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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, 2012
     
[  ]
 
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]

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, 2012, 194,212,018 shares of our common stock were issued and outstanding.

 
PART I
ITEM 1.   FINANCIAL STATEMENTS

 
MEXUS GOLD US
       
(An Exploration Stage Company)
       
CONSOLIDATED BALANCE SHEETS
       
(Unaudited)
       
           
     
September 30, 2012
March 31, 2012
ASSETS
       
CURRENT ASSETS
       
 
Cash
 
 $              26,763
 
 $                     -
 
Prepaid and other assets
 
15,036
 
8,419
TOTAL CURRENT ASSETS
 
41,799
 
8,419
           
FIXED ASSETS
       
 
Equipment, net of accumulated depreciation
1,322,465
 
1,131,097
TOTAL FIXED ASSETS
 
1,322,465
 
1,131,097
           
OTHER ASSETS
       
 
Equipment under construction
 
160,686
 
158,907
 
Property costs
 
597,307
 
682,374
TOTAL OTHER ASSETS
 
757,993
 
841,281
           
TOTAL ASSETS
 
 $        2,122,257
 
 $      1,980,797
           
LIABILITIES AND SHAREHOLDERS' EQUITY
       
CURRENT LIABILITIES
       
 
Accounts payable and accrued liabilities
 $              73,542
 
 $            96,561
 
Accounts payable - related party
 
62,512
 
52,637
 
Advance from Powercom Services
 
                             -
 
800,000
 
Notes payable
 
162,103
 
199,747
 
Note payable - related party
 
109,685
 
115,942
 
Loan payable
 
                             -
 
1,284
TOTAL CURRENT LIABILITIES
 
407,842
 
1,266,171
           
LONG TERM LIABILITIES
       
 
Loan payable, net of current portion
 
                             -
 
36,858
TOTAL LONG TERM LIABILITIES
 
                             -
 
36,858
TOTAL LIABILITIES
 
407,842
 
1,303,029
           
SHAREHOLDERS' 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
 
500,000,000 shares of common stock, $0.001 par value per share
 
Issued and outstanding
       
 
375,000 shares of Series A Convertible Preferred Stock (375,000 - March 31, 2012)
375
 
375
 
193,212,018 shares of common stock (179,381,712 - March 31, 2012)
193,224
 
179,382
 
Additional paid-in capital
 
6,665,358
 
5,381,846
 
Share subscription payable
 
511,328
 
67,893
 
Accumulated deficit
 
(648,441)
 
(648,441)
 
Accumulated deficit during the exploration stage
(5,007,429)
 
(4,303,287)
TOTAL SHAREHOLDERS EQUITY
 
1,714,415
 
677,768
           
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
2,122,257
 
1,980,797
           
The accompanying notes are an integral part of these consolidated financial  statements.

 
 

 


MEXUS GOLD US
         
(An Exploration Stage Company)
       
CONSOLIDATED STATEMENTS OF OPERATIONS
     
(Unaudited)
           
                 
               
For the Period from
               
exploration stage re-entry
       
Three months ended September 30,
Six months ended September 30,
(September 18, 2009) to
       
2012
2011
2012
2011
September 30, 2012
REVENUES
           
 
Revenues
 
 $                  50,145
 $                154,091
 $                155,728
 $                159,091
 $                                 416,639
Total revenues
 
                     50,145
154,091
155,728
159,091
416,639
                 
Expenses
             
 
General and administrative
205,516
192,261
379,892
294,524
                                2,248,885
 
Exploration costs
154,396
215,030
297,972
319,154
                                1,127,552
 
Stock-based expense
582,725
                               -
610,621
31,473
                                2,273,403
 
Impairment of mineral property
185,368
                               -
185,368
                               -
                                    185,368
 
Loss on sale of equipment
                     18,598
                               -
                     18,598
                               -
                                    138,476
Total operating expenses
1,146,603
407,291
1,492,451
645,151
5,973,684
                 
OTHER INCOME (EXPENSE)
       
 
Gain on settlement of debt
647,750
                               -
647,750
                               -
                                    647,750
 
Interest expense
(9,452)
(24,871)
(15,169)
(33,658)
                                    (98,134)
       
638,298
(24,871)
632,581
(33,658)
549,616
                 
NET LOSS
   
 $             (458,160)
 $             (278,071)
 $             (704,142)
 $             (519,718)
 $                           (5,007,429)
                 
BASIC LOSS PER COMMON SHARE
 $                    (0.00)
 $                    (0.00)
 $                    (0.00)
 $                    (0.00)
 
                 
WEIGHTED AVERAGE NUMBER OF
       
COMMON SHARES OUTSTANDING-
       
BASIC
   
188,560,115
163,377,323
184,809,066
162,578,994
 
                 
The accompanying notes are an integral part of these consolidated financial  statements.

