MMEX Resources Corp: Form 10-K for the period ended Apr 30, 2021

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 107-A S. Main Street, Fort Stockton, Texas 79735. The Company has adopted a fiscal year end of April 30.

Company 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 use and production, leveraging our history, management and business relationships from the traditional energy sector. The focus of our business plan is to

• Modify our planned CDU projects in Pecos County (West Texas) to produce potentially hydrogen and ultra-low sulfur fuel products combined with CO2 capture.
• Purchase additional acreage allowing us to develop additional megawatts of solar power for distribution to our projects in West Texas.

Our immediate plans are to pursue the following three projects:

Project 1: Ultra Fuel clean refining.

We have teamed with Polaris Engineering to develop a clean refining, 10,000 barrel per day facility at our Pecos County site to produce 87° gasoline, ultra-low sulphur diesel and low-sulphur fuel oil, utilizing the Ultra Fuels concept. The Ultra Fuels concept features small size facilities to take advantage of proximity to smaller markets and/or locate directly near crude oil production areas. Because equipment is fabricated in modular units in the USA and shipped to site, this allows for 15 to 18 months’ 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.

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Project 2: Blue Hydrogen

We have teamed with Black Tree Group to develop a facility in Pecos County to produce hydrogen with carbon capture and storage employing steam methane reformer technology with the abundant natural gas supplies in the immediate area as the feedstock.

Project 3: Green Hydrogen

This planned project will be a parallel plant in Pecos County, which plans to utilize the proprietary electrolyzer technology of a major international technology partner. The facility will utilize solar power, with water purification, to produce up to 50 tons of hydrogen production per day.

We are in various stages of negotiations with major company off-takes that range from specialty air and gas companies to international trading companies. We would expect the sales of hydrogen by these companies will be to their customer base, which are more traditional chemical end uses. The proposed distribution network of liquid hydrogen from our planned projects will be by truck and rail.

Completion of these projects is dependent upon our obtaining the necessary capital for planning, construction and start-up costs. We are in consultation with the local and state tax authorities to file for tax abatement treatment generally applicable to projects such as our H2 projects. However, neither the receipt of adequate capital or tax abatement treatment can be assured.

The New Hydrogen Economy

The energy systems both in the United States and internationally are rapidly evolving. Major energy companies, regulatory agencies and all segments of society are working toward decarbonization and preservation of natural resources. In the interim, however, we need electric power and transportation energy. Hydrogen, as the most abundant fuel in the universe, is an energy carrier that cuts across sectors and has multiple benefits.

Hydrogen is the most abundant element in the universe; however, it is rarely found in its elemental form on earth. It must be produced from a hydrogen-containing feedstock (e.g., water, biomass, fossil fuels, or waste materials) using an energy source. Once hydrogen is produced, it can be used to store, move, and deliver low- or no-carbon energy to where it is needed. Hydrogen can be stored as a liquid, gas, or chemical compound, and is converted to energy via traditional combustion methods (in engines, furnaces, or gas turbines), through electrochemical processes (in fuel cells), and through hybrid approaches such as integrated combined cycle gasification and fuel cell systems. It is also used as a feedstock or fuel in a number of industries, including petroleum refining, ammonia production, food and pharmaceutical production, and metals manufacturing. Hydrogen can be produced in large centralized production facilities or in smaller distributed production facilities, and can be transported via truck, pipeline, tanker, or other means. Hydrogen, as a versatile energy carrier and chemical feedstock, offers advantages that unite all of our nation’s energy resources—renewables, nuclear, and fossil fuels—and enables innovations in energy production and end uses that can help decarbonize three of the most energy intensive sectors of our economy: transportation, electricity generation, and manufacturing.

Supplying hydrogen to industrial users is now a major business globally. Demand for hydrogen, which has grown more than threefold since 1975, continues to rise. Demand for hydrogen in its pure form is approximately 70 million tons per year. Governments are recognizing hydrogen’s role in energy security and its ability to decarbonize sectors that are otherwise extremely difficult to abate – such as logistics, industrial heating and industry feedstock. Meanwhile, industry leaders across the automotive, chemicals, oil and gas and heating sectors look to low-carbon and renewable hydrogen as a serious alternative to reach their increasingly robust sustainability objectives.

