Mexus Gold US - Quarter Report: 2018 September (Form 10-Q)

U. S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018

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

For the transition period from ___________ to _____________

MEXUS GOLD US

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

	(916) 776 2166
	(Issuer’s Telephone Number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

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

Large accelerated filer	[ ]	Accelerated filer	[ ]

Non-accelerated filer	[ ] (Do not check if smaller reporting company)	Smaller reporting company	[X]

Emerging growth company	[ ]

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 November 14, 2018 there were 891,350,648 shares of our common stock were issued and outstanding.

PART I

ITEM 1. FINANCIAL STATEMENTS

MEXUS GOLD US

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018

(Unaudited)

MEXUS GOLD US AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

			September 30, 2018		March 31, 2018
ASSETS			(Unaudited)
CURRENT ASSETS
	Cash	$	1,103	$	125,942
TOTAL CURRENT ASSETS			1,103		125,942
FIXED ASSETS
	Property and equipment, net of accumulated depreciation		402,662		470,320
TOTAL FIXED ASSETS			402,662		470,320
OTHER ASSETS
	Equipment under construction		17,018		73,456
	Deposit on mineral property		-		324,000
	Property costs		829,947		505,947
TOTAL OTHER ASSETS			846,965		903,403
TOTAL ASSETS		$	1,250,730	$	1,499,665

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
	Accounts payable and accrued liabilities	$	129,483	$	149,553
	Accounts payable - related party		371,233		374,669
	Notes payable - related party		10,386		10,851
	Notes payable (net unamortized debt discount of $42,283 and $0, respectively)		367,316		172,897
	Note payable - related party (net unamortized debt discount of $15,029 and $0, respectively)		6,081		-
	Promissory notes		65,000		65,000
	Convertible promissory note (net of debt discount of $66,507 and $36,818, respectively)		18,480		354,664
	Convertible promissory note derivative liability		45,563		68,934
TOTAL CURRENT LIABILITIES			1,013,542		1,196,568
TOTAL LIABILITIES			1,013,542		1,196,568

CONTINGENT LIABILITIES (Note 13)

STOCKHOLDERS' EQUITY
	Capital stock
	Authorized
	9,000,000 shares of Preferred Stock, $0.001 par value per share, nil issued and outstanding		-		-
	1,000,000 shares of Series A Convertible Preferred Stock, $0.001 par value per share		-		-
	2,000,000,000 shares of Common Stock, $0.001 par value per share		-		-
	Issued and outstanding
	1,000,000 shares of Series A Convertible Preferred Stock (1,000,000 - March 31, 2018)		1,000		1,000
	882,579,495 shares of Common Stock (775,922,947 - March 31, 2018)		882,575		775,919
	Additional paid-in capital		26,523,188		25,743,607
	Share subscription payable		645,185		636,565
	Accumulated deficit		(27,814,760)		(26,853,994)
TOTAL STOCKHOLDERS' EQUITY			237,188		303,097

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	1,250,730	$	1,499,665

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

MEXUS GOLD US AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

		Three months ended September 30,				Six months ended September 30,
		2018		2017		2018		2017
REVENUES
Revenues	$	-	$	-	$	-	$	-
Total revenues		-		-		-		-

Expenses
Exploration		107,368		205,026		329,655		287,383
General and administrative		141,423		231,761		334,149		405,850
Stock-based expense - consulting services		164,531		243,775		233,956		748,735
Loss on settlement of accounts payable		-		2,000		-		2,000
Impairment of mineral property		-		75,000		-		75,000
Total operating expenses		413,322		757,562		897,760		1,518,968

OTHER INCOME (EXPENSE)
Foreign exchange		(1,272)		(2,470)		3,875		(4,497)
Interest		(169,435)		(51,330)		(336,118)		(51,330)
Gain on sale of equipment		10,000		-		10,000		-
(Loss) gain on settlement of debt		(31,297)		-		160,866		-
Gain on convertible promissory note derivative liability		29,437		-		98,371		-
		(162,567)		(53,800)		(63,006)		(55,827)

NET LOSS BEFORE PROVISION FOR TAX		(575,889)		(811,362)		(960,766)		(1,574,795)

Income tax		-		-		-		-

NET LOSS	$	(575,889)	$	(811,362)	$	(960,766)	$	(1,574,795)

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
		840,220,949		684,197,212		821,310,687		676,389,349

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

MEXUS GOLD US AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

		Six months ended September 30,
		2018		2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(960,766)	$	(1,574,795)
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization		132,177		119,968
(Gain) loss on settlement of debt and accounts payable		(160,866)		2,000
Stock-based compensation - services		233,956		748,735
Non cash Interest expense		323,696		45,109
Gain on sale of equipment		(10,000)		-
Gain on change in fair value of derivative instrument		(98,371)		-
Impairment of mineral property		-		75,000
Changes in operating assets and liabilities:
Decrease (Increase) of other assets		-		(1,091)
Accounts payable and accrued liabilities, including related parties		46,104		160,380
NET CASH USED IN OPERATING ACTIVITIES		(494,070)		(424,694)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment		(8,081)		(84,524)
Proceeds from the sale of equipment		10,000		-
NET CASH USED IN INVESTING ACTIVITIES		1,919		(84,524)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes payable		222,000		80,000
Proceeds from issuance of notes payable - related party		21,110		-
Payment of notes payable		(13,000)		-
Proceeds from the issuance of convertible promissory note		75,000		-
Repayment of convertible promissory note		(183,333)		-
Advances from related party		4,312		-
Payment of advances from related party		(4,777)		(20,248)
Proceeds from issuance of common stock, net		246,000		416,585
NET CASH PROVIDED BY FINANCING ACTIVITIES		367,312		476,337

