Don, I would love to be very wrong on this, but it is all disclosed in a 10Q SEC document. Typenex lent the company $375,000 In June 2013 plus a lot of money for expenses and fees, and Mexus did not pay the money back. The default interest rate is 22%. The anti-dilution factor is in there for the benefit of Typenex, not Mexus. It allows Typenex to get the shares much cheaper after Mexus traded under a certain price.
IMO, they are converting constantly and dumping the shares for a profit. I'm praying there is a floor on the conversion price, or they can continue to depress the price indefinitely and get cheaper and cheaper shares. I read through this stuff and my eyes glaze over, I'll admit it to you.
I am asking for your help in getting to the bottom of it, if anyone can do it, it is you.
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9. CONVERTIBLE PROMISSORY NOTES
Typenex Co-Investment, LLC
On June 12, 2013, the Company entered into a Securities Purchase Agreement with Typenex Co-Investment, LLC (“Typenex”), for the sale of an 8% Secured Convertible Promissory Notes (“Notes”) in the principal amount of $557,500 consisting of an initial tranche of $307,500 comprising of $250,000 of cash at closing, Typenex legal expenses in the amount of $7,500 and a $50,000 original issue discount and an additional tranche $250,000 in cash. On June 12, 2013, the Company closed on the initial tranche and received $250,000 in cash. On August 8, 2013, the Company closed on the second tranche and received $125,000 in cash. The Company has not closed on the final tranche for $125,000 in cash. The Company has no obligation to pay Typenex any amounts on the unfunded portion of the Note. The Notes have a maturity date that is thirteen months after the issuance date. Typenex has been granted a security interest in the property of the Company. At the option of the holder, all principal, costs, charges and interest amounts outstanding under all of the Notes shall be exchanged for shares of the Company’s common stock at the Conversion Price of $0.23 per share. The Conversion Price is subject to an anti-dilution adjustment in the event the Company at any time, while the Notes are outstanding, issues equity securities including common stock or any security convertible or exchangeable for shares of common stock for no consideration or for consideration less than $0.23 a share.
In conjunction with the issuance of the Notes on June 12, 2013, the Company issued a variable number of warrants of the Company’s common stock equal to $278,750 divided by the Market Price. Market Price is defined as the higher of (i) the closing price of the common stock of the Company on June 12, 2013, and (ii) the VWAP of the common stock for the trading day that is two days prior to the exercise date. The Exercise Price of the warrants are $0.24 per share. The Exercise Price is subject to an anti-dilution adjustment in the event the Company at any time, while the Warrants are outstanding, issues equity securities including common stock or any security convertible or exchangeable for shares of common stock for no consideration or for consideration less than $0.24 a share.
The anti-dilution protection for the Note and Warrants excludes (a) the Company’s issuance of securities in connection with strategic license agreements and other partnering arrangements so long as any such issuances are not for the purpose of raising capital and in which holders of such securities or debt are not at any time granted registration rights, and (b) the Company’s issuance of Common Stock or the issuance or grant of options to purchase Common Stock to employees, directors, officers and consultants, authorized by the Company’s board of directors in place on June 12, 2013. After three months after the issuance date, monthly installments are due on the Note payable at the option of the Company (i) in cash (ii) in shares of common stock of the Company discounted depending on the Company’s share price at either 30% or 35%, or (iii) in any combination of cash or shares.
On June 12, 2013, the Company recorded a discount on the Note equal to the fair value of the warrant derivative liability and convertible promissory note derivative liability. This discount is amortized using the effective interest rate method over the term of the Note.
Three Months
Ended
June 30, 2015
Year Ended
March 31, 2015
Opening balance
$ 102,842
$ 282,861
Conversion of principal into shares of common stock
(54,566)
(268,663)
Amortization of discount on Note and accrued interest
1,939
88,644
Closing balance
$ 50,215
$ 102,842
Default of Secured Convertible Promissory Notes
The Company did not pay the outstanding principal and interest due on July 12, 2014, the maturity date of the Notes, and the Notes went into default. On default, the Holders at their option may redeem the Notes in full or accelerate installments due on the Notes. The Holders may designate whether the installments are due in cash or discounted shares of common stock of the Company or a combination thereof. The default rate on the note is 22%.
