U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

x
Annual report under Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the fiscal year ended April 30, 2011
 
o
Transition report under 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 Issuer 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 610
   
Dallas, Texas 75204
 
214-880-0400
(Address of principal executive offices,
 
(Issuer’s telephone number,
including zip code)
 
including area code.)

Securities registered under Section 12(b) of the Exchange Act:

Title of Each Class
 
Name of Each Exchange on Which Registered
NONE
 
N/A

Securities registered under Section 12(g) of the Exchange Act:  NONE
 
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  o     No  x
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  o     No  x
 
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 the filing requirements for at least the past 90 days. Yes  x     No  o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  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 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 aggregate market value of the Registrant's common equity held by non-affiliates of the Registrant was approximately $2,023,832 on July 28, 2011.
 
There were 11,165,763 shares of the Registrant's Common Stock outstanding on July 28, 2011.
 
DOCUMENTS INCORPORATED BY REFERENCE:  None
 
 
 

 
 
MMEX MINING CORPORATION

     
Page
 
PART I
       
Item 1.
Business
    1  
Item 1A.
Risk Factors
    4  
Item 1B.
Unresolved Staff Comments
    4  
Item 2.
Properties
    4  
Item 3.
Legal Proceedings
    4  
Item 4.
Removed and Reserved
    4  
           
PART II
         
Item 5.
Market for Registrant’s Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities
    5  
Item 6.
Selected Financial Data
    6  
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
    6  
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
    10  
Item 8.
Financial Statements and Supplementary Data
    11  
Item 9.
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
    12  
Item 9A(T).
Controls and Procedures
    12  
Item 9B.
Other Information.
    13  
           
PART III
         
Item 10.
Directors, Executive Officers and Corporate Governance
    14  
Item 11.
Executive Compensation
    15  
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    16  
Item 13.
Certain Relationships and Related Transactions and Director Independence
    16  
Item 14.
Principal Accountant Fees and Services
    18  
           
PART IV
         
Item 15.
Exhibits, Financial Statement Schedules
    19  
           
SIGNATURES
    20  

 
 

 

PART I

Explanatory Note

This Annual Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”).  These statements are based on management’s beliefs and assumptions, and on information currently available to management.  Forward-looking statements include the information concerning possible or assumed future results of operations of the Company set forth under the heading “Management’s Discussion and Analysis of Financial Condition or Plan of Operation.” Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider” or similar expressions are used.

Forward-looking statements are not guarantees of future performance.  They involve risks, uncertainties and assumptions.  The Company’s future results and shareholder values may differ materially from those expressed in these forward-looking statements.  Readers are cautioned not to put undue reliance on any forward-looking statements.

Item 1:  Business

Background of the Company

Our business plan is to engage in the exploration, extraction and distribution of coal.  We are currently considered to be an exploration stage company 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 on the mining property we currently lease  or any other property that we acquire, if ever. In an exploration stage company, management devotes most of its activities to acquiring and exploring mineral properties.

Company History

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 4,000,000 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 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 owned a 95% interest in the subsidiary, Carpenter Creek, LLC (“CC”), and at the time of the merger, owned a 98.12% interest in Armadillo Holdings Group Corp. (“AHGC”), which in turn owned an 80% interest in Armadillo Mining Corp. (“AMC”). As of April 30, 2011, AHGC owned 94.6% of AMC through additional capital contributions.  The non-controlling interest of 1.88% in AHGC was subsequently acquired by MCCH on December 21, 2010 in exchange for 313,339 shares of MMEX.   On February 22, 2011, the Company amended its articles of incorporation to change the corporate name from Management Energy, Inc. to MMEX Mining Corporation.

Merger with Maple Carpenter Creek Holdings, Inc

On September 21, 2010, MMEX Mining Corporation, Inc entered into a merger agreement with Maple Carpenter Creek Holdings, Inc. (“MCCH”).  MCCH is engaged in the development of both thermal and metallurgical coal projects in the U.S. and Colombia.  MCCH had the following coal project interests as of the date of closing of the merger:

Under the terms of the merger agreement, MCCH merged with a wholly owned subsidiary of MMEX Mining Corporation in exchange for the issuance of 6,500,000 shares of MMEX Mining Corporation common stock to the owners of MCCH, of which 5,000,000 shares were issued on October 8, 2010 and 1,500,000 shares were presented as common stock payable.  On January 11, 2011, the Board of Directors, through a Unanimous Written Consent of the Board of Directors issued the remaining 1,500,000 in accordance with the merger agreement.  The Company reversed the subscription payable resulting in a $15,000 adjustment to common stock payable. The owners of MCCH also were granted the right to receive an additional 1,500,000 shares of common stock as contingent consideration to vest on certain milestones defined in the definitive merger agreement.
 
 
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Status of Previously Reported Coal Projects

Bridger-Fromberg-Bear Creek.  The Bridger-Fromberg-Bear Creek project, was a coal mining project in the vicinity of Bridger in Carbon County, Montana.  Under a Settlement Agreement dated as of October 8, 2009 between the Company and John Baugues, Jr, the developer of the project area, the Company was granted a sub-lease for the Bolzer lease, an overriding royalty of two percent , a net profits interest of fifteen percent and development and acquisition rights in the project area to be developed by John Baugues, Jr and any related companies, which include, inter alia, Carbon County Holdings, LLC ( the “Rights”), in exchange for a surrender of Company shares by John Baugues, Jr and related parties and in consideration of the settlement of claims.  The initial project consisted of 6,254 acres lease (the “Bolzer Property”) and over 50,000 additional acres potential.  Due to insufficient funding levels, we failed to make the January 2010 scheduled minimum annual payment of $62,541 under our lease for the Bolzer Property, which is part of the Bridger-Fromberg-Bear Creek project area.   In October of 2010, our development partner on the project provided a lease termination notice sent by the Bolzer’s.  We believe that the Company’s Rights with respect to the broader project area remain in force.

Snider Ranch, Montana: An 80% interest in the Snider Ranch real estate and coal prospect and the Mattfield and Janich Ranch prospects, both of which prospects are adjacent to the Signal Peak Mine, near Roundup, Montana, with surface rights covering a resource potential of over 43 million tons of coal.  On September 2, 2010, the option to purchase the Snider Ranch was distributed to the owners of MCC and recorded as a distribution 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, for $1,500,000 to Great Northern Properties Limited Partnership, and the Company’s subsidiary relinquished its option right to acquire this property.

Carpenter Creek, Montana: An 80% interest in the Carpenter Creek coal prospect near Round Up, Montana. – MCCH controls the surface rights covering a resource potential of 345 million tons; and the mineral rights for a resource potential of over 83 million tons of coal. This prospect was sold on March 18, 2011 for $2,503,401, with proceeds net of minority interest of $2,248,401 to MCCH.

Hunza Project:  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 concessions in the Boyacá Province of east-central Colombia.  The coal prospects in the Hunza concessions are mid-volatility metallurgical or coking coal.  We have commissioned a technical report in accordance with National Instrument (NI) 43-101 specifications.  Based on the report, the in-place coal tonnage estimate for the property is in the range of 45 to 50 metric tons.  The Company is undertaking a drilling program and until the drilling has been performed and the results analyzed, the estimates presented herein cannot be categorized as estimates of a coal resource under the standards of the 43-101 guidelines.

The Coal Industry

Coal is a combustible, sedimentary, organic mineral composition, which is composed mainly of carbon, hydrogen and oxygen. Coal goes through the process of coalification as it matures, affecting its chemical and physical properties. There are various grades of coal, ranging from low rank coals (lignite and sub-bituminous) to hard coals (bituminous and anthracite). Bituminous coal is used as either thermal coal or coking coal, depending on its properties. The properties of the coal determine its value in the market, and include but are not limited to calorific value, sulfur, moisture and ash content.

Global Coal Supply and Demand. Global economic growth, the primary driver of energy demand, is conservatively forecasted to increase by an average of 3.2% per annum between 2002 and 2030, according to the World Coal Institute (“WCI”). The world’s population is expected to increase from its current level of 6.4 billion to 8 billion by 2030, according to the United Nations’ 2004 world population prospects report. International Energy Agency (“IEA”) projections indicate that if governments continue with current energy policies, global demand for energy will increase by almost 60% by 2030, with more than two-thirds of this increase coming from developing countries.
 
Fossil fuels will continue to dominate energy consumption – accounting for around 85% of the increase in world primary energy demand over the next 30 years, according to the IEA. Although nuclear energy provides a significant proportion of energy in some economies, it can face very long permitting and construction cycles and private financing is difficult to find. Renewable energies are growing fast, but from a small base and, by 2030, they are still only expected to meet 14% of total energy demand, according to the IEA.
 
 
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Because of its availability, stability and affordability, coal is a major contributor to the global energy supply, providing approximately 40% of the world’s electricity, according to the WCI. Coal is also used in producing approximately 70% of the world’s steel supply, according to the WCI. Coal reserves can be found in 70 countries around the world.
 
We believe that rapid economic expansion in developing nations, particularly China and India, has increased global demand for coal. Coal is traded worldwide and can be transported to demand centers by ship and by rail. Worldwide coal production approximated 5.9 billion tons in 2006 and 5.4 billion tons in 2005, according to the WCI. China produces more coal than any other country in the world. Historically, Australia has been the world’s largest coal exporter, exporting more than 200 million tons in each of the last three years, according to the WCI. China, Indonesia and South Africa have also historically been significant exporters in the global coal markets.  However, growing demand in China has resulted in declining coal exports and increasing coal imports. These trends have caused China to become a less significant seaborne coal supply source.

According to the National Mining Association (“NMA”), coal is the lowest-cost fossil fuel used in producing electricity. We estimate that the cost of generating electricity from coal is less than one-third of the cost of generating electricity from other fuels. According to the EIA, the average delivered cost of coal to electric power generators during the first ten months of 2007 was $1.77 per million British thermal units (“BTUs”).

The EIA projects that power plants will increase their demand for coal as demand for electricity increases. The EIA estimates that electricity demand may increase up to 39% by 2030, despite continuing efforts throughout the United States to become more energy efficient. Coal consumption has generally grown at the pace of electricity growth because coal-fueled electricity generation is used in most cases to meet baseload requirements.
 
Coal is expected to remain the fuel of choice for domestic power generation through at least 2030, according to the EIA. Through that time, we expect new technologies intended to lower emissions of mercury, sulfur dioxide, nitrogen oxide and particulate matter will be introduced into the power generation industry. We believe these technological advancements will help coal retain its role as a key fuel for electric power generation well into the future.
 
The other major market for coal is the steel industry. Coal is essential for iron and steel production. According to the WCI, approximately 64% of all steel is produced from iron made in blast furnaces that use coal. The steel industry uses metallurgical coal, which is distinguishable from other types of coal because of its high carbon content, low expansion pressure, low sulfur content and various other chemical attributes. As such, the price offered by steel makers for metallurgical coal is generally higher than the price offered by power plants and industrial users for steam coal. Rapid economic expansion in China, India and other parts of Southeast Asia has significantly increased the demand for steel in recent years.

Colombian Coal Overview.

Development Strategy

Our current strategy is to focus on the acquisition of metallurgical coal assets in Colombia and other Latin American countries. We believe the benefits of this strategy include reduced capital requirements on the Company, and the ability to access industry technical development experience and marketing expertise.

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.
 
 
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Employees

As of July 28, 2011, we had 4 full time employees.  Our employees are not represented by a labor organization.  We maintain various employee benefit plans.

Item 1A:  Risk Factors

As a smaller reporting company, we are not required to provide the information required by this Item.

Item 1B:  Unresolved Staff Comments

None

Item 2:  Properties

Our executive offices are located in Dallas, Texas at 2626 Cole Avenue, Suite 610.  We lease 2,348 square feet of space in a facility as a tenant.  The term of the lease is through June 30, 2012 and the rent is presently $4,696 per month.


Item 3:  Legal Proceedings

None

Item 4:  Removed and Reserved
 
 
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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Common Stock is listed on the OTC Electronic Bulletin Board under the symbol “MMEX”. The following table indicates the quarterly high and low bid price for the Common Stock on the OTC Electronic Bulletin Board for the fiscal years ending April 30, 2011 and April 30, 2010.  Such inter-dealer quotations do not necessarily represent actual transactions and do not reflect retail mark-ups, mark-downs or commissions.

OTC ELECTRONIC BULLETIN BOARD BID PRICE

Fiscal 2011
 
Fiscal 2010
 
   
HIGH
   
LOW
     
HIGH
   
LOW
 
1 st Quarter
  $ 4.20     $ 2.80  
1 st Quarter
  $ 12.80     $ 7.40  
2 nd Quarter
  $ 3.90     $ 0.60  
2 nd Quarter
  $ 15.80     $ 11.90  
3 rd  Quarter
  $ 3.40     $ 0.50  
3 rd  Quarter
  $ 14.50     $ 2.30  
4 th Quarter
  $ 0.90     $ 0.30  
4 th Quarter
  $ 6.70     $ 2.00  

On July 28, 2011, the closing bid price of the Common Stock as reported on the OTC Electronic Bulletin Board was $.50.

The number of holders of record of the Company’s common stock as of July 28, 2011 was 30 as reported by our transfer agent. This number does not include an undetermined number of stockholders whose stock is held in “street” or “nominee” name.

We have not declared or paid any cash or other dividends on the Common Stock to date for the last two (2) fiscal years and have no intention of doing so in the foreseeable future.

We did not repurchase any of our equity securities during the fourth quarter of fiscal 2011.