DECREASE IN CASH		(124,839)		(32,881)

CASH, BEGINNING OF PERIOD		125,942		90,551

CASH, END OF PERIOD	$	1,103	$	57,670

Supplemental disclosure of cash flow information:
Interest paid	$	-	$	-
Taxes paid	$	-	$	-

Supplemental disclosure of non-cash investing and financing activities:
Shares issued for settlement of notes payable and interest	$	209,074	$	-
Shares issued to settle accounts payable	$	100,288	$	102,000
Reclassification of property and equipment under construction	$	56,438	$	-
Shares issued in conjunction with notes payable	$	40,601	$	-
Beneficial conversion features	$	64,938	$	80,000
Reclassification of deposit on mineral property to property costs	$	324,000	$	-


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

MEXUS GOLD US AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

1.ORGANIZATION AND BUSINESS OF COMPANY

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

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

2.BASIS OF PREPARATION

Pursuant to the rules and regulations of the Securities and Exchange Commission for Form 10-Q, the unaudited condensed consolidated financial statements, footnote disclosures and other information normally included in 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, 2018 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

The preparation of unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Management reviews these estimates and assumptions on an ongoing basis using currently available information. Actual results could differ from those estimates. Three and six month figures are not necessarily indicative of the results to be reported at the year end.

Basis of Consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company and controlled subsidiaries, Mexus Gold Mining, S.A. de C.V. (“Mexus Gold Mining), Mexus Enterprises S.A. de C.V. (“Mexus Gold Enterprises”) and Mexus Gold MX S.A. DE C.V. (“Mexus Gold MX”). Significant intercompany accounts and transactions have been eliminated.

Use of Estimates

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

Cash and cash equivalents

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

MEXUS GOLD US AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

2.BASIS OF PREPARATION (CONTINUED)

Equipment

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

Mining tools and equipment		7 years
Watercrafts		7 years
Vehicles		3 years

Equipment under Construction

Equipment under construction comprises mining equipment that is currently being fabricated and modified by the Company and is not presently in use. Equipment under construction totaled $17,018 and $73,456 as of September 30, 2018 and March 31, 2018, respectively. Equipment under construction at September 30, 2018 comprises a Hydraulic Drum 12YD, Skid Mounted Mill and Survey Winch Marine.

Exploration and Development Costs

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

Mineral Property Rights

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

Long-Lived Assets

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

MEXUS GOLD US AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

2.BASIS OF PREPARATION (CONTINUED)

Fair Value of Financial Instruments

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

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

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

Secured convertible promissory note derivative liability is measured at fair value on a recurring basis using Level 3 inputs.

Interest rate risk is the risk that the value of a financial instrument might be adversely affected by a change in the interest rates. The notes payable, loans payable and secured convertible promissory notes have fixed interest rates therefore the Company is exposed to interest rate risk in that they could not benefit from a decrease in market interest rates. In seeking to minimize the risks from interest rate fluctuations, the Company manages exposure through its normal operating and financing activities.

Derivative Instruments

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

Foreign Currency Translation

The Company’s functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated to United States dollars in accordance with ASC 740, Foreign Currency Translation Matters, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.

To the extent that the Company incurs transactions that are not denominated in its functional currency, they are undertaken in Mexican Pesos. The Company has not, as of the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

Comprehensive Loss

ASC 220, Comprehensive Income establishes standards for the reporting and display of comprehensive loss and its components in the consolidated financial statements. As at September 30, 2018 and 2017, the Company had no items that represent a comprehensive loss, and therefore has not included a schedule of comprehensive loss in the consolidated financial statements.

MEXUS GOLD US AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

2.BASIS OF PREPARATION (CONTINUED)

Income Taxes

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

Asset Retirement Obligations

In accordance with accounting standards for asset retirement obligations (ASC 410), the Company records the fair value of a liability for an asset retirement obligation (ARO) when there is a legal obligation associated with the retirement of a tangible long-lived asset and the liability can be reasonably estimated. The associated asset retirement costs are supposed to be capitalized as part of the carrying amount of the related mineral properties. As of September 30, 2018 and March 31, 2018, the Company has not recorded AROs associated with legal obligations to retire any of the Company’s mineral properties as the settlement dates are not presently determinable.

Revenue Recognition

The Company follows the guidance of the Securities and Exchange Commission’s Staff Accounting Bulletin (“SAB”) 104 for revenue recognition and Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition.” Accordingly, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the selling price to the customer is fixed or determinable and collectability of the revenue 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.

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.

MEXUS GOLD US AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

2.BASIS OF PREPARATION (CONTINUED)

Per Share Data (Continued)

At September 30, 2018 and March 31, 2018, we excluded the outstanding securities summarized below, which entitle the holders thereof to acquire shares of common stock as their effect would have been anti-dilutive:

	September 30, 2018	March 31, 2018
Common stock issuable upon conversion of convertible notes payable	21,025,615	13,675,741
Common stock issuable to satisfy stock payable obligations	83,631,639	48,641,961
Total	104,657,254	62,317,702

3.GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. During the six months ended September 30, 2018, the Company incurred a net loss of $960,766 and used cash in operating activities of $494,070, and at September 30, 2018, had an accumulated deficit of $27,814,760. At September 30, 2018, the Company is in the exploration stage and has not earned revenue from planned operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. The Company’s independent registered public accounting firm, in their report on the Company’s financial statements for the year ending March 31, 2018, expressed substantial doubt about the Company’s ability to continue as a going concern.

