) to purchase an aggregate of 2,000,000 shares of common stock at an exercise price of $0.35 per share. The options expire on the tenth anniversary of the date of grant and vested over a two year period from the date of grant. In June 2017, the option holders surrendered their options to the Company and the options were terminated.

(3)

During May 2017, certain warrant holders exercised warrants to purchase 353,359,992 shares of Class A common stock.

 

Penny Stock

 

Our common 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.

 

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Dividends

 

We have not declared or paid any cash or other dividends on the common stock and have no intention of doing so in the foreseeable future. See “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Equity Compensation Plans

As of April 30, 2021, the following securities were issuable under the Company’s equity compensation plans:

 

 

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) (c)

 

 

 

 

 

 

 

 

 

 

 

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 shares and options to 200 shares of common stock.

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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 the Risk Factors, Cautionary Notice Regarding Forward-Looking Statements and Business sections in this Prospectus. 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.

Overview

MMEX Resources Corporation was formed as a Nevada corporation in 2005. The current management team lead an acquisition of the Company (then named Management Energy, Inc.) through a reverse merger completed in 2010 and thereafter changed the Company’s name to MMEX Mining Corporation. In 2016, the Company changed its name to MMEX Resources Corporation to reflect the change in its business plan to an energy focus in the Americas.

Business Plan

 

The following discussion should be read in conjunction with the Consolidated Financial Statements, including the notes thereto.

Overview

Business Plan

We areCompany is a development stagedevelopment-stage company engaged in the exploration, extraction, refining and distribution of oil, gas, petroleum products and electric power. We plan to focusfocusing on the acquisition, development and financing of oil, gas, refining and electric powerinfrastructure projects in Texas Peru, and other countriesSouth 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 Latin America using the expertise of our principals to identify, finance and acquire these projects.Texas.

 

The most significantSince 2016, the focus of our current business plan ishas been to build crude oil distillation units and refining facilities (CDUs) in the Permian Basin in West Texas. We intend to implementrevised our current business plan in two phases, First, through2021 to move MMEX to clean energy use and production, leveraging our subsidiary,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.

·

Develop additional megawatts of solar power for distribution to our projects in West Texas

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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 Refining, we intendCounty site to buildproduce 87° gasoline, ultra-low sulphur diesel and commence operationlow-sulphur fuel oil, utilizing the Ultra Fuels Plus with carbon capture 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 10,000 bpd crude oil Distillation Unitmajor international technology partner.

We are in various stages of negotiations with major company off-takes that will produce a non-transportation grade diesel primarily for sale in the local market for drilling mudrange from specialty air and frac fluids, along with naphthagas companies to international trading companies. The proposed distribution network of liquid and heavy fuel oil to be sold to other refiners. Second, through a separate subsidiary, we intend to build and commence operation of the Large Refinery with up to 100,000 bpd capacity at the same location in West Texas. Thesegaseous hydrogen from our planned projects will be built on 476 acres located 20 miles northeast of Fort Stockton, Texas, near the Sulfur Junction spur of the Texas Pacifico Railroad. If successfully developed, the Refinery would connect to existing railwaysby truck and pipelines to market diesel, gasoline, liquefied petroleum gas and other refined products within the U.S., with the potential to market these products and crude oil to western Mexico and South America. If completed, the Large Refinery will be one of the first full scale oil refineries built in the United States in more than 40 years.rail.

 

The Company is focusing on the Distillation Unit first in an effort to build and commence operations, and ultimately generate cash flow, on an expedited basis. The permitting process is significantly shorter for constructionResults of the Distillation Unit and we received the permit from TCEQ on August 30, 2017. The permitting process for the Large Refinery is expected to be 12-18 months. Additionally, the construction of the Distillation Unit will require significantly less capital than the construction of the Large Refinery. As a result, the less capital will be required to build and complete the project and generate revenue and profits.Operations

 

Initially, Pecos Refining, the owner of the Distillation Unit,Three and the entity we formSix Months Ended October 31, 2021 compared to own and operate the Large Refinery will be wholly-owned subsidiaries of the Company. However, the construction of the Distillation Unit and the Large Refinery will require substantial equity and debt financing, far beyond the expected resources of the Company, and we anticipate that these Subsidiaries will obtain equity and debt financing to finance the cost of construction. We anticipate these Subsidiaries will be able to finance approximately 80% of the total costs of the Distillation Unit and the Large Refinery through debt financing, and the remaining 20% of the total costs would be financed through equity investments. To the extent these Subsidiaries raise money through the issuance of equity securities, our ownership will be diluted. We intend to retain managerial control of the Subsidiaries; however, 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.October 30, 2020

 

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We plan on marketing and distributing refined products in the Western areas of the United States and Mexico, and we may export product to Latin America. The Refinery will be located on the Texas Pacifico Railroad rail route 20 miles Northeast of Fort Stockton, Texas, approximately 1.5 miles from the Sulphur Junction on the Texas Pacifico Railroad. Once needed repairs are finished to the tracks and railway, the Texas Pacifico Railroad will connect to the Ferromex RR in Ojinago, Mexico, giving us access to the western Mexico markets. On August 4, 2017 the Texas Department of Transportation’s (TxDOT) announced receipt of a $7 million federal grant from The U.S. Department of Transportation to strengthen existing rail infrastructure in Permian Basin. As announced on August 4, the funds are expected to help rebuild the Presidio-Ojinaga International Rail Bridge and 72 miles of track on the South Orient Rail Line that run from the Mexico border to near Coleman, Texas owned by the state of Texas but maintained and operated by Texas Pacifico Transportation, Ltd. under a lease with TxDOT.

According to a report the Company received from VFuels Oil & Gas Engineering, the cost of a Distillation Unit with a 10,000 bpd capacity would be approximately $50 million. According to a report the Company received from KP Engineering, the cost of a 50,000 bpd refinery is estimated to be approximately $500 million and the cost of a 100,000 bpd refinery is estimated to be approximately $850 million. These estimates are only preliminary estimates and are subject to substantial change when additional engineering is completed.

Constructing the Refinery will require a significant number of governmental permits and approvals. The principal permit for the construction of the Refinery is the air quality permit issued by TCEQ and it was received by the Company on August 30, 2017. Trinity Consultants, the Company’s air quality permit advisor, estimates it will take approximately 18 months once the permit is filed to obtain the air quality permit for the Large Refinery. According to VFuels Oil & Gas Engineering, construction for the Distillation Unit would take approximately 12 to 15 months . . KP Engineering has estimated that the completion of the Large Refinery would take from 15 to 18 months following the receipt of the air quality permit.

We have no direct operations and no significant assets other than certain contractual rights relating to the ownership of certain real property and the development of the Refinery.

Results of Operations

Revenues

 

We have not yet begun to generate revenues.

 

General and Administrative Expenses

Our general and administrative expenses increased to $274,493 for the three months ended October 31, 2021 from $179,350 for the three months ended October 31, 2020 and increased to $717,000 for the six months ended October 31, 2021 from $362,675 for the six months ended October 31, 2020. The increase resulted from higher professional fee costs, which included increased costs for legal, public relations, and consulting services.

Project Costs

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 on our projects, including acquisition of rights, planning, design and permitting. During the six months ended October 31, 2021 we entered into, and paid for, planning and design contracts for our project development. The levels of spending on our projects will vary from period to period based on availability of financing and will be expensed as project costs are incurred.

Depreciation and Amortization Expense

Our depreciation and amortization expense results from the depreciation of land improvements and amortization of land easements and totaled to $9,246 and $8,720 for the three months ended October 31, 2021 and 2020, respectively. The depreciation and amortization was $17,964 and $17,438 for the six months ended October 31, 2021 and 2020, respectively.

Other Income (Expense)

Our interest expense includes interest accrued on debt, amortization of debt discount and penalties assessed on debt. Interest expense totaled $57,645 and $171,054 for the three months ended October 31, 2021 and 2020, respectively, and totaled $262,255 and $725,143 for the six months ended October 31, 2021 and 2020, respectively. The decrease in interest expense is due to a lower levels of new non-related party convertible debt in the current period, resulting in less amortization of debt discount to interest expense, less loan penalties incurred in the period, and reduced debt balances as a result of debt being paid off or converted into shares common stock.

We reported gains on derivative liabilities of $0 and $102,341 for the three months ended October 31, 2021 and 2020, respectively and $3,010,042 and $1,289,693 for the six months ended October 31, 2021 and 2020, respectively. We had previously identified the variable conversion feature of certain convertible notes payable as derivatives. We estimated 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 were subject to significant changes from period to period and to management’s judgment; therefore, the estimated fair value of the derivative liabilities would fluctuate from period to period, and the fluctuation has been material. During the six months ended October 31, 2021 all derivative liabilities were written off the books, resulting in a larger gain in the current period than in the prior period.

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We reported a net gain on extinguishment of liabilities of $196,166 and $136,310 for the three and six months ended October 31, 2021, respectively, which could be explained by the fact that our loan from the Small Business Administration was forgiven and we had other vendors forgive us for amounts owing. We reported no gain or loss on extinguishment of liabilities for the three or six months ended October 31, 2020.

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 October 31, 2021 and 2020, respectively, and $1,139,407 and $94,752 for the six months ended October 31, 2021 and 2020, respectively.

Non-Controlling Interest in Income of Consolidated Subsidiaries

Currently, we have no activity in our consolidated subsidiaries. Non-controlling interest in income of consolidated subsidiaries was $0 for all periods presented.

Net Income (Loss) Attributable to the Company

Because we had no non-controlling interest in income of consolidated subsidiaries, net income (loss) attributed to the Company was the same as net income (loss).

Fiscal Year ended April 30, 2021 Compared to Fiscal Year ended April 30, 2020

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 $20,132$36,835 to $211,160$867,471 for the year ended April 30, 20172021 from $231,292$904,306 for the year ended April 30, 2016.2020. The decrease is due to reduced payroll and operating expenses as we have focused on our new development strategy, offset by increased professional fees.

Our general and administrative expenses increased $29 ,930 to $132 ,581 for the three months ended October 31, 2017resulted from $102 ,651 for the three months ended October 31, 2016, and increased $ 3 44,470 to $ 4 70,711 for the six months ended October 31, 2017 from $ 126,241 for the six months ended October 31, 2017 . The increase s are due to additional professional fees,lower salaries, travel and other expenses associated with securing debt financing and administrative activities of our proposed refinery project and filingdevelopment activities due to limitations on funding during the current fiscal year.

Start-Up Costs

During the year ended April 30, 2021, the expenditures for the development of our S-1 registration statement.

Refinery Start-Up Costs

CDU project in Pecos County, Texas decreased from the prior fiscal year due to financing constraints. We expense the directhave expensed all costs incurred, prior to opening the Refinery, including acquisition of refinery rights, planning, design and permitting. Such costs totaled $372,560$179,133 and $214,439 for the yearyears ended April 30, 2017 . We did not incur any refinery start-up costs during the year ended April 30, 2016.2021 and 2020, respectively.

 

13

Refinery start-up costs totaled $165,420 for the three months ended October 31, 2017 and $498,531 for the six months ended October 31, 2017.

Table of Contents

 

Depreciation and Amortization Expense

 

Our depreciation and amortization expenses are not currently material to our operationsremained constant, totaling $34,875 and our property and equipment was fully depreciated as of April 30, 2017. Depreciation and amortization expenses were $386 and $1,947$34,663 for the years ended April 30, 20172021 and 2016,2020, respectively. The expense results from the depreciation of land improvements and amortization of land easements.

 

Depreciation and amortization expenses were $417 and $62 for the three months ended October 31, 2017 and 2016, respectively, and $707 and $386 for the six months ended October 31, 2017 and 2016, respectively.

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Other Income (Expense)

 

Our interest expense decreased $246,213$703,108 to $283,261$1,143,495 for the year ended April 30, 20172021 from $529,474$1,846,603 for the year ended April 30, 2016 due2020. We entered into fewer convertible debt arrangements in the current fiscal year, resulting in less amortization of debt discount to a reduction in our interest-bearing indebtedness,interest expense, which was partially offset by the fees incurred on and debt discount amortization associated with new convertible notes issued in fiscal year 2017.

Our interest expense increased $351,093 to $431,793 for the three months ended October 31, 2017 from $80,700 for the three months ended October 31, 2016, and increased $609,462 to $726,401 for the six months ended October 31, 2017 from $116,939 for the six months ended October 31, 2016. The increase in interest expense is due to interest accrued on new convertible debt during the current fiscal year, including amortization of debt discount. loan penalties and default interest.

 

For the years ended April 30, 20172021 and 2016,2020, we reported a losslosses on derivative liabilities of $6,105,727$22,906,922 and $395,619, respectively . The increase in loss on derivative liabilities resulted primarily from the issuance of new warrants.

We reported a loss on derivative liabilities of $514,129 and $52,587 for the three months ended October 31, 2017 and 2016, respectively, and reported a gain on derivative liabilities of $3,952,554 and $33,108 for the six months ended October 31, 2017 and 2016,$1,402,233, respectively. The increase in gain on derivative liabilities in the first six months of the current fiscal year resulted primarily from the exercise of substantially all warrants.

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 these fluctuationsthe fluctuation may be material.

We reported a gain on assignment and assumption agreement of $1,090,271 for the three months and six months ended October 31, 2017. 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 the member interests in LatAm, thereby acquiring all the assets and assuming all the liabilities of MCCH, MCC and CC. Short agreed to assume all liabilities and hold the Company harmless from any and all liabilities (contingent or otherwise). In consideration therefor, we issued Short 10,000,000 shares of Class A common stock, valued at $110,000, or $0.011 per share, equal to the market value of the stock on the date of the agreement, which amount was recorded as a reduction of the gain on Assignment and Assumption Agreement.

For the year ended April 30, 2017, we reported a gain on extinguishment of debt from the settlement of accrued salaries of $207,803. For the year ended April 30, 2016, we reported a loss on extinguishment of debt of $1,365,521 resulting primarily from the conversion of preferred stock and accrued dividends and convertible notes payable to shares of our common stock. We record the value of the shares issued at the current market price, which was significantly higher than the conversion price per share, resulting in a loss on conversion.

 

We reported a gain on extinguishment of debt of $475,587$605,010 for the six monthsyear ended October 31, 2017 resultingApril 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 a convertible notenotes payable preferred stock and certain accounts payable and accrued expenses. Where sharesDuring the year ended April 30, 2021 we settled certain notes which resulted in principal and accrued interest being written off for a gain of our Class A common stock are issued in extinguishment$242,102. We also recorded a gain of debt, we record$194,008 for the valuewrite off of the shares issued atderivative liabilities associated with the current market price, which at times is significantly higher than the book valuesettlement of the debt, resulting innotes and we recorded a gain on extinguishment of debt. We had no gain or loss on extinguishment of debt for$167,900 when the three months ended October 31, 2017 and 2016 andUnited States Small Business Administration forgave our loan issued under the six months ended October 31, 2016.

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Paycheck Protection Program.

 

Net Income ( Loss)(Loss)

 

As a result of the above, our net loss increased to $6,765,291 for the year ended April 30, 2017 from $2,523,853 for the year ended April 30, 2016.

Wewe reported net losses of $154,069$24,526,886 and $236,000$4,393,689 for the three months ended October 31, 2017 and 2016, respectively, and a net loss of $210,458 for the six months ended October 31, 2016. Primarily as a result of the gain on derivative liabilities, gain on assignment and assumption agreement and gain on extinguishment of debt discussed above, we reported net income of $3,822,062 for the six months ended October 31, 2017.

Non-Controlling Interest in (Income) Loss of Consolidated Subsidiaries

Non-controlling interest in loss of consolidated subsidiaries remained constant and was $1,824 for the yearyears ended April 30, 2017 compared to $1,838 for the year ended April 30, 2016 .2021 and 2020, respectively.

 

Non-controlling interest in income of consolidated subsidiaries was $651,005 and $650,659 for the three months and six months ended October 31, 2017, respectively. Non-controlling interest in loss of consolidated subsidiaries was $453 and $915 for the three months and six months ended October 31, 2017 and 2016, respectively. The increase in non-controlling interest in income of consolidated subsidiaries in the current fiscal year resulted from elimination of the accounts of MCCH, MCC and CC pursuant to an Assignment and Assumption Agreement entered into on September 18, 2017. Prior to this agreement, we had little activity in these consolidated subsidiaries.

Net Income ( Loss)Attributable to the Company

Net loss attributable to the Company increased to $6,763,467 for the year ended April 30, 2017 from $2,522,015 for the year ended April 30, 2016.

Net loss attributable to the Company was $805,074 and $235,547 for the three months ended October 31, 2017 and 2016, respectively, and $209,543 for the six months ended October 31, 2016. Net income attributable to the Company was $3,171,403 for the six months ended October 31, 2017.

Liquidity and Capital Resources

 

Working Capital

 

As of October 31, 2017,2021, we had current assets of $50, 297,$309,119, comprised of cash and prepaid expenses, and current liabilities of $3,253,684,$2,770,086, resulting in a working capital deficit of $3,203,387. Included in our current liabilities as of October 31, 2017 are derivative liabilities of $1,789,047, which we do not anticipate will require the payment of cash.$2,460,967.

 

Our total current liabilities as of October 31, 2017 decreased $5,750,738 to $3,253,684 from $9,004,422 as of April 30, 2017. The decrease resulted primarily from the decrease in derivative liabilities and the decrease in currently liabilities resulting from assumption of liabilities pursuant to an Assignment and Assumption Agreement entered into on September 18, 2017, partially offset by increased borrowings of the Company.

Sources and Uses of Cash

 

Our sources and uses of cash for the yearsthree months ended April 30, 2017October 31, 2021 and 20162020 were as follows:

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

Cash, Beginning of Year

 

$1,030

 

 

$141

 

Net Cash Used in Operating Activities

 

 

(281,409)

 

 

(74,111)

Net Cash Provided by Investing Activities

 

 

-

 

 

 

-

 

Net Cash Provided by Financing Activities

 

 

334,892

 

 

 

75,000

 

 

 

 

 

 

 

 

 

 

Cash, End of Year

 

$54,513

 

 

$1,030

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

Cash, beginning of period

 

$330,449

 

 

$66,830

 

Net cash used in operating activities

 

 

(2,275,278)

 

 

(96,780)

Net cash used in investing activities

 

 

(255,504)

 

 

-

 

Net cash provided by financing activities

 

 

2,474,019

 

 

 

30,000

 

 

 

 

 

 

 

 

 

 

Cash, end of period

 

$273,686

 

 

$50

 

 

28
 
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We used net cash of $281,409 in operating activities for the year ended April 30, 2017 as a result of net loss attributable to the Company of $6,763,467, non-controlling interest in net loss of consolidated subsidiaries of $1,824 and non-cash gain of $207,803, partially offset by non-cash expenses totaling $6,499,532 and increases in accounts payable of $49,201 and accrued expenses of $142,952.

By comparison, we used net cash of $74,111 in operating activities for the year ended April 30, 2016 as a result of net loss attributable to the Company of $2,522,015, non-controlling interest in loss of consolidated subsidiaries of $1,838 and a decrease in accounts payable of $12,985, partially offset by non-cash expenses totaling $2,171,341 and an increase in accrued expenses of $291,386.

We had no net cash provided by or used in investing activities for the years ended April 30, 2017 and 2016.

We had net cash provided by financing activities of $334,892 for the year ended April 30, 2017, comprised of proceeds from common stock payable of $49,741, proceeds from issuance of common stock of $76,369 and net proceeds from convertible notes payable of $208,782.

Net cash provided by financing activities was $75,000 for the year ended April 30, 2016 from proceeds from common stock payable.

Our sources and uses of cash for the six months ended October 31, 2017 and 2016 were as follows:

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

Cash, Beginning of Period

 

$54,513

 

 

$1,030

 

Net Cash Used in Operating Activities

 

 

(673,556)

 

 

(33,205)

Net Cash Used In Investing Activities

 

 

(101,910)

 

 

-

 

Net Cash Provided by Financing Activities

 

 

771,250

 

 

 

32,384

 

Cash, End of Period

 

$50,297

 

 

$209

 

We used net cash of $673 ,556$2,275,278 in operating activities for the six months ended October 31, 20172021 as a result of our net income attributable to the Company of $3,171 ,403, non-controlling interest in income of consolidated subsidiaries of $650, 659,$1,139,407, non-cash expenses totaling $821 ,222$95,786, decreases in prepaid expenses of $2,460, and increases in accrued expenses of $19,089. This was offset by our non-cash gains of $3,146,352, a decrease in accounts payable of $ 135,039$171,857 and a decrease in accounts payable and accrued expenses – related party of $67,433, offset by non-cash gains totaling $5 ,518,412 and increase in deposits of $900.$213,811.

 

By comparison, weWe used net cash of $33 ,205$96,780 in operating activities for the six months ended October 31, 20162020 as a result of our net loss attributable to the Companyincome of $209 ,543, non-controlling interest in net loss of consolidated subsidiaries of $915 and$94,752, non-cash gain of $33,108, partially offset by non- cash expenses totaling $47,640$187,397, decrease in prepaid expenses and other current assets of $16,187, and increases in accounts payable of $90 ,766$140,431, accrued expenses of $524,196 and accounts payable and accrued expenses – related party of $71,955.$229,950, partially offset by non-cash gain of $1,289,693.

 

Net cash used in investing activities for the six months ended October 31, 20172021 was $101,910,$255,504, comprised of the purchase of propertyland and equipment.costs incurred for land improvements during the period. We had no net cash provided by or used in investing activities for the six months ended October 31, 2016.

We had net cash provided by financing activities of $771 ,250 for the six months ended October 31, 2017, comprised of proceeds from convertible notes payable.2020.

 

Net cash provided by financing activities was $32, 384 for the six months ended October 31, 2016 from2021 was $2,474,019, comprised of proceeds from common stock payable.

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Capital Resources

We have not generated any revenues or operating cash flows. As a result, we have significant short-term cash needs. Our principal sourcenotes payable of operating capital has been provided$200,000, proceeds from private salesconvertible notes payable of $78,500, and proceeds from the sale of our common stock of $3,000,000. This was offset by repayments of notes payable of $200,000, repayments of convertible notes payable of $255,331, and warrants and debt financing.offering costs incurred of $349,150.

 

DuringNet cash provided by financing activities for the six months ended October 31, 2017, we issued an aggregate2020 was $30,000, comprised of $1,148 ,470 principal amount ofproceeds from convertible notes resulting in netpayable - related party of $20,000 and proceeds to usfrom an SBA express bridge loan of $771,250. Included$10,000.

Going Concern Uncertainty

Our financial statements are prepared using accounting principles generally accepted in the new convertible notesUnited 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 replacement note payable withquestion 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 principal amountgoing concern must be considered in light of $172,170, including $18,446 of capitalized interest expensethe problems, expenses and complications frequently encountered by entrance into established and emerging markets and the assumption of $145,000 principal and $8,724 from an April 17, 2017 promissory note. The notes are due and payable on various dates through October 2019 and bear interest at rates ranging from 8% to 12%. The notes are convertible into shares of our Class A common stock at a discount from the lowest price during certain measurement periods prior to the date of conversion. In order to redeem the notes,competitive environment in which we will be required to pay redemption premiums that range from 18% to 50% of the principal amounts of the notes, depending upon the date of redemption. The notes also contain penalty provisions in the event of our default in repayment of the notes (if not converted by the holder into shares of common stock) on the first anniversary after issuance.operate.

 

Subsequent to October 31, 2017, we issued an aggregate of $223,773 principle amount of convertible notes resulting in net proceeds to us of $197,000. The notes are dueSince inception, our operations have primarily been funded through private debt and payable on various dates through December 2019 and bear interest at 12%. The notes are convertible into shares of our Class A common stock at a discount from the lowest price during certain measurement periods prior to the date of conversion. In order to redeem the notes, we will be required to pay redemption premiums that range from 18% to 45% of the principal amounts of the notes, depending upon the date of redemption. The notes also contain penalty provisions in the event of our default in repayment of the notes (if not converted by the holder into shares of common stock) on the first anniversary after issuance.

Subsequent to October 31, 2017, the Company issued a total of 118,484,723 shares of its Class A common stock in consideration for the conversion of note payable principal totaling $585,170 and accrued interest payable of $17,106.

On June 12, 2017, we entered into an equity purchase agreement with Crown Bridge for the purpose of commencing a redemption of our convertible note obligations and providing additional working capital for us to pursue our business strategy. Pursuant to the terms of this agreement, as amended, Crown Bridge has committed to purchase up to $3,000,000 of our common stock for a period of up to 24 months commencing upon the effectiveness of a registration statement covering the resale of shares issuable to Crown Bridge under this agreement. This facility allows us to deliver a put notice to Crown Bridge stating the dollar amount of common stock that we intend to sell to Crown Bridge on the date specified in the put notice. The amount of each put notice is limited to a formula that is equal to the lesser of (i) $100,000 or (ii) 150% of the average dollar value of the trading volume of our stock, the lowest price during the trading period, for the seven days prior to the purchase of shares by Crown Bridge. Accordingly, there is no assurance that we will be able to effectively utilize the equity financing, provided by this facility to fully redeem our outstanding convertible notes.

Even ifand we fully utilize the equity purchase facility from Crown Bridge, our available cash resources are expectedexpect to continue to be insufficientseek additional funding through private or public equity and debt financing. Our ability to satisfycontinue as a going concern is dependent on our anticipated costs over the next 12ability to 18 months. Until we can generate sufficient cash from operations in future periods to contributemeet our cash needs and/or to our capital requirements, we willraise funds to continue to rely on external financing activities, including the sale of our equity securities, to satisfy our capital requirements for the foreseeable future. Due, in part, to our lack of historical revenues or earnings, our prior success in attracting additional funding has been limited to transactions in which our equity is used as currency. Equity financings of the type we have been required to pursue are dilutive to our stockholdersfinance ongoing operations and may adversely impact the market price for our shares. Thererepay debt. However, there can be no assurance that we will be successful in consummating any such future financing transactions on terms satisfactoryour efforts to us,raise additional debt or at all.

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In addition, we do not expect to have the financial resources necessary to complete the proposed Refinery projects. The Company expects to operate the Distillation Unit through its subsidiary, Pecos Refining, and to operate the Large Refinery through another subsidiary set up for such purpose. The construction of the Distillation Unit and the Large Refinery will require substantial equity and debt financing, far beyond the expected resources of the Company. We anticipatecapital and/or that these Subsidiaries will obtain typical project development financing for the construction and development of the Distillation Unit and the Large Refinery and that such financingsour cash generated by our operations will be composed of both debt and equity financings. We anticipate these Subsidiaries will be ableadequate to finance approximately 80% of the total costs of the Distillation Unit and the Large Refinery through debt financing, and the remaining 20% of the total costs would be financed through equity investments. The Company has had only preliminary discussions with prospective equity sources regarding the financing of these projects and it is unclear at this time ifmeet our needs. These factors, among others, raise substantial doubt that we will be able to obtain such financingcontinue 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 if so, how much equity in the Subsidiaries the equity investors will require in order to provide the financing. Any equity financing into which a Subsidiary enters will dilute the Company’s ownershipclassification of such Subsidiary. In addition, whilerecorded asset amounts or amounts and classifications of liabilities that might be necessary should the Company believes that the Refinery’s cost is financeable in large part through debt, it has not yet obtainedbe unable to continue as a letter of intent or commitment for such financing.going concern.

 

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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 elsewhere in this filing. There were no changes to our significant accounting policies during the year ended April 30, 2017 or six months ended October 31, 2017. The following is a description of those significant accounting policies that involve estimates and judgment by management.prospectus.

 

Derivative Liabilities

In a series of subscription agreements, we issued warrants that contain certain anti-dilution provisions that we have identified as derivatives. We have also identified the conversion feature of certain convertible notes payable as a derivative. We estimate the fair value of the derivatives using multinomial lattice models that value the derivatives 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.

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Fair Value of Financial InstrumentsBUSINESS

 

Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,” and ASC 825, “Financial Instruments,} FASB established a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements and 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- Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

·Level 2- 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- 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 at October 31, 2017, April 30, 2017 and 2016:

October 31, 2017

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liability

 

$1,789,047

 

 

$-

 

 

$-

 

 

$1,789,047

 

April 30, 2017

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liability

 

$6,610,001

 

 

$-

 

 

$-

 

 

$6,610,001

 

April 30, 2016

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liability

 

$395,619

 

 

$-

 

 

$-

 

 

$395,619

 

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INDUSTRY OVERVIEW

Background on Refining

Oil refining is the process of separating hydrocarbon molecules present in crude oil and converting them into marketable, finished petroleum products, such as gasoline, diesel fuel, jet fuel, lubricants and petrochemicals. Refining is primarily a margin-based business where both the feedstock (primarily crude oil) and refined petroleum products are commodities with fluctuating prices. Refiners create profit by selling refined petroleum products at prices higher than the costs of acquiring crude oil and other feedstocks, and by managing operating costs. It is important for a refinery to maximize the yields of high value finished products and to minimize the costs of feedstock and operating expenses. Access to robust supply and distribution infrastructure such as pipelines or rail infrastructure that can deliver low-cost crude oil and provide for the delivery of refined products is also a key driver of profitability.

The United States has historically been the largest consumer of petroleum-based products in the world. According to the U.S. Energy Information Administration’s (the “EIA”) 2016 Refinery Capacity Report, there were 139 operating oil refineries in the United States in January 2015, with a total refining capacity of approximately 18.2 million bpd. High capital costs, historical excess capacity and environmental regulatory requirements have limited the construction of new refineries in the United States over the past 35 years and reduced the number of refineries from 254 in 1982 to 139 in 2016. Domestic operating refining capacity has increased at a compounded annual growth rate of 0.3% between January 1982 and January 2016, from 16.1 million bpd to 18.2 million bpd, according to the EIA. This net increase in capacity is the result of efficiency measures and expansions at various refineries, partially offset by the closure of more than 115 smaller and less efficient refineries. The Refinery, if built, will be the first fully-new large scale refinery built in the United States in the last 40 years.

Ownership of Refineries

Refineries are owned by either integrated oil companies or independent entities. Integrated oil companies have upstream operations, which are concerned with the exploration and production of crude oil, combined with downstream businesses such as refining, marketing, logistics and petrochemicals.

An independent refiner has no proprietary crude oil production, and it purchases its feedstocks on the open market under term or spot contracts. Refiners distribute their products through bulk, wholesale or retail channels under term and spot contracts. Many refiners, both integrated and independent, distribute part of their refined products through retail outlets.

Based on data from EIA, in recent years, many integrated oil companies have sought to lower their exposure to the refining sector. Because of this trend, the refining industry increasingly must rely on its own operations for its profitability. We believe this trend will continue.

Refining Basics

Refineries are uniquely designed to process specific types of crude oils into selected products. In general, each of a refinery’s different process units performs one of three functions:

·separate through distillation the many types of hydrocarbons present in crude oil into a number of different components, ranging from light to heavy;

·catalytically or thermally convert the separated hydrocarbons into more desirable products; and

·treat the products by removing unwanted elements and compounds.

Each function in the refining process is designed to maximize the value of the refined petroleum products produced. Below is a general description of refinery process units. Not all refineries possess each of these units.

Distillation

Typically crude oil is initially processed at a refinery in the atmospheric and vacuum distillation units. Crude oil is separated by boiling point in the distillation units under high heat and low pressure and recovered as hydrocarbon fractions. The lowest boiling fractions, including gasoline and LPG, vaporize and exit the top part of the atmospheric distillation unit. Medium boiling liquids, including jet fuel, kerosene and distillates such as gasoil, heating oil and diesel fuel, are drawn from the middle of the distillation unit. Higher boiling liquids, such as fuel oils and the highest boiling liquids, called residuum, are drawn together from the bottom of the atmospheric distillation unit and separated further in the vacuum distillation unit. Vacuum residues can be used for fuel oil or bitumen production. The various fractions are then pumped to the next appropriate unit in the refinery for further processing into higher value products or are sent to storage tanks for sale to customers.

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Conversion

The next step in the refining process is to convert the hydrocarbon fractions into distinct products. One of the ways of accomplishing this is through “cracking,” a process that breaks or cracks higher boiling fractions into more valuable products, such as gasoline, distillates and gasoil. The most important conversion units are the hydrocracker, the FCC unit and the coker. Thermal cracking is generally accomplished in the coker. The coker upgrades residuum into naphtha, distillate and gasoil and produces coke as a residual. Catalytic cracking is accomplished in the hydrocracker and/or FCC unit. Hydrocrackers receive feedstocks from cokers, FCCs and crude oil distillation units and convert lower value intermediate products into gasoline, naphtha, kerosene and distillates under very high pressure in the presence of hydrogen and a catalyst. The FCC unit converts gasoil and some residual from the crude oil distillation units into LPG, gasoline and distillates by applying heat in the presence of a catalyst. An FCC unit produces a higher percentage of gasoline, whereas a hydrocracker produces a higher percentage of diesel.

The reformer converts naphtha, or low-octane gasoline fractions, into higher octane gasoline blendstocks, which are used to increase the overall octane level of the gasoline pool. The alkylation unit reduces the vapor pressure and enhances the octane of gasoline blendstocks produced by the FCC and coker units through the conversion of light olefins to heavier, high-octane paraffins.

Removal of Impurities

Lastly, the intermediate products from the distillation and conversion processes are treated to remove impurities, such as sulfur, nitrogen and heavy metals and are processed to enhance octane, reduce vapor pressure and to meet other product specifications. Treatment for sulfur, nitrogen and metals is most-commonly accomplished in hydrotreating units by heating the intermediates under high pressure in the presence of hydrogen and catalysts.

Crude Oil Quality

The quality of crude oil dictates the level of processing and conversion necessary to achieve the optimal mix of finished products. In seeking to maximize their refining margins, refiners strive to process the optimal mix or slate of crude oils through their refineries, depending on their refinery’s conversion and treating equipment, the desired product output and the relative price of available crude oils. The terms light, medium and heavy when used in reference to crude oils refer to their density and the terms sweet and sour refer to their sulfur content. These terms are often used in conjunction with each other to describe the qualities of crude oil.

Industry Terminology

Crack Spreads

Crack spreads are a proxy for refining margins and refer to the margin that would be derived from the simultaneous purchase of crude oil and the sale of refined petroleum products, in each case at the then-prevailing price. The 2-1-1 crack spread assumes two barrels of crude oil will be converted, or “cracked,” into one barrel of gasoline and one barrel of heating oil or diesel fuel. Average 2-1-1 crack spreads vary from region to region throughout the United States, depending on the supply and demand balances of crude oils and refined products.

