MMEX Resources Corp: Form 10-Q for the period ended Oct 31, 2024

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 three special purpose entities of the Company - one to transition from legacy refining transportation fuels by producing them as ultra clean fuels with low CO2, a second which plans to produce blue hydrogen from natural gas with carbon capture and utilize the hydrogen to produce electric power and a third which plans to produce green hydrogen converted to green ammonia for export. These three sub-divisions will be operating respectively as Pecos Clean Fuels & Transport, LLC, Trans Permian H2Hub, 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:

Pecos Clean Fuel & Transport, 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 fuels refinery, up to 11,600 barrel per day feedrate crude oil refining facility at our Pecos County, Texas site. The planned product slate will consist of transportation grade finished products, including zero sulfur 87° gasoline, ultra-low sulfur diesel and low-sulfur fuel oil. In addition, to finished products, the Ultra Fuel® configuration has expected criteria pollutant emissions that are on the order of 95% lower than those of a traditional refinery in the US Gulf Coast. The planned Blue Hydrogen project if implemented, will provide the refinery with Hydrogen for fuel gas and thus reduce CO2 emitting refineries in the world. The Ultra Fuels® configuration, with capex and technical details completed in the Front-End Load-2 (“FEL-2”) engineering package, features modular design features to take advantage of proximity to Permian Basin fuel markets and to 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-frame and more rapid implementation. The modular concept with reduced footprint, as well as lower emissions, also allowed for faster permitting which we obtained for this facility from the Texas Commission on Environmental Quality on February 18, 2022.

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Trans Permian H2Hub, LLC

Project 1: Pecos County, Texas- Blue Hydrogen to Power Project

The Company is in planning discussions with a super major oil company (the “Super Major”) to utilize its natural gas in the Permian Basin to develop a Blue Hydrogen to Power Project at the Company’s Pecos County, Texas site. The Project plans to utilize a portion of the Super Major’s significant natural gas production and transportation from the Permian in Siemens Energy gas turbines and generators in combined cycle to produce electric power in Phase 1. In Phase 2 the natural gas will be converted into hydrogen utilizing a major international company’s reformer technology, with the gas turbines converted to utilize 100% hydrogen to generate electric power. The produced electric power in both Phases will be managed and marketed to ERCOT, the Texas power distribution hub, by the Super Major power trading desk. The project design also includes a CO2 capture and production facility with the CO2 marketed to another Super Major oil company. The Project plans to utilize wind and solar power as its source of energy. Additionally, the Project plans to utilize its Hydrogen production as fuel gas to the refinery, and this fuel gas will generate zero CO2 emissions from the refinery.

Hydrogen Global, LLC

Project 1: Hydrogen Global- Pecos County, Texas- Green Hydrogen Project to Green Ammonia 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 110 tons of hydrogen production per day. The Company and Siemens have completed the Front-End Engineering and Design (“FEED”) study, which outlines the scope of the electrolyzer complex on the Company’s 321-acre site in Pecos County, Texas. The Company is in discussions with several renewable power developers to become the technology provider for 320 MW solar power component. In addition, the Company is in discussions with a major international technology provider for the Ammonia complex, for conversion of the green hydrogen to green ammonia. The project plans to transport the ammonia by rail to the Port of Corpus Christi, then to utilize planned terminal and storage facilities at the Port to load out the ammonia with a major international shipping company for export markets. The major shipper had patterned technology to re-crack the ammonia to hydrogen on board ship for the last mile delivery to the ultimate buyer.

Project 2: 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 plans to use the same Pecos County project major international technology provider for the Ammonia complex and the same international shipping company for the green Ammonia to be delivered to Europe or Asia and to be re-cracked to hydrogen for the last mile delivery.

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.

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Results of Operations

Revenues

We have not yet begun to generate revenues.

General and Administrative Expenses

Our general and administrative expenses increased to $358,169 for the three months ended October 31, 2024 from $312,175 for the three months ended October 31, 2023. The increase is a result of the Company recognizing additional consultant fees during the three months ended October 31, 2024, as compared to the three months ended October 31, 2023. Our general and administrative expenses increased to $708,700 for the six months ended October 31, 2024 from $636,213 for the six months ended October 31, 2023. The increase is a result of the Company recognizing additional consultant fees during the six months ended October 31, 2024, as compared to the six months ended October 31, 2023.

