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10
Recently Issued Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with
Conversion and Other Options (Subtopic 470-20) and Derivatives and
Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).
This update amends the guidance on convertible instruments and the
derivatives scope exception for contracts in an entity's own equity
and improves and amends the related EPS guidance for both
Subtopics. This standard is effective for fiscal years and interim
periods within those fiscal years beginning after December 15,
2023, which means it will be effective for our fiscal year
beginning April 1, 2024. Early adoption is permitted but no earlier
than fiscal years beginning after December 15, 2020, including
interim periods within those fiscal years. We are currently
evaluating the impact of ASU 2020-06 on our consolidated financial
statements.
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
three months ended June 30, 2022, the Company incurred a net loss
of $350,319 and used cash in operating activities of $169,112, and
on June 30, 2022, had an accumulated deficit of $38,608,811. On
June 30, 2022, 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,
2022, 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
|
June 30, 2022
Net Book Value
|
March 31, 2022
Net Book Value
|
|
Mining tools and equipment
|
$ 1,928,928
|
$ 1,583,695
|
$ 345,233
|
$ 220,558
|
|
Vehicles
|
178,810
|
178,553
|
257
|
899
|
|
$ 2,107,738
|
$ 1,762,248
|
$ 345,490
|
$ 221,457
|
Depreciation expense for three months ended June 30, 2022 and 2021
was $20,966 and $17,863, respectively.
During the three months ended June 30, 2022, the Company received
cash proceeds of $75,970 for the sale of equipment resulting in a
gain on sale of equipment of $70,970.
11
5.ACCOUNTS
PAYABLE – RELATED PARTY
During the three months ended June 30, 2022 and 2021, the Company
incurred rent expense to Paul D. Thompson, the sole director and
officer of the Company, of $12,272 and $11,400, respectively.
On June 30, 2022 and March 31, 2022, $192,637 and $182,619
for this and other obligations are outstanding, respectively.
Compensation
On June 30, 2022, 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, cash payment or deferred
payment in stock or cash. In addition. Mr. Thompson is due
2,000,000 shares of common stock at the end of each fiscal quarter.
On June 30, 2022 and March 31, 2022, $248,403 and $271,352 of
compensation due is included in accounts payable – related
party, respectively and $3,800 for 2,000,000 shares and $10,400 for
2,000,000 shares of common stock due is included in share
subscriptions payable, respectively.
6.NOTES
PAYABLE AND NOTES PAYABLE - RELATED PARTY
During the three months ended June 30, 2022, the Company issued the
following notes payable:
i)On
April 5, 2022, the Company issued a promissory note for cash with
$15,000 in principal. The Company agreed to repay $17,000 in cash
in 30 days.
ii)On
April 28, 2022, the Company issued a promissory note for cash with
$4,000 in principal. The promissory note bears interest of 12% per
annum, is unsecured and due on December 28, 2022.
iii)On
May 11, 2022, the Company issued a promissory note (“Note”) with a
principal of amount of $70,300 bearing interest of 12% per annum to
settle $70,300 in accounts payable due for accounting fees. The
Note is due on May 31, 2023. 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.
The Holder is required to give 61 days written notice to
convert.
iv)On
June 13, 2022, the Company issued a promissory note (“Note”) with a
principal amount of $65,000. In consideration for issuing the Note,
the Company agreed to issue 50,000,000 shares of common stock of
the Company to the holder of the Note. The Note is due on December
31, 2022 and is secured by equipment. On June 13, 2022, the
Company received $50,000 is cash. An additional, $15,000 of cash is
due to the Company on July 6, 2022.
During the three months ended June 30, 2022 and 2021, note
principal of $0 and $100,000, respectively, was paid through the
issuance of 0 shares and 4,651,163 shares of common stock,
respectively. In addition, for three months ended June 30,
2022 and 2021, the Company paid $10,000 and $0 in cash,
respectively, to settle debt.