Actual refinery margins vary from benchmark crack spreads due to the actual crude oils used and products produced, transportation costs, regional differences and the timing of the purchase of the feedstock and sale of light products.

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Benchmark Crude Oils

Crude oil pricing is generally quoted in reference to the classification of the crude oil, which is based on certain physical characteristics, the source of its production and the major trading hub with which it is associated. Relevant classifications of crude oil include:

·West Texas Intermediate (“WTI”). WTI is a grade of crude oil that is described as light because of its relatively low density, and sweet because of its low sulfur content. Cushing, Oklahoma is a major trading hub for WTI and has been the delivery point for crude oil contracts, and therefore the price settlement point, on the NYMEX for over three decades.

·Louisiana Light Sweet (“LLS”). LLS is a major benchmark for light, sweet crude oil that is sourced from the Gulf Coast region. It has a slightly higher density and slightly lower sulfur content than WTI.

·Brent Crude Oil (“Brent”). Brent is a major trading classification of light, sweet crude oil comprised of Brent, Forties and Oseberg and Ekofisk, which are types of crude oil blends sourced from the North Sea. The Intercontinental Exchange is a major trading hub for Brent. Petroleum suppliers in Europe, Africa and the Middle East often set prices for Brent crude oil according to its value on the Intercontinental Exchange if it is being sold in the Western Hemisphere.

Light-Heavy Crude Oil Differential

The light-heavy crude oil differential is the price differential between heavy (high density), sour (high sulfur) and light (low density), sweet (low sulfur) crude oils.

Product Differentials

Because refineries produce many other products that are not reflected in crack spreads, product differentials relative to the products reflected in the crack spreads are calculated to analyze a given refinery’s product mix advantage. Refineries that have an economic advantage are those that produce relatively high volumes of premium products, such as premium and reformulated gasoline, low-sulfur diesel fuel and jet fuel and relatively low volumes of lesser valued products, such as LPG, residual fuel oil, petroleum coke and sulfur.

Operating Costs

Major operating costs for refineries include employee labor, maintenance and energy. Employee labor and maintenance are relatively fixed costs that generally increase in proportion to inflation. By far, the predominant variable cost is energy such as natural gas, electricity and refinery fuel gas.

Refinery Products

The main products produced by a refinery are as follows:

·Gasoline. One of the most significant refinery products is motor gasoline. Various gasoline blendstocks, including RBOB ( Reformulated Blendstock for Oxygenate Blending) and CBOB (Conventional Blendstock for Oxygenate Blending), are blended to achieve specifications for premium and regular grades in both summer and winter gasoline formulations. Additives are often used to enhance performance and provide protection against oxidation and rust formation.

·Middle Distillates. Middle distillates are diesel fuels, heating oil and kerosene. Diesel fuels are used for on-road vehicles, construction equipment, locomotives and stationary and marine engines. Heating oil fuels are used for home heating, oil-fired heating plants and boilers. Kerosene is used for jet fuel, cooking, space heating, lighting and solvents and for blending into diesel fuel.

·Residual Fuels. Many marine vessels, power plants, commercial buildings and industrial facilities use residual fuels or combinations of residual and distillate fuels for heating and power generation. Bitumen, a low-value residual product, is used primarily for asphalt coating of roads and roofing materials.

·Petrochemical Feedstocks. Many products derived from crude oil refining, such as ethylene, propylene, butylene, isobutylene, tetramer, nonene, toluene, xylene and benzene are primarily intended for use as petrochemical feedstocks in the production of plastics, synthetic fibers, synthetic rubbers and other products. A variety of petrochemical feedstocks are produced for use as solvents, including benzene, toluene and xylene.

·Naphtha. Naphtha is a low-octane gasoline product used as a feedstock by the chemicals industry and for catalytic reforming and the production of hydrogen.

·Propane. Propane is a natural gas liquid with a variety of commercial, residential and industrial uses primarily as a fuel, and for heating and refrigeration.

·Niche Refined Petroleum Products. Various refined petroleum products are produced in relatively small quantities such as lubricant base oils, biofuels and other refined petroleum products. These products are commonly used as blending components for transportation fuels or as lubricants.

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Refinery Complexity

Refinery complexity refers to an oil refinery’s ability to process feedstocks, such as heavier and higher sulfur content crude oils, into value-added products. Refinery complexity is commonly measured by the Nelson Complexity Index. The Nelson Complexity Index assigns a complexity factor to each major piece of refinery equipment based on its complexity and cost in comparison to crude oil distillation, which is assigned a complexity factor of 1.0. The complexity of each piece of refinery equipment is then calculated by multiplying its complexity factor by its throughput ratio as a percentage of crude oil distillation capacity. Adding up the complexity values assigned to each piece of equipment, including crude oil distillation, determines a refinery’s complexity on the Nelson Complexity Index. A refinery with a complexity of 10.0 on the Nelson Complexity Index is considered ten times more complex than crude oil distillation for the same amount of throughput. The Nelson Complexity Index for the proposed Refinery is 6.0.

Refinery Location

The location of an oil refinery has an important impact on its refining margin since the location influences its ability to access feedstocks and distribute its products efficiently. The location also dictates whether the feedstocks and products can be transported via waterborne vessels, pipelines, rail or tank trucks. Refiners seek to maximize their profits by placing their products in the markets where they receive the highest margins. Historically, for example, refiners whose refineries and logistics systems are situated in areas of high petroleum consumption enjoy a competitive advantage over other suppliers in product distribution and in satisfying local demand. The map below shows the five regions in the United States (called Petroleum Administration for Defense Districts or “PADDs”), which have historically experienced varying levels of refining profitability due to regional market conditions.

Source: EIA

The Refinery will be located in PADD 3. PADD 3 has a refinery capacity that dwarfs the capacity of any of the other PADD regions. And, the PADD 3 region has produced more refined product than is used in the region due to its proximity to the Gulf of Mexico and the Texas and Louisiana Gulf Coast areas. Accordingly, the PADD 3 region has historically “exported” most of its refined product to the other PADD regions and internationally, whether by pipeline, ship or rail.

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The table below shows the export and import of gasoline from the PADD 3 region to other PADD regions and internationally.

Current Industry Trends Relevant to Our Business

The competitive landscape for U.S. refiners has been transformed by the growth of domestic crude oil. With the advent horizontal drilling and hydraulic fracturing, shale basins in the midcontinent of the U.S. began growing at accelerating rates in 2010 and 2011. This growth quickly overwhelmed a pipeline infrastructure that was ill-equipped to handle the volume of crude oil that needed to move from the interior of the United States to the coasts. As a result, the price of domestic crude oil, as represented by the WTI price marker, discounted relative to foreign crude oil, as represented by the Brent price marker. This discount has provided incentive for midstream logistics companies and refiners to build the infrastructure necessary to access this low-cost crude oil including crude-by-rail infrastructure that has been developed over the past several years. We believe that refiners with access to this lower-cost crude oil have benefitted from more attractive refining margins than those that lacked access. This margin environment has driven increased refinery utilization and increased exports of distillate while displacing significant volumes of imported of gasoline, transforming the United States into a net exporter of transportation fuels.

Growth in Domestic Crude Oil Supply, Particularly in the Permian Basin

In recent years the U.S. refining industry has benefitted from growth in U.S. crude oil production, especially production in the Bakken, Eagle Ford and Permian Basin shale basins. Due to advances in unconventional drilling technology and improved drilling economics, crude oil production in the United States increased from approximately 5.5 million bpd in 2009 to an average of nearly 8.9 million bpd in 2016. The aforementioned shale basins drove substantially all of this growth. The substantial decrease in the price of crude oil that began in early 2015 and persisted to the latter portion of 2016 caused a decrease in drilling and a resulting decrease in total crude oil production from these shale regions. Beginning in late 2016 and to the present, the price of crude oil stabilized at around $50 per barrel, drilling increased and shale production a whole increased, as shown in the following table.

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Source: EIA

The Refinery will be located in the Permian Basin of Texas. According to the EIA, between January 2016 and March 2017, oil production in the Permian Basin increased in all but three months, even as domestic crude oil prices fell. As production in other regions fell throughout most of 2015 and 2016, the Permian Basin provided a growing share of U.S. crude oil production.

With rising oil prices over the past year, the Permian Basin continues to be attractive to drillers, as reflected in rising rig counts. According to the EIA, as of April 21, 2017, the number of rigs in the Permian Basin reached 340, or 40% of the 857 total oil- and natural gas-directed rigs operating in the United States. The Permian Basin rig count reached as high as 568 in late 2014 before falling to a low of 134 in spring 2016 and increasing to 340 in April 2017.

Recent geological surveys have further explored the resources contained in the Permian Basin. In November 2016, the U.S. Geological Survey (“USGS”) estimated that technically recoverable tight oil and shale gas resources in the Midland Basin portion of Texas’ Permian Basin (specifically the Wolfcamp shale formation) could exceed 20 billion barrels of oil, 16 trillion cubic feet of natural gas, and 1.6 billion barrels of hydrocarbon gas liquids. The technically recoverable resource estimate for tight oil in the Midland Basin portion of the Permian Basin is higher than any previous USGS assessment of tight oil resources in any domestic resource basin.

Source: U.S. Energy Information Administration, U.S. Geological Survey, University of Texas Bureau of Economic Geology, and Drillinginfo

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The production from these US shale basins, including the Permian Basin, is predominantly light, sweet crude oil, with gravity in excess of 35 degrees API. As a result, coincident with the growth in crude oil from these shale basins, U.S. imports of light crude oil began declining in 2010.

Supply and Logistics Constraints Drive Discounts in Domestic Crude Oil Relative to Foreign Crude Oil

Historically, the United States has relied heavily on foreign crude oil imports which are received in waterborne vessels at coastal refineries and terminals. Given a concentration of U.S. refining capacity in the Gulf Coast, and significant refined product demand inland from the coast, much of the existing U.S. pipeline infrastructure was configured to move imported crude oil and domestic refined products from the Gulf Coast to other refining and population centers in the U.S. midcontinent and northern-tier states. With the growth of crude oil production in inland areas like the Bakken in North Dakota and both the Eagle Ford and Permian in the interior of Texas, new transportation infrastructure was needed to move crude oil generally in the opposite direction, to the coasts.

This mismatch between existing logistics capabilities and the growing need for inland U.S. crude oil producers to transport their crude oil to major refining centers drove a meaningful difference in the price of inland domestic crude oil and coastal crude oil. Inland domestic producers were forced to discount their crude oil in order to clear the market. As a measure of this discount, WTI on average traded at $10.04 per bbl less than Brent for the period from December 2009 to December 2014. This discount provided ample incentive for midstream logistics companies and others to invest in transportation infrastructure. However, the spread between WTI and Brent crude pricing has narrowed considerably, as more infrastructure to support transportation of inland crude oil to the US coasts has been developed.

During the last year, for example, the spread between WTI pricing and Brent pricing has been around $3 per barrel.

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Access to Domestic Crude Oil Provides Certain Refiners an Input Cost Advantage

Given the price differential between domestic and foreign crude oil over the past several years, refiners that have had access to low-cost domestic crude oil have demonstrated consistently higher margins relative to refiners that did not have access. Until the transportation infrastructure described above was built out, refineries in PADD II (Midwest), PADD III (Gulf Coast) and PADD IV (Rocky Mountain) have had access to these cheaper domestic crude oils via pipeline while refineries in PADD I (East Coast) and PADD V (West Coast) had to rely more heavily on waterborne imports or costly deliveries of domestic crude oil from the Gulf Coast via Jones Act compliant coastal barges and vessels.

This advantage is reflected in comparing the 2-1-1 crack spread using WTI crude oil as the input against the same crack spread using Brent crude oil as the input. According to information from the EIA, for the period from 2011 to mid-2013 the 2-1-1 WTI crack spread ranged from approximately $3 per barrel higher than the Brent crack spread to over $20 per barrel higher. From mid-2013 to 2015, the WTI crack spread over the Brent crack spread narrowed, ranging from a high of approximately $11 per barrel to a low of less than $1. After 2014, the WTI crack spread and Brent crack spread narrowed even further, with the Brent crack spread exceeding the WTI crack spread for brief periods. For the first few months of 2017, the WTI crack spread has exceeded the Brent-WTI crack spread by $2 or less per barrel

The United States is Becoming a Larger Exporter of Gasoline and Distillate, Including to Mexico

Coincident with accelerating crude oil production growth in the U.S. shale basins in 2010 and 2011, U.S. refining capacity utilization has increased significantly, as noted above. This has led to the U.S. becoming a net exporter of gasoline and distillate. One of the strongest export markets for US gasoline is Mexico, the market the Company intends to pursue.

The Mexican government is in the process of opening its gasoline and diesel markets to outside competition and replacing government-set prices with market-based prices. Last year, Mexico began allowing entities other than the state-owned company Petróleos Mexicanos (Pemex) to import gasoline and diesel and open retail stations. These changes followed previous energy sector reforms that ended Pemex’s upstream monopoly and opened the oil and natural gas sectors to foreign direct investment. According to the EIA, although Mexico is a large crude oil producer, it relies heavily on imports of gasoline from the United States to meet domestic demand. Based on reports from the EIA, the Company expects that these gasoline and diesel market reforms in Mexico will have significant implications for the sale of U.S.-produced gasoline.

The switch to market-based pricing in Mexico is being implemented in phases starting with a series of national price adjustments. The transition began at the start of this year. As reported by the EIA, January retail prices have averaged 14% and 20% higher than in December for regular gasoline and premium gasoline, respectively.

For the past several years, Pemex total gasoline sales, which can be used as an estimate for consumption, averaged around 800,000 bpd. However, gasoline sales increased 2.5% and averaged nearly 820,000 bpd in 2016 (through November). Mexican consumption of gasoline has been significantly greater than refinery production, with the difference increasing over the past three years.

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According to the EIA, Mexico’s refineries have historically been running at low utilization rates because they are challenged to produce clean gasoline and distillate fuels from the available marginal barrel of heavy sour crude oil. More recently, outages have hampered Mexico’s six refineries, which had a total output (including non-gasoline products) of 1.1 million bpd through November 2016, down from 1.3 million bpd over the same months in 2015. Mexican refinery output of gasoline fell steeply to 381,000 bpd in 2015 and then fell again to 333,000 bpd in 2016 (through November). Refinery utilization rates in Mexico declined in 2016 from 78% in January to 60% in November, creating a widening gap between domestic supply and demand.

To meet demand, Mexican imports of gasoline have climbed rapidly over the past two years. According to Pemex, Mexico’s motor gasoline imports were 122,000 bpd higher during the first 11 months of 2016 than during the comparable 2014 period. Since 2008, EIA data indicates that Mexico has imported significant quantities of U.S. gasoline. Based on U.S. and Mexican data sets, U.S. gasoline exports accounted for 80% of all Mexican gasoline imports and provided an average of 47% of Mexico’s gasoline consumption during the first 10 months of 2016.

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According to the EIA and Pemex, the volume of gasoline traded between Mexico and the United States is significant to U.S. refineries. Over the past five years, U.S. exports to Mexico accounted for between 44% (2014) and 54% (first 10 months of 2016) of total U.S. gasoline exports. On a year-over-year basis, U.S. gasoline exports to Mexico increased by 71,000 bpd in 2015, with additional average growth of 75,000 bpd over the first 10 months of 2016, when U.S. exports to Mexico averaged nearly 390,000 bpd.

While the effects of the ambitious reforms now underway in Mexico’s energy sector will only be realized over an extended period of time, the Company believes that the market will be very positive relative to the Company plans to market and sell its gasoline and diesel production in Western Mexico.

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BUSINESS

Background of the CompanyGeneral

 

MMEX Resources Corporation was formed as a Nevada corporation in 2005. The current management team leadled an acquisition of the Company (then named Management Energy, Inc.) through a reverse merger completed on September 23,in 2010 and changed the Company’s name to MMEX Mining Corporation on February 11, 2011. We previously unsuccessfully pursued miningin 2011 and coal projects that have since been abandoned. We have never generated any revenues and have accumulated losses of $36,918,594 as of April 30, 2017.

The Company was engaged in the exploration, extraction and distribution of coal from September 23, 2010 until April 12, 2016. As of April 12, 2016, the Company changed its business to the exploration, extraction, refining and distribution of oil, gas, petroleum products and electric power. Effective as of April 6, 2016, the Company changed its name from MMEX Mining Corporationthen to MMEX Resources Corporation to reflect the change in its business plan.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.

 

We are a development stage company engaged inSince 2016, 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 March 31, 2017, the Company amended its articles of incorporation to increase the number of authorized shares of common stock from 3,000,000,000 to 5,000,000,000 and to provide for two classes of common stock: 3,000,000,000 shares of Class A common stock, having one vote per share, and 2,000,000,000 shares of Class B common stock, having 10 votes per share. Our board of directors has agreed to further amend the articles of incorporation to increase the number of authorized shares of Class A common stock from 3,000,000,000 to 10,000,000, 000, subject to the required approval of the stockholders.

Current Business Operations and Strategy

The most significant focus of our current business plan ishas been to build crude oil distillation units and refining facilities (CDUs) in the Permian Basin in West Texas. We intend to commence operations with a 10,000 bpd Distillation Unit that will produce a non-transportation grade diesel primarily for sale in the local market for drilling mud and frac fluids, along with naphtha and heavy fuel oil to be sold to other refiners. We also anticipate constructing a crude oil refinery with up to a 100,000 bpd capacity at the same location in West Texas.

The Company is focusing on the Distillation Unit first in an effort to build and commence operations, and ultimately generate cash flow, on an expedited basis. The permitting process is significantly shorter for construction of the Distillation Unit and was received by the Company on August, 30, 2017. The permitting process for the Large Refinery is expected to be 12-18 months. Additionally, the construction of the Distillation Unit will require significantly less capital than the construction of the Large Refinery. As a result, less capital will be required to build and complete the project and generate revenue and profits.

On March 4, 2017, the Company entered into an agreement with Maple Resources, a related party, to acquire Maple Resources’revised our business plan for the Refinery, cash flow models, an agreementin 2021 to acquire the land for the Refinery site, potential refinery feed stock supplies,move MMEX to clean energy use and production, leveraging our history, management and business relationships for water resources, consulting services, refinery technology and potential railroad transportation agreements.from the traditional energy sector. The acquired assets did not include titlefocus of our business plan is to the site for the Refinery or any actual right to build the Refinery. The Company agreed to acquire all of these intangible assets in exchange for the issuance of 7,000,000,000 shares of Class B common stock. The shares were to be issued in two tranches, a first tranche of 1,500,000,000 shares issued on March 4, 2017 and a second tranche of 5,500,000,000 shares to be issued after the Company’s articles of incorporation were amended to increase the number of authorized shares of common stock. Following the issuance of the first tranche of 1,500,000 shares, Maple Resources agreed to forego the issuance of the second tranche of shares. Accordingly, no further shares will be issued to Maple Resources as part of this transaction.

 

These projects will be built on 476 acres located 20 miles northeast of Fort Stockton, Texas, near the Sulfur Junction spur of the Texas Pacifico Railroad. If successfully developed, the Refinery would connect to existing railways and pipelines to market diesel, gasoline, liquefied petroleum gas and other refined products within the U.S., with the potential to market these products and crude oil to western Mexico and South America. If completed, the Large Refinery will be one of the first full scale oil refineries built in the United States in more than 40 years.

According to a report the Company received from VFuels Oil & Gas Engineering, the cost of a Distillation Unit with a 10,000 bpd capacity would be approximately $50 million. According to a report the Company received from KP Engineering, the cost of a 50,000 bpd refinery is estimated to be approximately $500 million and the cost of a 100,000 bpd refinery is estimated to be approximately $850 million. These estimates are only preliminary estimates and are subject to substantial change when additional engineering is completed.

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Constructing the Refinery will require a significant number of governmental permits and approvals. The principal permit for the construction of the Refinery is the air quality permit issued by TCEQ and significant construction will not begin until we have received it. On August 30, 2017, we received approval from the TCEQ for the air quality permit for the Distillation Unit. Trinity Consultants, the Company’s air quality permit advisor, estimates it will take approximately 18 months to obtain the air quality permit for the Large Refinery. According to VFuels Oil & Gas Engineering, construction for the Distillation Unit would take approximately 12 to 15 months . KP Engineering has estimated that the completion of the Large Refinery would take from 15 to 18 months following the receipt of the air quality permit.

The cost of construction is very significant and we intend to finance 100% of such costs through debt and equity offerings . See “Business—Proposed Organizational Structure.”

We plan on marketing and distributing refined products in the Western areas of the United States and Mexico, and we may export product to Latin America. The diesel produced by the Distillation Unit will be marketed and sold locally, primarily for use in drilling mud and frac fluids, and likely transported by truck or by existing railroad systems. Any other refined products produced from the operation of the Distillation Unit (principally ATBs and naptha) would be shipped to other refineries, primarily in the Corpus Christi, Texas area, by pipeline and existing railroad systems for further processing.

The Refinery will be located on the Texas Pacifico Railroad rail route 20 miles Northeast of Fort Stockton, Texas, approximately 1.5 miles from the Sulphur Junction on the Texas Pacifico Railroad. Once needed repairs are finished to the tracks and railway, the Texas Pacifico Railroad will connect to the Ferromex RR in Ojinago, Mexico, giving us access to the western Mexico markets.

The Texas Department of Transportation owns the Texas Pacifico Railroad, which runs from the San Angelo Junction, near Coleman, Texas, to the Texas-Mexico border at Presidio. The Texas Pacifico Railroad entails approximately 371 miles of track and interchanges with BNSF Railway and Fort Worth and Western Railroad. The Texas Pacifico Railroad is operated by Texas Pacifico Transportation LTD, a subsidiary of Grupo Mexico. Our planned Refinery is located on the Texas Pacifico Railroad rail route approximately 20 miles northeast of Fort Stockton, Texas, approximately 1.5 miles from the Sulphur Junction on the Texas Pacifico Railroad. The Texas Pacifico Railroad will connect to the Ferromex Railroad at Ojinaga, Mexico.

The following chart indicates the principal project milestones and the Company’s currently estimated timetable for completing them. Completion of these milestones is dependent upon the consummation of required financing and the various risks described under “Risk Factors.” Further, completion of project milestones for the Large Refinery is dependent upon the commercial viability of the Distillation Unit. Accordingly, there is no assurance that this timetable or any individual project milestone will be achieved.

Project Milestones and Timeline

1sthalf of 2018(Projected Costs: $ 33,500,000 )


 

·

Modify our planned CDU projects in Pecos County (West Texas) to produce potentially hydrogen and ultra-low sulfur fuel products combined with CO2 capture.

LARGE SCALE REFINERY FEED STUDY COMMENCED

 

·

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 Polaris’ proprietary “UltraFuels® 2 Plus process,” to utilize the light crude oil and condensates from the Permian Basin to produce finished products of ultra-low sulfur diesel, gasoline, and IMO 2020 compliant marine fuel oil along with carbon capture from all major CO2 sources. The UltraFuels® 2 Plus 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 US A 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.

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. We have a 40% ownership in the WT Blue Fuels, LLC joint venture. The venture is contracting with Air Liquide to develop & implement the Air Liquide patented Steam Methane Reformer with Carbon Capture process to produce Blue H2. Air Liquide has built and operated liquid hydrogen plants since 1964 primarily for the space industry. WT Blue Fuels intends for the Pecos plan to have a 60 ton per day capacity.

Project 3: Green Hydrogen

MMEX has teamed up with Siemens Energy to develop and implement the Siemens patented process to produce Green Hydrogen by electrolysis of water with solar power. Siemens’ Silyzer 300 is the latest and most powerful product line in the Proton Exchange Membrane electrolysis portfolio. MMEX plans for Siemens to develop seven modular Silyzer 300 arrays to produce 50 tons per day at the planned project.

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 off-take agreements is expected to a condition to obtaining any material funding for the planned projects.

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We are also engaged in various stages of negotiations for supply arrangements to the planned projects. Our current plans include

LARGE SCALE REFINERY TCEQ PERMIT APPLICATION FILED·

Obtaining crude supply from three different international companies to be delivered at multiple terminals in the Crane, Texas area

 

·

Contracting with a full service engineering, procurement, and construction (EPC) firm to build a 38-mile crude pipeline to deliver from terminals to the ultra fuels site

CDU CONSTRUCTION CONTINUING

 

·

TEXAS PACIFICO RR NEGOTIATIONS FOR UPGRADE OF RR FROM FORT STOCKTON TO PRESIDIO

Contracting with EPC to build a six-mile water delivery pipeline to the green hydrogen electrolyzer

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. Financing depends upon the successful completion of front end engineering and design studies (FEED) for each planned project. MMEX believes that FEED studies for the ultra fuel and green hydrogen projects should be completed by the end of the first calendar quarter of 2022.

The costs to complete these projects is substantial and will require significant debt and equity funding MMEX estimates that the project capital budgets for the ultra fuels, blue hydrogen and green hydrogen projects are approximately $325 million, $300 million and $450 million.

There is no assurance that MMEX will be successful in obtaining financing or completing the milestones necessary to seek such financing.

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.

 

RAIL RATES FROM PROJECT TO MEXICO AND TEXAS GULF COAST DETERMINED

LARGE SCALE TCEQ PERMIT NOTICES AND PUBLIC HEARINGS HELD

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2ndHalf of 2018(Projected Costs: $ 24,000,000 )

CDU CONSTRUCTION COMPLETED

CDU COMMERICAL OPERATIONS

LARGE SCALE REFINERY FINANCING CIRCLED PENDING TCEQ PERMIT

TEXAS PACIFICO BRIDGE AT PRESIDIO-OJINAGA COMPLETED.

LARGE SCALE REFINERY CRUDE SUPPLY AND OFF-TAKE AGREEMENTS SIGNED.

2019 (Projected Costs: $ 275,000 )

LARGE SCALE REFINERY TCEQ PERMIT ISSUED

LARGE SCALE REFINERY FINANCING COMPLETED

LARGE SCALE REFINERY CONSTRUCTION GROUND BREAKING

2020 (Projected Costs: $875,000,000)

LARGE SCALE REFINERY CONSTRUCTED COMPLETED

Management Expertise in Oil, Gas, Refining and Electric Power Project Development and Project Finance Development

 

The Board of Directors has decided to focus the Company’s efforts in the oil, gas, refining and electric power business in the U.S. and in Latin America. The principal reasons behind this shift in focus is to capitalize on the experience and expertise of the MMEX management team, its directors and principal stockholders. 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 bpd4,000-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.

 

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Proposed Organizational Structure

 

The Company expects to operate the Distillation Unitits planned projects through its subsidiary, Pecos Refining, and to operate the Large Refinery through another subsidiary set up for such purpose. Currently, Pecos Refining is wholly-owned by the Company and the Company serves as its sole manager. However, thesubsidiaries. The construction of the Distillation Unit and the Large Refineryplanned projects will require substantial equity and debt financing, far beyond the expected resources of the Company, and we anticipate that the Subsidiariessubsidiaries will obtain equity and debt financing to finance the cost of construction. To the extent these Subsidiariessubsidiaries raise money through the issuance of equity securities, our ownership in the Subsidiariessubsidiaries 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.subsidiaries. In addition, while intend to retain managerial control of the Subsidiaries,subsidiaries, it is possiblelikely that equity investors will require representation on the board of managers in connection with their equity investments.

 

We anticipate these Subsidiariessubsidiaries will be able to finance approximately 80%a majority of the total costs of the Distillation Unit and the Large Refineryplanned projects through debt financing, and the remaining 20%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 Subsidiary borrowproject 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. In order to attract the significant capital necessary to build the Refinery, theThe Company will have to fund the cost of these reports and studies, likely out of equity raises. We have estimated that such cost will aggregate approximately $400,000.studies.

 

Location and LogisticsProperties

 

The Refinery will be locatedWe own a 126-acre and a 323.84-acre parcel of land in Pecos County, Texas that are the Permian Basin, which holds some ofsites for our planned clean fuels and hydrogen projects. We believe this site offers the largest tapped and untapped oil and gas reserves in the world. The Permian Basis is located principally in West Texas. While production in the Permian Basin in the past had been in decline,following logistical advantages for the development of hydraulic fracturing in shale zones reversed the trend, and the cost of developing oil and gas reserves from shale formations (the driver of recent US increases in production) is lower in the Permian Basin than in other areas of the US. For this reason, the activity in the Permian Basin has recently been expanding and drawing the interest of major oil and gas companies. We believe that the Permian Basin will be the major domestic producing region in the country for decades to come.these projects:

 

The Refinery will be located 20 miles northeast of Fort Stockton, Texas, near the Sulfur Junction spur of the Texas Pacifico Railroad and in the Permian Basin. The Refinery site is 476 acres and the rail line runs through a corner of the property. We do not currently own all of the land on the site near Fort Stockton, Texas at which we intend to build the Refinery. On July 28, 2017, we acquired the 126 acre parcel of the land, which is the site for the planned Distillation Unit, at a purchase price of $550 per acre, or $69,249. At such time, we have agreed with the seller of the property to acquire the remaining 350 acre parcel, which is the site for the planned Large Refinery, on or before January 31, 2018 at a price of $550 per acre, or $192,500. To the extent that there are insufficient net proceeds from draws under our Equity Purchase Agreement, we will be required to obtain additional financing to complete this purchase. We have not yet received any financing commitment for such purchase.

There are six refineries in the Permian Basin located at El Paso, Texas; McKee, Texas; Borger, Texas; Big Spring, Texas; and Artesia, New Mexico. The total capacity of these refineries is 640,500 bpd. These refineries are older refineries designed to process historic production from the Permian Basin. As such, these refineries do not take high-API production or discount it significantly, such as the production being produced from the hydraulically-fractured shale zones in which the current increase in production is occurring in the Permian Basin. Moreover, the increasing amount of shale oil production has outpaced these refineries’ ability to process the new crude oil production. For these reasons, much of the new shale production is currently being exported out of the Permian Basin. Significant infrastructure improvements have been developed and announced to move Permian Basin production to the Texas Gulf Coast. According to the EIA, these infrastructure improvements have and will decrease the discount to WTI pricing that has often plagued the sale of Permian Basin shale crude in the recent past. The Company believes that while the construction of crude oil pipelines from the Permian Basin to the significant refining infrastructure in the Texas Gulf Coast might decrease discounts, pipeline companies will charge significant fees to transport the new shale production out of the Permian Basin, resulting, in effect, in a continued discount for such production, compared to the delivered price to the Refinery.

The Refinery will be located near the major producing shale areas of the Permian Basin in Reeves and Pecos counties. The Company has signed a letter of intent with a significant mid-stream crude oil and pipeline company to supply 50,000 bpd of crude oil production to the Refinery. The Company believes that this arrangement can be expanded to 100,000 bpd should the Company choose to build a 100,000 bpd facility. The arrangement is subject to substantial conditions and there is no assurance that the arrangement can be successfully implemented with this particular company. But, the Company believes there are a number of alternative means of delivering the ever-increasing supply of oil shale production from the Permian Basin to the Refinery site, whether by truck, construction of gathering pipelines by another company or by rail.

The Company’s business plan includes the export of gasoline, diesel and other products produced from the Refinery. The export of gasoline and diesel production is particularly attractive because, as noted above, exported gasoline and diesel does not bear any RIN costs, which is a significant cost of domestic refiners. The export of gasoline and diesel will therefore be a significant way to increase profits of the Refinery.

There are opportunities to sell refined products domestically, and there are significant refined product pipelines throughout the Permian Basin. Indeed, for some of the products produced by the Refinery, such as ATBs, the logical market is other domestic refineries that are designed to use these products as feedstock. The Company has had favorable preliminary discussions with product pipeline companies regarding the transport of the refined products from the Refinery, but there are no arrangements or contracts in place.

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Transportation

We will likely be transporting refined products primarily by rail. Both the U.S. Department of Transportation and its agency, the Federal Railroad Administration, have issued regulations pertaining to the shipment of crude oil and refined products. In addition, TxDOT has its own set of regulations pertaining to these matters, and Mexico will have additional regulations governing the transport of refined products and crude oil. As part of the construction of the Refinery, we will develop procedures and policies in connection with our shipping partners and buyers to comply with all relevant regulations.

We intend to transport the diesel production from our Distillation Unit by truck or by existing railroad systems within the Permian Basin for use in drilling fracking markets. We intend to transport other of our refined products, principally ATBs and naptha, to other refineries, primarily in the Houston and Corpus Christi, Texas areas, by pipeline and existing railroad systems for further processing.

TxDOT owns the Texas Pacifico Railroad, which runs from the San Angelo Junction, near Coleman, Texas, to the Texas-Mexico border at Presidio. The Texas Pacifico Railroad entails approximately 371 miles of track and interchanges with BNSF Railway and Fort Worth and Western Railroad. The Texas Pacifico Railroad is operated by Texas Pacifico Transportation LTD, a subsidiary of Grupo Mexico. Our planned Refinery is located on the Texas Pacifico Railroad rail route approximately 20 miles northeast of Fort Stockton, Texas, approximately 1.5 miles from the Sulphur Junction on the Texas Pacifico Railroad. The Texas Pacifico Railroad will connect to the Ferromex Railroad at Ojinaga, Mexico.

We plan to transport refined product on the Texas Pacifico Railroad and significant investments are required to upgrade the railroad. TxDOT owns the Texas Pacifico Railroad, which runs from the San Angelo Junction, near Coleman, Texas, to the Texas-Mexico border at Presidio. There are two significant infrastructure improvement projects that TxDOT must be complete before we will be able to use the Texas Pacifico Railroad to transport our production to Mexico as we have planned.

The international railroad bridge, located at the southwestern end of the rail line connecting Presidio, TX to Ojinaga, Mexico burned on two separate occasions, February 29, 2008 and March 1, 2009. TxDOT and Texas Pacifico Transportation LTD, the company that operates the Texas Pacifico Railroad, plan to rebuild the bridge allowing access to Mexico and increased business potential. On August 4, 2017, Tx DOT announced a $7 million federal grant from The U.S. Department of Transportation to strengthen existing rail infrastructure in Permian Basin. As announced on August 4, the funds are expected to help rebuild the Presidio-Ojinaga International Rail Bridge and 72 miles of track on the South Orient Rail Line that run from the Mexico border to near Coleman, Texas owned by the state of Texas but maintained and operated by Texas Pacifico Transportation, Ltd. under a lease with TxDOT. A recent project schedule estimates the completion date to be in 2018.

In addition, the railroad track between Alpine and Presidio may be upgraded as traffic requires through the area. The upgrade capital improvements required on the Texas Pacifico Railroad to transport significant volumes of traffic are estimated by TxDOT to be in the range of $100 million to $150 million. Our business plan to market refined products into Western Mexico and to export refined products to Latin America will depend on the completion of the international bridge at Presidio/Ojinaga and the capital investment on the Texas Pacifico Railroad railroad . There is no assurance that these capital improvements will be made. If these capital improvements are not made, our business prospects and results of operations could be materially negatively impacted.

