The accompanying condensed consolidated financial statements of MMEX Resources Corporation and subsidiaries (the “Company”) are unaudited and have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions for Form 10-Q. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements.
In the opinion of management, the condensed consolidated financial statements contain all material adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial condition, results of operations, and cash flows of the Company for the interim periods presented.
Operating results and cash flows for any interim period are not necessarily indicative of the results that may be expected for other interim periods or the full fiscal year. These condensed consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended April 30, 2016 filed with the Securities and Exchange Commission (“SEC”).
Notes to Condensed Consolidated Financial Statements
Six Months Ended October 31, 2016
(Unaudited)
NOTE 1 – BACKGROUND, ORGANIZATION AND BASIS OF PRESENTATION
MMEX Resources Corporation (the “Company” or “MMEX”) was formed in the State of Nevada on May 19, 2005 as Inkie Entertainment Group, Inc. Subsequently, the Company amended its articles of incorporation to change its name to MMEX Resources Corporation and to authorize the Company to issue up to 3,000,000,000 common shares and 10,000,000 preferred shares. The changes in the number of authorized shares of the Company have been given retroactive effect in the accompanying consolidated financial statements.
The Board of Directors of the Company has decided to focus efforts on the oil, gas, refining and electric power business in the United States and Latin America.
The accompanying condensed consolidated financial statements include the accounts of the following entities, all of which the Company maintains control through a majority 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 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”) pursuant to which it assigned MCCH to LatAm. With the assignment of MCCH to LatAm, the Company has exited the Hunza coal project to focus on energy related projects under its new business plan.
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, 2016 filed with the SEC on January 13, 2017.
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 estimate the fair value of the derivatives using multinomial lattice models that value the warrants based on a probability weighted cash flow model using projections of the various potential outcomes. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility and management’s estimates of various potential equity financing transactions. These inputs are subject to significant changes from period to period and to management's judgment; therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material.
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
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:
October 31, 2016
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
$
|
362,511
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
362,511
|
|
April 30, 2016
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
$
|
395,619
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
395,619
|
|
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 three months and six months ended October 31, 2016, potential dilutive shares 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.
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 prior year periods have been reclassified to conform with the current year periods 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.
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 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 $30,364,670 and a total stockholders’ deficit of $2,932,519 at October 31, 2016, 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.
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, indicate that we may be unable 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
During the past few years, Tydus Richards, the former Chairman of our board of directors and shareholder, made certain payments on behalf of the Company. The Company has partially reimbursed Mr. Richards for these advances. As of October 31, 2016 and April 30, 2016, a remaining balance payable of $31,633 is included in accrued expenses – related party.
On October 9, 2014, convertible notes payable in default to an accredited investor of $1,650,000, $120,000 and $180,000 were assigned to The Maple Gas Corporation, a related party owned by Mr. Jack W. Hanks, a director and officer of the Company. On May 8, 2015, The Maple Gas Corporation converted the notes into 194,999,999 common shares of the Company at $0.01 per share, which resulted in a loss on extinguishment of debt of $975,000. The issuance of the common shares to Maple Structure Holdings was approved by the Company’s Board of Directors Resolution dated May 18, 2015, and the shares were issued on May 2, 2016. At April 30, 2016, common stock payable included an obligation of $2,925,000 for the issuance of the shares.
Accounts payable to related parties, comprised of amounts payable to The Maple Gas Corporation, totaled $4,760 and $0 at October 31, 2016 and April 30, 2016, respectively.
Accrued expenses (see Note 6) to related parties totaled $67,545 and $64,420 as of October 31, 2016 and April 30, 2016, respectively.
NOTE 5 –
PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at:
|
|
October 31,
2016
|
|
|
April 30,
2016
|
|
|
|
|
|
|
|
|
Computer software and hardware
|
|
$
|
25,023
|
|
|
$
|
25,023
|
|
Less accumulated depreciation and amortization
|
|
|
(25,023
|
)
|
|
|
(24,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
386
|
|
Depreciation and amortization expense totaled $62 and $375 for the three months ended October 31, 2016 and 2015, respectively, and $386 and $1,261 for the six months ended October 31, 2016 and 2015, respectively.
NOTE 6 –
ACCRUED EXPENSES
Accrued expenses consisted of the following at:
|
|
October 31,
2016
|
|
|
April 30,
2016
|
|
|
|
|
|
|
|
|
Accrued payroll
|
|
$
|
240,059
|
|
|
$
|
240,309
|
|
Accrued consulting
|
|
|
75,633
|
|
|
|
75,633
|
|
Accrued interest
|
|
|
742,529
|
|
|
|
670,324
|
|
Other
|
|
|
62,541
|
|
|
|
62,541
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,120,762
|
|
|
$
|
1,048,807
|
|
NOTE 7 – NOTES PAYABLE
Notes payable, currently in default, consist of the following at:
|
|
October 31,
2016
|
|
|
April 30,
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 December 31, 2010, with interest at 10%
|
|
|
25,000
|
|
|
|
25,000
|
|
Note payable to an unrelated party, maturing January 27, 2012, with interest at 25%
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
375,000
|
|
|
$
|
375,000
|
|
Accrued interest payable on notes payable, currently in default, totaled $297,102 and $276,477 at October 31, 2016 and April 30, 2016, respectively.
