UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

Form 10-K

 

(Mark One)

 

☒  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended April 30, 2022       

 

☐  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______________ to _______________.

 

Commission file number 333-152608

 

MMEX RESOURCES Corporation

(Exact name of registrant as specified in charter)

 

Nevada

 

26-1749145

(State or other jurisdiction of

incorporation or organization) 

 

(IRS Employer

Identification No.)

 

 

 

3600 Dickinson

Fort Stockton, Texas 78735

 

(855) 880-0400

(Address of principal executive offices,

including zip code)

 

(Issuer’s telephone number,

including area code)

 

Securities registered under Section 12(g) of the Exchange Act: Class A Common Stock, $0.001 par value

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer     

☐ 

Accelerated filer                         

☐

Non-accelerated Filer       

☒

Smaller reporting company          

☒

 

 

Emerging growth company             

☐

                                                        

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the issuer is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at October 31, 2021 (the second quarter end date) was approximately $8,276,000.

 

As of July 13, 2022, there were 23,312,484 shares of the issuer’s common stock outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE: None

 

 

 

  

MMEX RESOURCES CORPORATION

TABLE OF CONTENTS TO ANNUAL REPORT ON FORM 10-K

YEAR ENDED APRIL 30, 2022

 

Page

PART I

Item 1.

Business

3

Item 1A.

Risk Factors

10

Item 1B.

Unresolved Staff Comments

10

Item 2.

Properties

10

Item 3.

Legal Proceedings

10

Item 4.

Mine Safety Disclosures

10

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

11

Item 6.

Selected Financial Data

13

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

13

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

16

Item 8.

Financial Statements and Supplementary Data

16

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

17

Item 9AT.

Controls and Procedures

17

Item 9B.

Other Information

17

PART III

Item 10.

Directors, Executive Officers and Corporate Governance

18

Item 11.

Executive Compensation

19

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

19

Item 13.

Certain Relationships and Related Transactions, and Director Independence

20

Item 14.

Principal Accounting Fees and Services

24

Item 15.

Exhibits

25

SIGNATURES

26

 

 
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PART I

 

Special Note Regarding Forward-Looking Statements

 

This Annual Report contains certain forward-looking statements. When used in this Annual Report or in any other presentation, statements which are not historical in nature, including the words “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” “may,” “project,” “plan” or “continue,” and similar expressions are intended to identify forward-looking statements. They also include statements containing a projection of revenues, earnings or losses, capital expenditures, dividends, capital structure or other financial terms.

 

The forward-looking statements in this Annual Report are based upon our management’s beliefs, assumptions and expectations of our future operations and economic performance, taking into account the information currently available to them. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties, some of which are not currently known to us that may cause our actual results, performance or financial condition to be materially different from the expectations of future results, performance or financial condition we express or imply in any forward-looking statements. These forward-looking statements are based on our current plans and expectations and are subject to a number of uncertainties and risks that could significantly affect current plans and expectations and our future financial condition and results.

 

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Annual Report might not occur. We qualify any and all of our forward-looking statements entirely by these cautionary factors. As a consequence, current plans, anticipated actions and future financial conditions and results may differ from those expressed in any forward-looking statements made by or on our behalf. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented herein.

 

Item 1: Business

 

Corporate Information

 

MMEX was formed as a Nevada corporation in 2005. The current management team led an acquisition of the Company (then named Management Energy, Inc.) through a reverse merger completed in 2010 and changed the Company’s name to MMEX Mining Corporation in 2011 and then to MMEX Resources Corporation in 2016. Our mailing address is 3616 Far West Blvd #117-321, Austin, Texas 78731. Our physical office address is 3600 Dickinson, Fort Stockton, Texas 79735. The Company has adopted a fiscal year end of April 30.

 

Company Overview

 

MMEX is focused on the development, financing, construction and operation of clean fuels infrastructure projects powered by renewable energy. We have formed two operating sub-divisions of the Company - one sub-division to transition from legacy refining transportation fuels by producing them as ultra clean fuels with carbon capture or as stand-alone renewable or clean fuels projects, and the second sub-division which plans to produce green and/or blue hydrogen with the option of hydrogen conversion to ammonia or methanol. These two sub-divisions will be operating respectively as Clean Energy Global, LLC and Hydrogen Global, LLC. The planned projects are designed to be powered by solar and wind renewable energy.

 

Our portfolio contains the following pipeline of planned projects:

 

Clean Energy Global, LLC

 

Project 1: Pecos Clean Fuels & Transport, LLC -Ultra Clean Fuels Refining-Pecos County, Texas

 

We have teamed with Polaris Engineering to develop an ultra-clean transportation fuel, up to 11,600 barrel per day feedrate crude oil refining facility at our Pecos County, Texas site to produce 87° gasoline, ultra-low sulphur diesel and low-sulphur fuel oil, utilizing the Polaris Ultra FuelsTM patented concept, which removes over 95% emissions of a standard refinery. Added to this patented process, the Company plans to incorporate carbon capture with the CO2 marketed to enhanced oil recovery projects in the area. We have signed the term sheet for the CO2 purchase with a super major international oil company and agreed to a proposal with the world’s largest U.S. utility for solar development. The Ultra FuelsTM concept, with capex and technical details completed in the Front-End Load-2 (“FEL-2”) study, features small size facilities to take advantage of proximity to smaller markets and/or locate directly near crude oil production areas near the Company’s owned 126-acre site. Because equipment is fabricated in modular units and shipped to site, this allows for an 18 month project completion time and more rapid implementation than traditional facilities. The smaller size and footprint, as well as lower emissions, also allows for faster permitting which we obtained for this facility from the Texas Commission on Environmental Quality on February 18, 2022.

 

 
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Project 2: Tierra del Fuego Province Argentina Gas Turbine Power Project.

 

The Company has proposed with the Provincial Government of Tierra del Fuego (“Tierra del Fuego”) to supply two natural gas turbine packages with a rating of 12.9 MWe each with generator packages. The Company has a commercial and technical proposal with Siemens Energy, the manufacturer of these turbine and generators (the “Turbine Gen Sets”) for delivery to Tierra del Fuego. These turbine packages are designed to provide additional power in locations of Tierra del Fuego that have potential power shortages. The proposed financing of the project is to be supplied by Tierra del Fuego with a completion date of nine months from the notice to proceed. The Company will provide technical expertise along with that of Siemens Energy and Tierra del Fuego for instillation and conditioning of the Turbine Gen Sets designed with capability to switch over to 100% hydrogen fuel, as it potentially becomes available from the Company’s Green Hydrogen Project in Tierra del Fuego.

 

Project 3: Arroyo Cabral, Cordoba Province Argentina Solar Power Project.

 

The Company along with its international partners have entered a proposal with EPEC, the local utility in Cordoba Province to build potentially the Arroyo Cabral 48 MWe solar park for local power demand following the Company’s completion of a confidential information memorandum and pre-feasibility study for the project completed in June 2021. The local utility, EPEC, has proposed a Build Own Transfer structure with EPEC contributing 15% of the project costs as an equity contribution. The financing of the project potentially is to be provided by the Company’s international partners and other third parties.

 

Hydrogen Global, LLC

 

Project 4: Hydrogen Global- Pecos County, Texas- Green Hydrogen Project

 

This planned project to utilize the proprietary electrolyzer technology of Siemens Energy, a major international technology provider to the Company, plans to convert water to hydrogen through electrolysis. The facility will utilize solar power, with the Company’s water supply to produce up to 55 tons of hydrogen production per day. The Company and Siemens have completed the Front-End Engineering and Design (“FEED”) study in April 2022, which outlines the capex of the electrolyzer complex on the Company’s 321-acre site. The Company is in discussions with the same renewable power utility for the Ultra Fuels project to become the technology provider for 160 MWe solar power component. In addition, the Company is in discussions with two potential product off-takes (i) international partners to provide turn-key mobility markets to include hydrogen fueling stations and buses utilizing hydrogen fuel cells. The potential markets would be the major metropolitan areas in Texas to include Austin, Dallas, Houston, and San Antonio; (ii) with a technology provider for the Ammonia complex, for conversion of the hydrogen to ammonia to facilitate transportation of the finished product for marketing in the U.S. domestic ammonia market; and (ii) with international partners to provide turn-key hydrogen fueling stations and buses utilizing hydrogen fuel cells . The potential market would be the major metropolitan areas in Texas.

 

Project 5: Hydrogen Global- Tierra del Fuego Province Argentina-Green Hydrogen Project

 

On April 28, 2022, the Province of Tierra del Fuego and the Company announced the potential joint development of a green hydrogen project in the Río Grande, Tierra del Fuego area powered by wind energy. The Company has signed an amendment with Siemens Energy to adapt the Green H2 electroylzer FEED Study completed for Pecos County to this Project. In addition, the Company has a preliminary understanding with Siemens Gamesa as the technology provider for the wind energy. The Company estimates the land requirement of up to 10,000 hectares for the wind farm and the Green H2 facilities. The Company is in discussions with the same technology provider for the Ammonia complex as for Pecos County. The potential market for the Ammonia is Europe or Asia and the project location is ideal for ocean borne shipping east or west.

 

 
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Project 6: Hydrogen Global- Tangier Morocco- Green Hydrogen Project

 

The Company has identified sea-based land assets in Tangier Morocco and is in negotiations for the supply of 160MWe of certified renewable power with local utility. The Company has international partners with local prescence in Morocco. Tangier has developed what is now the largest trading hub in Africa with ten major ports (https://www.marineinsight.com/know-more/10-major-ports-in-morocco/) including multi-modal deep seaports, multiple free-zones areas with substantial tax and trade incentives and it is located 15km from Europe ports (Spain and Gibraltar). Tangier and the neighboring coastal area benefit from some of the best wind conditions in the world, which can also be associated with solar power generation. The Kingdom of Morocco is strongly pushing the use of renewable energy and has recently issued a Green Hydrogen regulatory framework. The principal off-take markets are the shipping and terminal companies present in the Tangier Port Med including APM Terminals (https://www.apmterminals.com/en/medport-tangier/about/our-terminal), and CGM-CMA (https://www.cma-cgm.com).

 

Project 7: Hydrogen Global- Southern Coast of Peru-Green Hydrogen Project

 

The Company has entered advanced discussions with Peru’s principal electric power distribution company to develop potentially a Green Hydrogen project to produce up to 55 tons per day of hydrogen, requiring 160 MWe of constant and certified renewable power load. The Company plans to use its Siemens Energy Electrolyzer FEED template and adapt it for Peru. The Peru distribution company will also provide the land area as part of the transaction – approximately 5 hectares, by the sea to facilitate exports of green Hydrogen/Ammonia/Methanol to Asia and the U.S. West Coast. Peru’s mining industry with its use of heavy extraction and transportation equipment has significant market potential for the Company's hydrogen production.

 

Project 8: Hydrogen Global- Pecos County, Texas-Blue Hydrogen Project

 

The Company is in planning discussions with a super major oil company (the “Super Major”) to develop jointly a Blue Hydrogen project at the Company’s Pecos County, Texas site. The Project plans to utilize potentially a portion of the Super Major’s 2 billion cubic feet per day natural gas production and transportation from the area to produce hydrogen utilizing an autothermal reformer (“ATR”) technology along with carbon capture. In turn, the hydrogen will be used in Siemens Energy turbines and generator sets to produce 265 MWe of electric power which are projected to utilize initially a 75% hydrogen-25% natural gas feed and moving to a 100% hydrogen feed, with the electric power to be marketed by the power commodity trading desk of the Super Major. Solar and wind power will be utilized in the ATR and under discussions with the renewable utility developing the Company’s other solar projects in the area.

 

Completion of these projects is dependent upon our obtaining the necessary capital for planning, construction and start-up costs. There is no assurance that such financing can be obtained on favorable terms.

 

Energy Transition

 

We believe that the world’s energy consumers will need and demand legacy petroleum derived fuels such as ultra-low sulfur diesel and gasoline for an interim period that may last for the next 15 years as the electric transportation sectors and hydrogen markets evolve. Our mission is to help meet this demand by producing these transitional fuels in the most environmentally compatible way with rapidly permitted, greenfield modular smaller footprint refineries that reduce emission by over 95% and which employ carbon capture and to be powered by renewable energy.1 That has led the Company to join with Polaris Energy to employ its Ultra FuelsTM Refinery patented process. To this the patented configuration, the Company has added carbon capture and for the entire project to be powered with solar energy.

____________________________________

1 We note the following comment regarding new legacy large scale refinery capacity: “Oil companies will almost certainly never build another new refinery in the U.S., said Robert Yawger, an analyst at Mizuho. The last new U.S. refinery was built in the 1970s, and the industry now considers them too expensive, and burdensome to invest in due to strict environmental rules. Some are expanding capacity at existing facilities, but that process can’t easily be sped up, Mr. Yawger said.” Andrew Restuccia and Collin Eaton, “Biden Pushes Fuel Makers to Boost Capacity, Criticizes Profits”, https://www.wsj.com/articles/biden-pushes-oil-companies-to-boost-capacity-criticizes-profits-11655297130?st=m4x22q74oti1m5f&reflink=article_email_share,  Wall Steet Journal, June 15, 2022.

 

 
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This business plan underscores our decision to form two sub-divisions of the Company that will be operating respectively as Clean Energy Global, LLC and Hydrogen Global, LLC. The planned clean fuels and hydrogen projects are designed to be powered by solar and wind renewable energy. Our business plan of producing potential transitional clean fuels and hydrogen establishes our footprint in the current clean fuels demand and for the future clean fuels demand and most importantly, we can develop these concepts on a global basis.

 

Evolution of The New Hydrogen Economy

 

Last year in our 10K Item 1 Business, we outlined “The New Hydrogen Economy” and why we think the Company should make hydrogen the cornerstone of our future. Since passage of one year, the global hydrogen outlook has increased and evolved, and so has that of the Company. As noted, we are increasing our hydrogen footprint on a global scale with projects being developed in Texas, Argentina, Peru and Morocco.

 

Why hydrogen?

 

“After years of dabbling, major oil companies are finally planning the kind of large-scale investments that would make green hydrogen a serious business” reports Bloomberg.2 “They’re chasing a very particular vision of a low-carbon future — multibillion dollar developments that generate vast concentrations of renewable electricity and convert it into chemicals or clean fuels that can be shipped around the world to power trucks, ships or even airplanes.”3

 

“Hydrogen is a versatile and clean-burning fuel many believe could be the key to addressing some of the obstacles the global economy is facing in its race to decarbonize. Green hydrogen is an emission-free fuel produced using renewable energy that powers an electrolyzer to turn water into hydrogen and oxygen. Meanwhile, blue hydrogen is made from natural gas and can be emissions-free with carbon capture technology. Many believe that hydrogen could replace natural gas as a fuel for power plants and other industrial processes. The energy industry could utilize a significant portion of its existing infrastructure to transport and store hydrogen, which would flow into existing power plants to produce emissions-free electricity. Given the fuel's versatility, ability to utilize existing infrastructure, and carbon emissions profile, analysts see a bright future for hydrogen. For example, investment bank Goldman Sachs believes that hydrogen could be a $1 trillion a year market by 2050.” 4

 

Major green hydrogen investments have been announced by three international super major petroleum companies and a major utility in the past month.  On June 14, 2022, British Petroleum announced a $30 billion green hydrogen project in Australia5. Also on June 14, 2022, Total Energies announced an investment in India’s Adani to produce 1 million tons of green hydrogen by 2030. The first project to produce green hydrogen and related products will cost around $5 billion. Longer term, the project sponsors plan to invest more than $50 billion over the next 10 years in green hydrogen and its ecosystem6 Chevron announced its $2.5 billion investment in hydrogen on June 16, 2022. 7

_________________________________

2 Will Mathis, Laura Hurst and Francois De Beaupuy, “Big Oil Bets that Green Hydrogen is the Future of Energy”, https://www.bloomberg.com/news/articles/2022-06-19/big-oil-bets-that-green-hydrogen-is-the-future-of-energy, June 19,2022.

3 Bloomberg, “Big Oil”.

4    Matthew DeLallo,https://www.msn.com/en-us/money/companies/chevron-is-betting-dollar25-billon-on-hydrogen-will-it-pay-off-for-investors/ar-AAYCYvg?li=BBnb7Kz, The Motley Fool,  June 17, 2022.

5 Jenny Strasburg, “BP Bets Big on Giant ‘Green Hydrogen’ Project in Australia, https://www.wsj.com/articles/bp-bets-big-on-giant-green-hydrogen-project-in-australia-11655240401?mod=djem_EnergyJournal

6 TotalEnergies Press Release, “TotalEnergies and Adani Join Forces to Create a World-Class Green Hydrogen Company, June 14, 2022,

https://totalenergies.com/media/news/press-releases/india-totalenergies-and-adani-join-forces-create-world-class-green. 

