UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Fiscal Year Ended December 31, 2013
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 000-54509
LONE STAR GOLD, INC.
(Name of Small Business Issuer in its charter)
Nevada 45-2578051
---------------------- -----------------------------
(State of incorporation) (IRS Employer Identification No.)
20311 Chartwell Center Drive, Ste. 1469
Cornelius, NC 28031
---------------------------------------- ----------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (704) 790-9799
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [x]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [x]
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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 has submitted electronically and
posted on its corporate Website, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files). Yes [ ] No [x]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [x]
1
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, a smaller reporting company or an
emerging growth company. See the definitions of "large accelerated filer,"
"accelerated filer," "smaller reporting company," and "emerging growth company"
in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Non-accelerated filer [ ]
(Do not check if a smaller reporting company) Smaller reporting company [x]
Accelerated filer [ ] Emerging growth company [x]
If an emerging growth company, indicate by checkmark if the registrant has
elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the
Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act): Yes [x] No [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Company on November 30, 2018, was approximately $0.
As of November 30, 2018 the Company had 143,261,963 outstanding shares of common
stock.
Documents incorporated by reference: None
2
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This report includes "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended, or the Securities Act, and
Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange
Act, which include but are not limited to, statements concerning our business
strategy, plans and objectives, projected revenues, expenses, gross profit,
income, and mix of revenue. These forward-looking statements are based on our
current expectations, estimates and projections about our industry, management's
beliefs and certain assumptions made by us. Words such as "anticipates,"
"expects," "intends," "plans," "predicts," "potential," "believes," "seeks,"
"hopes," "estimates," "should," "may," "will," "with a view to" and variations
of these words or similar expressions are intended to identify forward-looking
statements. These statements are not guarantees of future performance and are
subject to risks, uncertainties and assumptions that are difficult to predict.
Therefore, our actual results could differ materially and adversely from those
expressed in any forward-looking statements.
3
Item 1. Business
Throughout this Annual Report on Form 10-K Lone Star Gold, Inc. is referred
to as "we," "our," "us," the "Company," or "Lone Star."
The Company was formed as a Nevada corporation on November 26, 2007 as
Keyser Resources, Inc. On June 14, 2011, the Company changed its name to Lone
Star Gold, Inc. The Company has been inactive since September 30, 2013. As of
December 31, 2013 all of the Company's projects regarding La Candelaria and
Chihuahua, Mexico (the Tailings Project) were abandoned and all contracts
incident to those projects expired and or were terminated.
The Company was involved in exploration and development of mining
properties until September 30, 2013 when it discontinued operations. In June of
2017, the Company's creditors filed a petition in the District Court of Harris
County, Texas for the appointment of a receiver. In August of 2017, Angela
Collette was appointed receiver pursuant to the petition. In connection with the
receivership, Ms. Collette was appointed President, Secretary, Treasurer and
Director of the Company. In February 2018 Ms. Collette appointed William Alessi
as a director of the Company and then resigned as a director and officer of the
Company.
On November 28, 2018 the Company entered into an agreement to acquire all
of the issued and outstanding shares of Infinity, Inc. for 60,000,000
(post-split) shares of the Company's common stock.
The acquisition of Infinity is contingent upon a number of conditions,
including:
o FINRA's approval of a 100-for-1 reverse split of the Company's common
stock, and
o the Company's acquisition of Good Hemp Living, Inc. for 9,154,615
(post-split) shares of the Company's common stock.
Infinity is focused on the acquisition and management of vertically
integrated companies in the regulated recreational and medical-use cannabis
industry.
Infinity currently operates under a City of San Diego Business Tax
Certificate that allows processing and packaging of medical marijuana until
12/31/2019. This allows Infinity to operate under Prop215 until a Conditional
Use Permit ("CUP") is granted. Infinity is in Cycle 8 of 10 cycles with the City
of San Diego CUP process under San Diego Ordinance O-20858 which allows Infinity
to operate a marijuana manufacturing-processing, packaging and distribution
facility in accordance with San Diego Municipal Code section 141.1004.
Infinity also markets a line of disposable vape pens, CBD lotions, CBD/THC
pain salves, and CBD teas.
For the nine month period ended September 30, 2018 Infinity had revenues of
$4,531,775 and net income of $17,112.