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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.

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.

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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.

Employees

As of April 30, 2021, 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. Our two directors have not received any compensation for their service on the Board.

Legal Proceedings

See Item 3 of this Report.

Our executive offices for mailing purposes is 3616 Far West Blvd. #117-321, Austin, Texas 78731. Our physical office is located at 107 A South Main Street, Fort Stockton, Texas, near the site of our proposed clean fuels and hydrogen projects.

We own a 126-acre and a 323.84-acre parcel of land in Pecos County, Texas that are the sites for our planned clean fuels and hydrogen projects.

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 use and production, leveraging our history, management and business relationships from the traditional energy sector. The focus of our business plan is to

• Modify our planned CDU projects in Pecos County (West Texas) to produce potentially hydrogen and ultra-low sulfur fuel products combined with CO2 capture.
• Purchase additional acreage allowing us to develop additional megawatts of solar power for distribution to our projects in West Texas.

Our immediate plans are to pursue the following three projects:

Project 1: A clean refining 10,000 barrel per day facility at our Pecos County site to produce 87° gasoline, ultra-low sulphur diesel and low-sulphur fuel oil, utilizing the Ultra Fuels concept.

Project 2: We have teamed with Black Tree Group to develop a “blue hydrogen” facility in Pecos County to produce hydrogen with carbon capture and storage employing steam methane reformer technology with the abundant natural gas supplies in the immediate area as the feedstock.

Project 3: A parallel “green hydrogen” plant in Pecos County, which plans to utilize the proprietary electrolizer technology of a major international technology partner.

We are in various stages of negotiations with major company off-takes that range from specialty air and gas companies to international trading companies. We would expect the sales of hydrogen by these companies will be to their customer base, which are more traditional chemical end uses. The proposed distribution network of liquid hydrogen from our planned projects will be by truck and rail.

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Completion of these projects is dependent upon our obtaining the necessary capital for planning, construction and start-up costs. We are in consultation with the local and state tax authorities to file for tax abatement treatment generally applicable to projects such as our hydrogen projects. However, neither the receipt of adequate capital or tax abatement treatment can be assured.

Through April 30, 2021, we have had no revenues and have reported continuing losses from operations.

Results of Operations

We recorded a net loss of $24,526,886 or $(14.23) per share, for fiscal year ended April 30, 2021, compared to a net loss of $4,393,689 or $(6.57) per share, for the fiscal year ended April 30, 2020. 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 decreased $36,835 to $867,471 for the year ended April 30, 2021 from $904,306 for the year ended April 30, 2020. The decrease resulted from lower salaries, travel and other expenses associated with securing debt financing and administrative activities of our development activities due to limitations on funding during the current fiscal year.

Refinery Start-Up Costs

During the year ended April 30, 2021, the expenditures for the development of our CDU project in Pecos County, Texas decreased from the prior fiscal year due to financing constraints. We have expensed all costs incurred, including acquisition of refinery rights, planning, design and permitting. Such costs totaled $179,133 and $214,439 for the years ended April 30, 2021 and 2020, respectively.

Depreciation and Amortization Expense

Our depreciation and amortization expenses remained constant, totaling $34,875 and $34,663 for the years ended April 30, 2021 and 2020, respectively. The expense results from the depreciation of land improvements and amortization of land easements.

Other Income (Expense)

Our interest expense decreased $703,108 to $1,143,495 for the year ended April 30, 2021 from $1,846,603 for the year ended April 30, 2020. We entered into fewer convertible debt arrangements in the current fiscal year, resulting in less amortization of debt discount to interest expense, which was partially offset by the increase in loan penalties and default interest.

For the years ended April 30, 2021 and 2020, we reported losses on derivative liabilities of $22,906,922 and $1,402,233, respectively. In a series of subscription agreements, we issued warrants in prior years that contain 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 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. 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.

We reported a gain on extinguishment of debt of $605,010 for the year ended April 30, 2021 compared to a gain on extinguishment of debt of $8,555 for the year ended April 30, 2020. The gain on extinguishment of debt generally results from the settlement and extinguishment of convertible notes payable and certain accounts payable and accrued expenses. During the year ended April 30, 2021 we settled certain notes which resulted in principal and accrued interest being written off for a gain of $242,102. We also recorded a gain of $194,008 for the write off of the derivative liabilities associated with the settlement of the notes and we recorded a gain of $167,900 when the United States Small Business Administration forgave our loan issued under the Paycheck Protection Program.

