F-5
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MEXUS GOLD US AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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Year Ended March 31,
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2016
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2015
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CASH FLOWS FROM OPERATING ACTIVITIES
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|
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Net loss
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$
|
(2,177,577)
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$
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(947,856)
|
Adjustments to reconcile net loss to net cash used in operating activities:
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|
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Depreciation and amortization
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265,708
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330,678
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Loss on sale of equipment
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47,209
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18,230
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Loss on settlement of debt, accounts payable
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409,489
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319,533
|
Stock-based compensation - services
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592,722
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304,281
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Interest expense
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508,871
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504,838
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Impairment of marketable securities
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|
-
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96,150
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Loss on change in fair value of derivative instrument
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17,990
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(1,340,807)
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Gain on settlement of warrant liability
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(303,857)
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Write down of equipment
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109,136
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-
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Changes in operating assets and liabilities:
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Prepaid and other assets
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-
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81,747
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Accounts payable and accrued liabilities, including related parties
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173,417
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97,045
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NET CASH USED IN OPERATING ACTIVITIES
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(356,892)
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(536,161)
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CASH FLOWS FROM INVESTING ACTIVITIES
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Purchase of equipment
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(1,660)
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(34)
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Purchase of equipment under construction
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-
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(975)
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Proceeds from sale of equipment
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68,550
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41,000
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NET CASH PROVIDED BY INVESTING ACTIVITIES
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|
66,890
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39,991
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CASH FLOWS FROM FINANCING ACTIVITIES
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Bank overdraft
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-
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(4,053)
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Proceeds from issuance of notes payable
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203,545
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292,456
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Payment of notes payable
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(42,264)
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(2,000)
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Proceeds from issuance of convertible promissory notes
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50,000
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-
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Payment of convertible promissory notes
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(6,000)
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-
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Advances from related party
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32,490
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71,118
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Payment on advances from related party
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(114,905)
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(63,485)
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Proceeds from issuance of common stock, net
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194,850
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204,881
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NET CASH PROVIDED BY FINANCING ACTIVITIES
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317,716
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498,917
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INCREASE IN CASH
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27,714
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2,747
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CASH, BEGINNING OF PERIOD
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2,747
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-
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CASH, CONTINUED OPERATIONS AT THE END OF PERIOD
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$
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30,461
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$
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2,747
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Supplemental disclosure of cash flow information:
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Interest paid
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$
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23,487
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$
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11,343
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Taxes paid
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$
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-
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$
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-
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Supplemental disclosure of non-cash investing and financing activities:
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Shares issued for settlement of notes payable
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$
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503,960
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$
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472,309
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Shares issued for settlement of warrant liability
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$
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154,700
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$
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-
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Shares issued for equipment purchase
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$
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31,350
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$
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-
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Shares issued to settle accounts payable
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$
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124,448
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$
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47,446
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Shares issued to settle convertible note
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$
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611,773
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$
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523,007
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Shares issued to settle interest payable
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$
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36,470
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$
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-
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Discount for derivative liability recognized on issuance of convertible notes
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$
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67,604
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$
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-
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Discount for beneficial conversion feature recognized on issuance of notes payable
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$
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109,892
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$
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108,600
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Settlement of note and interest by related party
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$
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6,142
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$
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-
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Notes payable settled on issuance of convertible promissory note
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$
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181,001
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$
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-
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Stock payable settled on issuance of convertible promissory note
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$
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168,029
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$
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-
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Reclassification of equipment as held for sale
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$
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322,861
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$
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-
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Notes payable issued to settle accounts payable
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$
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77,150
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$
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-
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The accompanying notes are an integral part of these consolidated financial statements.
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F-6
MEXUS GOLD US
Notes to Consolidated Financial Statements
March 31, 2016 and 2015
1.
ORGANIZATION AND BUSINESS OF COMPANY
Mexus Gold US (the Company) was originally incorporated under the laws of the State of Colorado on June 22, 1990, as U.S.A. Connection, Inc. On October 28, 2005, the Company changed its name to Action Fashions, Ltd. On September 18, 2009, the Company changed its domicile to Nevada and changed its name to Mexus Gold US to better reflect the Companys new planned principle business operations. The Company has a fiscal year end of March 31.
The Company is a mining company engaged in the evaluation, acquisition, exploration and advancement of gold, silver and copper projects in the State of Sonora, Mexico and the Western United States, as well as, the salvage of precious metals from identifiable sources.
2.
GOING CONCERN
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements, the Company has a limited operating history and limited funds and has an accumulated deficit of $19,137,336 at March 31, 2016. These factors, among others, may indicate that the Company may not be able to continue as a going concern.
The Company is dependent upon outside financing to continue operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. It is managements plans to raise necessary funds through a private placement of its common stock to satisfy the capital requirements of the Companys business plan. There is no assurance that the Company will be able to raise the necessary funds, or that if it is successful in raising the necessary funds, that the Company will successfully execute its business plan.
The consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and/or liabilities that might be necessary should the Company be unable to continue as a going concern. The continuation as a going concern is dependent upon the ability of the Company to meet our obligations on a timely basis, and, ultimately to attain profitability.
3.
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
This summary of significant accounting policies of the Company is presented to assist in understanding the Companys consolidated financial statements. The consolidated financial statements and notes are representations of the Companys management, which is responsible for their integrity and objectivity. Certain 2015 financial statement amounts have been reclassified to conform to the financial statement presentation adopted in the current year.
These accounting policies conform to accounting principles generally accepted in the United States of America and are presented in U.S. dollars.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and controlled subsidiaries, Mexus Gold Mining, S.A. de C.V. (Mexus Gold Mining) and Mexus Enterprises S.A. de C.V. (Mexus Gold Enterprises). Significant intercompany accounts and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates. Management believes that the estimates used are reasonable.
F-7
Cash and cash equivalents
The Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.
Investments
Notes receivable and investment in marketable securities are classified as available-for-sale. Available-for-sale securities are recorded at fair value with the net unrealized gains and losses (that are deemed to be temporary) reported as a component of other comprehensive income (loss). Realized gains and losses and charges for other-than-temporary impairments are included in determining net income, with related purchase costs based on the first-in, first-out method. For impairments that are other-than-temporary, an impairment loss is recognized in earnings equal to the difference between the investments cost and its fair value at the balance sheet date of the reporting period for which the assessment is made. The fair value of the investment then becomes the new amortized cost basis of the investment and it is not adjusted for subsequent recoveries in fair value. During the year ended March 31, 2015, the Company recorded an impairment of marketable securities of $96,150 on its investment in 1,660,000 shares of common stock of Silver Pursuit Resources Limited.
Equipment
Equipment consists of mining tools and equipment, watercraft and vehicles which are depreciated on a straight-line basis over their expected useful lives as follows (see Note 6):
Mining tools and equipment
7 years
Watercrafts
7 years
Vehicles
3 years
Equipment under Construction
Equipment under construction comprises mining equipment that is currently being fabricated and modified by the Company and is not presently in use. Equipment under construction totaled $17,018 and $72,939 as of March 31, 2016 and 2015 respectively. Equipment under construction at March 31, 2016 comprises Hydraulic Drum 12YD, Skid Mounted Mill and Survey Winch Marine.
Exploration and Development Costs
Exploration costs incurred in locating areas of potential mineralization or evaluating properties or working interests with specific areas of potential mineralization are expensed as incurred. Development costs of proven mining properties not yet producing are capitalized at cost and classified as capitalized exploration costs under property, plant and equipment. Property holding costs are charged to operations during the period if no significant exploration or development activities are being conducted on the related properties. Upon commencement of production, capitalized exploration and development costs would be amortized based on the estimated proven and probable reserves benefited. Properties determined to be impaired or that are abandoned are written-down to the estimated fair value. Carrying values do not necessarily reflect present or future values.