The Company business plan may also include marketing diesel, gasoline and other refined products in the western areas of Mexico and to transport those products along Grupo Mexico’s rail lines to the Mexican port of Topolobampo located on the Gulf of Mexico for export to Latin America. This business plan depends on the completion of the track upgrades and the completion of the bridge at Presidio/Ojinaga. The Company believes that the market exists in Western Mexico and in Latin America for the refined products that it plans to ship, but it has no arrangements in place to market and sell its products in those areas.

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Construction of the Refinery

The Large Refinery would cover approximately 250 acres of the 476 acre property on which the Company holds an option. Before construction on the Refinery can commence, the Company must obtain all required permits. The Distillation Unit would cover approximately 15 acres of the property. Constructing the Refinery will require a significant number of governmental permits and approvals. The principal permit for the construction of the Refinery is the air quality permit issued by TCEQ and significant construction will not begin until we have received it. On August 30, 2017, we received approval from the TCEQ for the air quality permit for the Distillation Unit. Trinity Consultants, the Company’s air quality permit advisor, estimates it will take approximately 15 to 18 months to obtain the air quality permit for the Large Refinery, once filed. The other principal permits that will be required are the following:

 

·

Rail. The site provides access to all Class 1 carriers from direct location on the TXPF rail line, ability to go east or Rail west, and therefore potentially sell production to California and Western markets, the US Environmental Protection Agency (EPA)Gulf Coast or Mexico.

– Air Permits, Risk Management Plan (RMP), Fuel Additives Registration, Facility Response Plan

· 

Middle Pecos Groundwater Conservation District·

Highway System. The site connects by a 15-mile hard top road to the transcontinental Interstate 10. This will provide the planned projects with the flexibility to receive crude and send refined products by trucks for products.

– Water Use

· 

Pecos County·

Mexico. The site is 170 miles from Presidio Bridge, which has been recently rebuilt and allows for improved flow of goods by rail to western Mexico and to the ports of Mazatlán Mexico and Topolobampo.

– Construction Permits

· 

Occupational Safety and Health Administration (OSHA)

– Process Safety Management (PSM)

·

Railroad Commission (RRC)Pipeline. The site in the middle of Texascrude oil and gas pipelines and adjacent gathering systems that could be connected to the planned projects.

– Water discharge for oil & gas assets, LPG/LNG License & Notification

 

·

US Army Corps of Engineers (USACOE)

– Wetlands

·

Texas Historical Commission (THC)

– Cultural/Historical survey concurrence

·

Texas Parks and Wildlife Department (TPWD)

– Threatened/Endangered Species mitigation (if applicable)

·

US Department of Transportation (USDOT)

– HAZMAT shipping registration

·

Texas Department of Licensing and Registration (TDLR)

– Boiler registration

·

Department of Homeland Security (DHS)

– Chemical Facility Anti-Terrorism Standards (CFATS), Top-Screen Analysis

·

Occupational Safety & Health Administration (OSHA)

– OSHA 300 Logs, Reporting

We have not yet filed for any of the foregoing permits.

The Company has hired VFuels Oil & Gas Engineering to advise it with respect to the construction of the Distillation Unit. Vfuels has prepared a preliminary report regarding the estimated cost and time-line for construction of the Distillation Unit. VFuels has estimated the cost of a 10,000 bpd facility to be approximately $50 million. This estimate is only a preliminary estimate and is subject to substantial change when additional engineering is completed. VFuels has estimated that the completion of the Refinery would take approximately 12 to 15 months following the receipt of the air quality permit from the TCEQ.

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Regulation

 

The Company has hired KP Engineering to advise it with respect to the construction of the Refinery. KP Engineering has prepared a preliminary report regarding the estimated costAlthough we do not believe our planned blue hydrogen and time-line for construction of the Refinery. KP Engineering has estimated the cost of a 50,000 bpd refinery to be approximately $500 million and the cost of a 100,000 bpd refinery to be approximately $850 million. These estimates are only preliminary estimates and are subject to substantial change when additional engineering is completed. KP Engineering has estimated that the completion of the Large Refinery would take from 15 to 18 months following the receipt of the air quality permit.

Building a refinery is a complicated, costly and time-consuming process. The preliminary report from KP Engineering must be followed by other detailed engineering reports. But, these reports are all essential to the financing of the construction and development of the Refinery.

Employees

As of   October 31, 2017,green hydrogen projects will have any significant environmental or ecological impact, we had no employees and our executive officer and our two directors had not received any compensation. We contract for all professional services when needed.

Legal Proceedings

There are no legal proceedings against the Company.

Environmental Regulations Pertaining to Refinery Operations.

The operations of the Refinery will be subject to complex and frequently-changing federal, state, and localnumerous environmental laws and regulations relating to the protection of health and the environment, including laws and regulations that govern the handling and release of crude oil and other liquid hydrocarbon materials. As with the industry generally, compliance with existing and anticipated environmental laws and regulations increases our overall cost of business, including our capital costs to construct, maintain, operate, and upgrade equipment and facilities. While these laws and regulations affect our maintenance, capital expenditures and net income, we do not believe they affect our competitive position, as the operations of our competitors are similarly affected. Violations of environmental laws or regulations can result in the imposition of significant administrative, civil and criminal fines and penalties and, in some instances, injunctions banning or delaying certain activities. We will adopt policies and procedures to ensure compliance with applicable environmental laws and regulations. However, these laws and regulations are subject to frequent change at the federal, state and local levels, and the legislative and regulatory trend has been to place increasingly stringent limitations on activities that may affect the environment.

Clean Air Act.

The environmental laws and regulations applicable to the Refinery include permitting and monitoring activities relating to air emissions under the federal Clean Air Act, and its implementing regulations, as well as comparable state and local statutes and regulations. Failure to comply with these rules can result in severe penalties and potential shut down of facilities. We will be required to develop policies and procedures to comply with all these laws and regulations.

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Greenhouse Gas Emissions.

Various legislative and regulatory measures to address greenhouse gas (“GHG”) emissions, including carbon dioxide and methane emissions, are in different phases of implementation and discussion. At the federal legislative level, both houses of Congress have considered legislation to reduce GHG emissions, including proposals to: (i) establish a cap-and-trade system, (ii) create a federal renewable or “clean” energy standard requiring electric utilities to provide a certain percentage of power from such sources, and (iii) create enhanced incentives for use of renewable energy and increased energy efficiency in energy supply and use. A number of states, both individually and on a regional basis, have adopted measures to reduce carbon dioxide and other GHG emissions, including statewide GHG inventories and regional GHG cap-and-trade initiatives. The EPA has also begun to regulate GHG emissions under the authority granted to it by the federal Clean Air Act. The EPA has adopted regulations limiting emissions of GHGs from motor vehicles, addressing the permitting of GHG emissions from stationary sources, and requiring the reporting of GHG emissions from specified large GHG emission sources, including petroleum refineries. The implementation of EPA regulations could result in increased costs to (i) operate and maintain our facilities, (ii) install new emission controls on our facilities and (iii) administer and manage any GHG emissions program. Increased costs associated with compliance with any current or future legislation or regulation of GHG emissions, if it occurs, may have a material adverse effect on our financial condition, results of operations and cash flows. In addition, climate change legislation and regulations may result in increased costs not only for our business but also for our customers, thereby potentially decreasing demand for our products and services. Decreased demand for our products and services may have a material adverse effect on our financial condition, results of operations and cash flows.

Release of Hazardous Substances.

Environmental laws and regulations affecting our operations also relate to the release of hazardous substances or solid wastes into the soil, groundwater, and surface water, and include 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.

 

CERCLA.

The Refinery propertyWe expect to file with the Texas Commission on Environmental Quality (“TCEQ”) for construction and any wastes disposed therefrom may be subjectoperation permits. We expect to employ carbon capture with the federal Comprehensive Environmental Response, Compensationclean fuels and Liability Act (“CERCLA”),blue hydrogen facilities. We are studying the federal Resource Conservation and Recovery Act, and comparable Texas state laws. CERCLA and comparable state laws may impose liability without regard to faultoptions for sequestration for the CO2 in the various saline formations under our sites, which will require permits from the EPA or the legalityTexas Railroad Commission (which, we understand, is in the process of the original conduct on certain classes of persons regarding the presence or release of a hazardous substance in (or into) the environment, which may include the disposal of wastes generated by the Refinery, even if the wastes are taken from the Refinery by others and disposed by them. We will develop procedures and policies to ensure compliance with these laws.seeking primacy for sequestration permitting).

 

Our planned operations may potentially result in the discharge of regulated substances, including crude oil, refined products, or natural gas liquids. The federal Clean Air Act and comparable state laws impose restrictions and strict controls regarding the discharge of regulated substances into waters of the United States or state waters. We will develop policies and procedures to ensure compliance with these rules.

Renewable Identification Numbers.

In 2007, the EPA promulgated the Renewable Fuel Standard (“RFS”), which requires refiners to blend “renewable fuels” in with their transportation fuels or purchase renewable fuel credits, known as renewable identification numbers (“RINs”), in lieu of blending. Under the Clean Air Act the EPA is required to determine and publish the applicable annual renewable fuel percentage standards for each compliance year by November 30 of the prior year. However, the EPA has repeatedly missed that deadline. The percentage standards represent the ratio of renewable fuel volume to gasoline and diesel volume. For all domestically-sold gasoline and diesel fuels we produce at the Refinery, we will be required to blend renewable fuels into our gasoline and diesel fuel or purchase RINs in lieu of blending. The Refinery intends to purchase RINs on the open market or waiver credits from the EPA to comply with the RFS. While we cannot predict the future prices of RINs or waiver credits, the price of RINs can be extremely volatile. RINs will constitute a genuinely significant cost of operations for the Refinery relative to domestically-sold gasoline and diesel, which is why we intend to export gasoline and diesel to the fullest extent possible.

If the Refinery’s gasoline or diesel is sold domestically, we and other similarly-situated refiners may become more reliant on the purchase of RINs and waiver credits on the open market to comply with the RFS in the future. The cost of RINs is dependent upon a variety of factors, which include the volume mandates set by EPA, the availability of RINs for purchase, the price at which RINs can be purchased, transportation fuel production levels and the mix of our petroleum products, all of which can vary significantly from quarter to quarter. In addition, numerous instances of fraudulent RINs being made available on the market have led EPA to impose penalties on RIN purchasers, even those with no knowledge of the fraudulent nature of the RINs. If we purchase invalid RINs, or fail to properly keep records in accordance with EPA’s rules and regulations, we could be subject to fines and penalties.

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Safety, Security and Insurance Concerns in Operating Refineries.

The Refinery willalso 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. WeIf 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.

 

The RefineryOur 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 willmay also bebecome 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

We have no employees and our executive officer and our two directors currently do not receive compensation. We contract for all professional services when needed.

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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

Age

Office

Year First Elected Director

Jack W. Hanks

71

Director, Chief Executive Officer, President and Chief Financial Officer

2010

75

Director, Chief Executive Officer, President and Chief Financial Officer

2010

 

 

Bruce N. Lemons

62

Director

2010

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.

 

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Audit, Nominating and Compensation Committees

 

Because we are not listed on 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.

 

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, 2017,2021, no director expenses were incurred.

 

No option awards were granted to our non-executive directors during the year ended April 30, 2017. The following table reflects all option awards outstanding at April 30, 2017 to our non-executive directors:

Name (a)

 

Number of Securities underlying unexercised options (#) exercisable

(b)

 

 

Number of securities underlying unexercised options (#) unexercisable

(c)

 

 

Option

Awards Equity incentive plan awards: Number of securities underlying unexercised unearned options (#) (d)

 

 

Option exercise price (#)

(d)

 

 

Option

expiration date
(f)

 

Bruce N. Lemons

 

 

500,000

 

 

 

0

 

 

 

0

 

 

$0.35

 

 

March 7, 2022

 
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These options were surrendered by Mr. Lemons effective June 1, 2017.

Executive Compensation

 

The following table sets forth the compensation paid or earned by our executive officers during the fiscal years ended April 30, 20172021 and 2016.2020:

 

Summary Compensation Table

 

Name and

Principal Position

 

Year

 

Salary (2)

 

Bonus

Bonus

 

Stock

Awards

Stock

Awards

 

Option

Awards

Option

Awards

 

Non-Equity

Incentive Plan

Compensation

 

All Other Compensation

 

Total

 

Jack W. Hanks

 

20172020

 

$

-

 

$

-

 

$

-

 

$

-

 

$

-

 

$

-

 

$

-

 

Chief Executive Officer, President and Chief Financial Officer (1)

 

20162019

 

$

-

 

$

-

 

$

-

 

$

-

 

$

-

 

$

-

 

$

-

________________

(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 period from May through December 2017,years ended April 30, 2021 and 2020, we paidincurred consulting fees and expense reimbursement related to business development, financing and other corporate activities to Maple Resources Corporation an affiliate(“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 Mr. Hanks, a n aggregate of $37,052 for consulting services related to project developmentApril 30, 2021 and $9,354 in expense reimbursement for travel , office and other administrative support expenses on behalf of the Company.2020, respectively.

 

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Outstanding Equity Awards at Fiscal Year-End

 

We have not granted any stock awards other than stock options. The following table reflects all option awards outstanding atAt April 30, 20172021, we had no outstanding stock options or other equity awards issued to our executive officers:

Name (a)

 

Number of

Securities

underlying unexercised

options (#) exercisable

(b)

 

 

Number of

securities

underlying

unexercised options (#) unexercisable

(c)

 

 

Option

Awards Equity incentive plan awards: Number of securities underlying unexercised unearned

options (#)

(d)

 

 

Option exercise

price (#)

(d)

 

 

Option

expiration date
(f)

 

Jack W. Hanks

 

 

1,000,000

 

 

 

0

 

 

 

0

 

 

$0.35

 

 

March 7, 2022

 

We had previously issued stock options to our executive officer but all such options were surrendered to the company effective on June 1, 2017. As of   October 31, 2017, there are no options currently outstanding.officers.

 

CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS

 

Unless otherwise indicated, the terms of the following transactions between related parties were not determined as a result of arm’s length negotiations.

 

Forgiveness of DebtOptions to Purchase Shares

 

On May 18, 2015,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 N. Lemons, and Nabil Katabi, the thenrespectively, our directors (the “Affiliates”), to pledge their shares of Class B Common Stock (constituting 100% of the Company and certain companies under their control, entered anoutstanding 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 forgivesubstitute 1,000 shares of Series A preferred stock (constituting 100% of the following indebtedness fromoutstanding 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 totaling $2,212,721granted a ten-year option, effective as of AprilDecember 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, 2015 and contribute2020, the amountsoption agreement was amended to capital.

 

 

Accounts Payable

 

 

Accounts Payable – Related Party

 

 

Accrued Expenses

 

 

Notes Payable

 

Hanks:

 

 

 

 

 

 

 

 

 

 

 

 

Accrued compensation

 

$-

 

 

$-

 

 

$883,584

 

 

$-

 

Accounts payable

 

 

-

 

 

 

8,033

 

 

 

-

 

 

 

-

 

Notes payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

39,337

 

Accrued interest payable

 

 

-

 

 

 

-

 

 

 

5,901

 

 

 

-

 

Lemons:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrued consulting fees

 

 

-

 

 

 

-

 

 

 

791,315

 

 

 

 

 

Notes payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

63,530

 

Accrued interest payable

 

 

-

 

 

 

-

 

 

 

9,320

 

 

 

-

 

Katabi:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

5,536

 

 

 

-

 

 

 

-

 

 

 

-

 

Accrued consulting fees

 

 

-

 

 

 

-

 

 

 

375,000

 

 

 

-

 

Notes payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

27,100

 

Accrued interest payable

 

 

-

 

 

 

-

 

 

 

4,065

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$5,536

 

 

$8,033

 

 

$2,069,185

 

 

$129,967

 

Transfer and Conversion of Preferred Stockcancel the 2,000,000 options.

 

On May 18, 2015,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 $59,023, $272,834 and $170,881 as of October 31, 2021, April 30, 2021 and April 30, 2020, respectively.

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Effective July 1, 2019, we entered into a consulting agreement with Maple Structure Holdings, LLC,Resources Corporation (“Maple Resources”), a related party controlled by Jack W. Hanks, converted 1,000,000 preferredour 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. 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 Company previously transferrednumber 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 Structure Holdings from an unrelated party.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. In November 2015,September 2021 we made a payment of $110,000 to pay for the Company issued 123,283,700consulting 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, $118,540 and $101,012 as of October 31, 2021, April 30, 2021 and April 30, 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 itsour common stock to Maple Structure Holdings foreach month with a value of $2,500, with the conversionnumber of shares issued based on the average closing price of the preferred shares withstock 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 book valuetotal of $1,000,000 and accrued dividends of $410,685 into 123,283,7003,876 common shares of the Company at $0.01 per share. The common(38,761,580 shares issued werepre-split) valued at $1,849,256, or $0.015 per share,$15,009 to the related party, with the shares valued at the market price on the date of the conversion, resultingissuance, in a losspayment of accrued consulting fees totaling $17,500. A gain on extinguishment of debt of $438,571.$2,491 related to this compensation arrangement was recorded as a contribution to capital. 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. As of October 31, 2021, consulting fees of $5,000 were payable in stock and the related party was due $6,017 for compensation and reimbursable expenses. 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. 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.

 

On May 18, 2015, The Maple Gas Corporation, a related party controlled by Jack W. Hanks, converted convertible notes payable with a book value of $1,950,000 into 194,999,999 common shares ofEffective February 1, 2021 the Company at $0.01 per share.entered into consulting agreements with three children of our President and CEO. The common shares issued were valued at $0.015 per share,consulting agreements can be terminated 15 days after written notice of termination by either party subject to the market price onagreement or December 31, 2021, whichever occurs first. During the date ofsix months ended October 31, 2021 we incurred $61,515 for fees and expense reimbursements to the conversion, resultingchildren and paid $140,015. During the year ended April 30, 2021 we paid $25,500 in a loss on extinguishment of debt of $975,000. The common shares were issuedconsulting fees due under the agreements. Amounts included in May 2016. 

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Accrued Expenses

Accruedaccounts payable and accrued expenses to related parties due to the children totaled $70,670$12,000 as of October 31, 2021 and $64,420 as of April 30, 20172021, 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 2016, respectively.expense reimbursements payable that were incurred prior to the execution of the February 1, 2021 consulting agreement.

 

Contractual AgreementsEffective 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.

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Series A Preferred Stock

 

On March 4, 2017,Effective August 1, 2019, the Company entered into an agreement with Maple Resources Corporation, a related party owned by Mr. Jack W. Hanks, to acquire Maple Resources’ business plan to build a $450 million, 50,000 barrels per day capacity crude oil refinery in Pecos County, Texas in exchange for the issuance of 7 billionissued 1,000 shares of common stock. The Company issued 1.5 billion shares of commonSeries A preferred stock on March 4, 2017. Subsequently, the Company amended and restated its articles of incorporation to authorize Class A and Class B common stock. Upon such amendment and restatement, Maple Resources Corporation agreed to waive its right to receive the remainder of the 7 billion shares of common stock and the 1.5 billion shares already issued were designated as Class B common stock. The Class B common stock is identical to the Class A common stock except that the Class A common stock has one vote per share and the Class B common stock has 10 votes per share. The 1.5 billion Class B common stock issued to Maple Resources Corporationfor services rendered. The shares were valued at $150,000 by an independent valuation firm with the $150,000 expensed to refinery start-up costs.at $23,900.

 

Convertible Notes Payable – Related Parties

Convertible notes payable – related parties consisted of the following:

 

 

October 31,

2021

 

 

April 30,

2021

 

 

April 30,

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

 

 

 

-

 

Total

 

 

-

 

 

 

74,990

 

 

 

27,000

 

Less discount

 

 

-

 

 

 

(235)

 

 

(1,377)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net

 

$-

 

 

$74,755

 

 

$25,623

 

[1]

This convertible note was entered into on December 27, 2019 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. 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 and recorded interest expense of $171 during the year ended April 30, 2021. As of October 31, 2021, April 30, 2021, and April 30, 2020 accrued interest on the convertible note was $0, $718, and $547 respectively.

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[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 28,094 common 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 $269 during the six months ended October 31, 2021 and recorded interest expense of $190 during the year ended April 30, 2021. As of October 31, 2021, April 30, 2021, and April 30, 2020 accrued interest on the convertible note was $1,006, $737, and $547, 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 and recorded interest expense of $20 during the year ended April 30, 2021. As of October 31, 2021, April 30, 2021, and April 30, 2020 accrued interest on the convertible note was $0, $303, and $283, respectively.

[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 and recorded interest expense of $40 during the year ended April 30, 2021. As of October 31, 2021, April 30, 2021, and April 30, 2020, accrued interest on the convertible note was $0, $40, and $0, respectively.

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[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 and recorded interest expense of $2,005 during the year ended April 30, 2021. As of October 31, 2021, April 30, 2021, and April 30, 2020 accrued interest on the convertible note was $0, $2,005, and $0, 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 and recorded interest expense of $374 during the year ended April 30, 2021. As of October 31, 2021, April 30, 2021, and April 30, 2020 accrued interest on the convertible note was $0, $374, and $0, respectively.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth as of January 15, 2018,December 31, 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 1,592 ,747,80118,845,362 shares of Class A common stock and 1.5 billion shares of Class B common stock outstanding on January 15, 2018.December 31, 2021. Shares of common stock subject to options and warrants that are exercisable within 60 days of January 15, 2018December 31, 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.

 

Name and Address of Beneficial Owners (1)

 

Shares

 

 

Percentage Ownership

of Class

 

 

Voting

Power (2)

 

Directors and Officers:

 

 

 

 

 

 

 

 

 

Jack W. Hanks (2)(3)

 

 

1,695,050

 

 

 

9.0%

 

 

54.6%

Bruce N. Lemons (4)

 

 

1,036,626

 

 

 

5.5%

 

 

2.7%

All directors and officers as a group (two persons)

 

 

2,731,676

 

 

 

14.5%

 

 

57.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

5% Beneficial Owners:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nabil Katabi (5)

 

 

5,848,542

 

 

 

31.0

 

 

 

15.5

 

Robyn Watson (6)

 

 

2,929,523

 

 

 

15.5

 

 

 

7.7

 

Alexis Hanks (7)

 

 

1,298,585

 

 

 

6.9

 

 

 

3.4

 

 

 

Class A common stock

 

 

Class B common stock

 

 

 

 

Name and Address of Beneficial Owners (1)

 

Shares

 

 

Percentage Ownership of Class

 

 

Shares

 

 

Percentage Ownership of Class

 

 

 Voting

Power (5)

 

Jack W. Hanks (2)(4)

 

 

209,699,518

 

 

 

13.2%

 

 

1,400,000,000

 

 

 

93.33%

 

 

85.6%

Bruce N. Lemons (3)(4)

 

 

223,173,230

 

 

 

14.0%

 

 

100,000,000

 

 

 

6.67%

 

 

7.4%

All directors and officers as a group (two persons)

 

 

432,872,748

 

 

 

27.2%

 

 

1,500,000,000

 

 

 

100%

 

 

92.8%
_______________

_______________ 

(1)

(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)

Includes (i) 138,176,181 shares of Class A common stock held by The Maple Gas Corporation, (ii) 35,268,260 shares of Class A common stock held by Maple Structure Holdings, LLC, (iii) 36,255,077 shares of Class A common stock held by Maple Resources Corporation, and (iv) 1,400,000,000 shares of Class B common stock held by Maple Resources Corporation.

(3)

Includes (i) 190,436,380 shares of Class A common stock held by BNL Family Trust, (ii) 32,736,850 shares of Class A common stock held by AAM Investments, LLC and (iii) 100,000,000 shares of Class B common stock to be received by BNL Family Trust upon its exercise of an option to purchase such shares from Maple Resources Corporation. 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)

Maple Resources Corporation, a related party to Mr. Hanks, granted BNL Family Trust, a related party to Mr. Lemons, an option to purchase 100,000,000 shares of Class B common stock from Maple Resources at a price of $0.002 per share. The option expires in March 2022. Beneficial ownership of Messrs. Hanks and. Lemons give effect to the exercise of such option.

(5)

Shares of Class B common stock have ten votes per share, and shares of Class A common stock have one vote per share.

 

(2) The holders of Series A Preferred Stock have 51% of the voting power of the outstanding shares of capital stock of the Company.

(3) Common shares for Mr. Hanks include: (i) 43 shares held by The Maple Gas Corporation, (ii) 136 shares held by Maple Structure Holdings, LLC, (iii) 552,802 shares held by Maple Resources Corporation and 1,142,069 shares owned by Leslie Doheny Hanks, the wife of Mr. Hanks. Mr. Hanks disclaims beneficial ownership to the shares owned by Leslie Doheny Hanks.

(4) 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.

(5) Mr. Katabi’s address is c/o MMEX Resources Corporation, 3616 Far West Blvd #117-321, Austin, Texas 78731.

(6) Ms. Watson’s address is 770 Northstar Drive, Hailey, Idaho 83333.

(7) Ms. Hanks is the daughter of Jack W. Hanks. Her address is P.O. Box 5161, Ketchum, Idaho 83340

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SELLING STOCKHOLDERS

 

SELLING STOCKHOLDERS

2017 Equity Purchase Agreement

On June 12, 2017, we entered into an Equity Purchase Agreement with Crown Bridge Partners, LLC (“Crown Bridge”), and we amendedThe common stock being offered by the Equity Purchase Agreement effective October 9, 2017, in connection withselling stockholders are those issuable to the contemplated listingselling stockholders upon conversion of our Class A common stock for quotation onSeries B Preferred Stock or exercise of previously granted warrants. For additional information regarding the OTCQB. Pursuant to the termsissuances of the Equity Purchase Agreement, Crown Bridge has committed to purchase up to $3,000,000 of our Class A common stock for a period of up to 24 months commencing upon the effectiveness of a registration statement covering the resale ofthose shares issuable to Crown Bridge under the Equity Purchase Agreement. The Equity Purchase Agreement allows us to deliver a put notice to Crown Bridge stating the dollar amount of common stock that we intendand warrants, see “Prospectus Summary—2021 Private Placement Financing” above. We are registering the shares of common stock in order to sellpermit the selling stockholders to Crown Bridge onoffer the date specified in the put notice. The amount of each put notice is limitedshares for resale from time to a formula that is equal to the lesser of (i) $100,000 or (ii) 150% of the average dollar value of the trading volume of our stock, measured at the lowest price during the trading period, for the seven days prior to the purchase of shares by Crown Bridge. The purchase price of shares issued in respect of each put notice is 80% of the average of the three lowest trading prices in the seven trading days immediately preceding the date on which the Company exercises its put right. The rights of Crown Bridge under the Equity Purchase Agreement are not transferable.time.

 

In connectionWe completed a registered direct offering with the Equity Purchase Agreement, we issued to Crown Bridge, as a commitment fee, an $80,000 convertible promissory note which matured on December 12, 2017. Pursuant to the terms of the note, Crown Bridge thereafter converted the principal balance of the note plus accrued interest at 8% per annum into 19,834,823 shares of our Class A common stock, representing a conversion price equal to the lesser of (i) the closing price of our Class A common stock on the issuance date of the note or (ii) 60% of the average of the three lowest trading prices during the 25-day period prior to the notice of conversion.

Alsoselling stockholders in connection with the execution of the Equity Purchase Agreement, we entered into a Registration Rights Agreement with Crown Bridge,July 15, 2021, pursuant to which we agreed to register for resale by Crown Bridgeissued 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. Except as described above, the selling stockholders have not had any material relationship with us within the past three years.

The table below lists the selling stockholders and other information regarding the beneficial ownership (as determined under Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder) of the shares of Class A common stock purchased by them pursuant toeach of the Equity Purchase Agreement. We are required to use our reasonable best efforts to causeselling stockholders. The second column lists the registration statement to become effectivenumber of shares of common stock beneficially owned by each selling stockholder, based on its ownership of the common stock and the warrants, as promptly as is practicable.  

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Table of Contents

Warrant Holdersof December 31, 2021, assuming exercise of all warrants held by the selling stockholders on that date, but taking account of any limitations on exercise set forth therein.

 

The Company previously issued warrants to qualified investors in a private placement for debt discounts. On June 1, 2017,third column lists the Company had outstanding warrants to purchase an aggregate of 395,261,211 shares of Class A common stock at a weighted average exercise price of $.01 per share. Throughout June, most of our warrant holders notified us of their intention to exercise their warrants and purchase shares of Class A common stock. In June 2017, we issued 353,359,992 shares of Class A common stock to the holders of substantially all of the outstanding warrants in exchange for the surrender of such warrants to the Company for cancellation. As of January 15, 2018, two warrant holders held warrants to purchase a total of 50,562 ,321 shares of Class A common stock.

Selling Stockholder Table

The selling stockholders may offer and sell, from time to time, any or all of the 1,033,769,176 shares of Class A common stock being offered by this prospectus. We are registering for resaleprospectus by the selling stockholders and does not take into account any limitations on exercise of the warrants set forth therein.

The second column lists the number of shares of our common stock that are issuedbeneficially owned by each selling stockholder, based on its ownership of the shares of common stock and outstandingwarrants, as of December 31, 2021, assuming exercise of the warrants held by the selling stockholders identified below. We are registeringon that date, without regard to any limitations on exercises.

The third column lists the Shares to permitshares of common stock being offered by this prospectus by the selling stockholders.

In accordance with the terms of a registration rights agreement with the selling stockholders, and their pledgees, donees and other successors-in-interest that receive theirthis prospectus generally covers the resale of the sum of (i) the number of shares fromof common stock issued to the selling stockholders in the “Private Placement of Common Shares and Warrants” described above and (ii) the maximum number of shares of common stock issuable upon exercise of the related warrants, determined as a gift, partnership distribution or other non-sale related transfer afterif the outstanding warrants were exercised in full as of the trading day immediately preceding the date this registration statement was initially filed with the SEC, each as of this prospectusthe trading day immediately preceding the applicable date of determination and all subject to reselladjustment as provided in the registration right agreement, without regard to any limitations on the exercise of the warrants.The fourth column assumes the sale of all of the shares whenoffered by the selling stockholders pursuant to this prospectus.

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Table of Contents

Under the terms of the Series B Preferred Stock and the Series D Warrants, a selling stockholder may not convert such shares or exercise such warrants to the extent such conversion or exercise would cause such selling stockholder, together with its affiliates and attribution parties, to beneficially own a number of shares of common stock which would exceed 4.99% or 9.99%, as they deem appropriateapplicable, of our then outstanding common stock following such exercise, excluding for purposes of such determination the shares of common stock issuable upon conversion of preferred shares or exercise of warrants which have not been converted or exercised, as applicable. The number of shares in the manner describedsecond and fifth columns do not reflect this limitation. The selling stockholders may sell all, some or none of their shares in the “Planthis offering. See "Plan of Distribution.” As of January 15, 2018, we had 1,592 ,747,801 shares of Class A common stock and 1.5 billion shares of Class B common stock issued and outstanding."

Name of Selling Stockholder

 

Shares Beneficially

Owned Prior to the Offering

 

 

Maximum Number of Shares Being Offered Pursuant to

 

 

Shares Beneficially
Owned After Offering

 

 

 

Number

 

 

Percent

 

 

this Prospectus

 

 

Number

 

 

Percent

 

Sabby Warrant Volatility Master Fund, Ltd. (1)

 

 

940,383(2)

 

4.99

%

 

 

31,975,000(3)

 

 

940,383(2)

 

4.99

%

Michael Vasinkevich (4)

 

 

1,082,110

 

 

 

5.74

 

 

 

865,688

 

 

 

216,422

 

 

*

 

Noam Rubenstein (4)

 

 

531,563

 

 

*

 

 

 

425,250

 

 

 

106,313

 

 

*

 

Craig Schwabe (4)

 

 

56,953

 

 

*

 

 

 

45,562

 

 

 

11,391

 

 

*

 

Charles Worthman (4)

 

 

16,875

 

 

*

 

 

 

13,500

 

 

 

3,375

 

 

*

 

_____________

* Less than 1%.

 

The following table sets forth for each selling stockholder:

·

the name of such selling stockholder;

·

the number of shares of Class A common stock beneficially owned by such selling stockholder as of January 15, 2018;

·

the maximum number of shares of Class A common stock that may be offered by such selling stockholder pursuant to this prospectus;

·

the number of shares of Class A common stock beneficially owned by such selling stockholder following the sale of the Class A common stock covered by this prospectus; and

·

the percentage of Class A common stock owned by such selling stockholder following the sale of the Class A common stock covered by this prospectus.

All information(1) Sabby Management, LLC is the investment manager of Sabby Volatility Warrant Master Fund, Ltd. and shares voting and investment power with respect to these shares in this capacity. As manager of Sabby Management, LLC, Hal Mintz also shares voting and investment power on behalf of Sabby Volatility Warrant Master Fund, Ltd. The address of Sabby Volatility Warrant Master Fund, Ltd. is c/o Sabby Management, LLC, 10 Mountainview Road, Suite 205, Upper Saddle River, NJ 07458. Each of Sabby Management, LLC and Hal Mintz disclaims beneficial ownership over the securities listed except to the extent of their pecuniary interest therein.

(2) This column lists the number of shares of common stock beneficially owned by the selling stockholders’stockholder after giving effect to the ownership limitations described above. Without giving effect to such limitations, the selling stockholder beneficially owned, in addition to shares described in footnote 3, a total of the Shares has been furnished by or on behalf691,528 shares of common stock, 1,425,000 shares issuable upon exercise of pre-funded warrants, 2,575,000 shares issuable upon exercise of Series A warrants, 14,399,500 shares issuable upon exercise of Series B warrants and 2,575,500 shares issuable upon exercise of Series C warrants.

(3) Consists of 15,000,000 shares issuable upon conversion of shares of Series B Preferred Stock, 14,399,500 shares issuable upon exercise of Series B Warrants and 2,575,500 shares issuable upon exercise of Series C Warrants.

(4) Each of the selling stockholders is affiliated with H.C. Wainwright & Co., LLC, a registered broker dealer and is ashas a registered address of January 15, 2018. We believe, based on information supplied by the selling stockholders, that except as may otherwise be indicated in the footnotes to the table below, the selling stockholders havec/o H.C. Wainwright & Co., LLC 430 Park Ave, 3rd Floor, New York, NY 10022, and has sole voting and dispositive power with respect toover the Class A common stock reported as beneficially owned by them.