On June 30, 2022 and March 31, 2022, the carrying value of the
notes payable totaled $1,237,276 (net of unamortized debt discount
of $64,301) and $1,169,147 (net of unamortized debt discount of
$0), respectively.
Notes payable – related party – On June 30, 2022
and 2021, notes payable – related party of $141,169 and
$141,169, 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.
Interest and amortization of debt discount was $9,829 and $50,760
for the three months ended June 30, 2022 and 2021,
respectively.
On June 30, 2022 and March 31, 2022, accrued interest of $362,908
and $323,133, respectively, is included in accounts payable and
accrued liabilities.
12
On June 30, 2022, $1,373,316 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 June 30, 2022 is $0.
7.PROMISSORY
NOTE
On June 30, 2022 and March 31, 2022, 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 June 30,
2022, the Company has not made the scheduled payments and is in
default on this promissory note. The default interest rate on
the notes is seven percent per annum. On June 30, 2022 and
March 31, 2022, accrued interest of $56,173 and $54,146,
respectively, is included in accounts payable and accrued
liabilities.
8.CONVERTIBLE
PROMISSORY NOTES
Power Up Lending Group Ltd.
On October 5, 2021, the Company issued a Convertible Promissory
Note (“Note”) to Power Up Lending Group Ltd. (“Holder”) in the
original principal amount of $38,500 less transaction costs of
$3,500 bearing a 12% annual interest rate and maturing October 5,
2022 for $35,000 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. At inception, the
carrying value of the Note was $15,964 (accreted value of $59,231
less debt discount of $43,267). 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. On
March 31, 2022 the Note is recorded at accreted value of $48,500
less unamortized debt discount of $8,108. From April 8, 2022 to
April 13, 2022, the Company issued 13,710,945 shares of common
stock of the Company with the fair value $69,764 to the Holder to
fully settle the Note resulting in a loss on settlement of $6,979.
Interest and amortization of debt discount was $22,393 and $0 for
the three months ended June 30, 2022 and 2021, respectively. This
Note has been paid in full.
Sixth Street Lending LLC
On December 7, 2021, the Company issued a Convertible Promissory
Note (“Note”) to Sixth Street Lending LLC (“Holder”) in the
original principal amount of $38,500 less transaction costs of
$3,500 bearing a 12% annual interest rate and maturing December 7,
2022, for $35,000 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. At inception,
the carrying value of the Note was $17,365 (accreted value of
$59,231 less debt discount of $41,866). 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. From
June 9, 2022 to June 24, 2022, the Company issued 22,180,451 shares
of common stock of the Company with the fair value $62,895 to the
Holder resulting in a loss on settlement of $9,049. On June 30,
2022 and March 31, 2022, the Note is recorded at an accreted value
of $(1,000) ($9,091 less unamortized debt discount of $10,091) and
$32,661 ($43,695 less unamortized debt discount of $11,034),
respectively. Interest and amortization of debt discount was
$20,185 and $0 for the three months ended June 30, 2022 and 2021,
respectively.
13
On January 10, 2022, the Company issued a Convertible Promissory
Note (“Note”) to Sixth Street Lending LLC (“Holder”) in the
original principal amount of $43,500 less transaction costs of
$3,500 bearing a 12% annual interest rate and maturing January 10,
2023, 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
determined that upon issuance of the Note, the initial fair value
of the embedded conversion feature was $34,059, which was recorded
as debt discount. The Company may repay the Note if repaid in cash
within 30 days of date of issue at 110% of the original principal
amount plus interest, between 31 days and 60 days at 115% of the
original principal amount plus interest, between 61 days and 90
days at 120% of the original principal amount plus interest,
between 91 days and 120 days at 125% of the original principal
amount plus interest 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. On June 30, 2022 and
March 31, 2022, the Note is recorded at an accreted value of
$38,273 ($54,736 less unamortized debt discount of $16,463) and
$21,067 ($46,894 less unamortized debt discount of $25,827),
respectively. Interest and amortization of debt discount was
$17,206 and $0 for the three months ended June 30, 2022 and 2021,
respectively.
