U.
S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X]
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the
quarterly period ended December 31, 2019
[
] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from ___________ to _____________
MEXUS GOLD
US
Nevada
|
|
000-52413
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20-4092640
|
(State
or other jurisdiction
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|
(Commission File Number)
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|
(IRS
Employer
|
of
Incorporation)
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|
|
|
Identification Number)
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1805 N. Carson Street, #150
|
|
|
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Carson City, NV 89701
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|
|
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(Address of principal executive offices)
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|
|
|
|
|
|
|
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(916) 776 2166
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(Issuer’s Telephone Number)
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|
|
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Exchange Act of 1934 during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past
90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule12b-2 of the Exchange Act.
[
]
|
Large accelerated
filer
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[
]
|
Accelerated filer
|
[
]
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Non-accelerated
filer
|
[X]
|
Smaller reporting
company
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|
(Do not check if
smaller reporting company)
|
[
]
|
Emerging growth
company
|
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check
whether the registrant filed all documents and reports required to
be filed by Section 12, 13, or 15(d) of the Exchange Act of 1934
after the distribution of securities under a plan confirmed by a
court.
APPLICABLE ONLY TO CORPORATE ISSUERS
State
the number of shares outstanding of each of the issuer’s classes of
common equity, as of the latest practicable date: As of February 7,
2020, there were 1,510,446,348 shares of our common stock were
issued and outstanding.
1
PART I
ITEM
1. FINANCIAL STATEMENTS
MEXUS GOLD US AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
December 31,
2019
|
|
March 31,
2019
|
ASSETS
|
|
(Unaudited)
|
|
|
CURRENT
ASSETS
|
|
|
|
|
Cash
|
$
|
51,111
|
$
|
12,029
|
Prepaid and other
assets
|
|
-
|
|
5,500
|
TOTAL CURRENT
ASSETS
|
|
51,111
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|
17,529
|
|
|
|
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FIXED
ASSETS
|
|
|
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|
Property and
equipment, net of accumulated depreciation
|
|
309,014
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|
383,524
|
TOTAL FIXED
ASSETS
|
|
309,014
|
|
383,524
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|
|
|
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OTHER
ASSETS
|
|
|
|
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Equipment under
construction
|
|
-
|
|
17,018
|
Property costs
|
|
829,947
|
|
829,947
|
TOTAL OTHER
ASSETS
|
|
829,947
|
|
846,965
|
|
|
|
|
|
TOTAL
ASSETS
|
$
|
1,190,072
|
$
|
1,248,018
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' DEFICIT(EQUITY)
|
|
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CURRENT
LIABILITIES
|
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
299,045
|
$
|
254,578
|
Accounts payable -
related party
|
|
384,705
|
|
434,704
|
Notes payable (net
unamortized debt discount of $97,648 and $94,127, respectively)
|
|
803,531
|
|
626,190
|
Notes payable -
related party
|
|
102,769
|
|
67,410
|
Promissory notes
|
|
65,000
|
|
65,000
|
Convertible promissory
note (net of debt discount of $607,651 and $136,355,
respectively)
|
|
244,533
|
|
104,034
|
Convertible promissory
note derivative liabilities
|
|
365,530
|
|
113,091
|
Warrant derivative
liability
|
|
35,971
|
|
-
|
TOTAL CURRENT
LIABILITIES
|
|
2,301,084
|
|
1,665,007
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
2,301,084
|
|
1,665,007
|
|
|
|
|
|
CONTINGENT
LIABILITIES (Note 11)
|
|
|
|
|
|
|
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|
STOCKHOLDERS'
(DEFICIT) EQUITY
|
|
|
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Capital stock
|
|
|
|
|
Authorized
|
|
|
|
|
9,000,000 shares of Preferred Stock, $0.001 par value per share,
nil issued and outstanding
|
|
|
|
|
1,000,000 shares of Series A Convertible Preferred Stock, $0.001
par value per share
|
|
|
|
|
5,000,000,000 shares of Common Stock, $0.001 par value per
share
|
|
|
|
|
Issued and
outstanding
|
|
|
|
|
1,000,000 shares of Series A Convertible Preferred Stock (1,000,000
- March 31, 2019)
|
|
1,000
|
|
1,000
|
1,477,873,729 shares of Common Stock (1,011,848,975 - March 31,
2019)
|
|
1,477,870
|
|
1,011,845
|
Additional paid-in
capital
|
|
28,517,054
|
|
27,064,698
|
Share subscription
payable
|
|
370,041
|
|
632,840
|
Accumulated
deficit
|
|
(31,476,977)
|
|
(29,127,372)
|
TOTAL STOCKHOLDERS'
(DEFICIT) EQUITY
|
|
(1,111,012)
|
|
(416,989)
|
|
|
|
|
|
TOTAL LIABILITIES
AND STOCKHOLDERS' (DEFICIT) EQUITY
|
$
|
1,190,072
|
$
|
1,248,018
|
|
|
|
|
|
The
accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
|
2
MEXUS GOLD US AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
Three Months
Ended
December 31,
|
|
Nine Months
Ended
December 31,
|
|
|
2019
|
|
2018
|
|
2019
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|
2018
|
REVENUES
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
Total
revenues
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
Exploration
|
|
161,715
|
|
208,755
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|
535,979
|
|
538,410
|
General and
administrative
|
|
201,467
|
|
280,258
|
|
688,523
|
|
614,407
|
Stock-based expense -
consulting services
|
|
56,975
|
|
67,600
|
|
432,390
|
|
301,556
|
Loss on settlement of
accounts payable
|
|
-
|
|
-
|
|
16,400
|
|
-
|
Total operating
expenses
|
|
420,157
|
|
556,613
|
|
1,673,292
|
|
1,454,373
|
|
|
|
|
|
|
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|
OTHER INCOME
(EXPENSE)
|
|
|
|
|
|
|
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Foreign exchange
|
|
(1,117)
|
|
802
|
|
(2,903)
|
|
4,677
|
Interest
|
|
(456,504)
|
|
(145,722)
|
|
(920,097)
|
|
(481,840)
|
Gain on sale of
equipment
|
|
-
|
|
-
|
|
-
|
|
10,000
|
Gain (loss) Loss on
settlement of debt
|
|
9,838
|
|
(2,875)
|
|
(60,139)
|
|
157,991
|
Gain on change in fair value and settlement of convertible
promissory note derivative liabilities
|
|
71,598
|
|
223
|
|
306,826
|
|
98,594
|
|
|
(376,185)
|
|
(147,572)
|
|
(676,313)
|
|
(210,578)
|
|
|
|
|
|
|
|
|
|
NET LOSS BEFORE
PROVISION FOR TAX
|
|
(796,342)
|
|
(704,185)
|
|
(2,349,605)
|
|
(1,664,951)
|
|
|
|
|
|
|
|
|
|
Income tax
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
$
|
(796,342)
|
$
|
(704,185)
|
$
|
(2,349,605)
|
$
|
(1,664,951)
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED
LOSS PER COMMON SHARE
|
$
|
(0.00)
|
$
|
(0.00)
|
$
|
(0.00)
|
$
|
(0.00)
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE
NUMBER OF COMMON SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
- BASIC AND DILUTED
|
|
1,448,948,961
|
|
906,551,279
|
|
1,285,752,640
|
|
849,827,525
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
|
3
MEXUS GOLD US AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT)
EQUITY
(Unaudited)
|
Three Months Ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
Series A
Preferred Stock
|
Common Stock
|
|
Share
|
|
Total
|
|
Number
of
Shares
|
Amount
|
Number
of
Shares
|
Amount
|
Number
of
Shares
|
Amount
|
Additional
Paid-in
Capital
|
Subscription
Payable
|
Accumulated
Deficit
|
Stockholders'
Equity
|
Balance, September 30, 2018
|
-
|
$
-
|
1,000,000
|
$
1,000
|
882,579,495
|
$
882,575
|
$
26,523,188
|
$
645,185
|
$(27,814,760)
|
$
237,188
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services and supplies
|
-
|
-
|
-
|
-
|
5,878,947
|
5,879
|
73,696
|
(11,975)
|
-
|
67,600
|
Shares issued for cash
|
-
|
-
|
-
|
-
|
35,250,000
|
35,250
|
32,750
|
(19,900)
|
-
|
48,100
|
Shares issued for note principal and interest
|
-
|
-
|
-
|
-
|
13,650,807
|
13,651
|
156,458
|
(131,633)
|
-
|
38,476
|
Beneficial conversion features
|
-
|
-
|
-
|
-
|
-
|
-
|
40,000
|
-
|
-
|
40,000
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(704,185)
|
(704,185)
|
Balance, December 31, 2018
|
-
|
$
-
|
1,000,000
|
$
1,000
|
937,359,249
|
$
937,355
|
$
26,826,092
|
$
481,677
|
$
(28,518,945)
|
$
(272,821)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
months Ended December 31, 2018
|
Balance, March 31, 2018
|
-
|
$
-
|
1,000,000
|
$
1,000
|
775,922,947
|
$
775,919
|
$
25,743,607
|
$
636,565
|
$
(26,853,994)
|
$
303,097
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services and supplies
|
-
|
-
|
-
|
-
|
19,206,166
|
19,206
|
270,260
|
12,090
|
-
|
301,556
|
Shares issued for cash
|
-
|
-
|
-
|
-
|
119,309,666
|
119,309
|
415,971
|
(241,180)
|
-
|
294,100
|
Shares issued for note principal and interest
|
-
|
-
|
-
|
-
|
16,850,807
|
16,851
|
197,098
|
74,202
|
-
|
288,151
|
Shares issued for accounts payable
|
|
|
|
|
6,069,663
|
6,070
|
94,218
|
|
|
100,288
|
Beneficial conversion features
|
-
|
-
|
-
|
-
|
-
|
-
|
104,938
|
-
|
-
|
104,938
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,664,951)
|
(1,664,951)
|
Balance, December 31, 2018
|
-
|
$
-
|
1,000,000
|
$
1,000
|
937,359,249
|
$
937,355
|
$
26,826,092
|
$
481,677
|
$
(28,518,945)
|
$
(272,821)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2019
|
-
|
$
-
|
1,000,000
|
$
1,000
|
1,397,287,172
|
$
1,397,283
|
$
28,014,189
|
$
410,237
|
$
(30,680,635)
|
$
(857,926)
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services and supplies
|
-
|
-
|
-
|
-
|
6,304,348
|
6,305
|
84,245
|
(33,575)
|
-
|
56,975
|
Shares issued for cash
|
-
|
-
|
-
|
-
|
8,399,999
|
8,400
|
16,800
|
47,550
|
-
|
72,750
|
Shares issued for accounts payable
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Shares issued for note principal and interest
|
-
|
-
|
-
|
-
|
39,012,350
|
39,012
|
277,160
|
(54,171)
|
-
|
262,001
|
Shares issued for convertible notes principal and interest
|
-
|
-
|
-
|
-
|
26,869,860
|
26,870
|
124,660
|
-
|
-
|
151,530
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(796,342)
|
(796,342)
|
Balance, December 31, 2019
|
-
|
$
-
|
1,000,000
|
$
1,000
|
1,477,873,729
|
$
1,477,870
|
$
28,517,054
|
$
370,041
|
$
(31,476,977)
|
$
(1,111,012)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
months Ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2019
|
-
|
$
-
|
1,000,000
|
$
1,000
|
1,011,848,975
|
$
1,011,845
|
$
27,064,698
|
$
632,840
|
$
(29,127,372)
|
$
(416,989)
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services and supplies
|
-
|
-
|
-
|
-
|
55,373,555
|
55,374
|
566,141
|
(189,125)
|
-
|
432,390
|
Shares issued for cash
|
-
|
-
|
-
|
-
|
311,133,989
|
311,134
|
232,611
|
(45,850)
|
-
|
497,895
|
Shares issued for accounts payable
|
-
|
-
|
-
|
-
|
19,000,000
|
19,000
|
98,400
|
(81,000)
|
-
|
36,400
|
Shares issued for note principal and interest
|
-
|
-
|
-
|
-
|
53,647,350
|
53,647
|
328,130
|
47,016
|
-
|
428,793
|
Shares issued for convertible notes principal and interest
|
-
|
-
|
-
|
-
|
26,869,860
|
26,870
|
124,660
|
-
|
-
|
151,530
|
Shares issued for equipment
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
6,160
|
-
|
6,160
|
Beneficial conversion features
|
-
|
-
|
-
|
-
|
-
|
-
|
102,414
|
-
|
-
|
102,414
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(2,349,605)
|
(2,349,605)
|
Balance, December 31, 2019
|
-
|
$
-
|
1,000,000
|
$
1,000
|
1,477,873,729
|
$
1,477,870
|
$
28,517,054
|
$
370,041
|
$
(31,476,977)
|
$
(1,111,012)
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
|
4
MEXUS GOLD US AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Nine
Months Ended December 31,
|
|
|
2019
|
|
2018
|
CASH FLOWS FROM
OPERATING ACTIVITIES
|
|
|
|
|
Net loss
|
$
|
(2,349,605)
|
$
|
(1,664,951)
|
Adjustments to
reconcile net loss to net cash used in operating activities:
|
|
|
|
|
Depreciation and amortization
|
|
141,813
|
|
192,299
|
Gain
on settlement of debt and accounts payable
|
|
76,540
|
|
(157,991)
|
Stock-based compensation - services
|
|
432,390
|
|
301,557
|
Non
cash Interest expense
|
|
849,871
|
|
481,840
|
Gain
on sale of equipment
|
|
-
|
|
(10,000)
|
Gain
on change in fair value of derivative instrument
|
|
(306,827)
|
|
(98,594)
|
Changes in operating
assets and liabilities:
|
|
|
|
|
Decrease (Increase) of other assets
|
|
5,500
|
|
-
|
Increase in accounts payable and accrued liabilities, including
related parties
|
|
83,322
|
|
120,019
|
NET CASH USED IN
OPERATING ACTIVITIES
|
|
(1,066,996)
|
|
(835,821)
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES
|
|
|
|
|
Purchase of
equipment
|
|
(44,125)
|
|
(10,481)
|
Sale of equipment
|
|
-
|
|
10,000
|
NET CASH USED IN
INVESTING ACTIVITIES
|
|
(44,125)
|
|
(481)
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES
|
|
|
|
|
Proceeds from issuance
of notes payable
|
|
557,500
|
|
442,500
|
Proceeds from issuance
of notes payable - related party
|
|
35,359
|
|
42,910
|
Payment of notes
payable
|
|
(210,000)
|
|
(13,000)
|
Proceeds from the
issuance of convertible promissory notes
|
|
671,750
|
|
150,500
|
Repayment of
convertible promissory note
|
|
(402,301)
|
|
(183,333)
|
Advances from related
party
|
|
-
|
|
4,312
|
Payment of advances