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

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

4.RECENT ACCOUNTING PRONOUNCEMENTS AFFECTING THE COMPANY

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

MEXUS GOLD US AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

4.RECENT ACCOUNTING PRONOUNCEMENTS AFFECTING THE COMPANY (CONTINUED)

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

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

5.MINERAL PROPERTIES AND EXPLORATION COSTS

Project Mabel

On May 1, 2018, Mexus Gold MX, entered into three agreements (collectively known as Project Mabel) to exploit and transfer mineral rights owed by Cesar Mauricio Lemas Contreras.

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

(ii)Project “El Plomito” –Participation of 50% Mexus Gold MX and 50% Pacific Comox. The agreement transfers mining rights at concessions 220563, 213711, 215941, 216544, 200395 and 222989, which together add up to 275.02 hectares.

(iii)Project “La Famosa” – Participation of 50% Mexus Gold MX and 50% Pacific Comox. The agreement transfers mining rights at concessions 220394, 220395, 220840, 220841 and 199006, which together add up to 200.0568 hectares.

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

6.EQUIPMENT

		Cost		Accumulated Depreciation		September 30, 2018 Net Book Value		March 31, 2018 Net Book Value
Mining tools and equipment	$	1,618,452	$	1,234,744	$	383,708	$	444,266
Vehicles		159,084		140,130		18,954		26,054
	$	1,777,536	$	1,374,874	$	402,662	$	470,320

Depreciation expense for the three and six months ended September 30, 2018 and 2017 was $64,789 and $60,962and $132,177 and $119,968, respectively.

MEXUS GOLD US AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

7.ACCOUNTS PAYABLE – RELATED PARTY

During the six months ended September 30, 2018 and 2017, the Company incurred rent expense to Paul D. Thompson, the sole director and officer of the Company, of $22,800 and $22,800, respectively. At September 30, 2018 and March 31, 2018, $119,823 and $97,023 for this obligation is outstanding, respectively.

Compensation

On July 2, 2015, the Company entered into a compensation agreement with Paul D. Thompson, the sole director and officer of the Company. Mr. Thompson is compensated $15,000 per month and has the option to take payment in Company stock valued at an average of 5 days closing price, cash payments or deferred payment in stock or cash. In addition, Mr. Thompson is due 2,000,000 shares of common stock at the end of each fiscal quarter. At September 30, 2018 and March 31, 2018, $251,410 and $277,646 of compensation due is included in accounts payable – related party, respectively and $32,600 for 2,000,000 shares of common stock due is included in share subscriptions payable, respectively.

8.NOTES PAYABLE – RELATED PARTIES

Notes due to North Pacific Gold were accumulated through a series of cash advances to the Company which are unsecured, non-interest bearing and due on demand. North Pacific Gold is controlled by Paul Thompson, Jr., an immediate family member of Paul D. Thompson Sr., the sole director and officer of the Company. As of September 30, 2018 and March 31, 2018, notes payable due to North Pacific Gold totaled $10,386 and $10,851, respectively.

9.NOTES PAYABLE

During the year ended March 31, 2014, the Company received cash advances of $164,502 from three unrelated shareholders of the Company. At September 30, 2018 and March 31, 2018, the balance of these advances outstanding totaled $15,000 and $15,000, respectively.

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

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

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

MEXUS GOLD US AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

9.NOTES PAYABLE (CONTINUED)

During the six months ended September 30, 2018, the Company received various advances for notes payable totaling $243,110 from twelve investors. These notes are unsecured and are due in one to six months from the date issue.

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

ii)Notes holders with $30,000 of principal earn interest at 0% to 20% per annum and are convertible into shares of common stock of the Company at $0.005 to $0.010 per share and received 480,000 shares of common stock of the Company value at $8,071 as an incentive to purchase Notes. These notes were initially recorded net of a debt discount of $15,328 for a beneficial conversion feature with a corresponding increase in additional paid-in capital of $15,328.

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

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

v)Note holders with $12,000 in principal earn interest at 6% to 10% per annum

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

During the six months ended September 30, 2018, note principal and interest of $41,500 and $2,543, respectively, was paid through the issuance of 8,671,153 shares of common stock with a fair value of $75,340 resulting in loss in settlement of debt of $31,297. In addition, during the six months ended September 30, 2018 the Company paid $13,000 in cash to settle debt.

At September 30, 2018 and March 31, 2018, the carrying value of the advances received from April 1, 2013 to September 30, 2018 totaled $373,397 (net of unamortized debt discount of $57,312) and $83,600, respectively. At September 30, 2018, $98,600 of these notes were in default. There are no default provisions stated in these notes. At September 30, 2018 and March 31, 2018, accrued interest of $12,339 and $6,236, respectively, is included in accounts payable and accrued liabilities.

On January 19, 2016, the Company issued a promissory note (“Note”) with a principal of amount of $77,150 bearing interest of 10% per annum to settle $77,150 in accounts payable due for accounting fees. Payments equal to 15% of cash proceeds received by the Company are due when equipment held for sale is sold. Any unpaid principal and interest is due in full on July 19, 2016. At September 30, 2018 and March 31, 2018 and 2017, the balance of this note was $0 and $74,297, respectively. On May 25, 2018, the Company issued 7,429,654 shares of common stock valued at $133,734 ($0.0180 per share) to settle the Note resulting in a loss on settlement of $56,584.

