Mexus Gold US - Quarter Report: 2015 December (Form 10-Q)

U. S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

 

For the transition period from ___________ to _____________

MEXUS GOLD US

Nevada		000-52413		20-4092640
(State or other jurisdiction		(Commission File Number)		(IRS Employer
of Incorporation)				Identification Number)
		1805 N. Carson Street, #150
		Carson City, NV 89701
		(Address of principal executive offices)
		(916) 776 2166
		(Issuer’s Telephone Number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  X .  N      .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange Act.

Large accelerated filer        .		Accelerated filer       .
Non-accelerated filer          .   (Do not check if smaller reporting company)		Smaller reporting company    X .

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes	.
No	X .

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court.

Yes	.
No	.

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:  As of February 22, 2016, 486,351,623 shares of our common stock were issued and outstanding.

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PART I

ITEM 1. FINANCIAL STATEMENTS

 

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MEXUS GOLD US AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

			Three Months Ended December 31,				Nine Months Ended December 31,
			2015		2014		2015		2014
REVENUES
	Revenues	$	86,656	$	-	$	105,010	$	936
Total revenues			86,656		-		105,010		936
Expenses
	General and administrative		172,600		201,764		559,938		520,843
	Exploration		57,165		70,462		198,440		195,113
	Stock-based expense - consulting services		215,598		99,242		511,722		275,608
	Impairment of marketable securities		-		96,150		-		96,150
	Loss on sale of equipment		26,386		-		64,172		4,672
	Loss on settlement of debt		145,597		89,270		409,489		141,526
Total operating expenses			617,346		556,888		1,743,761		1,233,912
OTHER INCOME (EXPENSE)
	Other		(1,955)		122,802		101,769		122,802
	Interest		(155,500)		(137,075)		(291,801)		(377,119)
	Foreign exchange		(1,166)		(5,340)		10,529		(11,502)
	Loss (gain) on derivative liabilities		(408,983)		(181,979)		(216,078)		1,034,717
	Gain on settlement of warrant liability		303,857		-		303,857		-
	Impairment on equipment held for sale		(39,645)		-		(39,645)		-
			(303,392)		(201,592)		(131,369)		768,898
NET LOSS		$	(834,082)	$	(758,480)	$	(1,770,120)	$	(464,078)
BASIC AND DILUTED LOSS PER COMMON SHARE		$	(0.00)	$	(0.00)	$	(0.00)	$	(0.00)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - BASIC AND DILUTED			401,423,140		272,591,940		358,331,862		261,681,634

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

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MEXUS GOLD US AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
		Nine Months Ended December 31,
		2015		2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(1,770,120)	$	(464,078)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		212,827		248,973
Loss on sale of equipment		64,172		4,672
Loss on settlement of debt, accounts payable		409,489		141,526
Stock-based compensation - services		511,722		275,608
Interest expense		279,534		282,032
Impairment of marketable securities		-		96,150
Loss on change in fair value of derivative instrument		216,078		(1,034,717)
Gain on settlement of warrant liability		(303,857)		-
Impairment of equipment held for sale		39,645		-
Changes in operating assets and liabilities:
Prepaid and other assets		-		(9,886)
Accounts payable and accrued liabilities, including related parties		114,027		122,065
NET CASH USED IN OPERATING ACTIVITIES		(226,483)		(337,655)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment		(1,660)		-
Purchase of equipment under construction		-		(34)
Proceeds from sale of equipment		34,050		41,000
NET CASH PROVIDED BY INVESTING ACTIVITIES		32,390		40,966
CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdraft		-		(4,053)
Proceeds from issuance of notes payable		178,500		228,400
Payment of notes payable		(40,764)		-
Proceeds from issuance of convertible promissory notes		50,000		-
Payment of convertible promissory notes		(6,000)		-
Advances from related party		29,567		65,743
Payment on advances from related party		(87,470)		(46,010)
Proceeds from issuance of common stock		80,397		90,600
NET CASH PROVIDED BY FINANCING ACTIVITIES		204,230		334,680
INCREASE IN CASH		10,137		37,991
CASH, BEGINNING OF PERIOD		2,747		-
CASH, CONTINUED OPERATIONS AT THE END OF PERIOD	$	12,884	$	37,991
Supplemental disclosure of cash flow information:
Interest paid	$	12,486	$	43,749
Taxes paid	$	-	$	-

(Continued)

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Supplemental disclosure of non-cash investing and financing activities:
Shares issued for settlement of notes payable	$	481,960	$	363,948
Shares issued for settlement of warrant liability	$	202,300	$	-
Shares issued  for equipment purchase	$	31,350	$	-
Shares issued to settle accounts payable	$	124,448	$	-
Shares issued  to settle convertible note	$	611,773	$	-
Shares issued  to settle stock payable	$	1,311,892	$	-
Shares issued to settle interest payable	$	36,470	$	-
Discount for derivative liability recognized on issuance of convertible notes	$	67,604	$	-
Discount for beneficial conversion feature recognized on issuance of notes payable	$	49,959	$	-
Settlement of note and interest by related party	$	6,142	$	-
Notes payable settled on issuance of convertible promissory note	$	181,001	$	-
Stock payable settled on issuance of convertible promissory note	$	168,029	$	-
Reclassification of equipment as held for sale	$	283,216	$	-
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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MEXUS GOLD US AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

December 31, 2015

(Unaudited)

1. ORGANIZATION AND BUSINESS OF COMPANY

Mexus Gold US (the “Company”) was originally incorporated under the laws of the State of Colorado on June 22, 1990, as U.S.A. Connection, Inc.  On October 28, 2005, the Company changed its’ name to Action Fashions, Ltd. On September 18, 2009, the Company changed its’ domicile to Nevada and changed its’ name to Mexus Gold US to better reflect the Company’s new planned principle business operations. The Company has a fiscal year end of March 31.

The Company is a mining company engaged in the evaluation, acquisition, exploration and advancement of gold, silver and copper projects in the State of Sonora, Mexico and the Western United States, as well as, the salvage of precious metals from identifiable sources.

2. BASIS OF PREPARATION

Pursuant to the rules and regulations of the Securities and Exchange Commission for Form 10-Q, the condensed consolidated financial statements, footnote disclosures and other information normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The condensed consolidated financial statements contained in this report are unaudited but, in the opinion of management, reflect all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the consolidated financial statements.  All significant inter-company accounts and transactions have been eliminated in consolidation. The results of operations for any interim period are not necessarily indicative of results for the full year. The condensed consolidated balance sheet at March 31, 2015 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Management reviews these estimates and assumptions on an ongoing basis using currently available information. Actual results could differ from those estimates.

Cash and Cash Equivalents

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

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.

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.

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.

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

The Company's financial instruments consist of cash, accounts payable, accrued liabilities, advances, notes payable, and a loan payable. The carrying amount of these financial instruments approximate fair value due to either length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

Our investment in marketable securities is measured at fair value on a recurring basis using Level 1 inputs.

On March 24, 2014, the Company resigned as the operator of the Joint Venture with Minerals La Negra S. de R.L. de C.V. and Trinidad Pacifica S. de R.L. de C.V. and sold 50 shares of the minimum fixed capital stock of Mexus Enterprises S.A. de C.V. to First Pursuit Silver de Mexico S. de R.L. de C.V. for the following consideration: Assumption of $468,000 of accounts payable; Payment of $100,000 and $100,000 on July 2014 and July 2015, respectively, on behalf of the Company to Minerales de Tarchi S. de R.L. de C.V. for lease payments under an exploration agreement; 1,660,000 shares of common stock of Silver Pursuit Resources Limited; and $4,000,000 due on or before March 24, 2015. The Company could recover its 50% interest sold should the purchaser not fulfill the terms of the sale. As of December 31, 2014 the Company had not been successful in obtaining the shares that they were to receive, accordingly an impairment of $96,150 on December 31, 2014 to fully impair the value of the investment was recorded as it was uncertain if the Company will be able to obtain such shares. As of December 31, 2015 the Company has not been successful in obtaining the shares.

Our warrant derivative liability and secured convertible promissory note derivative liability is measured at fair value on a recurring basis using Level 3 inputs.

Interest rate risk is the risk that the value of a financial instrument might be adversely affected by a change in the interest rates. The notes payable, loans payable and 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.

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.

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.

Warrants and conversion features have not been included in the calculation of dilutive earnings per share as the effect would be anti-dilutive.

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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.

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.

3. GOING CONCERN

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying condensed consolidated financial statements, the Company has a limited operating history and limited funds and has an accumulated deficit of $18,729,879 at December 31, 2015. These factors, among others, may indicate that the Company may not be able to continue as a going concern.

