NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL YEARS ENDED APRIL 30, 2015 AND 2014
NOTE 1 – BACKGROUND, ORGANIZATION, AND BASIS OF PRESENTATION
On May 25, 2011, the Board of Directors approved a 1 for 10 reverse stock split of its common stock. All references in the accompanying financial statements to the number of shares of common stock and loss per share have been retroactively restated to reflect the reverse stock split.
Organization
MMEX Resources Corporation (the Company or "MMEX") was formed in the State of Nevada on May 19, 2005 as Inkie Entertainment Group, Inc., for the purpose of engaging in the production, distribution and marketing of filmed entertainment products. On January 15, 2008, the Company changed its name to Quantum Information, Inc. In January 2009, the Company announced that it would transition out of the filmed entertainment products business and into the coal business. As part of that transition, on January 14, 2009, the Company sold all of its assets in exchange for the surrender to the Company of 400,000 shares of the Company's common stock, and the assumption of all of the Company's liabilities. The Company also changed its name to MGMT Energy, Inc. on February 5, 2009 and to Management Energy, Inc. on May 28, 2009 to better reflect the Company's business focus. On September 23, 2010, the Company, through a reverse merger, acquired 100% of the outstanding shares of Maple Carpenter Creek Holdings, Inc., ("MCCH") a Delaware Corporation, organized on October 15, 2009 as a holding Company with an 80% interest in Maple Carpenter Creek, LLC ("MCC"), which in turn owns 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 at April 30, 2012 a 98.6% interest in Armadillo Mining Corp. ("AMC"). The non-controlling interest of 1.88% in AHGC was subsequently acquired by MCCH on December 21, 2010 in exchange for 31,334 shares of MMEX.
On February 22, 2011, the Company amended its articles of incorporation to change the corporate name from Management Energy, Inc. to MMEX Mining Corporation. On April 6, 2016 the Company amended its articles of incorporation to change the corporate name from MMEX Mining Corporation to MMEX Resources Corporation and to authorize the Company to issue up to 1,000,000,000 common shares and 10,000,000 preferred shares.
Merger with Maple Carpenter Creek Holdings, Inc.
On September 21, 2010, MMEX entered into a merger agreement with Maple Carpenter Creek Holdings, Inc. ("MCCH") that closed on September 23, 2010. Under the terms of the merger agreement, MCCH merged with a wholly owned subsidiary of MMEX, MCC Merger, Inc. ("MCCM"), which was formed just prior to the merger and subsequently dissolved, in exchange for the issuance of 6,500,000 shares of MMEX, common stock to the owners of MCCH, of which 5,000,000 shares were issued on October 8, 2010 and 1,500,000 shares issued on January 12, 2011. The merger resulted in the owners of MCCH gaining control of MMEX.
The equity structure reflects the equity structure of the Company, the legal parent, and the equity structure of MCCH, the accounting acquirer, as restated using the exchange ratios established in the merger agreement to reflect the numbers of shares of the legal parent. References to the "Company" in these notes refer to MMEX and its wholly owned subsidiary, MCCH, as well as the subsidiaries discussed below.
Armadillo Group Holdings Corporation: A 78.12% ownership of Armadillo Mining Corp. ("AMC") in Colombia. As of the date of closing of the merger, AMC had exclusive options to acquire two metallurgical coal mines in the Cundinamarca province of Colombia: (i) Caparrapi is a permitted mine with minimum production and with a resource potential of 11 million metric tons; (ii) Yacopi has resource potential of 40 million metric tons. AMC has terminated the exclusive options for the Caparrapi and Yacopi mines.
Nature of Business
The MMEX Board of Directors have made the decision to focus the Company efforts into the oil, gas, refining and electric power business in the U.S. and in Latin America.
Basis of Presentation
The accompanying condensed consolidated financial statements include the accounts of the following entities, all of which the Company maintains control through a majority ownership:
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Form of
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State of
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Name of Entity
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%
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|
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Entity
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Incorporation
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Relationship
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MMEX Resources Corporation ("MMEX")
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-
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Corporation
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Nevada
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Parent
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MCC Merger, Inc. ("MCCM")
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100
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%
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Corporation
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Delaware
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|
Holding Sub
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Maple Carpenter Creek Holdings, Inc. ("MCCH")
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100
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%
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Corporation
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Delaware
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Subsidiary
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|
Maple Carpenter Creek, LLC ("MCC")
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80
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%
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LLC
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Nevada
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Subsidiary
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Carpenter Creek, LLC ("CC")
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95
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%
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LLC
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Delaware
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|
Subsidiary
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|
Armadillo Holdings Group Corp. ("AHGC")
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100
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%
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Corporation
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British Virgin Isl.
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Subsidiary
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Armadillo Mining Corp. ("AMC")
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98.6
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%
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Corporation
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British Virgin Isl.
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Subsidiary
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|
The condensed consolidated financial statements herein contain the operations of the above listed subsidiaries as of the dates and for the periods as indicated. All significant inter-company transactions have been eliminated in the preparation of these financial statements.
These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein.
The Company has adopted a fiscal year end of April 30th.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its aforementioned subsidiaries. See
Recently Issued Accounting Pronouncements
("ASC 810") below for additional information on Non-controlling interests in Consolidated Financial Statements. All significant intercompany accounts and transactions have been eliminated in consolidation.
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
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:
Furniture and fixtures
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5 years
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Machinery and equipment
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5 years
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Software and hardware
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5 years
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Maintenance and repairs will be 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 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.
Fair value of financial instruments
Under FASB ASC 820-10-05, the Financial Accounting Standards Board 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 and accrued expenses reported on the balance sheet are estimated by management to approximate fair value primarily due to the short term nature of the instruments. The Company had no other items that required fair value measurement on a recurring basis.
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, 2015 and 2014, 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
The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss adjusted on an "as if converted" basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the periods presented, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.
