Annual Report (10-k)

Date : 07/10/2019 @ 10:06PM
Source : Edgar (US Regulatory)
Stock : Mexus Gold Us (QB) (MXSG)
Quote : 0.0119  0.0009 (8.18%) @ 10:19PM

Annual Report (10-k)

 

U. S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

 

(Mark One)

 

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended March 31, 2019

 

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________ to _____________

 

Commission File Number: 000-52413

 

Mexus Gold us

(Name of small business issuer as specified in its charter)

 

Nevada

 

20-4092640

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

1805 N. Carson Street, Suite 150

Carson City, NV 89701

(Address of principal executive offices, including zip code)

 

( 916) 776-2166

Registrant’s telephone number, including area code:

 

None

Securities registered pursuant to Section 12(b) of the Act:

 

Common stock, $.001 par value

Securities registered pursuant to Section 12(g) of the Act:

 

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. No [X]

 

Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. No [X]

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X ]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. Yes [   ]

 

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,” “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act.


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Large accelerated filer

[   ]

 

Accelerated filer

[   ]

Non-accelerated filer

[   ]

 

Smaller reporting Company

[X]

Do not check if smaller reporting company)

 

 

Emerging growth Company

[   ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. [   ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). No [X]

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates on September 30, 2018, based upon the $0.0095 per share closing price for our common stock on the OTC Bulletin Board was approximately $7,545,862.

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

 

Indicate by check mark 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. Yes [   ] No [   ]

 

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of July 2, 2019, there were 1,172,098,176 shares of our common stock were issued and outstanding.

 

DOCUMENTS INCORPORATE BY REFERENCE

 

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to securities holders for fiscal year ended December 24, 1980).


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PART I

 

 

Item 1. Business

 

Cautionary Statement Concerning Forward-Looking Statements

 

The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and related notes included in this report. This report contains “forward-looking statements.” The statements contained in this report that are not historic in nature, particularly those that utilize terminology such as “may,” “will,” “should,” “expects,” “anticipates,” “estimates,” “believes,” or “plans” or comparable terminology are forward-looking statements based on current expectations and assumptions.

 

Various risks and uncertainties could cause actual results to differ materially from those expressed in forward-looking statements. Factors that could cause actual results to differ from expectations include, but are not limited to, those set forth under the section “Risk Factors” set forth in this report.

 

The forward-looking events discussed in this report, the documents to which we refer you and other statements made from time to time by us or our representatives, may not occur, and actual events and results may differ materially and are subject to risks, uncertainties and assumptions about us. For these statements, we claim the protection of the “bespeaks caution” doctrine. All forward-looking statements in this document are based on information currently available to us as of the date of this report, and we assume no obligation to update any forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.

 

The Company

 

Mexus Gold US is an exploration stage mining company engaged in the evaluation, acquisition, exploration and advancement of gold, silver and copper projects in the State of Sonora, Mexico. Mexus Gold US is dedicated to protect the environment and provide employment and education opportunities for the communities that it operates in.

 

Our President and CEO, Paul Thompson, brings over 45 years’ experience in mining and mining development to Mexus Gold US. Mr. Thompson is currently recruiting additional management personnel for its Mexico and Nevada mining operations.

 

Our executive offices are located at, 1805 N. Carson Street, #150, Carson City, Nevada 89701. Our telephone number is (916) 776 2166.

 

We were originally incorporated under the laws of the State of Colorado on June 22, 1990, as U.S.A. Connection, Inc. On September 18, 2009, we changed our domicile to Nevada and changed our name to Mexus Gold US to better reflect our new business operations. Our fiscal year end is March 31 st .

 

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.


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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. We have instituted a small placer processing operation to evaluate various areas of interest within the project lands.

 

Material Mining Properties

 

Santa Elena Prospect , (formerly known as the Caborca Project)

 

Our Santa Elena Prospect is comprised of early-stage exploration, including limited production operations, on the concessions. Under the terms of the concession agreement we also will acquire the associated surface. This concession is situated in the State of Sonora, Mexico.

 

On April 16, 2018, Mexus Gold Mining S.A. de C.V., a subsidiary of Mexus, announced that it planned to terminate its joint venture agreement with MarMar Holdings (the “JV Agreement”). The JV Agreement outlined the contractual obligations of the parties at the Santa Elena project in Caborca, Sonora State, Mexico. The decision to terminate the JV Agreement was made due to MarMar’s failure to provide agreed funding, equipment and general operations for the project, as well as MarMar’s inability to meet environmental standards at the site. We do not anticipate any early termination penalties associated with the JV Agreement. On July 2, 2018, the Company announced that the agreement was officially terminated.

 

We intend to move forward with the Santa Elena project with proper equipment and personnel. Due to the lack of funding by MarMar, the Santa Elena site, a disappointing 8.5oz Au was produced in the last 22 months.  

 

The Company has contracted with a security firm to provide 24-hour services at the Santa Elena site. Currently, there is equipment on site sufficient to produce an anticipated 500 tons a day and plans are in place to begin hiring staff with production beginning shortly thereafter. In addition, safety fencing will be installed and required site clean-up will occur that will satisfy any environmental concerns at the property. Two separate parties are running tests on the heap leach pad to determine the next steps to allow for recovery of gold and silver within the system. 

 

Using previously developed geological mapping the company plans to mine the Julio quartz vein and the adjacent shear zone via open pit mining. The existing Julio vein, with depths to 30 meters and widths from 1 to 4 meters, has values ranging from 1.5 to 186 grams Au per ton. The adjacent shear zone carries values from .5 to 17 grams Au per ton. Mexus estimates that the shear zone will average 2.5 grams per ton gold equivalent with the Julio vein values being much higher. Additional equipment will be purchased which will enable the company to increase production to 1000 tons a day and beyond. Mexus intends to announce a non-dilutive capital raise plan in the very near future.

 

Ures Property Prospects (also known as 8 brothers/370 mine project)

 

The Ures Prospects, also situated in the State of Sonora, Mexico are the 370 Prospect, San Ramon Prospect, La Platosa Prospect, Edgar Prospect, Edgar II Prospect, Los Lareles Prospect, El Scorpio Prospect, and Ocho Hermanos Prospect.

 

In June 2018, Mexus completed its first test of the VAT leaching system and the Merrill Crowe gold recovery plant at the 8 brothers/370 mine project. The successful test produced 70 pounds of precipitate which is currently being dried and prepared for smelting. Results of this first run will be released soon.  The material initially mined took longer to leach than expected. Mexus geologist, Cesar Lemas, has identified new material which has been column tested showing a 48 to 72 hour leach time. The company will mine and use this material going forward to accelerate recovery times.


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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 requirement payment of $500,000 due on August 13, 2017 was not paid in accordance with the purchase agreement pending the receipt of certain required instruments from the Grantor by the Company.

 

Other Operations

 

Cable Salvage Operation

 

The Company completed the first phase of its Cable Recovery Project in Alaskan waters. The cable which was recovered was smaller diameter cable which was excellent for testing the recovery equipment and vessels. The Company evaluated the project and conducted a mapping project and exploration activities in an attempt to identify larger cable.

 

At March 31, 2017, the Company ceased cable salvage operations in order to fully concentrate on Mexico operations.

 

Mergers and Acquisitions

 

We will routinely review merger and acquisition opportunities. An appropriate merger and acquisition opportunity must be accretive to the overall value of Mexus Gold US. Our primary focus will be on those opportunities involving precious metal production or near-term production with a secondary focus on other resource-based opportunities. Potential acquisition targets would include private and public companies or individual properties. Although our preference would be for candidates located in the United States and Mexico; Mexus Gold US will consider opportunities located in other countries where the geopolitical risk is acceptable.

 

Description of Mining Projects

 

The following properties are located in Mexico and owned by Mexus Gold S.A. de C.V., our wholly owned subsidiary:

 

Santa Elena Prospects (formerly known as the Caborca Project )

 

The Company executed a revised Mineral Mining and Purchase Agreement, dated December 3, 2015, with the Concession Owners covering 2,225 acres located in the State of Sonora, Mexico. The Agreement is for a term of 25 years and specifies a purchase privilege, at the discretion of the Company, for all concessions in the amount of $2,000,000 absent the exercise of the purchase privilege a royalty of 40% for lode deposits and 25% for placer deposits and is credited to the purchase price. The Agreement specifies a delayed monthly royalty in the amount of $1,000 and the payment of the semi-annual concession tax.

 

Santa Elena Concessions

 

 

 

 

No

CONCESSION NAME

TITLE NO

AREA

HECTARE

DATE ISSUED

END DATE

1

MARTHA ELENA

221447

339.3811

10/2/2004

9/2/2054

2

JULIO II

221448

59.0401

10/2/2004

9/2/2054

3

JULIO III

231609

99.6381

3/25/2008

3/24/2058

4

JULIO IV

231610

99.9687

3/25/2008

3/24/2058

5

JULIO V

231611

100

3/25/2008

3/24/2058

6

JULIO VI

231612

100

3/25/2008

3/24/2058

7

JULIO VII

231613

100

3/25/2008

3/24/2058

 

Total Hectares

 

898.028

 

 

 

Total Acres

 

2,219.0755

 

 


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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.

 

MEXUS GOLD FIG 1.JPG  

 

FIGURE 1 – SANTA ELENA PROJECT LOCATION MAP


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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.

 

 

MEXUS GOLD FIG 2.JPG  

 

FIGURE 2 - GUADALUPE DE URES PROJECT LOCATION MAP


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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 4 th 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.

 

MEXUS GOLD FIG 3.JPG  

 

FIGURE 3 - OCHO HERMANOS

PROJECT AREA CLAIM MAP

 

We did not perform any systematic sampling or any systematic drilling and because of this did not set up a formal QA/QC program. All of the samples were submitted to Certified Laboratories (ALS - Chemex in Hermosillo or American Assay in Reno, Nevada) which insert their own QA/QC samples/duplicates. Also the laboratories run duplicates and blanks from each batch fired. The sequence of events so far are the following:

 

We located a previously mined area with interesting values – Ocho Hermanos. Mexus began to submit characterization samples to the above noted assay laboratories, in order to determine the range of Au - Ag values present. Mexus then began an investigation into recovery options by using material taken from the areas with the better values.

 

The above work was completed before any systematic exploration was done because if no recovery method could be found relatively quickly, the project would move more slowly because of the lead time involved. Mexus began work on an Environmental Impact Statement for the likely operational area (a total of 4 hectares to begin). In order to complete the EIS, figures for estimated tonnages were submitted to cover the hoped for volume. To date, no suitable recovery method was found due primarily to the partial oxidation of the principally sulfide deposit.

 

The Environmental Permits run for 35 years so there is time for further investigation.


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The main geologic feature of this project area is an apparent “manto” sulfide zone composed primarily of galena with some pyrite, arsenopyrite and possibly phyrrotite. Above this zone there is an oxide zone composed of iron and lead oxides. The sulfides themselves are partially oxidized. Reconnaissance and characterization samples taken indicated sporadically high gold and silver values. The deposit occurs in shallow water sediments (principally quartzites, with some limestone and shales) and can be best characterized as a skarn type deposit due to the presence of intrusive rocks within 1 kilometer.

 

Given the complex nature of the sulfide deposit and the partial oxidization of the material (indicated by the presence of yellow colored lead oxides), a satisfactory recovery method has not yet been found. Consequently, at this time, no further systematic work beyond the initial reconnaissance and characterization sampling has been completed. The entire project was essentially put on hold until a suitable recovery method is found, which is a continuing effort and at this time is being pursued by a member of the faculty at the University of Sonora in Hermosillo. The faculty member teaches metallurgy and assay practices at the University. After a suitable recovery method has been identified, the process will need to be confirmed by a certified metallurgical testing laboratory.

 

The Environmental Permits detail all of the affected flora and fauna. The land is presently used for cattle grazing and the surface rights are owned by the community of Guadelupe de Ures. An agreement is in place with Mexus Gold Mining S.A. de C.V. for surface access and disturbance. The Environmental Permit concludes that no permanent damage or degradation of the present land use will result from the intended activity on the lands. At present, the Environmental Permits cover a total of 4 hectares - 3 hectares cover the initial site of the mineral as presently understood and 1 hectare is permitted for the erection of a suitable extraction plant.

 

No known contamination from past mining activities was found or is known to locals. The historic workings consisted of a few shallow adits and pits. In the course of obtaining the Environmental Permission the permit stipulated that properly lined ponds etc. must be used to prevent any potential surface or ground water contamination from any proposed activities.

 

Only separation is proposed to be conducted on site if found to be possible, while final metal recovery will be conducted at a properly licensed and certified metal refining facility. Current efforts to find suitable recovery methods are being conducted off site in a University laboratory. Up sizing the process, if found, will be completed by a licensed, certified metallurgical laboratory.

