MMEX Resources Corp (MMEX)

[flemsnopes]

Does this smell? (I'm just asking)

Item 3.02
Unregistered Sales of Equity Securities.

On March 22, 2011, we issued and sold 1,000,000 shares of Series A Preferred Stock to William D. Gross, an accredited investor, in consideration of the investor’s providing $1.0 million of financing to the Company. The issuance and sale of the Series A Preferred Stock was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. Our board of directors had previously designated 2.0 million shares of our authorized and unissued shares of preferred stock as the Series A Preferred Stock. The terms of the Series A Preferred Stock are as follows:

Liquidation value of $1.00 per share plus accrued and unpaid dividends

Liquidation preference equal to liquidation value

Dividends to accrue at annual rate of 10%; Company may elect to pay in kind rather than in cash

Convertible into common stock at rate of $.04 per share

Redeemable at liquidation value at earlier of March 1, 2016 or change of control of Company

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Voting rights on as converted basis

Previously, the investor loaned us $250,000, which is due and payable in installments through October of 2011. In the event that we default in the repayment of this loan, the investor will be entitled (in addition to customary creditor remedies) to receive additional shares of Series A Preferred Stock at the rate of $1.00 per share for the amounts due to him.

We have pledged a majority interest in our Armadillo Mining Corporation subsidiary to the investor to secure our obligation to repay the investor the redemption price of the Series A Preferred Stock. This pledge will be released upon the repayment to the investor of the redemption price or his earlier conversion of Series A Preferred Stock into our common stock.

As previously reported, on January 28, 2011, we issued $450,000 principal amount of convertible notes to a group of accredited investors. On March 22, 2011, the notes were repaid with the net proceeds of the sale of our Carpenter Creek project described in Item 8.01 below. Pursuant to the terms of the convertible notes, we issued warrants to purchase our common stock (at an exercise price of $.10 per share) at the time of repayment of the notes at the rate of ten warrant shares for every dollar value of the principal and interest. The warrants expire at the end of three years. The issuance and sale of the Series A Preferred Stock was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.