Amortization of debt discount was $187,727 and $45,109 for the six months ended September 30, 2018 and 2017, respectively, and $138,472 and $45,109 for the three months ended September 30, 2018 and 2017, respectively.

The amount by which the if-converted value of notes payable exceeds principal of notes payable at September 30, 2018 is $3,278.

MEXUS GOLD US AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

10.PROMISSORY NOTES

On April 18, 2013, the Company issued Promissory Notes for $255,000 in cash. The Notes bear interest of 4% per annum and are due on December 31, 2013. The Notes are secured by all of Mexus Gold US shares of stock in Mexus Resources S.A. de C.V. and a personal guarantee of Paul D. Thompson. In addition, a fee of 2,550,000 shares of common stock of the Company valued at $501,075 ($0.1965 per share) was paid to the Note holders on April 18, 2013. These financing fees were capitalized in the consolidated balance sheet as deferred finance expense and were being amortized on a straight-line basis, which approximates the effective interest rate method, as interest expense over the life of the Promissory Notes. On August 24, 2015, $100,000 of these Promissory Notes were settled on issuance of a convertible promissory note. On December 1, 2015, $60,000 of these Promissory Notes were settled on issuance of a convertible promissory note. On September 19, 2016, the Company issued 570,750 shares of common stock with a fair value $44,234 ($0.0775 per share) to settle a promissory note with principal of $20,000. On March 31, 2017, a promissory note with principal of $10,000 was settled for no consideration and recorded as a gain on the consolidated statement of operations. At September 30, 2018 and March 31, 2018, outstanding Promissory Notes were $65,000 and $65,000, respectively. As of September 30, 2018, the Company has not made the scheduled payments and is in default on these promissory notes. The default rate on the notes is seven percent. At September 30, 2018 and March 31, 2018 accrued interest of $27,847 and $24,673, respectively, is included in accounts payable and accrued liabilities.

11.CONVERTIBLE PROMISSORY NOTES

JMJ Financial

On November 14, 2017, the Company issued a Convertible Promissory Note (“Note”) to JMJ Financial (“Holder”), for a principal sum of $166,667 plus one-time 10% interest charge of $16,667 which matures on May 14, 2018 for $150,000 in cash. The Company may repay the Note and interest any time in cash before the maturity date without a prepayment penalty. If the Company defaults on repayment, this Note together with any unpaid accrued interest is convertible into shares of common stock at the Holder’s option at a variable conversion price calculated as lesser of (a) $0.0375 or (b) 50% (40% if the conversion shares are not deliverable by DWAC) of the lowest trade occurring during the 25 consecutive trading days immediately preceding the conversion date. On issuance of the Note, an embedded derivative with a fair value of $66,205 was identified and recorded as debt discount (See Note 12). In conjunction with the Note, the Company issued 3,591,940 shares of common stock (“Origination Shares”) of the Company which was recorded as debt discount. The Origination Shares and the Note were valued at $51,920 and $31,875 upon issuance, respectively, using the relative fair value method. Additional interest expense is accreted on the Note between issuance and maturity dates with the expectation that principal and interest is likely to be settled in shares of common stock of the Company at a variable conversion price calculated at 40% of trade price of common stock of the Company. On May 16, 2018, the Company paid JMJ Financial $183,333 in cash to fully settle the Convertible Promissory Note issued on November 14, 2017 resulting in a gain on settlement of $275,000. At September 30, 2018 and March 31, 2018, the principal and interest outstanding of $0 and $391,482, respectively, is recorded net of unamortized debt discount of $0 and $36,818, respectively. Interest and amortization of debt discount was $103,669 and $0 for the six months ended September 30, 2018 and 2017.

MEXUS GOLD US AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

11.CONVERTIBLE PROMISSORY NOTES (CONTINUED)

Power Up Lending Group Ltd.

On August 21, 2018, the Company issued a Convertible Promissory Note (“Note”) to Power Up Lending Group Ltd. (“Holder”) in the original principal amount of $77,500 less transaction costs of $2,500 bearing a 12% annual interest rate and maturing May 30, 2019 for $75,000 in cash. After 170 days after the issued date, this Note together with any unpaid accrued interest is convertible into shares of common stock of the Company at the Holder’s option at a variable conversion price calculated at 65% of the market price defined as the average of the lowest two trading prices during the fifteen trading day period ending on the latest complete trading day prior to the conversion date. The Company determined that upon issuance of the Note, the initial fair value of the embedded conversion feature was $110,737, of which $77,500 was recorded as debt discount and the remainder of $33,237 was recorded expensed and included in gain (loss) on derivative liability. The Company may repay the Note if repaid within 30 days of date of issue at 110% of the original principal amount plus interest, between 31 days and 60 days at 115% of the original principal amount plus interest, between 61 days and 90 days at 120% of the original principal amount plus interest, between 91 days and 120 days at 125% of the original principal amount plus interest, between 121 days and 150 days at 130% of the original principal amount plus interest, and between 151 days and 170 days at 135% of the original principal amount plus interest. Thereafter, the Company does not have the right of prepayment. At September 30, 2018, the Note is recorded at an accreted value of $84,987 less unamortized debt discount of $66,507. Interest and amortization of debt discount was $18,480 and $0 for the three and six months ended September 30, 2018.