Becausesecurities held. The selling stockholder purchased the selling stockholders identifiedwarrants in the table may sell some or allordinary course of business and, at the time of purchase of the Shares owned by them which are included in this prospectus, no estimate can be given as to the number of Shares available for resale hereby that will be held by the selling stockholders upon termination of this offering. In addition, the selling stockholders may have sold, transferred or otherwise disposed of, or may sell, transfer or otherwise dispose of, at any time and from time to time, the Shares they hold in transactions exempt from the registration requirements of the Securities Act after the date on which the selling stockholders provided the information set forth on the table below. We have, therefore, assumed for the purposes of the following table that the selling stockholders will sell all of the Shares beneficially owned by themsecurities that are covered by this prospectus, but will not sell any other shares of our common stock that they may presently own. A selling stockholder is under no obligation, however, to sell any shares pursuant to this prospectus.

Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days. The percent of beneficial ownershipregistered for the selling stockholders is based on 1,592, 747,801 shares of our shares of Class A common stock and 1.5 billion shares of Class B common stock outstanding as of January 15, 2018.

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Except as set forth in the footnotes to the table below, none of the selling stockholders has ever served as our officer or director or any of its predecessors or affiliates within the last three years, nor has any selling stockholder had a material relationship with us. No selling stockholder is either a broker-dealer nor an affiliate of a broker-dealer. None ofresale, the selling stockholders had any agreementno agreements or understanding, directly or indirectly with any person to distribute any of the shares being registered at the time of purchase.

Name

 

Shares of

Class A

Common Stock

Beneficially

Owned

Prior to

Offering

 

 

Maximum

Number of

Shares of

Class A

Common Stock

to be Sold

Hereunder

 

 

Number of

Shares of

Class A

Common

Stock

Beneficially

Owned after

Offering

 

 

Percentage

of Shares of

Common Stock

Beneficially

Owned

after

after Offering

 

Crown Bridge Partners, LLC (1)

 

 

300,000,000

 

 

 

300,000,000

 

 

 

0

 

 

*

 

BNL Family Trust (2)

 

 

190,436,380

 

 

 

146,117,220

 

 

 

44,319,160

 

 

 

1.4%

The Maple Gas Corporation (3)

 

 

138,176,181

 

 

 

100,000,000

 

 

 

38,176,181

 

 

 

1.2%

William Gross

 

 

100,000,000

 

 

 

100,000,000

 

 

 

0

 

 

*

 

Dennis Gauger

 

 

64,071,325

 

 

 

64,071,325

 

 

 

0

 

 

*

 

Juan Jose Munar Munoz

 

 

55,472,880

 

 

 

55,472,880

 

 

 

0

 

 

*

 

Bradley Adams

 

 

43,771,495

 

 

 

43,771,495

 

 

 

0

 

 

*

 

Jorge Luis Gonzales Reyes

 

 

32,437,097

 

 

 

32,437,097

 

 

 

0

 

 

*

 

David Clark (4)

 

 

31,872,300

 

 

 

16,500,000

 

 

 

15,372,300

 

 

*

 

Douglas Sellers

 

 

24,120,245

 

 

 

24,120,245

 

 

 

0

 

 

*

 

Rudi Winsberg

 

 

21,624,725

 

 

 

21,624,725

 

 

 

0

 

 

*

 

Art Achariyakosol

 

 

16,875,000

 

 

 

16,875,000

 

 

 

0

 

 

*

 

Nabil Katabi

 

 

16,000,000

 

 

 

16,000,000

 

 

 

0

 

 

*

 

Edgar Scott Bailey

 

 

14,337,064

 

 

 

14,337,064

 

 

 

0

 

 

*

 

Nolan Smith

 

 

14,163,190

 

 

 

12,132,794

 

 

 

2,030,396

 

 

*

 

Brendan Achariyakosol

 

 

11,562,500

 

 

 

11,250,000

 

 

 

312,500

 

 

*

 

William B. Short

 

 

10,000,000

 

 

 

10,000,000

 

��

 

0

 

 

*

 

Pete Setabutr

 

 

7,875,000

 

 

 

7,875,000

 

 

 

0

 

 

*

 

Thomas M. Echols, Jr.

 

 

5,555,556

 

 

 

5,555,556

 

 

 

0

 

 

*

 

William D. Elliott

 

 

3,797,712

 

 

 

2,916,680

 

 

 

881,032

 

 

*

 

David A. Bolen

 

 

2,222,222

 

 

 

2,222,222

 

 

 

0

 

 

*

 

William R. Lucas

 

 

2,222,222

 

 

 

2,222,222

 

 

 

0

 

 

*

 

Nick Shakesby

 

 

2,082,190

 

 

 

2,082,190

 

 

 

0

 

 

*

 

Ralph Ken Ross

 

 

1,666,667

 

 

 

1,666,667

 

 

 

0

 

 

*

 

Alfonso Morante

 

 

665,000

 

 

 

440,000

 

 

 

225,000

 

 

*

 

Total

 

 

1,111,006,951

 

 

 

1,009,690,382

 

 

 

101,316,569

 

 

 

 

 

_____________

* Represents beneficial ownership of less than one percent.

(1)

Includes 300,000,000 shares issuable to Crown Bridge pursuant to the Equity Purchase Agreement assuming we put $3,000,000 in shares of our Class A common stock to Crown Bridge of $0.01 per share. Seth Ahdoot has the voting and dispositive power over shares owned by Crown Bridge.

(2)

Bruce Lemons, a director on our board of directors, is the beneficiary of this selling stockholder. The trustee, who is not Mr. Lemons, exercises voting and investment authority over the shares held by this selling stockholder.

securities.

 

(3)

Jack W. Hanks, our CEO and a director, is the controlling person of this selling stockholder. Totals do not include other shares beneficially owned by Mr. Hanks. See “Security Ownership of Certain Beneficial Owners and Management.”

(4)

Includes shares issuable upon conversion of outstanding convertible notes at an assumed exercise price of $.01 per share. The notes are owned of record by Vista Capital Investments LLC.

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PLAN OF DISTRIBUTION

 

PLAN OF DISTRIBUTION

The selling stockholders, which as used herein includes donees, pledgees, transferees or other successors-in-interest selling shares of Class A common stock received after the date of this prospectus from aEach selling stockholder as a gift, pledge, partnership distribution or other transfer,of the securities and any of their pledgees, assignees and successors-in-interest may, from time to time, sell transfer or otherwise dispose of any or all of their shares of Class A common stocksecurities covered hereby on OTC Pink or any other stock exchange, market or trading facility on which the sharessecurities are traded or in private transactions. These dispositionssales may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices.

The A selling stockholdersstockholder may use any one or more of the following methods when disposing of shares or interests therein:selling securities:

 

 

·

ordinary brokerage transactions and transactions in which the broker-dealerbroker‑dealer solicits purchasers;

 

·

block trades in which the broker-dealerbroker‑dealer will attempt to sell the sharessecurities as agent but may position and resell a portion of the block as principal to facilitate the transaction;

 

·

purchases by a broker-dealerbroker‑dealer as principal and resale by the broker-dealerbroker‑dealer for its account;

 

·

an exchange distribution in accordance with the rules of the applicable exchange;

 

·

privately negotiated transactions;

 

·

in underwriting transactions;

 

·

settlement of short sales effected after the date the registration statement of which this prospectus is a part is declared effective by the SEC;sales;

 

·

in transactions through broker‑dealers that agree with the selling stockholders to sell a specified number of such securities at a stipulated price per security;

·

through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

 

·

broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;

 

·

distributions to employees, members, limited partners or stockholdings of selling stockholders;

·a combination of any such methods of sale; or

 

·

“at the market” or through market makers or into an existing market for the Shares; and

 

·

any other method permitted bypursuant to applicable law.

 

The selling stockholders may from time to time, pledge or grant a security interest in some or all of the Shares owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer andalso sell the Shares, from time to time, under this prospectus, or under an amendment to this prospectussecurities under Rule 424(b)(3)144 or any other applicable provision ofexemption from registration under the Securities Act, amendingif available, rather than under this prospectus.

Broker‑dealers engaged by the list of selling stockholders may arrange for other brokers‑dealers to includeparticipate in sales. Broker‑dealers may receive commissions or discounts from the pledgee, transferee or other successors in interest as selling stockholders under(or, if any broker‑dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus. The selling stockholders also may transferProspectus, in the Sharescase of an agency transaction not in other circumstances,excess of a customary brokerage commission in whichcompliance with FINRA Rule 2121; and in the case the transferees, pledgeesof a principal transaction a markup or other successorsmarkdown in interest will be the selling beneficial owners for purposes of this prospectus.compliance with FINRA Rule 2121.

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In connection with the sale of the Shares,securities or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the Class A common stocksecurities in the course of hedging the positions they assume. The selling stockholders may also sell their Sharessecurities short and deliver these securities to close out their short positions, or loan or pledge the common stocksecurities to broker-dealers that in turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation ofcreate one or more derivative securities which require the delivery to such broker-dealer or other financial institution of Sharessecurities offered by this prospectus, which Sharessecurities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

 

NotwithstandingThe selling stockholders and any broker-dealers or agents that are involved in selling the foregoing, Crown Bridgesecurities may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each selling stockholder has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities.

The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the securities. The Company has agreed withto indemnify the Companyselling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Equity Purchase Agreement that it will not execute any short salesSecurities Act.

We agreed to keep this prospectus effective until the earlier of our Class A common stock prior to(i) the date on which Crown Bridge’s commitment under the Equity Purchase Agreement has been terminated.

The aggregate proceedssecurities may be resold by the Selling Stockholders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the selling stockholders fromrequirement for the sale of the Shares offered by them will be the purchase price of the Shares less discounts or commissions, if any. Each of the selling stockholders reserves the right to accept and, together with their agents from time to time, to reject, in whole or in part, any proposed purchase of Class A common stockCompany to be made directly or through agents. We will not receive any ofin compliance with the proceeds from the sale of the Shares by the selling stockholders.

Except as described below, the selling stockholders also may resell all or a portion of the Shares in open market transactions in reliance uponcurrent public information under Rule 144 under the Securities Act provided that they meet the criteria and conform to the requirementsor any other rule of that rule.

Crown Bridge is deemed an underwriter of our common stock and will not be able rely on Rule 144 for resalessimilar effect or (ii) all of the Shares acquired in connection with the Equity Purchase Agreement. The other selling stockholders and any underwriters, broker-dealerssecurities have been sold pursuant to this prospectus or agents that participate in the sale of the common stock or interests therein may also be “underwriters” within the meaning of Section 2(11) of the Securities Act. Any discounts, commissions, concessions or profit they earn on any resale of the shares may be underwriting discounts and commissionsRule 144 under the Securities Act. Selling stockholders who are “underwriters” within the meaningAct or any other rule of Section 2(11) of the Securities Actsimilar effect. The resale securities will be subject to the prospectus delivery requirements of the Securities Act.

To the extent required, the Shares to be sold the names of the selling stockholders, the respective purchase prices and public offering prices, the names of any agents, dealer or underwriter, any applicable commissions or discounts with respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement that includes this prospectus.

In order to comply with the securities laws of some states, if applicable, the Shares may be sold in these jurisdictions only through registered or licensed brokers or dealers.dealers if required under applicable state securities laws. In addition, in somecertain states, the Sharesresale securities covered hereby may not be sold unless it hasthey have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirementsrequirement is available and is complied with.

 

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If a selling stockholder wants to sell its SharesUnder applicable rules and regulations under this prospectusthe Exchange Act, any person engaged in the United States,distribution of the resale securities may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the selling stockholderstockholders will also needbe subject to comply with state securities laws, also known as “Blue Sky laws,” with regard to secondary sales. All states offer a variety of exemption from registration for secondary sales. Many states, for example, have an exemption for secondary trading of securities registered under Section 12(g)applicable provisions of the Exchange Act or for securitiesand the rules and regulations thereunder, including Regulation M, which may limit the timing of issuers that publish continuous disclosurepurchases and sales of financial and non-financial information in a recognized securities manual, such as Standard & Poor’s. The broker for a selling stockholder will be able to advise a selling stockholder in which states the Shares are exempt from registration for secondary sales. Any person who purchases the Shares from a selling stockholder offeredcommon stock by this prospectus who then wants to sell such Shares will also have to comply with Blue Sky laws regarding secondary sales.

We have advised the selling stockholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares in the market and to the activities of the selling stockholders and their affiliates. In addition, to the extent applicable weor any other person. We will make copies of this prospectus (as it may be supplemented or amended from time to time) available to the selling stockholders for the purpose of satisfying the prospectus delivery requirementsand have informed them of the Securities Act. The selling stockholders may indemnify any broker-dealer that participates in transactions involvingneed to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale of the shares against certain liabilities, including liabilities arising(including by compliance with Rule 172 under the Securities Act.Act).

 

31

We have agreed to indemnify the selling stockholders against liabilities, including liabilities under the Securities Act and state securities laws, relating to the registration of the shares offered by this prospectus.

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We are required to pay all fees and expenses incident to the registration of the Shares covered by this prospectus, including with regard to compliance with state securities or Blue Sky laws. Otherwise, all discounts, commissions, transfer taxes or fees incurred in connection with the sale of the Shares offered hereby will be paid by the selling stockholders.

DESCRIPTION OF CAPITAL STOCK

 

The rights of our stockholders are be governed by Nevada law, and our Amended and Restated Articles of Incorporation and Bylaws, as amended. The following description of the Sharesbriefly summarizes the material terms of our common stock and preferred stock. We urge you to read the applicable provisions of the Shares that we may offer under this prospectus. It may not contain all the information that is important to you. For the complete termsNevada Corporation Law, our Amended and Restated Articles of the Shares, please refer to our amended and restated articles of incorporation,Incorporation and our amended and restated bylaws, which are incorporated by reference into the registration statement which includes this prospectus. The Nevada revised statutes (“NRS”) may also affect the terms of these securities.Bylaws.

 

Authorized Capital Stock

 

We areOur authorized to issue 5,010,000,000 shares of capital stock which consists of 5,000,000,000201,000,000 shares, consisting of 200,000,000 shares of common stock, $0.001 par value $0.001 per share, and 10,000,0001,000,000 shares of preferred stock, $.001 par value. Of the 5,000,000,000value $.0001 per share. As of December 31, 2021, there were 18,845,362 shares of authorizedour common stock, 3,000,000,000 are designated as Class1,000 shares of our Series A preferred stock and 1,500 shares of our Series B preferred stock outstanding.

Common Stock

Holders of our common stock and 2,000,000,000 shares are designated as Class B common stock. Our board of directors has agreed to further amend the articles of incorporation to increase the number of authorized shares of Class A common stock from 3,000,000,000 to 10,000,000,000, subject to the required approval of the stockholders.

Common Stock

All issued shares of common stock are designated as Class A common stock, except that the 1,500,000,000 shares issued by the Company to Maple Resources or its affiliates in connection with the acquisition of the refinery project in March of 2017 were designated as Class B common stock.

The holder of each share of Class A common stock is entitled to one vote for each such share as determinedheld on the record date for the vote or consent of stockholders and votes together with the holders of Class B common stock as a single class upon any itemsall matters submitted to a vote of stockholders, except with respect to matters requiring a separate series or class vote. The holderour stockholders. Holders of each share of Class Bour common stock is entitled to ten votes for each such share as determined on the record date for the vote or consent of stockholders and votes together with thehave no cumulative voting rights. Further, holders of Class Aour common stock as a single class upon any items submitted to a vote of stockholders, except with respect to matters requiring a separate serieshave no preemptive or class vote. Except for such votingconversion rights the rights of theor other subscription rights. Upon our liquidation, dissolution or winding-up, holders of Class A common stock and Class Bour common stock are identical.

The Class B common stock have a conversion feature whereby eachentitled to share in all assets remaining after payment of Class B common stock willall liabilities and the liquidation preferences of any of our outstanding shares of preferred stock. Subject to preferences that may be automatically converted into one share of Class A common stock upon the earlier of (i) the surrender to the Company by the holder thereof of such share of Class B common stock for voluntary conversion or (ii) the transfer or sale of such share of Class B common stockapplicable to any person other than Maple Resources Corporation, Jack W. Hanks, BNL Family Trust or oneoutstanding shares of their respective affiliates.

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There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares voted for the election of directors can elect all of the directors. Subject to the rights, if any, of any outstanding preferred stock, the holders of shares of our common stock are entitled to receive such dividends, and other distributions (payable in cash, property or capital stock of the Company) when,if any, as and ifmay be declared thereon by the Board of Directors from time to time by our Board out of our assets which are legally available. Such dividends, if any, assetsare payable in cash, in property or fundsin shares of capital stock.

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.

The shares of Series B Preferred Stock have a stated value of $1,000 per share and are convertible into an aggregate of 15,000,000 shares of common stock at an initial conversion price of $0.10 per share and are subject to full ratchet anti-dilution protection and other customary adjustments for stock splits and similar transactions. The shares of Series B Preferred Stock are non-voting and participate in any dividends or distributions made on our common stock on an as if converted basis. Upon any liquidation, dissolution or winding-up of the Company, and will share equally on a per share basis in such dividends and distributions.

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, after payment or provision for payment of the debts and other liabilities of the Company, and subject to the rights, if any, of any outstanding preferred stock, the holders of sharesSeries B Preferred Stock will be entitled to receive the same amount that a holder of our common stock are entitled towould receive allif the remaining assets of the Company available for distribution to its stockholders, ratably in proportion to the number of shares of Series B Preferred Stock had been fully converted into common stock, held by them. Our stockholders have no preemptive or other subscription rights and there are no sinking fund or redemption provisions applicable to ourwhich amounts will be paid pari passu with all holders of common stock.

 

AsAnti-Takeover Provisions of January 15, 2018, 1,592 ,747,801 shares of Class A common stock and 1,500,000,000 shares of Class B common stock were issued and outstanding. We had 143 record holders of our Class A common stock as of such date and one record holder of our Class B common stock, according to the books of our transfer agent.Nevada State Law

 

Preferred Stock

Our amended and restated articlesCertain anti-takeover provisions of incorporation provide that shares of preferred stock may be issued from time to time in one or more classes or series. Our Board of Directors is authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each class or series. Our Board of Directors is able to, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of the common stock and could have anti-takeover effects. The ability of our Board of Directors to issue preferred stock without stockholder approvalNevada law could have the effect of delaying deferring or preventing a change of control ofthird-party from acquiring us, or the removal of existing management.

We have no shares of preferred stock outstanding and have no current plans to issue such shares.

Warrants

The Company previously issued warrants to qualified investors in a private placement for debt discounts. On June 1, 2017, the Company had outstanding warrants to purchase an aggregate of 395,261,211 shares of Class A common stock at a weighted average exercise price of $.01 per share. Throughout June, most of our warrant holders notified us of their intention to exercise their warrants and purchase shares of Class A common stock. In June 2017, we issued 353,359,992 shares of Class A common stock to the holders of substantially all of the outstanding warrants in exchange for the surrender of such warrants to the Company for cancellation. As of January 15, 2018,  two warrant holders held warrants to purchase 50,059,187 shares of Class A common stock.

Dividends

We have never declared or paid any cash dividends on shares of our capital stock. We currently intend to retain earnings,even if any, to fund the development and growth of our business and do not anticipate paying cash dividends in the foreseeable future. Our payment of any future dividends will be at the discretion of our Board of Directors after taking into account various factors, including our financial condition, operating results, cash needs and growth plans.

Our Transfer Agent

The transfer agent for our common stock is TranShare Corporation. We have agreed to indemnify TranShare Corporation in its role as transfer agent, its agents and each of its stockholders, directors, officers and employees against all liabilities, including judgments, costs and reasonable counsel fees that may arise out of acts performed or omitted for its activities in that capacity, except for any liability due to any gross negligence, willful misconduct or bad faith of the indemnified person or entity.

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Anti-Takeover Provisions under the Nevada Revised Statutes and our Articles of Incorporation and Bylaws

Control Share Law

Nevada law seeks to impede “unfriendly” corporate takeovers in Sections 78.378 to 78.3793 of the NRS. Sometimes known as the “control share” law, these statutes contain provisions governing the acquisition of a controlling interest in certain Nevada corporations by providing generally that any person that acquires a “controlling interest” in certain Nevada corporations may be denied certain voting rights, unless a majority of the disinterested stockholders of the corporation elects to restore such voting rights. These statutes provide that a person acquires a “controlling interest” whenever a person acquires shares of a subject corporation that, but for the application of these provisions of the NRS, would enable that person to exercise (1) one-fifth or more, but less than one-third, (2) one-third or more, but less than a majority or (3) a majority or more, of all of the voting power of the corporation in the election of directors. Once an acquirer crosses one of these thresholds, shares which it acquired in the transaction taking it over the threshold and within the 90 days immediately preceding the date when the acquiring person acquired or offered to acquire a controlling interest become “control shares” to which the voting restrictions described above apply.

A Nevada corporation may elect to opt out of the provisions of Sections 78.378 to 78.3793 of the NRS. Our amended and restated articles of incorporation and amended and restated bylaws currently contain no provisions relating to these statutes, and unless our articles of incorporation or bylaws in effect on the tenth day after the acquisition of a controlling interest were to provide otherwise, these laws would apply to us if we were to (i) have 200 or more stockholders of record (at least 100 of which have addresses in the State of Nevada appearing on our stock ledger) and (ii) do business in the State of Nevada directly or through an affiliated corporation. As of January 15, 2018, we had 143 record stockholders and do not have 100 stockholders of record with Nevada addresses appearing on our stock ledger. If these laws were to apply to us, they might discourage companies or persons interested in acquiring a significant interest in or control of the Company, regardless of whether such acquisition may be in the interest ofarguably could benefit our stockholders.

 

Combinations with Interested Stockholders

 

Nevada’s “combinations with interested stockholders” statutes prohibit certain business “combinations” between certain Nevada corporations and any person deemed to be an “interested stockholder” for two years after such person first becomes an “interested stockholder” unless (i) the corporation’s Board of Directors approves the combination (or the transaction by which such person becomes an “interested stockholder”) in advance, or (ii) the combination is approved by the Board of Directors and sixty percent of the corporation’s voting power not beneficially owned by the interested stockholder, its affiliates and associates. Furthermore, in the absence of prior approval certain restrictions may apply even after such two-year period. For purposes of these statutes, an “interested stockholder” is any person who is (x) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares of the corporation, or (y) an affiliate or associate of the corporation and at any time within the two previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding shares of the corporation. The definition of the term “combination” is sufficiently broad to cover most significant transactions between the corporation and an “interested stockholder”.

 

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A Nevada corporation may elect not to be governed by Sections 78.411 to 78.444 by a provision in its articles of incorporation. We have no provision in our amended and restated articles of incorporation pursuant to which we have elected to opt out of Sections 78.411 to 78.444; therefore, these sections do apply to us.

 

Removal of Directors

 

Section 78.335 of the NRS provides that 2/3rds of the voting power of the issued and outstanding shares of the Company are required to remove a director from office. As such, it may be more difficult for stockholders to remove directors due to the fact the NRS requires greater than majority approval of the stockholders for such removal.

 

The effect of these statutes may be to potentially discourage parties interested in taking control of the Company from doing so if it cannot obtain the approval of our Board of Directors

 

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Articles of Incorporation and Bylaws.

 

Provisions of our amended and restated articles of incorporation and amended and restated bylaws may delay or discourage transactions involving an actual or potential change of control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our common stock. Among other things, these provisions include:

 

 

·

Blank Check Preferred Stock- the authorization of 10,000,000 shares of “blank check” preferred stock, the rights, preferences and privileges of which may be established and shares of which may be issued by our Board of Directors at its discretion from time to time and without stockholder approval;

 

·

·

No Cumulative Voting- Our amended and restated articles of incorporation and amended and restated bylaws do not provide for cumulative voting in the election of directors;

 

·

·

Bylaw Amendment- Our amended and restated articles of incorporation permit our Board of Directors to alter our amended and restated bylaws without stockholder approval;

 

·

·

Board Vacancies- Our amended and restated bylaws provide that vacancies on our Board of Directors may be filled by a majority of the directors in office, even if less than a quorum.

 

Such provisions may have the effect of discouraging a third-party from acquiring us, even if doing so would be beneficial to our stockholders. These provisions also may have the effect of preventing changes in our management.

 

Rule 144Transfer Agent and Registrar

The transfer agent and registrar for our common stock is Transhare Corporation.

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Indemnification of Directors and Officers

The NRS empowers us to indemnify our directors and officers against expenses relating to certain actions, suits or proceedings as provided for therein. In order for such indemnification to be available, the applicable director or officer must not have acted in a manner that constituted a breach of his or her fiduciary duties and involved intentional misconduct, fraud or a knowing violation of law, or must have acted in good faith and reasonably believed that his or her conduct was in, or not opposed to, our best interests. In the event of a criminal action, the applicable director or officer must not have had reasonable cause to believe his or her conduct was unlawful.

 

Pursuant to Rule 144our articles, we may indemnify each of our present and future directors, officers, employees or agents who becomes a party or is threatened to be made a party to any suit or proceeding, whether pending, completed or merely threatened, and whether said suit or proceeding is civil, criminal, administrative, investigative, or otherwise, except an action by or in the right of the Company, by reason of the fact that he is or was a director, officer, employee, or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses, including, but not limited to, attorneys' fees, judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit, proceeding or settlement, provided such person acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interest of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

The expenses of directors, officers, employees or agents of the Company incurred in defending a civil or criminal action, suit, or proceeding may be paid by the Company as they are incurred and in advance of the final disposition of the action, suit, or proceeding, if and only if the director, officer, employee or agent undertakes to repay said expenses to the Company if it is ultimately determined by a court of competent jurisdiction, after exhaustion of all appeals therefrom, that he is not entitled to be indemnified by the corporation.

No indemnification shall be applied, and any advancement of expenses to or on behalf of any director, officer, employee or agent must be returned to the Company, if a final adjudication establishes that the person's acts or omissions involved a breach of any fiduciary duties, where applicable, intentional misconduct, fraud or a knowing violation of the law which was material to the cause of action.

The NRS further provides that a corporation may purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such, whether or not the corporation has the authority to indemnify him against such liability and expenses. We have secured a directors’ and officers’ liability insurance policy. We expect that we will continue to maintain such a policy.

Disclosure of Commission Position on Indemnification for Securities Act Liabilities

Insofar as indemnification for liabilities under the Securities Act which we refermay be permitted to as “Rule 144”, a person who has beneficially owned restricted shares of our common stockofficers, directors or warrants for at least six months would be entitled to sell their securities provided that (i) such person is not deemed to have been one of our affiliates atpersons controlling the time of, or at any time during the three months preceding, a sale and (ii) we are subjectCompany pursuant to the Exchange Act periodic reporting requirements for at least three months beforeforegoing provisions, the sale and have filed all required reports under Section 13 or 15(d)Company has been informed that is it is the opinion of the ExchangeSEC that such indemnification is against public policy as expressed in such Securities Act during the 12 months (or such shorter period as we were required to file reports) preceding the sale.and is, therefore, unenforceable.

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Persons who have beneficially owned restricted shares of our common stock or warrants for at least six months but who are our affiliates at the time of, or at any time during the three months preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of:

·1% of the total number of shares of common stock then outstanding; or

·the average weekly reported trading volume of the common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.

Sales by our affiliates under Rule 144 are also limited by manner of sale provisions and notice requirements and to the availability of current public information about us.

Listing of Securities

Our Class A common stock is listed for quotation on OTC under the symbol “MMEX.” There is no established trading market for the Class B common stock.

MATERIAL U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF OUR COMMON STOCK

 

The following is a summary of the material U.S. federal income and estate tax consequences of the ownership and disposition of our common stock that is purchased pursuant to this offering, but does not purport to be a complete analysis of all potential tax effects. This summary is limited to Non-U.S. Holders (as defined below) that hold our common stock as a “capital asset” within the meaning of Section 1221 of the U.S. Internal Revenue Code of 1986, as amended (which we refer to as the “Code”) (generally, property held for investment) for U.S. federal income tax purposes. This summary does not discuss all of the aspects of U.S. federal income and estate taxation that may be relevant to a Non-U.S. Holder in light of the Non-U.S. Holder’s particular investment or other circumstances, including the impact of the Medicare contribution tax on net investment income. Accordingly, all prospective Non-U.S. Holders should consult their own tax advisors with respect to the U.S. federal, state, local, and non-U.S. tax consequences of the ownership and disposition of our common stock.

 

This summary is based on provisions of the Code, applicable U.S. Treasury regulations promulgated thereunder and administrative and judicial interpretations, all as in effect or in existence on the date of this prospectus. Subsequent developments in U.S. federal income or estate tax law, including changes in law or differing interpretations, which may be applied retroactively, could alter the U.S. federal income and estate tax consequences to a Non-U.S. Holder of owning and disposing of our common stock as described in this summary. There can be no assurance that the Internal Revenue Service (the “IRS”) or a court will not take a contrary position with respect to one or more of the tax consequences described herein, and we have not obtained, nor do we intend to obtain, a ruling from the IRS with respect to the U.S. federal income or estate tax consequences of the ownership or disposition of our common stock.

 

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As used in this summary, the term “Non-U.S. Holder” means a beneficial owner of our common stock that is not, for U.S. federal income tax purposes:

 

 

·

an individual who is a citizen or resident of the United States;

 

·

·

a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;

 

·

·

an entity or arrangement treated as a partnership for U.S. federal income tax purposes;

 

·

·

an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or

 

·

·

a trust, if (1) a U.S. court is able to exercise primary supervision over the trust’s administration and one or more “United States persons” (within the meaning of the Code) has the authority to control all of the trust’s substantial decisions, or (2) the trust has a valid election in effect under applicable U.S. Treasury regulations to be treated as a “United States person” (within the meaning of the Code).

 

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner in such a partnership generally will depend upon the status of the partner, the activities of the partnership, and certain determinations made at the partner level. Partnerships, and partners in partnerships, that hold our common stock should consult their own tax advisors as to the particular U.S. federal income and estate tax consequences of owning and disposing of our common stock that are applicable to them.

 

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This summary does not consider any specific facts or circumstances that may apply to a Non-U.S. Holder and does not address any special tax rules that may apply to particular Non-U.S. Holders, such as:

 

 

·

a Non-U.S. Holder that is a bank, financial institution, insurance company, tax-exempt or government organization, pension plan, broker, dealer or trader in stocks, securities or currencies, U.S. expatriate, former citizen, long-term resident of the United States, person subject to the alternative minimum tax, controlled foreign corporation, tax-qualified retirement plan, passive foreign investment company, or corporation that accumulates earnings to avoid U.S. federal income tax;

 

·

·

a Non-U.S. Holder holding our common stock as part of a conversion, constructive sale, wash sale or other integrated transaction, or a hedge, straddle, synthetic security, or other risk reduction strategy;

 

·

·

a Non-U.S. Holder that holds or receives our common stock pursuant to the exercise of any employee stock option or otherwise as compensation;

 

·

·

a Non-U.S. Holder that is deemed to sell our common stock under the constructive sale provisions of the Code; or

 

·

·

a Non-U.S. Holder that at any time owns, directly, indirectly or constructively, 5% or more of our outstanding common stock.

 

In addition, this summary does not address any U.S. state or local, or non-U.S. or other tax consequences, or any U.S. federal income or estate tax consequences for beneficial owners of a Non-U.S. Holder, including stockholders of a controlled foreign corporation or passive foreign investment company that holds our common stock.

 

Each Non-U.S. Holder should consult its own tax advisor regarding the U.S. federal, state, local, and non-U.S. income and other tax consequences of owning and disposing of our common stock.

 

Distributions on Our Common Stock

 

As discussed under “Dividend Policy” above, we have no current plans to pay any dividends on our common stock in the foreseeable future. If we make distributions of cash or property (other than certain pro rata distributions of our common stock) with respect to our common stock, any such distributions generally will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. If a distribution exceeds our current and accumulated earnings and profits, the excess will be treated as a nontaxable return of capital to the extent of the Non-U.S. Holder’s adjusted tax basis in its common stock and will reduce (but not below zero) such Non-U.S. Holder’s adjusted tax basis in its common stock. Any remaining excess will be treated as gain from a disposition of our common stock subject to the tax treatment described below in “—Sales or Other Dispositions of Our Common Stock”.

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Distributions on our common stock to a Non-U.S. Holder that are treated as dividends, and that are not effectively connected with a Non-U.S. Holder’s conduct of a trade or business in the United States, generally will be subject to withholding of U.S. federal income tax at a rate of 30% of the gross amount of dividends. A Non-U.S. Holder may be eligible for a lower rate of withholding under an applicable income tax treaty between the United States and its jurisdiction of tax residence. In order to claim the benefit of an applicable income tax treaty, a Non-U.S. Holder will be required to provide to the applicable withholding agent a properly executed IRS Form W-8BEN or W-8BEN-E (or other applicable form) in accordance with the applicable certification and disclosure requirements certifying qualification for the lower treaty rate. Special rules apply to partnerships and other pass-through entities and these certification and disclosure requirements also may apply to beneficial owners of partnerships and other pass-through entities that hold our common stock. A Non-U.S. Holder should consult its tax advisor regarding its entitlement to benefits under any applicable income tax treaty.

 

Distributions on our common stock to a Non-U.S. Holder that are treated as dividends, and that are effectively connected with a Non-U.S. Holder’s conduct of a trade or business in the United States will be taxed on a net income basis at the regular graduated rates and generally in the manner applicable to United States persons (unless the Non-U.S. Holder is eligible for and properly claims the benefit of an applicable income tax treaty and the dividends are not attributable to a permanent establishment or fixed base maintained by the Non-U.S. Holder in the United States, in which case the Non-U.S. Holder may be eligible for a lower rate under an applicable income tax treaty between the United States and its jurisdiction of tax residence). Dividends to a Non-U.S. Holder that are effectively connected with a Non-U.S. Holder’s conduct of a trade or business in the United States will not be subject to the withholding of U.S. federal income tax discussed above if the Non-U.S. Holder provides to the applicable withholding agent a properly executed IRS Form W-8ECI (or other applicable form) in accordance with the applicable certification and disclosure requirements. A Non-U.S. Holder that is treated as a corporation for U.S. federal income tax purposes may also be subject to a “branch profits” tax at a 30% rate (or a lower rate if the Non-U.S. Holder is eligible for a lower rate under an applicable income tax treaty) on the Non-U.S. Holder’s earnings and profits (attributable to dividends on our common stock or otherwise) that are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States, subject to certain adjustments.

