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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">UNITED STATES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">SECURITIES AND EXCHANGE COMMISSION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Washington, D.C. 20549</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">______________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; font-variant: small-caps; text-align: center">FORM 8-K</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">CURRENT REPORT</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Pursuant to Section 13 or 15(d) of the</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Securities Exchange Act of 1934</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">______________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Date of Report (Date of earliest event reported):
February 1, 2012 (January 26, 2012)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>LONE STAR GOLD, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-variant: small-caps">(</FONT>Exact
Name of Registrant as Specified in its Charter<FONT STYLE="font-variant: small-caps">)</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

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    <TD STYLE="width: 33%; text-align: center; font-weight: bold">Nevada</TD>
    <TD STYLE="width: 34%; text-align: center; font-weight: bold">333-159561</TD>
    <TD STYLE="width: 33%; text-align: center; font-weight: bold">45-2578051</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">(State of Incorporation)</TD>
    <TD STYLE="text-align: center">(Commission File Number)</TD>
    <TD STYLE="text-align: center">(IRS Employer Identification No.)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>6565 Americas Parkway NE, Suite 200, Albuquerque,
NM 87110</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"><FONT STYLE="font-variant: small-caps">(</FONT>Address
of principal executive offices<FONT STYLE="font-variant: small-caps">)</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Registrant&rsquo;s telephone number, including
area code:<B> (505) 563-5828</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left">Check the appropriate box below if the Form 8-K
filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left">&nbsp;</P>

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    <TD STYLE="width: 5%; text-align: left"><FONT STYLE="font-family: Wingdings 2">&#163;</FONT></TD>
    <TD STYLE="width: 95%; text-align: left">Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left"><FONT STYLE="font-family: Wingdings 2">&#163;</FONT></TD>
    <TD STYLE="text-align: left">Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left"><FONT STYLE="font-family: Wingdings 2">&#163;</FONT></TD>
    <TD STYLE="text-align: left">Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left"><FONT STYLE="font-family: Wingdings 2">&#163;</FONT></TD>
    <TD STYLE="text-align: left">Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))</TD></TR>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>FORWARD-LOOKING STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">Certain statements contained
in this Current Report on Form 8-K constitute &ldquo;forward-looking statements.&rdquo; These statements, identified by words such
as &ldquo;plan,&rdquo; &ldquo;anticipate,&rdquo; &ldquo;believe,&rdquo; &ldquo;estimate,&rdquo; &ldquo;should,&rdquo; &ldquo;expect&rdquo;
and similar expressions include our expectations and objectives regarding our future financial position, operating results and
business strategy. These statements reflect the current views of management with respect to future events and are subject to risks,
uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially
different from those described in the forward-looking statements. Such risks and uncertainties include those set forth in this
Current Report on Form 8-K. We do not intend to update the forward-looking information to reflect actual results or changes in
the factors affecting such forward-looking information. We advise you to carefully review the reports and documents we file from
time to time with the Securities and Exchange Commission (the &ldquo;SEC&rdquo;), particularly our Annual Reports on Form 10-K,
our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">As used in this report,
the terms &ldquo;we,&rdquo; &ldquo;us,&rdquo; &ldquo;our,&rdquo; and the &ldquo;Company&rdquo; means Lone Star Gold, Inc., unless
otherwise indicated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><U>Glossary of Exploration Terms</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following terms, when used in this report,
have the respective meanings specified below:</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="width: 15%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 85%; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">Exploration</TD>
    <TD STYLE="text-align: justify">Prospecting, trenching, mapping, sampling, geochemistry, geophysics, diamond drilling and other work involved in searching for mineral bodies.</TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">Mine Tailings</TD>
    <TD STYLE="text-align: justify">Refuse remaining after ore has been processed.</TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">Mineral</TD>
    <TD STYLE="text-align: justify">A naturally occurring inorganic element or compound having an orderly internal structure &amp; characteristic chemical composition, crystal form &amp; physical properties.</TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">Mineralization</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Rock containing an undetermined amount of minerals
        or metals.</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Item 1.01 Entry into a Material Definitive
Agreement.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 26, 2012, the Company, acting through
a newly-formed subsidiary, entered into a Joint Venture Agreement (the &ldquo;JV Agreement&rdquo;) with Miguel Angel Jaramillo
Tapia (&ldquo;Jaramillo&rdquo;), a resident of Mexico. Under the JV Agreement, Amiko Kay, S. de R.L. de C.V., a company organized
under the laws of Mexico (the &ldquo;Subsidiary&rdquo; or &ldquo;Amiko Kay&rdquo;), and Jaramillo formed a joint venture to process
1,200,000 tons of mine tailings located in the city of Hidalgo Del Parral in the state of Chihuahua, Mexico (the &ldquo;Tailings&rdquo;),
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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Tailings consist of approximately 1.2
million tons of mine tailings from previous mining activity in the Chihuahua area over the last 100 years or more. Mine tailings
represent the <FONT STYLE="color: black">refuse remaining after ore has been processed. The joint venture between the Subsidiary
and Jaramillo (the &ldquo;Joint Venture&rdquo;) has been formed to re-process the mine tailings heap to extract minerals that were
not extracted during the initial processing, and to market and sell any minerals extracted from the Tailings. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As consideration for Jaramillo&rsquo;s contribution
of the right to process the Tailings to the Joint Venture, the Company paid Jaramillo $25,000 when it signed a letter of intent
for a proposed acquisition of an interest in the Tailings, and another $75,000 when it signed the JV Agreement. The Company agreed
to pay Jaramillo an additional $200,000 no later than January 26, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In addition, the Company or
the Subsidiary will fund an amount up to $1,000,000  (the &ldquo;Work Commitment&rdquo;) for the benefit of the Joint Venture
over its first two years, as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 5%; text-align: justify">(a)</TD>
    <TD STYLE="width: 90%; text-align: justify">$250,000 within the first year of the Joint Venture for the purchase of used heavy equipment, miscellaneous equipment and materials for processing the Tailings, and taxes, permits, and general operating expenses.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">(b)</TD>
    <TD STYLE="text-align: justify">$750,000 within the second year of the Joint Venture for the construction of a heap leach system and floatation plant on the Property.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company may make an additional $250,000
available to the Joint Venture, if additional processing equipment is justified and required to maximize the liberation of precious
metals in the Tailings material.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As further consideration, the Company is obligated
to issue 600,000 shares of the common stock, $0.001 par value, of the Company (&ldquo;Common Stock&rdquo;), to Jaramillo as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"><TR STYLE="vertical-align: top">
<TD STYLE="width: 5%"></TD><TD STYLE="width: 5%">(a)</TD><TD STYLE="text-align: justify; width: 90%"> 100,000 shares of Common Stock immediately upon signing of the JV Agreement.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"><TR STYLE="vertical-align: top">
<TD STYLE="width: 5%"></TD><TD STYLE="width: 5%">(b)</TD><TD STYLE="text-align: justify; width: 90%"> 200,000 shares of Common Stock within 6 months of signing the JV Agreement.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"><TR STYLE="vertical-align: top">
<TD STYLE="width: 5%"></TD><TD STYLE="width: 5%">(c)</TD><TD STYLE="text-align: justify; width: 90%"> 300,000 shares of Common Stock within 12 months of signing the JV Agreement.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The shares of Common Stock will be restricted
shares and carry current and appropriate legends to that effect. Jaramillo executed a Share Issuance Agreement concurrently with
the execution of the JV&nbsp;Agreement, with respect to the shares of Common Stock to be issued under the JV Agreement. See Item
3.02, <I>Unregistered Sales of Equity Securities</I>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Joint Venture will initially process 100-200
tons of the Tailings per day at a processing plant in Parral, a short distance from the Property. The Company plans for the amount
processed to be increased up to 600-800 tons per day during the first year, depending on the Joint Venture&rsquo;s ability to employ
more equipment and workers at the Property and to complete construction of the heap leach system and flotation plant on the Property.
The Company plans to complete the processing plant during 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Jaramillo will manage the day-to-day
affairs associated with processing the Tailings, selling the minerals extracted from the Tailings (&ldquo;Extracted
Minerals&rdquo;), and other activities of the Joint Venture. Jaramillo will pay all expenses associated with the processing
of the Tailings, the sale of any Extracted Minerals from the Tailings, and other obligations of the Joint Venture from the
funds received under the Work Commitment and, eventually, from revenues from operations. All net revenues from the sale of
any Extracted Minerals or other sources, after deducting expenses, will be distributed and paid monthly, with 65% of the net
revenues paid to the Subsidiary and 35% of the net revenues paid to Jaramillo. It is anticipated that the portion to be paid
to the Subsidiary will be paid directly to the Company. Jaramillo will provide a monthly accounting of all revenues and
expenses associated with the operations of the Joint Venture.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Title to the Property and the Tailings will
remain in Jaramillo&rsquo;s name. Jaramillo will be responsible for obtaining all permits, approvals and authorizations associated
with the processing of the Tailings. He is also responsible for causing the Joint Venture to comply with all applicable laws, rules
and regulations, and to maintain insurance on the Property. The Subsidiary will have access to the Property and the Tailings at
all times during the term of the JV Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Subsidiary and Jaramillo will mutually
develop plans and programs to process the Tailings. Jaramillo will prepare a detailed budget setting forth the expenses to be paid
under the Work Commitment, which will be approved by the Subsidiary. Finally, Jaramillo will provide quarterly financial reports
to the Subsidiary.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">If either party defaults under the JV Agreement,
the defaulting party&rsquo;s rights to participate in the Joint Venture will be immediately suspended, and the defaulting party
will have no right to share in the revenues of the Joint Venture until the breach is cured. If the defaulting party is Jaramillo,
then the Subsidiary may perform the duties of Jaramillo under the Agreement. The nondefaulting party may also sue for damages incurred
as a result of the event of default.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The JV Agreement will terminate upon completion
of processing the Tailings, as determined by the Subsidiary in its sole discretion. If Jaramillo materially breaches the JV Agreement,
the Subsidiary may terminate the JV Agreement upon 30 days notice to Jaramillo. Jaramillo has no right to terminate the JV Agreement
before the processing of the Tailings is complete.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Jaramillo provides independent consulting services
to the Company on the La Candelaria project. He acts as Vice President of Exploration on the La Candelaria project (although he
is not an executive officer, or an employee, of the Company, Metales or the Subsidiary). See Item 5, <I>Directors and Officers
&ndash; Significant Employees and Consultants</I>, below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Because we were a shell company before we formed
the Joint Venture, we have included in this Current Report the information on our Company that would be required if we were filing
a general form for registration of securities on Form 10.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>FORM 10 DISCLOSURE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><B>Item 1.&#9;&#9;<U>Business</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><B><I>General Overview</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We are a start-up exploration stage company
in the business of gold and mineral exploration, acquisition and development. Our principal office is located at 6565 Americas
Parkway NE, Suite 200, Albuquerque, New Mexico 87110. Our telephone number is (505) 563-5828.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Lone Star Gold, Inc., formerly known as Keyser
Resources, Inc., was incorporated in the State of Nevada on November 26, 2007.&nbsp;&nbsp;The Company&rsquo;s business was initially
to acquire an option to purchase a mining interest in Canada. After a change in control, the Company explored a merger with another
company in order to obtain an option to purchase several oil and gas leases in the state of Nevada. The then-current management
of the Company decided not to pursue the merger.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On March 29, 2011, the Company underwent another
change in management.&nbsp;&nbsp;On March 29, 2011, Daniel&nbsp;M. Ferris was elected to serve as the sole director.&nbsp;&nbsp;Mr.
Ferris subsequently appointed himself President, Secretary and Treasurer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Following the appointment of Daniel M. Ferris
as sole director and officer of the Company, the Company has changed its focus to that of a company engaged in the acquisition,
exploration and development of gold and silver mining properties. To further reflect this change in business focus, the Company
changed its name to &ldquo;Lone Star Gold, Inc.&rdquo; on June 14, 2011. In addition, to create a more flexible capital structure,
the Company increased the number of authorized shares of its Common Stock from 75,000,000 to 150,000,000 on June 14, 2011. A 20:1
forward stock split was declared to stockholders of record as of June 17, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Agreements</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><U>La Candelaria </U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 31, 2011, Metales HBG, S.A. de C.V.
(&ldquo;Metales&rdquo;), a company organized under the laws of Mexico, was formed, with the Company owning 70% of the issued and
outstanding shares of capital stock. The remaining 30% of the issued and outstanding capital stock of Metales was issued to Homero
Bustillos Gonzalez, a resident of Mexico (&ldquo;Gonzalez&rdquo;). On June 10, 2011, Gonzalez assigned to Metales 8 gold and silver
mining concessions (the &ldquo;Concessions&rdquo;) covering property located in the town of Guachochi, state of Chihuahua, Mexico.
The Concessions cover 800 hectares, or approximately 1,976 acres.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Gonzalez transferred the Concessions to Metales
pursuant to an agreement previously entered into with a third party, American Gold Holdings, Ltd., a company formed under the laws
of the British Virgin Islands (&ldquo;American Gold&rdquo;). American Gold paid Gonzalez an aggregate of $125,000 prior to the
formation of Metales, as required by its agreement with Gonzalez. On August 17, 2011, in connection with its investment in Metales
and the exploration and development of the Concessions, the Company, American Gold, and Gonzalez executed an Assignment Agreement
(the &ldquo;Assignment Agreement&rdquo;) pursuant to which (a) American Gold assigned to the Company all of its right and interest
in and to a Letter of Intent between American Gold and Gonzalez, and an Option to Purchase Agreement between American Gold and
Gonzalez dated January 11, 2011 (the &ldquo;Option Agreement&rdquo;), (b) the Company accepted the assignment of all of the rights
and interest of American Gold in and to the Letter of Intent and the Option Agreement, and (c) the Company assumed all of the duties
and obligations of American Gold under the Letter of Intent and the Option Agreement with Gonzalez. In connection with the execution
of the Assignment Agreement, American Gold released any claims against the Company, Metales or Gonzalez in connection with the
(i) $125,000 payment it made to Gonzalez, (ii) the LOI or Option Agreement, or (iii) the Assignment Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Pursuant to the Assignment Agreement, the Company
has taken or has agreed to take the following actions that are required under the Option Agreement and the Letter of Intent, in
connection with transfer of the Concessions to Metales:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">1.</TD><TD STYLE="text-align: justify">The Company has issued 125,000 shares of its Common Stock to North American Gold Corp, a company
organized under the laws of the Marshall Islands (&ldquo;North American&rdquo;), as repayment of the $125,000 that American Gold
paid Gonzalez in connection with the Option Agreement. The shares were issued to North American in satisfaction of the Company&rsquo;s
obligations under the Assignment Agreement, with the agreement of American Gold.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">2.</TD><TD STYLE="text-align: justify">The Company has issued 300,000 shares of its Common Stock to Gonzalez.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">3.</TD><TD STYLE="text-align: justify">The Company must pay Gonzalez an additional $125,000 before March 11, 2012, of which $25,000 has
been paid.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">4.</TD><TD STYLE="text-align: justify">The Company, either alone or through Metales, is obligated to fund $150,000 per year of development
costs for three years, for a total of $450,000 (the &ldquo;Work Plan&rdquo;).</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Gonzalez retains a 2% Net Smelter Returns Royalty
on the Concessions. In addition, the Company is obligated to issue 1,000,000 shares of its Common Stock to Gonzalez upon the discovery
of a 1 million-ounce equivalent gold deposit, as defined by industry standards as set forth by a recognized exchange in North America.
Metales is obligated to undertake work necessary to bring the existing geological survey on the property up to NJ 43-101 standards.