Stock-based compensation
The Company adopted FASB guidance on stock based compensation upon inception at April 23, 2009. Under FASB ASC 718-10-30-2, all share-based payments to employees, including grants of employee stock options, are to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. For the fiscal years ended April 30, 2015 and 2014, the Company did not record any share based compensation.
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
Effective upon the Company's fiscal year ended April 30, 2009, the Company adopted new 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.
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.
Income or loss per share
Basic EPS 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 EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as stock options, warrants, convertible preferred stock and convertible debentures, were exercised or converted into common stock. For 2015 and 2014, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.
Loss per share is based on the weighted average number of shares outstanding of 57,188,313 for the both of the years ended April 30, 2015 and 2014.
Recently issued accounting pronouncements
Accounting standards promulgated by the
Financial Accounting Standards Board ("
FASB") are subject to change. Changes in such standards may have an impact on the Company's future financial statements. The following are a summary of recent accounting developments.
In April 2015, the FASB issued
Accounting Standards Update
("ASU") 2015-05 regarding Subtopic 350-40, "Intangibles - Goodwill and Other - Internal-Use Software." The amendments in ASU 2015-05 provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The amendments in ASU 2015-05 are effective for annual and interim periods beginning after December 15, 2015. Early adoption is permitted. The amendments in ASU 2015-05 may be applied either prospectively to all arrangements entered into or materially modified after the effective date or retrospectively. The adoption of ASU 2015-05 is not expected to have a material impact on our financial position or results of operations.
In November 2014, the FASB issued ASU No. 2014-16, "Derivatives and Hedging (Topic 815) - Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is More Akin to Debt or to Equity". ASU 2014-16 was issued to clarify how current U.S GAAP should be interpreted in evaluating the economic characteristics and risk of a host contract in a hybrid financial instrument that is issued in the form of a share. In addition, ASU 2014-16 was issued to clarify that in evaluating the nature of a host contract, an entity should assess the substance of the relevant terms and features (that is, the relative strength of the debt-like or equity-like terms and features given the facts and circumstances) when considering how to weight those terms and features. The effects of initially adopting ASU 2014-16 should be applied on a modified retrospective basis to existing hybrid financial instruments issued in a form of a share as of the beginning of the fiscal year for which the amendments are effective. Retrospective application is permitted to all relevant prior periods. ASU 2014-16 is effective fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption in an interim period is permitted. The adoption of ASU 2014-16 is not expected to have a material impact on our financial position or results of operations.
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 310-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. The amendments in this Update provide guidance in GAAP about management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company has not determined the impact of the future adoption of the provisions of ASU No. 2014-15 on its financial statements.
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 $27,633,112 and a working capital deficit of $7,657,639 at April 30, 2015, 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 period from May 1, 2009 through April 30, 2010, Tydus Richards, the former Chairman of our board of directors and shareholder, made payments totaling $71,700 on behalf of the Company. The Company reimbursed Mr. Richards $8,700 on September 3, 2009 and the remaining balance of $63,000 was outstanding as of April 30, 2010. During the first and second quarter of the current fiscal year, Mr. Richards made additional payments totaling $7,633 on behalf of the Company. On May 12, 2010, the Company reimbursed an additional $39,000 of the balance and as of April 30, 2015 and 2014, the remaining balance of $31,633 remains outstanding.
On September 4, 2010, MCCH entered into an employment agreement with the Company's CEO, Jack W. Hanks for a two year term, automatically renewable for one year terms thereafter, at an annual compensation of $300,000 per year.
On September 4, 2010, MCCH entered into a consulting agreement with Bruce N. Lemons, one of the Company's two directors, for a two year term, automatically renewable for one year terms thereafter, at an annual compensation of $170,000 per year.
Convertible notes
BNL Family Partners Convertible Notes
On September 15, 2012, the Corporation entered into a $4,500 convertible note agreement with BNL Family Partners, LLC. Mr. Bruce N. Lemons, a director of the Corporation, is a partner of BNL Family Partners. The debentures carry a 20% interest rate until maturity at September 30, 2013 and are convertible into common shares at the holder's option at $0.20 per common share. The holders may accelerate repayment of the promissory notes upon the Corporation raising additional capital of $150,000. The computed interest of $900 was added to the balance of the note and recorded as additional debt discount. During the fiscal years ended April 30, 2015 and 2014, $0 and and $497 were recorded as amortization of the debt discount into interest expense with a remaining discount balance of $0 as of April 30, 2015. In addition, the Corporation issued 4,500 Warrants at an exercise price of $0.30 per Common Share until September 15, 2015 valued at $800.
The Company allocated the proceeds from the issuance of the note to the warrants and the note based on their fair market values at the date of issuance using the Black-Scholes model. The value assigned to the warrants of $800 was recorded as an increase in additional paid-in capital. The assignment of a value to the warrants resulted in a loan discount being recorded for the same amount. The discount will be amortized over the original one year term of the Note as additional interest expense. During the fiscal years ended April 30, 2015 and 2014, $0 and $358 were recorded as amortization of the debt discount into interest expense with a remaining discount balance of $0 as of April 30, 2015.
On April 30, 2014, the Company converted the notes above into a single $48,130 convertible note agreement with BNL Family Partners (a related party); Mr. Bruce N. Lemons, a director of the Company, is a partner of BNL Family Partners. The holder may accelerate repayment of the promissory note upon the Corporation raising additional capital of $1,000,000. The holder may also convert the note into Common Shares at the holder's option at $0.025 per Common Share. As the conversion option is above the value of the stock on the date of conversion, no beneficial conversion feature was recorded with this note.