JMJ Financial
On January 28, 2015, the Company issued a Convertible Promissory Note (“Note”) to JMJ Financial (“Holder”), in the original principal amount of $110,000 bearing a 12% annual interest rate and maturing in two years for $100,000 of consideration paid in cash and a $10,000 original issue discount. The Company may repay the Note any time and if repaid within 90 days of date of issue with an interest rate is 0%. This Note together with any unpaid accrued interest is convertible into shares of common stock at the Holder’s option at a variable conversion price calculated as lessor of (a) $0.029 or (b) 60% of the lowest trade occurring during the 25 consecutive trading days immediately preceding the conversion date. On January 28, 2015, the Company received cash of $50,000 in the first tranche, which was net of original issue discount of $5,000. At June 30, 2015, the first tranche of the Note is recorded net of unamortized debt discount of $36,261.
LGH Investments, Inc.
On April 6, 2015, the Company issued a Convertible Promissory Note (“Note”) to LGH Investments, Inc. (“Holder”), in the original principal amount of $110,000 bearing a 12% annual interest rate and maturing in two years for $100,000 of consideration paid in cash and a $10,000 original issue discount. This Note together with any unpaid accrued interest is convertible into shares of common stock at the Holder’s option at a variable conversion price calculated as lessor of (a) $0.019 or (b) 60% of the lowest trade occurring during the 25 consecutive trading days immediately preceding the conversion date. On April 6, 2015, the Company received cash of $25,000 in the first tranche, which was net of original issue discount of $2,500. At June 30, 2015, the first tranche of the Note is recorded net of unamortized debt discount of $30,965.
Lucas Hoppel
On June 11, 2015, the Company issued a Convertible Promissory Note (“Note”) to Lucas Hoppel (“Holder”), in the original principal amount of $110,000 bearing a 12% annual interest rate and maturing in two years for $100,000 of consideration paid in cash and a $10,000 original issue discount. This Note together with any unpaid accrued interest is convertible into shares of common stock at the Holder’s option at a variable conversion price calculated as lessor of (a) $0.018 or (b) 60% of the lowest trade occurring during the 25 consecutive trading days immediately preceding the conversion date. On June 11, 2015, the Company received cash of $25,000 in the first tranche, which was net of original issue discount of $2,500. At June 30, 2015, the first tranche of the Note is recorded net of unamortized debt discount of $38,651.
10. WARRANT DERIVATIVE LIABILITY
The Warrants are subject to anti-dilution adjustments that allow for the reduction in the Exercise Price in the event the Company subsequently issues equity securities including common stock or any security convertible or exchangeable for shares of common stock for no consideration or for consideration less than $0.24 a share. The Company accounted for the warrants in accordance with ASC Topic 815. Accordingly, the Warrants are not considered to be solely indexed to the Company’s own stock and, as such, recorded as a liability.
The Company’s warrant derivative liability has been measured at fair value at June 30, 2015 and March 31, 2014 using a binomial model. Since the Exercise Price contains an anti-dilution adjustment, the probability that the Exercise Price of the Notes would decrease as the share price decreased was incorporated into the valuation calculation. After June 12, 2013, the Company issued common stock for cash at a price of $0.01 per share and the conversion price has been adjusted accordingly.
The inputs into the binomial model are as follows:
June 30, 2015
March 31, 2015
Market price
$0.0178
$0.0194
Conversion price
$0.0100
$0.0110
Risk free rate
1.01%
0.89%
Expected volatility
135%
121%
Dividend yield
0%
0%
Expected life
35 months
38 months
The fair value of the warrant derivative liability is $404,826 at June 30, 2015. The increase (decrease) in the fair value of the warrant liability of $(2,759) and $(475,764) has been recorded as a (gain) loss in the consolidated statements of operations for the three months ended June 30, 2015 and 2014, respectively.
11. CONVERTIBLE PROMISSORY NOTE DERIVATIVE LIABILITY
The Convertible Promissory Note with Typenex is subject to anti-dilution adjustments that allow for the reduction in the Conversion Price in the event the Company subsequently issues equity securities including common stock or any security convertible or exchangeable for shares of common stock for no consideration or for consideration less than $0.23 a share. The Company accounted for the conversion option in accordance with ASC Topic 815. Accordingly, the Conversion Option is not considered to be solely indexed to the Company’s own stock and, as such, recorded as a liability.
The Company’s convertible promissory note derivative liabilities has been measured at fair value at March 31, 2015 and 2014 using a binomial model. Since the Conversion Price contains an anti-dilution adjustment, the probability that the Conversion Price of the Notes would decrease as the share price decreased was incorporated into the valuation calculation. After June 12, 2013, the Company issued common stock for cash at a price of $0.01 per share and the conversion price has been adjusted accordingly.
