10-Q
2012-06-30
false
Mexus Gold US
0001355677
--03-31
Smaller Reporting Company
Yes
No
No
2013
Q1
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<!--egx--><table width="100%" style="WIDTH:100%" cellpadding="0" cellspacing="0"> <tr> <td width="24" style="BORDER-BOTTOM:#f0f0f0; BORDER-LEFT:#f0f0f0; PADDING-BOTTOM:0in; BACKGROUND-COLOR:transparent; PADDING-LEFT:0in; WIDTH:0.25in; PADDING-RIGHT:0in; BORDER-TOP:#f0f0f0; BORDER-RIGHT:#f0f0f0; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"><b>1. </b></p></td> <td style="BORDER-BOTTOM:#f0f0f0; BORDER-LEFT:#f0f0f0; PADDING-BOTTOM:0in; BACKGROUND-COLOR:transparent; PADDING-LEFT:0in; PADDING-RIGHT:0in; BORDER-TOP:#f0f0f0; BORDER-RIGHT:#f0f0f0; PADDING-TOP:0in" valign="top"> <p style="MARGIN:0in 0in 0pt"><b> ORGANIZATION AND BUSINESS OF COMPANY</b></p></td></tr></table> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">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.</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">The Company re-entered the exploration stage as of September 18, 2009, as defined by the Financial Accounting Standard Board (FASB) in FASB ASC 915-10, “Development Stage Entities”. The Company is devoting substantially all of its present efforts to establish a new business and none of its planned principal operations have commenced. All losses accumulated since re-entry into the exploration stage has been considered part of the Company’s exploration stage activities.</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">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.</p> <p style="MARGIN:0in 0in 0pt"> </p>
<!--egx--><table width="100%" style="WIDTH:100%" cellpadding="0" cellspacing="0"> <tr> <td width="24" style="BORDER-BOTTOM:#f0f0f0; BORDER-LEFT:#f0f0f0; PADDING-BOTTOM:0in; BACKGROUND-COLOR:transparent; PADDING-LEFT:0in; WIDTH:0.25in; PADDING-RIGHT:0in; BORDER-TOP:#f0f0f0; BORDER-RIGHT:#f0f0f0; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"><b>2. </b></p></td> <td style="BORDER-BOTTOM:#f0f0f0; BORDER-LEFT:#f0f0f0; PADDING-BOTTOM:0in; BACKGROUND-COLOR:transparent; PADDING-LEFT:0in; PADDING-RIGHT:0in; BORDER-TOP:#f0f0f0; BORDER-RIGHT:#f0f0f0; PADDING-TOP:0in" valign="top"> <p style="MARGIN:0in 0in 0pt"><b>BASIS OF PREPARATION</b></p></td></tr></table> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">Pursuant to the rules and regulations of the Securities and Exchange Commission for Form 10-Q, the 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 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 consolidated balance sheet at March 31, 2012 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.</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Management reviews these estimates and assumptions on an ongoing basis using currently available information. Actual results could differ from those estimates.</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt"><b>Cash and cash equivalents</b></p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">The Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt"><b>Per Share Data</b></p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">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.</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt"><b> Fair value of financial instruments</b></p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">The Company's financial instruments consist of cash, accounts payable, accrued liabilities, advances, notes payable, and a loan payable. The carrying amount of these financial instruments approximates fair value due to either length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt"><b>Stock-based compensation</b></p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">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.</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">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.</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt"><b>Revenue recognition</b></p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">The Company recognizes revenues and the related costs when persuasive evidence of an arrangement exists, delivery and acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured.