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 September 30, 2020
[ ] 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
|
|
20-4092640
|
(State
or other jurisdiction
|
|
(Commission File Number)
|
|
(IRS
Employer
|
of
Incorporation)
|
|
|
|
Identification Number)
|
|
|
1805 N. Carson Street, #150
|
|
|
|
|
Carson City, NV 89701
|
|
|
|
|
(Address of principal executive offices)
|
|
|
|
|
|
|
|
|
|
(916) 776 2166
|
|
|
|
|
(Issuer’s Telephone Number)
|
|
|
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
|
[ ]
|
Accelerated filer
|
[ ]
|
Non-accelerated
filer
|
[ ]
|
Smaller reporting
company
|
[X]
|
(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 November
10, 2020, there were 112,081,655 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
|
|
September
30,
2020
|
|
March
31,
2020
|
ASSETS
|
|
(Unaudited)
|
|
|
CURRENT ASSETS
|
|
|
|
|
Cash
|
$
|
13,017
|
$
|
64,173
|
TOTAL
CURRENT ASSETS
|
|
13,017
|
|
64,173
|
|
|
|
|
|
FIXED
ASSETS
|
|
|
|
|
Property and equipment, net of accumulated depreciation
|
|
329,570
|
|
330,888
|
TOTAL
FIXED ASSETS
|
|
329,570
|
|
330,888
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
|
|
Property costs
|
|
829,947
|
|
829,947
|
TOTAL
OTHER ASSETS
|
|
829,947
|
|
829,947
|
|
|
|
|
|
TOTAL
ASSETS
|
$
|
1,172,534
|
$
|
1,225,008
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
379,084
|
$
|
332,795
|
Accounts payable - related party
|
|
386,420
|
|
397,469
|
Notes payable (net unamortized debt discount of $28,492 and
$43,867, respectively)
|
|
1,123,849
|
|
934,248
|
Notes payable - related party
|
|
141,169
|
|
138,169
|
Promissory notes
|
|
65,000
|
|
65,000
|
Convertible promissory note (net of debt discount of $227,007 and
$262,116, respectively)
|
|
200,044
|
|
386,239
|
Convertible promissory note derivative liabilities
|
|
214,741
|
|
486,663
|
Warrant derivative liabilities
|
|
28,030
|
|
39,387
|
TOTAL
CURRENT LIABILITIES
|
|
2,538,337
|
|
2,779,970
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
2,538,337
|
|
2,779,970
|
|
|
|
|
|
CONTINGENT LIABILITIES (Note 11)
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
DEFICIT
|
|
|
|
|
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, 2020)
|
|
1,000
|
|
1,000
|
107,964,017 shares of Common Stock (79,699,130 - March 31,
2020)
|
|
107,964
|
|
79,699
|
Additional paid-in capital
|
|
31,887,845
|
|
30,382,200
|
Share subscription payable
|
|
222,632
|
|
327,807
|
Accumulated deficit
|
|
(33,585,244)
|
|
(32,345,668)
|
TOTAL
STOCKHOLDERS' DEFICIT
|
|
(1,365,803)
|
|
(1,554,962)
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
$
|
1,172,534
|
$
|
1,225,008
|
|
|
|
|
|
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
September 30,
|
|
Six
Months Ended
September 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
EXPENSES
|
|
|
|
|
|
|
|
|
Exploration (net of sale of gold of $14,522 and $131,911 for
the three and six months ended September 30, 2020,
respectively)
|
|
161,252
|
|
180,118
|
|
169,380
|
|
374,263
|
General and administrative
|
|
188,853
|
|
270,417
|
|
360,573
|
|
487,057
|
Stock-based expense - consulting services
|
|
148,630
|
|
137,250
|
|
234,840
|
|
375,415
|
Loss on settlement of accounts payable
|
|
-
|
|
-
|
|
-
|
|
16,400
|
Total operating
expenses
|
|
498,735
|
|
587,785
|
|
764,793
|
|
1,253,135
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
(EXPENSE)
|
|
|
|
|
|
|
|
|
Foreign exchange
|
|
(6,245)
|
|
188
|
|
(8,115)
|
|
(1,786)
|
Interest
|
|
(316,162)
|
|
(248,747)
|
|
(819,757)
|
|
(463,594)
|
Loss on settlement of debt
|
|
-
|
|
(85,448)
|
|
-
|
|
(69,977)
|
Gain on change in fair value and settlement of convertible
promissory note and warrant derivative liabilities
|
|
61,761
|
|
207,727
|
|
353,089
|
|
235,229
|
Total other
expense
|
|
(260,646)
|
|
(126,280)
|
|
(474,783)
|
|
(300,128)
|
|
|
|
|
|
|
|
|
|
NET LOSS BEFORE
PROVISION FOR TAX
|
|
(759,381)
|
|
(714,065)
|
|
(1,239,576)
|
|
(1,553,263)
|
|
|
|
|
|
|
|
|
|
Income tax
|
|
-
|
|
-
|
|
-
|
|
-
|
NET LOSS
|
$
|
(759,381)
|
$
|
(714,065)
|
$
|
(1,239,576)
|
$
|
(1,553,263)
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED
LOSS PER COMMON SHARE
|
$
|
(0.01)
|
$
|
(0.01)
|
$
|
(0.01)
|
$
|
(0.03)
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE
NUMBER OF COMMON SHARES
|
|
|
|
|
|
|
|
|
OUTSTANDING -
BASIC AND DILUTED
|
|
100,993,949
|
|
65,288,276
|
|
91,868,318
|
|
60,185,430
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
Stock
|
Series A
Preferred Stock
|
Common
Stock
|
|
|
|
|
|
Number
of
Shares
|
Amount
|
Number
of
Shares
|
Amount
|
Number
of
Shares
|
Amount
|
Additional
Paid-in
Capital
|
Share
Subscription
Payable
|
Accumulated
Deficit
|
Total
Stockholders'
Equity
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2020
|
-
|
$
-
|
1,000,000
|
$
1,000
|
94,961,170
|
$
94,961
|
$
31,263,785
|
$
284,903
|
$
(32,825,863)
|
$
(1,181,214)
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for services
|
-
|
-
|
-
|
-
|
995,889
|
996
|
169,411
|
(21,777)
|
-
|
148,630
|
Shares
issued for cash
|
-
|
-
|
-
|
-
|
8,176,389
|
8,176
|
197,840
|
(20,016)
|
-
|
186,000
|
Shares
issued for
|
-
|
|
-
|
|
638,889
|
639
|
46,639
|
(47,278)
|
-
|
-
|
equipment
|
Shares
issued for note
|
-
|
-
|
-
|
-
|
1,291,667
|
1,292
|
43,708
|
-
|
-
|
45,000
|
principal and interest
|
Shares
issued for
|
-
|
-
|
-
|
-
|
1,900,013
|
1,900
|
166,462
|
26,800
|
-
|
195,162
|
convertible notes
|
principal and interest
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(759,381)
|
(759,381)
|
Balance, September 30,
|
-
|
$
-
|
1,000,000
|
$
1,000
|
107,964,017
|
$
107,964
|
$
31,887,845
|
$
222,632
|
$
(33,585,244)
|
$
(1,365,803)
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Six
Months Ended
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31,
|
-
|
$
--
|
1,000,000
|
$
1,000
|
79,699,130
|
$
79,699
|
$
30,382,200
|
$
327,807
|
$
(32,345,668)
|
$
(1,554,962)
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for services
|
-
|
-
|
-
|
-
|
2,151,152
|
2,151
|
269,872
|
(37,181)
|