Project Costs

We expense the direct costs incurred on our projects, including acquisition of rights, planning, design and permitting. The levels of spending on our projects will vary from period to period based on availability of financing. Our project costs have decreased to $0 for the three months ended October 31, 2024 from $5,482 for the three months ended October 31, 2023 and decreased to $5,430 for the six months ended October 31, 2024 from $5,482 for the six months ended October 31,2023. The decrease is a result of timing of costs on our Trans Permian H2Hub project during the three and six months ended October 31, 2024 versus the three and six months ended October 31, 2023.

Depreciation and Amortization Expense

Our depreciation and amortization expense results from the depreciation of land improvements and amortization of land easements and totaled to $9,100 for the three months ended October 31, 2024 and 2023, respectively and totaled $18,197 for the six months ended October 31, 2024 and 2023, respectively.

Other Income (Expense)

Our interest expense includes interest accrued on debt, amortization of debt discount and penalties assessed on debt. Interest expense totaled $84,165 and $108,952 for the three months ended October 31, 2024 and 2023, respectively and totaled $174,329 and $208,091 for the six months ended October 31, 2024 and 2023, respectively. The decrease in interest expense is due to 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, containing provisions in lieu of interest. Additionally, the debt also resulted in amortization of debt discount to interest expense incurred in the period.

We reported a net gain (loss) on extinguishment of liabilities of $0 and $1,148 for the three months ended October 31, 2024 and 2023, respectively and $0 and $(752,150) for the six months ended October 31, 2024 and 2023, respectively. The gain in the prior three-month period was due to a note conversion that waived a portion of unpaid interest. The loss in the prior six-month period was due to accrued liabilities being converted into common shares that were valued in excess of the liabilities being extinguished.

We reported a net loss on extinguishment of debt of $20,013 and $0 for the three and six months ended October 31, 2024 and 2023, respectively. The loss in the current period was a result of loan modifications that met the conditions of a debt extinguishment.

Net Income (Loss)

As a result of the above, we reported net income (loss) of $(471,447) and $(434,561) for the three months ended October 31, 2024 and 2023, respectively and ($926,669) and ($1,620,133) for the six months ended October 31, 2024 and 2023, respectively.

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Liquidity and Capital Resources

Working Capital

As of October 31, 2024, we had current assets of $10,413, comprised of cash and prepaid expenses, and current liabilities of $5,699,716, resulting in a working capital deficit of $5,689,303.

Sources and Uses of Cash

Our sources and uses of cash for the six months ended October 31, 2024 and 2023 were as follows:

We used net cash of $271,585 in operating activities for the six months ended October 31, 2024 as a result of our net loss of $926,669, an increase in prepaid expenses of $500, offset by non-cash net expense totaling $119,905, and increases in accounts payable, accrued expenses, and accounts payable and accrued expenses - related party of $535,679.

We used net cash of $212,614 in operating activities for the six months ended October 31, 2023 as a result of our net loss of $1,620,133, offset by non-cash net expense totaling $886,558, a decrease in prepaid expenses of $18,500, and increases in accounts payable, accrued expenses, and accounts payable and accrued expenses - related party of $502,911.

Net cash used in investing activities for the six months ended October 31, 2024 and 2023 was $0.

Net cash provided by financing activities for the six months ended October 31, 2024 was $277,600, comprised of proceeds from notes payable of $7,000, proceeds from notes payable -related parties of $302,776 offset by repayments of notes payable of $16,276 and repayment of notes payable – related parties of $15,900.

Net cash provided by financing activities for the six months ended October 31, 2023 was $202,196, comprised of proceeds from notes payable of $100,000, proceeds from convertible notes payable of $50,000, proceeds from convertible note payable – related parties of $50,000 and proceeds from notes payable – related parties of $30,400 offset by repayments of notes payable of $8,614, and repayments of convertible notes payable of $19,590.

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.

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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.

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, 2024 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 six months ended October 31, 2024.

(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.

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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 October 31, 2024. 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 October 31, 2024, 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.

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