7  Will Mathis, “Chevron Eyes $2.5 Billion Investments in Low-Carbon Hydrogen”, Bloomberg, June 16, 2022.

 

 
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As noted by British Petroleum, the hub is one of a handful of hydrogen megaprojects attracting increasingly bigger investment, including from companies traditionally focused on fossil fuels. Hydrogen is emerging as a potential way to cut carbon emissions from industries such as trucking, shipping, steelmaking and fertilizer manufacturing that contribute to climate change but are hard to reduce8.

 

The Russian invasion of Ukraine is a catalyst for review of energy policy around the globe. Recent high natural-gas prices, exacerbated by Russia’s war in Ukraine, and Europe’s subsequent efforts to wean itself off Russian fossil fuels have accelerated government support for green hydrogen across the globe. Analysts and investors say the fuel is needed to supplement and ultimately supplant natural gas, including the liquefied form called LNG that countries in Europe and elsewhere are rushing to import. 9

 

Major power generation companies are joining the hydrogen evolution. On June 15, 2022, NextEra Energy, technology provider for MMEX West Texas projects, announced its RealZero goal to eliminate carbon emissions from number of its operations including its power generation facilities. 10 The Press Release stated: “NextEra Energy has created the Zero Carbon Blueprint™, a comprehensive plan to significantly increase renewable energy deployment and lead the $4 trillion market opportunity to decarbonize the U.S. economy. Plan would generate only carbon-emissions-free energy from a diverse mix of wind, solar, battery storage, nuclear, green hydrogen and other renewable sources. Real Zero is the most ambitious carbon emissions reduction goal ever set by an energy producer, and the sector's only one to not require carbon offsets for success.  Natural gas would be displaced by green hydrogen in some of its existing generating units: FPL would convert 16,000 MW of existing natural gas units to run on green hydrogen. The conversion of these modern, efficient units to green hydrogen is expected to be a cost-effective solution for customers and their operation would serve as an important and diverse generation source. Importantly, reaching FPL's Real Zero goal would not result in any stranded generation assets.”

 

RBN Energy analysis of the NextEra announcement stated “NextEra announced yesterday its Real Zero strategy, which envisions the company reaching full decarbonization by 2045. While the vision is multi-faceted, the plans for NextEra’s Florida Power and Light (FPL) subsidiary caught our attention. As part of Real Zero, FPL’s 16,000 megawatts (MW) of natural gas-powered electric generating capacity would be converted to run on 100% green hydrogen by 2045. How much hydrogen would that require, you may ask? The answer is, well, a lot. At 100% utilization and an assumed heat rate of 7.2 megawatt-hours per million British Thermal Units (MMBtus), we estimate the FPL gas plants can consume a peak rate of about 2,500,000 MMBtus per day, roughly 2.5 billion cubic feet per day of natural gas. If all that natural gas were replaced by hydrogen, and assuming an equivalent heat rate for the power plants when burning H2, the hydrogen requirement of 2,500,000 MMBtus per day would require about 50,000 MW of electrolysis capacity to produce it. That is an enormous amount of electrolysis, the scale of which dwarfs anything we have heard of in the U.S., or the world, for that matter.”11

 

The forecasts for the hydrogen economy are robust. In a recent report, an international assurance and risk management company DNV forecasts the use of hydrogen in the energy transition through to 2050. The report states:

 

 

·

“Renewable and low-carbon hydrogen is crucial for meeting the Paris Agreement goals to decarbonize hard-to-abate sectors. To meet the targets, hydrogen would need to meet around 15% of world energy demand by mid-century.

 

 

 

 

·

We forecast that global hydrogen uptake is very low and late relative to Paris Agreement requirements — reaching 0.5% of global final energy mix in 2030 and 5% in 2050, although the share of hydrogen in the energy mix of some world regions will be double these percentages.

_____________________________

8 TotalEnergies Press Release, “TotalEnergies and Adani Join Forces”.

9  Strasburg, Wall Street Journal

10 NextEra Energy Press Release, June 14, 2022, https://newsroom.nexteraenergy.com/2022-06-14-NextEra-Energy-sets-industry-leading-Real-Zero-TM-goal-to-eliminate-carbon-emissions-from-its-operations,-leverage-low-cost-renewables-to-drive-energy-affordability-for-customers.

11  Jason Ferguson, RBN Hydrogen Billboard Report, June 15, 2022, https://rbnenergy.com/hydrogen-billboard/report/2022-06-15.

 

 
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·

Global spend on producing hydrogen for energy purposes from now until 2050 will be USD 6.8trn, with an additional USD 180bn spent on hydrogen pipelines and USD 530bn on building and operating ammonia terminals.

 

 

 

 

·

Hydrogen will be transported by pipelines up to medium distances within and between countries, but almost never between continents. Ammonia is safer and more convenient to transport, e.g. by ship, and 59% of energy-related ammonia will be traded between regions by 2050.

 

 

 

 

·

Direct use of hydrogen will be dominated by the manufacturing sector, where it replaces coal and gas in high-temperature processes. These industries, such as iron and steel, are also where the uptake starts first, in the late 2020s.

 

 

 

 

·

Hydrogen derivatives like ammonia, methanol and e-kerosene will play a key role in decarbonizing the heavy transport sector (aviation, maritime, and parts of trucking), but uptake only scales in the late 2030s.12

 

The Company’s Hydrogen Initiatives-A Significant Global Footprint

 

The Company has initiated development of hydrogen projects in three of the top ten countries with hydrogen projects- U.S., Morocco and Argentina.

 

mmex_10kimg1.jpg13

 

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

 

MMEX management has over 30 years of experience in natural resource project development and project financing in North and South America and the U.K. In addition, MMEX directors and principal stockholders with oil, gas, refining and electric power experience will bring this expertise into the Company.

 

MMEX principals formed Maple Resources Corporation (“Maple Resources”) in 1986 to engage in the evaluation, acquisition and development of oil & gas, refining, power generation, natural gas transmission and processing energy projects in the western United States and Latin America. Maple Resources and its principals have engaged in a number of oil and gas acquisitions and dispositions and ultimately acquired assets that included 10 gas processing plants and approximately 770 miles of natural gas gathering lines and transmission infrastructure. In 1992, Maple Resources sold substantially all of its existing US-based assets and began to pursue energy projects in Latin America, particularly in Peru through its affiliate The Maple Gas Corporation del Peru Ltd (“Maple Peru”). In 1993, Maple Peru began developing the Aguaytía Project, an integrated natural gas and electric power generation and transmission project. This US$273 million project involved the first commercial development of a natural gas field in Peru, as well as the construction and operation of approximately 175 miles of hydrocarbon pipelines, a gas processing plant, a fractionation facility, a 153 MW power plant and the related 392 km of electricity transmission lines. The Aguaytía Project began commercial operation in 1998. Maple Peru also acquired a 4,000-bpd refinery in Pucallpa along with 3 producing oil fields.

_______________________________

12 DNV, “Hydrogen Forecast to 2050, Energy Transition Outlook 2022, June 14, 2022.

13 Strasburg, Wall Street Journal

 

 
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Jack Hanks, our President and CEO, is no longer engaged in the active business operations of Maple Peru and is able to devote substantially all of his business time to his duties on behalf of the Company. Further, we do not anticipate that Maple Resources will present any conflicts of interest for the MMEX principals in carrying out their responsibilities on behalf of the Company.

 

Proposed Organizational Structure

 

The Company expects to operate its planned projects through subsidiaries.  The construction of the planned projects will require substantial equity and debt financing, far beyond the expected resources of the Company, and we anticipate that the subsidiaries will obtain equity and debt financing to finance the cost of construction. To the extent these subsidiaries raise money through the issuance of equity securities, our ownership in the subsidiaries will be diluted and our economic ownership of such entities may be a minority interest. As such, we will be entitled to only a portion of any future distributions made by these subsidiaries. In addition, while intend to retain managerial control of the subsidiaries, it is likely that equity investors will require representation on the board of managers in connection with their equity investments.

 

We anticipate these subsidiaries will be able to finance a majority of the total costs of the planned projects through debt financing, and the remaining portion of the total costs would be financed through equity investments. We intend to pursue the required debt financing from banks or other large institutional investors. Traditionally, such debt financing is in the form of project financing, which among other terms will require the project subsidiary to restrict its activities to the operation of the project financed by the lender, to pledge all assets of the project to the lender and to be subject to restrictive financial covenants. Such lenders further typically require engineering, marketing and feasibility studies as a condition precedent to the financing.  The Company will have to fund the cost of these reports and studies. 

 

Regulation

 

Although we do not believe our planned blue hydrogen and green hydrogen projects will have any significant environmental or ecological impact, we will be subject to numerous environmental laws and regulations relating to the release of hazardous substances or solid wastes into the soil, groundwater, and surface water, and measures to control pollution of the environment. These laws generally regulate the generation, storage, treatment, transportation, and disposal of solid and hazardous waste. They also require corrective action, including investigation and remediation, at a facility where such waste may have been released or disposed. There are risks of accidental releases into the environment associated with our operations, such as releases of crude oil or hazardous substances from our pipelines or storage facilities. To the extent an event is not covered by our insurance policies, accidental releases could subject us to substantial liabilities arising from environmental cleanup and restoration costs, claims made by neighboring landowners and other third parties for personal injury and property damage, and fines or penalties for any related violations of environmental laws or regulations.

 

We expect to file with the Texas Commission on Environmental Quality (“TCEQ”) for construction and operation permits.  We expect to employ carbon capture with the clean fuels and blue hydrogen facilities.  We are studying the options for sequestration for the CO2 in the various saline formations under our sites, which will require permits from the EPA or the Texas Railroad Commission (which, we understand, is in the process of seeking primacy for sequestration permitting). 

 

Our planned operations may also be subject to the Department of Homeland Security’s Chemical Facility Anti-Terrorism Standards, which are designed to regulate the security of high-risk chemical facilities, and to the Transportation Security Administration’s Pipeline Security Guidelines and Transportation Worker Identification Credential program. If applicable, we will have to have an internal program of inspection designed to monitor and enforce compliance with all of these requirements, and we will need to develop a Facility Security Plan as required under the relevant law. We will also have to have in place procedures to monitor compliance with all applicable laws and regulations regarding the security of all our facilities.

 

Our planned operations will also be subject to the requirements of the Occupational Safety and Health Act (“OSHA”) and comparable state statutes that regulate the protection of the health and safety of workers. In addition, the OSHA hazard communication standard requires that information be maintained about hazardous materials used or produced in operations and that this information be provided to employees, state and local government authorities and citizens. We may also become subject to OSHA Process Safety Management regulations, which are designed to prevent or minimize the consequences of catastrophic releases of toxic, reactive, flammable or explosive chemicals. We will take measures to ensure that our operations are in substantial compliance with OSHA requirements, including general industry standards, record keeping requirements, and monitoring of occupational exposure to regulated substances.

 

 
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Employees

 

As of April 30, 2022, we had no employees but rather to reduce costs our key management team is working under consulting agreements.  We contract for all professional services when needed. 

 

Legal Proceedings

 

See Item 3 of this Report.

 

Item 1A:  Risk Factors

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

Item 1B:  Unresolved Staff Comments.

 

None.

 

Item 2:  Properties

 

Our office address for mailing purposes is 3616 Far West Blvd. #117-321, Austin, Texas 78731. Our executive physical office is located at 3600 Dickinson, Fort Stockton, Texas, 79735 near the sites of our proposed clean fuels and hydrogen projects.

 

We own  a total of approximately 1,043.25 acres in Pecos County, Texas that are the sites for our planned clean fuels and hydrogen projects. 

 

Item 3:  Legal Proceedings

 

None

 

Item 4:  Mine Safety Disclosures

 

Not Applicable.

 

 
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PART II

 

Item 5:  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Since April 10, 2018, our common stock has been listed on the OTC Pink under the symbol "MMEX".  The OTC Market is a network of security dealers who buy and sell stock. The dealers are connected by a computer network that provides information on current “bids” and “asks”, as well as volume information.  From November 2, 2017 through April 9, 2018, our Class A common stock was listed on the OTCQB and prior to November 2, 2017, our Class A common stock was quoted on the OTC Pink tier.  The following table indicates the quarterly high and low bid price for our common stock for the fiscal years ending April 30, 2022 and 2021.  Such inter-dealer quotations do not necessarily represent actual transactions and do not reflect retail mark-ups, mark-downs or commissions.

 

 

 

High

 

 

Low

 

Fiscal year ended April 30, 2021

 

 

 

 

 

 

Quarter ended July 31, 2020

 

$395.57

 

 

$294.96

 

Quarter ended October 31, 2020

 

$325.27

 

 

$236.94

 

Quarter ended January 31, 2021

 

$374.99

 

 

$245.03

 

Quarter Ended April 30, 2021

 

$452.06

 

 

$335.73

 

 

 

 

 

 

 

 

 

 

Fiscal year ended April 30, 2022

 

 

 

 

 

 

 

 

Quarter ended July 31, 2021

 

$17.00

 

 

$1.00

 

Quarter ended October 31, 2021

 

$1.10

 

 

$0.48

 

Quarter ended January 31, 2022

 

$0.59

 

 

$0.13

 

Quarter Ended April 30, 2022

 

$0.30

 

 

$0.11

 

 

On July 13, 2022, the closing bid price of our common stock as reported on the OTC Pink was $0.09.

 

The number of holders of record of the Company's common stock as of April 30, 2022 was 171 as reported by our transfer agent. This number does not include an undetermined number of stockholders whose stock is held in "street" or "nominee" name.

 

We have not declared or paid any cash or other dividends on our common stock to date for the last two (2) fiscal years and have no intention of doing so in the foreseeable future.

 

We did not repurchase any of our equity securities during the fourth quarter of fiscal 2022.

 

Recent Sales of Unregistered Securities not previously reported in the Company's Form 10-Q

 

On February 15, 2022 the Company issued 250,000 shares of its common stock for the exercise of prefunded warrants.

 

On March 1, 2022 the Company issued 250,000 shares of its common stock for the exercise of prefunded warrants.

 

On March 10, 2022 the Company issued 300,000 shares of its common stock for the exercise of prefunded warrants.

 

On March 16, 2022 the Company issued 375,000 shares of its common stock for the exercise of prefunded warrants.

 

On March 18, 2022 the Company issued 25,611 shares of its common stock to extinguish $15,000 of accrued liabilities and issued 78,709 shares of its common stock to extinguish $40,000 of accrued liabilities owed to related parties.

 

On April 4, 2022 the Company issued 400,000 shares of its common stock for the exercise of its Series A warrants and received proceeds of $40.

 

 
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On April 13, 2022 the Company issued 100,000 shares of its common stock valued at $14,091 for a debt discount.

 

On April 19, 2022 the Company issued 330,000 shares of its common stock for the exercise of its Series A warrants and received proceeds of $33.

 

On May 25, 2022 the Company issued 500,000 shares of its common stock for the exercise of its Series A warrants and received proceeds of $50.

 

On June 1, 2022 the Company issued 710,802 shares of its common stock for the conversion of $90,000 of note principal and $19,677 of accrued interest.

 

On June 7, 2022 the Company entered into a $105,000 convertible note with a maturity date of June 7, 2023.  The note has an interest rate of 10% and is convertible into shares of the Company’s common stock at a conversion price of $0.11 per share for the first 180 days following the issuance date.  After the first 180 days has passed the note will have a variable conversion price equal to 58% of the Company’s lowest trading price during the ten days prior to the conversion date.

 

On June 13, 2022 the Company issued 497,000 shares of its common stock for the exercise of its Series A warrants and received proceeds of $50.

 

On June 30, 2022 the Company issued 400,000 shares of its common stock for the exercise of its Series A warrants and received proceeds of $40.

 

Outstanding Equity Awards at Fiscal Year-End

 

Plan Category

 

Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a)

 

 

Weighted Average Exercise Price of Outstanding Options, Warrants and Rights

 

 

Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities in Column (a)

 

 

 

 

 

 

 

 

 

 

 

Equity Compensation Plans Approved by Security Holders

 

 

0

 

 

 

0

 

 

 

0

 

Equity Compensation Plans Not Approved by Security Holders

 

 

35,508,000

 

 

$0.06

 

 

 

0

 

Total

 

 

35,508,000

 

 

$0.06

 

 

 

0

 

 

Penny Stock

 

Our stock is considered to be a penny stock. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.

 

 
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The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.

 

These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.