Good Hemp Living, Inc. is a company involved in developing a line of hemp
based consumer goods. Good Hemp Living, Inc. is controlled by Mark Spoone,
William Alessi and Chris Chumas. For the nine month period ended September 30,
2018 Good Hemp Living did not have any revenues.
4
Emerging Growth Company Status
We are an "emerging growth company" as defined under the Jumpstart Our
Business Startups Act, commonly referred to as the JOBS Act. We will remain an
"emerging growth company" for up to five years, or until the earliest of (i) the
last day of the first fiscal year in which our total annual gross revenues
exceed $1 billion, (ii) the date that we become a "large accelerated filer" as
defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would
occur if the market value of our ordinary shares that is held by non-affiliates
exceeds $700 million as of the last business day of our most recently completed
second fiscal quarter or (iii) the date on which we have issued more than $1
billion in non-convertible debt during the preceding three year period.
As an "emerging growth company," we may take advantage of certain
exemptions from various reporting requirements that are applicable to other
public companies that are not "emerging growth companies" including, but not
limited to:
o not being required to comply with the auditor attestation requirements
of section 404(b) of the Sarbanes-Oxley Act (we also will not be
subject to the auditor attestation requirements of Section 404(b) as
long as we are a "smaller reporting company," which includes issuers
that had a public float of less than $75 million as of the last
business day of their most recently completed second fiscal quarter);
o reduced disclosure obligations regarding executive compensation in our
periodic reports and proxy statements; and
o exemptions from the requirements of holding a nonbinding advisory vote
on executive compensation and shareholder approval of any golden
parachute payments not previously approved.
In addition, Section 107 of the JOBS Act provides that an "emerging growth
company" can take advantage of the extended transition period provided in
Section 7(a)(2)(B) of the Securities Act for complying with new or revised
accounting standards. Under this provision, an "emerging growth company" can
delay the adoption of certain accounting standards until those standards would
otherwise apply to private companies. In other words, an "emerging growth
company" can delay the adoption of such accounting standards until those
standards would otherwise apply to private companies until the first to occur of
the date the subject company (i) is no longer an "emerging growth company" or
(ii) affirmatively and irrevocably opts out of the extended transition period
provided in Securities Act Section 7(a) (2) (B). The Company has elected to take
advantage of this extended transition period and, as a result, our financial
statements may not be comparable to the financial statements of other public
companies. Accordingly, until the date that we are no longer an "emerging growth
company" or affirmatively and irrevocably opt out of the exemption provided by
Securities Act Section 7(a) (2) (B), upon the issuance of a new or revised
accounting standard that applies to your financial statements and has a
different effective date for public and private companies, clarify that we will
disclose the date on which adoption is required for non-emerging growth
companies and the date on which we will adopt the recently issued accounting
standard.
Other Information
The Company's office is located at 20311 Chartwell Center Drive, Ste. 1469,
Cornelius, NC 28031 which is the office of the sole officer and director.
5
Item 1A. Risk Factors.
Not applicable for a smaller reporting company.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Properties.
See Item 1.
Item 3. Legal Proceedings.
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities.
Since June 20, 2011, shares of the Company's common stock have been quoted
on the Over-the-Counter Market under the symbol "LSTG".
The following table summarizes the high and low historical closing prices
of the Company's common stock for the periods indicated:
Fiscal Year Ended December 31, 2012
High Low
First Quarter $0.70 $0.23
Second Quarter $0.24 $0.13
Third Quarter $0.19 $0.09
Fourth Quarter $0.09 $0.03
Fiscal Year Ended December 31, 2013
High Low
First Quarter $0.158 $0.032
Second Quarter $0.059 $0.031
Third Quarter $0.035 $0.021
Fourth Quarter $0.023 $0.012
Holders of our common stock are entitled to receive dividends as may be
declared by the Board of Directors. The Company's Board of Directors is not
restricted from paying any dividends but is not obligated to declare a dividend.
No cash dividends have ever been declared and it is not anticipated that cash
dividends will ever be paid.
6
The Company's Articles of Incorporation authorize the Board of Directors to
issue up to 30,000,000 shares of preferred stock. The provisions in the Articles
of Incorporation relating to the preferred stock allow directors to issue
preferred stock with multiple votes per share and dividend rights which would
have priority over any dividends paid with respect to the holders of common
stock. The issuance of preferred stock with these rights may make the removal of
management difficult even if the removal would be considered beneficial to
shareholders generally, and will have the effect of limiting shareholder
participation in certain transactions such as mergers or tender offers if these
transactions are not favored by our management.