 

Figures of the proposed permitted sites are attached. These were extracted from the environmental permit Application.

 

MEXUS GOLD FIG 4.JPG  

 

FIGURE 4- MICROLOCALIZACION PROYECTO “URES MINING DISTRICT”


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MEXUS GOLD FIG 5.JPG  

 

FIGURE 5 – LOCALIZACION DE AREAS DE EXTRACCION

 

MEXUS GOLD FIG 6.JPG  

 

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.


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As of the date of this Report, we have opened up old workings at the Los Laureles claim and have discovered a gold carrying vein running north and south into the mountain to the south.

 

The San Felix Mine Project

 

The San Felix mining site contains seven (7) concessions over an area of approximately 26,000 acres located in the La Alameda area of Caborca, Sonora, Mexico. During the year ended March 31, 2018, the Company recorded an impairment of mineral property for the San Felix Project of $75,000 because the requirement payment of $500,000 due on August 13, 2017 was not paid in accordance with the purchase agreement pending the receipt of certain required instruments from the Grantor by the Company.

 

Employees

 

We have no employees at this time in the United States and Mexico. Consultants with specific skills are utilized to assist with various aspects of the requirements of activities such as project evaluation, property management, due diligence, acquisition initiatives, corporate governance and property management. If we complete our planned activation of the operations of the Mexican mining properties, our total workforce will be approximately 20 persons. Mr. Paul D. Thompson is our sole officer and director.

 

Competition

 

We compete with other mining companies in connection with the acquisition of gold properties. There is competition for the limited number of gold acquisition opportunities, some of which is with companies having substantially greater financial resources than Mexus Gold US. As a result, Mexus Gold US may have difficulty acquiring attractive gold projects at reasonable prices.

 

Management of Mexus Gold US believes that no single company has sufficient market power to affect the price or supply of gold in the world market.

 

Legal Proceedings

 

There are no legal proceedings to which Mexus Gold US or Mexus Gold S.A. de C.V. is a party or of which any of our properties are the subject thereof.

 

Property Interests, Mining Claims and Risk

 

Property Interests and Mining Claims

 

Our exploration activities and operations in Mexico are subject to the rules and regulations of the United Mexican States. The Ministry (Secretariat) of Mining is the Federal Mexican Government ministry charged with controlling all mining matters. A concession is granted on the acceptance of an application which identifies the specific minerals to be mined and description of the exact location of the lands to be mined. The concession is subject to a semiannual tax to continue the concession in good standing. Usually, our arrangements with a concessionaire describe specific period payments to the concessionaire and a royalty on the minerals recovered from mining operations. Where prospective mineral properties are identified by the Company, some type of conveyance of the mining rights and property acquisition agreement is necessary in order for us to explore or develop such property. Generally, these agreements take the form of long term mineral leases under which we acquire the right to explore and develop the property in exchange for periodic cash payments during the exploration and development phase and a royalty, usually expressed as a percentage of gross production or net profits derived from the leased properties if and when mines on the properties are brought into production. Other forms of acquisition agreements are exploration agreements coupled with options to purchase and joint venture agreements.

 

Reclamation

 

We may be required to mitigate long-term environmental impacts by stabilizing, contouring, re-sloping and re-vegetating various portions of a site after mining and mineral processing operations are completed. These reclamation efforts will be conducted in accordance with detailed plans, which must be reviewed and approved by the appropriate regulatory agencies.

 

While the Company, as of March 31, 2019, does not have a legal obligation associated with the disposal of certain chemicals used in its leaching process, the Company estimates it will incur costs up to $50,000 to neutralize those chemicals at the close of the leaching pond.


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Risk

 

Our success depends on our ability to recover precious metals, process them, and successfully sell them for more than the cost of production. The success of this process depends on the market prices of metals in relation to our costs of production. We may not always be able to generate a profit on the sale of gold or other minerals because we can only maintain a level of control over our costs and have no ability to control the market prices. The total cash costs of production at any location are frequently subject to great variation from year to year as a result of a number of factors, such as the changing composition of ore grade or mineralized material production, and metallurgy and exploration activities in response to the physical shape and location of the ore body or deposit. In addition costs are affected by the price of commodities, such as fuel and electricity. Such commodities are at times subject to volatile price movements, including increases that could make production at certain operations less profitable. A material increase in production costs or a decrease in the price of gold or other minerals could adversely affect our ability to earn a profit on the sale of gold or other minerals. Our success depends on our ability to produce sufficient quantities of precious metals to recover our investment and operating costs.

 

Distribution Methods of the Products

 

The end product of our operations will usually be doré bars. Doré is an alloy consisting of gold, silver and other precious metals. Doré is sent to refiners to produce bullion that meets the required market standard of 99.95% pure gold. Under the terms of refining agreements we expect to execute, the doré bars are refined for a fee and our share of the refined gold, silver and other metals are credited to our account or delivered to our buyers who will then use the refined metals for fabrication or held for investment purposes.

 

General Market

 

The general market for gold has two principal categories, being fabrication and investment. Fabricated gold has a variety of end uses, including jewelry, electronics, dentistry, industrial and decorative uses, medals, medallions and official coins. Gold investors buy gold bullion, official coins and jewelry. The supply of gold consists of a combination of current production from mining and the draw-down of existing stocks of gold held by governments, financial institutions, industrial organizations and private individuals.

 

Patents, trademarks, licenses, franchises, concessions, royalty agreements, or labor contracts, including duration;

 

We do not have any designs or equipment which is copyrighted, trademarked or patented.

 

Effect of existing or probable governmental regulations on the business

 

Government Regulation

 

Mining operations and exploration activities in Mexico are subject to the Ministry of Mining federal laws and regulations which govern prospecting, development, mining, production, exports, taxes, labor standards, occupational health, waste disposal, protection of the environment, mine safety, hazardous substances and other matters. We have obtained or have pending applications for those licenses, permits or other authorizations currently required to conduct our exploration and other programs. We believe that Mexus Gold US is in compliance in all material respects with applicable mining, health, safety and environmental statutes and the regulations passed thereunder any jurisdiction in which we will operate. We are not aware of any current orders or directions relating to Mexus Gold US with respect to the foregoing laws and regulations.

 

Environmental Regulation

 

Our gold projects are subject to various Mexican federal laws and regulations governing protection of the environment. These laws are continually changing and, in general, are becoming more restrictive. It is our policy to conduct business in a way that safeguards public health and the environment. We believe that the actions and operations of Mexus Gold US will be conducted in material compliance with applicable laws and regulations. Changes to current Mexican federal laws and regulations where we operate currently, or in jurisdictions where we may operate in the future, could require additional capital expenditures and increased operating and/or reclamation costs. Although we are unable to predict what additional legislation, if any, might be proposed or enacted, additional regulatory requirements could impact the economics of our projects.

 

Research and Development

 

We do not foresee any immediate future research and development costs.


12


 

 

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.

 

Item 1A. Risk Factors

 

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

 

Item 1B. Unresolved Staff Comments.

 

None

 

Item 2. Properties

 

Real Property

 

At present, we do not own any property. Our business office is located at 13601 East River Road, Sacramento, CA 95690, in a leased facility where we have local access to all commercial freight systems. The current retail facility is approximately 5,000 square feet of building and one acre of concrete padded yard. This facility contains our administrative and sales as well as our manufacturing facility. Monthly rent is $3,800 and the lease term is month to month.

 

Item 3. Legal Proceedings

 

We are not a party to any legal proceedings responsive to this Item number.

 

Item 4. Mining Safety Disclosures

 

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


13


 

 

PART II

 

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

 

Market information

 

Our common stock has been quoted on the Over-The-Counter Bulletin Board since on or about March 2009, under the symbol “MXSG.” The stock currently trades on the OTCMarkets trading system under the symbol "MXSG." The following table sets forth the high and low bid prices for our common stock for each quarter during the last two fiscal years, so far as information is reported, as quoted on the Over-the-Counter Bulletin Board. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

 

 

High

$

Low

$

For the Fiscal Year Ended March 31, 2019

 

 

 

 

 

Fourth Quarter ended March 31, 2019

0.0140

0.0046

Third Quarter ended December 31, 2018

0.0107

0.0055

Second Quarter ended September 30, 2018

0.0189

0.0070

First Quarter ended June 30, 2018

0.0309

0.0120

 

 

 

For the Fiscal Year Ended March 31, 2018

 

 

 

 

 

Fourth Quarter ended March 31, 2018

0.0645

0.0200

Third Quarter ended December 31, 2017

0.0669

0.0348

Second Quarter ended September 30, 2017

0.0800

0.0445

First Quarter ended June 30, 2017

0.1230

0.0576

 

As of July 2, 2019, we had 1,172,098,176 shares of our common stock issued and outstanding, of which 655,217,964 shares were restricted. The closing price of our common stock on July 2, 2019, was $0.01.

 

Holders

 

At of the date of this report, we have approximately 333 holders of record of our common stock.

 

Dividends

 

We have not declared any cash dividends on any class of our securities and we do not have any restrictions that currently limit, or are likely to limit, our ability to pay dividends now or in the future.

 

Securities authorized for issuance under equity compensation plans

 

On August 11, 2016, our Board adopted the Mexus Gold US 2016 Stock Incentive Plan. The total number of shares of stock which may be purchased or granted directly by Options, Stock Awards or Restricted Stock Purchase Offers, or purchased indirectly through exercise of Options granted under the plan shall not exceed thirty million (30,000,000).

 

Item 6. Selected Financial Data.

 

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

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Critical Accounting Policies

 

Equipment under Construction

 

Equipment under construction comprises mining equipment that is currently being fabricated and modified by the Company and is not presently in use. Equipment under construction totaled $73,456 and $73,456 as of March 31, 2019 and 2018, respectively. Equipment under construction at March 31, 2019 comprises a Gold Recovery Cyanide Plant, Hydraulic Drum 12YD, Skid Mounted Mill and Survey Winch Marine.


14


 

 

Mineral Property Rights

 

Costs of acquiring mining properties are capitalized upon acquisition. Mine development costs incurred either to develop new ore deposits, to expand the capacity of mines, or to develop mine areas substantially in advance of current production are also capitalized once proven and probable reserves exist and the property is a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are charged to operations upon abandonment. The Company evaluates the carrying value of capitalized mining costs and related property and equipment costs, to determine if these costs are in excess of their recoverable amount whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Evaluation of the carrying value of capitalized costs and any related property and equipment costs would be based upon expected future cash flows and/or estimated salvage value in accordance with Accounting Standards Codification (ASC) 360-10-35-15, Impairment or Disposal of Long-Lived Assets .

 

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.

 

Asset Retirement Obligations

 

In accordance with accounting standards for asset retirement obligations (ASC 410), the Company records the fair value of a liability for an asset retirement obligation (ARO) when there is a legal obligation associated with the retirement of a tangible long-lived asset and the liability can be reasonably estimated. The associated asset retirement costs are supposed to be capitalized as part of the carrying amount of the related mineral properties. As of March 31, 2019 and 2018, 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

 

The Company recognizes revenues and the related costs when persuasive evidence of an arrangement exists, delivery and acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured.

 

Accounting for Derivative Instruments

 

Accounting standards require that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. A change in the market value of the financial instrument is recognized as a gain or loss in results of operations in the period of change.

 

Stock-based compensation

 

The Company records stock based compensation in accordance with the guidance in ASC Topic 718 which requires the Company to recognize expenses related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.

 

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.


15


 

 

Results of Operations

 

The following management’s discussion and analysis of operating results and financial condition of Mexus Gold US is for the years ended March 31, 2019 and 2018. All amounts herein are in U.S. dollars.

 

Year Ended March 31, 2019 Compared with the Year Ended March 31, 2018

 

We had a net loss during the year ended March 31, 2019 of $2,273,378 compared to a net loss of $3,909,961 during the same period in 2018. The decrease in net loss is primarily attributable (i) a decrease in general and administrative expenses of $150,411 (ii) a decrease in stock-based expense – consulting services of $878,174 (iii) a decrease in loss on settlement of accounts payable of $102,600 and (iv) a decrease in impairment of mineral property of $75,000. The decrease in the net loss is partially offset by an increase in exploration expenses of $102,993.

 

Revenue

 

For the year ended March 31, 2019, we had revenues of $0 compared to $0 for the year ended March 31, 2018.

 

Operating Expenses

 

Total operating expenses increased to $1,993,923 during year ended March 31, 2019, compared to $3,107,115 for the year ended March 31, 2018. The decrease in operating expenses was primarily due to decreases in general and administration expense, stock-based expense – consulting services, loss on settlement of accounts payable and a decrease in impairment of mineral property.