 

Item 6:  Selected Financial Data

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

Item 7:  Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under Special Note Regarding Forward-Looking Statements and Business sections in this Annual Report. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

 

The following discussion and analysis constitutes forward-looking statements for purposes of the Securities Act and the Exchange Act and as such involves known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. The words “expect”, “estimate”, “anticipate”, “predict”, “believes”, “plan”, “seek”, “objective” and similar expressions are intended to identify forward-looking statements or elsewhere in this report. Important factors that could cause our actual results, performance or achievement to differ materially from our expectations are discussed in detail in Item 1 above. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by such factors. We undertake no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Notwithstanding the foregoing, we are not entitled to rely on the safe harbor for forward looking statements under 27A of the Securities Act or 21E of the Exchange Act as long as our stock is classified as a penny stock within the meaning of Rule 3a51-1 of the Exchange Act. A penny stock is generally defined to be any equity security that has a market price (as defined in Rule 3a51-1) of less than $5.00 per share, subject to certain exceptions.

 

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

 

Overview

 

Business Overview

 

Since 2016, the focus of our business has been to build crude oil distillation units and refining facilities (CDUs) in the Permian Basin in West Texas.  We revised our business plan in 2021 to move MMEX to clean energy production, leveraging our history, management and business relationships from the traditional energy sector.  

 

Since 2021 MMEX has expanded its focus to the development, financing, construction and operation of clean fuels infrastructure projects powered by renewable energy.  We have formed two operating sub-divisions of the Company - one sub-division to transition from legacy refining transportation fuels by producing them as ultra clean fuels with carbon capture or as stand-alone renewable or clean fuels projects, and the second sub-division which plans to produce green and/or blue hydrogen with the option for conversion of hydrogen to ammonia or methanol.  These two sub-divisions will be operating respectively as Clean Energy Global, LLC and Hydrogen Global, LLC. The planned projects are designed to be powered by solar and wind renewable energy.

 

 
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Through April 30, 2022, we have had no revenues and have reported continuing losses from operations.

 

Results of Operations

 

We recorded a net loss of $228,730 or $(0.02) per share, for fiscal year ended April 30, 2022, compared to a net loss of $24,526,886 or $(14.23) per share, for the fiscal year ended April 30, 2021.  As discussed below, the net income or loss for any fiscal year fluctuates materially due to non-operating gains and losses.

 

Revenues

 

We have not yet begun to generate revenues.

 

General and Administrative Expenses

 

Our general and administrative expenses increased $426,201 to $1,293,672 for the year ended April 30, 2022 from $867,471 for the year ended April 30, 2021.  The increase resulted from higher professional fee costs, which included increased costs for legal, public relations, and consulting services. 

 

Project Costs

 

Our project costs increased $1,458,609 to $1,637,742 for the year ended April 30, 2022 from $179,133 for the year ended April 30, 2021.  The levels of spending on our projects will vary from period to period based on availability of financing and will be expensed as project costs are incurred.  During the year ended April 30, 2022, we obtained financing and were able to move forward on our projects, which included incurring costs for the  acquisition of rights, planning, design and permitting. 

 

Depreciation and Amortization Expense

 

Our depreciation and amortization expenses remained constant, totaling $35,877 and $34,875 for the years ended April 30, 2022 and 2021, respectively. The expense results from the depreciation of land improvements and amortization of land easements. 

 

Other Income (Expense)

 

Our interest expense decreased $625,711 to $517,784 for the year ended April 30, 2022 from $1,143,495 for the year ended April 30, 2021.  We entered into fewer convertible debt arrangements in the current fiscal year, resulting in less amortization of debt discount to interest expense, and our debt arrangements during the year ended April 30, 2022 had more favorable interest rates, thus explaining the decrease in interest expense over time.

 

For the years ended April 30, 2022 and 2021, we reported gains (losses) on derivative liabilities of $3,010,042 and $(22,906,922), respectively.  In a series of subscription agreements, we issued warrants in prior years that contained certain anti-dilution provisions that we have identified as derivatives.  We also identified the variable conversion feature of certain convertible notes payable as derivatives.  We estimated the fair value of the derivatives using multinomial lattice models that value the warrants based on a probability weighted cash flow model using projections of the various potential outcomes.  These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility and management’s estimates of various potential equity financing transactions.  These inputs 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. During the year ended April 30, 2022 all derivative liabilities were written off the books, resulting in a larger gain in the current period than in the prior period.

 

We reported a gain on extinguishment of debt of $243,303 for the year ended April 30, 2022 compared to a gain on extinguishment of debt of $605,010 for the year ended April 30, 2021.  The gain on extinguishment of debt generally results from the settlement and extinguishment of convertible notes payable and certain accounts payable and accrued expenses and can fluctuate over time as we are able to settle or pay off debt.

 

 
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Net Income (Loss)

 

As a result of the above, we reported net losses of $228,730 and $24,526,886 for the years ended April 30, 2022 and 2021, respectively. 

 

Liquidity and Capital Resources

 

Working Capital

 

As of April 30, 2022, we had current assets of $184,200, comprised of cash of $136,867 and prepaid expenses and other current assets of $47,333, and current liabilities of $3,054,377, resulting in a working capital deficit of $2,870,177.  

 

Sources and Uses of Cash

 

Our sources and uses of cash for the years ended April 30, 2022 and 2021 were as follows:

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

Cash, Beginning of Year

 

$330,449

 

 

$66,830

 

Net Cash Used in Operating Activities

 

 

(3,402,572)

 

 

(805,683)

Net Cash Used in Investing Activities

 

 

(677,905)

 

 

-

 

Net Cash Provided by Financing Activities

 

 

3,886,895

 

 

 

1,069,302

 

 

 

 

 

 

 

 

 

 

Cash, End of Year

 

$136,867

 

 

$330,449

 

 

We used net cash of $3,402,572 in operating activities for the year ended April 30, 2022 as a result of our net loss of $228,730, our non-cash gains of $3,253,345, our increase in prepaid expenses and other current assets of $9,440, our increase in accounts payable of $116,276, and our increase in  accounts payable and accrued expenses – related parties of $156,064, partially offset by non-cash expenses totaling $279,887, a decrease in our deposit of $900, and an increase in accrued expenses of $80,496.

 

In comparison, we used net cash of $805,683 in operating activities for the year ended April 30, 2021 as a result of our net loss of $24,526,886, our non-cash gain of $605,010 and our increase in prepaid expenses and other current assets of $14,748, partially offset by non-cash expenses totaling $23,402,206, and increases in accounts payable of $3,695, accrued expenses of $756,839 and accounts payable and accrued expenses – related parties of $178,221.

 

Net cash used in investing activities was $677,905, and $0 for the years ended April 30, 2022 and 2021, respectively, comprised on the purchase of property and equipment. 

 

Net cash provided by financing activities was $3,886,895 for the year ended April 30, 2022, comprised of proceeds from notes payable of $352,500, proceeds from convertible notes payable of $233,500, proceeds from the sale of common and series B preferred stock and warrants of $4,500,000, and proceeds from warrant exercise of $73, partially offset by repayments of notes payable of $388,048, repayments of convertible notes payable of $255,331, and the payment of $555,799 in offering costs.

 

By comparison, net cash provided by financing activities was $1,069,302 for the year ended April 30, 2021, comprised of proceeds from notes payable of $775,000, proceeds from convertible notes payable of $10,000, proceeds from convertible notes payable – related parties of $163,500, proceeds from SBA bridge loan of $10,000, and proceeds from a PPP loan payable of $150,000, partially offset by repayments of convertible notes payable of $39,198.

 

Going Concern Uncertainty

 

Our financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business.  We have incurred continuous losses from operations, have an accumulated deficit of $68,213,423 and a total stockholders’ deficit of $1,755,980 at April 30, 2022, and have reported negative cash flows from operations since inception.  In addition, as of April 30, 2022 we did not have the cash resources to meet our operating commitments for the next twelve months.  We require capital investments to implement our business plan, including the development of our planned hydrogen projects. Additionally, 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.

 

 
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We expect to continue to seek additional funding through private or public equity and debt financing. Our ability to continue as a going concern is dependent on our ability to generate sufficient cash from operations to meet our cash needs and/or to raise funds to finance ongoing operations and repay debt.  However, there can be no assurance that we will be successful in our efforts to raise additional debt or equity capital and/or that our cash generated by our operations will be adequate to meet our needs. These factors, among others, raise substantial doubt that we will be able to continue as a going concern for a reasonable period of time.

 

The financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company's ability to continue as a going concern. The financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

 

Critical Accounting Policies

 

Our results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to inventories, investments, intangible assets, income taxes, financing operations, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. 

 

For further information on our significant accounting policies see the notes to our consolidated financial statements included in this Annual Report. There were no material changes to our significant accounting policies during the year ended April 30, 2022 and there are no policies we deem to be critical accounting policies.

 

Item 7A:  Quantitative and Qualitative Disclosures About Market Risk

 

As a smaller reporting company, we are not required to provide the information required by this item.

 

Item 8:  Financial Statements and Supplementary Data

 

The following financial statements are being filed with this report and are located immediately following the signature page.

 

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of April 30, 2022 and 2021

Consolidated Statements of Operations for the years ended April 30, 2022 and 2021

Consolidated Statements of Stockholders’ Deficit for the years ended April 30, 2022 and 2021

Consolidated Statements of Cash Flows for the years ended April 30, 2022 and 2021

Notes to Consolidated Financial Statements

 

 
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Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

There have been no changes in or disagreements with our accountants on accounting and financial disclosures.

 

Item 9A(T):  Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of April 30, 2022, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

Management's Annual Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act, as amended. Our management assessed the effectiveness of our internal control over financial reporting as of April 30, 2022. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework. Based on our evaluation, management concluded that we maintained effective internal control over financial reporting as of April 30, 2022, based on the COSO framework criteria. Management believes our processes and controls are sufficient to ensure the consolidated financial statements included in this Form 10-K were fairly stated in accordance with U.S. GAAP.

 

Changes in Internal Control Over Financial Reporting

 

Management has made changes to the Company's internal control over financial reporting through the date of this report and/or through the quarter ended April 30, 2022, that materially affected the Company's internal control over financial reporting.  Specifically, management increased its accounting personnel and made numerous changes to its accounting processes which resulted in a segregation of duties and the implementation of reviews and monitoring activities which have added controls into the accounting processes and improved our financial reporting. Additionally, management established a formal written policy for the approval, identification, and authorization of related party transactions.

 

Limitations on Effectiveness of Controls and Procedures

 

Our management does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

Independent Registered Accountant's Internal Control Attestation

 

This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.

 

Item 9B. Other Information

 

None. 

 

 
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Part III

 

Item 10.  Directors, Executive Officers and Corporate Governance

 

Directors and Executive Officers

 

The Board of Directors currently consists of two persons.  Directors serve until the next annual meeting and until their successors are elected and qualified. The following table sets forth information about our directors and executive officers:

 

Name

 

Age

 

Office

 

Year First Elected Director

 

 

 

 

 

 

 

Jack W. Hanks

 

75

 

Director, Chief Executive Officer, President and Chief Financial Officer

 

2010

Bruce N. Lemons

 

67

 

Director

 

2010

________________________

 

Mr. Hanks has served as Director, Chief Executive Officer and President of the Company since the merger of Maple Carpenter Creek, LLC with the Company in September 2010. Mr. Hanks founded Maple Resources Corporation in 1986 and has been President or Chairman of the Board of Maple Resources since its inception. Mr. Hanks has also been the Executive Chairman of Maple Energy plc, a publicly listed company on the London Stock Exchange AIM and the Lima Bolsa. Prior to founding Maple Resources Corporation, Mr. Hanks was a partner in the Washington D.C. office of the law firm of Akin Gump Strauss Hauer & Feld LLP. Mr. Hanks graduated from the University of Texas at Austin with a law degree in 1971 and a petroleum land management degree in 1968. We believe that Mr. Hanks’ business, finance and management experience qualifies him to serve as a member of our board of directors.

 

Mr. Lemons has been a practicing lawyer in the mineral area for over 25 years. He has been a private investor in oil and gas and coal projects in the last several years, including in Maple Carpenter Creek, LLC and Maple Energy, plc and predecessor entities. Since 2002, Mr. Lemons has served as a director of Ansen, an electronics manufacturing company based in upstate New York. Mr. Lemons was a partner in the law firms of Holme Roberts & Owen and in Holland & Hart. Mr. Lemons graduated law school from Brigham Young University in 1980, where he was a member of law review, and holds undergraduate degrees in Economics and Political Science from Utah State University. We believe that Mr. Lemons’ business, finance and management experience qualifies him to serve as a member of our board of directors.

 

We are not aware of any “family relationships” (as defined in Item 401(d) of Regulation S-K promulgated by the SEC) among directors, executive officers, or persons nominated or chosen by us to become directors or executive officers.

 

The Board of Directors has determined that neither director is “independent” as such term is defined by the listing standards of Nasdaq and the rules of the SEC. Mr. Lemons is not “independent” due to his significant beneficial ownership of our common stock. Mr. Hanks is not “independent” due to his significant beneficial ownership of our common stock and his role as an executive officer of the Company.

 

Audit, Nominating and Compensation Committees

 

Because we are not listed on a securities exchange, we are not required to establish audit, nominating or compensation committees of the Board of Directors and we have not done so. In the event we elect to seek listing on a securities exchange, we will meet the corporate governance requirements imposed by a national securities exchange, including the appointment of an audit committee, nominating committee and compensation committee, the adoption of charters for each such committee and the appointment of independent directors to such committees as required by the requirements of such securities exchange.

 

 
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Compensation of Directors

 

We do not currently pay any compensation to our directors, but we pay their expenses to attend our board meetings. During the fiscal year ended April 30, 2022, no director expenses were incurred.

 

No option awards were granted to our non-executive directors during the year ended April 30, 2022.  There were no stock option awards outstanding at April 30, 2022 to our non-executive directors.

 

Item 11.  Executive Compensation

 

The following table sets forth the compensation paid or earned by our executive officers during the fiscal years ended April 30, 2022 and 2021.

 

Summary Compensation Table

 

Name and

Principal Position

 

Year

 

Salary

 

 

Bonus  

 

 

Stock

Awards

 

 

Option

Awards

 

 

Non-Equity

Incentive Plan

Compensation

 

 

All Other Compensation

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jack W. Hanks

 

2022

 

$-

 

 

$-

 

 

$-

 

 

$-

 

 

$-

 

 

$-

 

 

$-

 

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

 

2021

 

$-

 

 

$-

 

 

$-

 

 

$-

 

 

$-

 

 

$-

 

 

$-

 

 

(1)    Mr. Hanks has served as Chief Executive Officer since September 21, 2010.

 

There are no employment agreements in place and no severance benefits are currently in place. During the years ended April 30, 2022 and 2021, we incurred consulting fees and expense reimbursement related to business development, financing and other corporate activities to Maple Resources Corporation (“Maple Resources”), a related party controlled by our President and CEO, totaling $240,800 and $218,970, respectively.  Amounts included in accrued expenses – related parties due to Maple Resources totaled $40,000 and $118,540 as of April 30, 2022 and 2021, respectively.

 

Outstanding Equity Awards at Fiscal Year-End

 

During the year ended April 30, 2022 we did not grant any stock awards. At April 30, 2022, we had no outstanding stock options or other equity awards issued to our executive officers.

 

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

The following table sets forth as of July 13, 2022, the name and number of shares of the Company’s common stock beneficially owned by (i) each of the directors and named executive officers of the Company, (ii) beneficial owners of 5% or more of our common stock; and (iii) all the officers and directors as a group. Pursuant to the rules and regulations of the SEC, shares of common stock that an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purposes of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purposes of computing the percentage ownership of any other person shown in the table.

 

SEC rules provide that, for purposes hereof, a person is considered the “beneficial owner” of shares with respect to which the person, directly or indirectly, has or shares the voting or investment power, irrespective of his/her/its economic interest in the shares. Unless otherwise noted, each person identified possesses sole voting and investment power over the shares listed, subject to community property laws.

 

 
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Table of Contents

 

The percentages in the table below are based on 23,312,484 shares of common stock outstanding on July 13, 2022. Shares of common stock subject to options and warrants that are exercisable within 60 days of July 13, 2022 are deemed beneficially owned by the person holding such options for the purposes of calculating the percentage of ownership of such person but are not treated as outstanding for the purpose of computing the percentage of any other person.

 

Name and Address of Beneficial Owners (1)

 

Shares

 

 

Percentage Ownership of Class

 

 

Voting Power (5)

 

Jack W. Hanks (2)(5)

 

 

3,592,336

 

 

 

13.65%

 

 

52.25%

Bruce N. Lemons (3)

 

 

4,056,267

 

 

 

15.42%

 

 

2.22%

Nabil Katabi (4)

 

 

8,864,283

 

 

 

33.69%

 

 

12.33%

Robyn Watson

 

 

2,929,523

 

 

 

12.57%

 

 

6.16%

Alexis Hanks

 

 

1,298,585

 

 

 

5.57%

 

 

2.73%

All directors and officers as a group (two persons)

 

 

7,648,603

 

 

 

7.07%

 

 

54.47%

_______________ 

(1)

Unless otherwise noted, the business address for each of the individuals set forth in the table is c/o MMEX Resources Corporation, 3600 Dickinson, Fort Stockton, Texas 79735.