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Net Income (Loss)

As a result of the above, we reported net losses of $24,526,886 and $4,393,689 for the years ended April 30, 2020 and 2019, respectively.

Liquidity and Capital Resources

Working Capital

As of April 30, 2021, we had current assets of $368,342, comprised of cash of $330,449 and prepaid expenses and other current assets of $37,893, and current liabilities of $6,611,452, resulting in a working capital deficit of $6,243,110. Included in our current liabilities as of April 30, 2021 are derivative liabilities of $3,010,042, which we do not anticipate will require the payment of cash.

Sources and Uses of Cash

Our sources and uses of cash for the years ended April 30, 2021 and 2020 were as follows:

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.

In comparison, we used net cash of $734,518 in operating activities for the year ended April 30, 2020 as a result of our net loss of $4,393,689 and non-cash gain of $8,555, partially offset by non-cash expenses totaling $3,020,499, decrease in prepaid expenses and other current assets of $15,804, and increases in accounts payable of $58,753, accrued expenses of $375,732 and accounts payable and accrued expenses – related parties of $196,938.

Net cash used in investing activities was $0, and $10,540 for the years ended April 30, 2021 and 2020, respectively, comprised on the purchase of property and equipment.

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.

By comparison, net cash provided by financing activities was $756,700 for the year ended April 30, 2020, comprised of proceeds from convertible notes payable of $365,300, proceeds from convertible notes payable – related parties of $323,500 and proceeds from PPP loan payable of $167,900, partially offset by repayments of convertible notes payable of $100,000.

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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 $67,984,693 and a total stockholders’ deficit of $5,770,041 at April 30, 2021, and have reported negative cash flows from operations since inception. In addition, as of April 30, 2021 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. On July 15, 2021, we entered into a Securities Purchase Agreement (“SPA”) which closed on July 20, 2021, pursuant to which we issued and sold to an institutional investor in a registered direct offering 170,000 shares of our common stock, 2,575,000 warrants, and 3,580,000 pre-funded warrants. We received proceeds of $2,650,850 after deducting placement agent fees and related offering expenses. We have subsequently utilized approximately $560,000 of the proceeds to reduce indebtedness and intend to utilize the remaining amount for working capital purposes. Nevertheless, 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.

In addition to the SPA, 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, 2021. The following is a description of those significant accounting policies that involve estimates and judgment by management.

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Derivative liabilities

In a series of subscription agreements, the Company issued warrants in prior years that contain certain anti-dilution provisions that have been identified as derivatives. In addition, the Company identified the conversion feature of certain convertible notes payable and convertible preferred stock as derivatives. As of April 30, 2021, the number of warrants or common shares to be issued under these agreements is indeterminate; therefore, the Company concluded that the equity environment is tainted and all additional warrants, stock options and convertible debt are included in the value of the derivative. 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.

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:

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 the end of the period covered in this report, our disclosure controls and procedures were not 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.

Our management, including our principal executive officer and principal financial officer, 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. To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

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, 2021. 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. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. We have identified the following material weaknesses:

1. As of April 30, 2021, we did not maintain effective controls over the control environment. Specifically, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-B. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

2. As of April 30, 2021, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness.

3. As of April 30, 2021, we did not establish a formal written policy for the approval, identification and authorization of related party transactions.

4. As of April 30, 2021, we had no full-time employees with the requisite expertise in the key functional areas of finance and accounting. As a result, there is a lack of proper segregation of duties necessary to ensure that all transactions are accounted for accurately and in a timely manner

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Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of April 30, 2021, based on the criteria established in "2013 Internal Control-Integrated Framework" issued by the COSO.

Changes in Internal Control Over Financial Reporting.

There have been no changes in the Company's internal control over financial reporting through the date of this report or during the quarter ended April 30, 2021, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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.

Corrective Action.

Subject to availability of funds and progress with the Company’s business plan, management plans to address the structure of the Board of Directors and discuss adding an audit committee during fiscal year 2022.