Recent Sales of Unregistered Securities not previously reported on the Company’s 10-Q

On February 1, 2011, the Company entered into a securities purchase agreements with The Maple Gas Corporation, a wholly owned subsidiary of Maple Resources Corporation, which is 100% owned by the Company’s CEO, for the issuance of a convertible debentures in the amount of $39,100.  The promissory note carries a 25% interest rate, matures on January 31, 2012 and is convertible into the Company’s common stock at the holders’ option at $0.10 per common share. The holder may accelerate repayment of the note upon sale of the Carpenter Creek prospect.  In addition, the Company will issue warrants to purchase shares of the Company’s common stock at the time of repayment or conversion of the note equal to ten warrant shares for every dollar value of the principal and interest, at an exercise price of $.10 per share on or before three years from the repayment or conversion date.  These convertible debentures were issued at the same price as that provided to participants of the offering closed on January 28, 2011.

On February 1, 2011, the Company entered into a securities purchase agreements with 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 $25,800.  The promissory note carries a 25% interest rate, matures on January 31, 2012 and is convertible into the Company’s common stock at the holders’ option at $0.10 per common share. The holder may accelerate repayment of the note upon sale of the Carpenter Creek prospect.  In addition, the Company will issue warrants to purchase shares of the Company’s common stock at the time of repayment or conversion of the note equal to ten warrant shares for every dollar value of the principal and interest, at an exercise price of $.10 per share on or before three years from the repayment or conversion date.  These convertible debentures were issued at the same price as that provided to participants of the offering closed on January 28, 2011.

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, that is being reported as interest due to the classification of the preferred stock, and have a mandatory redemption feature on the earlier of March 1, 2016 or on a change of control transaction.  The investment is collateralized with a security interest in 2,500,000 MMEX Mining Corporation common stock shares.
 
 
5

 
 
On April 25, 2011, the Company closed a note purchase agreement with various investors pursuant to which the Company sold an aggregate of $520,000 notes in a private placement transaction.  The notes are due and payable on or before October 14, 2011 and carry a 25% interest rate which will be amortized over the life of the loan. The note is 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 $.80 per share on or before three years from the repayment or conversion date.

On May 9, 2011, the Company closed a note purchase agreement with various investors pursuant to which the Company sold an aggregate of $160,000 notes in a private placement transaction.  The notes are due and payable on or before October 14, 2011 and carry a 25% interest rate.   The note is 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 250,000 warrants to purchase shares of the Company’s common stock at an exercise price of $.80 per share on or before three years from the repayment or conversion date.

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.

Item 6. Selected Financial Data

As a smaller reporting company, we are not required to provide the information required by this Item.

Item 7. 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.

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

Overview

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.

 
6

 

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.  Going forward, we plan to focus the company efforts in acquiring metallurgical coal assets in the country of Colombia and other Latin America countries.

Mineral Reserve Estimates

Hunza Project:  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 concessions in the Boyacá Province of east-central Colombia. The coal prospects in the Hunza concessions are mid-volatility metallurgical or coking coal. We have commissioned a technical report in accordance with National Instrument (NI) 43-101 specifications.  Based on the report, the in-place coal tonnage estimate for the property is in the range of 45 to 50 metric tons. The Company is undertaking a drilling program and   until the drilling has been performed and the results analyzed, the estimates presented herein cannot be categorized as estimates of a coal resource under the standards of the 43-101 guidelines.

Development Strategy

Our current strategy is to focus on the acquisition of metallurgical coal assets in Colombia and other Latin American countries. We intend to sell our Carpenter Creek project. We believe the benefits of this strategy include reduced capital requirements on the Company, and the ability to access industry technical development experience and marketing expertise.

Merger with Maple Carpenter Creek Holdings, Inc

On September 21, 2010, MMEX Mining Corporation, Inc entered into a merger agreement with Maple Carpenter Creek Holdings, Inc. (“MCCH”).  MCCH is engaged in the development of both thermal and metallurgical coal projects in the U.S. and Colombia.  Under the terms of the merger agreement, MCCH merged with a wholly owned subsidiary of MMEX Mining Corporation in exchange for the issuance of 6,500,000 shares of MMEX Mining Corporation common stock to the owners of MCCH, of which 5,000,000 shares were issued on October 8, 2010 and 1,500,000 shares were presented as common stock payable.  On January 11, 2011, the Board of Directors, through a Unanimous Written Consent of the Board of Directors issued the remaining 1,500,000 in accordance with the merger agreement.  The Company reversed the subscription payable resulting in a $15,000 adjustment to common stock payable. The owners of MCCH also were granted the right to receive an additional 1,500,000 shares of common stock as contingent consideration to vest on certain milestones defined in the definitive merger agreement.

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 $3,476,796, or $.42 per share, for the fiscal year ended April 30, 2011, compared to a net loss of $1,506,729, or $.30 per share for the fiscal year ended April 30, 2010.

 
7

 
 
Revenues:

We are currently in the exploration stage and have not yet begun to generate revenues.

Exploration and development:

Exploration and development costs were $1,108,831 for the fiscal year ended April 30, 2011 compared to $466,896 for the fiscal year ended April 30, 2010, an increase of $641,935. The increase was due to additional due diligence payments to acquire rights in Colombia mines that were not incurred in prior periods through our subsidiary, Armadillo Mining Corporation.

General and administrative:

General and administrative expenses were $762,372 for the fiscal year ended April 30, 2011 compared to $380,321 for the fiscal year ended April 30, 2010, an increase of $382,051. The increase is due to increased operational activities to support our acquisition of Colombian mining activity including extensive international travel.

Payroll and taxes:

Payroll and taxes expense was $532,504 for the fiscal year ended April 30, 2011 compared to $351,099 for the fiscal year ended April 30, 2010, an increase of $181,405. The increase was primarily due to increased salaries to our COO for services performed at Maple Carpenter Creek which were incurred on a part time basis in the comparative period ending, April 30, 2010 as his time commitments increased to focus on our coal projects.

Professional fees:

Professional fees expense was $1,170,959 for the fiscal year ended April 30, 2011 compared to $533,477 for the fiscal year ended April 30, 2010, an increase of $637,482. The increase was due to legal, accounting, and financial services related to our reverse acquisition merger agreement between ourselves and MCCH on September 21, 2010, and engineering and legal services regarding acquisition rights and operation plans in Columbia.

Depreciation and amortization:

Depreciation and amortization expense was $6,741 for the fiscal year ended April 30, 2011 compared to $5,064 for the fiscal year ended April 30, 2010, an increase of $1,677. The increase was due to the acquisition of additional office equipment.

Net operating loss:

Net operating loss for the fiscal year ended April 30, 2011 was $3,581,407 or $0.43 per share compared to a net operating loss of $1,726,857 for the fiscal year ended April 30, 2010, or $0.35 per share, an increase of $1,854,550. Net operating loss increased primarily as a result of our increased operating expenses as we expanded our operations to Latin America during the fiscal year ended April 30, 2011. We were not operating in Latin America during the comparable period in 2010.

Other income (expense):

Other income consisted of gain on the disposal of our two U.S. properties, Snider Ranch and Carpenter Creek.                Total gain recognized was $2,592,023 for the fiscal year ended April 30, 2011 compared to $0 for the fiscal year end April 30, 2010.  Loss on the disposal of fixed assets was $11,351 and $0 for the fiscal year ended April 30, 2011 and 2010, respectively.  We reported impairment expense of $1,830,000 for the fiscal year ended April 30, 2011.  This was incurred on the Hunza property based on the uncertainty of recouping our investment.  Interest expense was $820,873 and $171,905 for the fiscal year ended April 30, 2011 and 2010, respectively. The increase of $638,283 was due to debt issuance costs incurred.
 
Non-controlling interests in loss of consolidated subsidiaries:

Non-controlling interests in loss of consolidated subsidiaries represented approximately $174,812 and $392,033 of the total losses for the fiscal year ended, 2011 and 2010, respectively. Our non-controlling interest in our losses decreased by $217,221 as a result of conversion of one of our minority interest holder’s interest into common shares of MMEX and the reduction of another of our minority interest holder’s in Armadillo Mining Corporation from 20% to 5.4%
 
 
8

 
 
Net loss:

We recorded a net loss of $3,476,796, or $.42 per share, for the fiscal year ended April 30, 2011, compared to a net loss of $1,506,729, or $.30 per share for the fiscal year ended April 30, 2010, an increased net loss of $1,959,382. Net loss increased primarily as a result of our increased operating expenses as we expanded our operations to Latin America during the fiscal year ended April 30, 2011. We were not operating in Latin America during the comparable period in 2010.

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, 2011, we had a negative working capital position of $1,386,399.

On January 28, 2011 and February 1, 2011, pursuant to Section 4(2) of the Securities Act and Regulation D thereunder, we completed the closing of 1-year Convertible Note to a group of high net worth investors for an aggregate of $514,900.  The notes carried a 25% interest rate, maturity on the first anniversary date of the note and are convertible into the Company’s common stock at the holders’ option at $1.00 per common share. In addition, the Company issued warrants to purchase shares of the Company’s common stock at the time of repayment or conversion of the note equal to ten 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.  $489,900 of these debentures were paid in full on March 23, 2011.

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, that is being reported as interest due to the classification of the preferred stock, and have a mandatory redemption feature on the earlier of March 1, 2016 or on a change of control transaction.  The investment is collateralized with a security interest in 2,500,000 MMEX Mining Corporation common stock shares.

On April 25, 2011, the Company closed a note purchase agreement with various investors pursuant to which the Company sold an aggregate of $520,000 notes in a private placement transaction.  The notes are due and payable on or before October 14, 2011 and carry a 25% interest rate.   The computed interest of $130,000 was added to the balance of the note.  The note is 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 $.80 per share on or before three years from the repayment or conversion date.

On May 9, 2011, the Company closed a note purchase agreement with various investors pursuant to which the Company sold an aggregate of $160,000 notes in a private placement transaction.  The notes are due and payable on or before October 14, 2011 and carry a 25% interest rate.   The note is 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 250,000 warrants to purchase shares of the Company’s common stock at an exercise price of $.80 per share on or before three years from the repayment or conversion date.

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.

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.
 
 
9

 
 
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 approximately $6,000,000 over the next twelve months to complete its acquisition of current mining contracts, corporate overhead, and continue as a reporting company.  Management believes that current cash and cash equivalents will not be sufficient to meet these anticipated capital requirements.  Such projections have been based on remaining contractual requirements and general overhead.  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.  We would be required to renegotiate our current contracts until such time as necessary funds are secured.

Critical Accounting Policies

Our accounting policies are fully described in Note B 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.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to provide the information required by this Item.
 
 
10

 
 
Item 8.  Financial Statements and Supplementary Data

MMEX Mining Corporation
FINANCIAL STATEMENTS
APRIL 30, 2011 and 2010

Report of Independent Registered Public Accounting Firm
    F-1  
Financial Statements
       
Balance Sheets
    F-2  
Statements of Operations
    F-3  
Statements of Stockholders’ Equity (Deficit)
    F-4  
Statements of Cash Flows
    F-5  
Notes to Financial Statements
    F-6  

 
11

 

Item 9.   Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

There have been no changes in or disagreements with our accountants on accounting and financial disclosures.

Item 9A(T). Controls and Procedures

Evaluation of disclosure controls and procedures.             We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)).  Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs.  Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.
 
Management’s Annual Report on Internal Control over Financial Reporting.   Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act, as amended.  Our management assessed the effectiveness of our internal control over financial reporting as of April 30, 2011. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework.  A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.  We have identified the following material weaknesses:

1.  
As of April 30, 2011, we did not maintain effective controls over the control environment.  Specifically, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-B.  Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

2.  
As of April 30, 2011, we did not maintain effective controls over financial statement disclosure.  Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements.   Accordingly, management has determined that this control deficiency constitutes a material weakness.

Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of April 30, 2011, based on the criteria established in "Internal Control-Integrated Framework" issued by the COSO.

 
12

 
 

Changes in Internal Control Over Financial Reporting.   There have been no changes in the Company’s internal control over financial reporting through the date of this report or during the quarter ended July 31, 2011, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
Independent Registered Accountant’s Internal Control Attestation. This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Corrective Action. Management plans to address the structure of the Board of Directors and discuss adding an audit committee during 2011.
 
Item 9B. Other Information

None
 
 
13

 
 
PART III

Item 10. Directors, Executive Officers and Corporate Governance

Directors and Executive Officers

The Board of Directors currently consists of two (2) people. Directors serve until the next annual meeting and until their successors are elected and qualified.  The following table sets forth information about all of our Directors and executive officers and all persons nominated or chosen to become such:

Name
 
Age
 
Office
 
Year First Elected Director
Jack W. Hanks
 
64
 
Director, Chief Executive Officer, President and Chief Financial Officer
 
2010
Bruce N. Lemons
 
58
 
Director
 
2010

Mr. Hanks has served as Director, Chief Executive Officer and President of the Company since the merger of Maple Carpenter Creek, LLC with the Company in September 2010.  Mr. Hanks founded Maple Resources Corporation in the United States, in 1986 and has been President or Chairman of the Board of Maple Resources Corporation since its inception. Mr. Hanks has also been the Executive Chairman of Maple Energy PLC, a publicly-listed company on the London Stock Exchange AIM and the Lima Bolsa. Prior to founding Maple, Mr. Hanks was a partner in the Washington D.C. office of the law firm of Akin Gump Strauss. Mr. Hanks graduated from the University of Texas at Austin with a law degree in 1971 and a petroleum land management degree in 1968. 