(2)

Common shares for Mr. Hanks include: (i) 43 shares held by The Maple Gas Corporation, (ii) 136 shares held by Maple Structure Holdings, LLC, (iii) 592,157 shares held by Maple Resources Corporation and (iv) 3,000,000 shares issuable upon the exercise of outstanding warrants.  This number excludes 1,161,746 shares owned by Leslie Doheny Hanks, the wife of Mr. Hanks, as to which Mr. Hanks disclaims any beneficial ownership.

(3)

Common shares for Mr. Lemons include: (i) 1,056,231 shares held by BNL Family Trust (ii) 36 shares held by AAM Investments, LLC, and (iii) 3,000,000 shares issuable upon the exercise of outstanding warrants. Mr. Lemons and his family are the beneficiaries of BNL Family Trust. AAM Investments, LLC is indirectly owned by BNL Family Trust, a trust established for the benefit of Mr. Lemons and his family.

(4)

Common shares for Mr. Katabi include: (i) 5,864,283 shares held personally and (ii) 3,000,000 shares issuable upon the exercise of outstanding warrants.

(5)

The holders of Series A Preferred Stock have 51% of the voting power of the outstanding shares of capital stock of the Company and this amount represents common stock ownership as of July 13, 2022 and does not take into account any shares of common stock subject to any exercises of options or warrants.

 

Item 13.  Certain Relationships and Related Transactions and Director Independence

 

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

 

Contractual Agreements

 

Accounts Payable and Accrued Expenses – Related Parties

 

Accounts payable and accrued expenses to related parties, consisting primarily of consulting fees and expense reimbursements payable, totaled $76,770 and $272,834 as of April 30, 2022 and 2021, respectively.

 

Effective July 1, 2019, we entered into a consulting agreement with Maple Resources Corporation (“Maple Resources”), a related party controlled by our President and CEO, that provides for payment of consulting fees and expense reimbursement related to business development, financing and other corporate activities. Effective January 1, 2020, the Maple Resources consulting agreement was amended to provide for monthly consulting fees of $17,897 and effective March 1, 2021 the Maple Resources consulting agreement was amended to provide for monthly consulting fees of $20,000. During the year ended April 30, 2022, we incurred consulting fees and expense reimbursement to Maple Resources totaling $240,800 and we made repayments to Maple Resources of $245,899, resulting in $20,000 still owed as of April 30, 2022.

 

In addition, the consulting agreement provides for the issuance to Maple Resources of shares of our common stock each month with a value of $5,000, with the number of shares issued based on the average closing price of the stock during the prior month. In September 2021 we made a payment of $110,000 to pay for the consulting fees accrued through August 2021 under the consulting agreement and in March 2022 we issued 39,355 shares of our common stock to extinguish $20,000 owed under the consulting agreement, therefore $20,000 was still owed as of April 30, 2022.

 

 
20

Table of Contents

 

Amounts included in accounts payable and accrued expenses – related parties due to Maple Resources totaled $40,000 and $118,540 as of April 30, 2022 and 2021, respectively, which was inclusive of accrued interest due under the convertible notes described below.

 

Effective October 1, 2018, we entered into a consulting agreement with Leslie Doheny-Hanks, the wife of our President and CEO, to issue shares of our common stock each month with a value of $2,500, with the number of shares issued based on the average closing price of the stock during the prior month. The related party consultant provides certain administrative and accounting services and is reimbursed for expenses paid on behalf of the Company. During the year ended April 30, 2022 we recorded $30,000 for the amount payable in stock under the consulting agreement and recorded expense reimbursements owed to Mrs. Hanks of $41,641.  In September 2021 we made a payment of $55,000 to pay for the consulting fees accrued through August 2021 under the consulting agreement and in March 2022 we issued 19,677 shares of our common stock to extinguish $10,000 owed under the consulting agreement.  During the year ended April 30, 2022 we made repayments of $52,435 for reimbursable expenses.  Amounts included in accounts payable and accrued expenses – related parties due to Mrs. Hanks totaled $17,264 ($10,000 payable in stock) and $63,058 ($45,000 payable in stock) as of April 30, 2022 and 2021, respectively.

 

Effective February 1, 2021 the Company entered into consulting agreements with three children of our President and CEO.  The consulting agreements were to end on December 31, 2021 but were extended by amendments to continue on a month-to-month basis. During the year ended April 30, 2022 we incurred $117,225 for fees and expense reimbursements to the children and paid $199,225. Amounts included in accounts payable and accrued expenses – related parties due to the children totaled $8,500 and $90,500 as of April 30, 2022 and 2021, respectively.

 

Effective September 1, 2021, we entered into a consulting agreement with BNL Family Trust, a related party to Bruce Lemons, Director, to issue shares of our common stock each month with a value of $2,500, with the number of shares issued based on the average closing price of the stock during the prior month.  During the year ended April 30, 2022 we recorded $20,000 for the amount payable in stock under the consulting agreement and in March 2022 we issued 19,677 shares of our common stock to extinguish $10,000 owed under the consulting agreement, therefore $10,000 was still owed and included in accounts payable and accrued expenses – related parties as of April 30, 2022.

 

Convertible Notes Payable – Related Parties

 

Convertible notes payable – related parties consist of the following at April 30:

 

 

 

2022

 

 

2021

 

Convertible note payable with Maple Resources Corporation, matured December 27, 2020, with interest at 5%, convertible into common shares of the Company [1]

 

$-

 

 

$7,033

 

Convertible note payable with BNL Family Trust, matured December 27, 2020, with interest at 5%, convertible into common shares of the Company [2]

 

 

-

 

 

 

10,691

 

Convertible note payable with Maple Resources Corporation, matured February 12, 2021, with interest at 5%, convertible into common shares of the Company [3]

 

 

-

 

 

 

5,000

 

Convertible note payable with Maple Resources Corporation, matured March 2, 2021, with interest at 5%, convertible into common shares of the Company [4]

 

 

-

 

 

 

800

 

Convertible note payable with Maple Resources Corporation, matured May 12, 2021, with interest at 5%, convertible into common shares of the Company [5]

 

 

-

 

 

 

41,466

 

Convertible note payable with Maple Resources Corporation, matured July 31, 2021, with interest at 5%, convertible into common shares of the Company [6]

 

 

-

 

 

 

10,000

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

74,990

 

Less discount

 

 

-

 

 

 

(235)

 

 

 

 

 

 

 

 

 

Total

 

$-

 

 

$74,755

 

 

 
21

Table of Contents

 

 

[1]

This convertible note was entered into on 12/27/19 in exchange for cash of $5,500 and financing fees of $5,500 and was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. At inception the Company identified the conversion feature of the convertible note as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and assuming the existence of a tainted equity environment (see Note 10). On the effective date of the convertible note, the related party lender simultaneously submitted a notice to convert the total note principal into 1,000,000 shares of the Company’s common stock (10,000,000,000 shares pre-split). The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. During the year ended April 30, 2021 shares became available to affect a partial conversion, therefore 360,682 common shares (1,579,982,678 pre-split shares) were issued to extinguish $3,967 of the principal balance. During the year ended April 30, 2022 the Company issued 639,318 shares of common stock to extinguish the full principal balance of $7,033 and paid $853 in cash to extinguish all of the accrued interest due under the note. The Company continued to accrue interest on the convertible note until the debt was paid in full, therefore they recorded interest expense of $135 during the year ended April 30, 2022. As of April 30, 2022 and 2021 accrued interest on the convertible note was $0 and $718, respectively.

 

 

 

 

[2]

This convertible note was entered into on 12/27/19 in exchange for cash of $11,000 and was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. At inception the Company identified the conversion feature of the convertible note as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and assuming the existence of a tainted equity environment (see Note 10). On the effective date of the convertible note, the related party lender simultaneously submitted a notice to convert the total note principal into 1,000,000 shares of the Company’s common stock (10,000,000,000 shares pre-split). The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. During the year ended April 30, 2021 shares became available to affect a partial conversion, therefore 28,094 common shares (280,936,972 pre-split shares) were issued to extinguish $309 of the principal balance. During the year ended April 30, 2022 the Company issued 971,906 shares of common stock to extinguish the full principal balance of $10,691. The Company continued to accrue interest on the convertible note until the debt was paid in full, therefore they recorded interest expense of $269 during the year ended April 30, 2022. As of April 30, 2022 and 2021 accrued interest on the convertible note was $1,006 and $737, respectively.

 

 

 

 

[3]

This convertible note was entered into on 2/12/20 in exchange for cash of $5,000 and was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. At inception the Company identified the conversion feature of the convertible note as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and assuming the existence of a tainted equity environment (see Note 10). On the effective date of the convertible note, the related party lender simultaneously submitted a notice to convert the total note principal into 454,545 shares of the Company’s common stock (4,545,454,545 shares pre-split). The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. During the year ended April 30, 2022 the Company issued 454,545 shares of common stock to extinguish the full principal balance of $5,000 and paid $399 in cash to extinguish all of the accrued interest due under the note. The Company continued to accrue interest on the convertible note until the debt was paid in full, therefore they recorded interest expense of $96 during the year ended April 30, 2022. As of April 30, 2022 and 2021 accrued interest on the convertible note was $0 and $303, respectively.

 

 
22

Table of Contents

 

 

[4]

This convertible note was entered into on 3/2/20 in exchange for cash of $800 and was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. At inception the Company identified the conversion feature of the convertible note as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and assuming the existence of a tainted equity environment (see Note 10). On the effective date of the convertible note, the related party lender simultaneously submitted a notice to convert the total note principal into 72,727 shares of the Company’s common stock (727,272,727 shares pre-split). The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. During the year ended April 30, 2022 the Company issued 72,727 shares of common stock to extinguish the full principal balance of $800 and paid $55 in cash to extinguish all of the accrued interest due under the note. The Company continued to accrue interest on the convertible note until the debt was paid in full, therefore they recorded interest expense of $15 during the year ended April 30, 2022. As of April 30, 2022 and 2021 accrued interest on the convertible note was $0 and $40, respectively.

 

 

 

 

[5]

This convertible note was entered into on 5/12/20 in exchange for accrued consulting fees worth $41,466 and was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. At inception the Company identified the conversion feature of the convertible note as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and assuming the existence of a tainted equity environment (see Note 10). On the effective date of the convertible note, the related party lender simultaneously submitted a notice to convert the total note principal into 3,769,636 shares of the Company’s common stock (37,696,363,636 shares pre-split). The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. During the year ended April 30, 2022 the Company issued 3,769,636 shares of common stock to extinguish the full principal balance of $41,466 and paid $2,800 in cash to extinguish all of the accrued interest due under the note. The Company continued to accrue interest on the convertible note until the debt was paid in full, therefore they recorded interest expense of $795 during the year ended April 30, 2022. As of April 30, 2022 and 2021 accrued interest on the convertible note was $0 and $2,005, respectively.

 

 

 

 

[6]

This convertible note was entered into on 7/31/20 in exchange for cash of $10,000 and was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. At inception the Company identified the conversion feature of the convertible note as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and assuming the existence of a tainted equity environment (see Note 10). On the effective date of the convertible note, the related party lender simultaneously submitted a notice to convert the total note principal into 909,091 shares of the Company’s common stock (9,090,909,091 shares pre-split). The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. During the year ended April 30, 2022 the Company issued 909,091 shares of common stock to extinguish the full principal balance of $10,000 and paid $566 in cash to extinguish all of the accrued interest due under the note. The Company continued to accrue interest on the convertible note until the debt was paid in full, therefore they recorded interest expense of $192 during the year ended April 30, 2022. As of April 30, 2022 and 2021 accrued interest on the convertible note was $0 and $374, respectively.

 

 
23

Table of Contents

 

Item 14:  Principal Accounting Fees and Services

 

Our independent auditors, M&K CPAs, PLLC ("M&K"), have no direct or indirect interest in the Company and have been the Company's Independent Registered Public Accounting Firm since 2009. The following table sets forth the fees billed and estimated fees for professional audit services provided by such firm for the fiscal years ended April 30, 2022 and 2021:

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

Audit Fees (a)

 

$25,100

 

 

$24,400

 

 

 

 

 

 

 

 

 

 

Audit-Related Fees (b)

 

$-

 

 

$-

 

 

 

 

 

 

 

 

 

 

Tax Fees (c)

 

$-

 

 

$-

 

 

 

 

 

 

 

 

 

 

All Other Fees

 

$-

 

 

$-

 

 

(a)

Includes fees for services related to the audits of our annual financial statements and the reviews of our interim financial statements and assistance with SEC filings.

(b)

Includes fees for services related to transaction due diligence and consultations with respect to compliance with Section 404 of the Sarbanes-Oxley Act.

(c)

Includes fees for services related to tax compliance, preparation and planning services (including U.S. federal, state and local returns) and tax examination assistance.

 

 Our Board of Directors established a policy whereby the outside auditors are required to seek pre-approval on an annual basis of all audit, audit-related, tax and other services by providing a prior description of the services to be performed. For the year ended April 30, 2022, 100% of all audit-related services were pre-approved by the Board of Directors, which concluded that the provision of such services by M&K was compatible with the maintenance of that firm's independence in the conduct of its auditing functions.

 

 
24

Table of Contents

 

Item 15:  Exhibits

 

(a) (3) Exhibits

 

Exhibit No.

 

Description

 

 

 

3.1

 

Amended and Restated Articles of Incorporation (1)

3.2

 

Amended and Restated By-laws (1)

3.3

 

Amendment to Amended and Restated Articles of Incorporation (4)

3.4

 

Certificate of Designation of Series A Preferred Stock (9)

4.1

 

Form of Warrant to Purchase Common Stock (2)

4.2

 

10% Convertible Note due January 31, 2020, payable to Auctus Fund, LLC (6)

4.3

 

10% Convertible Note due February 20, 2020, payable to GS Capital Partners LLC(8)

4.4

 

Second Amendment to Promissory Notes, dated March 31, 2020, by and between MMEX Resources Corporation and GS Capital Partners LLC (10)

4.5

 

Sixth Amendment to Promissory Notes, dated February 22, 2021, by and between MMEX Resources Corporation and GS Capital Partners LLC (11)

4.6

 

10% Promissory Note due December 31, 2021, payable to GS Capital Partners, LLC (11)

4.7

 

10% Promissory Note due March 26, 2021, payable to GS Capital Partners, LLC (5)

4.8

 

10% Promissory Note due June 22, 2022, payable to GS Capital Partners, LLC (5)

4.9

 

Form of Series A Warrant (12)

4.10

 

Form of Pre-Funded Warrant (12)

4.11

 

Form of Placement Agent Warrant (12)

10.1

 

Stock Purchase Agreement, dated March 4, 2017, by and between MMEX Resources Corporation and Maple Resources Corporation

10.2

 

Option Agreement, dated December 11, 2018, by and among MMEX Resources Corporation, Maple Resources Corporation and BNL Family Trust (6)

10.3

 

Securities Purchase Agreement, dated July 15, 2021, by and between MMEX Resources Corporation and institutional investor (12)

21.1

 

Subsidiaries (3)

31.1

 

Certification by Chief Executive Officer and Chief Financial Officer of the Registrant, pursuant to 17 CFR 240.13a—14(a) or 17 CFR 240.15d—14(a).*

32.1

 

Certification by Chief Executive Officer and Chief Financial Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*

 

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

101.SCH*

 

Inline XBRL Taxonomy Extension Schema Document.

101.CAL*

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*

 

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*

 

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104*

 

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

________

*

Filed herewith.

(1)

Filed as exhibit to Report on Form 8-K filed on April 3, 2017.

(2)

Filed as exhibit to Report on Form 10-K filed on August 11, 2011.

(3)

Filed as exhibit to Form S-1 Registration Statement No. 333-218958.

(4)

Filed as exhibit to Report on Form 8-K filed on October 12, 2018

(5)

Filed herewith as exhibit to Report on Form 10-K filed on July 29, 2021.

(6)  

Filed as exhibit to Report on Form 10-Q filed on March 12, 2019.

(7)

Filed as exhibit to Report on Form 8-K filed on March 10, 2017.

(8)

Filed as exhibit to Report on Form 10-K filed on July 26, 2019.

(9)

Filed as exhibit to Report on Form 8-K filed on August 2, 2019.

(10)

Filed as exhibit to Report on Form 10-K filed on August 13, 2020.

(11)

Filed as exhibit to Report on Form 10-Q filed on March 15, 2021.

(12)

Filed as exhibit to Report on Form 8-K filed on July 19, 2021.

 

 
25

Table of Contents

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this annual report on Form 10-K to be signed on its behalf by the undersigned thereto duly authorized.