On February 11, 2022, the Company issued a Convertible Promissory
Note (“Note”) to Sixth Street Lending LLC (“Holder”) in the
original principal amount of $40,000 less transaction costs of
$3,500 bearing a 12% annual interest rate and maturing February 11,
2023, for $36,500 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
determined that upon issuance of the Note, the initial fair value
of the embedded conversion feature was $34,920, which was recorded
as debt discount. The Company may repay the Note if repaid in cash
within 30 days of date of issue at 110% of the original principal
amount plus interest, between 31 days and 60 days at 115% of the
original principal amount plus interest, between 61 days and 90
days at 120% of the original principal amount plus interest,
between 91 days and 120 days at 125% of the original principal
amount plus interest 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. On June 30, 2022 and
March 31, 2022, the Note is recorded at an accreted value of
$27,226 ($47,515 less unamortized debt discount of $20,289) and
$10,436 ($40,303 less unamortized debt discount of $29,867),
respectively. Interest and amortization of debt discount was
$16,790 and $0 for the three months ended June 30, 2022 and 2021,
respectively.
On March 9, 2022, the Company issued a Convertible Promissory Note
(“Note”) to Sixth Street Lending LLC (“Holder”) in the original
principal amount of $48,500 less transaction costs of $3,500
bearing a 12% annual interest rate and maturing March 9, 2023, 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 determined
that upon issuance of the Note, the initial fair value of the
embedded conversion feature was $36,212, which was recorded as debt
discount. The Company may repay the Note if repaid in cash within
30 days of date of issue at 110% of the original principal amount
plus interest, between 31 days and 60 days at 115% of the original
principal amount plus interest, between 61 days and 90 days at 120%
of the original principal amount plus interest, between 91 days and
120 days at 125% of the original principal amount plus interest 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. On June 30, 2022 and March 31, 2022, the Note
is recorded at an accreted value of $31,939 ($55,857 less
unamortized debt discount of $23,918) and $13,295 ($47,114 less
unamortized debt discount of $33,819), respectively. Interest
and amortization of debt discount was $18,644 and $0 for the three
months ended June 30, 2022 and 2021, respectively.
On April 6, 2022, the Company issued a Convertible Promissory Note
(“Note”) to Sixth Street Lending LLC (“Holder”) in the original
principal amount of $38,500 less transaction costs of $3,500
bearing a 12% annual interest rate and maturing April 6, 2023, for
$35,000 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
14
date. The Company determined that upon
issuance of the Note, the initial fair value of the embedded
conversion feature was $21,877, which was recorded as debt
discount. The Company may repay the Note if repaid in cash within
30 days of date of issue at 110% of the original principal amount
plus interest, between 31 days and 60 days at 115% of the original
principal amount plus interest, between 61 days and 90 days at 120%
of the original principal amount plus interest, between 91 days and
120 days at 125% of the original principal amount plus interest 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. On June 30, 2022, the Note is recorded at an
accreted value of $25,516 ($41,483 less unamortized debt discount
of $15,967). Interest and amortization of debt discount was
$12,392 and $0 for the three months ended June 30, 2022 and 2021,
respectively.
1800 Diagonal Lending LLC
On May 31, 2022, the Company issued a Convertible Promissory Note
(“Note”) to 1800 Diagonal Lending LLC (“Holder”) in the original
principal amount of $33,500 less transaction costs of $3,500
bearing a 12% annual interest rate and maturing May 31, 2023, for
$30,000 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 determined
that upon issuance of the Note, the initial fair value of the
embedded conversion feature was $30,161, which was recorded as debt
discount. The Company may repay the Note if repaid in cash within
30 days of date of issue at 110% of the original principal amount
plus interest, between 31 days and 60 days at 115% of the original
principal amount plus interest, between 61 days and 90 days at 120%
of the original principal amount plus interest, between 91 days and
120 days at 125% of the original principal amount plus interest 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. On June 30, 2022, the Note is recorded at an
accreted value of $4,596 ($31,991 less unamortized debt discount of
$27,395). Interest and amortization of debt discount was
$4,757 and $0 for the three months ended June 30, 2022 and 2021,
respectively.