from related party
|
|
-
|
|
(22,596)
|
Proceeds from issuance
of common stock, net
|
|
497,895
|
|
294,100
|
NET CASH PROVIDED
BY FINANCING ACTIVITIES
|
|
1,150,203
|
|
715,393
|
|
|
|
|
|
DECREASE (DECREASE)
IN CASH
|
|
39,082
|
|
(120,909)
|
CASH, BEGINNING OF
PERIOD
|
|
12,029
|
|
125,942
|
CASH, END OF
PERIOD
|
$
|
51,111
|
$
|
5,033
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
Interest paid
|
$
|
7,170
|
$
|
-
|
Taxes paid
|
$
|
-
|
$
|
-
|
|
|
|
|
|
Supplemental
disclosure of non-cash investing and financing activities:
|
|
|
|
|
Shares issued for
settlement of notes payable and interest
|
$
|
353,798
|
$
|
234,949
|
Shares issued for
settlement of convertible notes
|
$
|
151,530
|
$
|
-
|
Shares issued to
settle accounts payable
|
$
|
36,400
|
$
|
100,288
|
Note payable issued to
settle accounts payable
|
$
|
66,754
|
$
|
-
|
Shares issued in
conjunction with the issuance of notes payable and convertible
promissory note
|
$
|
70,500
|
$
|
53,201
|
Discount for
beneficial conversion feature recognized on issuance of notes
payable
|
$
|
102,414
|
$
|
104,938
|
Initial value of
embedded derivative liability
|
$
|
595,237
|
$
|
-
|
Shares issued to
purchase equipment
|
$
|
6,160
|
$
|
-
|
Reclassification of
equipment under construction to property and equipment
|
$
|
17,018
|
$
|
-
|
Reclassification of
equipment held for sale to property and equipment
|
$
|
-
|
$
|
56,438
|
Reclassification of
deposit on mineral property to property costs
|
$
|
-
|
$
|
324,000
|
The
accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
|
5
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2019
(Unaudited)
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 Company’s 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.
BASIS OF PREPARATION
Pursuant to the rules and regulations of the Securities and
Exchange Commission for Form 10-Q, the unaudited condensed
consolidated financial statements, footnote disclosures and other
information normally included in condensed consolidated financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The condensed
consolidated financial statements contained in this report are
unaudited but, in the opinion of management, reflect all
adjustments, consisting of only normal recurring adjustments,
necessary for a fair presentation of the condensed consolidated
financial statements. All significant inter-company accounts
and transactions have been eliminated in consolidation. The results
of operations for any interim period are not necessarily indicative
of results for the full year. The condensed consolidated balance
sheet at March 31, 2019 has been derived from the audited
consolidated financial statements at that date but does not include
all of the information and footnotes required by accounting
principles generally accepted in the United States of America for
complete financial statements.
The
preparation of unaudited condensed consolidated 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, 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. Management
reviews these estimates and assumptions on an ongoing basis using
currently available information. Actual results could differ from
those estimates. Three-month figures are not necessarily indicative
of the results to be reported at the year end.
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), Mexus Enterprises S.A. de C.V. (“Mexus
Gold Enterprises”) and Mexus Gold MX S.A. DE C.V. (“Mexus Gold
MX”). Significant intercompany accounts and transactions have been
eliminated.
Use of Estimates
The preparation
of consolidated 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. The more significant estimates and assumptions by
management include, among others, the accrual of potential
liabilities, the assumptions used in valuing share-based
instruments issued for services, valuation of derivative
liabilities and the valuation allowance for deferred tax
assets.
Cash and cash equivalents
The
Company considers highly liquid financial instruments purchased
with a maturity of three months or less to be cash equivalents.
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 4):
6
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2019
(Unaudited)
2.
BASIS OF PREPARATION (CONTINUED)
Mining tools and
equipment
|
7
years
|
Watercraft
|
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 $0 and
$17,018 as of December 31, 2019 and March 31, 2019,
respectively.
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 are 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.
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.
7
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2019
(Unaudited)
2.
BASIS OF PREPARATION (CONTINUED)
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 promissory note
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.
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.
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.
Foreign Currency Translation
The
Company’s 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 December 31, 2019 and
2018, 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.
Income Taxes
The
Company accounts for income taxes using the asset and liability
method in accordance with ASC 740, “Accounting for Income Tax”. 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.
8
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2019
(Unaudited)
2.
BASIS OF PREPARATION (CONTINUED)
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 December 31, 2019 and March 31, 2019, the Company has not
recorded AROs associated with legal obligations to retire any of
the Company’s mineral properties as the settlement dates are not
presently determinable.
Revenue Recognition
In
accordance with ASC 606, revenue is recognized when a customer
obtains control of promised goods or services. The amount of
revenue recognized reflects the consideration to which we expect to
be entitled to receive in exchange for these goods or services. The
provisions of ASC 606 include a five-step process by which we
determine revenue recognition, depicting the transfer of goods or
services to customers in amounts reflecting the payment to which we
expect to be entitled in exchange for those goods or services. ASC
606 requires us to apply the following steps: (1) identify the
contract with the customer; (2) identify the performance
obligations in the contract; (3) determine the transaction price;
(4) allocate the transaction price to the performance obligations
in the contract; and (5) recognize revenue when, or as, we satisfy
the performance obligation.
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.
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.
At
December 31, 2019 and March 31, 2019, we excluded the outstanding
securities summarized below, which entitle the holders thereof to
acquire shares of common stock as their effect would have been
anti-dilutive:
|
December 31,
2019
|
|
March 31,
2019
|
Common stock issuable upon conversion of notes payable and
convertible notes payable
|
310,109,935
|
|
77,245,894
|
Common stock issuable to satisfy stock payable obligations
|
71,452,242
|
|
105,502,659
|
Total
|
381,562,177
|
|
182,748,553
|
9
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2019
(Unaudited)
2.
BASIS OF PREPARATION (CONTINUED)
Recently Issued Accounting Pronouncements
In
February 2016, the FASB issued 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 adoption of ASU 2016-02 on
April 1, 2019 did not have a material impact since the Company on
the date of adoption had short-term leases and elected not to apply
the recognition requirement.
Other
recent accounting pronouncements issued by the FASB, including its
Emerging Issues Task Force, the American Institute of Certified
Public Accountants, and the Securities and Exchange Commission did
not or are not believed by management to have a material impact on
the Company's present or future consolidated financial
statements.
3.
GOING CONCERN
The
accompanying condensed consolidated financial statements have been
prepared assuming the Company will continue as a going concern,
which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. During the nine
months ended December 31, 2019, the Company incurred a net loss of
$2,349,605 and used cash in operating activities of $1,066,996, and
at December 31, 2019, had an accumulated deficit of $31,476,977. At
December 31, 2019, the Company is in the exploration stage and has
not earned revenue from planned operations. These factors, among
others, raise substantial doubt about the Company’s ability to
continue as a going concern within one year of the date that the
financial statements are issued. The Company’s independent
registered public accounting firm, in their report on the Company’s
financial statements for the year ending March 31, 2019, expressed
substantial doubt about the Company’s ability 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 management’s
plans to raise necessary funds through a private placement of its
common stock to satisfy the capital requirements of the Company’s
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
condensed 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.
4.
PROPERTY & EQUIPMENT
|
|
Cost
|
|
Accumulated
Depreciation
|
|
December 31,
2019
Net Book Value
|
|
March 31,
2019
Net Book Value
|
Mining tools
and equipment
|
$
|
1,771,468
|
$
|
1,479,068
|
$
|
292,400
|
$
|
363,710
|
Vehicles
|
|
177,270
|
|
160,656
|
|
16,614
|
|
19,814
|
|
$
|
1,948,738
|
$
|
1,639,724
|
$
|
309,014
|
$
|
383,524
|
Depreciation expense for three and nine months ended December 31,
2019 and 2018 was $28,334 and $60,121 and $141,813 and $192,299,
respectively.
10
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2019
(Unaudited)
5.
ACCOUNTS PAYABLE – RELATED PARTIES
During the nine months ended December 31, 2019 and 2018, the
Company incurred rent expense to Paul D. Thompson, the sole
director and officer of the Company, of $34,200 and $34,200,
respectively. At December 31, 2019 and March 31, 2019,
$174,648 and $140,448 for this obligation is outstanding,
respectively.
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 at the end of each fiscal quarter. At December 31, 2019 and
March 31, 2019, $210,057 and $294,256 of compensation due is
included in accounts payable – related party, respectively and
$32,600 for 2,000,000 shares and $32,600 for 2,000,000 shares of
common stock due is included in share subscriptions payable,
respectively.
6.
NOTES PAYABLE AND NOTES PAYABLE RELATED PARTY
During the nine months ended December 31, 2019, the Company issued
the following notes payable:
i)On
April 5, 2019, the Company issued a promissory note (“Note”) for
$41,000 in cash. The Note earns interest at 12% per annum, matures
on April 6, 2020 and is convertible into shares of common stock of
the Company, the option of the Holder, at $0.005 per share. This
Note were initially recorded net of a debt discount of $41,000 for
a beneficial conversion feature with a corresponding increase in
additional paid-in capital of $41,000.
ii)On
April 15, 2019, the Company issued a promissory note (“Note”) with
a principal of amount of $66,754 bearing interest of 10% per annum
to settle $66,754 in accounts payable due for accounting fees. The
Note is due on June 30, 2020. The holder of the Note may convert
principal and interest into shares of common stock of the Company
at $0.005 per share. This Note were initially recorded net of a
debt discount of $61,414 for a beneficial conversion feature with a
corresponding increase in additional paid-in capital of
$61,414.
iii)On
May 14, 2019, the Company issued a promissory note (“Note”) for
$90,000 in cash with a face value of $95,000. The face value of the
Note was due on May 24, 2019 plus an additional 1,000,000 shares of
common stock of the Company. On May 17, 2019 and June 17, 2019, the
Company paid the Note holder $60,000 and $35,000, respectively. The
1,000,000 shares of common stock was valued at $8,500 ($0.0085 per
share) and recorded as interest expense. An additional $270 was
paid to reimburse the Holder for fees.
iv)On
March 11, 2019, the Company entered into a loan agreement (“Note”)
for $70,000 in cash with a term of one year and one day. Upon
signing the Note, the Company agreed to issue 3,000,000 shares of
common stock of the Company. In addition, the Company agreed to
issue a warrant with an exercise price of $0.05 per share once the
Note is fully settled. The Note also states that the Company will
repay the Note from 5% of the net profit from the Santa Elena
Caborca gold project net smelter royalty until the Note is paid in
full. During the nine months ended December 31, 2019, an additional
$70,000 in cash was advanced in accordance with the terms of the
Note.
v)Promissory
notes with $3,000 in principal that earn interest at 10% per annum
and a term of nine months.
vi)On
July 18, 2019, the Company entered into a loan agreement (“Note”)
for $105,000 in cash. The terms of the Note require the repayment
of $75,000 in cash and the issuance of 200,000 shares of the
Company on August 1, 2019. On July 31, 2019, the Company repaid
$75,000 in cash. On September 25, 2019, the Company agreed to
settle the remaining $30,000 of principal by issuing 8,750,000
shares of common stock of the Company resulting in a loss on
settlement of debt of $82,788.
vii)On
July 26, 2019, a promissory note with principal of $5,000 with
interest payable of $350.
viii)On
August 9,2019, a promissory note with principal of $6,000 with
total interest comprising of $1,300 in cash and 50,000 shares of
common stock of the Company.