Finally, the Company has granted anti-dilution rights to Gonzalez, such that the Company must allow Gonzalez the opportunity to
maintain his percentage stock ownership in the Company until the date on which the Company has complied fully with its obligations
under the Option Agreement or January 11, 2014, whichever comes first. Gonzalez has waived the exercise of his anti-dilution rights
with respect to issuances of Common Stock to North American under the Investment Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">If the Company fails to comply with all its
obligations under the Option Agreement before January 11, 2014, the Option Agreement will terminate and the Company will be obligated
to return the Concessions to Gonzalez.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A copy of the Option Agreement was attached
as Exhibit 10.8 to the Company&rsquo;s Quarterly Report on Form 10-Q filed on November 10, 2011. A copy of the Assignment Agreement
was filed as Exhibit 10.3 to the Company&rsquo;s Quarterly Report filed on August 22, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="color: black">The Company advanced
more than $150,000 to Metales in the first year of the Work Plan, satisfying its obligations for that first year. </FONT>On January
10, 2012, the Company and Gonzalez signed an amendment to the Option Agreement extending the date of the final payment of $125,000
to Gonzalez until the earlier of (i) five business days after the Company receives the complete, final results of the core drilling
tests conducted on the Property in November and December 2011, or (ii) March 11, 2012. The Company has pre-paid $25,000 of the
$125,000 to be paid to Gonzales. After paying the remaining $100,000 to Gonzales, the Company, which has paid approximately $50,000
towards the payments required in the second year of the Work Plan, will continue to make payments as required under the Work Plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><U>La Candelaria Concessions </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left">The concession numbers, file numbers, dates of
term, surface area and location of the Concessions are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><U>Mine Concessions &ldquo;La Candelaria&rdquo;</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%; border: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Concession Number: 234759</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">File number: 016/37587</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Term: August 14, 2009- August 13, 2059</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Surface Area: 100 hectares</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Municipality and State: Guachochi, Chihuahua</P></TD>
    <TD STYLE="width: 50%; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Concession Number: 234760</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">File number: 016/37588</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Term: August 14, 2009- August 13, 2059</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Surface Area: 100 hectares</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Municipality and State: Guachochi, Chihuahua</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Concession Number: 234761</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">File number: 016/37589</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Term: August 14, 2009- August 13, 2059</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Surface Area: 100 hectares</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Municipality and State: Guachochi, Chihuahua</P></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Concession Number: 234762</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">File number: 016/37590</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Term: August 14, 2009- August 13, 2059</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Surface Area: 100 hectares</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Municipality and State: Guachochi, Chihuahua</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Concession Number: 235690</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">File number: 016/38785</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Term: February 16, 2010- February 15, 2060</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Surface Area: 100 hectares</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Municipality and State: Guachochi, Chihuahua</P></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Concession Number: 235691</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">File number: 016/38786</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Term: February 16, 2010- February 15, 2060</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Surface Area: 100 hectares</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Municipality and State: Guachochi, Chihuahua</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Concession Number: 235692</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">File number: 016/38787</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Term: February 16, 2010- February 15, 2060</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Surface Area: 100 hectares</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Municipality and State: Guachochi, Chihuahua</P></TD>
    <TD STYLE="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Concession Number: 235693</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">File number: 016/38788</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Term: February 16, 2010- February 15, 2060</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Surface Area: 100 hectares</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Municipality and State: Guachochi, Chihuahua</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The four Concessions numbered 234759 &ndash;
234762 constitute the original &ldquo;La Candelaria&rdquo; project that formed the basis of the Report referenced in &ldquo;History
and Plan of Operation&rdquo; below. However, all references to &ldquo;La Candelaria&rdquo; herein refer to all eight concessions
unless otherwise indicated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Concessions in the La Candelaria project
are without known reserves, as defined under SEC Industry Guide 7, and the exploration program described in &ldquo;History and
Plan of Operation&rdquo; below is exploratory in nature.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The transfer of the Concessions to Metales
must be registered under Mexican law. <FONT STYLE="color: black">The Company has been advised that the transfer of the Concessions
from Gonzalez to Metales is in the process of being registered with the appropriate Mexican authorities.<B> </B>Under Mexican law,
a mining concession gives the holder both exploration and exploitation rights for any minerals found in the property. To maintain
the concession, the holder must pay appropriate taxes, perform assessment work, comply with environmental laws, and file a production
report each year with the appropriate authorities. Foreign individuals and companies wanting to hold concessions must do so through
ownership in a Mexican corporation or through a joint venture, but may not hold mining concessions directly. The Company will rely
on persons associated with Metales, and its employees and consultants in Mexico, to perform all acts necessary to comply with the
legal requirements necessary to maintain the Concessions. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><U>Location and Access</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="color: black">The property covered
by the Concessions is located approximately 125 miles southwest of the city of Chihuahua, Mexico, in the municipality of Guachochi.
The town of Tonachi is approximately 3 miles southeast from the border of the Concessions. Guachochi may be reached by a paved
road from all directions, including from Chihuahua. The road from Guachochi is an established paved road, with the final 20 miles
(36 km) being good quality dirt roads capable of handling trucks and other vehicles. The closest airstrip is located </FONT>just
outside Guachochi, but Chihuahua remains the main hub.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left">A map of the location of the La Candelaria Concessions
is set forth below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><IMG SRC="image_001.jpg" ALT=""></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><IMG SRC="image_001.gif" ALT=""></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><U>History and Plan of Operation</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="color: black">The Company, either
alone or through Metales, is obligated to fund $150,000 per year of development costs for three years, for a total of $450,000
(the &ldquo;Work Plan&rdquo;). The Work Plan consists of a </FONT>3-phase, $450,000 exploration program. Phase 1 exploration work
includes mapping of the property; defining 10-15 core drill targets; and equipping a regional satellite office in Chihuahua to
conduct work programs on the property while providing a secure sample transfer location for delivery to the ALS CHEMEX regional
office/processing plant. The geological team will conduct layers of geo-chemical and geo-physical analysis of the entire property
to increase the Company's geo-chemical data. In addition, the team will isolate surface areas of interest and define any underground
structures and faults systems. Phase 2 exploration work will include drilling the initial targets identified in Phase 1. Phase
3 exploration work will include further defining underground structures in the most economical areas on the property based on previous
drill results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has been involved in Phase 1 exploration,
including gathering as much drill data as possible from the previously identified low sulphidation epithermal system; identifying
drill targets; and beginning initial drilling. In terms of gathering data, existing data and the Company's new data (from approximately
150 rock chip, outcrop, quartz vein and sediment samples) will undergo a geo-physical study and ongoing analysis, including full
spectral results. To date, much of the data has been mapped and processed in Lone Star's Chihuahua office. In November 2011, a
team of Geologists drilled ten drill holes to a depth of approximately 200 meters (650 feet). The Company is waiting for the results
of the drilling from the ALS CHEMEX Laboratories. If results from the initial drilling stage indicate further drilling is justified,
a larger drill unit will be used, capable of reaching depths of 500+ meters (1,600+ feet). The Company currently anticipates drilling
3-4 deep core holes before March 11, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><U>Mineralization</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left">The mineralization is believed to be a low sulphadation
epithermal deposit, likely caused by a nearby magma chamber or caldera. This would be classified as a large low&nbsp;grade deposit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><U>Mine Tailings Project.</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 26, 2012, the Company entered into
the JV Agreement with Jaramillo, pursuant to which the Subsidiary formed a Joint Venture to process the Tailings. See Item 1.01,
<I>Entry into a Material Definitive Agreement</I>, for a description of the terms of the Joint Venture.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><U>Location</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Tailings Property is identified as San
Antonio del Potrero, Mineral de Jal, comprising approximately 75 hectares. It is registered with the San Antonio Ejido and the
city of Hidalgo del Parral. The city of Hidalgo del Parral is located approximately 220 kilometers from the city of Chihuahua,
Mexico. Hidalgo del Parral<B> </B>may be reached by a paved road from all directions, including from Chihuahua. The closest airport
is located in Chihuahua.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left">A map of the location of the Tailings property
is set forth below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><IMG SRC="image_002.jpg" ALT=""><BR STYLE="mso-special-character: line-break">
<BR STYLE="mso-special-character: line-break">
</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><IMG SRC="image_002.gif" ALT=""></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><U>History and Plan of Operation</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has obtained the results of 29
test samples performed by ALS CHEMEX. The samples were taken from the Tailings in late 2010 by the previous owner.&nbsp; The results
of analysis of the test samples showed an average of 113 grams per ton of silver, with additional by-product of gold, zinc, lead
and copper.&nbsp; The Company expects to receive the results of recent testing performed on the Tailings in the next few weeks.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="color: black">We are a start-up,
exploration-stage company engaged in the search for gold and related minerals. </FONT>No proven (measured) or probable (indicated)
reserves have been established with respect to the La Candelaria project or the Tailings project, and the proposed program of exploration
and development for the La Candelaria project and the Tailings project is exploratory in nature.<FONT STYLE="color: black"> There
is no assurance that a commercially viable mineral deposit, or reserve, exists on the property covered by the Concessions or the
Tailings project or can be shown to exist until sufficient and appropriate exploration is done, and a comprehensive evaluation
of such work concludes that the extraction of such a mineral deposit, if found, can be economically and legally feasible.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><U>LOI Regarding the Ocampo Property</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On September 29, 2011, the Company entered
into a letter of intent (the &ldquo;LOI&rdquo;) with Antonio Aguirre Rascon, a resident of Mexico, to acquire a 70% interest in
mining concessions covering approximately 570 hectares located in the municipality of Ocampo in the state of Chihuahua, Mexico
(the &ldquo;Ocampo Property&rdquo;). The LOI was intended to serve as the basis for a definitive agreement to be negotiated between
the parties. If the definitive agreement was not executed within 90 days of the date of the LOI, the LOI would expire unless extended
by mutual agreement of the parties. The Company allowed the LOI to expire by its terms as of December 29, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Competition</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The mining industry is intensely competitive.
Competition includes large established mining companies with substantial capabilities and with greater financial and technical
resources than we have. As a result of this competition, we may be unable to acquire additional attractive mining claims or financing
on terms we consider acceptable. We also compete with other mining companies in the recruitment and retention of qualified managerial
and technical employees. If we are unable to successfully compete for financing or for qualified employees, our exploration and
development programs may be slowed down or suspended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Compliance with Governmental Regulation</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company is committed to complying with
all governmental and environmental regulations applicable to the Company, its properties and its business. Permits from a variety
of regulatory authorities are required for many aspects of mine operation. The Company relies on its consultants in Mexico to obtain
and maintain all permits, authorizations and approvals necessary or desirable to maintain our business and properties. The Company
has been informed that it has the necessary permits and approvals to proceed with the operation of the Tailings joint venture,
including a preliminary approval for the construction of a plant on the Tailings Property.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Employees</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Currently, the sole employee of the Company
is Daniel M. Ferris, our President, Treasurer, Secretary and sole director. Mr. Ferris is employed under an Employment Agreement,
which is described more fully in Item 5, <I>Directors and Executive Officers.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We engage independent contractors and consultants
from time to time to consult with our geologic and exploration program. See Item 5, <I>Directors and Executive Officers.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Subsidiaries</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our Company has two subsidiaries. The
Company owns 70% of the issued and outstanding shares of stock of Metales. The Company owns 99% of the issued and outstanding
membership interests of Amiko Kay. Miguel Robles, the Company&rsquo;s attorney in Mexico, owns a 1% membership interest to
satisfy Mexican law requirements for there being at least two owners. The Company intends to enter into an agreement with
Mr.&nbsp;Robles regarding voting and other matters related to his minority interest. Both Metales and Amiko Key are companies
organized under the laws of Mexico.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"><IMG SRC="image_003.gif" ALT=""></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><I>Intellectual Property</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left">We do not own any patents or trademarks.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><B>Item 1A. &#9;<U>Risk Factors</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">An investment in the Common Stock involves
a high degree of risk. In addition to the other information in this Report, the following risk factors should be considered carefully
in evaluating the Company and our business. We have sought to identify what we believe to be the most significant risks to our
business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have
identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment
decision with respect to our Common Stock. If you decide to buy our Common Stock, you should be able to afford a complete loss
of your investment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>The Company is an exploration stage company
with a history of operating losses and expects to continue to realize losses in the near future.&nbsp;&nbsp;The Company currently
has no operations that are producing revenue, and currently relies on investments by third parties to fund its business.&nbsp;&nbsp;Even
when the Company begins to generate revenues from operations, the Company may not become profitable or be able to sustain profitability.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company is an exploration stage company,
and since inception, the Company has incurred significant net losses.&nbsp;&nbsp;The Company has reported a net loss of $1,084,986
from the date of inception through September 30, 2011.&nbsp;&nbsp;The Company expects to continue to incur net losses and negative
cash flow in the near future, and we will continue to experience losses for at least as long as it takes our Company to generate
revenue by selling Extracted Minerals from the Tailings, or through its mining operations.&nbsp;The size of these losses will depend,
in large part, on whether the Company finds gold or other minerals in its properties and is able to extract and sell the minerals
in a profitable manner.&nbsp;&nbsp;To date, the Company has not had any operating revenues, nor has it found any minerals or developed
any mineral deposits.&nbsp;&nbsp;Because the Company does not yet have a revenue stream resulting from sales or other operations,
there can be no assurance that the Company will achieve material revenues in the future.&nbsp;&nbsp;&nbsp;Should the Company achieve
a level of revenues that make it profitable, there is no assurance the Company can maintain or increase profitability levels in
the future. <FONT STYLE="color: black">An investment in the Common Stock involves a high degree of risk. In addition to the other
information in this Report, the following risk factors should be considered carefully in evaluating the Company and our business.