-
|
234,842
|
Shares
issued for cash
|
-
|
-
|
-
|
-
|
9,500,556
|
9,501
|
230,015
|
(43,516)
|
-
|
196,000
|
Shares
issued for
|
-
|
-
|
-
|
-
|
638,889
|
639
|
46,639
|
(47,278)
|
-
|
-
|
equipment
|
Shares
issued for
|
-
|
-
|
-
|
-
|
1,136,364
|
1,136
|
48,864
|
-
|
-
|
50,000
|
accounts
payable –
|
related
party
|
Shares
issued for note
|
-
|
-
|
-
|
-
|
1,391,667
|
1,392
|
51,408
|
22,800
|
-
|
75,600
|
principal and interest
|
Shares
issued for
|
-
|
-
|
-
|
-
|
13,446,259
|
13,446
|
858,847
|
-
|
-
|
872,293
|
convertible notes
|
principal and interest
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,239,576)
|
(1,239,576)
|
Balance, September 30,
|
-
|
$
-
|
1,000,000
|
$
1,000
|
107,964,017
|
$
107,964
|
$
31,887,845
|
$
222,632
|
(33,585,244)
|
$
(1,365,803)
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2019
|
-
|
$
-
|
1,000,000
|
$
1,000
|
58,354,909
|
$
58,355
|
$
28,700,722
|
$
547,830
|
$
(29,966,570)
|
$
(658,663)
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for services
|
-
|
-
|
-
|
-
|
1,825,000
|
1,825
|
311,675
|
(176,250)
|
-
|
137,250
|
and
supplies
|
Shares
issued for cash
|
-
|
-
|
-
|
-
|
9,434,450
|
9,434
|
280,961
|
(70,795)
|
-
|
219,600
|
Shares
issued for
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
accounts
payable
|
Shares
issued for note
|
-
|
-
|
-
|
-
|
250,000
|
250
|
48,250
|
103,292
|
-
|
151,792
|
principal and interest
|
Shares
issued for
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
6,160
|
-
|
6,160
|
equipment
|
Beneficial conversion
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
features
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(714,065)
|
(714,065)
|
Balance, September 30, 2019
|
-
|
$
-
|
1,000,000
|
$
1,000
|
69,864,359
|
$
69,864
|
$
29,341,608
|
$
410,237
|
$
(30,680,635)
|
$
(857,926)
|
4
MEXUS
GOLD US AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
(CONTINUED)
(Unaudited)
Six
Months Ended
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2019
|
-
|
$
-
|
1,000,000
|
$
1,000
|
50,592,449
|
50,592
|
$
28,025,951
|
$
632,840
|
$
(29,127,372)
|
$
(416,989)
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for services
|
-
|
-
|
-
|
-
|
2,453,460
|
2,453
|
528,512
|
(155,550)
|
-
|
375,415
|
and
supplies
|
Shares
issued for cash
|
-
|
-
|
-
|
-
|
15,136,700
|
15,137
|
503,408
|
(93,400)
|
-
|
425,145
|
Shares
issued for accounts
|
-
|
-
|
-
|
-
|
950,000
|
950
|
116,450
|
(81,000)
|
-
|
36,400
|
payable
|
Shares
issued for note
|
-
|
-
|
-
|
-
|
731,750
|
732
|
64,873
|
101,187
|
-
|
166,792
|
principal and interest
|
Shares
issued for equipment
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
6,160
|
-
|
6,160
|
Beneficial conversion features
|
-
|
-
|
-
|
-
|
-
|
-
|
102,414
|
-
|
-
|
102,414
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,553,263)
|
(1,553,263)
|
Balance, September 30, 2019
|
-
|
$
-
|
1,000,000
|
$
1,000
|
69,864,359
|
69,864
|
$
29,341,608
|
$410,237
|
$
(30,680,635)
|
$
(857,926)
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of these unaudited condensed
consolidated financial statements.
|
5
MEXUS GOLD US AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Six
Months Ended June 30,
|
|
|
2020
|
|
2019
|
CASH FLOWS FROM
OPERATING ACTIVITIES
|
|
|
|
|
Net loss
|
$
|
(1,239,576)
|
$
|
(1,553,263)
|
Adjustments to
reconcile net loss
|
|
|
|
|
to net cash used in
operating activities:
|
|
|
|
|
Depreciation and amortization
|
|
50,318
|
|
113,479
|
Loss
on settlement of debt and accounts payable
|
|
222,555
|
|
69,977
|
Stock-based compensation - services
|
|
234,842
|
|
375,415
|
Non
cash Interest expense
|
|
760,750
|
|
426,902
|
Gain
on change in fair value of derivative instruments
|
|
(575,644)
|
|
(235,229)
|
Changes in operating
assets and liabilities:
|
|
|
|
|
Decrease of other assets
|
|
-
|
|
5,500
|
Increase in accounts payable and accrued liabilities, including
related parties
|
|
179,454
|
|
99,339
|
NET CASH USED IN
OPERATING ACTIVITIES
|
|
(367,301)
|
|
(697,880)
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES
|
|
|
|
|
Purchase of
equipment
|
|
(49,000)
|
|
(44,125)
|
NET CASH USED IN
INVESTING ACTIVITIES
|
|
(49,000)
|
|
(44,125)
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES
|
|
|
|
|
Proceeds from
issuance of notes payable
|
|
65,000
|
|
320,000
|
Proceeds from
issuance of notes payable - related party
|
|
3,000
|
|
7,700
|
Payment of notes
payable
|
|
(32,000)
|
|
(170,000)
|
Proceeds from the
issuance of convertible promissory notes
|
|
312,000
|
|
412,500
|
Repayment of
convertible promissory note
|
|
(178,855)
|
|
(215,719)
|
Proceeds from
issuance of common stock, net
|
|
196,000
|
|
425,145
|
NET CASH PROVIDED
BY FINANCING ACTIVITIES
|
|
365,145
|
|
779,626
|
|
|
|
|
|
INCREASE
(DECREASE) IN CASH
|
|
(51,156)
|
|
37,621
|
|
|
|
|
|
CASH, BEGINNING OF
PERIOD
|
|
64,173
|
|
12,029
|
|
|
|
|
|
CASH, END OF
PERIOD
|
$
|
13,017
|
$
|
49,650
|
|
|
|
|
|
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
|
$
|
3,800
|
$
|
153,798
|
Shares issued for
settlement of convertible notes
|
$
|
872,293
|
$
|
-
|
Shares issued to
settle accounts payable
|
$
|
-
|
$
|
36,400
|
Shares issued to
settle accounts payable - related party
|
$
|
50,000
|
$
|
-
|
Note payable issued
to settle accounts payable and accrued interest
|
$
|
94,216
|
$
|
66,754
|
Shares issued in
conjunction with the issuance of notes payable
|
$
|
71,800
|
$
|
8,500
|
Discount for
beneficial conversion feature recognized on issuance of notes
payable
|
$
|
-
|
$
|
102,414
|
Initial value of
embedded derivative liability
|
$
|
292,366
|
$
|
376,606
|
Shares issued to
purchase equipment
|
$
|
-
|
$
|
6,160
|
Reclassification of
equipment under construction to property and equipment
|
$
|
-
|
$
|
17,018
|
|
|
|
|
|
The
accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
|
6
MEXUS GOLD US AND
SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2020
(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, 2020 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.