Convertible notes payable, currently in default, consist of the following at:
|
|
October 31,
2016
|
|
|
April 30,
2016
|
|
|
|
|
|
|
|
|
Note payable to an accredited investor, 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
|
|
$
|
120,000
|
|
|
$
|
120,000
|
|
Note payable to an unrelated party, maturing March 18, 2014, with interest at 10%
|
|
|
75,001
|
|
|
|
75,001
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
195,001
|
|
|
$
|
195,001
|
|
Accrued interest payable on convertible notes payable, currently in default, totaled $129,272 and $112,058 at October 31, 2016 and April 30, 2016, respectively.
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 was amortized as additional interest expense over the term of the notes.
NOTE 8 – CONVERTIBLE PREFERRED STOCK
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. 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 the conversion took place at below the market price and not within the terms of the agreement on the date of conversion, a loss of $75,328 was recorded. As of October 31, 2016 and April 30, 2016, the remaining face value of the Preferred Stock was $137,500. Accrued dividends on the Preferred Stock totaled $316,165 and $281,789 as of October 31, 2016 and April 30, 2016, respectively.
The Company recorded interest expense, which included amortization of debt discount on certain debt in prior years, totaling $80,700 and $36,107 for the three months ended October 31, 2016, respectively, and $116,939 and $456,997 for the six months ended October 31, 2016 and 2015, respectively.
NOTE 9 – DERIVATIVE LIABILITIES
In a series of subscription agreements, we have issued warrants that contain certain anti-dilution provisions that we have identified as derivatives.
During the six months ended October 31, 2016, we had the following activity in our derivative liabilities:
Balance, April 30, 2016
|
|
$
|
395,619
|
|
Change in fair value of derivative liabilities
|
|
|
(33,108
|
)
|
|
|
|
|
|
Balance, October 31, 2016
|
|
$
|
362,511
|
|
The Company calculated the fair value of the derivatives 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.
Key inputs and assumptions used in valuing the Company’s derivative liabilities are as follows for issuances of warrants:
|
·
|
Stock prices on all measurement dates were based on the fair market value
|
|
·
|
Risk-free interest rates ranging from 1.03% – 2.49%
|
|
·
|
The probability of future financing was estimated at 100%
|
|
·
|
Computed volatility ranging from 103% to 249%
|
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 10 – STOCKHOLDERS’ DEFICIT
Authorized Shares
As of April 6, 2016, the Company amended its articles of incorporation to increase its authorized shares to 1,000,000,000 common shares and 10,000,000 preferred shares, and subsequently increased its authorized common shares to 3,000,000 shares (Note 14). The increase in authorized shares has been given retroactive effect in the accompanying condensed consolidated financial statements for all periods presented.
Stock Issuances
On May 2, 2016, the Company issued 194,999,999 shares of its common stock to a related party pursuant to the conversion of notes payable in default (see Note 4), reducing stock subscriptions payable by $2,925,000.
As part of a private placement to qualified investors, the Company issued 1,096,397 shares of its common stock on July 12, 2016 to an investor for stock subscriptions payable of $10,000.
On October 31, 2016, the Company issued 7,000,000 shares of its common stock as a settlement fee valued at $34,300 to an institution lender pursuant to a Settlement Agreement and Stipulation (see Note 11).
Common Stock Payable
During the six months ended October 31, 2016, the Company completed subscription agreements for common stock and warrants with qualified investors in a private placement for cash of $32,384. The shares of common stock were issued subsequent to October 31, 2016, and common stock payable included $32,384 at October 31, 2016 related to these transactions. The attached warrants were identified as derivatives, resulting in their inclusion in the derivative liabilities of $362,511 at October 31, 2016 (see Note 9).
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 six months ended October 31, 2016.
A summary of stock option activity during the six months ended October 31, 2016 is presented below:
|
|
Shares
|
|
|
Weighted Average
Exercise Price
|
|
|
Weighted Average
Remaining Contractual Life (Years)
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, April 30, 2016
|
|
|
2,000,000
|
|
|
$
|
0.35
|
|
|
|
5.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Canceled / Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, October 31, 2016
|
|
|
2,000,000
|
|
|
$
|
0.35
|
|
|
|
5.35
|
|
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 three months and six months ended October 31, 2016 and 2015 related to stock option grants. There was no unrecognized stock option expense at October 31, 2016.
Warrants
The Company has issued warrants to qualified investors in a private placement, for debt discounts 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.
A summary of warrant activity during the six months ended October 31, 2016 is presented below:
|
|
Shares
|
|
|
Weighted Average
Exercise Price
|
|
|
Weighted Average
Remaining Contractual Life (Years)
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, April 30, 2016
|
|
|
14,811,362
|
|
|
$
|
0.01
|
|
|
|
5.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
2,518,445
|
|
|
$
|
0.01
|
|
|
|
|
|
Canceled / Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, October 31, 2016
|
|
|
17,329,807
|
|
|
$
|
0.01
|
|
|
|
5.33
|
|
Common Stock Reserved
At October 31, 2016, 17,329,807 shares of the Company’s common stock were reserved for issuance of outstanding warrants.