On June 20, 2014, the Corporation entered into a $10,000 convertible note agreement with BNL Family Partners, LLC. Mr. Bruce N. Lemons, a director of the Corporation, is a partner of BNL Family Partners. The debentures carry a 15% interest rate until maturity at June 20, 2015 and are convertible into common shares at the holder's option at $0.025 per common share. The Corporation issued 10,000 Warrants at an exercise price of $0.05 per Common Share until June 20, 2017 valued at $114 which was recorded as a debt discount of the same amount. During the year ended April 30, 2015, $96 was amortized into interest expense from the debt discount, resulting in a remaining debt discount of $18 as of April 30, 2015.
Delavega Trading Ltd. Convertible Notes
On August 1, 2012, the Company entered into a $13,000 convertible note agreement with Delavega Trading Ltd., Mr. Nabil Katabi, a director of the Corporation, is a control person of Delavega Trading Ltd. The debenture carries a 20% interest rate until maturity at September 30, 2013 and is convertible into common shares at the holder's option at $0.20 per common share. The computed interest of $2,600 was added to the balance of the note and recorded as additional debt discount. During the fiscal years ended April 30, 2015 and 2014, $0 and $936 was recorded as amortization of the debt discount into interest expense with a remaining balance of $0 as of April 30, 2015. In addition, the Corporation issued 13,000 Warrants at an exercise price of $0.30 per Common Share until August 1, 2015 valued at $1,292.
The Company allocated the proceeds from the issuance of the note to the warrants and the note based on their fair market values at the date of issuance using the Black-Scholes model. The value assigned to the warrants of $1,292 was recorded as an increase in additional paid-in capital. The assignment of a value to the warrants resulted in a loan discount being recorded for the same amount. The discount will be amortized over the original one year term of the Note as additional interest expense. During the fiscal years ended April 30, 2015 and 2014, $0 and $465 was recorded as amortization of the debt discount into interest expense with a remaining discount balance of $0 as of April 30, 2015.
On December 17, 2012, the Company entered into a $6,500 convertible note agreement with Delavega Trading Ltd., Mr. Nabil Katabi, a director of the Corporation, is a control person of Delavega Trading Ltd. The debenture carries a 20% interest rate until maturity at December 17, 2013 and is convertible into common shares at the holder's option at $0.20 per common share. The computed interest of $1,300 was added to the balance of the note and recorded as additional debt discount. During the fiscal years ended April 30, 2015 and 2014, $0 and $815 were recorded as amortization of the debt discount into interest expense with a remaining discount balance of $0 as of April 30, 2015. In addition, the Corporation issued 6,500 Warrants at an exercise price of $0.30 per Common Share until December 17, 2015 valued at $549.
The Company allocated the proceeds from the issuance of the note to the warrants and the note based on their fair market values at the date of issuance using the Black-Scholes model. The value assigned to the warrants of $549 was recorded as an increase in additional paid-in capital. The assignment of a value to the warrants resulted in a loan discount being recorded for the same amount. The discount will be amortized over the original one year term of the Note as additional interest expense. During the fiscal years ended April 30, 2015 and 2014, $0 and $344 were recorded as amortization of the debt discount into interest expense with a remaining discount balance of $0 as of April 30, 2015.
On April 30, 2014, the Company converted the notes above and associated accrued interest into a single $27,100 convertible note agreement with Delavega Trading Ltd., Mr. Nabil Katabi, a director of the Corporation, is a control person of Delavega Trading LTd. (a related party). The holder may accelerate repayment of the promissory note upon the Corporation raising additional capital of $1,000,000. The holder may also convert the note into Common Shares at the holder's option at $0.025 per Common Share. As the conversion option is above the value of the stock on the date of conversion, no beneficial conversion feature was recorded with this note.
Maple Gas Convertible Note
On April 30, 2014, the Company entered into a $39,337 convertible note agreement with Maple Gas Corporation (a related party); Mr. Jack W. Hanks, a director of the Company, is owner of Maple Gas Corporation. The holder may accelerate repayment of the promissory note upon the Corporation raising additional capital of $1,000,000. The holder may also convert the note into Common Shares at the holder's option at $0.025 per Common Share. As the conversion option is above the value of the stock on the date of conversion, no beneficial conversion feature was recorded with this note.
NOTE 5 – PROPERTY AND EQUIPMENT
Property and Equipment consists of the following:
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|
April 30, 2015
|
|
|
April 30, 2014
|
|
|
|
|
|
|
|
|
|
|
Software and hardware
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|
$
|
25,023
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|
|
$
|
25,023
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|
Less: accumulated depreciation and amortization
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|
|
(22,691
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)
|
|
|
(17,685
|
)
|
|
|
$
|
2,333
|
|
|
$
|
7,338
|
|
Depreciation and amortization expense totaled $5,005 and $5,353 for the years ended April 30, 2015 and 2014, respectively.
NOTE 6 – ACCRUED EXPENSES
As of April 30, 2015 and 2014 accrued expenses included the following:
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|
April 30, 2015
|
|
|
April 30, 2014
|
|
|
|
|
|
|
|
|
|
|
Accrued Lease Expenses
|
|
$
|
62,541
|
|
|
$
|
62,541
|
|
Accrued Payroll, Officers
|
|
|
883,584
|
|
|
|
579,891
|
|
Accrued Payroll, Employees
|
|
|
301,359
|
|
|
|
177,559
|
|
Accrued Consulting
|
|
|
1,433,616
|
|
|
|
1,051,983
|
|
Accrued Dividend
|
|
|
410,685
|
|
|
|
310,685
|
|
Accrued Interest
|
|
|
485,219
|
|
|
|
373,154
|
|
|
|
$
|
3,577,004
|
|
|
$
|
2,555,813
|
|
NOTE 7 – NOTES PAYABLE
In November of 2009 the Company entered into a $300,000 note agreement, which carried a 10% interest, rate due on July 15, 2010. Accrued interest of $182,986 and $152,986 was outstanding at April 30, 2015 and April 30, 2014, respectively. As of April 30, 2015, this note is in default.