If you decide to buy our securities, you should be able to afford a complete loss of your investment.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>There is substantial doubt as to whether
we will continue operations. If we discontinue operations, you could lose your investment.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following factors raise substantial doubt
regarding the ability of our business to continue as a going concern: (i) the losses we incurred since our inception; (ii) our
lack of operating revenues since inception through the date of this Current Report; and (iii) our dependence on the sale of equity
securities to continue in operation. We have signed an Investment Agreement with a third party, North American Gold, for up to
$15,000,000 through sales of our Common Stock. However, the investor has the option to refuse to fund any request for investment
if market conditions are not favorable. We anticipate that we will incur increased expenses without realizing enough revenues from
operations. We therefore expect to incur significant losses in the foreseeable future. The financial statements do not include
any adjustments that might result from the uncertainty about our ability to continue our business. If we are unable to obtain additional
financing from outside sources and eventually produce enough revenues, we may be forced to curtail or cease our operations. If
this happens, you could lose all or part of your investment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Our lack of any operating history makes
it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We do not have any material operating history,
which makes it impossible to evaluate our business on the basis of historical operations.&nbsp;&nbsp;Furthermore, the Company has
pursued the business of mineral exploration and development for a short time, and thus our business carries both known and unknown
risks. As a consequence, our past results may not be indicative of future results. Although this is true for any business, it is
particularly true for us because of our lacking any material operating history.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>The Company recently underwent two separate
changes in management, and the current management had no experience in mining or mineral exploration prior to joining the Company.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company underwent a change in management
in November 2010 and again in March 2011. The new director and sole executive officer of the Company was not previously an employee
of or otherwise involved in the management of the Company. While Mr. Ferris has prior business experience, he had no prior experience
in mining or mineral exploration or development before joining the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Together, two of our stockholders have
the ability to significantly influence any matters to be decided by the stockholders, which may prevent or delay a change in control
of our company.</I> &nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Mr. Ferris and one other stockholder currently
own approximately 34.5% of our common stock on a fully diluted basis, as a group<B>.&nbsp;&nbsp;</B>As a result, they could exert
considerable influence over the outcome of any corporate matter submitted to our stockholders for approval, including the election
of directors and any transaction that might cause a change in control, such as a merger or acquisition.&nbsp;&nbsp;Any stockholders
in favor of a matter that is opposed by these two stockholders would have to obtain a significant number of votes to overrule the
collective votes of Mr. Ferris and the other principal stockholder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>We may conduct further offerings in the
future in which case investors' shareholdings will be diluted.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-size: 10pt">Since our inception,
we have relied on sales of our common stock and warrants to fund our operations. The Investment Agreement grants North American
Gold the ability to buy a substantial number of shares of Common Stock of the Company in a series of private placement transactions
at a price that is at a discount to the market price. In addition</FONT><FONT STYLE="color: black">, <FONT STYLE="font-size: 10pt">under
the Option Agreement</FONT>, <FONT STYLE="font-size: 10pt">the Company must allow Gonzalez the opportunity to maintain his percentage
stock ownership in the Company until the date on which the Company has complied fully with its obligations under the Option Agreement
or January 11, 2014, whichever comes first</FONT>. <FONT STYLE="font-size: 10pt">Finally, Jaramillo is entitled to 600,000 shares
of Common Stock as partial consideration under the JV Agreement. </FONT></FONT>We may conduct further equity offerings in the future
to finance our current projects or to finance subsequent projects that we decide to undertake. If Common Stock is issued in return
for additional funds, the price per share could be lower than that paid by our current stockholders.&nbsp;&nbsp;We anticipate continuing
to rely on equity sales of our common stock in order to fund our business operations. If we issue additional stock, investors'
percentage interests in us will be diluted. The result of this could reduce the value of current investors' stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Because the SEC imposes additional sales
practice requirements on brokers who deal in our shares which are penny stocks, some brokers may be unwilling to trade them. This
means that you may have difficulty reselling your shares and this may cause the price of the shares to decline.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A penny stock is generally a stock that is
not listed on a national securities exchange or NASDAQ, is listed in the &quot;pink sheets&quot; or on the OTC Bulletin Board,
has a price per share of less than $5.00, and is issued by a company with net tangible assets less than $5 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The penny stock trading rules impose additional
duties and responsibilities upon broker-dealers and salespersons effecting purchase and sale transactions in Common Stock and other
equity securities, including determination of the purchaser's investment suitability, delivery of certain information and disclosures
to the purchaser, and receipt of a specific purchase agreement before effecting the purchase transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Many broker-dealers will not effect transactions
in penny stocks, except on an unsolicited basis, in order to avoid compliance with the penny stock trading rules. In the event
our Common Stock becomes subject to the penny stock trading rules:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 11%; text-align: right">&#9679;&nbsp;&nbsp;</TD>
    <TD STYLE="width: 89%; text-align: justify">such rules may materially limit or restrict the ability to resell our Common Stock, and</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">&#9679;&nbsp;&nbsp;</TD>
    <TD STYLE="text-align: justify">the liquidity typically associated with other publicly traded equity securities may not exist.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Because of the significant restrictions on
trading penny stocks, a public market may never emerge for our securities. If this happens, you may never be able to publicly sell
your shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>We do not intend to pay dividends and
there will be fewer ways in which you can make a gain on any investment in us.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We have never paid any cash dividends and currently
do not intend to pay any dividends for the foreseeable future. Because we do not intend to declare dividends, any gain on an investment
in us will need to come through appreciation of the stock&rsquo;s price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>The Company holds the Concessions through
a Mexican subsidiary, Metales, in which it owns a 70% interest. Therefore, the Company&rsquo;s ability to realize revenues from
the La Candelaria project will depend in part upon the payment of dividends by Metales and thus is dependent on Mexican corporate
and other law. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As a US company, Lone Star Gold cannot hold
the Concessions directly. Instead, Mexican law requires that a company formed in Mexico own the Concessions. The Company has invested
in Metales in order to comply with this law. Therefore, Metales must comply with Mexican laws regarding the declaration and payment
of dividends in order to distribute profits to its stockholders, including the Company. If it fails to do so, the Company could
fail to realize revenues from the project and you could lose all or part of your investment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><U>Risks Relating to Mining Activities</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>We have no known mineral reserves and
we may not find any gold or, if we find gold, it may not be in economic quantities. If we fail to find any gold or if we are unable
to find gold in economic quantities, we will have to suspend operations.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The chance of finding gold, silver or other
mineral reserves on any individual parcel of land is almost infinitesimal. It is not uncommon to spend millions of dollars on a
potential project, complete many phases of exploration and still not obtain reserves that can be economically exploited. Therefore,
the chances of the Company finding economically viable mineral reserves are remote.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We have no known mineral reserves. Even if
the Company finds gold or silver deposits, it may not be of sufficient quantity to warrant recovery. Additionally, even if the
Company finds gold or silver deposits in sufficient quantity to warrant recovery, it ultimately may not be recoverable. Finally,
even if any gold or silver is recoverable, we may be unable to recover at a profit. Failure to locate deposits in economically
recoverable quantities will cause us to cease operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>We face a high risk of business failure
because of the unique difficulties and uncertainties inherent in mineral exploration ventures.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Potential investors should be aware of the
difficulties generally encountered by new mineral exploration companies and their high rate of failure. The likelihood of success
must be considered in light of the problems, expenses, difficulties, complications and delays that we may encounter in our mining
activities. These potential problems may lead to additional costs and expenses that exceed current estimates. Problems such as
unusual or unexpected formations and other adverse conditions often result in unsuccessful exploration efforts. If the results
of our exploration do not reveal viable commercial mineralization, we may decide to abandon the Concessions and acquire new properties
for exploration. The acquisition of additional properties will depend on whether we possess sufficient capital resources at the
time. If no funding is available, we may be forced to abandon our mining operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Tailings may fail to yield Extracted Minerals
in amounts or grades that are sufficient to produce a steady source of revenue to the Joint Venture. If the Joint Venture fails
to produce sufficient revenue, we may lose all amounts invested in the Joint Venture.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Because of the inherent dangers involved
in mineral exploration, there is a risk that we may incur liability or damages as we conduct our business.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The search for valuable minerals involves numerous
hazards. As a result, we may become subject to liability for such hazards, including pollution, cave-ins and other hazards against
which we cannot insure or against which we may elect not to insure. The payment of such liabilities may have a material adverse
effect on our financial position.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>We may not have access to all of the
supplies and materials we need to explore our properties, which could delay or suspend our operations.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Competition and unforeseen limited sources
of supplies in the industry or in the region in which we operate could result in occasional spot shortages of supplies, such as
explosives, and certain equipment such as bulldozers and excavators. If we cannot find the products and equipment we need, we will
have to suspend our exploration plans until we do find the products and equipment we need.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>We face intense competition in the mining
industry. We will have to compete for financing and for qualified managerial and technical employees.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The mining industry is intensely competitive.
Competition includes large established mining companies with substantial capabilities and with greater financial and technical
resources than we have. As a result of this competition, we may be unable to acquire additional attractive mining claims or financing
on terms we consider acceptable. We also compete with other mining companies in the recruitment and retention of qualified managerial
and technical employees. If we are unable to successfully compete for financing or for qualified employees, our exploration and
development programs may be slowed down or suspended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Our properties are located in Mexico
and are subject to changes in Mexican political conditions and government regulations. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Concessions and Tailings are located in
Mexico. In the past, Mexico has been subject to political and social instability. Change and uncertainty in Mexico could lead to
changes in existing government regulations affecting mineral exploration and mining. Our business activities in Mexico may be adversely
affected by changing governmental regulations relating to the mining industry. More generally, shifts in political conditions may
increase the cost of conducting our business or maintaining our properties. Finally, Mexico&rsquo;s status as a developing country
may make it more difficult to obtain required financing for our projects.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Our business operations may be adversely
affected by social and political unrest in Chihuahua. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our business operations could be negatively
impacted if Chihuahua or other areas of Mexico experiences a period of social and political unrest. Our exploration and construction
program in La Candelaria, or the processing of the Tailings, could be interrupted if we are unable to hire qualified personnel
or if we are denied access to our properties. We may be required to make additional expenditures to provide increased security
in order to protect our property or personnel located at our sites. Significant delays in exploration or increases in expenditures
will likely have a material adverse effect on our financial condition and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>We require substantial funds merely to
determine if mineral reserves exist on our Concessions.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Any potential development and production of
minerals on our Concessions depends upon the results of exploration programs, feasibility studies and the recommendations of qualified
engineers and geologists. Such activities require substantial funding. Before deciding to explore for, and then produce or develop,
mineral reserves, we must consider several significant factors, including, but not limited to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 8%; text-align: justify">&bull;</TD>
    <TD STYLE="width: 92%; text-align: justify">Costs of bringing the property into production;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&bull;</TD>
    <TD STYLE="text-align: justify">Availability and costs of financing;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&bull;</TD>
    <TD STYLE="text-align: justify">Ongoing costs of production;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&bull;</TD>
    <TD STYLE="text-align: justify">Market prices for the products to be produced;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&bull;</TD>
    <TD STYLE="text-align: justify">Environmental compliance regulations and restraints; and</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&bull;</TD>
    <TD STYLE="text-align: justify">Political climate and/or governmental regulation and control.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>There is no assurance that Extracted
Minerals from the Tailings will be produced in amounts that will make the Joint Venture commercially viable.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The 1.2 million tons of Tailings located on
the Property must be processed at a plant operated by a third party to determine whether any gold, silver or other minerals may
be extracted. There is no assurance that any valuable minerals will be extracted after processing. Even if valuable minerals are
extracted from the Tailings, there is no assurance that they will be in sufficient quantities, or of sufficient grades, to allow
the processing to be commercially viable for the Company. If we cannot make a profit by processing the Tailings, the Joint Venture
may fail, and we may lose our investment in the Joint Venture. The failure of the Joint Venture to provide a source of current
revenue to the Company may also force us to abandon or curtail our other operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>The Assignment Agreement, and the Option
Agreement underlying the Assignment Agreement, obligates the Company to fund certain exploration costs under the Work Plan, and
to make certain payments to Gonzalez. If we fail to satisfy those obligations, Gonzalez could demand a return of the Concessions.
</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Under the terms of the Option Agreement, if
the Company fails to comply with its obligations to make expenditures under the Work Plan and to pay $125,000 to Gonzalez before
January 11, 2014, the Option Agreement will terminate and the Company will be obligated to return the Concessions to Gonzalez.
If this occurs, Company may be forced to cease operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Since most of our expenses are paid in
Mexican pesos, and our outside investors fund the Company in United States dollars, we are subject to adverse changes in currency
values that may adversely affect our results of operations.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our operations in the future could be affected
by changes in the value of the Mexican peso against the United States dollar. The appreciation of non-U.S. dollar currencies such
as the peso against the U.S. dollar increases expenses and the cost of purchasing capital assets in U.S. dollar terms in Mexico,
which can adversely impact our operating results and cash flows. Conversely, depreciation of the non-U.S. dollar currencies usually
decreases operating costs and capital asset purchases in U.S. dollar terms. The value of cash and cash equivalents denominated
in foreign currencies also fluctuates with changes in currency exchange rates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Our ability to develop our property in
Mexico is subject to the rights of the Ejido (local inhabitants) to use the surface for agricultural purposes</I></B><I>.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our ability to mine minerals is subject to
maintaining satisfactory arrangements with the <I>Ejido</I> for access and surface disturbances. <I>Ejidos</I> are groups of local
inhabitants who were granted rights to conduct agricultural activities on the property. We must negotiate and maintain a satisfactory
arrangement with these residents in order to disturb or discontinue their rights to farm. While we have successfully negotiated
and signed such agreements related to the Joint Venture, our ability to maintain these agreements or consummate similar agreements
for new projects could impair or impede our ability to successfully mine the properties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Item 2.&#9; <U>Financial Statements</U>.&#9;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We incorporate herein by reference the information
set forth in Part II, Item 7, &ldquo;Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operations&rdquo;
of our Annual Report on Form 10-K filed with the Commission on April 22, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We incorporate herein by reference the information
set forth in Part I, Item 2, &ldquo;Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operations&rdquo;
of our Quarterly Report on Form 10-Q filed with the Commission on November 10, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Item 3.&#9;<U>Properties.</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company leases its office at 6565 Americas
Parkway NE, Suite 200, Albuquerque, New Mexico.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company owns a 70% interest in the Concessions
through its ownership interest in Metales. See the description of the Concessions in Item 1, &ldquo;Our Business&rdquo;, above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Subsidiary has entered into the Joint Venture
to process the Tailings and sell any Extracted Minerals from the Tailings. See the description of the Tailings in Item 1, &ldquo;Our
Business&rdquo;, above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Item 4. &#9;<U>Security Ownership of Certain
Beneficial Owners and Management</U>.&#9;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table sets forth the ownership,
as of January 26, 2012, of our Common Stock by our sole officer and director, and by each person known to us who is the beneficial
owner of more than 5% of any class of our securities. Information with respect to beneficial owners who are not officers and directors
is to the best of our knowledge. As of January 26, 2011, there were 66,791,068 common shares issued and outstanding. On January
13, 2012, the Company entered into separate agreements with John G. Rhoden and Daniel M. Ferris, providing for the Company to
redeem 7,500,000 shares of Common Stock previously held by Mr. Ferris, and 22,500,000 shares of Common Stock previously held by
Mr. Rhoden (the &ldquo;Rhoden Redemption Shares&rdquo;). The Company disclosed the redemption transactions in its Current Report
on Form 8-K filed with the Commission on January 18, 2012. The Company&rsquo;s transfer agent has not received the Rhoden Redemption
Shares for cancellation, but the Company&rsquo;s books and records and this Current Report reflects the cancellation of those
shares. All persons named have sole voting and investment power with respect to the shares, except as otherwise noted.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 53%; border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Name and Address of</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Beneficial Owner</B></P></TD>
    <TD STYLE="width: 3%; padding-bottom: 1.1pt; text-align: justify; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 28%; border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Number of Shares Owned</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Beneficially</B></P></TD>
    <TD STYLE="width: 3%; padding-bottom: 1.1pt; text-align: justify; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 13%; border-bottom: black 1pt solid; text-align: center; font-weight: bold">Percentage Ownership</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Daniel M. Ferris</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">President, Secretary, Treasurer and Director</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">6565 Americas Parkway NE, Suite 200</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Albuquerque, NM 87110</P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center">7,500,000</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center">8.64%</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">5% or more beneficial owners:</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">John Rhoden</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">22,500,000</P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">25.92%&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify; font-weight: bold">All executive officers and directors as a group</TD>
    <TD STYLE="text-align: justify; font-weight: bold">&nbsp;</TD>
    <TD STYLE="text-align: center; font-weight: bold">7,500,000</TD>
    <TD STYLE="text-align: justify; font-weight: bold">&nbsp;</TD>
    <TD STYLE="text-align: center; font-weight: bold">8.64%</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Item 5.&#9;<U>Directors and Executive Officers</U>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Directors and Officers serving our Company
are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 27%; border-bottom: black 1pt solid; text-align: justify">&nbsp;<B>Name</B></TD>
    <TD STYLE="width: 3%; padding-bottom: 1.1pt; text-align: justify; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 11%; border-bottom: black 1pt solid; text-align: center; font-weight: bold">Age</TD>
    <TD STYLE="width: 3%; padding-bottom: 1.1pt; text-align: justify; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 56%; border-bottom: black 1pt solid; text-align: justify; font-weight: bold">Positions Held</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">Daniel M. Ferris</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center">30</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">President, Secretary, Treasurer &nbsp;and Director</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The sole director named above will serve until
the next annual meeting of the stockholders. Thereafter, directors will be elected for one-year terms at the annual stockholders'
meeting.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Officers will hold their positions at the pleasure
of the board of directors. On July 12, 2011, the Company entered into an Employment Agreement with Mr. Ferris regarding his position
as President of the Company. The Employment Agreement has an initial term of three years, and after the initial term will automatically
renew for successive one-year periods until terminated in accordance with the Agreement (the &ldquo;Term&rdquo;). The Employment
Agreement may be terminated voluntarily by either party upon 30 days written notice, upon Mr. Ferris&rsquo; death or disability,
by mutual agreement at the end of the Term, or for &ldquo;cause&rdquo; by the Company. The Employment Agreement defines &ldquo;cause&rdquo;
as the willful and continued failure by Ferris to perform his duties under the Employment Agreement, conviction of a felony, or
engaging in conduct that is contrary to the best interests of the Company or adversely affects the Company&rsquo;s reputation<B>.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Biographical Information &ndash; Daniel
M. Ferris</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Mr. Ferris was elected sole director and President,
Secretary and Treasurer of the Company on March 29, 2011. Mr. Ferris&rsquo; career began in public relations. Mr. Ferris was a
senior publicist at Freud Communications. After leaving Freud Communications, he began his own public relations and corporate strategy
firm, Magnum Communications. Magnum Communications assisted clients in Europe with public relations, financing arrangements, and
recruitment. Mr. Ferris&rsquo; association with Magnum Communications ended in January 2009. Recently, Mr. Ferris has assisted
fund managers with raising funds for a diamond project in the Democratic Republic of Congo. He also serves as a consultant for
LCI, which is affiliated with Caesar&rsquo;s Palace Group. Mr. Ferris&rsquo; position at the Company represents his primary business
activity. Mr. Ferris currently resides in London.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Significant Employees and Consultants</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We have no employees, other than our President,
Mr. Ferris.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has retained several consultants.