 

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The certifications described above must be provided to the applicable withholding agent prior to the payment of dividends and must be updated periodically. A Non-U.S. Holder may obtain a refund or credit of any excess amounts withheld by timely filing an appropriate claim for a refund with the IRS. Non-U.S. Holders should consult their own tax advisors regarding their eligibility for benefits under a relevant income tax treaty and the manner of claiming such benefits.

 

The foregoing discussion is subject to the discussion below under “—Backup Withholding and Information Reporting” and “—FATCA Withholding”.

 

Sales or Other Dispositions of Our Common Stock

 

A Non-U.S. Holder generally will not be subject to U.S. federal income tax (including withholding thereof) on any gain recognized on sales or other dispositions of our common stock unless:

 

the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, such gain is attributable to a permanent establishment or fixed base maintained by the Non-U.S. Holder in the United States); in this case, the gain will be subject to U.S. federal income tax on a net income basis at the regular graduated rates and generally in the manner applicable to United States persons (unless an applicable income tax treaty provides otherwise) and, if the Non-U.S. Holder is treated as a corporation for U.S. federal income tax purposes, the “branch profits tax” described above may also apply; the Non-U.S. Holder is a nonresident alien individual who is present in the United States for more than 182 days in the taxable year of the disposition and meets certain other requirements; in this case, except as otherwise provided by an applicable income tax treaty, the gain, which may be offset by certain U.S. source capital losses, generally will be subject to a flat 30% U.S. federal income tax, even though the Non-U.S. Holder is not considered a resident of the United States under the Code; or we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of (i) the five-year period ending on the date of disposition and (ii) the period that the Non-U.S. Holder held our common stock.

 

Generally, a corporation is a “United States real property holding corporation” if the fair market value of its “United States real property interests” equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. We believe that we are not currently, and we do not anticipate becoming in the future, a United States real property holding corporation. However, because the determination of whether we are a United States real property holding corporation is made from time to time and depends on the relative fair market values of our assets, there can be no assurance in this regard. If we were a United States real property holding corporation, the tax relating to disposition of stock in a United States real property holding corporation generally will not apply to a Non-U.S. Holder whose holdings, direct, indirect, and constructive, constituted 5% or less of our common stock at all times during the applicable period, provided that our common stock is “regularly traded on an established securities market” (as provided in applicable U.S. Treasury regulations) at any time during the calendar year in which the disposition occurs. However, no assurance can be provided that our common stock will be regularly traded on an established securities market for purposes of the rules described above. Non-U.S. Holders should consult their own tax advisors regarding the possible adverse U.S. federal income tax consequences to them if we are, or were to become, a United States real property holding corporation.

 

The foregoing discussion is subject to the discussion below under “—Backup Withholding and Information Reporting” and “—FATCA Withholding”.

 

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Federal Estate Tax

 

Our common stock that is owned (or treated as owned) by an individual who is not a U.S. citizen or resident of the United States (as specially defined for U.S. federal estate tax purposes) at the time of death will be included in the individual’s gross estate for U.S. federal estate tax purposes, unless an applicable estate tax or other treaty provides otherwise and, therefore, may be subject to U.S. federal estate tax.

 

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Backup Withholding and Information Reporting

 

Backup withholding (currently at a rate of 28%) will not apply to payments of dividends on our common stock to a Non-U.S. Holder if the Non-U.S. Holder provides to the applicable withholding agent a properly executed IRS Form W-8BEN or W-8BEN-E (or other applicable form) certifying under penalties of perjury that the Non-U.S. Holder is not a United States person, or otherwise qualifies for an exemption. However, the applicable withholding agent generally will be required to report to the IRS and to such Non-U.S. Holder payments of dividends on our common stock and the amount of U.S. federal income tax, if any, withheld with respect to those payments. Copies of the information returns reporting such dividends and any withholding may also be made available to the tax authorities in the country in which the Non-U.S. Holder resides under the provisions of a treaty or agreement.

 

The gross proceeds from sales or other dispositions of our common stock may be subject, in certain circumstances discussed below, to U.S. backup withholding and information reporting. If a Non-U.S. Holder sells or otherwise disposes of our common stock outside the United States through a non-U.S. office of a non-U.S. broker and the sale or disposition proceeds are paid to the Non-U.S. Holder outside the United States, then the U.S. backup withholding and information reporting requirements generally will not apply to that payment. However, U.S. information reporting, but not U.S. backup withholding, will apply to a payment of sale or disposition proceeds, even if that payment is made outside the United States, if a Non-U.S. Holder sells our common stock through a non-U.S. office of a broker that is a United States person or has certain enumerated connections with the United States, unless the broker has documentary evidence in its files that the Non-U.S. Holder is not a United States person and certain other conditions are met or the Non-U.S. Holder otherwise qualifies for an exemption.

 

If a Non-U.S. Holder receives payments of the proceeds of sales or other dispositions of our common stock to or through a U.S. office of a broker, the payment will be subject to both U.S. backup withholding and information reporting unless the Non-U.S. Holder provides to the broker a properly executed IRS Form W-8BEN or W-8BEN-E (or other applicable form) certifying under penalties of perjury that the Non-U.S. Holder is not a United States person, or the Non-U.S. Holder otherwise qualifies for an exemption.

 

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be credited against the Non-U.S. Holder’s U.S. federal income tax liability (which may result in the Non-U.S. Holder being entitled to a refund), provided that the required information is timely furnished to the IRS.

 

FATCA Withholding

 

The Foreign Account Tax Compliance Act and related Treasury guidance (commonly referred to as “FATCA”) impose U.S. federal withholding tax at a rate of 30% on payments to certain foreign entities of (i) U.S.-source dividends (including dividends paid on our common stock) and (ii) after December 31, 2018, the gross proceeds from the sale or other disposition of property that produces U.S.-source dividends (including sales or other dispositions of our common stock). This withholding tax applies to a foreign entity, whether acting as a beneficial owner or an intermediary, unless such foreign entity complies with (i) certain information reporting requirements regarding its U.S. account holders and its U.S. owners and (ii) certain withholding obligations regarding certain payments to its account holders and certain other persons, or, in each case, such foreign entity otherwise qualifies for an exemption. Accordingly, the entity through which a Non-U.S. Holder holds its common stock will affect the determination of whether such withholding is required. A payee that is a foreign financial institution located in a jurisdiction that has an intergovernmental agreement with the United States governing FATCA may be subject to different rules. Non-U.S. Holders are encouraged to consult their tax advisors regarding FATCA.

 

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LEGAL MATTERS

 

The validity of the common stock offered by this prospectus will be passed upon for us by Hallett & Perrin, Dallas, Texas.

 

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EXPERTS

 

The consolidated financial statements of our company included in this prospectus and in the registration statement have been audited byso included in reliance on the reports of M&K CPAS,CPAs, PLLC, an independent registered public accounting firm, related to the extentconsolidated financial statements as of April 30, 2021 and 2020 and for the periods set forth in their report appearing elsewhere herein and in the registration statement, and are included in relianceyears then ended, given on such report, given the authority of said firm as an expertexperts in auditing and accounting.

 

WHERE YOU CAN FIND MORE INFORMATION

 

We filed with the SEC a registration statement under the Securities Act for the common stock in this offering. This prospectus does not contain all of the information in the registration statement and the exhibits and schedule that were filed with the registration statement. For further information with respect to us and our common stock, we refer you to the registration statement and the exhibits and schedule that were filed with the registration statement. Statements contained in this prospectus about the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and we refer you to the full text of the contract or other document filed as an exhibit to the registration statement. A copy of theThe registration statement, andincluding the exhibits and schedules, that were filed with the registration statement may be inspected without charge, are available at the Public Reference Room maintained by the SECSEC’s website at 100 F Street, N.E. Washington, DC 20549, and copies of all or any part of the registration statement may be obtained from the SEC upon payment of the prescribed fee. Information regarding the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC. The address of the website is http://www.sec.gov.

 

We file periodic reports underare subject to the reporting requirements of the Exchange Act includingand file annual, quarterly and specialcurrent reports, and other information with the SEC. These periodic reports, proxy statements and other information are available for inspection and copying at the regional offices, public reference facilities andSEC’s website. We also maintain a website at www.mmexresources.com, through which you can access our SEC filings. The information set forth on our website is not part of this prospectus supplement or the SEC referred to above.accompanying prospectus.

 

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MMEX RESOURCES CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

Audited Consolidated Financial Statements:Statements:

 

Report of Independent Registered Public Accounting Firm

 

F-2F-1

 

Consolidated Balance Sheets as of April 30, 20172021 and 20162020

 

F-3F-2

 

Consolidated Statements of Operations for the Years Ended April 30, 20172021 and 20162020

F-3

Consolidated Statements of Stockholders’ Deficit for the Years Ended April 30, 2021 and 2020

 

F-4

 

Consolidated Statements of Stockholders’ Deficit and Members’ Interests for the Years Ended April 30, 2017 and 2016

 

F-5

Consolidated Statements of Cash Flows for the Years Ended April 30, 20172021 and 20162020

 

F-7F-6

 

Notes to Consolidated Financial Statements

 

F-8F-7

Unaudited Condensed Consolidated Financial Statements:

 

Unaudited Condensed Consolidated Financial Statements:

 

Condensed Consolidated Balance Sheets as of October 31, 20172021 and April 30, 2017.2021.

F-23

F-30

 

Condensed Consolidated Statements of Operations for the Three and Six Months Ended October 31, 20172021 and 20162020

F-24

F-31

 

Condensed Consolidated Statements of Stockholders’ Deficit and Members’ Interests for the Three and Six Months Ended October 31, 20172020

F-32

F-25

Condensed Consolidated Statements of Stockholders’ Deficit for the Three and Six Months Ended October 31, 2021

F-33

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended October 31, 20172021 and 20162020

F-26

F-34

 

Notes to Condensed Consolidated Financial Statements

F-35

F-27

F-1
 
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders

Stockholders of 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, 20172021 and 2016,2020, and the related consolidated statements of operations, stockholders'stockholders’ deficit, and members’ interests, and cash flows for each of the years inthen ended, and the two-year period ended April 30, 2017. MMEX Resources Corporation’s management is responsible for these consolidated financial statements. Our responsibility isrelated notes (collectively referred to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with standards ofas the Public Company Accounting Oversight Board (United States)"financial statements"). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of MMEX Resources Corporationthe Company as of April 30, 20172021 and 2016,2020, and the results of its operations and its cash flows for each of the years in the two-year periodthen ended April 30, 2017, in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Companycompany suffered a net loss from operationsfor the year ended April 30, 2021 and hashad a networking capital deficiency,deficit and a stockholders’ deficit as of April 30, 2021, which raises substantial doubt about its ability to continue as a going concern. Management'sManagement’s plans regarding thosethese 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, TexasTX

July 28, 2017

July 29, 2021

 

F-2
 
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MMEX RESOURCES CORPORATION

Consolidated Balance Sheets

 

April 30,

2017

 

April 30,

2016

 

 

April 30,

 

 

 

 

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

Cash

 

$54,513

 

 

$1,030

 

 

$330,449

 

$66,830

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

37,893

 

 

 

23,145

 

Total current assets

 

54,513

 

1,030

 

 

368,342

 

89,975

 

 

 

 

 

 

Property and equipment, net

 

 

-

 

 

 

386

 

 

472,169

 

507,044

 

Deposit

 

 

900

 

 

 

900

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$54,513

 

 

$1,416

 

 

$841,411

 

 

$597,919

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$694,664

 

$651,188

 

 

$802,640

 

$798,945

 

Accrued expenses

 

912,870

 

984,387

 

 

807,349

 

551,080

 

Accrued expenses – related party

 

70,670

 

64,420

 

Notes payable, currently in default

 

375,001

 

375,001

 

Convertible notes payable, net of discount of $0 and $0 at April 30, 2017 and 2016, respectively, currently in default

 

195,000

 

195,000

 

Convertible note payable, net of discount of $136,284 and $0 at April 30, 2017 and 2016, respectively

 

8,716

 

-

 

Convertible preferred stock, currently in default

 

137,500

 

137,500

 

Accounts payable and accrued expenses – related parties

 

272,834

 

170,881

 

Notes payable

 

775,000

 

0

 

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

 

0

 

Derivative liabilities

 

 

6,610,001

 

 

 

395,619

 

 

 

3,010,042

 

 

 

2,607,433

 

Total current liabilities

 

6,611,452

 

6,322,880

 

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

 

9,004,422

 

 

 

2,803,115

 

Long-term liabilities

 

 

0

 

 

 

0

 

Total liabilities

 

 

6,611,452

 

 

 

6,322,880

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ deficit:

 

 

 

 

 

 

 

 

 

 

Common stock; $0.001 par value:

 

Class A; 3,000,000,000 shares authorized, 987,616,168 and 180,432,013 shares issued and outstanding at April 30, 2017 and 2016, respectively

 

987,617

 

180,434

 

Class B; 2,000,000,000 shares authorized, 1,500,000,000 and 0 shares issued and outstanding at April 30, 2017 and 2016, respectively

 

1,500,000

 

-

 

Common stock payable

 

307,978

 

3,395,483

 

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

 

25,551,533

 

24,154,130

 

 

62,201,528

 

37,721,639

 

Non-controlling interest

 

(378,443)

 

(376,619)

 

9,871

 

9,871

 

Accumulated (deficit)

 

 

(36,918,594)

 

 

(30,155,127)

 

 

(67,984,693)

 

 

(43,457,807)

 

 

 

 

 

Total stockholders’ deficit

 

 

(8,949,909)

 

 

(2,801,699)

 

 

(5,770,041)

 

 

(5,724,961)

 

 

 

 

 

Total liabilities and stockholders’ deficit

 

$54,513

 

 

$1,416

 

 

$841,411

 

 

$597,919

 

 

See accompanying notes to consolidated financial statements.

 

F-3
 
F-2

Table of Contents

  

MMEX RESOURCES CORPORATION

Consolidated Statements of Operations

 

 

Years Ended April 30,

 

 

Years Ended April 30,

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$-

 

 

$-

 

 

$0

 

 

$0

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

211,160

 

231,292

 

 

867,471

 

904,306

 

Refinery start-up costs

 

372,560

 

-

 

 

179,133

 

214,439

 

Depreciation and amortization

 

 

386

 

 

 

1,947

 

 

 

34,875

 

 

 

34,663

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

584,106

 

 

 

233,239

 

 

 

1,081,479

 

 

 

1,153,408

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(584,106)

 

 

(233,239)

 

 

(1,081,479)

 

 

(1,153,408)

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(283,261)

 

(529,474)

 

(1,143,495)

 

(1,846,603)

Loss on derivative liabilities

 

(6,105,727)

 

(395,619)

 

(22,906,922)

 

(1,402,233)

Gain (loss) on extinguishment of debt

 

 

207,803

 

 

 

(1,365,521)

Gain on extinguishment of liabilities

 

605,010

 

8,555

 

Loss on conversion of debt

 

 

0

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

Total other (expense)

 

 

(6,181,185)

 

 

(2,290,614)

Total other income (expense)

 

 

(23,445,407)

 

 

(3,240,281)

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

(6,765,291)

 

(2,523,853)

 

(24,526,886)

 

(4,393,689)

Provision for income taxes

 

 

-

 

 

 

-

 

 

 

0

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

(6,765,291)

 

(2,523,853)

 

$(24,526,886)

 

$(4,393,689)

 

 

 

 

 

 

 

 

 

 

Non-controlling interest in loss of consolidated subsidiaries

 

 

1,824

 

 

 

1,838

 

 

 

 

 

 

Net loss attributable to the Company

 

$(6,763,467)

 

$(2,522,015)

Net loss per common share – basic and diluted

 

$(14.23)

 

$(6.57)

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding – basic and diluted

 

 

568,407,531

 

 

 

115,253,619

 

 

 

1,723,476

 

 

 

669,210

 

 

 

 

 

 

Net loss per common share – basic and diluted

 

$(0.01)

 

$(0.02)

 

See accompanying notes to consolidated financial statements.

 

F-4
 
F-3

Table of Contents

 

MMEX RESOURCES CORPORATION

Consolidated Statements of Stockholders’ Deficit and Members’ Interests

Years Ended April 30, 20172021 and 20162020

 

 

 

Class A Common Stock

 

 

Class B Common Stock

 

 

Common Stock

 

 

Additional Paid-in

 

 

Non-Controlling

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Payable

 

 

Capital

 

 

Interest

 

 

Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, April 30, 2015

 

 

57,188,313

 

 

$57,189

 

 

 

-

 

 

$-

 

 

$90,000

 

 

$20,215,398

 

 

$(374,781)

 

$(27,633,112)

 

$(7,645,306)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustment to shares

 

 

(40,000)

 

 

(39)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

39

 

 

 

-

 

 

 

-

 

 

 

-

 

Related party debt forgiven and contributed to capital

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,212,721

 

 

 

-

 

 

 

-

 

 

 

2,212,721

 

Shares issued to related party for conversion of preferred stock and accrued dividends

 

 

123,283,700

 

 

 

123,284

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,725,972

 

 

 

-

 

 

 

-

 

 

 

1,849,256

 

Conversion of related party convertible notes payable to common stock payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,925,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,925,000

 

Cash for common stock payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

75,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

75,000

 

Services for common stock payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

13,815

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

13,815

 

Conversion of accrued expenses to common stock payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

291,668

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

291,668

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,838)

 

 

(2,522,015)

 

 

(2,523,853)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, April 30, 2016

 

 

180,432,013

 

 

$180,434

 

 

 

-

 

 

$-

 

 

$3,395,483

 

 

$24,154,130

 

 

$(376,619)

 

$(30,155,127)

 

$(2,801,699)

 

 

Class A Common Stock

 

 

Series A Preferred Stock

 

 

Additional
Paid-in

 

 

Non-Controlling

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Interest

 

 

Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, April 30, 2019

 

 

6,818

 

 

$6

 

 

 

-

 

 

$0

 

 

$35,690,566

 

 

$9,871

 

 

$(39,064,118)

 

$(3,363,675)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares issued for: Services

 

 

3

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

84

 

 

 

0

 

 

 

0

 

 

 

84

 

Accrued expenses

 

 

16,991

 

 

 

17

 

 

 

-

 

 

 

0

 

 

 

28,370

 

 

 

0

 

 

 

0

 

 

 

28,387

 

Conversion of convertible notes payable

 

 

667,835

 

 

 

668

 

 

 

-

 

 

 

0

 

 

 

811,008

 

 

 

0

 

 

 

0

 

 

 

811,676

 

Conversion of convertible notes payable - related parties

 

 

643,636

 

 

 

644

 

 

 

-

 

 

 

0

 

 

 

354,816

 

 

 

0

 

 

 

0

 

 

 

355,460

 

Preferred shares issued for services to related party

 

 

-

 

 

 

0

 

 

 

1,000

 

 

 

1

 

 

 

23,899

 

 

 

0

 

 

 

0

 

 

 

23,900

 

Settlement of derivative liabilities

 

 

-

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

812,896

 

 

 

0

 

 

 

0

 

 

 

812,896

 

Net loss

 

 

-

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(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-5
 
F-4

Table of Contents

 

MMEX RESOURCES CORPORATION

Consolidated Statements of Stockholders’ Deficit and Members’ Interests

Years Ended April 30, 20172021 and 20162020 (continued)

 

 

 

Class A Common Stock

 

 

Class B Common Stock

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Non-Controlling

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Payable

 

 

Capital

 

 

Interest

 

 

Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, April 30, 2016

 

 

180,432,013

 

 

$180,434

 

 

 

-

 

 

$-

 

 

$3,395,483

 

 

$24,154,130

 

 

$(376,619)

 

$(30,155,127)

 

$(2,801,699)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Related party debt forgiven and contributed to capital

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(90,000)

 

 

90,000

 

 

 

-

 

 

 

-

 

 

 

-

 

Shares issued for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

 

39,394,400

 

 

 

39,395

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

36,974

 

 

 

-

 

 

 

-

 

 

 

76,369

 

Common stock payable

 

 

236,784,319

 

 

 

236,783

 

 

 

-

 

 

 

-

 

 

 

(3,064,332)

 

 

2,827,549

 

 

 

-

 

 

 

-

 

 

 

-

 

Conversion of convertible note payable and derivative liabilities

 

 

489,000,000

 

 

 

489,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(304,091)

 

 

-

 

 

 

-

 

 

 

184,909

 

Accrued expenses

 

 

2,082,190

 

 

 

2,082

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,666)

 

 

-

 

 

 

-

 

 

 

416

 

Accounts payable

 

 

28,625,000

 

 

 

28,625

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(22,900)

 

 

-

 

 

 

-

 

 

 

5,725

 

Services

 

 

4,298,246

 

 

 

4,298

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

94,237

 

 

 

-

 

 

 

-

 

 

 

98,535

 

Interest expense

 

 

7,000,000

 

 

 

7,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

27,300

 

 

 

-

 

 

 

-

 

 

 

34,300

 

Shares issued to related party for refinery project rights

 

 

-

 

 

 

-

 

 

 

1,500,000,000

 

 

 

1,500,000

 

 

 

-

 

 

 

(1,350,000)

 

 

-

 

 

 

-

 

 

 

150,000

 

Cash for common stock payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

49,741

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

49,741

 

Services for common stock payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

17,086

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

17,086

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,824)

 

 

(6,763,467)

 

 

(6,765,291)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, April 30, 2017

 

 

987,616,168

 

 

$987,617

 

 

 

1,500,000,000

 

 

$1,500,000

 

 

$307,978

 

 

$25,551,533

 

 

$(378,443)

 

$(36,918,594)

 

$(8,949,909)

 

 

Class A Common Stock

 

 

Series A Preferred Stock

 

 


Additional
Paid-in

 

 


Non-Controlling

 

 

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

 

 

 

-

 

 

 

0

 

 

 

33,998

 

 

 

0

 

 

 

0

 

 

 

34,000

 

Conversion of convertible notes payable

 

 

1,525,583

 

 

 

1,526

 

 

 

-

 

 

 

0

 

 

 

1,930,839

 

 

 

0

 

 

 

0

 

 

 

1,932,365

 

Conversion of convertible notes payable - related parties

 

 

388,775

 

 

 

389

 

 

 

-

 

 

 

0

 

 

 

3,888

 

 

 

0

 

 

 

0

 

 

 

4,277

 

Settlement of derivative liabilities

 

 

-

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

22,511,164

 

 

 

0

 

 

 

0

 

 

 

22,511,164

 

Net loss

 

 

-

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(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-6
 
F-5

Table of Contents

MMEX RESOURCES CORPORATION

Consolidated Statements of Cash Flows

 

 

 

Years Ended April 30,

 

 

 

2017

 

 

2016

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss attributable to the Company

 

$(6,763,467)

 

$(2,522,015)

Non-controlling interest in net loss of consolidated subsidiaries

 

 

(1,824)

 

 

(1,838)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

386

 

 

 

1,947

 

Issuance of Class B common stock for refinery start-up costs

 

 

150,000

 

 

 

-

 

Stock-based compensation

 

 

149,921

 

 

 

13,815

 

Amortization of debt discount

 

 

93,498

 

 

 

375,617

 

Loss on derivative liabilities

 

 

6,105,727

 

 

 

395,619

 

(Gain) loss on extinguishment of debt

 

 

(207,803)

 

 

1,365,521

 

Decrease in deposits

 

 

-

 

 

 

10,000

 

Amortization of deferred loan costs

 

 

-

 

 

 

8,822

 

Increase (decrease) in:

 

 

 

 

 

 

 

 

Accounts payable

 

 

49,201

 

 

 

(12,985)

Accrued expenses

 

 

142,952

 

 

 

291,386

 

Net cash used in operating activities

 

 

(281,409)

 

 

(74,111)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from common stock payable

 

 

49,741

 

 

 

75,000

 

Proceeds from the issuance of common stock

 

 

76,369

 

 

 

-

 

Proceeds from convertible notes payable, net

 

 

208,782

 

 

 

-

 

Net cash provided by financing activities

 

 

334,892

 

 

 

75,000

 

 

 

 

 

 

 

 

 

 

Net increase in cash

 

 

53,483

 

 

 

889

 

Cash, beginning of year

 

 

1,030

 

 

 

141

 

Cash, end of year

 

$54,513

 

 

$1,030

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures:

 

 

 

 

 

 

 

 

Interest paid

 

$-

 

 

$-

 

Income taxes paid

 

 

-

 

 

 

-

 

Common stock payable contributed to capital

 

 

90,000

 

 

 

-

 

Common shares issued for common stock payable

 

 

(3,064,332)

 

 

-

 

Common shares issued for conversion of convertible note payable and derivative liabilities

 

 

(184,909)

 

 

-

 

Common shares issued for accounts payable

 

 

(5,725)

 

 

-

 

Common shares issued for accrued expenses

 

 

(416)

 

 

-

 

Derivative liability for debt discount

 

 

208,782

 

 

 

-

 

Adjustment to common stock and additional paid-in capital

 

 

-

 

 

 

(39)

Accrued expenses contributed to capital

 

 

-

 

 

 

2,340,844

 

Common shares issued for preferred stock and accrued dividends

 

 

-

 

 

 

(1,410,685)

Notes payable converted to common stock payable

 

 

-

 

 

 

1,950,000

 

Notes payable – related party contributed to capital

 

 

-

 

 

 

149,253

 

Accrued expenses converted to common stock payable

 

 

-

 

 

 

14,292

 

MMEX RESOURCES CORPORATION

Consolidated Statements of Cash Flows

 

 

Years Ended April 30,

 

 

 

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

 

 

0

 

 

 

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

 

 

0

 

 

 

(10,540)

Net cash used in investing activities

 

 

0

 

 

 

(10,540)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from notes payable

 

 

775,000

 

 

 

0

 

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

 

 

 

0

 

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

 

 

0

 

 

 

0

 

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

 

 

0

 

 

 

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.

 

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MMEX RESOURCES CORPORATION

Notes to Consolidated Financial Statements

Years Ended April 30, 20172021 and 20162020

 

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.

 

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, 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 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
of Entity

 

State of
Incorporation

 


Relationship

 

 

 

 

 

MMEX Resources Corporation (“MMEX”)

 

-

 

Corporation

 

Nevada

 

Parent

MCC Merger, Inc.Pecos Refining & Transport, LLC (“MCCM”PRT”)

 

100%

100

Corporation

Delaware

Holding Subsidiary

Maple Carpenter Creek Holdings, Inc. (“MCCH”)

100%

Corporation

Delaware

Subsidiary

Maple Carpenter Creek, LLC (“MCC”)

80%%

 

LLC

 

NevadaTexas

 

Subsidiary

Carpenter Creek, LLC (“CC”)

 

95%

LLC

Delaware

Subsidiary

Armadillo Holdings Group Corp. (“AHGC”)

 

100%

100

%

 

Corporation

 

British Virgin Isles

 

Subsidiary

Armadillo Mining Corp. (“AMC”)

 

98.6%

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 the Company.

On September 1, 2016, the Company entered into a stock assignment agreement with LatAm Services, LLC (“LatAm”), a related party, pursuant to which the Company assigned MCCH to LatAm. The accounts of MCCH are included in the consolidated financial statements due to the common ownership. With the assignment of MMCH to LatAm, the Company exited the coal industry to focus on energy related products.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.

 

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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.

 

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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 of the related asset as follows:

Furniture and fixtures

5 years

Machinery and equipment

5 years

Software and hardware

5 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.

All of the Company’s property and equipment was fully depreciated at April 30, 2017.

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.

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:

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Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

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

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, 2017

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liability

 

$6,610,001

 

 

$-

 

 

$-

 

 

$6,610,001

 

April 30, 2016

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liability

 

$395,619

 

 

$-

 

 

$-

 

 

$395,619

 

Refinery startup costs

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, are recorded as startup costs and expensed as incurred.

Advertising and promotion

All costs associated with advertising and promoting products are expensed as incurred. No expenses were incurred for the years ended April 30, 2017 and 2016, 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.

Basic and diluted 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 years ended April 30, 2017 and 2016, 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 share is the same as diluted net loss per share.

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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 fiscal years ended April 30, 2017 and 2016, the Company did not record any share 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.

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.

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 January 2017, the FASB issued Accounting Standards Update (“ASU”) No. 2017-4, “Intangibles – Goodwill and Other (Topic 350): “Simplifying the Test for Goodwill Impairment.” This update simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Instead, under the amendments in this update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. An entity should apply the amendments in this update on a prospective basis. An entity is required to disclose the nature of and reason for the change in accounting principle upon transition. That disclosure should be provided in the first annual period and in the interim period within the first annual period when the entity initially adopts the amendments in this update. A public business entity that is an SEC filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company is currently unable to determine the impact on its consolidated financial statements of the adoption of this new accounting pronouncement.

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In January 2017, the FASB issued ASU No. 2017-1, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” The amendments in this update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments of this ASU are effective for public business entities for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. The amendments in this Update are to be applied prospectively on or after the effective date. The Company is currently unable to determine the impact on its consolidated financial statements of the adoption of this new accounting pronouncement.

In October 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-17, “Consolidation (Topic 810): Interests Held Through Related Parties That are Under Common Control.” This update amends the consolidation guidance on how a reporting entity that is the single decision maker of a variable interest entity (“VIE”) should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. The primary beneficiary of a VIE is the reporting entity that has a controlling financial interest in a VIE and, therefore, consolidates the VIE. A reporting entity has an indirect interest in a VIE if it has a direct interest in a related party that, in turn, has a direct interest in the VIE. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company is currently unable to determine the impact on its consolidated financial statements of the adoption of this new accounting pronouncement.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” This ASU addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently unable to determine the impact on its consolidated financial statements of the adoption of this new accounting pronouncement.

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 $36,918,594 and a total stockholders’ deficit of $8,949,909 at April 30, 2017, and have reported negative cash flows from operations since inception. In addition, we do not currently have the cash resources to meet our operating commitments for the next twelve months, and we expect to have ongoing requirements for capital investment 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 markets and the competitive environment in which we operate.

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.

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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, successfully complete our proposed refinery project 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 to continue as a going concern for a reasonable period of time.

Our consolidated financial statements 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

Accrued expenses (see Note 6) to related parties totaled $70,670 and $64,420 as of April 30, 2017 and 2016, respectively. Included in accrued expenses to related parties as of April 30, 2017 and 2016 is a balance payable of $31,633 to Tydus Richards, the former Chairman of our board of directors and shareholder.

See Note 6 regarding the Company’s acquisition in March 2017 of the right, title and interest in a refinery project from a related party.

On May 18, 2015, Jack W. Hanks, Bruce N. Lemons and Nabil Katabi, the three directors of the Company and certain companies under their control, entered an agreement to forgive the following indebtedness from the Company totaling $2,212,721 and contribute the amounts to capital.

 

 

Accounts

Payable

 

 

Accounts Payable – Related Party

 

 

Accrued

Expenses

 

 

Notes

Payable

 

Hanks:

 

 

 

 

 

 

 

 

 

 

 

 

Accrued compensation

 

$-

 

 

$-

 

 

$883,584

 

 

$-

 

Accounts payable

 

 

-

 

 

 

8,033

 

 

 

-

 

 

 

-

 

Notes payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

39,337

 

Accrued interest payable

 

 

-

 

 

 

-

 

 

 

5,901

 

 

 

-

 

Lemons:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrued consulting fees

 

 

-

 

 

 

-

 

 

 

791,315

 

 

 

-

 

Notes payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

63,530

 

Accrued interest payable

 

 

-

 

 

 

-

 

 

 

9,320

 

 

 

-

 

Katabi:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

5,536

 

 

 

-

 

 

 

-

 

 

 

-

 

Accrued consulting fees

 

 

-

 

 

 

-

 

 

 

375,000

 

 

 

-

 

Notes payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

27,100

 

Accrued interest payable

 

 

-

 

 

 

-

 

 

 

4,065

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$5,536

 

 

$8,033

 

 

$2,069,185

 

 

$129,967

 

On May 18, 2015, Maple Structure Holdings, LLC (“Maple Structure Holdings”), a related party controlled by Jack W. Hanks, President and CEO of the Company, converted 1,000,000 preferred shares of the Company (the “Preferred Shares”) previously transferred to Maple Structure Holdings from an unrelated party. In November 2015, the Company issued 123,283,700 shares of its common stock to Maple Structure Holdings for the conversion of the Preferred Shares with a book value of $1,000,000 and accrued dividends of $410,685 into 123,283,700 common shares of the Company at $0.01 per share. The common shares issued were valued at $1,849,256, or $0.015 per share, the market price on the date of the conversion, resulting in a loss on extinguishment of debt of $438,571.

On May 18, 2015, The Maple Gas Corporation, a related party controlled by Jack W. Hanks, converted convertible notes payable with a book value of $1,950,000 into 194,999,999 common shares of the Company at $0.01 per share. The common shares issued were valued at $0.015 per share, the market price on the date of the conversion, resulting in a loss on extinguishment of debt of $975,000. The common shares were issued in May 2016, and common stock payable included $2,925,000 at April 30, 2016 related to this transaction. The shares were issued in May 2016.

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Table of Contents

NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at April 30:

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

Computer software and hardware

 

$25,023

 

 

$25,023

 

Less accumulated depreciation and amortization

 

 

(25,023)

 

 

(24,637)

 

 

 

 

 

 

 

 

 

 

 

$-

 

 

$386

 

Depreciation and amortization expense totaled $386 and $1,947 for the years ended April 30, 2017 and 2016, 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 7,000,000,000 Class B common shares (the “Purchased Shares”).

The Refinery Transaction provided for the Company to issue the Purchased Shares in two tranches, of which the First Tranche of 1,500,000,000 shares was issued on March 4, 2017. The Second Tranche of 5,500,000,000 shares was to be issued once the Company’s Articles of Incorporation were amended to increase the number of authorized shares of common stock. In connection with the March 2017 amendment to the Company’s Articles of Incorporation discussed in Note 12, Maple agreed to waive its right to receive the second tranche of 5,500,000,000 shares of Class B common stock. 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 April 30:

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

Accrued payroll

 

$30,090

 

 

$240,309

 

Accrued consulting

 

 

75,633

 

 

 

75,633

 

Accrued interest

 

 

815,276

 

 

 

670,324

 

Other

 

 

62,541

 

 

 

62,541

 

 

 

 

 

 

 

 

 

 

 

 

$983,540

 

 

$1,048,807

 

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NOTE 8 – NOTES PAYABLE

Notes payable, currently in default, consisted of the following at April 30:

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

Note payable to an unrelated party, maturing July 15, 2010, with interest at 10%

 

$300,000

 

 

$300,000

 

Note payable to an unrelated party, maturing March 18, 2014, with interest at 10%

 

 

75,001

 

 

 

75,001

 

 

 

 

 

 

 

 

 

 

 

 

$375,001

 

 

$375,001

 

Accrued interest payable on notes payable, currently in default, totaled $273,870 and $236,370 at April 30, 2017 and 2016, respectively.