</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt"><b>Mineral Property Rights</b></p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">Costs of acquiring mining properties are capitalized upon acquisition. Mine development costs incurred either to develop new ore deposits, to expand the capacity of mines, or to develop mine areas substantially in advance of current production are also capitalized once proven and probable reserves exist and the property is a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are charged to operations upon abandonment. The Company evaluates the carrying value of capitalized mining costs and related property and equipment costs, to determine if these costs are in excess of their recoverable amount whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Evaluation of the carrying value of capitalized costs and any related property and equipment costs would be based upon expected future cash flows and/or estimated salvage value in accordance with Accounting Standards Codification (ASC) 360-10-35-15, <i>Impairment or Disposal of Long-Lived Assets</i>.</p>
<!--egx--><div align="center"> <table width="100%" style="WIDTH:100%" cellpadding="0" cellspacing="0"> <tr> <td width="24" style="BORDER-BOTTOM:#f0f0f0; BORDER-LEFT:#f0f0f0; PADDING-BOTTOM:0in; BACKGROUND-COLOR:transparent; PADDING-LEFT:0in; WIDTH:0.25in; PADDING-RIGHT:0in; BORDER-TOP:#f0f0f0; BORDER-RIGHT:#f0f0f0; PADDING-TOP:0in" valign="top"> <p style="MARGIN:0in 0in 0pt"><b>3.</b></p></td> <td style="BORDER-BOTTOM:#f0f0f0; BORDER-LEFT:#f0f0f0; PADDING-BOTTOM:0in; BACKGROUND-COLOR:transparent; PADDING-LEFT:0in; PADDING-RIGHT:0in; BORDER-TOP:#f0f0f0; BORDER-RIGHT:#f0f0f0; PADDING-TOP:0in" valign="top"> <p style="MARGIN:0in 0in 0pt"><b>GOING CONCERN</b></p></td></tr></table></div> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements, the Company has a limited operating history and limited funds and has an accumulated deficit of $648,441 and an accumulated deficit since entry into the exploration stage of $4,549,269 at June 30, 2012. These factors, among others, may indicate that the Company will be unable to continue as a going concern.</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">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 operate its business plan.</p> <p style="MARGIN:0in 0in 0pt"> </p> <div align="center"> <table width="100%" style="WIDTH:100%" cellpadding="0" cellspacing="0"> <tr> <td width="19" style="BORDER-BOTTOM:#f0f0f0; BORDER-LEFT:#f0f0f0; PADDING-BOTTOM:0in; BACKGROUND-COLOR:transparent; PADDING-LEFT:0in; WIDTH:14.2pt; PADDING-RIGHT:0in; BORDER-TOP:#f0f0f0; BORDER-RIGHT:#f0f0f0; PADDING-TOP:0in" valign="top"> <p style="MARGIN:0in 0in 0pt"> </p></td> <td style="BORDER-BOTTOM:#f0f0f0; BORDER-LEFT:#f0f0f0; PADDING-BOTTOM:0in; BACKGROUND-COLOR:transparent; PADDING-LEFT:0in; PADDING-RIGHT:0in; BORDER-TOP:#f0f0f0; BORDER-RIGHT:#f0f0f0; PADDING-TOP:0in" valign="top"> <p style="MARGIN:0in 0in 0pt">The financial statements do not include any adjustments relating to the recoverability and classification of assets and/or liabilities that might be necessary should the Company be unable to continue as a going concern. The</p></td></tr></table></div> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">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.</p>
<!--egx--><table width="100%" style="WIDTH:100%" cellpadding="0" cellspacing="0"> <tr> <td width="24" style="BORDER-BOTTOM:#f0f0f0; BORDER-LEFT:#f0f0f0; PADDING-BOTTOM:0in; BACKGROUND-COLOR:transparent; PADDING-LEFT:0in; WIDTH:0.25in; PADDING-RIGHT:0in; BORDER-TOP:#f0f0f0; BORDER-RIGHT:#f0f0f0; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"><b>4. </b></p></td> <td style="BORDER-BOTTOM:#f0f0f0; BORDER-LEFT:#f0f0f0; PADDING-BOTTOM:0in; BACKGROUND-COLOR:transparent; PADDING-LEFT:0in; PADDING-RIGHT:0in; BORDER-TOP:#f0f0f0; BORDER-RIGHT:#f0f0f0; PADDING-TOP:0in" valign="top"> <p style="MARGIN:0in 0in 0pt"><b>RECENT ACCOUNTING PRONOUNCEMENTS AFFECTING THE COMPANY</b></p></td></tr></table> <p style="MARGIN:0in 0in 0pt"> </p> <div align="center"> <table width="100%" style="WIDTH:100%" cellpadding="0" cellspacing="0"> <tr> <td width="19" style="BORDER-BOTTOM:#f0f0f0; BORDER-LEFT:#f0f0f0; PADDING-BOTTOM:0in; BACKGROUND-COLOR:transparent; PADDING-LEFT:0in; WIDTH:14.2pt; PADDING-RIGHT:0in; BORDER-TOP:#f0f0f0; BORDER-RIGHT:#f0f0f0; PADDING-TOP:0in" valign="top"> <p style="MARGIN:0in 0in 0pt"> </p></td> <td style="BORDER-BOTTOM:#f0f0f0; BORDER-LEFT:#f0f0f0; PADDING-BOTTOM:0in; BACKGROUND-COLOR:transparent; PADDING-LEFT:0in; PADDING-RIGHT:0in; BORDER-TOP:#f0f0f0; BORDER-RIGHT:#f0f0f0; PADDING-TOP:0in" valign="top"> <p style="MARGIN:0in 0in 0pt">There have been no recent accounting pronouncements or changes in accounting pronouncements that impacted the first quarter of fiscal 2013, or which are expected to impact future periods that were not already adopted and disclosed in prior periods.</p></td></tr></table></div>