Miguel Angel Jaramillo Tapia (&ldquo;Jaramillo&rdquo;) is an independent consultant who is acting as the Company&rsquo;s Vice President
of Exploration (although he is not an executive officer or employee of the Company). Jaramillo, a professional geologist, has worked
on numerous mining projects in the Sierra Madre area of Mexico, in which the Concessions are located. He has worked as a consultant
performing economic feasibility studies for mining companies in the area. He presently owns his own geo-exploration company focused
on mineral mining and analysis of investment projects. Jaramillo also has a working knowledge of the local area surrounding the
Concessions. The Company does not have a written consulting contract with Jaramillo.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has entered into a joint venture
with Jaramillo to process the Tailings. See Item 1.01, <I>Entry into a Material Definitive Agreement</I>. He is entitled to 35%
of the net revenue from the Tailings Joint Venture under the Joint Venture Agreement. Jaramillo is paid for his services as a consultant
on the La Candelaria project from the Work Plan for La Candelaria.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-size: 10pt; color: black">Adam
Whyte is a consultant for the Company based in Mexico, who performs consulting services pursuant to a Consulting Agreement dated
October 31, 2011. </FONT>&nbsp;<FONT STYLE="font-size: 10pt">The contract calls for Mr. Whyte to receive $15,000 upon execution
of the agreement, $5,000 per month through the term of the agreement, and a one-time grant of 150,000 restricted shares of the
Company's Common Stock. The term of agreement is one year and it will automatically renew if not cancelled in writing 30 days prior
to the end of the annual period.&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company employs the services of engineering
consultants. On September 27, 2011, the Company signed a contract with Ralph R. Sacrison, P.E., of the firm Sacrison Engineering,
to perform engineering consulting and related services. The Company will pay Sacrison Engineering a monthly retainer of $1,000
per month, which will cover 2 full days of services. The contact may be terminated at any time by either party.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has an informal agreement with
Dr. Mike Seeger, of MX Mining Capital Advisors, to provide up to two days&rsquo; advice via phone, email or Skype for $1,500 per
month. The engagement is at-will.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For our accounting requirements we use the
services of an accounting firm to assist in the preparation of our financial statements. We also have employed legal counsel in
connection with our securities reporting requirements and other matters related to our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Item 6.&#9;<U>Executive Compensation.</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We incorporate herein by reference the information
set forth in Part III, Item 11, &ldquo;Executive Compensation&rdquo;, of our Annual Report on Form 10-K filed with the Commission
on April 22, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Mr. Ferris replaced Mr. Vollmers as sole director
and officer on March 29, 2011. Under the terms of his Employment Agreement, as compensation for serving as President of the Company,
Mr. Ferris will be paid a base salary of $120,000 per year during the Term. Mr. Ferris will also be entitled to receive 3,000,000
shares of Common Stock, which will vest in three equal increments over the first 3 years of the Term. Therefore, Mr. Ferris will
receive 1,000,000 shares of Common Stock on July 12 of each of the years 2012, 2013, 2014. If Mr. Ferris&rsquo; employment is terminated
for &ldquo;cause&rdquo;, or if he voluntarily resigns, then he would not be entitled to receive any shares of Common Stock that
have not vested as of the date of resignation or termination. If Mr. Ferris&rsquo; employment is terminated for any other reason,
he would receive the full 3,000,000 shares of Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Item 7. <U>Certain Relationships and Related
Transactions, and Director Independence. </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We incorporate herein by reference the information
set forth in Part III, Item 13, &ldquo;Certain Relationships and Related Transactions, and Director Independence&rdquo;, of our
Annual Report on Form 10-K filed with the Commission on April 22, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Director Independence</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Quotations for the Company&rsquo;s common stock
are entered on the Over-the-Counter Bulletin Board inter-dealer quotation system, which does not have director independence requirements.
For purposes of determining director independence, the Company applied the definitions set out in NASDAQ Rule 4200(a)(15). Under
NASDAQ Rule 4200(a)(15), a director is not considered to be independent if he or she is also an executive officer or employee of
the corporation. As a result, the Company does not have any independent directors. Our sole director, Daniel M. Ferris, is also
an executive officer of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Item 8.&#9;<U>Legal Proceedings</U>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-size: 10pt">We are not aware
of any pending or threatened legal proceedings which involve the Company or any of our properties</FONT>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Item 9.&#9;<U>Market Price of and Dividends
on the Registrant&rsquo;s Common Equity and Related Stockholder Matters.</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Since June 20, 2011, shares of our common stock
have been quoted on the OTCBB under the symbol &ldquo;LSTG&rdquo;, following the change in name of the Company to &ldquo;Lone Star
Gold, Inc.&rdquo; From <FONT STYLE="color: black">October 27, 2010 </FONT>to June 20, 2011, our shares of Common Stock were quoted
on the OTCBB under the symbol &ldquo;KYSR&rdquo;. <FONT STYLE="color: black">Our stock began trading on October 27, 2010 at $0.155
and the stock price did not change until July 2011. Accordingly, there are no high and low bids for the Common Stock before
the third quarter 2011. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">The following table summarizes
the high and low historical closing prices reported by the OTCBB Historical Data Service for the periods indicated. OTCBB quotations
reflect inter-dealer prices, without retail mark-up, mark down or commissions, so those quotes may not represent actual transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 70%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center; border-bottom: Black 1pt solid">High</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center; border-bottom: Black 1pt solid">Low</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 56%; text-align: justify">Third Quarter 2011</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1.40</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">0.80</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify">Fourth Quarter 2011</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1.21</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.60</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">First Quarter 2012 (through January 25)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.70</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.39</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We had approximately 11 record holders of our
common stock as of January 25, 2012, according to the books of our transfer agent. A significant number of shares are held in street
name, so the Company believes that the number of beneficial owners is higher<B>. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">There are no restrictions in our articles of
incorporation or bylaws that restrict us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring
dividends where, after giving effect to the distribution of the dividend:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR>
    <TD STYLE="width: 5%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 5%; vertical-align: top; text-align: justify">1.</TD>
    <TD STYLE="width: 90%; text-align: justify">we would not be able to pay our debts as they become due in the usual course of business; or</TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">2.</TD>
    <TD STYLE="text-align: justify">our total assets would be less than the sum of our total liabilities, plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-size: 10pt">We have not declared
any dividends. We do not plan to declare any dividends in the foreseeable future</FONT>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Equity Compensation Plans</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Other than the shares of Common Stock to be
issued to Mr. Ferris under his Employment Agreement, as described more fully in Item 6, &ldquo;Executive Compensation&rdquo; above,
we have no equity compensation program including no stock option plan, and none are planned for the foreseeable future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Item 10.&#9;<U>Recent Sales of Unregistered
Securities</U>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We incorporate herein by reference the information
set forth in Part II, Item 5,&ldquo;Recent Sales of Unregistered Securities&rdquo;, of our Annual Report on Form 10-K filed with
the Commission on April 22, 2011, and on April 15, 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We incorporate herein by reference the information
set forth in Part II, Item 2,&ldquo;Recent Sales of Unregistered Securities&rdquo;, of our Quarterly Report on Form 10-Q filed
with the Commission on August 22, 2011, and our Quarterly Report on Form 10-Q filed with the Commission on November 10, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We incorporate herein by reference the information
set forth in our Current Report on Form 8-K filed with the Commission on December 27, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 26, 2012, the Company agreed to
issue 100,000 shares of Common Stock to Jaramillo as partial consideration pursuant to the JV Agreement. See Item 3.02, <I>Unregistered
Sales of Equity Securities</I>.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Item 11.&#9;<U>Description of Registrant&rsquo;s
Securities to be Registered</U>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Authorized Capital Stock</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Amended and Restated Articles of Incorporation
of the Company (the &ldquo;Articles of Incorporation&rdquo;) give the Company the authority to issue 150,000,000 shares of common
stock, par value $0.001 per share (the &ldquo;Common Stock&rdquo;). As of January 25, 2011, there were 66,791,068 shares of Common
Stock issued and outstanding, after giving effect to the redemption transactions discussed in Item 4 above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Common Stock</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Holders of Common Stock are entitled to one
vote for each share held of record on all matters submitted to a vote of the stockholders of the Company. There are no cumulative
voting rights. Accordingly, holders of a majority of the shares of Common Stock entitled to vote in any election of directors may
elect all of the directors standing for election. Holders of Common Stock are entitled to receive dividends, if any, ratably as
may be declared from time to time by the Board of Directors out of funds legally available for the declaration of dividends. Upon
the liquidation, dissolution or winding up of the Company, the holders of the Common Stock are entitled to receive our net assets
available after the payment of all liabilities pro rata in accordance with the number of Common Shares owned. Holders of Common
Stock have no preemptive, subscription, redemption or conversion rights, and there are no redemption or sinking fund provisions
applicable to the Common Stock. Each outstanding share of Common Stock is fully authorized, fully paid and non-assessable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Warrants</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has issued 100,000 warrants for
the purchase of Common Stock to North American Gold Corp. in a private placement. The Warrant entitles North American Gold to purchase
a share of Common Stock at $1.20 at any time until June 30, 2014. See Item 10, &ldquo;<I>Recent Sales of Unregistered Securities</I>&rdquo;
above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Anti-Dilution</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Under the terms of the Assignment Agreement,
the Company has granted anti-dilution rights to Gonzalez, such that the Company must allow Gonzalez the opportunity to maintain
his percentage stock ownership in the Company until the date on which the Company has complied fully with its obligations under
the Option Agreement or January 11, 2014, whichever comes first. See Item I, &ldquo;Business-Agreements&rdquo; above. Gonzalez
has waived his anti-dilution rights as to the Investment Agreement. As of the date of the issuance of shares of Common Stock to
Gonzalez under the Assignment Agreement, Gonzalez owned .25% of the issued and outstanding shares of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Stock Split</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A 20:1 forward stock split was declared to
stockholders of record as of June 17, 2011, pursuant to which each shares of Common Stock was reclassified and changed into 20
new shares of Common Stock. Each Stockholder was entitled to receive a certificate or certificates representing 20 shares for every
one share of Common Stock, upon delivery of his stock certificate to the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Applicable Provisions of Nevada State Law</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Nevada&rsquo;s Control Share Acquisition Act
(Nevada Revised Statutes 78.378 -78.3793) prohibits an acquirer, under certain circumstances, from voting shares of a corporation&rsquo;s
stock after crossing specific threshold ownership percentages, unless the acquirer obtains the approval of the issuing corporation&rsquo;s
stockholders. The first such threshold is the acquisition of at least one-fifth but less than one-third of the outstanding voting
power. The Company may become subject to Nevada&rsquo;s Control Share Acquisition Act if it has 200 or more stockholders of record
at least 100 of whom are residents of the State of Nevada and does business in the State of Nevada directly or through an affiliated
corporation. Currently, we do not have more than 200 stockholders of record, nor do we conduct business in the State of Nevada.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We may be subject to Nevada&rsquo;s Combination
with Interested Stockholders Statute (Nevada Revised Statutes 78.411 -78.444) which prohibits an &ldquo;interested stockholder&rdquo;
from entering into a &ldquo;combination&rdquo; with the corporation, unless certain conditions are met. An &ldquo;interested stockholder&rdquo;
is a person who, together with affiliates and associates, beneficially owns (or within the prior three years, did beneficially
own) 10 percent or more of the corporation&rsquo;s voting stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Transfer Agent</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The transfer agent of the Common Stock is Corporate
Stock Transfer, Inc., 3200 Cherry Creek South Drive, Suite 430, Denver, Colorado 80209. Its telephone number is (303) 282-4800.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Item 12.&#9;<U>Indemnification of Directors
and Officers</U>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Articles of Incorporation provide that
the Company may indemnify each person who is or was a director or officer of the Company to the fullest extent permissible under
applicable Nevada law. The Board of Directors, in its sole discretion, shall have the power, on behalf of the Company, to indemnify
such other persons for whom indemnification is permitted by such provisions of the Nevada Revised Statutes (&ldquo;NRS&rdquo;),
to the fullest extent permissible thereunder, and may purchase such liability indemnification and/or other similar insurance as
the Board of Directors from time to time shall deem necessary or appropriate, in its sole discretion. &#9;The power to indemnify
and/or obtain insurance is cumulative of any other power of the Board of Directors and/or any rights to which such a person or
entity may be entitled by law, the Articles of Incorporation and/or Bylaws of the Company, contract, other agreement, vote or otherwise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Pursuant to the Company&rsquo;s Bylaws, the
Company shall indemnify any person who was or is a party or is threatened to be made a party to any proceeding, by reason of the
fact that such person is or was a legal representative or a director or officer or agent of the Company, or is or was serving at
the request of the Company or for its benefit as a director or officer of another corporation, or as its representative in partnership,
joint venture, trust or other enterprise, against expenses, liability and loss (including attorneys&rsquo; fees, judgment, fines
and amounts paid in settlement) reasonably included and suffered by such person in connection therewith. The expenses of officers
and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the Company as they are incurred
and in advance of the final disposition of the&nbsp;action, suit or proceeding upon receipt of an undertaking by or on behalf of
the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not
entitled to be indemnified by the corporation.&nbsp;&nbsp;&nbsp;Such right of indemnification shall not be exclusive of any other
right to indemnification by any bylaw, agreement, vote of stockholders, provision of law or otherwise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Bylaws permit the Company to purchase and
maintain insurance on behalf of any person who is or was a director or officer of the Company, or is or was serving at the request
of the Company as a director or officer of another corporation, or as its representative in a partnership, joint venture, trust
or other enterprise against any liability asserted against such person and incurred in any such capacity or arising out of such
status, whether or not the Company would have the power to indemnify such person.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">NRS Sections 78.7502 and 78.751 permit the
Company to indemnify its directors, officers, employees and agents, against any liabilities (including attorneys fees and costs),
incurred by reason of the fact that such person was a director, officer, employee or agent of the Company. The director or officer
being indemnified must have conducted himself or herself in good faith and reasonably believe that his or her conduct was in, or
not opposed to, the best interests of the Company. In a criminal action, the director, officer, employee or agent must not have
had reasonable cause to believe that his or her conduct was unlawful. The Company may advance expenses to an indemnified party
if the director or officer affirms in writing that her or she believes that the standards have been met, and will personally repay
the expenses advances if it is determined that such officer or director did not meet the standards.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Item 13.&#9;<U>Financial Statements and Supplementary
Data</U>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We incorporate herein by reference the information
set forth in Part II, Item 8, &ldquo;Financial Statements and Supplementary Data&rdquo;, of our Annual Report on Form 10-K filed
with the Commission on April 22, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We incorporate herein by reference the information
set forth in Part I, Item 1, &ldquo;Financial Statements&rdquo;, of our Quarterly Report on Form 10-Q filed with the Commission
on May 12, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We incorporate herein by reference the information
set forth in Part I, Item 1, &ldquo;Financial Statements,&rdquo; of our Quarterly Report on Form 10-Q filed with the Commission
on August 22, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We incorporate herein by reference the information
set forth in Part I, Item 1, &ldquo;Financial Statements,&rdquo; of our Quarterly Report on Form 10-Q filed with the Commission
on November 10, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Item 14.&#9;<U>Changes in and Disagreements
with Accountants on Accounting and Financial Disclosure</U>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We incorporate herein by reference the information
set forth in Part II, Item 9, &ldquo;Changes in and Disagreements with Accountants on Accounting and Financial Disclosure,&rdquo;
of our Annual Report on Form 10-K filed with the Commission on April 22, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Item 15.&#9;<U>Financial Statements and Exhibits</U>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">See Item 9.01 below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Item 3.02 Unregistered Sales of Equity Securities.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 26, 2012, the Company agreed to
issue 100,000 shares of Common Stock to Jaramillo as partial consideration pursuant to the JV Agreement. See Item 1.01, <I>Entry
into a Material Definitive Agreement</I>. The issuance of the shares of Common Stock to Jaramillo will not be registered under
the Securities Act of 1933. Instead, the issuance will be completed in reliance upon an exemption from registration pursuant to