Mr. Lemons has been a practicing lawyer in the mineral area for over 25 years. He has been a private investor in oil and gas and coal projects in the last several years, including in Maple Carpenter Creek, LLC and Maple Energy, PLC and predecessor entities. Since 2002, Mr. Lemons has served as a director of Ansen, an electronics manufacturing company based in upstate New York, which has a Chinese affiliate.  Mr. Lemons was a partner in the law firms of Holme Roberts & Owen and in Holland & Hart.  Mr. Lemons graduated law school from Brigham Young University in 1980, where he was a member of law review and holds undergraduate degrees in Economics and Political Science from Utah State University.
 
We are not aware of any “family relationships” (as defined in Item 401(c) of Regulation S-­ B promulgated by the SEC) among directors, executive officers, or persons nominated or chosen by us to become directors or executive officers.

Except as set forth above, we are not aware of any event (as listed in Item 401(d) of Regulation S-B promulgated by the SEC) that occurred during the past five years that are material to an evaluation of the ability or integrity of any director, person nominated to become a director, executive officer, promoter or control person of the company.
 
 
14

 
 
The Board of Directors has determined that Mr. Lemons is not “independent” as such term is defined by the listing standards of Nasdaq and the rules of the SEC since he is a major shareholder and a consultant to the Company.  Mr. Hanks is not “independent” since he is an employee of the Company.

Compliance with Section 16(a) of the Exchange Act

 Due to our status as a Section 15(d) reporting company, our executive officers, directors, and persons who beneficially own more than 10% of a registered class of our equity securities are not required to file with the SEC reports of ownership and changes in ownership of MMEX Mining's equity securities pursuant to Section 16(a) of the Securities Exchange Act of 1934.

Code of Ethics

We intend to adopt a code of ethics that applies to our officers, directors and employees, including our Chief Executive Officer and Chief Financial Officer, but have not done so to date due to our relatively small size.

Audit, Nominating and Compensation Committees

There currently are no committees of our board of directors.  Our board of directors is expected to appoint an audit committee, nominating committee and compensation committee, and to adopt charters relative to each such committee.  We intend to appoint such persons to the board of directors and committees of the board of directors as are expected to be required to meet the corporate governance requirements imposed by a national securities exchange, although we are not required to comply with such requirements until we elect to seek listing on a securities exchange.

Compensation of Directors

We do not currently pay any cash fees to our directors, but we pay directors’ expenses in attending board meetings. During the fiscal year ended April 30, 2011, no director expenses were incurred.

Item 11.  Executive Compensation

The following table sets forth the compensation paid or earned by our executive officers during the fiscal years ended April 30, 2011 and 2010.

Annual Compensation

Name & Principal Position
 
Year
 
Salary
($)
 
Bonus
($)
 
Stock Awards
 
Option Awards
 
Non- Equity Incentive Plan Compensation
 
Non- qualified Deferred Compensation Earnings
 
All Other Compensation
($)
 
Total
Jack W. Hanks Chief Executive Officer,
 
2011
 
 $195,617 (2)
 
  -
 
-
 
  -
 
  -
 
-
 
-
 
  $195,617
President, and Chief Financial Officer (1)
 
2010
 
-
 
-
 
-
 
-
 
-
 
-
 
-
 
-
 

(1)  
Mr. Hanks  has served as Chief Executive Officer since September 21, 2010.
 
(2)  
The amount has been accrued but not paid.

The Company has an employment agreement with Jack W. Hanks, its Chief Executive Officer, which provides for annual compensation of $300,000.  The agreement was effective September 4, 2010 and continues for a period of two years thereafter. As of April 30, 2011, no compensation has been paid but the Company has accrued $195,617 of salary expense.

 
15

 

Outstanding Equity Awards at Fiscal Year-End

As of April 30, 2011, there were no outstanding equity awards held by any named executive officer.


Compensation of Directors

We do not currently pay any cash fees to our directors, but we pay directors' expenses in attending board meetings. During the year ended April 31, 2011, no director expenses were reimbursed.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth as of July 28, 2011, the name and number of shares of the Company’s common stock, par value $0.001 per share, held of record by (i) each of the directors and named executive officers of the Company, (ii) beneficial owners of 5% or more of our common stock; and (iii) all the officers and directors as a group. Pursuant to the rules and regulations of the Securities and Exchange Commission, shares of common stock that an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purposes of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purposes of computing the percentage ownership of any other person shown in the table.
 
Beneficial Ownership (1), (2)

  Jack W. Hanks (3)
    3,361,375       29.91 %
  Bruce N. Lemons (4)
    3,313,500       29.61 %
  Tydus Richards (5)
    578,100       5.20 %
  All Directors and executive officers as a group (two persons) (6)
    6,674,875       59.52 %


1)  
SEC rules provide that, for purposes hereof, a person is considered the “beneficial owner” of shares with respect to which the person, directly or indirectly, has or shares the voting or investment power, irrespective of his/her/its economic interest in the shares.  Unless otherwise noted, each person identified possesses sole voting and investment power over the shares listed, subject to community property laws.
 
2)  
Based on 11,125,763 shares outstanding on July 28, 2011.  Shares of common stock subject to options that are exercisable within 60 days of July 28, 2011, are deemed beneficially owned by the person holding such options for the purposes of calculating the percentage of ownership of such person but are not treated as outstanding for the purpose of computing the percentage of any other person.
 
3)  
Includes 31,250 shares issuable upon exercise of warrants held by the Alexis L. Hanks Trust for which Mr. Hanks has voting and investment power over the shares held by the Alexis L. Hanks Trust, 3,250,000 shares held by the Maple Gas Corporation, 80,125 shares issuable upon exercise of warrants held by the Maple Gas Corporation, for which Mr. Hanks has sole voting power over the shares held by Maple Gas Corporation.
 
4)  
Includes 3,250,000 shares held by AAM Investments, LLC, an entity owned by trusts for the benefit of Mr. Lemons and his family. This amount includes 63,500 shares issuable upon exercise of warrants held by BNL Family Partners, for which Mr. Lemons currently has voting and investment power.
 
5)  
Includes 578,00 shares held by Lotus Asset Management, an entity controlled by Tydus Richards.
 
6)  
Includes the shares described in footnotes 3 and 4.
 
Item 13. Certain Relationships and Related Transactions , and Director Independence

The Company has an employment agreement with Mr. Hanks.  (see Item 11 for further discussion of this agreement).

The Company has a consulting agreement with Bruce N. Lemons, a Company Director, which provides for annual compensation of $170,000.  The agreement was effective September 4, 2010 and continues for a period of two years thereafter. As of April 30, 2011, no compensation has been paid but the Company has accrued $110,849 of consulting fees.

 
16

 
 
In December 2007, Maple Carpenter Creek, LLC distributed to its members Garb Holdings, LLC, AAM Investments, LLC, and Maple Resources Corporation, a 2% royalty interest which covered all the assets, including ultimately, the interest in its Colombian assets.  This royalty was disclosed to the prior Board of Directors of the Company before the merger, and the royalty obligation was accordingly not acquired by the Company pursuant to the terms of the merger transaction. The Company’s Officers and Directors are, directly or indirectly, majority owners of AAM Investments, LLC and Maple Resources Corporation.
 
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 directly or indirectly, 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.

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 September 4, 2010, MCCH entered into a consulting agreement with Bruce N. Lemons, one of the Company’s two directors, for a two year term, automatically renewable for one year terms thereafter, at an annual compensation of $170,000 per year.

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.

Starting on October 13, 2010 and at various times through January 31, 2011, the Company’s Director Bruce N. Lemons or entities through which he held an interest 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.
 
 
17

 
 
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.

See Item 9 above for information concerning director independence.

Item 14.  Principal Accountant Fees and Services

Our independent auditors, M&K CPAs, PLLC (“M&K”), have no direct or indirect interest in the Company and have been the Company’s Independent Registered Public Accounting Firm since 2009.  The following table sets forth the fees billed and estimated fees for professional audit services provided by such firm for the fiscal years ended April 30, 2011 and 2010:

   
2011
   
2010
 
Audit Fees (a)
  $ 39,000     $ 6,500  
                 
Audit-Related Fees (b)
  $ 0     $ 0  
                 
Tax Fees (c)
  $ 0     $ 0  
                 
All Other Fees
  $ 0     $ 0  
 

(a)  
Includes fees for services related to the audits of our annual financial statements and the reviews of our interim financial statements and assistance with SEC filings.
 
(b)  
Includes fees for services related to transaction due diligence and consultations with respect to compliance with Section 404 of the Sarbanes-Oxley Act.
 
(c)  
Includes fees for services related to tax compliance, preparation and planning services (including U.S. federal, state and local returns) and tax examination assistance.

Our Board of Directors established a policy whereby the outside auditors are required to seek pre-approval on an annual basis of all audit, audit-related, tax and other services by providing a prior description of the services to be performed.  For the year ended April 30, 2011, 100% of all audit-related services were pre-approved by the Board of Directors, which concluded that the provision of such services by M&K was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions.
 
 
18

 
 
Item 15. Exhibits

(a)(3) Exhibits

No
 
Description
2.1
 
Agreement and Plan of Merger, dated September 21, 2010 (2)
     
3.1
 
Articles of Incorporation (3)
     
3.2
 
Certificate of Amendment to the Articles of Incorporation dated February 5, 2009 (4)
     
3.3
 
Certificate of Amendment to the Articles of Incorporation dated May 28, 2009 (5)
     
3.4
 
Certificate of Amendment to the Articles of Incorporation dated June 3, 2010 (6)
     
3.5
 
Certificate of Amendment to the Articles of Incorporation dated February 18, 2011 (1)
     
3.6
 
Certificate of Amendment to the Articles of Incorporation dated March 22, 2011 (1)
     
3.7
 
Amended and Restated By-Laws of the Registrant (7)
     
4.1
 
Statement of Designation of Series A Preferred Stock of the Registrant (7)
     
4.2
 
Form of warrant to purchase Common Stock of the Registrant (1)
     
4.3
 
Form of bridge note for April 2011 financing (1)
     
10.1
 
Form of Subscription Agreement for April 2011 financing (1)
     
10.2
 
Pledge Agreement dated March 22, 2011 between Armadillo Holdings Group Corporation and William D. Gross (1)
     
10.3
 
Convertible Preferred Stock Subscription Agreement dated March 22, 2011 between the Registrant and William D. Gross (1)
     
21
 
Subsidiaries of the Registrant (1)
     
31.1
 
Certification by Chief Executive Officer and Chief Financial Officer of the Registrant, pursuant to 17 CFR 240.13a—14(a) or 17 CFR 240.15d—14(a).(11). (1)
     
32.1
 
Certification by Chief Executive Officer and Chief Financial Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)


(1)
Filed herewith
 
(2)
Incorporated herein by reference to the registrant’s Current Report on Form 8-K filed with the SEC on September 29, 2010.
 
(3)
Incorporated herein by reference to the registrant’s Registration Statement on Form S-1filed with the SEC on July 29, 2008.
 
(4)
Incorporated herein by reference to the registrant’s Current Report on Form 8-K filed with the SEC on March 3, 2009.
 
(5)
Incorporated herein by reference to the registrant’s Current Report on Form 8-K filed with the SEC on May 29, 2009.
 
(6)
Incorporated herein by reference to the registrant’s Current Report on Form 8-K filed with the SEC on June 7, 2010.
 
(7)
Incorporated herein by reference to the registrant’s Current Report on Form 8-K filed with the SEC on March 28, 2011.

 
19

 

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this annual report on Form 10-K to be signed on its behalf by the undersigned thereto duly authorized.
 
 
MMEX Mining Corporation
(Registrant)
 
       
Date: August 11, 2011 
By:  
/s/ Jack W. Hanks  
    Jack W. Hanks, Chairman  

Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report on Form 10-KSB has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SIGNATURE
 
TITLE
 
DATE
         
/s/ Jack W. Hanks
 
Chairman and Chief Executive Officer
 
August 11, 2011
Jack W. Hanks
  (Principal Executive Officer) President. Chief Financial Officer and Director (Principal Financial and Accounting Officer)    
 
/s/ Bruce N. Lemons
 
 
Director
 
 
August 11, 2011
Bruce N. Lemons
       

 
20

 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
MMEX Mining Corporation
Dallas, Texas
(An Exploration Stage Company)

We have audited the accompanying balance sheets of MMEX Mining Corporation (the “Company”) (an exploration stage company) as of April 30, 2011 and 2010 and the related statements of operations, stockholders' equity (deficit) and cash flows for the twelve month periods then ended and the period from inception (May 23, 2007) through April 30, 2011. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of MMEX Mining Corporation as of April 30, 2011 and 2010 and the results of its operations and cash flows for the period described above in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statement, the Company suffered a net loss from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ M&K CPAS, PLLC

www.mkacpas.com
Houston, Texas
August 11, 2011

 
F-1

 
 
MMEX MINING CORPORATION
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
APRIL 30, 2011 AND 2010

   
April 30,
   
April 30,
 
   
2011
   
2010
 
Assets
           
             
Current assets:
           
Cash
  $ 118,059     $ 314  
Prepaid expenses
    -       65,793  
Escrow account
    135,000       -  
Total current assets
    253,059       66,107  
                 
Property and equipment, net
    19,705       18,208  
                 
Other assets:
               
Investment in property
    -       1,413,253  
Deferred loan costs
    48,822       -  
Deposits
    10,000       10,000  
                 
Total Assets
  $ 331,586     $ 1,507,568  
                 
Liabilities and Stockholders' (Deficit)
               
                 
Current liabilities:
               
Accounts payable, including related party amounts of $35,818 and $135,347 at April 30, 2011 and April 30, 2010, respectively
  $ 520,788     $ 270,482  
Accrued expenses
    453,405       90,328  
    Convertible notes, $675,000 net of $649,735 discount     25,265       -  
Notes payable, including related party amounts of $290,000 and $300,000 at April 30, 2011 and April 30, 2010, respectively
    640,000       600,000  
Total current liabilities
    1,639,458       960,810  
                 
Long-term liabilities:
               
Preferred stock redemption right, net of $976,438 discount
    23,562       -  
Notes payable, related party
    -       798,446  
                 
Total Liabilities
    1,663,020       1,759,256  
                 
Stockholders' (Deficit):
               
Common stock, $0.001 par value, 300,000,000 shares authorized, 11,165,761 and 50,000 shares issued and outstanding at April 30, 2011 and April 30, 2010, respectively
    111,657       50,000  
Additional paid in capital
    9,285,280       6,840,007  
Non-controlling interest
    (111,920 )     (2,040 )
Deficit accumulated during the exploration stage
    (10,616,451 )     (7,139,655 )
Total Stockholders' (Deficit)
    (1,331,434 )     (251,688 )
                 
Total Liabilities and Stockholders' (Deficit)
  $ 331,586     $ 1,507,568  
 
The accompanying notes are an integral part of these statements.
 