As of, November 30, 2018, the Company had 143,261,963 outstanding shares of
common stock which were owned by approximately 20 shareholders of record.
Item 6. Selected Financial Data
Not applicable.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
The Company has been inactive after September 30, 2013. As a result of its
inactivity, the Company generated no revenue. Following the close of the
receivership, the Company had liabilities as disclosed on its Balance Sheet as
at December 31, 2013.
The Company did not, as of November 30, 2018, have any significant capital
requirements.
The Company does not know of any trends, demands, commitments, events or
uncertainties that will result in, or that are reasonable likely to result in,
our liquidity increasing or decreasing in any material way.
The Company does not know of any significant changes in expected sources
and uses of cash.
The Company does not have any commitments or arrangements from any person
to provide it with any equity capital.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data.
See the financial statements attached to this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Item 9A. Controls and Procedures.
An evaluation was carried out under the supervision and with the
participation of our management, including our Principal Executive and Financial
Officers of the effectiveness of our disclosure controls and procedures as of
7
the end of the period covered by this report on Form 10-K. Disclosure controls
and procedures are procedures designed with the objective of ensuring that
information required to be disclosed in our reports filed under the Securities
Exchange Act of 1934, such as this Form 10-K, is recorded, processed, summarized
and reported, within the time period specified in the Securities and Exchange
Commission's rules and forms, and that such information is accumulated and is
communicated to our management, including our Principal Executive and Financial
Officers, or persons performing similar functions, as appropriate, to allow
timely decisions regarding required disclosure. Based on that evaluation, our
management concluded that, as of December 31, 2013, our disclosure controls and
procedures were not effective. A controls system cannot provide absolute
assurance, however, that the objectives of the controls system are met, and no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within a company have been detected.
Management's Report on Internal Control over Financial Reporting
The Company's management is responsible for establishing and maintaining
adequate internal control over financial reporting and for the assessment of the
effectiveness of internal control over financial reporting. As defined by the
Securities and Exchange Commission, internal control over financial reporting is
a process designed by, or under the supervision of the company's Principal
Executive and Financial Officers and implemented by its Board of Directors,
management and other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of our financial
statements in accordance with U.S. generally accepted accounting principles.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
The Company's Principal Executive and Financial Officers evaluated the
effectiveness of its internal control over financial reporting as of December
31, 2013, based on criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission, or the COSO Framework (2013). Management's assessment included an
evaluation of the design of our internal control over financial reporting and
testing of the operational effectiveness of those controls.
Based on this evaluation, management concluded that the Company's internal
control over financial reporting was not effective as of December 31, 2013. Due
to the following:
o the lack of formal written documentation relating to the design of the
Company's controls.
o the Company did not maintain adequate segregation of duties related to
job responsibilities for initiating, authorizing, and recording of
certain transactions due to the small size of our company.
o the Company does not have sufficient personnel to provide adequate
risk assessment functions.
Notwithstanding the above, a controls system cannot provide absolute
assurance that the objectives of the controls system are met, and no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within a company have been detected. Changes in Internal
Control Over Financial Reporting
8
There was no change in the Company's internal control over financial
reporting that occurred during the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
Item 9B. Other Information.
None.
Item 10. Directors, Executive Officers and Corporate Governance.
The Company's officers and directors are listed below.
Name Age Position
----- --- --------
William Alessi 47 Chief Executive, Financial and Accounting
Officer and a Director
Mark Spoone 52 Director
Directors are generally elected at an annual shareholders' meeting and hold
office until the next annual shareholders' meeting, or until their successors
are elected and qualified. Executive officers are elected by directors and serve
at the board's discretion.
Mr. Alessi has been the Managing Director of Hybrid Titan Management, LLC
since September 11, 2000. He was formerly the interim CEO of RMD Entertainment
Group, Inc. from April of 2017 through October of 2017, and was the interim CEO
of Land Star, Inc. from April of 2017 to December of 2017.
Mr. Spoone was the founder of Cannalife USA, Ltd and since 2013 has been
its Chief Executive Officer. Cannalife is one of the first companies to develop
and market beverages using byproducts of hemp as an essential ingredient. Mr.
Spoone is one of the founders of the National Hemp Associations.