Regulation S promulgated under the Securities Act of 1933. Jaramillo has represented to the Company that he is not a &ldquo;US
person&rdquo; as defined in Regulation S, and that he is acquiring the securities issued by the Company for investment purposes
only and not with a view towards distribution. The shares of Common Stock issued to Jaramillo will be &ldquo;restricted securities&rdquo;
and any subsequent resale or transfer of those shares will have to be made pursuant to an exemption from or registration under
the Securities Act of 1933, as amended.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Item 5.06 Change in Shell Company Status.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">Prior to entering into
the JV Agreement, the Company was a &ldquo;shell company&rdquo; as defined in Rule 12b-2 of the Securities Exchange Act of 1934,
as amended. Management of the Company has determined that the Company ceased to be a shell company as a result of its joint venture
to process the Tailings, which the Company anticipates will be a source of revenue within a reasonable period of time. The Joint
Venture, together with the La Candelaria Concessions and the various corporate activities that the Company will now be able to
undertake in pursuit of gold and other mineral exploration and mining, substantially expands the business activity of the Company
in Mexico.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt/200% Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"><B>Item 9.01 Financial Statements
and Exhibits.</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt/200% Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(a)</TD><TD STYLE="text-align: justify">Financial statements. Not applicable.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt/200% Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(b)</TD><TD STYLE="text-align: justify">Exhibits.</TD></TR></TABLE>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 15%; border-bottom: black 1pt solid; text-align: justify; font-weight: bold">Exhibit&nbsp;No.</TD>
    <TD STYLE="width: 2%; padding-bottom: 1.1pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 83%; border-bottom: black 1pt solid; text-align: justify; font-weight: bold">Exhibit&nbsp;Description</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">3.1</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Certificate of Incorporation of Keyser Resources Incorporated (incorporated by reference to the Company&rsquo;s Registration Statement on Form S-1 filed on May 28, 2009)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-align: justify">3.2</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">By-laws of Keyser Resources Incorporated (incorporated by reference to the Company&rsquo;s Registration Statement on Form S-1 filed on May 28, 2009)</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">3.3</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Amended and Restated Articles of Incorporation (incorporated by reference to the Company&rsquo;s 10-Q filed on May 12, 2011)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-align: justify">10.1</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Declaration of Trust (incorporated by reference to the Company&rsquo;s Registration Statement on Form S-1 filed on May 28, 2009)</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">10.2</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Option Agreement with Bearclaw Capital Corporation&nbsp; (incorporated by reference to the Company&rsquo;s Registration Statement on Form S-1 filed on May 28, 2009)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">10.3</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Assignment Agreement by and among the Company, American Gold Holdings, Ltd. and Homero Bustillos Gonzalez dated as of June 10, 2011 (incorporated by reference to the Company&rsquo;s 10-Q filed August 22, 2011)</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">10.4</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Employment Agreement dated July 12, 2011, between the Company and Dan M. Ferris (incorporated by reference to the Company&rsquo;s 10-Q filed August 22, 2011)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-align: justify">10.6</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Investment Agreement between North American Gold and the Company dated August 29, 2011(incorporated by reference to the Company&rsquo;s Current Report on Form 8-K filed on August 29, 2011)</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">10.7</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Press Release dated August 29, 2011(incorporated by reference to the Company&rsquo;s Current Report on Form 8-K filed on August 29, 2011)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-align: justify">10.8</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Option Agreement between American Gold Holdings, Ltd. and Homero Bustillos Gonzales dated January 11, 2011 (incorporated by reference to the Company&rsquo;s Quarterly Report on Form 10-Q filed on November 10, 2011)</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">10.9</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Consulting Agreement between the Company and Adam Whyte dated October 31, 2011 (incorporated by reference to the Company&rsquo;s Quarterly Report on Form 10-Q filed on November 10, 2011)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-align: justify">10.10</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">First Amendment to the Investment Agreement dated November 9, 2011, between the Company and North American Gold Corp (incorporated by reference to the Company&rsquo;s Quarterly Report on Form 10-Q filed on November 10, 2011)</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">10.11</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Amendment Agreement dated January 10, 2012, between the Company and Homero Bustillos Gonzales (incorporated by reference to the Company&rsquo;s Current Report on Form 8-K filed on January 17, 2012)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-align: justify">10.12</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Joint Venture Agreement between Amiko Kay, S. de R.L. de C.V. and Miguel Angel Jaramillo
    Tapia dated January 26, 2012 (filed herewith).</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">99.1</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Press Release, dated August 11, 2011 (filed August 26, 2011, as amended by the Company&rsquo;s Form 8-K/A filed on October 18, 2011)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-align: justify">99.2</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Press Release, dated August 19, 2011 (filed August 26, 2011, as amended by the Company&rsquo;s Form 8-K/A filed on October 18, 2011)</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">99.3</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Press Release dated September 12, 2011 (filed September 12, 2011)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-align: justify">99.4</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Press Release, dated September 19, 2011 (filed on September 19, 2011)</TD></TR>
</TABLE>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>SIGNATURE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.</P>

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<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">Date: February 1, 2012</TD>
    <TD COLSPAN="3" STYLE="text-align: justify"><B>LONE STAR GOLD, INC.</B></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; width: 50%">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 3%">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 32%">&nbsp;</TD>
    <TD STYLE="width: 15%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">By:</TD>
    <TD STYLE="text-align: justify; border-bottom: Black 1pt solid; padding-left: 11pt"><I>/s/ Daniel M. Ferris</I></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify"></TD>
    <TD STYLE="text-align: justify; padding-left: 11pt">Daniel M. Ferris</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify"></TD>
    <TD STYLE="text-align: justify; padding-left: 11pt">President, Treasurer and Secretary</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
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[{"type": "8-K", "sequence": "1", "filename": "v301039_8-k.htm", "description": "CURRENT REPORT", "secsgml_size_bytes": 170318}]
{"company-data": {"conformed-name": "Lone Star Gold, Inc.", "cik": "0001464865", "assigned-sic": "1000", "irs-number": "000000000", "state-of-incorporation": "NV", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-54509", "film-number": "12563318"}, "business-address": {"street1": "6565 AMERICAS PARKWAY NE", "street2": "SUITE 200", "city": "ALBUQUERQUE", "state": "NM", "zip": "87110", "phone": "(505) 563-5828"}, "mail-address": {"street1": "6565 AMERICAS PARKWAY NE", "street2": "SUITE 200", "city": "ALBUQUERQUE", "state": "NM", "zip": "87110"}, "former-company": {"former-conformed-name": "Keyser Resources, Inc.", "date-changed": "20090526"}}
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
______________________
Date of Report (Date of earliest event reported):
February 1, 2012 (January 26, 2012)
LONE STAR GOLD, INC.
(
Exact
Name of Registrant as Specified in its Charter
)
Nevada
333-159561
45-2578051
(State of Incorporation)
(Commission File Number)
(IRS Employer Identification No.)
6565 Americas Parkway NE, Suite 200, Albuquerque,
NM 87110
(
Address
of principal executive offices
)
Registrant's telephone number, including
area code:
(505) 563-5828
Check the appropriate box below if the Form 8-K
filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
£
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
£
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
£
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
£
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
1
FORWARD-LOOKING STATEMENTS
Certain statements contained
in this Current Report on Form 8-K constitute "forward-looking statements." These statements, identified by words such
as "plan," "anticipate," "believe," "estimate," "should," "expect"
and similar expressions include our expectations and objectives regarding our future financial position, operating results and
business strategy. These statements reflect the current views of management with respect to future events and are subject to risks,
uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially
different from those described in the forward-looking statements. Such risks and uncertainties include those set forth in this
Current Report on Form 8-K. We do not intend to update the forward-looking information to reflect actual results or changes in
the factors affecting such forward-looking information. We advise you to carefully review the reports and documents we file from
time to time with the Securities and Exchange Commission (the "SEC"), particularly our Annual Reports on Form 10-K,
our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K.
As used in this report,
the terms "we," "us," "our," and the "Company" means Lone Star Gold, Inc., unless
otherwise indicated.
Glossary of Exploration Terms
The following terms, when used in this report,
have the respective meanings specified below:
Exploration
Prospecting, trenching, mapping, sampling, geochemistry, geophysics, diamond drilling and other work involved in searching for mineral bodies.
Mine Tailings
Refuse remaining after ore has been processed.
Mineral
A naturally occurring inorganic element or compound having an orderly internal structure & characteristic chemical composition, crystal form & physical properties.
Mineralization
Rock containing an undetermined amount of minerals
        or metals.
Item 1.01 Entry into a Material Definitive
Agreement.
On January 26, 2012, the Company, acting through
a newly-formed subsidiary, 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, S. de R.L. de C.V., a company organized
under the laws of Mexico (the "Subsidiary" or "Amiko Kay"), and Jaramillo formed a joint venture to process
1,200,000 tons of 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 Tailings consist of approximately 1.2
million tons of mine tailings from previous mining activity in the Chihuahua area over the last 100 years or more. Mine tailings
represent the
refuse remaining after ore has been processed. The joint venture between the Subsidiary
and Jaramillo (the "Joint Venture") has been formed to re-process the mine tailings heap to extract minerals that were
not extracted during the initial processing, and to market and sell any minerals extracted from the Tailings.
As consideration for Jaramillo's contribution
of the right to process the Tailings to the Joint Venture, the Company paid Jaramillo $25,000 when it signed a letter of intent
for a proposed acquisition of an interest in the Tailings, and another $75,000 when it signed the JV Agreement. The Company agreed
to pay Jaramillo an additional $200,000 no later than January 26, 2013.
2
In addition, the Company or
the Subsidiary will fund an amount up to $1,000,000  (the "Work Commitment") for the benefit of the Joint Venture
over its first two years, as follows:
(a)
$250,000 within the first year of the Joint Venture for the purchase of used heavy equipment, miscellaneous equipment and materials for processing the Tailings, and taxes, permits, and general operating expenses.
(b)
$750,000 within the second year of the Joint Venture for the construction of a heap leach system and floatation plant on the Property.
The Company may make an additional $250,000
available to the Joint Venture, if additional processing equipment is justified and required to maximize the liberation of precious
metals in the Tailings material.
As further consideration, the Company is obligated
to issue 600,000 shares of the common stock, $0.001 par value, of the Company ("Common Stock"), to Jaramillo as follows:
(a)
100,000 shares of Common Stock immediately upon signing of the JV Agreement.
(b)
200,000 shares of Common Stock within 6 months of signing the JV Agreement.
(c)
300,000 shares of Common Stock within 12 months of signing the JV Agreement.
The shares of Common Stock will be restricted
shares and carry current and appropriate legends to that effect. Jaramillo executed a Share Issuance Agreement concurrently with
the execution of the JV Agreement, with respect to the shares of Common Stock to be issued under the JV Agreement. See Item
3.02,
Unregistered Sales of Equity Securities
.
The Joint Venture will initially process 100-200
tons of the Tailings per day at a processing plant in Parral, a short distance from the Property. The Company plans for the amount
processed to be increased up to 600-800 tons per day during the first year, depending on the Joint Venture's ability to employ
more equipment and workers at the Property and to complete construction of the heap leach system and flotation plant on the Property.
The Company plans to complete the processing plant during 2013.
Jaramillo will manage the day-to-day
affairs associated with processing the Tailings, selling the minerals extracted from the Tailings ("Extracted
Minerals"), and other activities of the Joint Venture. Jaramillo will pay all expenses associated with the processing
of the Tailings, the sale of any Extracted Minerals from the Tailings, and other obligations of the Joint Venture from the
funds received under the Work Commitment and, eventually, from revenues from operations. All net revenues from the sale of
any Extracted Minerals or other sources, after deducting expenses, will be distributed and paid monthly, with 65% of the net
revenues paid to the Subsidiary and 35% of the net revenues paid to Jaramillo. It is anticipated that the portion to be paid
to the Subsidiary will be paid directly to the Company. Jaramillo will provide a monthly accounting of all revenues and
expenses associated with the operations of the Joint Venture.
Title to the Property and the Tailings will
remain in Jaramillo's name. Jaramillo will be responsible for obtaining all permits, approvals and authorizations associated
with the processing of the Tailings. He is also responsible for causing the Joint Venture to comply with all applicable laws, rules
and regulations, and to maintain insurance on the Property. The Subsidiary will have access to the Property and the Tailings at
all times during the term of the JV Agreement.
3
The Subsidiary and Jaramillo will mutually
develop plans and programs to process the Tailings. Jaramillo will prepare a detailed budget setting forth the expenses to be paid
under the Work Commitment, which will be approved by the Subsidiary. Finally, Jaramillo will provide quarterly financial reports
to the Subsidiary.
If either party defaults under the JV Agreement,
the defaulting party's rights to participate in the Joint Venture will be immediately suspended, and the defaulting party
will have no right to share in the revenues of the Joint Venture until the breach is cured. If the defaulting party is Jaramillo,
then the Subsidiary may perform the duties of Jaramillo under the Agreement. The nondefaulting party may also sue for damages incurred
as a result of the event of default.
The JV Agreement will terminate upon completion
of processing the Tailings, as determined by the Subsidiary in its sole discretion. If Jaramillo materially breaches the JV Agreement,
the Subsidiary may terminate the JV Agreement upon 30 days notice to Jaramillo. Jaramillo has no right to terminate the JV Agreement
before the processing of the Tailings is complete.
Jaramillo provides independent consulting services
to the Company on the La Candelaria project. He acts as Vice President of Exploration on the La Candelaria project (although he
is not an executive officer, or an employee, of the Company, Metales or the Subsidiary). See Item 5,
Directors and Officers
– Significant Employees and Consultants
, below.
Because we were a shell company before we formed
the Joint Venture, we have included in this Current Report the information on our Company that would be required if we were filing
a general form for registration of securities on Form 10.
FORM 10 DISCLOSURE
Item 1.
Business
General Overview
We are a start-up exploration stage company
in the business of gold and mineral exploration, acquisition and development. Our principal office is located at 6565 Americas
Parkway NE, Suite 200, Albuquerque, New Mexico 87110. Our telephone number is (505) 563-5828.
Lone Star Gold, Inc., formerly known as Keyser
Resources, Inc., was incorporated in the State of Nevada on November 26, 2007.  The Company's business was initially
to acquire an option to purchase a mining interest in Canada. After a change in control, the Company explored a merger with another
company in order to obtain an option to purchase several oil and gas leases in the state of Nevada. The then-current management
of the Company decided not to pursue the merger.
On March 29, 2011, the Company underwent another
change in management.  On March 29, 2011, Daniel M. Ferris was elected to serve as the sole director.  Mr.
Ferris subsequently appointed himself President, Secretary and Treasurer.
Following the appointment of Daniel M. Ferris
as sole director and officer of the Company, the Company has changed its focus to that of a company engaged in the acquisition,
exploration and development of gold and silver mining properties. To further reflect this change in business focus, the Company
changed its name to "Lone Star Gold, Inc." on June 14, 2011. In addition, to create a more flexible capital structure,
the Company increased the number of authorized shares of its Common Stock from 75,000,000 to 150,000,000 on June 14, 2011. A 20:1
forward stock split was declared to stockholders of record as of June 17, 2011.
4
Agreements
La Candelaria
On May 31, 2011, Metales HBG, S.A. de C.V.
("Metales"), a company organized under the laws of Mexico, was formed, with the Company owning 70% of the issued and
outstanding shares of capital stock. The remaining 30% of the issued and outstanding capital stock of Metales was issued to Homero
Bustillos Gonzalez, a resident of Mexico ("Gonzalez"). On June 10, 2011, Gonzalez assigned to Metales 8 gold and silver
mining concessions (the "Concessions") covering property located in the town of Guachochi, state of Chihuahua, Mexico.
The Concessions cover 800 hectares, or approximately 1,976 acres.
Gonzalez transferred the Concessions to Metales
pursuant to an agreement previously entered into with a third party, American Gold Holdings, Ltd., a company formed under the laws
of the British Virgin Islands ("American Gold"). American Gold paid Gonzalez an aggregate of $125,000 prior to the
formation of Metales, as required by its agreement with Gonzalez. On August 17, 2011, in connection with its investment in Metales
and the exploration and development of the Concessions, the Company, American Gold, and Gonzalez executed an Assignment Agreement
(the "Assignment Agreement") pursuant to which (a) American Gold assigned to the Company all of its right and interest
in and to a Letter of Intent between American Gold and Gonzalez, and an Option to Purchase Agreement between American Gold and
Gonzalez dated January 11, 2011 (the "Option Agreement"), (b) the Company accepted the assignment of all of the rights
and interest of American Gold in and to the Letter of Intent and the Option Agreement, and (c) the Company assumed all of the duties
and obligations of American Gold under the Letter of Intent and the Option Agreement with Gonzalez. In connection with the execution
of the Assignment Agreement, American Gold released any claims against the Company, Metales or Gonzalez in connection with the
(i) $125,000 payment it made to Gonzalez, (ii) the LOI or Option Agreement, or (iii) the Assignment Agreement.