 
 

 


Mexus Gold US
     
(An Exploration Stage Company)
     
CONSOLIDATED STATEMENTS OF CASH FLOWS
   
(Unaudited)
     
       
     
For the Period from
     
exploration stage re-entry
 
Six months ended September 30,
(September 18, 2009) to
 
2012
2011
September 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES
   
Net loss
 $                         (704,142)
 $                           (519,718)
 $                               (5,007,429)
Adjustments to reconcile net loss
     
  to net cash used in operating activities:
     
  Depreciation and amortization
119,081
106,372
438,718
  Loss (gain) on sale of equipment
18,598
                                             -
138,475
  Loss on settlement of accounts payable
                                           -
11,000
11,000
  Gain on settlement of debt
(647,750)
                                             -
(647,750)
  Stock-based compensation
610,621
83,673
2,244,933
  Stock issued for interest
                                    3,000
18,520
32,020
  Impairment of mineral property
                               185,368
                                             -
185,368
 Changes in operating assets and liabilities:
   
  Increase in prepaid and other assets
(6,617)
4,381
(15,036)
  Increase in accounts payable and accrued liabilities
(10,849)
13,593
145,915
NET CASH USED IN OPERTATING ACTIVITIES
(432,690)
(282,179)
(2,473,786)
CASH FLOWS FROM INVESTING ACTIVITIES
   
  Purchase of equipment
(219,066)
(75,556)
(1,041,256)
  Purchase of equipment under construction
(2,779)
(131,636)
(421,607)
  Purchase of mineral properties
(69,051)
(69,051)
(320,675)
  Proceeds from sale of equipment
                                 19,000
                                             -
95,989
NET CASH USED IN INVESTING ACTIVITES
(271,896)
(276,243)
(1,687,549)
CASH FLOWS FROM FINANCING ACTIVITIES
   
  Issuance of notes payable
121,200
100,000
771,019
  Payments on notes payable
(98,639)
                                 (75,271)
(239,951)
  Payments on loans payable
(204)
                                             -
(1,343)
  Advance from related party
10,488
37,300
137,917
  Payments on advances from related party
(22,490)
                                   (5,315)
(41,581)
  Advance from Powercom Services Inc.
                                           -
                                             -
800,000
  Proceeds from issuance of common stock
720,994
                                 188,001
2,713,939
Share subcriptions payable
                                           -
                                 209,410
43,393
NET CASH PROVIDED BY FINANCING ACTIVITIES
731,349
454,125
4,183,393
       
INCREASE (DECREASE) IN CASH
26,763
(104,297)
22,058
CASH, BEGINNING OF PERIOD
                                           -
109,142
4,705
CASH, END OF PERIOD
 $                              26,763
 $                                  4,845
 $                                       26,763
       
Supplemental disclosure of cash payments:
   
  Interest paid
 $                              12,340
 $                                  3,947
 $                                       16,287
  Taxes paid
 $                                       -
 $                                         -
 $                                                -
       
Supplemental disclosure of non-cash investing and financing activities:
 
Shares issued for notes payable
 $                            212,500
 $                              233,000
 $                                     445,500
Shares issued for advances related party
 $                                       -
 $                                  2,200
 $                                         2,200
Shares issued for accounts payable, including related party
 $                              21,500
 $                                39,000
 $                                       60,500
Deferred gain on equipment
 $                                       -
 $                                         -
 $                                       46,000
Shares issued for equipment purchase
 $                            165,919
 $                              104,150
 $                                     359,110
Shares issued for equipment under construction
 $                                       -
 $                                  5,000
 $                                         5,000
Shares issued for mineral property
 $                              12,000
 $                              150,000
 $                                     162,000
Asset relinquished to settle debt
 $                                       -
 $                                37,938
 $                                     145,938
Asset given as settlement of payable
 $                                       -
 $                                         -
 $                                       65,000
Loan for equipment
 $                                       -
 $                                         -
 $                                       39,546
Payables issued for mineral properties
 $                              19,250
 $                                         -
 $                                       19,250
Subscriptions payable settled by related party
 $                              (5,745)
 $                                         -
 $                                       (5,745)
   Transfer of equipment from equipment under construction
 $                                1,000
 $                                         -
 $                                         1,000
       
The accompanying notes are an integral part of these consolidated financial  statements.

 
 

 

 
 
 
MEXUS GOLD US
(An Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
 
September 30, 2012
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CONSOLIDATED BALANCE SHEETS
 
CONSOLIDATED STATEMENTS OF OPERATIONS
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 
 

 


 
MEXUS GOLD US
(AN EXPLORATION STAGE COMPANY)
Notes to Consolidated Financial Statements
September 30, 2012
(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 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.

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

Cash and cash equivalents

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

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.
 
Fair value of financial instruments
 
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.

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.

Revenue recognition

The Company recognizes revenues and the related costs when persuasive evidence of an arrangement exists, delivery and acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured.
 