The Company believes that its director is qualified to serve as a director
due to his experience in the capital markets.
The Company does not have an independent director, as that term is defined
in Section 803 of the NYSE Company Guide. The Company does not have a financial
expert.
The Company has not adopted a code of ethics applicable to its principal
executive, financial and accounting officers and persons performing similar
functions.
Management Changes.
o In August 2017, Angela Collette was appointed receiver of the Company
pursuant to a petition filed by the Company's creditors in District
Court, Harris County, Texas. In addition, in 2018 Ms. Collette was
appointed President, Secretary, Treasurer and a director of the
Company.
9
o In February, 2018, William Alessi was appointed a director and the
Company's Chief Executive, Financial and Accounting Officer.
o Following Mr. Alessi's appointment as a director of the Company, Ms.
Collette's position as receiver ended and Ms. Collette resigned as an
officer and director of the Company.
o Prior to the receivership, Mark Townsend was the Company's sole
officer and director. Mr. Townsend was removed in February 2018.
o The Company appointed Mark Spoone to be a director on December 3,
2018.
Item 11. Executive Compensation.
The following table summarizes the compensation earned by the Company's
principal executive officers during the two years ended December 31, 2013.
Bonus Stock Optio Other Annual
Name and Fiscal Salary Bonus Awards Awards Compensation Total
Principal Position Year (1) (2) (3) (4) (5) ($)
---------------------------------------------------------------------------------------
Mark Townsend 2013 $ -- -- -- -- -- $ --
Chief Executive Officer
Daniel Ferris 2013 $ -- -- -- -- -- $ --
Chief Executive Officer 2012 $120,000 $999,996 -- -- $1,119,996
(1) The dollar value of salary (cash and non-cash) earned. (2) The dollar value
of bonus (cash and non-cash) earned.
(3) The value of the shares of restricted stock issued as compensation for
services computed in accordance with ASC 718 on the date of grant.
(4) The value of all stock options computed in accordance with ASC 718 on the
date of grant.
(5) All other compensation received that could not be properly reported in any
other column of the table.
Long-Term Incentive Plans. The Company does not provide its officers or
employees with pension, stock appreciation rights, long-term incentive or other
plans.
Employee Pension, Profit Sharing or other Retirement Plans. The Company
does not have a defined benefit, pension plan, profit sharing or other
retirement plan, although it may adopt one or more of such plans in the future.
Compensation of Directors. During the year ended December 31, 2013, the
Company did not compensate its directors for acting as such.
Compensation Committee Interlocks and Insider Participation. During the
year ended December 31, 2013, none of the Company's officers was also a member
of the compensation committee or a director of another entity, which other
entity had one of its executive officers serving as one of the Company's
directors.
The following shows the amounts the Company expects to pay to its officer
during the twelve months ending December 31, 2019 and the amount of time this
person expects to devote to the Company.
10
Projected Percent of time to be devoted
Name Compensation to the Company's business
---- ------------ -----------------------------
William Alessi $ -- 10%
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table lists, as of November 30, 2018, the shareholdings of
(i) each person owning beneficially 5% or more of the Company's outstanding
shares of common stock; (ii) each executive officer of the Company, and (iii)
all officers and directors as a group. Unless otherwise indicated, each owner
has sole voting and investment power over his shares of common stock.
Name and Address Number of Shares Percent of Class
---------------- ---------------- ----------------
William Alessi 100,000 Nil
20311 Chartwell Center Drive
Suite 1469
Cornelius, NC 28031
Mark Spoone -- --
4833 Front St., B-405
Castle Rock, CO 80104
All Officers and Directors 100,000 Nil
as a group (two persons)
Mr. Alessi also owns 30,000,000 shares of the Company's Series A Preferred
stock, which represents 100% of the outstanding shares of this class. Each share
of Series A Preferred stock is entitled to 100 votes on any matter upon which
the holders of common stock are entitled to vote.
Item 13. Certain Relationships and Related Transactions, and Director
Independence.
In February 2018 William Alessi, our sole director and Executive Officer
was issued 100,000 shares of common stock and 30,000,000 shares of Series A
preferred share. Each Series A preferred share is entitled to 100 votes on any
matter upon which the holders of common stock is entitled to vote.
Item 14. Principal Accountant Fees and Services.