7
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2020
(Unaudited)
2.
BASIS OF PREPARATION (CONTINUED)
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):
Mining tools and
equipment
|
7 years
|
Watercraft
|
7 years
|
Vehicles
|
3 years
|
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.
8
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2020
(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. For the six months ended
September 30, 2020 and 2019, 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.
9
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2020
(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 September
30, 2020 and March 31, 2020, 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 September
30, 2020 and March 31, 2020, 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:
|
September
30,
2020
|
|
March
31,
2020
|
Common stock issuable upon conversion of notes payable and
convertible notes payable
|
11,992,046
|
|
18,009,112
|
Common stock issuable to satisfy stock payable obligations
|
2,970,315
|
|
3,437,035
|
Common stock issuable upon conversion of Series A Preferred
Stock
|
1,000,000
|
|
1,000,000
|
Total
|
15,962,361
|
|
22,446,147
|
10
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2020
(Unaudited)
2.
BASIS OF PREPARATION (CONTINUED)
Recently
Issued Accounting Pronouncements
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 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 six months
ended September 30, 2020, the Company incurred a net loss of
$1,239,576 and used cash in operating activities of $367,301, and
at September 30, 2020, had an accumulated deficit of $33,585,244.
At September 30, 2020, the Company is in the exploration stage.
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,
2020, 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 Company is unable to predict the
effect, if any, that the coronavirus COVID-19 global pandemic may
have on its access to the financing markets.
The
consolidated financial statements do not include any adjustments
relating to the recoverability and classification of assets and/or
liabilities that might be necessary should the Company be unable to
continue as a going concern. The continuation as a going concern is
dependent upon the ability of the Company to meet our obligations
on a timely basis, and, ultimately to attain profitability.
4.
PROPERTY & EQUIPMENT
|
|
Cost
|
|
Accumulated
Depreciation
|
|
September 30,
2020
Net
Book
Value
|
|
March
31,
2020
Net
Book
Value
|
Mining tools and equipment
|
$
|
1,867,746
|
$
|
1,548,449
|
$
|
319,297
|
$
|
316,392
|
Vehicles
|
|
178,810
|
|
168,537
|
|
10,273
|
|
14,496
|
|
$
|
2,046,556
|
$
|
1,716,986
|
$
|
329,570
|
$
|
330,888
|
Depreciation
expense for three and six months ended September 30, 2020 and 2019
was $25,149 and $53,689 and $50,318 and $113,479, respectively.
11
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2020
(Unaudited)
5.
ACCOUNTS PAYABLE – RELATED PARTIES
During the
three and six months ended September 30, 2020 and 2019, the Company
incurred rent expense to Paul D. Thompson, the sole director and
officer of the Company, of $11,400 and $22,800 and $11,400 and
$22,800, respectively. At September 30, 2020 and March 31, 2020,
$125,550 and $107,161 for this obligation is outstanding,
respectively.
Compensation
On July 2,
2015, the Company entered into a compensation agreement with Paul
D. Thompson Sr., 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 100,000 shares of common stock at
the end of each fiscal quarter. On September 30, 2020, the
compensation agreement was amended to increase the number of shares
of common stock due to Mr. Thompson to 2,000,000 shares. At
September 30, 2020 and March 31, 2020, $260,870 and $290,308 of
compensation due is included in accounts payable – related
party, respectively and $116,000 for 2,000,000 shares and $32,600
for 100,000 shares of common stock due is included in share
subscriptions payable, respectively.
6.
NOTES PAYABLE AND NOTES PAYABLE – RELATED PARTY
During the
six months ended September 30, 2020, the Company issued the
following notes payable:
i)During
the period June 12, 2020 to June 15, 2020, the Company issued two
(2) promissory notes (“Notes”) with $20,000 in principal that earns
interest at 12% 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 14
trading days. These Notes has been accounted for in accordance with
ASC 480 Distinguishing Liabilities from Equity.
ii)On
July 2, 2020, the Company issued a promissory note (“Note”) for
cash with $35,000 in principal that earns interest at 12% per annum
and a term of six months. In conjunction with the issuance of this
Note the Company issued 875,000 shares of its common stock to the
Note holder which was recorded as a $35,000 debt
discount.
iii)On
August 26, 2020, the Company issued a promissory note (“Note”) for
cash with $10,000 in principal that earns interest at 12% per annum
and a term of six months. In conjunction with the issuance of this
Note the Company issued 416,667 shares of its common stock to the
Note holder which was recorded as a $10,000 debt
discount.
iv)On
September 4, 2020, the Company issued a promissory note (“Note”)
with a principal of amount of $82,650 bearing interest of 10% per
annum to settle $82,650 in accounts payable due for accounting
fees. The Note is due on September 30, 2021. The Note holder, in
its sole discretion, may convert any part or all of the principal,
interest or other charges due and payable under this Note to
restricted common stock of the Company at a variable conversion
price calculated at 50% of the market price defined as the average
of the five closing trading prices during the previous five trading
days. This Note has been accounted for in accordance with ASC 480
Distinguishing Liabilities from Equity.
v)On
September 23, 2020, the Company agreed to change certain terms of a
promissory note (“Note”) issued on April 15, 2019, with principal
of $66,754 and accrued interest of $11,566. The Note had the
following original terms (i) bearing interest of 10% per annum (ii)
the holder of the Note may convert principal and interest into
shares of common stock of the Company at $0.10 per share and (iii)
due on June 30, 2020. The Company agreed the Note holder, in its
sole discretion, may convert any part or all of the principal,
interest or other charges due and payable under this Note to
restricted common stock of the Company at a variable conversion
price calculated at 50% of the market price defined as the average
of the five closing trading prices during the previous five trading
days and change the maturity date to September 30, 2021. This Note
has been accounted for in accordance with ASC 480 Distinguishing
Liabilities from Equity. The Note is no longer convertible at a
fixed price of $0.10 per share.