12.CONVERTIBLE PROMISSORY NOTES DERIVATIVE LIABILITY

The Convertible Promissory Notes (“Notes”) with JMJ Financial with an issue date of November 14, 2017 and Power Up Lending Group Ltd. was accounted for under ASC 815. The variable conversion price is not considered predominately based on a fixed monetary amount settleable with a variable number of shares due to the volatility and trading volume of the Company’s common stock. The Company’s convertible promissory notes derivative liabilities has been measured at fair value at November 14, 2017, March 31, 2018, August 21, 2018 and September 30, 2018 using the Black-Scholes model.

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

		November 14, 2017		March 31, 2018		August 21, 2018		September 30, 2018
Closing share price	$	0.038	$	0.02467	$	0.0155	$	0.0095
Conversion price	$	0.0348	$	0.0200	$	0.0076	$	0.0090
Risk free rate		0.050%		0.050%		0.050%		0.050%
Expected volatility		109%		157%		163%		178%
Dividend yield		0%		0%		0%		0%
Expected life		0.5 years		0.13 years		0.77 years		0.66 years

At May 16, 2018, the Note with JMJ Financial was settled in full for $183,333 in cash. The fair value of the conversion option derivative liabilities is $45,563 and $68,934 at September 30, 2018 and March 31, 2018, respectively. The decrease in the fair value of the conversion option derivative liability of $62,674 and $98,371 is recorded as a gain in the unaudited condensed consolidated statements of operations for the three and six months ended September 30, 2018.

13.CONTINGENT LIABILITIES

An asset retirement obligation is a legal obligation associated with the disposal or retirement of a tangible long-lived asset that results from the acquisition, construction or development, or the normal operations of a long-lived asset, except for certain obligations of lessees. While the Company, as of September 30, 2018, 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.

MEXUS GOLD US AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

14.STOCKHOLDERS’ EQUITY

The stockholders’ equity of the Company comprises the following classes of capital stock as of September 30, 2018 and March 31, 2018:

Preferred Stock, $0.001 par value per share; 9,000,000 shares authorized, 0 issued and outstanding at September 30, 2018 and March 31, 2018.

Series A Convertible Preferred Stock (‘Series A Preferred Stock”), $0.001 par value share; 1,000,000 shares authorized: 1,000,000 shares issued and outstanding at September 30, 2018 and March 31, 2018.

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; 2,000,000,000 shares authorized: 882,579,495 and 775,922,947 shares issued and outstanding at September 30, 2018 and March 31, 2018, respectively. Holders of Common Stock have one vote per share of Common Stock held.

Increase in the Number of Authorized Shares

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

Common Stock Issued

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

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

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

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

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

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

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

MEXUS GOLD US AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2018

(Unaudited)

14.STOCKHOLDERS’ EQUITY (CONTINUED)

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

Common Stock Payable

As at September 30, 2018, the Company had total subscriptions payable for 83,631,639 shares of common stock for $94,782 in cash, shares of common stock for equipment valued at $1,500, shares of common stock for interest valued at $48,014, shares of common stock for services valued at $335,655 and common stock for settlement of notes payable valued at $165,233.

15.SUBSEQUENT EVENTS

Common Stock Issued

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

Common Stock Payable

For the period of October 1, 2018 to November 5, 2018, the Company issued subscriptions payable for 5,000,000 shares of common stock ($0.005 per share) for $25,000 in cash.

Convertible Promissory Note

On October 12, 2018, the Company issued a Convertible Promissory Note (“Note”) in the principal amount of $200,000. The Note matures in 12 months, carries a per annum interest rate of six percent (6%) and is convertible in whole or in part into shares of Company common stock at a conversion rate of $.006666667 per share.

Events of Default include, but are not limited to, failure to make timely interest or principal payments, failure to deliver conversion shares, bankruptcy, receivership, insolvency, and failure to reserve required shares for issuance upon conversion. Upon an Event of Default under the Note, Investor may accelerate the outstanding principal amount of all outstanding Note, plus accrued and unpaid interest, and other amounts owing through the date of acceleration.

Pursuant to the terms of the Note, the Company is required to reserve and keep available out of its authorized and unissued shares of common stock, a minimum of 30,000,000 shares of common stock.

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 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 this report.

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

The Company

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

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

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

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

Description of the Business of Mexus Gold US

Mexus Gold US is engaged in the evaluation, acquisition, exploration and advancement of gold exploration and development projects in the United Mexican States, as well as, the salvage of precious metals from identifiable sources. Our main activities in the near future will be comprised of our mining operations in Mexico. Our mining opportunities located in the State of Sonora, Mexico will provide us with projects to recover gold, silver, copper and other precious metals.

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

Business Strategy

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

Mining Operations

We classify our mineral properties into three categories: “Development Properties”, “Advanced Exploration Properties”, and “Other Exploration Properties”. Development Properties are properties where a decision to develop the property into a producing mine has been made. Advanced Exploration Properties are those properties where we retain a significant ownership interest or joint venture and where there has been sufficient drilling and analysis to identify and report proven and probable reserves or other mineralized material. We currently do not have a Development Property or Advanced Exploration Property. Other Exploration Properties are those that do not fall into the other categories. Please see below for information about our Other Exploration Properties.