11
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2019
(Unaudited)
6.
NOTES PAYABLE AND NOTES PAYABLE RELATED PARTY
ix)During
the period November 1, 2019 to December 11, 2019, the Company
issued 11 promissory notes (“Notes”) with $26,500 in principal that
earn interest at 10% per annum and a term of six months. These
promissory notes together with any unpaid accrued interest are
payable, at the option of the holder, in cash or shares in the
Company valued at the average closing prices of the previous 10
trading days. These Notes has been accounted for in accordance with
ASC 480 Distinguishing Liabilities from Equity.
x)On
October 7, 2019, the Company entered into a loan agreement (“Note”)
for $125,000 in cash. On October 15, 2019 the Company repaid
$40,000 in cash. The balance of the Note is due in equal quarterly
installments commencing January 15, 2020 with interest payment at
14% per annum. In conjunction with the issuance of this Note the
Company issued 5,000,000 shares of its common stock to the Note
holder. The Note holder has the option to settle quarterly cash
installments due in shares of common stock of the Company valued at
50% of market value calculated using the average of the last 10 day
closing price. These Notes has been accounted for in accordance
with ASC 480 Distinguishing Liabilities from
Equity.
xi)On
November 15, 2019, the Company entered into a loan agreement
(“Note”) for $25,000 in cash. On January 15, 2020, $25,000
principal plus $5,000 of interest is due on January 15,
2020.
xii)On
December 10, 2019, the Company entered into a loan agreement
(“Note”) for $61,000 in cash. The balance of the Note is due in
equal installments on March 10, 2020 and June 10, 2020 with
interest payment at 14% per annum.
During the nine months ended December 31, 2019 and 2018, note
principal of $252,000 and $64,500, respectively, was paid through
the issuance of 48,149,850 and 12,121,153 shares of common stock,
respectively. In addition, during the nine months ended
December 31, 2019 and 2018, the Company paid $210,000 and $13,000
in cash, respectively, to settle debt.
At
December 31, 2019 and March 31, 2019, the carrying value of the
notes totaled $803,531 (net of unamortized debt discount of $97,648
and $626,190 (net of unamortized debt discount of $94,127),
respectively. At December 31, 2019, $467,215 of these notes were in
default. There are no default provisions stated in these notes.
At December 31, 2019 -and March 31, 2019, accrued interest of
$87,130 and $31,332, respectively, is included in accounts payable
and accrued liabilities.
Notes payable – related party – At December 31,
2019 and March 31, 2019, notes payable – related party of
$102,769 and $67,410, respectively, are due to Paul Thompson Sr.,
the sole officer and director of the Company. These notes bear
interest from 0% to 12% per annum.
Interest and amortization of debt discount was $262,722 and
$297,691 for the nine months ended December 31, 2019 and 2018,
respectively.
The
amount by which the if-converted value of notes payable exceeds
principal of notes payable at December 31, 2019 is $667.
7.
PROMISSORY NOTE
At
December 31, 2019 and March 31, 2019, outstanding Promissory Notes
were $65,000 and $65,000, respectively. The Note bear interest of
4% per annum and are due on December 31, 2013. The Note is 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. As of December
31, 2019, the Company has not made the scheduled payments and is in
default on this promissory note. The default rate on the
notes is seven percent. At December 31, 2019 and March 31,
2019, accrued interest of $36,276 and $31,117, respectively, is
included in accounts payable and accrued liabilities.
12
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2019
(Unaudited)
8.
CONVERTIBLE PROMISSORY NOTES
Power Up Lending Group Ltd.
On
November 7, 2018, the Company issued a Convertible Promissory Note
(“Note”) to Power Up Lending Group Ltd. (“Holder”) in the original
principal amount of $78,000 less transaction costs of $2,500
bearing a 12% annual interest rate and maturing August 30, 2019 for
$75,500 in cash. After 170 days after the issue date, this Note
together with any unpaid accrued interest is convertible into
shares of common stock of the Company at the Holder’s option at a
variable conversion price calculated at 65% of the market price
defined as the average of the lowest two trading prices during the
fifteen trading day period ending on the latest complete trading
day prior to the conversion date. The Company determined that upon
issuance of the Note, the initial fair value of the embedded
conversion feature was $50,690 which was recorded as a debt
discount. The Company may repay the Note if repaid in cash within
30 days of date of issue at 110% of the original principal amount
plus interest, between 31 days and 60 days at 115% of the original
principal amount plus interest, between 61 days and 90 days at 120%
of the original principal amount plus interest, between 91 days and
120 days at 125% of the original principal amount plus interest,
between 121 days and 150 days at 130% of the original principal
amount plus interest, and between 151 days and 170 days at 135% of
the original principal amount plus interest. Thereafter, the
Company does not have the right of prepayment. At March 31, 2019,
the Note is recorded at an accreted value of $125,681 less
unamortized debt discount of $48,879. On May 10, 2019, the Company
paid $111,531 in cash to Power Up Lending Group Ltd. to fully
settle the Note resulting in a gain on settlement of $15,471.
Interest and amortization of debt discount was $50,203 for the nine
months ended December 31, 2019.
On
January 25, 2019, the Company issued a Convertible Promissory Note
(“Note”) to Power Up Lending Group Ltd. (“Holder”) in the original
principal amount of $73,000 less transaction costs of $3,000
bearing a 12% annual interest rate and maturing November 15, 2019
for $70,000 in cash. After 170 days after the issue date, this Note
together with any unpaid accrued interest is convertible into
shares of common stock of the Company at the Holder’s option at a
variable conversion price calculated at 65% of the market price
defined as the average of the lowest two trading prices during the
fifteen trading day period ending on the latest complete trading
day prior to the conversion date. The Company determined that upon
issuance of the Note, the initial fair value of the embedded
conversion feature was $76,073, of which $70,000 was recorded as
debt discount and the remainder of $6,073 was recorded expensed and
included in gain (loss) on derivative liability. The Company may
repay the Note in cash if repaid within 30 days of date of issue at
110% of the original principal amount plus interest, between 31
days and 60 days at 115% of the original principal amount plus
interest, between 61 days and 90 days at 120% of the original
principal amount plus interest, between 91 days and 120 days at
125% of the original principal amount plus interest, between 121
days and 150 days at 130% of the original principal amount plus
interest, and between 151 days and 170 days at 135% of the original
principal amount plus interest. Thereafter, the Company does not
have the right of prepayment. At March 31, 2019, the Note is
recorded at an accreted value of $114,708 less unamortized debt
discount of $52,714. On July 18, 2019, the Company paid $104,188 in
cash to Power Up Lending Group Ltd. to fully settle the Note
resulting in a gain on settlement of $14,249. Interest and
amortization of debt discount was $91,207 for the nine months ended
December 31, 2019.
On
April 5, 2019, the Company issued a Convertible Promissory Note
(“Note”) to Power Up Lending Group Ltd. (“Holder”) in the original
principal amount of $88,000 less transaction costs of $3,000
bearing a 12% annual interest rate and maturing February 28, 2020
for $85,000 in cash. After 170 days after the issue date, this Note
together with any unpaid accrued interest is convertible into
shares of common stock of the Company at the Holder’s option at a
variable conversion price calculated at 65% of the market price
defined as the average of the lowest two trading prices during the
fifteen trading day period ending on the latest complete trading
day prior to the conversion date. The Company determined that upon
issuance of the Note, the initial fair value of the embedded
conversion feature was $74,311 which was recorded as a debt
discount. The Company may repay the Note if repaid within 30 days
of date of issue at 110% of the original principal amount plus
interest, between 31 days and 60 days at 115% of the original
principal amount plus interest, between 61 days and 90 days at 120%
of the original principal amount plus interest, between 91 days and
120 days at 125% of the original principal amount plus interest,
between 121 days and 150 days at 130% of the original principal
amount plus interest, and between 151 days and 170 days at 135% of
the original principal amount plus interest. Thereafter, the
Company does not have the right of prepayment. On October 8, 2019,
the Company paid $125,830 in cash to Power Up Lending Group Ltd. to
fully settle the Note resulting in a gain on settlement of $17,602.
Interest and amortization of debt discount was $132,743 for the
nine months ended December 31, 2019.
13
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2019
(Unaudited)
8.
CONVERTIBLE PROMISSORY NOTES (CONTINUED)
On
May 9, 2019, the Company issued a Convertible Promissory Note
(“Note”) to Power Up Lending Group Ltd. (“Holder”) in the original
principal amount of $83,000 less transaction costs of $3,000
bearing a 12% annual interest rate and maturing March 15, 2020 for
$80,000 in cash. After 170 days after the issue date, this Note
together with any unpaid accrued interest is convertible into
shares of common stock of the Company at the Holder’s option at a
variable conversion price calculated at 65% of the market price
defined as the average of the lowest two trading prices during the
fifteen trading day period ending on the latest complete trading
day prior to the conversion date. The Company determined that upon
issuance of the Note, the initial fair value of the embedded
conversion feature was $77,741 which was recorded as a debt
discount. The Company may repay the Note if repaid within 30 days
of date of issue at 110% of the original principal amount plus
interest, between 31 days and 60 days at 115% of the original
principal amount plus interest, between 61 days and 90 days at 120%
of the original principal amount plus interest, between 91 days and
120 days at 125% of the original principal amount plus interest,
between 121 days and 150 days at 130% of the original principal
amount plus interest, and between 151 days and 170 days at 135% of
the original principal amount plus interest. Thereafter, the
Company does not have the right of prepayment. From November 14,
2019 to December 9, 2019, the Company issued 26,869,860 shares of
common shares of the Company with the fair value $151,531 to Power
Up Lending Group Ltd. to fully settle the Note resulting in a loss
on settlement of $16,177. Interest and amortization of debt
discount was $133,096 for the nine months ended December 31,
2019.
On
June 11, 2019, the Company issued a Convertible Promissory Note
(“Note”) to Power Up Lending Group Ltd. (“Holder”) in the original
principal amount of $42,500 less transaction costs of $2,500
bearing a 12% annual interest rate and maturing April 15, 2020 for
$40,000 in cash. After 170 days after the issue date, this Note
together with any unpaid accrued interest is convertible into
shares of common stock of the Company at the Holder’s option at a
variable conversion price calculated at 65% of the market price
defined as the average of the lowest two trading prices during the
fifteen trading day period ending on the latest complete trading
day prior to the conversion date. The Company determined that upon
issuance of the Note, the initial fair value of the embedded
conversion feature was $38,450 which was recorded as a debt
discount. The Company may repay the Note if repaid within 30 days
of date of issue at 110% of the original principal amount plus
interest, between 31 days and 60 days at 115% of the original
principal amount plus interest, between 61 days and 90 days at 120%
of the original principal amount plus interest, between 91 days and
120 days at 125% of the original principal amount plus interest,
between 121 days and 150 days at 130% of the original principal
amount plus interest, and between 151 days and 170 days at 135% of
the original principal amount plus interest. Thereafter, the
Company does not have the right of prepayment. On December 11,
2019, the Company paid $60,751 in cash to Power Up Lending Group
Ltd. to fully settle the Note resulting in a gain on settlement of
$8,413. Interest and amortization of debt discount was $67,614 for
the nine months ended December 31, 2019.