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

4. RECENT ACCOUNTING PRONOUNCEMENTS AFFECTING THE COMPANY

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“FASB ASU 2014-09”). This standard update clarifies the principles for recognizing revenue and develops a common revenue standard for U.S. generally accepted accounting principles (GAAP) and International Financial Reporting Standards. The standard update intends to provide a more robust framework for addressing revenue issues; improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; and provide more useful information to users of consolidated financial statements through improved disclosure requirements. Upon adoption of this standard update, the Company expects that the allocation and timing of revenue recognition will be impacted. The provisions of FASB ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and are to be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. Early application is not permitted. The Company is currently evaluating the impact that this standard update will have on its consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern. The new standard requires management of public and private companies to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern and, if so, disclose that fact. Management will also be required to evaluate and disclose whether its plans alleviate that doubt. The standard requires management to evaluate, for each reporting period, whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The new standard is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted. The Company does not expect the adoption of the ASU to have a significant impact on our consolidated financial statements

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The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its consolidated financial statements.

5. EQUIPMENT

	Cost	Accumulated Depreciation	December  31, 2015 Net Book Value	March 31, 2015 Net Book Value
Mining tools and equipment	$        1,280,980	$           670,378	$             610,602	$           1,117,568
Watercraft	153,510	99,542	53,968	70,415
Vehicles	116,491	113,191	3,300	24,866
	$        1,550,981	$           883,111	$             667,870	$          1, 212,849

During the nine months ended December 31, 2015, mining tools and equipment with a carrying value of $322,861 was reclassified as held for sale and an impairment of equipment held for sale of $39,645.

Depreciation expense for the nine months ended December 31, 2015 and 2014 was $212,827 and $248,973, respectively.

6. ACCOUNTS PAYABLE – RELATED PARTIES

During the nine months ended December 31, 2015 and 2014, the Company incurred rent expense to Paul D. Thompson, the sole director and officer of the Company, of $34,200 and $34,200, respectively.  At December 31, 2015 and March 31, 2015, $19,598 and $83,798 for this obligation is outstanding, respectively.

On June 10, 2015, the Company issued 625,000 shares of Series A Preferred Stock ($0.12 per share) to Paul Thompson Sr., Chief Executive Officer and sole director of the Company, for $75,000 for settlement of accounts payable – related party.

Compensation

On July 2, 2015, the Company entered into a compensation agreement with Paul D. Thompson, the sole director and officer of the Company. Mr. Thompson is compensated $15,000 per month and has the option to take payment in Company stock valued at an average of 5 days closing price, cash payments or deferred payment in stock or cash. In additional, Mr. Thompson is due 2,000,000 shares of common stock valued at the 5 day average closing price each fiscal quarter. At December 31, 2015, $90,000 of compensation due is included in accounts payable – related party and $36,800 for 4,000,000 shares of common stock due is included in share subscriptions payable.

7. DEPOSIT

Option and Joint Venture Agreement

On July 6, 2015, Mexus Gold Mining, S.A. de C.V., a wholly owned Mexican subsidiary of the Company (“Mexus”), entered into an Option and Joint Venture Agreement (“Agreement”) with Minera Real Del Oro, S.A. De C.V., a wholly owned Mexican subsidiary of Argonaut Gold, Inc., a Canadian gold company engaged in exploration, mine development and production activities (“Argonaut”). Pursuant to the Agreement, Mexus has granted Argonaut an exclusive and irrevocable option to acquire all rights to Mexus’ mining concessions located in Caborca, Mexico, Sonora State described as the Marta Elena, Julio II-VII and Mexus III Claims (the “Mining Concessions”).

According to the Agreement, Mexus will transfer its Mining Concessions into a newly formed Mexican Company (“Newco”), and Argonaut will have the sole option to purchase up to 80% ownership of Newco in accordance with the terms of the Agreement.  The initial option period expires on December 31, 2015.

A summary of Argonaut’s required payments to Mexus for the option and required expenditures relating to the Mining Conessions are as follows:  

1. Argonaut will make a cash payment to Mexus of US$75,000 upon execution of the Agreement plus incur required expenditures relating to the Mining Concessions of not less than US$300,000 by December 31, 2015.

2. In the event that Argonaut desires to extend the option period to June 30, 2016, Argonaut shall pay a cash payment to Mexus  of  US$125,000 plus incur required expenditures relating to the Mining Concessions of not less than US$500,000.

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3. In the event that Argonaut desires to extend the option period to December 31, 2016, Argonaut shall pay a cash payment to Mexus of US$350,000 plus incur required expenditures relating to the Mining Concessions of not less than US$1,000,000.

4. In the event that Argonaut desires to extend the option period to December 31, 2017, Argonaut shall pay a cash payment to Mexus of US$400,000 plus incur required expenditures relating to the Mining Concessions of not less than US$3,300,000.

5.  Argonaut is responsible for paying all land taxes, annual concessions or permit fees and the monthly lease of US$1,000 during the term of the Agreement.  In addition, prior to July 6, 2016, Argonaut must expend a minimum of US$600,000 in expenditures relating to drilling Reverse Circulation and/or Core or a combination of both drill holes in relation to the Mining Concessions.

6.  At any time prior to December 31, 2018, Argonaut may exercise the option, provided that it has incurred minimal expenditures on the project of US$5,000,000 and made cash payments to Mexus equal to US$950,000.

Once the option is exercised, Argonaut will hold an 80% interest of Newco and Mexus will hold a 20% interest in Newco.  All mining operations will be funded by Argonaut at no cost to Mexus.  Newco will be managed by three board members, one of which will be Mexus.  Argonaut reserves the right to terminate the Agreement at any time with 30 days written notice provided that the required payments to Mexus have been made in accordance with the terms of the Agreement.

On July 7, 2015, Mexus deposited $75,000 of cash received from Argonaut in accordance with this Agreement. The proceeds from the issue of the option is accounted for using the option method. If the option is exercised, the Company will include the option proceeds in the sales value of the property.  If the option is not exercised, the Company will recognize the option proceeds as income at the time the option expires.

On December 4, 2015, Argonaut notified the Company that it will not exercise its option for the Mining Concessions and the Agreement was terminated. The $75,000 cash deposit received by Mexus on July 7, 2015 is recognized as revenue in the consolidated statement of operations.

8. NOTES PAYABLE – RELATED PARTY

Notes due to Taurus Gold, Inc. are unsecured, non-interest bearing and due on demand.  These notes were accumulated through a series of cash advances to the Company. Taurus Gold, Inc. is controlled by Paul D. Thompson, the sole director and officer of the Company.  As of December 31, 2015 and March 31, 2015, notes payable due to Taurus Gold Inc. totaled $111,488 and $174,460, respectively.

Notes due to North Pacific Gold were accumulated through a series of cash advances to the Company. North Pacific Gold is controlled by Paul Thompson, Jr. an immediate family member of Paul D. Thompson, the sole director and officer of the Company. On June 29, 2015, North Pacific Gold advanced the Company $7,500 in cash. This loan is due in 90 days, unsecured and bears interest of 6% per annum and is repayable in cash or Company common stock at market value at the option of the Company.  As of December 31, 2015 and March 31, 2015, notes payable due to North Pacific Gold totaled $23,543 and $12,332, respectively.

9. NOTES PAYABLE

On January 8, 2013, the Company entered into an unsecured promissory note agreement with William H. Brinker in the amount of $185,000.  The note is due on demand upon the occurrence of certain events and at the discretion of the note holder. A finance charge of $5,000 is due on or before March 31, 2013. The note is secured by 5,000,000 shares of common stock of Mexus Gold US pledged by the Company and certain mining equipment including a radial stacker and cone crushing plant.  On April 1, 2013, the Company repaid $50,000 in principal. On August 24, 2015, the remaining balance of this unsecured promissory note of $140,000 was settled in full on issuance of the convertible promissory note ($140,000 – March 31, 2015). See Note 9.

On February 4, 2014, the Company received a cash advance of $30,000 for a note payable with a face value of $36,000 with no specific terms of repayment secured by a mobile crusher unit. At December 31, 2015 and March 31, 2015, the balance of this note is $0 and $30,000, respectively. The note principal was paid in full by way of cash and partly by conversion of shares on July 9, 2015. At December 31, 2015 and March 31, 2015, accrued interest of $0 and $6,000 on this note have been included in accounts payable and accrued liabilities, respectively.

During the year ended March 31, 2014, the Company received cash advances of $15,000 and repaid $500 from an unrelated shareholder of the Company. The note principal and interest was paid in full through the conversion of shares on July 9, 2015.  These advances bear interest of 10%, are unsecured and are due within 60 days. At December 31, 2015 and March 31, 2015, the balance of these advances totaled $0 and $14,500, respectively.