Crown Bridge Partners, LLC
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. At inception, the carrying value of the Note
was $0 (accreted value of $91,667 less debt discount of $91,667).
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. From June 10, 2022 to June 24, 2022, the Company repaid
$60,000 of Note principal in cash. On June 30, 2022 and March 31,
2022, the Note is recorded at an accreted value of $52,401 ($52,401
less unamortized debt discount of $0) and of $109,658 ($109,658
less unamortized debt discount of $0), respectively. Interest and
amortization of debt discount was $2,744 and $25,659 for the years
ended June 30, 2022 and 2021, respectively.
Status of Convertible Promissory Notes
The outstanding convertible promissory notes (“Notes’) held by
Sixth Street Lending LLC and 1800 Diagonal Lending LLC (“Note
Holders”) went into default on July 15, 2022 for failure to comply
with the Exchange Act due to late filing of the Form 10K for the
year ended March 31, 2022. The Notes Holders are aware of the
breach and waived the default.
15
9.CONVERTIBLE
PROMISSORY NOTE DERIVATIVE LIABILITY
The Convertible Promissory Notes (“Notes”) with Power Up Lending
Group Ltd., Crown Bridge Partners, LLC Sixth Street Lending
LLC and 1800 Diagonal Lending 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.
The inputs into the Black-Scholes models are as follows:
|
.
|
June 30, 2022
|
March 31, 2022
|
|
Closing share price
|
$0.0019
|
$0.0052
|
|
Conversion price
|
$0.0019 - $0.0020
|
$0.0049 - $0.0051
|
|
Risk free rate
|
1.72% - 2.92%
|
1.06% - 1.50%
|
|
Expected volatility
|
134% - 202%
|
159% - 195%
|
|
Dividend yield
|
0%
|
0%
|
|
Expected life (years)
|
0.25- 0.77
|
0.50 – 0.94
|
|
Continuity of the Fair value of the Conversion Option Derivative
Liabilities
|
Three Months Ended
June 30, 2022
|
Three Months Ended
June 30, 2021
|
|
Opening
|
$163,230
|
$138,539
|
|
Initial value
|
52,038
|
103,403
|
|
Decrease in fair value
|
(78,514)
|
(95,699)
|
|
Closing
|
$136,754
|
$146,243
|
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.
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:
|
|
June 30, 2022
|
March 31, 2022
|
|
Closing share price
|
$0.0019
|
$0.0052
|
|
Conversion price
|
$1.00
|
$1.00 - $0.10
|
|
Risk free rate
|
2.96 – 2.99%
|
2.35 – 2.45%
|
|
Expected volatility
|
163-167%
|
171 – 182%
|
|
Dividend yield
|
0%
|
0%
|
|
Expected life (years)
|
2.40 -3.12
|
2.65– 3.36
|
|
Continuity of the Fair value of the Warrant Liabilities
|
Three Months Ended June 30, 2022
|
Three Months Ended June 30, 2021
|
|
Opening
|
$184
|
$12,669
|
|
Increase (decrease)
in fair value
|
(158)
|
1,266
|
|
Closing
|
$26
|
$13,935
|
16
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 June 30,
2022, 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’
(DEFICIT) EQUITY
The stockholders’ (deficit) equity of the Company comprises the
following classes of capital stock as of June 30, 2022 and March
31, 2022:
Preferred Stock, $0.001 par value per share; 9,000,000 shares
authorized, 0 issued and outstanding on June 30, 2022 and March 31,
2022.
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 on June 30, 2022 and March 31,
2022.
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: 546,299,842 and 400,659,071 shares issued and
outstanding on June 30, 2022 and March 31, 2022, respectively.
Holders of Common Stock have one vote per share of Common Stock
held.