Mineral Property Rights
 
 
Costs of acquiring mining properties are capitalized upon acquisition. Mine development costs incurred either to develop new ore deposits, to expand the capacity of mines, or to develop mine areas substantially in advance of current production are also capitalized once proven and probable reserves exist and the property is a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are charged to operations upon abandonment. The Company evaluates the carrying value of capitalized mining costs and related property and equipment costs, to determine if these costs are in excess of their recoverable amount whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Evaluation of the carrying value of capitalized costs and any related property and equipment costs would be based upon expected future cash flows and/or estimated salvage value in accordance with Accounting Standards Codification (ASC) 360-10-35-15, Impairment or Disposal of Long-Lived Assets.
 
3.
GOING CONCERN

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying 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 $5,007,429 at September 30, 2012. These factors, among others, may indicate that the Company will be unable 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 operate its business plan.

The financial statements do not include any adjustments relating to the recoverability and classification of assets and/or liabilities that might be necessary should the Company be unable to continue as a going concern. The continuation as a going concern is dependent upon the ability of the Company to meet our obligations on a timely basis, and, ultimately to attain profitability.
 
4.  
RECENT ACCOUNTING PRONOUNCEMENTS AFFECTING THE COMPANY
 
 
There have been no recent accounting pronouncements or changes in accounting pronouncements that impacted the second quarter of fiscal 2013, or which are expected to impact future periods that were not already adopted and disclosed in prior periods.

5.  
ACCOUNTS PAYABLE – RELATED PARTIES

During the six months ended September 30, 2012 and 2011, the Company incurred rent expense payable to Paul D. Thompson, the sole director and officer of the Company, of $22,800 and $11,400, respectively.  At September 30, 2012 and March 31, 2012, $1,875 and $0 for this obligation is outstanding, respectively and included in accounts payable.

At September 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.

6.  
ADVANCE FROM POWERCOM

On July 8, 2010, the Company entered into a Project Management Agreement (“Agreement”) with Powercom Services, Inc. (“Powercom”). Pursuant to the terms of the Agreement, Powercom will assist the Company with cable salvaging operations and receive a percent of the profit from the sale of the salvaged cable. In addition, Powercom has agreed to loan the Company up to $800,000 for the administration and development of the cable salvaging project. As of March 31, 2012 Powercom has advanced to the Company a total of $800,000. Under the terms, the advance is required to be paid in full without interest out of the proceeds from the first shipment of cable brought to port by the Company. The advances are for the purpose of funding the installation and cable pulling apparatus on the cable recovery barge operated by the Company.

The Company and Powercom agreed, effective August 8, 2012, to terminate and settle any and all claims created as a result of the Agreement.  In consideration for cancelling the Agreement, the Company issued 1,000,000 shares of its common stock valued at $150,000 ($0.15 per share).  As a result of the termination, the Company recorded a $650,000 gain on settlement of the $800,000 advance.

7.  
NOTES PAYABLE – RELATED PARTY

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 September 30, 2012 and March 31, 2012, Notes payable – related party totalled $109,685 and $115,942, respectively.

8.  
NOTES PAYABLE

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 September 30, 2012 and March 31, 2012, the balances on this note totalled $116,591 and $0, respectively.

Defaulted Senior Notes

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 September 30, 2012 and March 31, 2012, the balances on this note totalled $2,500 and $2,500, respectively.

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 September 30, 2012, the Company has not paid the principle balance. Of the $50,000 principle balance, $39,388 remains outstanding as of September 30, 2012.  On November 9, 2012, subsequent the financials, Lorna D. Seals agreed to $20,000 cash and $20,002 worth of Mexus Gold US stock valued at $0.25 per share.

9.  
LOAN PAYABLE

On January 25, 2011, the Company entered into an agreement to purchase a vessel for $45,866 payable in $1,000 in cash, 22,727 shares of common stock of the Company valued at $5,341 and 172 monthly payments of $483 with no stated interest rate. The agreement to facilitate the purchase is contracted at an interest rate substantially below market rates for similar types of vessels. Accordingly, the Company imputed a discount of $43,472 at a market interest rate of 12% in accordance FASB ASC 835, “Interest”.

In July, 2012, the Company agreed to return the vessel with a net book value of $38,479 to the note holder as full payment for the outstanding loan payable of $37,938 resulting in a loss on disposal recorded in the consolidated statement of operations of $541.

10.  
STOCKHOLDERS’ EQUITY

The stockholders’ equity of the Company comprises the following classes of capital stock as of September 30, 2012 and March 31, 2012:

Preferred Stock, $.001 par value per share; 9,000,000 shares authorized, 0 shares issued and outstanding at September 30, 2012 and March 31, 2012, respectively.
 
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 September 30, 2012 and March 31, 2012.
 
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.
 