12
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2020
(Unaudited)
6.
NOTES PAYABLE AND NOTES PAYABLE – RELATED PARTY
(CONTINUED)
During the
six months ended September 30, 2020 and 2019, note principal of
$2,000 and $52,000, respectively, was paid through the issuance of
50,000 shares and 907,500 shares of common stock, respectively. In
addition, for six months ended September 30, 2020 and 2019, the
Company paid $32,000 and $170,000 in cash, respectively, to settle
debt.
At September 30, 2020 and March
31, 2020, the carrying value of the notes payable totaled
$1,123,849 (net of unamortized debt discount of $28,492) and
$934,248 (net of unamortized debt discount of $43,867),
respectively.
Notes
payable – related party – At September 30, 2020 and March
31, 2020, notes payable – related party of $141,169 and
$138,169, 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. On June 26, 2020, the Company issued a note
payable – related party for cash with $3,000 in principal that
earns interest at 10% per annum and a term of six months.
Interest and
amortization of debt discount was $136,185 and $71,336 for the six
months ended September 30, 2020 and 2019, respectively.
At September
30, 2020 and March 31, 2020, accrued interest of $155,430 and
$113,603, respectively, is included in accounts payable and accrued
liabilities.
At September
30, 2020, $1,129,540 of notes payable and notes payable
– related party were in default. There are no default
provisions stated in these notes.
The amount by
which the if-converted value of notes payable exceeds principal of
notes payable at September 30, 2020 is $0.
7.
PROMISSORY NOTE
At September
30, 2020 and March 31, 2020, 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 September 30,
2020, 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 September 30, 2020 and March 31, 2020, accrued
interest of $42,657 and $38,043, respectively, is included in
accounts payable and accrued liabilities.
8.
CONVERTIBLE PROMISSORY NOTES
Power Up
Lending Group Ltd.
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. From April 13, 2020
to April 22, 2020, the Company issued 2,489,415 shares of common
shares of the Company with the fair value $154,491 to the Holder to
fully settle the Note resulting in a loss on settlement of $19,953.
Interest and amortization of debt discount was $42,155 for the six
months ended September 30, 2020.
13
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2020
(Unaudited)
8.
CONVERTIBLE PROMISSORY NOTES (CONTINUED)
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 and
between 121 days and 180 days at 135% of the original principal
amount plus interest. Thereafter, the Company does not have the
right of prepayment. From June 17, 2020 to June 24, 2020, the
Company issued 1,935,938 shares of common shares of the Company
with the fair value $137,709 to the Holder to fully settle the Note
resulting in a loss on settlement of $43,940. Interest and
amortization of debt discount was $52,332 for the six months ended
September 30, 2020.
On March 2,
2020, the Company issued a Convertible Promissory Note (“Note”) to
Power Up Lending Group Ltd. (“Holder”) in the original principal
amount of $52,500 less transaction costs of $2,500 bearing a 12%
annual interest rate and maturing December 15, 2020 for $50,000 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 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 $70,613 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 and
between 121 days and 180 days at 135% of the original principal
amount plus interest. Thereafter, the Company does not have the
right of prepayment. From September 8, 2020 to September 17, 2020,
the Company issued 1,114,824 shares of common shares of the Company
with the fair value $90,894 to the Holder to fully settle the Note
resulting in a loss on settlement of $5,278. Interest and
amortization of debt discount was $76,712 for the six months ended
September 30, 2020.
On March 26,
2020, 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 January 15, 2021 for $40,000 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 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 $38,003 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 and
between 121 days and 180 days at 135% of the original principal
amount plus interest. Thereafter, the Company does not have the
right of prepayment. At September 30, 2020, the Note is recorded at
an accreted value of $58,625 less unamortized debt discount of
$12,191. Interest and amortization of debt discount was $43,255 for
the six months ended September 30, 2020.
14
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2020
(Unaudited)
8.
CONVERTIBLE PROMISSORY NOTES (CONTINUED)
On June 9,
2020, the Company issued a Convertible Promissory Note (“Note”) to
Power Up Lending Group Ltd. (“Holder”) in the original principal
amount of $52,500 less transaction costs of $2,500 bearing a 12%
annual interest rate and maturing April 1, 2021 for $50,000 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 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 $67,285, of which $50,000 was recorded as debt discount
and the remainder of $17,285 was recorded expensed and included in
gain (loss) on derivative liability. 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 and between 121 days and 180 days at 135% of
the original principal amount plus interest. Thereafter, the
Company does not have the right of prepayment. At September 30,
2020, the Note is recorded at an accreted value of $66,011 less
unamortized debt discount of $29,958. Interest and amortization of
debt discount was $36,054 for the six months ended September 30,
2020.
On July 17,
2020, 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 May 17, 2021 for $40,000 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 65% of the market price defined as the average
of the lowest two trading prices during the fifteen (15) trading
day period ending on the latest complete trading day prior to the
conversion date. 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 and between 121 days and 180 days at 135% of
the original principal amount plus interest. Thereafter, the
Company does not have the right of prepayment. At September 30,
2020, the Note is recorded at an accreted value of $47,258 less
unamortized debt discount of $23,191. Interest and amortization of
debt discount was $15,672 for the six months ended September 30,
2020.
On September
17, 2020, the Company issued a Convertible Promissory Note (“Note”)
to Power Up Lending Group Ltd. (“Holder”) in the original principal
amount of $47,500 less transaction costs of $2,500 bearing a 12%
annual interest rate and maturing September 17, 2021 for $45,000 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 65% of the market price defined as
the average of the lowest two trading prices during the fifteen
(15) trading day period ending on the latest complete trading day
prior to the conversion date. 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 and between 121 days and
180 days at 135% of the original principal amount plus interest.
Thereafter, the Company does not have the right of prepayment. At
September 30, 2020, the Note is recorded at an accreted value of
$46,223 less unamortized debt discount of $32,469. Interest and
amortization of debt discount was $2,515 for the six months ended
September 30, 2020.
15
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2020
(Unaudited)
8.
CONVERTIBLE PROMISSORY NOTES (CONTINUED)
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. From
April 15, 2020 to April 29, 2020, the Company issued 5,595,893
shares of common shares of the Company with the fair value $305,082
to the Holder to fully settle the Note resulting in a loss on
settlement of $78,158. Interest and amortization of debt discount
was $92,382 for the six months ended September 30, 2020.