Convertible notes payable, currently in default, consist of the following at April 30:

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

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

 

 

$50,000

 

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

 

 

25,000

 

 

 

25,000

 

Note payable to an unrelated party, maturing March 1, 2013, with interest at 1.87% per month, secured with 900,000 common shares of the Company owned by the President and CEO of the Company, convertible into common shares of the Company at $0.20 per share

 

 

120,000

 

 

 

120,000

 

 

 

 

 

 

 

 

 

 

Total

 

 

195,000

 

 

 

195,000

 

 

 

 

 

 

 

 

 

 

Less discount

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Net

 

$195,000

 

 

$195,000

 

On January 2, 2013, the Company closed a note purchase agreement with an accredited investor pursuant to which the Company sold a $120,000 note in a private placement transaction. The note was due and payable on March 1, 2013, is currently in default and carries a monthly interest rate of 1.87%. The note purchase agreement included the issuance of 300,000 shares of the Company’s common stock. The note is secured with 900,000 shares of the Company’s common stock owned by Jack W. Hanks, the Company’s President and CEO. The 300,000 shares were valued at $0.10 per share, the closing price of the Company’s common stock on January 2, 2013, and recorded as a $30,000 increase to debt discount and an increase to common stock payable. The Company allocated the proceeds from the issuance of the notes to the warrants when applicable and to the notes based on their estimated fair market values at the date of issuance using the Black-Scholes option pricing model. The debt discount resulting from interest and the value of warrants computed at the inception of the notes payable is amortized over the term of the notes as additional interest expense and was fully amortized as of April 30, 2014. This note and related accrued interest payable were extinguished subsequent to April 2017 through the issuance of Class A common shares of the Company (see Note 15).

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Accrued interest payable on convertible notes payable, currently in default, totaled $190,343 and $152,165 at April 30, 2017 and 2016, respectively.

The convertible note payable as of April 30, 2017 consists of a 12% convertible note payable to JSJ Investments, Inc. in the principal amount of $145,000 and dated April 19, 2017. The note was issued at a discount, resulting in the receipt of $138,000. The Company can redeem the note at any time prior to 90 days from the issuance date at a redemption price of 120% plus accrued interest. The redemption price thereafter increases to 125%, plus accrued interest, until the 120th day from issuance. The note is due and payable on the 180th day after issuance at a redemption price of 150% plus accrued interest. The holder of the note, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 40% discount from the lowest trading price during the 20 days prior to conversion. Prior to the 180th day after issuance, the conversion price cannot be less than a floor of $.03 per share of common stock. The Company has identified this conversion feature as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and considering the existence of a tainted equity environment. (See Note 11). The note also contains penalty provisions in the event of our default in repayment of the note (if not converted by the holder into shares of common stock) after 180 days from issuance. The convertible note payable is recorded net of discount of $136,284 at April 30, 2017. Accrued interest payable on the convertible note payable was $524 at April 30, 2017

The Company recorded interest expense on all indebtedness, which includes amortization of debt discount on certain debt described above and accrued dividends on convertible preferred stock (Note 9), totaled $262,393 and $529,474 for the years ended April 30, 2017 and 2016, respectively.

NOTE 9 – SETTLEMENT AGREEMENT AND STIPULATION

On October 28, 2016, the Company entered into a Settlement Agreement and Stipulation (the “Settlement Agreement”) with Rockwell Capital Partners, Inc. (“RCP”). Pursuant to the Settlement Agreement, as amended, RCP purchased certain outstanding payables between the Company and designated vendors totaling $84,782 (the “Payables” or “Claims”) and exchanged the portion of such Payables assigned for a Settlement Amount payable in common shares of the Company. 

In settlement of the Claims, the Company issued and delivered to RCP, in multiple tranches, shares of the Company’s common stock (“Common Stock”), subject to adjustment and ownership limitations as set forth in the Settlement Agreement, sufficient to satisfy the Claims amount at a 50% discount to market based on the market price during the valuation period as defined in the Settlement Agreement. We identified this conversion feature as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and considering the existence of a tainted equity environment. (See Note 11). The Company also issued 7,000,000 shares of Common Stock as a settlement fee on October 31, 2016.

On October 28, 2016, a circuit court in Florida issued an order confirming the fairness of the terms of the Settlement Agreement within the meaning of exemption from registration provided by Section 3(a) (10) of the Securities Act of 1933.

The Company’s creditors received a total of $84,782 pursuant to the Settlement Agreement, and the Company issued to RCP a total of 489,000,000 shares of the Company’s common stock in conversion of $84,782 note principal. The Settlement Agreement was terminated in March 2017.

NOTE 10 – CONVERTIBLE PREFERRED STOCK, CURRENTLY IN DEFAULT

On June 30, 2011, the Company issued 360,000 shares of Armadillo Mining Corporation Preferred Stock to five unrelated parties in exchange for an investment of $360,000. The Preferred Stock carry a 25% cumulative dividend and have a mandatory redemption feature on December 31, 2011 at a price of $1.25 per share. We identified this conversion feature as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and considering the existence of a tainted equity environment. (See Note 11). In addition, the Company issued 360,000 warrants to purchase shares of the Company’s common stock at an exercise price of $0.60 per share on or before three years from the repayment or conversion date.

On January 6, 2012, three unrelated parties converted their Preferred Stock and accrued dividends of $312,500 into 2,983,293 shares of the Company’s common stock at a price of $.10475 per share. As of April 30, 2017 and 2016, the remaining face value of the Preferred Stock was $137,500. Accrued dividends on the Preferred Stock, included in accrued interest payable, totaled $350,539 and $281,789 as of April 30, 2017 and 2016, respectively.

Subsequent to April 30, 2017, the Company entered into agreements with the holders of the convertible preferred stock to convert all outstanding preferred stock and accrued dividends into Class A common shares of the Company (see Note 15).

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NOTE 11 – DERIVATIVE LIABILITIES

In a series of subscription agreements, the Company issued warrants 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, 2017, the number of warrants or common shares to be issued under these agreements is indeterminate; therefore, we have concluded that the equity environment is tainted and all additional warrants 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, 2017 and 2016, we had the following activity in our derivative liabilities:

 

 

 

 

Convertible

 

 

Preferred

 

 

 

 

 

 

Warrants

 

 

Notes

 

 

Stock

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, April 30, 2015

 

$-

 

 

$-

 

 

$-

 

 

$-

 

Increases in derivative value due to new issuances

 

 

1,290,874

 

 

 

-

 

 

 

-

 

 

 

1,290,874

 

Change in fair value of derivative liabilities

 

 

(895,255)

 

 

-

 

 

 

-

 

 

 

(895,255)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, April 30, 2016

 

 

395,619

 

 

 

-

 

 

 

-

 

 

 

395,619

 

Increases in derivative value to debt discount

 

 

-

 

 

 

208,782

 

 

 

-

 

 

 

208,782

 

Decrease in derivative value due to note conversions

 

 

-

 

 

 

(100,127)

 

 

-

 

 

 

(100,127)

Change in fair value of derivative liabilities

 

 

5,904,051

 

 

 

196,020

 

 

 

5,656

 

 

 

6,105,727

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, April 30, 2017

 

$6,299,670

 

 

$304,675

 

 

$5,656

 

 

$6,610,001

 

Key inputs and assumptions used in valuing the Company’s derivative liabilities as of April 30, 2017 are as follows:

·Stock prices on all measurement dates were based on the fair market value

·Risk-free interest rates ranging from 1.45% – 2.13%

·The probability of future financing was estimated at 100%

·Computed volatility estimated at 104% – 110%

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.

NOTE 12 – STOCKHOLDERS’ DEFICIT

Authorized Shares

On March 31, 2017, the Company amended its articles of incorporation to provide for an increase in the authorized shares of common stock from 3,000,000,000 to 5,000,000,000 shares. In addition, the articles of incorporation were amended to provide for two classes of common shares: (i) Class A Shares, having one vote per share, and (ii) Class B Shares, with 10 votes per share. All of the currently outstanding shares of common stock were reclassified as Class A Shares, except that the common shares issued in the refinery transaction discussed in Note 6 were classified as Class B Shares. Other than the provisions of the voting rights, the two classes of shares of common stock will have equal terms and conditions.

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Table of Contents

Adjustment to Outstanding Shares

During the year ended April 30, 2016, the Company cancelled 40,000 outstanding shares of its common stock, resulting in a decrease to common stock and an increase to additional paid-in capital of $39.

Related Party Debt Contributed to Capital

On May 18, 2015, Jack W. Hanks, Bruce N. Lemons and Nabil Katabi, the then three directors of the Company and certain companies under their control, entered an agreement to forgive the indebtedness from the Company totaling $2,212,721 and contribute the amounts to capital. See Note 4.

Stock Issuances

During the year ended April 30, 2017, the Company issued a total of 807,184,154 shares of its Class A common stock: 39,394,400 shares for cash of $76,369; 236,784,319 shares for common stock payable of $3,064,332; 489,000,000 shares valued at $184,909 in conversion of a convertible note payable and reduction in related derivative liabilities; 2,082,190 shares valued at $416 for accrued expenses; 28,625,000 valued at $5,725 for accounts payable; 4,298,245 shares valued at $98,535 for services and 7,000,000 shares valued at $34,300 for interest expense.

During the year ended April 30, 2016, the Company issued 123,283,700 shares of its Class A common stock to a related party pursuant to the conversion of 1,000,000 Preferred Shares with a book value of $1,000,000 and accrued dividends of $410,685 into 123,283,700 common shares of the Company at $0.01 per share. The common shares issued were valued at $1,849,256, or $0.015 per share, the market price on the date of the conversion, resulting in a loss on extinguishment of debt of $438,571.

As further discussed in Note 6, on March 4, 2017, the Company entered into an agreement with Maple, a related party, to acquire all of Maple’s right, title and interest in plans (the “Rights”) to build a crude oil refinery in Pecos County, Texas. The Company issued 1,500,000,000 Class B common shares to Maple to acquire the rights. The shares were valued at $150,000 by an independent valuation firm, with the $150,000 expensed to refinery start-up costs.

Common Stock Payable

During the year ended April 30, 2016, common stock payable was increased from $90,000 at April 30, 2015 to $3,395,483 at April 30, 2016: $2,925,000 for conversion of related party notes payable of $1,950,000 and loss on extinguishment of debt of $975,000; $75,000 for cash and $13,815 for services in a private placement and $291,668 in conversion of accrued expenses.

During the year ended April 30, 2017, common stock payable decreased from $3,395,483 at April 30, 2016 to $307,978 at April 30, 2017: decreased $90,000 for common stock payable to related parties forgiven and contributed to paid-in capital; decreased $3,064,332 for 236,784,319 Class A common shares issued; increased $49,741 for cash and increased $17,086 for services. Subsequent to April 30, 2017, the balance in common stock payable of $291,668 was eliminated through the issuance of Class A common shares (see Note 15).

Stock Options

On March 7, 2012, the Company issued a total of 2,000,000 stock options exercisable at $0.35 per share for a period of ten years from the date of grant. The Company did not grant any stock options during the years ended April 30, 2017 and 2016.

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A summary of stock option activity during the years ended April 30, 2017 and 2016 is presented below:

 

 

Shares

 

 

Weighted Average

Exercise Price

 

 

Weighted Average

Remaining Contractual Life (Years)

 

 

 

 

 

 

 

 

 

 

 

Outstanding, April 30, 2015

 

 

2,000,000

 

 

$0.35

 

 

 

6.85

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 

-

 

 

 

-

 

 

 

 

 

Canceled / Expired

 

 

-

 

 

 

-

 

 

 

 

 

Exercised

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding, April 30, 2016

 

 

2,000,000

 

 

$0.35

 

 

 

5.85

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 

-

 

 

 

-

 

 

 

 

 

Canceled / Expired

 

 

-

 

 

 

-

 

 

 

 

 

Exercised

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding, April 30, 2017

 

 

2,000,000

 

 

$0.35

 

 

 

4.85

 

The Company uses the Black-Scholes option pricing model to estimate the grant date fair value of its stock options, which value is amortized to stock-based compensation expense over the vesting period of the options. No stock-based compensation expense was recorded during the years ended April 30, 2017 and 2016 related to stock option grants. There was no unrecognized stock option expense at April 30, 2017.

Subsequent to April 30, 2017, the holders of the options surrendered them to the Company and the options were cancelled (see Note 15).

Warrants

The Company has issued warrants to non-employees for debt discounts, equity financing or other stock-based compensation. These warrants generally vest upon grant and are valued using the Black-Scholes option pricing model or multinomial lattice models that value the warrants based on a probability weighted cash flow model using projections of the various potential outcomes.

During the year ended April 30, 2016, the Company issued warrants to purchase 10,000 shares of common stock to a related party lender.

In a series of subscription agreements, during the year ended April 30, 2016, we issued 3,289,192 warrants that contain certain anti-dilution provisions that we have 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 11).

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Table of Contents

A summary of warrant activity during the years ended April 30, 2017 and 2016 is presented below:

 

 

Shares

 

 

Weighted Average

Exercise Price

 

 

Weighted Average

Remaining Contractual Life (Years)

 

 

 

 

 

 

 

 

 

 

 

Outstanding, April 30, 2015

 

 

564,000

 

 

$0.25

 

 

 

0.50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 

11,512,170

 

 

$0.01

 

 

 

 

 

Canceled / Expired

 

 

(554,000)

 

$0.26

 

 

 

 

 

Exercised

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding and exercisable, April 30, 2016

 

 

11,522,170

 

 

$0.01

 

 

 

5.91

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 

383,739,041

 

 

$0.01

 

 

 

 

 

Canceled / Expired

 

 

-

 

 

 

 

 

 

 

 

 

Exercised

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding and exercisable, April 30, 2017

 

 

395,261,211

 

 

$0.01

 

 

 

4.90

 

The number of warrant shares granted during the year ended April 30, 2017 includes a total of 220,644,681 warrant shares issued to warrant holders pursuant to anti-dilution provisions.

Common Stock Reserved

At April 30, 2016, 395,261,211 shares of the Company’s common stock were reserved for issuance of outstanding warrants and 233,000,000 shares were reserved for the April 19, 2017 convertible promissory note.

NOTE 13 – COMMITMENTS AND CONTINGENCIES

Legal

There were no legal proceedings against the Company.

Operating Lease Commitments

The Company acquired the Bolzer Lease pursuant to a September 23, 2010 merger. Subsequently, notice of termination on this lease effective April 26, 2010 was provided by previous management. The Company has recorded an accrued expense as of April 30, 2017 and 2016 for the minimum lease payment of $62,541 for the January 2010 payment.

NOTE 14 – 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.

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No provision for income taxes has been recorded due to the net operating loss carryforwards totaling approximately $9,016,000 as of April 30, 2017 that will be offset against future taxable income. The available net operating loss carry forwards expire in various years through 2037. 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:

 

 

2017

 

 

2016

 

Deferred tax asset:

 

 

 

 

 

 

Net operating loss carryforward

 

$3,373,482

 

 

$3,155,766

 

Valuation allowance

 

 

(3,373,482)

 

 

(3,155,766)

 

 

 

 

 

 

 

 

 

Total

 

$-

 

 

$-

 

The components of income tax expense are as follows for the years ended April 30:

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

Change in net operating loss benefit

 

$

217,716

 

 

$114,935

 

Change in valuation allowance

 

 

(217,716

)

 

 

(114,935)

 

 

 

 

 

 

 

 

 

Total

 

$-

 

 

$-

 

NOTE 15 – SUBSEQUENT EVENTS

In accordance with ASC 855-10, all subsequent events have been reported through the filing date as set forth below.

Issuance of Class A Common Shares

Subsequent to April 30, 2017, we issued a total of 465,396,910 shares of Class A common stock: 62,846,918 shares in payment of common stock payable of $307,978; 8,000,000 shares for services valued at $136,000; 440,000 shares in settlement of accrued expenses of $44,000; 353,359,992 shares in the cashless exercise of warrants; 24,750,000 shares in settlement of preferred stock and accrued dividends payable totaling $428,707 and 16,000,000 shares in settlement of a convertible note payable and accrued interest payable totaling of $239,365.

Cashless Exercise of Warrants

In May 2017, the Company offered the holders of warrants to register the underlying Class A common shares in exchange for the warrant holders converting the warrants on a cashless, one-share for one-share basis. All but two warrant holders accepted the offer, and in May 2017, a total of 353,359,992 Class A common shares were issued to warrant holders in a cashless exercise.

Settlement of Debt

Effective June 19, 2017, the Company entered into agreements with the holders of outstanding convertible preferred stock (Note 10) pursuant to which $137,500 principal and $291,207 accrued dividends payable were extinguished through the issuance of a total of 24,750,000 shares of the Company’s Class A common stock.

Effective June 20, 2017, the Company entered into an agreement to extinguish a convertible note payable of $120,000 and $119,365 accrued interest payable through the issuance of 16,000,000 shares of the Company’s Class A common stock.

May 15, 2017 Convertible Redeemable Note

Effective May 15, 2017, we issued and delivered to Eagle Equities LLC an 8% convertible redeemable note in the principal amount of $115,000. The note was issued at a discount, resulting in our receipt of $105,000. We can redeem the note at any time prior to 90 days from the issuance date at a redemption price of 125% plus accrued interest. The redemption price thereafter increases to 135%, plus accrued interest, until the 120th day from issuance and to150%, plus accrued interest, until the 180th day from issuance. The note is due and payable on May 15, 2018. During the first 6 months the note is in effect, the holder of the note, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of our common stock at a fixed price of $0.03 per share. Beginning the 6 month anniversary of the note, the holder of the note, at is option, may convert the unpaid principal of, and accrued interest on, the note into shares of our common stock a 40% discount from the average of the three lowest trading prices during the 25 days prior to conversion. The note also contains penalty provisions in the event of our default in repayment of the note (if not converted by the holder into shares of common stock) after 180 days from issuance.

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May 16, 2017 Convertible Redeemable Note

Effective May 16, 2017, we issued and delivered to Crown Bridge Partners, LLC an 8% convertible redeemable note in the principal amount of $60,000. The note was issued at a discount, resulting in our receipt of $54,000. The note is due and payable on May 16, 2018. The other terms of the note are identical to the terms of the May 15, 2017 convertible redeemable note.

May 24, 2017 Convertible Redeemable Note

Effective May 24, 2017, we issued and delivered to GS Capital Partners, LLC an 8% convertible note in the principal amount of $173,000. The note was issued at a discount, resulting in our receipt of $158,000. The note is due and payable on May 24, 2018. We can redeem the note at any time prior to 60 days from the issuance date at a redemption price of 118% plus accrued interest. The redemption price thereafter increases to 125%, plus accrued interest, until the 120th day from issuance and then to 133%, plus accrued interest, until the 180th day from issuance. The note cannot be prepaid after the 180th day after issuance. The holder of the note, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of our common stock at a 40% discount from the lowest trading price during the 20 days prior to conversion. Prior to the 180th day after issuance, the conversion price cannot be less than a floor of $.03 per share of common stock. The note also contains penalty provisions in the event of our default in repayment of the note (if not converted by the holder into shares of common stock).

June 12, 2017 Equity Purchase Agreement 

On June 12, 2017, we entered into an Equity Purchase Agreement with Crown Bridge Partners, LLC (“Crown Bridge”). Pursuant to the terms of the Equity Purchase Agreement, Crown Bridge has committed to purchase up to $3,000,000 of our common stock for a period of up to 24 months commencing upon the effectiveness of a registration statement covering the resale of shares issuable to Crown Bridge under the Equity Purchase Agreement. The Equity Purchase Agreement allows us to deliver a put notice to Crown Bridge stating the dollar amount of common stock that we intend to sell to Crown Bridge on the date specified in the put notice. The amount of each put notice is limited to a formula that is equal to the lesser of (i) $100,000 or (ii) 150% of the average dollar value of the trading volume of our stock, measured at the lowest price during the trading period, for the seven days prior to the purchase of shares by Crown Bridge. The purchase price of shares issued in respect of each put notice is 80% of the average of the three lowest trading prices in the seven trading days immediately preceding the date on which the Company exercises its put right. We are required to file a registration statement with the SEC on Form S-1 within 45 days of the date of the Equity Purchase Agreement covering the resale of shares to be issued under such agreement and to use our best efforts to cause the registration statement to become effective within 90 days of such date. 

In connection with the Equity Purchase Agreement, we issued to Crown Bridge, as a commitment fee, an $80,000 convertible promissory note which matures on December 12, 2017. The note bears interest at a rate of 8% per annum. We are entitled to redeem the note at a redemption price of 125% plus accrued interest during the first 90 days after issuance. The redemption price then increases to 135% until the 120th day after issuance and then increases to 150% until the 180th day after issuance, after which the date the note may not be redeemed. If the note is not redeemed or we otherwise default thereunder, Crown Bridge may convert the unpaid balance into shares of our Class A common stock at a conversion price equal to the lesser of (i) the closing price of our Class A common stock on the issuance date of the note or (ii) 60% of the average of the three lowest trading prices during the 25-day period prior to the notice of conversion. 

July 7, 2017 Convertible Redeemable Note

On July 7, 2017, we completed the funding of a 12% convertible note in the principal amount of $125,000 issued to JSJ Investments Inc. The note was issued at a discount, resulting in our receipt of $118,750 of net proceeds, prior to expenses. We can redeem the note at any time prior to 90 days from the issuance date at a redemption price of 120% plus accrued interest. The redemption price thereafter increases to 125%, plus accrued interest, until the 120th day from issuance, and thereafter increases to a redemption price of 145% plus accrued interest until the 180th day after issuance and 150% plus accrued interest until the maturity date of March 30, 2018. The holder of the note, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of our common stock at a price of no lower than $0.03 per share of common stock until the 180th day after issuance and thereafter at a price 40% discount from the lowest trading prices during the 20 days prior to conversion. The note also contains penalty provisions in the event of our default in repayment of the note (if not converted by the holder into shares of common stock) on the maturity date of March 30, 2018.

We have agreed with JSJ Investments Inc. to use any proceeds from draws on our prospective equity line of credit or sale of assets to first repay the note we issued to JSJ Investments in April 2017 and second to repay the July 7, 2017 note.

F-22
Table of Contents

MMEX RESOURCES CORPORATION

Condensed Consolidated Balance Sheets

 

 

October 31,

2017

 

 

April 30,

2017

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$50,297

 

 

$54,513

 

Total current assets

 

 

50,297

 

 

 

54,513

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

101,203

 

 

 

-

 

Deposit

 

 

900

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Total assets

 

$152,400

 

 

$54,513

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$715,221

 

 

$694,664

 

Accrued expenses

 

 

232,720

 

 

 

912,870

 

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 October 31, 2017 and April 30, 2017, respectively

 

 

75,000

 

 

 

195,000

 

Convertible notes payable, net of discount of $628,608 and $136,284 at October 31, 2017 and April 30, 2017, respectively

 

 

335,062

 

 

 

8,716

 

Convertible preferred stock

 

 

-

 

 

 

137,500

 

Derivative liabilities

 

 

1,789,047

 

 

 

6,610,001

 

Total current liabilities

 

 

3,253,684

 

 

 

9,004,422

 

 

 

 

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Convertible note payable, net of discount of $181,003 at October 31, 2017

 

 

3,797

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

3,257,481

 

 

 

9,004,422

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ deficit:

 

 

 

 

 

 

 

 

Common stock; $0.001 par value:

 

 

 

 

 

 

 

 

Class A: 3,000,000,000 shares authorized, 1,474,263,078 and 987,616,168 shares issued and outstanding at October 31, 2017 and April 30, 2017, respectively

 

 

1,474,264

 

 

 

987,617

 

Class B: 2,000,000,000 shares authorized, 1,500,000,000 shares issued and outstanding at October 31, 2017 and April 30, 2017, respectively

 

 

1,500,000

 

 

 

1,500,000

 

Common stock payable

 

 

-

 

 

 

307,978

 

Additional paid-in capital

 

 

27,395,630

 

 

 

25,551,533

 

Non-controlling interest

 

 

272,216

 

 

 

(378,443)

Accumulated (deficit)

 

 

(33,747,191)

 

 

(36,918,594)

Total stockholders’ deficit

 

 

(3,105,081)

 

 

(8,949,909)

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ deficit

 

$152,400

 

 

$54,513

 

See accompanying notes to condensed consolidated financial statements.

F-23
Table of Contents

MMEX RESOURCES CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

Three Months Ended

October 31,

 

 

Six Months Ended

October 31,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$-

 

 

$-

 

 

$-

 

 

$-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

 

132,581

 

 

 

102,651

 

 

 

470,711

 

 

 

126,241

 

Refinery start-up costs

 

 

165,420

 

 

 

-

 

 

 

498,531

 

 

 

-

 

Depreciation and amortization

 

 

417

 

 

 

62

 

 

 

707

 

 

 

386

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

298,418

 

 

 

102,713

 

 

 

969,949

 

 

 

126,627

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(298,418)

 

 

(102,713)

 

 

(969,949)

 

 

(126,627)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(431,793)

 

 

(80,700)

 

 

(726,401)

 

 

(116,939)

Gain (loss) on derivative liabilities

 

 

(514,129)

 

 

(52,587)

 

 

3,952,554

 

 

 

33,108

 

Gain on assignment and assumption agreement

 

 

1,090,271

 

 

 

-

 

 

 

1,090,271

 

 

 

-

 

Gain on extinguishment of debt

 

 

-

 

 

 

-

 

 

 

475,587

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other income (expense)

 

 

144,349

 

 

 

(133,287)

 

 

4,792,011

 

 

 

(83,831)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

(154,069)

 

 

(236,000)

 

 

3,822,062

 

 

 

(210,458)

Provision for income taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

(154,069)

 

 

(236,000)

 

 

3,822,062

 

 

 

(210,458)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-controlling interest in (income) loss of consolidated subsidiaries

 

 

(651,005)

 

 

453

 

 

 

(650,659)

 

 

915

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to the Company

 

$(805,074)

 

$(235,547)

 

$3,171,403

 

 

$(209,543)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

1,468,936,991

 

 

 

376,528,409

 

 

 

1,396,834,000

 

 

 

373,973,860

 

Diluted

 

 

1,468,936,991

 

 

 

376,528,409

 

 

 

1,467,161,534

 

 

 

373,973,860

 

See accompanying notes to condensed consolidated financial statements.

F-24
Table of Contents

MMEX RESOURCES CORPORATION

Condensed Consolidated Statements of Stockholders’ Deficit and Members’ Interests

Six Months Ended October 31, 2017

(Unaudited)

 

 

Class A Common Stock

 

 

Class B Common Stock

 

 

Common Stock

 

 

Additional Paid-in

 

 

Non-Controlling

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Payable

 

 

Capital

 

 

Interest

 

 

Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, April 30, 2017

 

 

987,616,168

 

 

$987,617

 

 

 

1,500,000,000

 

 

$1,500,000

 

 

$307,978

 

 

$25,551,533

 

 

$(378,443)

 

$(36,918,594)

 

$(8,949,909)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares issued for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock payable

 

 

62,846,918

 

 

 

62,847

 

 

 

-

 

 

 

-

 

 

 

(307,978)

 

 

245,131

 

 

 

-

 

 

 

-

 

 

 

-

 

Services

 

 

19,250,000

 

 

 

19,250

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

207,875

 

 

 

-

 

 

 

-

 

 

 

227,125

 

Accrued expenses

 

 

440,000

 

 

 

440

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,960

 

 

 

-

 

 

 

-

 

 

 

4,400

 

Cashless exercise of warrants

 

 

353,359,992

 

 

 

353,360

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,552,646

 

 

 

-

 

 

 

-

 

 

 

1,906,006

 

Settlement of preferred stock

 

 

24,750,000

 

 

 

24,750

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

175,726

 

 

 

-

 

 

 

-

 

 

 

200,476

 

Settlement of debt

 

 

26,000,000

 

 

 

26,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

208,800

 

 

 

-

 

 

 

-

 

 

 

234,800

 

Assignment and assumption agreement

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(550,041)

 

 

-

 

 

 

-

 

 

 

(550,041)

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

650,659

 

 

 

3,171,403

 

 

 

3,822,062

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, October 31, 2017

 

 

1,474,263,078

 

 

$1,474,264

 

 

 

1,500,000,000

 

 

$1,500,000

 

 

$-

 

 

$27,395,630

 

 

$272,216

 

 

$(33,747,191)

 

$(3,105,081)

See accompanying notes to condensed consolidated financial statements.

F-25
Table of Contents

MMEX RESOURCES CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

Six Months Ended October 31,

 

 

 

2017

 

 

2016

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income (loss) attributable to the Company

 

$3,171,403

 

 

$(209,543)

Non-controlling interest in income (loss) of consolidated subsidiaries

 

 

650,659

 

 

 

(915)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

707

 

 

 

386

 

Stock-based compensation

 

 

227,125

 

 

 

47,254

 

Convertible note payable issued for commitment fee

 

 

80,000

 

 

 

-

 

Interest expense added to convertible note principal

 

 

38,247

 

 

 

-

 

Gain on derivative liabilities

 

 

(3,952,554)

 

 

(33,108)

Gain on assignment and assumption agreement

 

 

(1,090,271)

 

 

-

 

Gain on extinguishment of debt

 

 

(475,587)

 

 

-

 

Amortization of debt discount

 

 

475,143

 

 

 

-

 

Increase in deposits

 

 

(900)

 

 

-

 

Increase in liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

 

135,039

 

 

 

90,766

 

Accrued expenses

 

 

67,433

 

 

 

71,955

 

Net cash used in operating activities

 

 

(673,556)

 

 

(33,205)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(101,910)

 

 

-

 

Net cash used in investing activities

 

 

(101,910)

 

 

-

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from convertible notes payable

 

 

771,250

 

 

 

-

 

Proceeds from common stock payable

 

 

-

 

 

 

32,384

 

Net cash provided by financing activities

 

 

771,250

 

 

 

32,384

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash

 

 

(4,216)

 

 

(821)

Cash at the beginning of the period

 

 

54,513

 

 

 

1,030

 

Cash at the end of the period

 

$50,297

 

 

$209

 

Supplemental disclosure:

 

 

 

 

 

 

Interest paid

 

$-

 

 

$-

 

Income taxes paid

 

 

-

 

 

 

-

 

Common stock for common stock payable

 

 

307,978

 

 

 

2,935,000

 

Settlement of convertible preferred stock and accrued interest for common stock

 

 

200,476

 

 

 

-

 

Common stock and additional paid-in capital for derivative liabilities in cashless exercise of warrants

 

 

1,906,006

 

 

 

-

 

Common stock for accrued expenses

 

 

4,400

 

 

 

-

 

Settlement of convertible notes payable and accrued interest for common stock

 

 

124,800

 

 

 

-

 

Derivative liabilities for debt discount

 

 

1,043,220

 

 

 

-

 

Accrued interest payable added to convertible note principal

 

 

8,723

 

 

 

-

 

See accompanying notes to condensed consolidated financial statements.

F-26
Table of Contents

MMEX RESOURCES CORPORATION

Notes to Condensed Consolidated Financial Statements

Six Months Ended October 31, 2017

(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 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 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:

Name of Entity

%

Form of Entity

State of Incorporation

Relationship

MMEX Resources Corporation (“MMEX”)

-

Corporation

Nevada

Parent

MCC Merger, Inc. (“MCCM”)

100%

Corporation

Delaware

Holding Subsidiary

Maple Carpenter Creek Holdings, Inc. (“MCCH”)

100%

Corporation

Delaware

Subsidiary

Maple Carpenter Creek, LLC (“MCC”)

80%

LLC

Nevada

Subsidiary

Carpenter Creek, LLC (“CC”)

95%

LLC

Delaware

Subsidiary

Armadillo Holdings Group Corp. (“AHGC”)

100%

Corporation

British Virgin Isles

Subsidiary

Armadillo Mining Corp. (“AMC”)

98.6%

Corporation

British Virgin Isles

Subsidiary

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.

F-27
Table of Contents

All significant inter-company transactions have been eliminated in the preparation of the consolidated financial statements.

These 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.

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, 2017 filed with the SEC on July 28, 2017.

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 improvement

15 years

Land easements

10 years

 

F-28
Table of Contents
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

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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

 

October 31, 2017

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

April 30, 2020

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$1,789,047

 

$-

 

$-

 

$1,789,047

 

 

$2,607,433

 

$0

 

$0

 

$2,607,433

 

Revenue Recognition

 

April 30, 2017

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$6,610,001

 

 

$-

 

 

$-

 

 

$6,610,001

 

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.

 

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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 lossincome (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 three monthsyears ended October 31, 2017April 30, 2021 and 2016 and the six months ended October 31, 2016,2020, potential dilutive sharessecurities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common shares;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 six monthsyears ended October 31, 2017, diluted weighted average numberApril 30, 2021 and 2020, the Company recorded share-based compensation to employees of common shares outstanding included 635,701 common shares issuable for in-the-money warrants using the treasury stock method$0 and 69,691,833 common shares issuable for convertible debt.$0, respectively.

 

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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 periods have been reclassified to conform with the current year periods 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.

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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.

 

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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 $33,747,191$67,984,693 and a total stockholders’ deficit of $3,105,081$5,770,041 at October 31, 2017,April 30, 2021, and have reported negative cash flows from operations since inception. In addition, as of April 30, 2021 we dodid not currently have the cash resources to meet our operating commitments for the next twelve months, and we expect to have ongoing requirements formonths. We require capital investmentinvestments to implement our business plan. Finally,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.

��

Since inception, our operations have primarily been funded through private debt and equity financing, as well as capital contributions by our subsidiaries' partners, andIn 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, indicateraise substantial doubt that we maywill be unableable 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 (see Note 7) to related parties, consisting primarily of consulting fees and expense reimbursements payable, totaled $31,633$272,834 and $70,670$170,881 as of October 31, 2017 and April 30, 2017,2021 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.

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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

 

 

 

0

 

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

 

 

 

0

 

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

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

74,990

 

 

 

27,000

 

Less discount

 

 

(235)

 

 

(1,377)

 

 

 

 

 

 

 

 

 

Total

 

$74,755

 

 

$25,623

 

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[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.

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[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.