On
July 29, 2019, the Company issued a Convertible Promissory Note
(“Note”) to Power Up Lending Group Ltd. (“Holder”) in the original
principal amount of $85,000 less transaction costs of $2,500
bearing a 12% annual interest rate and maturing June 15, 2020 for
$82,500 in cash. After 170 days after the issue date, this Note
together with any unpaid accrued interest is convertible into
shares of common stock of the Company at the Holder’s option at a
variable conversion price calculated at 65% of the market price
defined as the average of the lowest two trading prices during the
fifteen trading day period ending on the latest complete trading
day prior to the conversion date. The Company determined that upon
issuance of the Note, the initial fair value of the embedded
conversion feature was $105,696 which was recorded as a debt
discount. The Company may repay the Note if repaid within 30 days
of date of issue at 110% of the original principal amount plus
interest, between 31 days and 60 days at 115% of the original
principal amount plus interest, between 61 days and 90 days at 120%
of the original principal amount plus interest, between 91 days and
120 days at 125% of the original principal amount plus interest,
between 121 days and 150 days at 130% of the original principal
amount plus interest, and between 151 days and 170 days at 135% of
the original principal amount plus interest. Thereafter, the
Company does not have the right of prepayment. At December 31,
2019, the Note is recorded at an accreted value of $111,196 less
unamortized debt discount of $41,584. Interest and amortization of
debt discount was $69,612 for the nine months ended December 31,
2019.
14
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2019
(Unaudited)
8.
CONVERTIBLE PROMISSORY NOTES (CONTINUED)
On
October 3, 2019, the Company issued a Convertible Promissory Note
(“Note”) to Power Up Lending Group Ltd. (“Holder”) in the original
principal amount of $82,500 less transaction costs of $2,500
bearing a 12% annual interest rate and maturing August 15, 2020 for
$80,000 in cash. After 170 days after the issue date, this Note
together with any unpaid accrued interest is convertible into
shares of common stock of the Company at the Holder’s option at a
variable conversion price calculated at 65% of the market price
defined as the average of the lowest two trading prices during the
fifteen trading day period ending on the latest complete trading
day prior to the conversion date. The Company determined that upon
issuance of the Note, the initial fair value of the embedded
conversion feature was $50,377 which was recorded as a debt
discount. The Company may repay the Note if repaid within 30 days
of date of issue at 110% of the original principal amount plus
interest, between 31 days and 60 days at 115% of the original
principal amount plus interest, between 61 days and 90 days at 120%
of the original principal amount plus interest, between 91 days and
120 days at 125% of the original principal amount plus interest,
between 121 days and 150 days at 130% of the original principal
amount plus interest, and between 151 days and 170 days at 135% of
the original principal amount plus interest. Thereafter, the
Company does not have the right of prepayment. At December 31,
2019, the Note is recorded at an accreted value of $96,186 less
unamortized debt discount of $35,531. Interest and amortization of
debt discount was $31,031 for the nine months ended December 31,
2019.
On
December 12, 2019, the Company issued a Convertible Promissory Note
(“Note”) to Power Up Lending Group Ltd. (“Holder”) in the original
principal amount of $57,500 less transaction costs of $2,500
bearing a 12% annual interest rate and maturing September 15, 2020
for $55,000 in cash. After 170 days after the issue date, this Note
together with any unpaid accrued interest is convertible into
shares of common stock of the Company at the Holder’s option at a
variable conversion price calculated at 65% of the market price
defined as the average of the lowest two trading prices during the
fifteen trading day period ending on the latest complete trading
day prior to the conversion date. The Company determined that upon
issuance of the Note, the initial fair value of the embedded
conversion feature was $49,646 which was recorded as a debt
discount. The Company may repay the Note if repaid within 30 days
of date of issue at 110% of the original principal amount plus
interest, between 31 days and 60 days at 115% of the original
principal amount plus interest, between 61 days and 90 days at 120%
of the original principal amount plus interest, between 91 days and
120 days at 125% of the original principal amount plus interest,
between 121 days and 150 days at 130% of the original principal
amount plus interest, and between 151 days and 170 days at 135% of
the original principal amount plus interest. Thereafter, the
Company does not have the right of prepayment. At December 31,
2019, the Note is recorded at an accreted value of $57,669 less
unamortized debt discount of $46,082. Interest and amortization of
debt discount was $6,232 for the nine months ended December 31,
2019.
JSJ Investments Inc.
On
September 16, 2019, the Company issued a Convertible Promissory
Note (“Note”) to JSJ Investments Inc. (“Holder”) in the original
principal amount of $142,000 less debt discount of $17,000 bearing
a 6% annual interest rate and maturing September 16, 2020 for
$125,000 in cash. After 180 days after the issue date, this Note
together with any unpaid accrued interest is convertible into
shares of common stock of the Company at the Holder’s option at a
variable conversion price calculated at 35% discount to the average
of the two lowest trading prices during the previous fifteen (15)
trading days. The Company determined that upon issuance of the
Note, the initial fair value of the embedded conversion feature was
$103,604 which was recorded as a debt discount. The Company may
repay the Note if repaid within 30 days of date of issue at 110% of
the original principal amount plus interest, between 31 days and 60
days at 115% of the original principal amount plus interest,
between 61 days and 90 days at 120% of the original principal
amount plus interest, between 91 days and 120 days at 125% of the
original principal amount plus interest, between 121 days and 150
days at 130% of the original principal amount plus interest, and
between 151 days and 180 days at 135% of the original principal
amount plus interest. Thereafter, the Company does not have the
right of prepayment. At December 31, 2019, the Note is recorded at
an accreted value of $150,951 less unamortized debt discount of
$68,672. Interest and amortization of debt discount was $60,880 for
the nine months ended December 31, 2019.
15
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2019
(Unaudited)
8.
CONVERTIBLE PROMISSORY NOTES (CONTINUED)
Crown Bridge Partners, LLC
On
November 21, 2019, the Company issued a Convertible Promissory Note
(“Note”) to Crown Bridge Partners, LLC (“Holder”) in the original
principal amount of $27,500 less transaction costs of $3,250
bearing a 12% annual interest rate and maturing November 21, 2020
for $24,250 in cash. This Note together with any unpaid accrued
interest is convertible into shares of common stock of the Company
at the Holder’s option at a variable conversion price calculated at
60% of the market price defined as the lowest trading price during
the twenty trading day period ending on the latest complete trading
day prior to the conversion date. The Company determined that upon
issuance of the Note, the initial fair value of the embedded
conversion feature was $18,608 which was recorded as a debt
discount. The Company may repay the Note if repaid within 60 days
of date of issue at 125% of the original principal amount plus
interest, between 61 days and 120 days at 135% of the original
principal amount plus interest and between 121 days and 180 days at
145% of the original principal amount plus interest. Thereafter,
the Company does not have the right of prepayment. At December 31,
2019, the Note is recorded at an accreted value of $26,856 less
unamortized debt discount of $16,219. Interest and amortization of
debt discount was $4,995 for the nine months ended December 31,
2019.
Auctus Fund, LLC
On
December 19, 2019, the Company entered into a Securities Purchase
Agreement with Auctus Fund, LLC, (“Holder”) relating to the
issuance and sale of a Convertible Promissory Note (the “Note”)
with an original principal amount of $112,750 less an original
issue discount of $10,000 and transaction costs of $2,750 bearing a
12% annual interest rate and maturing October 19, 2020 for $100,000
in cash. The Company determined that upon issuance of the Note, the
initial fair value of the embedded conversion feature and warrant
liability was $110,475 which was recorded as a debt discount. After
180 days after the issue date, the Note together with any unpaid
accrued interest is convertible into shares of common stock of the
Company at the Holder’s option at a variable conversion price
calculated at 50% of the market price defined as the lowest trading
price during the twenty-five trading day period ending on the
latest trading day prior to the conversion date. The Company may
prepay the Note in cash, if repaid within 90 days of date of issue,
at 135% of the original principal amount plus interest and between
90 days and 180 days at 150% of the original principal amount plus
interest. Thereafter, the Company does not have the right of
prepayment. At December 31, 2019, the Note is recorded at an
accreted value of $105,326 less unamortized debt discount of
$95,564. Interest and amortization of debt discount was $9,762 for
the nine months ended December 31, 2019.
9.
CONVERTIBLE PROMISSORY NOTE DERIVATIVE LIABILITY
The
Convertible Promissory Notes (“Notes”) with Power Up Lending Group
Ltd., JSJ Investments Inc., Crown Bridge Partners, LLC and Auctus
Fund, LLC 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 Company’s common stock.
The Company’s convertible promissory notes derivative liabilities
has been measured at fair value using the Black-Scholes model.
|
March 31,
2019
|
June 30,
2019
|
Sept. 30,
2019
|
Dec. 31,
2019
|
Closing share
price
|
$0.0112
|
$0.01
|
$0.0115
|
$0.0038
|
Conversion price
|
$0.0100
|
$0.0075
|
$0.0113
|
$0.0031
- $0.0032
|
Risk free rate
|
2.44% -
2.56%
|
2.10%
|
2.10%
|
1.51% -
1.60%
|
Expected
volatility
|
230%
|
216% -
256%
|
153% -
214%
|
172% -
211%
|
Dividend yield
|
0%
|
0%
|
0%
|
0%
|
Expected life
(years)
|
0.42-
0.63
|
0.38
– 0.79
|
0.39
– 0.96
|
0.46
– 0.89
|
The
inputs into the Black-Scholes models are as follows:
The
fair value of the conversion option derivative liabilities is
$365,530 and $113,091 at December 31, 2019 and March 31, 2019,
respectively. The decrease (increase) in the fair value of the
conversion option derivative liability for the three and nine
months ended December 31, 2019 and 2018 of $72,479 and $223 and
$307,707 and $98,594, respectively, is recorded as a gain (loss) in
the condensed consolidated statements of operations.
16
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2019
(Unaudited)
10.
WARRANT LIABILITY
In
conjunction with the issuance of the Convertible Promissory Note
with Auctus Fund, LLC (the “Note”) on December 19, 2019, the
Company issued 10,000,000 warrants with an exercise price of $0.005
and a term of five years. The warrants are subject to down round
and other anti-dilution protections. The warrant is tainted and
classified as a liability as a result of the issuance of the Note
since there is a possibility during the life of the warrant the
Company would not have enough authorized shares available if the
warrant is exercised. The Company’s warrant liability has been
measured at fair value at December 19, 2019 and December 31, 2019
using the Black-Scholes.
The
inputs into the Black-Scholes models are as follows:
|
|
December 19,
2019
|
|
December 31,
2019
|
Closing share
price
|
$
|
0.0037
|
$
|
0.0038
|
Conversion price
|
$
|
0.005
|
$
|
0.005
|
Risk free rate
|
|
1.65%
|
|
1.69%
|
Expected
volatility
|
|
178%
|
|
177%
|
Dividend yield
|
|
0%
|
|
0%
|
Expected life
(years)
|
|
5.0
|
|
4.97
|
The
fair value of the warrant liability is $35,090, which was recorded
as initial derivative expense, and $35,971 at December 19, 2019 and
December 31, 2019, respectively. The decrease (increase) in the
fair value of the warrant liability of $(881) is recorded as a loss
in the unaudited condensed consolidated statements of operations
for the three and nine months ended December 31, 2019.
11.
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 December 31,
2019, 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.
12.
STOCKHOLDERS’ EQUITY (DEFICIT)
The
stockholders’ equity of the Company comprises the following classes
of capital stock as of December 31, 2019 and March 31, 2019:
Preferred Stock, $0.001 par value per share; 9,000,000 shares
authorized, 0 issued and outstanding at December 31, 2019 and March
31, 2019.
Series A Convertible Preferred Stock (‘Series A Preferred Stock”),
$0.001 par value share; 1,000,000 shares authorized: 1,000,000
shares issued and outstanding at December 31, 2019 and March 31,
2019.
Holders of Series A Preferred Stock may convert one share of Series
A Preferred Stock into ten shares 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.
Common Stock, par value of $0.001 per share; 5,000,000,000 shares
authorized: 1,477,873,729 and 1,011,848,975 shares issued and
outstanding at December 31, 2019 and March 31, 2019, respectively.
Holders of Common Stock have one vote per share of Common Stock
held.
17
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2019
(Unaudited)
12.
STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)
Common Stock Issued
On
April 17, 2019, the Company issued 53,799,286 shares of common
stock to satisfy obligations under share subscription agreements of
$47,600 for settlement of services, $4,392 for interest and
$139,500 for cash receipts included in share subscriptions
payable.
On
April 30, 2019, the Company issued 15,444,439 shares of common
stock to satisfy obligations under share subscription agreements of
$7,000 for settlement of services and $15,500 for cash receipts
included in share subscriptions payable.