Pursuant to the Assignment Agreement, the Company
has taken or has agreed to take the following actions that are required under the Option Agreement and the Letter of Intent, in
connection with transfer of the Concessions to Metales:
1.
The Company has issued 125,000 shares of its Common Stock to North American Gold Corp, a company
organized under the laws of the Marshall Islands ("North American"), as repayment of the $125,000 that American Gold
paid Gonzalez in connection with the Option Agreement. The shares were issued to North American in satisfaction of the Company's
obligations under the Assignment Agreement, with the agreement of American Gold.
2.
The Company has issued 300,000 shares of its Common Stock to Gonzalez.
3.
The Company must pay Gonzalez an additional $125,000 before March 11, 2012, of which $25,000 has
been paid.
4.
The Company, either alone or through Metales, is obligated to fund $150,000 per year of development
costs for three years, for a total of $450,000 (the "Work Plan").
Gonzalez retains a 2% Net Smelter Returns Royalty
on the Concessions. In addition, the Company is obligated to issue 1,000,000 shares of its Common Stock to Gonzalez upon the discovery
of a 1 million-ounce equivalent gold deposit, as defined by industry standards as set forth by a recognized exchange in North America.
Metales is obligated to undertake work necessary to bring the existing geological survey on the property up to NJ 43-101 standards.
Finally, the Company has granted anti-dilution rights to Gonzalez, such that the Company must allow Gonzalez the opportunity to
maintain his percentage stock ownership in the Company until the date on which the Company has complied fully with its obligations
under the Option Agreement or January 11, 2014, whichever comes first. Gonzalez has waived the exercise of his anti-dilution rights
with respect to issuances of Common Stock to North American under the Investment Agreement.
5
If the Company fails to comply with all its
obligations under the Option Agreement before January 11, 2014, the Option Agreement will terminate and the Company will be obligated
to return the Concessions to Gonzalez.
A copy of the Option Agreement was attached
as Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q filed on November 10, 2011. A copy of the Assignment Agreement
was filed as Exhibit 10.3 to the Company's Quarterly Report filed on August 22, 2011.
The Company advanced
more than $150,000 to Metales in the first year of the Work Plan, satisfying its obligations for that first year.
On January
10, 2012, the Company and Gonzalez signed an amendment to the Option Agreement extending the date of the final payment of $125,000
to Gonzalez until the earlier of (i) five business days after the Company receives the complete, final results of the core drilling
tests conducted on the Property in November and December 2011, or (ii) March 11, 2012. The Company has pre-paid $25,000 of the
$125,000 to be paid to Gonzales. After paying the remaining $100,000 to Gonzales, the Company, which has paid approximately $50,000
towards the payments required in the second year of the Work Plan, will continue to make payments as required under the Work Plan.
La Candelaria Concessions
The concession numbers, file numbers, dates of
term, surface area and location of the Concessions are as follows:
Mine Concessions "La Candelaria"
Concession Number: 234759
File number: 016/37587
Term: August 14, 2009- August 13, 2059
Surface Area: 100 hectares
Municipality and State: Guachochi, Chihuahua
Concession Number: 234760
File number: 016/37588
Term: August 14, 2009- August 13, 2059
Surface Area: 100 hectares
Municipality and State: Guachochi, Chihuahua
Concession Number: 234761
File number: 016/37589
Term: August 14, 2009- August 13, 2059
Surface Area: 100 hectares
Municipality and State: Guachochi, Chihuahua
Concession Number: 234762
File number: 016/37590
Term: August 14, 2009- August 13, 2059
Surface Area: 100 hectares
Municipality and State: Guachochi, Chihuahua
Concession Number: 235690
File number: 016/38785
Term: February 16, 2010- February 15, 2060
Surface Area: 100 hectares
Municipality and State: Guachochi, Chihuahua
Concession Number: 235691
File number: 016/38786
Term: February 16, 2010- February 15, 2060
Surface Area: 100 hectares
Municipality and State: Guachochi, Chihuahua
Concession Number: 235692
File number: 016/38787
Term: February 16, 2010- February 15, 2060
Surface Area: 100 hectares
Municipality and State: Guachochi, Chihuahua
Concession Number: 235693
File number: 016/38788
Term: February 16, 2010- February 15, 2060
Surface Area: 100 hectares
Municipality and State: Guachochi, Chihuahua
6
The four Concessions numbered 234759 –
234762 constitute the original "La Candelaria" project that formed the basis of the Report referenced in "History
and Plan of Operation" below. However, all references to "La Candelaria" herein refer to all eight concessions
unless otherwise indicated.
The Concessions in the La Candelaria project
are without known reserves, as defined under SEC Industry Guide 7, and the exploration program described in "History and
Plan of Operation" below is exploratory in nature.
The transfer of the Concessions to Metales
must be registered under Mexican law.
The Company has been advised that the transfer of the Concessions
from Gonzalez to Metales is in the process of being registered with the appropriate Mexican authorities.
Under Mexican law,
a mining concession gives the holder both exploration and exploitation rights for any minerals found in the property. To maintain
the concession, the holder must pay appropriate taxes, perform assessment work, comply with environmental laws, and file a production
report each year with the appropriate authorities. Foreign individuals and companies wanting to hold concessions must do so through
ownership in a Mexican corporation or through a joint venture, but may not hold mining concessions directly. The Company will rely
on persons associated with Metales, and its employees and consultants in Mexico, to perform all acts necessary to comply with the
legal requirements necessary to maintain the Concessions.
Location and Access
The property covered
by the Concessions is located approximately 125 miles southwest of the city of Chihuahua, Mexico, in the municipality of Guachochi.
The town of Tonachi is approximately 3 miles southeast from the border of the Concessions. Guachochi may be reached by a paved
road from all directions, including from Chihuahua. The road from Guachochi is an established paved road, with the final 20 miles
(36 km) being good quality dirt roads capable of handling trucks and other vehicles. The closest airstrip is located
just
outside Guachochi, but Chihuahua remains the main hub.
7
A map of the location of the La Candelaria Concessions
is set forth below:
History and Plan of Operation
The Company, either
alone or through Metales, is obligated to fund $150,000 per year of development costs for three years, for a total of $450,000
(the "Work Plan"). The Work Plan consists of a
3-phase, $450,000 exploration program. Phase 1 exploration work
includes mapping of the property; defining 10-15 core drill targets; and equipping a regional satellite office in Chihuahua to
conduct work programs on the property while providing a secure sample transfer location for delivery to the ALS CHEMEX regional
office/processing plant. The geological team will conduct layers of geo-chemical and geo-physical analysis of the entire property
to increase the Company's geo-chemical data. In addition, the team will isolate surface areas of interest and define any underground
structures and faults systems. Phase 2 exploration work will include drilling the initial targets identified in Phase 1. Phase
3 exploration work will include further defining underground structures in the most economical areas on the property based on previous
drill results.
The Company has been involved in Phase 1 exploration,
including gathering as much drill data as possible from the previously identified low sulphidation epithermal system; identifying
drill targets; and beginning initial drilling. In terms of gathering data, existing data and the Company's new data (from approximately
150 rock chip, outcrop, quartz vein and sediment samples) will undergo a geo-physical study and ongoing analysis, including full
spectral results. To date, much of the data has been mapped and processed in Lone Star's Chihuahua office. In November 2011, a
team of Geologists drilled ten drill holes to a depth of approximately 200 meters (650 feet). The Company is waiting for the results
of the drilling from the ALS CHEMEX Laboratories. If results from the initial drilling stage indicate further drilling is justified,
a larger drill unit will be used, capable of reaching depths of 500+ meters (1,600+ feet). The Company currently anticipates drilling
3-4 deep core holes before March 11, 2012.
8
Mineralization
The mineralization is believed to be a low sulphadation
epithermal deposit, likely caused by a nearby magma chamber or caldera. This would be classified as a large low grade deposit.
Mine Tailings Project.
On January 26, 2012, the Company entered into
the JV Agreement with Jaramillo, pursuant to which the Subsidiary formed a Joint Venture to process the Tailings. See Item 1.01,
Entry into a Material Definitive Agreement
, for a description of the terms of the Joint Venture.
Location
The Tailings Property is identified as San
Antonio del Potrero, Mineral de Jal, comprising approximately 75 hectares. It is registered with the San Antonio Ejido and the
city of Hidalgo del Parral. The city of Hidalgo del Parral is located approximately 220 kilometers from the city of Chihuahua,
Mexico. Hidalgo del Parral
may be reached by a paved road from all directions, including from Chihuahua. The closest airport
is located in Chihuahua.
A map of the location of the Tailings property
is set forth below:
9
History and Plan of Operation
The Company has obtained the results of 29
test samples performed by ALS CHEMEX. The samples were taken from the Tailings in late 2010 by the previous owner.  The results
of analysis of the test samples showed an average of 113 grams per ton of silver, with additional by-product of gold, zinc, lead
and copper.  The Company expects to receive the results of recent testing performed on the Tailings in the next few weeks.
We are a start-up,
exploration-stage company engaged in the search for gold and related minerals.
No proven (measured) or probable (indicated)
reserves have been established with respect to the La Candelaria project or the Tailings project, and the proposed program of exploration
and development for the La Candelaria project and the Tailings project is exploratory in nature.
There
is no assurance that a commercially viable mineral deposit, or reserve, exists on the property covered by the Concessions or the
Tailings project or can be shown to exist until sufficient and appropriate exploration is done, and a comprehensive evaluation
of such work concludes that the extraction of such a mineral deposit, if found, can be economically and legally feasible.
LOI Regarding the Ocampo Property
On September 29, 2011, the Company entered
into a letter of intent (the "LOI") with Antonio Aguirre Rascon, a resident of Mexico, to acquire a 70% interest in
mining concessions covering approximately 570 hectares located in the municipality of Ocampo in the state of Chihuahua, Mexico
(the "Ocampo Property"). The LOI was intended to serve as the basis for a definitive agreement to be negotiated between
the parties. If the definitive agreement was not executed within 90 days of the date of the LOI, the LOI would expire unless extended
by mutual agreement of the parties. The Company allowed the LOI to expire by its terms as of December 29, 2011.
Competition
The mining industry is intensely competitive.
Competition includes large established mining companies with substantial capabilities and with greater financial and technical
resources than we have. As a result of this competition, we may be unable to acquire additional attractive mining claims or financing
on terms we consider acceptable. We also compete with other mining companies in the recruitment and retention of qualified managerial
and technical employees. If we are unable to successfully compete for financing or for qualified employees, our exploration and
development programs may be slowed down or suspended.
Compliance with Governmental Regulation
The Company is committed to complying with
all governmental and environmental regulations applicable to the Company, its properties and its business. Permits from a variety
of regulatory authorities are required for many aspects of mine operation. The Company relies on its consultants in Mexico to obtain
and maintain all permits, authorizations and approvals necessary or desirable to maintain our business and properties. The Company
has been informed that it has the necessary permits and approvals to proceed with the operation of the Tailings joint venture,
including a preliminary approval for the construction of a plant on the Tailings Property.
10
Employees
Currently, the sole employee of the Company
is Daniel M. Ferris, our President, Treasurer, Secretary and sole director. Mr. Ferris is employed under an Employment Agreement,
which is described more fully in Item 5,
Directors and Executive Officers.
We engage independent contractors and consultants
from time to time to consult with our geologic and exploration program. See Item 5,
Directors and Executive Officers.
Subsidiaries
Our Company has two subsidiaries. The
Company owns 70% of the issued and outstanding shares of stock of Metales. The Company owns 99% of the issued and outstanding
membership interests of Amiko Kay. Miguel Robles, the Company's attorney in Mexico, owns a 1% membership interest to
satisfy Mexican law requirements for there being at least two owners. The Company intends to enter into an agreement with
Mr. Robles regarding voting and other matters related to his minority interest. Both Metales and Amiko Key are companies
organized under the laws of Mexico.
Intellectual Property
We do not own any patents or trademarks.
Item 1A.
Risk Factors
An investment in the Common Stock involves
a high degree of risk. In addition to the other information in this Report, the following risk factors should be considered carefully
in evaluating the Company and our business. We have sought to identify what we believe to be the most significant risks to our
business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have
identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment
decision with respect to our Common Stock. If you decide to buy our Common Stock, you should be able to afford a complete loss
of your investment.
11
The Company is an exploration stage company
with a history of operating losses and expects to continue to realize losses in the near future.  The Company currently
has no operations that are producing revenue, and currently relies on investments by third parties to fund its business.  Even
when the Company begins to generate revenues from operations, the Company may not become profitable or be able to sustain profitability.
The Company is an exploration stage company,
and since inception, the Company has incurred significant net losses.  The Company has reported a net loss of $1,084,986
from the date of inception through September 30, 2011.  The Company expects to continue to incur net losses and negative
cash flow in the near future, and we will continue to experience losses for at least as long as it takes our Company to generate
revenue by selling Extracted Minerals from the Tailings, or through its mining operations. The size of these losses will depend,
in large part, on whether the Company finds gold or other minerals in its properties and is able to extract and sell the minerals
in a profitable manner.  To date, the Company has not had any operating revenues, nor has it found any minerals or developed
any mineral deposits.  Because the Company does not yet have a revenue stream resulting from sales or other operations,
there can be no assurance that the Company will achieve material revenues in the future.   Should the Company achieve
a level of revenues that make it profitable, there is no assurance the Company can maintain or increase profitability levels in
the future.
An investment in the Common Stock involves a high degree of risk. In addition to the other
information in this Report, the following risk factors should be considered carefully in evaluating the Company and our business.
If you decide to buy our securities, you should be able to afford a complete loss of your investment.
There is substantial doubt as to whether
we will continue operations. If we discontinue operations, you could lose your investment.
The following factors raise substantial doubt
regarding the ability of our business to continue as a going concern: (i) the losses we incurred since our inception; (ii) our
lack of operating revenues since inception through the date of this Current Report; and (iii) our dependence on the sale of equity
securities to continue in operation. We have signed an Investment Agreement with a third party, North American Gold, for up to
$15,000,000 through sales of our Common Stock. However, the investor has the option to refuse to fund any request for investment
if market conditions are not favorable. We anticipate that we will incur increased expenses without realizing enough revenues from
operations. We therefore expect to incur significant losses in the foreseeable future. The financial statements do not include
any adjustments that might result from the uncertainty about our ability to continue our business. If we are unable to obtain additional
financing from outside sources and eventually produce enough revenues, we may be forced to curtail or cease our operations. If
this happens, you could lose all or part of your investment.
Our lack of any operating history makes
it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance.
We do not have any material operating history,
which makes it impossible to evaluate our business on the basis of historical operations.  Furthermore, the Company has
pursued the business of mineral exploration and development for a short time, and thus our business carries both known and unknown
risks. As a consequence, our past results may not be indicative of future results. Although this is true for any business, it is
particularly true for us because of our lacking any material operating history.
12
The Company recently underwent two separate
changes in management, and the current management had no experience in mining or mineral exploration prior to joining the Company.
The Company underwent a change in management
in November 2010 and again in March 2011. The new director and sole executive officer of the Company was not previously an employee
of or otherwise involved in the management of the Company. While Mr. Ferris has prior business experience, he had no prior experience
in mining or mineral exploration or development before joining the Company.
Together, two of our stockholders have
the ability to significantly influence any matters to be decided by the stockholders, which may prevent or delay a change in control
of our company.
Mr. Ferris and one other stockholder currently
own approximately 34.5% of our common stock on a fully diluted basis, as a group
.
As a result, they could exert
considerable influence over the outcome of any corporate matter submitted to our stockholders for approval, including the election
of directors and any transaction that might cause a change in control, such as a merger or acquisition.  Any stockholders
in favor of a matter that is opposed by these two stockholders would have to obtain a significant number of votes to overrule the
collective votes of Mr. Ferris and the other principal stockholder.
We may conduct further offerings in the
future in which case investors' shareholdings will be diluted.
Since our inception,
we have relied on sales of our common stock and warrants to fund our operations. The Investment Agreement grants North American
Gold the ability to buy a substantial number of shares of Common Stock of the Company in a series of private placement transactions
at a price that is at a discount to the market price. In addition
,
under
the Option Agreement
,
the Company must allow Gonzalez the opportunity to maintain his percentage
stock ownership in the Company until the date on which the Company has complied fully with its obligations under the Option Agreement
or January 11, 2014, whichever comes first
.