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During the year ended March 31, 2014, the Company received cash advances of $164,502 from three unrelated shareholders of the Company. These advances are non-interest bearing, unsecured and have no specific terms of repayment. On August 19, 2014, the Company issued 1,750,020 shares of common stock valued at $70,000. The shares were issued in settlement in of the convertible promissory note ($0.04 per share) to settle $87,501 in advances. As a result, the Company recorded a gain on settlement of debt of $17,501. On February 28, 2015, the Company issued 2,272,727 shares of common stock valued at $48,636 ($0.0214 per share) to settle $25,000 in advances. As a result, the Company recorded a loss on settlement of debt of $23,636. On August 24, 2015, $37,001 of these advances were settled on issuance of the convertible promissory note (See Note 9). At December 31, 2015 and March 31, 2015, the balance of these advances totaled $15,000 and $52,001, respectively.

During the year ended March 31, 2015, the Company received various cash advances totaling $286,757 from twenty-two investors. In addition, during the nine months ended December 31, 2015, the Company received various cash advances totaling $178,500 from seven investors. These advances are unsecured and are due within 30 to 90 days of issue. Upon receipt of the cash advance, the Company paid majority of the investors the value of their investment in shares of common stock of the Company as a finance fee. The investor has the option to be repaid within 90 days 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 $0.010 per share to $0.040 per share. During the nine months ended note principal and interest of $427,163 was paid through the issuance of shares of common stock and $40,000 in cash. At December 31, 2015 and March 31, 2015, the balance of these advances totaled $166,544 and $167,056, respectively. At December 31, 2015 and March 31, 2015, debt discount of $47,387 and $14,922, respectively has been recorded on the consolidated balance sheet related to these cash advances. At December 31, 2015, $40,000 of these notes were in default. There are no default provisions stated in the notes. Of the $425,257 received, $30,000 plus interest of $5,000 is required to be repaid on December 31, 2015 and is secured by an assignment of payments due from Argonaut.

On February 16, 2010, the Company made an unsecured Promissory Note Agreement with William McCreary in the amount of $2,500 at eight percent interest and due on demand or no later than September 1, 2010. The Company has not made the scheduled payments and is in default on this note as of December 31, 2011. The default rate on the note is eight percent.  On October 2015, Paul Thompson Sr., the Chief Executive Officer and sole director of the Company, personally paid the Note in full. At December 31, 2015 and March 31, 2015, the balances on this note totalled $0 and $2,500, respectively.  At December 31, 2015 and March 31, 2015, accrued interest of $3,540 and $3,540 on this note have been included in accounts payable and accrued liabilities, respectively.

Amortization of debt discount was $89,639 and $41,235 for the nine months ended December 31, 2015 and 2014, respectively, and $43,502 and $41,235 for the three months ended December 31, 2015 and 2014, respectively.

10. PROMISSORY NOTES

On April 18, 2013, the Company issued Promissory Notes for $255,000 in cash. The Notes bear interest of 4% per annum and are due on December 31, 2013. The Notes are secured by all of Mexus Gold US shares of stock in Mexus Resources S.A. de C.V. and a personal guarantee of Paul D. Thompson. In addition, a fee of 2,550,000 shares of common stock of the Company valued at $501,075 ($0.1965 per share) was paid to the Note holders on April 18, 2013.  These financing fees were capitalized in the consolidated balance sheet as deferred finance expense and were being amortized on a straight-line basis, which approximates the effective interest rate method, as interest expense over the life of the Promissory Notes. On August 24, 2015, $100,000 of these Promissory Notes were settled on issuance of the convertible promissory note. On December 1, 2015, $60,000 of these Promissory Notes were settled on issuance of the convertible promissory note. At December 31, 2015 and March 31, 2015, outstanding Promissory Notes were $95,000 and $255,000, respectively. As of December 31, 2015, 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.  Accrued interest of $23,832 is included in accounts payable and accrued liabilities.

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On August 24, 2015, the Company issued a convertible promissory note (“Note”) for a total amount of $343,973 due on February 24, 2017 to William H. Brinker (“Holder”). The total amount of the Note is due in three equal payments plus any accrued interest at 180 days, 360 days and 540 days from the issuance date. The Holder upon annual election may elect to be paid in cash or stock (but not both) as follows: (a) in cash, with interest at 4% per annum (b) in shares of common stock of the Company, with interest at 12% per annum (“Stock Payment”). For a Stock Payment, the number of shares is determined by multiplying the outstanding principal of the Note by 12% divided by 100% of the average of the closing price of the Stock for ten trading days immediately preceding the payment date. This Note has been accounted for in accordance with ASC 480 Distinguishing Liabilities from Equity. In consideration of the Company issuing the Note, the Holder agreed to cancel all other notes, contracts or other agreements with a carrying value totaling $458,402 prior to the issuance of the Note comprising unsecured promissory note dated January 8, 2013 of $140,000, promissory note of $100,000 dated April 18, 2013, various notes payable of $41,001, interest payable of $9,372 and share subscriptions payable of $168,029. In conjunction with the Note, on September 2, 2015, the Company issued the Holder 8,732,880 shares of common stock with a fair value of $134,486 ($0.0154 per share) which as recorded as debt discount. The issuance of the Note resulted in gain on settlement of $114,429. At December 31, 2015, the Note is recorded net of discount of $104,601. The net note balance as of December 31, 2015 and March 31, 2015 was $239,373 and $0, respectively.

On December 1, 2015, the Company issued a convertible promissory note (“Note”) dated August 24, 2015 for a total amount of $41,189 due on February 24, 2017 to David Long (“Holder”). The total amount of the Note is due in three equal payments plus any accrued interest at 180 days, 360 days and 540 days from the date of the Note. The Holder upon annual election may elect to be paid in cash or stock (but not both) as follows: (a) in cash, with interest at 4% per annum (b) in shares of common stock of the Company, with interest at 12% per annum (“Stock Payment”). For a Stock Payment, the number of shares is determined by multiplying the outstanding principal of the Note by 12% divided by 100% of the average of the closing price of the Stock for ten trading days immediately preceding the payment date. This Note has been accounted for in accordance with ASC 480 Distinguishing Liabilities from Equity. In consideration of the Company issuing the Note, the Holder agreed to cancel all other notes, contracts or other agreements with a carrying value totaling $60,000 prior to the issuance of the Note comprising a promissory note of $60,000 dated April 18, 2013. In conjunction with the Note, on September 2, 2015, the Company issued the Holder 686,475 shares of common stock with a fair value of $10,297 ($0.015 per share) which as recorded as debt discount. The issuance of the Note resulted in gain on settlement of $18,811. At December 31, 2015, the Note is recorded net of discount of $8,009. The net note balance as of December 31, 2015 and March 31, 2015 was $33,180 and $0, respectively.

11. CONVERTIBLE PROMISSORY NOTES

Typenex Co-Investment, LLC

On June 12, 2013, the Company entered into a Securities Purchase Agreement with Typenex Co-Investment, LLC (“Typenex”), for the sale of an 8% Secured Convertible Promissory Note (“Notes”) in the principal amount of $557,500 consisting of an initial tranche of $307,500 comprising of $250,000 of cash at closing, Typenex legal expenses in the amount of $7,500 and a $50,000 original issue discount and an additional tranche $250,000 in cash. On June 12, 2013, the Company closed on the initial tranche and received $250,000 in cash. On August 8, 2013, the Company closed on the second tranche and received $125,000 in cash. The Company has not closed on the final tranche for $125,000 in cash. The Company has no obligation to pay Typenex any amounts on the unfunded portion of the Note. The Notes have a maturity date that is thirteen months after the issuance date. Typenex has been granted a security interest in the property of the Company. At the option of the holder, all principal, costs, charges and interest amounts outstanding under all of the Notes shall be exchanged for shares of the Company’s common stock at the Conversion Price of $0.23 per share. The Conversion Price is subject to an anti-dilution adjustment in the event the Company at any time, while the Notes are outstanding, issues equity securities including common stock or any security convertible or exchangeable for shares of common stock for no consideration or for consideration less than $0.23 a share.

In conjunction with the issuance of the Notes on June 12, 2013, the Company issued a variable number of warrants of the Company’s common stock equal to $278,750 divided by the Market Price.  Market Price is defined as the higher of (i) the closing price of the common stock of the Company on June 12, 2013, and (ii) the VWAP of the common stock for the trading day that is two days prior to the exercise date.  The Exercise Price of the warrants are $0.24 per share. The Exercise Price is subject to an anti-dilution adjustment in the event the Company at any time, while the Warrants are outstanding, issues equity securities including common stock or any security convertible or exchangeable for shares of common stock for no consideration or for consideration less than $0.24 a share.