 
F-2

 
 
MMEX MINING CORPORATION
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED APRIL 30, 2011 AND 2010


               
For the period
 
   
 
   
May 23, 2007
 
   
For the Year Ended April 30,
   
(Inception) through
 
   
2011
   
2010
   
April 30, 2011
 
Revenue:
                 
Revenues
  $ -     $ 10,000     $ 10,000  
                         
Operating Expenses:
                       
Exploration and development
    1,108,831       466,896       3,205,368  
General and administrative
    762,372       380,321       3,817,838  
Payroll and taxes
    532,504       351,099       1,812,154  
Professional fees
    1,170,959       533,477       3,143,613  
Depreciation and amortization
    6,741       5,064       14,183  
Total operating expenses
    3,581,407       1,736,857       11,993,156  
                         
Net operating (loss)
    (3,581,407 )     (1,726,857 )     (11,983,156 )
                         
Other income (expense):
                       
Interest income
    -       -       59  
Gain on disposition of property
    2,592,023       -       2,592,023  
Loss on disposal of fixed assets
    (11,351 )     -       (11,351 )
Impairment expense
    (1,830,000 )     -       (1,830,000 )
Interest expense
    (820,873 )     (171,905 )     (954,548 )
Total other income (expense)
    (70,201 )     (171,905 )     (203,817 )
                         
Net (loss) before non-controlling interest
    (3,651,608 )     (1,898,762 )     (12,186,973 )
                         
Non-controlling interest in loss of consolidated subsidiaries
    174,812       392,033       1,570,522  
                         
Net (loss)
  $ (3,476,796 )   $ (1,506,729 )   $ (10,616,451 )
                         
Weighted average number of common shares outstanding - basic and fully diluted
    8,249,856       5,000,000          
                         
Net (loss) per share - basic and fully diluted
  $ (0.42 )   $ (0.30 )        
 
The accompanying notes are an integral part of these statements.
 
 
F-3

 

MMEX MINING CORPORATION
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE YEARS ENDED APRIL 30, 2011 AND 2010
 
                                       
Total
 
                                       
Stockholders
 
                Additional     Common          
Non-
   
Equity
(deficit) and
 
   
Common Stock
   
Paid
   
Stock
   
Accumulated
    controlling    
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 issuance of Preferred Stock beneficial conversion feature
    -       -       1,000,000       -       -       -       1,000,000  
Issuance of subsidiary ownership interests
    -       -       (212,453 )     -       -       212,453       -  
Net (loss) for the year ended April 30, 2011
    -       -       -       -       (3,476,796 )     (174,812 )     (3,651,608 )
Balance, April 30, 2011
    11,165,761     $ 111,657     $ 9,285,280     $ -     $ (10,616,451 )   $ (111,920 )   $ (1,331,434 )
 
The accompanying notes are an integral part of these statements.
 
 
F-4

 

MMEX MINING CORPORATION
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, 2011 AND 2010

   
For the Year Ended April 30,
   
For the period from
May 23, 2007 (Inception)
through
 
   
2011
   
2010
   
4/30/2011
 
Cash flows from operating activities
                 
Net (loss)
  $ (3,476,796 )   $ (1,506,729 )   $ (10,616,451 )
Non-controlling interest in net (loss)
    (174,812 )     (392,033 )     (1,570,522 )
Adjustments to reconcile net (loss) to net cash (used) provided by in operating activities:
                       
Depreciation and amortization expense
    6,741       5,064       14,183  
Loss on sale of assets
    11,351       -       11,351  
Common stock issued for services
    165,000       -       165,000  
Imputed interest
    1,650       -       1,650  
Amortization of debt discount
    538,727       -       538,727  
Impairment expense
    1,830,000       -       1,830,000  
Decrease (increase) in assets:
                       
Prepaid expenses
    65,795       (7,999 )     -  
Deferred loan costs
    (48,822 )     -       (48,822 )
Deposits
    -       -       (10,000 )
Increase (decrease) in liabilities:
                       
Accounts payable, including related party amounts of $131,162 and $135,347 at April 30, 2011 and 2010, respectively
    294,423       88,712       520,788  
Accrued expenses
    298,125       90,328       442,720  
Net cash (used) in operating activities
    (488,618 )     (1,722,657 )     (8,721,376 )
                         
Cash flows from investing activities
                       
Escrow account
    (135,000 )     -       (135,000 )
Proceeds from sale of Snider Ranch
    1,130,602       -       1,130,602  
Purchase of Hunza option
    (1,830,000 )     -       (1,830,000 )
Purchase of fixed assets
    (22,599 )     (1,320 )     (48,249 )
Proceeds from sale of fixed assets
    3,010       -       3,010  
Net cash (used) in investing activities
    (853,987 )     (1,320 )     (879,637 )
                         
Cash flows from financing activities
                       
Capital contributions from members
    723,796       1,606,354       8,023,387  
Acquisition of noncontrolling interest
    -       (500,000 )     (500,000 )
Proceeds from debt
    1,424,900       600,000       3,074,900  
Proceeds from issuance of Preferred Stock
    1,000,000       -       1,000,000  
Payments on notes payable
    (1,688,346 )     (20,542 )     (1,889,900 )
Net cash provided by financing activities
    1,460,350       1,685,812       9,708,387  
                         
Net increase (decrease) in cash
    117,745       (38,165 )     107,374  
Cash - beginning
    314       38,479       -  
Cash - ending
  $ 118,059     $ 314     $ 107,374  
                         
Supplemental disclosures:
                       
Interest paid
  $ 365,288     $ 107,311     $ 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 )   $ -     $ (282,651 )
Effect of reverse acquisition merger
  $ (70,832 )   $ -     $ (70,832 )
Conversion of minority interest into equity
  $ (22,839 )           $ (22,839 )
    Debt discount on issuance of warrants
  $ 1,034,900     $ -     $ 1,034,900  
Preferred Stock beneficial conversion feature
  $ 1,000,000     $ -     $ 1,000,000  
Additional ownership interestin subsidiary
  $ 212,453     $ -     $ 212,453  
 
The accompanying notes are an integral part of these statements.
 
 
F-5

 
 
MMEX Mining Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements

NOTE 1 – BACKGROUND, ORGANIZATION, AND BASIS OF PRESENTATION

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.

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 98.12% interest in Armadillo Holdings Group Corp. (“AHGC”), which in turn owned at April 30, 2011 a 94.6% interest in Armadillo Mining Corp. (“AMC”). The non-controlling interest of 1.88% in AHGC was subsequently acquired by MCCH on December 21, 2010 in exchange for 31,334 shares of MMEX. On February 22, 2011, the Company amended its articles of incorporation to change the corporate name from Management Energy, Inc. to MMEX Mining Corporation.

Merger with Maple Carpenter Creek Holdings, Inc
 
On September 21, 2010, MMEX Mining Corporation entered into a merger agreement with Maple Carpenter Creek Holdings, Inc. (“MCCH”) that closed on September 23, 2010. Under the terms of the merger agreement, MCCH merged with a wholly owned subsidiary of MMEX Mining Corporation., MCC Merger, Inc. (“MCCM”), which was formed just prior to the merger and subsequently dissolved, in exchange for the issuance of 6,500,000 shares of MMEX Mining Corporation, common stock to the owners of MCCH, of which 5,000,000 shares were issued on October 8, 2010 and 1,500,000 shares issued on January 12, 2011. The merger resulted in the owners of MCCH gaining control of MMEX Mining Corporation.  The owners of MCCH also were granted the right to receive an additional 1,500,000 shares of common stock as contingent consideration to vest on certain milestones defined in the definitive merger agreement 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.

For financial statement reporting purposes, the merger agreement was treated as a reverse acquisition with MCCH deemed the accounting acquirer and the Company deemed the accounting acquiree under the purchase method of accounting in accordance with Accounting Standards Codification (“ASC”) 805-10-40, Business Combinations – Reverse Acquisitions . The reverse merger is deemed a recapitalization and the consolidated financial statements reflect the assets and liabilities of MCCH recognized and measured at their carrying value before the combination and the assets and liabilities of the Company (the legal acquirer/legal parent) are measured at fair value. The carrying value of the Company’s net assets approximates fair value at the date of acquisition.  The fair value of the net assets acquired is ($70,832).  The equity structure reflects the equity structure of the Company, the legal parent, and the equity structure of MCCH, the accounting acquirer, as restated using the exchange ratios established in the merger agreement to reflect the numbers of shares of the legal parent. References to the “Company” in these notes refer to MMEX Mining Corporation and its wholly owned subsidiary, MCCH, as well as the subsidiaries discussed below.
 
As of the date of the merger agreement, MCCH was focused on the development of both thermal and metallurgical coal projects in the United States and in Colombia. MCCH had the following coal project interests as of the date of closing of the merger:
 
 
F-6

 
 
MMEX Mining Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
 
Carpenter Creek, Montana: An 80% interest in the Carpenter Creek coal prospect near Round Up, Montana. – MCCH controls the surface rights covering a resource potential of 345 million tons; and the mineral rights for a resource potential of over 83 million tons of coal. This prospect was sold on March 18, 2011 for $2,248,401.

Snider Ranch, Montana: An 80% interest in the Snider Ranch real estate and coal prospect and the Mattfield and Janich Ranch prospects, both of which prospects are adjacent to the Signal Peak Mine, near Roundup, Montana. MCCH controls the surface rights covering a resource potential of over 43 million tons of coal.  This prospect was sold on December 21, 2010 for $1,500,000.

Armadillo Group Holdings Corporation: A 78.12% ownership of Armadillo Mining Corp. (“AMC”) in Colombia. 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. Both of these options were allowed to lapse. 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.  The $5,000,000 is to be made in several payments starting April 29, 2011 through March 1, 2012.  As of July 28, 2011, $700,000 has been paid to the exploration fund.  Any payments made on the option are non-refundable.  The agreement may be terminated if the option to acquire the interest is not made prior to March 1 st , 2012.
 
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 $10,616,451 and used net cash in operations of $8,721,376 for the period from inception (May 23, 2007) through April 30, 2011. 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.

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”)
    94.6 %  
Corporation
 
British Virgin Isl.
 
Subsidiary
 
 
F-7

 
 
MMEX Mining Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
 
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.

These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein.
The Company has adopted a fiscal year end of April 30th.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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
 
Under FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements.  This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts of cash, accounts payable and accrued expenses reported on the balance sheet are estimated by management to approximate fair value primarily due to the short term nature of the instruments. The Company had no other items that required fair value measurement on a recurring basis.
 
 
F-8

 
 
MMEX Mining Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
 
Asset retirement obligations
 
The Company records the fair value of a liability for an asset retirement obligation in the period in which the asset is acquired and a corresponding increase in the carrying amount of the related long-lived asset. The liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. If the liability is settled for an amount other than the recorded amount, a gain or loss is recognized. No asset retirement obligation has been recognized as of April 30, 2011 or 2010.

Advertising and promotion
 
All costs associated with advertising and promoting products are expensed as incurred. No expenses were incurred for the years ended April 30, 2011 and 2010, 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.

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.

 
F-9

 
 
MMEX Mining Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
 
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.

Income or loss per share
 
Basic EPS is calculated by dividing net income or loss (available to common stockholders) by the weighted average number of common shares outstanding for the period.  Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as stock options, warrants, convertible preferred stock and convertible debentures, were exercised or converted into common stock.  For 2011 and 2010, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.

Loss per share is based on the weighted average number of shares outstanding of 8,249,856 and 5,000,000, for the years ended April 30, 2011, and 2010, respectively.

Recently issued accounting pronouncements
 
In April 2010, the FASB issued ASU No. 2010-18 regarding improving comparability by eliminating diversity in practice about the treatment of modifications of loans accounted for within pools under Subtopic 310-30 – Receivable – Loans and Debt Securities Acquired with Deteriorated Credit Quality (“Subtopic 310-30”). Furthermore, the amendments clarify guidance about maintaining the integrity of a pool as the unit of accounting for acquired loans with credit deterioration.  Loans accounted for individually under Subtopic 310-30 continue to be subject to the troubled debt restructuring accounting provisions within Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors.  The amendments in this Update are effective for modifications of loans accounted for within pools under Subtopic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010.  The amendments are to be applied prospectively. Early adoption is permitted. The adoption of this ASU did not have a material impact on our financial statements.

In January 2010, the FASB issued ASU No. 2010-06 regarding fair value measurements and disclosures and improvement in the disclosure about fair value measurements.  This ASU requires additional disclosures regarding significant transfers in and out of Levels 1 and 2 of fair value measurements, including a description of the reasons for the transfers.  Further, this ASU requires additional disclosures for the activity in Level 3 fair value measurements, requiring presentation of information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements.  This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. We are currently evaluating the impact of this ASU; however, we do not expect the adoption of this ASU to have a material impact on our financial statements.