The following is a summary of the fees billed to us by our independent
auditors for the fiscal year ended December 31, 2012:
Fiscal
Fee Category 2012
--------
Audit fees $ 69,355
Tax fees -
Other fees -
--------
Total fees $ 69,355
========
11
Audit Fees consist of fees billed for professional services rendered for the
audit of our financial statements and review of the interim financial statements
included in quarterly reports and services that are normally provided by our
auditors in connection with statutory and regulatory filings or engagements.
The Board of Directors' policy is to pre-approve all audit and permissible
non-audit services provided by the independent auditors on a case-by-case basis.
These services may include audit services, audit-related services, tax services
and other services.
The Company's financial statements for the year ended December 31, 2013, as
filed with the Company's December 31, 2014 10-K report, were unaudited and are
incorporated in this 10-K report by reference..
Item 15. Exhibits and Financial Statement Schedules.
The following exhibits are filed with this Form 10-K or incorporated by
references:
Exhibit No. Description
3.1 Amended and Restated Articles of Incorporation. (1)
3.2 Bylaws. (1)
31.1 Certification by the Principal Executive Officer.
31.2 Certification by the Principal Financial Officer.
32.1 Certifications by the Principal Executive and Financial Officers.
(1) Filed with the Company's annual report on Form 10-K for the year ended
December 31, 2017.
12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 31, 2013 and 2012 F-2
Consolidated Statements of Operations for the years ended
December 31, 2013 and 2012 F-3
Consolidated Statements of Cash Flows for the years ended
December 31, 2013 and 2012 F-4
Consolidated Statements of Stockholders' Deficit for the
years ended December 31, 2013 and 2012 F-5
Notes to Consolidated Financial Statements F-6
LBB & ASSOCIATES LTD., LLP
10260 Westheimer Road, Suite 310
Houston, TX 77042
Phone: (713) 800-4343 Fax: (713) 456-2408
Report of Independent Registered Public Accounting Firm
To the Board of Directors of
Lone Star Gold, Inc.
(An Exploration Stage Company)
Albuquerque, New Mexico
We have audited the accompanying consolidated balance sheets of Lone Star Gold,
Inc. (the "Company") as of December 31, 2012, and the related consolidated
statements of operations, shareholders' equity (deficit), and cash flows for the
year then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits. We did not audit the statements
of operations, stockholders' deficit and cash flows for the period from November
26, 2007 (inception) to December 31, 2009, which totals reflected a deficit of
$107,017 accumulated during the exploration stage. Those financial statements
and cumulative totals were audited by other auditors whose report dated April
12, 2010, expressed an unqualified opinion on those statements and cumulative
totals, and included an explanatory paragraph regarding the Company's ability to
continue as a going concern. Our opinion, insofar as it relates to amounts
included for that period is based on the report of other independent auditors,
mentioned above.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit and the report of
the other auditors provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Lone Star Gold,
Inc. as of December 31, 2012, and the results of its operations and its cash
flows for the year then ended in conformity with accounting principles generally
accepted in the United States of America.
As discussed in Note 1 to the consolidated financial statements, the Company's
absence of significant revenues, recurring losses from operations, and its need
for additional financing in order to fund its projected loss in 2013 raise
substantial doubt about its ability to continue as a going concern. The 2012
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ LBB & Associates Ltd., LLP
LBB & Associates Ltd., LLP
Houston, Texas
April 12, 2013
F-2
LONE STAR GOLD, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
---------------------------
2013 2012
------------ -------------
ASSETS (Unaudited)
Current assets
Cash $ - $ -
Prepaid expenses - 152
Property and equipment, net - 38,353
Mining assets - 179,300
---------- ----------
Total assets - 217,805
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable 109,495 90,372
Accrued liabilities 52,513 110,216
Note payable 45,778 50,000
Derivative liability 166,051 30,555
Due to related party 38,910 38,910
---------- ----------
Total liabilities 369,104 320,053
Stockholders' equity
Common stock 143,262 89,995
Additional paid-in capital 5,398,908 3,497,642
Accumulated deficit (5,935,230) (3,671,447)
Non-controlling interest in subsidiary (19,687) (18,438)
---------- -----------
Total stockholders' deficit (369,104) (102,248)
---------- -----------
Total liabilities and stockholders' deficit $ - $ 217,805
========== ===========
The accompanying notes are an integral part of these financial statements.