The anti-dilution protection for the Note and Warrants excludes (a) the Company’s issuance of securities in connection with strategic license agreements and other partnering arrangements so long as any such issuances are not for the purpose of raising capital and in which holders of such securities or debt are not at any time granted registration rights, and (b) the Company’s issuance of Common Stock or the issuance or grant of options to purchase Common Stock to employees, directors, officers and consultants, authorized by the Company’s board of directors in place on June 12, 2013. After nine months after the issuance date, monthly installments are due on the Note payable at the option of the Company (i) in cash (ii) in shares of common stock of the Company discounted depending on the Company’s share price at either 30% or 35%, or (iii) in any combination of cash or shares.

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On June 12, 2013, the Company recorded a discount on the Note equal to the fair value of the warrant derivative liability and convertible promissory note derivative liability. This discount is amortized using the effective interest rate method over the term of the Note.

		Nine months Ended December 31, 2015		Year Ended March 31, 2015
Opening balance	$	102,842	$	282,861
Conversion of principal into shares of common stock		(105,623)		(268,663)
Amortization of discount on Note and accrued interest		2,781		88,644
Closing balance	$	-	$	102,842

On April 18, 2015, May 1, 2015, July 28, 2015 and September 2, 2015, the Company issued a total of 12,370,789 shares of common stock valued at $242,400 ($0.0196 per share) to Typenex Co-Investment, LLC for conversion of principal and interest of $96,336 and loss on settlement of debt of $146,064.

JMJ Financial

On January 28, 2015, the Company issued a Convertible Promissory Note (“Note”) to JMJ Financial (“Holder”), in the original principal amount of $110,000 bearing a 12% annual interest rate and maturing in two years for $100,000 of consideration paid in cash and a $10,000 original issue discount. The Company may repay the Note any time and if repaid within 90 days of date of issue, the interest rate is 0%. This Note together with any unpaid accrued interest is convertible into shares of common stock at the Holder’s option at a variable conversion price calculated as lessor of (a) $0.029 or (b) 60% of the lowest trade occurring during the 25 consecutive trading days immediately preceding the conversion date. On January 28, 2015, the Company received cash of $50,000 in the first tranche, which was net of original issue discount of $5,000. During the nine months ended December 31, 2015, the Holder converted 9,195,604 shares of common stock of the Company with a fair value of $152,689 to settle $61,600 of principal and interest. At December 31, 2015, the principal and interest outstanding for the first tranche of the Note was paid in full.

LGH Investments, Inc.

On April 6, 2015, the Company issued a Convertible Promissory Note (“Note”) to LGH Investments, Inc. (“Holder”), in the original principal amount of $110,000 bearing a 12% annual interest rate and maturing in two years for $100,000 of consideration paid in cash and a $10,000 original issue discount. This Note together with any unpaid accrued interest is convertible into shares of common stock at the Holder’s option at a variable conversion price calculated as lessor of (a) $0.019 or (b) 60% of the lowest trade occurring during the 25 consecutive trading days immediately preceding the conversion date. On April 6, 2015, the Company received cash of $25,000 in the first tranche, which was net of original issue discount of $2,500. During the nine months ended December 31, 2015, the Holder converted 9,146,736 shares of common stock of the Company with a fair value of $116,682 to settle $41,800 of principal and interest. At December 31, 2015, the principal and interest outstanding for the first tranche of the Note was paid in full.

Lucas Hoppel

On June 11, 2015, the Company issued a Convertible Promissory Note (“Note”) to Lucas Hoppel (“Holder”), in the original principal amount of $110,000 bearing a 12% annual interest rate and maturing in two years for $100,000 of consideration paid in cash and a $10,000 original issue discount. This Note together with any unpaid accrued interest is convertible into shares of common stock at the Holder’s option at a variable conversion price calculated as lessor of (a) $0.018 or (b) 60% of the lowest trade occurring during the 25 consecutive trading days immediately preceding the conversion date. On June 11, 2015, the Company received cash of $25,000 in the first tranche, which was net of original issue discount of $2,500. During the nine months ended December 31, 2015, the Company issued 20,000,000 shares of common stock of the Company with a fair value of $100,000 and paid $6,000 in cash to settle the Note in full.

12. WARRANT DERIVATIVE LIABILITY

The Warrants are subject to anti-dilution adjustments that allow for the reduction in the Exercise Price in the event the Company subsequently issues equity securities including common stock or any security convertible or exchangeable for shares of common stock for no consideration or for consideration less than $0.24 a share. The Company accounted for the warrants in accordance with ASC Topic 815. Accordingly, the Warrants are not considered to be solely indexed to the Company’s own stock and, as such, recorded as a liability.

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The Company’s warrant derivative liability has been measured at fair value at December 31, 2015 and March 31, 2015 using a binomial model. Since the Exercise Price contains an anti-dilution adjustment, the probability that the Exercise Price of the Notes would decrease as the share price decreased was incorporated into the valuation calculation. After June 12, 2013, the Company issued common stock for cash at a price of $0.01 per share and the conversion price has been adjusted accordingly.

The inputs into the binomial model are as follows:

	November 12, 2015	March 31, 2015
Market price	$0.0125	$0.0194
Conversion price	$0.0046	$0.0110
Risk free rate	1.20%	0.89%
Expected volatility	145%	121%
Dividend yield	0%	0%
Expected life	32 months	38 months

On November 13, 2015, the Company entered into a Warrant Settlement Agreement whereby the Company agreed to issue 30,000,000 shares of common stock of the Company with a fair value of $357,000 ($0.0119 per share) for full settlement and cancelation of the Warrant issued in conjunction with the 8% Secured Convertible Promissory Note on June 12, 2013 to Typenex Co-Investment, LLC. As a result a warrant liability of $660,857 was settled and a gain on settlement of debt of $303,857 is recorded in the unaudited condensed consolidated statement of operations for the nine months ended December 31, 2015.

The fair value of the warrant derivative liability is $0 and $407,585 at December 31, 2015 and March 31, 2015, respectively. The increase (decrease) in the fair value of the warrant liability of $253,272 and $(365,388) has been recorded as a (gain) loss in the unaudited condensed consolidated statements of operations for the nine months ended December 31, 2015 and 2014, respectively.

13. PROMISSORY NOTE DERIVATIVE LIABILITY

The Convertible Promissory Note with Typenex is subject to anti-dilution adjustments that allow for the reduction in the Conversion Price in the event the Company subsequently issues equity securities including common stock or any security convertible or exchangeable for shares of common stock for no consideration or for consideration less than $0.23 a share. The Company accounted for the conversion option in accordance with ASC Topic 815. Accordingly, the Conversion Option is not considered to be solely indexed to the Company’s own stock and, as such, recorded as a liability.

The Company’s convertible promissory note derivative liabilities has been measured at fair value at March 31, 2015 and 2014 using a binomial model. Since the Conversion Price contains an anti-dilution adjustment, the probability that the Conversion Price of the Notes would decrease as the share price decreased was incorporated into the valuation calculation. After June 12, 2013, the Company issued common stock for cash at a price of $0.01 per share and the conversion price has been adjusted accordingly. At December 31, 2015, the Convertible Promissory Note with Typenex was paid in full. As such, the fair value of the conversion feature at December 31, 2015 is $0 (See Note 10).

The inputs into the binomial model are as follows:

	March 31, 2015
Closing share price	$0.0194
Conversion price	$0.011
Risk free rate	0.14%
Expected volatility	180%
Dividend yield	0%
Expected life	0.5 years

Additionally, the Convertible Promissory Notes with JMJ Financial with an issue date of January 28, 2015, LGH Investments, Inc. with an issue date of April 6, 2015 and Lucas Hoppel with an issue date of June 11, 2015 was accounted for under ASC 815. The variable conversion price is not considered predominately based on a fixed monetary amount settleable with a variable number of shares due to the volatility and trading volume of the Company’s common stock. The Company’s convertible promissory note derivative liabilities has been measured at fair value at September 30, 2015, June 11, 2015, April 6, 2015 and March 31, 2015 using the Black-Scholes model.

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

	September 30, 2015	March 31, 2015
Closing share price	$0.0149	$0.0194
Conversion price	$0.0160	$0.019
Risk free rate	0.050%	0.050%
Expected volatility	143% - 151%	129%
Dividend yield	0%	0%
Expected life	1.58  – 1.95 years	1.83 years

The fair value of the conversion option derivatives is $0 and $167,678 at December 31, 2015 and March 31, 2015, respectively. The increase (decrease) in the fair value of the convertible promissory note derivative liabilities of $(235,282) and $(669,328) has been recorded as a (gain) loss in the unaudited condensed consolidated statements of operations for the nine months ended December 31, 2015 and 2014, respectively.