 

Other Income (Expense)

 

We reported $279,455 of other expense during the year ended March 31, 2019 compared to $802,846 of other expense during the same period in 2018.

 

Changes in other income (expense) is mainly attributable to a decrease in loss on settlement of debt and decrease in loss on change in fair value of derivatives which was partially offset by an increase interest expense. The increase in interest expense is primarily due to the issuance of the convertible promissory notes to Power Up Lending Group Ltd.

 

Liquidity and Capital Resources

 

At March 31, 2019, we had cash of $12,029 compared to cash of $125,942 at March 31, 2018.

 

Our property and equipment decreased to $383,524 at March 31, 2019, compared to $470,320 at March 31, 2018. The decrease in equipment is largely due to depreciation expense of $255,215 during the year ended March 31, 2019 and partially offset by $111,981 for the purchase of equipment.

 

Our equipment under construction to $17,018 at March 31, 2019, compared to $73,456 at March 31, 2018.

 

Our mineral properties increased to $829,947 at March 31, 2019, compared to $505,947 at March 31, 2018. The increase in mineral properties is due to the decrease in deposit for the mineral rights of Project Mabel of $324,000. On January 23, 2018, the Company paid 6,000,000 shares of common stock valued at $324,000 ($0.0540 per share) to Cesar Maruicio Lemas Contreras as consideration to enter into three Letter of Intent agreements. At March 31, 2018, the payment was recorded as a deposit on mineral property in the consolidated balance sheet. On May 1, 2018, the $324,000 deposit on mineral properties was transferred to property costs on the consolidated balance sheet.

 

Total assets decrease to $1,248,018 at March 31, 2019, compared to $1,499,665 at March 31, 2018. The majority of the decrease in assets relates to a $255,215 of depreciation expense.

 

Our total liabilities increased to $1,665,007 at March 31, 2019, compared to $1,196,568 as of March 31, 2018. The increase in our total liabilities can be primarily attributed to the issuance of notes payable and convertible promissory notes to Power Up Lending Group Ltd. along with the related convertible promissory note derivative liability.

 

Our working capital deficit at March 31, 2019 and March 31, 2018 is $1,647,478 and 1,070,626, respectively.


16


 

 

Our net cash used in operating activities for the year ended March 31, 2019 and 2018 is $995,172 and $1,057,569, respectively. Our net loss for the year ended March 31, 2019 of $2,273,378 was the main contributing factor for our negative cash flow offset mainly by depreciation and amortization of $255,215, stock-based compensation – services of $427,839 and non-cash interest expense of $634,755.

 

Our net cash (used in) provided by investing activities for the year ended March 31, 2019 and 2018 is $(101,981) and $(105,196), respectively, mainly due to the purchase of equipment.

 

Our net cash provided by financing activities for the year ended March 31, 2019 and 2018 is $983,240 and $1,198,156, respectively, mainly due to issuance of notes payable, convertible promissory notes and common stock.

 

The Company is dependent upon outside financing to continue operations. It is management’s plans to raise necessary funds through a private placement of its common stock to satisfy the capital requirements of the Company’s business plan. There is no assurance that the Company will be able to raise the necessary funds, or that if it is successful in raising the necessary funds, that the Company will successfully execute its business plan.

 

Future goals

 

The Caborca Properties have become our primary focus after our installation of a small placer recovery plant to conduct tests on prospective placer areas and determine the viability of the placer deposits while we conducted evaluations of the other Mexico properties. We have added additional equipment which will allow the continuation of mining operations of the placer deposits.

 

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 7A. Quantitative and Qualitative Disclosures About Market Risk

 

We currently do not utilize sensitive instruments subject to market risk in our operations.

 

 

Item 8. Financial Statements and Supplementary Data.

 

Our financial statements and related explanatory notes can be found on the “F” Pages at the end of this Report.

 

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

 

None.


17


 

 

Item 9A. 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 annual 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 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.

 

Management Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control over financial reporting has been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles generally accepted in the United States of America. The Company's internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets of the Company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures are being made only in accordance with authorization of management and directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the Company's financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management assessed the effectiveness of the Company's internal control over financial reporting at March 31, 2019. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control--Integrated Framework. Based on that assessment under those criteria, management has determined that, at March 31, 2019, the Company's internal control over financial reporting was not effective.

 

This Annual Report on Form 10-K does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management's report in this annual report.

 

Inherent Limitations of Internal Controls

 

Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

 

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;  

 

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and  

 

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.  


18


 

 

Our management does not expect that our internal controls 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 objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management has not identified any change in our internal control over financial reporting in connection with its evaluation of our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information.

 

None

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance.  

 

The following table sets forth, as of the date of this annual report, the name, age and position of our sole director/executive officer.

 

NAME

AGE

POSITION

Paul D. Thompson

77

President

Chief Executive Officer

Chief Financial Officer

Principle Accounting Officer

Secretary

Director

 

The background of our sole director/executive officer is as follows:

 

Paul D. Thompson

 

Mr. Paul D. Thompson is our sole director and officer acting in the capacity of Chief Executive Officer, Chief Financial Officer and Secretary. Mr. Thompson is 76 years old and has been involved in mining and the construction of mining equipment since 1959. Past mining companies which Mr. Thompson has established and operated include: Thompson Mining Corp. which developed mining and milling prospects; Thompson Yellow Jacket Mining which performed underground mining and milling; and Golden Eagle Mining Corp. which performed drilling and exploration. Mr. Thompson’s past mining activities include the Centennial Mine Project; the Otter Creek (placer) Project; and the "Big Hole" project on the Cosumnes River all located in El Dorado County, California. In addition, during the late 1980’s Mr. Thompson successfully developed the Crystal Caves Mobil Home Park in South El Dorado County. In Virginia City, Nevada, Mr. Thompson constructed a fully operating 1860's style 2 stamp mill for crushing and processing gold as an ongoing business to educate people on how gold was historically processed. In addition, for the past three years, Mr. Thompson has been conducting mineral exploration in Sonora, Mexico resulting in the acquisition of approximately 9,000 hectares of claims and six mining concessions.

 

Information about our Board and its Committees.

 

Audit Committee

 

We currently do not have an audit committee although we intend to create one as the need arises. Currently, our Board of Directors serves as our audit committee.

 

Compensation Committee

 

We currently do not have a compensation committee although we intend to create one as the need arises. Currently, our Board of Directors serves as our Compensation Committee.


19


 

 

Advisory Board

 

We currently do not have an advisory board although we intend to create one as the need arises.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers, and stockholders holding more than 10% of our outstanding common stock, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in beneficial ownership of our common stock. Executive officers, directors and greater-than-10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. To our knowledge, based solely on review of the copies of such reports furnished to us for the period ended March 31, 2019, the Section 16(a) reports required to be filed by our executive officers, directors and greater-than-10% stockholders were not filed on a timely basis.

 

Code of Ethics

 

Effective February 22, 2006, our board of directors adopted the Company’s Code of Business Conduct and Ethics. The board of directors believes that our Code of Business Conduct and Ethics provides standards that are reasonably designed to deter wrongdoing and to promote the following: (1) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; (2) full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submits to, the Securities and Exchange Commission ; (3) compliance with applicable governmental laws, rules and regulations; the prompt internal reporting of violations of the Code of Business Conduct and Ethics to an appropriate person or persons; and (4) accountability for adherence to the Code of Business Conduct and Ethics. We will provide a copy of our Code of Business Conduct and Ethics by mail to any person without charge upon written request to us at: 1805 N. Carson Street, Suite 150, Carson City, NV 89701.

 

Item 11. Executive Compensation

 

The following table sets forth the compensation paid to executive officers, for services rendered, and to be rendered. No restricted stock awards, long-term incentive plan payouts or other types of compensation, other than the compensation identified in the chart below, were paid to our executive officers during the fiscal years presented. As of the date of this Report, Mr. Thompson is our sole officer and director.

 

Name and Principal Position

Year

Ended

Salary

Bonus

Stock

Awards

Option

Awards

Non-Equity

Incentive Plan

Compensation

Nonqualified

Deferred

Compensation

Earnings

All Other

Compensation

Total

Paul D. Thompson

President,

Chief Executive Officer,

Chief Financial Officer,

and Secretary, and Director

2019

$180,000

$0

$130,400

$0

$0

$0

$0

$310,400

2018

$180,000

$0

$130,400

$0

$0

$0

$0

$310,400

 

Employment Agreements

 

On July 2, 2015, the Company entered into a compensation agreement with Paul D. Thompson, the sole director and officer of the Company. Mr. Thompson is compensated $15,000 per month and has the option to take payment in Company stock valued at an average of 5 days closing price, cash payments or deferred payment in stock or cash. In addition, Mr. Thompson is due 2,000,000 shares of common stock at the end of each fiscal quarter.

 

Compensation of Director

 

We currently do not compensate our director. In the future, we may compensate our current director or any additional directors for reasonable out-of-pocket expenses in attending board of directors meetings and for promoting our business. From time to time we may request certain members of the board of directors to perform services on our behalf. In such cases, we will compensate the directors for their services at rates no more favorable than could be obtained from unaffiliated parties.


20


 

 

 

 

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

 

The following table sets forth certain information regarding the beneficial ownership of the 1,172,098,176 issued and outstanding shares of our common stock as of July 2, 2019, by the following persons:

 

each person who is known to be the beneficial owner of more than five percent (5%) of our issued and outstanding shares of common stock; 

 

each of our directors and executive officers; and 

 

all of our Directors and Officers as a group 

 

Name And Address

Number Of Shares

Beneficially Owned

Percentage

Owned

Paul D. Thompson (1)

98,586,361 (2)(3)(4)

8.3%

Jeffrey Allen Braley (5)

60,049,841

5.1%

 

 

 

All Officers and Directors as Group

98,586,361

8.3%

 

 

 

Total

158,636,202

13.4%

 

(1) 1805 N. Carson Street, Suite 150, Carson City, NV 89701. 

 

(2) Includes 87,629,671 shares of common stock held by Mr. Thompson individually; 660,000 shares of common stock held by Tioga Gold, Inc.; 182,918 shares of common stock held by Mexus Gold Mining S.A. C.V.; and 113,772 shares of common stock held by Mexus Gold International. 

 

(3) I Mr. Thompson owns 1,000,000 shares of our Series A Convertible Preferred Stock, $.001 par value. Each share of our Series A Convertible Preferred Stock converts into 10 shares of our common stock. Assuming Mr. Thomson converted 100% of the Series A Convertible Preferred Stock held by him into shares of common stock, he would hold and additional 10,000,000 shares of common stock and a grand total of 98,586,361 shares of commons stock or approximately 8.3% of our issued and outstanding shares of common stock. 

 

(4) Holders of our Series A Convertible Preferred Stock have such number of votes as is determined by multiplying: (a) the number of shares of Series A Convertible Preferred Stock held by such holder, (b) the number of issued and outstanding shares of the Corporation’s Series A Convertible Preferred Stock and common stock on a fully-diluted basis; and (c) 0.000006. Accordingly, on any stockholders’ vote, Mr. Thompson has a total of 7,092,589,056 votes, and far greater than 50% of the issued and outstanding voting stock of the company. 

 

(5) 362 S 5 th St. Winneconne, WI 54986. 

 

Beneficial ownership is determined in accordance with the rules and regulations of the SEC. The number of shares and the percentage beneficially owned by each individual listed above include shares that are subject to options held by that individual that are immediately exercisable or exercisable within 60 days from the date of this annual report and the number of shares and the percentage beneficially owned by all officers and directors as a group includes shares subject to options held by all officers and directors as a group that are immediately exercisable or exercisable within 60 days from the date of this registration statement.

 

Item 13. Certain Relationships and Related Transactions and Director Independence.

 

None.

 

Transactions with Promoters

 

None.


21


 

 

Item 14. Principal Accounting Fees and Services.

 

Appointment of Auditors

 

Our Board of Directors selected RBSM LLP (“RBSM LLP”) as our auditors for the years ended March 31, 2019 and 2018.

 

Audit Fees

 

RBSM LLP billed us $52,000 in audit fees during the year ended March 31, 2019.

 

RBSM LLP billed us $56,000 in audit fees during the year ended March 31, 2018.

 

Audit-Related Fees

 

We did not pay any fees to RBSM LLP for assurance and related services that are not reported under Audit Fees above, during our fiscal years ending March 31, 2019 and 2018.

 

Tax and All Other Fees

 

We did not pay any fees to RBSM LLP for tax compliance, tax advice, tax planning or other work during our fiscal years ending March 31, 2019 and 2018.

 

Pre-Approval Policies and Procedures

 

We have implemented pre-approval policies and procedures related to the provision of audit and non-audit services. Under these procedures, our board of directors pre-approves all services to be provided by RBSM LLP and the estimated fees related to these services.