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

Material Mining Properties

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

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

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

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

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

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

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

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

The VAT system at the URES property worked as planned. Material from the property was placed in the VAT and allowed to leach. The material placed in the VAT showed better than 5 grams of gold per ton but unfortunately the material also held a high % of other metals which consumed the cyanide. The precipitate recovered held only a trace amount of gold with the majority being other base metals. The VAT system can be used in the future.

Project Mabel Project

On May 1, 2018, Mexus Gold MX, entered into three agreements (collectively known as Project Mabel) to exploit and transfer mineral rights owed by Cesar Mauricio Lemas Contreras.

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

ii)Project “El Plomito” –Participation of 50% Mexus Gold MX and 50% Pacific Comox. The agreement transfers mining rights at concessions 220563, 213711, 215941, 216544, 200395 and 222989, which together add up to 275.02 hectares.

iii)Project “La Famosa” – Participation of 50% Mexus Gold MX and 50% Pacific Comox. The agreement transfers mining rights at concessions 220394, 220395, 220840, 220841 and 199006, which together add up to 200.0568 hectares.

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

Non-Material Minting Properties

San Felix Mine Project (formerly known as the Mexus-Trinidad Joint Venture)

In March, 2014, we sold our 50% interest in the Joint Venture to Atzek Mineral S.A. de C.V (“Atzek”). Atzek is currently in default of the sale agreement.

Effective January 13, 2017, our wholly owned subsidiary, Mexus Gold Mining, S.A. de C.V., entered into a purchase agreement with Jesus Leopoldo Felix Mazon, Leonardo Elias Jaime Perez, and Elia Lizardi Perez, wherein we purchased a 50% interest in the “San Felix” mining site located in the La Alameda area of Caborca, State of Sonora, Mexico. The remaining 50% of the site is owned jointly by Mar Holdings S.A. de C.V. and Marco Antonio Martinez Mora. The San Felix mining site contains seven (7) concessions over an area of approximately 26,000 acres. During the year ended March 31, 2018, the Company recorded an impairment of mineral property for the San Felix Project of $75,000 because the requirement payment of $500,000 due on August 13, 2017 was not paid in accordance with the purchase agreement pending the receipt of certain required instruments from the Grantor by the Company.

Other Operations

Cable Salvage Operation

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

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

Mergers and Acquisitions

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

Description of Mining Projects

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

Santa Elena Prospects (formerly known as the Caborca Project)

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

Santa Elena Concessions
No	CONCESSION NAME	TITLE NO	AREA HECTARE	DATE ISSUED	END DATE
1	MARTHA ELENA	221447	339.3811	10/2/2004	9/2/2054
2	JULIO II	221448	59.0401	10/2/2004	9/2/2054
3	JULIO III	231609	99.6381	3/25/2008	3/24/2058
4	JULIO IV	231610	99.9687	3/25/2008	3/24/2058
5	JULIO V	231611	100	3/25/2008	3/24/2058
6	JULIO VI	231612	100	3/25/2008	3/24/2058
7	JULIO VII	231613	100	3/25/2008	3/24/2058
	Total Hectares		898.028
	Total Acres		2,219.0755

The Company has conducted geological evaluation of the Santa Elena Prospects comprised of expanding the existing placer facility for the purpose of mineral evaluation, physical geological evaluations including the drilling of reverse circulation and core holes. Situated on the prospect area are caterpillars, haul trucks, maintenance trucks, power generators, pumps, tractor blade, truck mounted winch, water handling supplies and maintenance trailer with supplies. The prospect area is accessed from a state highway on existing roads. There is access to well water which is available for the current and future operations.

On January 5, 2011, Mexus Gold Mining S.A. de C.V. entered into a Purchase Agreement to purchase the Santa Elena Prospect, formerly known as the Caborca Project. The Santa Elena Prospect consists of 7,400 acres (3,000 hectares) about 50 kilometers northwest of the City of Caborca, Sonora State, Mexico. The Caborca Project lies on claims filed by the owners of the Santa Elena Ranch, which controls the surface rights over the project claims. The claims lie near 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 Santa Elena Prospect consisting of approximately 1,000 additional acres.

We have been unable to locate geologic maps of the area from the Government Geological Survey. However, pursuant to our investigation of the project, the claims were found to be underlain by an igneous complex. The rocks observed included many types of granitic rocks, exhibiting porphyrytic textures, gneissic and equigrannular textures. Quartz was variable. At times quartz "eyes" were observed, that is porphyrytic quartz which many workers consider to be indicative of a porphyry environment. In other localities, no quartz was evident. When no quartz was present, the rock was equigrannular. Quartz veining was evident throughout the claim group. A mine was developed along a major quartz vein, called the Julio 2 Mine with the vein being called the Julio Vein.

There are multiple exploration targets on the Santa Elena Prospect. The two most important are the quartz stockwork zone and the Julio vein system. The first target will be the quartz stockwork zone area. A limited drilling program has been conducted and completed. Production testing has been completed resulting in the construction of the surface production and recovery facilities.

Access to the Santa Elena prospect is via dirt road approximately two miles west of paved highway Mexico 1 and approximately 34 miles northwest of the town of Caborca, Sonora, Mexico.

