# MMEX Resources Corp: Form 10-Q for the period ended Jul 31, 2023 - Company: [MMEX Resources Corp](/companies/mmex.md) (CIK 1440799) - Form: 10-Q - Filed: 2023-09-11 - Accepted by EDGAR: Sep 11, 2023, 16:50 ET - Period: 2023-07-31 - Accession: 0001477932-23-006808 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/1440799/000147793223006808/mmex_10q.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1440799/000147793223006808/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2023-07-31. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Revenue | 3 months, 2023-05-01 to 2023-07-31 | $0 | us-gaap:Revenues | | Operating income | 3 months, 2023-05-01 to 2023-07-31 | −$333.1k | us-gaap:OperatingIncomeLoss | | Interest expense | 3 months, 2023-05-01 to 2023-07-31 | $99.1k | us-gaap:InterestExpense | | Income tax | 3 months, 2023-05-01 to 2023-07-31 | $0 | us-gaap:IncomeTaxExpenseBenefit | | Net income | 3 months, 2023-05-01 to 2023-07-31 | −$1.2m | us-gaap:NetIncomeLoss | | Operating cash flow | 3 months, 2023-05-01 to 2023-07-31 | −$75.5k | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Capital expenditure | 3 months, 2023-05-01 to 2023-07-31 | $0 | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment | | Cash and equivalents | at 2023-07-31 | $250 | us-gaap:CashAndCashEquivalentsAtCarryingValue | | Current assets | at 2023-07-31 | $3.3k | us-gaap:AssetsCurrent | | Total assets | at 2023-07-31 | $1.1m | us-gaap:Assets | | Current liabilities | at 2023-07-31 | $4.0m | us-gaap:LiabilitiesCurrent | | Total liabilities | at 2023-07-31 | $4.0m | us-gaap:Liabilities | | Shareholders' equity | at 2023-07-31 | −$3.0m | us-gaap:StockholdersEquity | ## Management's discussion and analysis As filed, 18,648 characters. The following discussion and analysis constitute 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 Condensed Consolidated Financial Statements, including the notes thereto. ### Overview #### Company Information and Business Plan MMEX Resources Corporation (“MMEX”) was formed as a Nevada corporation in 2005. The current management team lead an acquisition of the Company (then named Management Energy, Inc.) through a reverse merger completed in 2010 and thereafter changed the Company’s name to MMEX Mining Corporation. 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. 23 #### Table of Contents #### Project 2: 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 3: 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 owned 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 several renewable power developers to become the technology provider for 160 MWe solar power component. In addition, the Company is in discussions with technology providers for the Ammonia and/or Methanol complex, for conversion of the hydrogen to ammonia or methanol to facilitate transportation of the finished product for the export market in either Europe or Asia and with 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 the U.S. and Texas to include Austin, Dallas, Houston, and San Antonio. #### Project 4: 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. #### Project 5: 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. 24 #### Table of Contents #### Project 6: 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 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, In turn, the hydrogen will be used in Siemens Energy turbines and generator sets to produce up to 70 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 purchased by the developer of a CO2 sequestration facility within the project area. The remainder of the hydrogen production is scheduled to be converted to ammonia and/or methanol. Solar and wind power will be utilized in the ATR and the Company is under discussions with the renewable power companies developing the Company’s other solar projects in the area. The planned carbon capture features of the project will be owned, financed, constructed, and operated by an independent third-party. 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. ### Results of Operations #### Revenues We have not yet begun to generate revenues. #### General and Administrative Expenses Our general and administrative expenses decreased to $333,136 for the three months ended July 31, 2023 from $817,312 for the three months ended July 31, 2022. The decrease is a result of the Company issuing 3,000,000 shares each to two entities affiliated with the Company’s two board members and a consultant and recognizing $495,000 as stock-based compensation during the three months ended July 31, 2022, versus $28,200 recognized for stock-based compensation during the three months ended July 31, 2023. #### Project Costs We expense the direct costs incurred on our projects, including acquisition of rights, planning, design and permitting. Our project costs have decreased to $0 for the three months ended July 31, 2023 from $4,357 for the three months ended July 31, 2022. The decrease is a result of not having funding available to invest in our projects during the periods presented. #### Depreciation and Amortization Expense Our depreciation and amortization expense results from the depreciation of land improvements and amortization of land easements and totaled to $9,097 and $9,097 for the three months ended July 31, 2023 and 2022, respectively. 