Common Stock, par value of $0.001 per share; 500,000,000 shares authorized: 193,212,018 and 179,381,712 shares issued and outstanding at September 30, 2012 and March 31, 2012, respectively. Holders of Common Stock have one vote per share of Common Stock held.

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.

On May 21, 2012, the Company issued 873,775 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.

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.

On July 25, 2012, the Company issued 4,551,848 shares of common stock to satisfy obligations under share subscription agreements for $267,111 in cash and $12,000 in mineral property included in share subscriptions payable.

On August 16, 2012, the Company issued 929,999 shares of common stock to satisfy obligations under share subscription agreements for $34,800 in cash and $32,375 in services included in share subscriptions payable.

On September 12, 2012, the Company issued 1,280,833 shares of common stock to satisfy obligations under share subscription agreements for $35,001 in cash, $20,300 in equipment and $140,000 in services included in share subscriptions payable.

On September 25, 2012, the Company issued 1,252,151 shares of common stock to satisfy obligations under share subscription agreements for $55,000 in cash, $4,000 in equipment and $250,634 in services included in share subscriptions payable.

On September 27, 2012, the Company issued 750,000 shares of common stock to satisfy obligations under share subscription agreements for $87,625 in cash and $52,500 in notes payable included in share subscriptions payable.

Common Stock Payable

During the six months ended September 30, 2012, the Company received $720,994 in cash in exchange for subscriptions payable of 10,463,079 shares of common stock ($0.069 per share).

During the six months ended September 30, 2012, the Company issued subscriptions payable for 3,577,887 shares of common stock for services valued at $610,621 ($0.171 per share).

During the six months ended September 30, 2012, the Company issued subscriptions payable for 835,000 shares of common stock for equipment valued at $165,919 ($0.199 per share).

During the six months ended September 30, 2012, the Company issued subscriptions payable for 100,000 shares of common stock for mineral property valued at $12,000 ($0.120 per share).

During the six months ended September 30, 2012, the Company issued subscriptions payable for 1,300,000 shares of common stock valued at $212,500 ($0.163 per share) for the settlement of advances and notes payable.

During the six months ended September 30, 2012, the Company issued subscriptions payable for 250,000 shares of common stock valued at $21,500 ($0.163 per share) for the settlement of accounts payable.

 
10.STOCKHOLDERS’ EQUITY– (Continued)

During the six months ended September 30, 2012, the Company issued subscriptions payable for 30,000 shares of common stock for interest expense valued at $3,000 ($0.100 per share).

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.
 
      11.  SUBSEQUENT EVENTS

From October 1 2012 to November 6, 2012, the Company received $758,702 in cash in exchange for subscriptions payable of 3,282,804 shares of common stock ($0.231 per share).

On October 10, 2012, the Company issued 1,000,000 shares of common stock to satisfy obligations under share subscription agreements for $150,000 for settlement of advances included in share subscriptions payable.

On November 1, 2012, Mexus Enterprise S.A. de C.V., a subsidiary wholly owned by Mexus Gold US, entered into a Joint Venture Agreement, for a term of fifty years, with Minerals La Negra S. de R.L. de C.V. and Trinidad Pacifica S. de R.L. de C.V. on certain mining concessions, a part of which are currently in the extraction and commercialization of minerals, located in the Municipality of Caborca, State of Sonora, Mexico. Mexus will serve as operator and receive 60% ownership and net revenue participation from the concession presently under production and extraction operation and in the concessions, leasing rights, environmental authorizations including all of the assets situated on the remaining lands. In exchange for the ownership described above, the Company will provide $1,500,000 operating capital to the Joint Venture.

On October 8, 2012, Mexus Resources S.A. de C.V., a wholly owned subsidiary of Mexus Gold US entered into a Letter of Intent with Minera Fierrcel S.A. de C.V. for the purpose to form a strategic alliance to conduct mining operations on mining properties located in Plomo, State of Sonora, Mexico and owned by Fierrcel S.A. de C.V. Mexus Resources S.A. de C.V. will receive 51% ownership in the established mining area and the surrounding mining claims. Under the terms of the Letter of Intent, Mexus Gold US has agreed to cause a payment of 500,000 restricted shares of its common stock to be issued and a payment of $100,000 to Fierrcel S.A. de C.V. in exchange for acquiring the mining and exploration rights and to conduct the operational duties associated with the mining activities.

 
 
 

 


ITEM 2.                      MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS

Cautionary Statement Concerning Forward-Looking Statements

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

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

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

The Company

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

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

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

We were originally incorporated under the laws of the State of Colorado on June 22, 1990, as U.S.A. Connection, Inc. On October 28, 2009, we changed our domicile to Nevada and changed our name to Mexus Gold US to better reflect our new business operations. Our fiscal year end is March 31st.