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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:at April 30:

 

 

 

October 31,

2017

 

 

April 30,

2017

 

 

 

 

 

 

 

 

Office furniture and equipment

 

$13,363

 

 

$454

 

Computer equipment and software

 

 

26,287

 

 

 

24,569

 

Less accumulated depreciation and amortization

 

 

(22,493)

 

 

(25,023)

 

 

 

17,157

 

 

 

-

 

Land

 

 

84,046

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

$101,203

 

 

$-

 

On July 28, 2017, the Company acquired 126 acres of land located near Fort Stockton, Texas 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.

 

 

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 $417$34,875 and $62$34,663 for the three monthsyears ended October 31, 2017April 30, 2021 and 2016, respectively, and $707 and $386 for the six months ended October 31, 2017 and 2016,2020, 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:at April 30:

 

 

October 31,

2017

 

April 30,

2017

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

Accrued payroll

 

$30,090

 

$30,090

 

 

$30,090

 

$30,090

 

Accrued consulting

 

31,633

 

75,633

 

 

60,000

 

24,000

 

Accrued interest

 

140,089

 

815,276

 

Accrued interest and penalties

 

623,085

 

402,816

 

Other

 

 

62,541

 

 

 

62,541

 

 

 

94,174

 

 

 

94,174

 

 

 

 

 

 

 

 

 

 

 

 

$264,353

 

 

$983,540

 

 

$807,349

 

 

$551,080

 

 

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NOTE 7 – NOTES PAYABLE

 

NOTE 8 – NOTES PAYABLENotes Payable

 

Notes payable currently in default, consist of the following at: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

 

 

$0

 

$200,000 draw on March 26, 2021 [1]

 

 

200,000

 

 

 

0

 

Note payable to an unrelated party with an issue date of March 8, 2021 with interest at 10% [2]

 

 

75,000

 

 

 

0

 

Note payable to an unrelated party with an issue date of March 11, 2021 with interest at 10% [3]

 

 

250,000

 

 

 

0

 

 

 

 

 

 

 

 

 

 

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

 

 

 

October 31,

2017

 

 

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

 

Accrued interest payable on notesNote payable, currently in default, totaled $34,634 and $273,870consists of the following at October 31, 2017 and April 30, 2017, respectively.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: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]

 

 

0

 

 

 

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]

 

 

0

 

 

 

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

 

 

 

0

 

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

 

 

 

0

 

 

 

 

235,775

 

 

 

323,133

 

Less discount

 

 

-

 

 

 

0

 

Total

 

$235,775

 

 

$323,133

 

 

 

October 31,

2017

 

 

April 30,

2017

 

 

 

 

 

 

 

 

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

 

 

$50,000

 

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

 

 

25,000

 

 

 

25,000

 

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

 

 

-

 

 

 

120,000

 

 

 

 

 

 

 

 

 

 

Total

 

$75,000

 

 

$195,000

 

__________________ 

** 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.

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.

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

 

Accrued interest payable onCurrent Convertible Notes Payable

Current convertible notes payable currently in default, totaled $80,366 and $190,343consisted of the following at October 31, 2017 and April 30, 2017, respectively.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]

 

$0

 

 

$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-33
 
F-21

Table of Contents

 

Convertible notes payable consist of the following at:

 

 

October 31,
2017

 

 

April 30,
2017

 

Note payable to an accredited investor, maturing May 15, 2018, with interest at 8%, convertible into common shares of the Company at a defined variable exercise price

 

$115,000

 

 

$-

 

Note payable to an accredited investor, maturing May 16, 2018, with interest at 8%, convertible into common shares of the Company at a defined variable exercise price

 

 

60,000

 

 

 

-

 

Note payable to an accredited investor, maturing May 24, 2018, with interest at 8%, convertible into common shares of the Company at a defined variable exercise price

 

 

173,000

 

 

 

-

 

Note payable to an accredited investor, maturing December 12, 2017, with interest at 8%, convertible into common shares of the Company at a defined variable exercise price

 

 

80,000

 

 

 

-

 

Note payable to an accredited investor, maturing March 30, 2018, with interest at 12%, convertible into common shares of the Company at a defined variable exercise price

 

 

125,000

 

 

 

-

 

Note payable to an accredited investor, maturing June 1, 2018, with interest at 12%, convertible into common shares of the Company at a defined variable exercise price

 

 

115,000

 

 

 

-

 

Note payable to an accredited investor, maturing June 20, 2018, with interest at 12%, convertible into common shares of the Company at a defined variable exercise price

 

 

123,500

 

 

 

-

 

Note payable purchased by an accredited investor pursuant to a Convertible Note Purchase and Assignment Agreement, maturing April 19, 2018, with a one-time interest charge of 12%, convertible into common shares of the Company at a defined variable exercise price

 

 

172,170

 

 

 

-

 

Note payable to an accredited investor, maturing October 19, 2017, with interest at 12%, convertible into common shares of the Company at a defined variable exercise price, extinguished pursuant to a Convertible Note Purchase and Assignment Agreement

 

 

-

 

 

 

145,000

 

Total

 

 

963,670

 

 

 

145,000

 

Less discount

 

 

(628,608)

 

 

(136,284)

 

 

 

 

 

 

 

 

 

Net

 

$335,062

 

 

$8,716

 

[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.

F-34

[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

 

Effective April 19, 2017 the Company issued and delivered to JSJ Investments, Inc. a 12% convertible note payable to JSJ Investments, Inc. (“JSJ”) in the principal amount of $145,000. The note was issued at a discount, resulting in the receipt of $138,000. The Company can redeem the note at any time prior to 90 days from the issuance date at a redemption price of 120% plus accrued interest. The redemption price thereafter increases to 125%, plus accrued interest, until the 120th day from issuance. The note is due and payable on the October 19, 2017 at a redemption price of 150% plus accrued interest. The holder of the note, at its option, may convert the unpaid principal balance and accrued interest into shares of the Company’s Class A common stock at a 40% discount from the lowest trading price during the 20 days prior to conversion. Prior to the 180th day after issuance, the conversion price cannot be less than a floor of $.03 per share of common stock. The note also contains penalty provisions in the event of default in repayment of the note (if not converted by the holder into shares of common stock) after 180 days from issuance. Pursuant to a Convertible Note Purchase and Assignment Agreement dated October 16, 2017 Vista Capital Investments, LLC (“Vista”) purchased from JSJ the convertible note with a principal balance of $145,000 and $8,723 accrued interest payable. No gain or loss was recognized on this transaction.

Effective May 15, 2017, the Company issued and delivered to Eagle Equities LLC an 8% convertible redeemable note in the principal amount of $115,000. The note was issued at a discount, resulting in the receipt of $105,000. The Company can redeem the note at any time prior to 90 days from the issuance date at a redemption price of 125% plus accrued interest. The redemption price thereafter increases to 135%, plus accrued interest, until the 120th day from issuance and to 150%, plus accrued interest, until the 180th day from issuance. The note is due and payable on May 15, 2018. During the first 6 months the note is in effect, the holder of the note, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s Class A common stock at a fixed price of $0.03 per share. Beginning the 6 month anniversary of the note, the holder of the note, at is option, may convert the unpaid principal and accrued interest into shares of the Company’s Class A common stock a 40% discount from the average of the three lowest trading prices during the 25 days prior to conversion. The note also contains penalty provisions in the event of default in repayment of the note (if not converted by the holder into shares of common stock) after 180 days from issuance.

Effective May 16, 2017, the Company issued and delivered to Crown Bridge Partners, LLC (“Crown Bridge”) an 8% convertible redeemable note in the principal amount of $60,000. The note was issued at a discount, resulting in the receipt of $54,000. The note is due and payable on May 16, 2018. The other terms of the note are identical to the terms of the May 15, 2017 convertible redeemable note described above.

Effective May 24, 2017, the Company issued and delivered to GS Capital Partners, LLC an 8% convertible note in the principal amount of $173,000. The note was issued at a discount, resulting in the receipt of $158,000. The note is due and payable on May 24, 2018. The Company can redeem the note at any time prior to 60 days from the issuance date at a redemption price of 118% plus accrued interest. The redemption price thereafter increases to 125%, plus accrued interest, until the 120th day from issuance and then to 133%, plus accrued interest, until the 180th day from issuance. The note cannot be prepaid after the 180th day after issuance. The holder of the note, at its option, may convert the unpaid principal balance and accrued interest into shares of the Company’s Class A common stock at a 40% discount from the lowest trading price during the 20 days prior to conversion. Prior to the 180th day after issuance, the conversion price cannot be less than a floor of $.03 per share of common stock. The note also contains penalty provisions in the event of default in repayment of the note (if not converted by the holder into shares of common stock). The Company entered into an amendment of the note with GS Capital which extends the redemption period of the note by an additional 75 days, during which period the redemption premium will be 47%.

 

[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.

F-35

[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.

 
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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.

 

On June 12, 2017,With an effective date of January 25, 2021, a second loan to the Company entered into an Equity Purchase Agreement with Crown Bridge. Pursuantwas 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 termsprovisions of the Equity Purchase Agreement, Crown Bridge has committed to purchase up to $3,000,000 of our common stock for a period of up to 24 months commencing upon the effectiveness of a registration statement covering the resale of shares issuable to Crown Bridge under the Equity Purchase Agreement. The Equity Purchase Agreement allows the Company to deliver a put notice to Crown Bridge stating the dollar amount of common stock that it intends to sell to Crown Bridge on the date specified in the put notice. The amount of each put notice is limited to a formula that is equal to the lesser of (i) $100,000 or (ii) 150% of the average dollar value of the trading volume of the Company’s stock, measured at the lowest price during the trading period, for the seven days prior to the purchase of shares by Crown Bridge. The purchase price of shares issued in respect of each put notice is 80% of the average of the three lowest trading prices in the seven trading days immediately preceding the date on which the Company exercises its put right. The Company is required to file a registration statement with the SEC on Form S-1 within 45 days of the date of the Equity Purchase Agreement covering the resale of shares to be issued under such agreement and to use its best efforts to cause the registration statement to become effective within 90 days of such date.Act.

 

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In connection with the Equity Purchase Agreement, the Company issued to Crown Bridge, as a commitment fee, an $80,000 convertible promissory note which matures on December 12, 2017. The note bears interest at a rate of 8% per annum. The Company is entitled to redeem the note at a redemption price of 125% plus accrued interest during the first 90 days after issuance. The redemption price then increases to 135% until the 120th day after issuance and then increases to 150% until the 180th day after issuance, after which the date the note may not be redeemed. If the note is not redeemed or the Company is otherwise in default, Crown Bridge may convert the unpaid balance into shares of the Company’s Class A common stock at a conversion price equal to the lesser of (i) the closing price of the Company’s Class A common stock on the issuance date of the note or (ii) 60% of the average of the three lowest trading prices during the 25-day period prior to the notice of conversion.

NOTE 9 – SBA BRIDGE LOAN PAYABLE

 

On July 7, 2017,14, 2020, the Company issuedreceived $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 deliveredis to JSJ a second 12% convertible note payable to JSJbe repaid in the principal amount of $125,000. The note was issued at a discount, resulting in the receipt of $118,750. The Company can redeem the note at any time prior to 90 daysfull by proceeds from the issuance date at a redemption price of 120% plus accrued interest. The redemption price thereafter increases to 125%, plus accrued interest, until the 120th day from issuance, and thereafter increases to a redemption price of 145% plus accrued interest until the 180th day after issuance and 150% plus accrued interest until the maturity date of March 30, 2018. The holder of the note, at its option, may convert the unpaid principal balance and accrued interest into shares of the Company’s Class A common stock at a price of no lower than $0.03 per share of common stock until the 180th day after issuance and thereafter at a price 40% discount from the lowest trading prices during the 20 days prior to conversion. The note also contains penalty provisions in the event of default in repayment of the note (if not converted by the holder into shares of common stock) on the maturity date of March 30, 2018. The Company agreed with JSJ to use any proceeds from draws on our prospective equity line of credit or sale of assets to first repay the note issued to JSJ in April 2017 and second to repay the July 7, 2017 note.EIDL.

 

On September 7, 2017, the Company completed the funding of a 12% convertible note in the principal amount of $115,000 issued to Auctus Fund, LLC. The Company received $105,000 of note proceeds after payment of $10,000 of the fees and expenses of the lender and its counsel. The Company can redeem the note at any time prior to 90 days from the issuance date at a redemption price of 125% plus accrued interest. The redemption price thereafter increases to 135%, plus accrued interest, until the 180th day after issuance. The holder of the note, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a price equal to the lesser of (i) the lowest trading price during the previous 25 trading day period ending on the latest complete trading day prior to the date of the note and (ii) 55% of the average of the two lowest trading prices for the Company’s common stock during the 25 trading day period ending on the latest complete trading day prior to the conversion date. The note also contains penalty provisions in the event of default in repayment of the note (if not converted by the holder into shares of common stock) on the maturity date of June 1, 2018.

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On September 18, 2017, the Company completed the funding of a 12% convertible note in the principal amount of $123,500 issued to Power Up Lending Group Ltd (“Power Up”). The Company received $112,500 of note proceeds after payment of $11,000 of the fees and expenses of the lender and its counsel. The Company can redeem the note at any time prior to 30 days from the issuance date at a redemption price of 120% plus accrued interest. The redemption price thereafter increases by an additional 5% each 30 days thereafter until the 180th day after issuance (at which date the note cannot thereafter be prepaid). The holder of the note, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a price equal to 61% of the average of the two lowest trading prices for the Company’s common stock during the 20 trading day period ending on the latest complete trading day prior to the conversion date. The note also contains penalty provisions in the event of default in repayment of the note (if not converted by the holder into shares of common stock) on the maturity date of June 20, 2018.

Pursuant to a Convertible Note Purchase and Assignment Agreement dated October 16, 2017 Vista Capital Investments, LLC (“Vista”) purchased from JSJ the April 19, 2017 convertible note with a principal balance of $145,000 and $8,723 accrued interest payable. The Company issued a replacement convertible note to Vista dated October 16, 2017 in the principal amount of $153,723, maturing on April 19, 2017. No gain or loss was recognized on this transaction. A one-time 12% interest charge of $18,447 was added to the note principal. The holder of the note, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 40% discount from the lowest trading price during the 20 days prior to conversion. The Company may prepay the note at a 45% redemption premium during the first 90 days after issuance.

The long-term convertible note payable at October 31, 2017 is comprised of a convertible note issued to Vista by the Company on October 19, 2017 in the principal amount of $184,800, less discount of $181,003. The Company issued and delivered to Vista a convertible note in the original maximum principal amount of $550,000 (consisting of an initial advance of $165,000 on such date and possible future advances). The initial advance was issued at a discount, resulting in the receipt of $160,000, $65,000 of which was paid to JSJ as a prepayment penalty for the first JSJ note purchased by Vista. A one-time 12% interest charge of $19,800 was added to the note principal. The holder of the note, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 40% discount from the lowest trading price during the 25 days prior to conversion. The Company may prepay the note at a 45% redemption premium during the first 90 days after issuance. The maturity date for each advance is two years from the date of advance.

Accrued interest payable on convertible notes payable totaled $25,089 and $524 at October 31, 2017 and April 30, 2017, respectively.

The Company has identified the conversion feature of its convertible notes payable as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and considering the existence of a tainted equity environment (see Note 10).

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NOTE 9 – CONVERTIBLE PREFERRED STOCK

As of April 30, 2017, the Company had $137,500 face value of Armadillo Mining Corporation preferred stock issued in June 2011 to two unrelated parties, with accrued dividends payable of $350,539. The preferred stock carried a 25% cumulative dividend and had a mandatory redemption feature on December 31, 2011 at a price of $1.25 per share.

Effective June 19, 2017, the Company entered into agreements with the holders of the outstanding convertible preferred stock pursuant to which $137,500 principal, $359,957 accrued dividends payable and $4,571 derivative liabilities were extinguished through the issuance of a total of 24,750,000 shares of the Company’s Class A common stock, recognizing a gain on extinguishment of debt of $302,595.

In connection with the settlement of the preferred stock on June 19, 2017, the Company issued 11,250,000 shares of its Class A common stock to a non-related consultant. The shares were valued at $91,125, based on the closing market price of the stock on the date of issuance, and included in general and administrative expenses. No gain or loss was recorded on the settlement.

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 October 31, 2017,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 six monthsyears ended October 31, 2017,April 30, 2021 and 2020, we had the following activity in our derivative liabilities:

 

 

 

 

 

 

Convertible

 

 

Preferred

 

 

 

 

 

 

Warrants

 

 

Notes

 

 

Stock

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, April 30, 2017

 

$6,299,670

 

 

$304,675

 

 

$5,656

 

 

$6,610,001

 

New issuances of debt

 

 

-

 

 

 

1,043,220

 

 

 

-

 

 

 

1,043,220

 

Debt conversions and warrant exercises

 

 

(1,906,006)

 

 

-

 

 

 

(5,614)

 

 

(1,911,620)

Change in fair value of derivative liabilities

 

 

(3,982,685)

 

 

30,173

 

 

 

(42)

 

 

(3,952,554)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, October 31, 2017

 

$410,979

 

 

$1,378,068

 

 

$-

 

 

$1,789,047

 

 

 

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

 

 

0

 

 

 

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 October 31, 2017April 30, 2021 are as follows:

 

 

·

Stock prices on all measurement dates were based on the fair market value

 

·

Risk-free interest rates ranging from 1.38% – 1.721%rate of 0.03% to 0.70%

 

·

The probability of future financing was estimated at 100%

 

·

Computed volatility ranging from 114%412.7% to 118%

1556.1%

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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.

 

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NOTE 11 – ASSIGNMENT AND ASSUMPTION AGREEMENTSTOCKHOLDERS’ DEFICIT

 

On September 1, 2016,Authorized Shares

As of April 30, 2021, the Company entered into a stock assignment agreement with LatAm Services, LLC (“LatAm”), whose members are officers and directorshad authorized 11,000,000 shares consisting 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 (see Note 1). 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 the member interests in LatAm, thereby acquiring all the assets and assuming all the liabilities of MCCH, MCC and CC. Prior to the Assignment and Assumption Agreement with Short on September 18, 2017, the accounts of MCCH, MCC and CC were consolidated with those of the Company and its other subsidiaries. The following is a summary of the accounts purchased or assumed by Short (there was no book value to the assets):

Liabilities assumed:

 

 

 

Accounts payable

 

$95,655

 

Accrued expenses

 

 

254,575

 

Note payable, currently in default

 

 

300,000

 

Total liabilities assumed

 

 

650,230

 

Additional paid- in capital

 

 

550,041

 

Total

 

 

1,200,271

 

Value of common shares issued

 

 

(110,000)

 

 

 

 

 

Gain

 

$1,090,271

 

Short agreed to assume all liabilities and hold the Company harmless from any and all liabilities (contingent or otherwise). In consideration therefor, the Company issued Short 10,000,000 shares of its Class A common stock valued at $110,000, or $0.011 per share, equal to the market valueand 1,000,000 shares of the stock on the date of the agreement, which amount was recorded as reduction in the gain recognized. 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.preferred stock.

 

NOTE 12 – STOCKHOLDERS’ DEFICITEffective 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.

 

Authorized Shares

On March 31, 2017,Effective July 1, 2021, the Company amended its articles of incorporation to provide for an increasea 1 for 10,000 reverse stock split of our common shares. Shareholders owning in the authorized sharesexcess of common stock from 3,000,000,000 to 5,000,000,000 shares. In addition, the articles of incorporation were amended to provide for two classes of common shares: (i) Class A Shares, having one vote per share, and (ii) Class B Shares, with 10 votes per share. All50.1% of the currently outstanding shares of voting common stock were reclassified as Class A Shares, except that the common shares issued in the refinery transaction discussed in Note 6 were classified as Class B Shares. Other than the provisions of the voting rights,Company executed a written consent approving such amendment. The amendment was also approved by the two classesCompany’s Board of shares of commonDirectors. The Company has given retroactive effect to the reverse stock will have equal terms and conditions.split for all periods presented. See Note 14.

 

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Table of Contents

Common Stock Issuances

 

During the six monthsyear ended October 31, 2017, April 30, 2021,the Company issued a total of 486,646,9101,916,358 shares of its Class A common stock: 62,846,9182,000 shares for common stock payable of $307,978; 29,250,000 shares forconsulting services valued at $337,125; 440,000$34,000; 1,525,583 shares valued at $4,400$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 $44,000$36,942 resulting in a gain on extinguishment of debt of $39,600; 353,359,992 shares in the cashless exercise of warrants and extinguishment of derivative liabilities of $1,906,006; 24,750,000$8,555; 667,835 shares valued at $200,476$811,676 in the extinguishmentconversion of preferred stockconvertible notes principal of $137,500,$769,255, accrued interest payable of $359,957$33,671 and derivative liabilitiespayment of $5,614 resulting in a gain on extinguishmentfees of debt of $302,595$8,750; and 16,000,000643,636 shares valued at $124,800$355,460 in the extinguishmentconversion of a convertible notenotes payable – related party principal of $120,000$354,000 and accrued interest payable of $119,365 resulting$1,460. Settlement of derivative liabilities in a gain on extinguishment of debt of $114,565.conversions and repayments totaled $812,896.

 

Series A Preferred Stock Options

 

On March 7, 2012, the Company issued a total of 2,000,000The Series A preferred stock options exercisable at $0.35 per share for a period of ten years from the date of grant. The Company did not grant any stock options during the six months ended October 31, 2017.

A summary of stock option activity during the six months ended October 31, 2017 is presented below:

 

 

Shares

 

 

Weighted Average

Exercise Price

 

 

Weighted Average

Remaining Contractual Life (Years)

 

 

 

 

 

 

 

 

 

 

 

Outstanding, April 30, 2017

 

 

2,000,000

 

 

$0.35

 

 

 

4.85

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 

-

 

 

$-

 

 

 

 

 

Canceled / Expired

 

 

(2,000,000)

 

$0.35

 

 

 

 

 

Exercised

 

 

-

 

 

$-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding, October 31, 2017

 

 

-

 

 

$-

 

 

 

-

 

Effective June 1, 2017,has no redemption, conversion or dividend rights; however, the holders of the options surrendered themSeries 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 and the optionsissued 1,000 shares of Series A preferred stock to Maple Resources for services rendered. The shares were cancelled.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-40
 
F-26

Table of Contents

 

A summary of warrant activity during the six monthsyears ended October 31, 2017April 30, 2021 and 2020 is presented below:

 

 

Shares

 

 

Weighted Average

Exercise Price

 

 

Weighted Average

Remaining Contractual Life (Years)

 

 

Shares

 

 

Weighted

Average

Exercise

Price

 

 

Weighted

Average

Remaining Contractual

Life (Years)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding, April 30, 2017

 

395,261,211

 

$0.01

 

4.91

 

 

 

 

 

 

 

 

Outstanding, April 30, 2019

 

1,789,291

 

$1.00

 

2.91

 

Granted

 

8,871,602

 

$0.01

 

 

 

 

444,248,462

 

$1.00

 

 

 

Canceled / Expired

 

(210,000)

 

$0.01

 

 

 

 

-

 

 

 

 

 

Exercised

 

 

(353,360,492)

 

$0.01

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding, October 31, 2017

 

 

50,562,321

 

 

$0.01

 

 

 

4.40

 

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 six monthsyears ended October 31, 2017April 30, 2021 and 2020 are comprised of warrant shares issued to warrant holders pursuant to anti-dilution provisions.

 

The 353,359,992 warrantStock 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 exercised were pursuantof 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 cashless exerciseAffiliates for entering into the GS pledge agreement, the Company granted a ten-year option, effective as of warrants and extinguishment of derivative liabilities of $1,906,006.

Common Stock Reserved

At October 31, 2017, 50,562,321December 11, 2018, to the Affiliates to purchase 2,000,000 common shares of the Company’s Class 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

 

 

-

 

 

$0

 

 

 

-

 

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Table of Contents

Common Stock Reserved

Combined with the 3,251,641 common stock wereshares outstanding at April 30, 2021, all authorized common shares have been issued or reserved for issuance of outstanding warrants, and 1,207,443,384 shares of the Company’s Class A common stock were reserved foroptions, and convertible notes payable.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

 

$0

 

 

$0

 

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

 

$0

 

 

$0

 

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.

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Table of Contents

NOTE 13 – COMMITMENTS AND CONTINGENCIES

 

Legal

 

There were no legal proceedingsOn July 14, 2020, a consultant for rail services to the Company filed a complaint against the Company.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.

 

SubsequentOn May 20, 2021, we entered into a Purchase and Sale Agreement to October 31, 2017,acquire 323.841 acres of land in, or near, Pecos County, Texas, in exchange for $242,881. Per the Companyterms 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 totaltitle 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 118,484,723 shares of its Class A common stock in considerationthe closing date, which was to occur on or before September 15, 2021. In exchange for the conversionextension, we remitted a non-refundable extension payment of note payable principal totaling $585,170 and accrued interest payable of $17,106.$10,000 which is applicable to the purchase price at closing. We closed on this land purchase on July 27, 2021.

 

On November 15, 2017,June 22, 2021, the Company issued and delivered to Power Up an 8%GS Capital Partners, LLC (“GS”) a 10% convertible note in the principal amount of $111,773.$82,000. The note was issued at a discount resulting inand the Company’s receiptCompany received net proceeds of $100,000. The holder$78,500 after payment of $3,500 of fees and expenses of the note,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 the Company’s common stock (i) during the first 180 days, at a price of $.03$0.015 per share of common stock and (ii) thereafter at a 40%34% discount from the average of the threetwo lowest trading priceprices of the Company’s common stock during the 2515 prior trading days prior to conversion.including the day upon which a notice of conversion is received by the Company. The Company may prepayredeem the note at a 18% redemption premiumprices ranging from 110% to 118% during the first 60180 days after issuance, increasing to 25% after 120 days from issuance and 33% after 180 days from 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 note also contains penalty provisions in the event of our default in repaymentmaturity date of the note (if not convertedis the earlier of (i) December 31, 2021 or (ii) the consummation by the holder intoCompany 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) onstock to account for rounding issues. The Company has given retroactive effect to the maturity date of November 14, 2018. reverse stock split for all periods presented. See Note 14.

 

On December 14, 2017,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 $100,000 from$2,650,850 after deducting placement agent fees and related offering expenses.

Subsequent to April 30, 2021, the Company made a second advance under the Vista Capital Investments, LLC 12%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.

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Table of Contents

MMEX RESOURCES CORPORATION

Condensed Consolidated Balance Sheets

 

 

October 31,
2021

 

 

April 30,
2021

 

Assets

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$273,686

 

 

$330,449

 

Prepaid expenses and other current assets

 

 

35,433

 

 

 

37,893

 

Total current assets

 

 

309,119

 

 

 

368,342

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

709,709

 

 

 

472,169

 

Deposit

 

 

900

 

 

 

900

 

 

 

 

 

 

 

 

 

 

Total assets

 

$1,019,728

 

 

$841,411

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$589,201

 

 

$802,640

 

Accrued expenses

 

 

816,861

 

 

 

807,349

 

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

 

 

0

 

 

 

3,010,042

 

Total current liabilities

 

 

2,770,086

 

 

 

6,611,452

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

2,770,086

 

 

 

6,611,452

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ deficit:

 

 

 

 

 

 

 

 

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

 

 

65,067,236

 

 

 

62,201,528

 

Non-controlling interest

 

 

9,871

 

 

 

9,871

 

Accumulated deficit

 

 

(66,845,286)

 

 

(67,984,693)

Total stockholders’ deficit

 

 

(1,750,358)

 

 

(5,770,041)

Total liabilities and stockholders’ deficit

 

$1,019,728

 

 

$841,411

 

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

MMEX RESOURCES CORPORATION

Condensed Consolidated Statements of Operations
(Unaudited)

 

 

Three Months Ended

October 31,

 

 

Six Months Ended
October 31,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$0

 

 

$0

 

 

$0

 

 

$0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

 

274,493

 

 

 

179,350

 

 

 

717,000

 

 

 

362,675

 

Project costs

 

 

1,006,666

 

 

 

51,985

 

 

 

1,009,726

 

 

 

89,685

 

Depreciation and amortization

 

 

9,246

 

 

 

8,720

 

 

 

17,964

 

 

 

17,438

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

1,290,405

 

 

 

240,055

 

 

 

1,744,690

 

 

 

469,798

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(1,290,405)

 

 

(240,055)

 

 

(1,744,690)

 

 

(469,798)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(57,645)

 

 

(171,054)

 

 

(262,255)

 

 

(725,143)

Gain (loss) on derivative liabilities

 

 

0

 

 

 

102,341

 

 

 

3,010,042

 

 

 

1,289,693

 

Gain (loss) on extinguishment of liabilities

 

 

196,166

 

 

 

0

 

 

 

136,310

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other income (expense)

 

 

138,521

 

 

 

68,713

 

 

 

2,884,097

 

 

 

564,550

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

(1,151,884)

 

 

(308,768)

 

 

1,139,407

 

 

 

94,752

 

Provision for income taxes

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

(1,151,884)

 

 

(308,768)

 

 

1,139,407

 

 

 

94,752

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-controlling interest in income of consolidated subsidiaries

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to the Company

 

$(1,151,884)

 

$(308,768)

 

$1,139,407

 

 

$94,752

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

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Table of Contents

MMEX RESOURCES CORPORATION

Condensed Consolidated Statement of Stockholders’ Deficit

Three and Six Months Ended October 31, 2020 (Unaudited)

 

 

Common Stock

 

 

Class A Preferred Stock

 

 


Additional
Paid-in

 

 


Non-Controlling

 

 

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

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

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

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

18,612

 

 

 

0

 

 

 

0

 

 

 

18,612

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

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.

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MMEX RESOURCES CORPORATION

Condensed Consolidated Statement of Stockholders’ Deficit

Three and Six Months Ended October 31, 2021 (Unaudited)

 

 

Common Stock

 

 

Series A Preferred Stock

 

 

Additional
Paid-in

 

 

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

 

 

 

3,000,000

 

Shares issued for conversion of convertible notes payable and accrued interest

 

 

11,814

 

 

 

11

 

 

 

-

 

 

 

-

 

 

 

42,520

 

 

 

-

 

 

 

0

 

 

 

42,531

 

Shares issued for reverse stock split

 

 

17,754

 

 

 

18

 

 

 

-

 

 

 

-

 

 

 

(18)

 

 

0

 

 

 

0

 

 

 

-

 

Shares issued for the exercise of prefunded warrants

 

 

250,000

 

 

 

250

 

 

 

-

 

 

 

0

 

 

 

(250)

 

 

0

 

 

 

0

 

 

 

0

 

Offering costs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

0

 

 

 

(349,150)

 

 

0

 

 

 

0

 

 

 

(349,150)

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

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

 

 

 

-

 

 

 

111,906

 

Shares issued for conversion of related party convertible notes payable and accrued interest

 

 

6,817,224

 

 

 

6,817

 

 

 

-

 

 

 

-

 

 

 

68,172

 

 

 

-

 

 

 

0

 

 

 

74,989

 

Shares issued for the exercise of prefunded warrants

 

 

880,000

 

 

 

880

 

 

 

-

 

 

 

0

 

 

 

(880)

 

 

0

 

 

 

-

 

 

 

-

 

Net (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

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.

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MMEX RESOURCES CORPORATION

Condensed Consolidated Statements of Cash Flows
(Unaudited)

 

 

Six Months Ended
October 31,

 

 

 

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.

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Table of Contents

MMEX RESOURCES CORPORATION

Notes to Condensed Consolidated Financial Statements

Six Months Ended October 31, 2021
(Unaudited)

NOTE 1 – BACKGROUND, ORGANIZATION AND BASIS OF PRESENTATION

MMEX Resources Corporation (the “Company” or “MMEX”) was formed as a Nevada corporation in 2005. The current management team lead 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 condensed consolidated financial statements include the accounts of the following entities, all of which as an original maximum principal amountthe Company maintains control through a majority ownership or through common ownership:


Name of Entity


%

Form
of Entity

State of
Incorporation


Relationship

MMEX Resources Corporation (“MMEX”)

-

Corporation

Nevada

Parent

Pecos Clean Fuels & Transport, LLC (“Pecos”) [1]

100%

LLC

Texas

Subsidiary

MMEX Solar Resources, LLC [2]

100%

LLC

Texas

Subsidiary

Texas Gulf Refining & Trading, LLC [2]

100%

LLC

Texas

Subsidiary

Louisiana Gulf Refining & Trading, LLC [2]

100%

LLC

Louisianna

Subsidiary

Rolling Stock Marine, LLC [2]

100%

LLC

Texas

Subsidiary

MMEX CO2 Capture, LLC [2] [3]

100%

LLC

Texas

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.

[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 $550,000 . 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 second advanceProject 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.

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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our significant accounting policies are the same as thosedescribed in our Annual Report on Form 10-K for the initial advance,year ended April 30, 2021 filed with a maturity date two years fromthe SEC on July 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 advance. 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 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.

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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:

October 31, 2021

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$0

 

 

$0

 

 

$0

 

 

$0

 

April 30, 2021

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$3,010,042

 

 

$0

 

 

$0

 

 

$3,010,042

 

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Revenue Recognition

The 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.

Project costs

All project costs incurred, including acquisition of refinery rights, planning, design and permitting, have been recorded as project costs and expensed as incurred.

Basic and diluted income (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 six months ended October 31, 2021 and 2020 the dilutive effect of options, warrants, and convertible 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 consolidated statement of operations based on their fair values. For the six months ended October 31, 2021 and 2020, the 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.

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Table of Contents

Reclassifications

Certain amounts in the consolidated financial statements for the prior-year period have been reclassified to conform with the current-year period 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 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 $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.

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Table of Contents

Since inception, our operations have primarily been funded through private debt and equity financing, 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, raise substantial doubt that we will be able 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 to related parties, consisting primarily of consulting fees and expense reimbursements payable, totaled $59,023 and $272,834 as of October 31, 2021 and April 30, 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 $110,000 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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Table of Contents

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

 

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[1]

This convertible note was entered into on December 27, 2019 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. 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 28,094 common 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 $269 during 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:

 

 

October 31,

2021

 

 

April 30,
2021

 

 

 

 

 

 

 

 

Office furniture and equipment

 

$13,864

 

 

$13,864

 

Computer equipment and software

 

 

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

 

 

(126,729)

 

 

(108,765)

 

 

 

 

 

 

 

 

 

 

 

$709,709

 

 

$472,169

 

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, which closed on July 27, 2021. We paid a total of $245,397 for the acquisition.

Depreciation and amortization expense totaled $17,964 and $17,438 for the six months ended October 31, 2021 and 2020, respectively.