 

 

MMEX Resources Corporation

(Registrant)

 

 

 

 

Date: July 15, 2022

By:

/s/ Jack W. Hanks

 

 

Jack W. Hanks, Chairman

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. 

 

SIGNATURE

 

TITLE

 

DATE

/s/ Jack W. Hanks

Chairman and Chief Executive Officer

July 15, 2022

Jack W. Hanks

(Principal Executive Officer) President. Chief Financial Officer and Director

 

 

(Principal Financial and Accounting Officer)

 

 

 

 

 

 

/s/ Bruce N. Lemons

Director

July 15, 2022

Bruce N. Lemons

 

 
26

Table of Contents

 

MMEX RESOURCES CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

Report of Independent Registered Public Accounting Firm

 

F-2

 

 

 

 

 

Consolidated Balance Sheets as of April 30, 2022 and 2021

 

F-3

 

 

 

 

 

Consolidated Statements of Operations for the Years Ended April 30, 2022 and 2021

 

F-4

 

 

 

 

 

Consolidated Statements of Stockholders’ Deficit for the Years Ended April 30, 2022 and 2021

 

F-5

 

 

 

 

 

Consolidated Statements of Cash Flows for the Years Ended April 30, 2022 and 2021

 

F-7

 

 

 

 

 

Notes to Consolidated Financial Statements

 

F-9

 

 

 
F-1

Table of Contents

 

mmex_10kimg2.jpg

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders

MMEX Resources Corporation

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of MMEX Resources Corporation (the Company) as of April 30, 2022 and 2021, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of  the years in the two-year period ended April 30, 2022, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2022 and 2021, and the results of its operations and its cash flows for each of  the years in the two-year period ended April 30, 2022 in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern

 

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the company suffered a net loss for the year ended April 30, 2022 and had a working capital deficit and a stockholders’ deficit as of April 30, 2022, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe our audits provide a reasonable basis for our opinion.

 

Critical Audit Matter

 

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

 

Capital Stock and Other Equity Accounts

 

As discussed in Note 11, during the year ended April 30, 2022 the Company issued warrants in conjunction with the sale of common stock to third parties. During the year ended April 30, 2022 the Company modified the terms of 2,575,500 warrants which resulted in a change in the exercise price. The Company accounted for this modification as a cancellation of the previous award and issuance of a new award in its place and determined there was no change in the fair value of the warrants as a result of this modification.  Auditing management’s calculation of the fair value of the change in the modified warrants issued can be a significant judgment given the fact that the Company uses management estimates on various inputs to the calculations.

 

To test the valuation of the warrants, we evaluated management’s significant judgments and estimates.  Significant judgements and estimates related to the valuation of the warrants include fair valuing of warrants which involve significant estimates of volatility, grant terms, risk-free rates and the use of historical trading data.  We evaluated management’s conclusions regarding their fair values and reviewed support for the significant inputs used in the valuation model, as well as assessing the model for reasonableness.  In addition, we evaluated the Company’s disclosure in relation to this matter included in Notes 11 to the financial statements.

 

/s/ M&K CPAS, PLLC

 

M&K CPAS, PLLC

We have served as the Company’s auditor since 2013

 

Houston, TX

July 15, 2022

 

PCAOB ID 2738

  

 
F-2

Table of Contents

 

MMEX RESOURCES CORPORATION

Consolidated Balance Sheets

 

 

 

April 30,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$136,867

 

 

$330,449

 

Prepaid expenses and other current assets

 

 

47,333

 

 

 

37,893

 

Total current assets

 

 

184,200

 

 

 

368,342

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

1,114,197

 

 

 

472,169

 

Deposit

 

 

-

 

 

 

900

 

 

 

 

 

 

 

 

 

 

Total assets

 

$1,298,397

 

 

$841,411

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$639,782

 

 

$802,640

 

Accrued expenses

 

 

851,275

 

 

 

807,349

 

Accounts payable and accrued expenses – related parties

 

 

76,770

 

 

 

272,834

 

Notes payable

 

 

904,452

 

 

 

775,000

 

Note payable, currently in default

 

 

75,001

 

 

 

75,001

 

Convertible notes payable, currently in default, net of discount of $0 at April 30, 2022 and 2021

 

 

75,000

 

 

 

235,775

 

Convertible notes payable, net of discount of $22,903 and $133,944 at April 30, 2022 and 2021, respectively

 

 

432,097

 

 

 

398,056

 

Convertible notes payable – related parties, net of discount of $0 and $235 at April 30, 2022 and 2021, respectively

 

 

-

 

 

 

74,755

 

PPP loan payable

 

 

-

 

 

 

150,000

 

SBA express bridge loan

 

 

-

 

 

 

10,000

 

Derivative liabilities

 

 

-

 

 

 

3,010,042

 

Total current liabilities

 

 

3,054,377

 

 

 

6,611,452

 

 

 

 

 

 

 

 

 

 

Long-term liabilities

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

    Total liabilities

 

 

3,054,377

 

 

 

6,611,452

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ deficit:

 

 

 

 

 

 

 

 

Common stock; $0.001 par value; 200,000,000 shares authorized, 21,204,682 and 3,251,641 shares issued and outstanding at April 30, 2022 and 2021, respectively

 

 

21,205

 

 

 

3,252

 

Preferred stock; $0.001 par value; 1,000,000 shares authorized:

 

 

 

 

 

 

 

 

1,000 Series A preferred shares issued and outstanding at April 30, 2022 and 2021

 

 

1

 

 

 

1

 

1,500 and 0 Series B preferred shares issued and outstanding at April 30, 2022 and 2021, respectively

 

 

2

 

 

 

-

 

Additional paid-in capital

 

 

66,426,364

 

 

 

62,201,528

 

Non-controlling interest

 

 

9,871

 

 

 

9,871

 

Accumulated deficit

 

 

(68,213,423)

 

 

(67,984,693)

Total stockholders’ deficit

 

 

(1,755,980)

 

 

(5,770,041)

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ deficit

 

$1,298,397

 

 

$841,411

 

 

See accompanying notes to consolidated financial statements.

 

 
F-3

Table of Contents

 

MMEX RESOURCES CORPORATION

Consolidated Statements of Operations

 

 

 

Years Ended

April 30,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

Revenues

 

$-

 

 

$-

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

General and administrative expenses

 

 

1,293,672

 

 

 

867,471

 

Refinery start-up costs

 

 

1,637,742

 

 

 

179,133

 

Depreciation and amortization

 

 

35,877

 

 

 

34,875

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

2,964,291

 

 

 

1,081,479

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(2,964,291)

 

 

(1,081,479)

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense

 

 

(517,784)

 

 

(1,143,495)

Gain (loss) on derivative liabilities

 

 

3,010,042

 

 

 

(22,906,922)

Gain on extinguishment of liabilities

 

 

243,303

 

 

 

605,010

 

 

 

 

 

 

 

 

 

 

Total other income (expense)

 

 

2,735,561

 

 

 

(23,445,407)

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(228,730)

 

 

(24,526,886)

Provision for income taxes

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Net loss

 

$(228,730)

 

$(24,526,886)

 

 

 

 

 

 

 

 

 

Net loss per common share – basic and diluted

 

$(0.02)

 

$(14.23)

 

 

 

 

 

 

 

 

 

Weighted average number of common

   shares outstanding – basic and diluted

 

 

12,820,881

 

 

 

1,723,476

 

 

See accompanying notes to consolidated financial statements.

 

 
F-4

Table of Contents

 

MMEX RESOURCES CORPORATION

Consolidated Statements of Stockholders’ Deficit

Years Ended April 30, 2021 and 2022

 

 

 

Class A Common Stock

 

 

Series A Preferred Stock

 

 

Series B Preferred Stock

 

 

Additional

Paid-in

 

 

Non-Controlling

 

 

Accumulated

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Interest

 

 

Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, April 30, 2020

 

 

1,335,283

 

 

$1,335

 

 

 

1,000

 

 

$1

 

 

 

-

 

 

$-

 

 

$37,721,639

 

 

$9,871

 

 

$(43,457,807)

 

$(5,724,961)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for services

 

 

2,000

 

 

 

2

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

33,998

 

 

 

-

 

 

 

-

 

 

 

34,000

 

Shares issued for conversion of convertible notes payable

 

 

1,525,583

 

 

 

1,526

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,930,839

 

 

 

-

 

 

 

-

 

 

 

1,932,365

 

Shares issued for conversion of convertible notes payable - related parties

 

 

388,775

 

 

 

389

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,888

 

 

 

-

 

 

 

-

 

 

 

4,277

 

Settlement of derivative liabilities

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

22,511,164

 

 

 

-

 

 

 

-

 

 

 

22,511,164

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(24,526,886)

 

 

(24,526,886)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, April 30, 2021

 

 

3,251,641

 

 

$3,252

 

 

 

1,000

 

 

$1

 

 

 

-

 

 

$-

 

 

$62,201,528

 

 

$9,871

 

 

$(67,984,693)

 

$(5,770,041)

 

See accompanying notes to consolidated financial statements.

 

 
F-5

Table of Contents

 

MMEX RESOURCES CORPORATION

Consolidated Statements of Stockholders’ Deficit

Years Ended April 30, 2021 and 2022 (Continued)

 

 

 

Class A Common Stock

 

 

Series A Preferred Stock

 

 

Series B Preferred Stock

 

 

Additional

Paid-in

 

 

Non-Controlling

 

 

Accumulated

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Interest

 

 

Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, April 30, 2021

 

 

3,251,641

 

 

$3,252

 

 

 

1,000

 

 

$1

 

 

 

-

 

 

$-

 

 

$62,201,528

 

 

$9,871

 

 

$(67,984,693)

 

$(5,770,041)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share issued with prefunded warrants for cash

 

 

170,000

 

 

 

170

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,999,830

 

 

 

-

 

 

 

-

 

 

 

3,000,000

 

Shares issued for accrued expenses

 

 

25,611

 

 

 

25

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

14,975

 

 

 

-

 

 

 

-

 

 

 

15,000

 

Shares issued for accrued expenses – related parties

 

 

78,709

 

 

 

79

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

39,921

 

 

 

-

 

 

 

-

 

 

 

40,000

 

Shares issued for debt discount

 

 

100,000

 

 

 

100

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

13,991

 

 

 

-

 

 

 

-

 

 

 

14,091

 

Shares issued for conversion of convertible notes payable

 

 

6,433,743

 

 

 

6,434

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

148,004

 

 

 

-

 

 

 

-

 

 

 

154,438

 

Shares issued for conversion of convertible notes payable - related parties

 

 

6,817,224

 

 

 

6,817

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

68,172

 

 

 

-

 

 

 

-

 

 

 

74,989

 

Shares issued with warrants for cash

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,500

 

 

 

2

 

 

 

1,499,998

 

 

 

-

 

 

 

-

 

 

 

1,500,000

 

Shares issued for the exercise of prefunded warrants

 

 

3,580,000

 

 

 

3,580

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,580)

 

 

-

 

 

 

-

 

 

 

-

 

Shares issued for the exercise of Series A warrants

 

 

730,000

 

 

 

730

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(657)

 

 

-

 

 

 

-

 

 

 

73

 

Shares issued for reverse stock split

 

 

17,754

 

 

 

18

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(18)

 

 

-

 

 

 

-

 

 

 

-

 

Offering costs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(555,800)

 

 

-

 

 

 

-

 

 

 

(555,800)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(228,730)

 

 

(228,730)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, April 30, 2022

 

 

21,204,682

 

 

$21,205

 

 

 

1,000

 

 

$1

 

 

 

1,500

 

 

$2

 

 

$66,426,364

 

 

$9,871

 

 

$(68,213,423)

 

$(1,755,980)

 

See accompanying notes to consolidated financial statements.

 

 
F-6

Table of Contents

 

MMEX RESOURCES CORPORATION

Consolidated Statements of Cash Flows

 

 

 

Years Ended April 30,

 

 

 

     2022

 

 

     2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$(228,730)

 

$(24,526,886)

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

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

35,877

 

 

 

34,875

 

Stock-based compensation

 

 

-

 

 

 

34,000

 

Loan fees and penalties added to convertible note principal

 

 

165,000

 

 

 

208,055

 

(Gain) loss on derivative liabilities

 

 

(3,010,042)

 

 

22,906,922

 

Gain on extinguishment of liabilities

 

 

(243,303)

 

 

(605,010)

Amortization of debt discount

 

 

79,011

 

 

 

218,354

 

(Increase) decrease in assets:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(9,440)

 

 

(14,748)

Deposit

 

 

900

 

 

 

-

 

Increase (decrease) in liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

 

(116,277)

 

 

3,695

 

Accrued expenses

 

 

80,497

 

 

 

756,839

 

Accounts payable and accrued expenses – related parties

 

 

(156,064)

 

 

178,221

 

Net cash used in operating activities

 

 

(3,402,571)

 

 

(805,683)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(677,905)

 

 

-

 

Net cash used in investing activities

 

 

(677,905)

 

 

-

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from notes payable

 

 

352,500

 

 

 

775,000

 

Repayments of notes payable

 

 

(388,048)

 

 

-

 

Proceeds from convertible notes payable

 

 

233,500

 

 

 

163,500

 

Repayments of convertible notes payable

 

 

(255,331)

 

 

(39,198)

Proceeds from convertible notes payable – related parties

 

 

-

 

 

 

10,000

 

Proceeds from PPP loan payable

 

 

-

 

 

 

150,000

 

Proceeds from SBA express bridge loan payable

 

 

-

 

 

 

10,000

 

Proceeds from the sale of common stock and prefunded warrants

 

 

3,000,000

 

 

 

-

 

Proceeds from the sale of series B preferred stock and warrants

 

 

1,500,000

 

 

 

-

 

Proceeds from the exercises of series A warrants

 

 

73

 

 

 

-

 

Offering costs

 

 

(555,800)

 

 

-

 

Net cash provided by financing activities

 

 

3,886,894

 

 

 

1,069,302

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash

 

 

(193,582)

 

 

263,619

 

Cash at the beginning of the period

 

 

330,449

 

 

 

66,830

 

Cash at the end of the period

 

$136,867

 

 

$330,449

 

 

See accompanying notes to consolidated financial statements.

 

 
F-7

Table of Contents

 

MMEX RESOURCES CORPORATION

Consolidated Statements of Cash Flows (continued)

   

 

 

Years Ended April 30,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

Supplemental disclosure:

 

 

 

 

 

 

Interest paid

 

$164,135

 

 

$14,784

 

Income taxes paid

 

$-

 

 

$-

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Common stock issued in conversion of debt

 

$154,438

 

 

$1,932,365

 

Common stock issued in conversion of related party debt

 

$74,989

 

 

$4,277

 

Common stock issued for accrued expenses

 

$15,000

 

 

$-

 

Common stock issued for accrued expenses – related parties

 

$40,000

 

 

$-

 

Settlement of derivative liabilities

 

$-

 

 

$22,511,164

 

Derivative liabilities for debt discount

 

$-

 

 

$200,859

 

Convertible notes payable for accrued expenses

 

$-

 

 

$34,000

 

Convertible notes payable – related parties for accrued expenses

 

$-

 

 

$42,268

 

Reverse split

 

$18

 

 

$-

 

Exercise of prefunded warrants

 

$3,580

 

 

$-

 

Shares issued for debt discount

 

$14,091

 

 

$-

 

 

See accompanying notes to consolidated financial statements.

 

 
F-8

Table of Contents

 

MMEX RESOURCES CORPORATION

Notes to Consolidated Financial Statements

Years Ended April 30, 2022 and 2021

 

NOTE 1 – BACKGROUND, ORGANIZATION AND BASIS OF PRESENTATION

 

MMEX was formed as a Nevada corporation in 2005. The current management team led an acquisition of the Company (then named Management Energy, Inc.) through a reverse merger completed on September 23, 2010 and changed the Company’s name to MMEX Mining Corporation on February 11, 2011 and to MMEX Resources Corporation on April 6, 2016.

 

Since 2021 MMEX has expanded its focus to the development, financing, construction and operation of clean fuels infrastructure projects powered by renewable energy. 

