July 11, 2016 - 10:00 AM EDT
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MMEX RESOURCES CORP - 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis constitutes forward-looking statements for purposes of the Securities Act and the Exchange Act and as such involves known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. The words "expect", "estimate", "anticipate", "predict", "believes", "plan", "seek", "objective" and similar expressions are intended to identify forward-looking statements or elsewhere in this report. Important factors that could cause our actual results, performance or achievement to differ materially from our expectations are discussed in detail in Item 1 above. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by such factors. We undertake no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Notwithstanding the foregoing, we are not entitled to rely on the safe harbor for forward looking statements under 27A of the Securities Act or 21E of the Exchange Act as long as our stock is classified as a penny stock within the meaning of Rule 3a51-1 of the Exchange Act. A penny stock is generally defined to be any equity security that has a market price (as defined in Rule 3a51-1) of less than $5.00 per share, subject to certain exceptions.

The following discussion should be read in conjunction with the Financial Statements, including the notes thereto.


Overview


As of April 30, 2015, MMEX Mining Corporation had interests in coal prospects in Colombia, South America. As of May 18, 2015, the MMEX Board of Directors approved the transfer its coal assets in Colombia to a trust for the benefit of its existing shareholders. The shareholders in MMEX have the same prorata ownership interests in the trust that they had in MMEX as of the date of the transfer which is as of April 11, 2016. In addition, the shareholders in MMEX have the same ownership interests in MMEX subject to the dilution by the acquisition of Maple Structured Holdings, LLC of the purchase of the Preferred Shares and selected debt of the Company, and then the subsequent conversion of those Instruments into equity in MMEX at US$0.01 per share followed by the assignment by Maple Structure Holdings, LLC of shares to related parties. That conversion results in a substantial dilution of existing shareholders including majority shareholder ownership. See Note 15 on page F-29 below for details of the dilution.



New Business Plan



The MMEX Board of Directors have made the decision to focus the Company efforts into the oil, gas, refining and electric power business in the U.S. and in Latin America. The principal reasons are the following:



      ·     MMEX principal shareholders and directors are also principals in a
            privately held U.S. oil and gas company, Maple Resources Corporation
            ('Maple") based in Austin, Texas.
      ·     The MMEX management team has over 30 years of experience in natural
            resource project development and project financing in North and South
            America and the U.K.
      ·     MMEX directors and principal shareholders with oil, gas, refining and
            electric power experience will bring this expertise into the Company.




Management Expertise in Oil, Gas, Refining and Electric Power Project Development and Project Finance Development




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MMEX principals formed Maple Resources Corporation ("Maple Resources") in 1986. Maple Resources is a privately held corporation, registered in Delaware, with its principal operating offices in Austin, Texas. It is engaged in the evaluation, acquisition and development of oil & gas, refining, power generation, natural gas transmission and processing energy projects in the western United States and Latin America. Maple Resources was established in 1986 in Dallas, Texas USA. Maple Resources engaged in a number of oil and gas acquisitions and dispositions and ultimately acquired assets that included 10 gas processing plants and approximately 770 miles of natural gas gathering lines and transmission infrastructure. In 1992, Maple Resources Dallas sold substantially all of its existing US-based assets and began to pursue energy projects in Latin America. Maple Resources went to Peru in 1992 and managed its Peru business through The Maple Gas Corporation del Peru Ltd ("Maple Peru"). In 1993, Maple Peru began developing the Aguaytía Project, an integrated natural gas and electric power generation and transmission project. This US$ 273 million project involved the first commercial development of a natural gas field in Peru, as well as the construction and operation of approximately 175 miles of hydrocarbon pipelines, a gas processing plant, a fractionation facility, a 153 MW power plant and the related 392 km of electricity transmission lines. The Aguaytía Project began commercial operation in 1998. Maple Peru also acquired a 4,000 barrel per day refinery in Pucallpa along with 3 producing oil fields. In 2007, Maple Peru was registered on the London Stock Market AIM under the name of Maple Energy, plc .In October 2015, Maple Resources along with its partners took Maple Gas del Peru private with the acquisition of the company from Maple Energy, plc, the publically listed company.



Development Strategy



The new development strategy is to focus on the acquisition, development and financing of oil, gas, refining and electric power projects in Texas, Peru and other countries in Central and Latin America.

As we continue to expand our business and implement our business strategy, our current monthly cash flow requirements will exceed our near term cash flow from operations. Our available cash resources and anticipated cash flow from operations are insufficient to satisfy our anticipated costs associated with new project development. There can be no assurance that we will be able to generate sufficient cash from operations in future periods to satisfy our capital requirements. Therefore, we will have to continue to rely on external financing activities, including the sale of our equity securities, to satisfy our capital requirements for the foreseeable future. Due, in part, to our lack of historical earnings, our prior success in attracting additional funding has been limited to transactions in which our equity is used as currency. In light of the availability of this type of financing, and the lack of alternative proposals, our board of directors has determined that the continued use of our equity for these purposes may be necessary if we are to sustain operations. Equity financings of the type we have been required to pursue are dilutive to our stockholders and may adversely impact the market price for our shares. However, we have no commitments for borrowings or additional sales of equity, the precise terms upon which we may be able to attract additional funding is not known at this time, and there can be no assurance that we will be successful in consummating any such future financing transactions on terms satisfactory to us, or at all.




Results of Operations




We recorded a net loss of $1,328,445, or $0.02 per share, for the fiscal year ended April 30, 2015, compared to a net loss of $1,679,518, or $0.03 per share, for the fiscal year ended April 30, 2014.



Revenues:



We have not yet begun to generate revenues.



General and administrative:



General and administrative expenses were $289,593 for the fiscal year ended April 30, 2015 compared to $357,713 for the fiscal year ended April 30, 2014, a decrease of $68,120.