On March 18, 2013, the Company entered into a $75,000 note agreement with an unrelated party. The note is due and payable on March 18, 2014 and carries a 10% interest rate. Accrued interest of $15,884 and $8,384 was outstanding at April 30, 2015 and April 30, 2014, respectively. As of April 30, 2015, this note is in default.
NOTE 8 – CONVERTIBLE DEBENTURES
March 8, 2010 Convertible Note
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. Accrued interest of $25,704 and $20,704 were outstanding at April 30, 2015 and April 30, 2014 respectively. As of April 30, 2015 and 2014, this note is in default.
January 28, 2011 Convertible Notes
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. The holder may accelerate repayment of the Note upon sale of the Carpenter Creek prospect. In addition, the Company issued 643,625 warrants to purchase shares of the Company's common stock at an exercise price of $1.00 per share on or before three years from the repayment or conversion date. All but $25,000 of the promissory notes plus interest were paid in full on March 23, 2011. Accrued interest of $26,537 and $20,287 were outstanding at April 30, 2015 and April 30, 2014 respectively. As of April 30, 2015 and 2014 the remaining $25,000 was in default.
Convertible note consolidated on April 25, 2012
On April 25, 2011, the Company closed a note purchase agreement with an investor pursuant to which the Company sold a $375,000 note in a private placement transaction. The note was due and payable on or before October 14, 2011 and carry a 25% interest rate due in full at issuance. The note was convertible upon default at the option of the holder into our common stock at a fixed conversion price of $0.40, subject to adjustment for stock splits and combinations. In addition, the Company issued 1,062,500 warrants to purchase shares of the Company's common stock at an exercise price of $0.80 per share on or before three years from the issuance date.
The Company allocated the proceeds from the issuance of the notes to the warrants and the notes based on their fair market values at the date of issuance using the Black-Scholes model. The value assigned to the warrants of $375,000 was recorded as an increase in additional paid-in capital and was limited to the note balance. The assignment of a value to the warrants resulted in a loan discount being recorded for the same amount. The discount will be amortized over the original six-month term of the notes as additional interest expense.
On September 9, 2011, the Company closed a note purchase agreement with an accredited investor pursuant to which the Company sold a $300,000 note in a private placement transaction. The note is due and payable on September 19, 2012, carries a 25% interest rate due in full at issuance. The computed interest of $75,000 was added to the balance of the note and recorded as additional debt discount. The note is secured with 1,000,000 of the Company's common stock. In addition, the Company issued 375,000 warrants to purchase shares of the Company's common stock at an exercise price of $0.16 per share on or before three years from the issuance date.
The Company allocated the proceeds from the issuance of the note to the warrants and the note based on their fair market values at the date of issuance using the Black-Scholes model. The value assigned to the warrants of $55,934 was recorded as an increase in additional paid-in capital. The assignment of a value to the warrants resulted in a loan discount being recorded for the same amount. The discount will be amortized over the original one year term of the Note as additional interest expense. During the fiscal years ended April 30, 2015 and 2014, $0 and $0 was amortized into interest expense leaving a remaining balance of $0 at April 30, 2015 and 2014.
On October 28, 2011, the Company closed a note purchase agreement with an accredited investor pursuant to which the Company sold a $500,000 note in a private placement transaction. The note is due and payable on October 31, 2012, carries a 25% interest rate due in full at issuance. The computed interest of $125,000 was added to the balance of the note and recorded as additional debt discount. The note is secured with 1,665,000 of the Company's common stock. In addition, the Company issued 625,000 warrants to purchase shares of the Company's common stock at an exercise price of $0.16 per share on or before three years from the issuance date.
The Company allocated the proceeds from the issuance of the note to the warrants and the note based on their fair market values at the date of issuance using the Black-Scholes model. The value assigned to the warrants of $124,400 was recorded as an increase in additional paid-in capital. The assignment of a value to the warrants resulted in a loan discount being recorded for the same amount. The discount will be amortized over the original one year term of the Note as additional interest expense. During the fiscal years ended April 30, 2015 and 2014, $0 and $0 was amortized into interest expense leaving a remaining balance of $0 at April 30, 2015 and 2014.
On December 8, 2011, the Company closed a note purchase agreement with an accredited investor pursuant to which the Company sold a $100,000 note in a private placement transaction. The Company is required to redeem the note on that date which is the earlier of: (i) the closing of any Company equity financing in excess of $2,250,000 or (ii) December 8, 2012 at a payment equal to $125,000. The Company at its option may elect to redeem the note at such payment amount on any earlier date. In addition to redemption of the note, the Company agreed to redeem an additional amount of debt owed to the investor in the amount of $100,000 in principal and $25,000 in fees out of additional funding from any financing. Such funding shall be applied to the $500,000 note dated October 28, 2011 issued by the Company to the investor. The note is secured with 330,000 shares of the Company's common stock. In addition, the Company issued 125,000 warrants to purchase shares of the Company's common stock at an exercise price of $0.20 per share on or before three years from the issuance date.
The Company allocated the proceeds from the issuance of the note to the warrants and the note based on their fair market values at the date of issuance using the Black-Scholes model. The value assigned to the warrants of $28,369 was recorded as an increase in additional paid-in capital. The assignment of a value to the warrants resulted in a loan discount being recorded for the same amount. The discount will be amortized over the original one year term of the Note as additional interest expense. During the fiscal years ended April 30, 2015 and 2014, $0 and $0 was amortized into interest expense leaving a remaining balance of $0 at April 30, 2015 and 2014.
On April 25, 2012, the notes dated September 9, 2011, October 28, 2011 and December 8, 2011 and $375,000 from the April 25, 2011 offering were consolidated into a new $1,500,000 note. The note is due and payable on July 31, 2013, carries an additional 10% interest rate due in full at maturity. The computed interest of $150,000 was added to the balance of the note and recorded as additional debt discount. During the fiscal years ended April 30, 2015 and 2014, $0 and $49,819, respectively, of the discount was amortized into interest expense with a remaining discount balance at April 30, 2015 of $0. The note is convertible at the option of the holder into our common stock at a fixed conversion price of $0.20, subject to adjustment for stock splits and combinations. The note is secured with 2,995,000 of the Company's common stock.