 

The accompanying consolidated financial statements include the accounts of the following entities, all of which the Company maintains control through a majority ownership or through common ownership:

 

Name of Entity

 

%

 

Form

 of Entity

 

State of

 Incorporation

 

Relationship

 

 

 

 

 

 

 

 

 

 

 

MMEX Resources Corporation (“MMEX”)

 

-

 

Corporation

 

Nevada

 

Parent

 

Pecos Refining & Transport, LLC (“PRT”)

 

100%

 

LLC

 

Texas

 

Subsidiary

 

MMEX Solar Resources, LLC

 

100%

 

LLC

 

Texas

 

Subsidiary

 

Louisiana Gulf Refining & Trading, LLC

 

100%

 

LLC

 

Louisiana

 

Subsidiary

 

Rolling Stock Marine, LLC

 

100%

 

LLC

 

Texas

 

Subsidiary

 

Hydrogen Global, LLC

 

100%

 

LLC

 

Texas

 

Subsidiary

 

Hydrogen Ultra, LLC

 

100%

 

LLC

 

Texas

 

Subsidiary

 

 

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

 

The Company has adopted a fiscal year end of April 30.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Consolidation

 

The accompanying consolidated financial statements include the accounts of the Company and its aforementioned subsidiaries and entities under common ownership. All significant intercompany accounts and transactions have been eliminated in consolidation. The ownership interests in subsidiaries that are held by owners other than the Company are recorded as non-controlling interest and reported in our consolidated balance sheets within stockholders’ deficit. Losses attributed to the non-controlling interest and to the Company are reported separately in our consolidated statements of operations.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

 
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Property and equipment

 

Property and equipment is recorded at the lower of cost or estimated net recoverable amount, and is depreciated or amortized using the straight-line method over the estimated useful life or legal life of the related asset as follows:

 

Office furniture and equipment

10 years

Computer equipment and software

5 years

Land improvement

15 years

Land easements

10 years

 

The land easements owned by the Company have a legal life of 10 years.

 

Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments will be capitalized. At the time of retirement or other disposition of equipment, the cost and accumulated depreciation will be removed from the accounts and the resulting gain or loss, if any, will be reflected in operations.

 

The Company will assess the recoverability of property and equipment by determining whether the depreciation and amortization of these assets over their remaining life can be recovered through projected undiscounted future cash flows. The amount of equipment impairment, if any, will be measured based on fair value and is charged to operations in the period in which such impairment is determined by management.

 

Derivative liabilities

 

In a series of subscription agreements, the Company issued warrants in prior years that contained certain anti-dilution provisions that were previously identified as derivatives.  In addition, the Company had previously identified the conversion feature of certain convertible notes payable and convertible preferred stock as derivatives.  Through April 30, 2021, the number of warrants or common shares to be issued under these agreements was indeterminate; therefore, the Company concluded that the equity environment was tainted and all additional warrants, stock options and convertible debt were included in the value of the derivative. During the year ended April 30, 2022 it was determined that the Company could increase their authorized common shares at any time, therefore the environment was no longer deemed to be tainted and all derivative liabilities were written off the books.

 

We estimate the fair value of the derivatives using multinomial lattice models that value the derivative liabilities based on a probability weighted cash flow model using projections of the various potential outcomes. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility and management’s estimates of various potential equity financing transactions. These inputs are subject to significant changes from period to period and to management's judgment; therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material.

 

Fair value of financial instruments

 

Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, and ASC 825, Financial Instruments, the FASB establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company's financial statements as reflected herein. The carrying amounts of cash, accounts payable, accrued expenses and notes reported on the accompanying consolidated balance sheets are estimated by management to approximate fair value primarily due to the short-term nature of the instruments.

 

 
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An entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value using a hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value.  A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  The hierarchy prioritized the inputs into three levels that may be used to measure fair value:

 

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

 

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in markets that are not active.

 

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

Our derivative liabilities are measured at fair value on a recurring basis and estimated as follows:

 

April 30, 2022

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$-

 

 

$-

 

 

$-

 

 

$-

 

 

April 30, 2021

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$3,010,042

 

 

$-

 

 

$-

 

 

$3,010,042

 

 

Revenue Recognition

 

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”), as amended.  ASC 606 provides a single comprehensive model to be used in the accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific guidance. The standard’s stated core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, ASC 606 includes provisions within a five-step model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when, or as, an entity satisfies a performance obligation.

 

Project costs

 

Costs incurred prior to opening the Company’s then proposed crude oil refinery in Pecos County, Texas, including acquisition of refinery rights, planning, design and permitting, are recorded as project costs and expensed as incurred.

 

Advertising and promotion

 

All costs associated with advertising and promoting products are expensed as incurred. For the year ended April 30, 2022 and 2021, $18,398 and $10,000 were recorded, respectively.

 

Income taxes

 

The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.

 

 
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Uncertain tax positions

 

The Company has adopted FASB standards for accounting for uncertainty in income taxes. These standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

 

Various taxing authorities periodically audit the Company's income tax returns. These audits include questions regarding the Company's tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established, is audited and fully resolved. The Company has not yet undergone an examination by any taxing authorities and has not identified any uncertain tax positions requiring recognition in its consolidated financial statements.

 

The assessment of the Company's tax position relies on the judgment of management to estimate the exposures associated with the Company's various filing positions.

 

Basic and diluted income (loss) per share

 

Basic net income or loss per common share is calculated by dividing net income or loss (available to common stockholders) by the weighted average number of common shares outstanding for the period.  Diluted income or loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as stock options, warrants, convertible debt and convertible preferred stock, were exercised or converted into common stock.  As of April 30, 2022 and 2021 all potentially dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share; therefore, basic net loss per common share is the same as diluted net loss per share.

 

Employee stock-based compensation

 

Pursuant to FASB ASC 718, all share-based payments to employees, including grants of employee stock options, are recognized in the statement of operations based on their fair values. For the years ended April 30, 2022 and 2021, the Company recorded share-based compensation to employees of $0 and $0, respectively. 

 

Issuance of shares for non-cash consideration

 

The Company accounts for the issuance of equity instruments to acquire goods and/or services based on the fair value of the goods and services or the fair value of the equity instrument at the time of issuance, whichever is more reliably determinable.  The Company's accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of the standards issued by the FASB.  The measurement date for the fair value of the equity instruments issued is determined as the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor's performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.

 

 
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Reclassifications

 

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

 

Recently Issued Accounting Pronouncements

 

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) No. ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. Under current GAAP, there are five accounting models for convertible debt instruments. ASU 2020-06 removes from U.S. GAAP the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, after adopting the ASU’s guidance, entities will not separately present in equity an embedded conversion feature in such debt. Instead, they will account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock (i.e., as a single unit of account), unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC 815 or (2) a convertible debt instrument was issued at a substantial premium. Additionally, for convertible debt instruments with substantial premiums accounted for as paid-in capital, the FASB decided to add disclosures about (1) the fair value amount and the level of fair value hierarchy of the entire instrument for public business entities and (2) the premium amount recorded as paid-in capital. ASU 2020-06 will be effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the potential impact of the adoption of this accounting pronouncement to its financial statements.

 

Although there are several other new accounting pronouncements issued or proposed by the FASB, which the Company has adopted or will adopt, as applicable, the Company does not believe any of these accounting pronouncements has had or will have a material impact on its consolidated financial position or results of operations.

 

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 $68,213,423 and a total stockholders’ deficit of $1,755,980 at April 30, 2022, and have reported negative cash flows from operations since inception.  While we have received debt and equity funding during the period and have cash on hand of $136,867 at April 30, 2022, we still have a working capital deficit of $2,870,177, therefore there is a question of whether or not we have the cash resources to meet our operating commitments for the next twelve months and have, or will obtain, sufficient capital investments to implement our business plan, including the development of our planned hydrogen projects. Finally, our ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered by entrance into established and emerging markets and the competitive environment in which we operate.

 

Since inception, our operations have primarily been funded through private debt and equity financing, and we expect to continue to seek additional funding through private or public equity and debt financing.  Our ability to continue as a going concern is dependent on our ability to generate sufficient cash from operations to meet our cash needs and/or to raise funds to finance ongoing operations and repay debt.  However, there can be no assurance that we will be successful in our efforts to raise additional debt or equity capital and/or that our cash generated by our operations will be adequate to meet our needs. These factors, among others, raise substantial doubt that we will be able to continue as a going concern for a reasonable period of time.

 

 
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The consolidated financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company's ability to continue as a going concern. The consolidated financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

NOTE 4 – RELATED PARTY TRANSACTIONS

 

Accounts Payable and Accrued Expenses – Related Parties

 

Accounts payable and accrued expenses to related parties, consisting primarily of consulting fees and expense reimbursements payable, totaled $76,770 and $272,834 as of April 30, 2022 and 2021, respectively.

 

Effective July 1, 2019, we entered into a consulting agreement with Maple Resources Corporation (“Maple Resources”), a related party controlled by our President and CEO, that provides for payment of consulting fees and expense reimbursement related to business development, financing and other corporate activities. Effective January 1, 2020, the Maple Resources consulting agreement was amended to provide for monthly consulting fees of $17,897 and effective March 1, 2021 the Maple Resources consulting agreement was amended to provide for monthly consulting fees of $20,000. During the year ended April 30, 2022, we incurred consulting fees and expense reimbursement to Maple Resources totaling $240,800 and we made repayments to Maple Resources of $245,899, resulting in $20,000 still owed as of April 30, 2022.

 

In addition, the consulting agreement provides for the issuance to Maple Resources of shares of our common stock each month with a value of $5,000, with the number of shares issued based on the average closing price of the stock during the prior month. In September 2021 we made a payment of $110,000 to pay for the consulting fees accrued through August 2021 under the consulting agreement and in March 2022 we issued 39,355 shares of our common stock to extinguish $20,000 owed under the consulting agreement, therefore $20,000 was still owed as of April 30, 2022.

 

Amounts included in accounts payable and accrued expenses – related parties due to Maple Resources totaled $40,000 and $118,540 as of April 30, 2022 and 2021, respectively, which was inclusive of accrued interest due under the convertible notes described below.

 

Effective October 1, 2018, we entered into a consulting agreement with Leslie Doheny-Hanks, the wife of our President and CEO, to issue shares of our common stock each month with a value of $2,500, with the number of shares issued based on the average closing price of the stock during the prior month. The related party consultant provides certain administrative and accounting services and is reimbursed for expenses paid on behalf of the Company. During the year ended April 30, 2022 we recorded $30,000 for the amount payable in stock under the consulting agreement and recorded expense reimbursements owed to Mrs. Hanks of $41,641.  In September 2021 we made a payment of $55,000 to pay for the consulting fees accrued through August 2021 under the consulting agreement and in March 2022 we issued 19,677 shares of our common stock to extinguish $10,000 owed under the consulting agreement.  During the year ended April 30, 2022 we made repayments of $52,435 for reimbursable expenses.  Amounts included in accounts payable and accrued expenses – related parties due to Mrs. Hanks totaled $17,264 ($10,000 payable in stock) and $63,058 ($45,000 payable in stock) as of April 30, 2022 and 2021, respectively.

 

 
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Table of Contents

 

Effective February 1, 2021 the Company entered into consulting agreements with three children of our President and CEO.  The consulting agreements were to end on December 31, 2021 but were extended by amendments to continue on a month-to-month basis. During the year ended April 30, 2022 we incurred $117,225 for fees and expense reimbursements to the children and paid $199,225. Amounts included in accounts payable and accrued expenses – related parties due to the children totaled $8,500 and $90,500 as of April 30, 2022 and 2021, respectively.

 

Effective September 1, 2021, we entered into a consulting agreement with BNL Family Trust, a related party to Bruce Lemons, Director, to issue shares of our common stock each month with a value of $2,500, with the number of shares issued based on the average closing price of the stock during the prior month.  During the year ended April 30, 2022 we recorded $20,000 for the amount payable in stock under the consulting agreement and in March 2022 we issued 19,677 shares of our common stock to extinguish $10,000 owed under the consulting agreement, therefore $10,000 was still owed and included in accounts payable and accrued expenses – related parties as of April 30, 2022.

 

Convertible Notes Payable – Related Parties

 

Convertible notes payable – related parties consist of the following at April 30:

 

 

 

2022

 

 

2021

 

Convertible note payable with Maple Resources Corporation, matured December 27, 2020, with interest at 5%, convertible into common shares of the Company [1]

 

$-

 

 

$7,033

 

Convertible note payable with BNL Family Trust, matured December 27, 2020, with interest at 5%, convertible into common shares of the Company [2]

 

 

-

 

 

 

10,691

 

Convertible note payable with Maple Resources Corporation, matured February 12, 2021, with interest at 5%, convertible into common shares of the Company [3]

 

 

-

 

 

 

5,000

 

Convertible note payable with Maple Resources Corporation, matured March 2, 2021, with interest at 5%, convertible into common shares of the Company [4]

 

 

-

 

 

 

800

 

Convertible note payable with Maple Resources Corporation, matured May 12, 2021, with interest at 5%, convertible into common shares of the Company [5]

 

 

-

 

 

 

41,466

 

Convertible note payable with Maple Resources Corporation, matured July 31, 2021, with interest at 5%, convertible into common shares of the Company [6]

 

 

-

 

 

 

10,000

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

74,990

 

Less discount

 

 

-

 

 

 

(235)

 

 

 

 

 

 

 

 

 

Total

 

$-

 

 

$74,755

 

 

 
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Table of Contents

 

 

[1]

This convertible note was entered into on 12/27/19 in exchange for cash of $5,500 and financing fees of $5,500 and was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. At inception the Company identified the conversion feature of the convertible note as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and assuming the existence of a tainted equity environment (see Note 10). On the effective date of the convertible note, the related party lender simultaneously submitted a notice to convert the total note principal into 1,000,000 shares of the Company’s common stock (10,000,000,000 shares pre-split). The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. During the year ended April 30, 2021 shares became available to affect a partial conversion, therefore 360,682 common shares (1,579,982,678 pre-split shares) were issued to extinguish $3,967 of the principal balance. During the year ended April 30, 2022 the Company issued 639,318 shares of common stock to extinguish the full principal balance of $7,033 and paid $853 in cash to extinguish all of the accrued interest due under the note. The Company continued to accrue interest on the convertible note until the debt was paid in full, therefore they recorded interest expense of $135 during the year ended April 30, 2022. As of April 30, 2022 and 2021 accrued interest on the convertible note was $0 and $718, respectively.

 

 

 

 

[2]

This convertible note was entered into on 12/27/19 in exchange for cash of $11,000 and was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. At inception the Company identified the conversion feature of the convertible note as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and assuming the existence of a tainted equity environment (see Note 10). On the effective date of the convertible note, the related party lender simultaneously submitted a notice to convert the total note principal into 1,000,000 shares of the Company’s common stock (10,000,000,000 shares pre-split). The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. During the year ended April 30, 2021 shares became available to affect a partial conversion, therefore 28,094 common shares (280,936,972 pre-split shares) were issued to extinguish $309 of the principal balance. During the year ended April 30, 2022 the Company issued 971,906 shares of common stock to extinguish the full principal balance of $10,691. The Company continued to accrue interest on the convertible note until the debt was paid in full, therefore they recorded interest expense of $269 during the year ended April 30, 2022. As of April 30, 2022 and 2021 accrued interest on the convertible note was $1,006 and $737, respectively.

 

 

 

 

[3]

This convertible note was entered into on 2/12/20 in exchange for cash of $5,000 and was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. At inception the Company identified the conversion feature of the convertible note as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and assuming the existence of a tainted equity environment (see Note 10). On the effective date of the convertible note, the related party lender simultaneously submitted a notice to convert the total note principal into 454,545 shares of the Company’s common stock (4,545,454,545 shares pre-split). The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. During the year ended April 30, 2022 the Company issued 454,545 shares of common stock to extinguish the full principal balance of $5,000 and paid $399 in cash to extinguish all of the accrued interest due under the note. The Company continued to accrue interest on the convertible note until the debt was paid in full, therefore they recorded interest expense of $96 during the year ended April 30, 2022. As of April 30, 2022 and 2021 accrued interest on the convertible note was $0 and $303, respectively.

 

 
F-16

Table of Contents

 

 

[4]

This convertible note was entered into on 3/2/20 in exchange for cash of $800 and was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. At inception the Company identified the conversion feature of the convertible note as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and assuming the existence of a tainted equity environment (see Note 10). On the effective date of the convertible note, the related party lender simultaneously submitted a notice to convert the total note principal into 72,727 shares of the Company’s common stock (727,272,727 shares pre-split). The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. During the year ended April 30, 2022 the Company issued 72,727 shares of common stock to extinguish the full principal balance of $800 and paid $55 in cash to extinguish all of the accrued interest due under the note. The Company continued to accrue interest on the convertible note until the debt was paid in full, therefore they recorded interest expense of $15 during the year ended April 30, 2022. As of April 30, 2022 and 2021 accrued interest on the convertible note was $0 and $40, respectively.