Description of the Business of Mexus Gold US

Mexus Gold US is engaged in the evaluation, acquisition, exploration and advancement of gold exploration and development projects in the state of Nevada and Mexico, as well as, the salvage of precious metals from identifiable sources. Our main activities in the near future will be comprised of our mining operations in Nevada and Mexico and our cable salvage operations in Alaska and along the west coast of the United States.

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

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

Business Strategy

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

Lida Mining District, Nevada

We believe the Nevada properties represent the potential to provide the company with a viable project with the addition of additional geologic evaluation and the drilling of prospective areas. Our strategy for this project is to utilize geological data acquired through prior studies, confirm prior drilling results, expand the delineation of the possible ore body and identify reserves through our own geological evaluations.

Mexus Gold S.A. de C.V.

Effective March 31, 2011, we have acquired Mexus Gold S.A. de C.V. We begun funding the operations in Mexico and have begun shipping equipment to the mining sites. In addition, we have begun shipping raw materials from the mining areas for bulk processing and further analysis. We have also initiated an exploration drilling program to further identify the extent of the possible reserves now identified.

Joint Venture Project – Caborca, Sonora Mexico

On November 1, 2012, Mexus Enterprise S.A. de C.V., a subsidiary wholly owned by Mexus Gold US, entered into a Joint Venture Agreement, for a term of fifty years, with Minerals La Negra S. de R.L. de C.V. and Trinidad Pacifica S. de R.L. de C.V. on certain mining concessions, a part of which are currently in the extraction and commercialization of minerals, located in the Municipality of Caborca, State of Sonora, Mexico. Mexus will serve as operator and receive 60% ownership and net revenue participation from the concession presently under production and extraction operation and in the concessions, leasing rights, environmental authorizations including all of the assets situated on the remaining lands. In exchange for the ownership described above, the Company will provide $1,500,000 operating capital to the Joint Venture.

Letter of Intent – Plomo mining properties

On October 8, 2012, Mexus Resources S.A. de C.V., a wholly owned subsidiary of Mexus Gold US entered into a Letter of Intent with Minera Fierrcel S.A. de C.V. for the purpose to form a strategic alliance to conduct mining operations on mining properties located in Plomo, State of Sonora, Mexico and owned by Fierrcel S.A. de C.V. Mexus Resources S.A. de C.V. will receive 51% ownership in the established mining area and the surrounding mining claims. Under the terms of the Letter of Intent, Mexus Gold US has agreed to cause a payment of 500,000 restricted shares of its common stock to be issued and a payment of $100,000 to Fierrcel S.A. de C.V. in exchange for acquiring the mining and exploration rights and to conduct the operational duties associated with the mining activities.

Other Exploration Properties

Our Other Exploration Properties comprise earlier-stage exploration properties. We are currently conducting a number of activities in connection with our earlier-stage exploration properties. During 2009, additional unpatented mining claims were staked in Esmeralda County, Nevada. The evaluation includes compilation of all geologic data and land information for the properties in a geological information system data base. We also staked additional claims in the State of Sonora, Mexico in areas of interest to the company.

Mergers and Acquisitions

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

Mining Operations

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

Other Exploration Properties

Our Other Exploration Properties consist of the following:

Mining Properties located in the state of Nevada

Lida Mining District 

We have entered into agreements on lands located in Esmeralda County, Nevada. We hold an option on 150 acres of patented lands, 14 mining claims and two mill sites with water rights. We have also staked additional claims as a result of our initial geological evaluations. On July 9, 2011, we entered into an Agreement to extend the option period until July 7, 2012.

The lands are situated in an area of previous exploration and evaluation for precious metals. Past mine engineering reports have established indicated reserves through drilling and show both underground and open pit mining potential. Our plans are to conduct a drilling program to confirm the data presented in prior geological reports. Based on the results of our geological evaluation we will determine our future course of exploration and evaluation.

There have been several geological reports over the years regarding the properties. The following reports are under evaluation:

1.           A 1977 report by Andrew J. Zinkle, Mining Engineer, the property was given 52,946 tons proven, 99,500 tons probable and 278,000 tons possible mineral bearing ore with grades estimated at 20 ounces per ton silver and .05 ounces per ton gold.

2.           A report dated 1981 by E.R. Kruchowski, Mine Engineer gives the property 136,089 proven tons ore and 272,178 probable tons ore at average grades of 7.63 ounces silver per ton and .05 ounces gold per ton.

The previous Engineering reports mentioned are reported to us as covering only one third of the patented property. Additional patented claims have been included in the option agreement representing approximately 100 acres. The additional lands have no current geological evaluation; however, there are historical reports prior to 1939.

