Attached files

file filename
EXCEL - IDEA: XBRL DOCUMENT - MMEX Mining CorpFinancial_Report.xls
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR2.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR7.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR4.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR8.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR1.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR9.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR6.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR3.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR5.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR12.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR11.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR35.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR32.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR38.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR26.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR10.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR20.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR14.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR36.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR17.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR23.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR39.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR19.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR18.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR33.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR31.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR42.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR28.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR30.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR27.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR34.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR43.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR37.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR15.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR21.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR22.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR25.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR40.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR41.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR13.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR29.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR16.htm
EX-32.1 - CERTIFICATION - MMEX Mining Corpmmex_ex321.htm
EX-31.1 - CERTIFICATION - MMEX Mining Corpmmex_ex311.htm
XML - IDEA: XBRL DOCUMENT - MMEX Mining CorpR24.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

x           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2012

o           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission file number 333-152608

MMEX MINING CORPORATION
 (Exact name of registrant as specified in its charter)

Nevada
 
26-1749145
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
 
2626 Cole Avenue, Suite 714
   
Dallas, Texas
 
75204
(Address of principal executive offices)
  (Zip Code)

Registrant’s telephone number, including area code (214) 880-0400

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).   Yes  o   No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer o Accelerated filer o
Non-accelerated filer o Smaller reporting company x
(Do not check if a smaller reporting company)      
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of shares of Common Stock, par value $0.01 per share, outstanding as of December 3, 2012 was 55,522,788.



 
 

 
MMEX MINING CORPORATION & SUBSIDIARIES
INDEX TO QUARTERLY REPORT
October 31, 2012
 
Part I. Financial Information        
           
Item 1. Unaudited Condensed Consolidated Financial Statements        
           
  Unaudited Condensed Consolidated Balance Sheets     3  
           
  Unaudited Condensed Consolidated Statements of Operations     4  
           
  Unaudited Condensed Consolidated Statement of Stockholder’s Equity (Deficit)     5  
           
  Unaudited Condensed Consolidated Statements of Cash Flows     6  
           
  Notes to Unaudited Condensed Consolidated Financial Statements     8  
           
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations     29  
           
Item 3. Quantitative and Qualitative Disclosures About Market Risk     35  
           
Item 4T. Controls and Procedures     35  
           
Part II. Other Information        
           
Item 1. Legal Proceedings     36  
           
Item 1A. Risk Factors     36  
           
Item 2. Unregistered Sales of Securities and Use of Proceeds     36  
           
Item 3. Defaults upon Senior Securities     36  
           
Item 4. Mining Safety Disclosures     36  
           
Item 5. Other Information     36  
           
Item 6. Exhibits and Reports on Form 8-K     37  
           
Signatures     38  
 
 
2

 

MMEX MINING CORPORATION
(An Exploration Stage Company)
Consolidated Balance Sheets
 
   
October 31,
   
April 30,
 
   
2012
   
2012
 
Assets
           
             
Current assets:
           
Cash
  $ 718     $ 163,673  
Prepaid Legal Fees
    -       5,994  
Other assets - current
    10,000       10,000  
Total current assets
    10,718       179,667  
                 
Property and equipment, net
    15,204       17,034  
                 
Other assets:
               
Deferred loan costs - long term
    23,822       28,822  
Deposits
    14,696       14,696  
Investment accounted for under equity method in property
    7,076,032       7,287,705  
                 
Total Assets
  $ 7,140,472     $ 7,527,924  
                 
Liabilities and Stockholders' (Deficit)
               
                 
Current liabilities:
               
Accounts payable
  $ 634,943     $ 419,486  
Accounts payable - related party
    20,067       8,033  
Accrued expenses
    448,575       536,603  
Accrued expenses - related party
    556,131       446,274  
Due on investment in property
    3,000,000       3,000,000  
Notes payable, currently in default
    300,000       300,000  
Notes payable - related party
    -       290,000  
Convertible notes, currently in default
    75,000       75,000  
Convertible notes, net of discount of $351,424 and $103,619 at October 31, 2012 and April 30, 2012, respectively
    1,418,576       558,181  
Convertible notes, net of discount of $5,340 and $0 at October 31, 2012 and April 30, 2012, respectively - related party
    15,660       -  
Convertible preferred stock, currently in default
    137,500       137,500  
Total current liabilities
    6,606,452       5,771,077  
                 
Long-term liabilities:
               
                 
Convertible notes, net of discount of $0 and $585,367 at October 31, 2012 and April 30, 2012, respectively
    -       1,064,633  
Preferred stock - mandatory redemption right, net of $959,150 and $959,424 discount at October 31, 2012 and April 30, 2012, respectively
    40,850       40,418  
                 
Total Liabilities
    6,647,302       6,876,128  
                 
Stockholders' (Deficit):
               
Common stock, $0.001 par value, 300,000,000 shares authorized, 55,522,788 and 45,269,055 shares issued and outstanding
               
at October 31, 2012 and April 30, 2012, respectively
    555,227       452,690  
Common stock payable
    75,000       518,289  
Additional paid in capital
    19,274,864       16,751,775  
Non-controlling interest
    (299,674 )     (290,241 )
Accumulated (deficit) during the exploration stage
    (19,112,247 )     (16,780,717 )
Total Stockholders' (Deficit)
    493,170       651,796  
                 
Total Liabilities and Stockholders' (Deficit)
  $ 7,140,472     $ 7,527,924  
 
See accompanying notes to financial statements.
 
 
3

 
 
MMEX MINING CORPORATION
(An Exploration Stage Company)
Consolidated Statements of Operations
 
   
For the three months ended
   
For the six months ended
   
For the period
May 23, 2007
(Inception) through
 
   
October 31,
   
October 31,
   
October 31,
 
   
2012
   
2011
   
2012
   
2011
   
2012
 
Revenue:
                             
Revenues
  $ -     $ -     $ -     $ -     $ 10,000  
                                         
Operating Expenses:
                                       
Exploration and development
            1,894       -       1,894       3,207,262  
General and administrative
    72,292       289,669       144,913       403,600       4,625,216  
Payroll and taxes
    107,702       120,351       236,345       247,571       2,557,846  
Professional fees
    274,397       88,380       539,959       164,662       4,773,746  
Impairment expense
    -       718,786       -       932,454       2,762,454  
Depreciation and amortization
    1,241       1,161       2,480       2,395       21,496  
Total operating expenses
    455,632       1,220,241       923,697       1,752,576       17,948,020  
                                         
Net operating (loss)
    (455,632 )     (1,220,241 )     (923,697 )     (1,752,576 )     (17,938,020 )
                                         
Other income (expense):
                                       
Interest income
    -       -                       59  
Gain on disposition of property
    -       -                       2,592,023  
Loss on debt conversion
    -       -       (441,960 )             (462,345 )
Loss on investment in property
    (178,848 )     -       (211,673 )             (223,968 )
Loss on disposal of fixed assets
    -       (3,651 )             (3,651 )     (15,003 )
Interest expense
    (469,007 )     (608,182 )     (763,633 )     (1,169,009 )     (4,823,269 )
Total other income (expense)
    (647,855 )     (611,833 )     (1,417,266 )     (1,172,660 )     (2,932,503 )
                                         
Net (loss) before non-controlling interest
    (1,103,487 )     (1,832,074 )     (2,340,963 )     (2,925,236 )     (20,870,523 )
                                         
Non-controlling interest in loss of consolidated subsidiaries
    5,246       56,777       9,433       79,005       1,758,276  
                                         
Net (loss)
  $ (1,098,241 )   $ (1,775,297 )   $ (2,331,530 )   $ (2,846,231 )   $ (19,112,247 )
                                         
Weighted average number of common shares outstanding -
                                       
basic and fully diluted
    55,049,962       11,781,318       54,388,016       11,473,540          
                                         
Net (loss) per share - basic and fully diluted
  $ (0.02 )   $ (0.15 )   $ (0.04 )   $ (0.25 )        
 
See accompanying notes to financial statements.
 
 
4

 
 
MMEX MINING CORPORATION
(An Exploration Stage Company)
Consolidated Statement of Stockholders' Equity (Deficit) and Members' Interests
 
     
Total
 
                                       
Stockholders
 
                                       
Equity (deficit)
 
   
Common Stock
   
Additional Paid
   
Common Stock
   
Accumulated
   
Non-controlling
   
and Members'
 
   
Shares
   
Amount
   
In Capital
   
Payable
   
(Deficit)
   
Interests
   
Interests
 
                                           
Balance, May 23, 2007 (Inception)
    5,000,000     $ 50,000     $ (50,000 )   $ -     $ -     $ -     $ -  
                                                         
Acquisition of subsidiary, Carpenter Creek, LLC, 75% interest
    -       -       -       -       -       69,411       69,411  
Note receivable issued as capital contributions from members
    -       -       453,563       -       -       69,668       523,231  
Acquisition of subsidiary, Carpenter Creek, LLC, 2.5% interest
    -       -       (65,208 )     -       -       65,208       -  
Capital contributions from members
    -       -       2,906,086       -       -       447,414       3,353,500  
Net (loss) for the period from May 23, 2007
                                                       
(Inception) through  April 30, 2008
    -       -       -       -       (3,327,375 )     (638,912 )     (3,966,287 )
Balance, April 30, 2008
    5,000,000     $ 50,000     $ 3,244,441     $ -     $ (3,327,375 )   $ 12,789     $ (20,145 )
                                                         
Capital contributions from members
    -       -       2,762,446       -       -       468,735       3,231,181  
Net (loss) for the year ended April 30, 2009
    -       -       -       -       (2,305,551 )     (364,765 )     (2,670,316 )
Balance, April 30, 2009
    5,000,000     $ 50,000     $ 6,006,887     $ -     $ (5,632,926 )   $ 116,759     $ 540,720  
                                                         
Acquisition of subsidiary, Carpenter Creek, LLC, 2.5% interest
    -       -       (473,385 )     -       -       (26,615 )     (500,000 )
Capital contributions from members
    -       -       1,306,505       -       -       299,849       1,606,354  
Net (loss) for the year ended April 30, 2010
    -       -       -       -       (1,506,729 )     (392,033 )     (1,898,762 )
Balance, April 30, 2010
    5,000,000     $ 50,000     $ 6,840,007     $ -     $ (7,139,655 )   $ (2,040 )   $ (251,688 )
                                                         
Distribution of property, Snider Ranch property
    -       -       -       -       -       (282,651 )     (282,651 )
Common stock issued for services
    50,000       500       164,500       -       -       -       165,000  
Imputed interest on related party advances
    -       -       1,650       -       -       -       1,650  
Effect of reverse acquisition merger
    4,584,427       45,844       (131,676 )     15,000       -       -       (70,832 )
Capital contributions from shareholder
    -       -       343,139       -       -       97,604       440,743  
Capital contributions from members
    -       -       268,052       -       -       15,000       283,052  
Acquisition of subsidiary, Armadillo Holdings 1.88% interest
    31,334       313       (22,839 )     -       -       22,526       -  
Issuance of shares related to reverse merger
    1,500,000       15,000       -       (15,000 )     -       -       -  
Discount from the issuance of Notes allocated to warrants
    -       -       1,034,900       -       -       -       1,034,900  
Discount from the issuance of Preferred Stock allocated to warrants
    -       -       1,000,000       -       -       -       1,000,000  
Dividend payable
    -       -       -       -       (10,685 )     -       (10,685 )
Issuance of subsidiary ownership interests beneficial conversion feature
    -       -       (212,453 )     -       -       212,453       -  
Net (loss) for the year ended April 30, 2011
    -       -       -       -       (3,466,111 )     (174,812 )     (3,640,923 )
Balance, April 30, 2011
    11,165,761     $ 111,657     $ 9,285,280     $ -     $ (10,616,451 )   $ (111,920 )   $ (1,331,434 )
                                                         