At December 31, 2015, the Company determined that is does not have sufficient authorized and unissued shares to settle contractual obligations for stock payable, Series A Convertible Preferred Stock and convertible notes. After allocating available shares of common stock to various contracts, there is a shortfall of 82,731,750 shares to satisfy obligations for convertible notes. As a result, the obligation to deliver shares was reclassified from equity to liabilities and a $198,088 promissory note obligation is recorded on the condensed consolidated balance sheet at December 31, 2015.

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

	December 31, 2015
Closing share price	$0.0035
Conversion price	$0.0046 to $0.0110
Risk free rate	0.050%
Expected volatility	209% to 271%
Dividend yield	0%
Expected life	0.12 to1.15 years

14. CONTINGENT LIABILITIES

An asset retirement obligation is a legal obligation associated with the disposal or retirement of a tangible long-lived asset that results from the acquisition, construction or development, or the normal operations of a long-lived asset, except for certain obligations of lessees.  While the Company, as of December 31, 2015, does not have a legal obligation associated with the disposal of certain chemicals used in its leaching process, the Company estimates it will incur costs up to $50,000 to neutralize those chemicals at the close of the leaching pond.

15. STOCKHOLDERS’ EQUITY

The stockholders’ equity of the Company comprises the following classes of capital stock as of December 31, 2015 and March 31, 2015:

Preferred Stock, $0.001 par value per share; 9,000,000 shares authorized, 0 shares issued and outstanding at December 31, 2015 and March 31, 2015, respectively.

Series A Convertible Preferred Stock (‘Series A Preferred Stock”), $0.001 par value share; 1,000,000 shares authorized: 1,000,000 shares and 375,000 shares issued and outstanding at December 31, 2015 and March 31, 2015, respectively.

Holders of Series A Preferred Stock may convert one share of Series A Preferred Stock into one share of Common Stock.  Holders of Series A Preferred Stock have the number of votes determined by multiplying (a) the number of Series A Preferred Stock held by such holder, (b) the number of issued and outstanding Series A Preferred Stock and Common Stock on a fully diluted basis, and (c) 0.000006.  

Common Stock, par value of $0.001 per share; 500,000,000 shares authorized: 453,837,799 and 308,236,718 shares issued and outstanding at December 31, 2015 and March 31, 2015, respectively. Holders of Common Stock have one vote per share of Common Stock held.

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Series A Preferred Stock

On June 10, 2015, the Company issued 625,000 shares of Series A Preferred Stock to Paul Thompson Sr., Chief Executive Officer and sole director of the Company, to satisfy obligations under share subscription agreements for $75,000 for settlement of accounts payable – related party included in share subscriptions payable.

Common Stock

On April 14, 2015 the Company issued 1,840,908 shares of common stock (valued at $28,818 and classified as common stock of $1,841 and additional paid-in capital of $26,977) to satisfy obligations under share subscription agreements for $21,318 for settlement of notes payable and $7,500 in services included in share subscriptions payable.

On April 21, 2015 the Company issued 4,745,452 shares of common stock (valued at $67,241 and classified as common stock of $4,745 and additional paid-in capital of $62,496)  to satisfy obligations under share subscription agreements for $36,441 for settlement of notes payable, $12,000 in services and $18,800 in cash receipts included in share subscriptions payable.

On May 13, 2015 the Company issued 3,176,134 shares of common stock (valued at $49,289 and classified as common stock of $3,176 and additional paid-in capital of $46,113)  to satisfy obligations under share subscription agreements for $30,289 for settlement of notes payable, $10,000 in equipment and $9,000 in cash receipts included in share subscriptions payable.

On June 10, 2015 the Company issued 5,830,863 shares of common stock (valued at $81,482 and classified as common stock of $5,831 and additional paid-in capital of $75,651)  to satisfy obligations under share subscription agreements for $49,448 for settlement of accounts payable, $9,534 in services and $22,500 in cash receipts included in share subscriptions payable.

On June 23, 2015 the Company issued 1,800,000 shares of common stock (valued at $32,000 and classified as common stock of $1,800 and additional paid-in capital of $30,200)  to satisfy obligations under share subscription agreements for $12,000 in services and $20,000 in cash receipts included in share subscriptions payable.

On July 9, 2015 the Company issued 7,796,966 shares of common stock to satisfy obligations under share subscription agreements for $63,000 for settlement of notes payable, $14,200 in services and $12,500 in cash receipts included in share subscriptions payable.

On July 29, 2015 the Company issued 2,078,333 shares of common stock to satisfy obligations under share subscription agreements for $8,490 in services and $15,000 in cash receipts included in share subscriptions payable.

On August 6, 2015 the Company issued 2,125,000 shares of common stock to satisfy obligations under share subscription agreements for $25,500 in services included in share subscriptions payable.

On August 14, 2015 the Company issued 1,500,000 shares of common stock to satisfy obligations under share subscription agreements for $38,150 in services included in share subscriptions payable.

On September 2, 2015 the Company issued 10,207,799 shares of common stock to satisfy obligations under share subscription agreements for $207,988 for settlement of notes payable, $29,000 in services and $12,776 in cash receipts included in share subscriptions payable.

On September 18, 2015 the Company issued 1,109,090 shares of common stock to satisfy obligations under share subscription agreements for $10,000 for settlement of notes payable and $2,000 in cash receipts included in share subscriptions payable.

On September 21, 2015 the Company issued 6,500,000 shares of common stock to satisfy obligations under share subscription agreements for $48,750 for settlement of notes payable, $48,500 in services and $10,000 in cash receipts included in share subscriptions payable.

On September 30, 2015, the Company issued 750,000 shares of common stock to satisfy obligations under share subscription agreement for $45,000 in services.

On April 18, 2015, May 1, 2015, July 28, 2015 and September 2, 2015, the Company issued a total of 12,370,789 shares of common stock valued at $242,400 ($0.0196 per share) to Typenex Co-Investment, LLC for conversion of principal and interest of $96,336 and loss on settlement of debt of $146,064.

On December 7, 2015 the Company issued 7,005,194 shares of common stock to satisfy obligations under share subscription agreements for $15,500 in services and $70,622 in cash receipts included in share subscriptions payable.

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On December 18, 2015 the Company issued 13,896,345 shares of common stock to satisfy obligations under share subscription agreements for $13,318 for settlement of notes payable, $18,200 in services, $3,000 in equipment and $174,461 in cash receipts included in share subscriptions payable.

On December 23, 2015 the Company issued 8,669,993 shares of common stock to satisfy obligations under share subscription agreements for $25,197 for settlement of notes payable, $55,900 in services and $11,000 in cash receipts included in share subscriptions payable.

On July 28, 2015, August 10, 2015, August 24, 2015, September 1, 2015, September 15, 2015 and September 24, 2015, October 2, 2015 and October 20, 2015, the Company issued a total of 9,195,604 shares of common stock valued at $152,689 ($0.0166 per share) to JMJ Financial for conversion of principal and interest of $61,600 and loss on settlement of debt of $91,089.

On October 15, 2015, October 26, 2015, November 4, 2015, November 11, 2015 and November 13, 2015, the Company issued a total of 9,146,739 shares of common stock valued at $116,682 ($0.0128 per share) to LGH Investments, Inc. for conversion of principal and interest of $41,800 and loss on settlement of debt of $74,882.

On November 13, 2015, the Company entered into a Warrant Settlement Agreement whereby the Company agreed to issue 30,000,000 shares of common stock of the Company with a fair value of $357,000 ($0.0119 per share) for full settlement and cancelation of the Warrant issued in conjunction with the 8% Secured Convertible Promissory Note on June 12, 2013 to Typenex Co-Investment, LLC. On November 13, 2015, the Company issued 17,000,000 shares of common stock in accordance with the Warrant Settlement Agreement. At December 31, 2015, the obligation to issue the remaining 13,000,000 shares are included in share subscription payable.

On December 16, 2015, the Company issued a total of 20,000,000 shares of common stock valued at $100,000 ($0.005 per share) and paid $6,000 in cash to Lucas Hoppel for conversion of principal and interest of $31,980 and loss on settlement of debt of $74,020.

Series A Preferred Stock

During the nine months ended December 31, 2015, the Company issued subscriptions payable for 625,000 shares of Series A Preferred Stock valued at $75,000 and classified as Series A Preferred Stock of $625 and additional paid-in capital of $74,375 ($0.12 per share) to Paul Thompson Sr., Chief Executive Officer and sole director of the Company, for $75,000 for settlement of accounts payable – related party.  

Common Stock Payable

During the nine months ended December 31, 2015, the Company issued subscriptions payable for 10,441,844 shares of common stock ($0.0098 per share) for $102,898 in cash.  

During the nine months ended December 31, 2015, the Company issued subscriptions payable for 36,523,591 shares of common stock for services valued at $511,722 ($0.0149 per share).