 

 

 

 

[5]

This convertible note was entered into on 5/12/20 in exchange for accrued consulting fees worth $41,466 and was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. At inception the Company identified the conversion feature of the convertible note as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and assuming the existence of a tainted equity environment (see Note 10). On the effective date of the convertible note, the related party lender simultaneously submitted a notice to convert the total note principal into 3,769,636 shares of the Company’s common stock (37,696,363,636 shares pre-split). The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. During the year ended April 30, 2022 the Company issued 3,769,636 shares of common stock to extinguish the full principal balance of $41,466 and paid $2,800 in cash to extinguish all of the accrued interest due under the note. The Company continued to accrue interest on the convertible note until the debt was paid in full, therefore they recorded interest expense of $795 during the year ended April 30, 2022. As of April 30, 2022 and 2021 accrued interest on the convertible note was $0 and $2,005, respectively.

 

 

 

 

[6]

This convertible note was entered into on 7/31/20 in exchange for cash of $10,000 and was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. At inception the Company identified the conversion feature of the convertible note as a derivative and estimated the fair value of the derivative using a multinomial lattice model simulation and assuming the existence of a tainted equity environment (see Note 10). On the effective date of the convertible note, the related party lender simultaneously submitted a notice to convert the total note principal into 909,091 shares of the Company’s common stock (9,090,909,091 shares pre-split). The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. During the year ended April 30, 2022 the Company issued 909,091 shares of common stock to extinguish the full principal balance of $10,000 and paid $566 in cash to extinguish all of the accrued interest due under the note. The Company continued to accrue interest on the convertible note until the debt was paid in full, therefore they recorded interest expense of $192 during the year ended April 30, 2022. As of April 30, 2022 and 2021 accrued interest on the convertible note was $0 and $374, respectively.

 

Other Contractual Agreements

 

Maple Resources granted BNL Family Trust (“BNL”), a related party to Mr. Lemons, an option to purchase 1,000,000 shares of common stock from Maple Resources at a price of $0.20 per share. The option expired in March 2022. Beneficial ownership of Messrs. Hanks and. Lemons give effect to the exercise of such option.

 

NOTE 5 – PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following at April 30:

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

Office furniture and equipment

 

$13,864

 

 

$13,864

 

Computer equipment and software

 

 

17,517

 

 

 

10,962

 

Land

 

 

721,828

 

 

 

67,088

 

Land improvements

 

 

468,615

 

 

 

452,005

 

Land easements

 

 

37,015

 

 

 

37,015

 

 

 

 

1,258,839

 

 

 

580,934

 

Less accumulated depreciation and amortization

 

 

(144,642)

 

 

(108,765)

 

 

 

 

 

 

 

 

 

 

 

$1,114,197

 

 

$472,169

 

 

 
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Table of Contents

 

Depreciation and amortization expense totaled $35,877 and $34,875 for the years ended April 30, 2022 and 2021, respectively.

 

NOTE 6 – ACCRUED EXPENSES

 

Accrued expenses consisted of the following at April 30:

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

Accrued payroll

 

$30,090

 

 

$30,090

 

Accrued consulting

 

 

12,000

 

 

 

60,000

 

Accrued interest and penalties

 

 

714,827

 

 

 

623,085

 

Other

 

 

94,358

 

 

 

94,174

 

 

 

 

 

 

 

 

 

 

 

 

$851,275

 

 

$807,349

 

 

NOTE 7 – NOTES PAYABLE

 

Notes Payable

 

Notes payable consist of the following at April 30:

 

 

 

2022

 

 

2021

 

Note payable to an unrelated party with an issue date of February 22, 2021 with interest at 10%

 

 

 

 

 

 

$250,000 draw on March 5, 2021

 

$250,000

 

 

$250,000

 

$200,000 draw on March 26, 2021

 

 

200,000

 

 

 

200,000

 

$50,000 draw on April 13, 2022 [1]

 

 

50,000

 

 

 

-

 

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

 

 

-

 

 

 

75,000

 

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

 

 

136,952

 

 

 

250,000

 

Note payable to an unrelated party with an issue date of February 28, 2022 with interest at 10% [4]

 

 

102,500

 

 

 

-

 

Note payable to an unrelated party with an issue date of March 3, 2022 with interest at 5% [5]

 

 

165,000

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Total

 

$904,452

 

 

$775,000

 

 

 
F-18

Table of Contents

 

 

[1]

Effective February 22, 2021 the Company entered into a promissory note with GS Capital Partners, LLC, with a principal amount of $1,000,000, which is subject to drawdown requests by the Company. The original maturity date of the note was the earlier of (i) December 31, 2021 or (ii) the consummation by the Company of an equity or equity-based financing providing net proceeds to the Company sufficient to retire the outstanding indebtedness under the note. On December 30, 2021 the Company entered into an amendment to the notes to extend the maturity date to March 31, 2022 and on April 12, 2022 the Company entered into an amendment to the notes to extend the maturity date to March 31, 2023. The note has an interest rate of 10% per annum from the date of each drawdown. In addition to the amounts shown as outstanding here, the Company received an additional $200,000 from a draw on June 21, 2021 and repaid the amount on July 20, 2021.

 

 

 

 

[2]

Effective March 8, 2021 the Company entered into a promissory note with JSJ Investments, Inc with a principal amount of $75,000. The maturity date of the note was March 8, 2022 and the note had an interest rate of 10% per annum from the date of funding. The Company paid the note in full on February 21, 2022.

 

 

 

 

[3]

Effective March 11, 2021 the Company entered into a promissory note with Vista Capital Investments, Inc with a principal amount of $250,000. The maturity date of the note was March 11, 2022 which was amended on February 23, 2021 to extend the due date to December 31, 2022. The note has an interest rate of 10% per annum from the date of funding. On February 23, 2022 the Company made a payment of $113,048 to pay down the note principal.

 

 

 

 

[4]

Effective February 28, 2022 the Company entered into a promissory note with Oscar and Ilda Gonzales with a principal amount of $102,500. The maturity date of the note is February 28, 2026 and repayments on the note are to begin on March 1, 2023 in the amount of $3,309 per month. The note has an interest rate of 10% per annum.

 

 

 

 

[5]

Effective March 3, 2022 the Company entered into a promissory note with Sabby Volatility Warrant Master Fund with a principal amount of $165,000 in full satisfaction of all liquidated damages pursuant to a Registration Rights Agreement dated December 22, 2021. The maturity date of the note is due the earlier of February 28, 2023 or the date MMEX receives at least $6 million of proceeds from an equity or equity-based financing and the principal amount of the note is to increase to $181,500 if the note is not paid in full prior to June 22, 2022.

 

Note Payable, Currently in Default

 

Note payable, currently in default, consists of the following at April 30:

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

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

 

$75,001

 

 

$75,001

 

 

 

 

 

 

 

 

 

 

 

 

$75,001

 

 

$75,001

 

 

 
F-19

Table of Contents

 

Convertible Notes Payable, Currently in Default

 

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

 

 

 

2022

 

 

2021

 

Note payable to an unrelated party, matured December 31, 2010, with interest at 10%, convertible into common shares of the Company [1]

 

$50,000

 

 

$50,000

 

Note payable to an unrelated party, matured January 27, 2012, with interest at 25%, convertible into common shares of the Company [2]

 

 

25,000

 

 

 

25,000

 

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

 

 

-

 

 

 

91,331

 

Note payable to an individual, maturing December 27, 2020, with interest at 5%, convertible into common shares of the Company at a defined variable exercise price [4]

 

 

-

 

 

 

10,000

 

Note payable to an individual, maturing December 27, 2020, with interest at 5%, convertible into common shares of the Company at a defined variable exercise price [5]

 

 

-

 

 

 

9,719

 

Note payable to an individual, maturing January 22, 2021, with interest at 5%, convertible into common shares of the Company at a defined variable exercise price [6]

 

 

-

 

 

 

6,500

 

Note payable to an individual, maturing May 14, 2021, with interest at 5%, convertible into common shares of the Company at a defined variable exercise price [7]

 

 

-

 

 

 

34,000

 

Note payable to an individual, maturing September 9, 2021, with interest at 5%, convertible into common shares of the Company at a defined variable exercise price [8]

 

 

-

 

 

 

9,225

 

 

 

 

 

 

 

 

 

 

 

 

 

75,000

 

 

 

235,775

 

Less discount

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Total

 

$75,000

 

 

$235,775

 

 

 

[1]

On March 8, 2010, the Company closed a note purchase agreement with an accredited investor pursuant to which the Company sold a $50,000 convertible note in a private placement transaction. In the transaction, the Company received proceeds of $35,000 and the investor also paid $15,000 of consulting expense on behalf of the Company. The convertible note was due and payable on December 31, 2010 with an interest rate of 10% per annum. The note is convertible at the option of the holder into our common stock at a fixed conversion price of $3.70, subject to adjustment for stock splits and combinations.

 

 

 

 

[2]

On January 28, 2011 and February 1, 2011, the Company closed a Convertible Note Agreement totaling $514,900 in principal amount of 25% Convertible Note (the "Notes") due on the first anniversary of the date of the Note, to a group of institutional and high net worth investors. The Notes are convertible into the Company's common stock at the holders' option at $1.00 per common share. All but $25,000 of the promissory notes plus interest were paid in full on March 23, 2011.

 

 

 

 

[3]

Effective January 31, 2019, the Company issued and delivered to Auctus Fund, LLC (“Auctus”) a 10% convertible note in the principal amount of $125,000. The Company received net proceeds $112,250 after payment of $12,750 of the fees and expenses of the lender and its counsel. Auctus, on or following the 180th calendar day after the issuance date of the note, may convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock a 40% discount to the lowest trading price during the 20 days prior to the date the notice of conversion is received by the Company. The note matured on January 31, 2020 and was in default as of April 30, 2020. The Company could redeem the note at redemption prices ranging from 120% to 135% during the first 180 days after issuance. The Company could not redeem the note after 180 days from the issuance date. The note had a principal balance of $125,000 as of April 30, 2019. During year ended April 30, 2020, Auctus converted principal of $33,669 into common shares of the Company, resulting in a principal balance of $91,331 as of April 30, 2020. During the year ended April 30, 2021 there was no activity on the note so the balance remained unchanged. During the year ended on April 30, 2022 this note was paid in full.

 

 
F-20

Table of Contents

 

 

[4]

Effective December 27, 2019 the Company issued and delivered to a consultant a 5% convertible note in the principal amount of $10,000 in payment of accrued fees of $10,000 that was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. On the effective date of the convertible note, the lender simultaneously submitted a notice to convert the total note principal into shares of the Company’s common stock. The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. During the year ended April 30, 2022 the Company issued 909,091 shares of common stock to extinguish the full principal balance of $10,000 and paid $863 in cash to extinguish all of the accrued interest due under the note.

 

 

 

 

[5]

Effective December 27, 2019 the Company issued and delivered to a consultant a 5% convertible note in the principal amount of $10,000 in payment of accrued fees of $10,000 that was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. On the effective date of the convertible note, the lender simultaneously submitted a notice to convert the total note principal into shares of the Company’s common stock. The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. During the year ended April 30, 2021 shares became available to affect a partial conversion, therefore common shares were issued to extinguish $281 of the principal balance. During the year ended April 30, 2022 the Company issued 883,551 shares of common stock to extinguish the full principal balance of $9,719 and paid $856 in cash to extinguish all of the accrued interest due under the note.

 

 

 

 

[6]

Effective January 22, 2020 the Company issued and delivered to a consultant a 5% convertible note in the principal amount of $6,500 in exchange for cash. The note was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. On the effective date of the convertible note, the lender simultaneously submitted a notice to convert the total note principal into shares of the Company’s common stock. The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. During the year ended April 30, 2022 the Company issued 590,909 shares of common stock to extinguish the full principal balance of $6,500 and paid $538 in cash to extinguish all of the accrued interest due under the note.

 

 

 

 

[7]

Effective May 14, 2020 the Company issued and delivered to a consultant a 5% convertible note in the principal amount of $34,000 in payment of accrued fees of $34,000 that was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. On the effective date of the convertible note, the lender simultaneously submitted a notice to convert the total note principal into shares of the Company’s common stock. The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. During the year ended April 30, 2022 the Company issued 3,090,909 shares of common stock to extinguish the full principal balance of $34,000 and paid $2,287 in cash to extinguish all of the accrued interest due under the note.

 

 

 

 

[8]

Effective September 9, 2020 the Company issued and delivered to a consultant a 5% convertible note in the principal amount of $10,000 in exchange for cash. The note was convertible into common shares of the Company at a conversion price equal to 110% of the lowest price at which the shares of common stock were issued by the Company during the twenty prior trading days, including the day upon which a notice of conversion is received by the Company. On the effective date of the convertible note, the lender simultaneously submitted a notice to convert the total note principal into shares of the Company’s common stock. The conversions were not completed, and the shares were not issued, due to a lack of sufficient shares of common stock at the time the conversion was requested. During the year ended April 30, 2021 shares became available to affect a partial conversion, therefore common shares were issued to extinguish $775 of the principal balance. During the year ended April 30, 2022 the Company issued 838,591 shares of common stock to extinguish the full principal balance of $9,225 and paid $505 in cash to extinguish all of the accrued interest due under the note.

 

 
F-21

Table of Contents

 

Current Convertible Notes Payable

 

Current convertible notes payable consisted of the following at April 30:

 

 

 

2022

 

 

2021

 

Extension fee added to note payable to an accredited investor issued, with interest at 18%, convertible into common shares of the Company at a defined variable exercise price [1]

 

$200,000

 

 

$200,000

 

Extension fee added to note payable to an accredited investor, with interest at 18%, convertible into common shares of the Company at a defined variable exercise price [2]

 

 

90,000

 

 

 

90,000

 

Note payable to an accredited investor, with interest at 18%, convertible into common shares of the Company at a defined variable exercise price [3]

 

 

-

 

 

 

80,000

 

Note payable to an accredited investor issued for extension fees, with interest at 18%, convertible into common shares of the Company at a defined variable exercise price [4]

 

 

-

 

 

 

80,000

 

Note payable to an accredited investor issued for extension fees, with interest at 10%, convertible into common shares of the Company at a defined variable exercise price [5]

 

 

-

 

 

 

82,000

 

Note payable to an accredited investor, with interest at 10%, convertible into common shares of the Company at $0.10 per share [6]

 

 

165,000

 

 

 

-

 

Total

 

 

455,000

 

 

 

532,000

 

Less discount

 

 

(22,903)

 

 

(133,944)

 

 

 

 

 

 

 

 

 

Net

 

$432,097

 

 

$398,056

 

 

 

[1]

Effective March 31, 2020, the Company entered into a second amendment to certain convertible notes with GS Capital Partners, LLC (“GS”) ($110,000 note dated September 13, 2018, $70,000 note dated September 18, 2018, $600,000 note dated October 5, 2018, and $110,000 note dated February 20, 2019) to extend the notes due dates to November 30, 2020. In consideration of the extension of the maturity dates of the notes the Company was to pay an extension fee of $200,000, which was added to the principal amount owed and would incur interest at 18% per annum. The extension fee is payable in cash at the earlier of (1) in connection with, and at the time of repayment of the Notes, or (2) on November 20, 2020, which, as of the date of this filing, has been extended to March 31, 2023. GS, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock at a 40% discount from the lowest trading price during the 20 days prior to conversion (with a floor of $3.00 per share during the first six months after issuance.)

 

 

 

 

[2]

Effective September 12, 2019, the Company entered into an amendment to certain convertible notes with GS ($110,000 note dated September 13, 2018, $70,000 note dated September 18, 2018, and $600,000 note dated October 5, 2018) to extend the notes due dates to February 4, 2020. In consideration of the extension of the maturity dates of the notes the Company was to pay an extension fee of $90,000, which was added to the principal amount owed and would incur interest at 18% per annum The extension fee is payable in cash at the earlier of (1) in connection with, and at the time of repayment of the Notes, or (2) on November 20, 2020, which, as of the date of this filing, has been extended to March 31, 2023. GS, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock at a 40% discount from the lowest trading price during the 20 days prior to conversion (with a floor of $3.00 per share during the first six months after issuance).

 

 
F-22

Table of Contents

 

 

[3]

Effective December 15, 2020, the Company entered into a fourth amendment to certain convertible notes with GS ($110,000 note dated September 13, 2018, $70,000 note dated September 18, 2018, $600,000 note dated October 5, 2018, and $110,000 note dated February 20, 2019) to extend the notes due dates from December 20, 2020 to December 31, 2020. In conjunction with the extension, the Company entered into an 18% convertible note in the principal amount of $80,000. The note was issued at a discount and the Company received net proceeds of $75,000 after an original issue discount of $5,000. GS, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock at a 40% discount from the lowest trading price during the 20 days prior to conversion (with a floor of $3.00 per share during the first six months after issuance). In June of 2021 the Company issued 11,814 common shares to convert $40,000 worth of principal and $2,027 worth of accrued interest under the terms of the agreement. In September of 2021 the Company entered into a settlement agreement with GS where 108,878 common shares were issued to convert the remaining $40,000 worth of principal and $2,462 worth of accrued interest under the terms of the agreement and $4,584 worth of accrued interest was forgiven and recorded as a gain on extinguishment of liabilities.