NOTE 6 – ACCRUED EXPENSES

Accrued expenses consisted of the following at:

 

 

October 31,

2021

 

 

April 30,
2021

 

 

 

 

 

 

 

 

Accrued payroll

 

$30,090

 

 

$30,090

 

Accrued consulting

 

 

9,000

 

 

 

60,000

 

Accrued interest and penalties

 

 

683,597

 

 

 

623,085

 

Other

 

 

94,174

 

 

 

94,174

 

 

 

 

 

 

 

 

 

 

 

 

$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,
2021

 

 

 

 

 

 

 

 

Note payable to an unrelated party, matured March 18, 2014, with interest at 10%

 

$75,001

 

 

$75,001

 

 

 

 

 

 

 

 

 

 

 

 

$75,001

 

 

$75,001

 

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Table of Contents

Notes Payable

Notes payable consist of the following at:

 

 

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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Convertible Note Payable, Currently in Default

Convertible notes payable, currently in default, consist of the following at:

 

 

October 31,

2021

 

 

April 30,

2021

 

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, maturing January 31, 2020, with interest at 10%, convertible into common shares of the Company at a defined variable exercise price [3]

 

 

0

 

 

 

91,331

 

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]

 

 

0

 

 

 

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 [5]

 

 

-

 

 

 

9,719

 

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]

 

 

0

 

 

 

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 [7]

 

 

0

 

 

 

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 [8]

 

 

0

 

 

 

9,225

 

 

 

 

75,000

 

 

 

235,775

 

Less discount

 

 

0

 

 

 

0

 

 

 

 

 

 

 

 

 

 

Total

 

$75,000

 

 

$235,775

 

[1]

On March 8, 2010, the Company closed a note purchase agreement with an accredited investor pursuant to which the Company sold a $50,000convertible 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.

[3]

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 of $112,250after payment of $12,750of 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 $125,000as of April 30, 2019. During year ended April 30, 2020, Auctus converted principal of $33,669into common shares of the Company, resulting in a principal balance of $91,331as of April 30, 2020. During the year ended April 30, 2021 there was no activity on the note so the balance remained unchanged. During the six months ended October 31, 2021 this note was paid in full.

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Table of Contents

[4]

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 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 $863 in cash to extinguish all of the accrued interest due under the note.

[5]

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. During the six months ended October 31, 2021 the Company issued 883,551 shares of common stock to extinguish the full principal balance of $9,719 and paid $856 in cash to extinguish all of the accrued interest due under the note.

[6]

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. During the six months ended October 31, 2021 the Company issued 590,909 shares of common stock to extinguish the full principal balance of $6,500 and paid $538 in cash to extinguish all of the accrued interest due under the note.

[7]

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. During the six months ended October 31, 2021 the Company issued 3,090,909 shares of common stock to extinguish the full principal balance of $34,000 and paid $2,287 in cash to extinguish all of the accrued interest due under the note.

[8]

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. During the six months ended October 31, 2021 the Company issued 838,591 shares of common stock to extinguish the full principal balance of $9,225 and paid $505 in cash to extinguish all of the accrued interest due under the note.

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Convertible Notes Payable

Current convertible notes payable consisted of the following at:

 

 

October 31,

2021

 

 

April 30,

2021

 

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 [1]

 

$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 [2]

 

 

90,000

 

 

 

90,000

 

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 [3]

 

 

0

 

 

 

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 [4]

 

 

80,000

 

 

 

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 [5]

 

 

0

 

 

 

82,000

 

Total

 

 

370,000

 

 

 

532,000

 

Less discount

 

 

0

 

 

 

(133,944)

 

 

 

 

 

 

 

 

 

Net

 

$370,000

 

 

$398,056

 

[1]

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 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.)

[2]

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 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.)

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[3]

Effective December 15, 2020, the Company entered into a fourth amendment to certain convertible notes with GS ($110,000 note dated September 13, 2018, $70,000 note dated September 18, 2018, $600,000 note dated October 5, 2018, and $110,000 note dated February 20, 2019) 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. 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). In June of 2021 the Company issued 11,814 common shares to convert $40,000 worth of principal and $2,027 worth of accrued interest under the terms of the agreement. In September of 2021 the Company entered into a settlement agreement with GS where 108,878 common shares were issued to convert the remaining $40,000 worth of principal and $2,462 worth of accrued interest under the terms of the agreement and $4,584 worth of accrued interest was forgiven and recorded as a gain on extinguishment of liabilities.

[4]

Effective December 31, 2020, the Company entered into a fifth amendment to certain convertible notes with GS ($110,000 note dated September 13, 2018, $70,000 note dated September 18, 2018, $600,000note dated October 5, 2018, and $110,000 note dated February 20, 2019) 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. 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).

[5]

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, could 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 could redeem the note at redemption prices ranging from 110% to 118% during the first 180 days after issuance. During the six months ended July 31, 2021, the Company repaid this note in full.

In addition to the Convertible Notes outstanding as of July 31, 2021 and April 30, 2021, as noted above, effective June 22, 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, could 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 during the 15 prior trading days including the day of conversion. The Company could redeem the note at redemption prices ranging from 110% to 118% during the first 180 days after issuance. During the six months ended October 31, 2021, the Company repaid this note in full.

NOTE 8 – PPP LOANS PAYABLE

With an effective date of January 25, 2021, 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.) (“the Act”) in the amount of $150,000 and was funded on January 26, 2020. During the six months ended October 31, 2021, Company was notified that its loan was forgiven pursuant to the provisions of the Act, therefore $150,000 was recorded as a gain on extinguishment of liabilities.

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NOTE 9 – SBA BRIDGE LOAN PAYABLE

 

On January 8, 2018, our boardJuly 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 directors agreed$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 number of warrants or common shares to amendbe issued under these agreements is indeterminate; therefore, through April 30, 2021 the articles of incorporationCompany 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 three months ended July 31, 2021, it was determined that the Company could increase their authorized common shares at any time, based on an agreement of the majority of voters to do so when needed, therefore the environment was no longer deemed to be tainted and all derivative liabilities were written off the books.

The Company estimated 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 six months ended October 31, 2021, we had the following activity in our derivative liabilities:

 

 

Options and

 

 

Convertible

 

 

 

 

 

 

Warrants

 

 

Notes

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

Balance, April 30, 2021

 

$235,902

 

 

$2,774,140

 

 

$3,010,042

 

Change in fair value of derivative liabilities

 

 

(235,902)

 

 

(2,774,140)

 

 

(3,010,042)

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, October 31, 2021

 

$0

 

 

$0

 

 

$0

 

NOTE 11 – STOCKHOLDERS’ DEFICIT

Authorized Shares

As of April 30, 2021, the Company had authorized 11,000,000 shares of capital stock, consisting of 10,000,000 shares of common stock and 1,000,000 shares of preferred stock. However, on August 16, 2021, the Company approved an amendment to its Articles of Incorporation to increase the number of its authorized shares of Class A common stock from 3,000,000,00010,000,000 to 10,000,000,000, subject200,000,000. Shareholders owning in excess of 50.1% of the outstanding shares of voting common stock of the Company executed a written consent approving the amendment. As of October 31, 2021, the Company had authorized 201,000,000 shares of capital stock, consisting of 200,000,000 shares of common stock and 1,000,000 shares of preferred stock.

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Common Stock Issuances

During the six months ended October 31, 2021, the Company issued a total of 14,568,721 shares of its common stock: 170,000 shares (plus 3,580,000 prefunded warrants and 2,575,500 warrants, see Warrants below) for cash of $3,000,000; 6,433,743 shares valued at $154,437 in conversion of convertible notes principal of $149,444, accrued interest payable of $4,490 and payment of fees of $504; 6,817,224 shares valued at $74,989 in conversion of related party convertible notes principal; 17,754 shares issued pursuant to the required approvalrounding of fractional shares in connection with our reverse stock split; and 1,130,000 shares issued for the exercise of prefunded warrants. In conjunction with the stock and warrants issued for cash, the Company also issued 337,500 warrants to the placement agent (see Warrants below) and recognized $349,150 in out-of-pocket offering costs.

During the six months ended October 31, 2020, the Company issued a total of 85,828 shares of its common stock in conversion of convertible notes principal of $53,500 and accrued interest payable of $3,180. Settlement of derivative liabilities in the debt conversions totaled $18,612.

Series A Preferred Stock

The Series A preferred stock has no redemption, conversion or dividend rights; however, the holders of the stockholders.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 six months ended October 31, 2021 and 2020 the Company did not issue any shares of its preferred stock.

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. The Company estimates 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 previous existence of a tainted equity environment (see Note 10).

A summary of warrant activity during the six months ended October 31, 2021 is presented below:

 

 

Shares

 

 

Weighted Average

Exercise Price

 

 

Weighted Average

Remaining Contractual Life (Years)

 

 

 

 

 

 

 

 

 

 

 

Outstanding, April 30, 2021

 

 

107,991

 

 

$1.00

 

 

 

0.91

 

Granted

 

 

6,980,263

 

 

$0.41

 

 

 

 

 

Canceled / Expired

 

 

-

 

 

$0

 

 

 

 

 

Exercised

 

 

(1,130,000)

 

$0.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding, October 31, 2021

 

 

5,958,254

 

 

$0.50

 

 

 

2.34

 

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During the six months ended October 31, 2021 the Company granted 487,263 warrants issued to warrant holders pursuant to anti-dilution provisions and 6,493,000 warrants issued in conjunction with the sale of common stock (see Common Stock Issuances above). As the fair value of the warrants granted would have had a net zero impact to equity (increasing additional paid in capital and recording offering costs for the same amount), the Company did not break out or complete a separate valuation of the warrant granted in association with the capital raise. Of the 6,493,000 warrants granted, 3,580,000 are prefunded, therefore have a zero exercise price and no expiration. The remaining warrants have a 5 year life and 2,575,500 of the warrants have a $0.80 exercise price while the other 337,500 have a $1.00 exercise price.

NOTE 12 – COMMITMENTS AND CONTINGENCIES

Legal

In the ordinary course of business, we may be, or have been, involved in legal proceedings from time to time. During the six months ended October 31, 2021 we were not involved in any material legal proceedings.

NOTE 13 – SUBSEQUENT EVENTS

In accordance with ASC 855-10, all subsequent events that are required to be reported through the filing date of these consolidated financial statements are reported below.

Common Shares Issued

Subsequent to October 31, 2021, the Company issued 25,000 shares of common stock for the exercise of prefunded warrants.

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PART II — INFORMATION NOT REQUIRED IN THE PROSPECTUS

 

Item. 13. Other Expenses Of Issuance And Distribution.

 

Securities and Exchange Commission registration fee

 

$

1,421

 

 

$726

 

Accounting fees and expenses

 

$

7,500

 

 

$2,500

 

Legal fees and expense

 

$

75,000

 

 

$20,000

 

Blue Sky fees and expenses

 

$

10,000

 

 

$7,500

 

Miscellaneous

 

$

6,079

 

 

$19,274

 

Total

 

$

100,000

 

$50,000

 

  

All amounts are estimates other than the SEC’s registration fee. We will bear all costs, expenses and fees in connection with the registration of the Shares, including the cost of compliance with state securities or “blue sky” laws. The selling stockholders will bear all commissions, discounts and transfer taxes, if any, attributable to their sales of the Shares.

 

Item. 14. Indemnification Of Directors And Officers.

 

NRS 78.037 permits a corporation to eliminate or limit the personal liability of a director or officer to the corporation or its stockholders for damages relating to breach of fiduciary duty as a director or officer, but such a provision must not eliminate or limit the liability of a director or officer for (a) acts or omissions which involve intentional misconduct, fraud or a knowing violation of law or (b) the payment of distributions in violation of NRS 78.300.

 

NRS 78.7502 provides as follows with respect to indemnification of directors, officers, employees and agents:

 

 

(a)

We may indemnify any person who was or is a party or is threatened to be made a party to any action, except an action by us, by reason of the fact that he is or was our director, officer, employee or agent, or is or was serving as a director, officer, employee or agent of any other person at our request, against expenses actually and reasonably incurred by him in connection with the action, suit or proceeding if he: (i) is not liable for breach of his fiduciary duties as a director or officer pursuant to Nevada Revised Statutes 78.138; and (ii) acted in good faith and in a manner which he reasonably believed to be in or not opposed to our best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

 

(b)

We may indemnify any person who was or is a party or is threatened to be made a party to any action by us, by reason of the fact that he is or was our director, officer, employee or agent, or is or was serving as a director, officer, employee or agent of any other person at our request, against expenses actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he: (i) is not liable for breach of his fiduciary duties pursuant to Nevada Revised Statutes 78.138; and (ii) acted in good faith and in a manner which he reasonably believed to be in or not opposed to our best interest. We may not indemnify him for any claim, issue or matter as to which he has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to us or for amounts paid in settlement to us, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, he is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.

 

(c)

To the extent that our director, officer, employee or agent has been successful on the merits or otherwise in defense of any action, suit or proceeding, or in defense of any claim, issue or matter therein, we are required to indemnify him against expenses, including attorneys’ fees actually and reasonably incurred by him in connection with the defense.

 

Our amended and restated articles of incorporation and our amended and restated bylaws provide for elimination of any liability of our directors and officers and indemnity of our directors and officers to the fullest extent permitted by Nevada law.

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The above-described provisions relating to the exclusion of liability and indemnification of directors and officers are sufficiently broad to permit the indemnification of such persons in certain circumstances against liabilities arising under the Securities Act. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors and officers and to persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

 

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Item. 15. Recent Sales of Unregistered Securities.

 

Set forth below is information regarding securities sold by us within the past three years that were not registered under the Securities Act:Act. All issuances were pursuant to the exemption provided by Section 4(2) for sales not involving a public offering.

 

1. On December 28, 2021, we issued to an institutional investor 1,500 shares of our Series B Convertible Preferred Stock (convertible into shares of common stock at a conversion rate of $0.10 per share) and Series D Warrants to purchase up to an aggregate of 15,000,000 shares of common stock (with an exercise price of $0.10 per share). We received gross proceeds of $1.5 million. We engaged H.C. Wainwright & Co., LLC as placement agent in connection with the private offering. We paid the placement agent a cash fee of 9.0% of the aggregate gross proceeds raised in the Offering, plus a management fee equal to 1.0% of the gross proceeds raised in the Offering and $35,000 for non-accountable expenses. We also issued to designees of the placement agent warrants to purchase up to 1,350,000 shares of common stock at an exercise price of $0.125 per share.

2. On June 24, 2021, we issued 11,814 shares of our common stock to GS Capital Partners, LLC to retire outstanding indebtedness in the principal amount of $40,000.

3. We issued convertible notes at various dates during the three year period to related parties in consideration of funding provided to us and for consulting or financing fees. The aggregate amount of convertible notes were as set forth below:

Name

 

Dollar Amount

 

 

 

 

 

Maple Resources Corporation

 

$68,266

 

BNL Family Trust

 

$11,000

 

Each of the holders immediately converted the unpaid principal balance of the newly issued notes into shares of the Company’s common stock at a conversion price of $0.011 (or 110% of the lowest price at which shares of the common stock had been issued by the Company during the twenty trading days prior to the date of conversion) as follows:

Name

1.

At various dates during the year ended April 30, 2016, the Company issued 123,283,700 shares

Number of its common stock to a related party pursuant to the conversion of 1,000,000 shares of preferred stock with a book value of $1,000,000 and accrued dividends of $410,685 at $0.01 per share.

Shares

 

2.During the year ended April 30, 2016, the Company completed subscription agreements for shares of its common stock and warrants to purchase shares of common stock with qualified investors in a private placement for cash of $75,000 and services valued at $13,815. The shares of common stock were issued subsequent to April 30, 2016.

 

 

 

3.On May 2, 2016, the Company issued 194,999,999 shares of its common stock to a related party in conversion of notes payable in default of $2,925,000.

Maple Resources Corporation (“Maple”)

 

 

6,205,999

 

4.In July 2016, the Company issued 1,096,397 shares of its common stock and 1,096,397 warrants to purchase shares of common stock to an investor for $10,000 in cash.

BNL Family Trust

 

 

5.On October 31, 2016, the Company issued 7,000,000 shares of its common stock as a fee to an institutional lender valued at $34,300. During November 2016 through January 31, 2017, the Company issued to the lender a total of 452,000,000 shares of its common stock in conversion of $56,100 note principal.

1,000,810

 

6.In December 2016, the Company issued 27,740,423 shares of its common stock and 27,740,423 warrants to purchase shares of common stock to seven investors for stock subscriptions payable totaling $126,742.

7.In January 2017, the Company issued 12,947,500 shares of its common stock and 12,947,500 warrants to purchase shares of common stock to two investors for stock subscriptions payable totaling $10,358.

8.On January 19, 2017, the Company issued 5,000,000 shares of its common stock and 5,000,000 warrants to purchase common stock to an investor for $1,000 cash.

9.On January 24, 2017, the Company entered into an agreement with a former employee to issue 2,082,190 shares of the Company’s common stock in settlement of accrued salaries of $208,219, and recognized a gain on extinguishment of liabilities of $207,803. On that same date, the Company also issued 28,625,000 shares of its common stock and 28,625,000 warrants to purchase common stock to a consultant in payment of services valued at $5,725.

10.On February 5, 2017, the Company issued 12,500,000 shares of its common stock and 12,500,000 warrants to purchase shares of common stock to an investor for cash of $2,500.

11.On February 27, 2017, the Company issued 12,500,000 shares of its common stock and 12,500,000 warrants to purchase shares of common stock to an investor for cash of $2,500.

12.On March 4, 2017, the Company issued 1.5 billion shares (denominated as shares of Class B common stock) to Maple Resources Corporation, a related party, to acquire all of Maple’s right, title and interest in plans to build a $450 million, 50,000 bpd capacity crude oil refinery in Pecos County, Texas.

13.On March 9, 2017, the Company issued 37,000,000 shares of its common stock to a lender in conversion of debt of $28,682 and issued 96,154 shares of its common stock and 96,154 warrants to purchase shares of common stock to an investor for cash of $500.

14.On March 16, 2017, the Company issued a total of 5,263,158 shares of its common stock and 5,263,158 warrants to purchase shares of common stock to an investor for cash of $10,000 and services valued at $9,736.

15.

On April 3, 2017, the Company issued a total of 6,666,667 shares of its common stock and 6,666,667 warrants to purchase shares of common stock to four investors for cash of $60,000 and issued 1,666,667 shares of its common stock to an investor for services valued at $88,667.

16.

Effective April 19, 2017, the Company issued and delivered to JSJ Investments, Inc. a 12% convertible note in the principal amount of $145,000. The note was issued at a discount, resulting in the Company’s receipt of $134,000. The holder of the note, 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 $.03 per share of common stock and (ii) thereafter at a 40% discount from the average of the three lowest trading prices during the 25

4. On June 19, 2019, we closed a financing with Odyssey Capital Funding LLC for a 10% convertible note in the principal amount of $250,000. The holder of the note was entitled to 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. On October 19, 2017, Vista Capital Investments, LLC acquired the note from JSJ Investments, Inc. and we issued a replacement note to Vista Capital Investments, LLC for the note balance of $153,724.54 with an extension of the maturity date to April 19, 2018.

 

5. On May 8, 2019, we closed a financing with Odyssey Capital Funding LLC for a 10% convertible note in the principal amount of $100,000. The holder of the note was entitled to 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.

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6. On February 21, 2019, we closed a financing with GS Capital Partners, LLC for a 10% convertible note in the principal amount of $110,000. During the first 180 days after issuance, the holder of the note was entitled to convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock at a price of $80 per share; thereafter, the conversion price was equal to a 40% discount from the lowest trading price during the 20 days prior to conversion.

 

17.On May 2, 2017, the Company issued 8,000,000 shares of its common stock7. On January 22, 2019, we closed a financing with JSJ Investments Inc. for a 12% convertible note in the principal amount of $125,000. The holder of the note was entitled to an investor for services valued at $136,000.

18.Effective May 15, 2017, the Company issued and delivered to Eagle Equities, LLC a 8% convertible note in the principal amount of $115,000. The note was issued at a discount, resulting in the Company’s receipt of $100,000. The holder of the note, 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 pricing for the 20 days prior to conversion. Prior to the 180th day after issuance, the conversion price cannot be less than a floor of $.03 per share of common stock.

19.On May 16, 2017, the Company issued a total of 62,846,918 shares of its common stock to three investors for common stock payable of $307,918 and issued 440,000 shares of its common stock to an investor for accrued compensation of $44,000. Also on that same date, the Company issued and delivered to Crown Bridge Partners, LLC an 8% convertible note in the principal amount of $60,000. The note was issued at a discount, resulting in the Company’s receipt of $50,000. The holder of the note, 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 pricing for the 20 days prior to conversion. Prior to the 180th day after issuance, the conversion price cannot be less than a floor of $.03 per share of common stock.

20.Effective May 24, 2017, the Company issued and delivered to GS Capital Partners, LLC a 8% convertible note in the principal amount of $173,000. The note was issued at a discount, resulting in the Company’s receipt of $150,000. The holder of the note, 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 $.03 per share of common stock and (ii) thereafter at a 40% discount from the average of the three lowest trading price during the 25 days prior to conversion.

21.On May 26 and 27, 2017, the Company issued a total of 353,359,992 shares of its common stock to seventeen investors in the cashless exercise of 353,359,992 warrants to purchase shares of common stock.

22.On June 19, 2017, the Company issued 11,250,000 shares of its common stock to an investor for services valued at $91,125.

23.On June 19, 2017, the Company issued a total of 24,750,000 shares of its common stock to two investors in payment of convertible preferred stock of $137,500 and accrued dividends payable of $291,207.

24.On June 20, 2017, the Company issued 16,000,000 shares of its common stock to an investor in payment of a convertible note payable of $120,000 and accrued interest payable of $119,365.
25.

Effective July 7, 2017, the Company issued and delivered to JSJ Investments Inc a 12% convertible note in the principal amount of $125,000. The note was issued at a discount, resulting in the Company’s receipt of $118,750 of net proceeds, prior to expenses. The Company can redeem the note at any time prior to 90 days from the issuance date at a redemption price of 120% plus accrued interest. The redemption price thereafter increases to 125%, plus accrued interest, until the 120th day from issuance, and thereafter increases to a redemption price of 145% plus accrued interest until the 180th day after issuance and 150% plus accrued interest until the maturity date of March 30, 2018. The holder of the note, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of our common stock at a price of no lower than $.03 per share of common stock until the 180th day after issuance and thereafter at a price 40% discount from the lowest trading prices during the 20 days prior to conversion. The note also contains penalty provisions in the event of our default in repayment of the note (if not converted by the holder into shares of common stock) on the maturity date of March 30, 2018.

26.

On September 7, 2017, the Company issued and delivered to Auctus Fund, LLC a 12% convertible note in the principal amount of $115,000. The note was issued at a discount, resulting in the Company’s receipt of $105,000 of net proceeds, prior to expenses. The Company can redeem the note at any time prior to 90 days from the issuance date at a redemption price of 125% plus accrued interest. The redemption price thereafter increases to 135% until the 180th day after issuance. The holder of the note, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of our common stock at a 42% discount from the lowest trading price during the 20 days prior to conversion.

8. On January 14, 2019, we closed a financing with One44 Capital LLC for a 12% convertible note in the principal amount of $120,000. The holder of the note was entitled to 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 $30 per share during the first six months after issuance).

9. On January 8, 2019, we closed a financing with Geneva Roth Remark Holdings, Inc. for a 9% convertible note in the principal amount of $136,000. The holder of the note was entitled to convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock at a 21% discount from the average of the three lowest trading prices during the 20 days prior to conversion.

10. Effective September 18, 2018, we facilitated the purchase by GS Capital Partners, LLC of our outstanding convertible note in the original principal amount of $120,000 previously issued to One44 Capital LLC for a price equal to the lesser of (i) the lowest trading price during the previous 25 trading day period ending on the latest complete trading day prior to the date of the note and (ii) 55% of the average of the two lowest trading prices for our common stock during the 25 trading day period ending on the latest complete trading day prior to the conversion date. The note also contains penalty provisions in the event of our default in repayment of the note (if not converted by the holder into shares of common stock) on the maturity date of June 1, 2018.

27.

On September 18, 2017, the Company issued and delivered to Power Up Lending Group Ltd. a 12% convertible note in the principal amount of $123,500. After payment of lender expenses of $11,000, the Company received net proceeds of $112,500. The Company may redeem the note during the first 30 days after issuance at a redemption price of 120% plus accrued interest. The redemption price thereafter increases by an additional 5% each 30 days thereafter until the 180thday after issuance (at which date the note cannot thereafter be prepaid). The holder of the note, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of our common stock at a price equal to 61% of the average of the two lowest trading prices for our common stock during the 20 trading day period ending on the latest complete trading day prior to the conversion date. The note also contains penalty provisions in the event of our default in repayment of the note (if not converted by the holder into shares of common stock) on the maturity date of June 20, 2018.

28.

Effective September 18, 2017, the Company issued 10,000,000 shares of its common stock to William B. Short in consideration of Mr. Short’s assumption of the ownership, and liabilities relating to, our LatAm Services, LLC former subsidiary.

29.

On October 19, 2017, the Company issued and delivered to Vista Capital Investments, LLC a 12% convertible note in the original maximum principal amount of $550,000 (consisting of an initial advance of $165,000 on such date and possible future advances). The holder of the note, 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 25 days prior to conversion. The Company may prepay the note at a 45% redemption premium during the first 90 days after issuance. The maturity date for each advance is two years from the date of advance. On December 14, 2017, the Company received proceeds of $100,000 from a second advance. The terms of the second advance are the same as those for the initial advance, with a maturity date two years from the date of the advance.

30.

On November 15, 2017, the Company issued and delivered to Power Up Lending Group Ltd. a 8% convertible note in the principal amount of $111,773. The note was issued at a discount, resulting in the Company’s receipt of $100,000. The holder of the note, 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 $.03 per share of common stock and (ii) thereafter at a 40% discount from the average of the three lowest trading price during the 25 days prior to conversion. The Company may prepay the note at a 18% redemption premium during the first 60 days after issuance, increasing to 25% after 120 days from issuance and 33% after 180 days from issuance.  

_______

All issuances other than Item 9 above were pursuant to the exemption provided by Section 4(2)redemption price of such note ($182,342.47). We issued to GS Capital Partners a 10% convertible note in the principal amount of $70,000 in consideration of its payment of the Securities Act for sales not involvingredemption premium to One44 Capital and related discount and expenses. GS Capital Partners was entitled to convert the unpaid principal balance of, and accrued interest on, the new convertible note into shares of common stock (i) during the first 180 days, at a public offering. The issuances pursuant to Item 9 were pursuant to Section 3(a)(10)price of $30 per share of common stock and (ii) thereafter at a 40% discount from the average of the Securities Act.three lowest trading price during the 25 days prior to conversion.

 

11. On September 13, 2018, we issued to Vista Capital Investments, LLC a 12% convertible note in the original maximum principal amount of $550,000, prior to original discount of $50,000 (consisting of an initial advance of $100,000 on such date and possible future advances, less the prorated discount). The holder of the note was entitled to 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 25 days prior to conversion.

12. On September 13, 2018, we issued and delivered to GS Capital Partners, LLC a 10% convertible note in the principal amount of $110,000. The holder of the note was entitled to 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 $30 per share of common stock and (ii) thereafter at a 40% discount from the average of the three lowest trading price during the 25 days prior to conversion.

13. On March 26, 2018, we completed the funding of a 10% convertible note issued to One44 Capital LLC in the principal amount of $120,000. The holder of the note was entitled to convert the unpaid principal balance of, and accrued interest on, the note into shares of our common stock at a price of no lower than $30 per share of common stock until the 180th day after issuance and thereafter at a price 40% discount from the lowest trading price during the 20 trading days prior to conversion.

14. On March 16, 2018, we completed the funding of a 12% convertible note issued to JSJ Investments Inc. in the principal amount of $125,000. The holder of the note was entitled to convert the unpaid principal balance of, and accrued interest on, the note into shares of our common stock at a price of no lower than $30 per share of common stock until the 180th day after issuance and thereafter at a price 40% discount from the lowest trading prices during the 20 days prior to conversion.

15. On March 22, 2018, we completed the funding of an 8% convertible note in the principal amount of $220,000 issued to Auctus Fund, LLC. The holder of the note was entitled to convert the unpaid principal balance of, and accrued interest on, the note into shares of our common stock at a price of no lower than $30 per share of common stock until the 180th day after issuance and thereafter at a price equal to the lesser of (i) the lowest trading price during the previous 25 trading day period ending on the latest complete trading day prior to the date of the note and (ii) 55% of the average of the two lowest trading prices for our common stock during the 25 trading day period ending on the latest complete trading day prior to the conversion date.

16. On February 21, 2018, we closed a financing with Power Up Lending Group Ltd. for a 8% convertible note in the principal amount of $83,000. The holder of the note was entitled to convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock at a 39% discount from the average of the two lowest trading price during the 20 days prior to conversion.

17. Effective January 24, 2018, the Company issued and delivered to GS Capital Partners, LLC an 8% convertible note in the principal amount of $173,000. The holder of the note was entitled to 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 $.03 per share of common stock and (ii) thereafter at a 40% discount from the average of the three lowest trading price during the 25 days prior to conversion.

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Item 16. Exhibits and Financial Statement Schedules

 

Exhibit No.

 

Description

3.1

 

Amended and Restated Articlesrestated articles of Incorporationincorporation (1)

3.2

 

AmendedAmendment to amended and Restated By-lawsrestated articles of incorporation (2)

3.3

Certificate of designation of Series A Preferred Stock (3)

3.4

Certificate of designation of Series B Convertible Preferred Stock (4)

3.5

Bylaws (1)

4.1

 

Form of Series A Warrant to Purchase Common Stock of registrant (2)(4)

4.2

 

Replacement Convertible Note due April 19, 2018, payable to Vista Capital Investments, LLC (3)Form of Series B/C Warrant (4)

4.3

 

8% Convertible Note due May 15, 2018, payable to Eagle Equities, LLC (3)Form of Series D Warrant (4)

4.4

 

8% Convertible Note due May 16, 2018, payable to Crown Bridge Partners, LLC (3)Form of Placement Agent Warrant (5)

4.5

 

8% Convertible Note due May 24, 2018, payableEighth Amendment to Promissory Notes, dated December 30, 2021, with GS Capital Partners, LLC (3)(7)

4.6

 

8% Convertible Note due December 12, 2017, payable to Crown Bridge10% promissory note, dated February 22, 2021, with GS Capital Partners, LLC (4)(6)

4.7

 

12% Convertible Note due10% promissory note, dated March 30, 2018, payable to8, 2021, with JSJ Investments, Inc. (5)(6)

4.8

 

12% Convertible Note due June 1, 2018, payable to Auctus Fund, LLC (3)

4.9

12% Convertible Note due June 20, 2018, payable to Power Up Lending Group Ltd. (3)

4.10

Convertible Note10% promissory note, dated October 19, 2017, issued toMarch 11, 2021, with Vista Capital Investments, LLC (3) Inc. (6)

5.1

 

Opinion of Hallett & Perrin (3)(7)

10.1

 

StockSecurities Purchase Agreement, dated March 4, 2017, by and between the registrant and Maple Resources Corporation (7)July 15, 2021, with institutional investor (5)

10.2

 

EquitySecurities Purchase Agreement, dated June 12, 2017, by and between the registrant and Crown Bridge Partners, LLCDecember 22, 2021, with institutional investor (4)

10.3

 

Registration Rights Agreement, dated June 12, 2017, by and between the registrant and Crown Bridge Partners, LLC (3)December 22, 2021, with institutional investor (4)

10.4

 

Amendment No. 1 to Equity PurchaseReduction of Exercise Price Agreement, dated October 9, 2017, by and between the registrant and Crown Bridge Partners, LLC (7)December 22, 2021, with institutional investor (4)

21.1

 

Subsidiaries (3)(7)

23.1

 

Consent of M&K CPAs LLP (7)

101.INS*23.2

 

XBRL Instance Document.Consent of Hallett & Perrin (included in exhibit 5.1)

101.SCH*

 

XBRL Taxonomy Extension Schema.

101.CAL*101

 

XBRL Taxonomy Extension Calculation Linkbase.Interactive data files pursuant to Rule 405 of Regulation S-T.

101.DEF*101.INS

 

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

101.SCH

Inline XBRL Taxonomy Extension Definition Linkbase.Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB*101.DEF

 

Inline XBRL Taxonomy Extension Label Linkbase.Definition Linkbase Document.

101.PRE*101.LAB

 

Inline XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase.

______________ 

*

Filed as exhibit to the Annual Report on Form 10-K, filed with the SEC on January 13, 2017. In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 shall be deemed “furnished” and not “filed”.Linkbase Document.

(1)104

Filed as exhibit to Report on Form 8-K filed on April 3, 2017.

(2)

FiledCover Page Interactive Data File (formatted as exhibit to Report on Form 10-K filed on August 11, 2011.inline XBRL and contained in Exhibit 101).

(3)

Previously filed.

(4)

Filed as exhibit to Report on Form 8-K filed on June 13, 2017.

(5)

Filed as exhibit to Report on Form 10-K filed on July 28, 2017.

(6)

Filed as exhibit to Report on Form 8-K filed on March 10, 2017

(7)

______________

(1) Filed as exhibit to 8-K filed on April 3, 2017

(2) Filed as exhibit to 8-K filed on October 12, 2018

(3) Filed as exhibit to 8-K filed on August 2, 2019

(4) Filed as exhibit to 8-K filed on December 23, 2021

(5) Filed as exhibit to 8-K filed on July 19, 2021

(6) Filed as exhibit to 10-Q filed on March 15, 2021

(7) Filed herewith

 

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Item 17. Undertakings.

 

The undersigned registrant hereby undertakes:

 

 

(1)

To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

 

 

(i)

To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

 

(ii)

To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

 

(iii)

To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement or any material change to such information in the registration statement.

 

 

(2)

That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

(3)

To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

 

(4)

That, for purposes of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424 (b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness, provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

 

(5)

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

(6)

That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this amendment to registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Dallas,Austin, Texas on January 19, 2018.6, 2022.

 

 

MMEX RESOURCES CORPORATION

 

 

By:

/s/ Jack W. Hanks

Name:

Jack W. Hanks

Title:

President, Chief Executive Officer, Chief Financial Officer and Director

 

Pursuant to the requirements of the Securities Act of 1933, this amendment to registration statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

 

Title

 

Date

 

/s/ Jack W. Hanks

 

President, Chief Executive Officer

 

January 19, 20186, 2022

Jack W. Hanks

 

Chief Financial Officer and Director

 

/s/ Bruce N. Lemons

 

Director

 

January 19, 20186, 2022

Bruce N. Lemons

 

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