During the nine months ended December 31, 2015, the Company issued subscriptions payable for 1,103,240 shares of common stock for purchase of equipment valued at $31,350 ($0.0284 per share).

During the nine months ended December 31, 2015, the Company issued subscriptions payable for 3,525,000 shares of common stock for settlement of accounts payable valued at $124,448 ($0.0353 per share).

During the nine months ended December 31, 2015, the Company issued subscriptions payable for 27,196,037 shares of common stock for settlement of notes payable valued at $459,960 ($0.0169 per share).

During the nine months ended December 31, 2015, the Company issued subscriptions payable for 1,215,674 shares of common stock for settlement of interest payable valued at $36,470 ($0.0300 per share).

During the nine months ended December 31, 2015, the Company issued subscriptions payable for 13,000,000 shares of common stock for settlement of warrant liability valued at $154,700 ($0.0119 per share).

On August 24, 2015, $168,029 of share subscriptions payable for 2,517,040 shares of common stock due William H. Brinker were settled on issuance of the convertible promissory note.

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16. SUBSEQUENT EVENTS

Common Stock

On January 15, 2016 the Company issued 9,256,711 shares of common stock to satisfy obligations under share subscription agreements for $30,000 in services and $51,750 for interest included in share subscriptions payable.

On January 18, 2016 the Company issued 13,000,000 shares of common stock to satisfy obligations under share subscription agreements for $154,700 to settle a warrant liability included in share subscriptions payable.

On February 9, 2016 the Company issued 9,112,985 shares of common stock to satisfy obligations under share subscription agreements for $23,430 in services, for settlement of notes payable of $28,818, for interest of $2,000 and $9,000 in cash receipts included in share subscriptions payable.

Common Stock Payable

From January 1, 2016 to February 10, 2016, the Company issued subscriptions payable for 4,285,714 shares of common stock for services valued at $15,000 ($0.0036 per share).

From January 1, 2016 to February 10, 2016, the Company issued subscriptions payable for 1,363,636 shares of common stock for settlement of notes payable valued at $15,000 ($0.0110 per share).

From January 1, 2016 to February 10, 2016, the Company issued subscriptions payable for 400,000 shares of common stock for interest valued at $2,000 ($0.005 per share).

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Concerning Forward-Looking Statements

The following discussion and analysis should be read in conjunction with our unaudited interim condensed 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 our Form 10-K filed with the SEC on July 14, 2015.

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 and the Western United States.  Mexus Gold US is dedicated to protect the environment, provide employment and education opportunities for the communities that it operates in.

Our President and CEO, Paul Thompson, brings over 40 years’ experience in mining and mining development to Mexus Gold US. Mr. Thompson is currently recruiting additional management personnel for its Mexico, Nevada, and submarine Cable Recovery operations to assist in growing the company.

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 state of Nevada and Mexico, 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 Nevada and the state of Sonora, Mexico will provide us with projects to recover gold, silver, copper and other precious metals. The cable salvage opportunity involves principally the recovery of copper and lead from abandoned cable previously utilized for communications purposes.  Each of these opportunities are discussed further herein.

In addition, our management will look for opportunities to improve the value of the gold projects that we own or may acquire knowledge of or may acquire control through exploration drilling, introduction of technological innovations or acquisition with the goal of developing those properties into operating mines. We expect that emphasis on gold project acquisition and development will continue in the future.

Business Strategy

Our business plan was developed with the overriding goal of maximizing shareholder value through the exploration and development of our mineral properties, utilizing the extensive mining-related background and capabilities of our management consultants and advisors.  To achieve this goal, our business plan focuses on the following prospective areas:

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Mexus Gold Mining S.A. de C.V.

Effective March 31, 2011, we acquired Mexus Gold S.A. de C.V. We began funding the operations in Mexico and have instituted a small placer processing operation to evaluate various areas of interest within the project lands.

Mexus-Trinidad Joint Venture

In March, 2014, we sold our 50% interest in the Joint Venture to Atzek Mineral S.A. de C.V.

Caborca Project

Our Caborca Project is comprised of earlier-stage exploration on lands purchased in State of Sonora, Mexico.

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 plans to conduct exploration activities in an attempt to identify larger cable. Should those activities identify any cable suitable for salvage operations, the Company would determine the proper title and ownership of the cable and once such title is determined act accordingly as to whether or not a recovery operation is warranted.

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.

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.

Other Exploration Properties

Our Other Exploration Properties consist of the following:

Mining Properties Located in Mexico

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

Caborca Project

On January 5, 2011, Mexus Gold Mining S.A. de C.V. entered into a Purchase Agreement to purchase the Caborca Project. The Caborca Project 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 112^o 25' W, 31^o 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 Caborca Project 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.

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There are multiple exploration targets on the Caborca Project.  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 detailed drilling program will be scheduled to test the Julio vein system.

[Please see Exhibit 99.1]

FIGURE 1 – PRELIMINARY REPORT AND FIRST STAGE MAPPING

Ocho Hermanos – Guadalupe de Ures Project

The Guadalupe de Ures Project is accessed from Hermosillo by driving via good paved road for 60 kilometers to the town of Guadalupe de Ures and then for 15 kilometers over dirt roads to the prospects.  A base camp has been established near the town of Guadalupe de Ures using mainly trailers for accommodation, workshops and kitchen facilities.

FIGURE 2 - LOCATION MAP

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 term of the agreement is 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 can be purchased for USD 50,000.  The agreement has expired and the Company is currently in negotiations to extend the agreement.

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Minerales Ruta Dorado de RL de CV is a duly constituted Mexican Company and as such can hold mining claims in Mexico.

FIGURE 3 - OCHO HERMANOS

PROJECT AREA CLAIM MAP

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

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

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

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

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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 member of the faculty at the University of Sonora in Hermosillo.  The faculty member teaches metallurgy and assay practices at the University. After a suitable recovery method has been identified, the process will need to be confirmed by a certified metallurgical testing laboratory.

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

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

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

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

Application.

FIGURE 4- MICROLOCALIZACION PROYECTO “URES MINING DISTRICT”

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FIGURE 5 – LOCALIZACION DE AREAS DE EXTRACCION

FIGURE 6 - PLANTA DE BENEFICIO

AREA DE EXTRACCION

370 Area

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.

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El Scorpion Project Area

This area has several shear zones and veins which show copper and gold mineralization. Recent assays of an 84’ drill hole shows 1.750% per ton to .750% per ton of copper and 3.971 grams per ton to 0.072 grams per ton of gold. Another assay of rock sample from the area shows greater than 4.690% per ton copper. This land form distribution appears to be synonymous to the ideal porphyry deposit at Baja La Alumbrera, Argentina.

Los Laureles

Los Laureles is a vein type deposit mainly gold with some silver and copper. Recent assays from grab samples show gold values of 67.730 grams per ton gold, 38.4 grams per ton silver, 2,800 grams per ton copper.

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

Mining Properties located in the state of Nevada

Lida Mining District 

The Lida Project is located in south central Nevada, approximately 20 miles south-west of Goldfield. The project area is accessed by proceeding 15 miles south of Goldfield along US Highway 95 to Lida Junction. Then by proceeding west along Nevada State Route 266 for 19 miles to Lida, Nevada, the project site. This mining property was fully impaired in the accounting records of the Company on March 31, 2013.

Cable Salvage Operation

Our examination of the information provided to us and our accumulation of data has identified the most prospective area to begin our salvage operations is the near coast areas of Alaska. The initial recovery operations will be comprised of acquiring two and one-half inch diameter cable with a weight of eight and one-half pounds. We are satisfied that we will be able to comply with all permits and notifications to the appropriate governmental authorities regarding the salvage operations.

We have 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.  Following our evaluation, we plan to conduct additional exploration activities in an attempt to identify larger cable. Should those activities identify any cable suitable for salvage operations, the Company would determine the proper title and ownership of the cable and once such title is determined, act accordingly as to whether or not a recovery operation is warranted.

Employees

We have no employees at this time in the United States. In Mexico we currently have seven employees carrying out administrative and security duties. 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 Nichols Property Exploration and Drilling Program, Cable Salvage Operations and operations of the Mexican mining properties, our total workforce will be approximately 30 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.

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Property Interests, Mining Claims and Risk

Property Interests and Mining Claims

Our exploration activities are conducted in the state of Nevada and Mexico. Mineral interests may be owned in this state by (a) the United States, (b) the state itself, or (c) private parties. Where prospective mineral properties are owned by private parties, or by the state, some type of 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. Where prospective mineral properties are held by the United States, mineral rights may be acquired through the location of unpatented mineral claims upon unappropriated federal land. If the statutory requirements for the location of a mining claim are met, the locator obtains a valid possessory right to develop and produce minerals from the claim. The right can be freely transferred and, provided that the locator is able to prove the discovery of locatable minerals on the claims, is protected against appropriation by the government without just compensation. The claim locator also acquires the right to obtain a patent or fee title to his claim from the federal government upon compliance with certain additional procedures.