Mineral Property Rights
Costs of acquiring mining properties are capitalized upon acquisition. Mine development costs incurred either to develop new ore deposits, to expand the capacity of mines, or to develop mine areas substantially in advance of current production are also capitalized once proven and probable reserves exist and the property is a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are charged to operations upon abandonment. The Company evaluates the carrying value of capitalized mining costs and related property and equipment costs, to determine if these costs are in excess of their recoverable amount whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Evaluation of the carrying value of capitalized costs and any related property and equipment costs would be based upon expected future cash flows and/or estimated salvage value in accordance with Accounting Standards Codification (ASC) 360-10-35-15,
Impairment or Disposal of Long-Lived Assets
.
F-8
Long-Lived Assets
In accordance with ASC 360, Property Plant and Equipment the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.
Fair Value of Financial Instruments
ASC Topic 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.
Included in the ASC Topic 820 framework is a three level valuation inputs hierarchy with Level 1 being inputs and transactions that can be effectively fully observed by market participants spanning to Level 3 where estimates are unobservable by market participants outside of the Company and must be estimated using assumptions developed by the Company. The Company discloses the lowest level input significant to each category of asset or liability valued within the scope of ASC Topic 820 and the valuation method as exchange, income or use. The Company uses inputs which are as observable as possible and the methods most applicable to the specific situation of each company or valued item.
The Company's financial instruments consist of cash, accounts payable, accrued liabilities, advances, notes payable, and a loan payable. The carrying amount of these financial instruments approximate fair value due to either length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.
Our investment in marketable securities is measured at fair value on a recurring basis using Level 1 inputs.
Our warrant derivative liability and secured convertible promissory note derivative liability is measured at fair value on a recurring basis using Level 3 inputs.
Interest rate risk is the risk that the value of a financial instrument might be adversely affected by a change in the interest rates. The notes payable, loans payable and secured convertible promissory notes have fixed interest rates therefore the Company is exposed to interest rate risk in that they could not benefit from a decrease in market interest rates. In seeking to minimize the risks from interest rate fluctuations, the Company manages exposure through its normal operating and financing activities.
Foreign Currency Translation
The Companys functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated to United States dollars in accordance with ASC 740, Foreign Currency Translation Matters, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.
To the extent that the Company incurs transactions that are not denominated in its functional currency, they are undertaken in Mexican Pesos. The Company has not, as of the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
Comprehensive Loss
ASC 220, Comprehensive Income establishes standards for the reporting and display of comprehensive loss and its components in the consolidated financial statements. As at March 31, 2016 and 2015, the Company had no items that represent a comprehensive loss, and therefore has not included a schedule of comprehensive loss in the consolidated financial statements.
F-9
Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Income Taxes. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
Exploration and Development Costs
Exploration costs incurred in locating areas of potential mineralization or evaluating properties or working interests with specific areas of potential mineralization are expensed as incurred. Development costs of proven mining properties not yet producing are capitalized at cost and classified as capitalized exploration costs under property, plant and equipment. Property holding costs are charged to operations during the period if no significant exploration or development activities are being conducted on the related properties. Upon commencement of production, capitalized exploration and development costs would be amortized based on the estimated proven and probable reserves benefited. Properties determined to be impaired or that are abandoned are written-down to the estimated fair value. Carrying values do not necessarily reflect present or future values.
Mineral Property Rights
Costs of acquiring mining properties are capitalized upon acquisition. Mine development costs incurred either to develop new ore deposits, to expand the capacity of mines, or to develop mine areas substantially in advance of current production are also capitalized once proven and probable reserves exist and the property is a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are charged to operations upon abandonment. The Company evaluates the carrying value of capitalized mining costs and related property and equipment costs, to determine if these costs are in excess of their recoverable amount whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Evaluation of the carrying value of capitalized costs and any related property and equipment costs would be based upon expected future cash flows and/or estimated salvage value in accordance with Accounting Standards Codification (ASC) 360-10-35-15,
Impairment or Disposal of Long-Lived Assets
.
Asset Retirement Obligations
In accordance with accounting standards for asset retirement obligations (ASC 410), the Company records the fair value of a liability for an asset retirement obligation (ARO) when there is a legal obligation associated with the retirement of a tangible long-lived asset and the liability can be reasonably estimated. The associated asset retirement costs are supposed to be capitalized as part of the carrying amount of the related mineral properties. As of March 31, 2016 and 2015, the Company has not recorded AROs associated with legal obligations to retire any of the Companys mineral properties as the settlement dates are not presently determinable.
Revenue Recognition
The Company recognizes revenues and the related costs when persuasive evidence of an arrangement exists, delivery and acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured.
Accounting for Derivative Instruments
Accounting standards require that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. A change in the market value of the financial instrument is recognized as a gain or loss in results of operations in the period of change.
Stock-based Compensation
The Company records stock based compensation in accordance with the guidance in ASC Topic 718 which requires the Company to recognize expenses related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.
F-10
ASC 505, Compensation-Stock Compensation, establishes standards for the accounting for transactions in which an entity exchanges its equity instruments to non-employees for goods or services. Under this transition method, stock compensation expense includes compensation expense for all stock-based compensation awards granted on or after January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of ASC 505.
Per Share Data
Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, Earnings per Share. Basic earnings per common share (EPS) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09,
Revenue from Contracts with Customers
. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted in annual reporting periods beginning after December 31, 2016. The Company is in the process of evaluating the impact of ASU 2014-09 on the Companys consolidated financial statements and disclosures.
In August 2014, the FASB issued Accounting Standards Update No. 2014-15,
Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern
, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. ASU 2014-15 requires management to perform interim and annual assessments of an entitys ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entitys ability to continue as a going concern. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the impact the adoption of ASU 2014-15 on the Companys consolidated financial statements and disclosures.
In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02,
Leases
. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the expected impact that the standard could have on its consolidated financial statements and related disclosures.
The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its consolidated financial statements.
F-11
4.
DEPOSIT
Option and Joint Venture Agreement
On July 6, 2015, Mexus Gold Mining, S.A. de C.V., a wholly owned Mexican subsidiary of the Company (Mexus), entered into an Option and Joint Venture Agreement (Agreement) with Minera Real Del Oro, S.A. De C.V., a wholly owned Mexican subsidiary of Argonaut Gold, Inc., a Canadian gold company engaged in exploration, mine development and production activities (Argonaut). Pursuant to the Agreement, Mexus has granted Argonaut an exclusive and irrevocable option to acquire all rights to Mexus mining concessions located in Caborca, Mexico, Sonora State described as the Marta Elena, Julio II-VII and Mexus III Claims (the Mining Concessions).
According to the Agreement, Mexus will transfer its Mining Concessions into a newly formed Mexican Company (Newco), and Argonaut will have the sole option to purchase up to 80% ownership of Newco in accordance with the terms of the Agreement. The initial option period expires on December 31, 2015.
A summary of Argonauts required payments to Mexus for the option and required expenditures relating to the Mining Concessions are as follows:
1.
Argonaut will make a cash payment to Mexus of US$75,000 upon execution of the Agreement plus incur required expenditures relating to the Mining Concessions of not less than US$300,000 by December 31, 2015.
2.
In the event that Argonaut desires to extend the option period to June 30, 2016, Argonaut shall pay a cash payment to Mexus of US$125,000 plus incur required expenditures relating to the Mining Concessions of not less than US$500,000.
3.
In the event that Argonaut desires to extend the option period to December 31, 2016, Argonaut shall pay a cash payment to Mexus of US$350,000 plus incur required expenditures relating to the Mining Concessions of not less than US$1,000,000.
4.
In the event that Argonaut desires to extend the option period to December 31, 2017, Argonaut shall pay a cash payment to Mexus of US$400,000 plus incur required expenditures relating to the Mining Concessions of not less than US$3,300,000.
5.
Argonaut is responsible for paying all land taxes, annual concessions or permit fees and the monthly lease of US$1,000 during the term of the Agreement. In addition, prior to July 6, 2016, Argonaut must expend a minimum of US$600,000 in expenditures relating to drilling Reverse Circulation and/or Core or a combination of both drill holes in relation to the Mining Concessions.
6.
At any time prior to December 31, 2018, Argonaut may exercise the option, provided that it has incurred minimal expenditures on the project of US$5,000,000 and made cash payments to Mexus equal to US$950,000.