On June 9,
2020, the Company issued a Convertible Promissory Note (“Note”) to
JSJ Investments Inc. (“Holder”) in the original principal amount of
$130,000 less debt discount of $3,000 bearing a 6% annual interest
rate and maturing June 9, 2021 for $127,000 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 $139,417, of which $127,000 was recorded as
debt discount and the remainder of $12,417 was recorded expensed
and included in gain (loss) on derivative liability. 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 September 30, 2020, the Note is
recorded at an accreted value of $152,386 less unamortized debt
discount of $86,753. Interest and amortization of debt discount was
$65,633 for the six months ended September 30, 2020.
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. From June 2,
2020 to August 19, 2020, the Company issued 2,310,089 shares of
common shares of the Company with the fair value $171,028 to the
Holder to fully settle the Note resulting in a loss on settlement
of $132,785. Interest and amortization of debt discount was $29,331
for the six months ended September 30, 2020.
16
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2020
(Unaudited)
8.
CONVERTIBLE PROMISSORY NOTES (CONTINUED)
On August 11,
2020, the Company issued a Convertible Promissory Note (“Note”) to
Crown Bridge Partners, LLC (“Holder”) in the original principal
amount of $55,000 less transaction costs of $5,000 bearing a 12%
annual interest rate and maturing August 10, 2021 for $50,000 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 $91,113 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. The Company
determined that upon issuance of the Note, the initial fair value
of the embedded conversion feature was $91,113, of which $50,000
was recorded as debt discount and the remainder of $41,113 was
recorded expensed and included in gain (loss) on derivative
liability. At September 30, 2020, the Note is recorded at an
accreted value of $56,543 less unamortized debt discount of
$42,445. Interest and amortization of debt discount was $14,098 for
the six months ended September 30, 2020.
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 September 15, 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. On
June 15, 2020, the Company paid $178,855 in cash the Holder to
fully settle the Note resulting in a gain on settlement of $59,359.
Interest and amortization of debt discount was $154,426 for the six
months ended September 30, 2020.
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,
2020
|
June 30,
2020
|
September 30,
2020
|
Closing share price
|
$0.076
|
$0.068
|
$0.058
|
Conversion price
|
$0.052
- $0.056
|
$0.048
- $0.064
|
$0.058
|
Risk
free rate
|
0.11%
- 0.15%
|
0.14%
- 0.15%
|
0.10%
- 0.12%
|
Expected volatility
|
201% -
256%
|
192% -
223%
|
148% -
206%
|
Dividend yield
|
0%
|
0%
|
0%
|
Expected life (years)
|
0.21
– 0.79
|
0.39
– 0.94
|
0.29
– 0.96
|
The inputs
into the Black-Scholes models are as follows:
The fair
value of the conversion option derivative liabilities is $214,741
and $486,663 at September 30, 2020 and March 31, 2020,
respectively. The decrease in the fair value of the conversion
option derivative liability for the three and six months ended
September 30, 2020 and 2019 of $115,711 and $564,287 and $207,727
and $235,229, respectively, is recorded as a gain in the unaudited
condensed consolidated statements of operations.
17
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2020
(Unaudited)
10.
WARRANT LIABILITY
In
conjunction with the issuance of the Convertible Promissory Notes
with Crown Bridge Partners, LLC on November 21, 2019 and August 11,
2020, the Company issued, with each Note, 1,100,000 warrants with
an exercise price of $1.00 and a term of five years.
Also, 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 $0.10
and a term of five years.
These
warrants are subject to down round and other anti-dilution
protections. These warrants are classified as a liability since
there is a possibility during the life of these warrants the
Company would not have enough authorized shares available if these
warrants are exercised.
The inputs
into the Black-Scholes models are as follows:
|
March 31, 2020
|
June 30, 2020
|
September 30, 2020
|
Closing share price
|
$0.076
|
$0.068
|
$0.058
|
Conversion price
|
$1.00
- $0.10
|
$1.00
- $0.10
|
$1.00
- $0.10
|
Risk
free rate
|
0.37%
|
0.37%
|
0.27%
|
Expected volatility
|
181%
|
171 -
175%
|
167% -
180%
|
Dividend yield
|
0%
|
0%
|
0%
|
Expected life (years)
|
4.72
|
4.40
– 4.47
|
4.15
– 4.86
|
The fair
value of the warrant liability is $28,030 and $39,387 at September
30, 2020 and March 31, 2020, respectively. The decrease in the fair
value of the warrant liability of $6,238 and $11,357 is recorded as
a gain in the unaudited condensed consolidated statements of
operations for the three and six months ended September 30, 2020,
respectively.
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 September 30, 2020, 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)
On October 6,
2020, a Certificate of Amendment to our Articles of Incorporation
was filed with the Secretary of State of Nevada to effect a
one-for-twenty reverse stock split of our common stock became
effective. All common stock share and per-share amounts for
all periods presented in these unaudited condensed consolidated
financial statements have been adjusted retroactively to reflect
the reverse stock split.
The
stockholders’ equity of the Company comprises the following classes
of capital stock as of September 30, 2020 and March 31, 2020:
Preferred
Stock, $0.001 par value per share; 9,000,000 shares authorized, 0
issued and outstanding at September 30, 2020 and March 31,
2020.
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 September 30, 2020 and March 31,
2020.
18
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2020
(Unaudited)
12.
STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)
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:
107,964,017 and 79,699,130 shares issued and outstanding at
September 30, 2020 and March 31, 2020, respectively. Holders of
Common Stock have one vote per share of Common Stock held.
Common Stock Issued
On April 2,
2020, the Company issued 1,124,167 shares of common stock to
satisfy obligations under share subscription agreements of $28,500
for cash and $3,800 for settlement of notes payable and interest
included in share subscriptions payable.
From April
14, 2020 to May 1, 2020, the Company issued 8,085,309 shares of
common stock to satisfy obligations under share subscription
agreements of $459,572 for settlement of convertible notes included
in share subscriptions payable.
On May 4,
2020, the Company issued 1,563,732 shares of common stock to
satisfy obligations under share subscription agreements of $53,680
for settlement of services and $54,000 for the settlement of note
payable included in share subscriptions payable.
On May 11,
2020, the Company issued 67,500 shares of common stock to satisfy
obligations under share subscription agreements of $5,130 for
settlement of services included in share subscriptions payable.
On May 12,
2020, the Company issued 352,500 shares of common stock to satisfy
obligations under share subscription agreements of $14,805 for
settlement of services included in share subscriptions payable.