Mining Properties Located in Mexico

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

Caborca Project

On January 5, 2011, Mexus Gold Mining S.A. de C.V. entered into a Purchase Agreement to purchase the Caborca Project. The Caborca Project consists of 7,400 acres (3,000 hectares) about 50 kilometers northwest of the City of Caborca, Sonora State, Mexico. The Caborca Project lies on claims filed by the owners of the Santa Elena Ranch, which controls the surface rights over the project claims. The claims lie near 112o 25' W, 31o 7.5" N. These claims were visited near the end of January, 2011. On or about July 11, 2011, we acquired five additional claims surrounding the Caborca Project consisting of approximately 1,000 additional acres.

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

There are multiple exploration targets on the Caborca Project. The two most important are the quartz stockwork zone and the Julio vein system. The first target will be the quartz stockwork zone. At least four drill holes are expected to be drilled in this zone to test the mineral potential of this area. Additional holes will be completed to test the Julio vein system.

Ocho Hermanos

The main feature is a sulfide zone composed primarily of galena with some pyrite and arsenopyrite. Above this zone there is an oxide zone composed of iron and lead oxides. Recent grab samples taken indicate that values over 5,000 grams per ton of silver were encountered. These samples may not reflect the average grade. However, grab sample results indicate silver values over 3,000 grams per ton appear to be not unusual. Gold in the samples ranged from 1 gram per ton to over 5 grams per ton.

As of the date of this report, we have obtained all necessary permits to begin operations and as of June 30, 2011, we have completed the bypass water channel around the 8 brothers mine. All necessary milling equipment for the 8 brothers mine in now complete and ready to be shipped to Mexico to begin operations.

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.

370 Area and El Scorpion Project Area

The Company cancelled the lease on these properties during the quarter ended September 30, 2012.
 
Cessation Cable Salvage Operation

On September 18, 2012, we executed an Agreement to Terminate and Release whereby we agreed to terminate our July 8, 2010, Project Management Agreement with Powercom Services, Inc. a Georgia corporation.  The Parties have agreed that the terms and conditions of the Project Management Agreement no longer address and benefit the cable pulling project in a manner that would mutually benefit either party to continue into the future.  As compensation for the termination, we agreed to issue to Powercom Services, Inc. 1,000,000 restricted shares of our common stock in exchange for Powercom’s release and indemnification.

Employees

Mexus Gold US has no employees at this time. Consultants with specific skills are utilized to assist with various aspects of the requirements of activities such as project evaluation, property management, due diligence, acquisition initiatives, corporate governance and property management. If we complete our planned activation of the Nichols Property Exploration and Drilling Program, Cable Salvage Operations and operations of the Mexican mining properties, our total workforce will be approximately 30 persons. Mr. Paul D. Thompson is our sole officer and director.

Competition

Mexus Gold US competes 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 are conducted in the state of Nevada. Mineral interests may be owned in this state by (a) the United States, (b) the state itself, or (c) private parties. Where prospective mineral properties are owned by private parties, or by the state, some type of property acquisition agreement is necessary in order for us to explore or develop such property. Generally, these agreements take the form of long term mineral leases under which we acquire the right to explore and develop the property in exchange for periodic cash payments during the exploration and development phase and a royalty, usually expressed as a percentage of gross production or net profits derived from the leased properties if and when mines on the properties are brought into production. Other forms of acquisition agreements are exploration agreements coupled with options to purchase and joint venture agreements. Where prospective mineral properties are held by the United States, mineral rights may be acquired through the location of unpatented mineral claims upon unappropriated federal land. If the statutory requirements for the location of a mining claim are met, the locator obtains a valid possessory right to develop and produce minerals from the claim. The right can be freely transferred and, provided that the locator is able to prove the discovery of locatable minerals on the claims, is protected against appropriation by the government without just compensation. The claim locator also acquires the right to obtain a patent or fee title to his claim from the federal government upon compliance with certain additional procedures.

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

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.

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.

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 plan 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 necessary funds or that if it is successful in raising the necessary funds, that the Company will successfully operate its business plan.

Distribution Methods of the Products

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

General Market

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

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

Effect of existing or probable governmental regulations on the business

Government Regulation

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

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

Research and Development

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

Costs and effects of compliance with environmental laws

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

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

Results of Operations

The following management’s discussion and analysis of operating results and financial condition of Mexus Gold US is for the three and six month periods ended September 30, 2012 and 2011 and for the period from September 18, 2009 (exploration stage entry) through September 30, 2011. All amounts herein are in U.S. dollars.

Three Months Ended September 30, 2012 compared with the Three Months Ended September 30, 2011 and September 18, 2009 (Exploration Stage Entry) through June 30, 2012

We had a net loss during the three months ended September 30, 2012 of $458,160 compared to a net loss of $278,071 during the same period in 2011.  We had a cumulative net loss of $5,007,429 for the period from September 18, 2009 (Exploration Stage Entry) through September 30, 2012.  This increase in net loss is attributable to an increase in exploration costs, stock-based compensation and impairment of mineral property.  The increase in operating costs was partially offset by a gain on settlement of debt.