Once the option is exercised, Argonaut will hold an 80% interest of Newco and Mexus will hold a 20% interest in Newco. All mining operations will be funded by Argonaut at no cost to Mexus. Newco will be managed by three board members, one of which will be Mexus. Argonaut reserves the right to terminate the Agreement at any time with 30 days written notice provided that the required payments to Mexus have been made in accordance with the terms of the Agreement.
On July 7, 2015, Mexus deposited $75,000 of cash received from Argonaut in accordance with this Agreement. The proceeds from the issue of the option is accounted for using the option method. If the option is exercised, the Company will include the option proceeds in the sales value of the property. If the option is not exercised, the Company will recognize the option proceeds as income at the time the option expires.
On December 4, 2015, Argonaut notified the Company that it will not exercise its option for the Mining Concessions and the Agreement was terminated. The $75,000 cash deposit received by Mexus on July 7, 2015 is recognized as revenue in the consolidated statement of operations.
F-12
5.
MINERAL PROPERTIES AND EXPLORATION COSTS
The following is a continuity of mineral property acquisition costs capitalized on the consolidated balance sheets during the years ended March 31, 2016 and 2015:
|
|
|
|
|
|
|
Balance
March 31, 2015
|
Cash
Payments
|
Share-based
Payments
|
Impairment
|
Balance
March 31, 2016
|
Ures (a)
|
$ -
|
$ -
|
$ -
|
$ -
|
$ -
|
Corborca (b)
|
505,947
|
-
|
-
|
-
|
505,947
|
|
$ 505,947
|
$ -
|
$ -
|
$ -
|
$ 505,947
|
|
|
|
|
|
|
|
Balance
March 31,
2014
|
Cash
Payments
|
Share-based
Payments
|
Impairment
|
Balance
March 31,
2015
|
Ures (a)
|
$ -
|
$ -
|
$ -
|
$ -
|
$ -
|
Corborca (b)
|
505,947
|
-
|
-
|
-
|
505,947
|
|
$ 505,947
|
$ -
|
$ -
|
$ -
|
$ 505,947
|
The following is a continuity of exploration costs expensed in the consolidated statements of operation:
|
|
|
|
|
|
Balance
March 31, 2015
|
Cash
Payments
|
Share-based
Payments
|
Balance
March 31,
2016
|
Ures (a)
|
$ 1,910,649
|
$ -
|
$ -
|
$ 1,910,649
|
Corborca (b)
|
2,331,867
|
241,990
|
212,290
|
2,786,147
|
|
$ 4,242,516
|
$ 241,990
|
$ 212,290
|
$ 4,696,796
|
|
|
|
|
|
|
Balance
March 31, 2014
|
Cash
Payments
|
Share-based
Payments
|
Balance
March 31, 2015
|
Ures (a)
|
$ 1,910,649
|
$ -
|
$ -
|
$ 1,910,649
|
Corborca (b)
|
1,761,742
|
420,579
|
149,546
|
2,331,867
|
|
$ 3,672,391
|
$ 420,579
|
$ 149,546
|
$ 4,242,516
|
(a)
Ures, Sonora, Mexico
On May 25, 2010, the Company entered into a Mineral Exploration and Mining Lease with Option to Purchase with the owner of four mining claims (i) Ocho Hermanos (ii) 370 Area (iii) El Scorpion (iv) Los Laureles located at Ures, Sonora, Mexico. For an initial exploration and drilling term up to June 30, 2011, the Company agreed to pay a monthly lease payment of $5,000 and a production royalty of 3% of the net smelter returns. The Company has the option to purchase the mining claims payable, year 1 - $200,000, year 2 - $300,000, year 3 - $400,000 and year 4 - $2,100,000 for a total of $3,000,000. These property rights are owned by Mexus Gold S.A. de C.V. The properties were fully impaired at March 31, 2013 as the reserves were deemed not to be sufficient to warrant further work.
(b)
Corborca, Sonora, Mexico
On January 5, 2011, the Company entered into a Mineral Exploration, Exploitation and Mining Concession Purchase Agreement for two mining properties (i) Julio II (ii) Martha Elena located in the municipality of Caborca, Sonora, Mexico. The purchase price of these rights are (a) $50,000 cash (b) 1,000,000 shares of common stock of Mexus Gold US (c) $2,000,000 paid at a rate of 40% net smelter royalty. The term of the agreement can be terminated at the option of the Company. These property rights are owned by Mexus Gold Mining S.A. de C.V.
F-13
6.
PROPERTY & EQUIPMENT
|
|
|
|
|
|
Cost
|
Accumulated
Depreciation
|
March 31, 2016
Net Book Value
|
March 31, 2015
Net Book Value
|
Mining tools and equipment
|
$ 1,176,576
|
$ 650,265
|
$ 526,311
|
$ 1,117,568
|
Watercraft
|
-
|
-
|
-
|
70,415
|
Vehicles
|
116,491
|
114,841
|
1,650
|
24,866
|
|
$ 1,293,066
|
$ 765,105
|
$ 527,961
|
$ 1, 212,849
|
During the year ended March 31, 2016, mining tools and equipment with a carrying value of $322,861 was reclassified as held for sale resulting in an impairment of equipment held for sale of $39,645. In addition, equipment with carrying value of $69,490 was written off with no proceeds.
During the year ended March 31, 2015, equipment of total cost net of accumulated depreciation of $59,230 were sold and a loss of $18,230 was recognized.
During the year ended March 31, 2016, equipment of total cost net of accumulated depreciation of $115,759 were sold and a loss of $47,209 was recognized.
Depreciation expense for the years ended March 31, 2016 and 2015 was $265,708 and $330,678, respectively.
7.
ACCOUNTS PAYABLE RELATED PARTIES
During the years ended March 31, 2016 and 2015, the Company incurred rent expense to Paul D. Thompson, the sole director and officer of the Company, of $45,600 and $45,600, respectively. At March 31, 2016 and 2015, $33,798 and $83,798 for this obligation is outstanding, respectively.
On June 10, 2015, the Company issued 625,000 shares of Series A Convertible Preferred Stock ($0.12 per share) to Paul Thompson Sr., Chief Executive Officer and sole director of the Company, for $75,000 for settlement of accounts payable related party.
Compensation
On July 2, 2015, the Company entered into a compensation agreement with Paul D. Thompson, the sole director and officer of the Company. Mr. Thompson is compensated $15,000 per month and has the option to take payment in Company stock valued at an average of 5 days closing price, cash payments or deferred payment in stock or cash. In addition, Mr. Thompson is due 2,000,000 shares of common stock valued at the 5 day average closing price each fiscal quarter. At March 31, 2016, $116,400 of compensation due is included in accounts payable related party and $86,800 for 6,000,000 shares of common stock due is included in share subscriptions payable.
8.
NOTES PAYABLE RELATED PARTY
Notes due to Taurus Gold, Inc. are unsecured, non-interest bearing and due on demand. These notes were accumulated through a series of cash advances to the Company. Taurus Gold, Inc. is controlled by Paul D. Thompson, the sole director and officer of the Company. As of March 31, 2016 and 2015, notes payable due to Taurus Gold Inc. totaled $101,428 and $174,460, respectively.
Notes due to North Pacific Gold were accumulated through a series of cash advances to the Company. North Pacific Gold is controlled by Paul Thompson, Jr. an immediate family member of Paul D. Thompson, the sole director and officer of the Company. On June 29, 2015, North Pacific Gold advanced the Company $7,500 in cash. This loan is due in 90 days, unsecured and bears interest of 6% per annum and is repayable in cash or Company common stock at market value at the option of the Company. As of March 31, 2016, notes payable due to North Pacific Gold totaled $9,091 and $12,332, respectively.
F-14
9.