Common Stock Issued
On April 8, 2022, the Company issued 6,000,000 shares of common
stock to satisfy obligations under share subscription agreements of
$10,000 for cash included in share subscriptions payable.
On April 11, 2022, the Company issued 8,064,516 shares of common
stock to satisfy obligations under share subscription agreements of
$44,355 for settlement of convertible notes included in share
subscriptions payable.
On April 11, 2022, the Company issued 5,450,000 shares of common
stock to satisfy obligations under share subscription agreements of
$28,340 for settlement of services included in share subscriptions
payable.
On April 14, 2022, the Company issued 5,646,429 shares of common
stock to satisfy obligations under share subscription agreements of
$25,409 for settlement of convertible notes included in share
subscriptions payable.
On May 5, 2022, the Company issued 6,000,000 shares of common stock
to satisfy obligations under share subscription agreements of
$6,000 for cash included in share subscriptions payable.
On June 1, 2022, the Company issued 7,500,000 shares of common
stock to satisfy obligations under share subscription agreements of
$7,500 for cash included in share subscriptions payable.
On June 9, 2022, the Company issued 40,000,000 shares of common
stock to satisfy obligations under share subscription agreements of
$40,000 for cash included in share subscriptions payable.
On June 10, 2022, the Company issued 7,894,737 shares of common
stock to satisfy obligations under share subscription agreements of
$22,895 for settlement of convertible notes included in share
subscriptions payable.
On June 16, 2022, the Company issued 30,000,000 shares of common
stock to satisfy obligations under share subscription agreements of
$150,000 for purchase of equipment included in share subscription
payable.
17
On June 21, 2022, the Company issued 14,799,375 shares of common
stock to satisfy obligations under share subscription agreements of
$50,318 to warrant holders included in share subscriptions
payable.
On June 27, 2022, the Company issued 14,285,714 shares of common
stock to satisfy obligations under share subscription agreements of
$40,000 for settlement of convertible notes included in share
subscriptions payable.
Common Stock Payable
As at June 30, 2022, the Company had total subscriptions payable
for 66,885,315 shares of common stock for $28,367 in cash, shares
of common stock for interest valued at $92,911, shares of common
stock for services valued at $59,766 and shares of common stock for
notes payable of $20,673.
13.RELATED
PARTY TRANSACTIONS
During the three months ended June 30, 2022 and March 31, 2022, 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 and notes payable – relate party – Note
6
14.SUBSEQUENT
EVENTS
Common Stock Issued
On July 18, 2022, the Company issued 13,650,000 shares of common
stock to satisfy obligations under share subscription agreements of
$27,435 for settlement of services included in share subscriptions
payable.
On August 2, 2022, the Company issued 4,841,667 shares of common
stock to satisfy obligations under share subscription agreements of
$10,168 for settlement of convertible notes included in share
subscriptions payable.
On August 4, 2022, the Company issued 12,500,000 shares of common
stock to satisfy obligations under share subscription agreements of
$23,750 for settlement of convertible notes included in share
subscriptions payable.
On August 11, 2022, the Company issued 25,925,000 shares of common
stock to satisfy obligations under share subscription agreements of
$54,443 for settlement of convertible notes included in share
subscriptions payable.
On August 15, 2022, the Company issued 10,000,000 shares of common
stock to satisfy obligations under share subscription agreements of
$20,000 for settlement of services included in share subscriptions
payable.
Crown Bridge Partners, LLC
On July 7, 2022, the Company fully settled the Convertible
Promissory Note (“Note") with Crown Bridge Partners, LLC issued on
August 11, 2020 for $80,000 in cash (paid $60,000 prior to June 30,
2022 and with the last payment of $20,000 on July 7, 2022). The
settlement included all related obligations for the Note including
principal, interest, warrants issued in conjunction with the Note
and reserved shares.
Common Stock Payable
As at August 16, 2022, the Company had total subscriptions payable
for 53,235,315 shares of common stock for $28,366 in cash, shares
of common stock for interest valued at $92,911, shares of common
stock for services valued at $32,330 and shares of common stock for
notes payable of $20,673.