Revenue

For the three months ended September 30, 2012, we had revenues of $50,145 compared to $154,091 for the three months ended September 30, 2011.  We recorded revenues of $416,639 for the cumulative period from September 18, 2009 (Exploration Stage Entry) through September 30, 2012.  During the three months ended September 30, 2012 we earned revenue from the sale of gold bars. The cumulative period from September 18, 2009 (Exploration Stage re-entry) through September 30, 2012 includes $150,000 of revenue form an option agreement.

Operating Expenses

Total operating expenses decreased to $1,146,603 during the three months ended September 30, 2012, compared to $407,291 for the three months ended September 30, 2011.  Total operating expenses for the period from September 18, 2009 (exploration stage entry) through September 30, 2012 were $5,973,684.  The increase in operating expenses was due to an increase in exploration costs, stock-based compensation and impairment of mineral property.

Other Income (Expense)

The Company and Powercom Services Inc. agreed, effective August 8, 2012, to terminate and settle any and all claims created as a result of the Project Management Agreement for cable pulling operations.  In consideration for cancelling the Agreement, the Company issued 1,000,000 shares of its common stock valued at $150,000 ($0.15 per share).  As a result of the termination, the Company recorded a $650,000 gain on settlement of the $800,000 advance received under the Agreement.

We incurred $9,452 of interest expense during the three months ended September 30, 2012 compared to $24,871 during the same period in 2011. The decrease is attributable to a decrease in our borrowings during the three months ended September 30, 2012.

Six Months Ended September 30, 2012 Compared with the Six Months Ended September 30, 2011

We had a net loss during the six months ended September 30, 2012 of $704,142 compared to a net loss of $519,718 during the same period in 2011.  Our net loss is comparable to the prior period. This increase in net loss is attributable to an increase in exploration costs, stock-based compensation and impairment of mineral property.  The increase in operating costs was partially offset by a gain on settlement of debt.

Revenue

For the six months ended September 30, 2012, we had revenues of $155,728 compared to $159,091 for the six months ended September 30, 2011.  During the six months ended September 30, 2012 we earned revenue from the sale of gold bars. During the six months ended September 30, 2011 we earned $150,000 on an option agreement.

Operating Expenses

Total operating expenses decreased to $1,492,451 during the six months ended September 30, 2012, compared to $645,151 for the six months ended September 30, 2011.  The increase in operating expenses was due to an increase in exploration costs, stock-based compensation and impairment of the impairment of mineral property.

Other Income (Expense)

The Company and Powercom Services Inc. agreed, effective August 8, 2012, to terminate and settle any and all claims created as a result of the Project Management Agreement for cable pulling operations.  In consideration for cancelling the Agreement, the Company issued 1,000,000 shares of its common stock valued at $150,000 ($0.15 per share).  As a result of the termination, the Company recorded a $650,000 gain on settlement of the $800,000 advance received under the Agreement.

We incurred $15,169 of interest expense during the six months ended September 30, 2012 compared to $33,658 during the same period in 2011. The decrease is attributable to a decrease in our borrowings during the six months ended September 30, 2012.

Liquidity and Capital Resources

At September 30, 2012, we had cash of $26,763 compared to $0 at March 31, 2012.  This increase in cash is primarily due to cash from proceeds from the issuance of common stock.

Our equipment increased to $1,322,465 at September 30, 2012, compared to $1,131,097 at March 31, 2012. The increase in equipment during the six months ended September 30, 2012 is due to the purchase heavy equipment for exploration activities.

Equipment under construction increased to $160,686 at September 30, 2012, compared to $158,907 at March 31, 2012.  Our equipment under construction represents our process of fabricating and modifying equipment relating to mining and salvage operations.  We anticipate equipment under construction will be used to perform bulk sampling projects on our exploration properties or will have the capacity of being placed into a production process pending a determination by management as to the most beneficial application of the equipment.

Our mineral properties decrease to $597,307 at September 30, 2012, compared to $682,374 at March 31, 2012.  The decrease in mineral properties is due to an $185,368 impairment charge recorded during the three months ended September 30, 2012 on the 370 Area and El Scorpion Area properties.

Total assets increased to $2,122,257 at September 30, 2012, compared to $1,980,797 at March 31, 2012.  The majority of the increase in assets related to the purchase of equipment and mineral properties during the six months ended September 30, 2012.

Our total liabilities decreased to $407,842 at September 30, 2012, compared to $1,303,029 as of March 31, 2012.  This total includes current liabilities of $407,842 and long-term liabilities of $0 as of September 30, 2012.  At March 31, 2011, current liabilities totaled $1,266,171 and long-term liabilities totaled $36,858.

In addition to anticipated revenues from operations, we believe that we have sufficient available cash and available loans from our sole officer and director and other individual sources to satisfy our working capital and capital expenditure requirements during the next 12 months.  There can be no assurance, however, that cash and cash from loans will be sufficient to satisfy our working capital and capital requirements for the next 12 months or beyond.