On
May 8, 2019, the Company issued 45,882,143 shares of common stock
to satisfy obligations under share subscription agreements of
$48,496 for settlement of services, $117,400 to settle accounts
payable, $2,254 for interest and $32,100 for cash receipts included
in share subscriptions payable.
On
June 4, 2019, the Company issued 16,678,333 shares of common stock
to satisfy obligations under share subscription agreements of
$13,291 for settlement of services and $23,000 for cash receipts
included in share subscriptions payable.
On
June 18, 2019, the Company issued 23,445,000 shares of common stock
to satisfy obligations under share subscription agreements of
$101,078 for settlement of services, $18,050 for cash receipts,
$6,500 to settle notes payable and $3,960 for interest included in
share subscriptions payable.
On
July 2, 2019, the Company issued 5,000,000 shares of common stock
to satisfy obligations under share subscription agreements of
$10,000 for cash receipts.
On
July 9, 2019, the Company issued 17,314,000 shares of common stock
to satisfy obligations under share subscription agreements of
$57,200 for settlement of services and $20,785 for cash receipts
included in share subscriptions payable.
On
July 10, 2019, the Company issued 61,108,334 shares of common stock
to satisfy obligations under share subscription agreements of
$90,000 for settlement of services and $90,110 for cash receipts
included in share subscriptions payable.
On
July 22, 2019, the Company issued 22,083,332 shares of common stock
to satisfy obligations under share subscription agreements for
$25,500 for cash receipts included in share subscriptions
payable.
On
July 29, 2019, the Company cancelled 1,000,000 shares of common
stock originally issued to satisfy obligations under share
subscription agreements of $5,000 for cash receipts.
On
August 9, 2019, the Company issued 32,933,332 shares of common
stock to satisfy obligations under share subscription agreements of
$63,300 for settlement of services, $29,900 for cash receipts and
$38,500 for interest included in share subscriptions payable.
On
August 13, 2019, the Company issued 10,000,000 shares of common
stock to satisfy obligations under share subscription agreements of
$103,000 for settlement of services included in share subscriptions
payable.
On
August 20, 2019, the Company issued 39,583,332 shares of common
stock to satisfy obligations under share subscription agreements of
$56,700 for settlement of cash receipts included in share
subscriptions payable.
On
September 17, 2019, the Company issued 43,166,666 shares of common
stock to satisfy obligations under share subscription agreements
$62,400 for cash receipts and $10,000 for settlement of notes
payable included in share subscriptions payable.
On
October 1, 2019, the Company issued 19,912,499 shares of common
stock to satisfy obligations under share subscription agreements of
$37,200 for settlement of services, $25,200 for cash receipts,
$3,384 for interest and $112,788 for the settlement of notes
payable included in share subscriptions payable.
On
October 29, 2019, the Company issued 29,999,850 shares of common
stock to satisfy obligations under share subscription agreements of
$200,000 for settlement of notes payable included in share
subscriptions payable.
18
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2019
(Unaudited)
12.
STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)
On
November 1, 2019, the Company issued 3,804,348 shares of common
stock to satisfy obligations under share subscription agreements of
$53,350 for settlement of services included in share subscriptions
payable.
On
November 20, 2019, the Company issued 2,272,727 shares of common
stock to satisfy obligations under share subscription agreements of
$22,500 for settlement of convertible notes included in share
subscriptions payable.
On
November 21, 2019, the Company issued 3,488,372 shares of common
stock to satisfy obligations under share subscription agreements of
$20,930 for settlement of convertible notes included in share
subscriptions payable.
On
November 25, 2019, the Company issued 4,166,667 shares of common
stock to satisfy obligations under share subscription agreements of
$22,917 for settlement of convertible notes included in share
subscriptions payable.
On
December 2, 2019, the Company issued 5,625,000 shares of common
stock to satisfy obligations under share subscription agreements of
$28,125 for settlement of convertible notes included in share
subscriptions payable.
On
December 4, 2019, the Company issued 5,555,556 shares of common
stock to satisfy obligations under share subscription agreements of
$30,556 for settlement of convertible notes included in share
subscriptions payable.
On
December 9, 2019, the Company issued 5,761,538 shares of common
stock to satisfy obligations under share subscription agreements of
$26,503 for settlement of convertible notes included in share
subscriptions payable.
Common Stock Payable
As at
December 31, 2019, the Company had total subscriptions payable for
71,452,242 shares of common stock for $125,132 in cash, shares of
common stock for interest valued at $63,112, shares of common stock
for services valued at $151,527, shares of common stock for notes
payable of $24,510 and shares of common stock for equipment of
$6,160.
13.
RELATED PARTY TRANSACTIONS
During the nine months ended December 31, 2019 and 2018, 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
Accounts payable – related parties – Note 5
Notes
payable – Note 6
14.
SUBSEQUENT EVENTS
Common Stock Issued
On
January 8, 2020, the Company issued 15,225,000 shares of common
stock to satisfy obligations under share subscription agreements of
$37,500 for cash receipts, $62,000 for interest and $24,510 for the
settlement of notes payable included in share subscriptions
payable.
On
January 31, 2020, the Company issued 3,300,000 shares of common
stock to satisfy obligations under share subscription agreements of
$9,250 for cash receipts and $6,160 for equipment included in share
subscriptions payable.
On
January 31, 2020, the Company issued 5,714,286 shares of common
stock to satisfy obligations under share subscription agreements of
$18,286 for settlement of convertible notes included in share
subscriptions payable.
On
February 7, 2020, the Company issued 8,333,333 shares of common
stock to satisfy obligations under share subscription agreements of
$28,334 for settlement of convertible notes included in share
subscriptions payable.
19
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2019
(Unaudited)
14.
SUBSEQUENT EVENTS (CONTINUED)
Common Stock Payable
For
the period of January 1, 2020 to February 7, 2020, the Company
issued subscriptions payable for 4,500,000 shares of common stock
for $18,700 ($0.0042 per share) in services.
For
the period of January 1, 2020 to February 7, 2020, the Company
issued subscriptions payable for 500,000 shares of common stock for
$2,150 ($0.0043 per share) to settle notes payable – related
party.
For
the period of January 1, 2020 to February 7, 2020, the Company
issued subscriptions payable for 14,047,619 shares of common stock
for $46,619 ($0.0043 per share) to settle convertible note
principal of $27,000.
Notes Payable
For
the period of January 1, 2020 to February 7, 2020, the Company
issued various notes payable for $40,500 in cash. These notes
bear interest at 10% per annum, are unsecured and have maturities
from one to six months. These notes payable include $16,500 of
principal which are convertible at the option of the holder into
shares of common stock of the Company based on a 10 day average of
the closing price.
20
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Cautionary Statement Concerning Forward-Looking
Statements
The
following discussion and analysis should be read in conjunction
with our audited consolidated financial statements and related
notes included in this report. This report contains
“forward-looking statements.” The statements contained in this
report that are not historic in nature, particularly those that
utilize terminology such as “may,” “will,” “should,” “expects,”
“anticipates,” “estimates,” “believes,” or “plans” or comparable
terminology are forward-looking statements based on current
expectations and assumptions.
Various risks and uncertainties could cause actual results to
differ materially from those expressed in forward-looking
statements. Factors that could cause actual results to differ from
expectations include, but are not limited to, those set forth under
the section “Risk Factors” set forth in this report.
The
forward-looking events discussed in this report, the documents to
which we refer you and other statements made from time to time by
us or our representatives, may not occur, and actual events and
results may differ materially and are subject to risks,
uncertainties and assumptions about us. For these statements, we
claim the protection of the “bespeaks caution” doctrine. All
forward-looking statements in this document are based on
information currently available to us as of the date of this
report, and we assume no obligation to update any forward-looking
statements. Forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual
results to differ materially from any future results, performance
or achievements expressed or implied by such forward-looking
statements.
The Company
Mexus
Gold US is an exploration stage mining company engaged in the
evaluation, acquisition, exploration and advancement of gold,
silver and copper projects in the State of Sonora, Mexico. Mexus
Gold US is dedicated to protect the environment and provide
employment and education opportunities for the communities that it
operates in.
Our
President and CEO, Paul Thompson, brings over 45 years’ experience
in mining and mining development to Mexus Gold US. Mr. Thompson is
currently recruiting additional management personnel for its Mexico
and Nevada mining operations.
Our
executive offices are located at, 1805 N. Carson Street, #150,
Carson City, Nevada 89701. Our telephone number is (916) 776
2166.
We
were originally incorporated under the laws of the State of
Colorado on June 22, 1990, as U.S.A. Connection, Inc. On September
18, 2009, we changed our domicile to Nevada and changed our name to
Mexus Gold US to better reflect our new business operations. Our
fiscal year end is March 31st.
Description of the Business of Mexus Gold US
Mexus
Gold US is engaged in the evaluation, acquisition, exploration and
advancement of gold exploration and development projects in the
United Mexican States, as well as, the salvage of precious metals
from identifiable sources. Our main activities in the near future
will be comprised of our mining operations in Mexico. Our mining
opportunities located in the State of Sonora, Mexico will provide
us with projects to recover gold, silver, copper and other precious
metals.
In
addition, our management will look for opportunities to improve the
value of the gold projects that we own or may acquire knowledge of
or may acquire control through exploration drilling, introduction
of technological innovations or acquisition with the goal of
developing those properties into operating mines. We expect that
emphasis on gold project acquisition and development will continue
in the future.
Business Strategy
Our
business plan was developed with the overriding goal of maximizing
shareholder value through the exploration and development of our
mineral properties, utilizing the extensive mining-related
background and capabilities of our management consultants and
advisors. To achieve this goal, our business plan focuses on the
following prospective areas:
21
Mining
Operations
We
classify our mineral properties into three categories: “Development
Properties”, “Advanced Exploration Properties”, and “Other
Exploration Properties”. Development Properties are properties
where a decision to develop the property into a producing mine has
been made. Advanced Exploration Properties are those properties
where we retain a significant ownership interest or joint venture
and where there has been sufficient drilling and analysis to
identify and report proven and probable reserves or other
mineralized material. We currently do not have a Development
Property or Advanced Exploration Property. Other Exploration
Properties are those that do not fall into the other categories.
Please see below for information about our Other Exploration
Properties.
Effective March 31, 2011, we acquired Mexus Gold S.A. de C.V. (our
wholly owned subsidiary) and began funding mining operations in
Mexico. We have instituted a small placer processing operation to
evaluate various areas of interest within the project lands.
Material Mining
Properties
Santa Elena
Prospect, (formerly known as the Caborca Project)
Our
Santa Elena Prospect is comprised of early-stage exploration,
including limited production operations, on the concessions. Under
the terms of the concession agreement we also will acquire the
associated surface. This concession is situated in the State of
Sonora, Mexico.
On
April 16, 2018, Mexus Gold Mining S.A. de C.V., a subsidiary of
Mexus, announced that it planned to terminate its joint venture
agreement with MarMar Holdings (the “JV Agreement”). The JV
Agreement outlined the contractual obligations of the parties at
the Santa Elena project in Caborca, Sonora State, Mexico. The
decision to terminate the JV Agreement was made due to MarMar’s
failure to provide agreed funding, equipment and general operations
for the project, as well as MarMar’s inability to meet
environmental standards at the site. We do not anticipate any early
termination penalties associated with the JV Agreement.
On July 2, 2018, the Company
announced that the agreement was officially terminated.
We
intend to move forward with the Santa Elena project with proper
equipment and personnel. Due to the lack of funding by MarMar, the
Santa Elena site, a disappointing 8.5oz Au was produced in the last
22 months.
The
Company has contracted with a security firm to provide 24-hour
services at the Santa Elena site. Currently, there is equipment on
site sufficient to produce an anticipated 500 tons a day and plans
are in place to begin hiring staff with production beginning
shortly thereafter. In addition, safety fencing will be installed
and required site clean-up will occur that will satisfy any
environmental concerns at the property. Two separate parties are
running tests on the heap leach pad to determine the next steps to
allow for recovery of gold and silver within the system.
Using
previously developed geological mapping the company plans to mine
the Julio quartz vein and the adjacent shear zone via open pit
mining. The existing Julio vein, with depths to 30 meters and
widths from 1 to 4 meters, has values ranging from 1.5 to 186 grams
Au per ton. The adjacent shear zone carries values from .5 to 17
grams Au per ton. Mexus estimates that the shear zone will average
2.5 grams per ton gold equivalent with the Julio vein values being
much higher. Additional equipment will be purchased which will
enable the company to increase production to 1000 tons a day and
beyond. Mexus intends to announce a non-dilutive capital raise plan
in the very near future.