 

With respect to the audit of our financial statements as of March 31, 2019 and 2018, and for the years then ended, none of the hours expended on RBSM LLP’s engagement to audit those financial statements were attributed to work by persons other than RBSM LLPs full-time, permanent employees.

 

Item 15. Exhibits, Financial Statement Schedules.

 

Statements

 

Report of Independent Registered Public Accounting Firm

 

Consolidated Balance Sheets at March 31, 2019 and 2018

 

Consolidated Statements of Operations for the years ended March 31, 2019 and 2018

 

Consolidated Statements of Stockholders' Equity for the years ended March 31, 2019 and 2018

 

Consolidated Statements of Cash Flows for the years ended March 31, 2019 and 2018

 

Notes to Consolidated Financial Statements

 

Schedules

 

All schedules are omitted because they are not applicable or the required information is shown in the Financial Statements or notes thereto.


22


 

 

MEXUS GOLD US AND SUBSIDARIES

CONSOLIDATED FINANCIAL STATEMENTS

 

March 31, 2019

 

 

AUDITORS’ REPORT F-2  

 

CONSOLIDATED BALANCE SHEETS F-3  

 

CONSOLIDATED STATEMENTS OF OPERATIONS F-4  

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY F-5  

 

CONSOLIDATED STATEMENTS OF CASH FLOWS F-6  

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7  

 

 

 

 

 

   


F-1


 

 

PICTURE 1  

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of Mexus Gold US. and subsidiaries

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Mexus Gold US. and subsidiaries (The “Company”) as of March 31, 2019 and 2018, and the related consolidated statements of operations, stockholders’ (deficit)equity, and cash flows for each of the years in the two year period ended March 31, 2019 and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2019, and 2018 and the consolidated results of its operations and its cash flows for each of the years in the two year period ended March 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

 

The Company's Ability to Continue as a Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has an accumulated deficit, recurring losses, and expects continuing future losses, has not earned revenue from planned operations and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/S/ RBSM LLP

 

We have served as the Company’s auditor since 2015.

 

New York, New York

July 10, 2019

 

New York | Washington, DC | California | Nevada | China | India | Greece

Member of ANTEA International with offices worldwide


F-2


 

 

MEXUS GOLD US AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

March 31, 2019

 

March 31, 2018

ASSETS

 

 

 

 

CURRENT ASSETS

 

 

 

 

Cash

$

12,029

$

125,942

Prepaid and other assets

 

5,500

 

-

TOTAL CURRENT ASSETS

 

17,529

 

125,942

 

 

 

 

 

FIXED ASSETS

 

 

 

 

Property and equipment, net of accumulated depreciation

 

383,524

 

470,320

TOTAL FIXED ASSETS

 

383,524

 

470,320

 

 

 

 

 

OTHER ASSETS

 

 

 

 

Equipment under construction

 

17,018

 

73,456

Deposit on mineral property

 

-

 

324.000

Property costs

 

829,947

 

505,947

TOTAL OTHER ASSETS

 

846,965

 

903,403

 

 

 

 

 

TOTAL ASSETS

$

1,248,018

$

1,499,665

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT (EQUITY)

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

Accounts payable and accrued liabilities

$

254,578

$

149,553

Accounts payable - related party

 

434,704

 

374,669

Notes payable (net unamortized debt discount of $94,127 and $0, respectively)

 

693,600

 

172,897

Note payable – related party

 

-

 

10,851

Promissory notes

 

65,000

 

65,000

Convertible promissory note (net of debt discount of $136,355 and $36,818, respectively)

 

104,034

 

354,664

Convertible promissory note derivative liability

 

113,091

 

68,934

TOTAL CURRENT LIABILITIES

 

1,665,007

 

1,196,568

 

 

 

 

 

TOTAL LIABILITIES

 

1,665,007

 

1,196,568

 

 

 

 

 

CONTINGENT LIABILITIES (Note 13)

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ (DEFICIT) EQUITY

 

 

 

 

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

 

-

 

-

2,000,000,000 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, 2018)

 

1,000

 

1,000

1,011,848,745 shares of Common Stock (775,922,947 - March 31, 2018)

 

1,011,845

 

775,919

Additional paid-in capital

 

27,064,698

 

25,743,607

Share subscription payable

 

632,840

 

636,565

Accumulated deficit

 

(29,127,372)

 

(26,853,994)

TOTAL STOCKHOLDERS' (DEFICIT)EQUITY

 

(416,989)

 

303,097

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)EQUITY

$

1,248,018

$

1,499,665

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.


F-3


 

 

MEXUS GOLD US AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

 

 

 

Year ended March 31,

 

 

2019

 

2018

REVENUES

 

 

 

 

Revenues

$

-

$

-

Total revenues

 

-

 

-

 

 

 

 

 

Expenses

 

 

 

 

Exploration

 

724,786

 

621,793

General and administrative

 

821,898

 

972,309

Stock-based expense - consulting services

 

427,839

 

1,306,013

(Gain) loss on sale of equipment

 

(10,000)

 

-

Loss on settlement of accounts payable

 

29,400

 

132,000

Impairment of mineral property

 

-

 

75,000

Total operating expenses

 

1,993,923

 

3,107,115

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

Foreign exchange

 

3,256

 

(15,899)

Interest

 

(634,755)

 

(487,300)

Gain (loss) Loss on settlement of debt

 

200,511

 

(296,918

Loss (gain) on convertible promissory note derivative liability

 

151,533

 

(2,729)

 

 

(279,455)

 

(802,846)

 

 

 

 

 

NET LOSS BEFORE PROVISION FOR TAX

 

 

 

 

Income tax

 

-

 

-

 

 

 

 

 

NET LOSS

$

(2,273,378)

$

(3,909,961)

 

 

 

 

 

BASIC AND DILUTED LOSS PER COMMON SHARE

$

(0.00)

$

(0.01)

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES

 

 

 

 

OUTSTANDING – BASIC AND DILUTED

 

878,846,013

 

706,016,990

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.


F-4


 

 

MEXUS GOLD US AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

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, March 31, 2017

-

$         -

1,000,000

$ 1,000

665,556,526

$ 665,555

$22,379,274

$ 571,467

$(22,944,033)

$  673,263

Shares issued for

 services and supplies

-

-

-

-

28,819,117

28,819

1,115,280

24,910

-

1,169,009

Shares issued for

 deposit on

 mineral property

-

-

-

-

6,000,000

6,000

318,000

-

-

324,000

Shares issued for

 equipment

-

-

-

-

4,452,309

4,452

119,865

(9,000)

-

115,317

Shares issued for cash

-

-

-

-

44,475,713

44,475

888,809

55,776

-

989,060

Shares issued for

 accounts payable

-

-

-

-

4,708,333

4,708

259,792

-

-

264,500

Shares issued for

 note principal and interest

-

-

-

-

21,410,949

21,410

446,083

(6,588)

-

460,905

Shares issued for

 to settle stock payable

-

-

-

-

500,000

500

136,504

-

-

137,004

Beneficial conversion feature

-

-

-

-

-

-

80,000

-

-

80,000

Net loss

-

-

-

-

-

-

-

-

(3,909,961)

(3,909,961)

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2018

-

-

1,000,000

1,000

775,922,947

775,919

25,743,607

636,565

(26,853,994)

303,097

 

 

 

 

 

 

 

 

 

 

 

Shares issued for

 services and supplies

-

-

-

-

27,857,226

27,857

370,171

29,811

-

427,839

Shares issued for

 equipment

-

-

-

-

-

-

 

-

-

-

Shares issued for cash

-

-

-

-

179,016,332

179,016

441,564

(145,080)

-

475,500

Shares issued for

 accounts payable

-

-

-

-

6,069,663

6,070

94,218

81,000

-

181,288

Shares issued for

note principal and interest

-

-

-

-

22,982,807

22,983

261,974

33,194

-

318,151

Beneficial conversion feature

-

-

-

-

-

-

121,043

-

-

121,043

Settlement of stock payable

-

-

-

-

-

-

2,650

(2,650)

-

-

Issue of warrant

-

-

-

-

-

-

29,471

-

-

29,471

Net loss

-

-

-

-

-

-

-

-

(2,273,378)

(2,273,378)

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2019

-

$         -

1,000,000

$ 1,000

1,011,848,975

$1,011,845

$ 27,064,698

$ 632,840

$ 29,127,372)

$ (416,989)

 

The accompanying notes are an integral part of these consolidated financial statements.


F-5


 

 

MEXUS GOLD US AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

Year ended March 31,

 

 

2019

 

2018

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

Net loss

$

(2,273,378)

$

(3,909,961)

Adjustments to reconcile net loss

 

 

 

 

to net cash used in operating activities:

 

 

 

 

Depreciation and amortization

 

255,215

 

255,776

(Gain) loss on sale of equipment

 

(10,000)

 

-

Loss on settlement of debt and accounts payable

 

(171,112)

 

428,918

Stock-based compensation - services

 

427,839

 

1,306,013

Non cash Interest expense

 

634,755

 

477,923

Loss on change in fair value of derivative instrument

 

(151,533)

 

2,729

Impairment of mineral property

 

-

 

75,000

Changes in operating assets and liabilities:

 

 

 

 

Decrease (Increase) of other assets

 

(5,500)

 

32,972

Accounts payable and accrued liabilities, including related parties

 

298,542

 

273,061

NET CASH USED IN OPERATING ACTIVITIES

 

(995,172)

 

(1,057,569)

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

Purchase of equipment

 

(111,981)

 

(105,196)

Proceeds from sale of equipment

 

10,000

 

-

NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES

 

(101,981)

 

(105,196)

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Proceeds from issuance of notes payable

 

555,487

 

135,000

Proceeds from issuance of notes payable - related party

 

67,410

 

-

Payment of notes payable

 

(13,000)

 

-

Proceeds from the issuance of convertible promissory notes

 

220,500

 

150,000

Repayment of convertible promissory note

 

(288,851)

 

-

Advances from related party

 

4,312

 

16,000

Payment of advances from related party

 

(38,118)

 

(91,904)

Proceeds from issuance of common stock, net

 

475,500

 

989,060

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

983,240

 

1,198,156

 

 

 

 

 

INCREASE IN CASH

 

(113,913)

 

35,391

 

 

 

 

 

CASH, BEGINNING OF PERIOD

 

125,942

 

90,551

 

 

 

 

 

CASH, END OF PERIOD

$

12,029

$

125,942

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

Interest paid

$

-

$

-

Taxes paid

$

-

$

-

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

 

Discount for beneficial conversion feature recognized on issuance of notes payable

$

150,513

$

80,000

Shares issued for settlement of notes payable and interest

$

234,949

$

399,418

Shares issued to settle accounts payable

$

100,288

$

264,500

Shares issued for equipment

$

-

$

115,317

Shares issued for deposit on mineral property

$

-

$

324,000

Shares issued in conjunction with the issuance of notes payable and convertible promissory note

$

83,201

$

61,487

Initial value of embedded derivative liability

$

-

$

66,205

Reclassification of equipment held for sale of property and equipment

$

56,438

$

-

Reclassification of deposit on mineral property to property costs

$

324,000

$

-

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.


F-6


 

 

MEXUS GOLD US AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

 

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. 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 year ended March 31, 2019, the Company incurred a net loss of $2,273,378 and used cash in operating activities of $995,172, and at March 31, 2019, had an accumulated deficit of $29,127,372. At March 31, 2019, the Company is in the exploration stage and has not earned revenue from planned operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. The Company’s independent registered public accounting firm, in their report on the Company’s financial statements for the year ending March 31, 2019, expressed substantial doubt about the Company’s ability to continue as a going concern.

 

The Company is dependent upon outside financing to continue operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. It is management’s plans to raise necessary funds through a private placement of its common stock to satisfy the capital requirements of the Company’s business plan. There is no assurance that the Company will be able to raise the necessary funds, or that if it is successful in raising the necessary funds, that the Company will successfully execute its business plan.

 

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and/or liabilities that might be necessary should the Company be unable to continue as a going concern. The continuation as a going concern is dependent upon the ability of the Company to meet our obligations on a timely basis, and, ultimately to attain profitability.

 

3. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

 

This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s consolidated financial statements. The consolidated financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. Certain 2018 financial statement amounts have been reclassified to conform to the financial statement presentation adopted in the current year.

 

These accounting policies conform to accounting principles generally accepted in the United States of America and are presented in U.S. dollars.

 

Basis of Consolidation

 

The consolidated financial statements include the accounts of the Company and controlled subsidiaries, Mexus Gold Mining, S.A. de C.V. (“Mexus Gold Mining), 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.