F-3
LONE STAR GOLD, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended
-------------------------------
December 31, December 31,
2013 2012
------------ -------------
(Unaudited)
Revenue $ - $ -
---------- ------------
Operating Expenses (1,460) (1,965,638)
---------- ------------
Loss from operations (1,460) (1,965,638)
---------- ------------
Other income (expense) (135,496) (9,849)
---------- ------------
Income (loss) from discontinued operation (2,128,076) -
Net Income (Loss) (2,265,032) (1,975,487
Net Income (loss) attributable to
non-controlling interest (1,249) 1,757
---------- ------------
Net Income (loss) attributable to Lone
Star Gold, Inc. $(2,263,783) $ (1,973,730)
=========== ============
Loss per share - basic and diluted $ (0.02) $ (0.02)
=========== ============
Weighted average shares - basic and 143,261,963 89,799,438
diluted
The accompanying notes are an integral part of these financial statements.
F-4
LONE STAR GOLD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
2013 2012
(Unaudited)
Operating Activities
Net loss $(2,265,032) $(1,975,487)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation expense 7,972
Stock issued for services 1,954,533 999,996
Change in derivative liability changes in
operating assets and liabilities 135,496 9,575
Prepaid expenses 152 2,086
Accounts payable and accrued liabilities (38,580) 165,123
----------- ----------
Cash used in Operating Activities (213,431) (790,735)
----------- ----------
Investing Activities
Property and equipment 38,353 -
Mining assets 179,300 (75,000)
----------- ----------
Cash provided by(used in) Investing Activities 217,653 (75,000)
----------- ----------
Financing Activities
Proceeds from sale of common stock - 600,000
Notes payable (4,222) 50,000
Redemption of shares - (2)
----------- ----------
Cash provided by(used in) Financing
Activities (4,222) 649,998
----------- ----------
Net change in cash - (215,737)
Cash - Beginning of year - 215,737
----------- ----------
Cash - End of year $ - $ -
=========== ==========
Supplementary Disclosure
Shares issued for mining assets $ - $ 79,300
=========== ==========
The accompanying notes are an integral part of these financial statements
F-5
LONE STAR GOLD, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDER' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 2013 (UNAUDITED)
Additional Non-
Common Stock Paid-In Accumulated Controlling
Shares Amount Capital Deficit Interests Total
------ ----- --------- ----------- ----------- -----
Balance - January
1, 2013 89,994,663 $ 89,995 $3,497,64 $(3,671,447) $(18,438) $ (102,248)
Stock issued for
services 53,267,300 53,267 1,901,266 1,954,533
Net loss (2,263,783) (1,249) (2,265,032)
---------- -------- ---------- ----------- -------- ----------
Balance - December
31, 2013 143,261,963 143,262 $5,398,908 $(5,935,230) $(19,687) $(412,747)
=========== ======== ========== =========== ======== =========
The accompanying notes are an integral part of these financial statements
F-6
LONE STAR GOLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2013
NOTE 1 - NATURE OF OPERATIONS AND DISCONTINUANCE OF BUSIENSS
Lone Star Gold, Inc. (the "Company" or "Lone Star"), formerly known as Keyser
Resources, Inc., was incorporated in the State of Nevada on November 26, 2007.
The Company is an Exploration Stage Company as defined by Financial Accounting
Standards Board Accounting Standards Codification ("ASC") Topic 915 Development
Stage Entities.
On January 26, 2012, the Company, acting through a subsidiary, Amiko Kay, S. de
R.L. de C.V., a company organized under the laws of Mexico ("Amiko Kay"),
entered into a Joint Venture Agreement (the "JV Agreement") with Miguel Angel
Jaramillo Tapia ("Jaramillo"), a resident of Mexico. Under the JV Agreement,
Amiko Kay and Jaramillo agreed to process mine tailings located in the city of
Hidalgo Del Parral in the state of Chihuahua, Mexico (the "Tailings"), and,
after processing, to use, market and sell any minerals extracted from the
Tailings. The Company owns 99% of the issued and outstanding membership
interests of Amiko Kay. The JV Agreement provides Amiko Kay the right to receive
65% of the net revenues from the sale of any materials extracted from the
Tailings. The Company is accounting for the activities under the JV Agreement as
a collaborative arrangement as defined by ASC 808. As a result, acquisition
costs related to the JV Agreement have been capitalized and all other
expenditures by the Company related to the JV Agreement have been expensed as
incurred as exploration costs. This is in accordance with the Company's Mineral
Property Cost Accounting Policy.