The Company recorded the intrinsic value of the beneficial conversion of $330,000 as debt discount and will amortize the discount over the original fifteen month term of the Note. During the fiscal years ended April 30, 2015 and 2014, $0 and $109,603, respectively, of the discount was amortized into interest expense with a remaining discount balance at April 30, 2015 of $0.
BNL Family Partners Convertible Notes
On September 15, 2012, the Corporation entered into a $4,500 convertible note agreement with BNL Family Partners, LLC. Mr. Bruce N. Lemons, a director of the Corporation, is a partner of BNL Family Partners. The debentures carry a 20% interest rate until maturity at September 30, 2013 and are convertible into common shares at the holder's option at $0.20 per common share. The holders may accelerate repayment of the promissory notes upon the Corporation raising additional capital of $150,000. The computed interest of $900 was added to the balance of the note and recorded as additional debt discount. During the fiscal years ended April 30, 2015 and 2014, $0 and and $497 were recorded as amortization of the debt discount into interest expense with a remaining discount balance of $0 as of April 30, 2015. In addition, the Corporation issued 4,500 Warrants at an exercise price of $0.30 per Common Share until September 15, 2015 valued at $800.
The Company allocated the proceeds from the issuance of the note to the warrants and the note based on their fair market values at the date of issuance using the Black-Scholes model. The value assigned to the warrants of $800 was recorded as an increase in additional paid-in capital. The assignment of a value to the warrants resulted in a loan discount being recorded for the same amount. The discount will be amortized over the original one year term of the Note as additional interest expense. During the fiscal years ended April 30, 2015 and 2014, $0 and $358 were recorded as amortization of the debt discount into interest expense with a remaining discount balance of $0 as of April 30, 2015.
On April 30, 2014, the Company converted the notes above into a single $48,130 convertible note agreement with BNL Family Partners (a related party); Mr. Bruce N. Lemons, a director of the Company, is a partner of BNL Family Partners. The holder may accelerate repayment of the promissory note upon the Corporation raising additional capital of $1,000,000. The holder may also convert the note into Common Shares at the holder's option at $0.025 per Common Share. As the conversion option is above the value of the stock on the date of conversion, no beneficial conversion feature was recorded with this note.
On June 20, 2014, the Corporation entered into a $10,000 convertible note agreement with BNL Family Partners, LLC. Mr. Bruce N. Lemons, a director of the Corporation, is a partner of BNL Family Partners. The debentures carry a 15% interest rate until maturity at June 20, 2015 and are convertible into common shares at the holder's option at $0.025 per common share. The Corporation issued 10,000 Warrants at an exercise price of $0.05 per Common Share until June 20, 2017 valued at $114 which was recorded as a debt discount of the same amount. During the year ended April 30, 2015, $96 was amortized into interest expense from the debt discount, resulting in a remaining debt discount of $18 as of April 30, 2015.
Delavega Trading Ltd. Convertible Notes
On August 1, 2012, the Company entered into a $13,000 convertible note agreement with Delavega Trading Ltd., Mr. Nabil Katabi, a director of the Corporation, is a control person of Delavega Trading Ltd. The debenture carries a 20% interest rate until maturity at September 30, 2013 and is convertible into common shares at the holder's option at $0.20 per common share. The computed interest of $2,600 was added to the balance of the note and recorded as additional debt discount. During the fiscal years ended April 30, 2015 and 2014, $0 and $936 was recorded as amortization of the debt discount into interest expense with a remaining balance of $0 as of April 30, 2015. In addition, the Corporation issued 13,000 Warrants at an exercise price of $0.30 per Common Share until August 1, 2015 valued at $1,292.
The Company allocated the proceeds from the issuance of the note to the warrants and the note based on their fair market values at the date of issuance using the Black-Scholes model. The value assigned to the warrants of $1,292 was recorded as an increase in additional paid-in capital. The assignment of a value to the warrants resulted in a loan discount being recorded for the same amount. The discount will be amortized over the original one year term of the Note as additional interest expense. During the fiscal years ended April 30, 2015 and 2014, $0 and $465 was recorded as amortization of the debt discount into interest expense with a remaining discount balance of $0 as of April 30, 2015.
On December 17, 2012, the Company entered into a $6,500 convertible note agreement with Delavega Trading Ltd., Mr. Nabil Katabi, a director of the Corporation, is a control person of Delavega Trading Ltd. The debenture carries a 20% interest rate until maturity at December 17, 2013 and is convertible into common shares at the holder's option at $0.20 per common share. The computed interest of $1,300 was added to the balance of the note and recorded as additional debt discount. During the fiscal years ended April 30, 2015 and 2014, $0 and $815 were recorded as amortization of the debt discount into interest expense with a remaining discount balance of $0 as of April 30, 2015. In addition, the Corporation issued 6,500 Warrants at an exercise price of $0.30 per Common Share until December 17, 2015 valued at $549.
The Company allocated the proceeds from the issuance of the note to the warrants and the note based on their fair market values at the date of issuance using the Black-Scholes model. The value assigned to the warrants of $549 was recorded as an increase in additional paid-in capital. The assignment of a value to the warrants resulted in a loan discount being recorded for the same amount. The discount will be amortized over the original one year term of the Note as additional interest expense. During the fiscal years ended April 30, 2015 and 2014, $0 and $344 were recorded as amortization of the debt discount into interest expense with a remaining discount balance of $0 as of April 30, 2015.