F-7


 

 

MEXUS GOLD US AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

 

3. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Continued)

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates. Management believes that the estimates used are reasonable. The more significant estimates and assumptions by management include, among others, the accrual of potential liabilities, the assumptions used in valuing share-based instruments issued for services, valuation of derivative liabilities and the valuation allowance for deferred tax assets.

 

Cash and cash equivalents

 

The Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.

 

Equipment

 

Equipment consists of mining tools and equipment, watercraft and vehicles which are depreciated on a straight-line basis over their expected useful lives as follows (see Note 5):

 

Mining tools and equipment

 

7 years

Watercrafts

 

7 years

Vehicles

 

3 years

 

Equipment under Construction

 

Equipment under construction comprises mining equipment that is currently being fabricated and modified by the Company and is not presently in use. Equipment under construction totaled $17,018 and $73,456 as of March 31, 2019 and 2018, respectively. Equipment under construction at March 31, 2019 comprises a Hydraulic Drum 12YD, Skid Mounted Mill and Survey Winch Marine.

 

Exploration and Development Costs

 

Exploration costs incurred in locating areas of potential mineralization or evaluating properties or working interests with specific areas of potential mineralization are expensed as incurred. Development costs of proven mining properties not yet producing are capitalized at cost and classified as capitalized exploration costs under property, plant and equipment. Property holding costs are charged to operations during the period if no significant exploration or development activities are being conducted on the related properties. Upon commencement of production, capitalized exploration and development costs would be amortized based on the estimated proven and probable reserves benefited. Properties determined to be impaired or that are abandoned are written-down to the estimated fair value. Carrying values do not necessarily reflect present or future values.

 

Mineral Property Rights

 

Costs of acquiring mining properties are capitalized upon acquisition. Mine development costs incurred either to develop new ore deposits, to expand the capacity of mines, or to develop mine areas substantially in advance of current production are also capitalized once proven and probable reserves exist and the property is a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are charged to operations upon abandonment. The Company evaluates the carrying value of capitalized mining costs and related property and equipment costs, to determine if these costs are in excess of their recoverable amount whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Evaluation of the carrying value of capitalized costs and any related property and equipment costs 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 .


F-8


 

 

MEXUS GOLD US AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

 

3. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Continued)

 

Long-Lived Assets

 

In accordance with ASC 360, Property Plant and Equipment the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

 

Fair Value of Financial Instruments

 

ASC Topic 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

 

Included in the ASC Topic 820 framework is a three level valuation inputs hierarchy with Level 1 being inputs and transactions that can be effectively fully observed by market participants spanning to Level 3 where estimates are unobservable by market participants outside of the Company and must be estimated using assumptions developed by the Company. The Company discloses the lowest level input significant to each category of asset or liability valued within the scope of ASC Topic 820 and the valuation method as exchange, income or use. The Company uses inputs which are as observable as possible and the methods most applicable to the specific situation of each company or valued item.

 

The Company's financial instruments consist of cash, accounts payable, accrued liabilities, advances, notes payable, and a 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.


F-9


 

 

MEXUS GOLD US AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

 

3. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Continued)

 

Comprehensive Loss

 

ASC 220, Comprehensive Income establishes standards for the reporting and display of comprehensive loss and its components in the consolidated financial statements. As at March 31, 2019 and 2018, the Company had no items that represent a comprehensive loss, and therefore has not included a schedule of comprehensive loss in the consolidated financial statements.

 

Income Taxes

 

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Accounting for Income Tax”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 

Asset Retirement Obligations

 

In accordance with accounting standards for asset retirement obligations (ASC 410), the Company records the fair value of a liability for an asset retirement obligation (ARO) when there is a legal obligation associated with the retirement of a tangible long-lived asset and the liability can be reasonably estimated. The associated asset retirement costs are supposed to be capitalized as part of the carrying amount of the related mineral properties. As of March 31, 2019 and 2018, 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.


F-10


 

 

MEXUS GOLD US AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

 

3. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Continued)

 

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 March 31, 2019 and 2018, 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:

 

 

March 31,

2019

 

March 31,

2018

Common stock issuable upon conversion of convertible notes payable

77,245,894

 

13,675,741

Common stock issuable to satisfy stock payable obligations

105,502,659

 

48,641,961

Total

182,748,553

 

62,317,702

 

Recently Issued Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09, as amended, is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. Under ASU 2014-09, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 is effective for annual and interim periods beginning after December 15, 2017. Under ASU 2014-09, revenue will be recognized when performance obligations under the terms of a contract are satisfied, which generally occurs upon shipment or delivery to customers based on written sales terms, which is also when control is transferred. Revenue will be measured as the amount of consideration we expect to receive in exchange for transferring products or services to a customer. The Company adopted the guidance of ASU 2014-09 on April 1, 2018. As the Company does not currently have revenue, the adoption of the new guidance did not have an impact on the Company’s consolidated financial statements.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use of asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the expected impact that the standard could have on its consolidated financial statements and related disclosures.

 

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.


F-11


 

 

MEXUS GOLD US AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

 

4. DEPOSIT ON MINERAL PROPERTIES

 

On January 18, 2018, Mexus Gold MX, entered into three Letter of Intent (“LOI”) agreements (collective known as Project Mabel) to exploit and transfer mineral rights owed by Cesar Mauricio Lemas Contreras.

 

(i) Project “Mabel” – Declaration of Intent dated January 18, 2018 with participation of 90% Mexus Gold MX and 10% Pacific Comox S.A. de C.V. (“Pacific Comox”). The administrator of Pacific Comox is Cesar Maruicio Lemas Contreras. This LOI contemplates transfers of mining rights at concessions 216136, 216137, 218587, 218588, 190649, 172975, 2019102, 172960, 180700, 222782 and 222783, which together add up to 2,128.2003 hectares 

 

(ii) Project “El Plomito” – Declaration of Intent dated January 23, 2018 with participation of 50% Mexus Gold MX and 50% Pacific Comox. This LOI contemplates transfers of mining rights at concessions 220563, 213711, 215941, 216544, 200395 and 222989, which together add up to 275.02 hectares. 

 

(iii) Project “La Famosa” – Declaration of Intent dated January 21, 2018 with participation of 50% Mexus Gold MX and 50% Pacific Comox. This LOI contemplates transfers of mining rights at concessions 220394, 220395, 220840, 220841 and 199006, which together add up to 200.0568 hectares. 

 

On January 23, 2018, the Company paid 6,000,000 shares of common stock valued at $324,000 ($0.0540 per share) to Cesar Maruicio Lemas Contreras as consideration to enter into three Letter of Intent agreements. At March 31, 2018, the payment was recorded as a deposit on mineral property in the consolidated balance sheet. On May 1, 2018, the $324,000 deposit on mineral properties was transferred to property costs on the consolidated balance sheet.

 

5. MINERAL PROPERTIES AND EXPLORATION COSTS

 

The following is a continuity of mineral property acquisition costs capitalized on the consolidated balance sheets during the years ended March 31, 2019 and 2018:

 

 

Balance

March 31,

2018

Cash

Payments

Share-based

Payments

Impairment

Balance

March 31,

2019

Ures Property (a)

$            -

$            -

$            -

$            -

$            -

Santa Elena Mine (b)

505,947

-

-

-

505,947

San Felix Project (c)

-

-

-

-

-

Project Mabel (See Note 4)

-

-

324,000

-

324,000

 

$ 505,947

$            -

$ 324,000

$            -

$ 829,947

 

 

Balance

March 31,

2017

Cash

Payments

Share-based

Payments

Impairment

Balance

March 31,

2018

Ures Property (a)

$            -

$            -

$            -

$            -

$            -

Santa Elena Mine (b)

505,947

-

-

-

505,947

San Felix Project (c)

75,000

-

-

(75,000)

-

 

$ 580,947

$            -

$            -

$ (75,000)

$ 505,947

 

The following is a continuity of exploration costs expensed in the consolidated statements of operation:

 

 

Balance

March 31,

2018

Cash

Payments

Share-based

Payments

Balance

March 31,

2019

Ures Property (a)

$ 2,089,538

$            -

$            -

$ 2,089,538

Santa Elena Mine (b)

4,668,410

724,786

100,114

5,493,310

 

$ 6,757,948

$ 724,786

$ 100,114

$ 7,582,848


F-12


 

 

MEXUS GOLD US AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

 

5. MINERAL PROPERTIES AND EXPLORATION COSTS (Continued)

 

 

Balance

March 31,

2017

Cash

Payments

Share-based

Payments

Balance

March 31,

2018

Ures Property (a)

$ 1,929,984

$ 138,644

$ 20,910

$ 2,089,538

Santa Elena Mine (b)

3,940,761

483,149

244,500

4,668,410

 

$ 5,870,745

$ 621,793

$ 265,410

$ 6,757,948

 

(a) Ures Property 

 

On May 25, 2010, the Company entered into a Mineral Exploration and Mining Lease with Option to Purchase mineral rights approximately 80 km NE of Hermosillo, Sonora, Mexico. The properties comprise approximately 10,000 acres over 9 concessions (including Ocho Hermanos, 370, San Ramon, Plat Osa, Edgar 1, Edgar 2, El Scorpio, Los Laureles and Mexus Gold). These property rights are owned by Mexus Gold S.A. de C.V. The Company is currently evaluating two properties, the El Scorpio and Ocho Hermanos. The evaluation involves trench testing and sampling.

 

(b) Santa Elena Mine 

 

Santa Elena Mine (also known as Caborca or Julio) comprise seven concessions with a total of 898.028 hectares of exploration properties located 54km NW of Caborca, State of Sonora, Mexico. These property rights are owned by Mexus Gold Mining S.A. de C.V. At March 31, 2019, a total of $505,947 have been capitalized on the consolidated balance sheet for these property costs.

 

On May 19, 2016, Mexus entered into a new joint venture agreement to continue the exploration program under the Exploration, Exploitation and Mining Concessions Agreement (“Marmar Agreement”) with Marmar Holdings SA de CV (“Marmar”) for the Santa Elena property (title 221448) and Marta Elena property (title 221447). The Marmar Agreement requires Mexus to contribute its interest in the Santa Elena and Marta Elena properties and Marmar will bear all costs associated with operations and administration. Profits from net revenues will be distributed 5% Mexus and 95% Marmar until Marmar recovers its operating and administration costs. Thereafter, net revenues with be distributed 50% Mexus and 50% Marmar.

 

On April 16, 2018, the Company announced that it terminated its joint venture agreement with MarMar. The agreement outlined the contractual obligations at the Santa Elena project in Caborca, Sonora State, Mexico. The decision to terminate the agreement was made due to MarMar’s lack of funding for the project, non-compliance with various aspects of the agreement, and their inability to meet environmental standards at the site. The Company intends to move forward on the project with the proper equipment and personnel.

 

(c) San Felix Project 

 

Effective January 13, 2017, Mexus Gold Mining, S.A. de C.V., a wholly owned Mexican subsidiary of the Company, entered into a purchase agreement with Jesus Leopoldo Felix Mazon, Leonardo Elias Jaime Perez, and Elia Lizardi Perez, wherein the Company 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.

 

The total purchase price is US$2,000,000 of which the Company is 50% responsible. The required payment schedule is as follows: $150,000 by January 30, 2017, $500,000 by August 13, 2017, $500,000 by March 13, 2018, $500,000 by October 13, 2018, and $350,000 by May 13, 2019. On January 30, 2017, the Company paid $75,000 (50% of $150,000).

 

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 .


F-13


 

 

MEXUS GOLD US AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

 

6. PROPERTY & EQUIPMENT

 

 

Cost

Accumulated Depreciation

March 31, 2019

Net Book Value

March 31, 2018

Net Book Value

Mining tools and equipment

$ 1,713,451

$ 1,349,741

$ 363,710

$ 444,266

Vehicles

167,985

148,171

19,814

26,054

 

$ 1,881,436

$ 1,497,912

$ 383,524

$ 470,320

 

Depreciation expense for the years ended March 31, 2019 and 2018 was $255,215 and $255,776, respectively.

 

7. ACCOUNTS PAYABLE – RELATED PARTIES

 

During the years ended March 31, 2019 and 2018, the Company incurred rent expense to Paul D. Thompson, the sole director and officer of the Company, of $45,600 and $45,600, respectively. At March 31, 2019 and 2018, $140,448 and $97,023 for this obligation is outstanding, respectively.

 

Compensation

 

On July 2, 2015, the Company entered into a compensation agreement with Paul D. Thompson, the sole director and officer of the Company. Mr. Thompson is compensated $15,000 per month and has the option to take payment in Company stock valued at an average of 5 days closing price, cash payments or deferred payment in stock or cash. In addition, Mr. Thompson is due 2,000,000 shares of common stock at the end of each fiscal quarter. At March 31, 2019 and 2018, $294,256 and $277,646 of compensation due is included in accounts payable – related party, respectively and $32,600 for 2,000,000 shares and $32,600 for 2,000,000 shares of common stock due is included in share subscriptions payable, respectively.