On May 21,
2020, the Company issued 357,895 shares of common stock to satisfy
obligations under share subscription agreements of $28,000 for
settlement of services included in share subscriptions payable.
From June 4,
2020 to June 25, 2020, the Company issued 3,460,938 shares of
common stock to satisfy obligations under share subscription
agreements of $244,359 for settlement of convertible notes included
in share subscriptions payable.
On June 5,
2020, the Company issued 250,000 shares of common stock to satisfy
obligations under share subscription agreements of $5,000 for
settlement of cash included in share subscriptions payable.
On July 13,
2020, the Company issued 250,000 shares of common stock to satisfy
obligations under share subscription agreements of $20,000 for the
settlement of convertible notes included in share subscriptions
payable.
On July 23,
2020, the Company issued 1,979,678 shares of common stock to
satisfy obligations under share subscription agreements of $33,000
for cash and $32,105 for settlement of services included in share
subscriptions payable.
On July 28,
2020, the Company issued 1,395,588 shares of common stock to
satisfy obligations under share subscription agreements of $14,000
for cash, $49,300 for settlement of services and $39,690 for the
settlement of convertible notes included in share subscriptions
payable.
On August 19,
2020, the Company issued 5,566,667 shares of common stock to
satisfy obligations under share subscription agreements of $109,516
for cash, $14,800 for settlement of services and supplies and
$41,000 for the settlement of interest included in share
subscriptions payable.
On August 20,
2020, the Company issued 185,189 shares of common stock to satisfy
obligations under share subscription agreements of $17,778 for
settlement of convertible notes included in share subscriptions
payable.
19
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2020
(Unaudited)
12.
STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)
On September
9, 2020, the Company issued 384,615 shares of common stock to
satisfy obligations under share subscription agreements of $33,077
for settlement of convertible notes included in share subscriptions
payable.
On September
10, 2020, the Company issued 2,510,901 shares of common stock to
satisfy obligations under share subscription agreements of $49,500
for cash, $14,402 for settlement of services and supplies, $4,000
for interest and $47,278 for the settlement of equipment included
in share subscriptions payable.
On September
15, 2020, the Company issued 300,000 shares of common stock to
satisfy obligations under share subscription agreements of $23,400
for settlement of convertible notes included in share subscriptions
payable.
On September
18, 2020, the Company issued 430,208 shares of common stock to
satisfy obligations under share subscription agreements of $34,417
for settlement of convertible notes included in share subscriptions
payable.
Common
Stock Payable
As at
September 30, 2020, the Company had total subscriptions payable for
2,970,315 shares of common stock for $28,366 in cash, shares of
common stock for interest valued at $27,911, shares of common stock
for services valued at $145,681 and shares of common stock for
notes payable of $20,673.
During the
six months ended September 30, 2020, the Company settled common
stock obligations of $59,800 for no consideration. The decrease in
common stock payable was recorded as an increase in additional
paid-in capital.
13.
RELATED PARTY TRANSACTIONS
During the
six months ended September 30, 2020 and 2019, 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
From October
5, 2020 to October 16, 2020, the Company issued 1,357,488 shares of
common stock to satisfy obligations under share subscription
agreements of $85,374 for settlement of convertible notes included
in share subscriptions payable.
On October 6,
2020, as a result of the one-for-twenty reverse stock split of our
common stock the Company issued 150 shares of common stock due to
rounding.
On October 7,
2020, the Company issued 625,000 shares of common stock to satisfy
obligations under share subscription agreements of $15,000 for
settlement of cash included in share subscriptions payable.
On November
6, 2020, the Company issued 2,135,000 shares of common stock to
satisfy obligations under share subscription agreements of $123,860
for settlement of services included in share subscriptions
payable.
20
MEXUS GOLD US AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2020
(Unaudited)
14.
SUBSEQUENT EVENTS (CONTINUED)
Common Stock Payable
As at
November 10, 2020, the Company had total subscriptions payable for
835,315 shares of common stock for $28,366 in cash, shares of
common stock for interest valued at $27,911, shares of common stock
for services valued at $21,850 and shares of common stock for notes
payable of $20,673.
Power Up
Lending Group Ltd.
On October
15, 2020, the Company issued a Convertible Promissory Note (“Note”)
to Power Up Lending Group Ltd. (“Holder”) in the original principal
amount of $52,500 less transaction costs of $2,500 bearing a 12%
annual interest rate and maturing October 15, 2021 for $50,000 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 65% of the market price defined as
the average of the lowest two trading prices during the fifteen
(15) trading day period ending on the latest complete trading day
prior to the conversion date. 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 and between 121 days and
180 days at 135% of the original principal amount plus interest.
Thereafter, the Company does not have the right of prepayment.
21
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.
COVID-19
The
recent outbreak of the coronavirus COVID-19 has spread across the
globe and is impacting worldwide economic activity. Conditions
surrounding the coronavirus continue to rapidly evolve and
government authorities have implemented emergency measures to
mitigate the spread of the virus. The outbreak and the related
mitigation measures have had and will continue to have a material
adverse impact on global economic conditions as well as on the
Company's business activities. The extent to which COVID-19 may
impact the Company's business activities will depend on future
developments, such as the ultimate geographic spread of the
disease, the duration of the outbreak, travel restrictions,
business disruptions, and the effectiveness of actions taken in the
United States, Mexico and other countries to contain and treat the
disease. These events are highly uncertain and, as such, the
Company cannot determine their financial impact at this time. No
adjustments have been made to the amounts reported in the
consolidated financial statements as a result of this matter.
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.
22
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:
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. A small placer processing operation was instituted to
evaluate various areas of interest within the project lands held by
Mexus Gold S.A. de C.V.
Mexus Properties
and Future Plans
Santa Elena Gold
Project
The Company
is managed by Paul Thompson Sr., President. The Santa Elena mine is
located 54km NW of Caborca, Sonora State, Mexico. This fully
permitted project consists of 9 concessions and totals over 6500
acres. The property is easily accessible from the local highway
with major infrastructure a short distance away. The Santa Elena
project is 100% owned by Mexus Gold US.
Exploration at the Santa Elena project area has been systematically
directed as initial surface geologic mapping and sampling with some
ground geophysical surveys as electro magnetics and radiometric.
Evaluation of results has led to continued production sampling with
percussion drilling and diamond core drilling of portions of areas
of interest. This resulted in 3 major geologic structures which are
open pit mined and are the main source of production. The producing
structures are all associated with mixed hydrothermal quartz vein
fissure filling and orogenic thrust fault conduits and are in the
order of 0.5 to 9 g/t gold. Additional structures are in the area
and will be soon be evaluated and brought to production. The
exploration resulted in the discovery of three major targets on
Mexus’ three of nine concessions located on the Santa Elena gold
project. This resulted in the company opening 3 pits: Julio 1,
Julio 2 and Mexus 3. Mineralized material was crushed to 1/2inch
minus and transferred to the existing heap leach pad via a conveyor
system. All three pits show mineable grade gold up to 1 oz. per
ton. All 3 pits show a viable chemistry after running four months
and testing an estimated 25,000 tons. As of June 20, 2020, the
Company is producing ore from the Julio 1 pit which is the most
cost effective to mine and has proven to be very productive
leaching material.
