Mexus Gold US (MXSG)

[1manband]

The JMJ toxic convertible note was even more costly than it first appeared.

Mexus borrowed $150,000 for 7 months and repaid $183,333 in principal and interest. That works out to an annual interest rate of 38%. But, it gets worse. Much worse.

The Company, as the "origination shares" also issued JMJ 3,591,940 common shares when they took out the note. That was valued at $51,920. That was bad enough. But suddenly, the terms of the note changed. The original SEC filings did not contain any additional requirements to the note. But oddly, in the new 10-K, an additional clause to the note appeared which was not disclosed in prior filings (perhaps THIS is the penalty for paying the note late? Hmmmmm…..) the terms of the note now contain a reset provision which required the Company to "top off" that amount under the following terms:

"The number of Origination Shares is subject to a reset on the six month anniversary of the Note equal to the $166,667 divided by the lowest daily price of shares of common stock (i) during the 10 days before the delivery of the Origination Shares (ii) during the ten days prior to the date of the Note or (iii) during the ten days prior to the date of the six month anniversary (“Top-off Liability”)."

And that was a real killer. For the top-off, the Company issued JMJ an additional 4,269,663 common shares valued at $67,888. Those shares were issued on May 30th, which was TWO WEEKS AFTER the Company purportedly paid off the note. Curious, indeed.

In the end, the Company paid JMJ $303,141 to borrow $150,000 for 7 months, which works out to an effective annual interest rate of 175%.

So why didn't the Company just borrow the money directly from the shareholders in the first place? And why did they try to hide the fact that much of the money received from the toxic convertible went directly into the pockets of Paul Thompson and his son? Maybe they didn't want to disclose that to the shareholders?