Rounding of shares on stock reverse
    2       -       -       -       -       -       -  
Discount from the issuance of Notes allocated to warrants
    -       -       602,051       -       -       -       602,051  
Financing fee for warrants issued as additional consideration
    -       -       240,734       -       -       -       240,734  
Issuance of shares related to reverse merger
    1,230,349       12,303       (15,000 )     2,697       -       -       -  
Issuance of common stock for cash
    26,983,938       269,839       4,711,678       225,000       -       -       5,206,517  
Conversion of convertible preferred stock to common stock
    2,983,293       29,832       357,995       -       -       -       387,827  
Beneficial conversion feature on convertible note
    -       -       610,182       -       -       -       610,182  
Conversion of debenture to common stock
    2,059,625       20,598       772,068       290,592       -       -       1,083,258  
Options issued to employees and consultants
    -       -       34,491       -       -       -       34,491  
Issuance of shares related to consulting agreements
    846,087       8,461       152,296       -       -       -       160,757  
Net (loss) for the year ended April 30, 2012
    -       -       -       -       (6,164,266 )     (178,321 )     (6,342,587 )
Balance, April 30, 2012
    45,269,055     $ 452,690     $ 16,751,775     $ 518,289     $ (16,780,717 )   $ (290,241 )   $ 651,796  
                                                         
Issuance of shares related to reverse merger
    269,651       2,697       -       (2,697 )                     -  
Issuance of common stock for cash
    1,375,000       13,750       261,250       (225,000 )                     50,000  
Beneficial conversion feature on convertible note
                    319,999                               319,999  
Conversion of accounts payable to common stock
    881,032       8,810       245,351       75,000                       329,161  
Conversion of debenture to common stock
    7,428,050       74,280       1,642,489       (290,592 )                     1,426,177  
Issuance of shares related to consulting agreements
    300,000       3,000       54,000                               57,000  
Net (loss) for the six months ended October 31, 2012
                                    (2,331,530 )     (9,433 )     (2,340,963 )
Balance, October 31, 2012
    55,522,788       555,227       19,274,864       75,000       (19,112,247 )     (299,674 )     493,170  
 
See accompanying notes to financial statements.
 
 
5

 
 
MMEX MINING CORPORATION
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
 
               
For the period from
 
   
For the six months ended
   
May 23, 2007
(Inception) through
 
   
October 31,
   
October 31,
 
   
2012
   
2011
   
2012
 
Cash flows from operating activities
                 
Net (loss)
  $ (2,331,530 )   $ (1,070,934 )   $ (19,112,247 )
Non-controlling interest in net (loss)
    (9,433 )     (22,228 )     (1,758,276 )
Adjustments to reconcile net (loss) to net cash (used) provided by operating activities:
                       
Depreciation and amortization expense
    2,480       1,234       21,495  
Loss on sale of assets
    -       -       15,003  
Loss on investment
    211,673       -       223,968  
Loss due to late payment penalty
    -       -       1,200,000  
Common stock issued for services
    57,000       -       417,248  
Imputed interest
    -       -       1,650  
Amortization of debt discount
    676,153       514,360       2,934,719  
Loss on conversion of debt
    441,960       -       462,345  
Impairment expense
    -       213,668       2,762,454  
Financing fee on issuance of warrants
    -       -       240,734  
Amortization of deferred loan cost
                    10,000  
Decrease (increase) in assets:
                       
Prepaid expenses
    5,994       -       -  
Employee receivable
    -       (1,652 )     (27,785 )
Deferred loan costs
    5,000       2,500       (43,822 )
Deposits
    -       (4,696 )     (14,696 )
Increase (decrease) in liabilities:
                       
Accounts payable
    215,457       (55,096 )     539,598  
Related party payable
    12,034       (15,979 )     143,196  
Accrued expenses
    383,407       120,435       1,366,284  
Net cash (used) in operating activities
    (329,805 )     (318,388 )     (10,618,132 )
                         
Cash flows from investing activities
                       
Proceeds from sale of Snider Ranch
    -       -       1,130,602  
Purchase of Hunza option
    -       (213,668 )     (7,062,454 )
Purchase of fixed assets
    (650 )     (4,082 )     (54,712 )
Proceeds from sale of fixed assets
    -       -       3,010  
Net cash (used) in investing activities
    (650 )     (217,750 )     (5,983,554 )
                         
Cash flows from financing activities
                       
Capital contributions from members
    -       -       8,023,387  
Acquisition of noncontrolling interest
    -       -       (500,000 )
Proceeds from debt
    127,500       160,000       5,862,400  
Proceeds from issuance of preferred stock
    -       260,000       1,360,000  
Proceeds from issuance of common stock
    50,000       -       5,256,517  
Payments on notes payable
    (10,000 )     -       (3,399,900 )
Net cash provided by financing activities
    167,500       420,000       16,602,404  
                         
Net increase (decrease) in cash
    (162,955 )     (116,138 )     718  
Cash - beginning
    163,673       118,059       -  
Cash - ending
  $ 718     $ 1,921     $ 718  
 
 
6

 
 
MMEX MINING CORPORATION
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
 
Supplemental disclosures:
                 
Interest paid
  $ -     $ -     $ 483,723  
Income taxes paid
  $ -     $ -     $ -  
Non-cash investing and financing transactions:
                       
Note receivable issued as capital contributions
  $ -     $ -     $ 523,231  
Distribution of property, Snider Ranch
  $ -     $ -     $ (282,651 )
Effect of reverse acquisition merger
  $ -     $ -     $ (70,832 )
Conversion of minority interest into equity
  $ -     $ -     $ (22,839 )
Additional ownership interest in subsidiary
  $ -     $ -     $ 212,453  
Issuance of contingent consideration from merger
  $ -     $ -     $ (15,000 )
Stock issued for conversion of debt
  $ (985,440 )   $ -     $ 465,259  
Stock issued for conversion of accrued compensation
  $ 329,162     $ -     $ 254,162  
Stock issued for common stock payable
  $ 518,289     $ -     $ 518,289  
Preferred stock beneficial conversion feature
  $ -     $ -     $ 1,000,000  
Common stock beneficial conversion feature
  $ 17,305     $ -     $ 627,488  
Purchase of Hunza option
  $ -     $ -     $ 3,000,000  
Debt discount on issuance of warrants
  $ -     $ 314,216     $ 1,636,951  
Convertible debenture issued by agreement
  $ -     $ -     $ 1,200,000  
 
See accompanying notes to financial statements.
 
 
7

 
 
Note 1 – Nature of Business and Significant Accounting Policies

On May 25, 2011, the Board of Directors approved a 1 for 10 reverse stock split of its common stock.  All references in the accompanying financial statements to the number of shares of common stock and loss per share have been retroactively restated to reflect the reverse stock split.

Basis of Presentation
The accompanying condensed consolidated financial statements include the accounts of the following entities, all of which the Company maintains control through a majority ownership:
 
         
Form of
 
State of
   
Name of Entity
 
%
 
Entity
 
Incorporation
 
Relationship
MMEX Mining Corporation (“MMEX”)
    -    
Corporation
 
Nevada
 
Parent
MCC Merger, Inc. (“MCCM”)
    100 %  
Corporation
 
Delaware
 
Holding Sub
Maple Carpenter Creek Holdings, Inc. (“MCCH”)
    100 %  
Corporation
 
Delaware
 
Subsidiary
Maple Carpenter Creek, LLC ("MCC”)
    80 %  
LLC
 
Nevada
 
Subsidiary
Carpenter Creek, LLC (“CC”)
    95 %  
LLC
 
Delaware
 
Subsidiary
Armadillo Holdings Group Corp. (“AHGC”)
    100 %  
Corporation
 
British Virgin Isl.
 
Subsidiary
Armadillo Mining Corp. (“AMC”)
    98.6 %  
Corporation
 
British Virgin Isl.
 
Subsidiary

The condensed consolidated financial statements herein contain the operations of the above listed subsidiaries as of the dates and for the periods as indicated. All significant inter-company transactions have been eliminated in the preparation of these financial statements. On September 21, 2010 the Company’s wholly-owned subsidiary, MCC Merger, Inc. (“Acquisition Sub”), formed previous to the merger, and Maple Carpenter Creek Holdings, Inc. (“The Target Company”) entered into an Agreement and Plan of Merger (the “Merger Agreement”). Under the Merger Agreement, as closed on September 23, 2010, Acquisition Sub merged with and into the Target Company, with the Target Company remaining as the surviving corporation and wholly-owned subsidiary of the Company (the “Merger”).  Going forward, the Company will be a holding company parent of the Target Company, and the Company’s business operations following the Merger will be those of the Target Company.

The Company has adopted a fiscal year end of April 30th.

The Company’s functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with ASC 820, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in the Colombian peso. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

The accounting policies followed by MMEX Mining Corporation are set forth in the Company’s financial statements that are a part of its April 30, 2012, Form 10-K and should be read in conjunction with the financial statements for the three and six months ended October 31, 2012, contained herein.

The financial information included herein as of October 31, 2012, and for the three and six month periods ended October 31, 2012 and 2011, has been presented without an audit, pursuant to accounting principles for the interim financial information generally accepted in the United States of America and the rules of the Securities and Exchange Commission.  The Company believes that the disclosures are adequate to make the information presented not misleading.  The information presented reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the period.

Organization
MMEX Mining Corporation (the Company or “MMEX”) was formed in the State of Nevada on May 19, 2005 as Inkie Entertainment Group, Inc., for the purpose of engaging in the production, distribution and marketing of filmed entertainment products. On January 15, 2008, the Company changed its name to Quantum Information, Inc. In January 2009, the Company announced that it would transition out of the filmed entertainment products business and into the coal business. As part of that transition, on January 14, 2009, the Company sold all of its assets in exchange for the surrender to the Company of 400,000 shares of the Company’s common stock, and the assumption of all of the Company’s liabilities. The Company also changed its name to MGMT Energy, Inc. on February 5, 2009 and to Management Energy, Inc. on May 28, 2009 to better reflect the Company’s business focus. On September 23, 2010, the Company, through a reverse merger, acquired 100% of the outstanding shares of Maple Carpenter Creek Holdings, Inc., (“MCCH”) a Delaware Corporation, organized on October 15, 2009 as a holding Company with an 80% interest in Maple Carpenter Creek, LLC (“MCC”), which in turn owns a 95% interest in the subsidiary, Carpenter Creek, LLC (“CC”), and a 100% interest in Armadillo Holdings Group Corp. (“AHGC”), which in turn owns a 98.6% interest in Armadillo Mining Corp. (“AMC”). On February 22, 2011, the Company amended its articles of incorporation to change the corporate name from Management Energy, Inc. to MMEX Mining Corporation.

 
8

 
 
Armadillo Group Holdings Corporation: As of the date of closing of the merger, AMC had exclusive options to acquire two metallurgical coal mines in the Cundinamarca province of Colombia: (i) Caparrapi is a permitted mine with minimum production and with a resource potential of 11 million metric tons; (ii) Yacopi has resource potential of 40 million metric tons. AMC has terminated the exclusive options for the Caparrapi and Yacopi mines. On January 20, 2011, AMC acquired an option to purchase a 50% interest in a permitted and operating mine Company in Colombia producing metallurgical coal, with a potential resource of 16 million tons to 90 million tons based on existing exploration resources reports.  The agreement required an exclusivity fee of $1,400,000 that was completed on March 22, 2011, and $5,000,000 to be deposited to an exploration fund to continue the financing of an exploration and drilling program.  On February 3, 2012 the parties to the Hunza Agreement executed and delivered an amendment thereto, which, among other things, provided that:
 
(a)  
in order to exercise the option to acquire 50% of Hunza, AMCC would be required to complete the payment of exclusivity fees on or before February 29, 2012, including issuing on February 3, 2012 a $1,200,000 debenture convertible into 4,000,000 Common Shares to Black Stone Investment S.A. Black Stone Investment S.A. converted the March 2012 Debenture into 4,000,000 Common Shares in two tranches: (i) 1,794,000 Common Shares were issued on March 8, 2012; and (ii) 2,206,000 Common Shares were issued on May 1, 2012.
 