Preliminary
reserve estimates at the Santa Elena project indicates a tonnage of
approximately 1.5 to 5 million tons to a depth of 100 meters on the
Julio structure. Geologic data further indicates the Julio
structure is present at depths of 1,000 to 2,000 meters at a
shallow incline. There are five additional structures that have
been identified for further evaluation the Santa Elena Projects
lands.
Production was slowed due to COVID 19.
Return
flow from the heap leach pad is running from .2 to .5 GPT of
solution. At this stage of development, the company expects return
from the heap leach pad flow and the activated carbon cell flow to
match at 9 liters per second allowing a 24 hour a day, 7 day a week
uninterrupted operation at an average of .35 per ton solution.
Three
carbon cells are in use with 100% recovery in addition to the final
recovery being an electro winning plant to clean the gold from the
activated carbon. The electro winning plant takes approximately 30
hours to run 1 ton of material carbon. The company has a complete
and operable Merrill Crowe gold recovery plant on site as a
back‐up.
The
Company has all the necessary mining, crushing and recovery
equipment to mine 3000 tons a week. Future plans include the
development and expansion of the Santa Elena gold project to an
estimated 300 oz. Au production per month by the second quarter of
2021. The company is planning to
construct a second larger heap leach pad adjacent to the existing
pad presently in use. This construction project is expected to be
completed by June 2021.
23
Mabel Property
Mexus Gold
MX, a fully owned subsidiary of Mexus Gold US, is 90% owner of the
Mabel Project comprised of approximately 2,128 hectares (5,258
acres) is located approximately 52Km’s SW from Nogales, Sonora
State, Mexico and 34Km’s south of the United States border at
Sasabe.
Mexus has
decided to continue to validate a Technical Report on the advanced
Gold and Porphyry Copper property. Completion of an updated 43‐101
Technical Report will include all exploration results since the
last 43‐101 report which was issued on January 14, 2013. The update
report will include high density drilling, geologic mapping,
geophysics and a preliminary resource estimate.
The 2013
exploration consisted of more than 700 drill holes, 4000 RC drills
and surface samples which were analyzed in several independent
laboratories.
Preliminary
Resource Estimates from a 5% fraction of the project gave 1.3
million tons of 0.7 g/t Au and 23 g/t Ag including 20% with an
average grade of 1.9 g/t Au equivalent. Potential resources at
productive shallow depths are expected to be approximately
6,000,000 tons.
There are
also surface geological and
geophysical anomalies identified which, upon further evaluation and
sampling, may present a strong potential for the existence of a
porphyry copper target.
Ures
Property
Mexus Gold US
owns mineral rights to approximately 10,000 acres over 9
concessions near Hermosillo, Mexico. The concessions include the
Ocho Hermanos, 370, San Ramon, Plan Osa, Edgar 1, Edgar 2, El
Scorpio, Los Laureles, and Eusol. The concessions are located in
Sonora State, Mexico approximately 80 KM NE of Hermosillo.
In the past
year, Mexus has completed leach VAT testing and trenching including
assaying with promising results. Historical assaying of the Ocho
Hermanos concession has produced assays up to 1 Kg Ag per ton with
10 Gpt Au, 4% lead and 1% copper. One ton of mineralized materials
holds 40 metals which is a complex ore. The Company is evaluating
production procedures to economically process this ore.
Mexus has
done limited drill hole testing of the Scorpio Project concession
with results up to 3% copper, 1.5 Gpt Au, and 60 Gpt Ag.
The Company
plans to begin drilling on 3 of the 9 concessions by mid-2021.
Non-Material
Mining 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 payment of $500,000
installment due on August 13, 2017 was not executed 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.
24
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
|
|
|
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.
25
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
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
26
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 is
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 for
volume were submitted. To date, no suitable recovery method has been identified 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.
27
The
main geologic feature of this project area is an apparent “manto”
sulfide zone composed primarily of galena with some pyrite,
arsenopyrite and possibly pyrrhotite. 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 Guadalupe 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”
28
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.
29
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 one employee, Paul D. Thompson, and no employees at this time
in the United States of 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, 2020, 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.
30
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, the doré bars are refined for a fee and our share of
the refined product is delivered to a buyer for immediate sale or
held by the Company 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.
31
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 six
months ended September 30, 2020 and 2019. All amounts herein are in
U.S. dollars.
Three Months Ended
September 30, 2020 Compared with the Three Months Ended September
30, 2019
We
had a net loss during the three months ended September 30, 2020 of
$759,381 compared to a net loss of $714,065 during the same period
in 2019. The increase in net loss is primarily attributable (i) an
increase in stock-based expense of $11,380 (ii) an increase in
interest expense of $67,415 and (iii) a decrease in the gain on
convertible promissory note derivative liability of $145,966. The
increase in the net loss is partially offset by (i) an increase in
gold sales of $14,522 (ii) a decrease in general and administrative
expense of $81,564 and (iii) a decrease in loss on settlement of
debt of $85,448.
Operating
Expenses
Total
operating expenses decreased to $498,735 for three months ended
September 30, 2020, compared to $587,785 for the three months ended
September 30, 2019. The decrease in operating expenses was
primarily due to the sale of gold and a decrease in general and
administrative expense.
For
the three months ended September 30, 2020, the Company had
recoveries from the sale of gold of $14,522 compared to $0 for the
three months ended September 30, 2019. Sales of gold are reported
as a reduction of exploration expense in the consolidated statement
of operations since the Company is in the exploration stage.
Other Income
(Expense)
We
reported $260,646 of other expense during the three months ended
September 30, 2020 compared to $126,280 of other expense during the
same period in 2019.
Changes in other income (expense) is mainly attributable to
increases in interest expense and decrease in the gain on
convertible promissory note derivative liability which was
partially offset by a decrease in the 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.
Six months Ended
September 30, 2020 Compared with the Six months Ended September 30,
2019
We
had a net loss during the six months ended September 30, 2020 of
$1,239,576 compared to a net loss of $1,553,263 during the same
period in 2019. The decrease in net loss is primarily attributable
(i) an increase of gold sales of $131,911 (ii) a decrease in
exploration expense of $72,972 (iii) a decrease of general and
administrative expense of $126,484 and (iv) a decrease stock-based
expense of $140,575 (v) a decrease in loss on settlement of debt of
$69,977 and (vi) an increase in gain on settlement of derivative
liability of $117,860. The decrease in the net loss is partially
offset by an increase in interest expense of $356,163.