<!--egx--><table width="100%" style="WIDTH:100%" cellpadding="0" cellspacing="0"> <tr> <td width="24" style="BORDER-BOTTOM:#f0f0f0; BORDER-LEFT:#f0f0f0; PADDING-BOTTOM:0in; BACKGROUND-COLOR:transparent; PADDING-LEFT:0in; WIDTH:0.25in; PADDING-RIGHT:0in; BORDER-TOP:#f0f0f0; BORDER-RIGHT:#f0f0f0; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"><b>5. </b></p></td> <td style="BORDER-BOTTOM:#f0f0f0; BORDER-LEFT:#f0f0f0; PADDING-BOTTOM:0in; BACKGROUND-COLOR:transparent; PADDING-LEFT:0in; PADDING-RIGHT:0in; BORDER-TOP:#f0f0f0; BORDER-RIGHT:#f0f0f0; PADDING-TOP:0in" valign="top"> <p style="MARGIN:0in 0in 0pt"><b>ACCOUNTS PAYABLE - RELATED PARTIES</b></p></td></tr></table> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">During the three months ended June 30, 2012 and 2011, the Company incurred rent expense payable to Paul D. Thompson, the sole director and officer of the Company, of $11,400 and $11,400, respectively. At June 30, 2012 and March 31, 2012, $0 and $46,400 for this obligation is outstanding, respectively and included in accounts payable.</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">At June 30, 2012 and March 31, 2012, the Company has an outstanding obligation of $60,637 and $52,637, respectively, due to Philip E. Koehnke APC, the former majority shareholder of the Company, for legal fees.</p>
<!--egx--><table width="100%" style="WIDTH:100%" cellpadding="0" cellspacing="0"> <tr> <td width="24" style="BORDER-BOTTOM:#f0f0f0; BORDER-LEFT:#f0f0f0; PADDING-BOTTOM:0in; BACKGROUND-COLOR:transparent; PADDING-LEFT:0in; WIDTH:0.25in; PADDING-RIGHT:0in; BORDER-TOP:#f0f0f0; BORDER-RIGHT:#f0f0f0; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"><b>7. </b></p></td> <td style="BORDER-BOTTOM:#f0f0f0; BORDER-LEFT:#f0f0f0; PADDING-BOTTOM:0in; BACKGROUND-COLOR:transparent; PADDING-LEFT:0in; PADDING-RIGHT:0in; BORDER-TOP:#f0f0f0; BORDER-RIGHT:#f0f0f0; PADDING-TOP:0in" valign="top"> <p style="MARGIN:0in 0in 0pt"><b>NOTES PAYABLE</b></p></td></tr></table> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">On April 16, 2012, the Company made a Promissory Note Agreement with Francis Stadelman secured by a marine vessel (Barge ITB230) in the amount of $121,200 at six percent interest with monthly payments of $2,343. The Promissory Note is due in five years. At the option of the holder, $60,000 of the Promissory Note amount may be paid in common stock of the Company valued on a 30 day average. The proceeds from this Promissory Note were used to pay in full principal of $120,000 and total outstanding interest of $1,200 of a Promissory Note with Island Tug & Barge. At June 30, 2012 and March 31, 2012, the balances on this note totalled $118,486 and $0, respectively.</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt"><b>Defaulted Senior Notes</b></p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">On February 16, 2010, the Company made an unsecured Promissory Note Agreement with William McCreary in the amount of $2,500 at eight percent interest and due on demand or no later than September 1, 2010. The Company has not made the scheduled payments and is in default on this note as of December 31, 2011. The default rate on the note is eight percent. At June 30, 2012 and March 31, 2012, the balances on this note totalled $2,500 and $2,500, respectively.</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">On February 18, 2011, the Company entered into an unsecured promissory note agreement with Lorna D. Seals in the amount of $50,000 with interest payable monthly and principal due on January 17, 2012. As of June 30, 2012, the Company has not paid the principle balance and is in default on this note. Of the $50,000 principle balance, $39,388 remains outstanding as of June 30, 2012. The default rate on the note is eighteen percent.</p>