In October 2009, the FASB issued ASU No. 2009-13, Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force, which provides amendments to the criteria for separating consideration in multiple-deliverable arrangements. As a result of these amendments, multiple-deliverable revenue arrangements will be separated in more circumstances than under existing U.S. GAAP. The ASU does this by establishing a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific objective evidence nor third-party evidence is available. A vendor will be required to determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis. This ASU also eliminates the residual method of allocation and will require that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any discount in the overall arrangement proportionally to each deliverable based on its relative selling price. Expanded disclosures of qualitative and quantitative information regarding application of the multiple-deliverable revenue arrangement guidance are also required under the ASU. The ASU does not apply to arrangements for which industry specific allocation and measurement guidance exists, such as long-term construction contracts and software transactions. ASU No. 2009-13 is effective beginning January 1, 2011. The Company is currently evaluating the impact of this standard on its results of operations and financial condition.
 
F-10

 
 
MMEX Mining Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
   
In August 2009, the FASB issued ASU No. 2009-05, Measuring Liabilities at Fair Value, which provides additional guidance on how companies should measure liabilities at fair value under ASC 820. The ASU clarifies that the quoted price for an identical liability should be used. However, if such information is not available, an entity may use the quoted price of an identical liability when traded as an asset, quoted prices for similar liabilities or similar liabilities traded as assets, or another valuation technique (such as the market or income approach). The ASU also indicates that the fair value of a liability is not adjusted to reflect the impact of contractual restrictions that prevent its transfer and indicates circumstances in which quoted prices for an identical liability or quoted price for an identical liability traded as an asset may be considered level 1 fair value measurements. This ASU is effective October 1, 2009. The adoption of this ASU did not impact the Company's results of operations or financial condition.

Effective July 1, 2009, the Company adopted the FASB Accounting Standards Codification ("ASC") 105-10, Generally Accepted Accounting Principles—Overall ("ASC 105-10"). ASC 105-10 establishes the FASB Accounting Standards Codification (the "Codification") as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification is non-authoritative. The FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates ("ASUs"). The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the bases for conclusions on the change(s) in the Codification. References made to FASB guidance throughout these consolidated financials have been updated for the Codification.

In June 2009, the Financial Accounting Standards Board (“FASB”) issued the FASB Accounting Standards Codification (the “ASC”). The ASC has become the single source of non-governmental accounting principles generally accepted in the United States (“GAAP”) recognized by the FASB in the preparation of financial statements. The Company adopted the ASC as of July 1, 2009. The ASC does not change GAAP and did not have an effect on the Company’s financial position, results of operations or cash flows.

The Company applies FASB ASC 810, Non-controlling Interests in Consolidated Financial Statements – an Amendment to ARB No. 51 (“ASC 810”). ASC 810 requires non-controlling interests (previously referred to as non-controlling interests) to be reported as components of equity and net income or loss, which changes the accounting for transactions with non-controlling interest holders. Prior to January 1, 2009 the non-controlling interest had been reduced to zero, therefore we had no beginning balance of the non-controlling at May 1, 2009. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.

NOTE 3 – 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 $10,616,451 and a working capital deficit of $1,386,399 at April 30, 2011, 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.
 
 
F-11

 
 
MMEX Mining Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements

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.
 
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 4 – RELATED PARTY TRANSACTIONS

In December 2007, Maple Carpenter Creek, LLC distributed to its members Garb Holdings, LLC, AAM Investments, LLC, and Maple Resources Corporation, a 2% royalty interest which covered all the assets, including ultimately the interest in its Colombian assets.  This royalty was disclosed to the prior Board of Directors of the Company before the merger, and the royalty obligation was accordingly not acquired by the Company pursuant to the terms of the merger transaction. The Company’s Officers and Directors are, directly or indirectly, majority owners of AAM Investments, LLC and Maple Resources Corporation.

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 had agreed that upon successful repayment of the note, it would transfer the Snider Ranch title to MCC. MCC also had 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. The net proceeds on the sale after payment of closing costs and proceeds to minority interest holders was $1,408,856.

On August 5, 2008, Maple Resource Company, a mutually owned entity under common management by the Company’s CEO, Jack Hanks, received a promissory note in the original principal balance of $1,000,000, a mutually owned company of the CEO, Jack Hanks, and assigned to Carpenter Creek, LLC, along with the investment in property, which carried a 7% interest rate, matured on August 11, 2013, and was secured by an investment in the Snider Ranch property.  The balance of the note of $793,546 which included some accrued interest was paid in full on the sale of Snider Ranch on December 21, 2010.

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.
 
 
F-12

 
 
MMEX Mining Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
 
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, directly or indirectly, 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.

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 September 4, 2010, MCCH entered into a consulting agreement with Bruce N. Lemons, one of the Company’s two directors, for a two year term, automatically renewable for one year terms thereafter, at an annual compensation of $170,000 per year.

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.

Starting on October 13, 2010 and at various times through January 31, 2011, the Company’s Director Bruce N. Lemons or entities through which he held an interest 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.
 
 
F-13

 
 
MMEX Mining Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
 
For the period from inception (May 23, 2007) through April 30, 2011, there has been contributions of capital from members of $7,696,652 and contributions of capital from shareholders of $343,139.

Common stock

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.

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 cancelled the subscription payable.
 
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 2,500,000 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 1,500,000 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.  The shares were previously reserved for DE Investments Corporation due to an agreement in place between DE Investments Corporation and the Company’s majority shareholders not with MMEX.  The majority shareholders may have an obligation to transfer these shares in the future.

NOTE 5 – PROPERTY AND EQUIPMENT

   
April 30, 2011
   
April 30, 2010
 
Furniture and fixtures
  $ -     $ 6,001  
Software and hardware
    22,599       19,649  
      22,599       25,650  
Less accumulated depreciation and amortization
    (2,894 )     (7,442 )
    $ 19,705     $ 18,208  

Depreciation and amortization expense totaled $6,741 and $5,064 for the years ended April 30, 2011 and 2010, respectively.

 
F-14

 
 
MMEX Mining Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
 
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 would 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 distribution in the amount of $1,413,253. A total of $282,651 of the distribution was to non-controlling interests.  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.

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.  The $5,000,000 is to be made in several payments starting April 29, 2011 through March 1, 2012.  At April 30, 2011, total paid towards funding of the option was $1,830,000.  The Company fully impaired the $1,830,000 due to the probability of future funding.  As of July 28, 2011, $700,000 has been paid to the exploration fund.  Any payments made on the option are non-refundable.  The agreement may be terminated if the option to acquire the interest is not made prior to March 1 st , 2012.

NOTE 7 – ACCRUED EXPENSES

As of April 30, 2011 and 2010 accrued expenses included the following:
 
   
April 30, 2011
   
April 30, 2010
 
Accrued lease expenses
  $ 62,541     $ -  
Accrued payroll, officers
    195,617       -  
Accrued consulting
    110,849       -  
Accrued interest
    84,398       90,328  
    $ 453,405     $ 90,328  
 
F-15

 
 
MMEX Mining Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
 
NOTE 8 – NOTES PAYABLE

Current and long term debt consists of the following at April 30, 2011 and 2010, respectively:

   
April 30, 2011
   
April 30, 2010
 
             
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 $5,735 and $0 was outstanding at April 30, 2011 and April 30, 2010 respectively.
  $ 50,000     $ -  
                 
Unsecured promissory note, matured on July 15, 2009, carrying a 10% default rate. Accrued interest of $62,986 and $42,986 was outstanding at April 30, 2011 and April 30, 2010, respectively.
    300,000       300,000  
                 
Related party, unsecured promissory note, carried a 20% interest rate until maturity at July 15, 2010, at which time the principal and 20% interest (or $60,000), was compounded and extended under a an amended agreement carrying a 10% interest rate that was being amortized over the extended life of the loan. Matures on July 15, 2011. Accrued interest of $0 and $47,342 was outstanding at April 30, 2011 and April 30, 2010, respectively. This note and accrued interest of $96,000 was retired on December 21, 2010, upon the closing of the Snider Ranch sale.
    -       300,000  
                 
Promissory note in the original principal balance of $1,000,000 owed by Maple Resources Company, a mutually owned company of the CEO, Jack Hanks, and assigned to Carpenter Creek, LLC, along with the investment in property, carries a 7% interest rate, matures on August 11, 2013, secured by an investment in property; Snider Ranch. This note was retired on December 21, 2010, upon the closing of the Snider Ranch sale.
    -       798,446  
                 
On January 27 and February 1, 2011 the Company closed a note purchase agreement with various investors pursuant to which the Company sold an aggregate of $514,900 convertible notes in a private placement transaction.  $139,900 of the notes were to related parties.  The convertible notes are due and payable on January 26, 2012, carry a 25% interest rate which will be amortized over the life of the loan. The note is convertible at the option of the holder into our common stock at a fixed conversion price of $1.00, subject to adjustment for stock splits and combinations.  On March 23, 2011 $489,900 of the notes were paid in full.  Accrued interest of $1,575 and $0 was outstanding at April 30, 2011 and April 30, 2010, respectively.
    25,000       -  
                 
Debt issuance discount net of amortization of $6,370.
    (18,630 )     -  
                 
On April 25, 2011, the Company closed a note purchase agreement with various investors pursuant to which the Company sold an aggregate of $520,000 notes in a private placement transaction.  The notes are due and payable on or before October 14, 2011, carry a 25% interest rate due in full at issuance.  The computed interest of $130,000 was added to the balance of the note and recorded as additional debt discount.   The note is 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.  Accrued interest of $2,329 and $0 was outstanding at April 30, 2011 and April 30, 2010, respectively.
    650,000       -  
                 
Debt issuance discount
    (631,105 )        
                 
Related party promissory note due and payable on March 18,2012, carry a 10% interest rate which will be amortized over the life of the loan. Accrued interest of $3,416 and $0 was outstanding at April 30, 2011 and April 30, 2010, respectively.
    290,000       -  
    $ 665,265     $ 1,398,446  
Less: Current maturities
    665,265       600,000  
Long term portion of notes payable
  $ -     $ 798,446  
 
 
F-16

 
 
MMEX Mining Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
 
The Company recorded interest expense on debt instruments in the amount of $810,188 and $171,905 for the years ended April 30, 2011 and 2010, respectively.

NOTE 9 – CONVERTIBLE DEBENTURES

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.  The promissory notes plus interest were paid in full on March 23, 2011.

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.

On April 25, 2011, the Company closed a note purchase agreement with various investors pursuant to which the Company sold an aggregate of $520,000 notes in a private placement transaction.  The 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 $130,000 was added to the balance of the note and recorded as debt discount which will be taken as interest expense over the life of the notes.  The note is 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 812,500 warrants to purchase shares of the Company’s common stock at an exercise price of $.80 per share on or before three years from the repayment or conversion date.

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 $520,000 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.

NOTE 10 – CONVERTIBLE PREFERRED STOCK

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, that is being reported as interest due to the classification of the preferred stock, 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 over the term on the agreement.

 
F-17

 
 
MMEX Mining Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
 
NOTE 11 – 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 300,000,000 shares of its $0.001 par value common stock. There were 11,165,761 shares issued and outstanding at April 30, 2011. The Company had a commitment to issue 1,500,000 shares of common stock pursuant to the merger with MCCH recorded as a subscription payable at par value of $15,000 on 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 also has a contingent commitment to issue up to another 1,500,000 shares of common stock if certain milestones are achieved.
 
On May 28, 2009, the Company completed a five-for-one stock split of the Company’s common stock and an increase in the number of our authorized shares of common stock from 75,000,000 to 300,000,000.

For the period from inception (May 23, 2007) through April 30, 2011, 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.

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 but as part of and in connection with the original issuance of Company common stock in connection with the acquisition of MCCH.  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.
 
 
F-18

 
 
MMEX Mining Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
 
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 but as part of and in connection with the original issuance of Company common stock in connection with the acquisition of MCCH.  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.

Common stock reserved

At April 30, 2011, 5,944,639 shares of common stock were reserved 1,738,514 for debt conversion purposes, 2,500,000 for conversion of Preferred Stock A, and 1,706,125 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 $0.40 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.  Dividends payable at April 30, 2011 were $10,685.

NOTE 12 – NON-CONTROLLING INTERESTS

On April 30, 2011, non-controlling interests held an approximate 5.4% residual interest in AHGC.  Pursuant to that merger between MCC Merger, Inc., a wholly owned subsidiary of Management, Inc., and MCCH, we acquired entities that directly, and indirectly, held non-controlling interests in both, consolidated Corporations and Partnerships. MCCH’s interest in its subsidiaries, MCC and AHGC brought non-controlling interests of 20% in MCC’s subsidiary, CC and 1.88% in AHGC, respectively. The 1.88% interest in AHGC was converted to stock in MMEX on December 22, 2010.  In turn, MCC held a 5% non-controlling interest in CC, and AHGC held an 80% non-controlling interest in AMC which by April 30, 2011 was 94.6%.

NOTE 13 – 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 to vest on certain milestones defined in the definitive merger agreement 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.

Legal

There were no legal proceedings against the Company.

Operating Leases Commitments

The Company acquired the Bolzer Lease pursuant to the September 23, 2010 merger.  Subsequently, notice of termination on this lease effective April 26, 2010 was provided by previous management.  The Company has recorded an accrued expense for the minimum lease payment of $62,541 for the January 2010 payment.