25 #### Table of Contents #### Other Income (Expense) Our interest expense includes interest accrued on debt, amortization of debt discount and penalties assessed on debt. Interest expense totaled $99,138 and $62,889 for the three months ended July 31, 2023 and 2022, respectively. The increase in interest expense is due to higher levels of new non-related party notes payable and related party notes payable in the current period as a result of borrowing funds to assist with cash flows. Additionally, the higher levels of debt also resulted in more amortization of debt discount to interest expense incurred in the period. We reported a net gain (loss) on extinguishment of liabilities of $(753,298) and $16,540 for the three months ended July 31, 2023 and 2022, respectively. The gain in the prior period was due to a lender converting a note payable and forgiving certain amounts of accrued interest, while the loss in the current period was due to accrued liabilities being converted into common shares that were valued in excess of the liabilities being extinguished. #### Net Income (Loss) As a result of the above, we reported net income (loss) of $(1,185,572) and $(863,660) for the three months ended July 31, 2023 and 2022, respectively. #### Deemed Dividend Effective June 7, 2022 we reduced the conversion price of our Series B preferred stock from $0.10 to $0.05. This resulted in the recognition of a deemed dividend of $2,534,402 during the three months ended July 31, 2022 in order to account for the change in fair value of the Series B preferred stock. #### Net Income (Loss) Attributable to Common Shareholders As a result of the deemed dividend, our net loss attributed to common shareholders was $(3,398,062) for the three months ended July 31, 2022. We had no similar activity during the three months ended July 31, 2023, therefore net income attributed to the Company was the same as net loss of $1,185,572. ### Liquidity and Capital Resources #### Working Capital As of July 31, 2023, we had current assets of $3,250, comprised of cash and prepaid expenses, and current liabilities of $4,024,703, resulting in a working capital deficit of $4,021,453. #### Sources and Uses of Cash Our sources and uses of cash for the three months ended July 31, 2023 and 2022 were as follows: | | 2023 | 2022 | | --- | ---: | ---: | | Cash, beginning of period | $10,363 | $136,867 | | Net cash used in operating activities | (75,513) | (233,608) | | Net cash used in investing activities | - | - | | Net cash provided by financing activities | 65,400 | 105,000 | | Cash, end of period | $250 | $8,259 | 26 #### Table of Contents We used net cash of $75,513 in operating activities for the three months ended July 31, 2023 as a result of our net loss of $1,185,572, offset by non-cash net expense totaling $815,055, a decrease in prepaid expenses of $21,000, and increases in accounts payable, accrued expenses, and accounts payable and accrued expenses - related party of $274,004. We used net cash of $233,608 in operating activities for the three months ended July 31, 2022 as a result of our net loss of $863,660, offset by non-cash net expense totaling $510,129, a decrease in prepaid expenses of $17,500, and increases in accounts payable, accrued expenses, and accounts payable and accrued expenses - related party of $102,423. Net cash used in investing activities for the three months ended July 31, 2023 and 2023 was $0. Net cash provided by financing activities for the three months ended July 31, 2023 was $65,400, comprised of proceeds from notes payable of $35,000 and proceeds from convertible notes payable of $30,400. Net cash provided by financing activities for the three months ended July 31, 2022 was $105,000, comprised of proceeds from notes payable. #### 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, and have reported negative cash flows from operations since inception. Additionally, we have a working capital deficit, 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. 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. 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. 27 #### Table of Contents ### Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements that have or are reasonably likely to have a 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 our Annual Report on Form 10-K for the year ended April 30, 2023 filed with the SEC and Note 2 to our condensed consolidated financial statements included in this quarterly report. There were no changes to our significant accounting policies during the three months ended July 31, 2023. ## Controls and procedures As filed, 3,170 characters. ### (a) 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(c) 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 effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 (“Securities Exchange Act”) 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. 28 #### Table of Contents 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. 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 July 31, 2023. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in 2013 Internal Control-Integrated Framework. Based on our evaluation, management concluded that we maintained effective internal control over financial reporting as of July 31, 2023, based on the COSO framework criteria. Management believes our processes and controls are sufficient to ensure the that the consolidated 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 in accordance with U.S. GAAP. ### (b) Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 29 #### Table of Contents Filed Sep 11, 2023. Source: SEC EDGAR, the filing index for accession 0001477932-23-006808. Last ingested by Listed: Nov 5, 2026, 12:23 ET. No prices; not investment advice.