On April 30, 2014, the Company converted the notes above and associated accrued interest into a single $27,100 convertible note agreement with Delavega Trading Ltd., Mr. Nabil Katabi, a director of the Corporation, is a control person of Delavega Trading LTd. (a related party). The holder may accelerate repayment of the promissory note upon the Corporation raising additional capital of $1,000,000. The holder may also convert the note into Common Shares at the holder's option at $0.025 per Common Share. As the conversion option is above the value of the stock on the date of conversion, no beneficial conversion feature was recorded with this note.
August 15, 2012 Convertible Note
On August 15, 2012, the Corporation entered into a $100,000 convertible note agreement with an unrelated party. The debenture is subject to a 20% placement fee payable to the holder irrespective of the date redeemed, matures on October 31, 2013 and is convertible into common shares at the holder's option at $0.20 per Common Share. Pursuant to the agreement, the Corporation also (i) amended the conversion rate of the March 2011 Series A Preferred Stock ("Preferred Stock") from $0.40 to $0.20 per Common Share, (ii) amended the maturity date of the April 2012 Debenture from July 31, 2013 to October 31, 2013, (iii) amended the exercise price of the Warrant agreement of April 2011 to purchase 468,750 Common Shares from $0.80 to $0.20, and (iv) issued 120,000 Warrants, to the holder of the August 15, 2012 Debenture, with an exercise price of $0.30 per Common Share until August 15, 2015 valued at $14,232. The computed interest of $20,000 was added to the balance of the note and recorded as additional debt discount. During the fiscal years ended April 30, 2015 and 2014, $0 and $8,326 were recorded as amortization of the debt discount into interest expense with a remaining discount balance of $0 as of April 30, 2015.
As a result of the August 15, 2012 amendment of the Preferred Stock exercise price, $300,000 of additional paid in capital was recognized as an additional interest expense in conjunction with the proceeds received from the note agreement. As a result of the August 25, 2012 amendment to the exercise price of the warrant agreement, $2,694 of additional paid in capital was recognized as an additional interest expense in conjunction with the proceeds received from the note agreement.
The Company allocated the proceeds from the issuance of the note to the warrants and the note based on their fair market values at the date of issuance using the Black-Scholes model. The value assigned to the warrants of $14,232 was recorded as an increase in additional paid-in capital. The assignment of a value to the warrants resulted in a loan discount being recorded for the same amount. The discount will be amortized over the original one year term of the Note as additional interest expense. During the fiscal years ended April 30, 2015 and 2014, $0 and $5,925 were amortized into interest expense with a remaining discount balance of $0 as of April 30, 2015.
January 2, 2013 Convertible Note
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 is due and payable on March 1, 2013, carries a 1.87% per month interest rate due and payable on March 1, 2013 and included 300,000 shares of the Company's common stock. The note is secured with 900,000 of the Company's common stock which were pledged and owned by Jack Hanks, the Company's President and CEO. The 300,000 shares were valued at $0.10 per share, the closing price of the Company stock on January 2, 2013, and recorded as a $30,000 increase to discount on notes payable and an increase in common stock payable. The discount will be amortized over the term of the note. During the fiscal years ended April 30, 2015 and 2014, $0 and $0 were amortized into interest expense with a remaining discount balance of $0 as of April 30, 2015. This note is currently in default.
February 1, 2013 Convertible Note
On February 1, 2013, the Company entered into a $150,000 convertible note agreement with an unrelated party. The debentures carry a 20% interest rate until maturity at February 1, 2014 and are convertible into Common Shares at the holder's option at $0.20 per Common Share. The note is convertible upon default at the option of the holder into our common stock at a fixed conversion price of $0.20, subject to adjustment for stock splits and combinations. The Company recorded as a $30,000 increase to debt discount on notes payable from the additional accrued interest. The discount will be amortized over the term of the note. During the fiscals year ended April 30, 2015 and 2014, $0 and $22,500 were amortized into interest expense with a remaining discount balance of $0 as of April 30, 2015. In addition, the Company issued 150,000 warrants to purchase shares of the Company's common stock at an exercise price of $0.20 per share on or before three years from the repayment or conversion date.
The Company allocated the proceeds from the issuance of the note to the warrants and the note based on their fair market values at the date of issuance using the Black-Scholes model. The value assigned to the warrants of $16,103 was recorded as an increase in additional paid-in capital. The assignment of a value to the warrants resulted in a loan discount being recorded for the same amount. The discount will be amortized over the original one year term of the Note as additional interest expense. During the fiscal years ended April 30, 2015 and 2014, $0 and $12,077 were recorded as amortization of the debt discount into interest expense with a remaining discount balance of $0 as of April 30, 2015.
Maple Gas Convertible Note
On April 30, 2014, the Company entered into a $39,337 convertible note agreement with Maple Gas Corporation (a related party); Mr. Jack W. Hanks, a director of the Company, is owner of Maple Gas Corporation. The holder may accelerate repayment of the promissory note upon the Corporation raising additional capital of $1,000,000. The holder may also convert the note into Common Shares at the holder's option at $0.025 per Common Share. As the conversion option is above the value of the stock on the date of conversion, no beneficial conversion feature was recorded with this note.
NOTE 9 – CONVERTIBLE PREFERRED STOCK
On March 22, 2011 the Company issued 1,000,000 shares of Series A Preferred Stock ( the "Preferred Stock") to an unrelated party in exchange for an investment of $1,000,000. The shares may be converted into the Company's common shares at $0.40 per common share. The Preferred Stock carry a 10% cumulative dividend and have a mandatory redemption feature on the earlier of March 1, 2016 or on a change of control transaction. The Company is required to redeem the shares at a liquidation value of $1.00 per share plus any accrued and unpaid dividends. Due to the mandatory redemption feature, the Company recorded the investment as a liability under ASC Subtopic 480-10.