Ures Property
Prospects (also known as 8 brothers/370 mine project)
The
Ures Prospects, also situated in the State of Sonora, Mexico are
the 370 Prospect, San Ramon Prospect, La Platosa Prospect, Edgar
Prospect, Edgar II Prospect, Los Lareles Prospect, El Scorpio
Prospect, and Ocho Hermanos Prospect.
In
June 2018, Mexus completed
its first test of the VAT leaching system and the Merrill Crowe
gold recovery plant at the 8 brothers/370 mine project. The
successful test produced 70 pounds of precipitate which is
currently being dried and prepared for smelting. Results of this
first run will be released soon. The material initially mined took
longer to leach than expected. Mexus geologist, Cesar Lemas, has
identified new material which has been column tested showing a 48
to 72 hour leach time. The company will mine and use this material
going forward to accelerate recovery times.
22
Non-Material
Minting Properties
San Felix Mine
Project (formerly known as the Mexus-Trinidad Joint
Venture)
In
March, 2014, we sold our 50% interest in the Joint Venture to Atzek
Mineral S.A. de C.V (“Atzek”). Atzek is currently in default of the
sale agreement.
Effective January 13, 2017, our wholly owned subsidiary, Mexus Gold
Mining, S.A. de C.V., entered into a purchase agreement with Jesus
Leopoldo Felix Mazon, Leonardo Elias Jaime Perez, and Elia Lizardi
Perez, wherein we purchased a 50% interest in the “San Felix”
mining site located in the La Alameda area of Caborca, State of
Sonora, Mexico. The remaining 50% of the site is owned jointly by
Mar Holdings S.A. de C.V. and Marco Antonio Martinez Mora. The San
Felix mining site contains seven (7) concessions over an area of
approximately 26,000 acres. During the year ended March 31, 2018,
the Company recorded an impairment of mineral property for the San
Felix Project of $75,000 because the requirement payment of
$500,000 due on August 13, 2017 was not paid in accordance with the
purchase agreement pending the receipt of certain required
instruments from the Grantor by the Company.
Other
Operations
Cable Salvage
Operation
The
Company completed the first phase of its Cable Recovery Project in
Alaskan waters. The cable which was recovered was smaller diameter
cable which was excellent for testing the recovery equipment and
vessels. The Company evaluated the project and conducted a mapping
project and exploration activities in an attempt to identify larger
cable.
At
March 31, 2017, the Company ceased cable salvage operations in
order to fully concentrate on Mexico operations.
Mergers and
Acquisitions
We
will routinely review merger and acquisition opportunities. An
appropriate merger and acquisition opportunity must be accretive to
the overall value of Mexus Gold US. Our primary focus will be on
those opportunities involving precious metal production or
near-term production with a secondary focus on other resource-based
opportunities. Potential acquisition targets would include private
and public companies or individual properties. Although our
preference would be for candidates located in the United States and
Mexico; Mexus Gold US will consider opportunities located in other
countries where the geopolitical risk is acceptable.
Description of Mining Projects
The
following properties are located in Mexico and owned by Mexus Gold
S.A. de C.V., our wholly owned subsidiary:
Santa Elena Prospects (formerly known as the Caborca
Project)
The
Company executed a revised Mineral Mining and Purchase Agreement,
dated December 3, 2015, with the Concession Owners covering 2,225
acres located in the State of Sonora, Mexico. The Agreement is for
a term of 25 years and specifies a purchase privilege, at the
discretion of the Company, for all concessions in the amount of
$2,000,000 absent the exercise of the purchase privilege a royalty
of 40% for lode deposits and 25% for placer deposits and is
credited to the purchase price. The Agreement specifies a delayed
monthly royalty in the amount of $1,000 and the payment of the
semi-annual concession tax.
Santa Elena Concessions
|
|
|
|
|
No
|
CONCESSION NAME
|
TITLE NO
|
AREA
HECTARE
|
DATE ISSUED
|
END DATE
|
1
|
MARTHA
ELENA
|
221447
|
339.3811
|
10/2/2004
|
9/2/2054
|
2
|
JULIO II
|
221448
|
59.0401
|
10/2/2004
|
9/2/2054
|
3
|
JULIO III
|
231609
|
99.6381
|
3/25/2008
|
3/24/2058
|
4
|
JULIO IV
|
231610
|
99.9687
|
3/25/2008
|
3/24/2058
|
5
|
JULIO V
|
231611
|
100
|
3/25/2008
|
3/24/2058
|
6
|
JULIO VI
|
231612
|
100
|
3/25/2008
|
3/24/2058
|
7
|
JULIO VII
|
231613
|
100
|
3/25/2008
|
3/24/2058
|
|
Total Hectares
|
|
898.028
|
|
|
|
Total Acres
|
|
2,219.0755
|
|
|
23
The
Company has conducted geological evaluation of the Santa Elena
Prospects comprised of expanding the existing placer facility for
the purpose of mineral evaluation, physical geological evaluations
including the drilling of reverse circulation and core holes.
Situated on the prospect area are caterpillars, haul trucks,
maintenance trucks, power generators, pumps, tractor blade, truck
mounted winch, water handling supplies and maintenance trailer with
supplies. The prospect area is accessed from a state highway on
existing roads. There is access to well water which is available
for the current and future operations.
On
January 5, 2011, Mexus Gold Mining S.A. de C.V. entered into a
Purchase Agreement to purchase the Santa Elena Prospect, formerly
known as the Caborca Project. The Santa Elena Prospect consists of
7,400 acres (3,000 hectares) about 50 kilometers northwest of the
City of Caborca, Sonora State, Mexico. The Caborca Project lies on
claims filed by the owners of the Santa Elena Ranch, which controls
the surface rights over the project claims. The claims lie near
112o 25' W, 31o 7.5" N. These claims were visited near the end of
January, 2011. On or about July 11, 2011, we acquired five
additional claims surrounding the Santa Elena Prospect consisting
of approximately 1,000 additional acres.
We
have been unable to locate geologic maps of the area from the
Government Geological Survey. However, pursuant to our
investigation of the project, the claims were found to be underlain
by an igneous complex. The rocks observed included many types of
granitic rocks, exhibiting porphyrytic textures, gneissic and
equigrannular textures. Quartz was variable. At times quartz "eyes"
were observed, that is porphyrytic quartz which many workers
consider to be indicative of a porphyry environment. In other
localities, no quartz was evident. When no quartz was present, the
rock was equigrannular. Quartz veining was evident throughout the
claim group. A mine was developed along a major quartz vein, called
the Julio 2 Mine with the vein being called the Julio Vein.
There
are multiple exploration targets on the Santa Elena Prospect. The
two most important are the quartz stockwork zone and the Julio vein
system. The first target will be the quartz stockwork zone area. A
limited drilling program has been conducted and completed.
Production testing has been completed resulting in the construction
of the surface production and recovery facilities.
Access to the Santa Elena prospect is via dirt road approximately
two miles west of paved highway Mexico 1 and approximately 34 miles
northwest of the town of Caborca, Sonora, Mexico.
FIGURE 1
– SANTA ELENA PROJECT LOCATION MAP
24
Exhibit 99.1 – PRELIMINARY REPORT AND FIRST STAGE
MAPPING
Ures
Property Prospects, being comprised of the following projects:
Ocho Hermanos
– Guadalupe de Ures Project
The
Guadalupe de Ures Project is accessed from Hermosillo by driving
via good paved road for 60 kilometers to the town of Guadalupe de
Ures and then for 15 kilometers over dirt roads to the prospects. A
base camp has been established near the town of Guadalupe de Ures
using mainly trailers for accommodation, workshops and kitchen
facilities.
FIGURE 2 -
GUADALUPE DE URES PROJECT LOCATION MAP
25
The
Ocho Hermanos Project (also called the Guadalupe de Ures Project)
consists of the “Ocho Hermanos” and "San Ramon" claims which are
covered by the Sales and Production Contract dated the
4th day of July, 2009 between “Minerales Ruta Dorado de
RL de CV” (seller) and “Mexus Gold Mining S.A. de C.V.”, a wholly
owned subsidiary of Mexus Gold US (buyer). The Ocho Hermanos Claim
consists of 34.9940 hectares (1 acre = 0.4047 hectares) or 86.4690
acres while the San Ramon Claim consists of 80 hectares (197.6773
acres).(Figure 4).
The
initial term of the agreement was 5 years. During the term Mexus
must pay 40% of the net revenue received for minerals produced to
the seller. At the conclusion of the 5 years, the lease could be
purchased for USD 50,000. Upon expiration on July 4, 2014, Mexus
renewed the agreement with an indefinite term. The renewed
agreement requires Mexus to pay $1,500 per month and 20% to the
total proceeds upon a sale of the rights.
Minerales Ruta Dorado de RL de CV is a duly constituted Mexican
Company and as such can hold mining claims in Mexico.
FIGURE 3 - OCHO HERMANOS
PROJECT AREA CLAIM MAP
We
did not perform any systematic sampling or any systematic drilling
and because of this did not set up a formal QA/QC program. All of
the samples were submitted to Certified Laboratories (ALS - Chemex
in Hermosillo or American Assay in Reno, Nevada) which insert their
own QA/QC samples/duplicates. Also the laboratories run duplicates
and blanks from each batch fired. The sequence of events so far are
the following:
We
located a previously mined area with interesting values – Ocho
Hermanos. Mexus began to submit characterization samples to the
above noted assay laboratories, in order to determine the range of
Au - Ag values present. Mexus then began an investigation into
recovery options by using material taken from the areas with the
better values.
The
above work was completed before any systematic exploration was done
because if no recovery method could be found relatively quickly,
the project would move more slowly because of the lead time
involved. Mexus began work on an Environmental Impact Statement for
the likely operational area (a total of 4 hectares to begin). In
order to complete the EIS, figures for estimated tonnages were
submitted to cover the hoped for volume. To date, no suitable
recovery method was found due primarily to the partial oxidation of
the principally sulfide deposit.
The
Environmental Permits run for 35 years so there is time for further
investigation.
26
The
main geologic feature of this project area is an apparent “manto”
sulfide zone composed primarily of galena with some pyrite,
arsenopyrite and possibly phyrrotite. Above this zone there is an
oxide zone composed of iron and lead oxides. The sulfides
themselves are partially oxidized. Reconnaissance and
characterization samples taken indicated sporadically high gold and
silver values. The deposit occurs in shallow water sediments
(principally quartzites, with some limestone and shales) and can be
best characterized as a skarn type deposit due to the presence of
intrusive rocks within 1 kilometer.
Given
the complex nature of the sulfide deposit and the partial
oxidization of the material (indicated by the presence of yellow
colored lead oxides), a satisfactory recovery method has not yet
been found. Consequently, at this time, no further systematic work
beyond the initial reconnaissance and characterization sampling has
been completed. The entire project was essentially put on hold
until a suitable recovery method is found, which is a continuing
effort and at this time is being pursued by a member of the faculty
at the University of Sonora in Hermosillo. The faculty member
teaches metallurgy and assay practices at the University. After a
suitable recovery method has been identified, the process will need
to be confirmed by a certified metallurgical testing
laboratory.
The
Environmental Permits detail all of the affected flora and fauna.
The land is presently used for cattle grazing and the surface
rights are owned by the community of Guadelupe de Ures. An
agreement is in place with Mexus Gold Mining S.A. de C.V. for
surface access and disturbance. The Environmental Permit concludes
that no permanent damage or degradation of the present land use
will result from the intended activity on the lands. At present,
the Environmental Permits cover a total of 4 hectares - 3 hectares
cover the initial site of the mineral as presently understood and 1
hectare is permitted for the erection of a suitable extraction
plant.
No
known contamination from past mining activities was found or is
known to locals. The historic workings consisted of a few shallow
adits and pits. In the course of obtaining the Environmental
Permission the permit stipulated that properly lined ponds etc.
must be used to prevent any potential surface or ground water
contamination from any proposed activities.
Only
separation is proposed to be conducted on site if found to be
possible, while final metal recovery will be conducted at a
properly licensed and certified metal refining facility. Current
efforts to find suitable recovery methods are being conducted off
site in a University laboratory. Up sizing the process, if found,
will be completed by a licensed, certified metallurgical
laboratory.
Figures of the proposed permitted sites are attached. These were
extracted from the environmental permit
Application.