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Payroll and taxes:




Payroll and taxes expense was $315,566 for the fiscal year ended April 30, 2015 compared to $520,000 for the fiscal year ended April 30, 2014, a decrease of $204,434. The decrease was due to changes in administrative personnel.



Professional fees:



Professional fees expense was $174,900 for the fiscal year ended April 30, 2015 compared to $181,756 for the fiscal year ended April 30, 2014, a decrease of $6,856. The decrease was due to reduced need for legal, accounting, financial, and engineering services.

Depreciation and amortization:

Depreciation and amortization expense was $5,005 for the fiscal year ended April 30, 2015 compared to $5,353 for the fiscal year ended April 30, 2014, an decrease of $348 due to fewer assets subject to depreciation during 2015 compared to 2014.




Net operating loss:




Net operating loss for the fiscal year ended April 30, 2015 was $785,064 compared to a net operating loss of $1,064,822 for the fiscal year ended April 30, 2014, a decrease of $279,758. The net operating loss decreased primarily due to fewer payroll expenses incurred during the fiscal year ended April 30, 2015 as compared to the prior year.



Other income (expense):



Interest expense was $543,381 for the fiscal year ended April 30, 2015 and $614,696 for the fiscal year ended April 30, 2014. The decrease of $71,315 was due to lower amortization expense from debt discounts in 2015 compared to 2014.

Non-controlling interests in loss of consolidated subsidiaries:

Non-controlling interests in loss of consolidated subsidiaries were $6,603 and $6,853 for the fiscal years ended April 30, 2015 and 2014, respectively.

Net loss attributed to the Company:

We recorded a net loss attributed to the Company of $1,321,842, or $0.02 per share, for the fiscal year ended April 30, 2015, compared to a net loss of $1,672,665, or $0.03 per share, for the fiscal year ended April 30, 2014, a decreased net loss of $350,823. Net losses decreased primarily as a result of our decreased expenses for the year.




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Liquidity and Capital Resources

Our principal source of operating capital has been provided from private sales of our common stock, preferred stock, partnership capital contributions, and debt financing. At April 30, 2015, we had a negative working capital position of $7,657,639.

On April 30, 2014, the Company converted the notes into a single $48,130 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 $1,000,000. The holder may also convert the note into Common Shares at the holder's option at $0.025 per Common Share. As the conversion option is above the value of the stock on the date of conversion, no beneficial conversion feature was recorded with this note.

On April 30, 2014, the Company converted the notes and associated accrued interest into a single $27,100 convertible note agreement with Delavega Trading Ltd., Mr. Nabil Katabi, a director of the Corporation, is a control person of Delavega Trading LTd. (a related party). The holder may accelerate repayment of the promissory note upon the Corporation raising additional capital of $1,000,000. The holder may also convert the note into Common Shares at the holder's option at $0.025 per Common Share. As the conversion option is above the value of the stock on the date of conversion, no beneficial conversion feature was recorded with this note.

On April 30, 2014, the Company entered into a $39,337 convertible note agreement with Maple Gas Corporation (a related party); Mr. Jack W. Hanks, a director of the Company, is owner of Maple Gas Corporation. The holder may accelerate repayment of the promissory note upon the Corporation raising additional capital of $1,000,000. The holder may also convert the note into Common Shares at the holder's option at $0.025 per Common Share. As the conversion option is above the value of the stock on the date of conversion, no beneficial conversion feature was recorded with this note.

On June 20, 2014, the Corporation entered into a $10,000 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 15% interest rate until maturity at June 20, 2015 and are convertible into common shares at the holder's option at $0.025 per common share. As the conversion option is above the value of the stock on the date of conversion, no beneficial conversion feature was recorded with this note.

As we attempt to expand exploration activities and develop our international operations, we expect to continue to experience net negative cash flows from operations in amounts not now determinable, and will be required to obtain additional financing to fund operations through common stock offerings, preferred stock offerings, and debt borrowings to the extent necessary to provide working capital. We have and expect to continue to have substantial capital expenditure and working capital needs. We do not now have funds sufficient to fund our operations at their current level for the next twelve months. We need to raise additional cash to fund our operations and implement our business plan. We expect that the additional financing will (if available) take the form of a private placement of equity, although we may be constrained to obtain additional debt financing in lieu thereof. We are maintaining an on-going effort to locate sources of additional funding, without which we will not be able to remain a viable entity. No financing arrangements are currently under contract, and there are no assurances that we will be able to obtain adequate financing. If we are able to obtain the financing required to remain in business, eventually achieving operating profits will require commencement of operations to generate revenues or drastically reducing expenses from their current levels or both. If we are able to obtain the required financing to remain in business, future operating results depend upon a number of factors that are outside of our control.




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Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.



Future Obligations



Management projects working capital needs to be uncertain and this will depend on future projects to be developed by the Company. The corporate overhead requirements are uncertain also at this time and will depend on the project pipeline flow. With Armadillo Mining Corporation now subject to its own trust arrangement, the Company will not be responsible for any more costs or obligations for Armadillo Mining Corporation or the Colombia coal operations of Hunza. Management believes that current cash and cash equivalents will not be sufficient to meet anticipated capital requirements or corporate overhead requirements under this new business plan. We will be forced to raise additional capital through the issuance of new shares, the exercise of outstanding warrants, or reduce our current overhead. However, any projections of future cash needs and cash flows are subject to substantial uncertainty.

Critical Accounting Policies

Our accounting policies are fully described in Note 2 to our financial statements. The following describes the general application of accounting principles that impact our consolidated financial statements.

Our results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debt, inventories, investments, intangible assets, income taxes, financing operations, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer


Source: Equities.com News (July 11, 2016 - 10:00 AM EDT)

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