The Company recorded the intrinsic value of the beneficial conversion of $1,000,000 as debt discount and will amortize the discount through the mandatory redemption feature date of March 1, 2016. The investment is collateralized with a security interest in 2,500,000 MMEX Mining Corporation common stock shares. During the fiscal years ended April 30, 2015 and 2014, $269,572 and $153,190 were amortized into interest expense with a remaining discount balance of $375,600 as of April 30, 2015.
Loan costs of $50,000 incurred on the issuance of the Preferred Stock were recorded as deferred loan costs and will be amortized by the effective interest method. The Company recorded amortization on loan costs in the amount of $10,000 and $10,000 for the years ended April 30, 2015 and 2014, respectively. Dividends payable were $410,685 and $310,685 for the periods ended April 30, 2015 and 2014, respectively.
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 MMEX Mining Corporation common stock at a price of $0.10475 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. The remaining two unrelated parties balances at April 30, 2015 and 2014 were $137,500 and $137,500, respectively. Accrued interest on the two unrelated parties at April 30, 2015 and 2014 was $213,039 and $144,289, respectively.
On August 15, 2012, the company amended the Preferred Stock agreement and lowered the conversion rate provided from $0.40 per common share to $0.20 per common share. The amendment generated a $302,694 fair value adjustment that was recorded as additional interest expense and increased additional paid in capital.
NOTE 10 – CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
The Company is authorized to issue up to 200,000,000 shares of its $0.001 par value common stock. There were 57,188,313 shares issued and outstanding at April 30, 2015.
Common stock
No shares were issued during the years ended April 30, 2015 and 2014.
Stock-based compensation – Stock options
On March 7, 2012, three directors of the Company (the "Optionees") received 2,000,000 unvested stock options exercisable for the common stock; after service of one year, 50% will be vested, and after service of the second year the remaining 50% will become vested; with an actual term of ten years from the date of grant. No stock-based compensation expense was recorded during the fiscal year ended April 30, 2015 and 2014 related to stock option grants.
A summary of stock option activity during the fiscal years ended April 30, 2015 and 2014 are presented below:
|
|
April
30, 2015
|
|
|
April
30, 2014
|
|
|
|
Number
Outstanding
|
|
|
Weighted
Average
exercise
price
per
share
|
|
|
Weighted
Average
remaining
contractual life (years)
|
|
|
Number
Outstanding
|
|
|
Weighted
Average
exercise
price
per
share
|
|
|
Weighted
Average
remaining
contractual life (years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at
beginning
of year
|
|
|
2,000,000
|
|
|
$
|
0.35
|
|
|
|
8.83
|
|
|
|
2,000,000
|
|
|
$
|
0.35
|
|
|
|
9.83
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end
of year
|
|
|
2,000,000
|
|
|
$
|
0.35
|
|
|
|
7.83
|
|
|
|
2,000,000
|
|
|
$
|
0.35
|
|
|
|
8.83
|
|
Options exercisable
at end of year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
The Company uses the Black-Scholes option pricing model in determining its option expense. There were no options granted during the fiscal year ended April 30, 2015 and April 30, 2014.
Stock Based Compensation – Stock warrants
During the fiscal year ended April 30, 2015, the Company issued vested warrants totaling 10,000 respectively to a related party in connection with a convertible note discussed in Note 8. These warrants were valued using a Black Scholes Model and the amounts were recorded as either debt discounts or stock-based compensation.
During the fiscal year ended April 30, 2014, the Company did not issue any warrants.
Expense Information
The Company measures and recognizes compensation expense for all stock-based payment awards made to non-employees based upon estimated fair values. The Company recorded stock-based compensation in operating expenses for non-employees of $0 and $0 for the fiscal years ended April 30, 2015 and 2014, respectively.
Valuation Assumptions
The Company uses the Black-Scholes option pricing model in determining its warrants expense issued to non-employees. The ranges of assumptions used during the fiscal year ended April 30, 2015, are as follows:
|
|
April 30, 2015
|
|
|
|
Warrants
|
|
|
|
|
|
|
Expected Volatility
|
|
|
291
|
%
|
Risk-free interest rate
|
|
|
0.94
|
%
|
Forfeiture Rate
|
|
|
0
|
%
|
Expected Dividend Rate
|
|
|
0
|
%
|
Expected Life (yrs)
|
|
|
3
|
|
The expected volatility is based on the weighted average of the historical volatility of the Company's stock.
The risk-free interest rate assumption is based upon published interest rates appropriate for the expected life of the Company's non-employee stock options.
The dividend yield assumption is based on the Company's history of not paying dividends and no future expectations of dividend payouts.
The expected life of the warrants represent the weighted-average period that the warrants are expected to remain outstanding and was determined based on historical experience of similar warrants, giving consideration to the contractual terms of the warrants, vesting and expectations of future investor behavior as influenced by changes to the terms of its warrants.
A summary of warrant activity during the fiscal years ended April 30, 2015 and 2014 are presented below:
|
|
April 30, 2015
|
|
|
April 30, 2014
|
|
|
|
Number Outstanding
|
|
|
Weighted
Average
exercise
price per share
|
|
|
Weighted
Average
remaining contractual life (years)
|
|
|
Number Outstanding
|
|
|
Weighted
Average
exercise
price per share
|
|
|
Weighted
Average
remaining contractual life (years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at beginning of year
|
|
|
32,865,345
|
|
|
$
|
0.33
|
|
|
|
1.42
|
|
|
|
32,865,345
|
|
|
$
|
0.33
|
|
|
|
2.42
|
|
Granted
|
|
|
10,000
|
|
|
$
|
0.05
|
|
|
|
3.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year
|
|
|
32,875,345
|
|
|
$
|
0.33
|
|
|
|
0.42
|
|
|
|
32,865,345
|
|
|
$
|
0.33
|
|
|
|
1.42
|
|
Warrants exerciseable at end of year
|
|
|
32,875,345
|
|
|
$
|
0.33
|
|
|
|
0.42
|
|
|
|
32,865,345
|
|
|
$
|
0.33
|
|
|
|
1.42
|
|
Common stock reserved
At April 30, 2015, 49,350,984 shares of common stock were reserved: 16,485,639 for debt conversion purposes, and 32,865,345 for issuance of warrants outstanding.