Finally, Jaramillo is entitled to 600,000 shares
of Common Stock as partial consideration under the JV Agreement.
We may conduct further equity offerings in the future
to finance our current projects or to finance subsequent projects that we decide to undertake. If Common Stock is issued in return
for additional funds, the price per share could be lower than that paid by our current stockholders.  We anticipate continuing
to rely on equity sales of our common stock in order to fund our business operations. If we issue additional stock, investors'
percentage interests in us will be diluted. The result of this could reduce the value of current investors' stock.
Because the SEC imposes additional sales
practice requirements on brokers who deal in our shares which are penny stocks, some brokers may be unwilling to trade them. This
means that you may have difficulty reselling your shares and this may cause the price of the shares to decline.
A penny stock is generally a stock that is
not listed on a national securities exchange or NASDAQ, is listed in the "pink sheets" or on the OTC Bulletin Board,
has a price per share of less than $5.00, and is issued by a company with net tangible assets less than $5 million.
The penny stock trading rules impose additional
duties and responsibilities upon broker-dealers and salespersons effecting purchase and sale transactions in Common Stock and other
equity securities, including determination of the purchaser's investment suitability, delivery of certain information and disclosures
to the purchaser, and receipt of a specific purchase agreement before effecting the purchase transaction.
13
Many broker-dealers will not effect transactions
in penny stocks, except on an unsolicited basis, in order to avoid compliance with the penny stock trading rules. In the event
our Common Stock becomes subject to the penny stock trading rules:
●
such rules may materially limit or restrict the ability to resell our Common Stock, and
●
the liquidity typically associated with other publicly traded equity securities may not exist.
Because of the significant restrictions on
trading penny stocks, a public market may never emerge for our securities. If this happens, you may never be able to publicly sell
your shares.
We do not intend to pay dividends and
there will be fewer ways in which you can make a gain on any investment in us.
We have never paid any cash dividends and currently
do not intend to pay any dividends for the foreseeable future. Because we do not intend to declare dividends, any gain on an investment
in us will need to come through appreciation of the stock's price.
The Company holds the Concessions through
a Mexican subsidiary, Metales, in which it owns a 70% interest. Therefore, the Company's ability to realize revenues from
the La Candelaria project will depend in part upon the payment of dividends by Metales and thus is dependent on Mexican corporate
and other law.
As a US company, Lone Star Gold cannot hold
the Concessions directly. Instead, Mexican law requires that a company formed in Mexico own the Concessions. The Company has invested
in Metales in order to comply with this law. Therefore, Metales must comply with Mexican laws regarding the declaration and payment
of dividends in order to distribute profits to its stockholders, including the Company. If it fails to do so, the Company could
fail to realize revenues from the project and you could lose all or part of your investment.
Risks Relating to Mining Activities
We have no known mineral reserves and
we may not find any gold or, if we find gold, it may not be in economic quantities. If we fail to find any gold or if we are unable
to find gold in economic quantities, we will have to suspend operations.
The chance of finding gold, silver or other
mineral reserves on any individual parcel of land is almost infinitesimal. It is not uncommon to spend millions of dollars on a
potential project, complete many phases of exploration and still not obtain reserves that can be economically exploited. Therefore,
the chances of the Company finding economically viable mineral reserves are remote.
We have no known mineral reserves. Even if
the Company finds gold or silver deposits, it may not be of sufficient quantity to warrant recovery. Additionally, even if the
Company finds gold or silver deposits in sufficient quantity to warrant recovery, it ultimately may not be recoverable. Finally,
even if any gold or silver is recoverable, we may be unable to recover at a profit. Failure to locate deposits in economically
recoverable quantities will cause us to cease operations.
We face a high risk of business failure
because of the unique difficulties and uncertainties inherent in mineral exploration ventures.
Potential investors should be aware of the
difficulties generally encountered by new mineral exploration companies and their high rate of failure. The likelihood of success
must be considered in light of the problems, expenses, difficulties, complications and delays that we may encounter in our mining
activities. These potential problems may lead to additional costs and expenses that exceed current estimates. Problems such as
unusual or unexpected formations and other adverse conditions often result in unsuccessful exploration efforts. If the results
of our exploration do not reveal viable commercial mineralization, we may decide to abandon the Concessions and acquire new properties
for exploration. The acquisition of additional properties will depend on whether we possess sufficient capital resources at the
time. If no funding is available, we may be forced to abandon our mining operations.
14
The Tailings may fail to yield Extracted Minerals
in amounts or grades that are sufficient to produce a steady source of revenue to the Joint Venture. If the Joint Venture fails
to produce sufficient revenue, we may lose all amounts invested in the Joint Venture.
Because of the inherent dangers involved
in mineral exploration, there is a risk that we may incur liability or damages as we conduct our business.
The search for valuable minerals involves numerous
hazards. As a result, we may become subject to liability for such hazards, including pollution, cave-ins and other hazards against
which we cannot insure or against which we may elect not to insure. The payment of such liabilities may have a material adverse
effect on our financial position.
We may not have access to all of the
supplies and materials we need to explore our properties, which could delay or suspend our operations.
Competition and unforeseen limited sources
of supplies in the industry or in the region in which we operate could result in occasional spot shortages of supplies, such as
explosives, and certain equipment such as bulldozers and excavators. If we cannot find the products and equipment we need, we will
have to suspend our exploration plans until we do find the products and equipment we need.
We face intense competition in the mining
industry. We will have to compete for financing and for qualified managerial and technical employees.
The mining industry is intensely competitive.
Competition includes large established mining companies with substantial capabilities and with greater financial and technical
resources than we have. As a result of this competition, we may be unable to acquire additional attractive mining claims or financing
on terms we consider acceptable. We also compete with other mining companies in the recruitment and retention of qualified managerial
and technical employees. If we are unable to successfully compete for financing or for qualified employees, our exploration and
development programs may be slowed down or suspended.
Our properties are located in Mexico
and are subject to changes in Mexican political conditions and government regulations.
The Concessions and Tailings are located in
Mexico. In the past, Mexico has been subject to political and social instability. Change and uncertainty in Mexico could lead to
changes in existing government regulations affecting mineral exploration and mining. Our business activities in Mexico may be adversely
affected by changing governmental regulations relating to the mining industry. More generally, shifts in political conditions may
increase the cost of conducting our business or maintaining our properties. Finally, Mexico's status as a developing country
may make it more difficult to obtain required financing for our projects.
Our business operations may be adversely
affected by social and political unrest in Chihuahua.
Our business operations could be negatively
impacted if Chihuahua or other areas of Mexico experiences a period of social and political unrest. Our exploration and construction
program in La Candelaria, or the processing of the Tailings, could be interrupted if we are unable to hire qualified personnel
or if we are denied access to our properties. We may be required to make additional expenditures to provide increased security
in order to protect our property or personnel located at our sites. Significant delays in exploration or increases in expenditures
will likely have a material adverse effect on our financial condition and results of operations.
15
We require substantial funds merely to
determine if mineral reserves exist on our Concessions.
Any potential development and production of
minerals on our Concessions depends upon the results of exploration programs, feasibility studies and the recommendations of qualified
engineers and geologists. Such activities require substantial funding. Before deciding to explore for, and then produce or develop,
mineral reserves, we must consider several significant factors, including, but not limited to:
•
Costs of bringing the property into production;
•
Availability and costs of financing;
•
Ongoing costs of production;
•
Market prices for the products to be produced;
•
Environmental compliance regulations and restraints; and
•
Political climate and/or governmental regulation and control.
There is no assurance that Extracted
Minerals from the Tailings will be produced in amounts that will make the Joint Venture commercially viable.
The 1.2 million tons of Tailings located on
the Property must be processed at a plant operated by a third party to determine whether any gold, silver or other minerals may
be extracted. There is no assurance that any valuable minerals will be extracted after processing. Even if valuable minerals are
extracted from the Tailings, there is no assurance that they will be in sufficient quantities, or of sufficient grades, to allow
the processing to be commercially viable for the Company. If we cannot make a profit by processing the Tailings, the Joint Venture
may fail, and we may lose our investment in the Joint Venture. The failure of the Joint Venture to provide a source of current
revenue to the Company may also force us to abandon or curtail our other operations.
The Assignment Agreement, and the Option
Agreement underlying the Assignment Agreement, obligates the Company to fund certain exploration costs under the Work Plan, and
to make certain payments to Gonzalez. If we fail to satisfy those obligations, Gonzalez could demand a return of the Concessions.
Under the terms of the Option Agreement, if
the Company fails to comply with its obligations to make expenditures under the Work Plan and to pay $125,000 to Gonzalez before
January 11, 2014, the Option Agreement will terminate and the Company will be obligated to return the Concessions to Gonzalez.
If this occurs, Company may be forced to cease operations.
Since most of our expenses are paid in
Mexican pesos, and our outside investors fund the Company in United States dollars, we are subject to adverse changes in currency
values that may adversely affect our results of operations.
Our operations in the future could be affected
by changes in the value of the Mexican peso against the United States dollar. The appreciation of non-U.S. dollar currencies such
as the peso against the U.S. dollar increases expenses and the cost of purchasing capital assets in U.S. dollar terms in Mexico,
which can adversely impact our operating results and cash flows. Conversely, depreciation of the non-U.S. dollar currencies usually
decreases operating costs and capital asset purchases in U.S. dollar terms. The value of cash and cash equivalents denominated
in foreign currencies also fluctuates with changes in currency exchange rates.
16
Our ability to develop our property in
Mexico is subject to the rights of the Ejido (local inhabitants) to use the surface for agricultural purposes
.
Our ability to mine minerals is subject to
maintaining satisfactory arrangements with the
Ejido
for access and surface disturbances.
Ejidos
are groups of local
inhabitants who were granted rights to conduct agricultural activities on the property. We must negotiate and maintain a satisfactory
arrangement with these residents in order to disturb or discontinue their rights to farm. While we have successfully negotiated
and signed such agreements related to the Joint Venture, our ability to maintain these agreements or consummate similar agreements
for new projects could impair or impede our ability to successfully mine the properties.
Item 2.
Financial Statements
.
We incorporate herein by reference the information
set forth in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations"
of our Annual Report on Form 10-K filed with the Commission on April 22, 2011.
We incorporate herein by reference the information
set forth in Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations"
of our Quarterly Report on Form 10-Q filed with the Commission on November 10, 2011.
Item 3.
Properties.
The Company leases its office at 6565 Americas
Parkway NE, Suite 200, Albuquerque, New Mexico.
The Company owns a 70% interest in the Concessions
through its ownership interest in Metales. See the description of the Concessions in Item 1, "Our Business", above.
The Subsidiary has entered into the Joint Venture
to process the Tailings and sell any Extracted Minerals from the Tailings. See the description of the Tailings in Item 1, "Our
Business", above.
Item 4.
Security Ownership of Certain
Beneficial Owners and Management
.
The following table sets forth the ownership,
as of January 26, 2012, of our Common Stock by our sole officer and director, and by each person known to us who is the beneficial
owner of more than 5% of any class of our securities. Information with respect to beneficial owners who are not officers and directors
is to the best of our knowledge. As of January 26, 2011, there were 66,791,068 common shares issued and outstanding. On January
13, 2012, the Company entered into separate agreements with John G. Rhoden and Daniel M. Ferris, providing for the Company to
redeem 7,500,000 shares of Common Stock previously held by Mr. Ferris, and 22,500,000 shares of Common Stock previously held by
Mr. Rhoden (the "Rhoden Redemption Shares"). The Company disclosed the redemption transactions in its Current Report
on Form 8-K filed with the Commission on January 18, 2012. The Company's transfer agent has not received the Rhoden Redemption
Shares for cancellation, but the Company's books and records and this Current Report reflects the cancellation of those
shares. All persons named have sole voting and investment power with respect to the shares, except as otherwise noted.
17
Name and Address of
Beneficial Owner
Number of Shares Owned
Beneficially
Percentage Ownership
Daniel M. Ferris
President, Secretary, Treasurer and Director
6565 Americas Parkway NE, Suite 200
Albuquerque, NM 87110
7,500,000
8.64%
5% or more beneficial owners:
John Rhoden
22,500,000
25.92%
All executive officers and directors as a group
7,500,000
8.64%
Item 5.
Directors and Executive Officers
.
The Directors and Officers serving our Company
are as follows:
Name
Age
Positions Held
Daniel M. Ferris
30
President, Secretary, Treasurer  and Director
The sole director named above will serve until
the next annual meeting of the stockholders. Thereafter, directors will be elected for one-year terms at the annual stockholders'
meeting.
Officers will hold their positions at the pleasure
of the board of directors. On July 12, 2011, the Company entered into an Employment Agreement with Mr. Ferris regarding his position
as President of the Company. The Employment Agreement has an initial term of three years, and after the initial term will automatically
renew for successive one-year periods until terminated in accordance with the Agreement (the "Term"). The Employment
Agreement may be terminated voluntarily by either party upon 30 days written notice, upon Mr. Ferris' death or disability,
by mutual agreement at the end of the Term, or for "cause" by the Company. The Employment Agreement defines "cause"
as the willful and continued failure by Ferris to perform his duties under the Employment Agreement, conviction of a felony, or
engaging in conduct that is contrary to the best interests of the Company or adversely affects the Company's reputation
.
Biographical Information – Daniel
M. Ferris
Mr. Ferris was elected sole director and President,
Secretary and Treasurer of the Company on March 29, 2011. Mr. Ferris' career began in public relations. Mr. Ferris was a
senior publicist at Freud Communications. After leaving Freud Communications, he began his own public relations and corporate strategy
firm, Magnum Communications. Magnum Communications assisted clients in Europe with public relations, financing arrangements, and
recruitment. Mr. Ferris' association with Magnum Communications ended in January 2009. Recently, Mr. Ferris has assisted
fund managers with raising funds for a diamond project in the Democratic Republic of Congo. He also serves as a consultant for
LCI, which is affiliated with Caesar's Palace Group. Mr. Ferris' position at the Company represents his primary business
activity. Mr. Ferris currently resides in London.
18
Significant Employees and Consultants
We have no employees, other than our President,
Mr. Ferris.
The Company has retained several consultants.
Miguel Angel Jaramillo Tapia ("Jaramillo") is an independent consultant who is acting as the Company's Vice President
of Exploration (although he is not an executive officer or employee of the Company). Jaramillo, a professional geologist, has worked
on numerous mining projects in the Sierra Madre area of Mexico, in which the Concessions are located. He has worked as a consultant
performing economic feasibility studies for mining companies in the area. He presently owns his own geo-exploration company focused
on mineral mining and analysis of investment projects. Jaramillo also has a working knowledge of the local area surrounding the
Concessions. The Company does not have a written consulting contract with Jaramillo.
The Company has entered into a joint venture
with Jaramillo to process the Tailings. See Item 1.01,
Entry into a Material Definitive Agreement
. He is entitled to 35%
of the net revenue from the Tailings Joint Venture under the Joint Venture Agreement. Jaramillo is paid for his services as a consultant
on the La Candelaria project from the Work Plan for La Candelaria.
Adam
Whyte is a consultant for the Company based in Mexico, who performs consulting services pursuant to a Consulting Agreement dated
October 31, 2011.
The contract calls for Mr. Whyte to receive $15,000 upon execution
of the agreement, $5,000 per month through the term of the agreement, and a one-time grant of 150,000 restricted shares of the
Company's Common Stock. The term of agreement is one year and it will automatically renew if not cancelled in writing 30 days prior
to the end of the annual period.
The Company employs the services of engineering
consultants. On September 27, 2011, the Company signed a contract with Ralph R. Sacrison, P.E., of the firm Sacrison Engineering,
to perform engineering consulting and related services. The Company will pay Sacrison Engineering a monthly retainer of $1,000
per month, which will cover 2 full days of services. The contact may be terminated at any time by either party.
The Company has an informal agreement with
Dr. Mike Seeger, of MX Mining Capital Advisors, to provide up to two days' advice via phone, email or Skype for $1,500 per
month. The engagement is at-will.
For our accounting requirements we use the
services of an accounting firm to assist in the preparation of our financial statements. We also have employed legal counsel in
connection with our securities reporting requirements and other matters related to our business.
Item 6.
Executive Compensation.
We incorporate herein by reference the information
set forth in Part III, Item 11, "Executive Compensation", of our Annual Report on Form 10-K filed with the Commission
on April 22, 2011.