The inputs into the binomial model are as follows:
June 30, 2015
March 31, 2015
Closing share price
$0.0183
$0.0194
Conversion price
$0.0100
$0.011
Risk free rate
0.11%
0.14%
Expected volatility
182%
180%
Dividend yield
0%
0%
Expected life
0.5 years
0.5 years
Additionally, the Convertible Promissory Notes with JMJ Financial with an issue date of January 28, 2015, LGH Investments, Inc. with an issue date of April 6, 2015 and Lucas Hoppel with an issue date of June 11, 2015 was accounted for under ASC 815. The variable conversion price is not considered predominately based on a fixed monetary amount settleable with a variable number of shares due to the volatility and trading volume of the Company’s common stock. The Company’s convertible promissory note derivative liabilities has been measured at fair value at June 30, 2015, June 11, 2015, April 6, 2015 and March 31, 2015 using the Black-Scholes model.
The inputs into the Black-Scholes models are as follows:
June 30, 2015
March 31, 2015
Closing share price
$0.01826
$0.0194
Conversion price
$0.0160
$0.019
Risk free rate
0.050%
0.050%
Expected volatility
143% - 151%
129%
Dividend yield
0%
0%
Expected life
1.58 years – 1.95 years
1.83 years
The fair value of the conversion option derivative liabilities is $204,847 at June 30, 2015. The increase (decrease) in the fair value of the conversion option derivative liability of $159 and $(648,269) is recorded as a (gain) loss in the unaudited condensed consolidated statements of operations for the years ended June 30, 2015 and 2014, respectively.
12. CONTINGENT LIABILITIES
An asset retirement obligation is a legal obligation associated with the disposal or retirement of a tangible long-lived asset that results from the acquisition, construction or development, or the normal operations of a long-lived asset, except for certain obligations of lessees. While the Company, as of June 30, 2015, does not have a legal obligation associated with the disposal of certain chemicals used in its leaching process, the Company estimates it will incur costs up to $50,000 to neutralize those chemicals at the close of the leaching pond.
During the year ended March 31, 2014, an unrelated shareholder and note holder of the Company advanced $516,009 of cash to the Company. These cash advances were classified as share subscriptions payable by the Company upon receipt based on fully executed share subscription agreements. At June 30, 2015, the unrelated shareholder, in addition to the shares that were due under the share subscription agreement, is claiming an additional $516,009 notes payable are due. The unrelated shareholder asserts that these notes bearing interest from 4% to 6%, went into default on April 1, 2014 and have default interest of 9%. The Company believes the claim for additional notes payable due of $516,009 plus accrued interest is unlikely to succeed because the Company did not execute notes payable agreements for $516,009 with the unrelated shareholder. As such, no additional liability for this claim has been recorded in these financial statements at June 30, 2015.
13. STOCKHOLDERS’ EQUITY
The stockholders’ equity of the Company comprises the following classes of capital stock as of June 30, 2015 and March 31, 2015:
Preferred Stock, $.001 par value per share; 9,000,000 shares authorized, 0 shares issued and outstanding at June 30, 2015 and March 31, 2014, respectively.
Series A Convertible Preferred Stock (‘Series A Preferred Stock”), $.001 par value share; 1,000,000 shares authorized: 1,000,000 shares and 325,000 shares issued and outstanding at June 30, 2015 and March 31, 2014, respectively.
Holders of Series A Preferred Stock may convert one share of Series A Preferred Stock into one share of Common Stock. Holders of Series A Preferred Stock have the number of votes determined by multiplying (a) the number of Series A Preferred Stock held by such holder, (b) the number of issued and outstanding Series A Preferred Stock and Common Stock on a fully diluted basis, and (c) 0.000006.
Common Stock, par value of $0.001 per share; 500,000,000 shares authorized: 332,349,890 and 308,236,718 shares issued and outstanding at June 30, 2015 and March 31, 2015, respectively. Holders of Common Stock have one vote per share of Common Stock held.
Series A Preferred Stock
On June 10, 2015, the Company issued 625,000 shares of Series A Preferred Stock to Paul Thompson Sr., Chief Executive Officer and sole director of the Company, to satisfy obligations under share subscription agreements for $75,000 for settlement of accounts payable – related party included in share subscriptions payable.