FIGURE 4- MICROLOCALIZACION PROYECTO “URES MINING
DISTRICT”
27
FIGURE 5 – LOCALIZACION DE AREAS DE EXTRACCION
FIGURE 6 - PLANTA DE BENEFICIO
AREA DE EXTRACCION
370 Area
Project
This
zone is composed of a sedimentary sequence (limestone, quartzite,
shale) intruded by dacite and diorite as well as rhyolite. The
dacite exhibits argillic alterations as well as silicification
(quartz veins). The entire area is well oxidized on the surface.
This is an area of classic disseminated low grade gold and silver
mineralization. Surface grab sample assays show 0.14 grams per ton
to as high as 29.490 grams per ton gold. This area is an important
area for potentially defining an open pit heap leach project.
El Scorpion Project
Area
This
area has several shear zones and veins which show copper and gold
mineralization. Recent assays of an 84’ drill hole shows 1.750% per
ton to .750% per ton of copper and 3.971 grams per ton to 0.072
grams per ton of gold. Another assay of rock sample from the area
shows greater than 4.690% per ton copper. This land form
distribution appears to be synonymous to the ideal porphyry deposit
at Baja La Alumbrera, Argentina.
Los
Laureles
Los
Laureles is a vein type deposit mainly gold with some silver and
copper. Recent assays from grab samples show gold values of 67.730
grams per ton gold, 38.4 grams per ton silver, 2,800 grams per ton
copper.
28
As of
the date of this Report, we have opened up old workings at the Los
Laureles claim and have discovered a gold carrying vein running
north and south into the mountain to the south.
The San Felix Mine
Project
The
San Felix mining site contains seven (7) concessions over an area
of approximately 26,000 acres located in the La Alameda area of
Caborca, Sonora, Mexico. During the year ended March 31, 2018, the
Company recorded an impairment of mineral property for the San
Felix Project of $75,000 because the requirement payment of
$500,000 due on August 13, 2017 was not paid in accordance with the
purchase agreement pending the receipt of certain required
instruments from the Grantor by the Company.
Employees
We
have no employees at this time in the United States and Mexico.
Consultants with specific skills are utilized to assist with
various aspects of the requirements of activities such as project
evaluation, property management, due diligence, acquisition
initiatives, corporate governance and property management. If we
complete our planned activation of the operations of the Mexican
mining properties, our total workforce will be approximately 20
persons. Mr. Paul D. Thompson is our sole officer and director.
Competition
We
compete with other mining companies in connection with the
acquisition of gold properties. There is competition for the
limited number of gold acquisition opportunities, some of which is
with companies having substantially greater financial resources
than Mexus Gold US. As a result, Mexus Gold US may have difficulty
acquiring attractive gold projects at reasonable prices.
Management of Mexus Gold US believes that no single company has
sufficient market power to affect the price or supply of gold in
the world market.
Legal
Proceedings
There
are no legal proceedings to which Mexus Gold US or Mexus Gold S.A.
de C.V. is a party or of which any of our properties are the
subject thereof.
Property Interests, Mining Claims and Risk
Property Interests
and Mining Claims
Our
exploration activities and operations in Mexico are subject to the
rules and regulations of the United Mexican States. The Ministry
(Secretariat) of Mining is the Federal Mexican Government ministry
charged with controlling all mining matters. A concession is
granted on the acceptance of an application which identifies the
specific minerals to be mined and description of the exact location
of the lands to be mined. The concession is subject to a semiannual
tax to continue the concession in good standing. Usually, our
arrangements with a concessionaire describe specific period
payments to the concessionaire and a royalty on the minerals
recovered from mining operations. Where prospective mineral
properties are identified by the Company, some type of conveyance
of the mining rights and property acquisition agreement is
necessary in order for us to explore or develop such property.
Generally, these agreements take the form of long term mineral
leases under which we acquire the right to explore and develop the
property in exchange for periodic cash payments during the
exploration and development phase and a royalty, usually expressed
as a percentage of gross production or net profits derived from the
leased properties if and when mines on the properties are brought
into production. Other forms of acquisition agreements are
exploration agreements coupled with options to purchase and joint
venture agreements.
Reclamation
We
may be required to mitigate long-term environmental impacts by
stabilizing, contouring, re-sloping and re-vegetating various
portions of a site after mining and mineral processing operations
are completed. These reclamation efforts will be conducted in
accordance with detailed plans, which must be reviewed and approved
by the appropriate regulatory agencies.
While
the Company, as of March 31, 2019, 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.
29
Risk
Our
success depends on our ability to recover precious metals, process
them, and successfully sell them for more than the cost of
production. The success of this process depends on the market
prices of metals in relation to our costs of production. We may not
always be able to generate a profit on the sale of gold or other
minerals because we can only maintain a level of control over our
costs and have no ability to control the market prices. The total
cash costs of production at any location are frequently subject to
great variation from year to year as a result of a number of
factors, such as the changing composition of ore grade or
mineralized material production, and metallurgy and exploration
activities in response to the physical shape and location of the
ore body or deposit. In addition costs are affected by the price of
commodities, such as fuel and electricity. Such commodities are at
times subject to volatile price movements, including increases that
could make production at certain operations less profitable. A
material increase in production costs or a decrease in the price of
gold or other minerals could adversely affect our ability to earn a
profit on the sale of gold or other minerals. Our success depends
on our ability to produce sufficient quantities of precious metals
to recover our investment and operating costs.
Distribution Methods of the Products
The
end product of our operations will usually be doré bars. Doré is an
alloy consisting of gold, silver and other precious metals. Doré is
sent to refiners to produce bullion that meets the required market
standard of 99.95% pure gold. Under the terms of refining
agreements we expect to execute, the doré bars are refined for a
fee and our share of the refined gold, silver and other metals are
credited to our account or delivered to our buyers who will then
use the refined metals for fabrication or held for investment
purposes.
General Market
The
general market for gold has two principal categories, being
fabrication and investment. Fabricated gold has a variety of end
uses, including jewelry, electronics, dentistry, industrial and
decorative uses, medals, medallions and official coins. Gold
investors buy gold bullion, official coins and jewelry. The supply
of gold consists of a combination of current production from mining
and the draw-down of existing stocks of gold held by governments,
financial institutions, industrial organizations and private
individuals.
Patents, trademarks, licenses, franchises, concessions, royalty
agreements, or labor contracts, including duration;
We do
not have any designs or equipment which is copyrighted, trademarked
or patented.
Effect of existing or probable governmental regulations on the
business
Government
Regulation
Mining operations and exploration activities in Mexico are subject
to the Ministry of Mining federal laws and regulations which govern
prospecting, development, mining, production, exports, taxes, labor
standards, occupational health, waste disposal, protection of the
environment, mine safety, hazardous substances and other matters.
We have obtained or have pending applications for those licenses,
permits or other authorizations currently required to conduct our
exploration and other programs. We believe that Mexus Gold US is in
compliance in all material respects with applicable mining, health,
safety and environmental statutes and the regulations passed
thereunder any jurisdiction in which we will operate. We are not
aware of any current orders or directions relating to Mexus Gold US
with respect to the foregoing laws and regulations.
Environmental
Regulation
Our
gold projects are subject to various Mexican federal laws and
regulations governing protection of the environment. These laws are
continually changing and, in general, are becoming more
restrictive. It is our policy to conduct business in a way that
safeguards public health and the environment. We believe that the
actions and operations of Mexus Gold US will be conducted in
material compliance with applicable laws and regulations. Changes
to current Mexican federal laws and regulations where we operate
currently, or in jurisdictions where we may operate in the future,
could require additional capital expenditures and increased
operating and/or reclamation costs. Although we are unable to
predict what additional legislation, if any, might be proposed or
enacted, additional regulatory requirements could impact the
economics of our projects.
Research and Development
We do
not foresee any immediate future research and development
costs.
30
Costs and effects of compliance with environmental laws
Our
gold projects are subject to various federal and state laws and
regulations governing protection of the environment. These laws are
continually changing and, in general, are becoming more
restrictive. It is our policy to conduct business in a way that
safeguards public health and the environment. We believe that our
operations are and will be conducted in material compliance with
applicable laws and regulations. The economics of our current
projects consider the costs and expenses associated with our
compliance policy.
Changes to current state or federal laws and regulations in Mexico,
where we operate currently, or in jurisdictions where we may
operate in the future, could require additional capital
expenditures and increased operating and/or reclamation costs.
Although we are unable to predict what additional legislation, if
any, might be proposed or enacted, additional regulatory
requirements could impact the economics of our projects.
Results of Operations
The
following management’s discussion and analysis of operating results
and financial condition of Mexus Gold US is for the three and nine
months ended December 31, 2019 and 2018. All amounts herein are in
U.S. dollars.
Three Months Ended
December 31, 2019 Compared with the Three Months Ended December 31,
2018
We
had a net loss during the three months ended December 31, 2019 of
$796,342 compared to a net loss of $704,185 during the same period
in 2018. The increase in net loss is primarily attributable an
increase in interest expense of $310,782. The increase in the net
loss is partially offset by (i) a decrease in exploration costs of
$47,040 (ii) a decrease in general and administrative services of
$78,791 and (iii) an increase in gain on change of fair value of
derivatives of $71,375.
Revenue
For
the three months ended December 31, 2019, we had revenues of $0
compared to $0 for the three months ended December 31, 2018.
Operating
Expenses
Total
operating expenses decreased to $420,157 for three months ended
December 31, 2019, compared to $556,613 for the three months ended
December 31, 2018. The decrease in operating expenses was primarily
due to a decrease in exploration costs and general and
administration expense.
Other Income
(Expense)
We
reported $376,185 of other expense during the three months ended
December 31, 2019 compared to $147,572 of other income during the
same period in 2018.
Changes in other income (expense) is mainly attributable to an
increase in interest expense is primarily due to the issuance of
the convertible promissory notes.
Nine months Ended
December 31, 2019 Compared with the Nine months Ended December 31,
2018
We
had a net loss during the nine months ended December 31, 2019 of
$2,349,605 compared to a net loss of $1,664.951 during the same
period in 2018. The increase in net loss is primarily attributable
(i) an increase in general and administrative services of $74,116
(ii) an increase in stock-based expense – consulting services
of $130,834 (iii) an increase in interest expense of $438,257 and
(v) an increase in loss on settlement of debt of $218,130. The
increase in the net loss is partially offset by a gain on the
change in the fair value of derivatives of $208,232.
Revenue
For
the nine months ended December 31, 2019, we had revenues of $0
compared to $0 for the nine months ended December 31, 2018.
Operating
Expenses
Total
operating expenses increased to $1,673,292 for nine months ended
December 31, 2019, compared to $1,454,373 for the nine months ended
December 31, 2018. The increase in operating expenses was primarily
due to increases in stock-based expense – consulting services
and general and administration expense.
31
Other Income
(Expense)
We
reported $676,313 of other expense during the nine months ended
December 31, 2019 compared to $210,578 of other income during the
same period in 2018.
Changes in other income (expense) is mainly attributable to an
increase in interest expense and loss on settlement of debt which
was partially offset by a gain on changes in fair value of
derivative liabilities. The increase in interest expense is
primarily due to the issuance of the convertible promissory
notes.
Liquidity and Capital Resources
At
December 31, 2019, we had cash of $51,111 compared to cash of
$12,029 at March 31, 2019.
Our
property and equipment decreased to $309,014 at December 31, 2019,
compared to $383,524 at March 31, 2019. The decrease in equipment
is largely due to depreciation expense of $141,813 during the nine
months ended December 31, 2019 and partially offset by $50,285 for
the purchase of equipment and $17,018 transfer of equipment under
construction to property and equipment.
Our
equipment under construction to $0 at December 31, 2019, compared
to $17,018 at March 31, 2019.
Our
mineral properties increased to $829,947 at December 31, 2019,
compared to $829,947 at March 31, 2019.
Total
assets decrease to $1,190,072 at December 31, 2019, compared to
$1,248,018 at March 31, 2019. The majority of the decrease in
assets relates to a $141,813 of depreciation expense.
Our
total liabilities increased to $2,301,084 at December 31, 2019,
compared to $1,665,007 as of March 31, 2019. The increase in our
total liabilities can be primarily attributed to the issuance of
notes payable and convertible promissory notes along with the
related convertible promissory note derivative liability.
Our
working capital deficit at December 31, 2019 and March 31, 2019 is
$2,249,973 and $1,647,478, respectively.
Our
net cash used in operating activities for the nine months ended
December 31, 2019 and 2018 is $1,066,996 and $835,821,
respectively. Our net loss for the nine months ended December 31,
2019 of $2,349,605 was the main contributing factor for our
negative cash flow offset mainly by depreciation and amortization
of $141,813, stock-based compensation – services of $432,390
and non-cash interest expense of $849,871.