(b)  
after exercise of the option, AMCC would be obligated to fund an additional $3,000,000 upon the earlier of May 1, 2013 and 90 calendar days after the delivery of a technical report in respect of the work program to be carried out on the Hunza Project (see “The Hunza Project - Recommendations”); and
 
(c)  
AMCC would pledge one half of its interest in Hunza to secure any payment default by AMCC, which default would result in a reduction of the AMCC’s interest to 25% of Hunza.

Nature of Business
Our current strategy is to pursue various coal exploration projects in Colombia and expand to other minerals in other South American countries with development partners.

Exploration Stage Company
The Company is currently an exploration stage company. As an exploration stage enterprise, the Company discloses the deficit accumulated during the exploration stage and the cumulative statements of operations and cash flows from inception to the current balance sheet date. The Company has incurred net losses of $19,112,247 and used net cash in operations of $10,618,132 for the period from inception (May 23, 2007) through October 31, 2012. An entity remains in the exploration stage until such time as proven or probable reserves have been established for its deposits. Upon the location of commercially mineable reserves, the Company plans to prepare for mineral extraction and enter the development stage. To date, the exploration stage of the Company’s operations consists of contracting with geologists who sample and assess the mining viability of the Company’s claims.

Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its aforementioned subsidiaries. See Recently Issued Accounting Pronouncements (“ASC 810”) below for additional information on Non-controlling interests in Consolidated Financial Statements. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Property and equipment
Equipment is recorded at the lower of cost or estimated net recoverable amount, and is depreciated using the straight-line method over the estimated useful life of the related asset as follows:
 
Furniture and fixtures
5 years
Machinery and equipment
5 years
Software and hardware
5 years
 
 
9

 
 
Maintenance and repairs will be charged to expense as incurred. Significant renewals and betterments will be capitalized. At the time of retirement or other disposition of equipment, the cost and accumulated depreciation will be removed from the accounts and the resulting gain or loss, if any, will be reflected in operations.

The Company will assess the recoverability of equipment by determining whether the depreciation and amortization of these assets over their remaining life can be recovered through projected undiscounted future cash flows. The amount of equipment impairment, if any, will be measured based on fair value and is charged to operations in the period in which such impairment is determined by management.

Fair value of financial instruments
On January 1, 2011, the Company adopted guidance which defines fair value, establishes a framework for using fair value to measure financial assets and liabilities on a recurring basis, and expands disclosures about fair value measurements. Beginning on January 1, 2011, the Company also applied the guidance to non-financial assets and liabilities measured at fair value on a non-recurring basis, which includes goodwill and intangible assets. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:

Level 1 - Valuation is based upon unadjusted quoted market prices for identical assets or liabilities in active markets that the Company has the ability to access.

Level 2 -Valuation is based upon quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable in the market.

Level 3 - Valuation is based on models where significant inputs are not observable. The unobservable inputs reflect the Company's own assumptions about the inputs that market participants would use.
 
The following table presents assets and liabilities that are measured and recognized at fair value as of July 31, 2012 on a recurring and non-recurring basis:

Description
 
Level 1
   
Level 2
   
Level 3
   
Gains (Losses)
 
   
$
-
   
$
-
   
$
-
   
$
-
 
 
The following table presents assets and liabilities that are measured and recognized at fair value as of April 30, 2012 on a recurring and non-recurring basis:
 
Description
 
Level 1
   
Level 2
   
Level 3
   
Gains (Losses)
 
   
$
-
   
$
-
   
$
-
   
$
-
 
 
The Company’s financial instruments consist of cash and cash equivalents, equity investments, accounts payable, accrued liabilities and long-term debt. The estimated fair value of cash, accounts payable and accrued liabilities approximate their carrying amounts due to the short-term nature of these instruments. The carrying value of equity investments and long-term debt also approximate their fair values since their terms are similar to those in the lending market for comparable loans with comparable risks. None of these instruments are held for trading purposes.

Advertising and promotion
All costs associated with advertising and promoting products are expensed as incurred. $3,620 and $1,075 were incurred for both the six months and three months ended October 31, 2012 and 2011, respectively.

Income taxes
The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.
 
 
10

 
 
Basic and diluted loss per share
The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the periods presented, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.

Stock-based compensation
The Company adopted FASB guidance on stock based compensation upon inception at April 23, 2009. Under FASB ASC 718-10-30-2, all share-based payments to employees, including grants of employee stock options, are to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. For the periods presented, there were no share-based payments to employees.

In December of 2004, the FASB issued a standard which applies to transactions in which an entity exchanges its equity instruments for goods or services and also applies to liabilities an entity may incur for goods or services that are based on the fair value of those equity instruments.  For any unvested portion of previously issued and outstanding awards, compensation expense is required to be recorded based on the previously disclosed methodology and amounts.  Prior periods presented are not required to be restated.  The Company adopted this standard upon inception on May 23, 2007 and applied the standard using the modified prospective method.  

Issuance of Shares for Non-Cash Consideration
The Company accounts for the issuance of equity instruments to acquire goods and/or services based on the fair value of the goods and services or the fair value of the equity instrument at the time of issuance, whichever is more reliably determinable. The Company's accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of the standards issued by the FASB.  The measurement date for the fair value of the equity instruments issued is determined as the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor's performance is complete.  In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.

Uncertain tax positions
Effective upon the Company’s fiscal year ended April 30, 2009, the Company adopted new standards for accounting for uncertainty in income taxes. These standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

Various taxing authorities periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established, is audited and fully resolved. The Company has not yet undergone an examination by any taxing authorities.
 
The assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions.

Non-controlling interest
The Company accounts for non-controlling interest (“minority interest”) in accordance with ASC 810-10-45-18 through 21 which allows revenues, expenses, gains and losses, net income, or loss, and other comprehensive income to be reported in the consolidated financial statements at the consolidated amounts, which include the amounts attributable to the owners of the parent and the non-controlling interest.  Net income or loss and comprehensive income or loss are attributed to the parent and the non-controlling interest.  Losses attributable to the parent and the non-controlling interest in a subsidiary may exceed their interests in the subsidiary’s equity.  The excess, and any further losses attributable to the parent and the non-controlling interest, shall be attributed to those interests.  That is, the non-controlling interest shall continue to be attributed its share of losses even if that attribution results in a deficit non-controlling interest balance.

Recently issued accounting pronouncements
In October 2012, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2012-04, “Technical Corrections and Improvements” in Accounting Standards Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations.

 
11

 
 
In August 2012, the FASB issued ASU 2012-03, “Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)” in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The adoption of ASU 2012-03 is not expected to have a material impact on our financial position or results of operations.

In July 2012, the FASB issued ASU 2012-02, “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment” in Accounting Standards Update No. 2012-02. This update amends ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment and permits an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles - Goodwill and Other - General Intangibles Other than Goodwill. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The adoption of ASU 2012-02 is not expected to have a material impact on our financial position or results of operations.

In December 2011, FASB issued ASU No. 2011-11, “Balance Sheet - Disclosures about Offsetting Assets and Liabilities” (ASU 2011-11) to enhance disclosure requirements relating to the offsetting of assets and liabilities on an entity's balance sheet. The update requires enhanced disclosures regarding assets and liabilities that are presented net or gross in the statement of financial position when the right of offset exists, or that are subject to an enforceable master netting arrangement. The new disclosure requirements relating to this update are retrospective and effective for annual and interim periods beginning on or after January 1, 2013. The update only requires additional disclosures, as such, we do not expect that the adoption of this standard will have a material impact on our results of operations, cash flows or financial condition.

In September 2011, the FASB issued ASU No. 2011-08, “Intangibles — Goodwill and Other” (ASU 2011-08). ASU 2011-08 allows a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test. If it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the two-step impairment test would be performed. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, and early adoption is permitted.

In May 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This update clarifies the application of certain existing fair value measurement guidance and expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This update is effective on a prospective basis for annual and interim reporting periods beginning on or after December 15, 2011, which for the Company is January 1, 2012.

Note 2 – Going Concern

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 $19,112,247 and a working capital deficit of $6,595,734 at October 31, 2012, and have reported negative cash flows from operations since inception. In addition, we do not currently have the cash resources to meet our operating commitments for the next twelve months, and we expect to have ongoing requirements for capital investment to implement our business plan. Finally, 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.

Since inception, our operations have primarily been funded through private debt and equity financing, as well as capital contributions by our subsidiaries’ partners, 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, indicate that we may be unable to continue as a going concern for a reasonable period of time.

 
12

 
 
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.

Note 3 – Related Party Transactions

Loans & Advances
During the period from May 1, 2009 through April 30, 2010, Tydus Richards, the former Chairman of our board of directors and shareholder, made payments totaling $71,700 on behalf of the Company. The Company reimbursed Mr. Richards $8,700 on September 3, 2009 and the remaining balance of $63,000 was outstanding as of April 30, 2010. During the first and second quarter of the current fiscal year, Mr. Richards made additional payments totaling $7,633 on behalf of the Company. On May 12, 2010, the Company reimbursed an additional $39,000 of the balance and the remaining balance of $31,633 remains outstanding.

On July 15, 2009, MCC entered into a loan agreement with an Irrevocable Trust, of which the Company’s CEO is the trustee. The unsecured promissory note, carried a 20% interest rate until maturity at July 15, 2010, at which time the principal interest (or $60,000), was compounded and extended under an amended agreement carrying a 10% interest that is being amortized over the extended life of the loan. The promissory note plus total accrued interest of $96,000 was paid in full on December 23, 2010.

On September 2, 2010 the Company’s subsidiary, Maple Carpenter Creek, LLC, a Nevada limited liability company entered into a distribution resolution and agreement to distribute the Snider Ranch investment property, carrying a value of $1,413,253 at the time of distribution, to its partners; Garb Holdings, LLC, AAM Investments, LLC, and Maple Resources Corporation. The Company’s Officers and Directors are majority owners of AAM Investments, LLC and Maple Resources Corporation.

On September 4, 2010, AAM Investments, LLC, and Maple Resources Corporation contributed their interest in Snider Ranch to MCCH.  The value of the contribution was $1,130,602.

Starting on October 13, 2010 and at various times through January 31, 2011, the Company’s Director Bruce N. Lemons advanced the Company a total of $25,800.  On February 1, 2011, the advance was converted into a promissory note that carried a 25% interest rate, matured on January 27, 2012 and was convertible into the Company’s common stock at the holders’ option at $0.10 per common share.  The promissory note plus interest of $32,250 was paid in full on March 23, 2011. In addition, the Company issued 32.250 warrants to purchase shares of the Company’s common stock at the time of repayment of the note equal to one warrant shares for every dollar value of the principal and interest, at an exercise price of $1.00 per share on or before three years from the repayment or conversion date.

On January 24, 2011, the Company entered into a securities purchase agreements with unaffiliated investors and with each of The Maple Gas Corporation, a wholly owned subsidiary of Maple Resources Corporation, which is 100% owned by the Company’s CEO, an Irrevocable Trust, of which the Company’s CEO is the trustee, and BNL Family Partners of which one of the Company’s Directors, Bruce N. Lemons is a partner, for the issuance of a convertible debentures in the amount of $25,000.  The promissory notes carry a 25% interest rate, mature on January 27, 2012 and are convertible into the Company’s common stock at the holders’ option at $1.00 per common share. The holder may accelerate repayment of the note upon sale of the Carpenter Creek prospect.  In addition, the Company issued 562,500 warrants to purchase shares of the Company’s common stock at the time of repayment of the note equal to one warrant shares for every dollar value of the principal and interest, at an exercise price of $1.00 per share on or before three years from the repayment or conversion date.  These convertible debentures were issued to each of the affiliated investors at the same price as that paid by the unaffiliated investors in the private offering.  The promissory notes plus interest were paid in full on March 23, 2011.