The Company had various lease agreements associated with its interests in the Snider Ranch and Carpenter Creek prospects in Montana.  Upon sale of each of those prospects, outstanding lease payments were negotiated and paid from proceeds on the sale.
Lease expense was $1,108,831 and $466,896 for the years ended April 30, 2011 and 2010, respectively.
 
 
F-19

 
 
MMEX Mining Corporation
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
 
NOTE 14 – INCOME TAXES

The Company accounts for income taxes in accordance with standards of disclosure propounded by the FASB, and any related interpretations of those standards sanctioned by the FASB.  Accordingly, deferred tax assets and liabilities are determined based on differences between the financial statement and tax bases of assets and liabilities, as well as a consideration of net operating loss and credit carry forwards, using enacted tax rates in effect for the period in which the differences are expected to impact taxable income.  A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized.

No provision for income taxes has been recorded due to the net operating loss carryforwards totaling approximately $2,399,281 as of April 30, 2011 that will be offset against future taxable income. The available net operating loss carry forwards of approximately $2,399,281 expire in various years through 2030. No tax benefit has been reported in the financial statements because the Company believes there is a 50% or greater chance the carry forwards will expire unused. There were no uncertain tax positions taken by the Company.

Deferred tax asset and the valuation account is as follows:
 
   
April 30, 2011
   
April 30, 2010
 
Deferred tax asset:
           
  NOL Carryforward
  $ 687,004     $ 439,309  
  Valuation allowances
    (687,004 )     (439,309 )
  Total
  $ -     $ -  

The components of income tax expense are as follows:
 
Current Federal Tax
  $ -     $ -  
Current State Tax
    -       -  
Change in NOL benefit
    376,447       362,263  
Change in valuation allowance
    (376,447 )     (362,263 )
    $ -     $ -  

NOTE 15 – SUBSEQUENT EVENTS

On May 9, 2011, the Company closed a note purchase agreement with various investors pursuant to which the Company sold an aggregate of $160,000 notes in a private placement transaction.  The notes are due and payable on or before October 14, 2011 and carry a 25% interest rate.   The note is 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 250,000 warrants to purchase shares of the Company’s common stock at an exercise price of $.80 per share on or before three years from the repayment or conversion date.

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.

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

 
F-20

 
 
 
 

 
 
 
 

 
 
 
 
 

 
 
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW.

Warrant No. __ to Purchase
__________ Common Shares

Date:  April 25, 2011

1.            Grant of Warrant .                                __________  (the "Holder") is hereby entitled to purchase from MMEX Mining Corporation, a Nevada corporation (the "Company"), at any time after the date hereof and until on the Expiration Date (as defined below), __________ shares (the "Warrant Shares") of common stock of the Company (“Common Stock”), subject to adjustment as provided herein, at a Exercise Price of $0.08 per Share (the "Exercise Price").  This Warrant is issued pursuant to the terms of that certain Subscription Agreement, dated April 25, 2011.
 
2.            Exercise of Warrant .  This Warrant shall be exercisable at any time after the date hereof until the expiration of the Warrant as provided in Section 3 hereof, in the manner set forth in Section 4 hereof.

3.            Expiration of Warrant .  This Warrant, to the extent not exercised, shall expire and cease to be of force and effect at 5:00 P.M. (Dallas, Texas Time) on April 25, 2014 (the “Expiration Date”).

4.            Method of Exercise .  This Warrant must be exercised in whole and not in part.  In order to exercise this Warrant, the Holder shall provide written notice to the Company, together with the surrender of this Warrant, at the principal executive offices of the Company in Dallas, Texas, and upon payment to the Company of the Exercise Price.  The purchaser shall be treated for all purposes as the holder of the Warrant Shares as of the close of business on the date of exercise.  Unless this Warrant shall have expired, a new Warrant of like tenor and for such number of Warrant Shares as the Holder shall direct, representing in the aggregate the right to purchase that number of Warrant Shares with respect to which this Warrant shall not have been exercised, shall also be issued to the Holder within such time.

5.            Adjustment of Exercise Price and Number of Shares .  The number of shares of Common Stock purchasable upon the exercise of this Warrant shall be subject to adjustment from time to time upon the happening of certain events as follows:

5.1            Dividends, Subdivisions or Combinations .  If the Company at any time while the Warrant remains outstanding and unexpired shall:

  (a)           subdivide its outstanding Common Stock into a larger number of shares,
 
 
 

 

  (b)           combine its outstanding shares of Common Stock into a smaller number of shares, or

  (c)           pay a dividend or make a distribution in additional shares of Common Stock,

then the number of Warrant Shares purchasable upon the exercise of this Warrant immediately after the occurrence of any such event shall be adjusted to equal the number of Warrant Shares that a record holder of the same number of Warrant Shares represented by this Warrant immediately prior to the occurrence of such event would own or be entitled to receive after the happening of such event.

5.2            Reclassification, Consolidation or Merger .  At any time while this Warrant remains outstanding and unexpired, in case of any reclassification or change of outstanding securities issuable upon exercise of this Warrant or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with another corporation in which the Company is a continuing corporation and which does not result in any reclassification or change), or in the case of any sale or transfer to another corporation of the property of the Company as an entirety or substantially as an entirety, the Company, or such successor or purchasing corporation, as the case may be, shall, without payment of any additional consideration therefor, execute a new Warrant providing that the Holder shall have the right to exercise such new Warrant (upon terms not less favorable to the Holder than those then applicable to this Warrant) and to receive upon such exercise, in lieu of each Warrant Share theretofore issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money or property receivable upon such reclassification, change, consolidation, merger, sale or transfer by the Holder of one Warrant Share issuable upon exercise of this Warrant had this Warrant been exercised immediately prior to such reclassification, change, consolidation, merger, sale or transfer.  Such new Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section.  The provisions of this Section shall similarly apply to successive reclassification, changes, consolidations, mergers, sales and transfers.

5.3            Liquidating Distributions, Etc.   If the Company at any time while this Warrant remains outstanding and unexpired makes a distribution of its assets to the holders of its Shares as a dividend in liquidation or by way of return of capital or any distribution to such holders made in respect of the sale of all or substantially all of the Company's assets (other than under the circumstances otherwise provided for in this Section 5), the holder of this Warrant shall be entitled to receive upon the exercise hereof, in addition to the Warrant Shares receivable upon such exercise, and without payment of any consideration other than the Exercise Price, an amount in cash equal to the value of such distribution per share of Common Stock multiplied by the number of Warrant Shares which, on the record date for such distribution, are issuable upon exercise of this Warrant, and an appropriate provision therefor should be made a part of any such distribution.
 
 
 

 

5.4            Notice of Adjustments .  Whenever the number of Warrant Shares issuable upon exercise of this Warrant shall be adjusted pursuant hereto, the Company shall promptly notify the Holder in writing of such adjustment, setting forth in reasonable detail the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Company's Board of Directors made any determination hereunder), and the number of Warrant Shares issuable upon exercise of this Warrant after giving effect to such adjustment.

6.            Loss, Theft, Destruction or Mutilation .  Upon receipt by the Company of evidence reasonably satisfactory to it that this Warrant has been mutilated, destroyed, lost or stolen, and in the case of any destroyed, lost or stolen Warrant, a bond of indemnity reasonably satisfactory to the Company, or in the case of a mutilated Warrant, upon surrender and cancellation thereof, the Company will execute and deliver in the Holder's name, in exchange and substitution for the Warrant so mutilated, destroyed, lost or stolen, a new Warrant of like tenor substantially in the form thereof with appropriate insertions and variations.

7.            Successors and Assigns .  This Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the Holder.

8.            Amendment .  This Warrant may be modified with the written consent of the Company and the Holder.

9.            Governing Law .  This Warrant shall be governed by the laws of the State of Texas without regard to the provisions thereof relating to conflict of laws.

IN WITNESS WHEREOF, the Company has executed this Warrant on the date first set forth above.

 
MMEX Mining Corporation
     
 
By:
 
   
Jack W. Hanks, President and CEO

 
 

 


BRIDGE NOTE
 
MMEX Mining Corporation, a Nevada corporation (the "Company"), for value received, hereby promises to pay to the order of _____________  or assigns (the "Holder"), at the time and in the manner hereinafter provided, the principal sum of ___________________ ($__________).  
 
This Note shall be payable at the offices of the Holder as set forth in the Company’s records, or at such other address as the Holder shall from time to time designate in writing to Company.  This Note is being issued pursuant to the terms of the Subscription Agreement, dated April 25, 2011, to which the Company and the Holder are parties (“Subscription Agreement”).  
 
1.           Payment .  The outstanding principal amount of this Note shall be due and payable on the earlier of October 14, 2011or the date on which Company consummates a Qualified Financing (as defined in the Subscription Agreement”).  Fees shall be due and payable to the Holder in the amount and to the extent set forth in the Subscription Agreement.
 
2.           Default .
 
  (a)           "Event of Default" means any one of the following events:

(1)           the default by the Company in any scheduled payment at the Maturity Date; or

(2)           the entry of a decree or order for relief by a court having jurisdiction in the premises in respect of the Company in an involuntary case under the federal bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of its property, or ordering the winding up or liquidation of its affairs; or

(3)           the commencement by the Company or any affiliate thereof of a voluntary case under the federal bankruptcy laws, as now constituted or hereafter amended, or any other applicable federal or state bankruptcy, insolvency or other similar law, or the consent by it to the appointment to or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Company or for any substantial part of its property, or the making by it of any assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due.
 
 
 

 
 
(b)           If an Event of Default occurs pursuant to Section 2(a)(2) or Section 2(a)(3) of this Note, then the principal of this Note, together with all accrued and unpaid interest thereon shall be automatically due and payable immediately, and the same shall become and be due and payable without presentment, demand, protest, notice of intent to accelerate or other notice of any kind, all of which are expressly waived in subparagraph (c) hereinbelow, and the holder of this Note may exercise all remedies available at law, in equity or hereunder.  If any other Event of Default occurs, then the holder of this Note may declare the principal of this Note together with all accrued and unpaid interest thereon to be due and payable immediately, and the same shall become and be due and payable without presentment, demand, protest, notice of intent to accelerate or other notice of any kind all of which are expressly waived in subparagraph (c) hereinbelow, and Holder may exercise all remedies available at law, in equity or hereunder.

(c)           The Company expressly waives all notices, demands for payment, presentations for payment, notices of payment default, notices of intention to accelerate maturity, protest and notice of protest, and any other notices of any kind as to this Note and as to each, every and all installments or part payments thereof, and consents that the holder of this Note may at any time and from time to time, upon request of or by agreement with the Company, extend the date of maturity hereof or change the time or method of payments hereof without notice to any of the other Company’s, sureties or endorsers, who shall remain bound for the payment hereof.
 
3.            Conversion; Adjustment of Conversion Rate .   Upon the occurrence of an Event of Default, the Holder shall have the right to convert all or any part of the unpaid principal balance of this Note (inclusive of any unpaid fees due and payable pursuant to the Subscription Agreement) into shares of common stock of the Company (“Conversion Shares”) at the rate (“Conversion Rate”) of one Conversion Share for each $0.04 of the unpaid portion of this Note, subject to adjustment pursuant to the provisions hereof.  In order to exercise the conversion privilege, the Holder shall surrender this Note to the Company at its principal offices, accompanied by written notice to the Company that Holder elects to convert all or a portion of this Note into Conversion Shares.  The Conversion Rate and the number of Conversion Shares shall be subject to adjustment from time to time as follows:
 
(i)            Consolidation, Merger, Sale, Conveyance .  If the Company at any time shall consolidate or merge with, or sell or convey all or substantially all of its assets to, any other corporation (each of which shall constitute a "Major Event"), the Holder shall thereafter be entitled to purchase at the Conversion Rate then in effect such number and kind of securities as would have been issuable or distributable on account of such Major Event if the Holder had purchased Conversion Shares hereunder immediately prior to such Major Event.  The Company shall take such steps in connection with such Major Event as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or property thereafter deliverable upon the conversion of this Note.  The foregoing provisions shall similarly apply to successive transactions of a similar nature by any such successor or purchaser.  Without limiting the generality of the foregoing, the provisions of this section 2 shall apply to such securities of such successor or purchaser that is responsible for payment of principal and accrued interest hereunder after a Major Event.
 
 
 

 

(ii)            Stock Dividend, Reclassification, etc.   If the Company shall (A) pay a dividend in or make a distribution of shares of its capital stock, (B) subdivide its outstanding common stock, (C) combine its outstanding common stock into a smaller number of shares, or (D) issue any securities in a reclassification of its common stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), the number of Conversion Shares and the Conversion Rate shall be adjusted so that the Holder shall be entitled to receive the kind and number of shares or other securities of the Company which Holder would have owned or would have been entitled to receive after the happening of any of the events described above, had the Note been converted and the Conversion Shares been issued pursuant to Section 3 at the Conversion Rate immediately prior to the happening of such event or any record date with respect thereto.
 
4.            Governing Law and Venue .  This Note shall be deemed to be a contract made under the laws of the State of Texas, and for all purposes shall be governed by and construed in accordance with the laws of the State of Texas, exclusive of any such law under with the law of any other jurisdiction would apply.  If any action is brought to enforce or interpret this Note, venue for such action shall be in Dallas County, Texas.
 
5.           Successors and Assigns .  All references to the Company herein shall, and shall be deemed to, include its successors and assigns, and all covenants, stipulations, promises and agreements contained herein by or on behalf of the Company shall be binding upon its successors and assigns, whether so expressed or not.
 
6.           Amendments and Waivers .  This Note may be amended by written agreement of the Company and the Holder.  No waiver of the provisions hereof shall be effective unless agreed to in writing by the party against whom such waiver is asserted.
 