<!--egx--><div align="center"> <table width="100%" style="WIDTH:100%" cellpadding="0" cellspacing="0"> <tr> <td width="24" style="BORDER-BOTTOM:#f0f0f0; BORDER-LEFT:#f0f0f0; PADDING-BOTTOM:0in; BACKGROUND-COLOR:transparent; PADDING-LEFT:0in; WIDTH:0.25in; PADDING-RIGHT:0in; BORDER-TOP:#f0f0f0; BORDER-RIGHT:#f0f0f0; PADDING-TOP:0in" valign="top"> <p style="MARGIN:0in 0in 0pt"><b>9.</b></p></td> <td style="BORDER-BOTTOM:#f0f0f0; BORDER-LEFT:#f0f0f0; PADDING-BOTTOM:0in; BACKGROUND-COLOR:transparent; PADDING-LEFT:0in; PADDING-RIGHT:0in; BORDER-TOP:#f0f0f0; BORDER-RIGHT:#f0f0f0; PADDING-TOP:0in" valign="top"> <p style="MARGIN:0in 0in 0pt"><b>SUBSEQUENT EVENTS</b></p></td></tr></table></div> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">During July 2012, the Company received $172,111 in cash in exchange for a subscription payable of 2,868,515 shares of common stock ($0.06 per share).</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">During July 2012, the Company issued a subscription payable for 350,000 shares of common stock for services valued at $32,375 ($0.0925 per share).</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">On July 20, 2012, the Company issued 4,451,848 shares of common stock to satisfy obligations under share subscription agreements for $267,111 in cash included in share subscription payable.</p>
<!--egx--><table width="100%" style="WIDTH:100%" cellpadding="0" cellspacing="0"> <tr> <td width="24" style="BORDER-BOTTOM:#f0f0f0; BORDER-LEFT:#f0f0f0; PADDING-BOTTOM:0in; BACKGROUND-COLOR:transparent; PADDING-LEFT:0in; WIDTH:0.25in; PADDING-RIGHT:0in; BORDER-TOP:#f0f0f0; BORDER-RIGHT:#f0f0f0; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"><b>6. </b></p></td> <td style="BORDER-BOTTOM:#f0f0f0; BORDER-LEFT:#f0f0f0; PADDING-BOTTOM:0in; BACKGROUND-COLOR:transparent; PADDING-LEFT:0in; PADDING-RIGHT:0in; BORDER-TOP:#f0f0f0; BORDER-RIGHT:#f0f0f0; PADDING-TOP:0in" valign="top"> <p style="MARGIN:0in 0in 0pt"><b>NOTES PAYABLE - RELATED PARTY</b></p></td></tr></table> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">These notes are unsecured, non-interest bearing and due on demand. These notes were accumulated through a series of cash advances to the Company and are due to Paul D. Thompson, the sole director and officer of the Company. At June 30, 2012 and March 31, 2012, Notes payable – related party totalled $119,457 and $115,942, respectively.</p>
<!--egx--><table width="100%" style="WIDTH:100%" cellpadding="0" cellspacing="0"> <tr> <td width="24" style="BORDER-BOTTOM:#f0f0f0; BORDER-LEFT:#f0f0f0; PADDING-BOTTOM:0in; BACKGROUND-COLOR:transparent; PADDING-LEFT:0in; WIDTH:0.25in; PADDING-RIGHT:0in; BORDER-TOP:#f0f0f0; BORDER-RIGHT:#f0f0f0; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"><b>8. </b></p></td> <td style="BORDER-BOTTOM:#f0f0f0; BORDER-LEFT:#f0f0f0; PADDING-BOTTOM:0in; BACKGROUND-COLOR:transparent; PADDING-LEFT:0in; PADDING-RIGHT:0in; BORDER-TOP:#f0f0f0; BORDER-RIGHT:#f0f0f0; PADDING-TOP:0in" valign="top"> <p style="MARGIN:0in 0in 0pt"><b>STOCKHOLDERS EQUITY</b></p></td></tr></table> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">The stockholders’ equity of the Company comprises the following classes of capital stock as of June 30, 2012 and March 31, 2012:</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">Preferred Stock, $.001 par value per share; 9,000,000 shares authorized, 0 shares issued and outstanding at June 30, 2012 and March 31, 2012, respectively.</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">Series A Convertible Preferred Stock (‘Series A Preferred Stock”), $.001 par value share; 1,000,000 shares authorized: 375,000 shares issued and outstanding at June 30, 2012 and March 31, 2012.</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">On August 22, 2011, the Board of Directors designated 1,000,000 shares of its Preferred Stock, $0.001 par value as Series A Preferred Stock. 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.</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">Common Stock, par value of $0.001 per share; 500,000,000 shares authorized: 184,447,187 and 179,381,712 shares issued and outstanding at June 30, 2012 and March 31, 2012, respectively. Holders of Common Stock have one vote per share of Common Stock held.</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">On May 18, 2012, the Company issued 1,425,000 shares of common stock to satisfy obligations under share subscription agreements for $85,500 in cash included in share subscriptions payable.