Mr. Ferris replaced Mr. Vollmers as sole director
and officer on March 29, 2011. Under the terms of his Employment Agreement, as compensation for serving as President of the Company,
Mr. Ferris will be paid a base salary of $120,000 per year during the Term. Mr. Ferris will also be entitled to receive 3,000,000
shares of Common Stock, which will vest in three equal increments over the first 3 years of the Term. Therefore, Mr. Ferris will
receive 1,000,000 shares of Common Stock on July 12 of each of the years 2012, 2013, 2014. If Mr. Ferris' employment is terminated
for "cause", or if he voluntarily resigns, then he would not be entitled to receive any shares of Common Stock that
have not vested as of the date of resignation or termination. If Mr. Ferris' employment is terminated for any other reason,
he would receive the full 3,000,000 shares of Common Stock.
19
Item 7.
Certain Relationships and Related
Transactions, and Director Independence.
We incorporate herein by reference the information
set forth in Part III, Item 13, "Certain Relationships and Related Transactions, and Director Independence", of our
Annual Report on Form 10-K filed with the Commission on April 22, 2011.
Director Independence
Quotations for the Company's common stock
are entered on the Over-the-Counter Bulletin Board inter-dealer quotation system, which does not have director independence requirements.
For purposes of determining director independence, the Company applied the definitions set out in NASDAQ Rule 4200(a)(15). Under
NASDAQ Rule 4200(a)(15), a director is not considered to be independent if he or she is also an executive officer or employee of
the corporation. As a result, the Company does not have any independent directors. Our sole director, Daniel M. Ferris, is also
an executive officer of the Company.
Item 8.
Legal Proceedings
.
We are not aware
of any pending or threatened legal proceedings which involve the Company or any of our properties
.
Item 9.
Market Price of and Dividends
on the Registrant's Common Equity and Related Stockholder Matters.
Since June 20, 2011, shares of our common stock
have been quoted on the OTCBB under the symbol "LSTG", following the change in name of the Company to "Lone Star
Gold, Inc." From
October 27, 2010
to June 20, 2011, our shares of Common Stock were quoted
on the OTCBB under the symbol "KYSR".
Our stock began trading on October 27, 2010 at $0.155
and the stock price did not change until July 2011. Accordingly, there are no high and low bids for the Common Stock before
the third quarter 2011.
The following table summarizes
the high and low historical closing prices reported by the OTCBB Historical Data Service for the periods indicated. OTCBB quotations
reflect inter-dealer prices, without retail mark-up, mark down or commissions, so those quotes may not represent actual transactions.
High
Low
Third Quarter 2011
$
1.40
$
0.80
Fourth Quarter 2011
$
1.21
$
0.60
First Quarter 2012 (through January 25)
$
0.70
$
0.39
We had approximately 11 record holders of our
common stock as of January 25, 2012, according to the books of our transfer agent. A significant number of shares are held in street
name, so the Company believes that the number of beneficial owners is higher
.
20
There are no restrictions in our articles of
incorporation or bylaws that restrict us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring
dividends where, after giving effect to the distribution of the dividend:
1.
we would not be able to pay our debts as they become due in the usual course of business; or
2.
our total assets would be less than the sum of our total liabilities, plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.
We have not declared
any dividends. We do not plan to declare any dividends in the foreseeable future
.
Equity Compensation Plans
Other than the shares of Common Stock to be
issued to Mr. Ferris under his Employment Agreement, as described more fully in Item 6, "Executive Compensation" above,
we have no equity compensation program including no stock option plan, and none are planned for the foreseeable future.
Item 10.
Recent Sales of Unregistered
Securities
.
We incorporate herein by reference the information
set forth in Part II, Item 5,"Recent Sales of Unregistered Securities", of our Annual Report on Form 10-K filed with
the Commission on April 22, 2011, and on April 15, 2010.
We incorporate herein by reference the information
set forth in Part II, Item 2,"Recent Sales of Unregistered Securities", of our Quarterly Report on Form 10-Q filed
with the Commission on August 22, 2011, and our Quarterly Report on Form 10-Q filed with the Commission on November 10, 2011.
We incorporate herein by reference the information
set forth in our Current Report on Form 8-K filed with the Commission on December 27, 2011.
On January 26, 2012, the Company agreed to
issue 100,000 shares of Common Stock to Jaramillo as partial consideration pursuant to the JV Agreement. See Item 3.02,
Unregistered
Sales of Equity Securities
.
Item 11.
Description of Registrant's
Securities to be Registered
.
Authorized Capital Stock
The Amended and Restated Articles of Incorporation
of the Company (the "Articles of Incorporation") give the Company the authority to issue 150,000,000 shares of common
stock, par value $0.001 per share (the "Common Stock"). As of January 25, 2011, there were 66,791,068 shares of Common
Stock issued and outstanding, after giving effect to the redemption transactions discussed in Item 4 above.
Common Stock
Holders of Common Stock are entitled to one
vote for each share held of record on all matters submitted to a vote of the stockholders of the Company. There are no cumulative
voting rights. Accordingly, holders of a majority of the shares of Common Stock entitled to vote in any election of directors may
elect all of the directors standing for election. Holders of Common Stock are entitled to receive dividends, if any, ratably as
may be declared from time to time by the Board of Directors out of funds legally available for the declaration of dividends. Upon
the liquidation, dissolution or winding up of the Company, the holders of the Common Stock are entitled to receive our net assets
available after the payment of all liabilities pro rata in accordance with the number of Common Shares owned. Holders of Common
Stock have no preemptive, subscription, redemption or conversion rights, and there are no redemption or sinking fund provisions
applicable to the Common Stock. Each outstanding share of Common Stock is fully authorized, fully paid and non-assessable.
21
Warrants
The Company has issued 100,000 warrants for
the purchase of Common Stock to North American Gold Corp. in a private placement. The Warrant entitles North American Gold to purchase
a share of Common Stock at $1.20 at any time until June 30, 2014. See Item 10, "
Recent Sales of Unregistered Securities
"
above.
Anti-Dilution
Under the terms of the Assignment Agreement,
the Company has granted anti-dilution rights to Gonzalez, such that the Company must allow Gonzalez the opportunity to maintain
his percentage stock ownership in the Company until the date on which the Company has complied fully with its obligations under
the Option Agreement or January 11, 2014, whichever comes first. See Item I, "Business-Agreements" above. Gonzalez
has waived his anti-dilution rights as to the Investment Agreement. As of the date of the issuance of shares of Common Stock to
Gonzalez under the Assignment Agreement, Gonzalez owned .25% of the issued and outstanding shares of the Company.
Stock Split
A 20:1 forward stock split was declared to
stockholders of record as of June 17, 2011, pursuant to which each shares of Common Stock was reclassified and changed into 20
new shares of Common Stock. Each Stockholder was entitled to receive a certificate or certificates representing 20 shares for every
one share of Common Stock, upon delivery of his stock certificate to the Company.
Applicable Provisions of Nevada State Law
Nevada's Control Share Acquisition Act
(Nevada Revised Statutes 78.378 -78.3793) prohibits an acquirer, under certain circumstances, from voting shares of a corporation's
stock after crossing specific threshold ownership percentages, unless the acquirer obtains the approval of the issuing corporation's
stockholders. The first such threshold is the acquisition of at least one-fifth but less than one-third of the outstanding voting
power. The Company may become subject to Nevada's Control Share Acquisition Act if it has 200 or more stockholders of record
at least 100 of whom are residents of the State of Nevada and does business in the State of Nevada directly or through an affiliated
corporation. Currently, we do not have more than 200 stockholders of record, nor do we conduct business in the State of Nevada.
We may be subject to Nevada's Combination
with Interested Stockholders Statute (Nevada Revised Statutes 78.411 -78.444) which prohibits an "interested stockholder"
from entering into a "combination" with the corporation, unless certain conditions are met. An "interested stockholder"
is a person who, together with affiliates and associates, beneficially owns (or within the prior three years, did beneficially
own) 10 percent or more of the corporation's voting stock.
Transfer Agent
The transfer agent of the Common Stock is Corporate
Stock Transfer, Inc., 3200 Cherry Creek South Drive, Suite 430, Denver, Colorado 80209. Its telephone number is (303) 282-4800.
22
Item 12.
Indemnification of Directors
and Officers
.
The Articles of Incorporation provide that
the Company may indemnify each person who is or was a director or officer of the Company to the fullest extent permissible under
applicable Nevada law. The Board of Directors, in its sole discretion, shall have the power, on behalf of the Company, to indemnify
such other persons for whom indemnification is permitted by such provisions of the Nevada Revised Statutes ("NRS"),
to the fullest extent permissible thereunder, and may purchase such liability indemnification and/or other similar insurance as
the Board of Directors from time to time shall deem necessary or appropriate, in its sole discretion. 	The power to indemnify
and/or obtain insurance is cumulative of any other power of the Board of Directors and/or any rights to which such a person or
entity may be entitled by law, the Articles of Incorporation and/or Bylaws of the Company, contract, other agreement, vote or otherwise.
Pursuant to the Company's Bylaws, the
Company shall indemnify any person who was or is a party or is threatened to be made a party to any proceeding, by reason of the
fact that such person is or was a legal representative or a director or officer or agent of the Company, or is or was serving at
the request of the Company or for its benefit as a director or officer of another corporation, or as its representative in partnership,
joint venture, trust or other enterprise, against expenses, liability and loss (including attorneys' fees, judgment, fines
and amounts paid in settlement) reasonably included and suffered by such person in connection therewith. The expenses of officers
and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the Company as they are incurred
and in advance of the final disposition of the action, suit or proceeding upon receipt of an undertaking by or on behalf of
the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not
entitled to be indemnified by the corporation.   Such right of indemnification shall not be exclusive of any other
right to indemnification by any bylaw, agreement, vote of stockholders, provision of law or otherwise.
The Bylaws permit the Company to purchase and
maintain insurance on behalf of any person who is or was a director or officer of the Company, or is or was serving at the request
of the Company as a director or officer of another corporation, or as its representative in a partnership, joint venture, trust
or other enterprise against any liability asserted against such person and incurred in any such capacity or arising out of such
status, whether or not the Company would have the power to indemnify such person.
NRS Sections 78.7502 and 78.751 permit the
Company to indemnify its directors, officers, employees and agents, against any liabilities (including attorneys fees and costs),
incurred by reason of the fact that such person was a director, officer, employee or agent of the Company. The director or officer
being indemnified must have conducted himself or herself in good faith and reasonably believe that his or her conduct was in, or
not opposed to, the best interests of the Company. In a criminal action, the director, officer, employee or agent must not have
had reasonable cause to believe that his or her conduct was unlawful. The Company may advance expenses to an indemnified party
if the director or officer affirms in writing that her or she believes that the standards have been met, and will personally repay
the expenses advances if it is determined that such officer or director did not meet the standards.
Item 13.
Financial Statements and Supplementary
Data
.
We incorporate herein by reference the information
set forth in Part II, Item 8, "Financial Statements and Supplementary Data", of our Annual Report on Form 10-K filed
with the Commission on April 22, 2011.
We incorporate herein by reference the information
set forth in Part I, Item 1, "Financial Statements", of our Quarterly Report on Form 10-Q filed with the Commission
on May 12, 2011.
23
We incorporate herein by reference the information
set forth in Part I, Item 1, "Financial Statements," of our Quarterly Report on Form 10-Q filed with the Commission
on August 22, 2011.
We incorporate herein by reference the information
set forth in Part I, Item 1, "Financial Statements," of our Quarterly Report on Form 10-Q filed with the Commission
on November 10, 2011.
Item 14.
Changes in and Disagreements
with Accountants on Accounting and Financial Disclosure
.
We incorporate herein by reference the information
set forth in Part II, Item 9, "Changes in and Disagreements with Accountants on Accounting and Financial Disclosure,"
of our Annual Report on Form 10-K filed with the Commission on April 22, 2011.
Item 15.
Financial Statements and Exhibits
.
See Item 9.01 below.
Item 3.02 Unregistered Sales of Equity Securities.
On January 26, 2012, the Company agreed to
issue 100,000 shares of Common Stock to Jaramillo as partial consideration pursuant to the JV Agreement. See Item 1.01,
Entry
into a Material Definitive Agreement
. The issuance of the shares of Common Stock to Jaramillo will not be registered under
the Securities Act of 1933. Instead, the issuance will be completed in reliance upon an exemption from registration pursuant to
Regulation S promulgated under the Securities Act of 1933. Jaramillo has represented to the Company that he is not a "US
person" as defined in Regulation S, and that he is acquiring the securities issued by the Company for investment purposes
only and not with a view towards distribution. The shares of Common Stock issued to Jaramillo will be "restricted securities"
and any subsequent resale or transfer of those shares will have to be made pursuant to an exemption from or registration under
the Securities Act of 1933, as amended.
Item 5.06 Change in Shell Company Status.
Prior to entering into
the JV Agreement, the Company was a "shell company" as defined in Rule 12b-2 of the Securities Exchange Act of 1934,
as amended. Management of the Company has determined that the Company ceased to be a shell company as a result of its joint venture
to process the Tailings, which the Company anticipates will be a source of revenue within a reasonable period of time. The Joint
Venture, together with the La Candelaria Concessions and the various corporate activities that the Company will now be able to
undertake in pursuit of gold and other mineral exploration and mining, substantially expands the business activity of the Company
in Mexico.
24
Item 9.01 Financial Statements
and Exhibits.
(a)
Financial statements. Not applicable.
(b)
Exhibits.
Exhibit No.
Exhibit Description
3.1
Certificate of Incorporation of Keyser Resources Incorporated (incorporated by reference to the Company's Registration Statement on Form S-1 filed on May 28, 2009)
3.2
By-laws of Keyser Resources Incorporated (incorporated by reference to the Company's Registration Statement on Form S-1 filed on May 28, 2009)
3.3
Amended and Restated Articles of Incorporation (incorporated by reference to the Company's 10-Q filed on May 12, 2011)
10.1
Declaration of Trust (incorporated by reference to the Company's Registration Statement on Form S-1 filed on May 28, 2009)
10.2
Option Agreement with Bearclaw Capital Corporation  (incorporated by reference to the Company's Registration Statement on Form S-1 filed on May 28, 2009)
10.3
Assignment Agreement by and among the Company, American Gold Holdings, Ltd. and Homero Bustillos Gonzalez dated as of June 10, 2011 (incorporated by reference to the Company's 10-Q filed August 22, 2011)
10.4
Employment Agreement dated July 12, 2011, between the Company and Dan M. Ferris (incorporated by reference to the Company's 10-Q filed August 22, 2011)
10.6
Investment Agreement between North American Gold and the Company dated August 29, 2011(incorporated by reference to the Company's Current Report on Form 8-K filed on August 29, 2011)
10.7
Press Release dated August 29, 2011(incorporated by reference to the Company's Current Report on Form 8-K filed on August 29, 2011)
10.8
Option Agreement between American Gold Holdings, Ltd. and Homero Bustillos Gonzales dated January 11, 2011 (incorporated by reference to the Company's Quarterly Report on Form 10-Q filed on November 10, 2011)
10.9
Consulting Agreement between the Company and Adam Whyte dated October 31, 2011 (incorporated by reference to the Company's Quarterly Report on Form 10-Q filed on November 10, 2011)
10.10
First Amendment to the Investment Agreement dated November 9, 2011, between the Company and North American Gold Corp (incorporated by reference to the Company's Quarterly Report on Form 10-Q filed on November 10, 2011)
10.11
Amendment Agreement dated January 10, 2012, between the Company and Homero Bustillos Gonzales (incorporated by reference to the Company's Current Report on Form 8-K filed on January 17, 2012)
10.12
Joint Venture Agreement between Amiko Kay, S. de R.L. de C.V. and Miguel Angel Jaramillo
    Tapia dated January 26, 2012 (filed herewith).
99.1
Press Release, dated August 11, 2011 (filed August 26, 2011, as amended by the Company's Form 8-K/A filed on October 18, 2011)
99.2
Press Release, dated August 19, 2011 (filed August 26, 2011, as amended by the Company's Form 8-K/A filed on October 18, 2011)
99.3
Press Release dated September 12, 2011 (filed September 12, 2011)
99.4
Press Release, dated September 19, 2011 (filed on September 19, 2011)
25
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: February 1, 2012
LONE STAR GOLD, INC.
By:
/s/ Daniel M. Ferris
Daniel M. Ferris
President, Treasurer and Secretary
26