NOTES PAYABLE
On January 8, 2013, the Company entered into an unsecured promissory note agreement with William H. Brinker in the amount of $185,000. The note is due on demand upon the occurrence of certain events and at the discretion of the note holder. A finance charge of $5,000 is due on or before March 31, 2013. The note is secured by 5,000,000 shares of common stock of Mexus Gold US pledged by the Company and certain mining equipment including a radial stacker and cone crushing plant. On April 1, 2013, the Company repaid $50,000 in principal. On August 24, 2015, the remaining balance of this unsecured promissory note of $140,000 was settled in full on issuance of the convertible promissory note ($140,000 March 31, 2015 and $0 - March 31, 2016). See Note 10.
On February 4, 2014, the Company received a cash advance of $30,000 for a note payable with a face value of $36,000 with no specific terms of repayment secured by a mobile crusher unit. At March 31, 2016 and 2015, the balance of this note is $0 and $30,000, respectively. The note principal was paid in full by way of cash and partly by conversion of shares on July 9, 2015. At March 31, 2016 and 2015, accrued interest of $0 and $6,000 on this note have been included in accounts payable and accrued liabilities, respectively.
During the year ended March 31, 2014, the Company received cash advances of $15,000 and repaid $500 from an unrelated shareholder of the Company. The note principal and interest was paid in full through the conversion of shares on July 9, 2015. These advances bear interest of 10%, are unsecured and are due within 60 days. At March 31, 2016 and 2015, the balance of these advances totaled $0 and $14,500, respectively.
During the year ended March 31, 2014, the Company received cash advances of $164,502 from three unrelated shareholders of the Company. These advances are non-interest bearing, unsecured and have no specific terms of repayment. On August 19, 2014, the Company issued 1,750,020 shares of common stock valued at $70,000. The shares were issued in settlement of the convertible promissory note ($0.04 per share) to settle $87,501 in advances. As a result, the Company recorded a gain on settlement of debt of $17,501. On February 28, 2015, the Company issued 2,272,727 shares of common stock valued at $48,636 ($0.0214 per share) to settle $25,000 in advances. As a result, the Company recorded a loss on settlement of debt of $23,636. On August 24, 2015, $37,001 of these advances were settled on issuance of the convertible promissory note (See Note 10). At March 31, 2016 and 2015, the balance of these advances totaled $15,000 and $52,001, respectively.
During the year ended March 31, 2015, the Company received various advances totaling $286,757 from twenty-two investors. In addition, during the year ended March 31, 2016, the Company received various advances totaling $290,300 from nineteen investors. These advances are unsecured and are due within 30 to 180 days of issue. Upon receipt of the cash advance, the Company paid majority of the investors the value of their investment in shares of common stock of the Company as a finance fee. The investor has the option to be repaid when due by one of the following: (i) In cash (ii) One-half in cash and onehalf in shares converted into common stock of the Company or (iii) The entire amount of the investment converted into shares of common stock of the Company. The conversion prices range from $0.0018 per share to $0.040 per share. For one promissory note with principal of $40,000 payments equal to 20% of cash proceeds received by the Company are due when equipment held for sale is sold.
During the year ended March 31, 2016, note principal and interest of $503,960 was paid through the issuance of shares of common stock and $42,264 in cash. At March 31, 2016 and 2015, the balance of these advances totaled $243,089 and $167,056, respectively. At March 31, 2016 and 2015, debt discount of $54,112 and $14,922, respectively has been recorded on the consolidated balance sheet related to these cash advances. At March 31, 2016, $49,800 of these notes were in default. There are no default provisions stated in the notes.
On January 19, 2016, the Company issued a promissory note (Note) with a principal of amount of $77,150 bearing interest of 10% per annum to settle $77,150 in accounts payable due for accounting fees. Payments equal to 15% of cash proceeds received by the Company are due when equipment held for sale is sold. Any unpaid principal and interest is due in full on July 19, 2016.
On February 16, 2010, the Company made an unsecured Promissory Note Agreement with William McCreary in the amount of $2,500 at eight percent interest and due on demand or no later than September 1, 2010. The Company has not made the scheduled payments and is in default on this note as of December 31, 2011. The default rate on the note is eight percent. On October 2015, Paul Thompson Sr., the Chief Executive Officer and sole director of the Company, personally paid the Note in full. At March 31, 2016 and 2015, the balances on this note totalled $0 and $2,500, respectively. At March 31, 2016, accrued interest of $0 and $3,540 on this note have been included in accounts payable and accrued liabilities, respectively.
Amortization of debt discount was $70,702 and $74,903 for the years ended March 31, 2016 and 2015, respectively.
The amount by which the if-converted value of notes payable exceeds principal of notes payable at March 31, 2016 is $752,298.
F-15
10. PROMISSORY NOTES
On April 18, 2013, the Company issued Promissory Notes for $255,000 in cash. The Notes bear interest of 4% per annum and are due on December 31, 2013. The Notes are secured by all of Mexus Gold US shares of stock in Mexus Resources S.A. de C.V. and a personal guarantee of Paul D. Thompson. In addition, a fee of 2,550,000 shares of common stock of the Company valued at $501,075 ($0.1965 per share) was paid to the Note holders on April 18, 2013. These financing fees were capitalized in the consolidated balance sheet as deferred finance expense and were being amortized on a straight-line basis, which approximates the effective interest rate method, as interest expense over the life of the Promissory Notes. On August 24, 2015, $100,000 of these Promissory Notes were settled on issuance of the convertible promissory note. On December 1, 2015, $60,000 of these Promissory Notes were settled on issuance of the convertible promissory note. At March 31, 2016 and 2015, outstanding Promissory Notes were $95,000 and $255,000, respectively. As of March 31, 2016, the Company has not made the scheduled payments and is in default on these promissory notes. The default rate on the notes is seven percent. At March 31, 2016 and 2015 accrued interest of $18,013 and $30,133, respectively, is included in accounts payable and accrued liabilities.
On August 24, 2015, the Company issued a convertible promissory note (Note) for a total amount of $343,973 due on February 24, 2017 to William H. Brinker (Holder). The total amount of the Note is due in three equal payments plus any accrued interest at 180 days, 360 days and 540 days from the issuance date. The Holder upon annual election may elect to be paid in cash or stock (but not both) as follows: (a) in cash, with interest at 4% per annum (b) in shares of common stock of the Company, with interest at 12% per annum (Stock Payment). For a Stock Payment, the number of shares is determined by multiplying the outstanding principal of the Note by 12% divided by 100% of the average of the closing price of the Stock for ten trading days immediately preceding the payment date. This Note has been accounted for in accordance with ASC 480
Distinguishing Liabilities from Equity
. In consideration of the Company issuing the Note, the Holder agreed to cancel all other notes, contracts or other agreements with a carrying value totaling $458,402 prior to the issuance of the Note comprising unsecured promissory note dated January 8, 2013 of $140,000, promissory note of $100,000 dated April 18, 2013, various notes payable of $41,001, interest payable of $9,372 and share subscriptions payable of $168,029. In conjunction with the Note, on September 2, 2015, the Company issued the Holder 8,732,880 shares of common stock with a fair value of $134,486 ($0.0154 per share) which was recorded as debt discount. The issuance of the Note resulted in gain on settlement of $114,429. At March 31, 2016 the Note is recorded net of discount of $82,187. The net note balance as of March 31, 2016 and 2015 was $261,786 and $0, respectively.
On December 1, 2015, the Company issued a convertible promissory note (Note) dated August 24, 2015 for a total amount of $41,189 due on February 24, 2017 to David Long (Holder). The total amount of the Note is due in three equal payments plus any accrued interest at 180 days, 360 days and 540 days from the date of the Note. The Holder, upon annual election, may elect to be paid in cash or stock (but not both) as follows: (a) in cash, with interest at 4% per annum (b) in shares of common stock of the Company, with interest at 12% per annum (Stock Payment). For a Stock Payment, the number of shares is determined by multiplying the outstanding principal of the Note by 12% divided by 100% of the average of the closing price of the Stock for ten trading days immediately preceding the payment date. This Note has been accounted for in accordance with ASC 480
Distinguishing Liabilities from Equity
. In consideration of the Company issuing the Note, the Holder agreed to cancel all other notes, contracts or other agreements with a carrying value totaling $60,000 prior to the issuance of the Note comprising a promissory note of $60,000 dated April 18, 2013. In conjunction with the Note, on September 2, 2015, the Company issued the Holder 686,475 shares of common stock with a fair value of $10,297 ($0.015 per share) which as recorded as debt discount. The issuance of the Note resulted in gain on settlement of $18,811. At March 31, 2016, the Note is recorded net of discount of $6,293. The net note balance as of March 31, 2016 and 2015 was $34,896 and $0, respectively.