18
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.
19
Description of the Business of Mexus Gold US
Mexus Gold US is engaged in the evaluation, acquisition,
exploration and advancement of gold exploration and development
projects in the United Mexican States, as well as the salvage of
precious metals from identifiable sources. Our main activities in
the near future will be comprised of our mining operations in
Mexico. Our mining opportunities located in the State of Sonora,
Mexico will provide us with projects to recover gold, silver,
copper and other precious metals.
In addition, our management will look for opportunities to improve
the value of the gold projects that we own or may acquire knowledge
of or may acquire control through exploration drilling,
introduction of technological innovations or acquisition with the
goal of developing those properties into operating mines. We expect
that emphasis on gold project acquisition and development will
continue in the future.
Business Strategy
Our business plan was developed with the overriding goal of
maximizing shareholder value through the exploration and
development of our mineral properties, utilizing the extensive
mining-related background and capabilities of our management
consultants and advisors. To achieve this goal, our business plan
focuses on the following prospective areas:
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 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 30, 2022, 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.
20
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 of 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.
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.
21
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.
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.
22
|
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.
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.
23
FIGURE 1 – SANTA ELENA PROJECT LOCATION MAP
24
[Please see Exhibit
99.1]
Exhibit 99.1 – PRELIMINARY REPORT AND FIRST STAGE
MAPPING
Ures Property Prospects, being comprised of the following
projects:
Ocho Hermanos
– Guadalupe de Ures Project
The Guadalupe de Ures Project is accessed from Hermosillo by
driving via good paved road for 60 kilometers to the town of
Guadalupe de Ures and then for 15 kilometers over dirt roads to the
prospects. A base camp has been established near the town of
Guadalupe de Ures using mainly trailers for accommodation,
workshops and kitchen facilities.
FIGURE 2 - GUADALUPE DE URES PROJECT LOCATION MAP
25
The Ocho Hermanos Project (also called the Guadalupe de Ures
Project) consists of the “Ocho Hermanos” and "San Ramon" claims
which are covered by the Sales and Production Contract dated the
4th day of July, 2009
between “Minerales Ruta Dorado de RL de CV” (seller) and “Mexus
Gold Mining S.A. de C.V.”, a wholly owned subsidiary of Mexus Gold
US (buyer). The Ocho Hermanos Claim consists of 34.9940 hectares (1
acre = 0.4047 hectares) or 86.4690 acres while the San Ramon Claim
consists of 80 hectares (197.6773 acres).(Figure 4).
The initial term of the agreement was 5 years. During the term
Mexus must pay 40% of the net revenue received for minerals
produced to the seller. At the conclusion of the 5 years, the lease
could be purchased for USD 50,000. Upon expiration on July 4, 2014,
Mexus renewed the agreement with an indefinite term. The renewed
agreement requires Mexus to pay $1,500 per month and 20% to the
total proceeds upon a sale of the rights.
Minerales Ruta Dorado de RL de CV is a duly constituted Mexican
Company and as such can hold mining claims in Mexico.
FIGURE 3 - OCHO HERMANOS
PROJECT AREA CLAIM MAP
We
did not perform any systematic sampling or any systematic drilling
and because of this did not set up a formal QA/QC program. All of
the samples were submitted to Certified Laboratories (ALS - Chemex
in Hermosillo or American Assay in Reno, Nevada) which insert their
own QA/QC samples/duplicates. Also the laboratories run duplicates
and blanks from each batch fired. The sequence of events so far 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
26
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.
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.
27
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.
29
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.
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 other 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
30
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 June 30, 2022, 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.
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.
31
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.
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
months ended June 30, 2022 and 2021. All amounts herein are in U.S.
dollars.