 

8. NOTES PAYABLE – RELATED PARTIES

 

Notes due to North Pacific Gold were accumulated through a series of cash advances to the Company which are unsecured, non-interest bearing and due on demand. North Pacific Gold is controlled by Paul Thompson, Jr., an immediate family member of Paul D. Thompson Sr., the sole director and officer of the Company. As of March 31, 2019 and 2018, notes payable due to North Pacific Gold totaled $0 and $10,851, respectively.

 

9. NOTES PAYABLE

 

During the year ended March 31, 2014, the Company received cash advances of $164,502 from three unrelated shareholders of the Company. At March 31, 2019 and 2018, the balance of these advances outstanding totaled $15,000 and $15,000, respectively.

 

During the years ended March 31, 2016 and 2015, the Company received various advances totaling $290,300 from nineteen investors and received various advances totaling $286,757 from twenty-two investors, respectively. These advances are unsecured and are due within 30 to 180 days of issue. Upon receipt of the cash advances, the Company paid a majority of the investors the value of their investment in shares of common stock of the Company as a finance fee. The investor has the option to be repaid when due by one of the following: (i) In cash (ii) One-half in cash and one-half in shares converted into common stock of the Company or (iii) The entire amount of the investment converted into shares of common stock of the Company. The conversion prices range from $0.0018 per share to $0.040 per share. For one promissory note with principal of $15,000 payments equal to 20% of cash proceeds received by the Company are due when equipment held for sale is sold.

 

During the years ended March 31, 2018 and 2017, the Company received various advances for notes payable totaling $135,000 from eight investors and received $0 in advances, respectively. These notes are unsecured, due in three to nine months of issue and earn a finance fee of 15% to 20% of principal. The investors have the option for principal and the finance fee to be repaid when due by one of the following: (i) in cash or (ii) converted into shares of common stock of the Company $0.02 to $0.10 per share. These notes were initially recorded net of a debt discount of $80,000 for a beneficial conversion feature with a corresponding increase in additional paid-in capital of $80,000. In conjunction with issuance of these notes payable 300,000 shares of common stock of the Company valued at $9,568 were issued to the note holders and recorded as debt discount. At March 31, 2018 and 2017, a debt discount of $0 and $0, respectively has been recorded on the consolidated balance sheet related to these notes.


F-14


 

 

MEXUS GOLD US AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

 

9. NOTES PAYABLE (Continued)

 

During the years ended March 31, 2018 and 2017, note principal and interest of $95,000 and $132,000 was paid through the issuance of shares of common stock, respectively, and $0 and $26,500 in cash, respectively.

 

During the year ended March 31, 2019, the Company received various advances for notes payable totaling $485,410 from eleven investors. These notes are unsecured and are due in one to twelve months from the date issue.

 

i) Note holders with $139,500 principal earn interest at 12% per annum and received 1,992,000 shares of common stock of the Company value at $32,530 as an incentive to purchase the Notes. If the Company defaults on repayment, these Notes together with any unpaid accrued interest is secured by shares of common stock valued at 50% of market value calculated using the average of the last 30 day closing price. These Notes has been accounted for in accordance with ASC 480 Distinguishing Liabilities from Equity. 

 

ii) Notes holders with $35,000 of principal earn interest at 0% to 20% per annum and are convertible into shares of common stock of the Company at $0.001 to $0.010 per share and received 560,000 shares of common stock of the Company value at $9,200 as an incentive to purchase Notes. These notes were initially recorded net of a debt discount of $19,200 for a beneficial conversion feature with a corresponding increase in additional paid-in capital of $19,200. 

 

iii) Note holders with $31,500 of principal earn interest at 0% per annum with an issue price of $28,500 in cash and are convertible into shares of common stock of the Company at $0.004 to $0.065 per share. This notes were initially recorded net of a debt discount of $28,500 for a beneficial conversion feature with a corresponding increase in additional paid-in capital of $28,500. 

 

iv) Notes holders with $13,000 of principal earn interest at 0% per annum with an issue price of $12,000 in cash 

 

v) Notes holders with $27,500 in principal earn interest at 6% to 12% per annum. 

 

vi) Note holder with $200,000 of principal earn interest at 6% per annum is convertible into shares of common stock of the Company at $0.00666667 per share. This note were initially recorded net of a debt discount of $40,000 for a beneficial conversion feature with a corresponding increase in additional paid-in capital of $40,000. 

 

vii) Note Payable – Related Party - On August 8, 2018, the Company issued a Promissory Note (“Note”) to Paul Thompson Sr., the Chief Executive Officer and the sole director of the Company, for $21,110 in cash. The Note earns interest at 12% per annum. The Note and interest are convertible, at the option of the holder, into shares of common stock of the Company at a price of $0.00455 per share. This note were initially recorded net of a debt discount of $21,110 for a beneficial conversion feature with a corresponding increase in additional paid-in capital of $21,110. 

 

vii) Note Payable – Related Party - On December 27, 2018, the Company issued a Promissory Note (“Note”) to Paul Thompson Sr., the Chief Executive Officer and the sole director of the Company, for $21,800 in cash. The Note earns interest at 12% per annum.  

 

ix) Note Payable – Related Party - On January 23, 2019, the Company issued a Promissory Note (“Note”) to Paul Thompson Sr., the Chief Executive Officer and the sole director of the Company, for $24,500 in cash. The Note earns interest at 12% per annum and is due in six months. The Note and interest are may be settled, at the option of the holder, into shares of common stock of the Company at a price per share determined by the average of the last 30 day closing share price of the Company.  

 

ix) Note holders with $43,217 of principal earn interest at 0% per annum with an issue price of $42,987 in cash and are convertible into shares of common stock of the Company at $0.006 per share. This notes were initially recorded net of a debt discount of $16,105 for a beneficial conversion feature with a corresponding increase in additional paid-in capital of $16,105. 

 

xi) On March 11, 2019, the Company entered into a Loan Agreement (“Note”) for $70,000 in cash with a term of one year and one day. Upon signing the Note, the Company agreed to issue 3,000,000 shares of common stock of the Company. In addition, the Company agreed to issue a warrant with an exercise price of $0.05 per share once the Note is fully settled. The Note also states that the Company will repay the Note from 5% of the net profit from the Santa Elena Caborca gold project net smelter royalty until the Note is paid in full. After March 31, 2019, an additional $45,000 in cash was advanced in accordance with the Note. 


F-15


 

 

MEXUS GOLD US AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

 

9. NOTES PAYABLE (Continued)

 

During the year ended March 31, 2019, note principal and interest of $64,500 and $95,000, respectively, was paid through the issuance of 12,121,153 shares of common stock with a fair value of $101,215 resulting in loss in settlement of debt of $34,172. In addition, during the years ended March 31, 2019 and 2018, the Company paid $6,500 and $0 in cash, respectively, to settle debt.

 

At March 31, 2019 and 2018, the carrying value of the advances received from April 1, 2013 to March 31, 2019 totaled $787,727 (net of unamortized debt discount of $94,127) and $83,600, respectively. At March 31, 2019, $394,257 of these notes were in default. There are no default provisions stated in these notes. At March 31, 2019 and 2018, accrued interest of $31,332 and $6,236, respectively, is included in accounts payable and accrued liabilities.

 

On January 19, 2016, the Company issued a promissory note (the “Note”) with a principal of amount of $77,150 bearing interest of 10% per annum to settle $77,150 in accounts payable due for accounting fees. Payments equal to 15% of cash proceeds received by the Company are due when equipment held for sale is sold. Any unpaid principal and interest is due in full on July 19, 2016. At March 31, 2019 and 2018, the balance of this note was $0 and $74,297, respectively. On May 25, 2018, the Company issued 7,429,654 shares of common stock valued at $133,734 ($0.0180 per share) to settle the Note resulting in a loss on settlement of $59,437.

 

Interest and amortization of debt discount was $327,177 and $89,567 for the year ended March 31, 2019 and 2018, respectively.

 

The amount by which the if-converted value of notes payable exceeds principal of notes payable at March 31, 2019 is $93,641.

 

10. PROMISSORY NOTES

 

On April 18, 2013, the Company issued Promissory Notes for $255,000 in cash. The Notes bear interest of 4% per annum and are due on December 31, 2013. The Notes are secured by all of Mexus Gold US shares of stock in Mexus Resources S.A. de C.V. and a personal guarantee of Paul D. Thompson. In addition, a fee of 2,550,000 shares of common stock of the Company valued at $501,075 ($0.1965 per share) was paid to the Note holders on April 18, 2013. These financing fees were capitalized in the consolidated balance sheet as deferred finance expense and were being amortized on a straight-line basis, which approximates the effective interest rate method, as interest expense over the life of the Promissory Notes. On August 24, 2015, $100,000 of these Promissory Notes were settled on issuance of a convertible promissory note. On December 1, 2015, $60,000 of these Promissory Notes were settled on issuance of a convertible promissory note. On September 19, 2016, the Company issued 570,750 shares of common stock with a fair value $44,234 ($0.0775 per share) to settle a promissory note with principal of $20,000. On March 31, 2017, a promissory note with principal of $10,000 was settled for no consideration and recorded as a gain on the consolidated statement of operations. At March 31, 2019 and 2018, outstanding Promissory Notes were $65,000 and $65,000, respectively. As of March 31, 2018, the Company has not made the scheduled payments and is in default on these promissory notes. The default rate on the notes is seven percent. At March 31, 2019 and 2018 accrued interest of $31,117 and $24,673, respectively, is included in accounts payable and accrued liabilities.

 

11. CONVERTIBLE PROMISSORY NOTE

 

JMJ Financial

 

On November 14, 2017, the Company issued a Convertible Promissory Note (“Note”) to JMJ Financial (“Holder”), for a principal sum of $166,667 plus one-time 10% interest charge of $16,667 which matures on May 14, 2018 for $150,000 in cash. The Company may repay the Note and interest any time in cash before the maturity date without a prepayment penalty. If the Company defaults on repayment, this Note together with any unpaid accrued interest is convertible into shares of common stock at the Holder’s option at a variable conversion price calculated as lesser of (a) $0.0375 or (b) 50% (40% if the conversion shares are not deliverable by DWAC) of the lowest trade occurring during the 25 consecutive trading days immediately preceding the conversion date. On issuance of the Note, an embedded derivative with a fair value of $66,205 was identified and recorded as debt discount (See Note 12). In conjunction with the Note, the Company issued 3,591,940 shares of common stock (“Origination Shares”) of the Company which was recorded as debt discount. The Origination Shares and the Note were valued at $51,920 and $31,875 upon issuance, respectively, using the relative fair value method. Additional interest expense is accreted on the Note between issuance and maturity dates with the expectation that principal and interest is likely to be settled in shares of common stock of the Company at a variable conversion price calculated at 40% of trade price of common stock of the Company. On May 16, 2018, the Company paid JMJ Financial $183,333 in cash to fully settle the Convertible Promissory Note issued on November 14, 2017 resulting in a gain on settlement of $275,000. At March 31, 2019 and 2018, the principal and interest outstanding of $0 and $391,482, respectively, is recorded net of unamortized debt discount of $0 and $36,818, respectively and a top-off liability of $58,067 was included in accounts payable and accrued liabilities at March 31, 2018. Interest and amortization of debt discount was $103,669 and $380,856 for the years ended March 31, 2019 and 2018.


F-16


 

 

MEXUS GOLD US AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

 

11. CONVERTIBLE PROMISSORY NOTE (Continued)

 

Power Up Lending Group Ltd.

 

On August 21, 2018, the Company issued a Convertible Promissory Note (“Note”) to Power Up Lending Group Ltd. (“Holder”) in the original principal amount of $77,500 less transaction costs of $2,500 bearing a 12% annual interest rate and maturing May 30, 2019 for $75,000 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 $110,737, of which $77,500 was recorded as debt discount and the remainder of $33,237 was recorded expensed and included in gain (loss) on derivative liability. The Company may repay the Note in cash if repaid within 30 days of date of issue at 110% of the original principal amount plus interest, between 31 days and 60 days at 115% of the original principal amount plus interest, between 61 days and 90 days at 120% of the original principal amount plus interest, between 91 days and 120 days at 125% of the original principal amount plus interest, between 121 days and 150 days at 130% of the original principal amount plus interest, and between 151 days and 170 days at 135% of the original principal amount plus interest. Thereafter, the Company does not have the right of prepayment. On January 17, 2019, the Company paid $105,520 in cash to Power Up Lending Group Ltd. to fully settle the Convertible Promissory Note resulting in a gain of settlement of $19,121. Interest and amortization of debt discount was $124,638 for the year ended March 31, 2019.