Full page photo.jpg

FIGURE 1 – SANTA ELENA PROJECT LOCATION MAP

[Please see Exhibit 99.1]

Exhibit 99.1 – PRELIMINARY REPORT AND FIRST STAGE MAPPING

Ures Property Prospects, being comprised of the following projects:

Ocho Hermanos – Guadalupe de Ures Project

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

FIGURE 2 - GUADALUPE DE URES PROJECT LOCATION MAP

The Ocho Hermanos Project (also called the Guadalupe de Ures Project) consists of the “Ocho Hermanos” and "San Ramon" claims which are covered by the Sales and Production Contract dated the 4^th day of July, 2009 between “Minerales Ruta Dorado de RL de CV” (seller) and “Mexus Gold Mining S.A. de C.V.”, a wholly owned subsidiary of Mexus Gold US (buyer). The Ocho Hermanos Claim consists of 34.9940 hectares (1 acre = 0.4047 hectares) or 86.4690 acres while the San Ramon Claim consists of 80 hectares (197.6773 acres).(Figure 4).

The initial term of the agreement was 5 years. During the term Mexus must pay 40% of the net revenue received for minerals produced to the seller. At the conclusion of the 5 years, the lease could be purchased for USD 50,000. Upon expiration on July 4, 2014, Mexus renewed the agreement with an indefinite term. The renewed agreement requires Mexus to pay $1,500 per month and 20% to the total proceeds upon a sale of the rights.

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

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.

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

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

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

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

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

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

FIGURE 4- MICROLOCALIZACION PROYECTO “URES MINING DISTRICT”

FIGURE 5 – LOCALIZACION DE AREAS DE EXTRACCION

FIGURE 6 - PLANTA DE BENEFICIO

AREA DE EXTRACCION

370 Area Project

This zone is composed of a sedimentary sequence (limestone, quartzite, shale) intruded by dacite and diorite as well as rhyolite. The dacite exhibits argillic alterations as well as silicification (quartz veins). The entire area is well oxidized on the surface. This is an area of classic disseminated low grade gold and silver mineralization. Surface grab sample assays show 0.14 grams per ton to as high as 29.490 grams per ton gold. This area is an important area for potentially defining an open pit heap leach project.

El Scorpion Project Area

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

Los Laureles

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

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

The San Felix Mine Project

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

Employees

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

Competition

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

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

Legal Proceedings

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

Property Interests, Mining Claims and Risk

Property Interests and Mining Claims

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

Reclamation

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

While the Company, as of March 31, 2018, does not have a legal obligation associated with the disposal of certain chemicals used in its leaching process, the Company estimates it will incur costs up to $50,000 to neutralize those chemicals at the close of the leaching pond.

Risk

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

Distribution Methods of the Products

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

General Market

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

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

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

Effect of existing or probable governmental regulations on the business

Government Regulation

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

Environmental Regulation

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

Research and Development

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

Costs and effects of compliance with environmental laws

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

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

Results of Operations

The following management’s discussion and analysis of operating results and financial condition of Mexus Gold US is for the three months ended September 30, 2018 and 2017. All amounts herein are in U.S. dollars.

Three months ended September 30, 2018 Compared with the Three months ended September 30, 2017

We had a net loss during the three months ended September 30, 2018 of $575,889 compared to a net loss of $811,362 during the same period in 2017. The decrease in net loss is primarily attributable to (i) a decrease in exploration expenses of $97,658 (ii) a decrease in general and administrative expense of $90,338 (iii) a decrease in stock-based expense – consulting services of $79,244 and (iv) a decrease in impairment of mineral property of $75,000. The decrease in the net loss is partially offset by an increase in interest expense of $118,105.

Revenue

For the three months ended September 30, 2018, we had revenues of $0 compared to $0 for the three months ended September 30, 2017.

Operating Expenses

Total operating expenses decreased to $413,322 during three months ended September 30, 2018, compared to $757,562 for the three months ended September 30, 2017. The decrease in operating expenses was primarily due to decrease in exploration, general and administrative, stock-based expense – consulting services and impairment of mineral property.

Other Income (Expense)

We reported $162,567 of other expense during the three months ended September 30, 2018 compared to $53,800 of other expense during the same period in 2017.

Changes in other income (expense) is mainly attributable an increase in interest expense. The increase is interest expense is due to the issuance of notes payable convertible into shares of the Company’s common stock.

Six months ended September 30, 2018 Compared with the Six months ended September 30, 2017

We had a net loss during the six months ended September 30, 2018 of $960,766 compared to a net loss of $1,574,795 during the same period in 2017. The decrease in net loss is primarily attributable to (i) a decrease in stock-based expense – consulting services of $514,779 (ii) a decrease in impairment of mineral property of $75,000 (iii) an increase in gain on settlement of debt of $160,866 and (iv)an increase in gain on derivative liability of 98,371. The decrease in the net loss is partially offset by an increase in interest expense of $284,788.

Revenue

For the six months ended September 30, 2018, we had revenues of $0 compared to $0 for the six months ended September 30, 2017.

Operating Expenses

Total operating expenses decreased to $897,760 during six months ended September 30, 2018, compared to $1,518,968 for the six months ended September 30, 2017. The decrease in operating expenses was primarily due to decrease in stock-based expense – consulting services.

Other Income (Expense)

We reported $63,007 of other income during the six months ended September 30, 2018 compared to $55,827 of other expense during the same period in 2017.

Liquidity and Capital Resources

At September 30, 2018, we had cash of $1,103 compared to cash of $125,942 at March 31, 2018.