Three months ended
June 30, 2022 Compared with the Three Months Ended June 30,
2021
We
had a net loss during the three months ended June 30, 2022 of
$350,319 compared to a net loss of $829,506 during the same period
in 2021. The decrease in net loss is primarily attributable (i) a
decrease in exploration costs of $42,581 (ii) a decrease in
stock-based compensation – consulting services of $343,524
(iii) a decrease in interest expense of $92,905 (iv) a decrease in
general and administration expense of $9,657 (v) a decrease in the
loss on settlement of debt of $5,533 and (vi) an increase in gain
on the sale of equipment of $70,970. The decrease in the net loss
is partially offset by an decrease in gain on the change in the
fair value of and settlement of convertible promissory notes and
derivative liabilities of $66,078 and (ii) a decrease in the sale
of gold of $19,949.
32
Operating
Expenses
Total operating expenses decreased to $265,450 for three months
ended June 30, 2022, compared to $641,263 for the three months
ended June 30, 2021. The decrease in operating expenses was
primarily due to a decrease in stock-based expense
– consulting services,
For the three months ended June 30, 2022, the Company had
recoveries from the sale of gold of $0 compared to $19,949 for the
three months ended June 30, 2021. 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 $84,869 of other expense during the three months ended
June 30, 2022 compared to $188,243 of other income during the same
period in 2021.
The change in other income (expense) is mainly attributable to a
decrease in the gain on the change in the fair value of and
settlement of convertible promissory notes and derivative
liabilities and a decrease in interest expense.
Liquidity and Capital Resources
On
June 30, 2022, we had cash of $24,032 compared to cash of $7,174 on
March 31, 2022.
Our property and equipment increased to $345,490 on June 30, 2022,
compared to $221,457 at March 31, 2022. The increase in equipment
is due to the purchase of equipment of $150,000, sale of equipment
of $75,970, gain on sale of equipment of 70,970 and depreciation
expense of $20,966 during the three months ended June 30,
2022.
Our mineral properties remained unchanged at $829,947 on June 30,
2022 and March 31, 2022
Total assets increased to $1,199,469 on June 30, 2022, compared to
$1,058,578 on March 31, 2022. The majority of the increase in
assets relates to the purchase of equipment of $150,000, sale of
equipment of $75,970, gain on sale of equipment of 70,970 and
depreciation expense of $20,699 and increase in cash of
$16,858.
Our total liabilities increased to $2,817,969 as of June 30, 2022,
compared to $2,802,972 as of March 31, 2022. The increase in
our total liabilities can be primarily attributed to an increase in
accounts payable and promissory notes payable.
Our working capital deficit on June 30, 2022 and March 31, 2022 is
$2,793,937 and $2,795,798, respectively.
Our net cash used in operating activities for the three months
ended June 30, 2022 and 2021 is $169,112 and $170,898,
respectively. Our net loss for the three months ended June 30, 2022
of $350,319 was the main contributing factor for our negative cash
flow offset mainly by depreciation and amortization of $20,966,
loss on settlement of debt and accounts payable of $16,028,
stock-based compensation – consulting services of $32,236 and
non-cash interest expense of $166,743.
Our net cash (used in) provided by investing activities for the
three months ended June 30, 2022 and 2021 is $75,970 and $0,
respectively.
Our net cash provided by financing activities for the three months
ended June 30, 2022 and 2021 is $110,000 and $196,500,
respectively, mainly due to issuance of 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.
33
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
three months ended June 30, 2022, the Company incurred a net loss
of $350,319 and used cash in operating activities of $169,112, and
on June 30, 2022, had an accumulated deficit of $38,608,811. On
June 30, 2022, 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,
2022, 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.
Future goals
The Santa Elena Prospect (formerly known as Caborca Properties) has
become our primary focus. The completion of the initial surface
ground construction for a leaching production plant, being an
expandable ore leaching pad, solution ponds and production recovery
facility, has been tested and will be placed into production. The
ore leaching pad has 35,000 tons of ore in place and will be
increased in size on a continuing basis to realize the capacity of
the production facility.
Therefore, our goal for the current year is to increase the cash
flow of the Company’s operations through (a) place the
current facilities into full commercial production, (b) increase
the mineralization of the ore pad from 1 gram per ton gold and 3
grams per ton silver and (c) increase the capacity of the leach
pad.