 
 

 
 
7.            Severability; Usury Laws .  If any provision hereof or the application thereof to any person or circumstance shall, for any reason and to any extent, be invalid or unenforceable, neither the application of such provision to any other person or circumstance nor the remainder of the instrument in which such provision is contained shall be affected thereby and shall be enforced to the greatest extent permitted by law.  No provision of this Note or the Subscription Agreement shall require the payment or the collection of interest in excess of the maximum amount permitted by applicable law. If any excess of interest in such respect is hereby provided for, or shall be adjudicated to be so provided, in this Note or otherwise in connection with this loan transaction, the provisions of this section shall govern and prevail and neither the Company nor the sureties, guarantors, successors, or assigns of the Company shall be obligated to pay the excess amount of such interest or any other excess sum paid for the use, forbearance, or detention of sums loaned pursuant hereto. In the event Holder or any subsequent holder of this Note ever receives, collects, or applies as interest any such sum, such amount which would be in excess of the maximum amount permitted by applicable law shall be applied as a payment and reduction of the principal of the indebtedness evidenced by this Note; and, if the principal of this Note has been paid in full, any remaining excess shall forthwith be paid to the Company.  In determining whether or not the interest paid or payable exceeds the maximum rate permitted by applicable law, the Company and the Holder shall, to the extent permitted by applicable law, (a) characterize any non-principal payment as an expense, fee, or premium rather than as interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the entire contemplated term of the indebtedness evidenced by this Note so that interest for the entire term does not exceed the maximum rate permitted by applicable law.
 
8.           Notice .  All notices to the Company required or permitted by this Note shall be sufficient if given in writing and executed by the Holder.  All such notices to the Company shall be delivered by registered or certified mail, return receipt requested, or personally delivered, to the Company at its principal place of business on the date of the execution of this Note, or such other address as the Company may designate by written notice to the Holder of this Note.
  
THIS NOTE REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO WITH  RESPECT TO THE SUBJECT MATTER HEREOF, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
 
 
 

 
 
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of April 25, 2011.
 
 
MMEX Mining Corporation
   
 
By:
  
   
Jack W. Hanks, President and CEO

 
 

 
MMEX MINING CORPORATION
SUBSCRIPTION AGREEMENT

THIS SUBSCRIPTION AGREEMENT (this “AGREEMENT”), dated as of April 25, 2011, is among THE INVESTOR GROUP WHOSE NAMES AND SIGNATURES ARE SHOWN BELOW WITH PARTICPATION IN FACILITY NOTED (“PURCHASER”), AND MMEX MINING CORPORATION (“MMEX”).

The parties hereby agree as follows:
 
1.           Each Purchaser agrees to loan to MMEX the dollar amount set forth opposite the Purchaser’s signature on or before April 27, 2011, in a bridge note facility of up to US$600,000 (the “Bridge Note Facility”).  Purchaser will wire transfer such amount to an account designated by MMEX in Dallas, Texas.  MMEX will use the net proceeds of the Bridge Note Facility (i) to provide a $500,000 deposit for its Hunza Mine Project in Colombia and (ii) to the extent of any additional funds, for working capital purposes.  The net proceeds will be held in a segregated account at Chase Bank.  To the extent that funds are withdrawn by MMEX or any of its subsidiaries from the segregated account, such amounts will be deemed to be “Withdrawn Funds” hereunder.

2.           MMEX shall repay the entire unpaid principal amount of the Bridge Note Facility on the earlier of (i) October 14, 2011 or (ii) the date on which MMEX consummates any “Qualified Financing (as defined herein).”  MMEX shall have the right to prepay without penalty the Bridge Note Facility at any time prior to such maturity date.  As used herein, a Qualified Financing shall mean the receipt of net proceeds by MMEX or its subsidiaries of any debt or equity financing aggregating at least $5.0 million.

3            In lieu of a stated interest rate, MMEX shall pay to each Purchaser (i) a fee equal to 12% of the amount of the Bridge Note Facility contributed by such Purchaser and (ii) an additional fee equal to 13% of such Purchaser’s portion of the Withdrawn Funds.  All such fees shall be due and payable upon the maturity of the Bridge Note Facility.

4            Any and all payments by MMEX hereunder shall be made in U.S. dollars at the address of Purchaser set forth herein (or as otherwise advised in writing by Purchaser), free and clear of and without deduction for any and all present or future levies, deductions, stamp or documentary taxes or similar charges or withholdings and all liabilities with respect thereto.

5            In the event of default in the prompt repayment of the Bridge Note Facility, the Purchaser may elect to convert the unpaid balance of the Bridge Note Facility (including any unpaid fees pursuant to Section 3 above) into shares of MMEX common stock at the rate of $0.04 cents per share (i.e., one-half of the current market price, thus providing 2.0X coverage).

6.           Concurrently with the issuance of the Bridge Note Facility, MMEX does hereby grant to each Purchaser warrants (expiring on the third anniversary of their issuance) to purchase shares of MMEX common stock at the exercise price of $ 0.08 cents per share (i.e. current market price as of April 25, 2011).
 
 
 

 

7.           This Agreement shall be binding upon and inure to the benefit of the respective legal representatives, successors and assigns of the parties hereto; however , MMEX may not assign or transfer any of its rights or delegate any of its obligations under this Agreement or any of the documents contemplated hereunder to which it is a party or otherwise bound, by operation of law or otherwise.

8.           Any notice, consent, demand, request, approval or other communication to be given hereunder by any party to another shall be deemed to have been duly given if given in writing and personally delivered or sent by overnight delivery service, facsimile transmission or United States mail, registered or certified, postage prepaid, with return receipt requested, to the address set forth under the parties' signature hereto.  Notice so given shall be deemed to be given and received on the date of actual delivery.

9.           This Agreement and the documents contemplated hereby may only be amended by an instrument in writing executed jointly by MMEX and Purchaser and supplemented only by documents delivered or to be delivered in accordance with the express terms thereof.

10.         This Agreement may be executed in a number of identical counterparts, each of which shall be deemed an original for all purposes and all of which constitute, collectively, one agreement.
 
 
2

 

IN WITNESS WHEREOF, the parties hereto have executed this Subscription Agreement as of the date first above written.

MMEX MINING CORPORATION

By
  
 
Jack W. Hanks, President and CEO
 
   
PURCHASER I: US$
  
 
   
By:
  
 
  
   
Address for payment and notices:
 
   
PURCHASER II: US$
 
 
   
By:
  
 
  
   
Address for payment and notices:
 
   
PURCHASER III: US$
  
 
  
   
   
By:
  
 
   
Address for payment and notices:
 

 
3

 
 
STOCK PLEDGE AGREEMENT

This STOCK PLEDGE AGREEMENT (this "Pledge Agreement"), dated as of March 22, 2011, is by and among Armadillo Holdings Group Corporation (“Pledgor”) and William D. Gross (“Pledgee”).

Preliminary Statement :

a.           MMEX Mining Corporation, Pledgor’s parent (“MMEX”), has issued to Pledgee shares of its Series A Preferred Stock (the “MMEX Preferred Stock”).

b.           Under the terms of the MMEX Preferred Stock, MMEX is obligated to redeem the shares of MMEX Preferred Stock under certain circumstances and has agreed to secure its redemption obligation by causing Pledgor to enter into this Agreement.

c.           Pledgor is a subsidiary of MMEX and desires for Pledgee to purchase the MMEX Preferred Stock and accordingly advance funds to MMEX.

d.           Pledgee would not purchase the MMEX Preferred Stock absent Pledgor’s execution and delivery of this Pledge Agreement.

e.           Armadillo Mining Corporation (“Armadillo”) owns a majority of the shares of capital stock outstanding (“Armadillo Shares”).

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, Pledgee and Pledgor hereby agree as follows:

1.            Definitions .   The following terms shall have the following meanings in this Pledge Agreement:

Obligations :  the obligation of MMEX to redeem the MMEX Preferred Stock in accordance with its terms.

Collateral :  such number of Armadillo Shares as will at all times constitute at least 51% of the outstanding Armadillo Shares.

2.            Pledge of Collateral .   To secure the Obligations, Pledgor hereby pledges, assigns and grants to Pledgee a valid and perfected lien in the Collateral.  Concurrently with the execution and delivery of this Agreement, Pledgor hereby delivers to Pledgee or (if Pledgee directs) to Pledgee’s trustee (i) all certificates, if any, evidencing the ownership by Pledgor of the Collateral and (ii) such UCC financing statements as Pledgee may request to perfect Pledgee's security interest in the Collateral.  Pledgee hereby agrees that it will subordinate its lien in the Collateral and rights hereunder in the event it is required in connection with any material bona fide financing consummated by Armadillo after the date hereof.
 
 
 

 

3.            Representations, Warranties and Covenants .   Pledgor hereby represents, warrants and covenants to Pledgee that, with respect to the Collateral pledged by Pledgor to Pledgee on the date hereof, (i) Pledgor is the legal and beneficial owner of the Collateral pledged by Pledgor to Pledgee pursuant to this Pledge Agreement, (ii) such Collateral is validly issued, fully paid and is issued in the name of Pledgor, (iii) none of such Collateral is subject to any lien of any kind whatsoever, and (iv) until all of the Obligations have been paid and performed in full, Pledgor:  (A) will not create or permit to exist any lien upon or with respect to such Collateral and (B) will not sell, transfer, convey, assign, or otherwise voluntarily divest Pledgor's interest in such Collateral, or any part thereof, to any other person.

4.            Voting Power; Distributions .   Unless and until an Event of Default shall have occurred and be continuing, the Pledgor shall be entitled to exercise all voting powers in all matters pertaining to the Collateral or otherwise.  Unless and until all of the Obligations have been paid in full, Pledgor shall not be entitled to receive any distributions with respect to any portion of the Collateral.  If any such distributions are received by the Pledgor in violation of the terms of this Section 4 , such distributions shall be (i) held in trust by Pledgor on behalf of Pledgee, (ii) turned over to Pledgee by Pledgor immediately upon receipt thereof and (iii) deemed to constitute a portion of the Collateral pledged by Pledgor to Pledgee hereunder.

5.            Default and Remedies .

5.1           Occurrence .   An Event of Default shall occur upon any default by MMEX of its Obligations or any breach by Pledgor of the provisions set forth herein.

5.2           Remedies .   If an Event of Default shall occur and be continuing, Pledgee, at its option, may:

5.2.1            Sale of Collateral .   Sell, assign and deliver the whole, or from time to time, any part of the Collateral at any private sale or at public auction, with or without demand for performance or advertisement of the time or place of sale or adjournment thereof or otherwise, and free from any right of redemption (all of which hereby expressly are waived by Pledgor) for cash, for credit or for other property, for immediate or future delivery, and for such price and on such terms as Pledgee in its sole discretion may determine; and

5.2.2            Other Remedies .   Exercise any other remedy specifically granted under this Pledge Agreement or now or hereafter existing in equity, or at law, by virtue of statute or otherwise.

5.3           Agreement to Sell Collateral .   For the purposes of this Section 5 , an agreement to sell all or any part of the Collateral shall be treated as a sale thereof, and Pledgee shall be free to carry out such sale pursuant to such agreement, and the Pledgor shall not be entitled to the return of any of the same subject thereto, notwithstanding the fact that after Pledgee shall have entered into such an agreement, all Events of Default hereunder may have been remedied or all of the Obligations may have been paid and/or performed in full.
 
 
 

 

5.4            Proceeds of Sale .   The proceeds of any sale of the whole or any part of the Collateral and any other monies at the time held by Pledgee under the provisions of this Pledge Agreement shall be applied to the Obligations, and any surplus proceeds shall inure to the Pledgor.

5.5            No Duty of Pledgee .   Pledgee shall not have any duty to exercise any of the rights, privileges, options or powers or to sell or otherwise realize upon any of the Collateral, as hereinbefore authorized, and Pledgee shall not be responsible for any failure to do so or delay in so doing.

5.6            Effect of Sale .   Any sale of all or any portion of the Collateral pursuant to Section 5.2 above shall operate to divest all right, title and interest of Pledgor to the Collateral which is the subject of any such sale.

5.7            Securities Act .   Pledgor acknowledges that Pledgee may be unable to effect a public sale of all or a part of the Collateral by reason of certain prohibitions contained in the Securities Act of 1933, as amended (the “Securities Act”), or that it may be able to do so only after delay which might adversely affect the value that might be realized upon the sale of the Collateral.  Accordingly, the Pledgor agrees that Pledgee, without the necessity of attempting to cause any registration of the Collateral to be effected under the Securities Act, may sell the Collateral or any part thereof in one or more private sales to a restricted group of purchasers who may be required to agree, among other things, that they are acquiring the Collateral for their own account, for investment purposes only, and not with a view toward the distribution or resale thereof.  The Pledgor agrees that any such private sale may be at prices or on terms less favorable to the owner of the Collateral sold than would be the case if such Collateral was sold at public sale, and that any such private sale shall not be deemed not to have been made in a commercially reasonable manner by virtue of such sale having been a private sale.

5.8            Transfer of Control to Other Persons .   The Pledgor acknowledges and agrees that, upon the occurrence, and during the continuance, of an Event of Default, a transfer of control of the Collateral may be made to a receiver, trustee or similar official or to any purchaser of all or any part of the Collateral hereunder, pursuant to any court order, public or private sale, judicial sale, foreclosure or the exercise of any other remedies available to Pledgee hereunder or under applicable law.

5.9            Notice .   Pledgee shall give not less than ten business days' prior written notice to Pledgor of any sale pursuant to this Section 5.9 .  Pledgor hereby agrees that such notice is commercially reasonable.