On February 1, 2011, The Maple Gas Corporation, a wholly owned subsidiary of Maple Resources Corporation, which is 100% owned by the Company’s CEO, converted $39,100 of advances into a promissory note that carried a 25% interest rate, matured on January 27, 2012 and was convertible into the Company’s common stock at the holders’ option at $1.00 per common share.  The promissory note plus interest of $48,875 was paid in full on March 23, 2011.  In addition, the Company issued 48,875 warrants to purchase shares of the Company’s common stock at the time of repayment of the note equal to one warrant shares for every dollar value of the principal and interest, at an exercise price of $1.00 per share on or before three years from the repayment or conversion date.

For the period from inception (May 23, 2007) through October 31, 2012, there has been contributions of capital from members of $7,696,652 and contributions of capital from shareholders of $343,139.

 
13

 
 
Employment, Directing & Consulting Agreements and Appointments
On September 4, 2010, MCCH entered into an employment agreement with the Company’s CEO, Jack W. Hank for a two year term, automatically renewable for one year terms thereafter, at an annual compensation of $300,000 per year.  On December 15, 2011 the agreement was amended to provide for a 3 year term from September 4, 2010, automatically renewable for one year terms thereafter, at an annual compensation of $360,000 per year.

On September 4, 2010, MCCH entered into a consulting agreement with Bruce N. Lemons, one of the Company’s three directors, for a two year term, automatically renewable for one year terms thereafter, at an annual compensation of $170,000 per year. On December 15, 2011 the agreement was amended to provide for a 3 year term from September 4, 2010, automatically renewable for one year terms thereafter.

In connection with the closing of the merger with MCCH, our executive officers (David Walters, President and Matt Szot, Chief Financial Officer) and directors (Mr. Walters) resigned, effective September 22, 2010, and we appointed designees of MCCH (Jack W. Hanks and Bruce N. Lemons) as the new directors, all effective as of September 23, 2010. The board also named Mr. Hanks as our new President and Chief Executive Officer.

Accrued Expenses
On September 15, 2012, Nabil Katabi (a related party), a Company director, per terms of his consulting agreement requested the conversion of $75,000 of consulting fees into shares of the Company stock.  The total shares due but not delivered as of October 31, 2012 were 465,525.

On October 30, 2012, the Corporation issued 300,000 Common Shares at a price of $0.19 to Delavega Trading Ltd. (a related party), a company for which Nabil Katabi a Company director has a controlling interest, pursuant to terms of a consulting agreement dated February 1, 2012.

On November 2, 2012, the Corporation issued 465,525 Common Shares at an average price of $0.16 to Delavega Trading Ltd. (a related party), a company for which Nabil Katabi a Company director has a controlling interest, pursuant to extinguishments of accrued consulting fees. As the shares were issued under the terms of the consulting agreement, no gain or loss was recorded as part of the transaction.

Notes Payable
On March 18, 2011, the Company issued a $290,000 notes payable to Montana Coal Royalty, LLC in exchange for the relinquishment of a royalty agreement upon the sale of Carpenter Creek.  Montana Coal Royalty, LLC is owned equally by The Maple Gas Corporation, a wholly owned subsidiary of Maple Resources Corporation, which is 100% owned by the Company’s CEO and AAM Investments, LLC which is owned principally by a trust for Mr. Lemons’ family, a director of the Company. On May 16, 2012, the Corporation issued 3,480,000 shares of the Company’s common stock to Montana Coal Royalty, LLC (a related party) pursuant to conversion of $323,640 of a note and accrued interest. Montana Coal Royalty, LLC is owned equally by AAM Investments, LLC and The Maple Gas Corporation. The Maple Gas Corporation is controlled by Mr. Jack Hanks, the CEO and a director of the Corporation. As the conversion took place at below the market price on the date of conversion, a loss of $441,960 was recorded.

Convertible Debentures
On August 1, 2012, the Company entered into a $10,000 convertible note agreement with BNL Family Partners (a related party); Mr. Bruce N. Lemons, a director of the Company, is a partner of BNL Family Partners.  The holder may accelerate repayment of the promissory note upon the Corporation raising additional capital of $150,000 and are convertible into Common Shares at the holder’s option at $0.20 per common share. In addition, the Corporation issued 10,000 warrants to purchase Common Shares at an exercise price of $0.30 per Common Share until August 1, 2015 valued at $994 on the issuance date. On August 21, 2012 the note was repaid in full.

On August 1, 2012, the Company entered into a $13,000 convertible note agreement with Delavega Trading Ltd. (a related party), an entity controlled by Nabil Katabi, a director of the Company. The August 1, 2012 debentures carry a 20% interest rate until maturity at September 30, 2013 and are convertible into Common Shares at the holder’s option at $0.20 per common share. The holders may accelerate repayment of the promissory notes upon the Corporation raising additional capital of $150,000. In addition, the Corporation issued 13,000 warrants to purchase Common Shares at an exercise price of $0.30 per Common Share until August 1, 2015 valued at $800 on the issuance date.
 
Common stock issued related to M&A
On September 23, 2010 the Company issued a subscription payable for 15,000,000 shares of common stock pursuant to the merger with MCCH. The shares were valued at par value, resulting in a total subscription payable of $15,000 at October 31, 2010.  On January 11, 2011, the Board of Directors cancelled the subscription payable.
 
 
14

 
 
On October 8, 2010 the Company issued 25,000,000 shares of common stock to The Maple Gas Corporation, a wholly owned subsidiary of Maple Resources Corporation, which is 100% owned by the Company’s CEO pursuant to the merger with MCCH on September 23, 2010. The shares were valued at par value, resulting in a $25,000 adjustment to additional paid in capital in accordance with the accounting for reverse acquisition under ASC 805-10-40.

On October 8, 2010 the Company issued 25,000,000 shares of common stock to AAM Investments, LLC, affiliated with one of the Company’s Directors, Bruce N. Lemons, pursuant to the merger with MCCH on September 23, 2010. The shares were valued at par value, resulting in a $25,000 adjustment to additional paid in capital in accordance with the accounting for reverse acquisitions under ASC 805-10-40.

On January 11, 2011, the Board of Directors approved the issuance of the remaining 15,000,000 shares of merger consideration, agreed upon during the reverse merger, equally to AAM Investments, LLC, affiliated with one of the Company’s Directors, Bruce N. Lemons, and the Maple Gas Corporation, a wholly owned subsidiary of Maple Resources Corporation, which is 100% owned by the Company’s CEO, Jack Hanks.

Pursuant to the merger on September 23, 2010, the Company awarded the owners of MCCH the right to receive 1,500,000 shares of common stock as contingent consideration.  The milestones are accelerated in the event the owners of MCCH are diluted below 30% in their ownership of the Company.  The milestones defined in the definitive merger agreement are as follows:

·  
1,000,000 shares upon the closing of equity or debt financing that generates at least 2 million in net proceeds,
·  
250,000 shares upon the successful generation of $250,000 in revenue from coal sales in any fiscal quarter,
·  
250,000 shares upon the successful closing of additional equity or debt financing that will generate at least $2,000,000 in net proceeds.

On September 13, 2011, the Board of Directors determined that the first $2,000,000 milestone had been met and approved the issuance of 1,000,000 shares of merger consideration, equally to AAM Investments, LLC, affiliated with one of the Company’s Directors, Bruce N. Lemons, and the Maple Gas Corporation, a wholly owned subsidiary of Maple Resources Corporation, which is 100% owned by the Company’s CEO, Jack Hanks.

On April 26, 2012, the Board of Directors determined that the remaining milestones and acceleration regarding the Merger Agreement had been reached and the Corporation issued the remaining 500,000 shares of merger consideration, equally to AAM Investments, LLC, affiliated with one of the Company’s Directors, Bruce N. Lemons, and the Maple Gas Corporation, a wholly owned subsidiary of Maple Resources Corporation, which is 100% owned by the Company’s CEO, Jack Hanks.

Common stock issued for Conversions of Debt
On May 1, 2012, the Company issued 131,250 shares of common stock to DelaVega Trading Ltd. (a related party), an entity controlled by one of the Company’s Directors, Nabil Katabi, pursuant to conversion of a note and accrued interest of $43,750 at a price of $0.33 per share. Since the debt was converted at a lower price than under the terms of the note agreement, a loss on conversion of shares of $5,250 was reported during the fiscal year ended April 30, 2012.

On May 16, 2012, the Corporation issued 3,480,000 shares of the Company’s common stock to Montana Coal Royalty, LLC (a related party) pursuant to conversion of $323,640 of a note and accrued interest.  Montana Coal Royalty, LLC is owned equally by AAM Investments, LLC and The Maple Gas Corporation. The Maple Gas Corporation is controlled by Mr. Jack Hanks, the CEO and a director of the Corporation. As the conversion took place at below the market price on the date of conversion, a loss of $441,960 was recorded.

Common stock issued for Cash
On September 27, 2012, the Corporation issued 250,000 Common Shares at a price of $0.20 per share to Delavega Trading Ltd., (a related party) an entity controlled by one of the Company’s Directors, Nabil Katabi, in exchange for an investment of $50,000. In addition, the Corporation issued 250,000 Warrants at an exercise price of $0.30 per Common Share until September 27, 2015 valued at $49,468 on the date of issuance.
 
Common stock issued for Services
On October 30, 2012, the Corporation issued 300,000 Common Shares at a price of $0.19 to Delavega Trading Ltd. (a related party), an entity controlled by one of the Company’s Directors, Nabil Katabi pursuant to a consulting agreement dated February 2, 2012. As the shares were issued within the terms of the consulting agreement, no gain or loss was recognized upon payment.

 
15

 
 
On April 26, 2012, the Company granted 250,000 shares of common stock to The Maple Gas Corporation, a wholly owned subsidiary of Maple Resources Corporation, which is 100% owned by the Company’s CEO pursuant to the vesting of contingent consideration which was connected to the original issuance of Company common stock in connection with the acquisition of MCCH. The shares were valued at par value, resulting in a $2,500 adjustment to common stock payable in accordance with the accounting for reverse acquisition under ASC 805-10-40.  On April 26, 2012, 4,874 of these shares were issued, the remaining 245,126 shares were issued to DelaVega Trading Ltd. (a related party), an entity controlled by Nabil Katabi a company board member, on May 1, 2012.

On April 26, 2012, the Company issued 250,000 shares of common stock to AAM Investments, LLC, affiliated with one of the Company’s Directors, Bruce N. Lemons, pursuant to the vesting of contingent consideration which was connected to the original issuance of Company common stock in connection with the acquisition of MCCH.  The shares were valued at par value, resulting in a $2,500 adjustment to common stock payable in accordance with the accounting for reverse acquisition under ASC 805-10-40.   On April 26, 2012, 225,475 of these shares were issued, the remaining 24,525 shares were issued to DelaVega Trading Ltd. (a related party), an entity controlled by Nabil Katabi a company board member, on May 1, 2012.

Note 4 – Other Assets – Current

The current portion of Other Assets consists of the following:

   
October 31,
2012
   
April 30,
2012
 
Deferred Costs on Bridge Financing
  $ 10,000     $ 10,000  
    $ 10,000     $ 10,000  
 
Note 5 – Property and Equipment

Property and Equipment consists of the following:
 
   
October 31,
2012
   
April 30,
2012
 
Software and hardware
  $ 25,023     $ 24,373  
Less accumulated depreciation and amortization
    (9,819 )     (7,339 )
    $ 15,204     $ 17,034  
 
Depreciation and amortization expense totaled $2,480 and $2,395 for the six months ended October 31, 2012 and 2011, respectively, and $1,241 and $1,161 for the three months ended October 31, 2012 and 2011, respectively.

The Company disposed of $4,038 of fixed asset during the six month period ended October 31, 2011 resulting in a loss on disposal of assets of $3,651.