Shortly after September 30, 2013, the Company ceased operation as it was in
default of certain creditor obligations. The Company was put into receivership
to satisfy outstanding judgment creditor claims.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Non-controlling Interests
Non-controlling interests represent the equity in a subsidiary not attributable
directly or indirectly to the Company, and in represented in the consolidated
balance sheets as a component of stockholders' equity. Non-controlling interests
in the results of operations of the Company are presented in the face of the
statement of operations as an allocation of the total profit or loss between
non-controlling interests and the shareholders of the Company.
(b) Basis of Presentation
These financial statements and related notes are presented in accordance with
accounting principles generally accepted in the United States, and are expressed
in US dollars. The Company's fiscal year-end is December 31.
(c) Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
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. The Company regularly evaluates estimates and assumptions
related to the recoverability of long-lived assets and deferred income tax asset
valuation allowances. The Company bases its estimates and assumptions on current
facts, historical experience and various other factors that it believes to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities and the
accrual of costs and expenses that are not readily apparent from other sources.
The actual results experienced by the Company may differ materially and
adversely from the Company's estimates. To the extent there are material
differences between the estimates and the actual results, future results of
operations will be affected.
(d) Net Loss Per Common Share
The Company computes net income or loss per share in accordance with ASC 260
Earnings per Share. Under the provisions of the Earnings per Share Topic ASC,
basic net loss per share is computed by dividing the net loss available to
common stockholders for the period by the weighted average number of shares of
common stock outstanding during the period. The calculation of diluted net loss
per share gives effect to common stock equivalents; however, potential common
shares are excluded if their effect is anti-dilutive.
F-7
(e) Income Taxes
The Company accounts for its income taxes in accordance with ASC 740 Income
Taxes, which requires recognition of deferred tax assets and liabilities for
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and tax credit carry forwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in operations in the period that includes the
enactment date. A valuation allowance is provided for the amount of deferred tax
assets that would otherwise be recorded for income tax benefits primarily
relating to operating loss carryforwards as realization cannot be determined to
be more likely than not.
The statement establishes a more-likely-than-not threshold for recognizing the
benefits of tax return positions in the financial statements. Also, the
statement implements a process for measuring those tax positions which meet the
recognition threshold of being ultimately sustained upon examination by the
taxing authorities. There are no uncertain tax positions taken by the Company on
its tax returns and the adoption of the statement had no material impact to the
Company's consolidated financial statements. The Company files tax returns in
the US and states in which it has operations and is subject to taxation. Tax
years subsequent to 2013 remain open to examination by U.S. federal and state
tax jurisdictions.
(f) Discontinued operations
We discontinued operations during the year ended December 31, 2013. All
operations prior to that have been presented in the statement of operations and
the cash flow statement as net income or loss from discontinued operations. In
fact we had no assets related to an operating business as December 31, 2017,
2016, 2015, 2014 or 2013.
NOTE 3 - GOING CONCERN
The Company has elected to adopt early application of Accounting Standards
Update No. 2014-15, "Presentation of Financial Statements--Going Concern
(Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to
Continue as a Going Concern ("ASU 2014-15").
The financial statements do not include any adjustments related to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the Company is
unable to continue as a going concern.
The Company's financial statements have been prepared on the basis that the
Company has ceased operations for the time being and is in the process of
pursuing business opportunities for the Company to resume as a going concern.
As reflected in the consolidated financial statements, the Company had an
accumulated deficit of $5,935,230 at December 31, 2013. These factors raise
substantial doubt about the Company's ability to continue as a going concern in
the future once it acquires a viable entity.
NOTE 4 -SUBSEQUENT EVENTS
The Company has evaluated all transactions from December 31, 2013 through the
financial statement issuance date for subsequent event disclosure consideration
and noted no significant subsequent event that needs to be disclosed.
F-8
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
LONE STAR GOLD, INC.
Dated: December 7, 2018 By: /s/ William Alessi
--------------------------------
William Alessi
Chief Executive, Financial and
Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of l934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ William Alessi Chief Executive, Financial December 7, 2018
-------------------- and Accounting Officer
William Alessi and a Director
/s/ Mark Spoone Director December 7, 2018
-----------------
Mark Spoone