</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">On May 21, 2012, the Company issued 873,335 shares of common stock to satisfy obligations under share subscription agreements for $39,306 in services, $20,000 in cash, and $3,000 in equipment included in share subscription payable.</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">On June 11, 2012, the Company issued 2,766,700 shares of common stock to satisfy obligations under share subscription agreements for $145,002 in cash and $13,200 in equipment included in share subscriptions payable.</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="TEXT-INDENT:0.25in; MARGIN:0in 0in 0pt"><b>Common Stock Payable</b></p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">During the three months ended June 30, 2012, the Company received $430,303 in cash in exchange for a subscription payable of 7,371,734 shares of common stock ($0.058 per share).</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">During the three months ended June 30, 2012, the Company issued a subscription payable for 352,107 shares of common stock for services valued at $27,896 ($0.079 per share).</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">During the three months ended June 30, 2012, the Company issued a subscription payable for 350,000 shares of common stock for equipment valued at $30,544 ($0.087 per share).</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">On September 1, 2010, the Company incurred an obligation to issue 75,092 shares of common stock for equipment purchased with a fair value of $5,745. On May 31, 2012, this obligation was settled personally by Paul D. Thompson, the sole director and officer of the Company.</p>
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<!--egx--><p style="MARGIN:0in 0in 0pt"><b>Per Share Data</b></p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">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.</p>
<!--egx--><p style="MARGIN:0in 0in 0pt"><b>Stock based compensation</b></p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">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.</p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">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.</p>
<!--egx--><p style="MARGIN:0in 0in 0pt"><b>Revenue recognition</b></p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">The Company recognizes revenues and the related costs when persuasive evidence of an arrangement exists, delivery and acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured.</p>
<!--egx--><p style="MARGIN:0in 0in 0pt"><b>Cash and cash equivalents</b></p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">The Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.</p>
<!--egx--><p style="MARGIN:0in 0in 0pt"><b>Fair value of financial instruments</b></p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">The Company's financial instruments consist of cash, accounts payable, accrued liabilities, advances, notes payable, and a loan payable. The carrying amount of these financial instruments approximates fair value due to either length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.</p>
<!--egx--><p style="MARGIN:0in 0in 0pt"><b>Mineral Property Rights</b></p> <p style="MARGIN:0in 0in 0pt"> </p> <p style="MARGIN:0in 0in 0pt">Costs of acquiring mining properties are capitalized upon acquisition. Mine development costs incurred either to develop new ore deposits, to expand the capacity of mines, or to develop mine areas substantially in advance of current production are also capitalized once proven and probable reserves exist and the property is a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are charged to operations upon abandonment. The Company evaluates the carrying value of capitalized mining costs and related property and equipment costs, to determine if these costs are in excess of their recoverable amount whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Evaluation of the carrying value of capitalized costs and any related property and equipment costs would be based upon expected future cash flows and/or estimated salvage value in accordance with Accounting Standards Codification (ASC) 360-10-35-15, <i>Impairment or Disposal of Long-Lived Assets</i>.</p>
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