Note 6 – Investment in Property

On July 30, 2008, Maple Resources Corporation (“MRC”), a related party via common control from the Company’s CEO, Jack Hanks, purchased the Snider Ranch in Musselshell and Yellowstone Counties, Montana for $1,615,000. Simultaneously, MCC and MRC executed an option agreement whereby MCC became responsible for all principal and interest payments on a $1,000,000 bank note payable issued in MRC’s name in connection with its acquisition of the Snider Ranch and all other payments made by MRC to acquire the Snider Ranch. MRC has agreed that upon successful repayment of the note, it will transfer the Snider Ranch title to MCC. MCC also has issued MRC a $0.08/ton royalty from all future production generated from the Snider Ranch prospect as consideration for MRC and Jack W. Hanks, personally, guaranteeing the loan.  The expected fair value of this royalty could not readily be determined, and as such, was not recognized. The value of the property was periodically measured for impairment and $201,747 of impairment charges were recognized during the year ended, April 30, 2010. On September 2, 2010, the option to purchase the Snider Ranch was distributed to the owners of MCC and recorded as a dividend in the amount of $1,413,253. In the merger with MMEX, MCC partners, The Maple Gas Corporation and AAM Investments, LLC assigned their rights under the option agreement to the Company. Subsequently, on December 21, 2010, Maple Resources Corporation sold the Snider Ranch property located in Yellowstone and Musselshell counties, Montana, to Great Northern Properties Limited Partnership, and the Company’s subsidiary relinquished its option right to acquire this property.

 
16

 
 
On January 20, 2011, AMC acquired an option to purchase a 50% interest in a permitted and operating mine company in Colombia, the Hunza lease, producing metallurgical coal, with a potential resource of 16 million tons to 90 million tons based on existing exploration resources reports.  The agreement required an exclusivity fee of $1,400,000 that was completed on March 22, 2011, and $5,000,000 to be deposited to an exploration fund to continue the financing of an exploration and drilling program.  On February 3, 2012 the Company executed and delivered an amendment to the Hunza option agreement which, among other items, provides that:
 
·  
In order to exercise the option to acquire 50% of Hunza, the Company would be required to complete the payment of exclusivity fees on or before February 29, 2012, including issuing a $1.2 million note convertible into 4,000,000 shares of the Company’s common stock.  On March 8, 2012, $538,200 of the note was converted into 1,794,000 shares of the Company’s common stock.

·  
After exercise of the option, the Company would be obligated to fund an additional $3.0 million upon the earlier of May 1, 2013 or 90 days after the completion of the technical resources report which will be commissioned by Hunza.

·  
The Company would pledge one half of its interest in Hunza to secure any payment default by the Company, which default would result in a reduction of the Company’s interest to 25% of Hunza.

As a result of the acquisition of the 50% interest in Hunza, the board of directors and operating committee of Hunza consist of four members in total: two members from the Company; namely, Jack Hanks (CEO) and Nabil Katabi (Director).  The other two members of the board of directors and operating committee are non-related party to MMEX and jointly own the other 50% interest in Hunza and are themselves, brothers, and therefore, related party to each other (the “Original Shareholders).  The Original Shareholders have the right to, in the occurrence of a deadlock between themselves and the two board members from the Company, repurchase the 50% ownership from the Company at its fair value.  The Company does not have primary control over the Original Shareholders or Hunza.

On March 8, 2012, the final exclusivity payment of $3,600,000 was made with an additional $700,000 payment to the exploration fund, for a total of $2,015,559 contributed to the exploration fund, the Hunza purchase was completed.

During the course of fiscal years ended April 30, 2012 and 2011, impairments of $932,343 and $1,830,000 were taken due to the fact that it was uncertain whether or not the Company would be able to purchase the option to own 50% of Hunza.  During the fourth quarter of the fiscal year ended April 30, 2012, the Company did obtain the option with the final payment of $3,600,000 of cash and exercised it with the final payment of $700,000.  In addition, the Company obtained a valuation report from an independent contractor, as well as a feasibility report, indicating that production and exploration of Hunza is probable and economical.  The Company considered whether impairment of the payments made during the fourth quarter was necessary, but determined that based upon the information contained within the two reports received, that the investment bears value to the Company that exceeded the cash amounts paid during the fourth quarter, in addition to the future cash payment of $3,000,000 expected to be paid within the next twelve months.

The Company has capitalized the $3,600,000 exclusivity payment, $3,000,000 payable due, and the $700,000 exploration fund payments as investment in the property and will report income and loss from the investment by the equity method of accounting.

The following table reflects the income statements for the six month ended October 31, 2012 and the four month period ended April 30, 2012, for the Hunza equity investment:

   
October 31,
2012
   
April 30,
2012
 
   
(Unaudited)
   
(Audited)
 
             
Revenue
  $ 7,574     $ -  
Operating expenses
    (491,869 )     (279,137 )
Other income (expense)
    27,119       (101 )
Loss before taxes
    (457,176 )     (279,238 )
Income tax expense (benefit)
    33,831       20,670  
Net loss for the period
  $ (423,345 )   $ (258,568 )
 
The Company’s proportionate share of losses totaled $211,673 and $0 for the six months ended October 31, 2012 and 2011, respectively, and $178,848 and $0 for the three months ended October 31, 2012 and 2011, respectively, in relation to the acquired asset above.
 
 
17

 

The following table reflects the balance sheet for the period ended October 31, 2012 compared to the period ended April 30, 2012, for the Hunza equity investment:

   
October 31,
2012
   
April 30,
2012
 
   
(Unaudited)
   
(Audited)
 
Assets
           
   Cash and Cash Equivalents
  $ 1,246,843     $ 1,567,251  
   Loans and Advances
    53,177       33,278  
   Tangible Assets
    -       1,276  
   Property and Equipment
    20,644       22,972  
   Intangible Assets
    81,467       157,998  
   Deferred Charges
    1,950       59,548  
Total Assets
  $ 1,404,081     $ 1,842,323  
                 
Liabilities and Shareholders' Equity
               
   Accounts Payable
  $ 23,159     $ 45,380  
   Taxes Payable
    1,371       4,779  
   Other Liabilities
    72,712       75,744  
   Shareholders' Equity
    1,306,839       1,716,420  
Total Liabilities and Shareholders' Equity
  $ 1,404,081     $ 1,842,323  
 
Note 7 – Accrued Expenses

As of October 31, 2012 and April 30, 2012 accrued expenses included the following:

   
October 31,
2012
   
April 30,
2012
 
Accrued Lease Expenses
  $ 62,541     $ 62,541  
Accrued Payroll, Officers
    174,117       117,543  
Accrued Payroll, Employees
    21,925       -  
Accrued Consulting
    441,682       548,145  
Accrued Dividend
    160,685       110,685  
Accrued Interest
    143,756       143,963  
    $ 1,004,706     $ 982,877  
 
 
18

 

Note 8 – Long-term Debt

Long-term debt were as follows at:
 
   
October 31,
2012
   
April 30,
2012
 
Issued by MMEX Mining Corporation:
           
  Dosdall Investment - 10%, due 12/31/10, currently in default
  $ 50,000     $ 50,000  
  Blackstone Investment Corp. - 6%, due 3/1/17
    -       558,181  
  William Gross (preferred shares convertible) - 10%, due 3/18/16
    40,850       40,418  
  William Gross (common shares convertible) - 10%, due 7/31/13
    1,326,846       1,064,633  
  William Gross - 20%, due 10/31/13
    91,731       -  
  Montana Coal Royalty - 10%, due 3/18/12, related party
    -       290,000  
  BNL Family Partners, LLC  (convertible)- 20%, due 10/30/13, related party
    3,119       -  
  Delavega Trading Ltd (convertible)- 20%, due 9/30/13, related party
    12,541       -  
Issued by subsidiaries of the Company:
               
  AMC (preferred stock) - 10%, due 6/30/12
    137,500       137,500  
  Hawn Financial - 25%, due 1/27/12, currently in default
    25,000       25,000  
  Atlantic Coal PLC - 10%. On demand, currently in default
    300,000       300,000  
Total debt issued by the Company and subsidiaries
    1,987,587       2,465,732  
  Less current maturities
    (1,946,737 )     (1,360,681 )
Total long-term debt
  $ 40,850     $ 1,105,051  
 
Notes Payable-Third Party, currently in default
In November of 2009 the Company entered into a $300,000 note agreement which carried a 10% interest rate due on July 15, 2010.  Accrued interest of $107,986 and $92,986 was outstanding at October 31, 2012 and April 30, 2012, respectively.  This note is currently in default.

Notes Payable-Related Party
On March 18, 2011, the Company issued a $290,000 related party promissory note due and payable on March 18, 2012.  The note carried a 10% interest rate.  On May 16, 2012, the Corporation issued 3,480,000 shares of the Company’s common stock to Montana Coal Royalty, LLC pursuant to conversion of $323,640 of the note and accrued interest; the fair value of these shares ($0.22 per share) on May 16, 2012, was $765,600, which when compared to the obligations fulfilled of $323,640, resulted in a loss on conversion of $441,960 as the note and interest were converted outside of the terms of the agreement.  Montana Coal Royalty, LLC is owned equally by AAM Investments, LLC and The Maple Gas Corporation. The Maple Gas Corporation is controlled by Mr. Jack Hanks, the CEO and a director of the Corporation.

Convertible Notes-Third Party, currently in default
On March 8, 2010, the Company closed a note purchase agreement with an accredited investor pursuant to which the Company sold a $50,000 convertible note in a private placement transaction. In the transaction, the Company received proceeds of $35,000 and the investor also paid $15,000 of consulting expense on behalf of the Company. The convertible note was due and payable on December 31, 2010 with an interest rate of 10% per annum. The note is convertible at the option of the holder into our common stock at a fixed conversion price of $3.70, subject to adjustment for stock splits and combinations.  Accrued interest of $13,235 and $10,735 was outstanding at October 31, 2012 and April 30, 2012 respectively.  As of October 31, 2012 this note is in default.

On January 28, 2011 and February 1, 2011, the Company closed a Convertible Note Agreement totaling $514,900 in principal amount of 25% Convertible Note (the “Notes”) due on the first anniversary of the date of the Note, to a group of institutional and high net worth investors.  The Notes are convertible into the Company’s common stock at the holders’ option at $1.00 per common share. The holder may accelerate repayment of the Note upon sale of the Carpenter Creek prospect.  In addition, the Company issued 643,625 warrants to purchase shares of the Company’s common stock at an exercise price of $1.00 per share on or before three years from the repayment or conversion date.  All but $25,000 of the promissory notes plus interest were paid in full on March 23, 2011.  As of July 31, 2012 the remaining $25,000 was in default.

The Company allocated the proceeds from the issuance of the Notes to the warrants and the Notes based on their fair market values at the date of issuance using the Black-Scholes model.  The value assigned to the warrants of $514,900 was recorded as an increase in additional paid-in capital and was limited to the note balance.  The assignment of a value to the warrants resulted in a loan discount being recorded for the same amount. The discount will be amortized over the original one-year term of the Notes as additional interest expense.  Upon repayment of the notes on March 23, 2011, $514,900 of the loan discount was taken as an interest expense.
 
 
19

 

Convertible Notes-Third Party
On January 13, 2012, the Company closed a note purchase agreement with an accredited investor pursuant to which the Company sold a $100,000 note in a private placement transaction. The note is due and payable on January 12, 2013, carries a 25% interest rate due in full at issuance. The computed interest of $25,000 was added to the balance of the note and recorded as additional debt discount.  The note is secured with 330,000 of the Company's common stock.  In addition, the Company issued 125,000 warrants to purchase shares of the Company’s common stock at an exercise price of $.075 per share on or before three years from the issuance date.