6.            Pledgee's Obligations; Custodial Agreement; Performance Rights .   Pledgee shall not have any duty to protect, preserve or enforce rights against the Collateral other than a duty of reasonable custodial care of any such Collateral in its possession.
 
 
 

 

7.            Termination of Pledge Agreement .   Upon the payment and performance in full of the Obligations, Pledgee shall deliver to Pledgor the Collateral in its possession, and this Pledge Agreement thereupon shall terminate.

8.            Miscellaneous .

8.1           Exercise of Rights .   Pledgor unconditionally agrees that if an Event of Default has occurred and is continuing, Pledgee may exercise its rights and remedies hereunder prior to, concurrently with, or subsequent to the exercise by Pledgee of any of its available rights and remedies against Pledgor or any other person.  The obligations of Pledgor under this Pledge Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released or discharged or in any way affected by:

8.1.1            Exercise or Non-Exercise of Rights .   Any exercise or non-exercise of any right or remedy, or the granting of any postponements or extensions for time of payment or other indulgences to the Pledgor or any other person;

8.1.2            Bankruptcy .   The institution of any bankruptcy, insolvency, reorganization, debt arrangement, readjustment, composition, receivership or liquidation proceedings by or against the Pledgor or any other person; or

8.1.3            Other Defenses .   Any other circumstance which otherwise might constitute a defense to, or a discharge of, the Pledgor with respect to the Obligations.

8.2           Rights Cumulative .   Each and every right, remedy and power granted to Pledgee hereunder shall be cumulative and in addition to any other right, remedy or power specifically granted herein or now or hereafter existing in equity, at law, by virtue of statute or otherwise and may be exercised by Pledgee, from time to time, concurrently or independently and as often and in such order as Pledgee may deem expedient.  Any failure or delay on the part of Pledgee in exercising any such right, remedy or power, or abandonment or discontinuance of steps to enforce the same, shall not operate as a waiver thereof or affect the right of Pledgee thereafter to exercise the same, and any single or partial exercise of any such right, remedy or power shall not preclude any other or further exercise thereof or the exercise of any other right, remedy or power, and no such failure, delay, abandonment or single or partial exercise of rights of Pledgee hereunder shall be deemed to establish a custom or course of dealing or performance among the parties hereto.

8.3           Modification .   Any modification or waiver of any provision of this Pledge Agreement, or any consent to any departure by the Pledgor therefrom, shall not be effective in any event unless the same is in writing and signed by Pledgee and then such modification, waiver or consent shall be effective only in the specific instance and for the specific purpose given.  Any notice to or demand on the Pledgor in any event not specifically required of Pledgee hereunder shall not entitle Pledgor to any other or further notice or demand in the same, similar or other circumstances unless specifically required hereunder.
 
 
 

 

8.4            Further Assurances .   Pledgor agrees that at any time, and from time to time, after the execution and delivery of this Pledge Agreement, Pledgor, upon the reasonable request of Pledgee, promptly will execute and deliver such further documents and do such further acts and things as Pledgee reasonably may request in order to effect fully the purposes of this Pledge Agreement and to subject to the security interest created hereby any Collateral intended by the provisions hereof to be covered hereby.  Pledgor and Pledgee acknowledge their intent that, upon the occurrence, and during the continuance, of an Event of Default, Pledgee shall receive, to the fullest extent permitted by law and governmental policy, all rights necessary to obtain, use or sell the Collateral, and to exercise all remedies available to Pledgee under the Uniform Commercial Code or other applicable law.  Pledgor and Pledgee further acknowledge and agree that, in the event of changes in law or governmental policy occurring subsequent to the date hereof that affect in any manner Pledgee's rights of access to, or use or sale of, the Collateral, or the procedures necessary to enable Pledgee to obtain such rights of access, use or sale, Pledgee and Pledgor shall amend this Pledge Agreement in such manner as Pledgee shall request, in order to provide Pledgee such rights to the greatest extent possible consistent with then applicable law and governmental policy.

8.5            Preservation of Collateral .   Pledgor agrees that it will warrant, preserve, maintain and defend, at the expense of Pledgor, the right, title and interest of Pledgee in and to the Collateral and all right, title and interest represented thereby against all claims, charges and demands of all Persons whomsoever which are based on a breach of the Obligations hereunder.

8.6            Governing Law .   This Pledge Agreement shall be governed by the laws and decisions of the State of Texas.

8.7            Successors and Assigns .   This Pledge Agreement shall inure to the benefit of the successors and assigns of Pledgee and shall be binding upon the successors and assigns of Pledgor.

8.8            Counterparts .   This Pledge Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which when taken together shall be deemed to be one and the same instrument.
 
 
 

 

IN WITNESS WHEREOF, Pledgor and Pledgee have caused this Pledge Agreement to be executed as of the date first above written.

 
Armadillo Holdings Group Corporation
   
 
By:
  /s/ Jack W. Hanks
   
  Jack W. Hanks, President
   
 
Address:
2626 Cole Avenue, Suite 610
   
Dallas, Texas 75204
   
Fax:  214-880-0005
   
 
/s/ William D. Gross
 
 
William D. Gross
 
     
 
Address:
 
 
 
 

 

 
 
MMEX MINING CORPORATION
 
CONVERTIBLE PREFFERED
 
 SUBSCRIPTION AGREEMENT
 
 Dated as of March 22, 2011
 
THIS Convertible Preferred Subscription Agreement (“ Agreement ”), dated as of March 22, 2011 is by and among MMEX MINING CORPORATION ( “ MMEX “or “ Issuer ”) (formerly , Management Energy, Inc) and WILLIAM D. GROSS, (“ Purchaser ”) whose signatures are shown below.
 
RECITALS:
 
A.          MMEX is publicly traded on the OTC: Bulletin Board with 111,257,608 shares outstanding.
 
B.           MMEX has the following assets:
 
1.            Net Profits Interests . Certain net profit interest and royalty in the Bridger Fromberg Bear Creek coal project near Red Lodge, Montana.
 
2.            Carpenter Creek, Montana :  an 80% interest in the Carpenter Creek coal prospect (“ Carpenter Creek ”) near Round Up, Montana, which is currently finalizing the purchase and sale agreement for the sale of Carpenter Creek to Corbin Robertson Jr., the CEO of Great Northern Properties and Natural Resources Partners, a NYSE publically listed royalty trust. The Purchase price has been established at $2,700,000.
 
3.           Armadillo Group Holdings Corp :  an  89.1 % ownership of Armadillo Mining Corp. (“ AMC ”), a British Virgin Islands registered company with assets in Colombia. AMC has entered into an Option Agreement, dated January 20, 2011 to acquire 50% of the Colombian metallurgical coal company, C.I. Hunza Coal Ltda. (“ Hunza ”).  Hunza owns and operates a mine located in the Boyaca province of Colombia, which is estimated to contain metallurgical coal resources of 16 million to 90 million tons of high quality metallurgical coal.  The Hunza mine is permitted and is currently producing and marketing about 1,000 tons per month.
 
4.            Hunza Option Agreement : The Option Agreement provides that AMC will pay an exclusivity fee of US$1.4 million in stages through March 15, 2011 in order to maintain the option rights. Under the Option Agreement, there are three exclusivity payments.   AMC has funded the 1st payment of US$75,000 under the Option Agreement. The second payment of US$125,000 was funded on before January 30, 2011. The 3rd payment of US$1,200,000 is due on or before March 15, 2011. The 3rd payment of $1,200,00 is to be partially funded from the sales proceeds of Carpenter Creek and from this Agreement. Under the Option Agreement, AMC is required to invest US$5.0 million in mine exploration and production over a 12 month period in order to acquire the 50% interest in Hunza. This will be funded from future financing.                                               
  
SUBSCRIPTION AGREEMENT Page 1
 
 

 
 
5.            Research Study . AMC is engaging outside consultants to prepare a resource and reserve study of the Hunza mine.  The option agreement follows the MMEX business strategy of selling its US coal assets and focusing on Colombian metallurgical coal opportunities and Peru mining opportunities.  MMEX recently sold its Snider Ranch, Montana property and is currently negotiating to sell its interest in the Carpenter Creek, Montana project.
 
6.            Proposed Investment . Purchaser desires to invest in MMEX to facilitate funding of MMEX working capital and all or some portion of the payment schedules under the proposed option agreements through an preferred equity investment facility convertible into common equity shares of MMEX (the “Preferred Convertible Investment”);
 
NOW, THEREFORE, in consideration of the premises and the mutual intentions herein contained, the parties hereto hereby agree as follows:
 
1.           Agreement To Purchase Convertible Preferred Shares.
 
Purchaser agrees to invest US$1,000,000 on or before March 12, 2011 in a convertible preferred equity investment facility which has the option to convert to a private placement of 25,000,000 shares (US$1,000,00 @ US$0.04 cents per share) of MMEX stock subject to the terms and conditions of the Convertible Preferred Investment and Private Placement Agreement.
 
Purchaser upon funding will wire transfer the Preferred Convertible Investment funds to an account designated by MMEX in J.P. Morgan Chase Bank.
 
2.           Terms Of The Preferred Convertible Investment.
 
2.1           MMEX will grant Purchaser with a security interest in 25,000,000 shares of MMEX Rule 144 restricted stock.
 
2.2           Term: 60 months from date of issuance.
 
2.3           Placement Fee of 10% per annum (can be divided between real interest rate and placement fee at option of Purchaser).
 
2.4           Collateral:
 
(a.)           25,000,000 shares of MMEX Rule 144 shares. The collateral pledge may be exercised on March 1, 2016 upon failure of payment of Preferred Convertible Investment upon its due date and upon such other terms and conditions of the Pledge Agreement.  The amount of shares shall be increased on an annual basis subject to the PIK provisions of this Agreement.
  
SUBSCRIPTION AGREEMENT Page 2
 
 

 
 
(b)           Purchaser will be named on a term life insurance policy on the life of Jack W. Hanks to the extent that his interest may appear up to a maximum amount of $1,500,000.
 
(c)           MMEX will cause its wholly-owned subsidiary, Armadillo Holdings Group Corporation , to pledge of 51% of its common stock in Armadillo Mining Corporation to Purchaser subject to the following terms and conditions:
 
(i)         The shares have no voting rights unless and until Purchaser exercises the pledge.
 
(ii)        Purchaser may exercise the pledge upon failure of payment of the Preferred Convertible Investment upon the due date and upon such other terms and conditions of the Pledge Agreement.
 
(iii)       Such pledge shall be subordinated to any pledge or guarantee required by debt or equity financing of Armadillo Mining Corporation during the term hereof.
 
(iv)       Such pledge is subject to dilution of Armadillo Holdings Group Corporation or Armadillo Mining Corporation ownership shares as may be required by debt or equity financing of Armadillo Mining Corporation during the term hereof.
 
(v)        Such Convertible Preferred Instrument is subject to a due on sale clause in the event there is a change of control of Armadillo Mining Corporation.
 
(iv)       Purchaser may exercise its conversion rights to convert the face amount of the Preferred plus the accrued and unpaid annual Placement Fee into the common equity of MMEX at a conversion rate of US$0.04 cents per share at any time during the term of the Preferred Convertible Investment.
 
(v)        At the option of ISSUER; it may choose to increase the amount of the Preferred Convertible Investment by the amount of the Placement Fee in kind or pay the Placement Fee in cash on an annual basis (“ PIK ”).
 
3.            This Agreement May Be Signed In Counterparts.
 
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
 
 
AGREED TO:
   
 
MMEX MINING CORPORATION
   
 
By
/s/ Jack W. Hanks
 
Jack W. Hanks, President & CEO
   
 
PURCHASER:
   
 
By:
/s/ William D. Gross
 
 William D. Gross
 
SUBSCRIPTION AGREEMENT Page 3
 
 

 
 
Exhibit 21.1

MMEX Mining Corporation
List of Subsidiaries

         
Form of
 
State of
   
Name of Entity
 
%
   
Entity
 
Incorporation
 
Relationship
                   
MCC Merger, Inc.
    100 %  
Corporation
 
Delaware
 
Holding Sub
Maple Carpenter Creek Holdings, Inc.
    100 %  
Corporation
 
Delaware
 
Subsidiary
Maple Carpenter Creek, LLC
    80 %  
LLC
 
Nevada
 
Subsidiary
Carpenter Creek, LLC
    95 %  
LLC
 
Delaware
 
Subsidiary
Armadillo Holdings Group Corp.
    100 %  
Corporation
 
British Virgin Isl.
 
Subsidiary
Armadillo Mining Corp.
    94.6 %  
Corporation
 
British Virgin Isl.
 
Subsidiary

 
 

 
 
Exhibit 31.1


I, Jack W. Hanks, certify that:

1. I have reviewed this annual report on Form 10-K of MMEX Mining Corporation;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and I have:

a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this annual report is being prepared;

b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

c. presented in this annual report my conclusions about the effectiveness of the disclosure controls and procedures based on my evaluation as of the Evaluation Date;

5. I have disclosed, based on our most recent evaluation, to the registrant's auditors and the board of directors (or persons performing the equivalent function):

a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 
/s/ Jack W. Hanks
Jack W. Hanks
Chief Financial Officer
(Principal Executive Officer
   and  Principal Financial Officer)
August 11, 2011
  
 
 

 
 
Exhibit 32.1
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with the Annual Report of MMEX Mining Corporation (the "Company") on Form 10-K for the period ending April 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jack W. Hanks, Principal Executive Officer and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
 
          (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
          (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
 
/s/ Jack W. Hanks
Jack W. Hanks
Principal Executive Officer
Principal Financial Officer
August 11, 2011