Mining claims are subject to the same risk of defective title that is common to all real property interests. Additionally, mining claims are self-initiated and self-maintained and therefore, possess some unique vulnerabilities not associated with other types of property interests. It is impossible to ascertain the validity of unpatented mining claims solely from an examination of the public real estate records and, therefore, it can be difficult or impossible to confirm that all of the requisite steps have been followed for location and maintenance of a claim. If the validity of a patented mining claim is challenged by the BLM or the U.S. Forest Service on the grounds that mineralization has not been demonstrated, the claimant has the burden of proving the present economic feasibility of mining minerals located thereon. Such a challenge might be raised when a patent application is submitted or when the government seeks to include the land in an area to be dedicated to another use.

In addition, our operations in Mexico are subject to the rules and regulations of Mexico which is generally governed by the Ministry of Economy.  While the Mexican laws have generally become more favorable to US related mining interests, as in the US, it will be difficult or impossible to confirm that all of the requisite steps have been followed for location and maintenance of a claim and we have hired Mexican legal counsel to assist us with our Mexican operations.

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 December 31, 2015, does not have a legal obligation associated with the disposal of certain chemicals used in its leaching process, the Company estimates it will incur costs up to $50,000 to neutralize those chemicals at the close of the leaching pond.

Risk

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

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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 are subject to various national, state, provincial and local laws and regulations in the United States, 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 in the Nevada and United States and in any other 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.

Our operations in Mexico are subject to the rules and regulations of Mexico which is generally governed by the Ministry of Economy.  While the Mexican laws have generally become more favorable to US related mining interests, as in the US, it will be difficult or impossible to confirm that all of the requisite steps have been followed for location and maintenance of a claim and we have hired Mexican legal counsel to assist us with our Mexican operations.

Environmental Regulation

 

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 the actions and operations of Mexus Gold US will be conducted in material compliance with applicable laws and regulations.  Changes to current state or federal laws and regulations in Nevada, where we operate currently, or in jurisdictions where we may operate in the future, could require additional capital expenditures and increased operating and/or reclamation costs. Although we are unable to predict what additional legislation, if any, might be proposed or enacted, additional regulatory requirements could impact the economics of our projects.

Research and Development

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

Costs and effects of compliance with environmental laws

Our gold projects are subject to various federal and state laws and regulations governing protection of the environment. These laws are continually changing and, in general, are becoming more restrictive. It is our policy to conduct business in a way that safeguards public health and the environment. We believe that our operations are and will be conducted in material compliance with applicable laws and regulations. The economics of our current projects consider the costs and expenses associated with our compliance policy.

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Changes to current state or federal laws and regulations in Nevada, where we operate currently, or in jurisdictions where we may operate in the future, could require additional capital expenditures and increased operating and/or reclamation costs. Although we are unable to predict what additional legislation, if any, might be proposed or enacted, additional regulatory requirements could impact the economics of our projects.

Results of Operations

The following management’s discussion and analysis of operating results and financial condition of Mexus Gold US is for the three month periods ended December 31, 2015 and 2014. All amounts herein are in U.S. dollars.

Three Months Ended December 31, 2015 compared with the Three Months Ended December 31, 2014

We had a net loss during the three months ended December 31, 2015 of $834,082 compared to a net loss of $758,480 during the same period in 2014.  The decrease in net loss is primarily attributable to (i) an increase in gain on settlement of warrant liability of $303,857 which was offset by (i) an increase in stock-based expenses – consulting services of $116,356 and (ii) an increase of loss on settlement of debt of $56,327. The gain (loss) on derivative liabilities is primarily due to a decrease in the share price of common stock, increase in liabilities due to insufficient authorized capital of the Company and settlement of derivative liabilities.

Revenue

For the three months ended December 31, 2015, we had revenues of $86,656 compared to $0 for the three months ended December 31, 2014.  The increase is primarily due to $75,000 of cash deposit received for an option agreement which expired.

Operating Expenses

Total operating expenses increased to $617,346 during three months ended December 31, 2015, compared to $556,888 for the three months ended December 31, 2014.  The increase in operating expenses was primarily due to increases in stock-based expense – consulting services and loss on settlement of debt.  

Other Income (Expense)

We reported $303,392 of other expense during the three months ended December 31, 2015 compared to $201,592 other expense during the same period in 2014.

Changes in other expense is mainly attributable to the fair value of the secured convertible promissory note derivative, warrant derivative liabilities and gain on settlement of warrant liability at December 31, 2015. The increase in the fair value of the derivative liabilities of $408,983 is recorded as a  loss in the unaudited condensed consolidated statement of operations for the three months ended December 31, 2015.

Nine months Ended December 31, 2015 compared with the Nine months Ended December 31, 2014

We had a net loss during the nine months ended December 31, 2015 of $1,770,120 compared to a net loss of $464,078 during the same period in 2014.  The increase in net loss is primarily attributable to (i) an increase in stock-based expenses – consulting services of $236,114 (ii) an increase of loss on settlement of debt of $267,963 (iii) a decrease in gain on derivative liabilities of $1,250,795. The gain on derivative liabilities is primarily due to a decrease in the share price of common stock of the Company, the decreased expected life of conversion options and warrants, a decrease in the conversion and exercise price of convertible bonds and warrants due to an anti-dilution clauses and settlement of derivative liabilities and gain on settlement of warrants.

Revenue

For the nine months ended December 31, 2015, we had revenues of $105,010 compared to $936 for the nine months ended December 31, 2014.  The increase is primarily due to $75,000 of cash deposit received for an option agreement which expired.

Operating Expenses

Total operating expenses increased to $1,743,761 during nine months ended December 31, 2015, compared to $1,233,912 for the nine months ended December 31, 2014.  The increase in operating expenses was primarily due to increases in stock-based expense – consulting services and loss on settlement of debt.

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Other Income (Expense)

We reported $131,369 of other expense during the nine months ended December 31, 2015 compared to $768,898 other income during the same period in 2014.

Changes in other income (expense) is mainly attributable to the fair value of the secured convertible promissory note derivative and warrant derivative liabilities and gain on settlement of warrant liability. The increase in the fair value of the derivative liabilities of $216,078 is recorded as a loss in the unaudited condensed consolidated statement of operations for the nine months ended December 31, 2015.

Liquidity and Capital Resources

At December 31, 2015, we had cash of $12,884 compared to cash of $2,747 at March 31, 2015.  

Our equipment decreased to $667,870 at December 31, 2015, compared to $1,212,849 at March 31, 2015. The decrease in equipment is largely due to depreciation expense of $212,827 during the nine months ended December 31, 2015 and $227,295 equipment reclassified as held for sale and impairment of equipment held for sale of $39,645.

Our mineral properties had no change during the nine month period.

Equipment under construction decreased to $17,018 at December 31, 2015, compared to $72,939 at March 31, 2015. The decrease in equipment under construction is due to $55,921 equipment under construction reclassified as held for sale.

Total assets decreased to $1,486,935 at December 31, 2015, compared to $1,794,482 at March 31, 2015.  The majority of the decrease in assets relates to depreciation of equipment.

Our total liabilities decreased to $1,079,937 at December 31, 2015, compared to $1,786,164 as of March 31, 2015.  The decrease in our total liabilities can be primarily attributed to the settlement of convertible promissory note and derivative liabilities with shares of common stock of the Company.

Our working capital deficit at December 31, 2015 and March 31, 2015 is $1,067,053 and $1,783,417, respectively.

Our net cash used in operating activities for the nine months ended December 31, 2015 and 2014 is $226,483 and $337,655, respectively. Our net loss for the nine months ended of $1,770,120 was the main contributing factor for our negative cash, offset mainly by depreciation and amortization of $212,827, loss on settlement of debt, accounts payable of $409,489, stock-based compensation – services of $511,722 and interest expense of $279,534.

Our net cash provided by investing activities for the nine months ended December 31, 2015 and 2014 is $32,390 and $40,966, respectively, mainly due to the sale of equipment.

Our net cash provided by financing activities for the nine months ended December 31, 2015 and 2014 is $204,230 and $334,680, respectively, mainly due to issuance of notes payable 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 0.250 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 begun 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.

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Foreign Currency Transactions

The majority of our operations are located in United States and most of our transactions are in the local currency. We plan to continue exploration activities in Mexico and therefore we will be exposed to exchange rate fluctuations. We do not trade in hedging instruments and a significant change in the foreign exchange rate between the United States Dollar and Mexican Peso could have a material adverse effect on our business, financial condition and results of operations.