F-16
11. SECURED CONVERTIBLE PROMISSORY NOTES
Typenex Co-Investment, LLC
On June 12, 2013, the Company entered into a Securities Purchase Agreement with Typenex Co-Investment, LLC (Typenex), for the sale of an 8% Secured Convertible Promissory Note (Notes) in the principal amount of $557,500 consisting of an initial tranche of $307,500 comprising of $250,000 of cash at closing, Typenex legal expenses in the amount of $7,500 and a $50,000 original issue discount and an additional tranche $250,000 in cash. On June 12, 2013, the Company closed on the initial tranche and received $250,000 in cash. On August 8, 2013, the Company closed on the second tranche and received $125,000 in cash. The Company has not closed on the final tranche for $125,000 in cash. The Company has no obligation to pay Typenex any amounts on the unfunded portion of the Note. The Notes have a maturity date that is thirteen months after the issuance date. Typenex has been granted a security interest in the property of the Company. At the option of the holder, all principal, costs, charges and interest amounts outstanding under all of the Notes shall be exchanged for shares of the Companys common stock at the Conversion Price of $0.23 per share. The Conversion Price is subject to an anti-dilution adjustment in the event the Company at any time, while the Notes are outstanding, issues equity securities including common stock or any security convertible or exchangeable for shares of common stock for no consideration or for consideration less than $0.23 a share.
In conjunction with the issuance of the Notes on June 12, 2013, the Company issued a variable number of warrants of the Companys common stock equal to $278,750 divided by the Market Price. Market Price is defined as the higher of (i) the closing price of the common stock of the Company on June 12, 2013, and (ii) the VWAP of the common stock for the trading day that is two days prior to the exercise date. The Exercise Price of the warrants are $0.24 per share. The Exercise Price is subject to an anti-dilution adjustment in the event the Company at any time, while the Warrants are outstanding, issues equity securities including common stock or any security convertible or exchangeable for shares of common stock for no consideration or for consideration less than $0.24 a share.
The anti-dilution protection for the Note and Warrants excludes (a) the Companys issuance of securities in connection with strategic license agreements and other partnering arrangements so long as any such issuances are not for the purpose of raising capital and in which holders of such securities or debt are not at any time granted registration rights, and (b) the Companys issuance of Common Stock or the issuance or grant of options to purchase Common Stock to employees, directors, officers and consultants, authorized by the Companys board of directors in place on June 12, 2013. After nine months after the issuance date, monthly installments are due on the Note payable at the option of the Company (i) in cash (ii) in shares of common stock of the Company discounted depending on the Companys share price at either 30% or 35%, or (iii) in any combination of cash or shares.
On June 12, 2013, the Company recorded a discount on the Note equal to the fair value of the warrant derivative liability and convertible promissory note derivative liability. This discount is amortized using the effective interest rate method over the term of the Note.
|
|
|
|
|
|
|
Year Ended
March 31, 2016
|
|
Year Ended
March 31, 2015
|
Opening balance
|
$
|
102,842
|
$
|
282,861
|
Conversion of principal into shares of common stock
|
|
(105,623)
|
|
(268,663)
|
Amortization of discount on Note and accrued interest
|
|
2,781
|
|
88,644
|
|
|
|
|
|
Closing balance
|
$
|
-
|
$
|
102,842
|
On April 18, 2015, May 1, 2015, July 28, 2015 and September 2, 2015, the Company issued a total of 12,370,789 shares of common stock valued at $242,400 ($0.0196 per share) to Typenex Co-Investment, LLC for conversion of principal and interest of $96,336 and loss on settlement of debt of $146,064.
F-17
JMJ Financial
On January 28, 2015, the Company issued a Convertible Promissory Note (Note) to JMJ Financial (Holder), in the original principal amount of $110,000 bearing a 12% annual interest rate and maturing in two years for $100,000 of consideration paid in cash and a $10,000 original issue discount. The Company may repay the Note any time and if repaid within 90 days of date of issue, the interest rate is 0%. This Note together with any unpaid accrued interest is convertible into shares of common stock at the Holders option at a variable conversion price calculated as lessor of (a) $0.029 or (b) 60% of the lowest trade occurring during the 25 consecutive trading days immediately preceding the conversion date. On January 28, 2015, the Company received cash of $50,000 in the first tranche, which was net of original issue discount of $5,000. During the year ended March 31, 2016, the Holder converted 9,195,604 shares of common stock of the Company with a fair value of $152,689 to settle $61,600 of principal and interest. At March 31, 2015, the first tranche of the Note is recorded at a fully accreted value of $85,056 less unamortized debt discount of $67,802.At March 31, 2016 the principal and interest outstanding for the first tranche of the Note was paid in full.
LGH Investments, Inc.
On April 6, 2015, the Company issued a Convertible Promissory Note (Note) to LGH Investments, Inc. (Holder), in the original principal amount of $110,000 bearing a 12% annual interest rate and maturing in two years for $100,000 of consideration paid in cash and a $10,000 original issue discount. This Note together with any unpaid accrued interest is convertible into shares of common stock at the Holders option at a variable conversion price calculated as lessor of (a) $0.019 or (b) 60% of the lowest trade occurring during the 25 consecutive trading days immediately preceding the conversion date. On April 6, 2015, the Company received cash of $25,000 in the first tranche, which was net of original issue discount of $2,500. During the year ended March 31, 2016, the Holder converted 9,146,736 shares of common stock of the Company with a fair value of $116,682 to settle $41,800 of principal and interest. At March 31, 2016, the principal and interest outstanding for the first tranche of the Note was paid in full.
Lucas Hoppel
On June 11, 2015, the Company issued a Convertible Promissory Note (Note) to Lucas Hoppel (Holder), in the original principal amount of $110,000 bearing a 12% annual interest rate and maturing in two years for $100,000 of consideration paid in cash and a $10,000 original issue discount. This Note, together with any unpaid accrued interest, is convertible into shares of common stock at the Holders option at a variable conversion price calculated as lessor of (a) $0.018 or (b) 60% of the lowest trade occurring during the 25 consecutive trading days immediately preceding the conversion date. On June 11, 2015, the Company received cash of $25,000 in the first tranche, which was net of original issue discount of $2,500. During the year ended March 31, 2016, the Company issued 20,000,000 shares of common stock of the Company with a fair value of $100,000 and paid $6,000 in cash to settle the Note in full.
12. WARRANT DERIVATIVE LIABILITY
The Warrants are subject to anti-dilution adjustments that allow for the reduction in the Exercise Price in the event the Company subsequently issues equity securities including common stock or any security convertible or exchangeable for shares of common stock for no consideration or for consideration less than $0.24 a share. The Company accounted for the warrants in accordance with ASC Topic 815. Accordingly, the Warrants are not considered to be solely indexed to the Companys own stock and, as such, recorded as a liability.
The Companys warrant derivative liability has been measured at fair value at March 31, 2016 and 2015 using a binomial model. Since the Exercise Price contains an anti-dilution adjustment, the probability that the Exercise Price of the Notes would decrease as the share price decreased was incorporated into the valuation calculation. After June 12, 2013, the Company issued common stock for cash at a price of $0.01 per share and the conversion price has been adjusted accordingly.
The inputs into the binomial model are as follows:
|
|
|
|
November 12, 2015
|
March 31, 2015
|
Market price
|
$0.0125
|
$0.0194
|
Conversion price
|
$0.0046
|
$0.0110
|
Risk free rate
|
1.20%
|
0.89%
|
Expected volatility
|
145%
|
121%
|
Dividend yield
|
0%
|
0%
|
Expected life
|
32 months
|
38 months
|
F-18
On November 13, 2015, the Company entered into a Warrant Settlement Agreement whereby the Company agreed to issue 30,000,000 shares of common stock of the Company with a fair value of $357,000 ($0.0119 per share) for full settlement and cancelation of the Warrant issued in conjunction with the 8% Secured Convertible Promissory Note on June 12, 2013 to Typenex Co-Investment, LLC. As a result, a warrant liability of $660,857 was settled and a gain on settlement of debt of $303,857 is recorded in the consolidated statement of operations for the year ended March 31, 2016.