Preferred Stock
On March 18, 2011 the Board of Directors authorized 2,000,000 shares of $0.001 par value Series A Preferred Stock. The shares carry a 10% cumulative dividend, a $1.00 liquidation value, and may be converted into common shares at $0.40 per common share. The Preferred Stock has a mandatory redemption feature on such date that is the earlier of March 1, 2016 or upon a change of control transaction. Dividends payable were $410,685 and $310,685 for the period ended April 30, 2015 and 2014, respectively.
NOTE 11 – 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 MMEX resulting in 100% ownership of AHGC. On March 22, 2011, AHGC acquired a 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.
NOTE 12 – COMMITMENTS AND CONTINGENCIES
Legal
There were no legal proceedings against the Company.
Operating Lease Commitments
The Company acquired the Bolzer Lease pursuant to the 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 13 – 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 $8,688,089 as of April 30, 2015 that will be offset against future taxable income. The available net operating loss carry forwards of approximately $8,688,089 expire in various years through 2035. 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.
Deferred tax asset and the valuation account is as follows:
|
|
April 30, 2015
|
|
|
April 30, 2014
|
|
Deferred tax asset:
|
|
|
|
|
|
|
NOL Carryforward
|
|
|
3,040,831
|
|
|
|
2,676,070
|
|
Valuation Allowance
|
|
|
(3,040,831
|
)
|
|
|
(2,676,070
|
)
|
Total
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
The components of income tax expense are as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in NOL benefit
|
|
|
364,761
|
|
|
|
454,143
|
|
Change in valuation allowance
|
|
|
(364,761
|
)
|
|
|
(454,143
|
)
|
|
|
|
-
|
|
|
|
-
|
|
NOTE 14 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, all subsequent events have been reported through the filing date as set forth below.
As of April 6, 2016, MMEX amended its articles of incorporation to change its corporate name from MMEX Mining Corporation to MMEX Resources Corporation ("MMEX or the "Company") and to increase its authorized shares to 1,000,000,000 common shares and 10,000,000 preferred shares. As of April 13, 2016, MMEX had 180,432,013 common shares outstanding and no preferred shares outstanding.
As of April 30, 2014, MMEX had interests in coal prospects in Colombia, South America. As of May 18, 2015, the Board of Directors of MMEX approved a transfer its coal assets in Colombia to a trust for the benefit of its existing shareholders with an effective date as of April 13, 2016. The shareholders in MMEX have the same allocated share ownership interests in the trust that they had in MMEX as of the effective date of the transfer which is as of April 13, 2016, In addition, the shareholders in MMEX have the same ownership interests in MMEX subject to the dilution by the acquisition of Maple Structure Holdings, LLC of the purchase of the Preferred Shares and selected debt of the Company, and then the subsequent conversion of those Instruments into equity in MMEX at US$0.01 per share. That conversion results in a substantial dilution of existing shareholders including majority shareholder ownership. See below for details of the dilution.
On October 7, 2015, The Company transferred 1,000,000 Preferred Shares from William D. Gross to Maple Structure Holdings, LLC.
On November 10, 2015, the Company converted 100,000,000 common shares at $0.01 per share for 1,000,000 Preferred Shares acquired by Maple Structure Holdings, LLC and voided the issued Preferred Shares.
On November 10, 2015, the Company issued 23,283,700 new common shares to Maple Structure Holdings, LLC at $0.01 per share subject to the Company Board of Directors Resolutions issued May 18, 2015.
On November 11, 2015, Maple Structure Holdings, LLC transferred a total 70,890,440 shares to the following entities: (i) AAM Investments, LLC- 27,546,375 shares (ii) The Maple Gas Corporation- 28,091,350 shares (iii) Delavega Trading LTD- 15,252,715. All of the foregoing entities are related parties to the Directors of the Company.
As MMEX continues to expand its business and implement its business strategy, its current monthly cash flow requirements will exceed its near term cash flow from operations. In order to fund its development costs the Company completed a private placement to qualified investors of US$ 105,000 in cash and services in July, August September of 2015 and April of 2016. The investors were granted warrants to purchase 11,512,171 common shares at an exercise price of $0.0001 per share for a 3 year period from the date of the Company 1st future round of 3rd party financing in exchange for the US$105,000 investment. Of the $105,000 in cash and services contributed as of April 13, The Maple Gas Corporation, a related party to Director Jack W. Hanks has contributed $10,000 in cash and AAM Investments,LLC, a related party to Director Bruce N. Lemons has contributed $5,000 in cash.
As of April 13, 2016 the Company assigned AMC to an irrevocable trust (the " MMEX Trust"), whose beneficiaries are the existing shareholders of MMEX. AMC thru the Trust controls the Colombia Hunza coal interest previously owned by the Company.
As of April 13, 2016, Maple Structure Holdings, LLC a related party to Director Jack W. Hanks owns 52,393,260 common shares or 29.04 percent of the outstanding shares. The Maple Gas Corporation, a related party to Director Jack W. Hanks owns 33,061,224 common shares or 18.32 percent of the outstanding shares. AAM Investments, LLC, a related party to Director Bruce N. Lemons owns 32,736,850 common shares or 18.14 percent of the outstanding shares. Delavega Trading LTD, a related party to Director Nabil Katabi owns 17,549,603 common shares or 9.73 percent of the outstanding shares.
As of June 29, 2016, the Board of Directors executed a Board Resolution that the Directors of the Company may be two directors pursuant to the By-Laws of the Company. As of June 29, 2016, Nabil Katabi resigned as a director of the Company.