Future goals

The Caborca Properties have become our primary focus after our installation of a small placer recovery plant to conduct tests on prospective placer areas and determine the viability of the placer deposits while we conducted evaluations of the other Mexico properties. The positive results of the placer mining project quickly became interesting and began to show a cash flow which allowed the project to become a breakeven endeavor. The decision was then made to add additional equipment which also was successful and will allow the continuation of mining operations of the placer deposits.

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

Foreign Currency Transactions

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

Off-balance Sheet Arrangements

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

ITEM 3.                      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4(T).                      CONTROLS AND PROCEDURES

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

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

ITEM 5.                      OTHER INFORMATION

Management’s Report on Internal Control over Financial Reporting

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

Under the supervision and with the participation of management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal controls over financial reporting based on the framework in “Internal Control Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon this evaluation, management has concluded that our internal control over financial reporting was not effective as of September 30, 2012, 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 2013 to comply with the requirement of the SEC.  We believe that the ultimate success of our plan to improve our internal control over financial reporting will require a combination of additional financial resources, outside consulting services, legal advice, additional personnel, further reallocation of responsibility among various persons, and substantial additional training of those of our officers, personnel and others, including certain of our directors such as our Chairman of the Board and Chief Financial Officer,  who are charged with implementing and/or carrying out our plan.  It should also be noted that the design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
 
Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls or our internal control over financial reporting, or any system we design or implement in the future, will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Changes in Internal Control

There have not been any changes in our internal control over financial reporting during the three month period ended September 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 PART II – OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

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

ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On July 25, 2012, the Company issued 4,551,848 shares of common stock to satisfy obligations under share subscription agreements for $267,111 in cash and $12,000 in mineral property included in share subscriptions payable.

On August 16, 2012, the Company issued 929,999 shares of common stock to satisfy obligations under share subscription agreements for $34,800 in cash and $32,375 in services included in share subscriptions payable.

On September 12, 2012, the Company issued 1,280,833 shares of common stock to satisfy obligations under share subscription agreements for $35,001 in cash, $20,300 in equipment and $140,000 in services included in share subscriptions payable.

On September 25, 2012, the Company issued 1,252,151 shares of common stock to satisfy obligations under share subscription agreements for $55,000 in cash, $4,000 in equipment and $250,634 in services included in share subscriptions payable.

On September 27, 2012, the Company issued 750,000 shares of common stock to satisfy obligations under share subscription agreements for $87,625 in cash and $52,500 in notes payable included in share subscriptions payable.

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

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

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

ITEM 3.   DEFAULT UPON SENIOR SECURITIES

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.

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 September 30, 2012, the Company has not paid the principle balance. Of the $50,000 principle balance, $39,388 remains outstanding as of September 30, 2012.  On November 9, 2012, subsequent the financials, Lorna D. Seals agreed to $20,000 cash and $20,002 worth of Mexus Gold US stock valued at $0.25 per share.


ITEM 4.          MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.   OTHER INFORMATION

None.
ITEM 6.     EXHIBITS

Statements
       
         
Consolidated Balance Sheets at September 30, 2012 and March 31, 2012
       
         
Consolidated Statements of Operations for the six months ended  September 30, 2012 and 2011 and the period from September 18, 2009 (Exploration Stage Entry) through September 30, 2012
         
Consolidated Statements of Cash Flows for the six months ended  September 30, 2012 and 2011 and the period from September 18, 2009 (Exploration Stage Entry) through September 30, 2012
         
Notes to Consolidated Financial Statements
       
         
Schedules
       
         
All schedules are omitted because they are not applicable or the required information is shown in the Financial Statements or notes thereto.
         
 
Exhibit
Form
Filing
Filed with
Exhibits
#
Type
Date
This Report
         
Articles of Incorporation filed with the Secretary of State of Colorado on June 22, 1990
3.1
10-SB
1/24/2007
 
         
Articles of Amendment to the Articles of Incorporation filed with the Secretary of State of Colorado on October 17, 2006
3.2
10-SB
1/24/2007
 
         
Articles of Amendment to Articles of Incorporation filed with the Secretary of State of the State of Colorado on January 25, 2007
3.3
10KSB
6/29/2007
 
         
Amended and Restated Bylaws dated December 30, 2005
3.3
10-SB
1/24/2007
 
         
Code of Ethics
14.1
10-KSB
6/29/2007
 
         
Certification of Paul D. Thompson, pursuant to Rule 13a-14(a)
31.1
   
X
         
Certification of Paul D. Thompson pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.1
   
X



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, 2012
 
/s/ Paul D. Thompson
Paul D. Thompson
Chief Executive Officer
Chief Financial Officer
Principal Accounting Officer
Director