Our property and equipment decreased to $402,662 at September 30, 2018, compared to $470,320 at March 31, 2018. The decrease in equipment is largely due to depreciation expense of $132,177 during the six months ended September 30, 2018 which was partially offset by transfer of equipment under construction to property and equipment of $56,438 and purchase of equipment of $8,081.

Equipment under construction decreased to $17,018 at September 30, 2018, compared to $73,456 at March 31, 2018.

Total assets decreased to $1,250,730 at September 30, 2018, compared to $1,499,665 at March 31, 2018. The majority of the decrease in assets relates to depreciation on property and equipment and reduction of cash.

Our total liabilities decreased to $1,013,542 at September 30, 2018, compared to $1,196,568 as of March 31, 2018. The decrease in our total liabilities can be primarily attributed to the settlement of a convertible promissory note with JMJ Financial and the derecognition of the related bifurcated embedded derivative.

Our working capital deficit at September 30, 2018 and March 31, 2018 is $1,012,439 and $1,070,626, respectively.

Our net cash used in operating activities for the six months ended September 30, 2018 and 2017 is $494,070 and $424,694, respectively. Our net loss for the six months ended September 30, 2018 of $960,766 was the main contributing factor for our negative cash flow offset mainly by depreciation and amortization of $132,177, stock-based compensation – services of $233,956 and non-cash interest expense of $323,696.

Our net cash used in investing activities for the six months ended September 30, 2018 and 2017 is $1,919 and $84,524, respectively, due to the purchase of equipment. During the six months ended September 30, 2018, the Company received $10,000 in cash for the sale of equipment.

Our net cash provided by financing activities for the six months ended September 30, 2018 and 2017 is $367,312 and $476,337, respectively, mainly due to issuance of common stock, notes payable and convertible promissory notes.

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

Future goals

The Santa Elena Prospect (formerly known as Caborca Properties) has become our primary focus. The completion of the initial surface ground construction for a leaching production plant, being an expandable ore leaching pad, solution ponds and production recovery facility, has been tested and will be placed into production. The ore leaching pad has 35,000 tons of ore in place and will be increased in size on a continuing basis to realize the capacity of the production facility.

Therefore, our goal for the current year is to increase the cash flow of the Company’s operations through (a) place the current facilities into full commercial production, (b) increase the mineralization of the ore pad from 1 gram per ton gold and 3 grams per ton silver and (c) increase the capacity of the leach pad.

The Company has now scheduled the installation of a crushing/milling recovery plant for the high grade Julio quartz deposit as a result of the values of the assay analysis from the deposit which range from .250 to 5.5 ounces of gold per ton.

Therefore, our goal for the current year is to increase the cash flow of the placer mining operation, continue the drilling program which began during 2011, initialize mining operations on the Julio quartz deposit while we conduct a thorough geological study by an independent geological firm of the future potential of other vein deposits located near the Julio deposit.

Foreign Currency Transactions

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

Off-balance Sheet Arrangements

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4(T). CONTROLS AND PROCEDURES

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

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

ITEM 5. OTHER INFORMATION

Management’s Report on Internal Control over Financial Reporting

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

Under the supervision and with the participation of management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal controls over financial reporting based on the framework in “Internal Control Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon this evaluation, management has concluded that our internal control over financial reporting was not effective as of September 30, 2018, 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.

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 2018 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 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 nine month period ended September 30, 2018 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

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

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Statements

Condensed Consolidated Balance Sheets at September 30, 2018 (unaudited) and March 31, 2018

Condensed Consolidated Statements of Operations for the three and six months ended September 30, 2018 and 2017 (unaudited)

Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2018 and 2017 (unaudited)

Notes to Condensed Consolidated Financial Statements (unaudited)

Schedules

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

	Exhibit	Form	Filing	Filed with
Exhibits	#	Type	Date	This Report

Articles of Incorporation filed with the Secretary of State of Colorado on June 22, 1990	3.1	10-SB	1/24/2007

Articles of Amendment to the Articles of Incorporation filed with the Secretary of State of Colorado on October 17, 2006	3.2	10-SB	1/24/2007

Articles of Amendment to Articles of Incorporation filed with the Secretary of State of the State of Colorado on January 25, 2007	3.3	10KSB	6/29/2007

Articles of Incorporation filed with the Secretary of State of Nevada on October 1, 2009	3.4	10-K	7/27/2016

Certificate of Amendment filed with the Secretary of State of Nevada on March 9, 2016	3.5	10-K	7/27/2016

Certificate of Designation filed with the Secretary of State of Nevada on August 8, 2011	3.6	10-K	7/27/2016

Amended and Restated Bylaws dated December 30, 2005	3.7	10-SB	1/24/2007

Code of Ethics	14.1	10-KSB	6/29/2007

Certification of Paul D. Thompson, pursuant to Rule 13a-14(a)	31.1			X

Certification of Paul D. Thompson pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	32.1			X

Caborca Preliminary Report and First Stage Mapping	99.1			X

XBRL Instance Document	101.INS			X
XBRL Taxonomy Extension Schema Document	101.SCH			X
XBRL Taxonomy Extension Calculation Linkbase Document	101.CAL			X
XBRL Taxonomy Extension Definition Linkbase Document	101.DEF			X
XBRL Taxonomy Extension Label Linkbase Document	101.LAB			X
XBRL Taxonomy Extension Presentation Linkbase Document	101.PRE			X

Signatures

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

November 14, 2018

/s/ Paul D. Thompson

Paul D. Thompson

Chief Executive Officer

Chief Financial Officer

Principal Accounting Officer

Director