Our
net cash (used in) provided by investing activities for the nine
months ended December 31, 2019 and 2018 is $(44,125) and $(481),
respectively, mainly due to the purchase of equipment.
Our
net cash provided by financing activities for the nine months ended
December 31, 2019 and 2018 is $1,150,203 and $715,393,
respectively, mainly due to issuance of notes payable, convertible
promissory notes and common stock.
The
Company is dependent upon outside financing to continue operations.
It is management’s plans to raise necessary funds through a private
placement of its common stock to satisfy the capital requirements
of the Company’s 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.
Future goals
The
Santa Elena Prospect (formerly known as Caborca Properties) has
become our primary focus. The completion of the initial surface
ground construction for a leaching production plant, being an
expandable ore leaching pad, solution ponds and production recovery
facility, has been tested and will be placed into production. The
ore leaching pad has 35,000 tons of ore in place and will be
increased in size on a continuing basis to realize the capacity of
the production facility.
Therefore, our goal for the current year is to increase the cash
flow of the Company’s operations through (a) place the current
facilities into full commercial production, (b) increase the
mineralization of the ore pad from 1 gram per ton gold and 3 grams
per ton silver and (c) increase the capacity of the leach pad.
The
Company has now scheduled the installation of a crushing/milling
recovery plant for the high grade Julio quartz deposit as a result
of the values of the assay analysis from the deposit which range
from .250 to 5.5 ounces of gold per ton.
32
Therefore, our goal for the current year is to increase the cash
flow of the placer mining operation, continue the drilling program
which began during 2011, initialize mining operations on the Julio
quartz deposit while we conduct a thorough geological study by an
independent geological firm of the future potential of other vein
deposits located near the Julio deposit.
Foreign Currency Transactions
The
majority of our operations are located in United States and most of
our transactions are in the local currency. We plan to continue
exploration activities in Mexico and therefore we will be exposed
to exchange rate fluctuations. We do not trade in hedging
instruments and a significant change in the foreign exchange rate
between the United States Dollar and Mexican Peso could have a
material adverse effect on our business, financial condition and
results of operations.
Off-balance Sheet Arrangements
The
Company does not have any off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on the
Company’s financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to
investors.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
As a
“smaller reporting company” as defined by Item 10 of Regulation
S-K, the Company is not required to provide this information.
ITEM
4(T). CONTROLS AND PROCEDURES
We
conducted an evaluation, under the supervision and with the
participation of management, including our chief executive officer
and chief financial officer, of the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended) as of the end of the period covered by this
quarterly report.
Based
on this evaluation, our chief executive officer and chief financial
officer concluded that as of the evaluation date our disclosure
controls and procedures were not effective. Our procedures were not
designed to ensure that the information relating to our company
required to be disclosed in our SEC reports is recorded, processed,
summarized, and reported within the time periods specified in SEC
rules and forms, and is accumulated and communicated to our
management, including our chief executive officer and chief
financial officer, as appropriate to allow for timely decisions
regarding required disclosure. Management is currently evaluating
the current disclosure controls and procedures in place to see
where improvements can be made.
ITEM
5. OTHER INFORMATION
Management’s Report on Internal Control over Financial
Reporting
Our
management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined
in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control
over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures
are being made only in accordance with authorizations of management
and directors; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of our assets that could have a
material effect on the financial statements.
Under
the supervision and with the participation of management, including
our chief executive officer and chief financial officer, we
conducted an evaluation of the effectiveness of our internal
controls over financial reporting based on the framework in
“Internal Control Framework” issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based upon this
evaluation, management has concluded that our internal control over
financial reporting was not effective as of December 31, 2019, to
ensure that information required to be disclosed by us in reports
that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods
specified in SEC rules and forms. Management identified the
following material weaknesses in our internal control over
financial reporting, which are indicative of many small companies
with small staff: (i) we do not have an audit committee of the
Board of Directors or a financial expert serving on the Board of
Directors (ii) inadequate segregation of duties and effective risk
assessment; and (iii) insufficient written policies and procedures
for accounting and financial reporting with respect to the
requirements and application of both US GAAP and SEC guidelines
(iv) deficient design of our management information systems and
information technology because the potential for unauthorized
access to certain information systems and software applications
existed during 2018 in several departments, including corporate
accounting. Certain key controls for maintaining the overall
integrity of systems and data processing were not properly designed
and operating effectively.
33
To
remediate such weaknesses, we hope to implement the following
changes during our fiscal year ending December 31, 2019: (i)
appoint a financial expert and independent Directors to serve on
the Board of Directors (ii) appoint additional qualified personnel
to address inadequate segregation of duties, ineffective risk
management and deficient design of our management information
systems and information technology; and (iii) adopt sufficient
written policies and procedures for accounting and financial
reporting. The remediation efforts set out in (i), (ii) and (iii)
are largely dependent upon our securing additional financing to
cover the costs of implementing the changes required. If we are
unsuccessful in securing such funds, remediation efforts may be
adversely affected in a material manner.
Our
management, including our chief executive officer and chief
financial officer, does not expect that our disclosure controls or
our internal control over financial reporting, or any system we
design or implement in the future, will prevent or detect all
errors and all fraud. A control system, no matter how well designed
and operated, can provide only reasonable, not absolute, assurance
that the control system’s objectives will be met. The design of any
system of controls is based in part on certain assumptions about
the likelihood of future events, and there can be no assurance that
any design will succeed in achieving its stated goals under all
potential future conditions.
Changes in Internal Control
There
have not been any changes in our internal control over financial
reporting during the three month period ended December 31, 2019
that have materially affected, or are reasonably likely to
materially affect, our internal control over financial
reporting.
PART II – OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
We
are not subject to any legal proceedings responsive to this Item
Number.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
On
October 1, 2019, the Company issued 19,912,499 shares of common
stock to satisfy obligations under share subscription agreements of
$37,200 for settlement of services, $25,200 for cash receipts,
$3,384 for interest and $112,788 for the settlement of notes
payable included in share subscriptions payable.
On
October 29, 2019, the Company issued 29,999,850 shares of common
stock to satisfy obligations under share subscription agreements of
$200,000 for settlement of notes payable included in share
subscriptions payable.
On
November 1, 2019, the Company issued 3,804,348 shares of common
stock to satisfy obligations under share subscription agreements of
$53,350 for settlement of services included in share subscriptions
payable.
On
November 20, 2019, the Company issued 2,272,727 shares of common
stock to satisfy obligations under share subscription agreements of
$22,500 for settlement of convertible notes included in share
subscriptions payable.
On
November 21, 2019, the Company issued 3,488,372 shares of common
stock to satisfy obligations under share subscription agreements of
$20,930 for settlement of convertible notes included in share
subscriptions payable.
On
November 25, 2019, the Company issued 4,166,667 shares of common
stock to satisfy obligations under share subscription agreements of
$22,917 for settlement of convertible notes included in share
subscriptions payable.
On
December 2, 2019, the Company issued 5,625,000 shares of common
stock to satisfy obligations under share subscription agreements of
$28,125 for settlement of convertible notes included in share
subscriptions payable.
On
December 4, 2019, the Company issued 5,555,556 shares of common
stock to satisfy obligations under share subscription agreements of
$30,556 for settlement of convertible notes included in share
subscriptions payable.
On
December 9, 2019, the Company issued 5,761,538 shares of common
stock to satisfy obligations under share subscription agreements of
$26,503 for settlement of convertible notes included in share
subscriptions payable.
The
issuance of securities described above were deemed to be exempt
from registration under the Securities Act in reliance on Section
4(2) of the Securities Act of 1933 and Regulation D as transactions
by an issuer not involving any public offering. The recipients of
securities in each such transaction represented their intention to
acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof, and
appropriate legends were affixed to the share certificates and
other instruments issued in such transactions. The sales of these
securities were made without general solicitation or
advertising.
34
The
Company intends to use the proceeds from sale of the securities for
the purchase of equipment for mining operations, mining machinery,
supplies and payroll for operations, professional fees, and working
capital.
There
were no underwritten offerings employed in connection with any of
the transactions set forth above.
ITEM
3. DEFAULT UPON SENIOR SECURITIES
At
December 31, 2019 and March 31, 2019, the carrying value of the
notes totaled $803,531 (net of unamortized debt discount of $97,648
and $626,190 (net of unamortized debt discount of $94,127),
respectively. At December 31, 2019, $467,215 of these notes were in
default. There are no default provisions stated in these notes. At
December 31, 2019 -and March 31, 2019, accrued interest of $87,130
and $31,332, respectively, is included in accounts payable and
accrued liabilities.
At
December 31, 2019 and March 31, 2019, outstanding Promissory Notes
were $65,000 and $65,000, respectively. The Note bear interest of
4% per annum and are due on December 31, 2013. The Note is 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. As of December
31, 2019, the Company has not made the scheduled payments and is in
default on this promissory note. The default rate on the notes is
seven percent. At December 31, 2019 and March 31, 2019, accrued
interest of $36,276 and $31,117, respectively, is included in
accounts payable and accrued liabilities.
ITEM
4. MINE SAFETY DISCLOSURES
Not
applicable.
ITEM
5. OTHER INFORMATION
None.
35
ITEM
6. EXHIBITS
Statements
|
|
Condensed Consolidated Balance Sheets at December 31, 2019
(unaudited) and March 31, 2019
|
|
Condensed Consolidated Statements of Operations for the three and
nine months ended December 31, 2019 and 2018 (unaudited)
|
|
Condensed Consolidated Statements of Stockholders’ Equity for the
three and nine months ended December 31, 2019 and 2018
(unaudited)
|
|
Condensed Consolidated Statements of Cash Flows for the nine months
ended December 31, 2019 and 2018 (unaudited)
|
|
Notes
to Condensed Consolidated Financial Statements (unaudited)
|
|
Schedules
|
|
All
schedules are omitted because they are not applicable or the
required information is shown in the Financial Statements or notes
thereto.
|
|
Exhibit
|
Form
|
Filing
|
Filed with
|
Exhibits
|
#
|
Type
|
Date
|
This Report
|
|
|
|
|
|
Articles of Incorporation filed with the Secretary of State of
Colorado on June 22, 1990
|
3.1
|
10-SB
|
1/24/2007
|
|
|
|
|
|
|
Articles of Amendment to the Articles of Incorporation filed with
the Secretary of State of Colorado on October 17, 2006
|
3.2
|
10-SB
|
1/24/2007
|
|
|
|
|
|
|
Articles of Amendment to Articles of Incorporation filed with the
Secretary of State of the State of Colorado on January 25, 2007
|
3.3
|
10KSB
|
6/29/2007
|
|
|
|
|
|
|
Articles of Incorporation filed with the Secretary of State of
Nevada on October 1, 2009
|
3.4
|
10-K
|
7/27/2016
|
|
|
|
|
|
|
Certificate of Amendment filed with the Secretary of State of
Nevada on March 9, 2016
|
3.5
|
10-K
|
7/27/2016
|
|
|
|
|
|
|
Certificate of Designation filed with the Secretary of State of
Nevada on August 8, 2011
|
3.6
|
10-K
|
7/27/2016
|
|
|
|
|
|
|
Amended and Restated Bylaws dated December 30, 2005
|
3.7
|
10-SB
|
1/24/2007
|
|
|
|
|
|
|
Code
of Ethics
|
14.1
|
10-KSB
|
6/29/2007
|
|
|
|
|
|
|
Certification of Paul D. Thompson, pursuant to Rule 13a-14(a)
|
31.1
|
|
|
X
|
|
|
|
|
|
Certification of Paul D. Thompson pursuant to 18 U.S.C Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
|
32.1
|
|
|
X
|
|
|
|
|
|
Caborca Preliminary Report and First Stage Mapping
|
99.1
|
|
|
X
|
|
|
|
|
|
XBRL
Instance Document
|
101.INS
|
|
|
X
|
XBRL
Taxonomy Extension Schema Document
|
101.SCH
|
|
|
X
|
XBRL
Taxonomy Extension Calculation Linkbase Document
|
101.CAL
|
|
|
X
|
XBRL
Taxonomy Extension Definition Linkbase Document
|
101.DEF
|
|
|
X
|
XBRL
Taxonomy Extension Label Linkbase Document
|
101.LAB
|
|
|
X
|
XBRL
Taxonomy Extension Presentation Linkbase Document
|
101.PRE
|
|
|
X
|
36
Signatures
In
accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
February 19, 2020
/s/ Paul D.
Thompson
Paul
D. Thompson
Chief
Executive Officer
Chief
Financial Officer
Principal Accounting Officer
Director
37