The fair value of the warrant derivative liability is $0 and $407,585 at March 31, 2016 and 2015, respectively. The increase (decrease) in the fair value of the warrant liability of $253,272 and $(513,341) has been recorded as a (gain) loss in the consolidated statements of operations for the year ended March 31, 2016 and 2015, respectively.
13. CONVERTIBLE PROMISSORY NOTE DERIVATIVE LIABILITIES
The Convertible Promissory Note with Typenex is subject to anti-dilution adjustments that allow for the reduction in the Conversion Price in the event the Company subsequently issues equity securities including common stock or any security convertible or exchangeable for shares of common stock for no consideration or for consideration less than $0.23 a share. The Company accounted for the conversion option in accordance with ASC Topic 815. Accordingly, the Conversion Option is not considered to be solely indexed to the Companys own stock and, as such, recorded as a liability.
The Companys convertible promissory note derivative liabilities has been measured at fair value at March 31, 2015 and 2014 using a binomial model. Since the Conversion Price contains an anti-dilution adjustment, the probability that the Conversion Price of the Notes would decrease as the share price decreased was incorporated into the valuation calculation. After June 12, 2013, the Company issued common stock for cash at a price of $0.01 per share and the conversion price has been adjusted accordingly. At March 31, 2016, the Convertible Promissory Note with Typenex was paid in full. As such, the fair value of the conversion feature at March 31, 2016 is $0 (See Note 10).
The inputs into the binomial model are as follows:
|
|
|
March 31, 2015
|
Closing share price
|
$0.0194
|
Conversion price
|
$0.011
|
Risk free rate
|
0.14%
|
Expected volatility
|
180%
|
Dividend yield
|
0%
|
Expected life
|
0.5 years
|
Additionally, the Convertible Promissory Notes with JMJ Financial with an issue date of January 28, 2015, LGH Investments, Inc. with an issue date of April 6, 2015 and Lucas Hoppel with an issue date of June 11, 2015 was accounted for under ASC 815. The variable conversion price is not considered predominately based on a fixed monetary amount settleable with a variable number of shares due to the volatility and trading volume of the Companys common stock. The Companys convertible promissory note derivative liabilities has been measured at fair value at September 30, 2015, June 11, 2015, April 6, 2015 and March 31, 2015 using the Black-Scholes model.
The inputs into the Black-Scholes models are as follows:
|
|
|
|
September 30, 2015
|
March 31, 2015
|
Closing share price
|
$0.0149
|
$0.0194
|
Conversion price
|
$0.0160
|
$0.019
|
Risk free rate
|
0.050%
|
0.050%
|
Expected volatility
|
143% - 151%
|
129%
|
Dividend yield
|
0%
|
0%
|
Expected life
|
1.58 years 1.95 years
|
1.83 years
|
The fair value of the conversion option derivatives is $0 and $167,678 at March 31, 2016 and 2015, respectively. The increase (decrease) in the fair value of the convertible promissory note derivative liabilities of $(235,282) and $(827,466) has been recorded as a (gain) loss in the consolidated statements of operations for the year ended March 31, 2016 and 2015, respectively.
F-19
At December 31, 2015, the Company determined that it did not have sufficient authorized and unissued shares to settle contractual obligations for stock payable, Series A Convertible Preferred Stock and convertible notes. After allocating available shares of common stock to various contracts, there is a shortfall of 82,731,750 shares to satisfy obligations for convertible notes. As a result, the obligation to deliver shares was reclassified from equity to liabilities and a $198,088 promissory note obligation is recorded on the consolidated balance sheet at December 31, 2015.
The inputs into the Black-Scholes models are as follows:
|
|
|
December 31, 2015
|
Closing share price
|
$0.0035
|
Conversion price
|
$0.0046 to $0.0110
|
Risk free rate
|
0.050%
|
Expected volatility
|
209% to 271%
|
Dividend yield
|
0%
|
Expected life
|
0.12 to1.15 years
|
At February 4, 2016, the Company approved an amendment of the Companys articles of incorporation to increase the number of authorized common shares of the Company from 500,000,000 to 850,000,000 shares of common stock. As a result, the Company has sufficient shares of the common stock to settle contractual obligations for stock payable, Series A Convertible Preferred Stock and convertible notes and the obligation to deliver shares was reclassified from liabilities to equity.
14. CONTINGENT LIABILITIES
An asset retirement obligation is a legal obligation associated with the disposal or retirement of a tangible long-lived asset that results from the acquisition, construction or development, or the normal operations of a long-lived asset, except for certain obligations of lessees. While the Company, as of March 31, 2016, does not have a legal obligation associated with the disposal of certain chemicals used in its leaching process, the Company estimates it will incur costs up to $50,000 to neutralize those chemicals at the close of the leaching pond.
15. STOCKHOLDERS EQUITY (DEFICIT)
The stockholders equity of the Company comprises the following classes of capital stock as of March 31, 2016 and 2015:
Preferred Stock, $0.001 par value per share; 9,000,000 shares authorized, 0 shares issued and outstanding at March 31, 2016 and 2015, respectively.
Series A Convertible Preferred Stock (Series A Preferred Stock), $0.001 par value share; 1,000,000 shares authorized: 1,000,000 shares and 375,000 shares issued and outstanding at March 31, 2016 and 2015, respectively.
Holders of Series A Preferred Stock may convert one share of Series A Preferred Stock into one share of Common Stock. Holders of Series A Preferred Stock have the number of votes determined by multiplying (a) the number of Series A Preferred Stock held by such holder, (b) the number of issued and outstanding Series A Preferred Stock and Common Stock on a fully diluted basis, and (c) 0.000006.
At February 4, 2016, the Company approved an amendment of the Companys articles of incorporation to increase the number of authorized common shares of the Company from 500,000,000 to 850,000,000 shares of common stock.
Common Stock, par value of $0.001 per share; 850,000,000 shares authorized: 480,601,620 and 308,236,718 shares issued and outstanding at March 31, 2016 and 2015, respectively. Holders of Common Stock have one vote per share of Common Stock held.
Series A Preferred Stock
During the year ended March 31, 2016, the Company issued subscriptions payable for 625,000 shares of Series A Preferred Stock valued at $75,000 and classified as Series A Preferred Stock of $625 and additional paid-in capital of $74,375 ($0.12 per share) to Paul Thompson Sr., Chief Executive Officer and sole director of the Company, for $75,000 for settlement of accounts payable related party.
F-20
Common Stock
(i)
Year Ended March 31, 2016
On April 14, 2015 the Company issued 1,840,908 shares of common stock to satisfy obligations under share subscription agreements for $21,318 for settlement of notes payable and $7,500 in services included in share subscriptions payable.
On April 21, 2015 the Company issued 4,745,452 shares of common stock to satisfy obligations under share subscription agreements for $36,441 for settlement of notes payable, $12,000 in services and $18,800 in cash receipts included in share subscriptions payable.
On May 13, 2015 the Company issued 3,176,134 shares of common stock to satisfy obligations under share subscription agreements for $30,289 for settlement of notes payable, $10,000 in equipment and $9,000 in cash receipts included in share subscriptions payable.
On June 10, 2015 the Company issued 625,000 shares of Series A Preferred Stock to Paul Thompson Sr., the CEO and sole director of the Company, to satisfy obligations under share subscription agreements for $75,000 for settlement of accounts payable receipts included in share subscriptions payable.
On June 10, 2015 the Company issued 5,830,863 shares of common stock to satisfy obligations under share subscription agreements for $49,448 for settlement of accounts payable, $9,534 in services and $22,500 in cash receipts included in share subscriptions payable.