The Company has now scheduled the installation of a
crushing/milling recovery plant for the high grade Julio quartz
deposit as a result of the values of the assay analysis from the
deposit which range from .250 to 5.5 ounces of gold per ton.
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.
34
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.
35
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 June 30, 2022, 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 2021 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 June 30, 2022: (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 June 30,
2022 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial
reporting.
36
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 April 8, 2022, the Company issued 6,000,000 shares of common
stock to satisfy obligations under share subscription agreements of
$10,000 for cash included in share subscriptions payable.
On April 11, 2022, the Company issued 8,064,516 shares of common
stock to satisfy obligations under share subscription agreements of
$44,355 for settlement of convertible notes included in share
subscriptions payable.
On April 11, 2022, the Company issued 5,450,000 shares of common
stock to satisfy obligations under share subscription agreements of
$28,340 for settlement of services included in share subscriptions
payable.
On April 14, 2022, the Company issued 5,646,429 shares of common
stock to satisfy obligations under share subscription agreements of
$25,409 for settlement of convertible notes included in share
subscriptions payable.
On May 5, 2022, the Company issued 6,000,000 shares of common stock
to satisfy obligations under share subscription agreements of
$6,000 for cash included in share subscriptions payable.
On June 1, 2022, the Company issued 7,500,000 shares of common
stock to satisfy obligations under share subscription agreements of
$7,500 for cash included in share subscriptions payable.
On June 9, 2022, the Company issued 40,000,000 shares of common
stock to satisfy obligations under share subscription agreements of
$40,000 for cash included in share subscriptions payable.
On June 10, 2022, the Company issued 7,894,737 shares of common
stock to satisfy obligations under share subscription agreements of
$22,895 for settlement of convertible notes included in share
subscriptions payable.
On June 16, 2022, the Company issued 30,000,000 shares of common
stock to satisfy obligations under share subscription agreements of
$150,000 for purchase of equipment included in share subscription
payable.
On June 21, 2022, the Company issued 14,799,375 shares of common
stock to satisfy obligations under share subscription agreements of
$50,318 for settlement of warrants included in share subscriptions
payable.
On June 27, 2022, the Company issued 14,285,714 shares of common
stock to satisfy obligations under share subscription agreements of
$40,000 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.
37
ITEM 3. DEFAULT UPON SENIOR SECURITIES
On June 30, 2022 and March 31, 2022, the carrying value of the
notes payable totaled $1,237,276 (net of unamortized debt discount
of $64,301) and $1,169,147 (net of unamortized debt discount of
$0), respectively.
On June 30, 2022 and 2021, notes payable – related party of
$141,169 and $141,169, 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 30, 2022 and March 31, 2022, accrued interest of $362,908
and $323,133, respectively, is included in accounts payable and
accrued liabilities.
On June 30, 2022, $1,373,316 of notes payable and notes payable
– related party were in default. There are no default
provisions stated in these notes.
On June 30, 2022 and March 31, 2022, 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 June 30,
2022, 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. On June 30, 2022 and March 31, 2022,
accrued interest of $56,173 and $54,146, respectively, is included
in accounts payable and accrued liabilities.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM
6. EXHIBITS
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Statements
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|
|
|
Condensed Consolidated Balance Sheets at June 30, 2022 (unaudited)
and March 31, 2022
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Condensed Consolidated Statements of Operations for the three
months ended June 30, 2022 and 2021 (unaudited)
|
|
|
|
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity
for the three months ended June 30, 2022 and 2021 (unaudited)
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|
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Condensed Consolidated Statements of Cash Flows for the three
months ended June 30, 2022 and 2021 (unaudited)
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|
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Notes
to Condensed Consolidated Financial Statements (unaudited)
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Schedules
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|
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All
schedules are omitted because they are not applicable or the
required information is shown in the Financial Statements or notes
thereto.
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38
39