 

On November 7, 2018, the Company issued a Convertible Promissory Note (“Note”) to Power Up Lending Group Ltd. (“Holder”) in the original principal amount of $78,000 less transaction costs of $2,500 bearing a 12% annual interest rate and maturing August 30, 2019 for $75,500 in cash. After 170 days after the issue date, this Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price calculated at 65% of the market price defined as the average of the lowest two trading prices during the fifteen trading day period ending on the latest complete trading day prior to the conversion date. The Company determined that upon issuance of the Note, the initial fair value of the embedded conversion feature was $50,690 which was recorded as a debt discount. The Company may repay the Note if repaid in cash within 30 days of date of issue at 110% of the original principal amount plus interest, between 31 days and 60 days at 115% of the original principal amount plus interest, between 61 days and 90 days at 120% of the original principal amount plus interest, between 91 days and 120 days at 125% of the original principal amount plus interest, between 121 days and 150 days at 130% of the original principal amount plus interest, and between 151 days and 170 days at 135% of the original principal amount plus interest. Thereafter, the Company does not have the right of prepayment. At March 31, 2019, the Note is recorded at an accreted value of $125,681 less unamortized debt discount of $48,879. Interest and amortization of debt discount was $51,990 for the year ended March 31, 2019.

 

On January 25, 2019, the Company issued a Convertible Promissory Note (“Note”) to Power Up Lending Group Ltd. (“Holder”) in the original principal amount of $73,000 bearing a 12% annual interest rate and maturing November 15, 2019. 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 may repay the Note in cash if repaid within 30 days of date of issue at 110% of the original principal amount plus interest, between 31 days and 60 days at 115% of the original principal amount plus interest, between 61 days and 90 days at 120% of the original principal amount plus interest, between 91 days and 120 days at 125% of the original principal amount plus interest, between 121 days and 150 days at 130% of the original principal amount plus interest, and between 151 days and 170 days at 135% of the original principal amount plus interest. At March 31, 2019, the Note is recorded at an accreted value of $114,708 less unamortized debt discount of $87,476. Interest and amortization of debt discount was $27,230 for the year ended March 31, 2019.


F-17


 

 

MEXUS GOLD US AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

 

12. CONVERTIBLE PROMISSORY NOTE DERIVATIVE LIABILITY

 

The Convertible Promissory Notes (“Notes”) with JMJ Financial with an issue date of November 14, 2017 and Power Up Lending Group Ltd. 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 at November 14, 2017, March 31, 2018, August 21, 2018, November 7, 2018 and December 31, 2018, January 25, 2019 and March 31, 2018 using the Black-Scholes model.

 

The inputs into the Black-Scholes models are as follows:

 

 

November 14,

2017

March 31,

2018

August 21,

2018

November 7,

2018

December 31,

2018

January 25,

2019

March 31,

2019

Closing share price

$0.038

$0.02467

$0.0155

$0.0085

$0.0066

$0.0080

$0.0112

Conversion price

$0.0348

$0.0200

$0.0076

$0.0078

$0.0057

$0.0055

$0.0100

Risk free rate

0.050%

0.050%

0.050%

0.050%

2.56%

2.56%

2.44% - 2.56%

Expected volatility

109%

157%

163%

176%

168% - 178%

185%

230%

Dividend yield

0%

0%

0%

0%

0%

0%

0%

Expected life (years)

0.5

0.13

0.77

0.81

0.41 – 0.66

0.81

0.42- 0.63

 

The fair value of the conversion option derivative liabilities is $113,091 and $68,934 at March 31, 2019 and 2018, respectively. The decrease (increase) in the fair value of the conversion option derivative liability for the year ended March 31, 2019 and 2018 of $151,533 and $(2,729), respectively, is recorded as a gain (loss) in the consolidated statements of operations.

 

13. CONTINGENT LIABILITIES

 

An asset retirement obligation is a legal obligation associated with the disposal or retirement of a tangible long-lived asset that results from the acquisition, construction or development, or the normal operations of a long-lived asset, except for certain obligations of lessees. While the Company, as of March 31, 2019, does not have a legal obligation associated with the disposal of certain chemicals used in its leaching process, the Company estimates it will incur costs up to $50,000 to neutralize those chemicals at the close of the leaching pond.

 

14. STOCKHOLDERS’ EQUITY (DEFICIT)

 

The stockholders’ equity of the Company comprises the following classes of capital stock as of March 31, 2019 and 2018:

 

Preferred Stock, $0.001 par value per share; 9,000,000 shares authorized, 0 issued and outstanding at March 31, 2019 and 2018.

 

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 March 31, 2019 and 2018.

 

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; 2,000,000,000 shares authorized: 1,011,848,975 and 755,922,947 shares issued and outstanding at March 31, 2019 and 2018, respectively. Holders of Common Stock have one vote per share of Common Stock held.

 

Increase in the Number of Authorized Shares

 

On June 4, 2018, the Company’s board of directors and the majority shareholder approved an increase in the number of authorized shares of common stock of the Company from eight hundred fifty million (850,000,000) shares of common stock, par value $0.001 per share, to two billion (2,000,000,000) shares of common stock, par value $0.001 per share. A Certificate of Amendment for the increase in authorized shares was filed with the State of Nevada on July 6, 2018.


F-18


 

 

MEXUS GOLD US AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

 

14. STOCKHOLDERS’ EQUITY (DEFICIT) (Continued)

 

(i) Year Ended March 31, 2019  

 

On April 2, 2018, the Company issued 5,300,000 shares of common stock to satisfy obligations under share subscription agreements of $22,610 for settlement of services and $25,000 for cash receipts included in share subscriptions payable.

 

On April 16, 2018, the Company issued 18,600,000 shares of common stock to satisfy obligations under share subscription agreements of $186,000 for cash receipts included in share subscriptions payable.

 

On May 2, 2018, the Company issued 2,800,000 shares of common stock to satisfy obligations under share subscription agreements of $32,400 for settlement of accounts payable and $10,000 for cash receipts included in share subscriptions payable.

 

On May 24, 2018, the Company issued 5,945,410 shares of common stock to satisfy obligations under share subscription agreements of $70,050 for settlement of services and $25,280 for cash receipts included in share subscriptions payable.

 

On May 30, 2018, the Company issued 4,269,663 shares of common stock to satisfy obligations under share subscription agreements of $67,888 for settlement of the Top-off Liability included in accounts payable and accrued liabilities (see Note 11) included in share subscriptions payable.

 

On June 12, 2018, the Company issued 350,000 shares of common stock to satisfy obligations under share subscription agreements of $5,425 for services included in share subscriptions payable.

 

On August 23, 2018, the Company issued 61,066,666 shares of common stock to satisfy obligations under share subscription agreements of $55,896 for settlement of services, $43,840 for settlement of notes payable and $203,000 for cash receipts included in share subscriptions payable.

 

On September 10, 2018, the Company issued 8,324,809 shares of common stock to satisfy obligations under share subscription agreements of $55,910 for settlement of services and $18,000 for cash receipts included in share subscriptions payable.

 

On October 1, 2018, the Company issued 8,771,153 shares of common stock to satisfy obligations under share subscription agreements of $4,175 for settlement of services, $31,500 for settlement of notes payable and $15,000 for cash receipts included in share subscriptions payable.

 

On November 16, 2018, the Company issued 14,429,654 shares of common stock to satisfy obligations under share subscription agreements of $27,800 for settlement of services, $133,734 for settlement of notes payable and $25,000 for cash receipts included in share subscriptions payable.

 

On December 7, 2018, the Company issued 31,578,947 shares of common stock to satisfy obligations under share subscription agreements of $47,600 for settlement of services, $4,875 for settlement of notes payable and $28,000 for cash receipts included in share subscriptions payable.

 

On January 15, 2019, the Company issued 7,333,333 shares of common stock to satisfy obligations under share subscription agreements of $18,667 for settlement of services and $9,000 for cash receipts included in share subscriptions payable.

 

On January 24, 2019, the Company issued 10,732,727 shares of common stock to satisfy obligations under share subscription agreements of $47,600 for settlement of services, $21,000 for settlement of notes payable, $13,934 in interest and $6,100 for cash receipts included in share subscriptions payable.

 

On February 5, 2019, the Company issued 19,538,666 shares of common stock to satisfy obligations under share subscription agreements of $32,008 for interest and $32,000 for cash receipts included in share subscriptions payable.

 

On February 14, 2019, the Company issued 1,740,000 shares of common stock to satisfy obligations under share subscription agreements of $25,000 for services and $4,066 for interest included in share subscriptions payable.

 

On March 19, 2019, the Company issued 18,545,000 shares of common stock to satisfy obligations under share subscription agreements of $5,396 for services and $22,000 for cash receipts included in share subscriptions payable.


F-19


 

 

MEXUS GOLD US AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

 

14. STOCKHOLDERS’ EQUITY (DEFICIT) (Continued)

 

On March 25, 2019, the Company issued 16,600,000 shares of common stock to satisfy obligations under share subscription agreements of $11,900 for services and $16,200 for cash receipts included in share subscriptions payable.

 

(ii) Year Ended March 31, 2018  

 

On April 11, 2017, the Company issued 1,097,826 shares of common stock to satisfy obligations under share subscription agreements for $9,000 for settlement of equipment and $50,000 in cash receipts included in share subscriptions payable.

 

On April 17, 2017, the Company issued 621,954 shares of common stock to satisfy obligations under share subscription agreements for $15,000 for settlement of services and $25,000 in cash receipts included in share subscriptions payable.

 

On May 15, 2017, the Company issued 108,696 shares of common stock to satisfy obligations under share subscription agreements for $10,000 for settlement of services included in share subscriptions payable.

 

On June 2, 2017, the Company issued 4,593,333 shares of common stock to satisfy obligations under share subscription agreements for $41,300 for settlement of services and $36,500 in cash receipts included in share subscriptions payable.

 

On July 5, 2017, the Company issued 600,000 shares of common stock to satisfy obligations under share subscription agreements for $5,760 for settlement of services and $32,485 for settlement of stock payable included in share subscriptions payable.

 

On July 11 2017, the Company issued 2,949,253 shares of common stock to satisfy obligations under share subscription agreements for $25,975 for settlement of services and $88,500 in cash receipts included in share subscriptions payable.

 

On August 1, 2017, the Company issued 3,693,333 shares of common stock to satisfy obligations under share subscription agreements for $38,000 for settlement of services and $76,500 in cash receipts included in share subscriptions payable.

 

On August 15, 2017, the Company issued 11,436,667 shares of common stock to satisfy obligations under share subscription agreements for $102,000 for settlement of accounts payable, $405,500 for settlement of services and $36,000 in cash receipts included in share subscriptions payable.

 

On September 12, 2017, the Company issued 4,500,000 shares of common stock to satisfy obligations under share subscription agreements for $85,400 for settlement of services and $71,600 in cash receipts included in share subscriptions payable.

 

On September 25, 2017, the Company issued 3,500,000 shares of common stock to satisfy obligations under share subscription agreements for $61,300 for settlement of services and $45,000 in cash receipts included in share subscriptions payable.

 

On September 28, 2017, the Company issued 2,275,000 shares of common stock to satisfy obligations under share subscription agreements for $23,500 for settlement of services and $35,500 in cash receipts included in share subscriptions payable.

 

On October 13, 2017, the Company issued 3,814,232 shares of common stock to satisfy obligations under share subscription agreements for $47,000 for settlement of services, $10,000 for settlement of notes payable, interest of $2,303 and $44,785 in cash receipts included in share subscriptions payable.

 

On November 6, 2017, the Company issued 5,430,030 shares of common stock to satisfy obligations under share subscription agreements for $57,575 for settlement of services, $4,000 for settlement of notes payable, interest of $2,395 and $16,040 in cash receipts included in share subscriptions payable.

 

On November 13, 2017, the Company issued 6,591,666 shares of common stock to satisfy obligations under share subscription agreements for $6,000 for settlement of services, $57,500 for settlement of notes payable, interest of $1,632 and $50,000 in cash receipts included in share subscriptions payable.

 

On November 30, 2017, the Company issued 3,591,940 shares of common stock to satisfy obligations under share subscription agreements for interest of $51,920 and included in share subscriptions payable.


F-20


 

 

MEXUS GOLD US AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

 

14. STOCKHOLDERS’ EQUITY (DEFICIT) (Continued)

 

On December 12, 2017, the Company issued 2,283,333 shares of common stock to satisfy obligations under share subscription agreements for $29,000 in cash receipts included in share subscriptions payable.

 

On December 14, 2017, the Company issued 3,600,000 shares of common stock to satisfy obligations under share subscription agreements for $136,800 for settlement of services included in share subscriptions payable.