Off-balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

ITEM 4(T).

CONTROLS AND PROCEDURES

We conducted an evaluation, under the supervision and with the participation of management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this quarterly report.

Based on this evaluation, our chief executive officer and chief financial officer concluded that as of the evaluation date our disclosure controls and procedures were not effective. Our procedures were designed to ensure that the information relating to our company required to be disclosed in our SEC reports is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow for timely decisions regarding required disclosure.  Management is currently evaluating the current disclosure controls and procedures in place to see where improvements can be made.

ITEM 5.

OTHER INFORMATION

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Under the supervision and with the participation of management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal controls over financial reporting based on the framework in “Internal Control Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon this evaluation, management has concluded that our internal control over financial reporting was not effective as of December 31, 2015, to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Steps that the Company believes it must undertake is to retain a consulting firm to, among other things, design and implement adequate systems of accounting and financial statement disclosure controls during the current fiscal year to comply with the requirements of the SEC. We believe that the ultimate success of our plan to improve our disclosure controls and procedures will require a combination of additional financial resources, outside consulting services, legal advice, additional personnel, further reallocation of responsibility among various persons, and substantial additional training of those of our officers, personnel and others, including certain of our directors such as our committee chairs, who are charged with implementing and/or carrying out our plan. 

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Our management is responsible for establishing and maintaining adequate internal control over financial reporting as required in Rule 13a-15(b).  We are conducting an evaluation to design and implement adequate systems of accounting and financial statement disclosure controls.  We expect to complete this review during 2015 to comply with the requirement of the SEC.  We believe that the ultimate success of our plan to improve our internal control over financial reporting will require a combination of additional financial resources, outside consulting services, legal advice, additional personnel, further reallocation of responsibility among various persons, and substantial additional training of those of our officers, personnel and others, including certain of our directors such as our Chairman of the Board and Chief Financial Officer,  who are charged with implementing and/or carrying out our plan.  It should also be noted that the design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

  

Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls or our internal control over financial reporting, or any system we design or implement in the future, will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Changes in Internal Control

There have not been any changes in our internal control over financial reporting during the three month period ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

We are not subject to any legal proceedings responsive to this Item Number.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On December 7, 2015 the Company issued 7,005,194 shares of common stock to satisfy obligations under share subscription agreements for $15,500 in services and $70,622 in cash receipts included in share subscriptions payable.

On December 18, 2015 the Company issued 13,896,345 shares of common stock to satisfy obligations under share subscription agreements for $13,318 for settlement of notes payable, $18,200 in services, $3,000 in equipment and $174,461 in cash receipts included in share subscriptions payable.

On December 23, 2015 the Company issued 8,669,993 shares of common stock to satisfy obligations under share subscription agreements for $25,197 for settlement of notes payable, $55,900 in services and $11,000 in cash receipts included in share subscriptions payable.

On July 28, 2015, August 10, 2015, August 24, 2015, September 1, 2015, September 15, 2015 and September 24, 2015, October 2, 2015 and October 20, 2015, the Company issued a total of 9,195,604 shares of common stock valued at $152,689 ($0.0166 per share) to JMJ Financial for conversion of principal and interest of $61,600 and loss on settlement of debt of $91,089.

On October 15, 2015, October 26, 2015, November 4, 2015, November 11, 2015 and November 13, 2015, the Company issued a total of 9,146,739 shares of common stock valued at $116,682 ($0.0128 per share) to LGH Investments, Inc. for conversion of principal and interest of $41,800 and loss on settlement of debt of $74,882.

On November 13, 2015, the Company entered into a Warrant Settlement Agreement whereby the Company agreed to issue 30,000,000 shares of common stock of the Company with a fair value of $357,000 ($0.0119 per share) for full settlement and cancelation of the Warrant issued in conjunction with the 8% Secured Convertible Promissory Note on June 12, 2013 to Typenex Co-Investment, LLC.  On November 13, 2015, the Company issued 17,000,000 shares of common stock in accordance with the Warrant Settlement Agreement. At December 31, 2015, the obligation to issue the remaining 13,000,000 shares are included in share subscription payable.

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On December 16, 2015, the Company issued a total of 20,000,000 shares of common stock valued at $100,000 ($0.005 per share) and paid $6,000 in cash to Lucas Hoppel for conversion of principal and interest of $31,980 and loss on settlement of debt of $74,020.

The issuance of securities described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act of 1933 and Regulation D as transactions by an issuer not involving any public offering.  The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the share certificates and other instruments issued in such transactions. The sales of these securities were made without general solicitation or advertising.

The Company intends to use the proceeds from sale of the securities for the purchase of equipment for mining operations, mining machinery, supplies and payroll for operations, professional fees, and working capital.

There were no underwritten offerings employed in connection with any of the transactions set forth above.

ITEM 3.

DEFAULT UPON SENIOR SECURITIES

During the year ended March 31, 2015, the Company received various cash advances totaling $286,757 from twenty-two investors. In addition, during the nine months ended December 31, 2015, the Company received various cash advances totaling $178,500 from seven investors. These advances are unsecured and are due within 30 to 90 days of issue. Upon receipt of the cash advance, the Company paid each 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 within 90 days 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 $0.010 per share to $0.040 per share. During the nine months ended note principal of $427,163 was paid through the issuance of shares of common stock. At December 31, 2015 and March 31, 2015, the balance of these advances totaled $166,544 and $167,056, respectively. At December 31, 2015 and March 31, 2015, debt discount of $47,387 and $14,922, respectively has been recorded on the consolidated balance sheet related to these cash advances. At December 31, 2015, $40,000 of these notes were in default. There are no default provisions stated in the notes. Of the $425,257 received, $30,000 plus interest of $5,000 is required to be repaid on December 31, 2015 and is secured by an assignment of payments due from Argonaut.

On April 18, 2013, the Company issued Promissory Notes for $255,000 in cash. The Notes bear interest of 4% per annum and are due on December 31, 2013. The Notes are secured by all of Mexus Gold US shares of stock in Mexus Resources S.A. de C.V. and a personal guarantee of Paul D. Thompson. In addition, a fee of 2,550,000 shares of common stock of the Company valued at $501,075 ($0.1965 per share) was paid to the Note holders on April 18, 2013.  These financing fees were capitalized in the consolidated balance sheet as deferred finance expense and were being amortized on a straight-line basis, which approximates the effective interest rate method, as interest expense over the life of the Promissory Notes. On August 24, 2015, $100,000 of these Promissory Notes were settled on issuance of the convertible promissory note. On December 1, 2015, $60,000 of these Promissory Notes were settled on issuance of the convertible promissory note. At December 31, 2015 and March 31, 2015, outstanding Promissory Notes were $95,000 and $255,000, respectively. As of December 31, 2015, 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.  Accrued interest of $23,832 is included in accounts payable and accrued liabilities.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.

OTHER INFORMATION

None.

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ITEM 6.

EXHIBITS

Statements
Condensed Consolidated Balance Sheets at December 31, 2015 (unaudited) and March 31, 2015
Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2015 and 2014 (unaudited)
Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2015 and 2014 (unaudited)
Notes to Condensed Consolidated Financial Statements (unaudited)
Schedules
All schedules are omitted because they are not applicable or the required information is shown in the Financial Statements or notes thereto.

	Exhibit	Form	Filing	Filed with
Exhibits	#	Type	Date	This Report
Articles of Incorporation filed with the Secretary of State of Colorado on June 22, 1990	3.1	10-SB	1/24/2007
Articles of Amendment to the Articles of Incorporation filed with the Secretary of State of Colorado on October 17, 2006	3.2	10-SB	1/24/2007
Articles of Amendment to Articles of Incorporation filed with the Secretary of State of the State of Colorado on January 25, 2007	3.3	10KSB	6/29/2007
Amended and Restated Bylaws dated December 30, 2005	3.3	10-SB	1/24/2007
Code of Ethics	14.1	10-KSB	6/29/2007
Certification of Paul D. Thompson, pursuant to Rule 13a-14(a)	31.1			X
Certification of Paul D. Thompson pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	32.1			X
Santa Lena Report	99.1			X
XBRL Instance Document	101.INS
XBRL Taxonomy Extension Schema Document	101.SCH
XBRL Taxonomy Extension Calculation Linkbase Document	101.CAL
XBRL Taxonomy Extension Definition Linkbase Document	101.DEF
XBRL Taxonomy Extension Label Linkbase Document	101.LAB
XBRL Taxonomy Extension Presentation Linkbase Document	101.PRE

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Signatures

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

February 22, 2016

/s/ Paul D. Thompson

Paul D. Thompson

Chief Executive Officer

Chief Financial Officer

Principal Accounting Officer

Director

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