The Company allocated the proceeds from the issuance of the note to the warrants and the note based on their fair market values at the date of issuance using the Black-Scholes model.  The value assigned to the warrants of $19,817 was recorded as an increase in additional paid-in capital. The assignment of a value to the warrants resulted in a loan discount being recorded for the same amount. The discount will be amortized over the original one year term of the Note as additional interest expense.  During the six months ended October 31, 2012, $10,030 was recorded as amortization of the debt discount into interest expense. The Company recorded the intrinsic value of the beneficial conversion of $80,183 as debt discount and will amortize the discount over the original one year term of the Note.

On April 25, 2012, the holder of the above note elected to convert their note and accrued interest into 625,000 common shares under the same terms as provided to investors in the March 2, 2012 private placement. In addition, the Company issued 625,000 warrants to purchase shares of the Company’s common stock at an exercise price of $0.30 per share on or before three years from the issuance date. Since the debt was converted at a higher price than under the terms of the note agreement, a gain on conversion of shares of $250,000 was reported.  The Company allocated the proceeds from the issuance of the shares to the warrants and the shares on their fair market values at the date of conversion using the Black-Scholes model.  The value assigned to the warrants of $148,215 was recorded as a reduction in the gain realized on the conversion of the shares and an increase in additional paid-in capital.  In addition, the beneficial conversion feature of $80,183 was fully expensed on April 25, 2012 due to the conversion of the note into common shares.

On March 1, 2012, the Company issued a $1,200,000 convertible debenture as part of an amendment to its acquisition of the Hunza mine.  The note is due and payable on March 1, 2017 and carries a 6% interest rate.  The note is convertible at the option of the holder into our common stock at a fixed conversion price of $0.30.  On March 8, 2012 $538,200 of the note was converted into 1,794,000 of the Company's common stock.  On May 1, 2012, the remaining $661,800 balance of the $1,200,000 convertible note was converted into 2,206,000 shares of the Company’s common stock. No gain or loss was recognized on the conversions as they were within the terms of the convertible debenture.

The Company recorded the intrinsic value of the beneficial conversion of $200,000 as debt discount and was to be amortized over the life of the convertible debenture or as conversions occurred.  As a result of the conversion of part of the convertible debenture, $89,700 of the beneficial conversion debt discount was recognized as expense on March 8, 2012, with the remaining $103,619 being expensed on May 1, 2012 when the remaining debt was converted.

Convertible Debentures – Third Party - PPM Notes
On April 25, 2011 and May 7, 2011, the Company closed a note purchase agreement with various investors pursuant to which the Company sold an aggregate of $680,000 notes in a private placement transaction (PPM Notes). The PPM Notes are due and payable on or before October 14, 2011 and carry a 25% interest rate due in full at issuance. The computed interest of $170,000 was added to the balance of the PPM Notes and recorded as debt discount which will be taken as interest expense over the life of the notes. The PPM Notes are convertible upon default at the option of the holder into our common stock at a fixed conversion price of $0.40, subject to adjustment for stock splits and combinations.  In addition, the Company issued 1,062,500 warrants to purchase shares of the Company’s common stock at an exercise price of $0.80 per share on or before three years from the issuance date.

The Company allocated the proceeds from the issuance of the PPM Notes to the warrants and the notes based on their fair market values at the date of issuance using the Black-Scholes model.  The value assigned to the warrants of $680,000 was recorded as an increase in additional paid-in capital and was limited to the note balance. The assignment of a value to the warrants resulted in a loan discount being recorded for the same amount. The discount will be amortized over the original six-month term of the notes as additional interest expense.
 
 
20

 

On October 14, 2011, $106,250 of the PPM Notes plus interest was converted into common stock. As consideration for the extension of the balance of the remaining notes, the Company issued 989,188 warrants to purchase shares of the Company’s common stock at an exercise price of $0.20 per share on or before April 25, 2014. The warrants were valued at the date of issuance using the Black-Scholes model. The value assigned to the warrants of $195,646 was recorded as an increase in additional paid-in capital.  The assignment of a value to the warrants resulted in a financing fee being recorded for the same amount.
 
On February 17, 2012, $43,750 of the PPM Notes plus interest was converted into common stock within the terms of the agreement; therefore, no gain or loss was recorded as result of this conversion.

On April 24, 2012, $325,000 of the PPM Notes plus interest was converted into common stock. Loss on conversion of the debentures of $46,842 was recorded.

On April 25, 2012, the remaining $375,000 of principal and interest of the PPM Notes was consolidated with various other notes held by the same investor and reissued as a new note.  See PPM Note #2 below. The debt discounts associated with the interest were fully amortized on that date.

Convertible Debentures – Third Party – PPM Note #2
On September 9, 2011, the Company closed a note purchase agreement with an accredited investor pursuant to which the Company sold a $300,000 note in a private placement transaction. The note is due and payable on September 19, 2012, carries a 25% interest rate due in full at issuance. The computed interest of $75,000 was added to the balance of the note and recorded as additional debt discount. The note is secured with 1,000,000 of the Company's common stock.  In addition, the Company issued 375,000 warrants to purchase shares of the Company’s common stock at an exercise price of $0.16 per share on or before three years from the issuance date.

The Company allocated the proceeds from the issuance of the note to the warrants and the note based on their fair market values at the date of issuance using the Black-Scholes model.  The value assigned to the warrants of $55,934 was recorded as an increase in additional paid-in capital. The assignment of a value to the warrants resulted in a loan discount being recorded for the same amount. The discount will be amortized over the original one year term of the Note as additional interest expense.

On October 28, 2011, the Company closed a note purchase agreement with an accredited investor pursuant to which the Company sold a $500,000 note in a private placement transaction. The note is due and payable on October 31, 2012, carries a 25% interest rate due in full at issuance. The computed interest of $125,000 was added to the balance of the note and recorded as additional debt discount.  The note is secured with 1,665,000 of the Company's common stock.  In addition, the Company issued 625,000 warrants to purchase shares of the Company’s common stock at an exercise price of $.16 per share on or before three years from the issuance date.

The Company allocated the proceeds from the issuance of the note to the warrants and the note based on their fair market values at the date of issuance using the Black-Scholes model.  The value assigned to the warrants of $124,400 was recorded as an increase in additional paid-in capital. The assignment of a value to the warrants resulted in a loan discount being recorded for the same amount. The discount will be amortized over the original one year term of the Note as additional interest expense.

On December 8, 2011, the Company closed a note purchase agreement with an accredited investor pursuant to which the Company sold a $100,000 note in a private placement transaction. The Company is required to redeem the note on that date which is the earlier of: (i) the closing of any Company equity financing in excess of $2,250,000 or (ii) December 8, 2012 at a payment equal to $125,000.  The Company at its option may elect to redeem the note at such payment amount on any earlier date. In addition to redemption of the note, the Company agreed to redeem an additional amount of debt owed to the investor in the amount of $100,000 in principal and $25,000 in fees out of additional funding from any financing. Such funding shall be applied to the $500,000 note dated October 28, 2011 issued by the Company to the investor. The note is secured with 330,000 shares of the Company's common stock.  In addition, the Company issued 125,000 warrants to purchase shares of the Company’s common stock at an exercise price of $.20 per share on or before three years from the issuance date.

The Company allocated the proceeds from the issuance of the note to the warrants and the note based on their fair market values at the date of issuance using the Black-Scholes model.  The value assigned to the warrants of $28,369 was recorded as an increase in additional paid-in capital. The assignment of a value to the warrants resulted in a loan discount being recorded for the same amount. The discount will be amortized over the original one year term of the Note as additional interest expense.

On April 25, 2012, the notes dated September 9, 2011, October 28, 2011 and December 8, 2011 and $375,000 from the April 25, 2011 PPM Notes offering were consolidated into a new $1,500,000 note (PPM Note #2).  The PPM Note #2 is due and payable on October 31, 2013, carries an additional 10% interest rate due in full at maturity. The computed interest of $150,000 was added to the balance of the note and recorded as additional debt discount.  The note is convertible at the option of the holder into our common stock at a fixed conversion price of $0.20, subject to adjustment for stock splits and combinations.  The note is secured with 2,995,000 of the Company's common stock.
 
 
21

 

The Company recorded the intrinsic value of the beneficial conversion of $330,000 as debt discount and will amortize the discount over the original fifteen month term of the Note.  During the six months ended October 31, 2012, $131,141 was recorded as amortization of the debt discount into interest expense.

On August 15, 2012, the Corporation entered into a $100,000 convertible note agreement with an unrelated party. The debenture is subject to a 20% placement fee payable to the holder irrespective of the date redeemed, matures on October 31, 2013 and is convertible into common shares at the holder’s option at $0.20 per Common Share. Pursuant to the agreement, the Corporation also (i) amended the conversion rate of the March 2011 Series A Preferred Stock (“Preferred Stock”) from $0.40 to $0.20 per Common Share, (ii) amended the maturity date of the April 2012 Debenture from July 31, 2013 to October 31, 2013, (iii) amended the exercise price of the Warrant agreement of April 2011 to purchase 468,750 Common Shares from $0.80 to $0.20, and (iv) issued 120,000 Warrants, to the holder of the August 15, 2012 Debenture, with an exercise price of $0.30 per Common Share until August 15, 2015.  The computed interest of $20,000 was added to the balance of the note and recorded as additional debt discount.

As a result of the August 15, 2012 amendment of the Preferred Stock exercise price, $300,000 of additional paid in capital was recognized as an additional interest expense in conjunction with the proceeds received from the note agreement.  As a result of the August 25, 2012 amendment to the exercise price of the warrant agreement, $2,694 of additional paid in capital was recognized as an additional interest expense in conjunction with the proceeds received from the note agreement.

The Company allocated the proceeds from the issuance of the note to the warrants and the note based on their fair market values at the date of issuance using the Black-Scholes model. The value assigned to the warrants of $28,269 was recorded as an increase in additional paid-in capital. The assignment of a value to the warrants resulted in a loan discount being recorded for the same amount. The discount will be amortized over the original one year term of the Note as additional interest expense. During the six months ended October 31, 2012, $14,185 was recorded as amortization of the debt discount into interest expense.
 
Convertible Notes-Related Party
On August 1, 2012, the Corporation entered into a $10,000 convertible note agreement with BNL Family Partners, Mr. Bruce N. Lemons, a director of the Corporation, is a partner of BNL Family Partners, The debentures are convertible into common shares at the holder’s option at $0.20 per common share. The holders may accelerate repayment of the promissory notes upon the Corporation raising additional capital of $150,000. In addition, the Corporation issued 10,000 warrants at an exercise price of $0.30 per common share until August 1, 2015.  On August 21, 2012, the Corporation repaid the $10,000 debenture.
 
The Company allocated the proceeds from the issuance of the note to the warrants and the note based on their fair market values at the date of issuance using the Black-Scholes model. The value assigned to the warrants of $988 was recorded as an increase in additional paid-in capital. The assignment of a value to the warrants resulted in a loan discount being recorded for the same amount. The discount will be amortized over the original one year term of the Note as additional interest expense.  During the six months ended October 31, 2012, $199 was recorded as amortization of the debt discount into interest expense.
 
On August 1, 2012, the Company entered into a $13,000 convertible note agreement with Delavega Trading Ltd., Mr. Nabil Katabi, a director of the Corporation, is a control person of Delavega Trading Ltd. The debenture carries a 20% interest rate until maturity at September 30, 2013 and is convertible into common shares at the holder’s option at $0.20 per common share. The computed interest of $2,600 was added to the balance of the note and recorded as additional debt discount.  During the six months ended October 31, 2012, $259 was recorded as amortization of the debt discount into interest expense.
 
The Company allocated the proceeds from the issuance of the note to the warrants and the note based on their fair market values at the date of issuance using the Black-Scholes model. The value assigned to the warrants of $1,285 was recorded as an increase in additional paid-in capital. The assignment of a value to the warrants resulted in a loan discount being recorded for the same amount. The discount will be amortized over the original one year term of the Note as additional interest expense.
 