NOTE 11 – SETTLEMENT AGREEMENT AND STIPULATION
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 has purchased certain outstanding payables between the Company and designated vendors totaling $109,391 (the “Payables” or “Claims”) and will exchange the portion of such Payables assigned for a Settlement Amount payable in common shares of the Company.
In settlement of the Claims, the Company shall issue and deliver to RCP, in one or more tranches as necessary, 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. 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.
Subsequent to October 31, 2016, a total of 452,000,000 shares of the Company’s common stock were issued to the RCP (see Note 14).
NOTE 12 – NON-CONTROLLING INTERESTS
On September 23, 2010, the Company, through a reverse merger, acquired 100% of the outstanding shares of Maple Carpenter Creek Holdings, Inc., ("MCCH"), a holding Company, with an 80% interest in Maple Carpenter Creek, LLC ("MCC"), which in turn owned a 95% interest in the subsidiary, Carpenter Creek, LLC ("CC"), and a 98.12% interest in Armadillo Holdings Group Corp. ("AHGC"), which in turn owned an 80% interest in Armadillo Mining Corp. ("AMC"). The non-controlling interest of 1.88% in AHGC was acquired by MCCH on December 21, 2010 in exchange for 31,334 shares of the Company’s common stock resulting in 100% ownership of AHGC. On March 22, 2011, AHGC acquired 14.6% of AMC and on April 30, 2012, an additional 4% interest for a total of 98.6% based upon agreement with the minority interest holder to reduce their interest based upon proportionate share of additional capital contributed to AMC.
As of April 13, 2016, the Company assigned AMC to an irrevocable trust (the "Trust"), whose beneficiaries are the existing shareholders of MMEX. 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”) pursuant to which it assigned MCCH to LatAm. With the assignment of MCCH to LatAm, the Company has exited the Hunza coal project to focus on energy related projects under its new business plan.
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 for the minimum lease payment of $62,541 for the January 2010 payment.
NOTE 14 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, all subsequent events have been reported through the filing date as set forth below.
Refinery Transaction
On March 4, 2017, MMEX Resources Corporation (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 “Project”). Pursuant to the Refinery Transaction, the Company agreed to acquire the Rights in exchange for the issuance of 7,000,000,000 new common shares (the “Purchased Shares”).
The Refinery Transaction provides 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 is to be issued once the Company’s Articles of Incorporation are amended to increase the number of authorized shares of common stock, as more particularly described below. In addition, the Second Tranche amount of shares will be adjusted (up or down) subject to valuation of the Refinery Transaction by a third party outside consultant.
Completion of the Project is subject to the receipt of required governmental permits and completion of required debt and equity financing.
Amendments of Articles of Incorporation
As of November 29, 2016, the Company amended its articles of incorporation to increase its authorized common shares to 3,000,000,000 shares.
On March 7, 2017, the holders of more than 50.1% of the outstanding shares of common stock of the Company executed their written consent in lieu of special meeting approving an amendment and restatement of the articles of incorporation to provide for an increase in the authorized shares of common stock from 3,000,000,000 to 10,000,000,000 shares. In addition, the articles of incorporation will be 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 will be reclassified as Class A Shares, except that all of the Purchased Shares issued or to be issued in the Refinery transaction will be 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.
Private Placement
As the Company continues to expand its business and implement its business strategy, its current monthly cash flow requirements will exceed its near term cash flow from operations. In order to fund its development costs, the Company initiated in fiscal year 2016 a private placement to qualified investors for cash and services. Through the date of the filing of this report, $118,230 cash and $60,000 in services had been received, including $49,200 cash from related parties, for a total of 41,784,320 common shares of the Company and a total of 43,025,313 warrants. The warrants entitle the investors to purchase common shares at exercise prices of $0.0001 and $0.01 per share through March 1, 2022. Of the common shares issued, 1,096,397 shares were issued in July 2016 and a total of 40,687,923 shares were issued in December 2016 and January 2017.
Settlement Agreement
As discussed in Note 11, on October 28, 2016, the Company entered into a Settlement Agreement) with RCP. Pursuant to the Settlement Agreement, as amended, RCP has purchased certain outstanding payables from the Company for shares of common stock of the Company.
The Company’s creditors received a total of $84,782 pursuant to the Settlement Agreement. Beginning in November 2016, we have issued a cumulative total of 489,000,000 common shares pursuant to the Settlement Agreement and, as of March 9, 2017, have terminated any further obligation to issue shares. Our creditors will not receive further funding from the Settlement Agreement.
Other Issuances of Common Stock
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.
On January 24, 2017, the Company issued 28,625,000 shares of its common stock to a consultant in payment of services valued at $5,725.
Subsequent to October 31, 2016, the Company issued a total of 30,000,000 shares of its common stock to investors for cash of $6,000.