 

 

 

 

[4]

Effective December 31, 2020, the Company entered into a fifth amendment to certain convertible notes with GS ($110,000 note dated September 13, 2018, $70,000 note dated September 18, 2018, $600,000 note dated October 5, 2018, and $110,000 note dated February 20, 2019) to extend the notes due dates from December 31, 2020 to August 31, 2021. In exchange for the extension, the aggregate principal amounts of the notes increased by $80,000. GS, at its option, could convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock at a 40% discount from the lowest trading price during the 20 days prior to conversion (with a floor of $3.00 per share during the first six months after issuance). During the year ended April 30, 2022, GS forgave the $80,000 note and $11,993 of its related accrued interest, therefore $91,993 was recorded as a gain on extinguishment of liabilities.

 

 

 

 

[5]

Effective March 26, 2021, the Company issued and delivered to GS a 10% convertible note in the principal amount of $82,000. The note was issued at a discount and the Company received net proceeds of $78,500 after payment of $3,500 of fees and expenses of the lender and its counsel. During the first 180 days, GS, at its option, could convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock at a price of $0.015 per share and thereafter at 34% discount from the lowest trading price during the 15 days prior to conversion. The Company could redeem the note at redemption prices ranging from 110% to 118% during the first 180 days after issuance. During the year ended April 30, 2022, the Company repaid this note in full.

 

 

 

 

[6]

Effective April 12, 2022, the Company issued and delivered to GS a 10% convertible note in the principal amount of $165,000. The note was issued at a discount and the Company received net proceeds of $155,000 after payment of $10,000 of fees and expenses of the lender and its counsel. GS, at its option, can convert the unpaid principal balance of, and accrued interest on, the note into shares of common stock at a price of $0.10 per share. The Company can prepay the note with prepayment penalties ranging from 105% to 125% during the first 180 days after issuance.

 

In addition to the amounts shown as outstanding here, the Company entered into a $82,000 convertible note with GS on June 22, 2021 and received net proceeds of $78,500 after payment of $3,500 of fees and expenses of the lender and its counsel.  On July 20, 2021 the note was repaid in full.

 

NOTE 8 – PPP LOANS PAYABLE

 

With an effective date of January 25, 2021, a loan to the Company was approved under the terms and conditions of the Paycheck Protection Program of the United States Small Business Administration (“SBA”) and the CARES Act (2020) (H.R. 748) (15 U.S.C. 636 et seq.) (“the Act”) in the amount of $150,000 and was funded on January 26, 2020.  During the year ended April 30, 2022, the Company was notified that its loan was forgiven pursuant to the provisions of the Act, therefore $150,000 was recorded as a gain on extinguishment of liabilities.

 

NOTE 9 – SBA BRIDGE LOAN PAYABLE

 

On July 14, 2020, the Company received $10,000 pursuant to the SBA’s Express Bridge Loan Pilot Program.  This program allows small businesses who have a business relationship with an SBA Express Lender to access up to $25,000 quickly.  The funds were advanced to the Company since it has applied for an Economic Injury Disaster Loan (“EIDL”) and because the funds under the program are not required to be paid back the Company recorded the $10,000 loan balance as a gain on extinguishment of liabilities.

 

 
F-23

Table of Contents

 

NOTE 10 – DERIVATIVE LIABILITIES

 

In a series of subscription agreements, the Company issued warrants in prior years that contained certain anti-dilution provisions that had previously been identified as derivatives.  In addition, the Company previously identified the conversion feature of certain convertible notes payable and convertible preferred stock as derivatives.  The number of warrants or common shares to be issued under these agreements was indeterminate; therefore, through April 30, 2021 the Company concluded that the equity environment was tainted and all warrants, stock options and convertible debt were included in the value of the derivatives. During the three months ended July 31, 2021, it was determined that the Company could increase their authorized common shares at any time, based on an agreement of the majority of voters to do so when needed, therefore the environment was no longer deemed to be tainted and all derivative liabilities were written off the books.

 

The Company estimated the fair value of the derivative liabilities at the issuance date and at each subsequent reporting date, using a multinomial lattice model simulation. The model is based on a probability weighted discounted cash flow model using projections of the various potential outcomes.

 

During the years ended April 30, 2022 and 2021, we had the following activity in our derivative liabilities:

 

 

 

Options and

 

 

Convertible

 

 

 

 

 

Warrants

 

 

Notes

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

Balance, April 30, 2020

 

$15

 

 

$2,607,418

 

 

$2,607,433

 

New issuances of debt

 

 

-

 

 

 

200,859

 

 

 

200,859

 

Debt conversions and repayments

 

 

-

 

 

 

(22,705,172)

 

 

(22,705,172)

Change in fair value of derivative liabilities

 

 

235,887

 

 

 

22,671,035

 

 

 

22,906,922

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, April 30, 2021

 

 

235,902

 

 

 

2,774,140

 

 

 

3,010,042

 

Change in fair value of derivative liabilities

 

 

(235,902)

 

 

(2,774,140)

 

 

(3,010,042)

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, April 30, 2022

 

$-

 

 

$-

 

 

$-

 

 

Key inputs and assumptions used in valuing the Company’s derivative liabilities as of April 30, 2021 were as follows:

 

 

·

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

 

·

Risk-free interest rate of 0.03% to 0.70%

 

·

The probability of future financing was estimated at 100%

 

·

Computed volatility ranging from 412.7% to 1556.1%

 

These inputs are subject to significant changes from period to period and to management's judgment; therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material.

 

 
F-24

Table of Contents

 

NOTE 11 – STOCKHOLDERS’ DEFICIT

 

Authorized Shares

 

As of April 30, 2021, the Company had authorized 11,000,000 shares consisting of 10,000,000 shares of common stock and 1,000,000 shares of preferred stock.  However, on August 16, 2021, the Company approved an amendment to its Articles of Incorporation to increase the number of its authorized shares of common stock from 10,000,000 to 200,000,000.  Shareholders owning in excess of 50.1% of the outstanding shares of voting common stock of the Company executed a written consent approving the amendment.  As of April 30, 2022, the Company had authorized 201,000,000 shares of capital stock, consisting of 200,000,000 shares of common stock and 1,000,000 shares of preferred stock.

 

Common Stock Issuances

 

During the year ended April 30, 2022, the Company issued a total of 17,953,041 shares of its common stock: 170,000 shares (plus 3,580,000 prefunded warrants and 2,575,500 warrants, see Warrants below) for cash of $3,000,000; 6,433,743 shares valued at $154,438 in conversion of convertible notes principal of $149,444, accrued interest payable of $4,490 and payment of fees of $504; 6,817,224 shares valued at $74,989 in conversion of related party convertible notes principal; 17,754 shares issued pursuant to the rounding of fractional shares in connection with our reverse stock split; 3,580,000 shares issued for the exercise of prefunded warrants; 730,000 shares issued for the exercise of Series A warrants; 25,611 shares issued for accrued expenses of $15,000; 78,709 shares issued for accrued expenses – related parties of $40,000; and 100,000 shares issued for a debt discount valued at $14,091.  In conjunction with the stock and warrants issued for cash, the Company also issued 337,500 warrants to the placement agent (see Warrants below) and recognized $349,150 in out-of-pocket offering costs.

 

During the year ended April 30, 2021, the Company issued a total of 1,916,358 shares of its common stock: 2,000 shares for consulting services valued at $34,000; 1,525,583 shares valued at $1,932,365 in conversion of convertible notes principal of $1,618,394, accrued interest payable of $301,943 and payment of fees of $12,028; and 388,775 shares valued at $4,277 in conversion of convertible notes payable – related party principal of $4,277.  Settlement of derivative liabilities in debt conversions and repayments totaled $22,511,164.

 

Series A Preferred Stock

 

The Series A preferred stock has no redemption, conversion or dividend rights; however, the holders of the Series A preferred stock, voting separately as a class, has the right to vote on all shareholder matters equal to 51% of the total vote.

 

During the year ended April 30, 2022 and 2021 no preferred shares were issued.

 

Series B Preferred Stock

 

The Series B preferred stock has a stated value equal to $1,000, has no redemption or voting rights, and are entitled to receive dividends on preferred stock equal, on an as-of-converted-to-common-stock basis, to and in the same form as the dividends paid on shares of the common stock.  The Series B preferred stock was convertible, at the option of the holder, into the number of shares of common stock determined by dividing the stated value of such share of Preferred Stock by the Conversion Price of $0.10, subject to adjustment for stock dividends, stock splits, and certain subsequent equity sales or rights offerings. Effective June 7, 2022 we entered into an agreement to reduce the conversion price to $0.05 per share (see Note 14). 

 

During the year ended April 31, 2022 the Company designated 1,500 shares of preferred stock as Series B and issued 1,500 shares of Series B preferred stock (plus 31,975,000 warrants, see Warrants below) for cash of $1,500,000. In conjunction with the stock issued for cash, the Company also issued 1,350,000 warrants to the placement agent (see Warrants below) and recognized $206,650 in out-of-pocket offering costs.

 

 
F-25

Table of Contents

 

Warrants

 

The Company has issued warrants in prior years to investors in a series of subscription agreements in equity financings or for other stock-based compensation.  Certain of the warrants contain anti-dilution provisions that the Company has identified as derivatives.  We estimate the fair value of the derivatives using multinomial lattice models that value the warrants based on a probability weighted cash flow model using projections of the various potential outcomes and considering the existence of a tainted equity environment (see Note 10).

 

A summary of warrant activity during the years ended April 30, 2022 and 2021 is presented below:

 

 

 

Shares

 

 

Weighted Average

Exercise Price

 

 

Weighted Average

Remaining Contractual Life (Years)

 

 

 

 

 

 

 

 

 

 

 

Outstanding, April 30, 2020

 

 

44,604

 

 

$1.00

 

 

 

1.91

 

Granted

 

 

63,388

 

 

$1.00

 

 

 

 

 

Canceled / Expired

 

 

(1)

 

$0.58

 

 

 

 

 

Exercised

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding, April 30, 2021

 

 

107,991

 

 

$1.00

 

 

 

0.91

 

Granted

 

 

42,923,352

 

 

$1.00

 

 

 

 

 

Canceled / Expired

 

 

(3,213,343)

 

$0.84

 

 

 

 

 

Exercised

 

 

(4,310,000)

 

$0.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding, April 30, 2022

 

 

35,508,000

 

 

$0.06

 

 

 

4.64

 

 

During the year ended April 30, 2022 the Company granted 529,852 warrants issued to warrant holders pursuant to anti-dilution provisions, 6,493,000 warrants issued in conjunction with the sale of common stock (see Common Stock above), and 33,325,000 warrants issued in conjunction with the sale of Series B preferred stock (see Series B Preferred Stock above).  As the fair value of the warrants granted would have had a net zero impact to equity (increasing additional paid in capital and recording offering costs for the same amount), the Company did not break out or complete a separate valuation of the warrants granted in association with either capital raise. 

 

Of the 6,493,000 warrants granted with the sale of common stock, 3,580,000 were prefunded, therefore have a zero exercise price and no expiration.  The remaining warrants have a 5 year life and 2,575,500 of the warrants were issued with a $0.80 exercise price while the other 337,500 were issued with a $1.00 exercise price.  During the year ended April 30, 2022, the Company modified the terms of the 2,575,500 warrants which resulted in the exercise price changing from $0.80 to $0.0001.  The Company accounted for this modification as a cancellation of the previous award and issuance of a new award in its place, however, as there was no change in the fair value as a result of the modification, no additional expense was recorded on the Company’s books.

 

Of the 33,325,000 warrants granted with the sale of Series A preferred stock, 14,399,500 have an exercise price of $0.0001, 17,575,500 have an exercise price of $0.10, and 1,350,000 have an exercise price of $0.125. All 33,325,000 warrants were granted with a 5 year life.

 

Stock Options

 

As a condition for entering into the October 5, 2018 GS convertible debenture (see Note 7), GS required affiliates of Jack W. Hanks and Bruce Lemons, our directors (the “Affiliates”), to pledge their shares of Class B Common Stock (constituting 100% of the then outstanding shares of Class B Common Stock) to GS to secure the repayment of the debenture by the Company. As consideration to the Affiliates for entering into the GS pledge agreement, the Company granted a ten-year option, effective as of December 11, 2018, to the Affiliates to purchase 2,000,000 common shares of the Company at $0.08 per share.  Effective November 30, 2020, the option agreement was amended to cancel the 2,000,000 options.

 

 
F-26

Table of Contents

 

A summary of stock option activity during the years ended April 30, 2022 and 2021 is presented below:

 

 

 

Shares

 

 

Weighted Average

Exercise Price

 

 

Weighted Average

Remaining Contractual Life (Years)

 

 

 

 

 

 

 

 

 

 

 

Outstanding, April 30, 2020

 

 

2,000,000

 

 

$0.08

 

 

 

8.62

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 

-

 

 

 

 

 

 

 

 

 

Canceled / Expired

 

 

(2,000,000)

 

 

 

 

 

 

 

 

Exercised

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding, April 30, 2021

 

 

-

 

 

$-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 

-

 

 

 

 

 

 

 

 

 

Canceled / Expired

 

 

-

 

 

 

 

 

 

 

 

 

Exercised

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding, April 30, 2022

 

 

-

 

 

$-

 

 

 

-

 

 

Common Stock Reserved

 

Combined with the 21,204,682 common shares outstanding at April 30, 2022, all authorized common shares have been issued or reserved for issuance of outstanding warrants, stock options, and convertible notes payable and no common shares are available for share issuances other than those shares included in the reserves.

 

NOTE 12 – INCOME TAXES

 

The Company accounts for income taxes in accordance with standards of disclosure propounded by the FASB, and any related interpretations of those standards sanctioned by the FASB. Accordingly, deferred tax assets and liabilities are determined based on differences between the financial statement and tax bases of assets and liabilities, as well as a consideration of net operating loss and credit carry forwards, using enacted tax rates in effect for the period in which the differences are expected to impact taxable income. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized.

 

No provision for income taxes has been recorded due to the net operating loss carryforwards totaling approximately $19,677,000 as of April 30, 2022 that will be available to offset future taxable income. The available net operating loss carry forwards expire in various years through 2042.  No tax benefit has been reported in the financial statements because the Company believes there is a 50% or greater chance the carry forwards will expire unused. There were no uncertain tax positions taken by the Company.

 

The deferred tax asset and valuation account is as follows at April 30:

 

 

 

2022

 

 

2021

 

Deferred tax asset:

 

 

 

 

 

 

   Net operating loss carryforward

 

$4,132,196

 

 

$3,417,552

 

   Valuation allowance

 

 

(4,132,196)

 

 

(3,417,552)

 

 

 

 

 

 

 

 

 

   Total

 

$-

 

 

$-

 

 

 
F-27

Table of Contents

 

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

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

   Change in net operating loss benefit

 

$714,644

 

 

$390,912

 

   Change in valuation allowance

 

 

(714,644)

 

 

(390,912)

 

 

 

 

 

 

 

 

 

   Total

 

$-

 

 

$-

 

 

NOTE 13 – COMMITMENTS AND CONTINGENCIES

 

Legal

 

In the ordinary course of business, we may be, or have been, involved in legal proceedings from time to time. During the year ended April 30, 2022 we were not involved in any material legal proceedings.

 

NOTE 14 – SUBSEQUENT EVENTS

 

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

 

Subsequent to April 30, 2022 the Company issued 1,397,000 shares of its common stock for the exercise of its Series A warrants and received proceeds of $140.  Additionally, the Company issued 710,802 shares of its common stock for the conversion of $90,000 of note principal and $19,677 of accrued interest.

 

On June 7, 2022 the Company entered into a $105,000 convertible note with a maturity date of June 7, 2023.  The note has an interest rate of 10% and is convertible into shares of the Company’s common stock at a conversion price of $0.11 per share for the first 180 days following the issuance date.  After the first 180 days has passed the note will have a variable conversion price equal to 58% of the Company’s lowest trading price during the ten days prior to the conversion date.

 

Effective June 7, 2022 the Company entered into an agreement to reduce the conversion price of our Series B Preferred shares, as well as the exercise price of our Series C Warrants and our Series D Warrants, to $0.05 per share.

 

Subsequent to April 30, 2022 the Company issued 3,000,000 warrants each to Maple Resources Corporation, a related party controlled by Jack Hanks, President, CEO, and Director; BNL Family Trust, a related party to Bruce Lemons, Director; and Nabil Katabi, Consultant. The warrants were intended to incentivize each of the grantees to continue to perform services on behalf of the Company, as well as to recognize prior performance of services without cash compensation. The warrants have an exercise price of $0.20 per share and expire ten years from the date of issuance.

 

 

 
F-28

 

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