On September 15, 2012, the Corporation entered into a $4,500 convertible note agreement with BNL Family Partners, LLC.  Mr. Bruce N. Lemons, a director of the Corporation, is a partner of BNL Family Partners.  The debentures carry a 20% interest rate until maturity at September 30, 2013 and are convertible into common shares at the holder’s option at $0.20 per common share. The holders may accelerate repayment of the promissory notes upon the Corporation raising additional capital of $150,000. The computed interest of $900 was added to the balance of the note and recorded as additional debt discount. In addition, the Corporation issued 4,500 Warrants at an exercise price of $0.30 per Common Share until August 1, 2015.
 
The Company allocated the proceeds from the issuance of the note to the warrants and the note based on their fair market values at the date of issuance using the Black-Scholes model. The value assigned to the warrants of $800 was recorded as an increase in additional paid-in capital. The assignment of a value to the warrants resulted in a loan discount being recorded for the same amount. The discount will be amortized over the original one year term of the Note as additional interest expense. During the six months ended October 31, 2012, $90 was recorded as amortization of the debt discount into interest expense.
 
 
22

 
 
Convertible Preferred Stock-Third Party
On March 22, 2011 the Company issued 1,000,000 shares of Series A Preferred Stock ( the “Preferred Stock”) to an unrelated party in exchange for an investment of $1,000,000.  The shares may be converted into the Company’s common shares at $0.40 per common share.  The Preferred Stock carry a 10% cumulative dividend and have a mandatory redemption feature on the earlier of March 1, 2016 or on a change of control transaction.  The Company is required to redeem the shares at a liquidation value of $1.00 per share plus any accrued and unpaid dividends.  Due to the mandatory redemption feature, the Company recorded the investment as a liability under ASC Subtopic 480-10.

The Company recorded the intrinsic value of the beneficial conversion of $1,000,000 as debt discount and will amortize the discount through the mandatory redemption feature date of March 1, 2016. The investment is collateralized with a security interest in 2,500,000 MMEX Mining Corporation common stock shares.

Loan costs of $50,000 incurred on the issuance of the Preferred Stock were recorded as deferred loan costs and will be amortized by the effective interest method.  The Company recorded amortization on loan costs in the amount of $5,000 for both six month periods ended October 31, 2012 and 2011, respectively and $2,500 for both three month periods ended October 31, 2012 and 2011, respectively.  Unpaid dividends payable were $160,685 at October 31, 2012 on the Preferred Stock.

On August 15, 2012, the company amended the Preferred Stock agreement and lowered the conversion rate provided from $0.40 per common share to $0.20 per common share.  The amendment generated a $300,000 fair value adjustment that was recorded as additional interest and increased additional paid in capital.

Convertible Preferred Stock-Third Party, currently in default
On June 30, 2011, the Company issued 360,000 shares of Armadillo Mining Corporation Preferred Stock to five unrelated parties in exchange for an investment of $360,000.  The Preferred Stock carry a 25% cumulative dividend and have a mandatory redemption feature on December 31, 2011 at a price of $1.25 per share.  In addition, the Company issued 360,000 warrants to purchase shares of the Company’s common stock at an exercise price of $0.60 per share on or before three years from the repayment or conversion date.

On January 6, 2012, three unrelated parties converted their Preferred Stock and accrued dividends of $312,500 into 2,983,293 shares of MMEX Mining Corporation common stock at a price of $.10475 per share. As the conversion took place at below the market price and not within the terms of the agreement on the date of conversion; thus, a loss of $75,328 was recorded.

The Company recorded interest expense, which includes amortization of debt discounts on convertible debt from above, on debt in the amount of $494,099 and $1,169,009 for the six months ended October 31, 2012 and 2011, respectively and $199,473 and $608,182 for the three months ended October 31, 2012 and 2011, respectively.

Note 9 – Changes in Stockholders’ Equity (Deficit)

On May 25, 2011, the Board of Directors approved a 1 for 10 reverse stock split of its common stock.  All references in the accompanying financial statements to the number of shares of common stock and loss per share have been retroactively restated to reflect the reverse stock split.

The Company is authorized to issue up to 200,000,000 shares of its $0.001 par value common stock. There were 55,522,788 shares issued and outstanding at October 31, 2012.

For the period from inception (May 23, 2007) through October 31, 2012, there has been contributions of capital from members of $7,696,652 and contributions of capital from shareholders of $343,139.

Common stock issued commensurate with the merger with MCCH
On September 23, 2010 the Company issued a subscription payable for 1,500,000 shares of common stock pursuant to the merger with MCCH. The shares were valued at par value, resulting in a total subscription payable of $15,000 at October 31, 2010. On January 11, 2011, the Board of Directors, through a Unanimous Written Consent of the Board of Directors issued the remaining shares in accordance with the merger agreement.   The Company reversed the subscription payable resulting in a $15,000 adjustment to additional paid in capital.
 
 
23

 

On October 8, 2010 the Company issued 2,500,000 shares of common stock The Maple Gas Corporation, a wholly owned subsidiary of Maple Resources Corporation, which is 100% owned by the Company’s CEO pursuant to the merger with MCCH on September 23, 2010. The shares were valued at par value, resulting in a $25,000 adjustment to additional paid in capital in accordance with the accounting for reverse acquisition under ASC 805-10-40.

On October 8, 2010 the Company issued 2,500,00 shares of common stock to AAM Investments, LLC, affiliated with one of the Company’s Directors, Bruce N. Lemons, pursuant to the merger with MCCH on September 23, 2010. The shares were valued at par value, resulting in a $25,000 adjustment to additional paid in capital in accordance with the accounting for reverse acquisitions under ASC 805-10-40.

Common stock issued subsequent to the merger with MCCH
On October 12, 2010 the Company granted 50,000 shares of restricted common stock to a consultant for public relations services provided. The total fair value of the common stock was $165,000 based on the closing price of the Company’s common stock on the date of grant.

On December 22, 2010 the Company issued 31,334 shares to Steve Eppig in exchange for Mr. Eppig’s 1.88% interest in the equity of its Armadillo Holdings Group Corporation subsidiary.  The shares were valued at the value of the minority interest held in Armadillo Holding Group Corporation through January 31, 2011 which was $22,526.

On January 12, 2011 the Company issued 750,000 shares of common stock The Maple Gas Corporation, a wholly owned subsidiary of Maple Resources Corporation, which is 100% owned by the Company’s CEO pursuant to the termination and rescission of the DEIC agreement.  The shares were valued at par value, resulting in a $7,500 adjustment to common stock payable in accordance with the accounting for reverse acquisition under ASC 805-10-40.

On January 12, 2011 the Company issued 750,000 shares of common stock to AAM Investments, LLC, affiliated with one of the Company’s Directors, Bruce N. Lemons, pursuant to the termination and rescission of the DEIC agreement.  The shares were valued at par value, resulting in a $7,500 adjustment to common stock payable in accordance with the accounting for reverse acquisitions under ASC 805-10-40.

On September 13, 2011 the Company issued 500,000 shares of common stock to The Maple Gas Corporation, a wholly owned subsidiary of Maple Resources Corporation, which is 100% owned by the Company’s CEO pursuant to the vesting of contingent consideration which was connected to the original issuance of Company common stock in connection with the acquisition of MCCH. The shares were valued at par value, resulting in a $5,000 adjustment to common stock payable in accordance with the accounting for reverse acquisition under ASC 805-10-40.

On September 13, 2011 the Company issued 500,000 shares of common stock to AAM Investments, LLC, affiliated with one of the Company’s Directors, Bruce N. Lemons, pursuant to the vesting of contingent consideration which was connected to the original issuance of Company common stock in connection with the acquisition of MCCH.  The shares were valued at par value, resulting in a $5,000 adjustment to common stock payable in accordance with the accounting for reverse acquisition under ASC 805-10-40.

On April 26, 2012, the Company granted 250,000 shares of common stock to The Maple Gas Corporation, a wholly owned subsidiary of Maple Resources Corporation, which is 100% owned by the Company’s CEO pursuant to the vesting of contingent consideration which was connected to the original issuance of Company common stock in connection with the acquisition of MCCH. The shares were valued at par value, resulting in a $2,500 adjustment to common stock payable in accordance with the accounting for reverse acquisition under ASC 805-10-40.  On April 26, 2012, 4,874 of these shares were issued, the remaining 245,126 shares were issued to DelaVega Trading Ltd. (a related party), an entity controlled by Nabil Katabi a company board member, on May 1, 2012.

On April 26, 2012, the Company issued 250,000 shares of common stock to AAM Investments, LLC, affiliated with one of the Company’s Directors, Bruce N. Lemons, pursuant to the vesting of contingent consideration which was connected to the original issuance of Company common stock in connection with the acquisition of MCCH.  The shares were valued at par value, resulting in a $2,500 adjustment to common stock payable in accordance with the accounting for reverse acquisition under ASC 805-10-40.   On April 26, 2012, 225,475 of these shares were issued, the remaining 24,525 shares were issued to DelaVega Trading Ltd. (a related party), an entity controlled by Nabil Katabi a company board member, on May 1, 2012.
 
 
24

 

Common Stock issued for Cash
On August 28, 2011, the Company sold 200,000 shares of MMEX Mining Corporation common stock to an unrelated party in exchange for an investment of $32,000.

On October 4, 2011, the Company sold 312,500 shares of MMEX Mining Corporation common stock to an unrelated party in exchange for an investment of $50,000.

On December 8, 2011, the Company sold 50,000 shares of MMEX Mining Corporation common stock to an unrelated party in exchange for an investment of $10,000.

On March 2, 2012, the Company completed a private placement of units to South American investors (the “March 2012 Private Placement”). Each unit consisted of one Common Share and one Common Share purchase warrant and was issued at $0.20 per unit. The Corporation received gross proceeds of $5,509,288. Of the total 27,546,438 common shares due associated with the private placement, the Company was only able to issue 26,421,438 by April 30, 2012; the remaining 1,125,000 common shares were issued after an increased was approved to the Company’s authorized share count. In conjunction with the private placement, an unrelated party received 300,000 common shares at a price of $0.20 as compensation for services. Each warrant entitles the holder to acquire one common share at a price of $0.30 per Common Share for a period of three years.

The Company computed the proceeds from the issuance of the common shares to the warrants and the shares based on their fair market values at the date of issuance using the Black-Scholes model.  The value assigned to the warrants of $9,546,249 is provided for footnote purposes only.

On May 1, 2012, the Corporation issued 500,000 shares of the Company’s common stock at $0.20 per share to an unrelated party pursuant to the terms provided in the March 2, 2012 private placement. These shares had already been paid for by the unrelated party and were represented by a common stock payable as of April 30, 2012.  The subsequent issuance of common shares during May 2012 resulted in a decrease to the common stock payable and an increase to common stock and additional paid in capital.

On May 16, 2012, the Corporation issued 375,000 shares of the Company’s common stock at $0.20 per share to an unrelated party pursuant to the terms provided in the March 2, 2012 private placement. These shares had already been paid for by the unrelated party and were represented by a common stock payable as of April 30, 2012.  The subsequent issuance of common shares during May 2012 resulted in a decrease to the common stock payable and an increase to common stock.

On June 15, 2012, the Corporation issued 250,000 shares of the Company’s common stock at $0.20 per share to an unrelated party pursuant to the terms of the March 2, 2012 private placement.  These shares had already been paid for with cash by the unrelated party and were represented by a common stock payable as of April 30, 2012.  The subsequent issuance of common shares during May 2012 resulted in a decrease to the common stock payable and an increase to common stock.

On September 27, 2012, the Corporation issued 250,000 Common Shares at a price of $0.20 per share to Delavega Trading Ltd.(a related party), a company for which Nabil Katabi a Company director has a controlling interest, in exchange for an investment of $50,000. In addition, the Corporation issued 250,000 Warrants at an exercise price of $0.30 per Common Share until September 27, 2015 valued at $49,468 as the issuance date.