Operating
Expenses
Total
operating expenses decreased to $764,793 for six months ended
September 30, 2020, compared to $1,253,135 for the six months ended
September 30, 2019. The decrease in operating expenses was
primarily due to the sale of gold, a decrease in general and
administrative expense and a decrease in stock-based expense.
32
For
the six months ended September 30, 2020, the Company had recoveries
from the sale of gold of $131,911 compared to $0 for the six months
ended September 30, 2019. Sales of gold are reported as a reduction
of exploration expense in the consolidated statement of operations
since the Company is in the exploration stage.
Other Income
(Expense)
We
reported $474,783 of other expense during the six months ended
September 30, 2020 compared to $300,128 of other expense during the
same period in 2019.
Changes in other income (expense) is mainly attributable to an
increase in interest expense which was partially offset by a
decrease in loss on settlement of debt and an increase in the 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
September 30, 2020, we had cash of $13,017 compared to cash of
$64,173 at March 31, 2020.
Our
property and equipment decreased to $329,570 at September 30, 2020,
compared to $330,888 at March 31, 2019. The change in equipment is
due to purchase of equipment of $49,000 and depreciation expense of
$50,318 for six months ended September 30, 2019.
Our
mineral properties remained unchanged at $829,947 at September 30,
2020 and March 31, 2020.
Total
assets decreased to $1,172,534 at September 30, 2020, compared to
$1,225,008 at March 31, 2020. The majority of the decrease in
assets relates to a decrease in cash of $51,156.
Our
total liabilities decreased to $2,538,337 at September 30, 2020,
compared to $2,779,970 as of March 31, 2020. The decrease in our
total liabilities can be primarily attributed to the settlement
convertible promissory notes along with the related convertible
promissory note derivative liabilities.
Our
working capital deficit at September 30, 2020 and March 31, 2020 is
$2,525,320 and $2,715,797, respectively.
Our
net cash used in operating activities for the six months ended
September 30, 2020 and 2019 is $367,301 and $697,880, respectively.
Our net loss for the six months ended September 30, 2020 of
$1,239,576 was the main contributing factor for our negative cash
flow offset mainly by depreciation and amortization of $50,318,
gain of settlement of debt and accounts payable of $222,555,
stock-based compensation – services of $234,842 and non-cash
interest expense of $760,750.
Our
net cash (used in) provided by investing activities for the six
months ended September 30, 2020 and 2019 is $(49,000) and
$(44,125), respectively, due to the purchase of equipment.
Our
net cash provided by financing activities for the six months ended
September 30, 2020 and 2019 is $365,145 and $779,626, 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. The Company is unable to
predict the effect, if any, that the coronavirus COVID-19 global
pandemic may have on its access to the financing markets.
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.
33
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.
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.
34
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 September 30, 2020, 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 2019 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.
To
remediate such weaknesses, we hope to implement the following
changes during our fiscal year ending September 30, 2020: (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 September 30, 2020
that have materially affected, or are reasonably likely to
materially affect, our internal control over financial
reporting.
35
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
July 13, 2020, the Company issued 250,000 shares of common stock to
satisfy obligations under share subscription agreements of $20,000
for the settlement of convertible notes included in share
subscriptions payable.
On
July 23, 2020, the Company issued 1,979,678 shares of common stock
to satisfy obligations under share subscription agreements of
$33,000 for cash and $32,105 for settlement of services included in
share subscriptions payable.
On
July 28, 2020, the Company issued 1,395,588 shares of common stock
to satisfy obligations under share subscription agreements of
$14,000 for cash, $49,300 for settlement of services and $39,690
for the settlement of convertible notes included in share
subscriptions payable.
On
August 19, 2020, the Company issued 5,566,667 shares of common
stock to satisfy obligations under share subscription agreements of
$109,516 for cash, $20,262 for settlement of services and supplies
and $35,600 for the settlement of interest included in share
subscriptions payable.
On
August 20, 2020, the Company issued 185,189 shares of common stock
to satisfy obligations under share subscription agreements of
$17,778 for settlement of convertible notes included in share
subscriptions payable.
On
September 9, 2020, the Company issued 384,615 shares of common
stock to satisfy obligations under share subscription agreements of
$33,077 for settlement of convertible notes included in share
subscriptions payable.
On
September 10, 2020, the Company issued 2,510,901 shares of common
stock to satisfy obligations under share subscription agreements of
$49,500 for cash, $14,402 for settlement of services and supplies,
$4,000 for interest and $47,278 for the settlement of equipment
included in share subscriptions payable.
On
September 15, 2020, the Company issued 300,000 shares of common
stock to satisfy obligations under share subscription agreements of
$23,400 for settlement of convertible notes included in share
subscriptions payable.
On
September 18, 2020, the Company issued 430,208 shares of common
stock to satisfy obligations under share subscription agreements of
$34,417 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.
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.
36
ITEM
3. DEFAULT UPON SENIOR SECURITIES
At
September 30, 2020 and March 31, 2020, the carrying value of the
notes payable totaled $1,123,849 (net of unamortized debt discount
of $28,492) and $934,248 (net of unamortized debt discount of
$43,867), respectively. At September 30, 2020 and March 31, 2020,
notes payable – related party of $141,169 and $138,169,
respectively, are due to Paul Thompson Sr., the sole officer and
director of the Company. At September 30, 2020, $1,129,540 of these
notes were in default. There are no default provisions stated in
these notes. At September 30, 2020 and March 31, 2020, accrued
interest of $155,430 and $113,603, respectively, is included in
accounts payable and accrued liabilities.
At
September 30, 2020 and March 31, 2020, 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 September
30, 2020, 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 September 30, 2020 and March 31, 2020, accrued
interest of $42,657 and $38,043, respectively, is included in
accounts payable and accrued liabilities.
ITEM
4. MINE SAFETY DISCLOSURES
Not
applicable.
ITEM
5. OTHER INFORMATION
None.
37
ITEM
6. EXHIBITS
Statements
|
Condensed Consolidated Balance Sheets at September 30, 2020
(unaudited) and March 31, 2020
|
|
Condensed Consolidated Statements of Operations for the three and
six months ended September 30, 2020 and 2019 (unaudited)
|
|
Condensed Consolidated Statements of Stockholders’ Equity for the
three and six months ended September 30, 2020 and 2019
(unaudited)
|
|
Condensed Consolidated Statements of Cash Flows for the six months
ended September 30, 2020 and 2019 (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
|
38
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.
November 20, 2020
|
|
/s/ Paul D.
Thompson
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Paul D. Thompson
|
Chief Executive
Officer
Chief Financial
Officer
Principal Accounting
Officer
Director
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