On June 23, 2015 the Company issued 1,800,000 shares of common stock to satisfy obligations under share subscription agreements for $12,000 in services and $20,000 in cash receipts included in share subscriptions payable.
On July 9, 2015 the Company issued 7,796,966 shares of common stock to satisfy obligations under share subscription agreements for $63,000 for settlement of notes payable, $14,200 in services and $12,500 in cash receipts included in share subscriptions payable.
On July 29, 2015 the Company issued 2,078,333 shares of common stock to satisfy obligations under share subscription agreements for $8,490 in services and $15,000 in cash receipts included in share subscriptions payable.
On August 6, 2015 the Company issued 2,125,000 shares of common stock to satisfy obligations under share subscription agreements for $25,500 in services included in share subscriptions payable.
On August 14, 2015 the Company issued 1,500,000 shares of common stock to satisfy obligations under share subscription agreements for $38,150 in services included in share subscriptions payable.
On August 24, 2015, $168,029 of share subscriptions payable for 2,517,040 shares of common stock due William H. Brinker were settled on issuance of the convertible promissory note.
On September 2, 2015 the Company issued 10,207,799 shares of common stock to satisfy obligations under share subscription agreements for $207,998 for settlement of notes payable, $29,000 in services and $12,776 in cash receipts included in share subscriptions payable.
On September 18, 2015 the Company issued 1,109,090 shares of common stock to satisfy obligations under share subscription agreements for $10,000 for settlement of notes payable and $2,000 in cash receipts included in share subscriptions payable.
On September 21, 2015 the Company issued 6,500,000 shares of common stock to satisfy obligations under share subscription agreements $97,250 in services and $10,000 in cash receipts included in share subscriptions payable.
On September 30, 2015, the Company issued 750,000 shares of common stock to satisfy obligations under share subscription agreement for $45,000 in services.
On April 18, 2015, May 1, 2015, July 28, 2015 and September 2, 2015, the Company issued a total of 12,370,789 shares of common stock valued at $242,400 ($0.0196 per share) to Typenex Co-Investment, LLC for conversion of principal and interest of $96,336 and loss on settlement of debt of $146,064.
F-21
On December 7, 2015 the Company issued 7,005,194 shares of common stock to satisfy obligations under share subscription agreements for $56,000 in services and $30,122 in cash receipts included in share subscriptions payable.
On December 18, 2015 the Company issued 13,896,345 shares of common stock to satisfy obligations under share subscription agreements for $148,804 for settlement of notes payable, $26,325 in services, $21,350 in equipment and $12,500 in cash receipts included in share subscriptions payable.
On December 23, 2015 the Company issued 8,669,993 shares of common stock to satisfy obligations under share subscription agreements for $21,297 for settlement of notes payable, $59,800 in services and $11,000 in cash receipts included in share subscriptions payable.
On July 28, 2015, August 10, 2015, August 24, 2015, September 1, 2015, September 15, 2015 and September 24, 2015, October 2, 2015 and October 20, 2015, the Company issued a total of 9,195,604 shares of common stock valued at $152,689 ($0.0166 per share) to JMJ Financial for conversion of principal and interest of $61,600 and loss on settlement of debt of $91,089.
On October 15, 2015, October 26, 2015, November 4, 2015, November 11, 2015 and November 13, 2015, the Company issued a total of 9,146,739 shares of common stock valued at $116,682 ($0.0128 per share) to LGH Investments, Inc. for conversion of principal and interest of $41,800 and loss on settlement of debt of $74,882.
On November 13, 2015, the Company entered into a Warrant Settlement Agreement whereby the Company agreed to issue 30,000,000 shares of common stock of the Company with a fair value of $357,000 ($0.0119 per share) for full settlement and cancelation of the Warrant issued in conjunction with the 8% Secured Convertible Promissory Note on June 12, 2013 to Typenex Co-Investment, LLC. On November 13, 2015, the Company issued 17,000,000 shares of common stock in accordance with the Warrant Settlement Agreement. On January 18, 2016, the obligation of the remaining 13,000,000 shares due were issued.
On December 16, 2015, the Company issued a total of 20,000,000 shares of common stock valued at $100,000 ($0.005 per share) and paid $6,000 in cash to Lucas Hoppel for conversion of principal and interest of $31,980 and loss on settlement of debt of $74,020.
On January 15, 2016, the Company issued 9,256,711 shares of common stock to satisfy obligations under share subscription agreements for $30,000 in services and $51,750 in cash receipts included in share subscriptions payable.
On February 9, 2016, the Company issued 9,112,985 shares of common stock to satisfy obligations under share subscription agreements for $18,430 in services, $30,818 for settlement in notes payable and $14,000 in cash receipts included in share subscriptions payable.
On March 15, 2015, 5,750,000 shares of common stock previously issued to satisfy obligations under share subscription agreements for $24,200 in services and $58,125 in cash receipts were returned to treasury and included in share subscriptions payable.
(ii)
Year Ended March 31, 2015
On April 1, 2014, the Company issued 342,063 shares of common stock valued at $29,075 ($0.085 per share) to Typenex Co-Investment, LLC for conversion of principal and interest of $12,500 and loss on settlement of debt of $16,576.
On April 16, 2014, the Company issued 1,053,553 shares of common stock valued at $63,213 ($0.060 per share) to Typenex Co-Investment, LLC for conversion of principal and interest of $36,391 and loss on settlement of debt of $26,822.
On April 18, 2014, the Company issued 3,056,805 shares of common stock to satisfy obligations under share subscription agreements for $157,492 in cash, $76,110 in services and $7,698 for settlement of accounts payable included in share subscriptions payable.
On May 1, 2014, the Company issued 1,427,500 shares of common stock to satisfy obligations under share subscription agreements for $92,245 in services and $15,354 in equipment included in share subscriptions payable.
On June 16, 2014, the Company issued 919,033 shares of common stock valued at $36,761 ($0.040 per share) to Typenex Co-Investment, LLC for conversion of principal and interest of $23,608 and loss on settlement of debt of $13,153.
F-22
On July 3, 2014, the Company issued 1,103,370 shares of common stock to satisfy obligations under share subscription agreements for $7,500 in services and $44,103 in cash receipt in prior periods included in share subscriptions payable.
On July 31, 2014, the Company issued 467,144 shares of common stock valued at $19,153 ($0.041 per share) to Typenex Co-Investment, LLC for conversion of principal and interest of $10,822 and loss on settlement of debt of $8,331.
On August 20, 2014, the Company issued 1,064,237 shares of common stock valued at $42,569 ($0.040 per share) to Typenex Co-Investment, LLC for conversion of principal and interest of $20,780 and loss on settlement of debt of $21,789.
On August 25, 2014, the Company issued 4,800,105 shares of common stock to satisfy obligations under share subscription agreements for $227,505 in settlement of notes payable and $10,001 in cash included in share subscriptions payable.
On September 9, 2014, the Company issued 2,444,235 shares of common stock to satisfy obligations under share subscription agreements for $45,000 in finance expense and $27,000 in services included in share subscriptions payable.
On September 17, 2014, the Company issued 1,268,520 shares of common stock valued at $38,056 ($0.030 per share) to Typenex Co-Investment, LLC for conversion of principal and interest of $19,690 and loss on settlement of debt of $18,366.
On September 25, 2014, the Company issued 2,640,000 shares of common stock to satisfy obligations under share subscription agreements for $16,000 in finance expense and $98,500 in services included in share subscriptions payable.
On October 21, 2014, the Company issued 2,466,666 shares of common stock to satisfy obligations under share subscription agreements for $50,000 in finance expense and $18,750 in services included in share subscriptions payable.
On October 30, 2014, the Company issued 1,204,747 shares of common stock valued at $39,034 ($0.0324 per share) to Typenex Co-Investment, LLC for conversion of principal and interest of $17,510 and loss on settlement of debt of $21,524.
On November 26, 2014, the Company issued 783,333 shares of common stock to satisfy obligations under share subscription agreements for $15,000 in finance expense and $11,250 in services included in share subscriptions payable.