Common Stock issued for Debt Conversion
On October 19, 2011, an unrelated party converted their promissory note and accrued interest of $62,500 into 156,250 shares of MMEX Mining Corporation common stock at a price of $0.40 per share. As the value of the stock at the closing price on that date was equal to the value of the debt extinguished, no gain or loss was recognized.

On January 6, 2012, three unrelated parties converted their promissory notes and accrued interest of $312,500 into 2,983,293 shares of MMEX Mining Corporation common stock at a price of $0.10 per share. As the conversion took place at below the market price on the date of conversion, a loss of $75,328 was recorded.

On February 17, 2012, 109,375 shares of MMEX Mining Corporation common stock at a price of $0.40 per share were issued as a result of a conversion of $43,750 of debt and interest which had been requested on October 19, 2012 in accordance with the terms of the debt agreement; therefore, no gain or loss was recognized.
 
 
25

 

On March 8, 2012, $538,200 of the $1,200,000 convertible note issued in conjunction with the Hunza amendment was converted into 1,794,000 shares of the Company’s common stock at a price of $.30 per share.  No gain or loss was recognized on this conversion as the note was converted within the terms of the agreement.

On May 1, 2012, the Company issued 131,250 shares of common stock to DelaVega Trading Ltd., an entity controlled by one of the Company’s Directors, Nabil Katabi, pursuant to conversion of a note and accrued interest of $43,750 at a price of $0.33 per share. Since the debt was converted at a lower price than under the terms of the note agreement, a loss on conversion of shares of $5,250 was reported during the fiscal year ended April 30, 2012.

On May 1, 2012, the Corporation issued 625,000 shares of the Company’s common stock at a price of $0.20 per share upon the conversion of $125,000 convertible debenture.  Since the debt was converted at a higher price than under the terms of the note agreement, a gain on conversion of shares of $250,000 was reported during the fiscal year ended April 30, 2012.  The Company allocated the proceeds from the issuance of the shares to the warrants and the shares on their fair market values at the date of conversion (April 25, 2012) using the Black-Scholes model.  The value assigned to the warrants of $148,215 was recorded as a reduction in the gain realized on the conversion of the shares and an increase in additional paid-in capital.  In addition, the beneficial conversion feature of $80,183 was fully expensed on April 25, 2012 due to the conversion of the note into common shares. The subsequent issuance of common shares during May 2012 resulted in a decrease to the common stock payable and an increase to common stock.

On May 1, 2012, the remaining $661,800 of the $1,200,000 convertible note issued in conjunction with the Hunza amendment was converted into 2,206,000 shares of the Company’s common stock at a price of $0.30 per share.  No gain or loss was recognized on this conversion as the note was converted within the terms of the agreement.

On May 16, 2012, the Corporation issued 3,480,000 shares of the Company’s common stock at $0.10 per share to Montana Coal Royalty, LLC pursuant to conversion of $323,640 of a note and interest.  Montana Coal Royalty, LLC is owned equally by AAM Investments, LLC and The Maple Gas Corporation. The Maple Gas Corporation is controlled by Mr. Jack Hanks, the CEO and a director of the Corporation.  As the conversion took place at below the market price on the date of conversion, a loss of $441,960 was recorded.

On May 16, 2012, the Corporation issued 385,800 shares of the Company’s common stock at $0.33 per share to an unrelated party, in exchange for conversion of a total of $125,000 notes and interest. Since the debt was converted at a lower price than under the terms of the note agreement, a loss on conversion of shares of $17,592 was reported during the fiscal year ended April 30, 2012.

On May 16, 2012, the Corporation issued 600,000 shares of the Company’s common stock at $0.33 per share to an unrelated party, in exchange for conversion of a total of $200,000 notes and interest. Since the debt was converted at a lower price than under the terms of the note agreement, a loss on conversion of shares of $24,000 was reported during the fiscal year ended April 30, 2012.

Common Stock issued for Services
On February 17, 2012 the Company granted 546,087 shares of restricted common stock to a consultant for consulting services provided. The total fair value of the common stock was $103,757 based on the closing price of the Company’s common stock on the date of grant.

On June 5, 2012, the Corporation issued a total of 881,032 shares of the Company’s common stock, 144,932 at $0.23 per share and 736,100 at $0.30 per share, to an unrelated party pursuant to a consulting agreement which was already part of third party accrued compensation.  This amount had been expensed in the fiscal year ended April 30, 2012.  As the accrued compensation was converted in accordance with the signed written agreement, no gain or loss was recognized, as this was a non-cash transaction.

On October 30, 2012, the Corporation issued 300,000 Common Shares at a price of $0.19 to Delavega Trading Ltd. (a related party), a company for which Nabil Katabi a Company director has a controlling interest, pursuant to terms of a consulting agreement dated February 2, 2012.

Common stock reserved
At October 31, 2012, 48,934,483 shares of common stock were reserved 15,831,639 for debt conversion purposes and 33,102,844 for issuance of warrants outstanding.

Preferred Stock
On March 18, 2011 the Board of Directors authorized 2,000,000 shares of $.001 par value Series A Preferred Stock.  The shares carry a 10% cumulative dividend, a $1.00 liquidation value, and may be converted into common shares at $0.20 per common share.  The Preferred Stock has a mandatory redemption feature on such date that is the earlier of March 1, 2016 or upon a change of control transaction.
 
 
26

 

Note 10 – Non-controlling Interests
 
On September 23, 2010, the Company, through a reverse merger, acquired 100% of the outstanding shares of Maple Carpenter Creek Holdings, Inc., (MCCH), a holding Company, with an 80% interest in Maple Carpenter Creek, LLC (MCC), which in turn owned a 95% interest in the subsidiary, Carpenter Creek, LLC (CC), and a 98.12% interest in Armadillo Holdings Group Corp. (AHGC), which in turn owned an 80% interest in Armadillo Mining Corp. (AMC). The non-controlling interest of 1.88% in AHGC was acquired by MCCH on December 21, 2010 in exchange for 31,334 shares of MMEX resulting in 100% ownership of AHGC. On March 22, 2011, AHGC acquired a 14.6% of AMC and on April 30, 2012, an additional 4% interest for a total of 98.6% based upon agreement with the minority interest holder to reduce their interest based upon proportionate share of additional capital contributed to AMC. On July 31, 2012, non-controlling interests held an approximate 1.4% residual interest in AMC and 20% interest in MCC and 5% interest in CC.
Non-controlling interest balances were as follows:
 
   
October 31,
2012
   
April 30,
2012
 
             
Balances at the beginning of the period
    290,241       111,920  
Losses due to minority interest in subsidiaries:
               
   MCCH (13.66%)
    2,049       6,596  
   CC (5%)
    750       812  
   AMC (1.4%)
    6,634       170,913  
Balances at the end of the period
    299,674       290,241  
 
Note 11 – Commitments and Contingencies

Merger Agreement
Pursuant to the merger on September 23, 2010, the Company awarded the owners of MCCH the right to receive 1,500,000 shares of common stock as contingent consideration.  The milestones are accelerated in the event the owners of MCCH are diluted below 30% in their ownership of the Company.  The milestones defined in the definitive merger agreement are as follows:

·  
1,000,000 shares upon the closing of equity or debt financing that generates at least 2 million in net proceeds,
·  
250,000 shares upon the successful generation of $250,000 in revenue from coal sales in any fiscal quarter,
·  
250,000 shares upon the successful closing of additional equity or debt financing that will generate at least $2,000,000 in net proceeds.

On September 13, 2011, the Board of Directors, through a Unanimous Written Consent of the Board of Directors, declared that the milestone to distribute 1,000,000 shares of the 1,500,000 contingent consideration had vested leaving a balance of 500,000 shares of common stock as contingent consideration.

On April 26, 2012, the Board of Directors determined that the remaining milestones and acceleration regarding the Merger Agreement had been reached and the Corporation issued the remaining 500,000 shares of merger consideration, equally to AAM Investments, LLC, affiliated with one of the Company’s Directors, Bruce N. Lemons, and the Maple Gas Corporation, a wholly owned subsidiary of Maple Resources Corporation, which is 100% owned by the Company’s CEO, Jack Hanks.
 
 
27

 

After exercise of the Hunza option, the Company is obligated to fund an additional $3.0 million upon the earlier of May 1, 2013 or 90 days after the completion of the technical resources report which will be commissioned by Hunza. The Company pledged one half of its interest in Hunza as collateral; therefore, any payment default by the Company will result in a reduction of the Company’s interest to 25% of Hunza.

Legal
There were no legal proceedings against the Company.

Note 12 – Subsequent Events

On November 2, 2012, the Corporation issued 465,525 Common Shares at an average price of $0.16 to Delavega Trading Ltd., a company for which Nabil Katabi a Company director has a controlling interest, pursuant to extinguishments of accrued consulting fees.

In accordance with ASC 855-10, all subsequent events have been reported through the filing date.
 
 
28

 

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In this Quarterly Report on Form 10-Q, unless the context requires otherwise, “we,” “us” and “our” refer to MMEX Mining Corporation, a Nevada corporation.  The following Management’s Discussion and Analysis of Financial Condition and Results of Operation provide information that we believe is relevant to an assessment and understanding of our financial condition and results of operations.  The following discussion should be read in conjunction with our financial statements and notes thereto included with this Quarterly Report on Form 10-Q, and all our other filings, including Current Reports on Form 8-K, filed with the Securities and Exchange Commission (“SEC”) through the date of this report.

Forward Looking Statements

This Quarterly Report on Form 10-Q includes both historical and forward-looking statements, which include information relating to future events, future financial performance, strategies, expectations, competitive environment and regulations.  Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements.  Such statements are intended to operate as “forward-looking statements” of the kind permitted by the Private Securities Litigation Reform Act of 1995, incorporated in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  That legislation protects such predictive statements by creating a “safe harbor” from liability in the event that a particular prediction does not turn out as anticipated. Forward-looking statements should not be read as a guarantee of future performance or results and will probably not be accurate indications of when such performance or results will be achieved.  Forward-looking statements are based on information we have when those statements are made or our management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements.  You should review carefully the section entitled “Risk Factors” beginning on page 8 of our Annual Report on Form 10-K for a discussion of certain of the risks that could cause our actual results to differ from those expressed or suggested by the forward-looking statements.
 
The inclusion of the forward-looking statements should not be regarded as a representation by us, or any other person, that such forward-looking statements will be achieved.  You should be aware that any forward-looking statement made by us in this Quarterly Report on Form 10-Q, or elsewhere, speaks only as of the date on which we make it. We undertake no duty to update any of the forward-looking statements, whether as a result of new information, future events or otherwise.  In light of the foregoing, readers are cautioned not to place undue reliance on the forward-looking statements contained in this Quarterly Report on Form 10-Q.

Overview and Outlook

On May 25, 2011, the Board of Directors approved a 1 for 10 reverse stock split of its common stock.  All references in the accompanying financial statements to the number of shares of common stock and loss per share have been retroactively restated to reflect the reverse stock split.

MMEX Mining Corporation has interests in coal prospects in the United States and South America.  We are currently considered to be an exploration stage corporation because we are engaged in the search for coal deposits and are not engaged in the exploitation of a coal deposit.  We will be in the exploration stage until we discover commercially viable coal deposits. In an exploration stage company, management devotes most of its activities to acquiring and exploring mineral properties.

On January 20, 2011 the Company executed an exclusive option agreement to purchase a 50% interest in C.I. Hunza Coal, Ltd. (Hunza), a Colombian limited liability corporation that holds various mining interests in Colombia.

On February 3, 2012 the Company executed and delivered an amendment to the Hunza option agreement which, among other items, provides that:
 
·
In order to exercise the option to acquire 50% of Hunza, the Company would be required to complete the payment of exclusivity fees on or before February 29, 2012, including issuing a $1.2 million note convertible into 4,000,000 shares of the Company’s common stock.
·
After exercise of the option, the Company would be obligated to fund an additional $3.0 million upon the earlier of May 1, 2013 or 90 days after the completion of the technical resources report which will be commissioned by Hunza.
·