 

On December 20, 2017, the Company issued 8,050,000 shares of common stock to satisfy obligations under share subscription agreements for $106,400 for settlement of services, $80,000 for equipment and $44,200 in cash receipts included in share subscriptions payable.

 

On December 28, 2017, the Company issued 6,250,000 shares of common stock to satisfy obligations under share subscription agreements for $250,000 for settlement of notes payable included in share subscriptions payable.

 

On January 5, 2018, the Company issued 7,666,666 shares of common stock to satisfy obligations under share subscription agreements for $79,400 for settlement of services, $162,500 for settlement of accounts payable, $825 for interest and $39,000 in cash receipts included in share subscriptions payable.

 

On January 19, 2018, the Company issued 583,332 shares of common stock to satisfy obligations under share subscription agreements for $9,000 for settlement of cash receipts included in share subscriptions payable.

 

On January 29, 2018, the Company issued 3,187,000 shares of common stock to satisfy obligations under share subscription agreements for $8,448 for settlement of services and $36,600 in cash receipts included in share subscriptions payable.

 

On January 30, 2018, the Company issued 527,779 shares of common stock to satisfy obligations under share subscription agreements for $13,895 for settlement of services and $3,556 in cash receipts included in share subscriptions payable.

 

On February 21, 2018, the Company issued 11,324,223 shares of common stock to satisfy obligations under share subscription agreements for $371,600 for settlement of services, $15,000 for settlement of notes payable and $31,000 in cash receipts included in share subscriptions payable.

 

On March 21, 2018, the Company issued 12,090,158 shares of common stock to satisfy obligations under share subscription agreements for $66,250 for settlement of services, $71,918 for settlement of notes payable, $35,317 for equipment and $28,500 in cash receipts included in share subscriptions payable.

 

Common Stock Payable

 

(i) Year Ended March 31, 2019  

 

As at March 31, 2019, the Company had total subscriptions payable for 105,502,659 shares of common stock for $170,982 in cash, shares of common stock for interest valued at $40,606, shares of common stock for services valued at $340,252 and common stock for settlement of accounts payable valued at $81,000.

 

(ii) Year Ended March 31, 2018  

 

On June 26, 2017, the Company issued subscriptions payable for 500,000 shares in common stock valued at $32,485 ($0.06497 per share) to fully settle subscription payable and other liabilities totaling $137,004. The settlement resulted in an increase of additional paid-in capital of $104,519.

 

As at March 31, 2018, the Company had total subscriptions payable for 48,641,961 shares of common stock for $316,063 in cash, shares of common stock for equipment valued at $1,500, shares of common stock for interest valued at $7,412 and shares of common stock for services valued at $311,590.


F-21


 

 

MEXUS GOLD US AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

 

15. RELATED PARTY TRANSACTIONS

 

During the years ended March 31, 2019 and 2018, the Company entered into the following transactions with related parties:

 

Paul D. Thompson, sole director and officer of the Company

 

Taurus Gold, Inc., controlled by Paul D. Thompson

 

Accounts payable – related parties – Note 7

 

Notes payable – related parties – Note 8

 

Notes payable – Note 9

 

16. INCOME TAXES

 

The Company had no income tax expense due to operating loss incurred for the years ended March 31, 2019 and 2018.

 

United States

 

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”), which makes broad and complex changes to the U.S. tax code. Certain of these changes may be applicable to the Company, including but not limited to, reducing the U.S. federal corporate tax rate from 35 percent to 21 percent, creating a new limitation on deductible interest expense, eliminating the corporate alternative minimum tax (“AMT”), modifying the rules related to uses and limitations of net operating loss carryforwards generated in tax years ending after December 31, 2017, and changing the rules pertaining to the taxation of profits earned abroad  (IRC Sec. 965. Changes in tax rates and tax laws are accounted for in the period of enactment. The Tax Act reduces the corporate tax rate to 21 percent, effective January 1, 2018.

 

Mexico

 

Corporations resident in Mexico are taxable on their worldwide income from all sources, including profits from business and property. The Company is subject to Mexico tax at a rate of 30% on taxable income, if any, from Mexico operations.

 

The tax effects of temporary differences and tax loss and credit carry forwards that give rise to significant portions of deferred tax assets and liabilities at March 31, 2019 and 2018 are comprised of the following:

 

 

 

Year Ended

March 31, 2019

 

Year Ended

March 31, 2018

Deferred tax assets:

 

 

 

 

Net-operating loss carryforward

$

3,943,779

$

3,619,659

Total deferred tax assets

 

3,943,779

 

3,619,659

Valuation allowance

 

(3,943,779)

 

(3,619,659)

Deferred tax assets, net of allowance

$

-

$

-

 

 

 

Year Ended

March 31, 2019

 

Year Ended

March 31, 2018

Federal

 

 

 

 

Current

$

-

$

-

Deferred

 

3,943,779

 

3,619,659

State

 

-

 

-

Current

 

-

 

-

Deferred

 

-

 

-

Change in valuation allowance

 

(3,943,779)

 

(3,619,659)

Income tax provision

$

-

$

-


F-22


 

 

MEXUS GOLD US AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

 

16. INCOME TAXES (Continued)

 

During the ended March 31, 2018, the deferred tax asset was decreased by $2,186,393 for the reduction in the enacted U.S. Federal corporate tax rate from 35% to 21% in 2018.

 

At March 31, 2019, the Company had net operating loss carry forwards for federal tax purposes of approximately $18.7 million which expires in years 2030 through 2040. It appears that the Company had generated net operating losses, since 2010, which the Company’s preliminary analysis indicates would be subject to significant limitations pursuant to Internal Revenue Code Section 382. The Company has not completed its IRC Section 382 Valuation, as required and the NOL’s because of potential Change of Ownerships might be completely worthless. Therefore, Management of the Company has recorded a full valuation reserve; since it is more likely than not that no benefit will be realized for the Deferred Tax Assets.

 

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and taxing strategies in making this assessment. In case the deferred tax assets will not be realized in future periods, the Company has provided a valuation allowance for the full amount of the deferred tax assets at March 31, 2019. The valuation allowance increased by approximately $0.3 million as of March 31, 2019.

 

Corporations resident in Mexico are taxable on their worldwide income from all sources, including profits from business and property. The Company is subject to Mexico tax at a rate of 30% on taxable income, if any, from Mexico operations.

 

The expected tax expense (benefit) based on the U.S. federal statutory rate is reconciled with actual tax expense (benefit) as follows:

 

 

Year Ended

March 31, 2019

 

Year Ended

March 31, 2018

Statutory Federal Income Tax Rate

21%

 

21%

Change in valuation allowance

(21%)

 

(21%)

Income tax provision

$     -

 

$     -

 

The Company has not identified any uncertain tax positions requiring a reserve as of March 31, 2019

 

The Company is delinquent in filing its United States Corporate Income Tax Returns, since the 2009 tax year end. The Internal Revenue Service can impose penalties for noncompliance upon delinquent filings. All years remain open to audit by statute, due to non-filing. Management is planning to get the Company up to date with such delinquent filings, as of the statement date.

 

17. SUBSEQUENT EVENTS

 

Common Stock Issued

 

On April 17, 2019, the Company issued 53,799,286 shares of common stock to satisfy obligations under share subscription agreements of $47,600 for settlement of services, $4,392 for interest and $139,500 for cash receipts included in share subscriptions payable.

 

On April 30, 2019, the Company issued 15,444,439 shares of common stock to satisfy obligations under share subscription agreements of $7,000 for settlement of services and $15,500 for cash receipts included in share subscriptions payable.

 

On May 8, 2019, the Company issued 45,882,143 shares of common stock to satisfy obligations under share subscription agreements of $48,496 for settlement of services, $117,400 to settle accounts payable, $2,254 for interest and $32,100 for cash receipts included in share subscriptions payable.

 

On June 4, 2019, the Company issued 16,678,333 shares of common stock to satisfy obligations under share subscription agreements of $13,291 for settlement of services and $23,000 for cash receipts included in share subscriptions payable.


F-23


 

 

MEXUS GOLD US AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

 

17. SUBSEQUENT EVENTS (Continued)

 

On June 18, 2019, the Company issued 23,445,000 shares of common stock to satisfy obligations under share subscription agreements of $101,078 for settlement of services, $18,050 for cash receipts, $6,500 to settle notes payable and $3,960 for interest included in share subscriptions payable.

 

On July 2, 2019, the Company issued 5,000,000 shares of common stock to satisfy obligations under share subscription agreements of $10,000 for cash receipts.

 

Common Stock Payable

 

For the period of April 1, 2019 to July 2, 2019, the Company issued subscriptions payable for 115,280,666 shares of common stock for $194,645 in cash ($0.0017 per share).

 

For the period of April 1, 2019 to July 2, 2019, the Company issued subscriptions payable for 10,350,000 shares of common stock for $106,165 in services ($0.0103 per share).

 

For the period of April 1, 2019 to July 2, 2019, the Company issued subscriptions payable for 4,000,000 shares of common stock for $36,400 for settlement of accounts payable ($0.0091 per share).

 

For the period of April 1, 2019 to July 2, 2019, the Company issued subscriptions payable for 6,500,000 shares of common stock for $6,500 in equipment ($0.001 per share).

 

For the period of April 1, 2019 to July 2, 2019, the Company issued subscriptions payable for 1,000,000 shares of common stock for $8,500 in interest ($0.085 per share).

 

For the period of April 1, 2019 to July 2, 2019, the Company issued additional subscriptions payable for 2,484,750 shares of common stock to settle stock payable obligations.

 

Notes Payable

 

On April 5, 2019, the Company issued a Promissory Note (“Note”) for $41,000 in cash. The Note earns interest at 12% per annum, matures on April 6, 2020 and is convertible into shares of common stock of the Company, the option of the Holder, at $0.005 per share.

 

On May 14, 2019, the Company issued a Promissory Note (“Note”) for $90,000 in cash with a face value of $95,000. The face value of the Note is due on May 24, 2019 plus an additional 1,000,000 shares of common stock of the Company. On May 17, 2019 and June 16, 2019, the Company paid the holder $60,000 and $35,000, respectively.

 

On April 15, 2019, the Company issued a promissory note (“Note”) with a principal of amount of $66,754 bearing interest of 10% per annum to settle $66,654 in accounts payable due for accounting fees. The Note is due on June 30, 2020. The holder of the Note, may convert principal and interest into shares of common stock of the Company at $0.005 per share.

 

On March 11, 2019, the Company entered into a Loan Agreement (“Note”) for $70,000 in cash with a term of one year and one day. Upon signing the Note, the Company agreed to issue 3,000,000 shares of common stock of the Company. In addition, the Company agreed to issue a warrant with an exercise price of $0.05 per share once the Note is fully settled. The Note also states that the Company will repay the Note from 5% of the net profit from the Santa Elena Caborca gold project net smelter royalty until the Note is paid in full. After March 31, 2019, an additional $45,000 in cash was advanced in accordance with the Note.


F-24


 

 

MEXUS GOLD US AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2019 and 2018

 

17. SUBSEQUENT EVENTS (Continued)

 

Power Up Lending Group Ltd.

 

On April 5, 2019, the Company issued a Convertible Promissory Note (“Note”) to Power Up Lending Group Ltd. (“Holder”) in the original principal amount of $88,000 bearing a 12% annual interest rate and maturing February 20, 2020. After 170 days after the issued 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 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.

 

On May 10, 2019, the Company paid $111,531 in cash to Power Up Lending Group Ltd. to fully settle the Convertible Promissory Note issued on November 7, 2018. The carrying value of the Convertible Promissory Note on March 31, 2019 was $76,800.

 

On June 11, 2019, the Company issued a Convertible Promissory Note (“Note”) to Power Up Lending Group Ltd. (“Holder”) in the original principal amount of $42,500 bearing a 12% annual interest rate and maturing April 15, 2020. After 170 days after the issued 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 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.


F-25


 

 

 

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 Principal Executive Officer and Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.1

 

 

X

 

 

 

 

 

Certification of Principal Executive Officer and Principal Financial Officer 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


23


 

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

 

MEXUS GOLD US

 

/s/ Paul D. Thompson Sr.

By: Paul D. Thompson Sr.

Its: Chief Executive Officer

Principle Financial Officer

Principle Executive Officer

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant on the capacities and on the dates indicated.

 

Signatures

 

Title

 

Date

 

 

 

 

 

/s/ Paul D. Thompson Sr.

 

Chief Executive Officer

 

July 10, 2019

Paul D. Thompson Sr.

 

Chief Financial Officer

 

 

 

 

Principal Executive Officer

 

 

 

 

Principal Financial Officer

 

 

 

 

President

 

 

 

 

Secretary

 

 

 

 

Director

 

 


24

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