On December 4, 2014, the Company issued 2,408,146 shares of common stock valued at $96,085 ($0.0399 per share) to Typenex Co-Investment, LLC for conversion of principal and interest of $35,000 and loss on settlement of debt of $61,085.
On December 18, 2014, the Company issued 1,288,000 shares of common stock to satisfy obligations under share subscription agreements for $30,912 in services included in share subscriptions payable.
On January 16, 2015, the Company issued 1,881,721 shares of common stock to satisfy obligations under share subscription agreements for $53,946 in services included in share subscriptions payable.
On January 21, 2015, the Company issued 3,843,138 shares of common stock to satisfy obligations under share subscription agreements for $43,529 in settlement of accounts payable, $7,500 in settlement of notes payable, $15,000 in finance costs and $19,000 in cash receipts included in share subscriptions payable.
On January 27, 2015, the Company issued 3,552,726 shares of common stock to satisfy obligations under share subscription agreements for $69,700 in settlement of notes payable and $8,600 in cash included in share subscriptions payable.
On January 28, 2015, the Company issued 244,000 shares of common stock to satisfy obligations under share subscription agreements for $7,800 in services included in share subscriptions payable.
On January 23, 2015, the Company issued 2,752,167 shares of common stock valued at $82,290 ($0.0299 per share) to Typenex Co-Investment, LLC for conversion of principal and interest of $37,675 and loss on settlement of debt of $44,615.
On January 30, 2015, the Company issued 2,293,937 shares of common stock to satisfy obligations under share subscription agreements for $1,500 services, $11,000 for settlement of notes payable, $11,500 for finance costs and $8,000 in cash receipts included in share subscriptions payable.
On February 16, 2015, the Company issued 3,715,946 shares of common stock to satisfy obligations under share subscription agreements for $1,790 for settlement of accounts payable, $41,818 for settlement in account payable, $20,000 for finance costs, $5,000 for services and $10,500 in cash receipts included in share subscriptions payable.
F-23
On March 11, 2015, the Company issued 4,066,363 shares of common stock to satisfy obligations under share subscription agreements for $3,000 for settlement of services, $15,491 for settlement of notes payable and $35,000 in cash receipts included in share subscriptions payable.
On March 27, 2015, the Company issued 5,975,371 shares of common stock to satisfy obligations under share subscription agreements for $63,364 for settlement of notes payable, $4,864 for finance costs and $25,981 in cash receipts included in share subscriptions payable.
On March 23, 2015, the Company issued 3,070,782 shares of common stock valued at $76,770 ($0.025 per share) to Typenex Co-Investment, LLC for conversion of principal and interest of $40,000 and loss on settlement of debt of $36,770.
Common Stock Payable
(i)
Year Ended March 31, 2016
During the year ended March 31, 2016, the Company had total subscriptions payable for 81,781,794 shares of common stock for $282,589 in cash, shares of common stock for services valued at $213,453, stock for purchase of equipment valued at $500, common stock for settlement of notes payable valued at $13,673, stock for settlement of interest payable valued at $104,000.
(ii)
Year Ended March 31, 2015
During the year ended March 31, 2015, the Company had total subscriptions payable for 17,239,993 shares of common stock for $397,977 in cash, shares of common stock for services valued at $85,710, stock for purchase of equipment valued at $500, common stock for settlement of notes payable valued at $65,073, stock for settlement of interest payable valued at $10,000.
16. RELATED PARTY TRANSACTIONS
During the years ended March 31, 2016 and 2015, the Company entered into the following transactions with related parties:
Paul D. Thompson, sole director and officer of the Company
Taurus Gold, Inc., controlled by Paul D. Thompson
Rent expense Note 7
Notes Payable Note 9
F-24
17. INCOME TAXES
The following table presents income before taxes and income tax expense as well as the taxes charged to stockholders equity:
|
|
|
|
|
|
|
Year Ended
March 31, 2016
|
|
Year Ended
March 31, 2015
|
|
|
|
|
|
Net loss before taxes
|
$
|
(2,177,577)
|
$
|
(947,856)
|
|
|
|
|
|
Income tax expense charged to loss before taxes
|
$
|
-
|
$
|
-
|
A reconciliation of the expected consolidated income tax expense, computed by applying a 35% U.S. Federal corporate income tax rate to income before taxes to income tax expense is as follows:
|
|
|
|
|
|
|
Year Ended
March 31, 2016
|
|
Year Ended
March 31, 2015
|
Expected tax expense (recovery)
|
$
|
(762,000)
|
$
|
(332,000)
|
Share-based payments
|
|
207,000
|
|
107,000
|
Loss on sale of equipment
|
|
17,000
|
|
6,000
|
Gain on settlement of debt
|
|
143,000
|
|
118,000
|
Impairment of marketable securities
|
|
-
|
|
34,000
|
Impairment of equipment
|
|
14,000
|
|
-
|
Interest
|
|
184,000
|
|
177,000
|
(Gain) loss on derivatives
|
|
(100,000)
|
|
(469,000)
|
Change in valuation allowance
|
|
297,000
|
|
359,000
|
|
|
|
|
|
|
$
|
-
|
$
|
-
|
At March 31, 2016 and 2015, the Company had available a net-operating loss carry-forward for Federal tax purposes of approximately $14,459,000 and $13,610,000, respectively, which may be applied against future taxable income, if any, at various times through 2033. Certain significant changes in ownership of the Company may restrict the future utilization of these tax loss carry-forwards.
The Company recognizes interest and penalties, if any, related to uncertain tax positions in general and administrative expenses. No interest and penalties related to uncertain tax positions were accrued at March 31, 2016 and 2015.
The tax years 2016, 2015, 2014, 2013, 2012, 2011 and 2010 remain open to examination by the major taxing jurisdictions in which the Company operates. The Company expects no material changes to unrecognized tax positions within the next twelve months.
F-25
18. SUBSEQUENT EVENTS
Exploitation and Mining Concessions Agreement
Effective May 19, 2016, Mexus Gold Mining, S.A. de C.V., a wholly owned Mexican subsidiary of the Company entered into an Exploration, Exploitation and Mining Concessions Agreement with Marmar Holding SA de C.V. (Marmar) in regard to the Santa Elena (formally known as Julio) mining project Mining Concession with title 221448 and Mining Concession with title 221447 on the lot called Marta Elena.
Pursuant to the terms of the Agreement, Mexus will contribute its interests in both properties and equipment to the joint venture and Marmar will contribute production expertise, equipment and administrative capability to immediately begin operations on the Santa Elena project and will bear all costs associated with operations and administration.
Profits from net revenues will be distributed 5% Mexus and 95% to Marmar until Payout which is defined as the point when Marmar has recovered its original operational and administrative costs associated with the Project. Thereafter, revenues will be split between the parties on a 50/50 basis.
Equipment held for Sale
As a result of the Exploration and Mining Concessions Agreement, equipment previously classified as held for sale was reclassified as held and used on May 19, 2016.
Common Stock
On May 19, 2016, the Company issued 19,027,777 shares of common stock to satisfy obligations under share subscription agreements for $35,300 in cash receipts included in share subscriptions payable.
On June 16, 2016 the Company issued 17,791,176 shares of common stock to satisfy obligations under share subscription agreements for $33,000 for services, $75,000 for interest and $5,000 in cash receipts included in share subscriptions payable.
On June 28, 2016 the Company issued 17,141,176 shares of common stock to satisfy obligations under share subscription agreements for $12,000 for settlement of accounts payable, $2,000 for interest and $20,000 in cash receipts included in share subscriptions payable.
On July 6, 2016 the Company cancelled 1,830,600 shares of common stock previously issued to satisfy obligations under share subscription agreements for $10,297 for settlement of notes payable.
Common Stock Payable
From the period of April 1, 2016 to July 6, 2016, the Company issued subscriptions payable for 4,343,575 shares of common stock ($0.0093 per share) for $40,436 in cash.
From the period of April 1, 2016 to July 6, 2016, the Company issued subscriptions payable for 3,950,000 shares of common stock for settlement of notes payable valued at $9,000 ($0.0023 per share).
F-26