Common Stock
On April 14, 2015 the Company issued 1,840,908 shares of common stock (valued at $28,818 and classified as common stock of $1,841 and additional paid-in capital of $26,977) to satisfy obligations under share subscription agreements for $21,318 for settlement of notes payable and $7,500 in services included in share subscriptions payable.
On April 21, 2015 the Company issued 4,745,452 shares of common stock (valued at $67,241 and classified as common stock of $4,745 and additional paid-in capital of $62,496) to satisfy obligations under share subscription agreements for $36,441 for settlement of notes payable, $12,000 in services and $18,800 in cash receipts included in share subscriptions payable.
On May 13, 2015 the Company issued 3,176,134 shares of common stock (valued at $49,289 and classified as common stock of $3,176 and additional paid-in capital of $46,113) to satisfy obligations under share subscription agreements for $30,289 for settlement of notes payable, $10,000 in equipment and $9,000 in cash receipts included in share subscriptions payable.
On June 10, 2015 the Company issued 5,830,863 shares of common stock (valued at $81,482 and classified as common stock of $5,831 and additional paid-in capital of $75,651) to satisfy obligations under share subscription agreements for $49,448 for settlement of accounts payable, $9,534 in services and $22,500 in cash receipts included in share subscriptions payable.
On June 23, 2015 the Company issued 1,800,000 shares of common stock (valued at $32,000 and classified as common stock of $1,800 and additional paid-in capital of $30,200) to satisfy obligations under share subscription agreements for $12,000 in services and $20,000 in cash receipts included in share subscriptions payable.
On April 18, 2015 and May 1, 2015, the Company issued a total of 6,719,815 shares of common stock valued at $126,886 and classified as common stock of $6,720 and additional paid-in capital of $120,166 ($0.0189 per share) to Typenex Co-Investment, LLC for conversion of principal and interest of $54,566 and loss on settlement of debt of $72,320.
Series A Preferred Stock Payable
During the three months ended June 30, 2015, the Company issued subscriptions payable for 625,000 shares of Series A Preferred Stock valued at $75,000 and classified as Series A Preferred Stock of $625 and additional paid-in capital of $74,375 ($0.12 per share) to Paul Thompson Sr., Chief Executive Officer and sole director of the Company, for $75,000 for settlement of accounts payable – related party.
Common Stock Payable
During the three months ended June 30, 2015, the Company issued subscriptions payable for 3,686,652 shares of common stock ($0.0102 per share) for $37,776 in cash.
During the three months ended June 30, 2015, the Company issued subscriptions payable for 5,831,166 shares of common stock for services valued at $84,974 ($0.0146 per share).
During the three months ended June 30, 2015, the Company issued subscriptions payable for 312,500 shares of common stock for purchase of equipment valued at $10,000 ($0.0320 per share).
During the three months ended June 30, 2015, the Company issued subscriptions payable for 2,900,000 shares of common stock for settlement of accounts payable valued at $49,448 ($0.0171 per share).
During the three months ended June 30, 2015, the Company issued subscriptions payable for 7,863,633 shares of common stock for settlement of notes payable valued at $112,149 ($0.0143 per share).
14. SUBSEQUENT EVENTS
Common Stock
On July 9, 2015 the Company issued 7,796,966 shares of common stock to satisfy obligations under share subscription agreements for $78,037 for settlement of notes payable, $14,200 in services and $12,500 in cash receipts included in share subscriptions payable.
On July 28, 2015, the Company issued a total of 1,000,000 shares of common stock to JMJ Financial for conversion of principal and interest of $26,000.
On July 28, 2015, the Company issued a total of 2,877,698 shares of common stock to Typenex Co-Investment, LLC for conversion of principal and interest of $8,100.
On July 29, 2015 the Company issued 2,078,333 shares of common stock to satisfy obligations under share subscription agreements for $9,740 in services and $15,000 in cash receipts included in share subscriptions payable.
On August 6, 2015 the Company issued 2,125,000 shares of common stock to satisfy obligations under share subscription agreements for $13,500 in services and $12,000 in cash receipts included in share subscriptions payable.
On August 10, 2015, the Company issued a total of 1,100,000 shares of common stock to JMJ Financial for conversion of principal and interest of $8,800.
Common Stock Payable
From July 1, 2015 to August 10, 2015, the Company issued subscriptions payable for 2,100,000 shares of common stock for services valued at $36,000 ($0.0171 per share).
From July 1, 2015 to August 10, 2015, the Company issued subscriptions payable for 10,232,892 shares of common stock for settlement of notes payable valued at $102,329 ($0.0100 per share).
AI
